Principles of Management

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Unit 1
Nature of Organization
Organization is a social system composed of people, structure and technology for achieving
common goals in a dynamic environment.
In other words, Organization is a human association, where two or more people come
together with a certain common aim and equipment and desire to achieve certain common
goals through planned joint effort and team work.
According to S.A Sharlekar and V.S. Sherlekar, “Organization is a mechanism or a basic
framework enabling person to work together effectively and achieve the set goals through
integrated group effort. It is a medium for the management to exercise managerial functions.”
Similarly, according to W.J Duncan, “An organization is a collection of interacting and
interdependent individuals who work toward common goals and whose relationship are
determined according to a certain structure.”
Therefore, organization is a place with certain structure, where people come and work
together to achieve a common goal, in a changing environment.
*Tribe, ethnic groups, families are not organization.
* The three essential of an organizations are: - a. people b. common goal c. Joint effort.
Characteristics of Organization:
1. Human Association: Organization is the place where people work together to achieve the
common goals. Thus, there is always the involvement of human resource to perform a variety of
activities in goal achievement process.
2. Common goal: Every organization has its goals. It is a common purpose which binds all the
individuals and groups to contribute their effort.
3. Division of work: Organization always divides the large task into smaller packages for easy and
prompt functioning by individuals. This brings specialization in work.
4. Hierarchy of authority: Organization has a chain of command, determined by hierarchy of
authority. Under the basis of job responsibility and accountability, skill demand of the job and
complexity of the job hierarchy of authority is constructed. The power of decision making and
control is always determines by the hierarchy of authority in organization.
5. Flexibility (Envrionmental Adaptation): Organizational activities directly and indirectly influence
by the environmental factors. So it is always formulate its plans and policies that can match the
changing requirements of environment.
Types of Organization:
We find different kinds of organization in our society. These organizations are classified
according to the nature and purpose. They are as follows:-
1. Business organization: The organization which is established in order to make profit is known as
business organization. The prime beneficiaries of these organizations are the owners or
shareholders. E.g. Surya Nepal Company, Buddha Air etc.
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2. Nonprofit Social Organization: The organizations which are established not for making profit but
for giving or providing services to the customer/clients or community are nonprofit social
organizations. E.g. Tribhuvan University, Nepal Red Cross, Bir Hospital etc.
3. Cooperative Organization: These types of organization are established to reduce the effort of
competition and maximize the value of cooperation. The main aim of this organization is to fulfill
the individual needs and prosperity of all members involved through collective effort.
4. Government Organization: The organization formed by the government to provide service to
general public is government organization. They can be ministries, department, military, police
etc. The main goals of this type of organization are regulation and welfare of general public.
5. International Organization: The organizations which are established by the involvement of
different countries for the sake of their welfare are called international organization. E.g.
ASEAN, SAARC, UNDP, IMF etc. These organizations are always engage in promoting the
collective interest of member countries.
Organizational Goals:
Goal is the expected outcome from the activities performed in the organization. It is the reason
behind existence of the organization.
According to A. Etzioni, “Goal may be defined as a desired state of affairs that organizations
attempt to realize”
Similarly, according to Koontz and Weihrich “Goals are the ends towards which activity is
aimed –they are the result to be achieved.”
Thus, goal is a desired end that organization wants to achieve in future by performing several
activities.
*Vision: A general statement of its intended direction that generate strong emotional feelings
in organizational members
*Mission: It states who the company is, what it does, and where it headed.
Purposes of Goals:
The main purposes of achieving goals are as follows:
1. To provides guideline and direction: Goals is a desired destination that organization wants to
reach. Thus, it provides the direction toward which the organizational activities should be
focused.
2. To develop a good planning: Planning is predetermining the activities for future. These activities
can only be identified when organization know what it wants to achieve. So goals give idea about
the expectation, the time frame, skills necessary etc., which helps to make a effective plan.
3. To motivate employee: Motivation is creating willingness in individual to give higher effort
toward work. This can only be possible when people thing or accept that, their need is fulfilled by
their effort. Since goal is a outcome and provides an idea about what people can achieve in
future .It motivates employees towards works.
4. To utilize the resource optimally: Resource can be optimally utilized only when there is precise
definition and direction of work with motivated employees. Since there all are for what the goal is
meant for. Thus, goal helps in effective utilization of resources.
5. To evaluate and control: Evaluation and control of organizational performance is essential to
ensure that the organization’s functions are working properly, and people are within the tract
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(area, band) of budget limit and time schedule. This is only possible, when there is goal to be
achieved in future. Thus goal acts as standard which control and direct the actual activities.
Types of goals:
There are different types of goals formulated by an organization to their needs. They are as
follows:
1. Level wise goal:
a. Corporate Goals: Corporate goals are broad goals which cover and direct overall activities of
an organization. They are always formulating by the top level management. They are
represented by mission and strategy.
i. Mission: Mission is a statement, which describe the vision of top leadership about
organization and provides reason for the existence of an organization. E.g. “To be the
best school in Kathmandu valley” may be the mission statement of any school
situated at Kathmandu.
ii. Strategy (SWOT): It is a long term action plans. It is developed in the view of the
mission of an organization .It is a real intension which stated the course of action that
is going to be taken by an organization. E.g. to increase the market share by 15% by
the end of 3rd year.
b. Tactical Goals: Tactical goals are set to translate the strategic goals into action. They are the
target goals of department formulated by department heads or middle level managers. They
are generally shorter time framed, more specific and strongly focused. E.g. 20% increase in
sales annually.
c. Operational goals: Operational goals are unit/section level goals formulated by lower level
managers. They are more defined and time bound that help to achieve the tactical goals. E.g.
to produce 100 units of product each day.
2. Time Frame: 5-10 years long term goal, 2-4 Mid-term goals, below 1 or 1 year short term goal.
Features of Effective Organizational Goals:

The features of effective organizational goals are as follows:
1. Specific: Organizational goals must be precise. It must be clearly defined and should be
understood by every concerned people. E.g. 10% profit on sales, but not profit maximization.
2. Measurable: Every goal should contain details about, how particular aspects of performance will
be measured. It should be measurable in terms of quality and quantity. Measurable goals help to
assess work-in-progress of individuals and organization.
3. Acceptable: Goal should be accepted by workers, who are responsible for achieving them. There
must be participation and agreement of both higher and lower management in goal setting
process.
4. Realistic: Goal must be realistic enough, that each individual working in an organization should
have faith on its achievement. Unachievable or unrealistic goals lead to excess expenses and even
collapse of an organization.
5. Time bound: Goal must be bound by time frame. There must be clear estimation of time period
for accomplishment of goals in future. Time bound goals not only help to identify the necessities
of promptness but also serve as a standard for the organizational activities.
Approaches to Goal Formulation:

There are mainly three approaches to goal formulation. They are as follows:
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1. Top-down approach: Top-down approach is a directive approach.Under this approach, top

executives first develp the corporate goals and disseminates them to middle and lower level
managers for implementation. Top level mangers use their knowledge and experiences to
formulate the goals.
2. Bottom-Up approach: Bottom-up approach is a participatory approach. Under this approach,
functional workers formulate goals for their positions and passes to the top level for final revision
and approval. Top level management finalizes the goals on the basis of mission statement and
disseminate to lower level for its implementation.
3. Management by Objectives (MBO):MBO is initially suggested by Peter Durker in 1960.It is the
process under which both top level and lower level management jointly formulate the goals for an
organization. They determine each individual’s major area of responsibility in terms of goals
which gives employees a sense of ownership and motivates further. The collective effort of both
superior and subordinates in goal setting process is the major advantage of MBO.
Goal Formation Process:

Following are the steps involved in goal formulation process:
1. Assigning a group: At first a group in which the involvement of all the level of mangers from top,
middle and lower level are assigned. The involvement of higher level ensures the utilization of
their expertise on environmental changes and effective allocation of resources; where as the
involvement of lower level ensures the formulation of realistic and achievable goal and
commitment towards the work.
2. Environmental Scanning: After the group is assigned the necessary and relevant information of
internal and external environment are gathered and analyzed. This helps to know the changes
occur in external environment like political changes, technological changes, socio-cultural
changes etc. and its possible impacts as well as, the strength and weakness of the organization
that can capitalize the opportunities and neutralize the threats.
3. Determining and listing the potential goals: After the rigorous analysis of environmental factors
and its impacts, potential goals are formulated and listed.
4. Brainstorming on potential goals: Once managers formulated the list of potential goals, it is
necessary to think deeply on each of them according to their importance. Managers discuss these
goals on their relevancy, strength, weakness and success in future.
5. Reach the consensus: Once the goals are carefully discussed, a best goal among the list is choose.
There must be acceptance of majority in goal selection. This not only helps to avoid conflict but
also helps in motivating the workers toward goal achievement.
6. Determine the major area of responsibility: After finalizing the goal, the activities related to its
achievement are determined. In addition, the authority-responsibility relation of the activities and
individual are determined and assigned the task accordingly.
Problems of Goal formation:

The main problems in goal formulation are as follows:
1. Improper reward system: When there is a weaker link between reward system and goal setting, it
creates major problem in goal formulation. Employees are motivated only when there is a good
relation between goal formulation and reward system.
2. Environmental Constraint: It will be hard to anticipate any changes exactly that may occur in
future, which is a major problem in goal formulation. The environmental factors like technology,
politics, etc. force the organization to change its policies and practices. Thus, inadequate
assessment of these factors may lead to unrealistic and faulty goals.
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3. Unwillingness of managers in goal formulation: Due to lack of knowledge, experiences and

confidence, managers may show unwillingness to take part in goal setting process. This create
problem in goal formulation.
4. Resistance to change: Goals are formulated to achieve certain changes in present situation.
However employees and even managers may resist the changes because of the fear of job
termination, unmatched knowledge of new technology etc. and try to maintain status quo. This
creates problems in goal formulation.
5. Resource Constraint: Goals are formulated on the basis of backup resources available in an
organization. However, inadequacy of such resources may lead to unrealistic goals, frustration
and goal displacement.
Goal Succession and Goal Displacement:

Goal Succession: The deliberate or intentional change in goal after realization of previous goal is
known as goal succession. In other words, goal succession refers to conscious attempt by the
management to adapt new or modified goals .E.g. a team is assigned to manufacture a cheapest
car in the world. Once the car is manufactured as expected, the same team is assigned to
manufacture the world most fuel efficient car. Here, in above example the team faces the crisis of
existence once the cheapest car is manufactured, but to overcome that, the goal is succeeded to
most fuel efficient car.
The necessity of goal succession in any organization is because of the following reasons:
1. Achievement of original goal.
2. Changes in external environment
3. Unachievable goals.
Goal Displacement: An unintentional change in goal by management is known as goal

displacement. Goal displacement takes place when organizational energies and resources are
utilizes away from the original goals. E.g. an organization shifts its business firm manufacturing
to trading because of the establishment of many manufacturing organizations and severe
competition.
The reasons for goal displacement are as follows:
1. Goal Conflict: When organizational goal conflicts with individual goals. Employees choose to
pursue individual goals.
2. Abstract goals: When goal are not clearly defined and plans, decision are inconsistent with the
original goals, then displacement takes place.
3. Employee attitude: Employee attitude towards goal also lead to goal displacement. Uncooperative
employees and pressure from union association weaken the organizational activities needed,
which leads to goal displacement.
The changing Perspectives (Viewpoint) on Organization:

The organization is defined and viewed differently at different time period. Previously, it was
only considered as a people gathering place where workers do what the employer asked them to
do, there was no concerned about the relation of work and people performance. But as the time
passes by, the concept of work, workers and workplace has been gradually changing.
Organization is not only the gathering place, it is a place where people are embrace as an asset
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and help them to groom their abilities and make them competent to accept and overcome any
environmental changes.
The changing perspectives on organization are as follows;
a. Mechanistic viewpoint on Organization: This perspective states that organization as a machine.
Many classical theories of organization represent this view. It believes on fixed working hours,
production schedules, maintenance schedules, financial control system, quality control system,
sales targets, code of conduct, clear job description and procedures etc. The aim of these efforts is
to routinize the activities and reduce uncertainty of operation. These types of organization ignore
the human aspects and their effectiveness. It does not give priority to imagination, innovation and
creativity. Thus, this perspective is suitable in stable environment and for those organizations
where there is requirement of maximum blue collar workers.
b. Organization as an Open System: Business Organization are perceive as open adaptive system.
Any organism can be considered as an energy system which has inputs, transformation process
and outputs. E.g. the inputs for a university would be students, teaching materials, books, money
and so on. The transformation process would consist of lectures, seminars, assignments, research,
study, discussion, counseling etc. The output would be educated, cultured and discipline
individuals ready to enter the real world of business or employment. In general, the term system
is applied to any activity or any collection of facts, ideas or principles which are so arranged as to
present a united a whole. All operation of system will be methodical, thorough and regular and
above all as per plan to achieve set objectives. In business many division and departments are
organized on functional bases and all act as coordinated whole to achieve the basic objectives of
the firm.
A business organization as per open system

System View of Business Environmen
Inputs: Processing: Outputs:
a. Human a. Operation a. Product

b. Financial b. Management b. Services
c. Physical c. Control c. Profit
d. Information d. Information
e. Leadership
f. Efficiency
g. Social
Responsibility
Feedback
Environment
c. Organization as political System: According to this perspective, organizations are viewed as

“complex system of individual and coalitions, each having its own interest, beliefs, values,
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preferences, perspectives and perception. The coalitions continuously compete with each other
for scarce organizational resources”. It states that organizations are not about hierarchies and
structures but also about the internal politics that prevails in them. Understanding and assessing
an organization from this perspective is important to know its current activities and predict its
behaviour.
d. Organization as culture: The organizational cultural perspective states that many organizational
behaviour and decisions are predetermined by the pattern of basic assumptions (beliefs, rituals,
values) held by the members of an organizations. Different studies suggested that, organizational
culture acts as powerful forces in influencing organizational life.
e. Organization as a learning system: From this perspective organization is describe as a living and
thinking open system. Organization continuously learn from their history, experience and
environment and adjust accordingly .To be an effective, organization have to learn and develop
new capabilities on a continuous basis. Sharing knowledge, experience and ideas is habit of
learning organization. Thus, learning competency of organization plays an important role in
strategic planning process.
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Unit 2
Introduction to Management
The term “management” origins from the French “Management” which means, the directing and from the
Latin “menu agree”, this means to lead by the hand. This clearly indicates that management is necessary
to direct and lead organization. It directs, coordinates and integrates the individual activities of group and
secure teamwork to accomplish organizational goal.
According to Ricky W. Griffen, “Management is a set of activities (including planning, organizing, leading
and controlling) directed at an organization’s resources (human, financial, physical and informational)
with the aim of achieving organizational goals effectively and efficiently in a changing environment.
Similarly, according to Sherlekar and Sherlekar, “Management is a process involving coordination of human
and material resources through the functions of planning, organizing, staffing, leading and controlling in
order to accomplish stated objectives.”
Thus, management is what manager does in an organization to accomplish the predetermined goal in the
changing environment.
Characteristics of Management:
The various characteristics of management are:
a. Management is universal: It means that management is required for every type of organization. It may be
a business organization or social or political. It may be a small firm or a large one. Management is
required by a school or a college or university or a hospital or a big firm like Reliance Industries Limited
or a small variety store in your locality. Thus, it is a universal phenomenon and is common and essential
element in all organizations.
(b) Management is goal directed: Every organization is created to achieve certain goals. For example,
for a business firm it may be to make maximum profit and/or to provide quality products and services.
Management of an organization is always aimed at achievement of the organizational goals. Success of
management is determined by the extent to which these goals are achieved.
(c) Management is a continuous process: Management is an ongoing process. It continues as long as the
organization exists. No activity can take place without management. To perform all activities like
production, sale, storage, operation etc. management is required. So, as long as these activities continue
the process of management also continues to operate.
(d) Management is an integrating process: All the functions, activities, processes and operations are
intermixed among themselves. It is the task of management to bring them together and proceed in a
coordinated manner to achieve desired result. In fact, without integration of men, machine and material
and coordination of individual efforts to contribute successfully as a team, it will be difficult to achieve
organizational goals.
(e) Management is intangible: Management is not a place like a graphic showing Board meeting or a
graphic showing a school Principal at her office desk which can be seen .It is an unseen force and you can
feel its presence in the form of rules, regulation, output, work climate, etc.
(f) Management is multi-disciplinary: Management of an organization requires wide knowledge about
various disciplines as it covers handling of man, machine, and material and looking after production,
distribution, accounting and many other functions. Thus, we find the principles and techniques of
management are mostly drawn from almost all fields of study like – Engineering, Economics, Sociology,
Psychology, Anthropology, Mathematics, Statistics etc.
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(g) Management is a social process: The most important aspect of management is handling people
organized in work groups. This involves developing and motivating people at work and taking care of
their satisfaction as social beings. All managerial actions are primarily concerned with relations between
people and so it is treated as a social process.
(h) Management is situational: The success of management depends on, and varies from, situation to
situation. There is no best way of managing. The techniques and principles of management are relative,
and do not hold good for all situations to come.
Management as a Science as well as an Art
Management is regarded as a science as well as an art. Science refers to a systematic body of knowledge with
reference to understanding of some phenomenon or subject or object of study. It establishes a cause and
effect relationship between variables. It is based on systematic explanation, experimental analysis, critical
evaluation and logical consistency. In science we learn the ‘why’ of a phenomenon. For example, two
molecules/atoms of hydrogen and one molecule/atom of oxygen makes water (H2O). Similarly we can
say earth moves round the sun. Any subject of study to be called a science should have the following
characteristics:
(i) There must be a systematized body of knowledge that includes concepts, people and theories.
(ii) We should be able to establish a cause and effect relationship.
(iii) Its principles should be verifiable.
(iv) Its should ensure predictable results.
(v) It should have universal application.
Management as a subject of study fulfils almost all the above characteristics. Theories and techniques like
scientific management, PERT and CPM, break even analysis, budgeting etc. are all scientific in nature.
However, since it deals with human beings, we cannot predict a definite cause - effect relationships.
Hence management is not treated as a pure or full-fledged science. As for the art, you know that it refers
to bringing about the desired result through application of skill. It is a personalized process and states that
there is no best way of doing a thing. Thus, it is creative and it improves by practice. In art we learn about
the ‘how’ of a phenomenon. For example, take the case of painting. There is nothing called the best way
of painting. More one paints, the more he improves and learns how to paint. Now look at management.
Here also we apply a lot of skill (like technical, conceptual, human etc.) and it is also creative in nature.
Nobody can say that this is the best way of managing. It varies from one manager to another. The more
one manages, the more experienced and expert he becomes. Thus, management is a combination of both
science and art.
Management as Profession
In the first lesson you had learnt that profession is an occupation. To be precise, any occupation that satisfies
the following requirements is called a profession.
(i) It must be an organized and systematized body of knowledge. Take for example professions like
engineering or chartered accountancy. These require a specialized knowledge.
(ii) There is always a formal method of acquisition of such knowledge. In other words, individuals, to
pursue a specific profession, must acquire the specialized knowledge through some formal institutions.
For example, you need to get a degree in law or engineering to pursue the profession of a lawyer or
engineer.
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(iii) There exists an association to devise certain code of conduct for the professionals. This code of
conduct lays down norms to be observed by the professionals while doing their job. Violation of the
prescribed code can lead to derecognizing the professional to practice.
(iv) A profession is no doubt an occupation to earn one’s livelihood but the financial reward is not the
main measure of their success. The professional use their specialized knowledge to serve the long-run
interests of the society and are also conscious of their social responsibility. Though management may not
meet all the requirements of a profession in strict sense of the term, but it meets most of the above
requirements and is, now a days, regarded a fully fledged profession. A number of institutions have come
up to teach management in a formal way and train future managers. Various associations like American
Management Association in USA, All India Management Association in India have been functioning as
representative bodies of managers and have duly devised codes of conduct for managers. Many more
organizations have come up in the specialized fields of management.
Principle of Management
Following are the fourteen principles of management developed by the Henry Fayol:
1. Division of Work
According to Henry Fayol under division of work, "The worker always on the same post, the manager
always concerned with the same matters, acquire an ability, sureness and accuracy which increases
their output. In other words, division of work means specialization. According to this principle, a
person is not capable of doing all types of work. Each job and work should be assigned to the
specialist of his job. Division of work promotes efficiency because it permits an organizational
member to work in a limited area reducing the scope of his responsibility. Fayol wanted the division
of work not only at factory but at management levels also.
2. Authority and Responsibility
Authority and responsibility go together or co-existing. Both authority and responsible are the two sides
of a coin. In this way, if anybody is made responsible for any job, he should also have the concerned
authority. Fayol's principle of management in this regard is that an efficient manager makes best
possible use of his authority and does not escape from the responsibility. In other words when the
authority is exercised the responsibility is automatically generated.
3. Discipline
According to Henry Fayol discipline means sincerity about the work and enterprise, carrying out orders
and instructions of superiors and to have faith in the policies and programs of the business enterprise,
in other sense, discipline in terms of obedience, application, energy and respect to superior. However,
Fayol does not advocate warming, fines, suspension and dismissals of worker for maintaining
discipline. These punishments are rarely awarded. A well disciplined working force is essential for
improving the quality and quantity of the production.
4. Unity of Command
A subordinate should take order from only one boss and he should be responsible and accountable to him.
Further he claimed that if the unit of command is violated, authority is undermined, disciplined in
danger, order disturbed and stability threatened. The violation of this principle will face some serious
consequences. In this way, the principle of unity of command provides the enterprise disciplined
stable and orderly existence. It creates harmonious relationship between officers and subordinates,
congenial (pleasant) atmosphere at work. It is one of the Fayol's important essential principles of
management.
5. Unity of direction
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Fayol advocates "One head and one plan" which means that group efforts on a particular plan be led and
directed by a single person. This enables effective co-ordination of individual efforts and energy. This
fulfils the principles of unity of command and brings uniformity in the work of same nature. In this
way the principle of direction create dedication to purpose and loyalty. It emphasizes the attainment
of common goal under one head.
6. Subordination of individual interests to general interests
The interest of the business enterprise ought to come before the interests of the praise individual workers.
In other words, principle of management states that employees should surrender their personnel
interest before the general interest of the enterprise. Sometimes, employees overlook the interest of
the organization due to ignorance, selfishness, laziness, carelessness and emotional pleasure. This
attitude proves to be very harmful to the enterprise.
7. Fair Remuneration to employees
According to Fayol wage-rates and method of their payment should be fair, proper and satisfactory. Both
employees and ex-employers should agree to it. Logical and appropriate wage-rate and methods of
their payment reduces tension and differences between workers and management, create harmonious
relationship and a pleasing atmosphere of work. Further, Fayol, recommends that residential facilities
be provided including arrangement of electricity, water and facilities.
8. Centralization and Decentralization
There should be one central point in the organization which exercises overall direction and control of all
the parts. But the degree of centralization of authority should vary according to the needs of situation.
According to Fayol there should be centralization in small units and proper decentralization in big
organization. Further, Fayol does not favor centralization or decentralization of authorities but
suggests that these should be proper and effective adjustment between centralization and
decentralization in order to achieve maximum objectives of the business. The choice between
centralization and decentralization should be made after taking into consideration the nature of work
and the efficiency, experience and decision-making capacity of the executives.
9. Scalar chain
The scalar chain is a chain of supervisors from the highest to the lowest rank. It should be short- circuited.
An employee should feel the necessity to contact his superior through the scalar chain. The authority
and responsibility is communicated through this scalar chain. Fayol defines scalar chain as "the chain
of superiors ranging from the ultimate authority to the lowest rank."
10. Order:
According to Fayol there should be proper, systematic and orderly arrangement of physical and social
factors, such as land, raw materials, tools and equipments and employees respectively. As per view,
there should be safe, appropriate and specific place for every article and every place to be used
effectively for a particular activity and commodity. There should be selection and appointment of the
most suitable person to every job. There should be specific place for everyone and everyone should
have specific place. This principle also stresses scientific selection and appointment of employees on
every job.
11. Equity
The principle of equality should be followed and applicable at every level of management. There should
not be any discrimination as regards caste, sex and religion. An effective management always does
sympathetic and human treatment. The management should be kind, honest and impartial with the
employees. In other words, kindness and justice should be exercised by management in dealing with
their subordinates. This will create loyalty and devotion among the employees. Thus, workers should
be treated at par at every level.
12. Stability of use of personnel
Principle of stability is linked with long tenure of personnel in the organization. This means production
being a team work, an efficient management always builds a team of good workers. If the members of
the team go on changing, the entire process of production will be disturbed. It is always in the interest
of the enterprise that its trusted, experienced and trained employees do not leave the
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organization. Stability of job creates a sense of belongingness among workers who with this feeling are
encouraged to improve the quality and quantity of work.
13. Initiative
Under this principle, the successful management provides an opportunity to its employees to suggest their
new ideas, experiences and more convenient methods of work. The employees, who has been
working on the specific job since long discover now, better alternative approach and technique of
work. It will be more useful, if initiative to do so is provided to employees. In simple, to ensure
success, plans should be well formulated before they are implemented.
14. Spirit of Co-operation (Spirit de crops)
In order to achieve the best possible results, individual and group efforts are to be effectively integrated
and coordinated. Production is a team work for which the whole-hearted support and cooperation of
the members at all levels is required. Everyone should sacrifice his personal interest and contribute
his best energies to achieve the best results. It refers to the spirit of loyalty, faithfulness on the part of
the members of the group which can be achieved by strong motivating recognition and importance of
the members for their valuable contribution, effective coordination, informal mutual social
relationship between members of the group and positive and constructive approach of the
management towards workers' welfare.
Functions of Management:
In every organisation, the managers perform certain basic functions. These are broadly divided into six
categories viz., planning, organising, staffing, directing, coordinating and controlling. These are discussed
basically hereunder. You will learn about all these functions in detail in the lessons to follow.
(a)Planning
Planning is deciding in advance what is to be done, when it is to be done, how it is to be done. It is basically
concerned with the selection of goals to be achieved and determining the effective course of action from
among the various alternatives. This involves forecasting, establishing targets, developing the policies and
programming and scheduling the action, procedure, etc., Thus, planning requires decisions to be made on
what should be done, how it should be done, who will do it, where it will be done, and why it is to be
done. The essential part of planning consists of setting goals and programmes of activities. (b)Organizing
After the plans have been drawn, management has to organise the activities, and physical resources of the
firm to carry out the selected programmes successfully. It also involves determining the authority and
responsibility relationships among functions, departments and personnel at various levels to ensure
smooth and effective function together in accomplishing the objective. Thus, the organising function of
management is primarily concerned with identifying the tasks involved and grouping them into units and
departments, and defining the duties and responsibilities of people in different positions within each
department for well coordinated and cooperative effort in the organisation.
(c) Staffing
Staffing is concerned with employing people for the various activities to be performed. The objective of
staffing is to ensure that suitable people have been appointed for different positions. It includes the
functions of recruitment, training and development, placement and remuneration, and performance
appraisal of the employees.
(d) Directing
The directing function of management includes guiding the subordinates, supervising their performance,
communicating effectively and motivating them. A manager should be a good leader. He should be able
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to command and issue instruction without arousing any resentment among the subordinates. He should keep a
watch on the performance of his subordinates and help them out whenever they come across any
difficulty. The communication system, i.e., exchange of information should take place regularly for
building common understanding and clarity. The managers should also understand the needs of
subordinates and inspire them to do their best and encourage initiative and creativity.
(e) Coordinating
Management has to ensure that all the activities contribute to the achievement of the objectives of the business
as a whole. This requires integration of activities and synchronization of efforts. The heads of different
departments should not treat each other as competitors but should work as organs of one body. As the
proper functioning of every organ of a human body is important for a healthy body, the work of every
department is important for the organisation as a whole. Managers should, therefore, see that everybody
in the organisation understands its objectives and works in co-operation with others to achieve these
objectives. This function of management is called co-ordination. It consists of harmonizing group effort
so as to achieve common objectives.
(f) Controlling
This function of management consists of the steps taken to ensure that the performance of work is in
accordance with the plans. It involves establishing performance standards and measuring the actual
performance with the standards set. If differences are noticed, corrective steps are taken which may
include revision of standards, regulate operations, remove deficiencies and improve performance.
Levels of Management:
There are certain levels of management with varying degree of authority and responsibilities. Some managers
decide about the objectives of the business as a whole; some managers perform functions to achieve these
objectives in different departments, like production, sales, etc, and some of the managers are concerned
with the supervision of day-to-day activities of workers. Managers performing different types of duties
may, thus, be divided into three categories:
1. Top-Level Management
2. Middle-Level Management
3. Lower-Level Management
The following diagram will give you idea of different levels of management.
Board of Directors and Chief Top Level

Executives. Management
Departmental heads
Middle Level
and Managers
Management
Supervisors and Lower Level

Foreman Management
Workers
The diagram shows that the top level management includes Board of Directors and the Chief Executive. The
chief executive may have the designation of Chairman, Managing Director, President, Executive
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Director or General Manager. This level determines the objectives of the business as a whole and lays down
policies to achieve these objectives (making of policy means providing guidelines for actions and
decision). The top management also exercises an overall control over the organisation.
The middle-level management includes heads of various departments, e.g., production, sales, etc., and other
departmental managers. Sometimes senior departmental heads are included in the top management team.
The objectives of the business as a whole are translated into departmental objectives for the middle level
management. The heads of the departments then work out their own strategies so as to achieve these
objectives. Middle level managers are particularly concerned with the activities of their respective
departments.
The lower-level management consists of foremen and supervisors who look after the operative workers, and
ensure that the work is carried out properly and on time. Thus, they have the primary responsibility for the
actual production of goods and services in the organization.
These three levels of management taken together form the ‘hierarchy of management’. It indicates the ranks
and positions of managers in the hierarchy. It shows that the middle level management is subordinate to
the top-level and that the lower-level is subordinate to the middle-level management.
Managerial Roles
Mintzbergs a management thinker identified ten roles and classified them within three broad categories.
1 .Interpersonal Roles 2.Informational Roles 3. Decisional Roles 1
.Interpersonal Roles:
a) Figure head role:

In this role a manager performs symbolic duties required by the status of his office. His activities include to
greet the visitors attends the employee family functions.
b) Leader:
A Manager is responsible for the motivation and activation of subordinates. She/he is responsible for
staffing, training and associated duties.
c) Liaison:
It describes a manager’s relationship with the outsiders. A manager maintains smooth relation with other
organization government’s industry groups etc.
2. Informational Roles:
a) Monitor:
A manager scans the environment and collects internal and external information’s.
b) Disseminator:
Manager distributes the information to his subordinates in order to achieve organizational objectives.
c) Spokes person:
A Manager transmits the information’s to the outside of the organization.
3. Decision Role:
a) Entrepreneur:
Initiates and supervises design of organizational improvement projects.
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b) Disturbance handler:
A manager is responsible for taking corrective action when organization faces problem.
c) Resource allocated:
Manager is responsible for allocation of human, monetary and material resources.
d) Negotiator:
As a manager he bargains with suppliers, dealers, trade union, agents etc.
Managerial Skills
Robert L. Katz identified three kinds of skills for administrators. To these may be added a fourth—the ability
to design solutions.
1. Technical skill is knowledge of and proficiency in activities involving methods, processes, and
procedures. Thus it involves working with tools and specific techniques. For example, mechanics work
with tools, and their supervisors should have the ability to teach them how to use these tools. Similarly,
accountants apply specific techniques in doing their job.
2. Human skill is the ability to work with people; it is cooperative effort; it is teamwork; it is the
creation of an environment in which people feel secure and free to express their opinions.
3. Conceptual skill is the ability to see the "big picture," to recognize significant elements in a situation,
and to understand the relationships among the elements.
4. Design skill is the ability to solve problems in ways that will benefit the enterprise. To be effective,
particularly at upper organizational levels, managers must be able to do more than see a problem. If
managers merely see the problem and become "problem watchers," they will fail. They must have, in
addition, the skill of a good design engineer in working out a practical solution to a problem.
The relative importance of these skills may differ at various levels in the organization hierarchy. Among these
skills, technical skills are of greatest importance at the supervisory level. Human skills are also helpful in
the frequent interactions with subordinates. Conceptual skills, on the other hand, are usually not critical
for lower level supervisors. At the middle management level, the need for technical skills decreases;
human skills are still essential; and the conceptual skills gain in importance. At the top management level,
conceptual and design abilities and human skills are especially valuable, but there is relatively little need
for technical abilities.
Emerging Challenges of Management:
The challenges of the management in the today’s context are as follows:
a. Globalization of business: Globalization means flow of goods, services, informations, manpower etc
across nations without any restrictions. Due to globalization, world is consider as the small village.
The time and the place gap have been almost overcome by the help of new technologies. There is
continuous exchange of new ideas, innovations, methods and techniques across nations.This bring
both opportunities and threat to the business organization. A part from this, the regional agreement
and World Trade Organization (WTO) boost up the competitive market and added more complexity
to the manager’s job. Thus, managers need to understand the process of globalization and the
competition it creates for them and should act effectively and efficiently to overcome such challenges.
b. Technology: Technology is a major drive that changes the way the people think and act in their
corresponding environment. Technological advancement in computers and other electronic data
processing equipment have changed the whole system of managerial functions like planning, decision
making, organizing, motivating, controlling. Thus, managers need to recognize and anticipate
technological change and act according to capitalize the opportunities and neutralize the threats.
c. Quality Assurance and Productivity: In today’s context, quality is considered as the ability to satisfy
the customer. However, the human wants are every growing and providing the goods and service to
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satisfy their needs is bigger challenge for a today’s manager. The product and services must meet the
expectation of customer in terms cost, time, and services delivered within the product. To improve the
quality Total Quality Management (TQM) is being used in most of the organization, targeting
continuous improvement programs that include all the stakeholders together with suppliers and
customers. A part from this productivity is also becoming a major issue for today’s organization. Due
to extreme competition managers are focusing in reducing the wastages in terms of materials, time
and effort and thus enhancing the productivity.
d. Ethics and Social Responsibility: Ethics is concerned with the moral principles or values that
determine whether our action is right or wrong. Business must follow the ethics in their policies and
practices. However, one of the major challenges for our managers is to decide on whether a certain
behavior or action of employee is ethical or not. Thus, managers must understand the ethical norms
and values and act accordingly.
Social Responsibility is the duty towards society. The society includes all the stakeholders such as
customers, suppliers, creditors, employees, owners, government etc. So, management must address
the expectation of these stakeholders and fulfill their wants. Similarly, environmental issues, such as
global warming, pollution, ecology distortion etc are becoming major challenges to be addressed
effectively in the strategy and practices by the manger in an organization.
e. Empowerment: Delegating the power to the employees is a major challenge to mangers in today’s
context. People desire autonomy in their worksites, they want to take part in decision making and
enhance their creativity in the organizations. However, ineffective handling of such delegation may
de-motivate the employees and leads to employee turnover, absenteeism and stagnations in work.
Thus managers should create self-managed teams or autonomous work groups to empower the
employees.
f. Work-Force Diversity: It refers to the mix of people from various backgrounds in terms of gender,
race, ethnicity etc in today’s labour force. The participation of women and minorities has been
increasing. Thus, the challenge for a manager is to accommodate these diverse groups of people by
addressing different lifestyles, family needs and work styles.
g. Learning Organization: Organization must be able to learn from the past and present scenario and
formulate policies and practices accordingly. A learning organization is one that had developed the
capacity to continuously learn, adapt and change. The challenge for the managers is to change their
behavioural style and transform from the bosses to the team leaders.
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Unit 3
Evolution of Management Thoughts
Scientific Management Principles:

Meaning
The term scientific management is the combination of two words i.e. scientific and management. The word
"Scientific" means systematic analytical and objective approach while "management" means getting things
done through others. In simple words scientific management means application of principles and methods of
science in the field of management. "Scientific management is the art of knowing best and cheapest way". It
is the art of knowing exactly what is to be done by whom it is to be done and what is the best and cheapest
way of doing it. Scientific methods and techniques are applied in the field of management i.e., recruitment,
selection, training, placement of workers and methods of doing work in the best and cheapest way.
The Scientific management can be studied under the following heads:
Primary principles of scientific management as evolved by F.W. Taylor.

Secondary principles of scientific management.
Definitions of Scientific Management
The main definitions of scientific management are as follows:
According to Fredrick Winslow Taylor, "Scientific management means knowing exactly what you want men to
do and seeing that they do it in the best and the cheapest way."
According to Harlow Person, "Scientific management characterizes that form of organisation and procedure in
purposive collective effort which rests on principles or laws derived by the process of scientific
investigation and analysis, instead of tradition or on policies determined empirically and casually by the
process of trial and error."
According to Jones, "Scientific management is a body of rules, together with their appropriate expression in
physical and administrative mechanism and specialized executives, to be operated in coordination as a
system for the achievement of a new strictness in the control and process of production."
According to Lioyd, Dodd and Zynch, In broad outline "Scientific management seeks to get the maximum from
methods, men materials machines and money and it controls the works of production from the location and
layout of the worker to the final distribution of the product."
According to Peter F. Drucker, " Scientific management is the organized study of work, the analysis of work
into its simplest element and the systematic improvement of the workers".
Characteristics / Features of Scientific Management
The main characteristics or features of scientific management are as follows:
Approach: It is a systematic, analytical and objective approach to solve industrial problems.

Economy: The basis of scientific management is economy. For implementing economy, all the
unnecessary elements of production are eliminated and a sincere effort is made to achieve
optimum production at the minimum cost.
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A Definite plan: The main characteristic of scientific management is that before starting and work
there must be a definite plan before as and the work is to be done strictly according to that plan.
Discards old methods: It discards the age old methods of rule of thumb and hit or miss approaches.
Emphasis: It lays emphasis on all factors of production, men, material and technology.
Techniques: It implies scientific techniques in methods of work, recruitment, selection and training of
workers.
Attempts: It attempts to develop each man to his greatest efficiency and prosperities.
Method: It attempts to discover the best method of doing a work at the cheapest cost.
A definite Aim: It is another main characteristic of scientific management. Scientific management is
the process of organizing, directing, conducting and controlling human activities. Hence there
must be a definite aim before the managers, so that the human activities be organized directed
conducted and controlled for achieving that aim or aims.
Changes in attitude: It involves a complete change in the mental attitude of workers as well as the
management.
A Set of Rules: There must be a set of rules in accordance with the laid plan so that the objectives can
be achieved. According to F.W. Taylor, It is no single element but rather the whole combination
that constitutes the scientific management.
Primary Principles of scientific management as evolved by F.W. Taylor:F.W. Taylor, the father
of scientific management evolved the following five primary principle of scientific management:
Science, not Rule of Thumb

Rule of thumb was the technique of pre-scientific management era. Taylor maintained that the rule of
thumb should be replaced by scientific knowledge. While rule of thumb emphasizes mere
estimation, scientific method denotes precision in determining any aspect of work. This should be
done with the help of careful scientific investigation. Exactness of various aspects of work like
day's fair work, standardization in work, differential price rate for payment etc. is the basic care
of scientific management. Therefore, it is essential that these should be measured precisely and
not on mere estimates.
Harmony not Discord

Taylor emphasized that harmony rather than discord should be obtained in group action. Harmony means that a
group should work as a unit and contribute to the maximum. Within it there should be mutual give and take
situation and proper understanding.
Co-operation not Individualism

Scientific management requires that parts of industrial body co-operate with each other, scientific management
is based on mutual confidence, co-operation and goodwill. It requires a complete mental revolution on the
part of both workers and management. Taylor suggested "Substitution of war for peace, hearty and brotherly
co-operation for contention and strife, replacement of suspicious watchfulness with mutual confidence of
becoming friends instead of enemies."
The Development of each man to his greatest efficiency and prosperity

In order to maximize production all possible efforts are made to increase the efficiency of workers. Workers are
selected according to the nature of work. It includes scientific training, scientific allotment of work,
implementation of incentive wage plan above all, development of workers to the fullest extent for
themselves and also for the companies highest prosperity. Scientific management leads to the development
of each worker to his greatest efficiency and prosperity.
Secondary principles of scientific management: Standardization of Tools and Equipments
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Another principle of scientific management is the standardization of tools and equipments. it is essential for the
improvement of quality of products and also for bringing about uniformity in the production of standard
goods. As a matter of fact, standardization should be maintained in respect of tools, equipments, materials,
period of work, working conditions, amount of work, cost of production etc.
Scientific Selection and Training of Workers

Scientific management requires a radical change in the selection and training or workers. They must be selected
on a scientific basis. The old traditional and absolute methods of selection of workers have to be replaced by
the scientific and modern methods. Taylor suggested that the workers should be selected on scientific basis
taking into account their educational background, health, work experience, aptitude, physical, strength and
I.Q. etc. Further, proper training by qualified persons should be given according to their capabilities and
nature of work.
Experimentation and Scientific Investigation

The success of scientific management depends upon experimentation and investigation. It involves analytical
study, observation research, experimentation and investigation. It is only through constant experimentation
and scientific investigation that one can find out the best and most efficient methods of doing a work. It has
been rightly said that experimentation and investigation is the life-blood of scientific management.
Incentive Wage System

Taylor for the first time advocated an incentive wage system in the form of differential piece wages instead of
time wages. Under differential piece system two wage rates are prescribed, i.e. one lower and the other
higher. Those who are unable to perform standard work within standard time are paid wages at lower rate
per unit. On the contrary, those who attain standard or even more within the standard time are paid wages at
higher rate per unit. Thus, there is considerable difference in wages between those who attain and those who
do not attain standards.
Scientific Allotment of Task

Another important principle of scientific management is the scientific allotment of task. Every job must be
entrusted to the best available man according to his aptitude and training for that specific job. As a matter of
fact, every person, however efficient he may be, cannot perform all the jobs efficiently. One has to carefully
fit "the man to the job", and "the job to the man". The principle of 'right job to the right person' should be
implemented. A worker may perform his task most efficiently provided it suits his inclination aptitude taste
and capability.
Frank and Lillian Gilbreth:- The Gilbreth used motion picture films to study hand and body motions. Their
concern was on “economy of movement “They emphasized on the use of technique and methods to help
workers in developing their fullest potential trough training ,improved tools ,working environment and
standardize work method.
Willing H Leffingwell:- Leffingwell developed five principles of effective work. They are: - i) planning at work
ii) scheduling the work iii) executing the work iv) measuring the work and v) rewarding the workers.
Henry L Gantt: Gant refined the production control and cost control techniques. Gantt invent a technique of
scheduling work which is also called Gantt Chart. He was the first theorist to suggest management to pay
attention to service rather than profits.
Harrington Emerson: Emerson not only focuses on efficiency and productivity of work but, on the overall
objectives cost accounting and the function of staff department.
Contribution and limitation of scientific management
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Contribution of Scientific Management:

It promoted production through efficiency techniques. Productivity increased through assembly line
production method. Gantt chart representing flow of work in still widely used for scheduling
work.
It facilitates job design thorough specialization and standardization of work.
It gave importance to screening, selection, training and compensation of workers for improving
efficiency.
It introduced rational and systematic method to solve management problems .It replaced “rule of
thumb” method of doing work by scientific method.
Limitation of Scientific Management:

Exploitation of Workers: Taylor’s Scientific Management put unnecessary pressures on the
employees to perform the work faster. Importance was give to productivity and profitability. This
resulted in exploitation of the employees. Therefore, many employees joined trade unions. This
resulted in mistrust between management and employees.
Problem of unity of command: Taylor used functional foremanship. So the workers have to report to
eight bosses. This breaks the principles of unity of command, where the workers have to report to
only one boss. Lack of unity command can create confusion and chaos in the organisation.
Mechanical approach: Taylor approach was a mechanical approach. He gave too much importance to
efficiency. He did not consider the human element. Taylor considered workers as robots, which
could speed up the work at any cost.
Problems of separation of planning and doing: Taylor said to separate planning from doing. In reality
we cannot separate planning from doing. The planners should also be engaged in doing then only
they are able to make realistic plans for the organisation.
Individualistic approach: Taylor’s scientific management gives too much importance to individual
performance and not to group performance. However, the success of an organisation depends not
only on individual performance of workers, but also on the group performance.
Wrong assumption: Taylor assumed that workers are motivated only by financial gains. However, in
reality workers are motivated not financial incentives but also by social need and personal egos.
Narrow Application: Taylor’s scientific management has narrow application. It can be applied only
when the performance of the workers can be measured quantitatively. It can be applied only for
factories where the performance can be measured quantitatively. It cannot be used in the service
sector because in this sector the performance of a person cannot be measured quantitatively.
Administrative Management Principles:

This theory is concerned with management principles and function. It provided the process approach to
management. The major contributors of this theory are Henry Fayol, Max Weber and L Urwick. This theory
focuses on functions and skills that are need for management. It consists of:
Administrative management Theory (Fayol ‘s Theory)
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Bureaucracy Theory (Max Weber Theory)
1. Henri Fayol Theory of Management (Administrative Theory )
Fayol developed theory of management. According to him managerial excellence is a technical ability and can
be acquired. He developed theories and principles of management which are universally accepted and make
him universalistic. He was pioneer of the formal education in management. He stated that, management can
be studied in terms of the management process. Management consists of:
Managerial Skill: It includes: i. Physical Skill ii) Mental Skill iii) Moral Skill iv) Educational Skill v)
Technical Skill vi) Experience
Management Functions: It includes: i) Forecast and Plan ii) Organize iii) Command iv) Coordinate
v) Control
Business Activities: It includes : i) Technical ii) Commercial iii) Financial iv) Security v) Accounting
vi) Managerial
Principle of management : (See below)
Henry Fayol, a French industrialist, offered fourteen principles of management for the first time in 1916. During
the period of 1920-40 in the U.S. many authors did hard work in developing and testing various principles of
management. Today, there is a very lengthly list of management principles and it is not possible to give an
exhaustive lot of these management principles. Here, we are giving some important principles of
management.
Henry Fayol's Principle of Management
Following are the fourteen principles of management developed by the Henry Fayol:
Division of Work
According to Henry Fayol under division of work, "The worker always on the same post, the manager always
concerned with the same matters, acquire an ability, sureness and accuracy which increases their output. In
other words, division of work means specialization. According to this principle, a person is not capable of
doing all types of work. Each job and work should be assigned to the specialist of his job. Division of work
promotes efficiency because it permits an organizational member to work in a limited area reducing the
scope of his responsibility. Fayol wanted the division of work not only at factory but at management levels
also.
Authority and Responsibility

Authority and responsibility go together or co-existing. Both authority and responsible are the two sides of a
coin. In this way, if anybody is made responsible for any job, he should also have the concerned authority.
Fayol's principle of management in this regard is that an efficient manager makes best possible use of his
authority and does not escape from the responsibility. In other awards when the authority is exercised the
responsibility. In other awards when the authority is exercised the responsibility is automatically generated.
Discipline
According to Henry Fayol discipline means sincerity about the work and enterprise, carrying out orders and
instructions of superiors and to have faith in the policies and programmes of the business enterprise, in other
sense, discipline in terms of obedience, application, energy and respect to superior. However, Fayol does
not advocate warming, fines, suspension and dismissals of worker for maintaining discipline.
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These punishments are rarely awarded. A well disciplined working force is essential for improving the quality
and quantity of the production.
Unity of Command
A subordinate should take order from only one boss and he should be responsible and accountable to him.
Further he claimed that if the unit of command is violated, authority is undermined, disciplined in danger,
order disturbed and stability threatened. The violation of this principle will face some serious consequences.
In this way, the principle of unity of command provides the enterprise disciplined, stable and orderly
existence. It creates harmonious relationship between officers and subordinates, congenial atmosphere of
work. It is one of the Fayol's important essential principle of management.
Unity of direction
Fayol advocates "One head and one plan" which means that group efforts on a particular plan be led and
directed by a single person. This enables effective co-ordination of individual efforts and energy. This fulfils
the principles of unity of command and brings uniformity in the work of same nature. In this way the
principle of direction create dedication to purpose and loyalty. It emphasizes the attainment of common goal
under one head.
Subordination of individual interests to general interests

The interest of the business enterprise ought to come before the interests of the praise individual workers. In
other words, principle of management states that employees should surrender their personnel interest before
the general interest of the enterprise. Sometimes the employees due to this ignorance, selfishness, laziness,
carelessness and emotional pleasure overlook the interest of the organisation. This attitude proves to be very
harmful to the enterprise.
Fair Remuneration to employees

According to Fayol wage-rates and method of their payment should be fair, proper and satisfactory. Both
employees and ex-employers should agree to it. Logical and appropriate wage-rate and methods of their
payment reduces tension and differences between workers and management, create harmonious relationship
and a pleasing atmosphere of work. Further Fayol recommends that residential facilities be provided
including arrangement of electricity, water and facilities.
Centralization and Decentralization

There should be one central point in the organisation which exercises overall direction and control of all the
parts. But the degree of centralization of authority should vary according to the needs of situation.
According to Fayol there should be centralization in small units and proper decentralization in big
organisation. Further, Fayol does not favor centralization or decentralization of authorities but suggests that
these should be proper and effective adjustment between centralization and decentralization in order to
achieve maximum objectives of the business. The choice between centralization and decentralization be
made after taking into consideration the nature of work and the efficiency, experience and decision- making
capacity of the executives.
Scalar chain
The scalar chain is a chain of supervisors from the highest to the lowest rank. It should be short-circuited. An
employee should feel the necessity to contact his superior through the scalar chain. The authority and
responsibility is communicated through this scalar chain. Fayol defines scalar chain as "the chain of
superiors ranging from the ultimate authority to the lowest rank." The flow of information between
management and workers is a must. Business opportunities must be immediately avoided of. so we must
make direct contact with the concerned employee. Business problems need immediate solution, so we
cannot always depend on the established scalar chain. It requires that direct contact should be established.
Order:
According to Fayol there should be proper, systematic and orderly arrangement of physical and social factors,
such as land, raw materials, tools and equipments and employees respectively. As per view, there should be
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safe, appropriate and specific place for every article and every place to be used effectively for a particular
activity and commodity. In other words, principles that every piece of land and every article
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should be used properly, economically and in the best possible way. Selection and appointment of the most
suitable person to every job. There should be specific place for everyone and everyone should have specific
place. This principle also stresses scientific selection and appointment of employees on every job. Equity
The principle of equality should be followed and applicable at every level of management. There should not be
any discrimination as regards caste, sex and religion. An effective management always accords sympathetic
and human treatment. The management should be kind, honest and impartial with the employees. In other
words, kindness and justice should be exercised by management in dealing with their subordinates. This will
create loyalty and devotion among the employees. Thus, workers should be treated at par at every level.
Stability of use of personnel

Principle of stability is linked with long tenure of personnel in the organisation. This means production being a
team work, an efficient management always builds a team of good workers. If the members of the team go
on changing the entire process of production will be disturbed. It is always in the interest of the enterprise
that its trusted, experienced and trained employees do not leave the organisation. Stability of job creates a
sense of belongingness among workers who with this feeling are encouraged to improve the quality and
quantity of work.
Initiative
Under this principle, the successful management provides an opportunity to its employees to suggest their new
ideas, experiences and more convenient methods of work. The employees, who has been working on the
specific job since long discover now, better alternative approach and technique of work. It will be more
useful, if initiative to do so is provided to employees. In simple, to ensure success, plans should be well
formulated before they are implemented.
Spirit of Co-operation (Spirit de crops)

In order to achieve the best possible results, individual and group efforts are to be effectively integrated and
coordinated. Production is a team work for which the whole-hearted support and co-operation of the
members at all levels is required. Everyone should sacrifice his personal interest and contribute his best
energies to achieve the best results. it refers to the spirit of loyalty, faithfulness on the part of the members
of the group which can be achieved by strong motivating recognition and importance of the members for
their valuable contribution, effective coordination, informal mutual social relationship between members of
the group and positive and constructive approach of the management towards workers' welfare.
Contribution and Limitation of Administrative Management Theory:
Contribution:
This theory serves as the foundation for the study of management function of planning, organizing,
staffing , directing and controlling
It serves as the guide for modern management behaviors. Limitations:
This theory has limited application in the complex and dynamic environment. Since it ignores the
impact of environmental changes.
This principle is mechanistic in nature, which cannot be applicable in modern management.
This theory ignores the importance of human behaviors.
Comparison between Taylor’s and Fayol’s Principles.

Both the persons have contributed to development of science of management. The
contribution of these two pioneers in the field of science of management has been
reviewed as “The work of Taylor & Fayol was, of course, especially complementary.
They both realized that problem of personnel & its management at all levels is the key
to individual success. Both applied scientific method to this problem that Taylor
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managing director and work downwards, was merely a reflection of their very different
careers”. They both differ from each other in following aspects: -
Taylor looked at management from supervisory viewpoint & tried to improve efficiency at operating level. He
moved upwards while formulating theory. On the other hand, Fayol analyzed management from level of top
management downward. Thus, Fayol could afford a broader vision than Taylor.
Taylor called his philosophy “Scientific Management” while Fayol described his approach as “A general theory
of administration”.
Main aim of Taylor - to improve labor productivity & to eliminate all type of waste through standardization of
work & tools. Fayol attempted to develop a universal theory of management and stressed upon need for
teaching the theory of management.
Taylor focused his attention on fact by management and his principles are applicable on shop floor. But Fayol
concentrated on function of managers and on general principles of management wheel could be equally
applied in all.
Similarity - Both emphasized mutual co-operation between employment and employees. Spheres of
Human Activity
Fayol’s theory is more widely applicable than that of Taylor, although Taylor’s philosophy has
undergone a big change under influence of modern development, but Fayol’s principles of
management have stood the test of time and are still being accepted as the core of management
theory.
Psychologists View Point
According to Psychologists, Taylor's study had following drawbacks: -
Ignores human factors - Considers them as machines. Ignores human requirements, want and aspirations.
Separation of Planning and Doing.
Dissatisfaction - Comparing performance with others.
No best way - Scientific management does not give one best way for solving problems
2. Max Weber’s Bureaucracy Theory
Max Weber (1864-1920), who was a German sociologist, proposed different characteristics found in
effective bureaucracies that would effectively conduct decision-making, control resources, protect workers and
accomplish organizational goals. Max Weber's model of Bureaucracy is oftentimes described through a
simple set of characteristics, which will be described in this article.
Max Weber's work was translated into English in the mid-forties of the twentieth century, and was oftentimes
interpreted as a caricature of modern bureaucracies with all of their shortcomings. However, Weber's work
was indented to supplant old organizational structures that existed in the earlier periods of industrialization.
To fully appreciate and understand the work of Max Weber, one therefore has to keep the historic context in
mind, and not "just" see his work as a caricature of bureaucratic models.
Below, some characteristics of the bureaucratic model are presented. Each characteristic is described in relation
to which traditional features of administrative systems they were intended to succeed.
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Fixed division of labor

The jurisdictional areas are clearly specified, and each area has a specific set of official duties and rights that
cannot be changed at the whim of the leader.
This division of labor should minimize arbitrary assignments of duties found in more traditional structures, in
which the division of labor was not firm and regular, and in which the leader could change duties at any
time.
Hierarchy of offices
Each office should be controlled and supervised by a higher ranking office. However, lower offices should
maintain a right to appeal decisions made higher in the hierarchy.
This should replace a more traditional system, in which power and authority relations are more diffuse, and not
based on a clear hierarchical order.
Rational-legal authority
A bureaucracy is founded on rational-legal authority. This type of authority rests on the belief in the "legality" of
formal rules and hierarchies, and in the right of those elevated in the hierarchy to posses authority and issue
commands. Authority is given to officials based on their skills, position and authority placed formally in
each position.
This should supplant earlier types administrative systems, where authority was legitimized based on other, and
more individual, aspects of authority like wealth, position, ownership, heritage etc.
Creation of rules to govern performance

Rules should be specified to govern official decisions and actions. These formal rules should be relatively stable,
exhaustive and easily understood.
This should supplant old systems, in which rules were either ill-defined or stated vaguely, and in which leaders
could change the rules for conducting the daily work arbitrarily.
Separation of personal from official property and rights

Official property rights concerning e.g. machines or tools should belong to the office or department - not the
officeholder. Personal property should be separated from official property.
This should supplant earlier systems, in which personal and official property rights were not separated to the
needed extent.
Selection based on qualifications
Officials are recruited based on qualifications, and are appointed, not elected, to the office. People are
compensated with a salary, and are not compensated with benefices such as rights to land, power etc.
This should supplant more particularistic ways of staffing found in more traditional systems, where officials
were often selected due to their relation with the leader or social rank. Benefices such as land, rights etc.
were also common ways of compensating people, which was to be replaced by a general salary matching
qualifications.
Clear career paths
Employment in the organizations should be seen as a career for officials. An official is a full-time employee, and
anticipates a lifelong career. After an introduction period, the employee is given tenure, which protects the
employee from arbitrary dismissal.
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This should supplant more traditional systems, in which employees' career paths were determined by the leader,
and in which employees lacked the security of tenure.
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Max Weber viewed these bureaucratic elements as solutions to problems or defects within earlier and more
traditional administrative systems. Likewise, he viewed these elements as parts of a total system, which,
combined and instituted effectively, would increase the effectiveness and efficiency of the administrative
structure.
The bureaucratic structure would to a greater extent protect employees from arbitrary rulings from leaders, and
would potentially give a greater sense of security to the employees.
Additionally, the bureaucratic structure would create an opportunity for employees to become specialists within
one specific area, which would increase the effectiveness and efficiency in each area of the organization.
Finally, when rules for performance are relatively stable, employees would have a greater possibility to act
creatively within the realm of their respective duties and sub-tasks, and to find creative ways to accomplish
rather stable goals and targets.
Criticisms of Bureaucracy Theory

Bureaucratic organisation is a very rigid type of organisation. It does not give importance to human relation. It is
suitable for government organisation. It is also suitable for organisation s where change is very slow. It is
appropriate for static organization.
Bureaucratic organisation is criticized because of the following reasons:
Too much emphasis on rules and regulation .The rules and regulations are rigid and inflexible.
No importance is given to informal groups. Nowadays, informal groups play an important role in all
business organization.
Bureaucracy involves a lot of paper work. The result in lot of wastage of time, effort and money.
There will be unnecessary delay in decision making due to formalities and rules.
Bureaucratic model may be suitable for government organisation. But it is not suitable for business
organisation because business organisation believe in quick decision making and flexibility in
procedures.
Too much importance is given to the technical qualification of the employees for promotion and
transfers. Dedication and commitment of the employee is not considered.
There is difficulty in coordination and communication.
There is limited scope for human resources .(HR)
Behavioural Science Theory:

Behavioural Science Theory includes human relation and behavioural science movement. It modified improved
and extended the classical theory. Classical theory concentrated on job content and management of physical
resources, where as behavioural science theory gave greater emphasis to man behind the machine and
stressed the importance of individual as well as group relationship.
Chester Barnad: Barnad argued that people join organization to satisfy some of their personal
objectives. Organization should therefore, satisfy such personal goals, of employees, while
pursuing organizational goals. An organization can sustain and survive only when it strikes a
balance between their personal and organizational goals.
Mary Parker Follett: Follet propounded democratic and participatory theory of management. She
pointed out the need for the concept of group and association to be introduced in the practice of
management. She advocates the democratization of the work force.
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Elton W. Mayo (The Hawthorne Studies): The study conducted by Elton Mayo and his associates
between 1927-1932 at Western Electric’s Hawthorne Plant dramatically impacted the prevailing
thought of management .They experimented the effect of illumination on work productivity. In
that study, two groups: i) controlled and ii) experiment groups were formed to find out the effect
of bright and dim light. The control group work without change in lighting and the experiment
group worked in fluctuating lighting condition. The result showed that there is no relation
between illumination and performance. In other words, productivity of both groups increased.
Thus, the study concluded that the human element (more specifically relation among workers) is
important in the workplace. This study discovered the effect of group norms and standard on
individual behaviour. In another experiment Mayo revealed that productivity improved by change
in working conditions as length of rest time, duration of work, presence or absence of free lunch
etc.
Maslow’s Hierarchy of Needs:

Maslow’s Hierarchy of Needs (Abraham Maslow): Maslow hypothesized that within every human being, there
exists a hierarchy of five needs.
Physiological: Includes hunger, thirst, shelter, sex and other bodily needs.
Safety: Security and protection from physical and emotional harms.
Social: Affection, belongingness, acceptance and friendship.
Esteem: Internal factor such as self respect, autonomy and achievement and external factors such as
status, recognition and attention.
Self- actualization: Drive to become what one is capable of becoming: includes growth, achieving
one’s potential and self fulfillment.
Self actualization needs (Achievements)
Esteem Needs (Status)
Social Needs (friendship)
Safety Needs (physical, social, economic)
Physiological Needs (food, clothes, shelter)
Maslow’s Hierarchy of Needs Maslow separated the five needs into higher and lower orders.
Lower order needs: The needs that are satisfied externally and lower order needs, such physiological
needs, and safety needs.
Higher order needs: The needs that are satisfied internally, such as social, esteem and self-
actualization needs.
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McGregor’s Theory X and Theory Y:
Douglas McGregor invented the Theory X and Theory Y, also known as “hard guy, soft guy” approaches of
managing people in the organization. It states that, people’s commitment to work in organization is
influenced by assumptions managers make about people. One set of assumption is called theory X, which
describes employees with relatively negative view. And another set of assumption is called theory Y, which
describe employees positively.
McGregor’s Theory X and Theory Y
Theory X (Traditional View) Theory Y (Contemporary View)

1. The average person dislikes work inherently. 1. The average person does not inherently dislike
work but depending on condition may find work
to be satisfying or
punishment.
2. The average person will avoid work if he or she 2. People will exercise self-direction and self-
can. control to achieve organizational objectives under
certain conditions.
3. Most people must be coerced, controlled or 3.People will seek to attain their firm’s objectives
threatened with punishment to get them to if there are sufficient rewards provided.
work toward the achievement of
organizational goals.
4. The average person prefers to direct to avoid 4.Under proper conditions the average individual
responsibility. will seek responsibility.
5. The average individual has relatively little 5.The capacity to use imagination and originality is
ambition and wants security above all. widely found in the people.
Contribution and Limitation of Behavioural Theory:

Contributions:
This theory shifted the focus of management to the human side of organization. The “rational man” of
scientific became “social man” in the human relation theory.
Social Setting and groups are important for productivity. Workers respond to pressures of informal
work groups.
Non-Financial rewards such as recognition and appreciation are important for worker productivity.
Needs influence behavior. Unfulfilled needs influence productivity in organization.
Theory Y assumptions get people’s commitment to work. Limitations:
This Theory gives overemphasis on human variable.
Human behaviour is complex and is studied from a variety of viewpoints. This complicates the
problem for a manager trying to use insights from the behavioural sciences.
Human behaviour cannot be predicted. This limits the practical application of this theory.
Focus on symbolic reward may not always be effective on motivating the staffs.
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The Decision Theory:

Herbert Simon, Luther Gulik and Lyndall Urwick have been the major contributor to this management thought.
This theory focuses on managerial decisions. Decisions are made through rational choice among different
alternative available. It is a choice making activity and choice determines our activity.
Herbert Simon’s (One of the major contributors of decision theory) model is based on two concepts
Bounded rationality: rational decision making is constrained by limitation of knowledge, resource etc.
Satisficing: Maximization is not possible in decision making .Decision make should “satisfice” and
achieve the satisfactory outcome administrative man always satisfice.
This theory advocates that decision making should be rational. The rational approach to decision making should
involves the following steps:
Define the problems
Identify relevant alternatives
Evaluate the alternatives.
Select the best course of action
Implement the action
Evaluate the result of the action Contribution and Limitation of Decision Theory Contribution:
In the field of management the decision theory provides guidelines for manager to make decision and
solve problems.
This theory provides the “science” of improved organizational decision making through quantitative
methods.
The theory makes the path for studying the process by which administrative organization makes
decisions.
Limitations:
It does not take a total view of management. Its scope is limited.
Sometimes it is difficult to claim whether a decision finalize the action or commence the action.
Management Science Theory

The management science theory applies statistical and mathematical technique to solve complex problem in
business. It focuses on solving technical rather than human behaviour problem. It used the techniques like
linear programming, economic order quantity (EOQ), game theory, queuing theory etc to solve the problem.
With the development of computer technology and other source of communicate media there has been high
impact of management science theory in the business world to make decision and solve complex problems.
Currently, there are three main branches of management science. They are:-
Quantitative management: It utilizes mathematical techniques such as linear programming, modeling,
queuing theory, etc to help managers make right decisions.
Operation management (Operation Research): It provides managers with a set of techniques that they
can use to utilize an organization’s production system to increase efficiency.
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Management Information System: It helps manager design information systems that provide
information about events occurring within and outside an organization.
Contribution and Limitation of Management Science Theory:

Contributions:
This theory provides a new way to think about the complex managerial problems of the future and
prescribes basis to manage these problems proactively.
This theory enhances managers understanding of overall organizational processes. Limitations:
This theory ignores the importance of people, relationships and other non-quantifiable factors.
The assumptions used for quantifying decision making do not match the real world situations.
This theory is not substitute of management functions. It prescribes a limited number of tools for the
specific use in solving problems.
The System Theory

During the 1960, management researcher began to analyze organization from a systems perspective, a concept
taken from physical science. A system is a combination of two or more interrelated or interdependent parts
in a whole unit. A system is an established arrangement of components which leads to attainment of
particular objectives according to plan. The two basic types of systems are closed system (which do not
interact with their environment) and open system (which dynamically interact with their environment).
Business Organization are perceive as open adaptive system. Any organism can be considered as an energy
system which has inputs, transformation process and outputs. In general, the term system is applied to any
activity or any collection of facts, ideas or principles which are so arranged as to present a united a whole.
All operation of system will be methodical, thorough and regular and above all as per plan to achieve set
objectives. In business many division and departments are organized on functional bases and all act as
coordinated whole to achieve the basic objectives of the firm. E.g. the inputs for a university would be
students, teaching materials, books, money and so on. The transformation process would consist of lectures,
seminars, assignments, research, study, discussion, counseling etc. The output would be educated, cultured
and discipline individuals ready to enter the real world of business or employment.
The major features of system are:
Every system is always focusing on a goal.
A particular system has some subsystem .Each subsystem interact with each other.
System may be open or close.
There is always a unity of action in each and every subsystem to achieve an overall system goal.
System always has a boundary, which separate it from environment.
System depends upon the flow of information in and outside its boundary.
The emphasis is given to the effective feedback for system function control.
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System View of Organization
Contribution and Limitation of System Theory:
Contributions:
1. It recognizes the interrelation and interactions among subsystems for synergetic effect. In addition it
implies that decision s and actions take in one organizational area will affect others and vice versa.
2. It recognizes that organizations are not self –contained. They rely on their environment for essential
inputs and as outlets to absorb their outputs.
Limitations:
There are practical problems in applying system theory in organizations. The problems occur to
determine system’s boundaries and identify interrelations of the various sub-systems.
How managers have to process the things is not very clearly defined by the system theory.
Contingency Theory (Situational Theory)

The contingency theory can be described as “if, then” theory, i.e. If this is the way my situation is, then this is
the best way for me to manage. It states that, organization and even the units within the same organization
are diverse –in size, goals, work activities etc. So one best way, or universally applicable management is not
possible. Thus, management depends upon the situation and should act according to the situation. The major
contingency variables are:
Organizational Size: As size increase, so do the problems of coordination. For instance, the type of
organizational structure appropriate for an organization of 50,000 employees is likely to be
inefficient for an organization of 50 employees.
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Routineness of Task Technology: To achieve its purpose, an organization uses technology. Routine
technologies require organizational structure, leadership styles and control system that differ from
those required by customized or non-routine technologies.
Environmental Uncertainty: The degree of uncertainty caused by environmental changes influences
the management process. What works best in a stable and predictable environment may be totally
inappropriate in a rapidly changing and unpredictable environment.
Individual Differences: Individual differences in terms of their desire for growth, autonomy, tolerance
of ambiguity, and expectations. These and other individual differences are particularly important
when mangers select motivation techniques, leadership styles and job designs.
Contributions and Limitations of Contingency Theory:

Contributions:
This theory helps to examine the conditional or moderating variables of cause and effect relations.
This theory helps to improve the caliber of the managers. Since more knowledge is gained about
which factors should be take into account in what situation managers have to use their best
knowledge and will manage organizations better than now in the future.
Limitations:
1. This theory may not be applicable to all managerial issues. Since, it fails to identify all the important contingencies.
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Unit 4
Environmental Context of Management
Environment occupies a very significant place in functioning of organization. It refers to the forces that create
conditions and influences on the capacity of a business firm to compete in the market. The ability to cope
with the changing environment determines the survival of an organization. Thus, analysis of the
environmental forces is the key to be an effective organization.
Business environment is sum total of all forces surrounding and influencing the life and development of an
organization. According to Gareth: Business environment is defined as “The set of forces surrounding an
organization that have the potential to affect the way it operates and its access to scarce resources”
Business manager have to understand changes and complexity of the environment forces to skillfully exercise
them so as to increase firm’s competitive capacity in the market.
Organisation – Environment Relationship

Business organizations are viewed as the open system. There is constant interaction between a business
system and its environment. Organisation obtains resources from the environment and transforms them
into outputs that are again returned to the environment in the form of finished goods and services.
Political
Inputs Conversion Outputs

Capital Goods
Raw material Services

Technological Business Firm Socio-cultural
Labor Profit
Land Employment
Technology Feed back

Tax Revenue
Economic
Figure 1: Business system and its environment
Types of environment: The component of business environment is classified into two broad categories.
1. Internal Environment
2. External Environment.
1. Internal Environment: Internal Environment is defined as all the forces and conditions within an
organization that influence organizational behavior. An organization’s internal environment has
the following components:
a. Employees: They are the main components and important assets of an organization. Employees
are responsible to work as per the direction, goals, rule and regulation of the company. To work
on these goals and directions, organization has to motivate and satisfy employees with specific
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reward policy. Without the cooperation of employees and their productivity, organization cannot attain
their expected goals.
b. Shareholder and Board of Directors: Shareholders being the owners of business have a direct
interest in the performance of the organization. The directors are elected by them (shareholder),
who represent their interest in the board. The board is responsible to manage company and
formulate appropriate strategy and long term planning. They evaluate overall organization
performance and provide direction to the top level management for the growth of an organization.
c. Culture: Every organization has its own culture. Culture refers to a set values, beliefs of an
organization under which it is functioning. It helps to bind all employees and comply with
organizational rules and regulation. Culture has a powerful influence on the process of
organizational change and decision making.
d. Labor Unions: Labor Union represents the problems and feeling of their members to
management. The good relation between labor union and management avoid unnecessary
disturbances in an organization.
1. External Environment:
External Environment is the condition and forces outside the organization that are relevant to its
operation and influence the organizational activites. There are two categories of the external
environment.
a. General Environment
b. Task(Specific) Environment
a. General Environment: General Environment consists of those forces that put direct pressure on
the organizational activities. They are as follows;
i. Economic Environment: General economic conditions are critical to the success of an

organization. It is defined as the nature and direction of the economic system of a country and
their impacts in the individual organization. The economic factors such as, national income,
saving, investment, monetary policy, economic growth, interest rate, consumption pattern,
employment rate etc. have great impact on functioning of an organization. Managers should
devote much of their time and resources to forecast the economy and anticipating changes.
Components :( Economic System, Economic Policies, Business Cycle, Capital Market)
ii. Socio-Culture Environment: The socio-culture environment affects the behavior of people
and their organization. It includes, values, beliefs, lifestyle, family-system, opinions, and
assumptions widely held by the citizen of the particular country. These elements of society
directly influence business organization.
Components: (Attitude and Beliefs, Religion, Language, Education, Social Organisation, Class
System)
iii. Political Environment: It refers to the influence from government institution, strategies of the
political parties, policies of state and local government, and relationship between government
and business organization .Political Environment is important to the manager because:
a. It imposes certain legal constraint on the business.
b. It establishes a market atmosphere that may be pro-business or anti-business.
c. It has the potential to provide stability needed for long term business planning.
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Components: (Constitution, Political Parties, Government, International Political Events)
iv. Technological Environment: Technology is the practical application of scientific knowledge.

Radical development has occurred over the past several years in communication, information,
and automation including robotics. This development brings both opportunity and threats for
the organization. Thus, organization should utilize its strength to capitalize the opportunity
and neutralize the threats.
Components: (Up-gradation and Maintenance, Information & Communication Technology)
b. Task(Specific) Environment: The specific environment comprise the following factors:

i. Customer: Customer exchange resources, usually in the form of money for a organization’s
product and services .A customer may be individual, a family, a business house or an
institution. Customer not only buys the product or services they also give valuable ideas,
opinions information and reaction related to it. Thus mangers should maintain close
relationships with them.
ii. Suppliers: Suppliers are the organizations which provide resources (material, men, machines,
capital etc) t to other business firms. As the quality and price of the raw materials receive
from the suppliers determine the quality of output, the business firms try to obtain lower
prices, better quality work, and faster deliveries. Which strength the competitive position or
an organization.
iii. Government: The role of the government is to regulate business systems and to protect the
interest of the consumers and the general public .It has greater influence on corporate
policies, procedures and business practice of modern organization.
iv. Competitors: It refers to an organization that competes for resources with other organization.
The organization must analyze the competition and establish clearly defined marketing
strategy in order to provide superior customer satisfaction and to increase market share.
v. Media: The media keeps eye on the vital decision or actions of the business firm having
general public interest. Therefore managers need to have good communication with both
media and external audiences and deal with them effectively and promptly.
vi. Financial institution: Organization depend on a variety of financial institution such
commercial banks, merchant banks and insurance companies to supply fund for maintaining
and expanding their activities. The term and condition of loans and advances and quality and
promptness of their services have an impact on the performance of a business.
vii. Special interest group: It refers to environmentalist, unions, consumers, advocates, and much
other professional organization. There organizations pressurize the company or business firm
to advance their position and issues like quality service, price, waste management,
environmental protection etc.
Social Responsibility :( We prosper by helping society prosper)

Business is the integral part of the communities in which they operate. All good executives know that their
long-term success is based on continued good relations with the wide range of individuals, group and
institution. So in general, social responsibility refers to transparent business practices that are based on
ethical values, compliance with legal requirements and respect for people, communities and the
environment. Thus, beyond making profits, companies are responsible for the totality of their impact on
people and the planet.
According to Griffen:
“Social responsibility is the set of obligations an organization has to protect and enhance the societal context
in which it functions.”
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Approaches to social responsibility:
High Social Responsibility

Social Contribution
Social Reponse
Social Obligation
Low Social Responsibility

Social Obstruction
1. Social Obstruction: The organization which performs as low as possible social responsibility.
And sometimes even crosses the ethical boundaries. E.g. adulteration in products.
2. Social Obligation: The organization which only performs that much social responsibility which
are bound by laws. E.g. writing warning in cigarette packets.
3. Social Response: The organization which performs those activities which are legal and ethical.
Such as providing toothpaste and toothbrush in dental camp, collecting blood for Nepal Red cross
Society etc.
4. Social Contribution: Organization itself participates actively in the development and welfare of
the society. E.g. Building hospitals, schools, conducting skill development program etc.
Areas of Social Responsibility:

1. Organizational Stakeholder: Creditors, suppliers, local community, employees, government, are
the stakeholder of the organization. Thus, to have a good relation with them, the organization
should produce qualitative products, provide reasonable salaries to employees compare to
competitors, no discriminations between the employees, pay taxes etc.
2. The natural environment: There is globally high concern on natural resources depletion.
Protection of water, soil and air from pollutants are the global issues which the organization
should deeply consider while taking corporate decisions.
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3. General Social Welfare: For the perpetual growth and existence, organization should have good
relation with society. This relation can be strengthened by contributing in charities, establishing
health care centers in remote areas, providing jobs etc.
Management Ethics:
Management ethics is a philosophically related with moral conduct, duty, and judgment of our managers.
According to Ricky W. Girffen; “Ethics is an individual’s personal belief about whether a behavior, action or
decision is right and wrong”.
Sources of Management Ethics:

An organization’s ethics is derived from three principle sources. They are;
Social Ethics: The values and standard embodies in a society’s laws, customs, practices and norms and values.
Professional Ethics: The value and standard that groups of managers and workers use to decide, how to
behave appropriately.
Individual Ethics: Personal values and standards that results from the influence of family, peers, upbringing
and involvement in significant social institution.
Significance of management Ethics:

Organization is a social system. Any unethical activities may harm all the stakeholder of an organization.
Hence, the management of a business organization must be aware of the significance of maintaining
ethical standard for its existence and sustained growth.
 Ethical behavior enhances the reputations and goodwill of a business. The organization gains
reputation and goodwill when it behaves ethically. Reputation is a valuable asset for a business
firm.
 An organization violating ethical standards faces criticisms and hostility. Such violations also
result in penalty or social boycott of its products.
 Ethical standards of business helps in economic and social development in the society in which it
operates through effective and prudent use of resources, free and fair competition. A climate of
fairness develops, not only in the business, but also in other organizations associated with it.
 By following ethical standards, a business can keep its promises and transparency. It gains
credibility and stability.
 By acting ethically, a business organization can protect the interest of the wider society.
 A climate of justice, freedom, equity and equality is created in an organization through ethical
practices.
Emerging Business Environment in Nepal:

Nepal is one of the least developed countries in the world. After being restoration of democracy in 1990, there
were so many developmental activities conducted on improving the economic, social, political and
technological environments. The decade of 1990s witnessed fast changes in Nepal’s business
environment. Those developments are:
i. Open market, liberalization and deregulation of the economy.
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ii. Privatization of major public sector enterprises

iii. Consumers and environmentalists have started exerting pressure
iv. Social awareness brought forth the movement towards pluralistic society.
v. Demand on business also arose from the social activists and citizens
vi. Technology transfer issues cam into prominence.
vii. Nepal’s participation, commitment, and membership in different forum such as WTO.
Economic reforms started by the government during the last two decades have changed the industrial and
business environment significantly. After being Republic State on may 28th 2008, along with changing
political scenario different possibility and challenges of economic development have started to reorganize
in the sharper focus. The ever-growing process of globalization , the presence of multi-nationals in the
market, the open door to import and the obvious shift to a buyer’s market have thrown new demand and
challenges on business firms of the country.
1. Economic Environment: Nepal has adopted a mixed economy where the public and private
sectors freely operate for the overall development of the country. Though we have come to an end
of 3 years interim plan (2007-2010) the economic condition had not improved as planned. There
are vast disparities in the income level of the people. The growth rate is below 3% and has heavy
pressure to the low income group because of high inflation rate (i.e. more than 10%).There is
high trade deficit, import from India and China and third countries are increasing rapidly where as
the export to those countries are degrading day by day due to weak and low quality product and
services. Apart from this , the emerging globalization concept( i.e. free flow of goods ,services,
human resources, etc. in-between countries has hit hard to the small and cottage industries. The
brain-drain is also the new challenge for the nation. However, various reform programs in quality
management and export oriented business bring some hope in the development of economic
environment of Nepal.
2. Political and Legal Environment: Since the last 20 years Nepal has been going through a number
of political ups and downs. Unstable government and frequent strike by different political parties
and their sister organization create chaos in the country. The rules and regulation are being
violated by peoples and organizations supported by political parties. Frequent changes in policies
also create more confusion and threats to the existing and newly invested companies. Problems
related to labor unions, employees’ dissatisfaction, human right and civic societies and
professional have not been properly addressed. Apart from that, political parties are not reaching
in a consensus to draft a new constitution for New Nepal.
3. Socio-Cultural Environment: People of different caste, religion, belief system, educational

background, age, sex and awareness are in our nation. There are still the incidents related to caste
discrimination. Literary rate in remote areas are not improving as expected. Most of the younger
people in the villages are flown to Middle East countries for better life style and income.
Hierarchy system also prevails in society and organization. People working in higher position
think themselves as superior and dominate the lower position staff and people. Undue influences,
hypocrisy, nepotism, favoritism are very common in our society and organization. However,
Nepal are known for simple, well behaving the guests, honest for their parents and owners, loving
to the nature and sacrificing. This attitude and behavior could be good source for future growth of
business activities.
4. Technological Environment: The technological environment consists of that process by which

organization transforms inputs into outputs. Technological development depends on government
spending on research, new discoveries and development technology transfer and operation
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system. In Nepal there are very few industries which go side by side with the
increasing improvement in technology. Especially, the financial sector,
telecommunication sector are using latest technology. Whereas agriculture sector,
industrial sector are still show slow pace in improving the functioning of their
activities in using latest technology. There are also financial constraints for small
organization to update their technologies. Apart from that, government also
shows lack of interest in developing efficient and effective method to enhance the
development of new technologies.
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Unit 5
Planning and Decision
Making
Planning
Planning is the primary function of management. It is called primary function because it affects all the other
functions of management. Planning is concerned with deciding in advance that, when, where, why and
how is to be done and who shall do it. Thus, planning is a document stating the goals, outlining the action-
oriented strategies to attain these goals, and assigning organizational resources to attain them.
According to Koontz and O’Dennell, “planning is an intellectual process, the conscious determination of
course of action, the basing of decisions on purpose, facts and considered estimates”
Managerial Hierarchy and planning system
Managerial Pyramid Types of Planning
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Top
managment Strategic Planning
Middle
Tactical Planning
Management
Lower Managment Operational Planning
1. Strategic Plan: Strategic plan is also called grand plan. It has a strong external orientation and
covers the total organization. It begins by asking question regarding the purpose or mission and
the operation to which an organization is devoted. Senior executives are responsible for the
development of these plans.
2. Tactical plan: Tactical plans translate broad strategic goals and plans into specific goals and
plans. It mainly focuses on functional areas of the organization. Middle level managers who are
responsible for major division or branches in an organization develop the tactical plan. Tactical
plans focus on the major actions that a unit must take to fulfill its parts of the strategic plan.
3. Operational plan: Operational plans identify the specific procedures and process required at the
lower level of the organization. These plans are prepared by frontline managers and supervisors.
It mainly focuses on daily activities and routine jobs. They translate the tactical objectives into
specific operational activities to be assigned to individual or groups.
Besides above classification, business plans are also classified according to the time period for which they are
established, they are called, long-range, medium range, and short range plans. Similarly, plans are further
classified according to their frequency of use, they are known as standing plans (such as, policy,
procedure rule), and single use plan, (such as, program, project, budget etc)
Hierarchy of plans:
The hierarchy of the plans is as follows
1. Vision: An organization’s vision is a non-specified directional and motivational guidance for the
entire organization. Vision has emotional appeal that encourages people to commit full energies
and mind to achieve it.
2. Mission: An organization’s mission is the purpose and philosophy that will derive organization
over a longer period of time usually fine to ten year. Mission provide reason for being in the
business
3. Goals: Goals provide direction to the activities of an organization. They state how the mission
will be accomplished over the next year or two. They are the targeted ends that management
wants to reach.
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4. Objectives: It is a specific statement of what will be done to achieve a goal. Objectives are more
specified and are measurable than goals. Objectives are expected to be SMART (i.e., specific,
measurable, attainable, rewarding and Timed).
5. Strategies: Strategized are the courses of action which allocate resources in the effective and
efficient way for achieving objectives.
Methods of planning: Managers operating at different management levels are involved in planning.
According to the nature and size of an organization, method of planning varies. Generally, there are
three method of planning. They are:
1. Top-Down Planning: It is also called centralized planning method. Under this method, the central
office or headquarter of an organization develops and provide guidelines, which include, business
definition, mission statement, economic and social objectives, etc. to other branches and levels
accordingly.
2. Button-Up Planning: It is also called decentralize planning method. Under this method middle
and lower level management drafted the plan and presented to the higher level management for
its final approval. Discussion and meeting are held to make critical review and final approval of
the plan at the top management level. This method encourages in participation of lower
management in plan formation and ensures their full commitment.
3. Management by Objectives (MBO): MBO is powerful management tool and is considered as a
strong method of planning. Under this method all levels of management are involve in goal
setting process. The value of MBO is that it communicates the mission, goals, and objectives of
the organization to the lower level managers. Lower level manager’s work out their plans and
target in consultation with their subordinates. These are sent o higher levels for consideration.
This involvement of employees increases their motivation and commitment to their work.
The Key features of MBO are:
i. The superior and the subordinate meet to discuss and set goals for the subordinate for a
specified period of time.
ii. Both the superior and the subordinate attempt to establish goals that is realistic, challenging,
clear, and comprehensive.
iii. The standards for measuring and evaluating the goals are objectives and agreed upon. The
superior and the subordinate establish some intermediate review dates when the goals will be
re-examined.
iv. The superior plays more of a coaching, counseling and supportive role.
v. The entire process focus on results and on the counseling of the subordinates, and not on
activities, mistakes and organizational requirements
The advantage of MBO is that it blends planning and control function. It emphasizes results
rather than good intensions. MBO encourages self-management and control through
participation and commitment.
Planning Process or Steps in Planning
Planning involves complex process. The major steps in the planning process include the followings:
Defining mission and Goals
Analysis of environmental forces
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Identifying the opportunities and threats
Analyze the organizational resources
Formulation plans
Implementation of plans
Evaluation and Control
1. Defining mission and goals: Planning process starts with the understanding mission and goals.
Mission and goals direct the organization’s course of action. They maintain organization within
the boundaries of stated mission, and ensure its continuing existence. Thus for effective planning
mission and goals must be clearly defined.
2. Analysis of environmental forces: Environmental forces include both external and internal
components which directly and indirectly affect the overall functioning of an organization.
Planning and strategy development require a thorough analysis of the forces. Management must
know not only the current standing of these forces, but also have a fairly clear idea of where these
forces appear to be headed.
3. Identifying the opportunities and threats: External environment forces create both opportunities
and threat for organization. To identify these opportunities and threat for an organization is also a
step of planning. Plan should be able to capitalize the opportunities and neutralize the threats.
4. Analyze the organizational resources: organizational resources include its abilities, competencies,
information and other resources that are required to improve organizational performances.
Optimal allocation of resources improves efficiency and effectiveness of an organization. Thus,
these resources should be determined and analyzed in the process of planning.
5. Formulation plans: After completing the above steps the draft for future activities are determined
(i.e., formulating plan). Comprehensive and integrated plans are formulated which covers all the
level of management and their functions.
6. Implementation of plans: After the plans are formulated they are implemented. (i.e., activities
related the plans are performed). In the implementation, manager’s main task is to ensure the
availability of resources and their effective and efficient use and motivate people to complete the
planned activities with the stated time.
7. Evaluation and Control: The final step in planning process is to monitor progress of
implementation. Regular evaluation helps management to understand the deviations and their
causes. Feedback system helps to initiate timely actions and adjustment in the plan.
Importance of Planning:
Planning benefits everybody in the organization. It provides guidance for decision making clarifies role
and responsibilities of employees and is also a means of measuring performance. The importance of
planning is as follows:
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i. Provides direction: Where the organization wants to be in future and what are the activities to
be performed for it are mentioned in planning. Thus, planning is looking ahead, which gives
direction to different level of management in performing organizational activities.
ii. Reduce uncertainty: An organization has to work in an environment which is uncertain and
ever changing. Planning involves forecasting in anticipation of future uncertainties and meets
the future challenges.
iii. Help in coordination: Planning provide the basis for organized and coordinated effort to the
organization. It integrates the individual activities together toward a common goals .Thus it
helps in cooperation and coordination between employees.
iv. Ensure better utilization or resources: Planning primarily ensures the availability of resources
as and when needed. This prevents resources shortage in an organization. A part from this,
better communication and coordination also help in controlling the wastages.
v. Innovation and creativity: Under the ever changing environment, organization growth
depends on the innovative and creative actions of executives. Sound planning encourages
innovation through and creative actions.
vi. Basis of control: The control function of management is directly linked to planning. It
measures progress toward goals and provides information about the causes of success or
failure so that plans may be adjusted for the futures.
vii. Improves competitive strength: Effective planning increase the competitive strength of an
organization. Planning enables the organization to discover new opportunities and thereby
shape its future. It ensures an orderly progress of the organization.
Strategic Planning
(Only wisdom and instinct will not always work to predict the changing environment).
Strategic Planning is a process of determining how to pursue the organization’s long term goals with the
resources expected to be available.
It is a deliberate process that involves the review of market conditions, customer needs, competitive
strengths and weakness and the availability of resources that lead to specific opportunities or thereat
facing the organization.
A strategic planning consists of clearly stated organizational mission, organizational goals and
organizational strategies.
The main features of strategic planning are:
i. Master Planning: It is main corporate plan formulated in head office with the involvement of
(Board of Directors and Chief executive officers) top level management .The plan includes
the details of future course of action in changing environment situation.
ii. Top-down Approach: This plan is formulated by Top-level (especially Plan department) and
disseminate to the other levels for implementation after its ratification.
iii. Highly Prescribed: Strategic planning contains details of roles and responsibilities for
branches, divisions and sub divisions accordingly.
iv. Detailed Control: A centrally controlled mechanism is developed to monitor the activities in
different parts of the organization in-order to implement the strategic planning.
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Environmental Scanning:
Environmental scanning is an important function of strategic management .It is the method or technique
of acquiring information and systematically analyzing the emerging trends in the environment.
According to Wheeler and Hunger; Environment scanning is “monitoring, evaluating, and disseminating
of information from the external and internal environments to key people within the corporation”
The essence of environmental scanning is the identifying relevant environmental changes, monitoring
them to determine their nature and direction, forecasting their rates of change and their likely impact,
and strategically responding to them
Steps in Scanning Process

Identify potentially relevant environment changes
Monitor, determine nature, direction, rate of change,

magnitude of forces
Forecast probability of impact, timing of potential

consequences
Develop and implement strategic responses.
There are several methods which are used for comprehensive analysis of environmental forces. Some of
them are as follows;
i. Extrapolation method: Under this method past data were analyzed to explore the future.
Several statistical tools such as trend analysis, regression analysis are used for analysis.
ii. Intuitive reasoning: Under this method, the scanner used his/her rational intuition to scan the
environmental forces.
iii. Scenario Building: Under this method, a situation that could possibly happen is assumed with
logical causes and effect relationship to one another. This relation is use in anticipating the
effect of environmental forces.
iv. Cross-Impact matrix: When two different trends in the environment point to two conflicting
futures, the trends are studied to see their potential impact on each other.
v. Delphi Technique: Under this method, experts opinion is taken individually through several
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solicitation and feedback .The opinion are used to forecast the changing environment forces.
SWOT Analysis:
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SWOT (Strengths, Weakness, Opportunities, and Threats) analysis is very important tool in formulating a
strategy. It is used at corporate level or business units and frequently appears in marketing plans. It
provides a clear picture of an organization’s position in the market.
S- Strength: Strength is resources, skills or other advantages relative to competitors. Market Leadership,
Public Image, Experience, Financial and Human Resources, Organizational network, etc are strengths of
an organization.
W-Weakness: Weakness are the limitations which seriously affect the organization’s performance .Lack of
infrastructure, weak marketing skill, low capital etc are the weaknesses of an organization.
O-Opportunities: It is a situation which is in favor of an organization; New Market, Higher economic growth,
reduction in competition, etc. are the examples of opportunities.
T-Threats: A threat is a situation which does not favour an organization. The Entry of new competitor, change
in technology, increase of bargaining power of suppliers and customers etc. are the examples of threats.
SWOT analysis provides a useful framework for making the best strategic choice. The best strategy can be
seen as an optimal match between the external opportunities and threats and the organizational strength
and weakness. A SWOT matrix shows the framework of matching.
Internal Factors Internal Strengths(S) Internal Weaknesses(W)

e.g. strengths in management, e.g. weaknesses in finance,
operations, finance, marketing , operation, R&D, engineering etc.
External Factors R&D, engineering etc.
External Opportunities (O) SO Strategy: Potentially the most WO Strategy: Developmental
e.g. current and future economic successful strategy, utilizing the strategy to overcome weaknesses
conditions, political and social organization’s strength to take in order to take advantages of
changes, new products , services, advantage of opportunities. opportunities.
technology etc.
External Threats (T) ST Strategy: Use of strengths to WT Strategy: Retrenchment,
e.g. lack of energy, competition , cope with threat or to avoid liquidation, or joint venture to
technology, services etc. threats. minimize both weakness and
threats.
SO Strategy (Maxi-Maxi): At this stage the organization has high strength and has several environmental
opportunities. Organization adopts aggressive strategy to capitalize the opportunities.
ST Strategy (Maxi-Mini): At this stage organization’s key strength face environmental threats. Organization
formulates long term programmes; diversify business by utilizing to minimize the threats in this situation.
WO Strategy (Mini-Max): In this stage, organization faces impressive market opportunities but is limited by
several internal weaknesses. This organization should eliminate its weakness to exploit the market
opportunities.
WT Strategy (Mini-Mini): Under this stage, both weakness and threats are in the organization’s environment.
Organization should call for defensive strategy to minimize weakness and neutralize the threat.
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Formulation of Strategic Plans:

Strategic plans formulation is a process of decision making in order to define a firm’s future direction. It
includes developing a vision and mission, identifying an organization’s external opportunities and threats,
determining internal strengths and weaknesses, establishing long-term objectives, generating alternative
strategies, and choosing particular strategies to pursue.
Process of formulating strategic plans:

i. Evaluate current performance results: Firm’s current performance is to evaluate to identify its
position in the market. Profit and loss situation, return on investment, market share etc are
examined with respect to its mission, objective, strategies adopted by the firm.
ii. Review of corporate governance: it includes the careful evaluation of performance of top
level management. A good governance of firm depends on the top management skill to
develop vision and mission of a firm so, it should be analyzed properly.
iii. External Environment analysis: External environment poses both opportunities and threats.
Firm should scan and assess properly to capitalize the opportunities and neutralize the threats.
iv. Internal Environment analysis: How an organization can take advantages from external
environment greatly depends on its core competencies (i.e. Skill, abilities, resources etc.)
Through internal environment analysis, organization evaluates strength and weakness so that
it can enhance strength and overcome weakness.
v. Analyze strategic factors: Strategic factors are external and internal elements determining the
future of a firm. At this stage organization pinpoint the problematic areas and issues relating
to get competitive advantages. Organization identifies different strategic alternatives which fit
internal competencies with external opportunities.
vi. Evaluate and select the best strategic option: At this stage, organization evaluates and selects
the best strategic option which enhances overall organization’s performance. SWOT matrix
helps to select the best strategic option in this stage.
Implementation of Strategic Plan:

Strategy implementation refers to “working of plan” in action. Strategic plan will be simply a worthless
exercise if it is not implemented properly. Thus, strategy implementation is a vital function after the
strategic planning in an organization.
Implementing strategic plan affects everything from top to bottom level in an organization. If affects all
the functional and divisional area of a business.
The McKinsey 7-S framework is useful to describe how strategic plan needs an integrated framework in
the process of its implementation.
McKinsey 7-S Framework
Structure Strategy
Systems Shared Values Style
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Skills Staff
According to figure the process of strategic plan implementation requires the following:
i. Strategy: It is a set of decisions and actions aimed at gaining a sustainable competitive

advantage from the market.
ii. Structure: To implement strategic plan, organization structure with clear defined roles,
responsibility and accountability is required.
iii. System: It includes transforming inputs in to outputs.
iv. Style: It refers to the working attitudes and behavior of managers.
v. Staff: Employees are the main agents to implement strategic plan. Performance evaluation,
reward and employee satisfaction will help to retain staff in the organization.
vi. Shared values: To implement strategy all managers and employees should work together with
collective values to achieve the goal of plans.( Organizational Culture)
vii. Skills: Skills represent an organization’s dominant capabilities and competencies. Time to
time training and management development enhance employees’ capability to implement
strategic plans.
Quantitative tools for planning:

There are some quantitative tools which aid managers in performing their planning functions. They are as
follows:
1. PERT (Program Evaluation and Review Technique) or Network Technique: The PERT is used as
a tool of project planning. It is a flow chart diagram that shows the sequence of activities need to
complete a project and the time or cost associated with each activity. To apply the PERT it is
essential to know about events, activities, slack time and critical path.
i. Events: They are the end points of activities.
ii. Activities: They represent the time or resources to complete on event to another.
iii. Slack Time: It represents the amount of time that can be delayed in some activity without
delaying the project.
iv. Critical Path: It is a longest and time consuming sequence of events and sequence of
events and activities.
PERT Network
3 3 2 53
7
8
2 1 2
1 2 6
Events 3 6weeks
4
In the network above there are 8 events and activities. The critical path represents the longest weeks
14 (2, 3, 6, 1, 2) required to complete the total 8 activities.
2. Break Even Analysis: Break Even (BE) Analysis is also called Cost-Volume Profit Analysis. It
gives information about price and profit decision .The objective of BE analysis is to determine the
quantity at which the product or services will generate enough revenue to start earning a profit.
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In the above figure, the area between AO is loss area because cost of output is higher than revenue. The point
C is known as Break Even Point (BEP).The DE area is profit area resulting from the earning of higher
revenues compare to the costs.
3. Linear Programming: Linear Programming Technique is mostly useful for maximizing an

objective such as profit or minimizing an objective such as cost. Under limited resources, what
combination of variables gives the optimal solution (i.e., in maximizing profit or minimizing
costs) is identified through this technique. It includes maximizing production, minimizing
distribution cost and determining optimal inventory level.
4. Gant Chart: Gant Chart is another very useful tool for planning and monitoring project activities.
It has a X-axis and Y-axis. On the horizontal axis, the duration of project in days or weeks is
shown. On the vertical axis each individual activity is shown. A bar is then drawn for each
activity that shows the beginning and ending times of different stages in the process. This enables
the manager to monitor progress and deviation from the plan at a glance.
The Gantt chart
Activity January February March April May
Activity 1
Activity 2
Activity 3
Activity 4
Activity 5
5. Forecasting: Forecasts are prediction, projections or estimates of future situation. It is primarily

concerned with trying to reduce the uncertainty that exists about some part of the future. In the
forecasting techniques, the role of information collected from different sources is very significant.
Wrong information may lead to wrong forecast. The number of tools is available for quantitative
forecasting. They are;
i. Moving Average method: This method gives a time series of moving averages. It helps to
eliminate the effects of seasonality and other irregular trends while forecasting the future
figures.
ii. Time Series Analysis: Under this technique past information related to sales volume are
used to predict the future demand of the product. The assumption of time series analysis
is that the future will reflect the past. This method is especially suited for long range
forecasting.
iii. Extrapolation method: It is a projection or trend method. It involves the plotting of the
figures for the past several years and stretching of the line. This extrapolation gives the
figure for the coming years.
iv. Regression analysis: Under this technique linear equation is used to interpret the relation
between variables and forecasting the relation between independent and dependent
variables.
Decision Making
A decision may be defined as a choice made from available alternatives. It represents a course of action about
what must be done or must not be done.
Decision making is defined as the conscious process of selection a course of action among several alternatives to
achieve a desired goal or solve problems.
Decision making process:
Decision making is step by step process. There are following steps in decision making process.
1. Identifying and diagnosing the problem: Decision making process start when there is a problem
occurs in an organization. Problem definition is an initial step in decision making. Problem
should be accurately identified and thoroughly diagnosed so that corrective action can be under
taken. E.g. declining sales: It may be due to the poor product development or inadequate
advertising and sales promotion or any other reasons. Therefore, a decision maker has to collect
relevant information, use his diagnostic skill effectively and recognize the problems properly.
2. Generating possible alternatives: At this step decision maker should try to generate all the
possible alternative solutions to the problems. Relevant information is gathered, analyzed by
using their knowledge, skill and experiences to generate possible alternatives. It can be costly and
time consuming operation. Typically, the more important the problem situation the more time and
effort can be spent for the exploration of alternative solutions.
3. Evaluation of alternatives: After generating the alternatives the next step is to evaluate each
alternative. It is important to establish some common framework to evaluate each alternative to
assure consistency. Manager must ascertain, whether or not alternative is feasible and practical?
If an alternative is not feasible it should be eliminated and vice-versa.
4. Selection of best alternative: After evaluating each alternative the best alternative which
contribute maximum to the organizational goal is selected. Important reason for choosing one
alternative over the other are as follows:
i. It is less expensive.
ii. It takes less time.
iii. It will be more effective.
iv. It will be preferred by employees.
v. It will result in greater productivity.
5. Implement the selected alternative: Implementing means putting the selected solution to work.
The ultimate success of an alternative depends on its ability to be translated into action. All
concerned parties should be well communicated and their full cooperation for the implementation
should be obtained.
6. Evaluating and Controlling: It is the final step of decision making process. After decision has
been implemented, their progress should be constantly monitored and evaluated. If there are any
differences between the decision and the problem, the decision maker may restart the decision-
making process by setting a new goal.
Approaches to decision making:

There are two basic approaches (Model) to decision making .They are:
1. Classical Model
2. Administrative Model
1. Classical Model: This approach to decision making is influenced by the thinking of the classical
theorists, such as: Taylor, Fayol, and Weber etc. It is a prescriptive approach that is based on
critical economic assumption. This model is essentially a theory of decision making under
condition of certainty. It is based on the following assumptions.
i. The manager seeks to attain objectives that are both known and agreed upon.
ii. Targeted problems are precisely defined.
iii. The manager posses full information relation to the problem.
iv. All alternative solutions to problems and their potential results can be calculated.
v. The manager is rationale and logical in assigning values, evaluation alternatives and
making decisions.
vi. The manger will select the alternative that maximizes return to the organization or
attainment of organizational goals.
This model however is based on defective logic and reasoning .In real life situation these assumptions
cannot be met. Hence, this model is an idealistic explanation of decision making.
This model can probably be most helpful when used for programmed decision or for decisions made
in risk where outcome probabilities can be calculated.
2. Administrative Model: Herbert A. Simon develops the administrative model of decision making
to deal with the condition (uncertain and non- programmed) that mangers usually face. Simon’s
model is based on two concepts: Bounded rationality and Satisficing.
The decision maker’s rationality is limited or bounded by inherently individualized beliefs, values,
attitudes, skills, habits and unconscious reflexes. It is also limited by the complexity of the
organization, environment, available information, amount of time and money needed etc. So due
to these constraints the decisions maker rarely tries to find the optimum solution to a decision
problem.
By satisficing the decision maker selects the first solution alternative hat satisfied some minimal set
of outcome expectation. In other words, instead of conduction an exhaustive search the decision
maker looks for a limited number of alternatives. Hence, the decision maker satisfices rather than
optimizes and makes decision which he consider satisfactory in terms of his own or
organizationally determined criteria.
Types of Decision
Decisions are taken at various levels of management. Such decisions made in organization can be
classified according to their frequency and nature.
1. According to their frequency, decision are classified as programmed and non programmed
decisions
a. Programmed decisions: Most decision making that related to the day to day running of an
organization is called programmed decision making. Such decisions are taken by middle
or lower level and are repetitive and routine type. Decision maker knows in advance what
decision he/she has to take in a particular set of condition. In most organization
programmed decisions are handled through policies, rules or standard procedures which
have been set by top executives.
b. Non-Programmed decisions: Decision are called non-programmed when they are made
for novel, non-recurring and unstructured problems. They often deal with complex issues
that demand data gathering, forecasting and strategic planning. Such decisions are taken
by the top executives. E.g. Opening a branch in locality, launching a new product, establishing
strategic alliances etc.
2. According to nature, classification of decisions are as follows:
a. Operating decisions (internal): Operating decisions are day to day decisions which aim at
maximizing the efficiency and profitability of the organization’s current operation. These
decisions are deal with internal issues such as production schedule, inventory level,
operational monitoring and control. Low level manger takes such decisions.
b. Strategic decisions; Strategic decisions focus on issues external to the organization. These
decisions deal with problems such as the goal and objective of the organization selection of a
product market-mix, strategies for diversification, investment and expansion etc. These
decisions are centralized and are responsibility of top level management.
c. Administrative decisions: Administrative decisions act as a bridge between operative and
strategic decisions. They deal with issues such as rules, procedures, information flows,
reward system, acquiring resources etc. Mostly middle level managers are involved in the
kind of decisions.
Decision making styles:

Behavioral Aspects of Decision making (Decision making styles) [source Robinson’s book]
How a manager decides in an organization determines the organization’s future. The way of taking decision
varies with manager behaviour or style. Managers’ decision making styles differ along two dimensions viz.
individual way of thinking and tolerance for ambiguity.
Analytic Conceptual
Directive Behavioural
Low
Way of Thinking
Rational Intuitive
a. Directive Style: Decision makers using directive style have low tolerance for ambiguity and are
rational in their way of thinking. They are efficient and logical. Directive types make fast
decisions and focus on the short run. Their efficiency and speed in making decisions often result
in their making decision with minimal information and assessing few alternatives.
b. Analytic style: Decision makers with an analytic style have much greater tolerance for ambiguity
than do directive type. They want more information before making a decision and consider more
alternatives than a directive decision maker does. Analytic decision makers are characterized as
careful decision makers with the ability to adapt with unique situations.
c. Conceptual style: Individual with a conceptual style tends to be very broad in their outlook and
look at many alternatives. They focus on the long run and are very good at finding creative
solutions to problems.
d. Behavioural Style: Decision makers with a behaviour style work well with others. They are
concerned about the achievements of those around them and are receptive to suggestions from
others. They often use meeting to communicate, although they try to avoid conflict. Acceptance
by others is important to this decision making style.
Although these four decision making styles are distinct, most mangers have characteristics of more than one
style. It’s probably more realistic to think of a manger’s dominant style and alternative style.
Decision making style as per leader:
The way of decision making is different in different circumstances by the same individual. In other words,
style of decision making would differ as the situation changes. There are five most common styles of
making decisions they are as follows:
A. Autocratic:
i. Style I: The manger solves the problems or makes the decisions himself/herself by using
information available to him/her at that time.
ii. Style II: The manager obtains the necessary information from him/her sub-ordinates and then
decides on the situations to the problems himself/herself.
B. Consultative:
i. Style III: The manger shows the problem with relevant subordinates individually, getting
their ideas and suggestions without bringing them together as a group. The decision may or
may not reflect his/her sub-ordinates influences.
ii. Style IV: The manger shares the problem with his/her subordinates as a group, collectively
obtaining their ideas and suggestions. The decision may or may not reflect his/her sub-
ordinates influences.
C. Group Processes:
i. Style V: The manger shares the problem with his/her sub-ordinates as a group. Together
he/she generates and evaluates alternatives and attempts to reach agreement (consensus).
Manager accepts and implements solution that has the support of the entire group.
Decision making under condition of certainty and uncertainty
Decision making takes place under different conditions. These conditions are grouped into three categories.
They are as follows:
i. Condition of certainty
ii. Condition of Risk
iii. Condition of uncertainty
i. Condition of certainty: A state of certainty exists only when mangers know the available
alternatives as well as the conditions and consequences of those actions. E.g. to buy a vehicle,
organization can collect all the information related to vehicle and buy it after comparing the
specification of vehicle and the need of the organization. Thus, it is simple and easy to take
decision under condition of certainty.
ii. Condition of risk: A state of risk exists when the manger is aware of all alternatives, but is
unaware of the consequences. In other words, risk exists when the probability of an action
being less than 100 percent. Certain degree of risk is always associated under this condition
of decision making.
iii. Condition of uncertainty: Uncertainty means that mangers do not have enough information
about the environment to understand or predict the future. Under condition of uncertainty,
little is known about the alternative or their outcomes. This situation arises when the level of
ambiguity is higher at the time of making decision. The decision maker should use his/her
intuition, judgment and experience in making decisions under condition of uncertainty.
Concept of Problem Solving (Albert Einstein)

Problem identification is the first step in problem solving process. So the term problem is a deviation between
the actual and the desired program or situation.
Problem solving is defined as the use of information to minimize the deviation between current and the
desired situation. In other words, problem solving is the way of selecting alternative, resolving disputes
and making the optimum choice.
Types of problems:
Problems can be classified on the basis of;
i. Frequency
ii. Urgency
iii. Impact
iv. Sources
i. Frequency: Problem can be classified on the basis of their frequency of occurrence. They are;
a. Routine Problem: This type of problem occurs on a regular basis. E.g. problem related to
power supply, machine breakdown, order cancellation etc. Such problem can be foreseen
and solved through established policies, rules and regulations.
b. Exceptional Problem: It occurs occasionally. E.g. the sudden appearance of strong
multinational competitors in the market. Management must use their experience, skill etc
to tackle this type of problem.
ii. Urgency: Under this basis of urgency problems are classified into urgent and non urgent
problems.
a. Urgent Problem: This problem which must be solved immediately. E.g. machine
breakdown may cause problem in production unit. Such problem needs to be addressed
and solved as soon as possible.
b. Non-Urgent Problem: Such problem allows the manger to take their time to consult other,
develop alternatives, and decide on a course of action.
iii. Impact: There are two types, under this classification.

a. Overall Impact: A problem that affect the total organization its goals and objectives ahs
an overall impact. These problems are of serious in nature and have long-term effect. E.g.
reduce in sales and profit.
b. Partial Impact: A problem which affects only a segment (division, units, and section)
rather than entire organization is called partial impact problem.
iv. Source: Under the source, the problem is classified as technical and human.
a. Technical Problem: Those problems related to material, suppliers, equipments,
production etc lie under this type. Such problem should be identified and controlled at
time.
b. Human Problem: It is a behavioral problem of human beings. Such as employee
motivation, dissatisfactions, conflict etc. These problems are serious problems and should
be addressed effectively in an organization.
Problem Solving Strategies
Solving a problem is an essential skill of mangers. They must have knowledge to identify and define
the problem, which enable them to solve it effectively.
Judith G. Bulin (1996) suggests the following strategies which can be used by managers for solving
the problems.
1. Separate the person from the problem: Allow the person to express frustration and then try to
identify the real problem. Focus the conversation on solving the problem, not placing blame.
2. Listen Carefully: Listen to the whole problem and ask question to clarify before
responding .Listen not only for what has been said, but also for what has been avoided.
3. Get as much information as possible: Be sure to identify all the issues and talk to others, who
are involved before making a decision.
4. Explore alternative solution: Ask for suggestion for solving the problem from those who are
close to it. Solutions suggested by those involved are less likely to meet resistance when
implemented.
5. Decide what to do: Get agreement and understanding from those involved about what will
happen next. Select an acceptable alternative that will likely to achieve the desired results and
proceed slowly.
6. Create accountability: Define who will be responsible for each phase of the process and be
sure that everyone knows what each person will do and by when.
7. Monitor progress: Be sure to check if the plan is working. Be flexible and open to making
adjustment as needed to accomplish your objectives.
8. Give credit where it is due: Be sure to recognize the contribution of those involved in
resolving the problems.
Crisis Handling
In the process of implementing decisions something may happen unexpectedly so that decision maker has no
choice than to change the given alternative in the situation of crisis. A crisis is a serious problem. It is a
problem of greater intensity and wider implication. It threatens the organization’s ability to function.
Lack of planning, reluctance to deal with conflict, ignoring problems and its timely solution are the causes of
crisis situation. The effects of crisis can be devastating to an organization so it must be handled
effectively.
The phases of crisis handling

There are usually five phases of crisis handling. They are:
i. Warning: Prior to crisis, some warning signal appear. Managers should identify such warning
signal early and prevent crisis. This can be done through regular monitoring of the operations
and establishing open communication channel.
ii. Preparation and Prevention: In this phase, systematically search for potential problem and
their precautionary measure are identified and defined to prevent crisis. Preparation for
handling crisis is done through proper planning, training and drilling of staffs etc.
iii. Damage limitation: Damage limitation is done through careful analysis and advanced
preparation.
iv. Recovery: The crisis problem should be addressed as quickly as possible so that the
organization can be recovered and put back into track.
v. Organizational Learning: Why did the crisis occur? What are the causes? What can be done
to prevent future problem? Managers should learn from the problems and the way to handle
them, so that similar problem or crisis will not arise in future.
Steps in Crisis management
Crisis management means that managers try to anticipate the unexpected through contingency
plans to cope with possible crisis. The three crucial steps in crisis management are as follows:
i. Anticipating: The manager must try to understand the possible source of crisis to
manage them. Manager can anticipate crises by analyzing both the work and the
people for whom they are responsible.
ii. Contingency Planning: A contingency plan is a course of action to follow if some
unexpected events occur. The plan should specify warning signals or source of
information to be monitored.
iii. Practicing: Once the contingency plan is developed, it is necessary to be sure that
these would be practiced in case of the need.
Group Decision making

It is the process of making decision by groups that affect the welfare of the organization and the people in it.
In a group, members effectively identify problems, choosing alternatives and evaluate decision. Such
decisions are mostly unbiased and very effective.
Advantages and Disadvantages of Group decision making:
Advantages:
The following are the advantages of group decision –making
1. Generate more information ideas and solutions.

2. Builds team feeling
3. Communicates information to more people, improving understanding and morale.
4. Increases commitment to the solution.
5. Shares responsibility
6. Builds interpersonal and leadership skill
7. Particularly suitable to non programmed decision making
Disadvantages:
The following are some of the disadvantages of group decision making
1. Requires good group management and communication skills

2. Takes more time.
3. May create conflict between supporters of different views.
4. Dilutes responsibility, although the supervisor is ultimately accountable.
5. Domination of a vocal few, who talk the loudest and longest

6. Group think- a pressure to avoid disagreement or raise objection may occur.
Techniques of Group Decision Making:

Participation, communication, free flow of information, chances of interaction and respect for each individual
member in group are the main factors that lead to improve decision making.
The following are the technique used in group decision making:
1. Brain- Storming: It is a useful technique for generating ideas about possible causes of problems,
and about potential solution to problems, once they have been identified. The objective of brain
storming is to generate pool of ideas on a particular subject. The technique of brain storming
includes a strict series of rules. They are as follows;
a. No idea is too ridiculous. Group members are encouraged to state any extreme or outlandish
idea.
b. Each idea presented belongs to the group , not to the person stating it. In this way, it is hoped
that group members will utilize and build on the ideas of other.
c. No idea can be criticized.
d. The good ideas are selected later.
2. Delphi Technique: A Delphi technique is a systematic means to obtain consensus from a group or
panel of experts. In this technique participants are asked to give their ideas, suggestions and
views on the decisional problem. All responses are transcribed into a single document and the
results are sent back to the panel members and then again their reactions to others’ views, ideas
and suggestions are collected. The name of the participants is kept anonymous. A panel
coordinator contacts each participant usually by mail questionnaire. After obtaining consensus,
from the expert panel the decision will be made.
3. The Nominal Group Technique (NGT) : NGT is a structured group meeting that proceed as
follows:
A group of individuals (7 to 10) sit around a table but do not speak to one another. The problem is
presented to them and they write their reactions, ideas, suggestions, and views on a sheet of
paper. After this process is over, structured sharing of ideas takes place. Each person around the
table presents his/her ideas. A person designated as recorder writes the ideas of various members
on a blackboard. At the end of it, there is a list of ideas open for discussion. Each idea is
discussed fully before moving on to the next one. The next stage involves independent voting in
which each participant selects priorities by ranking or voting and final decision is made by the
majority of the votes cast.
Quantitative tools for decision making

Management decisions are also made by using quantitative tools. These tools are basically in use to give
emphasis on the means or how best to reach the stated goals. Some important quantitative tools are as
follows:
1. Linear programming: Linear programming is a mathematical technique for deciding among

competing demands for limited resources. This tool is used to fine out the exact solution that will
minimize costs or maximize gains. The application of linear programming determines the best
ways to do the followings:
a. To distribute manufacturing goods from a number warehouses to a number of customers.
b. Making placement of personal to various jobs.
c. Preparing shipping schedule
d. Selecting a product mix in a manufacturing plant to make the best use of machine and labor hours available
while maximizing the firm’s profit.
2. Probability: Probability is a statistical measure of the chance that a certain event will occur. It deals with the
rational calculation of chances of specific outcomes from a course of action. Nowadays the use of probability
calculation has been increased in decision making to calculate likelihood of certain events and to supply an
estimate of the gain or loss for a decision that assist the manger in selecting the best decision for a given set of
circumstances.
3. Queuing: Queuing theory is also called waiting theory .It is a mathematical decision-making technique for solving
waiting –line problems. The main objective of this theory is to minimize the losses caused from waiting. This
technique helps to take decision to minimize the line of customers, waiting to get the services from the
organization.
4. Decision Tree: This technique is based on probability factors. A decision tree is a representation in graphic form
of a number of possible futures events that may affect a decision. It is used to identify the strategy most likely to
reach the goal. It shows all possible courses of action, their values, and the best return that can be produced. Thus,
it enables the decision maker to evaluate alternatives in terms of the best estimates of future results.
5. Game Theory: Game theory is used to give reality to the situation. It is concerned with the formulation of a
strategy against the competitor. This theory assumes that business situation have a strong similarity with games.
Business games are played to formulate strategy that will provide maximum countering action. The outcome of
the game is readiness of mangers to respond to the action of competitors. The mangers should try to know what a
competitors’ strategy is, as well as the outcome of ever possible move that a competitor can make. This technique
is thus, useful to analyze behavior of the competitors.
6. Operation Research: It is the application of scientific or mathematical methods to analysis and evaluation of
alternative solution to a problem situation. It consists of bringing together available data on a specific problem,
processing these data and obtaining quantitative reports of various potential courses of action. Thus, it provides
data to the decision maker in choosing the solution which best satisfied the goals.
7. Simulation: Simulation is the process of experimentation with a model of some real system or situation in order to
gain understanding or solve a problem in the real world. It is a means of gaining artificial experience through the
use of model that gives the appearance or effect of reality. Thus, simulation models are empirical and not
mathematical like operation research model. It is basically a systematic trial and error approach to complex
problems.
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Unit 6
Organizing
Organizing is related to designing and assigning jobs for individuals to work more effectively and
efficiently.
Organizing refers to grouping of jobs, allocating jobs in divisions and units, assigning people to work,
delegation of authority and responsibility to achieve a common goal.
According to Allen, Organizing refers to,” The process of identifying and grouping the work to be
performed, defining and delegating responsibility and authority and establishing a pattern of relationship
for the purpose of enable people to work most effectively together in accomplishing objectives.”
Organizing is more related to structuring relations between people, jobs and organization through
designing jobs, grouping them into manageable units and determines job related responsibility of
individuals.
Importance of organizing as management function:
The following are the importance of organizing:
1. Specialization: Organizational structure is a network of relationships in which the work is divided

into units and departments. This division of work is helping in bringing specialization in various
activities of concern.
2. Well defined job: Organizational structure helps in putting right man on right job which can be
done by selecting people for various department according to their qualification, skill and
experience This is helping in defining the jobs properly which clarified the role of every person.
3. Clarifies authority: Organizational structure helps in clarifying the role positions to every
manager. This can be done by clarifying the power to every managers and the way he has to
exercise those power should be clarified so that misuse of power do not take place.
4. Coordination: Organization is the means of creating coordination among different departments of
the enterprise. It creates clear cut relationships among positions and ensures mutual cooperation
between individuals and groups.
5. Effective administration: The organization structure is helpful in defining the job positions. The
roles to be performed by different managers are classified. Specialization is achieved through
division of work. This all leads to effective and efficient administration.
6. Growth and diversification: Organizing helps in determining the effective and efficient
framework, which facilitates coordination between authority and responsibility and concentrating
on specialization. This enables the organization in capacity building and increases their level of
activities.
7. Scope of new changes: As the role of each individuals and groups are clear, along with their
authority and responsibility, they can take decisions independently to adopt in changing
environment. This may bring new changes into the running of an organization.
Principles of Organizing
Organizing is one of the major functions of management. It is performed by all mangers and it is a
continuous process. The principle of organizing has to do with the grouping of organizational activities
into various units and dividing responsibility and authority accordingly. Some of the widely practiced
principles are as follows:
1. Objective: An objective is an end or goal to be achieved. The goals and objectives must be clearly
defined for the entire organization for each department and even for each position in the
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organization structure. Once the objectives have been clearly defined, organizing function
become easier.
2. Specialization or division of Labor: The concept of division of work is based on the principle of
specialization and efficiency. Specialization helps to break down overall task of organization ad
divide it into the smaller component parts. Greater output can be obtained when each person
concentrates on doing the thing for which he/she is best qualified.
3. Span of control: Span of control represents a numerical limit of subordinates to be supervised or
controlled by a manger. It is believed that organizational efficiency is increased by limiting the
span of control at any point in the hierarchy to a small number.
4. Scalar Chain: The chain of supervisors ranging from the top management to the lowest rank
managers should be clearly defined. The chain of command should be short and clear which
makes decision making and communication more effective.
5. Unity of Command: In organizing activities, it is better when an employee receives orders from
only one supervisor. Direction from several superiors may result in confusion, chaos, conflict and
indiscipline.
6. Delegation of authority: Proper authority should be delegated at all level of management. The
authority delegated should be equal to responsibility so as to enable each manager to accomplish
the task assign to him/her.
7. Responsibility: Once authority is given, managers have to be responsible for their actions. They
are also responsible for the action of their subordinates.
8. Efficiency: The organization structure should enable to function efficiently and accomplish
organizational goals/ objectives with the lowest possible cost. Hence it should ensure optimum
utilization of all resources.
9. Simplicity: The organization should be kept as simple as possible. A complex organization means
difficulty of communication and coordination.
10. Flexibility: Since, external environment always changes, it is necessary to cope up with the
changing environment. Organizational structure should be flexible enough to cope up with the
changes in the external environment.
11. Balance: There should be a reasonable balance in the size of various departments and between
centralization and decentralization. Imbalances creates problem to achieve its goals for an
organization in an effective and efficient way.
12. Unity of Direction: There should be one objective and one plan for a group of activities having
the same objective. A boss with many objectives will create chaos. Thus unity of direction
facilitates verification and coordination of activities.
13. Staffing: Staffing principle focuses on employing, rewarding and developing people in the
organization to motivate them in order to work in the direction to achieve organizational goals.
Approaches to Organizing
The Approaches to organizing have considerable influence on organizing thought and practice. Some of
these approaches are as follows:
1. Classical Approach:
Taylor, Henry Fayol, and Max Weber, were major contributors to the classic approach to
organizational design. Though, their prescriptions and approaches to organizing are different,
they all advocate ”universal principles” of organizing. They attempt to specify the “one best way”
to organizing.
F.W. Taylor believed that the key to organizing is to scientifically design the job. Taylor’s ideas
on organizing are as follows:
a. Scientific approach to work by determining optimal workload laid by breaking down the job
into smaller components.
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b. Incentive for reward by designing incentive system in which the workers receive more pay for
more output.
c. Separation of planning from performance by dividing work between management and workers.
Management should undertake planning, standard setting, and supervising activities. Workers, on
the other-hand, should concentrate on physical and operational aspects of the jobs.
Max Weber is remembered for his work on bureaucracy. The bureaucratic organization has to the
following components.
a. Hierarchy: Jobs are highly specialized and arranged in a hierarchy.

b. Rules and regulations: All tasks are performed according to predetermined rules and procedures.
c. Authority levels: Each job has some jurisdiction. Employees exercise authority in performing
their jobs.
d. Impersonality: Impersonality in performing the task is extremely important. The supervisors
must maintain social distance from subordinates.
e. Technical qualification and career orientation: Employment and promotion are based on
technical qualification and achievement. Therefore, seniority is the main factor in promotion.
Similarly, Henry Fayol main principles of organizing are:
a. Unity of command
b. Scalar chain
c. Authority and responsibility
d. Unity of Direction
His assumptions were that, good management is able to motivate workers to perform according to
management guidelines and expectation. If worker fail to produce the fault lies with management. Thus,
he developed fourteen principles to make manger aware of their responsibilities and better at executing
them.
2. Behavioral Approach:
Behavioral approach to organizing focuses on employee behavior. It points out the people deserve to be
the central focus of any organized activity. This approach believes that successful management depends
largely on manager’s ability to understand and work with people, who have a variety of backgrounds,
needs, perceptions, and aspirations. Thus, while scientific management concentrated on physical aspects
of the job, behavioral approach concentrated on the social aspects of the job.
The following persons are the major contributors in the development of behavioral approach:
a. Elton Mayo’s human relations approach highlighted the” people side” of an organization .His
studies found that the social context of work, including group norms and interpersonal relation is
very important for organizing work activities.
b. Douglas McGregor’s Theory X and Theory Y reflect two extreme beliefs sets that, different
managers have about their workers.
c. The researchers at the Tavistock Institute of Technology in England developed the socio-
technical systems approach. Similarly, John Woodward developed the task-technology approach.
These approaches explain the consequences of different types of technical and organizational
forms for job satisfaction and workgroup behavior. These approaches integrate the two important
sub-systems the technical (task) subsystem and the social subsystem.
d. Chris Argyris propose the Personality and Organization Theory. He argued that each individual
has some potential, which can be realized give the right environment. He suggested that to
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achieve a balance between structures and people’s needs, there should be flexible roles, open
communication, and reliance on self-direction.
e. David McClelland, Fred Fiedler, and Frederic Herzberg provided manger with still greater
insights into employee behavior through their motivation and leadership theories.
The behavioral approach has thus, contribute a wealth of important ideas on people-management aspect
of an organization. This approach makes it clear that people are the key to organizing and productivity.
3. Systems and Contingency Approaches
Systems and contingency approaches have some common viewpoints on organizing. Both the approaches
are concerned with the interrelationships among organizational elements and between organization and
the environmental element. The systems approach is valuable to mangers as it helps them to conceptualize
the flow and interaction of various elements of the organization.
The contingency approach to organizing is logical. Organizations obviously differ in size, objective, and
environmental uncertainty. Similarly, employees of these organizations differ in values, attitudes, needs,
and experiences. So it is not wise to talk about universally applicable approaches that work in all
situations. The Following variables are mainly considered by the contingency approach.
a. Technology: Technology is important to all types of organizations. It is a means by which raw

material are transferred into outputs. Selection of technology and its best use are the deciding
factors for effectiveness.
b. Environment: Environment has influence on organization’s structure and performance. In fact,
environmental factors determine the structure.
c. Size: Size affects organizational designs in very complex ways. Large organizations have
complex structures. The smaller ones have more flexible structures.
d. Strategic Choice: Strategy is the determinant of structure. Structures are needed to implement the
strategy. Management should decide what the organization is to do before deciding on the
structure.
Process of Structuring and Organizations

Organization structure is defined as a framework of task and authority relationships. In other words, it is a
system of tasks, reporting, and authority relationships within which the organization does its work. The
processes of structuring an organization are as follows:
a. Study of Jobs: The first step in the process of organizing structure involves study of jobs and
elements to perform activities.
b. Grouping of Jobs (Departmentalization): Once a number of jobs are identified, it is necessary to
group them according to the functional requirement. Some jobs may belong to production
department, while the others may belong to marketing department. Thus, grouping of jobs can be
made on functional, process or product basis.
c. Division of Labor: Once jobs are grouped, they are performed with the help of labor. The division
of labor helps to maximize outputs and machines. In the process of division of labor, large tasks
are divided into smaller packages and assigned to labor according to their skill and training.
d. Deciding on organization design: Organizations follow different structures. Some organizations
follow a mechanic design whereas others follow a organic design. A mechanically designed
organization will be more rigid, hierarchic and rely on rules and regulation..On the contrary, an
organic organizational structure is highly adaptive, flexible, and participative in nature. What type
of design is selected also depends on contingency factors such as size, technology and degree of
environmental uncertainty.
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e. Coordination of activities: Although activities are grouped and work is divided accordingly, it is
essential to establish coordination of these activities. The role of a leader or supervisor is vital to
coordinate activities. Both inter and intra departmental coordination is essential for the
completion of given tasks and finally to achieve organizational activities.
Departmentalization-Meaning
{Divide (an organization or its work) into departments}
Departmentalization is the process by which jobs are grouped and allocated in different departments to
different groups according to the need of the organization. In this process jobs are grouped according to
some logical arrangement on the basis of functions, products or geographical requirements.
According to S. A. Shrlekar, “Departmentalization is the process of analyzing, dividing and arranging

work or activities into manageable portion for individuals, section and departments.”
The importance of departmentalization can be explained from the following points:
1. It provides the advantages of specialization of work.

2. It helps in fixing the responsibility and consequently (as a result) accountability for the results.
3. It facilitates the development of managers.
4. Managerial performance of the managers can be appraised more objectively through
departmentalization.
5. It gives the feeling of autonomy which provides the satisfaction and motivation leading to higher
efficiency of operations.
6. It facilitates (make easy) administrative and financial control.
Method of Departmentalization
Departmentalization is required in organizations employing a large number of employees. There are
several bases for departmentalization each of which is suitable for particular corporate -size, strategies
and purposes. They are as follows:
1. Departmentalization by Function: A function is a group of people, working together, who posses

similar skills or use the same kind of knowledge, tools, or techniques, to perform their jobs.
Employees who perform similar kinds of work are grouped together into one function unit is
called department. In the functional organization jobs are specialized and grouped according to
the business functions like production, marketing, finance, personnel, accounting etc.
Advantages:
 It encourages professional identity and clarifies career paths among managers. Since,
managers work in special division, they develop specific expertise by specializing in the
activities of the departments.
 In this structure, there is possibility of direct supervision. Since managers are experts in
functional areas, employees approach them with common problems and issues.
 Under the structure, it is easy to develop a pool qualified managers to take future
responsibility.
 The chief executive will remain familiar ad in direct and frequent contact with functional
managers to deal with different issues and problems.
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Disadvantages:
 Since all employees focus on a single unit’s goal, they may be less concerned about
the organizational goals. In other words, different units work less on common goals
that is more important than their conflicting departmental or individual goals.
 Divisional managers are more concerned with their routine activities rate rather than
total issues of the firm.
2. Departmentalization by Product: These types of departmentalization are eminently (to a notable

degree: very) suited to large enterprise manufacturing a variety of products. Under this method
products or product lines from the basis of departmentalization. All functions relating to one
product or product line are brought together under one department or division. Each division
looks after the production, marketing, finance and personnel functions of one product. These
types of departmentalization are suitable for organizations having diversified and large product
line or service. It is also suitable when the product lines differ greatly with respect to marketing
expertise, production technology and customers.
Advantages:
 It would be easy to group all jobs for a product that facilitate coordination and integration within
a product department.
 Managers of concerned product department can make prompt decision.
 Divisional performance can be controlled and evaluated without much difficulty.
 Healthy competition among the division of resources can enhance effectiveness.
Disadvantages:
 People working in one department care only one product and regard less about problems of rest of
the organization.
 One department specialist concentrates only on in his or her department, but not in other
departments even if s/he knows the problems of other departments.
 When organization employs different specialists in different departments, the operation costs will
rise.
 Because of too many divisions, such structure may create complexity.
3. Departmentalization by Customer/Client: Under this structure, work activities are organized
around specific customers. The main focus of this form of departmentalization is to serve
different types of clients or customers effectively. Therefore, emphasis is give to customers’ types
and needs. E.g. a commercial bank may divide its loan department into a number of sections each
specializing in loans to traders, industrialists, agriculturist etc.
Advantages:
 Mainly concentrates on business areas such as product or services or clients.

 This structure is a building block structure, because it accommodates growth relatively easily.
Related products or clients can be added without additional need for learning.
 Easy to measure performance of staff on the basis of product or client.
 It helps managers to concentrate on different strategies to expand its customers.
 Since all functions relating to specific client or customer should be made by a single department it
encourages general management development for managing concerned client.
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Disadvantages:
 The main problem with this structure is that it duplicates and under uses resources. Under this
type of structure the divisional specialists relating to sales, manufacturing and distributing are
spread throughout the various units.
 It tends to reduce cooperation across groups. Because specialists are organized just to
maximize their benefits, there will be problem in acquiring resources among different
managers in a multidivisional structure.
 With this structure, there will be too many divisions and therefore, complexity will rise. With
the rise in the number of departments chances of cooperation will be low.
4. Departmentalization by Territory: Departmentalization can also be done on the basis of territory

or geographic locations. It is useful to a large scale enterprise whose activities are widely
geographically dispersed. Banks, insurance companies, etc. generally adopt this type of
Departmentalization. Under this type of departmentalization activities are grouped into regions,
zones, branches etc.
Advantages:
 This structure facilitates to serve unique customers and is locally responsive.

 In-depth knowledge o specific region/country.
 Increases accountability by region.
 Facilitates regional integration, unification and coordination of activities.
Disadvantages:
 Often difficult for cross-regional coordination.

 Duplication of resources and functions across region.
 Since operation is located in different parts of the world, operation cost will be high for staffing.
5. Departmentation by process: This method of Departmentation is implemented in such
organization, were production activities need some distinct processes. Specially, this method is
used in large scale manufacturing concern such as textiles, cements, chemicals, medicines etc.
Advantages:
 Authorities, duties and responsibilities are clearly defined.

 Efficiency and effectiveness can be achieved in resource use.
 Able to adapt in dynamic environment.
Disadvantages:
 Mostly suitable for manufacturing organization.

 Duplication of effort leads to inefficiency and high cost
 There is lack of coordination among processes.
6. Departmentation by Time: Departmentation can also be done on the basis of time. For the
organization having the nature of providing 24 hours services, it becomes suitable to establish
different departments on the basis of time. Generally, hospitals, hotels, telecommunication,
electricity and other public utility companies which work around the clock are made departments
on the basis of time, such as day ,evening and nigh shift.
Advantages:
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 Optimum utilization of available resources becomes possible.

 Those employees who cannot work in day time can get opportunity to work in evening or nigh
time and vice-versa.
 Because of its flexibility, it can respond easily to environment.
Disadvantages:
 Large volumes of activities are needed.

 Complexity may arise in determining the work schedule for workers, because most of the workers
prefer to work in day time rather than other shifts. This also leads to de-motivation towards work.
 Since, payment for overtime services is needed, cost of production increase.
 Lack of coordination among departments.
Concepts of Authority, Responsibility and Accountability

Authority: Authority is the right to give order and the power to exact obedience. (Henri Fayol)
Similarly, Authority is the right to act or command others to act towards the attainment of organizational
goals.(S.P. Robbins)
Features:
1. It is the right to give orders and make decision.

2. It is provided by position by organization.
3. If flows from top to bottom.
4. It can be delegated to subordinates.
Responsibility: It is an obligation of individual to perform assigned duties to the best of his ability under the
direction of his executive leaders.(Davis)
Features:
1. It is obligation to perform assigned jobs.

2. It arises from delegation of authority.
3. It flows upward.
4. Responsibility should equals authority.
5. Responsibility cannot be delegated.
Accountability: It is the obligation of an individual to report formally to his superior about the work he
has to done to discharge the responsibility. (Mc. Farland)
It is the obligation to carry out responsibility and exercise authority in terms of performance standards
established. ( L Allen)
Features:
1. It is answerability for satisfactory performance of assigned jobs.

2. It arises both from authority and responsibility.
3. It flows upward.
4. It cannot be delegated.
Delegation of Authority
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(Responsibility-Obligation, Authority-Power, Accountability-answerable)
Delegation of authority is one vital organization process. It is inevitable along with the expansion and
growth of the business organization. Delegation means assigning of duty or task with necessary
authority by superior to subordinates.
In other words, Delegation is the transfer of authority to subordinates to enable them to make
decisions and use resources.
According to Griffin.” Delegation is the process by which a manager assigns a portion of his or her
total work load to others”
Features of Delegation of Authority:

1. Assigning responsibility: It creates obligation on the part of the receiver to perform the assigned
duty.
2. Granting authority: It grants sufficient authority to accomplish the giver assignment.
3. Creation of accountability: Accountability is a system making people answerable towards those
who delegate them authority in the management hierarchy. Thus, delegation of authority creates
the accountability towards the superior.
Advantages of Delegation of Authority:
1. It provides managers the opportunity to seek and accept increased responsibility from higher- level
management.
2. It reduces the workload to top management. It can concentrate on important and strategic issues.
3. It causes employees to accept accountability and exercise judgment.
4. It leads to better decisions, because the decision maker is close to place of action and has a clearer
view of facts.
5. It is an important method of developing managers and staffs in decision making. This also creates in
them a sense of accountability.
Principles of Delegation of Authority
1. Parity of Authority and Responsibility: There must be balance between authority delegated and
responsibility created. Since responsibility without authority makes managers ineffective and
authority without responsibility makes managers irresponsible in their acts.
2. Unity of command: There must be one boss for one sub-ordinate.
3. Scalar Chain: Authority should be delegated from top to bottom.
4. Result oriented: Authority should be delegated to accomplish expected goals.
5. Absolute Responsibility: Responsibility cannot be delegated. Superior from whom the authority is
delegated is also responsible for the act of the subordinates to whom the authority is delegated.
6. Management by exception: Except the major or exceptional matters, all the decision making
under the converge of authority should be taken by the subordinates to whom the authority is
delegated.
7. Acceptance: Subordinates should show willingness to accept authority and consider one-self
responsible and accountable for it.
Barriers of Delegation of Authority:

1. Employees may try to avoid or not to accept addition al responsibilities.
2. The delegation process is hindered because some managers lack confidence and trust in lower-
level employees.
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3. The fear of competition from lower level is also a barrier to effective delegation. Some managers
fear that their subordinates do better job than what they do.
4. Employees may be reluctant (unwilling) to accept additional responsibility, as there are no extra
monetary gains for such additional work.
Centralization
When top-management retains power and authority without delegating to the subordinates in planning
and decision making matters, it is called centralization.
According to Griffen:“centralization is the process of systematically retaining power in the hands of

higher level managers.”
Advantages of Centralization:
Terry and Franklin (2005) mention the following advantages of centralized structure:
1. Chief executives enjoy power and prestige.

2. Uniformity of policies, practices and decisions are fostered.
3. Duplication of functions is minimized.
4. A strong coordinated team of top management is developed.
5. Full utilization of the main office facilities is realized.
Disadvantages of Centralization:
1. Work load to the top management.

2. Rising inequality in the distribution of authority.
3. Less opportunity for development for middle and lower level managers.
4. Close supervision de-motivate educated and trained managers.
Decentralization
It means the decentralization of power of decision making to the level where the work is to be
performed. In other words, It is the systematic distribution of authority to the lowest levels of the
organization.
According to Koontz and Weihrich,: “ Decentralization a the tendency to disperse decision-
making authority in an organized structure”
Advantages of Decentralization:
1. Encourage other managers to make decision and take authority and responsibility.
2. Motivates employees at work.
3. Develops skills of managers and ensures their growth.
4. Coordination of activities can be increased.
5. Facilitates product diversification.
Disadvantages of decentralization:
1. Difficult to have uniform policy and procedures.

2. Loss of power in certain cases by the top management
3. Chances of misuse when managers are not skilled and qualified.
4. Increase cost in training and development of new managers.
5. Not Practical without proper mechanisms of planning and controlling.
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Reasons for decentralization
1. To delegate power and authority.

2. To deal with environmental complexity and uncertainty.
3. To encourages participation.
4. To attract qualified people in organization.
Difference between Delegation and Decentralization.
Basis Delegation Decentralization
Managers delegate some of

Right to take decisions is shared by top
Meaning their function and authority to
management and other level of management.
their subordinates.
Scope of delegation is limited as

superior delegates the powers Scope is wide as the decision making is
Scope
to the subordinates on shared by the subordinates also.
individual bases.
Responsibility remains of the Responsibility is also delegated to

Responsibility
managers and cannot be subordinates.
delegated
Freedom is not given to the

Freedom to work can be maintained by
Freedom of subordinates as they have to
subordinates as they are free to take decision
Work work as per the instructions of
and to implement it.
their superiors.
Nature It is a routine function It is an important decision of an enterprise.
Need on
Delegation is important in all Decentralization becomes more important in
purpose
concerns whether big or small. large concerns and it depends upon the
No enterprises can work without decision made by the enterprise, it is not
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delegation. compulsory.
Grant of The authority is granted by It is a systematic act which takes place at all
Authority one individual to another. levels and at all functions in a concern.
Grant of Authority with responsibility is delegated to

Responsibility cannot be delegated
Responsibility subordinates.
Degree of delegation varies from Decentralization is total by nature. It spreads

Degree concern to concern and throughout the organization i.e. at all levels
department to department. and all functions
Delegation is a process which It is an outcome which explains relationship

Process explains superior between top management and all other
subordinates relationship departments.
Delegation is essential of all kinds Decentralization is a decisions function by

Essentiality
of concerns nature.
Delegation is essential for Decentralization is an optional policy at the

Significance
creating the organization discretion of top management.
It is considered as a general policy of top

Delegated authority can be
Withdrawal management and is applicable to all
taken back.
departments.
Freedom of Very little freedom to

Considerable freedom
Action the subordinates
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Decentralization can be called as extension of delegation. When delegation of authority is done to the
fullest possible extent, it gives use to decentralization.
Coordination of activities
Coordination is the process of integration of work of different departments of the organization to

accomplish goals.
According to Griffin:” coordination is the process of linking activities of the various departments of the
organizations”
Purpose of coordination: Coordination is very important for effective management in an organization. The
main reasons for coordination are:
1. To increase efficiency and effectiveness.

2. To improve human relation.
3. To implement organizational planning.
4. To facilitate and enhance team building.
Forms of Organization Structure:

Organizational structure refers to the hierarchical arrangement of various position in an organisation. It is
a basic framework within which the decision making behavior of an executive takes place. Thus, a
structure reflects each organization’s specific situation.
The forms of organization structure are as follows:
I. Line Structure: It is the oldest and simple form of organization structure. It is also known as
scalar or military type of structure. In this structure authority is passed down from top
management to middle managers in the process for discharging the given responsibility and from
them it goes down to supervisors and then workers. In this structure each person has one superior
to whom he/she reports and looks for instructions. Thus, a single specific chain of command
exists.
Advantages:
1. It is Simple and Clear structure.

2. Quick decision making can be ascertained on this structure.
3. Good coordination.(It has effective communication and feedback system)
4. It ensures Unified control and discipline.
5. This structure is less costly and thus helps in maintaining efficiency.
6. It is flexible and can easily cope with changing environment.
Disadvantages:
1. Lack of specialization.
2. Only useful in small organization and big organization where strong discipline need to be
maintained.
3. Centralization of authority at the top level may lead to autocratic behavior.
4. Chances of nepotism and favoritism
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5. Key managers suffer from Work Load

6. One way communication.
7. Since line managers are busy on conducting operational activities which limits the scope of
specialization.
II. Line and Staff Structure: Line and Staff structure comprises a combination of both line employees
(actual managers who are directly responsible for the performance and people) and staff
employees (who are functional experts and advises to line staff).In the line and staff structure,
these experts help line managers by providing their functional expertise.
Advantages:
1. Use of experts facilitates decision making and specilzation.

2. Fewer burden to line managers.
3. Improvement in operational efficiency.
Disadvantages:
1. Chances of Conflict.
2. Increases cost.
3. Difficulty in adopting creative ideas.
4. Heavy inclination on staff specialist may decreases the effectiveness of line managers.
III. Committee Structure: A committee organization refers to the structure where authority and
responsibility are jointly held by a group of individual rather than by single managers.
-Almost all big organization has committee structure.
-Formed for better communication and coordination.
Advantages:
1. People accept group decision.
2. Motivation and commitment.
3. Participatory in nature.(autonomy to participate)
4. Dealing with complex problems.
Disadvantages:
1. Slower in making decision.

2. Expensive
3. Difficult in maintaining secrecy.
4. High risk of one man show.( domination of aggressive person)
IV. Functional Structure: FW Taylor originally developed the concept of functional structure. Under
this structure, the entire work of the organization is divided into major functions. Every function
is placed under the charge of a specialist and the subordinates are accountable to different
functional specialist for the performance of different function.
Advantages:
1. The Use of specialist Skill facilitates work specialization.

2. Specialist managers increase efficiency by controlling wastage and uniform decisions.
3. Work is divided on the basis of functional specialization, which reduces the overburden of work
to managers.
4. Training and development opportunities become available for the employees.
5. Command authority can be ascertained by the specialist.
Disadvantages:
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1. Due to lack of clearly defined authority conflict may appear between foreman and superior.
2. It lacks unity of command. One worker has to obey orders of several bosses sand has to be
responsible to all.
3. Delay in decision making.
4. There is no provision of formal relationship among the functional specialist which may lack
mutual coordination among them.
V. Matrix Structure: Matrix organization is also called project organization, gird organization or
multiple command system. In this structure, functional and departmental forms overlap. Matrix
design features a multiple command structure in which one individual may have any number of
superior including one functional and one or more project managers.
-essential for :- rapid change in environment, face uncertainties
-high information-processing requirement.
-financial and HR constraints.
Advantages:
1. Efficient use of resources.
2. Flexibility
3. Improve in decision quality.
4. Opportunities for personal development.
Disadvantages:
1. Delay in decision making.

2. Power struggle.
3. Lack of accountability.
4. Lack of commitment.
1. Team Structure: Team is considered today as the most effective means to organize work
activities. Team members are allowed to make decision on selection of inputs, scheduling and
allocating tasks among members training and development, performance evaluation and
controlling. The team based environment enhances performs reduces stress and promotes the
climate of creativity and innovation in the organization.
2. Virtual Organization: this is also called network organization where organization creates a
network of relationship that allows them to contract out almost all managerial function-
distribution, marketing, account keeping, staff management and other function. If management
feels that outside can undertake these function in a better and cheaper ways, such function are
outsourced. Since, most of the functions are outsourced and very little function is performed, so it
is called virtual organization.
3. Boundary less organization: Boundary less organization are composed of people who are linked
by computers, faxes, computer aided design systems and video teleconferencing. They rarely see
one another face-to-face. People are utilized when their services are needed, but they are not
formal members of organization. They are functional experts who forms and alliance within an
organization, to fulfill their contractual obligation.
4. Learning Organization: Learning Organization refers to those organizations which have
developed the capacity to continuously learn, adapt and change. A learning organization
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accumulates knowledge from the past experience, learning across parts of the company and
learning from other companies .It creates an environment to unlock the knowledge of people
working in the organization. People are encouraged to share information and knowledge so that
they can easily contribute to a changed goal in learning organization.
Staffing Function
Staffing function is assumed great importance in recent years due to increase in the size of the
organization, rapid advancement of technology and the complex behavior of human beings.
Staffing one of the managerial functions which is concerned with assessment of the manpower
requirement: recruitment, selection and placement of personnel, training and development of personnel,
and periodic appraisal of the performance of the personnel. It deals with planning and managing
manpower resources.
In other words, staffing in the process of obtaining, managing and maintaining a work force capable of
full-filling the goals of the organization.
Components of Staffing Function:
1. Job analysis: it involves the collection of job related information to prepare job description and
job specification. Job description includes detail information about what a person has to do while
being in specific job. Job Specification indicates the qualification, training work experience and
other personnel requirement to perform a particular job.
2. Human resource planning: It involves an estimation of demand and supply of manpower to fulfill
current and future HR requirement of the organization.
3. Recruitment and Selection: Recruitment is the process of making a pool of qualified candidates. It
starts with the invitation of application and ends with the development of a list of qualified
candidates. Selection involves the process of reviewing application blanks, organizing interviews
and test and informing candidates.
4. Training and Development: Training and development is required to develop the skill and ability
to motivate employees to work. Depending on the training needs, of the employees on the
job( inside the organization) and off the job (outside the organization) training in organized.
5. Performance Appraisal: It is a process of evaluation employees’ performance related strength and
weaknesses. Performance is measured against criteria set previously. The result of evaluation is
used for determining training needs, making promotion decision and providing reward based on
the employees’ performance.
6. Compensation and Benefits: Compensation is for rewarding people through pay, incentives and
benefits for the work done. Compensation and benefits are great source of motivating employees,
so the packages must be adequate, equitable and acceptable to the employees.
7. Health and Safety,
8. Employee relation.
Human Resource Management System:

Input Process Output
 Knowledge & Skill  Acquisition  Commitment
 Experience  Development  Competencies
 Business Strategy  Motivation  Congruence
 Technology  Maintenance  Efficiency
 Rules & Regulation
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Importance of Staffing Function:
1. It ensures the proper management of human resource in the organization ( right people in right
place at right time)
2. Staffing ensures the recruitment and selection of the right type of people.( attract right people
(qualified people) for vacancies)
3. It provides planning for effective utilization of efforts and potentialities of individuals and groups.
4. It organizes a proper division of tasks of an organization in accordance with a sound plan into
function and position.
5. It provides services to the entire organization.
6. It ensures social justice by uniform application of the rules and regulation.
7. It maintains friendly job relationship by providing opportunities for self development through
training and promotion program.
8. It ensures fair term of work and pleasant work environment.
Objectives of Staffing function:

1. To select the right kind of people to undertake various kind of jobs.
2. To achieve an effective utilization of human resources.
3. To establish and maintain an adequate organizational structure.
4. T o secure the coordination and integration of the individual and groups.
5. To generate maximum development of individual and groups.
6. To recognize and satisfy individual needs and groups goals.
7. To maintain high morale and better human relation.
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Unit 7
LeaderShip
(ability to influence people)
Someone has to direct, lead, supervise and motivate employees, determine course of action, giving orders and
instruction.
Leaders are the people who:
 Lead the group or follower

 Influence the behavior of others
 Possess the leadership skill
 Attain the organizational goals through their influence.
According to Dessler, “Leadership means influencing others to work willingly towards achieving objectives”.
Nature of Leadership;
 Follower
 Common objective
 Situational
 Ability to influence
 Continuous process.
Function of Leadership:
1. Directing: Leadership inspires and influences others to give their maximum efforts and
cooperation for the attainment of group objectives. Thus, Leader share mission & goals, defining
and set performance standard, explain plans, and decision and motivate employees to bring out
the best of them.
2. Supervising and coaching: Supervision is concerned with the training, coaching and development
of the group members. It includes the checkups required to assure the proper and prompt
execution of orders, and thus it is also called controlling function.
3. Motivating: Motivating employees is another important function of leadership. It creates a good
work climate along with a personal sense of belonging to the organisation, which helps to
motivate employees toward their tasks.
4. Communicating: Communicating with employees is a necessary part of leadership function.
Communication helps to generate ideas, create mutual understanding and coordination, so
providing information and facilitating communication reduce conflict among group members.
5. Maintaining: Maintenance function is related to retaining the members in a group. It is concerned
with providing safe work condition, good working environment in the workplace and addressing
the grievances of employees and solving them in effective way.
6. Mediating:
Leadership Style
The behavior pattern of leaders in directing the behavior of members in order to achieve the organizational
goals is known as leadership style. Leadership styles vary widely among leaders at different time and
different situation. It mostly depends on the philosophy, attitude, personality and the experience of the
individual leaders.
The four main styles of leadership are as follows:
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Figure from book….
1. Authoritarian Style (Leader centered) [dictatorial/Autocratic] Punishment base: Under this

leadership style power, authority and decision making are centralized in leaders. The leader rule
with unlimited authority. So he/she determines policies, make plans for the group with consulting
them. Every activity is direct by the leader and pressurized the employees to complete them at a
fixed time given by leader.
Advantages:-work can be done quickly, maintain discipline, maintain chain of command.
Disadvantages: - does not motivate group member, people work only by the fear of punishment,
no upward communication.
2. Paternalistic Style (leader centered) (benevolent-kind autocratic style): Under this style, leaders
make the decision, but deal more kindly with subordinates and allow them some flexibility. The
leaders guides, protects and treats subordinates like children.
Advantages: - some consideration/reward facility is provided.
Disadvantages: - do not take advantage of ideas from the group.
3. Participative/Democratic style (group centered) (consultative): Under this style, power and
authority is decentralized and takes decision in consultation with his/her subordinates.
Subordinates are encouraged to demonstrate ideas and creativity and take interest in setting plans
and policies.
Advantages: - let everybody feel involved in decision making process, people get the opportunity to
develop, grow with organisation.
Disadvantages:- time consuming in decision making , too much autonomy result indiscipline, leaders
may avoid responsibility.
4. Laissez-faire Style (Free rein Leadership): Under this style, a leader entrusts the decision making
authority to this subordinates. She/he avoids using power and leaves it to his subordinates to
establish the goals. The leaders only provide information, materials and facilities to his/her
subordinates. This type of style is only suitable for highly trained and professional staff who, are
creative, self motivated, required minimum guidance and control.
Advantages: - lets the group run by itself, complete freedom to work, potential of subordinates are
fully utilized.
Disadvantages: - group lacks focus towards goal, people may avoid responsibility, problems of
coordination are created.
Approaches of Leadership
“Leadership is one of the most observed and least understood phenomena on earth”. There is not any single
theory to understand leader’s behavior. A number of approaches of leadership were developed in the past.
It is important to understand different approaches of leadership in order to evaluate to strength and
weaknesses in the leaderships practices in the organization.
Different approaches of leadership are as follows:
1. The trait approach: This approach also known as the great-man theory of leadership. According to
this theory, people are described in terms of qualities and competencies to understand their
leadership behavior. Traits such as drive, originality, charisma, energy, intelligence, strength, self
confidence, decisiveness, extroversion, and introversion are important to distinguish leaders from
non leaders. E.g. leaders like Gandhi, Napoleon, and Churchill are the leaders with charismatic
qualities. The serious problem of this approach is that it is difficult to get common behavior trait
out of their (leaders) behavior that could be found such qualities in other person too. So far as the
practical application, special features such as physical( height, weight, body shape, age etc),
mental ( intelligence, stress, qualification, experience, handwriting pattern etc), emotional
( maturity, integrity, motivation, sociability, personality etc) and managerial ( supervisory ability,
3
managerial skill, self assurance, decisiveness etc ) are considered as the determinants of
leadership.
Limitation:
1. No common trait applicable for all.
2. Problem in perception (personal characteristics as a leadership quality without evaluating
whether that quality can be useful to the organizational success.)
3. Difficult to decide whether leadership is a cause or effect of trait. ( effect-leadership behavior
is because of strong self confidence or cause- the person is a leader so she/he has that level of
confidence )
2. The behavioral approach: The theory concerned about what a leader actually does and how she/he
does it. The assumption under this theory was;
a. The behavior of effective leader would be different from the behavior of less effective leader.
b. The behavior of effective leaders would be the same across all situations.
There are three important research studies, which attempted to analyze the leadership behaviors. They
are:
a. Ohio State Studies.

b. Michigan Studies.
c. Leadership Grid.
a. Ohio State Studies: Famous studies were undertaken in the 40s and 50s at Ohio State University
to find what behaviors make leadership effective? From their study, two dimension of leadership
behavior were identified.
i. Consideration: They describe consideration behavior is people oriented leadership
dimension where leader are sensitive to make people happy at work. They try to provide
pleasant work environment and are highly employee centered.
ii. Structure: Leader who focus on initiation of structure are more concerned with defining
work and task, maintaining standards, meeting deadlines method of works and roles. The
finding of this study revealed the following:
 Higher structure behavior and lower consideration behavior result in higher performance
of employees, but lower level of their satisfaction and vice-versa.
 Higher structure and consideration behavior is the best all-round style which not only
increased the performance but also provides maximum satisfaction at work.
b. Michigan Studies: From this study the leaders behavior was categories as job centered and
employee centered.
Employee centered leader are more employee welfare oriented whereas job centered leader are more
concerned with getting work done. The conclusion of the study was, employee centered
leadership style is more productive for both organization and employee. However, effective
leader need to show different types of behavior, depending on the situation.
c. Managerial Gird: Robert R Blake and Jane S Mouton developed this concept on 1964. The
leadership grid states the leadership’s effectiveness behavior in terms of leaders’ orientation to
either people or production. Some leaders have people concerned orientation while other is
production oriented. However, a leader might show moderation of all these behavior and thus
equal in both dimension. According to this theory, there are five main perspectives of leadership.
i. Authority type (9, 1):- High degree of concerned for production, concentrate on work
efficiency and arranging work condition.
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ii. Country Club (1, 9): - High degree of concerned for people. Try to satisfy the needs of people
and maintain good relation.
iii. Team management (9, 9): - High degree of concerned on people and production, maintain
good relationship of trust and respect through committing people to work for common goals.
iv. Improvised Management (1, 1): - Low degree of concern of both people and production,
putting minimum effort to get required work done with the need to sustain organization
membership.
v. Organisation Management (5, 5):- Optimum level of concerned for people and production,
balance between the work with need satisfaction of people.
3. Situational Approach: According to the situationist viewpoint, a specific situation determines the
effectiveness of the leader. i.e., if the situation changes the leadership role will also change. (E.g.
unskilled/uneducated- task oriented style whereas, after training and development and
experience- participative style.
a. Fiedler’s contingency approach: This approach assumed that , the effectiveness of the leader
is based on his ability to act in terms of situational requirements.Fiedler used Least preferred
scale(LPC) to measure leadership motivation- whether a manager is task oriented or
employee oriented. In addition, he suggested three important situations which affect the
leadership effectiveness.
i. Leader-member relation: A high degree of trust, confidence and respect of
subordinate toward the leaser.
ii. Task structure: The extent to which the group task, goal, and performance are clearly
defined.
iii. Position power: The extent to which the leader uses control, reward and punishment
for subordinates.
b. Path-goal theory of leadership (Robert House): This theory suggests that motivation of
employees can be enhanced by linking reward with performance. It states that effective leader
have to clarify the path (behavior) that will ultimately lead to desire reward (goal).
Path-goal theory is based on expectancy theory of motivation and it includes for leadership styles.
i. Directive: Provide specific guidance, schedules, rules and regulation, standard.
ii. Supportive: Treat equally and maintain friendly environment.
iii. Participative: Encourage to generate ideas and seek suggestion from employees in
decision making process.
iv. Achievement Oriented: Set challenging goals, emphasize excellence and seek
continuous improvement.
(Leader motivate employees as long as they influence the expectancies of employees)
Qualities of good leadership:

An effective leader should have following qualities.
1. A clear sense of purpose: Leader must be able to define and share the vision and mission with
subordinates.
2. Self-confidence: Leader should believe in his/her ability and skill to achieve goals.
3. Good Judgment: Leader should be able to judge the environment and take necessary decisions
and understand their consequences.
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4. Objectivity: Leader should be able to see all sides of a situation, and be impartial in reaching
conclusions.
5. Emotional Maturity: Leader should be able to acknowledge subordinates thoughts and their
importance.
6. Integrity: Leader should be honest, and fair in implementing organizational policies and
decisions.
7. Adaptability: Leader should be able to adapt quickly to new situation and lead the organization to
overcome the new situation effectively.
Work group :( It is not a collection of people):

According to Stephen P Robbins: “a group is two or more individuals, interacting and interdependent, who
have come together to achieve particular objective”
-There must be physiological relationship to one another.
-“A group is like a tune, it is not constituted of individual sound but by the relations between them.”
Group formation: Groups are formed to satisfy the need of the individuals and organizational. There are five
basic stage of group formation.
Forming: IN this stage, members join the group and try to be clear about their role and relationship, procedure to work
and familiarize them with other member with a view to performing group task.
Storming: In this stage, conflict and differences of opinion emerge among members. Members compete for sharing
resources and play different roles in the group. Similarly, there is conflict over the leadership issue.
Norming: In this stage individual group members start to understand one another feeling and develop cohesive
behavior and forms a consensus around the given group objectives.
Performing: In this stage, members begin to perform their assigned task.
Adjourning: Once the given task is completed, the group will adjourn. However, some group are more functional and
will work for long time in the organisation.(stop functioning)
Types of groups: Groups are categorized in two broad types.
1. Formal group: The group with legal and formal authority in an organization is formal group. E.g.
board of directors, departments, sections etc. The rules and work procedures are already defined
and members have to follow these rules and procedure in order to achieve their goals. .
a. Command group: This is a permanent type of group in which members report functionally in
the manner shown in an organizational chart. (Department, units etc.)
b. Task group: This type of group is created to undertake a certain task and after completion of
task the group is dissolved.
2. Informal group: Informal group are formed naturally without consent of management or without
any formal orders of any command force.
a. Friendship group: Friendship group are composed of employees who enjoy each other’s
company. E.g. group to see a movie, cup of tea .etc. this group extends relations beyond the
work place in order to satisfy employees’ different social needs.
b. Interest group: This group formed because of their shared common interest rather than
anything else. Since all members join the group voluntarily, each of them works
enthusiastically to promote their common interest.
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Characteristics of Groups: The main characteristic of the group are as follows:
1. Interdependent relation: Members of group are interdependent. They share common concerns,
resources and interest that are imposed internally and initiated externally.
2. Self perception as a group: Group member perceive themselves as a group members and try to
distinguish them from non-members.
3. Common goal: Goals and ideas of groups are common.
4. Group Norms: Every group has to own norms, rules and code of conduct. All members are
supposed to follow these norms and standard.
5. Groups are dynamic: Groups are not static but dynamic. Groups are subject to change its
structure, norms etc due to external and internal forces.
6. Influence on Personality: Groups, directly and indirectly shape the personality of their members.
They also provide opportunities for individual to grow, learn, express and become mature.
Teams: “A team is a group of people whose individuals effort result in a performance that is greater than the
sum of those individual inputs.”(Stephen P. Robbins)
Difference between work team and work group
Collective performance
Share information goal Collective performance
Neutral (Sometimes Negative) synergy Positive
Individual accountability Individual and mutual
Random and varied. Skill Complementary
Types of teams: Four must common types of team are as follow:
1. Problem solving team: Team is composing of 5-12 hourly employees from the same department
who met for a few hours each week to discuss ways of improving quality, efficiency and the work
environment.
2. Self managed teams: Self managed team is group of employed (typically 10-15) who perform
highly related or interdependent jobs and take on many of the responsibilities of their former
supervisors.
3. Cross functional teams: These teams are made up of employee from about the same hierarchical
level but from different work areas, who come together to accomplish the task.
4. Virtual teams: Teams that use computer technology to tie together physically dispersed members
in order to achieve a common goal.
Conflict
A process that begins when one party perceives that another party has negatively affected, or in about to
negatively affect, something that the first party cares about (Stephen P. Robbins)
Conflict is the disagreement between parties.
Transition in conflict thoughts:
1. Traditional vies of conflict: The belief that all conflict is harmful and must be avoided.
7
2. The human relation view of conflict: The belief that conflict is natural and inevitable outcome in
any group.
3. Inter-actionist view of conflict: The belief that conflict is not only a positive force in a group but
that it is also an absolute necessity for a group to perform effectively (not all conflict is good).
Types of conflict:
1. Intrapersonal conflict: The conflict takes place within an individual. E.g. Role conflict: Role
conflict leads to frustration and aggression.
2. Interpersonal conflict: Conflict occurs between two individuals. When two individuals not
agreeing on some issues, polices, plans etc may enter into such conflict.
3. Intergroup conflict: This type of conflict occurs within the group. When an individual belong to a
group dislike the group’s operation style then, a conflict arise.eg. Disagreement on plans,
polices.etc.
4. Inter group conflict: Conflict takes place between two groups in an organization. This type of
conflict arises when group interest clashes. Conflict on resource allocation issues, performances
issue etc.
Sources of conflict:
1. Goal Conflict: when individual goal clashes with the goals of organization, team and other
individual that result the conflict.
2. Difference in values and beliefs: Employees have different socio-cultural background. They
posses different ideas and views. Lack of proper management of such differences may create
conflict situation.
3. Resources conflict: Due to limited resources, every individual and groups compete for resources
in order to materialize their goal, which create conflict situation.
4. Task interdependent: When the task of one group is interdependent with that of other in sharing
inputs and when inputs are delayed or delivered in an incomplete or unsatisfactory form, serious
conflict may result.
5. Ambiguous rules: When work rules are incomplete and different to understand, a situation of
conflict arises.
6. Communication problems: Conflict in organisation may arise due to incomplete and faulty
communication between groups and their members.
Conflict management Strategy:
1. Win-win strategy: both the parties satisfy with the result.

2. Win –lose strategy: one party achieve goals on the cost of other.
3. Lose-Lose Strategy: Eliminate the conflict
Conflict management Techniques:
1. Problem solving: Under this techniques meeting is organized to discuss the related problems.
Facts are collected and its caused are identified. After fair discussion, the solution for the problem
is determined and solved it.
2. Expansion of resources: In the case o f conflict due to resources shortage, proper allocation of
resource and resource expansion (if possible) can also help to settle the conflict.
3. Avoidance: Sometimes, conflict or issues are ignored. It is considered that, with the passage of
time, conflict will resolve automatically.
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4. Compromise: In this technique, each party give-up something in the process of conflict
settlement. Usually manager intervenes in settlement of the problem between parties.
5. Authoritative command: Under these techniques, the authoritative body draws a solution by using
power to solve the problem of both parties involved.
6. Communication: Sometime conflict arises due to incomplete and unclear information. In such
case, effective communication can resolve such conflict.
7. Negotiation and Bargaining: When conflict cannot be solved internally external conflict
management experts can be called to resolve it. The solution is drawn by the negotiator after
heavy consultation with both the parties and is accepted by them.
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Unit: 8
Motivation
Show willingness to do the work
Determinants of job performance
Willingness to perform
Job performance
Capacity to perform Opportunity to perform
Motivation is the degree to which an individual both desires and willing to exert effort towards attaining job performance.
According to Stephen P. Robbins: “motivation is the process that account for an individual’s intensity, direction and
persistence of effort toward attaining a goal”
-intensity: how hard a person tries?
-direction: which way to decide?
-persistence: how long a person will continue to devote effort?
* Needs: The deficiencies that an individual experiences at a particular point of time.
Theories of motivation:
A. Maslow’s Hierarchy of Needs (Abraham Maslow): Maslow hypothesized that within every human being, there
exists a hierarchy of five needs.
a. Physiological: Includes hunger, thirst, shelter, sex and other bodily needs.
b. Safety: Security and protection from physical and emotional harms.
c. Social: Affection, belongingness, acceptance and friendship.
d. Esteem: Internal factor such as self respect, autonomy and achievement and external factors such as status,
recognition and attention.
e. Self- actualization: Drive to become what one is capable of becoming: includes growth, achieving one’s potential
and self fulfillment.
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Higher Order Needs
Self actualization needs
Esteem Needs
Social Needs
Safety Needs
Lower Order Needs
Physiological Needs
Maslow’s Hierarchy Needs
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Maslow separated the five needs into higher and lower orders.
1. Lower order needs: The needs that are satisfied externally and lower order needs, such physiological needs, and
safety needs.
2. Higher order needs: The needs that are satisfied internally, such as social, esteem and self-actualization needs.
B. Herzberg’s Two factor Theory ( Motivation –Hygiene theory)(Friderick Herzberg)
{According to Herzberg, the factors that lead to job satisfaction are separate and distinct from those that lead to job
dissatisfaction.}
Psychologist Friderick Herzberg proposed the two factor theory believing that an individual’s relation to work
in basic and one’s attitude toward work can very well determine success or failure.This theory has
emphasized the role of two set of factors.
a. Hygiene factors (maintenance factors/job context): This factors results in dissatisfaction when they are not
present but this do not necessarily motivated employees. E.g. Salary, job security, working condition, status,
company procedure, technical supervision interpersonal relation among superior, peer and subordinates.
b. Motivating factors (job content): This factor satisfies the employee’s needs for self actualization. E.g.
achievement, recognition, responsibility, advancement, the work itself, the possibility of the personal
growth.( it is the outcome of the job)
Satisfaction –no satisfaction
Dissatisfaction –no dissatisfaction.
What the person want from their job?
What situation they felt good and bad about the job?
Comparison between Maslow and Herzberg Model:
Fig from Prem sir book:
Maslow’s theory implied the employees could be motivated to perform when their job allowed them opportunities to
satisfying any of their dominant need. However Herzberg found that all job factors didn’t have the same effect on the needs
of the employees.
Reward system to motivate Performance (compensation on contribution):
Reward is defined as the material and psychological payoffs for performance tasks in the work place.
According to Decenzo and Robbins: “reward refers to the total compensation system that involves the assessment to
employee’s contribution in order to distribute fairly and equitably direct and indirect organizational rewards in exchange
for those contribution.”E.g. bonus, salary, recognition, promotion, profit sharing etc.
Reward is categorized into two groups:
1. Intrinsic reward: The rewards which are in internal to the job itself and can be satisfied with feeling of
accomplish, challenge and being a citizen of the organisation. E.g. opportunity to work, responsibility,
recognition, job freedom etc.
2. Extrinsic reward: The rewards which are the result of management policies and practices and are external to the
job are extrinsic reward. E.g. promotion, commission, fringe benefits, working condition etc.
In an organization reward system must be effective to motivate the employees towards work. Thus, reward system should
satisfy the following condition to be an effective.
i. The reward must satisfy the needs

ii. One must believe that effort will lead to reward.
iii. Reward must be equitable.
iv. Reward must be linked with performance.
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Motivation through employees’ participation
Employee’s participation is one of the management techniques to motivate employees towards the work. It includes employee
involvement, workplace democracy, and empowerment and employee ownership.
Benefits of participative management:
1. Increase productivity
2. Increased worker commitment.
3. Flexibility to meet market demand.
4. Increase intrinsic motivation.
Examples of Motivation through participation are:
1. Quality of work Life (QWL)

2. Self-managed Teams
A. Quality of work life: Quality of work life is totally deal with the relationship of employees and their working
environment. This program creates a workplace that enhances employee’s welfare and satisfaction. Following
elements are essential to maintain the QWL.
1. Enough and equitable compensation.
2. A work that provides personal freedom, right and dignity.
3. Opportunity for personal growth and security.
4. Safe and healthy environment. etc.
Some techniques by which we can achieve QWL are as follows:
1. Quality Circle :( 1960, K Ishikawa) It is a group of employees who meet regularly to discuss their quality
problems, investigate causes, recommend solution, and take corrective actions.
2. Employees’ share ownership: Under this technique employees are given the ownership in management and
organisation by distributing shares. It increases the commitment of employees towards organization and also
encourages them to take part in decision making.
3. Flexible work schedules (flex time): Under this technique, employees are give choice in time to work in
organization. The workday is broken down into two parts: core time and flex time. Employees are required to stay
in work place in core time but can select own suitable flex time, to work in organisation. E.g. come early go early,
Come late work late etc.
B. Self-managed Teams (self management is best management): Self managed team refer to work groups
empowered to make decision about planning, executing and evaluating their daily work. Team members are
allowed to make decisions on selection of inputs, scheduling and allocation tasks among members, training and
development, performance evaluation and controlling. Such teams comprise multi-skilled members from various
backgrounds according to the need of the task.
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Unit 9
Communication
Communication is defined as the transmission of information and understanding through the use of
common symbols from one person on group to another.
Similarly, according to Stephen P. Robbins, “communication is the transfer and understanding of

meaning”
Functions of communication:
1. Communication acts to control member behavior in several ways.

2. Communication fosters motivation by clarifying to employees what is to be done , how well they
are doing and what can be done to improve performance.
3. Communication provides a release for the emotional expression of feeling and for fulfillment of
social needs.
4. Communication provides the information that individual and groups need to make decisions by
transmitting the data to identify and evaluate alternative choices.
Communication Structure:
Communication structure refers to flows and direction of information in the communication

process.Following is the communication structure used in the organization.
a. Downward communication: Communication that flows from individuals in higher levels of

organization from individuals in higher levels of organization‘s hierarchy to those in lower is
known as downward communication. The most common form of downward communication is
job instruction, official memos, policy statement, manuals, company publication etc.
b. Upward communication: Upward communication flows from individual at lower levels of the
organization structure to those at higher level. Some examples are suggestion boxes, group
meetings, appeal and grievances procedures etc.
c. Lateral Communication: When communication takes place among members of the same work
group, among members of work group at the same level, among managers at the same level, or
among any other horizontally equivalent personnel, then it is called lateral communication.
Communication process: The steps between a source and a receiver that result in the transfer and
understanding of meaning is known as communication process.
Fig from book.
a. Sender (communicator); is a employee or manager with ideas, intension, information and a

purpose for communicating.
b. Encoding: It is translating the sender’s idea into a systematic set of symbols .i.e. into the language
expressing the sender’s purpose.
c. Medium/ Channel: It is a carrier of message.
d. Decoding: It is the interpretation of the message.
e. Feed back: It is the response or reaction of the receiver.
f. Noise: It is the interference in the normal flow of information.
Types of communications
1. Formal communication: It is task related communication in an organization and is controlled and

regulated by the management. E.g. official letters, memo, notice, newsletter etc. E.g. Chain
network, circle network, wheel network, all-channel network
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2. Informal communication: An unofficial communication between and within individuals, groups is

known as informal communication. E.g. Grape vine network.
3. Interpersonal communication: Communication that flows from individual to individual in face to
face and in group setting is interpersonal communication. E.g. Oral communication and written
communication.
4. Non-verbal communication: Communication through body language, such as eye contact,
gestures, postures, etc. Manager must be aware of non-verbal communication in the work place
because it should be inconsistent with verbal message.
Barriers of communication:
1. Filtering: only transfer those messages which are favorable to the receiver.
2. Selective perception: one’s way to see the thing, especially receiver view point.
3. Information overload: over message then able to process.
4. Emotion: in the context of anger and happy.
5. Language: ambiguous words, Jargon, etc.
6. Communication apprehension : sender anxiety( unnecessary tension)
7. Politically correct communication: word that might insult should be avoided while
communicating.
Enhancing effective communication:
a. Active listening
b. Use of understandable language
c. Use of advance technology
d. Providing feedback
e. Avoiding other physical barriers
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Unit 10: Control and Quality management

Controlling is the process of evaluation and correction of the performance in order to make sure that the
objectives of the enterprises are accomplished through the plan, formulated to attain them. In other words,
controlling is the systematic effort through which the manager assures that actual activities match to the
planned activities.
According to DeCenzo, “Controlling is the process of monitoring activities to ensure that they are being
accomplished as the plan and taking corrective action in any significant deviation”.
Similarly, According to Henri Fayol,” Control consist of verifying whether everything occurs in
conformity with the plans adopted, the instruction issued and the principle established. It has for its object
to point out weakness and errors in order to rectify them at prevent recurrence”.
Thus, controlling is the process of decreasing the deviation between actual and standard activities.
Controlling Process:
Following steps are involved in controlling process;-
Fig. from book.
1. Setting Standard: The first step in the controlling process is to set the standard of
performance. It is a reference point against which the actual performance is measured.
Usually, planning sets standard of performance. The standard should be stated in definite
measurable terms such as cost, income, unit of services, man-hours speed etc.
2. Measuring the actual Performance: After setting the standard, the information related to the
individual performance and their activities are gathered and evaluated. The evaluation or
measurement can be done through personal observation or through report writing. It is a
continuous process, which gives the clear idea about the individual’s ability and his/her actual
performance.
3. Comparing actual performance against standard: In this step, actual performance of an
individual or group is compared with the standard performance. It helps to determine any
deviation that may occur between actual and standard activities.
4. Taking Corrective actions: If any deviation occurred between standard and actual
performance after comparison, the remedial measure will be adopted. It helps to correct the
differences and put the actual performance in the track to standard performance. The
corrective action may involve a change in method, machineries, rules, procedures, improving
physical condition of work, changing the nature of supervision etc.
Types of control system

Fig. from book
Types of control are as follows:
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1. Feed-forward controls, sometimes called preliminary or preventive controls, attempt

to identify and prevent deviations in the standards before they occur. Feed-forward
controls focus on human, material, and financial resources within the organization.
These controls are evident in the selection and hiring of new employees. For example,
organizations attempt to improve the likelihood that employees will perform up to
standards by identifying the necessary job skills and by using tests and other
screening devices to hire people with those skills.
2. Concurrent controls monitor ongoing employee activity to ensure consistency with
quality standards. These controls rely on performance standards, rules, and regulations for
guiding employee tasks and behaviors. Their purpose is to ensure that work activities
produce the desired results. As an example, many manufacturing operations include
devices that measure whether the items being produced meet quality standards. Employees
monitor the measurements; if they see that standards are not being met in some area, they
make a correction themselves or let a manager know that a problem is occurring.
3. Feedback controls involve reviewing information to determine whether performance
meets established standards. For example, suppose that an organization establishes a goal
of increasing its profit by 12 percent next year. To ensure that this goal is reached, the
organization must monitor its profit on a monthly basis. After three months, if profit has
increased by 3 percent, management might assume that plans are going according to
schedule.
Characteristics of Effective controlling

1. Integrated with planning: Controlling will be effective only when it is linked with planning . Thus
while planning, expected problems that may arise on performing the task should be considered
and determine the necessary control measures.
2. Suitability: Controlling function should be able to meet the need of the organisation. Otherwise, It
may lead to over costing, ambiguity, conflict.
3. Accurate: The information provided by the control system must be reliable and accurate.
4. Flexibility: Control function should not be too rigid. It must changeable according to the
changing environment.
5. Understandable: Control system must be understood by employees working under it.
6. Assuring quality performance: Control system must assure the quality performance in an
organisation. It must help to maintain the quality in overall managerial function.
7. Acceptable: Control system must be accepted by the employees to be effective and efficient.
8. Economical: An expensive control system will raise the operation cost. Therefore, the control
system should be justified in terms of cost and benefits.
Problems with control system:

1. Problem with over control: Controlling does not mean to guide or instruct employees in each and
every activity. It is performed only when it is required. In addition, over controlling leads to
anxiety to the subordinates. Thus there should not be over controlling in an organization.
2. Fails in reporting: Controlling can be effective only when, there is reliable and accurate
information. Sometimes due to carelessness and negative attitude subordinates may pass-on
invalid and incorrect information which may lead to over costing, confusion in an organisation..
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3. Problems in fixing standard: There are some behavioral aspects of employees such as job
satisfaction, motivation, leadership etc. which cannot be quantified exactly. Thus, fixing standard
in such abstract term is one of the problems in controlling.
4. High Cost: Different professionals, tools, equipments, are used in the controlling process. So it
increases the cost of an organization.
5. Resistance: Controlling process is not always accepted by employees. There may be chances of
refusal to accept new ideas or change by employees in an organisation. E.g. Downsizing due to
environmental factors may be opposed by employees.
Managing information for effective control:

1. Management Information System (MIS): According to Griffen, MIS is defined as, “a system that
gathers comprehensive data, organizes and summarize it in a form valuable to managers and
provides those managers with information they need to do their work.
In other words, MIS is defined as, the system which provides the required information to each
level of management at the right time and in the right form.
It provides information about past, present and projected future and about relevant events both
inside and outside the organization.
2. Decision Support System( DSS): It is a specialized MIS design to support the managerial decision
making.
According to Girffen,: “ a system that automatically searches for manipulates and summarizes
information needed by managers to make specific decisions”
A DSS is an interactive computer system that is easily accessible to and operated by managers to
assist them in planning, controlling and decision making.
Budget:
Budget is a financial and or quantitative statement prepared prior to a definite period of time of the policy
to be pursued during that period for the purpose of obtaining a give objective
A. Budgetary Control: I t refers to the use to a budget in regulating and guiding these business
activities concerned with the acquisition and use of the resources.
Objectives of Budgetary control:
1. To determine the expected expenditure and revenue of an organization.

2. To control the unnecessary cost in an organization.
3. To perform the activity or task effectively under the cost limitation.
4. To know allocated cost for the respective departments and section or units.
B. Financial Control: According to Griffen,” Financial control is the control of financial resources
as they flow into organization(i.e., revenues, shareholder’s investment) are held by the
organization (i.e., working capital, retained earnings and flow out of the organization( i.e., pay
expenses).
In other words, financial control deals with inflow and outflow of financial resources in an
organization.
The tools used for financial controls are:
1. Financial Statements: Financial statements are the document which provides the information
of organization’s financial position, its expenditure and income along with profit and loss.
E.g. profit and loss a/c, cash flow, fund flow statement, Balance sheet, trading a/c.
2. Financial ratio analysis: Financial ratios are calculated on the basis of the information
available in the financial statements that help to find the financial health of a firm over time.
E.g. liquidity ratios, profitability ratios, leverage ratios etc.
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3. Financial audit: Auditing is an independent evaluation of an organization’s books of accounts

and financial statement. It is done to know whether the accounting are maintained as per the
stated rules and regulation or not as well as to verify the accuracy of financial and accounting
procedure in an organization.
Quality Concept: Quality is an abstract term, it is perceived differently by different

people .However, and quality can be defined as the totality of features and characteristics of a
product or revenues that bear on its ability to satisfy stated or implied needs.
Characteristics of quality as suggested by David A. Garvin (1987) are as follows:

a. Performance.
b. Features ( Functioning characteristics)
c. Reliability(Consistency-giving same performance)
d. Conformance ( meet established standard)
e. Durability ( life long period)
f. Serviceability(ability to repair, availability of spare parts, easy to access etc)
g. Aesthetics ( looks, taste , sound ,smell)
h. Perceived quality ( as seen by customer)
Quality control:
Quality control is determining the minimum standard of acceptability. It includes the following activities:
a. Determining the minimum range of deviation that can be tolerated.

b. Identifying the cause of deviation.
c. Separating non qualitative products from qualitative products.
d. Inspection, monitoring and testing of material, machine etc. are performed.
e. Provide necessary suggestion to improve quality.
Total Quality Management:
It is a comprehensive approach /method to improve product quality and thereby customer satisfaction.
According to Arthur R. Tenner and Irving J. Detoro (1992), “TQM is creating an organizational culture
committed to a continuous improvement of skills, team work, process, and product and service quality
and customer satisfaction.”
The main objective of TQM is to build up quality commitments among the stakeholder (suppliers,
employees, management etc.) for its long-term, sustained and continuous improvement to meeting
customers’ needs and expectation.
Factors affecting Quality:

1. People: People are directly involved in determining the quality of a product and services. Capable
people are required to enhance effective quality. Therefore organisation must update the
knowledge and skills by providing necessary training and education.
2. Materials: The material used in a product determines the quality of the product. So, qualitative
materials should be used in produce qualitative products.
3. Technology: Company must use efficient and high performing modern technology instead of
outdated technology instead of outdated technology to maintain qualitative product.
4. Control system and Standard: The quality control system and standard should be appropriately
designed and implemented to maintain quality in the product.
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5. Strategic commitment: There should be a total commitment of top level management for quality
improvement.
TQM Tools:
1. Benchmarking: It includes the activities of measuring services, practices or products against
organisation recognized as a leader in the industry.
2. Outsourcing: Outsourcing is the process of subcontracting some of the services or operation to the
firms that can perform cheaper or better or both.
3. Speed: In today’s dynamic speed is one of the competitive advantages for an organisation. It is
taken as the strategy to gain market and maintain goodwill for longterm.eg delivery of services
and goods.
4. ISO 9000: It is a set of global quality standards established by the International Standard
Organisation in Geneva ISO 9000 has fixed provisions for five sets of standard quality, product
testing, employee training , record keeping , supplier relation, repair policies and procedures.
5. Statistical Control: Several statistical tools can be used for maintain TQM. Such as Sampling
Technique, probability etc.
Deming Management (W. Edwards Deming)

 American Statistician.
 Improving production in the U.S during World war II
 Contribution on the reconstruction after war in Japan and became popular among Japanese scientists
and engineers.
 Deming advocated that improving quality will reduce costs while increasing productivity and
market share.
 Deming Prize 1951, the prize is awarded for those who directly or indirectly contributed to for those
who directly or indirectly contributed to the quality control and quality management in Japan.
Principles of Deming‘s Quality Management:
Deming has proposed the five principles of quality management.
a. Quality improvement drives the entire economy.

b. The customer always comes first.
c. A person should not be blamed for quality problems; a system of quality management must be
fixed.
d. Plan-do-check act (PDCK) should be enforced.( fig from PR pants book)
e. Continuous improvement should be sought through extensive training, leadership, team work and
self improvement.
Techniques of Deming’s Quality Management:

Deming recommended fourteen techniques for improving quality. They are as follows:
1. Create consistency: Organisation must be consistent on improving product and services to remain
competitive in the market.
2. Philosophy of co-operation: Adopting the philosophy of cooperation (win-win) helps everybody
to win and put it into practice by teaching it to employees, customer and suppliers.
3. Stop dependence on mass inspection: Inspection for faulty products is unnecessary if there is the
system of inbuilt inspection process from the very beginning.
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4. Avoid the constant search for lowest-cost suppliers: Build long-term loyal ad
trusting relationship with single suppliers.
5. Improve constantly: Continuous improvement in the system of production,
services, planning and any activity should be there in an organisation. This will
improve quality and productivity and decrease cost.
6. Institute training: There should be regular training to employees who need to
up to date their skill and knowledge in changing context.
7. Leadership for management of people: Leader in an organisation must
concentrate on helping people for better job instead of just telling them about
jobs.
8. Drive fear and develop trust: It is essential to create an environment where
employees work with fear and always ready to contribute, cooperate and
delegate authority and responsibility.
9. No barriers between departments: There should be cooperation between
departments and all should work as a steam for the achievement of quality
goal.
10. Eliminate slogans and targets: The employees should not be pressurized for
product quality. There should be direction and encouragement.
11. Eliminate numerical: Employees should not pressurized for numerical goals.
Instead, there should e given autonomy in predication system in determining
the production goal.
12. Remove barriers: Organisation must remove all kinds of barriers that hinder
the joy of people at work.
13. Program for education and self development: There should be program for
education and training which facilitates career development.
Transformation is everybody job: All the members of an organisation should

contribute their effort with honestly for implementing quality management system.
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Unit 11
Global Context of Management
Globalization:
Globalization can be defined as the integration of economic, cultural, political, religious, and social
systems reaching the whole world and practically all human beings.
In other words, Globalization is the process of development of the global community. It binds countries,
institutions and people in an interdependent global economy.
According to Sundaram and Black: “Globalization is the process by which an activity or undertaking
becomes would wide in scope.”
Globalization is a process of integration of the world as one market. In other words, globalization is a free
movement of goods, services, people, capital, and information across national boundaries.
Forms of Globalization: Following are the different forms of globalization.

1. Economic Globalization: It refers to increased global inter-linkage of the market in goods,
services, trade, capital and finance. It is contributed by privatization, deregulation, liberalization,
declining costs of transport and communication etc. Several countries have remove or decrease
the tariffs for import goods, they even declare the free trade zone, which helps to create economic
integration between countries. Similarly, World Trade Organization (WTO) has played vital role
in this process by initiating in different activities.
2. Cultural Globalization: Cultural integration between the nations is called cultural globalization.
Due to the technological improvement the people can now know about other’s nation value,
belief, customs etc, easily and exactly. This helps to increase mutual understanding, peaceful
coexistence and learning from each other’s experience. Thus, it creates the cultural homogeneity
which we called cultural globalization.
3. Political Globalization: Now a days, countries are joining hands to make a regional blocks such as
SAARC, EU, APEC,ASEAN etc. which helps them to build a strength and exchange views and
experience, establishment of good governance system, legal system, free media, decentralization
etc. and thus facilitate political globalization. And even this political globalization influences the
political system worldwide is shifting paradigm from command and mixed economics to the free
market economy.
4. Environmental globalization: Integration and commitment of the nation’s for the purpose to
tackle and prevent any further degradation of the global ecology is known as environmental
globalization. These countries are encouraging other nation to understand and join hands on
preserving natural resources and adopt necessary legal and other measures to protect the
environment.
Nature of globalization:
1. World Trade: The main objective of globalization is to facilitate world trade. Thus, globalization
focuses on enhancing the better trade between nations.
2. Portfolio investment: Next feature of globalization is portfolio investment. It means nation or
private institution purchase the foreign securities in the form of stock, bond, guilt etc. and in
return obtain dividend, interest. Thus, increase and decrease in interest rate directly affect the
inflow and outflow of the capital in a country.
3. Foreign Direct Investment (FDI): FDI is a long term investment which involves acquiring foreign
firm, building strategic alliance, joint ventures etc.
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4. Multi-National Companies: A company which operates beyond the boundary or across the
national boundaries is called MNC. FDI is the main factor for the growth of MNC. Since it
focused on the foreign market so it is also a nature of globalization.
Methods of Globalization:
1. Exporting: A company can globalize its activities through exporting product from one country to
another country.
2. Joint Ventures: Joint ventures are jointly owned firms by foreign and domestic firm for
establishing long-term relation. They are created by combining the resources and expertise
needed to develop new product and technologies.
3. Franchising: It refers to the rights granted by a company to another company allowing to use or
sell certain product. Such as Coca-Cola, Pepsi, McDonald. A franchiser is responsible for the
brand name, marketing and human resource development.
4. Licensing: It refers to the given right to a company by another one to manufacture a patented
product for which the latter has to pay royalty or fees to the former. The company which has
unique patented product or valuable knowhow but do not have resources to enter into the foreign
market usually give license to other company to produce the goods.
5. Strategic Alliances: When two firm make alliances to take market advantage is called strategic
alliances. These alliances do not have any joint management of asset so they can be separated
easily whenever they want.
6. Subcontracting: It refers to outsourcing certain production function or process to others firm due
to low cost or better quality or both.
Changing Global Business Scenario:

1. Changes in national economic priority: Economic priorities of most of the countries have been
changed. They are following market based economy so privatization, deregulation are common in
countries. Nation’s are encouraging private industries and given freedom in decision making.
2. Global outsourcing: Due to quality and low-cost, organizations are now purchasing inputs from
other organization throughout the world.
3. Investment in education: Most of the foreign investors are willing to invest in those nations,
where there is level of education is high with skill workforce and labor market. So emerging
countries are investing much of the portion of the GDP in education and skill development
program to attract those investors.
4. Shift from manufacturing to services: Most of the developed countries are shifting their business
from manufacturing to services sectors, such as hospitals, banking etc.
Effects of Globalization:
There are both positive and negative effects of globalization. They are:
Positive effects:
1. Creation of demand for goods and services.

2. Parallel growth of economy.
3. Transfer of technology.
4. Employment opportunities.
5. Recognition.
6. Economic Advantages.
Negative Effects:
4
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1. Exploitation of resources.
2. High price for necessary goods.
3. Maximum advantages will go to reach countries.
4. Threat for indigenous industries.
Multinational Companies:
Multinational companies are generally defined as a company engaged in producing and selling goods or
services in more than one country. They are operating worldwide in different forms and subsidiaries or
affiliates.
According to Daniels and Radegaugh, “A company that has worldwide approach to markets and
production is known as MNE. It usually undertakes nearly every type of international business practice”
Types of Multinational companies:

1. Raw material seeker: These MNCs look for best and cheapest raw materials from local suppliers
processed them locally and shipped them in home country from production of goods. Such as
British Petroleum, Anaconda Copper etc are those MNC who seeks for raw material
internationally.
2. Market Seeker: These MNCs look for market overseas to sell the product and services. E.g. IBM,
Unilever etc.
3. Cost minimizes: These MNCs seek out and invest in lower cost production sites abroad. (E.g.
Taiwan, China, India, Malaysia, Thailand etc) to remain cost competitive both at home and
abroad.
Advantages and Disadvantages of MNCs:

Advantages:
1. Transfer of technology.
2. Economic growth.
3. Employment of people
4. Transfer of knowledge and skill
5. Public welfare ( social works).
Disadvantages:
1. Loosing economic sovereignty.

2. Chances of exploitation of labor forces.
3. Influence in the local culture.
4. Rise in unnecessary influence to the local government.
1
Unit 12
Management Practices and Problems in Nepal
Growth of business sector: The growth of business sectors can be explained in four stages. They are as
follows:
Stage I:
 Company Act 1936

 Establishment of jute, cotton, cigarette, and oil mills.
Stage II:
 Planned industrial development started

 Industrial Policy 1957
 Industrial Policy 1962 motivated industrialists to establish manufacturing industries.
 Industrial Policy was revised in 1965 and 1967
 Priority for establishing import substituting and export promotion industries.
Stage III:
 Fully partially owned public enterprises were established during 1960s and 1970s.
 The largest numbers (29) of public enterprises were established in the manufacturing sector.
 The new industrial policy 1974 provided heavy incentives in the form of income tax, excise duty
and sales tax holidays for newly established industries.
 In 1981 and 1987 government revised industrial policy to simplify bureaucratic hurdles.
Stage IV:
 With the restoration of democracy in 1990 a major policy reform was initiated.
 The new industrial policy 1992 was announced and emphasis was given to deregulation and
encouragement of competition and reliance on market force.
 During 1991-1994 more than 3000 industries were registered.
 Measures were created to attract the Foreign Direct Investment (FDI).
 Private sector is attracted for investment.
 During 2002-03, 4475 private firms were registered.
 Nepal became member of the World Trade Organisation (WTO)
 The new industrial policy 2010.
Export Oriented Industries:
a. Carpet Industry
b. Garment Industry
c. Leather Industry
d. Handicraft Industry
2
Import Substituting Industries:
a. Pharmaceutical Industries
b. Electrical and Electronic Industries
c. Cement Industry Tobacco Industry
d. Sugar Industry
e. Paper Industry
Services Industry:
a. Tourism Industry
b. Trade and Services Industry
c. Transport Industry
d. Construction Industry
e. Financial and consultancy Services.
Existing Management Practices in Nepal:
a. Planning and decision making: Nepalese organisation has centralized mechanism in planning and decision making
process. Most of the decisions are made by top level management only. Middle and Lower level managers have to
dependent on top level manager in making decision and even they have to wait for order to impart their duties.
b. Authority delegation and responsibility: Nepalese organisations were structured in bureaucratic design, delegation of
authority and responsibility are done at the influence of top level managers rather than, in a way to achieve
organization’s goals.
c. Problems in integration: Planning, policies and programs are not properly integrated with the goals of organization.
Most of the organization, there is no matching of people jobs and department needs.
d. Organizational culture: Organization shared values and beliefs are rigid and traditional in nature. Employees always
resist the organizational change and development.
e. Business Culture: Majority of private sector business are family owned. They look for the family interest to make
business decision rather than professionalism of their management.
f. Working environment: Due to over influence of the politics and unnecessary interference of political parties
nepotism and favoritism prevailing every level of organization. Similarly there is no discipline in the organization.
Due to these reasons the productivity of organizations are degrading day by day.
g. Lack of managerial skills: Managers are weak in leadership capabilities, employees are weak in communication and
interpersonal skill, and workers are lack of vocational knowledge. Due to this there is always problem in
organization.
Major problems facing business in Nepal:
1. No proper business environment

2. Lack of market.
3. Unhealthy competition.
4. Poor investment climate.
5. In adequate Government policies.
6. Frequent changes in Government policies.

Principles of Management

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Features of Effective Organizational Goals:

Approaches to Goal Formulation:

1. Top-down approach: Top-down approach is a directive approach.Under this approach, top

Goal Formation Process:

Problems of Goal formation:

3. Unwillingness of managers in goal formulation: Due to lack of knowledge, experiences and

Goal Succession and Goal Displacement:

Goal Displacement: An unintentional change in goal by management is known as goal

The changing Perspectives (Viewpoint) on Organization:

A business organization as per open system

Inputs: Processing: Outputs:

a. Human a. Operation a. Product

c. Organization as political System: According to this perspective, organizations are viewed as

The various characteristics of management are:

Management as a Science as well as an Art

Board of Directors and Chief Top Level

Supervisors and Lower Level

a) Figure head role:

Emerging Challenges of Management:

The challenges of the management in the today’s context are as follows:

Evolution of Management Thoughts

Scientific Management Principles:

The Scientific management can be studied under the following heads:

Primary principles of scientific management as evolved by F.W. Taylor.

Definitions of Scientific Management

The main definitions of scientific management are as follows:

Characteristics / Features of Scientific Management

The main characteristics or features of scientific management are as follows:

Approach: It is a systematic, analytical and objective approach to solve industrial problems.

Science, not Rule of Thumb

Harmony not Discord

Co-operation not Individualism

The Development of each man to his greatest efficiency and prosperity

Secondary principles of scientific management: Standardization of Tools and Equipments

Scientific Selection and Training of Workers

Experimentation and Scientific Investigation

Incentive Wage System

Scientific Allotment of Task

Contribution and limitation of scientific management

Contribution of Scientific Management:

Limitation of Scientific Management:

Administrative Management Principles:

Bureaucracy Theory (Max Weber Theory)

1. Henri Fayol Theory of Management (Administrative Theory )

Henry Fayol's Principle of Management

Authority and Responsibility

Subordination of individual interests to general interests

Fair Remuneration to employees

Centralization and Decentralization

Stability of use of personnel

Spirit of Co-operation (Spirit de crops)

Contribution and Limitation of Administrative Management Theory:

Comparison between Taylor’s and Fayol’s Principles.

2. Max Weber’s Bureaucracy Theory

Fixed division of labor

Creation of rules to govern performance

Separation of personal from official property and rights

Selection based on qualifications

Clear career paths

Criticisms of Bureaucracy Theory

Behavioural Science Theory:

Maslow’s Hierarchy of Needs: