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UNIT – 1
INTRODUCTION TO MANAGEMENT AND ORGANIZATIONS

Syllabus
Definition of Management – Science or Art – Manager Vs Entrepreneur - types of
managers -managerial roles and skills – Evolution of Management – Scientific, human
relations , system and contingency approaches – Types of Business organization - Sole
proprietorship, partnership, company-public and private sector enterprises -
Organization culture and Environment – Current trends and issues in Management

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1.0 Management:

w.E Management is the process of planning, organizing, leading and controlling the
resources of an organization in the efficient and effective pursuit (pursuit means search)
of specified organizational goal

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1.1 Scope of Management
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Management is needed in all types of organized activities. Moreover,

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management principles are applicable to all types of organizations, including profit-
seeking organizations (industrial firms, banks, insurance companies, small business,

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etc.) and not-for-profit organizations (governmental organizations, health care
organizations. educations organizations, churches, etc.). Any group of two or more

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people working to achieve a goal and having resources at its disposal is engaged in
management. Obviously, a manager's job is somewhat different in different types of

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organizations, exists in unique environments, and uses different technology. However,
all organizations need the common basic activities: planning, organizing, leading, and
controlling.
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Management is also universal in that it uses a systematic body of knowledge
including economics, sociology, and laws. This knowledge can be applied to all
organizations, whether business, or government, or religious, and it is applicable at all
levels of management in same organizations.
1.1.1 Features of Management
 Organized activities
 Existence of objectives
 Relationship among resources
 Working with & Through people
 Decision- Making
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1.1.2 Importance of Management

 Effective Utilization of Resources
 Development of Resources
 To Incorporate Innovations
 Integrating Various Interest Groups
 Stability in the Society

1.1.3 SKILLs of Management

 Technical skills

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 Conceptual skills

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1.1.4 Functions of management
Planning :
EnDetermination of short term and long term objectives

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Development of strategies to achieve the objectives

Organizing :

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Identification of activities to achieve the objectives
Matching job and employees

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Establishing coordinating relationships

Leading Staffing
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Manpower requirement
Selection,
employees.
training and et
development of

Directing
Communication
Motivation
leadership

Controlling : Establishing standard of performance

Measuring current performance
Comparing
Corrective action to rectify the deviation
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1.1.5 Level of management

Level Roles

Top Level Management  Top management lays down the objectives and
(Administration Level) broad policies of the enterprise.
 It issues necessary instructions for preparation of
department budgets, procedures, schedules etc.
 It prepares strategic plans & policies for the
enterprise.
 It appoints the executive for middle level i.e.
departmental managers.

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
It controls & coordinates the activities of all the
departments.
It is also responsible for maintaining a contact with

w.E 

the outside world.
It provides guidance and direction.
The top management is also responsible towards

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enterprise.

Middle level  EnThey execute the plans of the organization in

management
(Manager, Executive
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accordance with the policies and directives of the
top management.
officer)

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They make plans for the sub-units of the
organization.

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They participate in employment & training of lower
level management.
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They interpret and explain policies from top level
management to lower level.



within the division or department. et
They are responsible for coordinating the activities

It also sends important reports and other important

data to top level management.
 They evaluate performance of junior managers.
 They are also responsible for inspiring lower level
managers towards better performance.

Lower level Management  Assigning of jobs and tasks to various workers.

(Supervisory / Operative  They guide and instruct workers for day to day
/ First-line managers) activities.
 They are responsible for the quality as well as
quantity of production.
 They are also entrusted with the responsibility of
maintaining good relation in the organization.
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 They communicate workers problems, suggestions,

and recommendatory appeals etc to the higher level
and higher level goals and objectives to the
workers.
 They help to solve the grievances of the workers.
 They supervise & guide the sub-ordinates.
 They are responsible for providing training to the
workers.
 They arrange necessary materials, machines, tools
etc for getting the things done.
 They prepare periodical reports about the
performance of the workers.

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

They ensure discipline in the enterprise.
They motivate workers.
They are the image builders of the enterprise

w.E because they are in direct contact with the workers.

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eer
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1.1.6 Operational information:

Operational information relates to the day-to-day operations of the organization
and thus, is useful in exercising control over the operations that are repetitive in nature.
Since such activities are controlled at lower levels of management, operational
information is needed by the lower management.
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For example, the information regarding the cash position on day-to-day basis is
monitored and controlled at the lower levels of management. Similarly, in marketing
function, daily and weekly sales information is used by lower level manager to monitor
the performance of the sales force.

1.1.7 Tactical information:

Tactical information helps middle level managers allocating resources and
establishing controls to implement the top level plans of the organization. For example,
information regarding the alternative sources of funds and their uses in the short run,
opportunities for deployment of surplus funds in short- term securities, etc. may be
required at the middle levels of management.

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may be partly current and partly historical, and may come from internal as well as

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external sources.

1.1.8 Strategic Information

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The strategic information helps in identifying and evaluating these options so that

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a manager makes informed choices which are different from the competitors and the
limitations of what the rivals are doing or planning to do. Such choices are made by
leaders only.
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Strategic information is used by managers to define goals and priorities, initiate

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new programmes and develop policies for acquisition and use of corporate resources.
For example, information regarding the long-term needs of funds for on-going and future

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projects of the company may be used by top level managers in taking decision
regarding going public or approaching financial institutions for term loan.

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1.2 Management & Administration
Administration et
“Administration is that phase of business enterprise that concerns itself with the
overall determination of institutional objectives & the policies necessary to be followed in
achieving those objectives.”
Management
“Management on the other hand, is an executive function which is primarily
concerned with carrying out broad policies laid down by the administration”
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Sl.No Basis of
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1.2.1 Comparison of Management & Administration

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Administration Management
difference
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1 Level in
organization
Top level
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Middle & lower

2 Major focus Policy formulation & g.n

Policy execution for
objective
determination
objective achievement
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3 Nature of Determinative Executive
functions

4 Scope of Broad & conceptual Narrow & operational

functions

5 Factors Mostly external Mostly internal

affecting
decisions
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6 Employer- Entrepreneurs & Employees

employee owners
relation

7 Qualities Administrative Technical

required

1.3 Managing: Science or Art?

The best response to the question of whether management is an art or a science is that

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it is both. Managing, like all other practices (e.g., music composition, medicine, or even
tennis) is an art. To manage effectively, peoples must have not only the necessary
abilities to lead but also a set of critical skills acquired through time, experience, and

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practice. If we define art as a personal aptitude or skill, then management has certain
artistic components.

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On the other hand, the organized knowledge underlying the practice may be referred to
as a science. To perform at high levels in a variety of situations, managers must be able
to draw on the sciences - particularly economics, sociology, mathematics, political

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science, psychology, and political science - for assistance and guidance.

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The tasks of modern managers require the use of techniques, practices, and skills. In
this context science and art not mutually exclusive but complementary.
1.3.1 Management as an Art
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Art involves the systematic application of theoretical knowledge and personal
skills to achieve desired results. The function of art is to effect change and to bring

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about desired results through deliberate efforts. Art represents 'how' of human behavior
because it is the know-how to accomplish concrete practical results.

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Art is a personalized process as every artist has his own style. Art is essentially
creative and the success of an artist is measured by the results he achieves. A
carpenter making furniture out of wood and a goldsmith shaping gold into ornaments
are examples of art.
Art prescribes how to do things and it can be improved through continuous
practice. Art is result-oriented involving practical way of doing specific things.
It consists of bringing about desired results through the use of skills. Art involves
practical application of theoretical knowledge.
Management is essentially an art because of the following reasons:
(a) The process of management involves the use of knowledge and skills. Every
manager has to apply certain knowhow and skills while dealing with people.
(b) Management seeks to achieve concrete practical results, e.g., profits, service,
etc. According to Prof. John F. Mee, "management is the art of securing maximum
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results with a minimum of effort so as to secure maximum prosperity and happiness for
both employer and employee and give the public best possible service."
(c) Like any other art, management is creative. It brings out new situations and
makes resources productive. In fact, management is one" of the most creative arts
because it requires molding and welding the attitudes and behavior of people at work for
the accomplishment of specific goals in a changing environment.
It is the art of securing desired response from people. Management makes things
happen.
(d) Like any other art, management is a personalized process. Every manager
has his own approach and technique depending upon his perception and the
environmental conditions.

ww (e) As an art, management requires judgment and skills. The art of management
can be refined with continuous practice of management theories and principles.

w.EThe art of management is as old as human civilization. The importance of

management art has increased with rapid growth in the number size and complexity of
organizations.

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1.3.2 Management as a Science:
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Science is an organized or systematized body of knowledge pertaining to a

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particular field of enquiry. Science is systematized in the sense that it establishes cause
and effect relationship between different variables.

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Such systematized body of knowledge contains concepts, principles and theories

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which help to explain past events and to predict the outcome of specific actions. These
principles are capable of universal application, i.e., they can be applied under different

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situations. They represent fundamental truths derived through empirical results. These
principles or basic truths are developed through scientific methods of continuous
observation, experiment and testing.

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When generalizations or hypotheses are empirically verified for accuracy through
continuous observation and experimentation they become principles. Science explains
'why' of human behavior.
Management is a science because it contains all the characteristics of science.
Firstly, there is a systematized body of knowledge in management. Principles are now
available in every function of management and these principles help to improve
managerial effectiveness. For instance, there are a number of principles which serve as
guidelines for delegating authority and thereby designing an effective organization
structure. Similarly, there are several techniques (ways of doing things) in the field of
management.
Budgeting, cost accounting, ratio analysis, rate of return on investment, critical
path method (CPM), programed evaluation and review technique (PERT) are some of
these techniques which facilitate better management. Secondly, principles of
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management have been developed through continuous observations and empirical

verification. Thirdly, management principles are capable of universal application.

1.4 Difference between Entrepreneur and Manager

Sl.No. Criteria Entrepreneur Manager

1 Motive The main motive of an But, the main motive of a

entrepreneur is to start a manager is to render his
venture by setting up an services in an enterprise

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the venture for his personal
gratification.
already set up by someone
else i.e., entrepreneur.

2 w.E Status An entrepreneur is the owner A manager is the servant in

of the enterprise. the enterprise owned by the

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3 Risk Bearing
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An entrepreneur being the A manager as a servant does
owner of the enterprise not bear any risk involved in
assumes
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uncertainty involved in running
the enterprise.

4 Rewards ee
The reward an entrepreneur
gets for bearing risks involved
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A manager gets salary as
reward for the services
in the enterprise is profit which
is highly uncertain.
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rendered by him in the
enterprise. Salary of
manager is certain and fixed.
a

5 Innovation Entrepreneur himself thinks

over what and how to produce
goods to meet the changing
demands of the customers.
Hence, he acts as an
innovator also called a
‘change agent’
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But, what a manager does is
simply to execute the plans
prepared by the entrepreneur.
Thus, a manager simply
translates the entrepreneur’s
ideas into practice.

6 Qualifications An entrepreneur needs to On the contrary, a manager

possess qualities and needs to possess distinct
qualifications like high qualifications in terms of
achievement motive, origi- sound knowledge in
nality in thinking, foresight, management theory and
risk -bearing ability and so on. practice
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1.5 Manager
A manager is someone whose primary activities are a part of the management
process. In particular, a manager is someone who plans, organizes, leads, and controls
human, financial, physical, and information resources."
The success or failure of an organization depends heavily on the ability of its
managers to perform these tasks effectively. Managers can be classified in two ways:
by their level within the organization and by the scope of their responsibilities.

1.5.1 Types of Managers

Managers are mostly typecast according to the different types of management

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styles, personality, function and involvement. The role of a manager, on a general note,
is to get things done by others by making optimum use of available resources,
exercising authority over and taking responsibility for all such resources that are

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allocated to be under his/her supervision.

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Based on organizational functions, the following manager types in a standard
commercial organization.

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manufacturing company.
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1. Purchase Manager who is responsible for procuring raw materials in a

2. Production Manager who is responsible for managing the manufacturing

process.
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3. IT Manager who is responsible for supervising all computing and IT
communication related issues.

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4. Marketing Manager who is responsible for supervising the promotion and
advertising of the company's products/services.

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5. Sales Manager who looks after the sales department and sets targets for sales
personnel and appraises their performance on the basis of the extent of target
achievement.
6. Finance Manager who is responsible for the financial management of the
organization.
7. Human Resources Manager who is responsible for the HR department and
oversees all human resource management functions like recruitment, payroll,
attendance, employee exit, etc. besides displaying all basic management skills.
8. Product Development Manager who is authorized with the management of the
technical division of new product design and product innovation.

Other than these, a standard company may have a general manager and an
operational manager, depending upon the type and scale of its operations.
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Software development and testing companies also have two types of project
managers
1. Functional project managers who are deeply involved with every technical
aspect of the project
2. Activity or resource managers who manage the operational and people part of
the project, leaving the technical aspects to his subordinate IT professionals.

In most companies these days, we can see another school of managers called case
managers. These case managers are chiefly vested with the responsibility of attending
to employees' medical well-being There are, broadly, two types of case managers –
1. Medical case managers who are responsible for getting medical aid for

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2. Liaison case managers who act as the mediator between the medical

w.Eprofessionals and the employer organization.

1.5.2 Types of
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Managers Based on Management
There can be the following sorts of managers based upon the four most prominent
Styles

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types of management styles. Each subheading underlines different aspects of
management styles and techniques.

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The Authoritarian Manager is one who is the sole decision maker for his management

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unit and prefers his subordinates to perform their tasks exactly as outlined by him. In a

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way, this type of manager makes work easier for the employee as the latter knows
exactly what is expected of him/her and the way in which the task is to be performed.

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The thinking part is left to the boss while the doing part lies with the subordinate. This
type of manager displays management skills of strong leadership and direction but may

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lack the skill for delegation.

The Democratic Manager is that person who believes in majority consensus and takes
any decision only after consulting his/her subordinates. This type of manager displays
participative management style by allowing his subordinates' participation in the
decision-making process, giving them a sense of belonging and deeper involvement in
the organizational fabric.

The Paternalistic manager is the one who acts like a parent figure to his subordinates
and makes sure to regularly bond with his subordinates to listen to their professional
issues and lend a helping hand to ease their operational difficulties. A paternalistic
manager encourages his subordinates to work as a family and be supportive of the
collective effort for the bigger organizational well-being.

The Laissez Faire Manager communicates the tasks to be performed by his

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subordinates and sets targets and deadlines for the completion of such tasks.
Thereafter he leaves the method to the subordinates. As long as the employees
complete the task in line with the organizational standards and within the specific
deadline, it doesn't matter what methods are employed by them to do so.

1. THE PROBLEM-SOLVING MANAGER

The Problem-Solving Manager is task driven and focused on achieving goals.
These problem-solvers are constantly putting out fires and leading their teams. The
paradox here is this: It is often the manager who creates the very problems and
situations that they work so hard to avoid. Continually providing solutions often results in
the lackluster team performance they are working so diligently to eliminate.

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2. THE PITCHFORK MANAGER

w.E People who manage by pitchfork lead their teams with a heavy and often
controlling hand: demanding progress, forcing accountability, prodding and pushing for

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results through the use of threats and fear tactics. This style of tough, ruthless
management is painful for employees who are pushed to avoid consequences rather
than pulled toward a desired goal.

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3. THE PONTIFICATING MANAGER
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These managers will readily admit they don’t follow any particular type of

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management strategy. Instead, they shoot from the hip, making it up as they go along

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and often generating sporadic, inconsistent results. Because of this, they often find
themselves in situations they are unprepared for. Interestingly, the Pontificating

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Manager thrives on situations like this.

4. THE PRESUMPTUOUS MANAGER

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Presumptuous Managers focus more on themselves than anything else. Their
personal production, recognition, sales quotas, and bonuses take precedence over their
people. As you can imagine, these managers experience more attrition, turnover, and
employee problems than any other type of manager.
Presumptuous Managers are typically assertive and confident individuals; however,
they are too often driven by their egos to look good and outperform the rest of the team.
Presumptuous Managers breed unhealthy competition rather than an environment of
collaboration.

5. THE PERFECT MANAGER

Perfect Managers are open to change and innovation, and committed to
improving and evolving as sales managers. But in their search for the latest and
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greatest approach, Perfect Managers (like Pontificating Managers) never get to

experience the benefit of consistency.
This manager is a talking spec sheet. Their emphasis on acquiring more facts, figures,
features, and benefits overshadows their ability to recognize the critical need for soft
skills training around the areas of presenting, listening, questioning, prospecting, and
the importance of following an organized, strategic selling system. Perfect Managers
rely on their vast amount of product knowledge and experience when managing and
developing their salespeople. Because of this great imbalance, these managers often
fall short on developing interpersonal skills that would make them more human than
machine.

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6. THE PASSIVE MANAGER
Also referred to as Parenting Managers or Pleasing Managers,

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Passive Managers have one ultimate goal: to make people happy. While this is certainly
an admirable trait, it can quickly become a barrier to effective leadership.
You can spot a Passive Manager by looking at their team and assessing the

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number of people who should have been fired long ago. Because all that Passive
Managers want to do is please, they are timid in their management approach. These

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managers will do anything to avoid confrontation and struggle with holding their people
accountable for failures or shortcomings.

7. THE PROACTIVE MANAGER gin

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The Proactive Manager encompasses all the good qualities that the other types of

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managers possess, yet without their pitfalls. Here are the characteristics this ideal
manager embodies, which you should strive to develop yourself. The Proactive
Manager possesses:
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


Manager et
The drive to support others and spearhead solutions like the Problem-Solving

The persistence, edge, and genuine authenticity of the Pitchfork Manager

 The enthusiasm, passion, charm, and presence of the Pontificating Manager
 The confidence of the Presumptuous Manager
 The knowledge, sales acumen, efficiency, focus, and passion of the Perfect
Manager
 The respectfulness, sensitivity, nurturing ability, and humanity of the
Passive Manager

The Proactive Manager is the ultimate manager and coach, and a testimonial to the
skills and coaching competencies every manager needs to develop in order to build a
winning team.
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1.5.3 MANAGERIAL ACTIVITIES /PRINCIPLES OF MANAGEMENT

The management activities are known as principles of management which are as
follows:
 Forecasting and Planning,
 Organizing
 Commanding,
 Co-ordaining and
 Controlling

Forecasting and Planning

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Planning means looking ahead or to foresee. To foresee means, “Both to assess the
future and make provision for it. To plan means to foresee and provide means for future.

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The process of planning includes:
1. The identification of organizational goals. The aim of any insurance company is

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to insure life or property of the human being. The goal is to insure maximum
number of person or the property so that the risk can be spread on number of
persons.

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2. The line of action to be followed. Once aim is set to insurer human being or
property then the next step is how to insure human beings or property. The

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action will be to create a Marketing Department for a company.
3. The various stages through which the action would pass: To sell the insurance

insurance products. ee
product only marketing department at one place i.e head office cannot achieve
the results therefore various offices at different location to be set up to sell the

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4. The method to be used to achieve the desired goals: The next issue comes how

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to sell the insurance products. Whether it should be through Agents or Corporate
Agent or Broker. Accordingly the action of the insurance company will start to
recruit the manpower.

Organizing
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To organize means building up the dual structure, material and human of the
organization. To organize means to provide the organization with everything useful to its
functioning raw material, tools, capital and personnel.
Example: An insurance company may not require the raw material but it requires other
material i.e. tool (computers), capital and personnel. A sound organization should have
the following to achieve the good relationship between material and human.
 A single competent and energetic guiding authority: There should be a
single person to be overall in-charge of the organization who will report to the
Board of directors. Like Chief Executing Officer (CEO) or Managing Director is
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appointed in all organization whether it is insurance or other type of organization.

Irrespective of the size of the organization.
 Efficient selection of personnel: Any organization is run by the human beings
therefore it is always endeavor of the CEO /Managing Director to recruit the
manpower weather technical or finance or marketing the person should be
intelligent and efficient. It saves the cost because the efficient people understand
the working of the organization and take the decisions quickly. In an insurance
industry the trained manpower is required because the insurance policies ate
technical in nature and requires lot of skill to make the understand to the
customer
 Clear definition of duties at all levels: The duties of each employee should be
defined to get the better results from the employees. If duties are not defined

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company the target should be given to the marketing personnel to insure so
many lives or property and being a marketing function, it should not be assigned

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to Finance Department. Moreover there will be many employees in the
department the target should be given to the Head of the Department and then
he will assign the targets to his juniors at different locations.
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Initiative and responsibility: The management should ensure that employees
take initiative to complete the job assigned to them. The employees should be

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held responsible for not doing the things. In an insurance company the marketing
team should be very strong to sell the insurance products. The team should take


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initiative to meet the number of persons to get the insurance business. The team
should not wait for the instruction of their superiors to meet the customers.
Minimum paper work: In the computer era the paper work can be reduced and

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the employees of the organization should maximum use the computers to save

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paper work. In insurance the marketing team should send the daily performance
report through email which will reduce the paper work.


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Reward & efficiency: The good performers should be awarded cash or non-
cash award which boost the moral and efficiency of the employees.


difficult. et
Unit of command: Every employee should report to one superior not to more
than otherwise the performance and controlling of the employees will be very

Clear and precise decision making: Any decision taken by any employee
should not be ambiguous i.e double meaning because it creates confusion.
 Proper control
o Disincentives for faults and error:
For any fault of any employee or non-performer should be penalized
otherwise it will affect the working of the performers.
 Supremacy of general interest in relation to individual etc.: Any individual
interest should not be clash with the organization interest. The organization
interest should be protected.
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Commanding
It means setting the business going to get the desired optimum results from the
subordinates. The managers must possess the requisites personal qualities and
knowledge to command effectively. The managers must
 Have a thorough knowledge of his personnel
 Have capacity to spot the right and competent workers so as to eliminate the
incompetent
 Set a good example i.e leadership
 Conduct periodic assessment or audit of performance
 Be well versed in agreement binding the business and its employees
 Have lively and constant touch with subordinates

ww  Aim at making unity, energy imitative and loyalty prevail among personnel

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Coordinating
It means the process developed by a manger to secure an orderly pattern of

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group effort among his personnel through unity of action to pursue the common goals.
The coordination should be within the resources available in the organization.

Controlling En
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The controlling means to ensure that everything is done in accordance with the
established rules and instruction given to the workmen. The purpose of control is to

The effective control must be

 Prompt,
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point out weaknesses and errors in order to rectify them and prevent their recurrence.

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

Followed with sanctions and
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Include measure to prevent recurrence of variances a or error

1.6 ROLES OF MANAGER

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1.6.1 DECISIONAL ROLES.
Decisional roles require managers to plan strategy and utilize resources. There are
four specific roles that are decisional. The entrepreneur role requires the manager to
assign resources to develop innovative goods and services, or to expand a business.
Most of these roles will be held by top-level managers, although middle managers may
be given some ability to make such decisions. The disturbance handler corrects
unanticipated problems facing the organization from the internal or external
environment. Managers at all levels may take this role. For example, first-line managers
may correct a problem halting the assembly line or a middle level manager may attempt
to address the aftermath of a store robbery. Top managers are more likely to deal with
major crises, such as requiring a recall of defective products. The third decisional role,
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that of resource allocator, involves determining which work units will get which
resources. Top managers are likely to make large, overall budget decisions, while
middle managers may make more specific allocations. In some organizations,
supervisory managers are responsible for determine allocation of salary raises to
employees. Finally, the negotiator works with others, such as suppliers, distributors, or
labor unions, to reach agreements regarding products and services. First-level
managers may negotiate with employees on issues of salary increases or overtime
hours, or they may work with other supervisory managers when needed resources must
be shared. Middle managers also negotiate with other managers and are likely to work
to secure preferred prices from suppliers and distributors. Top managers negotiate on
larger issues, such as labor contracts, or even on mergers and acquisitions of other
companies.

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1.6.2 INTERPERSONAL ROLES.

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Interpersonal roles require managers to direct and supervise employees and the
organization. The figurehead is typically a top of middle manager. This manager may

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communicate future organizational goals or ethical guidelines to employees at company
meetings. A leader acts as an example for other employees to follow, gives commands
and directions to subordinates, makes decisions, and mobilizes employee support.

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Managers must be leaders at all levels of the organization; often lower-level managers
look to top management for this leadership example. In the role of liaison, a manger

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must coordinate the work of others in different work units, establish alliances between
others, and work to share resources. This role is particularly critical for middle

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managers, who must often compete with other managers for important resources, yet
must maintain successful working relationships with them for long time periods.

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1.6.3 INFORMATIONAL ROLES.
g.n
Informational roles are those in which managers obtain and transmit information.
These roles have changed dramatically as technology has improved.
et
The monitor evaluates the performance of others and takes corrective action to improve
that performance. Monitors also watch for changes in the environment and within the
company that may affect individual and organizational performance. Monitoring occurs
at all levels of management, although managers at higher levels of the organization are
more likely to monitor external threats to the environment than are middle or first-line
managers. The role of disseminator requires that managers inform employees of
changes that affect them and the organization. They also communicate the company's
vision and purpose.
Managers at each level disseminate information to those below them, and much
information of this nature trickles from the top down. Finally,
a spokesperson communicates with the external environment, from advertising the
company's goods and services, to informing the community about the direction of the
organization. The spokesperson for major announcements, such as a change in
 18

strategic direction, is likely to be a top manager. But, other, more routine information
may be provided by a manager at any level of a company. For example, a middle
manager may give a press release to a local newspaper, or a supervisor manager may
give a presentation at a community meeting.

1.7 SKILLS OF MANAGER

Regardless of organizational level, all managers must have five critical skills:
technical skill, interpersonal skill, conceptual skill, diagnostic skill, and political skill.

1.7.1 TECHNICAL SKILL.

ww Technical skill involves understanding and demonstrating proficiency in a particular

workplace activity. Technical skills are things such as using a computer word

w.E
processing program, creating a budget, operating a piece of machinery, or preparing a
presentation. The technical skills used will differ in each level of management. First-
level managers may engage in the actual operations of the organization; they need to

asy
have an understanding of how production and service occur in the organization in order
to direct and evaluate line employees. Additionally, first-line managers need skill in

En
scheduling workers and preparing budgets. Middle managers use more technical skills
related to planning and organizing, and top managers need to have skill to understand

gin
the complex financial workings of the organization.

1.7.2 INTERPERSONAL SKILL.

ee rin
Interpersonal skill involves human relations, or the manager's ability to interact
effectively with organizational members. Communication is a critical part of

g.n
interpersonal skill, and an inability to communicate effectively can prevent career
progression for managers. Managers who have excellent technical skill, but poor
interpersonal skill are unlikely to succeed in their jobs. This skill is critical at all levels of
management.
et
1.7.3 CONCEPTUAL SKILL.
Conceptual skill is a manager's ability to see the organization as a whole, as a
complete entity. It involves understanding how organizational units work together and
how the organization fits into its competitive environment. Conceptual skill is crucial for
top managers, whose ability to see "the big picture" can have major repercussions on
the success of the business. However, conceptual skill is still necessary for middle and
supervisory managers, who must use this skill to envision, for example, how work units
and teams are best organized.
 19

1.7.4 DIAGNOSTIC SKILL.

Diagnostic skill is used to investigate problems, decide on a remedy, and implement
a solution. Diagnostic skill involves other skills—technical, interpersonal, conceptual,
and politic. For instance, to determine the root of a problem, a manager may need to
speak with many organizational members or understand a variety of informational
documents. The difference in the use of diagnostic skill across the three levels of
management is primarily due to the types of problems that must be addressed at each
level. For example, first-level managers may deal primarily with issues of motivation and
discipline, such as determining why a particular employee's performance is flagging and
how to improve it. Middle managers are likely to deal with issues related to larger work
units, such as a plant or sales office. For instance, a middle-level manager may have to
diagnose why sales in a retail location have dipped. Top managers diagnose

ww
organization-wide problems, and may address issues such as strategic position, the
possibility of outsourcing tasks, or opportunities for overseas expansion of a business.

w.E
1.7.5 POLITICAL SKILL.

asy
Political skill involves obtaining power and preventing other employees from taking
away one's power. Managers use power to achieve organizational objectives, and this

En
skill can often reach goals with less effort than others who lack political skill. Much like
the other skills described, political skill cannot stand alone as a manager's skill; in

gin
particular, though, using political skill without appropriate levels of other skills can lead
to promoting a manager's own career rather than reaching organizational goals.
Managers at all levels require political skill; managers must avoid others taking control

ee
that they should have in their work positions. Top managers may find that they need

rin
higher levels of political skill in order to successfully operate in their environments.
Interacting with competitors, suppliers, customers, shareholders, government, and the
public may require political skill.
g.n
1.8 EVOLUTION OF MANAGEMENT
et
First, the management was examined under classical management theories that
emerged around the turn of the twentieth century. These include scientific management,
which focuses on matching people and tasks to maximize efficiency; and administrative
management, which focuses on identifying the principles that will lead to the creation of
the most efficient system of organization and management. Next, we consider
behavioral management theories, developed both before and after the Second World
War, which focus on how managers should lead and control their workforces to increase
performance. Then we discuss management science theory, which developed during
the Second World War and which has become increasingly important as researchers
have developed rigorous analytical and quantitative techniques to help managers
measure and control organizational performance. Finally, we discuss business in the
1960s and 1970s and focus on the theories that were developed to help explain how the
external environment affects the way organizations and managers operate. By the end
of this chapter, you will understand the ways in which management theory has evolved
 20

over time. You will also

understand how
economic, political, and
cultural forces have
affected the
development of these
theories and the ways
in which managers and
their organizations
behave. Figure 1.3
summarizes the
chronology of the

ww
management theories
that are discussed in
this chapter.

w.E
1.8.1 SCIENTIFIC METHOD

asy
The evolution of modern management began in the closing decades of the
nineteenth century, after the industrial revolution had swept through Europe, Canada,

En
and the United States. In the new economic climate, managers of all types of
organizations—political, educational, and economic—were increasingly trying to find

gin
better ways to satisfy customers’ needs. Many major economic, technical, and cultural
changes were taking place at this time. The introduction of steam power and the

eer
development of sophisticated machinery and equipment changed the way in which
goods were produced, particularly in the weaving and clothing industries. Small
workshops run by skilled workers who produced hand-manufactured products (a system

ing
called crafts production) were being replaced by large factories in which sophisticated
machines controlled by hundreds or even thousands of unskilled or semiskilled workers
made products. Owners and managers of the new factories found themselves
.ne
unprepared for the challenges accompanying the change from small-scale crafts
production to large-scale mechanized manufacturing. Many of the managers and
t
supervisors had only a technical orientation, and were unprepared for the social
problems that occur when people work together in large groups (as in a factory or shop
system). Managers began to search for new techniques to manage their organizations’
resources, and soon they began to focus on ways to increase the efficiency of the
worker–task mix.

Fredrick w Taylor (1986-1915) rested his philosophy on four basic principles.

1. The development of a true science of management so that the best method for
performing each task could be determined.
2. The Scientific selection of workers so that the each worker would be given
responsibility for the task for which he or she was best suited.
 21

3. The scientific education and development of workers.

4. Intimate friendly cooperation between management and labor.

The scientific management schools

1. Scientific management theory arose in part from the need to increase
productivity.
2. In the United States especially, skilled labor was in short supply at the beginning
of the twentieth century.
3. The only way to expand the productivity was to raise the efficiency of workers.

ww4. Therefore ,Fredrick W.Taylor, Henry Gantt, and Frank and Lillian Gilberth
devised the body of principles known as Scientific management theory

w.E
Taylor contended that the success of these principles required” a complete mental
revolution” on the part of management and labor.

asy
Rather than quarrel over profits both side should increase production, by so doing, he
believed profits would rise to such an extent that labor have to fight over them.

En
 In short Taylor believed that management and labor had common interest in
increasing productivity.
gin
1. Taylor based his management system on production line time studies.

ee
Instead of relying on traditional work methods, he analyzed and timed steel
workers movements on a series of jobs.

rin
2. Using time study he broke each job down into its components and designed

g.n
the quickest and best method of performing each component. In this way he
established.

encourage et
 How much workers to do with the equipment and materials in hand. He also

 Employers to pay more productive workers higher rate than others. Using a
“scientifically correct “rate that would benefit both the company and workers.
 Thus the workers were urged to surpass their previous performance standards to
earn more pay .Taylor called his plane the differential rate system.

1.8.2 Contributions of scientific management theory

 The modern assembly line pours out finished products faster than Taylor could
ever imagine.
 This production “Miracle” is just one legacy of scientific management.
 22

 In addition its efficiency techniques have been applied to many tasks in non-
industrial organizations ranging from fat food service to the training of surgeons.
Limitations of scientific management theory
o Although Taylor's method led to dramatic increase in productivity and
higher pay in number of instance.
o Workers and unions began to oppose his approach because they feared
that working harder or faster would exhaust whatever work was available
Causing layoffs.
o Moreover, Taylor’s system clearly meant that time was of the essence.
o His critics objected to the speed up condition that placed undue pressure

ww on employees to perform at faster and faster levels.

o The emphasis on productivity and by extension profitability led some

w.E managers to exploit both the workers and customers.

o As a result more workers joined unions and thus reinforced a pattern of
suspicious and mistrust that shaded labor relations for decades.
1.8.3 Henry L.Gannt asy
En
Henry L. Gannt (1861-1919) worked with Taylor on several projects but when he went
out on his own as a consulting industrial engineer, Gannt began to reconsider tailors
insensitive systems.
gin
 Abandoning the differential rate system as having too little motivational impact
Gannet came up with new idea.
ee rin
 Every worker who finished days assigned work load win 50 percent bonus.

g.n
 Then he added a second motivation the supervisor would earn a bonus for each
worker who reached the daily standard.
 Plus an extra bonus if all the workers reached it.
et
 This Gantt reasoned would supervisor to train their workers to do a better job.
 Every workers progress was rated publicly and recorded an individual bar charts
 Mark as black on days the worker made the standard in red when he or she fell
below it.
 Going beyond this Gantt originated a charting system for production was
translated into eight languages and used throughout the world.
 Starting in 1920 s it was use in Japan Spain and soviet union it also formed that
the basis of two charting device which were developed to assist
 23

1. In planning, managing and controlling complex organization the Critical Path

Method (CPM) originated by DuPont and Program Evaluation and Review
Technique (PERT), developed by navy.
2. Lotus 1-2-3 is also a creative application of the Gannt chart.”

1.8.4 THE GILBRETHS

 Frank B. and Lillian M.Gilbreth (1968-1924) and (1878-1972) made their
contribution
 To the scientific management movement as a husband and wife team. Lillian and
Franck collaborated on fatigue and motion studies and focus on ways on

ww promoting the individual workers welfare to them the ultimate aim of scientific
management was to help workers reach their full potential as human beings

w.E
 In their conception motion and fatigue were intertwined every motion that was
eliminated reduced fatigue.

asy
 Using motion picture cameras they tried to find out the most economical motions
for each task in order to upgrade performance and reduce fatigue.

En
gin
1.8.5 CLASSICAL ORGANIZATION THEORY SCHOOL
Scientific management was concerned with increasing the productivity of the
shop and the individual worker.
ee rin
Classical organization theory grew out of the need to find guidelines for
managing such complex organization as factories.

1.8.6 HENRI FAYOL g.n

et
 Henri Fayol (1841-1925) is generally hailed as the founder of the classical
management school –not because he was the first to investigate managerial
behavior but because he was the first to systematize it.
 Fayol believed that sound manage
1. DIVISION OF LABOR
 The most people specialize the more efficiency they can perform their work.
This principle is epitomized by the modern assembly line.
2. AUTHORITY
 Managers must give orders so that they can get things done while this format
give them a right to command managers will not always compel obedience
unless they have
 24

 Personal authority (such as relevant) expert as well

3. DISIPLINE MEMBERS IN AN ORGANIZATION needs to respect the rules and

agreement that govern the organization.
 To Fayol, discipline leadership at all levels of the organization fair agreements
and judiciously enforced penalties for infractions.

4. UNITY OF COMMANDS
 Each employee must receive instruction from one person, Fayol believe that if
employee reported.

ww  More than one manager conflict in instruction and confusion in of authority

would result.

w.E
5. UNITY OF DIRECTION

asy
Those operations with in the same organization that have the same objective
should be directed by only one manager using one plan.

En
For example the personnel department in the company should not have a wo

gin
directors each with a different hiring policy.

 ee
6. SUBORDINATE OF INDIVIDUAL INTEREST TO COMMON GOOD

rin
In any undertaking the interest of employees should not take the precedence
over the interest of organization as a whole

g.n
7. REMUNERATION:
 et
Compensation of work done should be common to both employees and
employers.

8. CENTRALIZATION:
 Decreasing the role of subordinates in decision making is centralization,
increasing their role is decentralization.
 Fayol believed that the managers should retain the final responsibility.
 But should at the same time give their subordinate enough authority to do the
jobs properly.
 The problem is finding the proper degree of centralization in each case.
 25

9. THE HIERARCHY
 The line of authority in an organization should represent in the neat box and the
line of chart runs in order of rank from top management and lowest levels of
enterprise.

10. ORDER:
 Materials and the order should be in the right place at the right time.
 In particular should be in job or position they are most suited to.

11. EQUITY:

ww Managers should be fair and friendly to their subordinate.

w.E
12. STABILTY OF STAFF:
 A high employee turnover rate undermines the efficient functioning of an
organization.
asy
13. INITIATIVE:
En

gin
Subordinate should be given the freedom to conceive and carry out their plans
even though some mistake may result.

14. ESPRIT DE CROPS:


ee rin
Promoting team spirit will give the organization a sense of unity.


To Fayol even the small factor help to develop the spirit.
g.n
He suggested for example the use of verbal communication instead of formal,
written communication whenever possible.

1.8.7 THE BEHAVIORAL SCHOOL (HUMAN RELATION):

et
 The behavioral school emerged partly because the classical approach did not
archive sufficient production efficiency and workplace harmony.
 To ‘managers’ frustration,
 People did not always follow predicted or expected patterns of behavior.
 Thus there was increased interest in helping managers deal more effectively with
a people side of their organizations.
 Several Theorists tried to strengthen with a people side of their organization
theory with an insight of sociology and psychology.
 The human Relations movement
 A human relation is frequently used as a general term to describe the ways in
which managers interact with their employees.
 26

 When “employee management” simulate more and better work ,the organization
has a more and better work, the organization has effective human relations
 When morale and efficiency deteriorate, its human relations are said to be
ineffective.
 The human relations movement arose from early attempts to systematically
discover the social and psychological factors that would create effective Human
reaction.

1.8.8 THE CONTINGENCY APPROACH

The contingency approach sometimes called (situation approach) was developed
by the managers, consultants and researchers who tried to apply the concepts of the

ww
major schools to the real life.

w.E


When methods highly effective in one situation failed to work in other situation.
They sought an explanation.



asy
Why for example did an organization development work brilliantly in one situation
and fail miserably in another.

En
Advocates Of the contingency approach had a logical answer to such question.
Results differ because situation differs. Techniques that work in one case will not
work in other.

gin
According to the contagious technique the manager’s job is to find which
technique will in a particular situation, under particular circumstances and at a


particular time.
ee rin
Best contributes to attainments of management goals, where workers need to
encourage increasing productivity.


g.n
For example a classical theorist may prescribe a new work simplification scheme.
The behavioral scientist may instead seek to create a psychologically motivating
climate and recommend.

et
some approach like job enrichment the combination of tasks that are different in
scope and responsibility and allow the worker greater autonomy in making
decisions
 but the manager trained in the contiguous approach will ask
 Which ties the recourse are limited, work simplification would be the best
solution,
 However skilled workers driven by pride in their abilities. a job enrichment
program might be more effective.
 The contingency approach represents an important turn in management theory,
but it portals each set of organization relationship in its unique circumstances.
 27

ww
w.E
1.8.9 SYSTEM APPROACH
 The system approach to management views the organizations as a unified,
asy
purposeful system composed of integral parts.

En
 This approach gives managers a way of looking at the organization as a hole and
as a part of the larger external environment.

gin
 Systems theory tells us that the activity of any segment of an organization
affects, in varying degree the activity of every other segment.

eer
 Production managers in a manufacturing plant, for example, prefer long

ing
uninterrupted production runs of standardized products in order to maintain
maximum efficiency and low costs.

.ne
 Marketing managers on the other hand who want to offer customers quick
delivery of a wide range of products would like a flexible manufacturing schedule
that can fill special order on short notice.
t
 Systems oriented production managers make scheduling decisions only after
they have identified the impact of these decisions on other department and on
the entire organization.
 The point of system approach is that managers cannot wholly with in the
traditional organization chart.
 They must mesh their department with the whole enterprise.
 To do that they have to communicate not only with other employees and
departments, but frequently with representative of other organization as well.
 Clearly, systems managers grasp the importance of the webs of business
relationship to their efforts.
 28

1.9 BUSINESS ORGANIZATIONS

A business is an organization that uses economic resources or inputs to provide
goods or services to customers in exchange for money or other goods and services.
Business organizations come in different types
 Sole proprietorship
 Partnership
 Company
o Public sector
o Private sector

ww
1.9.1 Sole proprietorship
A sole proprietorship is a business owned by only one person. It is easy to set-up

w.E
and is the least costly among all forms of ownership.
The owner faces unlimited liability; meaning, the creditors of the business may go
after the personal assets of the owner if the business cannot pay them.

asy
The sole proprietorship form is usually adopted by small business entities.
Advantages
 En
Ease of formation and dissolution. Establishing a sole proprietorship can be

gin
as simple as printing up business cards or hanging a sign announcing the
business. Taking work as a contract carpenter or freelance photographer,




ee
Typically, there are low start-up costs and low operational overhead.
Ownership of all profits.

rin
Sole Proprietorships are typically subject to fewer regulations.
No corporate income taxes. Any income realized by a sole proprietorship is
declared on the owner's individual income tax return.
Disadvantages g.n
 et
Unlimited liability. Owners who organize their business as a sole
proprietorship are personally responsible for the obligations of the business,
including actions of any employee representing the business.
 Limited life. In most cases, if a business owner dies, the business dies as
well.
 It may be difficult for an individual to raise capital. It's common for funding to
be in the form of personal savings or personal loans.
1.9.2 Partnership
A Partnership consists of two or more individuals in business together. Partnerships
may be as small as mom and pop type operations, or as large as some of the big legal
or accounting firms that may have dozens of partners. There are different types of
partnerships—general partnership, limited partnership, and limited liability partnership—
 29

the basic differences stemming around the degree of personal liability and management
control.

Advantages
 Synergy. There is clear potential for the enhancement of value resulting from
two or more individuals combining strengths.
 Partnerships are relatively easy to form, however, considerable thought
should be put into developing a partnership agreement at the point of
formation.
 Partnerships may be subject to fewer regulations than corporations.
 There is stronger potential of access to greater amounts of capital.

ww  No corporate income taxes. Partnerships declare income by filing a

partnership income tax return. Yet the partnership pays no taxes when this
partnership tax return is filed. Rather, the individual partners declare their

w.E pro-rata share of the net income of the partnership on their individual income
tax returns and pay taxes at the individual income tax rate.
Disadvantages
 asy
Unlimited liability. General partners are individually responsible for the

 En
obligations of the business, creating personal risk.
Limited life. A partnership may end upon the withdrawal or death of a partner.

gin
There is a real possibility of disputes or conflicts between partners which
could lead to dissolving the partnership. This scenario enforces the need of a
partnership agreement.

1.9.4 Corporation or company

ee rin
g.n
A company is owned by shareholders who appoint Directors to give direction to the
business. The Chief Executive is the senior official within the company with

the company on behalf of the Board. et

responsibility for making major decisions. Specialist managers will be appointed to run

A company is a legal body in its own right with an existence that is separate in law
from its owners. The company will thus be sued and can sue in its own name.
Shareholders put funds into the company by buying shares. New shares are often
sold in face values of Rs10 per share but this does not have to be the case.
Limited liability is a form of business protection for company shareholders (and
some limited partners). For these individuals the maximums sum they can lose from a
business venture which they have contributed going bust is the sum of money that they
have invested in the company - this is the limit of their liability.
Every company must register with the Registrar of Companies, and must have an
official address.
There are two companies namely
 30

1.9.4.1 Private companies

Private companies have Ltd after their name. They are typically smaller than public
companies although some like Portakabin and Mars are very large. Shares in a private
company can only be bought and sold with permission of the Board of Directors.
Shareholders have limited liability.

Advantages
 Limited Liability: It means that if the company experience financial distress
because of normal business activity, the personal assets of shareholders will
not be at risk of being seized by creditors.


ww 

Continuity of existence: business not affected by the status of the owner.
Minimum number of shareholders need to start the business are only2.
More capital can be raised as the maximum number of shareholders allowed

w.E 
is 50.
Scope of expansion is higher because easy to raise capital from financial
institutions and the advantage of limited liability.
Disadvantages

asy

En
Growth may be limited because maximum shareholders allowed are only 50.
The shares in a private limited company cannot be sold or transferred to

gin
anyone else without the agreement of other shareholders

1.9.4.2 Public companies

ee rin
A public company like Cadbury-Schweppes or BT can sell shares to the public and
to financial institutions and have their shares traded on the Stock Exchange.

g.n
The main advantage is that large amounts of capital can be raised very quickly. One
disadvantage is that control of a business can be lost by the original shareholders if

et
large quantities of shares are purchased as part of a takeover bid. In order to create a
public company the directors must apply to the Stock Exchange Council, which will
carefully check the accounts.

Advantages
 There is limited liability for the shareholders.
 The business has separate legal entity. There is continuity even if any of the
shareholders die.
 These businesses can raise large capital sum as there is no limit to the
number of shareholders.
 The shares of the business are freely transferable providing more liquidity to
its shareholders
 31

Disadvantages
 There are lots of legal formalities required for forming a public limited
company. It is costly and time consuming.
 In order to protect the interest of the ordinary investor there are strict controls
and regulations to comply. These companies have to publish their accounts.
 The original owners may lose control.
 Public Limited companies are huge in size and may face management
problems such as slow decision making and industrial relations problems.

1.10 ORGANIZATIONAL CULTURE

ww Organizational culture is a system of shared assumptions, values, and beliefs,

which governs how people behave in organizations. These shared values have a strong
influence on the people in the organization and dictate how they dress, act, and perform

w.E
their jobs. Every organization develops and maintains a unique culture, which provides
guidelines and boundaries for the behavior of the members of the organization. Let's
explore what elements make up an organization's culture.

asy
Organizational culture is composed of seven characteristics that range in priority
from high to low. Every organization has a distinct value for each of these

En
characteristics, which, when combined, defines the organization's unique culture.
Members of organizations make judgments on the value their organization places on

gin
these characteristics, and then adjust their behavior to match this perceived set of
values. Let's examine each of these seven characteristics.

ee
Organizational culture includes an organization's expectations, experiences,

rin
philosophy, and values that hold it together, and is expressed in its self-image,
inner workings, interactions with the outside world, and future expectations. It is based

g.n
on shared attitudes, beliefs, customs, and written and unwritten rules that have
been developed over time and are considered valid. Also called corporate culture,
It's shown in
1. The ways the et
organization conducts its business,
its employees, customers, and the wider community
treats

The extent to which freedom is allowed in decision making, developing new ideas,
and personal expression
How power and information flow through its hierarchy, and
1. How committed employees are towards collective objectives.

It affects theorganization's productivity and performance,and provides guidelines on

customer care and service, product quality and safety, attendance and punctuality
and concern for the environment.
 32

It also extends to production-methods, marketing and advertising practices, and

to new product creation. Organizational culture is unique for every organization and one
of the hardest things to change.

1.10.1 CHARACTERISTICS OR DIMENSION OF ORGANIZATIONAL

CULTURE
The seven characteristics of organizational culture are:

a) INNOVATIVE CULTURES
Companies that have innovative cultures are flexible and adaptable, and

ww
experiment with new ideas. These companies are characterized by a flat hierarchy in
which titles and other status distinctions tend to be downplayed

w.E
For example, W. L. Gore & Associates Inc. is a company with innovative products
such as GORE-TEX® (the breathable fabric that is windproof and waterproof), Glide
dental floss, and Elixir guitar strings, earning the company the distinction of being

asy
elected as the most innovative company in the United States by Fast
Company magazine in 2004.

En
b) AGGRESSIVE CULTURES
gin
Companies with aggressive cultures value competitiveness and outperforming

ee
competitors: By emphasizing this, they may fall short in the area of corporate social
responsibility. For example, Microsoft Corporation is often identified as a company with

rin
an aggressive culture. The company has faced a number of antitrust lawsuits and
disputes with competitors over the years.

g.n
Recently, Microsoft founder Bill Gates established the Bill & Melinda Gates

et
foundation and is planning to devote his time to reducing poverty around the world.

c) OUTCOME-ORIENTED CULTURES
Outcome-oriented cultures as those that emphasize achievement, results, and
action as important values. A good example of an outcome-oriented culture may be
Best Buy Co. Inc. Having a culture emphasizing sales performance, Best Buy tallies
revenues and other relevant figures daily by department. Employees are trained and
mentored to sell company products effectively, and they learn how much money their
department made every day
 33

ww
w.E
asy
En
gin
d) STABLE CULTURES
e eri
Stable cultures are predictable, rule-oriented, and bureaucratic. These

ng.
organizations aim to coordinate and align individual effort for greatest levels of
efficiency. When the environment is stable and certain, these cultures may help the
organization be effective by providing stable and constant levels of output. These

dynamic environment. ne
cultures prevent quick action, and as a result may be a misfit to a changing and

t
e) PEOPLE-ORIENTED CULTURES
People-oriented cultures value fairness, supportiveness, and respect for individual
rights. These organizations truly live the mantra that “people are their greatest asset.” In
addition to having fair procedures and management styles, these companies create an
atmosphere where work is fun and employees do not feel required to choose between
work and other aspects of their lives. In these organizations, there is a greater emphasis
on and expectation of treating people with respect and dignity

TEAM-ORIENTED CULTURES
 34

Companies with team-oriented cultures are collaborative and emphasize

cooperation among employees. For example, Southwest Airlines Company facilitates a
team-oriented culture by cross-training its employees so that they are capable of
helping each other when needed. The company also places emphasis on training intact
work teams. Employees participate in twice daily meetings named “morning overview
meetings” (MOM) and daily afternoon discussions (DAD) where they collaborate to
understand sources of problems and determine future courses of action. In Southwest’s
selection system, applicants who are not viewed as team players are not hired as
employees. In team-oriented organizations, members tend to have more positive
relationships with their coworkers and particularly with their managers.

f) DETAIL-ORIENTED CULTURES
ww Organizations with detail-oriented cultures are characterized in the OCP
(Organization culture Profile) framework as emphasizing precision and paying attention

w.E
to details. Such a culture gives a competitive advantage to companies in the hospitality
industry by helping them differentiate themselves from others. For example, Four
Seasons Hotels Ltd. and the Ritz-Carlton Company LLC are among hotels who keep

asy
records of all customer requests, such as which newspaper the guest prefers or what
type of pillow the customer uses. This information is put into a computer system and

En
used to provide better service to returning customers. Any requests hotel employees
receive, as well as overhear, might be entered into the database to serve customers

gin
better. Recent guests to Four Seasons Paris who were celebrating their 21st
anniversary were greeted with a bouquet of 21 roses on their bed. Such clear attention

ee
to detail is an effective way of impressing customers and ensuring repeat visits.
McDonald’s Corporation is another company that specifies in detail how employees

rin
should perform their jobs by including photos of exactly how French fries and
hamburgers should look when prepared properly.

g.n
1.11 Organization Environment
et
The organizational environment is the set of forces surrounding an organization
that have the potential to affect the way it operates and its access to scarce resources.
The organization needs to properly understand the environment for effective
management.
Scholars have divided these environmental factors into two main parts as,
a) Internal Environment,
b) External Environment.
1.11.1 Internal Environment
The internal environment consists of the organization's owners, board of
directors, regulators, physical work environment and culture. In the internal environment
include strength and weakness of an organization.
 35

Elements of internal environment are:

1. Trade union
2. Management
3. Current employee
4. Shareholders.

1.11.2 External Environment:

As per the Daft theory (1997) , An organization's environment is defined as all the
elements existing outside the boundary of the organization that have the potential to

ww
affect all or part of the organization Examples include government regulatory agencies,
competitors, customers, suppliers, and pressure from the public.
Daft (1997) identified 10 environmental sectors that may have an impact on

w.E
particular organizations:
1) industry, 2) raw materials, 3) human resources, 4) financial resources, 5) markets, 6)

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technology, 7) general economy, 8) government/legal, 9) sociocultural, 10) international.
Each of these sectors may be divided into two basic components. They are:

En
1) Task (Specific) Environment: 2) General Environment.

1.11.2.1 Task Environment: gin

ee
Task environment is composed of the specific dimensions of the organization's

rin
surrounding that are very likely to influence of the organization. It also consists of five
dimensions: Competitors, Customers, and Employees, Strategic, Planners and
suppliers.
g.n
1.11.2.2 General Environment:
General environment is composed of the nonspecific elements of theet
organization's surrounding the might affect its activities. It consists of five dimensions:

(a) Economic Factor

Economic factors refer to the character and direction of the economic system
within which the firm operates. Economic factors include
 The balance of payments,
 The state of the business cycle,
 The distribution of income within the population, and
 Governmental monetary and fiscal policies.
 36

The impact of economic factors may also differ between industries.

BALANCE OF PAYMENTS.
The balance of payments of a country refers to the net difference in value of
goods bought and sold by citizens of the country. To decrease the value of goods
imported into a country, it is common practice to construct barriers to entry for particular
classes of products. Such practices reduce competition for firms whose products are
protected by the trade barriers.

Example : Mexico has limited the number of automobiles that can be imported. The
purpose of this practice is to stimulate the domestic automobile market
and to allow it to become large enough to create economies of scale and
to create jobs for Mexican workers. A side effect of the import restriction,

ww however, has been an increase in the price and a decrease in the quality
of automobiles available to the public.

w.E Another potential consequence of import restrictions is the possibility of

reciprocal import restrictions. Partially in retaliation to import restriction on Japanese

asy
televisions and automobiles by the United States, the Japanese have limited imports of
agricultural goods from the United States.

En
Lowering trade restrictions as a means of stimulating the economy of a country
may meet with mixed results. The North American Free Trade Agreement (NAFTA) has

gin
opened the borders between the United States, Canada, and Mexico for the movement
of many manufacturers. Government officials in the United States argue the results
have been positive, but many local communities that have lost manufacturing plants
question the wisdom of the agreement.
BUSINESS CYCLE ee rin
g.n
The business cycle is another economic factor that may influence the operation
of a firm. Purchases of many durable goods (appliances, furniture, and automobiles)
can be postponed during periods of recession and depression, as can purchases of new

et
equipment and plant expansions. Economic downturns result in lower profits, reductions
in hiring, increased borrowing, and decreased productivity for firms adversely affected
by the recession. Positive consequences of recessions may include reductions in waste,
more realistic perceptions of working conditions, exit of marginally efficient firms, and a
more efficient system.

INCOME DISTRIBUTION
The distribution of income may differ between economic systems. Two countries
with the same mean (per capita) income levels may have dramatically different
distributions of income. The majority of persons in the country are considered middle
income, with only a relatively small number of persons having exceptionally high or low
incomes.
 37

Many developing countries have citizens who are either extremely wealthy or
extremely poor. Only a few persons would qualify as middle class. Therefore, although
both countries had the same mean income, opportunities to market products to the
middle class would be greater in the United States.
TRANSFER PAYMENTS.
Transfer payments (e.g., welfare, social security) within the country change the
distribution of income. Transfer payments provide money to individuals in the lower
income brackets and enable them to purchase goods and services they otherwise could
not afford. Such a redistribution of income may not be the practice in other economic
systems. Thus, large numbers of people in need of basic goods and services do not
assure that those people will be able to purchase such goods and services.

ww
MONETARY AND FISCAL POLICIES.
Monetary and fiscal policies utilized by the federal government also influence

w.E
business operations. Monetary policies are controlled by the Federal Reserve System
and affect the size of the money supply and interest rates. Fiscal policies represent
purchases made by the federal government.

Example
asy
: Allocation of funds to defense means expenditures for weapons and
hardware. If appropriations had gone to the Health and Human Services

En
and Education Departments instead, much of the money would have
constituted transfer payments. The primary beneficiaries of such a fiscal

gin
policy would be firms in the basic food and shelter businesses. No matter
how government expenditures are reallocated, the result is lost sales and

(b)Technological Factor ee
cut budgets for some companies and additional opportunities for others.

rin
g.n
Technology is another aspect of the environment a firm should consider in
developing strategic plans. Changing technology may affect the demand for a firm's
products and services, its production processes, and raw materials. Technological

et
changes may create new opportunities for the firm, or threaten the survival of a product,
firm, or industry. Technological innovation continues to move at an increasingly rapid
rate.
DEMAND
Technology can change the lifestyle and buying patterns of consumers. Recent
developments in the field of microcomputers have dramatically expanded the potential
customer base and created innumerable opportunities for businesses to engage in
business via Internet. Whereas computers were traditionally used only by large
organizations to handle data processing needs, personal computers are commonly
used by smaller firms and individuals for uses not even imagined fifteen years ago.
Similarly, new developments in technology led to a reduction in prices for computers
and expanded the potential market. Lower prices allow computers to be marketed to the
general public rather than to business, scientific, and professional users—the initial
market.
 38

Technology may also cause certain products to be removed from the

market. Asbestos-related illnesses have severely limited asbestos as a resource used in
heat-sensitive products such as hair dryers. Further, a number of chemicals that have
been commonly used by farmers to control insects or plants are prohibited from use or
require licensure as a consequence of those chemicals appearing in the food chain.
PRODUCTION PROCESSES
Technology also changes production processes. The introduction of products
based on new technology often requires new production techniques. New production
technology may alter production processes. Robotics represents one of the most visible
challenges to existing production methods. Robots may be used in positions considered
hazardous for people or that require repetitive, detailed activities.

ww The consequences for other jobs currently occupied by people are not clear.
When production was first automated, although some workers were displaced, new jobs
were created to produce and maintain the automated equipment. The impact of robotics

w.E
on jobs is in large part a function of the uses made of the technology and the willingness
of workers to learn to use new technology.

asy
In some industries, use of robots during the early 2000s increased production
and efficiency but resulted in significant numbers of job losses. However, technological
innovation can also result in increased job growth.

Example En
: Ford Motor Company's $375-million technology update to its Norfolk

gin
assembly plant to build its 2004 F-150 resulted in the ability to build more
models on its assembly line and consequently created about 270 new

EVALUATING TECHNOLOGICAL CHANGES ee

jobs, an 11 percent increase.

rin
g.n
There is little doubt that technology represents both potential threats and potential
opportunities for established products. Products with relatively complex or new
technology are often introduced while the technology is being refined, making it hard for
firms to assess their market potential.

Example
et
: When ballpoint pens were first introduced, they leaked, skipped, and left
large blotches of ink on the writing surface. Fountain pen manufacturers
believed that the new technology was not a threat to existing products
and did not attempt to produce ball-point pens until substantial market
share had been lost

Another technology, the electric razor, has yet to totally replace the blade for
shaving purposes. Perhaps the difference is that the manufacturers of blades have
innovated by adding new features to retain customers. Manufacturers of fountain pens
did not attempt to innovate until the ballpoint pen was well established.
It is quite difficult to predict the impact of a new technology on an existing
product. Still, the need to monitor the environment for new technological developments
is obvious. Attention must also be given to developments in industries that are not direct
 39

competitors, since new technology developed in one industry may impact companies
and organizations in others.
(c) Sociocultural
The sociocultural dimensions of the environment consist of customs, lifestyles,
and values that characterize the society in which the firm operates. Socio-cultural
components of the environment influence the ability of the firm to obtain resources,
make its goods and services, and function within the society. Sociocultural factors
include anything within the context of society that has the potential to affect an
organization. Population demographics, rising educational levels, norms and values,
and attitudes toward social responsibility are examples of sociocultural variables.
POPULATION CHANGES

ww Changes in population demographics have many potential consequences for

organizations. As the total population changes, the demand for products and services

w.E
also changes. For instance, the decline in the birthrate and improvement in health care
have contributed to an increase in the average age of the population in the country.
Many firms that traditionally marketed their products toward youth are developing

Example asy
product lines that appeal to an older market.

: Clothing from Levi Strauss & Co. was traditionally popular among young

En
adults. While its popularity in this market has waned, the firm has been
able to develop a strong following in the adult market with
its Dockers label.
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ee
Other firms are developing strategies that will allow them to capitalize on the
aging population. Firms in the health-care industry and firms providing funeral services

rin
are expected to do well give the increasing age of the country population.

RISING EDUCATIONAL LEVELS. g.n

et
Rising educational levels also have an impact on organizations. Higher
educational levels allow people to earn higher incomes than would have been possible
otherwise. The increase in income has created opportunities to purchase additional
goods and services, and to raise the overall standard of living of a large segment of the
population. The educational level has also led to increased expectations of workers, and
has increased job mobility. Workers are less accepting of undesirable working
conditions than were workers a generation ago. Better working conditions, stable
employment, and opportunities for training and development are a few of the demands
businesses confront more frequently as the result of a more educated workforce.
NORMS AND VALUES
Norms (standard accepted forms of behavior) and values (attitudes toward right
and wrong) are differ across time and between geographical areas. Lifestyles differ as
well among different ethnic groups. As an example, the application in the United States
of Japanese-influenced approaches to management has caused firms to reevaluate the
 40

concept of quality. Customers have also come to expect increasing quality in products.
Many firms have found it necessary to reexamine production and marketing strategies
to respond to changes in consumer expectations.
SOCIAL RESPONSIBILITY
Social responsibility is the expectation that a business or individual will strive to
improve the welfare of society. From a business perspective, this translates into the
public expecting businesses to take active steps to make society better by virtue of the
business being in existence. Like norms and values, what is considered socially
responsible behavior changes over time.
In the 1970s agreeing action was a high priority. During the early part of the
twenty-first century prominent social issues were environmental quality (most

ww
prominently, recycling and waste reduction) and human rights, in addition to general
social welfare. More than just philanthropy, social responsibility looks for active
participation on the part of corporations to serve their communities.

w.E
a syE
ngi
nee
rin
g.n
et
 41

(d)Political-Legal Factor
The political-legal dimension of the general environment also affects business
activity. The philosophy of the political parties in power influences business practices.
The legal environment serves to define what organizations can and cannot do at a
particular point in time.
ATTITUDES TOWARD BUSINESS
A pro-business attitude on the part of government enables firms to enter into
arrangements that would not be allowed under a more anti-business philosophy. The
numerous joint ventures between U.S. and Japanese automobile manufacturers could
have been termed anticompetitive by a less pro-business administration. The release of
many acres of government land for business use (logging, mining) angered many

ww
environmentalists who had been able to restrict business use of the land under previous
administrations.

w.E Changes in sentiments toward smoking and its related health risks have altered
the public's attitude toward the tobacco industry. These changes have been reflected in
many organizations by limiting smoking to designated areas or completely prohibiting it

asy
at work. The transformation in attitude has also caused firms within the tobacco industry
to modify marketing strategies, encouraging many to seek expansion opportunities
abroad.
LEGISLATION
En
gin
The legal environment facing organizations is becoming more complex and
affecting businesses more directly. It has become increasingly difficult for businesses to

ee
take action without encountering a law, regulation, or legal problem. A very brief listing
of significant laws that affect business would include legislation in the areas of

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consumerism, employee relations, the environment, and competitive practices.

g.n
Many of the laws also have an associated regulatory agency. Powerful U.S.
regulatory agencies include



The Environmental Protection Agency (EPA)
The Occupational Safety and Health Administration (OSHA)
The Equal Employment Opportunity Commission (EEOC)
et
 The Securities and Exchange Commission (SEC).
Estimates of the cost of compliance vary widely; many of these costs are passed
to consumers. However, costs of legal expenses and settlements may not be incurred
for years and are not likely to be paid by consumers of the product or owners of the
company when the violation occurred. Still, potential legal action often results in higher
prices for consumers and a more conservative attitude by business executives.
LEVELS OF GOVERNMENT INFLUENCE
We generally speak about "the government" as referring to the federal
government. It is the federal government that passes and enforces legislation
concerning the entire country. Actions by the federal government affect a large number
 42

of firms and are consistent across state boundaries. Environmental analysis, however,
should not overlook actions by both state and local governments.
Regulations concerning many business practices differ between states. Tax rates
vary widely. Laws regarding unionization (e.g., right-to-work states) and treatment of
homosexual workers differ between states.
Local governments have the potential to affect business practices significantly.
Some local governments may be willing to provide incentives to attract business to the
area. Some may build industrial parks, service roads, and provide low-interest bonds to
encourage a desirable business to move into the community.
Regulatory measures such as building codes and zoning requirements differ
significantly between communities. Infrastructure such as electric and sewer services,

ww
educational facilities, and sewage treatment capabilities may not be able to
accommodate the increased demand associated with certain industries, making that
locale unsuitable for establishing some businesses.

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(e) International Factor
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A final component of the general environment is actions of other countries or groups

En
of countries that affect the organization. Governments may act to reserve a portion of
their industries for domestic firms, or may subsidize particular types of businesses to

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make them more competitive in the international market.
Some countries may have a culture or undergo a change in leadership that limits the

ECONOMIC ASSOCIATIONS
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ability of firms to participate in the country's economy.

rin
g.n
One of the most recent joint efforts by governments to influence business
practices was NAFTA. The agreement between the United States, Canada, and Mexico

et
was intended to facilitate free trade between the three countries. The result has been a
decrease in trade barriers between them, making it easier to transport resources and
outputs across national boundaries. The move has been beneficial to many businesses,
and probably to the economies of all three countries. In most economic associations,
preference is also given to products from member countries at the expense of products
from nonmembers.
Probably the best-known joint effort by multiple countries to influence business
practices is the Organization of Petroleum Exporting Countries (OPEC). The formation
of OPEC, an oil cartel including most major suppliers of oil and gas, led to a drastic
increase in fuel prices. Rising fuel prices had a significant effect on the demand for
automobiles worldwide. The increases in oil prices also contributed to inflation all over
the world. OPEC's early success encouraged countries producing other basic products
(coffee beans, sugar, bananas) to attempt to control the prices of their products.
 43

INTERGOVERNMENTAL RELATIONS
Changing relationships between the United States and other countries may alter
the ability of firms to enter foreign markets. The United States' establishment of trade
relations with China in the 1970s created opportunities for many firms to begin
marketing their products in China.
The rise of Ayatollah Ruhollah Khomeini to power in Iran altered the lives of
many Iranian citizens. Wine, vodka, music, and other forms of entertainment were
prohibited. Black markets provided certain restricted items. Other products, such as
wine, began to be produced at home.

ww
w.E
asy
En
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g.n
et
 UNIT IV
DIRECTING
DEFINITION
"Activating deals with the steps a manager takes to get sub-ordinates and others
to carry out plans" - Newman and Warren.
Directing concerns the total manner in which a manager influences the actions of subordinates.
It is the final action of a manager in getting others to act after all preparations have been
completed.

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Characteristics
•
•
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Elements of Management
Continuing Function
•
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Pervasive Function
•
•
Creative Function
Linking function En
• Management of Human Factor
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Scope of Directing
• Initiates action
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• Ensures coordination
Improves efficiency g.n
et
•
• Facilitates change
• Assists stability and growth

Elements of Directing
The three elements of directing are
• Motivation
• Leadership
• Communication
CREATIVITY AND INNOVATION
Often used interchangeably, they should to be considered separate and distinct.
Creativity can be described as problem identification and idea generation and innovation is
considered as idea selection, development and commercialization.
Creativity is creation of new ideas and Innovation is implementation of the new ideas.
There cannot be innovation without creativity. There can be creativity without innovation but it
has no value.
Steps involved in creativity

ww
w.E
asy
En
gin
eer
a) Preparation: This is the first stage at which the base for creativity and innovation is defined;
the mind is prepared for subsequent use in creative thinking. During preparation the individual is

ing
encouraged to appreciate the fact that every opportunity provides situations that can educate
and experiences from which to learn.
.ne
The creativity aspect is kindled through a quest to become more knowledgeable. This can be

t
done through reading about various topics and/or subjects and engaging in discussions with
others. Taking part in brainstorming sessions in various forums like professional and trade
association seminars, and taking time to study other countries and cultures to identify viable
opportunities is also part of preparation. Of importance is the need to cultivate a personal ability
to listen and learn from others.

b) Investigation: This stage of enhancing entrepreneurial creativity and innovation involves the
business owner taking time to study the problem at hand and what its various components are.
c) Transformation: The information thus accumulated and acquired should then be subjected
to convergent and divergent thinking which will serve to highlight the inherent similarities and
differences. Convergent thinking will help identify aspects that are similar and connected while
divergent thinking will highlight the differences. This twin manner of thinking is of particular
importance in realizing creativity and innovation for the following reasons:
Ø One will be able to skim the details and see what the bigger picture is
the situation/problem's components can be reordered and in doing so new patterns can
be identified.
Ø It will help visualize a number of approaches that can be used to simultaneously tackle
the problem and the opportunity.

wwØ One's decision-making abilities will be bettered such that the urge to make snap

w.E
decisions will be resisted.

d) Incubation: At this stage in the quest for creativity and innovation it is imperative that the

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subconscious reflect on the accumulated information, i.e. through incubation, and this can be

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improved or augmented when the entrepreneur:
Ø Engages in an activity completely unrelated to the problem/opportunity under scrutiny.

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Ø Takes time to daydream i.e. letting the mind roam beyond any restrictions self-imposed

eer
or otherwise.
Ø Relax and play
Ø Study the problem/opportunity in a wholly different environment
ing
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e) Illumination: This happens during the incubation stage and will often be spontaneous. The
realizations from the past stages combine at this instance to form a breakthrough.

t
f) Verification: This is where the entrepreneur attempts to ascertain whether the creativity of
thought and the action of innovation are truly effective as anticipated. It may involve activities
like simulation, piloting, prototype building, test marketing, and various experiments. While the
tendency to ignore this stage and plunge headlong with the breakthrough may be tempting, the
transformation stage should ensure that the new idea is put to the test.
MOTIVATION AND SATISFACTION

MOTIVATION
"Motivation" is a Latin word, meaning "to move". Human motives are internalized goals within
individuals. Motivation may be defined as those forces that cause people to behave in certain
ways. Motivation encompasses all those pressures and influences that trigger, channel, and
sustain human behavior. Most successful managers have learned to understand the concept of
human motivation and are able to use that understanding to achieve higher standards of
subordinate work performance.

ww
According to Koontz and O'Donnell, "Motivation is a class of drives, needs, wishes and similar
forces".
w.E
asy
NATURE AND CHARACTERISTICS OF MOTIVATION
Psychologists generally agree that all behavior is motivated, and that people have reasons for

En
doing the things they do or for behaving in the manner that they do. Motivating is the work a
manager performs to inspire, encourage and impel people to take required action.

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Ø Motivation is an Internal Feeling
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The characteristics of motivation are given below:-

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g.n
Motivation is a psychological phenomenon which generates in the mind of an individual the
feeling that he lacks certain things and needs those things. Motivation is a force within an
individual that drives him to behave in a certain way.
et
Ø Motivation is Related to Needs
Needs are deficiencies which are created whenever there is a physiological or psychological
imbalance. In order to motivate a person, we have to understand his needs that call for
satisfaction.

Ø Motivation Produces Goal-Directed Behaviour

Goals are anything which will alleviate a need and reduce a drive. An individual's behavior is
directed towards a goal.
Ø Motivation can be either Positive or Negative
Positive or incentive motivation is generally based on reward. According to Flippo - "positive
motivation is a process of attempting to influence others to do your will through the possibility of
gain or reward".
Negative or fear motivation is based on force and fear. Fear causes persons to act in a certain
way because they are afraid of the consequences if they don't.

IMPORTANCE OF MOTIVATION
A manager's primary task is to motivate others to perform the tasks of the organization.
Therefore, the manager must find the keys to get subordinates to come to work regularly and on

ww
time, to work hard, and to make positive contributions towards the effective and efficient

w.E
achievement of organizational objectives. Motivation is an effective instrument in the hands of a
manager for inspiring the work force and creating confidence in it. By motivating the work force,
management creates "will to work" which is necessary for the achievement of organizational

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goals. The various benefits of motivation are:-
•

En
Motivation is one of the important elements in the directing process. By motivating the
workers, a manager directs or guides the workers' actions in the desired direction for
accomplishing the goals of the organization.
gin
•

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Workers will tend to be as efficient as possible by improving upon their skills and knowledge
so that they are able to contribute to the progress of the organization thereby increasing

•
productivity.
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For performing any tasks, two things are necessary. They are: (a) ability to work and (b)

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willingness to work. Without willingness to work, ability to work is of no use. The willingness

•
to work can be created only by motivation.
t
Organizational effectiveness becomes, to some degree, a question of management's ability
to motivate its employees, to direct at least a reasonable effort towards the goals of the
organization.
• Motivation contributes to good industrial relations in the organization. When the workers are
motivated, contented and disciplined, the frictions between the workers and the
management will be reduced.

• Motivation is the best remedy for resistance to changes. When changes are introduced in an
organization, generally, there will be resistance from the workers. But if the workers of an
 organization are motivated, they will accept, introduce and implement the changes whole
heartily and help to keep the organization on the right track of progress.
• Motivation facilitates the maximum utilization of all factors of production, human, physical
and financial resources and thereby contributes to higher production.
• Motivation promotes a sense of belonging among the workers. The workers feel that the
enterprise belongs to them and the interest of the enterprise is their interests.
• Many organizations are now beginning to pay increasing attention to developing their
employees as future resources upon which they can draw as they grow and develop.

ww
SATISFACTION
Employee satisfaction (Job satisfaction) is the terminology used to describe whether

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employees are happy and contented and fulfilling their desires and needs at work. Many
measures purport that employee satisfaction is a factor in employee motivation, employee goal

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achievement, and positive employee morale in the workplace.
Employee satisfaction, while generally a positive in your organization, can also be a downer if

En
mediocre employees stay because they are satisfied with your work environment.
Factors contributing to employee satisfaction include treating employees with respect, providing

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regular employee recognition, empowering employees, offering above industry-average benefits

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and compensation, providing employee perks and company activities, and positive management
within a success framework of goals, measurements, and expectations.

ing
Employee satisfaction is often measured by anonymous employee satisfaction surveys
administered periodically that gauge employee satisfaction in areas such as:
• management,
.ne
•
•
•
understanding of mission and vision,
empowerment,
teamwork,
t
• communication, and
• Coworker interaction.
The facets of employee satisfaction measured vary from company to company.
A second method used to measure employee satisfaction is meeting with small groups of
employees and asking the same questions verbally. Depending on the culture of the company,
either method can contribute knowledge about employee satisfaction to managers and
employees.
JOB DESIGN
It is the process of Work arrangement (or rearrangement) aimed at reducing or
overcoming job dissatisfaction and employee alienation arising from repetitive and
mechanistic tasks. Through job design, organizations try to raise productivity levels
by offering non-monetary rewards such as greater satisfaction from a sense of personal
achievement in meeting the increased challenge and responsibility of one's work.

Approaches to job design include:

Ø Job Enl argement: Job enlargement changes the jobs to include more
and/or dif f erent tasks. Job enlargement should add interest to the work but may

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or may not give employees more responsibilit y.

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Ø Job Rotation: Job r otation moves employees f rom one task to another. It
distr ibutes the group tasks among a number of employees.
Ø Job Enrichment: Job enrichment allows employees to assume more

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responsibilit y, accountabilit y, and independence when learning new tasks or to

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allow f or greater participat ion and new opportunities.

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TYPES OF MOTIVATION TECHNIQUES
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ing
If a manager wants to get work done by his employees, he may either hold out a promise of a
reward (positive motivation) or he/she may install fear (negative motivation). Both these types
are widely used by managements.
.ne
a) Positive Motivation: t
This type of motivation is generally based on reward. A positive motivation involves the
possibility of increased motive satisfaction. According to Flippo - "Positive motivation is a
process of attempting to influence others to do your will through the possibility of gain or
reward". Incentive motivation is the "pull" mechanism. The receipt of awards, due recognition
and praise for work-well done definitely lead to good team spirit, co-operation and a feeling of
happiness.
• Positive motivation include:-
• Praise and credit for work done
• Wages and Salaries
 • Appreciation
• A sincere interest in subordinates as individuals
• Delegation of authority and responsibility

b) Negative Motivation:
This type of motivation is based on force and fear. Fear causes persons to act in a certain way
because they fear the consequences. Negative motivation involves the possibility of decreased
motive satisfaction. It is a "push" mechanism. The imposition of punishment frequently results in
frustration among those punished, leading to the development of maladaptive behaviour. It also

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creates a hostile state of mind and an unfavourable attitude to the job. However, there is no
management which has not used the negative motivation at some time or the other.

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MOTIVATION THEORIES
Some of the motivation theories are discussed below

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a) McGregor’s Theory X and Theory Y:

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McGregor states that people inside the organization can be managed in two ways. The

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first is basically negative, which falls under the category X and the other is basically positive,

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which falls under the category Y. After viewing the way in which the manager dealt with

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employees, McGregor concluded that a manager’s view of the nature of human beings is based
on a certain grouping of assumptions and that he or she tends to mold his or her behavior
towards subordinates according to these assumptions.
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Under the assumptions of theory X :
• Employees inherently do not like work and whenever possible, will attempt to avoid it.
• Because employees dislike work, they have to be forced, coerced or threatened with
punishment to achieve goals.
• Employees avoid responsibilities and do not work fill formal directions are issued.
• Most workers place a greater importance on security over all other factors and display
little ambition.
In contrast under the assumptions of theory Y :
• Physical and mental effort at work is as natural as rest or play.
 • People do exercise self-control and self-direction and if they are committed to those
goals.
• Average human beings are willing to take responsibility and exercise imagination,
ingenuity and creativity in solving the problems of the organization.
• That the way the things are organized, the average human being’s brainpower is only
partly used.

On analysis of the assumptions it can be detected that theory X assumes that lower-order
needs dominate individuals and theory Y assumes that higher-order needs dominate
individuals. An organization that is run on Theory X lines tends to be authoritarian in nature, the

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word “authoritarian” suggests such ideas as the “power to enforce obedience” and the “right to

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command.” In contrast Theory Y organizations can be described as “participative”, where the
aims of the organization and of the individuals in it are integrated; individuals can achieve their
own goals best by directing their efforts towards the success of the organization.

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b) Abraham Maslow’s “Need Hierarchy Theory”:
One of the most widely mentioned theories of motivation is the hierarchy of needs theory

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put forth by psychologist Abraham Maslow. Maslow saw human needs in the form of a

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hierarchy, ascending from the lowest to the highest, and he concluded that when one set of
needs is satisfied, this kind of need ceases to be a motivator.
As per his theory these needs are:
(i) Physiological needs: ing
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These are important needs for sustaining the human life. Food, water, warmth, shelter, sleep,

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medicine and education are the basic physiological needs which fall in the primary list of need
satisfaction. Maslow was of an opinion that until these needs were satisfied to a degree to
maintain life, no other motivating factors can work.
(ii) Security or Safety needs:
These are the needs to be free of physical danger and of the fear of losing a job, property, food
or shelter. It also includes protection against any emotional harm.
(iii) Social needs:
Since people are social beings, they need to belong and be accepted by others. People try to
satisfy their need for affection, acceptance and friendship.
(iv) Esteem needs:
According to Maslow, once people begin to satisfy their need to belong, they tend to want to be
held in esteem both by themselves and by others. This kind of need produces such satisfaction
as power, prestige status and self-confidence. It includes both internal esteem factors like self-
respect, autonomy and achievements and external esteem factors such as states, recognition
and attention.
(v) Need for self-actualization:
Maslow regards this as the highest need in his hierarchy. It is the drive to become what one is
capable of becoming; it includes growth, achieving one’s potential and self-fulfillment. It is to
maximize one’s potential and to accomplish something.

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All of the needs are structured into a hierarchy and only once a lower level of need has been
fully met, would a worker be motivated by the opportunity of having the next need up in the
hierarchy satisfied. For example a person who is dying of hunger will be motivated to achieve a
basic wage in order to buy food before worrying about having a secure job contract or the
respect of others.
A business should therefore offer different incentives to workers in order to help them fulfill each
need in turn and progress up the hierarchy. Managers should also recognize that workers are
not all motivated in the same way and do not all move up the hierarchy at the same pace. They
may therefore have to offer a slightly different set of incentives from worker to worker.

c) Frederick Herzberg’s motivation-hygiene theory:

 Frederick has tried to modify Maslow’s need Hierarchy theory. His theory is also known
as two-factor theory or Hygiene theory. He stated that there are certain satisfiers and
dissatisfiers for employees at work. Intrinsic factors are related to job satisfaction, while extrinsic
factors are associated with dissatisfaction. He devised his theory on the question: “What do
people want from their jobs?” He asked people to describe in detail, such situations when they
felt exceptionally good or exceptionally bad. From the responses that he received, he concluded
that opposite of satisfaction is not dissatisfaction. Removing dissatisfying characteristics from a
job does not necessarily make the job satisfying. He states that presence of certain factors in
the organization is natural and the presence of the same does not lead to motivation. However,
their non-presence leads to de-motivation. In similar manner there are certain factors, the

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absence of which causes no dissatisfaction, but their presence has motivational impact.

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Examples of Hygiene factors are:
Security, status, relationship with subordinates, personal life, salary, work conditions,
relationship with supervisor and company policy and administration.

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Examples of Motivational factors are:

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Growth prospectus job advancement, responsibility, challenges, recognition and achievements.

d) Victor Vroom’s Expectancy theory:

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The most widely accepted explanations of motivation have been propounded by Victor
Vroom. His theory is commonly known as expectancy theory. The theory argues that the

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strength of a tendency to act in a specific way depends on the strength of an expectation that
the act will be followed by a given outcome and on the attractiveness of that outcome to the

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individual to make this simple, expectancy theory says that an employee can be motivated to

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perform better when there is a belief that the better performance will lead to good performance
appraisal and that this shall result into realization of personal goal in form of some reward.
Therefore an employee is:
Motivation = Valence x Expectancy.
The theory focuses on three things:
• Efforts and performance relationship
• Performance and reward relationship
• Rewards and personal goal relationship

e) Clayton Alderfer’s ERG Theory:

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Alderfer has tried to rebuild the hierarchy of needs of Maslow into another model named

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ERG i.e. Existence – Relatedness – Growth. According to him there are 3 groups of core needs
as mentioned above. The existence group is concerned mainly with providing basic material

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existence. The second group is the individuals need to maintain interpersonal relationship with

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other members in the group. The final group is the intrinsic desire to grow and develop
personally. The major conclusions of this theory are :
•
•
In an individual, more than one need may be operative at the same time.
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If a higher need goes unsatisfied than the desire to satisfy a lower need intensifies.
• It also contains the frustration-regression dimension.
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f) McClelland’s Theory of Needs:
David McClelland has developed a theory on three types of motivating needs :
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(i) Need for Power
(ii) Need for Affiliation
(iii) Need for Achievement
Basically people for high need for power are inclined towards influence and control. They like to
be at the center and are good orators. They are demanding in nature, forceful in manners and
ambitious in life. They can be motivated to perform if they are given key positions or power
positions.
In the second category are the people who are social in nature. They try to affiliate themselves
with individuals and groups. They are driven by love and faith. They like to build a friendly
environment around themselves. Social recognition and affiliation with others provides them
motivation.
People in the third area are driven by the challenge of success and the fear of failure. Their
need for achievement is moderate and they set for themselves moderately difficult tasks. They
are analytical in nature and take calculated risks. Such people are motivated to perform when
they see at least some chances of success.
McClelland observed that with the advancement in hierarchy the need for power and
achievement increased rather than Affiliation. He also observed that people who were at the

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top, later ceased to be motivated by this drives.

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g) Stacey Adams’ Equity Theory:
As per the equity theory of J. Stacey Adams, people are motivated by their beliefs about

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the reward structure as being fair or unfair, relative to the inputs. People have a tendency to use
subjective judgment to balance the outcomes and inputs in the relationship for comparisons
between different individuals. Accordingly:
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If people feel that they are not equally rewarded they either reduce the quantity or quality of

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work or migrate to some other organization. However, if people perceive that they are rewarded
higher, they may be motivated to work harder.

h) Skinner’s Reinforcement Theory:

B.F. Skinner, who propounded the reinforcement theory, holds that by designing the
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environment properly, individuals can be motivated. Instead of considering internal factors like
impressions, feelings, attitudes and other cognitive behavior, individuals are directed by what
happens in the environment external to them. Skinner states that work environment should be
made suitable to the individuals and that punishment actually leads to frustration and de-
motivation. Hence, the only way to motivate is to keep on making positive changes in the
external environment of the organization.
LEADERSHIP
Definition
Leadership is defined as influence, the art or process of influencing people so that they
will strive willingly and enthusiastically toward the achievement of group goals.
- Leaders act to help a group attain objectives through the maximum application of its
capabilities.
- Leaders must instill values – whether it be concern for quality, honesty and

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Importance of Leadership
1. Aid to authority
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2. Motive power to group efforts

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3. Basis for co operation
4. Integration of Formal and Informal Organization.

LEADERSHIP STYLES
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a)
b)
Autocratic style
Democratic Style rin
c) Laissez Faire Style
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a) Autocratic style
Manager retains as much power and decision-making authority as possible. The manager does
not consult employees, nor are they allowed to give any input. Employees are expected to obey
orders without receiving any explanations. The motivation environment is produced by creating
a structured set of rewards and punishments.

Autocratic leadership is a classical leadership style with the following characteristics:

• Manager seeks to make as many decisions as possible
• Manager seeks to have the most authority and control in decision making
• Manager seeks to retain responsibility rather than utilize complete delegation
• Consultation with other colleagues in minimal and decision making becomes a solitary
process
• Managers are less concerned with investing their own leadership development, and prefer
to simply work on the task at hand.

Advantages

Reduced stress due to increased control

A more productive group ‘while the leader is watching’

Improved logistics of operations

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Faster decision making

Disadvantages

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Short-termistic approach to management.

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Manager perceived as having poor leadership skills

Increased workload for the manager




People dislike being ordered around
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Teams become dependent upon their leader

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b) Democratic Style
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Democratic Leadership is the leadership style that promotes the sharing of responsibility,
the exercise of delegation and continual consultation.
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The style has the following characteristics:
• Manager seeks consultation on all major issues and decisions.
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• Manager effectively delegate tasks to subordinates and give them full control and
responsibility for those tasks.
• Manager welcomes feedback on the results of intiatives and the work environment.
• Manager encourages others to become leaders and be involved in leadership development.

Advantages

Positive work environment

Successful initiatives

Creative thinking

Reduction of friction and office politics

Reduced employee turnover

Disadvantages

Takes long time to take decisions

Danger of pseudo participation

Like the other styles, the democratic style is not always appropriate. It is most successful
when used with highly skilled or experienced employees or when implementing operational
changes or resolving individual or group problems.

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c) Laissez-Faire Style
This French phrase means “leave it be” and is used to describe a leader who leaves
his/her colleagues to get on with their work. The style is largely a "hands off" view that tends to

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minimize the amount of direction and face time required.

Advantages En
• No work for the leader
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•
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Frustration may force others into leadership roles

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Allows the visionary worker the opportunity to do what they want, free from interference
• Empowers the group
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Disadvantages
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It makes employees feel insecure at the unavailability of a manager.
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The manager cannot provide regular feedback to let employees know how well they are
doing.

Managers are unable to thank employees for their good work.

The manager doesn’t understand his or her responsibilities and is hoping the employees
can cover for him or her.
LEADERSHIP THEORIES
The various leadership theories are

a) Great Man Theory:

Assumptions
• Leaders are born and not made.
• Great leaders will arise when there is a great need.

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Description

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Early research on leadership was based on the study of people who were already great leaders.
These people were often from the aristocracy, as few from lower classes had the opportunity to

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lead. This contributed to the notion that leadership had something to do with breeding.
The idea of the Great Man also strayed into the mythic domain, with notions that in times of

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need, a Great Man would arise, almost by magic. This was easy to verify, by pointing to people

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such as Eisenhower and Churchill, let alone those further back along the timeline, even to
Jesus, Moses, Mohammed and the Buddah.

Discussion ee rin
Gender issues were not on the table when the 'Great Man' theory was proposed. Most leaders

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were male and the thought of a Great Woman was generally in areas other than leadership.

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Most researchers were also male, and concerns about androcentric bias were a long way from
being realized.

b) Trait Theory:
Assumptions
• People are born with inherited traits.
• Some traits are particularly suited to leadership.
• People who make good leaders have the right (or sufficient) combination of traits.
Description
Early research on leadership was based on the psychological focus of the day, which was of
people having inherited characteristics or traits. Attention was thus put on discovering these
traits, often by studying successful leaders, but with the underlying assumption that if other
people could also be found with these traits, then they, too, could also become great leaders.

McCall and Lombardo (1983) researched both success and failure identified four primary traits
by which leaders could succeed or 'derail':
Emotional stability and composure: Calm, confident and predictable, particularly when under
stress.
Admitting error: Owning up to mistakes, rather than putting energy into covering up.
Good interpersonal skills: able to communicate and persuade others without resort to negative
or coercive tactics.

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Intellectual breadth: Able to understand a wide range of areas, rather than having a narrow (and

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narrow-minded) area of expertise.

c) Behavioral Theory:
Assumptions
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Leaders can be made, rather than are born.
Successful leadership is based in definable, learnable behavior.

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Description

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Behavioral theories of leadership do not seek inborn traits or capabilities. Rather, they look at
what leaders actually do.
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If success can be defined in terms of describable actions, then it should be relatively easy for

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other people to act in the same way. This is easier to teach and learn then to adopt the more
ephemeral 'traits' or 'capabilities'.

d) Participative Leadership:
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Assumptions
• Involvement in decision-making improves the understanding of the issues involved by
those who must carry out the decisions.
• People are more committed to actions where they have involved in the relevant decision-
making.
• People are less competitive and more collaborative when they are working on joint
goals.
 • When people make decisions together, the social commitment to one another is greater
and thus increases their commitment to the decision.
• Several people deciding together make better decisions than one person alone.

Description
A Participative Leader, rather than taking autocratic decisions, seeks to involve other people in
the process, possibly including subordinates, peers, superiors and other stakeholders. Often,
however, as it is within the managers' whim to give or deny control to his or her subordinates,
most participative activity is within the immediate team. The question of how much influence

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others are given thus may vary on the manager's preferences and beliefs, and a whole
spectrum of participation is possible

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e) Situational Leadership:

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Assumptions
• The best action of the leader depends on a range of situational factors.

Description En
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When a decision is needed, an effective leader does not just fall into a single preferred style. In
practice, as they say, things are not that simple.

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Factors that affect situational decisions include motivation and capability of followers. This, in

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turn, is affected by factors within the particular situation. The relationship between followers and
the leader may be another factor that affects leader behavior as much as it does follower
behavior.
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The leaders' perception of the follower and the situation will affect what they do rather than the
truth of the situation. The leader's perception of themselves and other factors such as stress
and mood will also modify the leaders' behavior.

f) Contingency Theory:
Assumptions
• The leader's ability to lead is contingent upon various situational factors, including the
leader's preferred style, the capabilities and behaviors of followers and also various
other situational factors.

Description
Contingency theories are a class of behavioral theory that contend that there is no one best way
of leading and that a leadership style that is effective in some situations may not be successful
in others.
An effect of this is that leaders who are very effective at one place and time may become
unsuccessful either when transplanted to another situation or when the factors around them
change.
Contingency theory is similar to situational theory in that there is an assumption of no simple
one right way. The main difference is that situational theory tends to focus more on the
behaviors that the leader should adopt, given situational factors (often about follower behavior),
whereas contingency theory takes a broader view that includes contingent factors about leader

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capability and other variables within the situation.

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g) Transactional Leadership:
Assumptions
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People are motivated by reward and punishment.
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Social systems work best with a clear chain of command.
When people have agreed to do a job, a part of the deal is that they cede all authority to
their manager.
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•

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The prime purpose of a subordinate is to do what their manager tells them to do.

Description
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The transactional leader works through creating clear structures whereby it is clear what is

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required of their subordinates, and the rewards that they get for following orders. Punishments

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are not always mentioned, but they are also well-understood and formal systems of discipline
are usually in place.

The early stage of Transactional Leadership is in negotiating the contract whereby the
subordinate is given a salary and other benefits, and the company (and by implication the
subordinate's manager) gets authority over the subordinate.

When the Transactional Leader allocates work to a subordinate, they are considered to be fully
responsible for it, whether or not they have the resources or capability to carry it out. When
things go wrong, then the subordinate is considered to be personally at fault, and is punished for
their failure (just as they are rewarded for succeeding).
h)Transformational Leadership:
Assumptions
• People will follow a person who inspires them.
• A person with vision and passion can achieve great things.
• The way to get things done is by injecting enthusiasm and energy.

Description
Working for a Transformational Leader can be a wonderful and uplifting experience. They put
passion and energy into everything. They care about you and want you to succeed.

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Transformational Leaders are often charismatic, but are not as narcissistic as pure Charismatic
Leaders, who succeed through a belief in themselves rather than a belief in others.

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One of the traps of Transformational Leadership is that passion and confidence can easily be
mistaken for truth and reality.

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Transformational Leaders, by definition, seek to transform. When the organization does not
need transforming and people are happy as they are, then such a leader will be frustrated. Like

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wartime leaders, however, given the right situation they come into their own and can be
personally responsible for saving entire companies.

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COMMUNICATION
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Communication is the exchange of messages between people for the purpose of
achieving common meanings. Unless common meanings are shared, managers find it

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extremely difficult to influence others. Whenever group of people interact, communication takes

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place. Communication is the exchange of information using a shared set of symbols. It is the
process that links group members and enables them to coordinate their activities. Therefore,
when managers foster effective communication, they strengthen the
connections between employees and build cooperation. Communication also functions to build
and reinforce interdependence between various parts of the organization. As a linking
mechanism among the different organizational subsystems, communication is a central feature
of the structure of groups and organizations. It helps to coordinate tasks and activities within
and between organizations.

DEFINITION
According to Koontz and O'Donnell, "Communication, is an intercourse by words, letters
symbols or messages, and is a way that the organization members shares meaning and
understanding with another".

THE COMMUNICATION PROCESS

Communication is important in building and sustaining human relationships at work.
Communication can be thought of as a process or flow. Before communication can take place, a
purpose, expressed as a message to be conveyed is needed. It passes between the sender and
the receiver. The result is transference of meaning from one person to another.
The figure below depicts the communication process. This model is made up of seven parts:

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(1) Source, (2) Encoding, (3) Message, (4) Channel, (5) Decoding, (6) Receiver, and (7)

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Feedback.

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a) Source:
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The source initiates a message. This is the origin of the communication and can be an
individual, group or inanimate object. The effectiveness of a communication depends to a
considerable degree on the characteristics of the source. The person who initiates the
communication process is known as sender, source or communicator. In an organization, the
sender will be a person who has a need or desire to send a message to others. The sender has
some information which he wants to communicate to some other person to achieve some
purpose. By initiating the message, the sender attempts to achieve understanding and change
in the behaviour of the receiver.
b) Encoding:
Once the source has decided what message to communicate, the content of the message must
be put in a form the receiver can understand. As the background for encoding information, the
sender uses his or her own frame of reference. It includes the individual's view of the
organization or situation as a function of personal education, interpersonal relationships,
attitudes, knowledge and experience. Three conditions are necessary for successful encoding
the message.
• Skill: Successful communicating depends on the skill you posses. Without the requisite
skills, the message of the communicator will not reach the requisite skills; the message
of the communicator will not reach the receiver in the desired form. One's total

ww communicative success includes speaking, reading, listening and reasoning skills.

•

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Attitudes: Our attitudes influence our behaviour. We hold predisposed ideas on a
number of topics and our communications are affected by these attitudes.

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• Knowledge: We cannot communicate what we don't know. The amount of knowledge
the source holds about his or her subject will affect the message he or she seeks to
transfer.
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c) The Message:
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The message is the actual physical product from the source encoding. The message contains
the thoughts and feelings that the communicator intends to evoke in the receiver. The message
has two primary components:-
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The Content: The thought or conceptual component of the message is contained in the
words, ideas, symbols and concepts chosen to relay the message.
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•
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The Affect: The feeling or emotional component of the message is contained in the
intensity, force, demeanour (conduct or behaviour), and sometimes the gestures of the
communicator.

d) The Channel:
The actual means by which the message is transmitted to the receiver (Visual, auditory, written
or some combination of these three) is called the channel. The channel is the medium through
which the message travels. The channel is the observable carrier of the message.
Communication in which the sender's voice is used as the channel is called oral communication.
When the channel involves written language, the sender is using written communication. The
sender's choice of a channel conveys additional information beyond that contained in the
message itself. For example, documenting an employee's poor performance in writing conveys
that the manager has taken the problem seriously.

f) Decoding:
Decoding means interpreting what the message means. The extent to which the decoding by
the receiver depends heavily on the individual characteristics of the sender and receiver. The
greater the similarity in the background or status factors of the communicators, the greater the
probability that a message will be perceived accurately. Most messages can be decoded in
more than one way. Receiving and decoding a message are a type of perception. The decoding
process is therefore subject to the perception biases.

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g) The Receiver:
The receiver is the object to whom the message is directed. Receiving the message means one
or more of the receiver's senses register the message - for example, hearing the sound of a

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supplier's voice over the telephone or seeing the boss give a thumbs-up signal. Like the sender,

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the receiver is subject to many influences that can affect the understanding of the message.
Most important, the receiver will perceive a communication in a manner that is consistent with

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previous experiences. Communications that are not consistent with expectations is likely to be

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rejected.

h) Feedback:
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The final link in the communication process is a feedback loop. Feedback, in effect, is

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communication travelling in the opposite direction. If the sender pays attention to the feedback

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and interprets it accurately, the feedback can help the sender learn whether the original
communication was decoded accurately. Without feedback, one-way communication occurs
between managers and their employees. Faced with differences in their power, lack of time, and
a desire to save face by not passing on negative information, employees may be discouraged
from providing the necessary feedback to their managers.

Guidelines for effective Communication

(i) Senders of message must clarify in their minds what they want to communicate. Purpose of
the message and making a plan to achieve the intended end must be clarified.
(ii) Encoding and decoding be done with symbols that are familiar to the sender and the
receiver of the message.
(iii) For the planning of the communication, other people should be consulted and encouraged
to participate.
(iv) It is important to consider the needs of the receivers of the information. Whenever
appropriate, one should communicate something that is of value to them, in the short run as
well as in the more distant future.
(v) In communication, tone of voice, the choice of language and the congruency between what
is said and how it is said influence the reactions of the receiver of the message.
(vi) Communication is complete only when the message is understood by the receiver. And one

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(vii) The function of communication is more than transmitting the information. It also deals with
emotions that are very important in interpersonal relationships between superiors,
subordinates and colleagues in an organization.
(viii)
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Effective communicating is the responsibility not only of the sender but also of the
receiver of the information.

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BARRIERS TO EFFECTIVE COMMUNICATION
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Barriers to communication are factors that block or significantly distort successful
communication. Effective managerial communication skills helps overcome some, but not all,

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barriers to communication in organizations. The more prominent barriers to effective
communication which every manager should be aware of is given below:

a) Filtering:
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Filtering refers to a sender manipulating information so it will be seen more favourably by
the receiver. The major determinant of filtering is the number of levels in an organization's
structure. The more vertical levels in the organization's hierarchy, the more opportunities for
filtering. Sometimes the information is filtered by the sender himself. If the sender is hiding some
meaning and disclosing in such a fashion as appealing to the receiver, then he is "filtering" the
message deliberately. A manager in the process of altering communication in his favour is
attempting to filter the information.

b) Selective Perception:
 Selective perception means seeing what one wants to see. The receiver, in the
communication process, generally resorts to selective perception i.e., he selectively perceives
the message based on the organizational requirements, the needs and characteristics,
background of the employees etc. Perceptual distortion is one of the distressing barriers to the
effective communication. People interpret what they see and call it a reality. In our regular
activities, we tend to see those things that please us and to reject or ignore unpleasant things.
Selective perception allows us to keep out dissonance (the existence of conflicting elements in
our perceptual set) at a tolerable level. If we encounter something that does not fit out current
image of reality, we structure the situation to minimize our dissonance. Thus, we manage to
overlook many stimuli from the environment that do not fit into out current perception of the

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world. This process has significant implications for managerial activities. For example, the

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employment interviewer who expects a female job applicant to put her family ahead of her
career is likely to see that in female applicants, regardless of whether the applicants feel that
way or not.

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c) Emotions:

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How the receiver feels at the time of receipt of information influences effectively how he

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interprets the information. For example, if the receiver feels that the communicator is in a jovial

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mood, he interprets that the information being sent by the communicator to be good and
interesting. Extreme emotions and jubilation or depression are quite likely to hinder the

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effectiveness of communication. A person's ability to encode a message can become impaired
when the person is feeling strong emotions. For example, when you are angry, it is harder to

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consider the other person's viewpoint and to choose words carefully. The angrier you are, the

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harder this task becomes. Extreme emotions – such as jubilation or depression - are most likely
to hinder effective communication. In such instances, we are most prone to disregard our
rational and objective thinking processes and substitute emotional judgments.

d) Language:
Communicated message must be understandable to the receiver. Words mean different
things to different people. Language reflects not only the personality of the individual but also
the culture of society in which the individual is living. In organizations, people from different
regions, different backgrounds, and speak different languages. People will have different
academic backgrounds, different intellectual facilities, and hence the jargon they use varies.
Often, communication gap arises because the language the sender is using may be
incomprehensible, vague and indigestible. Language is a central element in communication. It
may pose a barrier if its use obscures meaning and distorts intent. Words mean different things
to different people. Age, education and cultural background are three of the more obvious
variables that influence the language a person uses and the definitions he or she gives to
words. Therefore, use simple, direct, declarative language.
Speak in brief sentences and use terms or words you have heard from you audience. As much
as possible, speak in the language of the listener. Do not use jargon or technical language
except with those who clearly understand it.

e) Stereotyping:

ww Stereotyping is the application of selective perception. When we have preconceived

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ideas about other people and refuse to discriminate between individual behaviours, we are
applying selective perception to our relationship with other people. Stereotyping is a barrier to
communications because those who stereotype others use selective perception in their

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communication and tend to hear only those things that confirm their stereotyped images.

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Consequently, stereotypes become more deeply ingrained as we find more "evidence" to
confirm our original opinion. Stereotyping has a convenience function in our interpersonal

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relations. Since people are all different, ideally we should react and interact with each person

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differently. To do this, however, requires considerable psychological effort. It is much easier to
categorize (stereotype) people so that we can interact with them as members of a particular

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category. Since the number of categories is small, we end up treating many people the same
even though they are quite different. Our communications, then, may be directed at an

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individual as a member of a category at the sacrifice of the more effective communication on a
personal level.

f) Status Difference:
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The organizational hierarchy pose another barrier to communication within organization,
especially when the communication is between employee and manager. This is so because the
employee is dependent on the manager as the primary link to the organization and hence more
likely to distort upward communication than either horizontal or downward communication.
Effective supervisory skills make the supervisor more approachable and help reduce the risk of
problems related to status differences. In addition, when employees feel secure, they are more
likely to be straightforward in upward communication.
g) Use of Conflicting Signals:
A sender is using conflicting signals when he or she sends inconsistent messages. A
vertical message might conflict with a nonverbal one. For example, if a manager says to his
employees, "If you have a problem, just come to me. My door is always open", but he looks
annoyed whenever an employee knocks on his door". Then we say the manager is sending
conflicting messages. When signals conflict, the receivers of the message have to decide which,
if any, to believe.

h) Reluctance to Communicate:
For a variety of reasons, managers are sometimes reluctant to transmit messages. The reasons

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could be:-
•
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They may doubt their ability to do so.
They may dislike or be weary of writing or talking to others.
•
reaction.
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They may hesitate to deliver bad news because they do not want to face a negative

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When someone gives in to these feelings, they become a barrier to effective communications.

i) Projection:
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Projection has two meanings.

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(a) Projecting one's own motives into others behavior. For example, managers who are

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motivated by money may assume their subordinates are also motivated by it. If the
subordinate's prime motive is something other than money, serious problems may arise.

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(b) The use of defense mechanism to avoid placing blame on oneself. As a defense

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mechanism, the projection phenomenon operates to protect the ego from unpleasant
communications. Frequently, individuals who have a particular fault will see the same fault in
others, making their own fault seem not so serious.

j) The "Halo Effect":

The term "halo effect" refers to the process of forming opinions based on one element from a
group of elements and generalizing that perception to all other elements. For example, in an
organization, a good attendance record may cause positive judgments about productivity,
attitude, or quality of work. In performance evaluation system, the halo effect refers to the
practice of singling out one trait of an employee (either good or bad) and using this as a basis
for judgments of the total employee.
CHANNELS OF COMMUNICATION
a) Formal Communication
Formal communication follows the route formally laid down in the organization structure.
There are three directions in which communications flow: downward, upward and laterally
(horizontal).

i) Downward Communication
Downward communication involves a message travelling to one or more receivers at the lower

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level in the hierarchy. The message frequently involves directions or performance feedback.

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The downward flow of communication generally corresponds to the formal organizational
communications system, which is usually synonymous with the chain of command or line of
authority. This system has received a great deal of attention from both managers and behavioral

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scientists since it is crucial to organizational functioning.

ii) Upward Communication En

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In upward communication, the message is directed toward a higher level in the hierarchy. It is

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often takes the form of progress reports or information about successes and failures of the
individuals or work groups reporting to the receiver of the message. Sometimes employees also

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send suggestions or complaints upward through the organization's hierarchy.
The upward flow of communication involves two distinct manager-subordinate activities in
addition to feedback:
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•
•
The participation by employees in formal organizational decisions.

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Employee appeal is a result against formal organization decisions. The employee appeal is
a result of the industrial democracy concept that provides for two-way communication in
areas of disagreement.

iii) Horizontal Communication

When takes place among members of the same work group, among members of work groups at
the same level, among managers at the same level or among any horizontally equivalent
personnel, we describe it as lateral communications. In lateral communication, the sender and
receiver(s) are at the same level in the hierarchy. Formal communications that travel laterally
involve employees engaged in carrying out the same or related tasks.
The messages might concern advice, problem solving, or coordination of activities.

b) Informal Communication or Grapevine

Informal communication, generally associated with interpersonal communication, was primarily

seen as a potential hindrance to effective organizational performance. This is no longer the
case. Informal communication has become more important to ensuring the effective conduct of
work in modern organizations.
Probably the most common term used for the informal communication in the workplace is

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“grapevine” and this communication that is sent through the organizational grapevine is often

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considered gossip or rumor. While grapevine communication can spread information quickly

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and can easily cross established organizational boundaries, the information it carries can be
changed through the deletion or exaggeration crucial details thus causing the information

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inaccurate – even if it’s based on truth.
The use of the organizational grapevine as an informal communication channel often results

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when employees feel threatened, vulnerable, or when the organization is experiencing change
and when communication from management is restricted and not forthcoming.

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ORGANIZATIONAL CULTURE
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Organizational culture is an idea in the field of organizational studies and management
which describes the psychology, attitudes, experiences, beliefs and values (personal and
cultural values) of an organization. It has been defined as "the specific collection of values and
norms that are shared by people and groups in an organization and that control the way they
interact with each other and with stakeholders outside the organization."

ELEMENTS OF ORGANIZATIONAL CULTURE

Johnson and Scholes described a cultural web, identifying a number of elements that
can be used to describe or influence Organizational Culture:
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The six elements are:
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a) Stories: The past events and people talked about inside and outside the company. Who

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and what the company chooses to immortalize says a great deal about what it values,
and perceives as great behavior.

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b) Rituals and Routines: The daily behavior and actions of people that signal acceptable

valued by management.
c) Symbols: The visual representations of the company including logos, how plush the
et
behavior. This determines what is expected to happen in given situations, and what is

offices are, and the formal or informal dress codes.

d) Organizational Structure: This includes both the structure defined by the organization
chart, and the unwritten lines of power and influence that indicate whose contributions
are most valued.
e) Control Systems: The ways that the organization is controlled. These include financial
systems, quality systems, and rewards (including the way they are measured and
distributed within the organization.)
 f) Power Structures: The pockets of real power in the company. This may involve one or
two key senior executives, a whole group of executives, or even a department. The key
is that these people have the greatest amount of influence on decisions, operations, and
strategic direction.

TYPES OF ORGANIZATIONAL CULTURE

Deal and Kennedy argue organizational culture is based on based on two elements:
1. Feedback Speed: How quickly are feedback and rewards provided (through which the
people are told they are doing a good or a bad job).
2. Degree of Risk: The level of risk taking (degree of uncertainty).

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The combination of these two elements results in four types of corporate cultures:

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a) Tough-Guy Culture or Macho Culture (Fast feedback and reward, high risk):
Stress results from the high risk and the high potential decrease or increase of the

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•
reward.
•
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Focus on now, individualism prevails over teamwork.
Typical examples: advertising, brokerage, sports.

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The most important aspect of this kind of culture is big rewards and quick feedback. This kind of
culture is mostly associated with quick financial activities like brokerage and currency trading. It

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can also be related with activities, like a sports team or branding of an athlete, and also the
police team. This kind of culture is considered to carry along, a high amount of stress, and

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people working within the organization are expected to possess a strong mentality, for survival
in the organization.

b) Work Hard/Play Hard (Fast feedback and reward, low risk):

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• Stress results from quantity of work rather than uncertainty.
• Focus on high-speed action, high levels of energy.
• Typical examples: sales, restaurants, software companies.

This type of organization does not involve much risk, as the organizations already consist of a
firm base along with a strong client relationship. This kind of culture is mostly opted by large
organizations which have strong customer service. The organization with this kind of culture is
equipped with specialized jargons and is qualified with multiple team meetings.

c) Bet Your Company Culture (Slow feedback and reward, high risk):
• Stress results from high risk and delay before knowing if actions have paid off.
• Focus on long-term, preparation and planning.
• Typical examples: pharmaceutical companies, aircraft manufacturers, oil prospecting
companies.

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In this kind of culture, the company makes big and important decisions over high stakes

w.E
endeavors. It takes time to see the consequence of these decisions. Companies that postulate
experimental projects and researches as their core business, adopt this kind of culture. This

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kind of culture can be adopted by a company designing experimental military weapons for
example.

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d) Process Culture (Slow feedback and reward, low risk):
•
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Stress is generally low, but may come from internal politics and stupidity of the system.
•
•
Focus on details and process excellence.

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Typical examples: bureaucracies, banks, insurance companies, public services.

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This type of culture does not include the process of feedback. In this kind of culture, the

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organization is extremely cautious about the adherence to laws and prefer to abide by them.

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This culture provides consistency to the organization and is good for public services.

One of the most difficult tasks to undertake in an organization, is to change its work culture. An
organizational culture change requires an organization to make amendments to its policies, its
workplace ethics and its management system. It needs to start right from its base functions
which includes support functions, operations and the production floor, which finally affects the
overall output of the organization. It requires a complete overhaul of the entire system, and not
many organizations prefer it as the process is a long and tedious one, which requires patience
and endurance. However, when an organization succeeds in making a change on such a
massive level, the results are almost always positive and fruitful. The different types of
organizational cultures mentioned above must have surely helped you to understand them. You
can also adopt one of them for your own organization, however, persistence and patience is
ultimately of the essence.

MANAGING CULTURAL DIVERSITY

Experts indicate that business owners and managers who hope to create and manage an
effective, harmonious multicultural work force should remember the importance of the following:
• Setting a good example—This basic tool can be particularly valuable for small business
owners who hope to establish a healthy environment for people of different cultural

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backgrounds, since they are generally able to wield significant control over the business's
basic outlook and atmosphere.
•

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Communicate in writing—Company policies that explicitly forbid prejudice and discriminatory
behavior should be included in employee manuals, mission statements, and other written

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communications. Jorgensen referred to this and other similar practices as "internal
broadcasting of the diversity message in order to create a common language for all
members of the organization."
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Training programs—Training programs designed to engender appreciation and knowledge

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•
of the characteristics and benefits of multicultural work forces have become ubiquitous in

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recent years. "Two types of training are most popular: awareness and skill-building," wrote
Cox. "The former introduces the topic of managing diversity and generally includes

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information on work force demographics, the meaning of diversity, and exercises to get
participants thinking about relevant issues and raising their own self-awareness. The skill-

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building training provides more specific information on cultural norms of different groups and

t
how they may affect work behavior." New employee orientation programs are also ideal for
introducing workers to the company's expectations regarding treatment of fellow workers,
whatever their cultural or ethnic background.
• Recognize individual differences—Writing in The Complete MBA Companion, contributor
Rob Goffee stated that "there are various dimensions around which differences in human
relationships may be understood. These include such factors as orientation towards
authority; acceptance of power inequalities; desire for orderliness and structure; the need to
belong to a wider social group and so on. Around these dimensions researchers have
demonstrated systematic differences between national, ethnic, and religious groups." Yet
Goffee also cautioned business owners, managers, and executives to recognize that
differences between individuals can not always be traced back to easily understood
 differences in cultural background: "Do not assume differences are always 'cultural.' There
are several sources of difference. Some relate to factors such as personality, aptitude, or
competence. It is a mistake to assume that all perceived differences are cultural in origin.
Too many managers tend to fall back on the easy 'explanation' that individual behavior or
performance can be attributed to the fact that someone is 'Italian' or 'a Catholic' or 'a
woman.' Such conclusions are more likely to reflect intellectually lazy rather than culturally
sensitive managers."
• Actively seek input from minority groups—Soliciting the opinions and involvement of minority
groups on important work committees, etc., is beneficial not only because of the
contributions that they can make, but also because such overtures confirm that they are

ww
valued by the company. Serving on relevant committees and task forces can increase their

w.E
feelings of belonging to the organization. Conversely, relegating minority members to
superfluous committees or projects can trigger a downward spiral in relations between
different cultural groups.
•
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Revamp reward systems—An organization's performance appraisal and reward systems

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should reinforce the importance of effective diversity management, according to Cox. This
includes assuring that minorities are provided with adequate opportunities for career
development.
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• Make room for social events—Company sponsored social events—picnics, softball games,
volleyball leagues, bowling leagues, Christmas parties, etc.—can be tremendously useful in

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getting members of different ethnic and cultural backgrounds together and providing them
with opportunities to learn about one another.
•
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Flexible work environment—Cox indicated that flexible work environments—which he

t
characterized as a positive development for all workers—could have particularly "beneficial
to people from nontraditional cultural backgrounds because their approaches to problems
are more likely to be different from past norms."
• Don't assume similar values and opinions—Goffee noted that "in the absence of reliable
information there is a well-documented tendency for individuals to assume that others are
'like them.' In any setting this is likely to be an inappropriate assumption; for those who
manage diverse work forces this tendency towards 'cultural assimilation' can prove
particularly damaging."
• Continuous monitoring—Experts recommend that business owners and managers establish
and maintain systems that can continually monitor the organization's policies and practices
to ensure that it continues to be a good environment for all employees. This, wrote
 Jorgensen, should include "research into employees' needs through periodic attitude
surveys."
"Increased diversity presents challenges to business leaders who must maximize the
opportunities that it presents while minimizing its costs," summarized Cox. "The multicultural
organization is characterized by pluralism, full integration of minority-culture members both
formally and informally, an absence of prejudice and discrimination, and low levels of inter-
group conflict…. The organization that achieves these conditions will create an environment in
which all members can contribute to their maximum potential, and in which the 'value in diversity
' can be fully realized."

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 UNIT II

PLANNING

Syllabus

Nature and purpose of planning – planning process – types of planning – objectives –

setting objectives – Policies – Planning premises – Strategic Management – Planning
Tools and Techniques – Decision making steps and process.

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2.0 INTRODUCTION

w.E Planning is the most basic of all managerial functions. It is the process by which

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managers establish goals and define the methods by which these goals are to be
attained.

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According to Weihrich and Koontz, "Planning involves selecting missions and

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objectives and the actions to achieve them; it requires decision making, which is
choosing from among alternative future courses of action."

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Planning is taken as the foundation for future activities. Newman has thus
defined it as, "Planning is deciding in advance what is to be done; (i.e. a plan is a

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projected course of action)." So, planning can be thought of as deciding about a future

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course of action. It may also be treated as a process of thinking before doing.

Planning involves determining various types and volumes of physical and other
resources to be acquired from outside, to allocate these resources in an efficient
manner among competing claims and to make arrangement for systematic conversion
of these resources into useful outputs.

As it is clear from the above discussion, plans have two basic components: goals
and action statements.

 Goals represent an end state — the targets and results that managers hope to
achieve.
  Action statements represent the means by which an organization goes ahead to
attain its goals.

Planning is a deliberate and conscious act by means of which managers determine

a course of action for pursuing a specific goal.

Planning to a manager means thinking about

 What is to be done?
 Who is going to do it, and
 How and when he will do it.

ww It also involves thinking about past events (retrospectively) and about future

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opportunities and impending threats (prospectively). Planning enquirers
organizational strengths and weaknesses and involves decision making about desired
about

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ways and means to achieve them.

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2.1
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NATURE AND PURPOSE OF PLANNING

The nature of planning can be understood by examining its four major aspects. They
are;

1. Its contribution to objectives,

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2. Its primacy among the manager's tasks. g.n
3. Its pervasiveness, and

4. The efficiency of resulting plans.

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(a) Contribution of Planning to the Attainment of Objectives

Since plans are made to attain goals or objectives, every plan and all its support
should contribute to the achievement of the organization’s purpose and objectives. An
organized enterprise exists to accomplish group objectives through willing and
purposeful co-operation.
(b) Primacy of Planning

That planning is the prime managerial function is proved by the fact that all other
functions such as organizing, staffing, leading and controlling are designed to support
the accomplishment of the enterprise's objectives.

Planning quite logically therefore comes first before execution of all other managerial
functions as it involves establishing the objectives necessary for all group efforts. Also,
all the other managerial functions must be planned if they are to be effective.

Likewise, planning and controlling are inextricably bound up. Control without plan is

ww
meaningless, because plan provides the basis or standard of control.

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(c) Pervasiveness of Planning

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Planning is a unique and universal function of all managers. The character and

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scope of planning may vary with each manager's authority and with the nature of the
policies and plans outlined by superiors, but all managers must have some function of
planning.
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Because of one's authority or position in the managerial hierarchy, one may do more

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or less planning, but some kind or amount of planning a manager must do. According to

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Weihrich and Koontz; “All managers, from presidents to first-level supervisors - plan.”

(d) The Efficiency of Plans et

Plans should not only be effective, but also efficient. Effectiveness of a plan
relates to the extent to which it accomplishes the objectives.

The efficiency of plan, however, means its contribution to the purpose and
objectives, offset by the costs and other factors required to formulate and operate it.
Plans are efficient if they achieve their objective at a reasonable cost, when such a cost
is measure not only in terms of time, money or production, but also in terms of
satisfaction of the individual or group.
 Both conceptual and practical reasons are put forward in support of planning.
Two conceptual reasons supporting systematic planning by managers are limited
resources and an uncertain environment.

2.2 Purpose

 Plans guide our investment decisions

 Plans help us know who needs to be available to work on a project during a
given period.

ww  Plans help us to know if a project is on track to deliver the functionality that users
need and expect

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A good planning process supports this by



Reducing risk
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Reducing uncertainty
 Supporting better decision making


Establishing trust
Conveying information
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(a) Reducing Risk
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Planning increases the likelihood of project success by providing insights into the
project’s risks. Some projects are so risky that we may choose not to start once we’ve
learned about the risks. Other projects may contain features whose risks can be
contained by early attention.

(b) Reducing Uncertainty

Throughout a project, the team is generating new capabilities in the product.

They are also generating new knowledge—about the product, the technologies in use,
and themselves as a team. It is critical that this new knowledge be acknowledged and
factored into an iterative planning process that is designed to help a team refine their
vision of the product. The most critical risk facing most projects is the risk of developing
the wrong product. Yet this risk is entirely ignored on most projects. An agile approach
to planning can dramatically reduce (and ideally eliminate) this risk.

(c) Supporting Better Decision Making

Many of the decisions made while planning a project are tradeoff decisions. For

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example, on every project we make tradeoff decisions between development time and
cost. Often the cheapest way to develop a system would be to hire one good

w.E
programmer and allow her ten or twenty years to write the system, allowing her years of
detouring to perhaps master the domain, become an expert in database administration,

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and so on. Obviously, though, we can rarely wait twenty years for a system, and so we

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engage teams. A team of thirty may spend a year (thirty person-years) developing what
a lone programmer could have done in twenty. The development cost goes up, but the

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value of having the application nineteen years earlier justifies the increased cost.

(d) Establishing Trust

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Frequent reliable delivery of promised features builds trust between the

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developers of a product and the customers of that product. Reliable estimates enable
reliable delivery. Estimates also help a customer decide how much of a feature to
develop. Reliable estimates benefit developers by allowing them to work at a
sustainable pace. This leads to higher-quality code and fewer bugs.

2.3 PLANNING PROCESS

There are several models that could be used for planning, but they are all very
similar. This one should work fine as an example of effective planning.
The planning process contains six steps:

1 Stating organizational objectives : This is a necessary beginning point of

successful planning and should remain a
focal point throughout the planning process.

2 Listing alternatives for reaching : Managers should list many different ways to
objectives possibly reaching the objectives.

3 Developing assumptions about : Managers should spend time thinking about

wweach alternative what might happen depending on which

alternative is chosen. Managers need to use

w.E their knowledge and experience to make

solid assumptions.

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Choose the best alternative : Evaluate the assumptions and choose the

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Develop plans to pursue the : Manager begins to develop plans.

6
chosen alternative

Put the plans into action

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: This is where the organization benefits from
all the planning.
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2.4 TYPES OF PLANNING

(a) Strategic planning

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It is a very popular concept that has been around for years. Most if not all
companies and organizations spend time on their strategic plans. Strategic planning is
defined as long-range planning that focuses on the entire organization. Strategic
planning involves managers at the highest levels. Executive directors and presidents,
leaders of the organization, are involved. They must have a part in where the
organization is headed and how it will get there. The leaders are asking what must be
done in the long run to achieve the organizational goals and objectives. Three years or
longer is usually considered long range; however, many organizations seem to think five
years is the right amount of time for planning long term. The nature of strategic planning
is to develop strategies for achieving your objectives. Strategies must of course be
consistent with the purpose and mission of the organization.

There are three major level of strategy planning

1 Corporate-level strategy : It is concerned with deciding which

industries a firm should compete in and
how the firm should enter or exit

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2 Business-level strategy : It is concerned with deciding how the firm
should compete in the industries in which

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3 Operating strategy
E : It is concerned with the actions that should

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be taken at the level of individual

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functions, such as production, logistic,
R&D, and sales, to support business-level
strategy.
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(b) Tactical planning

It is characterized as short-term planning. This type of planning is usually

confined to one year or less. It is more concerned with current operations, and as such,
usually involves mid-level managers instead of the highest level managers. Tactical
planners are thinking about tomorrow and next week or next month and planning is
much more detailed than strategic. Strategic is more broad.

(c) Contingency planning

It is worth a brief mention. This is a term that is frequently used within

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organizations. It simply means what does an organization do when something
unexpected happens or when something needs changing. Contingency plans may

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cause a manager to go back to the original planning and look at other alternatives.
Contingency planning should continue to be more important with organizations as the

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world and businesses become more complicated

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There are two types of contingency plans:

1. Crisis management plans and

2. Scenario plans.
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Crisis Management Planning A crisis is a discrete event that can have a severe

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negative impact on an organization or its stakeholders. A crisis management plan is a
plan formulated specifically to deal with possible future crises.

Example – 1
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: In the wake of the September 11, 2001, terrorist attacks on the
United States—an obvious crisis if ever there was one—a
number of government organizations drew up crisis
management plans that detailed how they would respond to
specific terrorist incidents, including the deliberate release of
biological pathogens (such as smallpox or anthrax) or
chemicals (such as sarin gas). One of the companies
experiencing the largest loss of life on September 11 was the
 bond trading company Cantor Fitzgerald, which occupied the
top floors of one of the destroyed twin towers. Nearly 700 of its
1,000 U.S. employees died that day. Yet the company was
able to resume business almost immediately because after the
1993 bombing of the World Trade Center, the company had
formulated a crisis management plan that included backup
computer systems in New Jersey. Crises take many different
forms—from terrorist attacks and industrial disasters, such as
the gas leak from a Union Carbide plant in Bhopal, India, that

ww killed almost 4,000 people to natural disasters like the

December 26, 2004, tsunami that devastated parts of

w.E Southeast Asia and left 180,000 people dead. Drafting a plan

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to effectively manage a crisis involves three main steps:
prevention, preparation, and containment. The best way of

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dealing with a crisis is to prevent it from happening in the first

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place if possible. In the wake of the September 11, 2001,
attacks the U.S. government took a number of steps to
prevent
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future terrorist attacks, including

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Department of Homeland Security and implementing new
creating the

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regulations for screening passengers and baggage at airports.

Example – 2
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: Nobody could have predicted or stopped the December 26,
2004, tsunami. So managers need to plan for such events.
This is the preparation stage of a crisis management plan.
Preparation requires an organization to designate a crisis
management team and a spokesperson that will cope with
crises that arise. Preparation also requires a detailed plan of
the steps that will be taken to deal with the crisis, to coordinate
crisis management efforts, to manage its aftermath, and to
communicate important information to affected people and
organizations.
Example - 3
: Another prevention tactic is to build positive relationships with
key stakeholders, such as customers, suppliers, investors, and
communities. These relationships can act as an early warning
system, providing managers with information about an
impending crisis. In some cases quick action can limit its
impact.

Scenario Planning

ww Scenario planning is based on the realization that the future is inherently

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unpredictable and that an organization should plan for a range of possible futures.
Scenario planning involves formulating plans that are based on “what if ” scenarios. In

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the typical scenario planning exercise, some scenarios are optimistic and some
pessimistic. Teams of managers are asked to develop specific strategies to cope with

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each scenario. A set of indicators is chosen as “signposts” to track trends and identify

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the probability that any particular scenario is coming to pass. The idea is to get
managers to understand the dynamic and complex nature of their environment, to think

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through problems in a strategic fashion, and to generate a range of strategic options
that might be pursued under different circumstances
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The scenario approach to planning has spread rapidly among large companies.

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One survey found that over 50 percent of Fortune 500 companies use some form of
scenario planning methods.

The oil company Royal Dutch Shell has perhaps done more than most to pioneer
the concept of scenario planning, and its experience demonstrates the power of the
approach. Shell has been using scenario planning since the 1980s. Today the firm uses
two main scenarios to refine its strategic planning. The scenarios relate to future
demand for oil. One (“Dynamics as Usual”) sees a gradual shift from carbon fuels such
as oil and natural gas to renewable energy.

The second scenario (“The Spirit of the Coming Age”) looks at the possibility that
a technological revolution will lead to a rapid shift to new energy sources. 9 Shell is
making investments that will ensure the profitability of the company in either scenario,
and it is carefully tracking technological and market trends.

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2.5 OBJECTIVES

Purposes, missions, goals or targets are the terms used to refer to objectives.
Mission is usually used in military enterprises and occasionally in churches and
government. "Goals" and "targets' often carry the notation of specific quantitative end.
Sometimes the end can be qualitative also

SOCIAL OBJECTIVES

ww The objectives of a private enterprise have to be in harmony with the ends for
which a society is organized. Whenever the actions and objectives of a private

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enterprise are thought be against the objectives of the society, legal action is initiated to
regulate it or suppress it.

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United States has a statement of nation purpose set forth in the Declaration of

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Independence. The preamble of the Constitution of USA states:

We the people of the United States, in order to form a more perfect union, establish

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justice, insure domestic tranquility, provide for common defense, promote the general

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welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and
establish this Constitution for the United States of America.
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All subordinate enterprises in USA, be it a school, church, hospital, government
agency or business firm should have objectives which are harmonious with and
supportive to national objectives.
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ENTERPRISE OBJECTIVES

The plural form is used to stress the fact that enterprises have multiple objectives.
Drucker asserted that there are eight areas in which objectives of performance and
results have to set by all enterprises. They are:

 Market Standing,
 Innovation,
 Productivity,
  Physical and Financial Resources,
 Profitability,
 Manager Performance and Development,
 Worker Performance and Development, and
 Public Responsibility.

For each area or function that company identifies as necessary for survival there has
to be objective.

Principles to be followed in setting objectives:

ww1. Objectives have to be practically achievable. The organization must be able to do

w.E something to achieve each objective that it has set.

2. The objectives have to support the enterprise purpose, its contribution to the
customer.
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3. If long range objectives and short range objectives are specified, there must be

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integral relationship between them.

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4. At various points of time prioritization among objectives may be required.
5. Objectives have to be specific and actionable and verifiable

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6. Objectives have to plan their result of planning process or activity.

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7. Objectives have to be communicated to those charged with building plans to
meet them.
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2.6 POLICIES OF PLANNING et
The Strategic Planning Process

1. Input to the Organization: Various Inputs (People, Capital, Management and

Technical skills, others) including goals input of claimants (Employees,
Consumers, Suppliers, Stockholders, Government, Community and others)need
to be elaborated.
2. Industry Analysis: Formulation of strategy requires the evaluation of the
attractiveness of an industry by analyzing the external environment. The focus
should be on the kind of compaction within an industry, the possibility of new
 firms entering the market, the availability of substitute products or services, the
bargaining positions of the suppliers, and buyers or customers.
3. Enterprise Profile: Enterprise profile is usually the starting point for determining
where the company is and where it should go. Top managers determine the
basic purpose of the enterprise and clarify the firm’s geographic orientation.
4. Orientation, Values, and Vision of Executives: The enterprise profile is
shaped by people, especially executives, and their orientation and values are
important for formulation the strategy. They set the organizational climate, and
they determine the direction of the firm though their vision. Consequently, their
values, their preferences, and their attitudes toward risk have to be carefully

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5.
examined because they have an impact on the strategy.
Mission (Purpose), Major Objectives, and Strategic Intent: Mission or

w.EPurpose is the answer to the question: What is our business? The major
Objectives are the end points towards which the activates of the enterprise are
directed. Strategic intent is the commitment (obsession) to win in the competitive

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environment, not only at the top-level but also throughout the organization.
6.

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Present and Future External Environment: The present and future external
environment must be assessed in terms of threats and opportunities.
7.
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Internal Environment: Internal Environment should be audited and evaluated
with respect to its resources and its weaknesses, and strengths in research and

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development, production, operation, procurement, marketing and products and

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services. Other internal factors include, human resources and financial resources
as well as the company image, the organization structure and climate, the

8.
planning and control system, and relations with customers.
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Development of Alternative Strategies: Strategic alternatives are developed on

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the basis of an analysis of the external and internal environment. Strategies may
be specialize or concentrate. Alternatively, a firm may diversify, extending the
operation into new and profitable markets. Other examples of possible strategies
are joint ventures, and strategic alliances which may be an appropriate strategy
for some firms.
9. Evaluation and Choice of Strategies: Strategic choices must be considered in
the light of the risk involved in a particular decision. Some profitable opportunities
may not be pursued because a failure in a risky venture could result in
bankruptcy of the firm. Another critical element in choosing a strategy is timing.
Even the best product may fail if it is introduced to the market at an inappropriate
time.
 10. Medium/Short Range Planning, Implementation through Reengineering the
Organization Structure, Leadership and Control: Implementation of the
Strategy often requires reengineering the organization, staffing the organization
structure and providing leadership. Controls must also be installed monitoring
performance against plans.
11. Consistency Testing and Contingency Planning: The last key aspect of the
strategic planning process is the testing for consistency and preparing for
contingency plans.

2.7 PLANNING PREMISES

ww According to H. Weihrich and H.koontz, “Planning premises are identified as the

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anticipated environment in which plans are expected to operate."

According to C.B.Gupta, "Planning premises are the critical factors which lay

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down the boundary for planning"

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Premises are the assumptions of the future environment on which plans are to be
carried out. Premises are anticipated environment. It is to forecast sales volume, cost,

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political and legal environment, technological change, availability of labor. Premises are

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important because they give important information’s about future to managers.

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Establishment of premises is important step in planning. Premises are the forecast of
future expectations about:

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(a) Demographic trend: - It is related with human population, its distribution, size,
composition and migration.
(b) Future economic business condition: - Related to business sycle. Condition of
business cycle such as growth, prosperity, recession and recovery.
(c) Forecast about political and legal of the country.
(d) Technological change and innovations
(e) Resource availability
(f) Socio cultural forces
Types of Planning Premises

Different types of planning premises are:

1. Internal and External Premises

2. Controllable, semi-controllable and non-controllable premises
3. Tangible and Intangible premises

Internal and external premises:

Internal premises originate from factors within the enterprise. They relate to

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premises. Sales forecasts, personnel forecasts (skills and abilities of personnel) etc.
These premises may be strengths or weaknesses of the organization. Strength

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represents a positive attitude which provides strategic advantage to the company over
competitors and weakness is a limitation or constraint that provides strategic

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disadvantage. Managers analysis their strengths and weaknesses through corporate
analysis and when corporate analyses (internal) is combined with environmental

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analyses (external), it is called SWOT analyses (Strength, Weaknesses, Opportunities.

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Strengths). External premises originate from factors outside the organization. These are
the indirect action environmental factors (social, political, technological etc.) which affect

organization.
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the organization. They are also non- controllable premises beyond the control of the

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Controllable, Semi- controllable and non-controllable premises:
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Controllable premises are those within the control of a business enterprise. such
as, men, Monet, materials, policies, procedure, programmers etc. They can be
controlled but a business enterprise to ensure better sales of its products. Semi-
controllable premises are those which can be partially controlled by a business
enterprise like, labour position on the market. Non-controllable premises are those that
lie beyond the control of a business enterprise. Ware, natural calamities and external
environment factors are non- controllable premises.

Tangible and intangible premises:

Tangible premises can be estimated in quantitative terms like, production units,

cost per unit etc. Intangible premises cannot be quantified, for example, good will of the
firm, employer- employee relationships, leadership qualities of the managers,
motivational factors that get employees to work etc.

2.8 STRATEGIC MANAGEMENT

Strategic management is nothing but planning for both predictable as well as

unfeasible contingencies. It is applicable to both small as well as large organizations as
even the smallest organization face competition and, by formulating and implementing
appropriate strategies, they can attain sustainable competitive advantage.

ww One of the major role of strategic management is to incorporate various

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functional areas of the organization completely, as well as, to ensure these functional
areas harmonize and get together well. Another role of strategic management is to keep

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a continuous eye on the goals and objectives of the organization.

STRATEGIC MANAGEMENT PROCESS HAS FOLLOWING FOUR TOOLS:

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1. Environmental Scanning- Environmental scanning refers to a process of

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collecting, scrutinizing and providing information for strategic purposes. It helps in

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analyzing the internal and external factors influencing an organization. After

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executing the environmental analysis process, management should evaluate it
on a continuous basis and strive to improve it.

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2. Strategy Formulation- Strategy formulation is the process of deciding best

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course of action for accomplishing organizational objectives and hence achieving
organizational purpose. After conducting environment scanning, managers
formulate corporate, business and functional strategies.

3. Strategy Implementation- Strategy implementation implies making the strategy

work as intended or putting the organization’s chosen strategy into action.
Strategy implementation includes designing the organization’s structure,
distributing resources, developing decision making process, and managing
human resources.

4. Strategy Evaluation- Strategy evaluation is the final step of strategy

management process. The key strategy evaluation activities are: appraising
 internal and external factors that are the root of present strategies, measuring
performance, and taking remedial / corrective actions. Evaluation makes sure
that the organizational strategy as well as its implementation meets the
organizational objectives.

These components are steps that are carried, in chronological order, when
creating a new strategic management plan. Present businesses that have already
created a strategic management plan will revert to these steps as per the situation’s
requirement, so as to make essential changes.

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Strategy Formulation vs Strategy Implementation

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The main differences between Strategy Formulation and Strategy Implementation are
listed below.
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Strategy Formulation
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Strategy Implementation

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Strategy Formulation includes planning and Strategy Implementation involves all
decision-making involved in developing
organization’s strategic goals and plans.
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those means related to executing the
strategic plans.

In short, Strategy Formulation is placing In short, Strategy Implementation

the Forces before the action. is managing forces during the action.

Strategy Formulation is an Entrepreneurial Strategic Implementation is mainly

Activity based on strategic decision- an Administrative Task based on
making. strategic and operational decisions.
 Strategy Formulation emphasizes Strategy Implementation emphasizes
on effectiveness. on efficiency.

Strategy Formulation is a rational process. Strategy Implementation is basically

an operational process.

Strategy Formulation requires co-ordination Strategy Implementation requires co-

among few individuals. ordination among many individuals.

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Strategy Formulation requires a great deal Strategy Implementation requires

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of initiative and logical skills. specific motivational and leadership
traits.

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Strategic Formulation precedes Strategy Strategy Implementation follows
Implementation.
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Strategy Evaluation
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Strategy Evaluation is as significant as strategy formulation because it throws

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light on the efficiency and effectiveness of the comprehensive plans in achieving the

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desired results. The managers can also assess the appropriateness of the current
strategy in today’s dynamic world with socio-economic, political and technological
innovations. Strategic Evaluation is the final phase of strategic management.

The process of Strategy Evaluation consists of following steps-

1. Fixing benchmark of performance - While fixing the benchmark, strategists

encounter questions such as –

(a) What benchmarks to set?

(b) How to set them and
(c) How to express them.
 In order to determine the benchmark performance to be set, it is essential to
discover the special requirements for performing the main task. The performance
indicator that best identify and express the special requirements might then be
determined to be used for evaluation. The organization can use both quantitative and
qualitative criteria for comprehensive assessment of performance. A quantitative
criterion includes determination of net profit, ROI, earning per share, cost of production,
rate of employee turnover etc. Among the Qualitative factors are subjective evaluation
of factors such as - skills and competencies, risk taking potential, flexibility etc.

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2. Measurement of performance - The standard performance is a bench mark with
which the actual performance is to be compared. The reporting and communication

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system help in measuring the performance. If appropriate means are available for
measuring the performance and if the standards are set in the right manner, strategy

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evaluation becomes easier. But various factors such as manager’s contribution are
difficult to measure. Similarly divisional performance is sometimes difficult to

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measure as compared to individual performance. Thus, variable objectives must be

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created against which measurement of performance can be done. The
measurement must be done at right time else evaluation will not meet its purpose.

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For measuring the performance, financial statements like - balance sheet, profit and
loss account must be prepared on an annual basis.
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3. Analyzing Variance - While measuring the actual performance and comparing it

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with standard performance there may be variances which must be analyzed. The
strategists must mention the degree of tolerance limits between which the variance
between actual and standard performance may be accepted. The positive deviation
indicates a better performance but it is quite unusual exceeding the target always.
The negative deviation is an issue of concern because it indicates a shortfall in
performance. Thus in this case the strategists must discover the causes of deviation
and must take corrective action to overcome it.

4. Taking Corrective Action - Once the deviation in performance is identified, it is

essential to plan for a corrective action. If the performance is consistently less than
the desired performance, the strategists must carry a detailed analysis of the factors
 responsible for such performance. If the strategists discover that the organizational
potential does not match with the performance requirements, then the standards
must be lowered. Another rare and drastic corrective action is reformulating the
strategy which requires going back to the process of strategic management,
reframing of plans according to new resource allocation trend and consequent
means going to the beginning point of strategic management process.

Strategic decisions are the decisions that are concerned with whole environment in
which the firm operates the entire resources and the people who form the company and

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the interface between the two.

Characteristics/Features of Strategic Decisions

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a. Strategic decisions have major resource propositions for an organization. These
decisions may be concerned with possessing new resources, organizing others

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or reallocating others.

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b. Strategic decisions deal with harmonizing organizational resource capabilities

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with the threats and opportunities.

c. Strategic decisions deal with the range of organizational activities. It is all about

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what they want the organization to be like and to be about.

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d. Strategic decisions involve a change of major kind since an organization
operates in ever-changing environment.
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e. Strategic decisions are complex in nature.
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f. Strategic decisions are at the top most level, are uncertain as they deal with the
future, and involve a lot of risk.

g. Strategic decisions are different from administrative and operational decisions.

Administrative decisions are routine decisions which help or rather facilitate
strategic decisions or operational decisions. Operational decisions are
technical decisions which help execution of strategic decisions. To reduce cost is
a strategic decision which is achieved through operational decision of reducing
the number of employees and how we carry out these reductions will be
administrative decision.
The differences between Strategic, Administrative and Operational decisions can be
summarized as follows-

Strategic Decisions Administrative Decisions Operational Decisions

Strategic decisions are Administrative decisions are Operational decisions

long-term decisions. taken daily. are not frequently
taken.

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These are considered These are short-term based These are medium-

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where The future
planning is concerned.
Decisions. period based decisions.

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Strategic decisions are
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These are taken according to These are taken in
taken in Accordance
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strategic and operational
Decisions.
accordance with
strategic and
mission and vision.
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These are related to
overall Counter planning
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of employees in an g.n
These are related to
production.
of all Organization. Organization.
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These deal with These are in welfare of These are related to
organizational Growth. employees working in an production and factory
organization. growth.
Benefits of Strategic Management

(a) Possibility for newer products, newer markets, and newer forays into business
lines are only possible if firms indulge in strategic planning.

(b) Strategic management allows firms to take an objective view of the activities
being done by it and do a cost benefit analysis as to whether the firm is
profitable.

Just to differentiate, by this, we do not mean the financial benefits alone (which would
be discussed below) but also the assessment of profitability that has to do with

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evaluating whether the business is strategically aligned to its goals and priorities.

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The key point to be noted here is that strategic management allows a firm to orient itself
to its market and consumers and ensure that it is actualizing the right strategy.

Financial Benefits
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It has been shown in many studies that firms that engage in strategic management are
more profitable and successful than those that do not have the benefit of strategic
planning and strategic management.
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When firms engage in forward looking planning and careful evaluation of their priorities,

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they have control over the future, which is necessary in the fast changing business
landscape of the 21st century.
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It has been estimated that more than 100,000 businesses fail in the US every year and

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most of these failures are to do with a lack of strategic focus and strategic direction.
Further, high performing firms tend to make more informed decisions because they
have considered both the short term and long-term consequences and hence, have
oriented their strategies accordingly. In contrast, firms that do not engage themselves in
meaningful strategic planning are often bogged down by internal problems and lack of
focus that leads to failure.

Non-Financial Benefits

Apart from the financial benefits, the firms may have the following non-financial, if they
engage in strategic management are
 (a) More aware of the external threats

(b) Improved understanding of competitor strengths and weaknesses

(c) Increased employee productivity.

(d) Lesser resistance to change and a clear understanding of the link between
performance and rewards.

The key aspect of strategic management is that the problem solving and problem
preventing capabilities of the firms are enhanced through strategic management.
Strategic management is essential as it helps firms to rationalize change and actualize

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change and communicate the need to change better to its employees. Finally, strategic

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management helps in bringing order and discipline to the activities of the firm in its both
internal processes and external activities.

Closing Thoughts
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In recent years, virtually all firms have realized the importance of strategic management.
However, the key difference between those who succeed and those who fail is that the

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way in which strategic management is done and strategic planning is carried out makes

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the difference between success and failure. Of course, there are still firms that do not

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engage in strategic planning or where the planners do not receive the support from
management. These firms ought to realize the benefits of strategic management and
ensure their longer-term viability and success in the marketplace.
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Strategic Planning techniques
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1. Conventional Strategic Planning

This is the most common model of strategic planning, although it is not suited for
every organization. It is ideal for organizations that have sufficient resources to pursue
very ambitious visions and goals, have external environments that are relatively stable,
and do not have a large number of current issues to address. The model usually
includes the following overall phases:

(a) Develop or update the mission and optionally, vision and/or values statements.
 (b) Take a wide look around the outside and a good look inside the organization, and perhaps update
the statements as a result.
(c) As a result of this examination, select the multi-year strategies and/or goals to achieve the vision.
(d) Then develop action plans that specify who is going to do what and by when to achieve each
goal.
(e) Identify associated plans, for example, staffing, facilities, marketing and financial plans.
(f) Organize items 1-3 into a Strategic Plan and items 4-6 into a separate one-year Operational Plan.

2. Issues-Based Strategic Planning

This model works best for organizations that have very limited resources, several

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current and major issues to address, little success with achieving ambitious goals,
and/or very little buy-in to strategic planning. This model might include the following

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phases:

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(a) Identify 5-7 of the most important current issues facing the organization now.
(b) Suggest action plans to address each issue over the next 6-12 months.

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(c) Include that information in a Strategic Plan.

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After an issues-based plan has been implemented and the current, major issues
are resolved, then the organization might undertake the more ambitious conventional

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model. Many people might assert that issues-based planning is really internal

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development planning, rather than strategic planning. Others would argue that the

g.n
model is very strategic because it positions the organization for much more successful
outward-looking and longer term planning later on.

3. Organic Strategic Planning

The conventional model is considered by some people to be too confining and

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linear in nature. They believe that approach to planning too often produces a long
sequence of orderly activities to do, as if organizations will remain static and predictable
while all of those activities are underway. Other people believe that organizations are
robust and dynamic systems that are always changing, so a plan produced from
conventional planning might quickly become obsolete.

That is true, especially if planning is meant to achieve a very long-term vision for
many people, for example, for a community or even generations of people. The organic
model is based on the premise that the long-term vision is best achieved by everyone
working together toward the vision, but with each person regularly doing whatever
actions that he or she regularly decides to do toward that vision. The model might
include the following phases:

(a) With as many people as can be gathered, for example, from the community or generation,
articulate the long-term vision and perhaps values to work toward the vision.
(b) Each person leaves that visioning, having selected at least one realistic action that he or she will
take toward the vision before the group meets again, for example, in a month or two.
(c) People meet regularly to report the actions that they took and what they learned from them. The

ww vision might be further clarified during these meetings.

(d) Occasionally, the vision and the lists of accomplished and intended actions are included in a

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Strategic Plan.

4. Real-Time Strategic Planning

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Similar to the organic model of planning, this model is suited especially for people who

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believe that organizations are often changing much too rapidly for long-term, detailed

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planning to remain relevant. These experts might assert that planning for an
organization should be done continuously, or in "real time." The real-time planning

environments outside the organization.

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model is best suited, especially to organizations with very rapidly changing

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(a) Articulate the mission, and perhaps the vision and/or values.
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(b) Assign planners to research the external environment and, as a result, to suggest
a list of opportunities and of threats facing the organization. et
(c) Present the lists to the Board and other members of the organization for strategic
thinking and discussions.
(d) Soon after (perhaps during the next month) assign planners to evaluate the
internal workings of the organization and, as a result, to suggest a list of
strengths and of weaknesses in the organization.
(e) Present these lists to the Board and other members of the organization for
strategic thinking and discussions, perhaps using a SWOT analysis to analyze all
four lists.
 (f) Repeat steps 2-5 regularly, for example, every six months or year and document
the results in a Strategic Plan.

5. Alignment Model of Strategic Planning

The primary purpose of this model is to ensure strong alignment of the

organization’s internal operations with achieving an overall goal, for example, to
increase productivity or profitability, or to successfully integrate a new cross-functional
system, such as a new computer system. Overall phases in this model might include:

ww(a) Establish the overall goal for the alignment.

(b) Analyze which internal operations are most directly aligned with achieving that

w.Egoal, and which are not.

(c) Establish goals to more effectively align operations to achieving the overall goal.

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Methods to achieving the goals might include organizational performance
management models, for example, Business Process Re-engineering or models

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of quality management, such as the TQM or ISO models.

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(d) Include that information in the Strategic Plan.

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Similar to issues-based planning, many people might assert that the alignment

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model is really internal development planning, rather than strategic planning. Similarly,
others would argue that the model is very strategic because it positions the organization

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for much more successful outward-looking and longer term planning later on.

2.9 DECISION MAKING

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In the past, decision making was thought of as a management function all by
itself, but now almost everyone places it with planning. Regardless of how you view it,
decision making is a critical part of being an effective manager. Managers make dozens
of decisions every day. Many are quite small but some are huge. Your success as a
manager depends on how well you make decisions.

A decision is a choice between alternatives and decision making is the process

of choosing one alternative over the others. Making good decisions should be a
process. It is a process of identifying problems and resolving them, or of identifying
opportunities and taking advantage of them.

The process is made up of two components: (1) Judgement and (2) Choice

Judgment – a process of evaluating alternatives Choice – a process of selecting a

specific alternative to implement Judgment can occur without being followed by choice.
However, some level of judgment will always precede choice.

2.9.1 Characteristics of Human Information Processors

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Selective perception - Human beings can handle only limited amounts of stimuli
simultaneously, we all “choose” what we will attend to and what we will ignore. The key

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to successful organizational decision making is to “select” the relevant information and
ignore irrelevant information.

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Framing - This refers to how a decision is oriented and organized. A typical contrast of
“framing” is for a choice to be represented as a problem to solve versus an opportunity

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to take advantage of. Simply known as positive versus negative. Framing is important

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because different outcomes result depending upon how the decision is framed, even

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when the decision maker has the same information.

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Escalation of commitment to a failing course of action - Failure to ignore sunk costs

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(investments that are already gone and cannot be recovered) and see that the original
choice is not achieving--and will not achieve—the initial objectives. The “sunk cost”

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doesn’t have to be financial. It can be just personal effort and self-esteem that someone
has invested in a course of action.

Risk propensity - The orientation of the decision maker to either seek risk or avoid it.
While each of us has an individual risk propensity, all of us are typically risk seeking for
gains and risk averse for losses. This means that if something has been working, we will
continue to do more of the same even though the situation has changed. Coupled with
selective perception, framing, and escalation of commitment, this phenomenon of
choice can have dire consequences of overly conservative behavior to the point that we
fail to be creative.
Hindsight bias - this is the inability of a decision maker to remember correctly the
circumstances that existed prior to implementing a choice once action has been taken.
You can recognize this behavior when someone says, “I KNEW that was going to
happen!” This is a problem because we fail to learn from our decisions.

Over-confidence, complacency - Pilots know these two. Over-confidence is where we

give ourselves credit for being more capable than we actually are, particularly with
respect to risky situations. We take more risky actions than are objectively justifiable.
Complacency is becoming more comfortable with a situation than is warranted by the

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level of risk that objectively exists (Kilbourne, 2006). Both of these can cause us to
make poor choices.

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Background Factors for Decision Making

Degree of Certainty

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Certainty: All information relevant to the decision is known or available to the decision

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maker, including specific goals, alternatives, and outcomes associated with each
alternative action.
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g.n
Risk: Decision maker has specific goals and good information relevant to alternatives,
but there is some risk associated with the outcomes of each

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Alternative—but the risk can be assessed. Uncertainty: Decision maker has specific
goals, but information about alternatives and outcomes of alternatives is incomplete. t
Ambiguity: The situation is so new or unclear that goals are vague, alternatives are
difficult to specify, and outcomes of alternatives are unknown.

Decision Making Steps

There are many decision-making models. Here is another that is not nearly as insightful
as the one above, but it is one that many of the students will be familiar with.
1 Identify the : The first step is to recognize there is a problem and a
problem decision must be made. Some people just react to problems,
but good managers seek to understand the problem. Defining
and clarifying the problem helps. Decision making is
essentially a problem-solving process. This involves
understanding the situation and trying to resolve it.

2 List alternatives : Managers need to develop a list of possible courses of action

that will solve the problem. Managers must look for standard

ww answers and also creative answers. The technique

“brainstorming” is an example of creative thinking that can

w.E take place between a manager and the subordinates. In

brainstorming, everyone comes up with as many alternatives

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as possible. A critical point about brainstorming sessions is

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that no criticism should be allowed. You want to foster a
nurturing environment where everyone will feel like

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contributing. Shooting down an idea will stop the free flow of

3 Select the best :

exchange.
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In some models, the next step is evaluating your alternatives,
alternative
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but we are combining the evaluation with the selection.

et
Evaluating is part of selecting. As part of the evaluation, you
should list the potential effects of each choice. You should
also weigh the advantages and disadvantages. Discuss those
effects and make the decision based on what is best for the
organization.

4 Implement the : Put the alternative into action. This is critical. All of your
chosen successful analysis won’t do any good if you are afraid to act.
alternative Whether the implementation is easy or hard, you must take
action.
5 Evaluate : Earlier we evaluated the alternatives, but now this final step
means to evaluate the action. This is done with feedback.
Collect the best feedback you can. If the problem is not
resolved, a manager must go back through the process and
look at other alternatives.

Meeting the Challenge of Resource Scarcity

Resource scarcity is a very important consideration for any organization today. There
would be no need for planning if material, financial and human resources were unlimited

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and cheap.

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Planners in both private business and public agencies are challenged to stretch their
limited resources through intelligent planning. Otherwise, wasteful inefficiencies would

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give rise to higher prices, severe shortages and great public dissatisfaction.

Facing Environmental Uncertainty

En
gin
The second most important conceptual reason is that organizations continually face
environmental uncertainty in the course of accomplishing the tasks. Organizations meet

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this challenge largely through planning safeguard. Some organizations do this job better

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than others partly because of their differing patterns of response to environmental
factors beyond the organization’s immediate control.
g.n
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 UNIT III

ORGANISING
Nature and purpose – Formal and informal organization – organization chart –
organization structure – types – Line and staff authority – departmentalization –
delegation of authority – centralization and decentralization – Job Design - Human
Resource Management – HR Planning, Recruitment, selection, Training and

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Development, Performance Management, Career planning and management.

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INTRODUCTION

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Organizing is the management functions that focus on allocating and arranging

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the human and non-human resources to carry out their task successfully. It also
concerned with building, developing and maintaining working relationship.

Definition: gin
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Mescon,Albert says that organizing is the process of establishing a structure for

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the organization, so that it helps the manpower of organization to function
systematically, to fulfill the organization goal effectively.
g.n
et
Theo Haimann defined as the organizing is the process of defining and grouping
the activities of an enterprise and establishing the authority relationship among them.

Organization is the process by which individuals, groupsand facilities are

combined in a formal structure of tasks and authority,” said by Adam smith

Types of organization

 Line organization / military organization

 Functional organization
 Line and staff organization
  Matrix organization
 Committee organization

Principles of organization

a) Objective
b) Span of control
c) Scalar principle
d) Unity of command

wwe) Unity of direction

f) Responsibility and authority

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g) Division of work

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h) Line and staff relationship.
i) Effective communication
j) Balance and flexibility.
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NATURE OF ORGANIZATION
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The following are the important characteristics of organization.
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(a) Specialization and division of work
g.n
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The entire philosophy of organization is centered on the concepts of
specialization and division of work. The division of work is assigning responsibility for
each organizational component to a specific individual or group thereof. It becomes
specialization when the responsibility for a specific task lies with a designated expert
in that field. The efforts of the operatives are coordinated to allow the process at
hand to function correctly. Certain operatives occupy positions of management at
various points in the process to ensure coordination.

(b) Orientation towards goals

Every organization has its own purposes and objectives. Organizing is the function
employed to achieve the overall goals of the organization. Organization harmonizes the
individual goals of the employees with overall objectives of the firm.

(c) Composition of individuals and groups

Individuals form a group and the groups form an organization. Thus, organization is
the composition of individual and groups. Individuals are grouped into departments and
their work is coordinated and directed towards organizational goals.

(d) Differentiated functions

The organization divides the entire work and assigns the tasks to individuals in order
to achieve the organizational objectives; each one has to perform a different task

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and tasks of one individual must be coordinated with the tasks of others. Collecting

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these tasks at the final stage is called integration.

(e) Continuity

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An organization is a group of people with a defined relationship in which they work

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together to achieve the goals of that organization. This relationship does not come to
end after completing each task. Organization is a never ending process.

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PURPOSE OF ORGANIZATION ee
(a) Helps to achieve organizational goal rin
g.n
Organization is employed to achieve the overall objectives of business firms.

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Organization focuses attention of individual’s objectives towards overall objectives.

(b) Optimum use of resources

To make optimum use of resources such as men, material, money, machine and
method, it is necessary to design an organization properly. Work should be divided and
right people should be given right jobs to reduce the wastage of resources in an
organization.

(c) To perform managerial function

Planning, Organizing, Staffing, Directing and Controlling cannot be implemented

without proper organization.
(d) Facilitates growth and diversification

A good organization structure is essential for expanding business activity.

Organization structure determines the input resources needed for expansion of a
business activity similarly organization is essential for product diversification such as
establishing a new product line.

(e) Human treatment of employees

Organization has to operate for the betterment of employees and must not
encourage monotony of work due to higher degree of specialization. Now, organization

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has adapted the modern concept of systems approach based on human relations
and it discards the traditional productivity and specialization approach.

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FORMAL ORGANISATION
asy
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Formal organisation is a well-defined structure of authority and responsibility that
defines delegation of authority and relationships amongst various organisational

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members. It works along pre-defined sets of policies, plans, procedures, schedules and

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programmes. Most of the decisions in a formal organisation are based on

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predetermined policies. Formal organisation is a deliberately designed structure with

g.n
formal authority, responsibility, rules, regulations and channels of communication.

Characteristics of a formal organization

 Well defined rules and regulation

et
 Determined objectives and policies
 Status symbol
 Limitation on the activities of the individual
 Strict observance of the principle of co-ordination
 Messages are communicated through scalar chain
 It is to best attain the objectives of the enterprise.
Advantages of Formal Organisation:

1. Systematic Working:

Formal organisation structure results in systematic and smooth functioning of an

organisation.

2. Achievement of Organisational Objectives:

Formal organisational structure is established to achieve organisational objectives.

3. No Overlapping of Work:

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In formal organisation structure work is systematically divided among various
departments and employees. So there is no chance of duplication or overlapping of

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work.

4. Co-ordination:
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Formal organisational structure results in coordinating the activities of various
departments.
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5. Creation of Chain of Command:
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who reports to whom. ee
Formal organisational structure clearly defines superior subordinate relationship, i.e.,

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6. More Emphasis on Work:
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relations.

Disadvantages of Formal Organisation:

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Formal organisational structure lays more emphasis on work than interpersonal

1. Delay in Action:

While following scalar chain and chain of command actions get delayed in formal
structure.

2. Ignores Social Needs of Employees:

Formal organisational structure does not give importance to psychological and social
need of employees which may lead to demotivation of employees.
3. Emphasis on Work Only:

Formal organisational structure gives importance to work only; it ignores human

relations, creativity, talents, etc.

Theories of Formal Organisation

Organisation theory is the study of organisations and people and groups working in
them. There is no unified set of organisation theory that provides insight into
organisation principles and practices. Different theories have evolved over a period of

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time with different sets of assumptions and features.

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Organisational theories are classified as follows:

1. Classical Theory

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2. Human and Participative Theories

3. Contingency Theory
En
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Classical Theory of Formal Organisation
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It focuses on structure, design and features of the organisation like

g.n
specialization, scalar chain, departmentation, span of control, centralization /
decentralization etc. The structure is created and people are appointed to run the

et
various departments. It considers organisations as closed system with very little or no
interaction with the environmental forces. It emphasises on tasks more than people.

Important factors of classical theories of organisation

 Hierarchy of authority,

 Division of work,

 Specialization,

 Impersonal relations,

 Narrow span of control etc.

 (a) People work only if they are directed to work. They do not assume
responsibilities on their own.

(b) Formal plans, motivational factors and communication channels are designed to
get the work done through subordinates

(c) It achieves efficiency at the cost of social dissatisfaction.

(d) It emphasizes on division of work as a means to improve workers‟ performance.

(e) It views unity of control as the basis for achieving coordination amongst varied
activities of organisational members.

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Human and Participation Theories of Formal Organisation

The classical theory of organisation was opposed in 1950‟s when the behavioral
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theories emerged on the management scenario. The classical theory was criticized for

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being highly mechanistic, formal and impersonal. Hawthorne experiments conducted by

gin
Elton Mayo supported social and informal interactions amongst work groups to increase
organisational efficiency. The human theories focused on people as means to achieve

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the tasks. These theories characterized a shift from task - oriented approach to people -
oriented approach for achieving the organisational goals.
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g.n
Contingency Theory
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Classical and Participative theories are not unrealistic. However, managers may
choose a theory which consists of features from both to adapt the organisation to its
surrounding environment. The contingency theory identifies four factors that affect
manager‟s choice of a theory.

1. Nature of people: People, who are lazy, lack responsibility, do not wish to
work on their own, prefer to be led and guided, and prefer to be governed by the
classical theory of organisations.People, who enjoy their work, wish to seek greater
responsibility, exercise self-direction show better results if managers adopt participative
theory to organizing.
 2. Type of task and technology: Classical form of organisation is preferred for
producing goods through mass production technology while participative theory is more
suitable where job-order (small scale) or continuous technology is adopted.

3. The environment : Firms which operate in dynamic environment are more

flexible in their operations and, therefore, adopt a participative theory while firms
operating in a stable environment show better results when they work according to
principles of classical organisation.

4. Degree of change and uncertainty: Change in people’s attitudes, perception

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and knowledge from simple to complex shifts the organisation structure from classical to
participative.

w.E As society moves from underdevelopment to development, managers become

educated, trained and skilled labour is available in abundant supply, the general level of

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education and specialization increases and, therefore, a shift from classical to

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participative organisation structure is observed.

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FACTORS AFFECTING CONTINGENCY THEORY

Features
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Classical theory
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Participative theory

Nature of people Lazy, with litter or no desire Active

g.n
with desire to
to assume
responsibility et
additional assume and seek additional
responsibility

Technology Mass – Production Job-order and continuous

technology technology

Environment Stable Dynamic

Change Not observed Observed in the internal

and external environment
INFORMAL ORGANISATION

As the formal organisation grows in size, parallel existence of informal relationships

along with formal relationships becomes unavoidable. They arise because of inevitable
social and personal needs of individuals which cannot be satisfied by the principles of
formal organisations. They represent non-planned, unofficial, social interactions
amongst people working in formal structures. They arise out of common interests of
people. These organisations are not governed by formal set of principles but
nevertheless, are an important and integral part of formal organisations.

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Features of informal organisation:

(1) Informal organisational structure gets created automatically without any intended

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efforts of managers.

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(2) Informal organisational structure is formed by the employees to get psychological
satisfaction.

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(3) Informal organisational structure does not follow any fixed path of flow of
authority or communication.
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(4) Source of information cannot be known under informal structure as any person
can communicate with anyone in the organisation.
g.n
et
(5) The existence of informal organisational structure depends on the formal
organisation structure.

Benefits of Informal Organisation

1. Promotes social and cultural values

2. Relief to top managers

3. Supplement to managers‟ capacities

4. Social satisfaction and security

5. Communication
 6. Better relationships

7. Solve work-related problems

8. Promotes creativity

9. Self-control

10. Restraint on manager’s discretion

11. Social satisfaction

12. Quick feedback to managers

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Drawback of Informal Organisation

1. Spread Rumours:

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According to a survey 70% of information spread through informal organisational

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structure are rumors which may mislead the employees.

2. No Systematic Working:
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Informal structure does not form a structure for smooth working of an organisation.

3. May Bring Negative Results:

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g.n
If informal organisation opposes the policies and changes of management, then it
becomes very difficult to implement them in organisation.

4. More Emphasis to Individual Interest:

et
Informal structure gives more importance to satisfaction of individual interest as
compared to organisational interest.

Comparison of formal and informal organization

Sl. No. Nature Formal organization Informal Organization

1 Structure Formally structured Spontaneous reaction to

 authority-responsibility formally structured
relationships organization. No formal
structure

2 Emphasis Official authority – People and their relationship

responsibility structure

3 Power It is attached to position It is attached to person

4 Chain of The chain is respected The authority comes from

ww command and authority is delegated

by the top management
personal knowledge and skills
of group leaders and is given

w.E by the group itself.

5 Goals
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Organizational goals are
considered important
Individual goals may clash with
organizational goals

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6 Stability
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They are stable; not
affected by incomings and
Change in members can lead
to instability

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out goings of
organizational members
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7 Flexibility Not flexible; cannot be Highly flexible
g.n
easily changed. Members
interact with each other on
the basis of the job
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positions

8 Social They arise out of formal They arise out of social norms
acceptance authority-responsibility of acceptance and recognition
structure

9 Formation They are deliberately They are created by members

created by managers to achieve their personal goals
 10 Purpose They are formed to Their objective is to achieve
(objective) achieve formal social satisfaction
organizational goals

Organization chart

The organization chart is a diagram showing graphically the relation of one

official to another, or others, of a company. It is also used to show the relation of one

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department to another, or others, or of one function of an organization to another, or
others. This chart is valuable in that it enables one to visualize a complete organization,

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by means of the picture it presents.

Organizational charts do exactly what their name suggests: Organize the roles

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and positions in an organization. You may want to round out your org chart by including

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the details of people or departments. Adding contact information, location, and other
notes can make the organization more efficient and eliminate confusion about who does

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what. Try breaking down your org chart into manageable pieces to get started. This

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way, all of the information is consistent and leads back to the highest level of the

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organization. You can section off different areas of your chart with the following
categories:

 Department g.n


Team
Unit
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 Project
 Location
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asy
En
gin
There are several limitations of organizational charts:

 eer
If updated manually, organizational charts can very quickly become out-of-date,

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especially in large organizations that changes their staff regularly.

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They only show "formal relationships" and tell nothing of the pattern of human
(social) relationships which develop. They also often do not show horizontal


relationships.
They provide little information about the managerial style adopted (e.g.
t
"autocratic", "democratic" or an intermediate style)
 In some cases, an organigraph (means graphical representation of a company
structure) may be more appropriate, particularly if one wants to show non-linear,
non-hierarchical relationships in an organization.
 They often do not include customers.
Need of organization chart:

1. It assigns responsibilities to individuals

2. It helps identity control properly
3. Makes the management functions simpler
4. Serve as a framework of budgeting and scheduling
5. Helps to give sense of security
6. Outline fundamental relationships
7. Outlines basic authority

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8. Serve as basic for directives
9. Helps to improve communication channels

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10. It can be referred as reference document for various purposes.

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Benefits of organization chart:

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1. It shows organizational activities and identifies persons responsible for them

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2. It indicates clear reporting relationships pointing out who is accountable to whom.
3. It identifies scope and limit at the job explaining tasks to be performed at each
position.
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4. It tells about the inter – relationship of positions
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5. It helps to resolve complexities within organization
g.n
6. It can be used to introduce organizational relationships to new employees.

Limitations of organizational chart

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1. It does not represent human relationship between superior and subordinates
2. It can be introduce obstacles in relationships
3. It shows only formal authority relationships and omits many significant informal
and informational relationships.
4. It does not provide as to the authority existing at any point in the structure
5. For any changes in hierarchy or creation of new position results in recognizing
the chart.
Types of organizational chart

1. Hierarchical Organizational chart

2. Matrix Organizational chart
3. Flat Organizational chart

HIERARCHICAL
ORGANIZATIONAL CHART

ww The hierarchical

w.E
organizational chart is the most
common type. A hierarchy is

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where one group or person is at
the top, while those with less
power are beneath them, in the
shape of a pyramid. Think of a
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monarchy with a king or queen at
the top, or an organization with
n eer
the CEO at the top. With a
i ng.
hierarchy, members typically communicate with the person they report to and anyone

net
who reports directly to them. This gives guidance for information flow but can also limit
your ability to effect change.

MATRIX ORGANIZATIONAL CHART

The matrix organizational chart is a rarer type and usually only seen when
individuals have more than one manager. For example, an organization could have a
team of graphic designers who all report to the head graphic designer. The graphic
designers are also working on other projects that are likely headed by a separate
project manager. In this case, the graphic designers will have two managers. This
structure can lead to increased communication and cooperation between departments,
but it can also lead to conflicts of interest.
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a
FLAT ORGANIZATIONAL CHART
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The flat organizational chart, sometimes referred to as a horizontal org chart, has

nee
little or no levels of middle management and typically consists of two levels—the top
administrators and the workers. In companies like this, the workers have more
responsibility and are more directly involved in decision-making.
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g .ne
t
ORGANIZATION STRUCTURE

Organization structure refers to the systematic arrangement of the people

working for the organization to achieve the desired goals and objectives. It facilitates to
define authority and responsibility relationship between various positions.

The organization structure has two dimensions via horizontal and vertical. The
horizontal dimension shows the basic departmentation i.e. grouping the activities and
employees of an enterprise in to various departments. A vertical dimension shows the
hierarchy level of the organization.

ww
Need for organization structure:

w.E


To achieve specific goals
To define personal identity

 asy
Assigning responsibility and authority
To promote division of work that leads to specialization.

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Optimum utilization of staff and resources.
 For efficient functioning
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TYPES OF ORGANIZATIONAL STRUCTURES
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Types of organizational structures that can be observed in the modern business
organizations.

Bureaucratic Structures g.n

et
Bureaucratic structures maintain strict hierarchies when it comes to people
management. There are three types of bureaucratic structures:

1. Pre-bureaucratic structures

This type of organizations lacks the standards. Usually this type of structure can
be observed in small scale, start-up companies. Usually the structure is centralized and
there is only one key decision maker.

The communication is done in one-on-one conversations. This type of structures

is quite helpful for small organizations due to the fact that the founder has the full control
over all the decisions and operations.
2. Bureaucratic structures

These structures have a certain degree of standardization. When the

organizations grow complex and large, bureaucratic structures are required for
management. These structures are quite suitable for tall organizations.

3. Post-bureaucratic Structures

The organizations that follow post-bureaucratic structures still inherit the strict
hierarchies, but open to more modern ideas and methodologies. They follow techniques
such as total quality management (TQM), culture management, etc.

ww
Functional Structure

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The organization is divided into segments based on the functions when
managing. This allows the organization to enhance the efficiencies of these functional

a
groups. As an example, take a software company.

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Software engineers will only staff the entire software development department.

ngi
This way, management of this functional group becomes easy and effective.

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Functional structures appear to be successful in large organization that produces
high volumes of products at low costs. The low cost can be achieved by such
companies due to the efficiencies within functional groups.
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g .ne
t
 In addition to such advantages, there can be disadvantage from an
organizational perspective if the communication between the functional groups is not
effective. In this case, organization may find it difficult to achieve some organizational
objectives at the end.

Divisional Structure

These types of organizations divide the functional areas of the organization to

divisions. Each division is equipped with its own resources in order to function
independently. There can be many bases to define divisions.

ww Divisions can be defined based on the geographical basis, products/services

basis, or any other measurement.

w.EAs an example, take a company such as General Electrics. It can have

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microwave division, turbine division, etc., and these divisions have their own marketing
teams, finance teams, etc. In that sense, each division can be considered as a micro-

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company with the main organization.

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g.n
et
Matrix Structure

When it comes to matrix structure, the organization places the employees based
on the function and the product.

The matrix structure gives the best of the both worlds of functional and divisional
structures.

In this type of an organization, the company uses teams to complete tasks. The
teams are formed based on the functions they belong to (ex: software engineers) and
product they are involved in (ex: Project A).

ww This way, there are many teams in this organization such as software engineers

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of project A, software engineers of project B, QA engineers of project A, etc.

asy
En
gin
eer
ing
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t
Flat Organizational Structure

Many small companies use a flat organizational structure, where very few levels
of management separate executives from analysts, secretaries and lower-level
employees. Flat organizations work best when a company has less than 20 employees,
especially if the company employs one or two employees per department. One
advantage of using a flat organizational structure for management is that decisions can
be made relatively quickly. The flat organizational lacks the typical bureaucracy of taller
organizational structures--those with many levels of management.

ww
Product Organizational Structure

A product organizational structure has managers reporting to the president or

w.E
head of the company by product type. Product organizational structures are primarily
used by retail companies that have stores in various cities. However, stores in each city

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may still need a local human resources or marketing department to carry out functions

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locally. For example, a small department store company may have a vice president of
sporting goods, housewares and general merchandise at the corporate office. One

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manager may report to each vice president. However, each manager may oversee the

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work of one or more field marketing employees who travel and handle local marketing

rin
stores in several states. These field marketing employees may work for the sporting
goods manager one week in League City, Texas, then do merchandising for the
housewares manager another week in the Sugarland, Texas, market. g.n
Geographical Organizational Structure
et
The Small Business Administration is responsible for defining small businesses
in different industries. For example, in manufacturing, the SBA usually considers a
company with 500 or fewer employees a small business. Point is, small businesses are
still large enough to use a geographical organizational structure. A geographical
organizational structure is when companies decentralize the functional areas. For
example, unlike the product organizational structure, there may be a local marketing,
finance, accounting and research development person based in each region. For
example, a small consumer products food company may be large enough to place a
marketing research manager and analyst in each of six different regions. This can be
important because consumers in various areas have different tastes. Hence, a
geographical structure will enable the company to better serve the local market.

Authority

In many organizations, managers use authority by dividing it into line authority,

staff authority and functional authority. These kinds of authority differ according to the
kinds of power on which they are based.

ww
Line Authority:

w.E Managers with line authority are those people in the organization who are directly
responsible for achieving organizational goals. Line authority is represented by the

asy
standard chain of command starting with the board of directors and extending down

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activities of the organization that are carried out. Line authority is based primarily on
legitimate power.

gin
Since line activities are identified in terms of the company’s goals, the activities

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classified as line will differ in each organization. For example, managers at a

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manufacturing company may limit line functions to production and sales, while

g.n
managers at a department store, in which buying is a key element will consider the
purchasing department as well as the sales department as line activities. When an
organization is small, all positions may be line roles

Staff Authority:
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Staff authority belongs to those individuals or groups in an organization who
provide services and advice to line mangers. The concept of staff includes all elements
of the organization that are not classified as line. Advisory staffs have been used by
decision makers from emperors and kings to dictators and parliaments over the course
of recorded history.

Staff provides managers with varied types of expert help and advice. Staff
authority is based primarily on expert power. Staff offer line managers planning advice
through research, analysis and options development. Staff can also assist in policy
implementation, monitoring and control in legal and financial matters; and in the design
and operation of data processing systems.

As managers expand organizations over time, staff roles are often added to
supplement line activities. For example, partners at many law firms are adding staff
members to run the ‘business side’ of the firm. The presence of these specialists frees
lawyers to practice law, their line function.

ww
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asy
En
gin
eer
ing
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t
Functional Authority:

The role of staff members – to provide advice and service to line members –
implies that staff lacks independent formal authority. In reality, staff departments,
especially those responsible for audit functions, may have formal authority over line
members within the limits of their function. The right to control activities of other
departments as they relate to specific staff responsibilities is known as functional
authority. The finance manager of Division A reports through the chain of command to
the General Manager of Division A, but is also responsible to the vice president for
finance at the corporate level. This ‘dotted line’ relationship indicates the functional
authority of specialized staff in relation to line managers.

Functional authority is common in organizations. It is necessary in carrying out

many organizational activities, both to provide or a degree of uniformly and to allow
unhindered application of expertise. Thus, it is based on both legitimate and expert
power. The skills required to manage functional authority relationships and the problem
arising from those relationships are similar to the skills required to manage dual-boss

ww
relationships in matrix organizations.

Functional authority might be common in modern organizations, but it can be

w.E
difficult to practice. Take the case of Laura Kozol at the General Electric plant in Lynn,
Massachusetts, where jet engines are manufactured for small aircraft. As a design

asy
engineer, Kozol has a position traditionally associated with staff authority. When Kozol

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joined the plant staff, she found that engineers designed engines (staff authority)
without consulting those who actually produced the parts (line authority). Partly out of

gin
frustration, and partly because downsizing at the plant cut out layers of management,

ee
Kozol organized an ongoing collaborative process between engineers and production

rin
employees. She now exercises functional authority as she works with production
employees.

g.n
LINE AND STAFF CONFLICTS:
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As always, functional and decisional conflicts arise between line and staff members.
The causes may be attributed to the following reasons.

1. Line managers grudge against the staff personnel:

a) The staff authorities try to encroach upon the line managers and tell them how to
do their work

b) Lack of well-balanced advice from the staff managers

c) Staff managers are not directly accountable and sport a jealous attitude towards
line authorities
 d) Staff managers fail to see the big picture objectively and their interests are
confined to specified situations

e) Staff often tends to impose their superiority on line managers

2. Staff personnel complaints against the line managers

(a) Line managers don’t want to listen to the suggestions of the staff and make it a
point to resist new ideas

(b) Lack of authority on the part of staff managers to implement their innovative
ideas and hence the dependence on line authorities

ww(c) Line managers do not utilize the services of staff personnel properly and

w.Eeffectively

3. The workers’ attitude

asy
(a) The authority relationships between line and staff specialists are not clearly
defined most of the time
En
gin
(b) The basic difference in attitude and perception of the line and staff managers
create difficulties for the work force in carrying out orders and instructions

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DEPARTMENTALIZATION

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Departmentalization is the process of breaking down an enterprise into various
departments. How jobs are grouped together is called departmentalization. A
Department is an organization unit that is headed by a manager who is responsible for
its activities. Departmentation and Division of labour are same things. However
technically both are different. Both emphasize on the use of the specialized knowledge,
but departmentation has higher management level strategic considerations while the
division of labour has a lower level operating considerations.

Types of Departmentalization

There are five common forms of departmentalization

 1) Functional Departmentalization
2) Geographical Departmentalization
3) Product Departmentalization
4) Process Departmentalization
5) Customer Departmentalization

FUNCTIONAL DEPARTMENTALIZATION

It groups jobs according to function.

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performs such as accounting or purchasing. Every Organization must perform certain
jobs in order to do its work. For example, Manufacturing, Production, R & D, Purchasing

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etc. Same kinds of jobs are grouped together in departments. This kind of

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departmentalization includes persons with same knowledge or skills (like Accounting
Department having persons of commerce, Marketing Department having MBA persons).

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As in department people with same skill and knowledge are there. Their focus becomes

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narrow and they cannot appreciate each other’s work in the same department

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Advantages

 It is most logical and natural form of departmentalization.

  It brings about specialization which makes optimum utilization of human
resources.

 It lays emphasis on each and every activity.

 It enables top management to exercise control over a number of functions.

 It facilitates delegation of authority and therefore, reduces the work burden of top
manager.

 It eliminates the duplication of effort which brings efficiency.

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Disadvantages

 There may be conflict between departments as the responsibilities are inter

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There may be difficulty in coordinating the activities of different departments.

There is over emphasis on specialization.

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It maximizes supervision cost.

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It is non-responsive to environmental changes.

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It does not promote innovation and creativity.

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GEOGRAPHICAL DEPARTMENTALIZATION
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It groups jobs according to geographic region.
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Geographical departmentalization is an arrangement of departments according to
geographic area or territory. It divides works well for international business.
Geographical Departmentalization is beneficial when Organization are spread over a
wide area. Even each part or areas have different requirement or interests. For
example, marketing a product in Western Europe may have different requirements than
marketing the same product in Southeast Asia. Market area is broken up into sales
territories like Northern, Southern, West, East. The Salesman appointed for each
territory report to their regional or territorial manager. These manager again reports to
the sales manager who is head of the sales department.
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Advantages:

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It helps to achieve local operations.

It facilitates the expansion of business into various regions.

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It considers the environmental changes.

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There is better coordination of activities through the setting up of regional
divisions.
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 It can meet the local demands more effectively.
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Disadvantages:
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There may be a problem of integration of various regional offices.

There is the possibility of duplication of physical facilities. g.n

 It is more difficult to maintain central control over regional departments. et
 There may be lack of skilled and efficient persons to take charge of regional
departments.

PRODUCT DEPARTMENTALIZATION

It groups jobs by product line.

Companies may have multiple products. Like Maruti is producing Alto, Zen, Swift.
Large companies are often organized according to the product. All common activities
required to produce and market a product are grouped together. Major disadvantages
are duplication of resources. Each product requires most of the same functional areas
such as finance, marketing, production etc. For example, Samsung manufactures
Phones, T.V., and Tablet etc. For each product, they have same functional department
like marketing, production etc. Thus, it is duplication of functions. Product
Departmentalization has become important for large complex organization.

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Advantages
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It is suitable for the organization having various lines of products or services. It
brings about specialization in a product or service which makes optimum
utilization of human resources.
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 It directs attention toward specific product line and service.
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

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It facilitates to monitor and evaluate the performance of each production or
service department.

 Product/service managers can be held accountable for the profitability of each

product/service.

 It permits maximum use of specialized production/services facilities.

Disadvantages

 There may be conflict between production/service and other departments as the

responsibilities are inter dependent.
  There may be under utilization of plant capacity if the demand of the
product/service is not sufficient.

 It creates the problem of effective control over production divisions by the top
management.

 It maximizes administrative cost.

 The product/service manager may ignore overall objective of the organization.

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PROCESS DEPARTMENTALIZATION:

It groups Jobs on the Basis of Product or Customer Flow.

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Departmentalization is done on the basis of processing. In manufacturing

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organizations, the location of manufacturing plant or department can be at different
location due to cost of raw material and even labour charges. Even departmentalization

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can be done depending on the types of machines required. The similar types of

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machines can be kept at one place e.g. all lathes, all drilling machines, all shapers etc.
Activities are grouped into separate sections, each kept at one place.

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Advantages

 There is proper division of work into different processes.

 It facilitates coordination by grouping products.

 It ensures effective utilization of specialized skills and equipments.

  It provides full responsibility to process head to complete process activities which
improves product efficiency.

 It helps to make appropriate use of resources and facilities.

Disadvantages

 It is appropriate only for manufacturing organizations.

 The technical problem is one process may create problem for the whole
process.

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There is possibility of conflict among managers of different process.

It is more difficult to maintain coordination among different process.

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CUSTOMER DEPARTMENTALIZATION

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It groups Jobs on the Basis of specific And Unique Customers

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Customer divisions are divisions set up to service particular types of clients or

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customers. Some companies or organization divides the different units based on
customers or markets. For example, any PC manufacturing company like HP has

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different divisions like Consumer PC, Commercial PC, and Workstations etc. Nokia

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previously had three divisions like Consumer Phone, Business Phone & Smart Phone.

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Recently Nokia had changed their departmentalization from customer to process base.
Now

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there are only two divisions: Hardware and Software base departmentalization. They
will also sell their software to other mobile company. Another example is an educational
institution offers regular and extension courses to cater to the needs of different
students groups.

Advantages

 It is suitable for the organization dealing with various types of customers.

 Management can concentrate on clearly identified and potential customers.

 It considers the environmental changes.

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 It provides the benefit of specialization.

Disadvantages

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It may be difficult to maintain coordination.

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There may be under utilization of facilities especially during the period of low
demand.
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There may be possibility of duplication of activities.

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There is possibility of conflict between departments due to over emphasis of own
department by departmental managers.
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Over emphasis of on customers may lead to wastage of resources.

It is costly method of departmentalization. et

Departmentalization by Time

Time is also a basis of departmentalization in may organization, especially, those

that involve in public utility, production or service. Generally, hospitals, hotels,
telecommunication and other public utility organization which work around the clock
from departments on the basis of time shift such as day, evening and night shifts.
Therefore, a separate department is created on the basis of shift and a departmental
head of appointed for each shift to maintain control the activities of concerned shift.
Advantages

 There is proper division of works into different shifts.

 It facilitates coordination by grouping members into shifts.

 It ensures effective utilization of specialized skills and equipments.

 It provides full responsibility to the shift head to complete activities which

improves product/service efficiency.

 It helps in the appropriate use of resources and facilities.

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Disadvantages

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It is appropriate only for public utility enterprise where the work is round the
clock.

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The technical problem is one shift may create problems for the entire shift.

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There is possibility of conflict among managers of different shifts.

It is more difficult to maintain coordination among different shift mangers.

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The responsibility of total profit cannot be assigned to a shift department.

DELEGATION OF AUTHORITY
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Delegation of Authority means division of authority and powers downwards to the

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subordinate. Delegation is about entrusting someone else to do parts of your job.
Delegation of authority can be defined as subdivision and sub-allocation of powers to
the subordinates in order to achieve effective results.

Importance of Delegation:

1. Effective management:

In the delegation process managers pass routine work to the subordinates. So

they are free to concentrate on other important matters. The main job of managers is to
get the work done effectively and by delegating the authorities and responsibilities
managers can get the work done effectively and efficiently from the subordinates.
2. Employees’ Development:

As a result of delegation employees get more opportunities to utilise their talents.

It allows them to develop those skills which help them to perform complex task.
Delegation help in making better future managers by giving them chance to use their
skills, gain experience of work related to higher job position.

3. Motivation of employees:

In the delegation when the manager is sharing his responsibilities and authority
with the subordinates it motivates the subordinates as they develop the feeling of

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belongingness and trust which is shown to them by their superiors. Some employees
can be motivated by such kind of non-financial incentives.

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4. Facilitates organisational growth:

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In the process of delegation when the managers are passing their responsibility
and authority to the subordinates they keep in mind the qualification and capability of all

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the subordinates. This leads to division of work and specialisation which is very

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important for organisational growth.

5. Basis of Management Hierarchy:

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Delegation establishes superior-subordinate relationship which is the base for

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hierarchy of managers. The extent of power delegated to subordinates decides who will
report to whom, and the power at each job position forms the Management Hierarchy.

6. Better Coordination:
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In delegation systematically responsibility and authority is divided and employees
are made answerable for non-completion of task. This systematic division of work gives
clear pictures of work to everyone and there is no duplication of work clarity in duties
assigned and reporting relationship brings effective coordination in the organisation.

7. Reduces the work load of managers:

In the process of delegation, the managers are allowed to share their

responsibilities and work with the subordinates which help the managers to reduce their
work load. With the process of delegation the managers can pass all their routine work
to the subordinates and concentrate on important work. Without delegation managers
will be overburdened with the work.

8. Basis of superior-subordinate relationship:

In the delegation process only two parties are involved that is superior and
subordinate. If superiors share or pass their responsibilities and authorities to the
subordinates it indicates good relationship between the superior and subordinate
because superiors will transfer their responsibility and authority to their subordinates
only when they have trust in them. So delegation improves the relations between

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superiors and subordinates.

Elements of Delegation/Process of Delegation:

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There are three elements of delegation:

1) Responsibility
2) Authority asy
3) Accountability
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1. Responsibility:
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Responsibility means the work assigned to an individual. It includes all the

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physical and mental activities to be performed by the employees at a particular job

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position. The process of delegation begins when manager passes on some of his
responsibilities to his subordinates which mean responsibility can be delegated.

Features of Responsibility:

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Responsibility is the obligation of a subordinate to properly perform the
assigned duty.
 It arises from superior subordinate relationship because subordinate is bound
to perform the duty assigned by his superior.
 Responsibility flows upward because subordinate will always be responsible
to his superior.
2. Authority:

Authority means power to take decision. To carry on the responsibilities every

employee need to have some authority. So, when managers are passing their
responsibilities to the subordinates, they also pass some of the authority to the
subordinates. The delegating authority is the second step of organising process. While
sharing the authority managers keep in mind that the authority matching to the
responsibility should only be delegated. They shall not pass all their authority to their
subordinates.

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Features of Authority:

 Authority refers to right to take decision due to your managerial position.

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communicates his decisions to subordinate expecting compliance from him as
per his directions.
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Authority is restricted by law and rules and regulations of the organisation.

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Authority arises from the scalar chain which links various job positions.
Authority flows upward as we go higher up in management hierarchy the

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scope of authority increases.

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Authority must be equal to Responsibility i.e.,Authority = Responsibility

3. Accountability:
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To make sure that the employees or subordinates perform their responsibilities in
their expected manner, the accountability is created. Accountability means subordinates
will be answerable for the non-completion of the task; creating accountability is the third
and final step of delegation process.

The accountability cannot be passed or delegated. It can only be shared with the
subordinates which means even after delegating responsibility and authority the
managers will be accountable for non-completion of task.

If the production manager is given the target of producing 20 machines in one

month’s time and he divided this target between four foremen working under him, i.e., 5
machines to be produced by each foreman but one foreman could not achieve the
target and at the end of the month only 17 machines are manufactured, then production
manager will be held accountable for non-completion of target as accountability cannot
be transferred or shared: it is an absolute term.

Features of Accountability:

 Accountability refers to answerable for the final output.

 It cannot be delegated or passed.
 It enforced through regular feedback on the extent of work accomplished.
 If flows upward, i.e., subordinate will be accountable to his superior.

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Differences between Authority and Responsibility

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Authority

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It is the legal right of a person or It is the obligation of subordinate to perform the
a superior to command his
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Authority is attached to the
position of a superior in
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Responsibility arises out of superior-subordinate
relationship in which subordinate agrees to carry
concern. out duty given to him.

Authority can be delegated by a Responsibility cannot be shifted and is absolute

superior to a subordinate

It flows from top to bottom. It flows from bottom to top.

“Centralization” is the systematic and consistent reservation of authority at central points
in the organization.

The implication of centralization can be

 Reservation of operation at lower level at the directions of the top level.

 Reservation of operating authority with the middle level managers.
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Reservation of decision making power at top level.

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Advantage of Centralized Organizational Structure •

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Reduced cost
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 Personal leadership
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Flexibility
Improved quality of work gin
 Better co-ordination
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Disadvantage of Centralized Organizational Structure g.n
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Delay in work
Remote control
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 No loyalty
 No Secrecy
 No special attention

FACTORS INFLUENCING CENTRALIZATION

 Size and dispersal of operation

 Level of diversity of product-lines
  Nature of growth
 Nature of Business
 Quality of Executives
 Management by Exception
 Effective Control System

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Decentralization” is a systematic delegation of authority at all levels of management and
in all of the organization. n eer
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Everything that increasing the role of subordinates is decentralization and that
decreases the role is centralization”
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Authority in retained by the top management for taking major decisions.
 Decentralization pattern is wider is scope.

Advantage of De Centralized Organizational Structure

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 Distribution of burden of top executive
 Increased motivation and morale
 Greater efficiency and output
 Diversification of Activities
 Better Co-ordination
 Maintenance of Secrecy
 Facilitate effective control and quick decision
Disadvantage of De Centralized Organizational Structure

 More cost
 No specialization
 Need more specialists
 No uniform action
 No equitable distribution of work
 Control Systems

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Types of Business
Branches of organization
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Type of organization

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FACTORS AFFECTING DECENTRALIZATION
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 Size of the organization – large or small
 Cost and Importance of decisions
 Uniformity
 History of organization
 Management Philosophy
 Availability of efficient managers
 Type of business
 Branches of organization
 Centralization Decentralization

 Environment is stable  Environment is complex, uncertain.

 Lower-level managers are not  Lower-level managers are capable

as capable or experienced at and experienced at making
making decisions as upper-level decisions.
managers.

 Lower-level managers do not

 Lower-level managers want a

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Decisions are significant.

Organization is facing a crisis or

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Decisions are relatively minor.

Corporate culture is open to

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the risk of company failure. allowing managers to have a say

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Company is large.

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implementation of
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Company is geographically single.

Effective implementation of

managers retaining say over

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company strategies depends on company strategies depends on

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managers having involvement and
what happens.
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flexibility to make decisions

JOB ANALYSIS
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Job Analysis is a systematic exploration, study and recording the responsibilities,
duties, skills, accountabilities, work environment and ability requirements of a specific
job.

Job design

Job design follows job analysis i.e. it is the next step after job analysis. It aims at
outlining and organizing tasks, duties and responsibilities into a single unit of work for
the achievement of objectives.
 There are various steps involved in job design that follow a logical sequence,
those that were mentioned earlier on. The sequence is as follows:

 What tasks are required to e done or what tasks is part of the job?
 How are the tasks performed?
 What amount are tasks are required to be done?
 What is the sequence of performing these tasks?

All these questions are aimed at arriving upon a clear definition of a specific job
and thereby make it less risky for the one performing the same. A well defined job

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encourages feeling of achievement among the employees and a sense of high self
esteem.

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organizational setup, those that pertain to ones description of a job and the associated
relationships. More specifically the following areas are fine tuned:

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Checking the work overload.
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Checking upon the work under load.
Ensuring tasks are not repetitive in nature.
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Ensuring that employees don not remain isolated.
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 Defining the work processes clearly.
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Benefits of Job Design

The following are the benefits of a good job design:

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1. Employee Input: A good job design enables a good job feedback.
Employees have the option to vary tasks as per their personal and social
needs, habits and circumstances in the workplace.
2. Employee Training: Training is an integral part of job design. Contrary to
the philosophy of “leave them alone’ job design lays due emphasis on
training people so that are well aware of what their job demands and how
it is to be done.
 3. Work / Rest Schedules: Job design offers good work and rest schedule
by clearly defining the number of hours an individual has to spend in
his/her job.
4. Adjustments: A good job designs allows for adjustments for physically
demanding jobs by minimizing the energy spent doing the job and by
aligning the manpower requirements for the same.

Job design is a continuous and ever evolving process that is aimed at helping
employees make adjustments with the changes in the workplace. The end goal is

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reducing dissatisfaction, enhancing motivation and employee engagement at the
workplace.

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Approaches to Job Design

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There are various methods or approaches to do the job design. The important
ones are discussed below
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Human Approach
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The human approach of job design laid emphasis on designing a job around the

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people or employees and not around the organizational processes. In other words it
recognizes the need of designing jobs that are rewarding (financially and otherwise) and
interesting at the same time.
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According to this approach jobs should satisfy an individual’s need for
recognition, respect, growth and responsibility.

Herzberg classified these factors into two categories –

1. The hygiene factors

2. The motivators.

Motivators include factors like achievement, work nature, responsibility, learning

and growth etc that can motivate an individual to perform better at the work place.
 Hygiene factor on the other hand include things like working conditions,
organizational policies, salary etc that may not motivate directly but the absence of
which can lead to dissatisfaction at the work place.

Engineering Approach

The engineering approach was devised by FW Taylors. They introduced the idea
of the task that gained prominence in due course of time. According to this approach the
work or task of each employee is planned by the management a day in advance. The

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instructions for the same are sent to each employee describing the tasks undertaken in
detail. The details include things like what, how and when of the task along with the time

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deadlines.

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The approach is based on the application of scientific principles to job design.
Work, according to this approach should be scientifically analyzed and fragmented into
logical tasks.
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The Job Characteristics Approach
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The job characteristics approach was popularized by Hackman and Oldham.

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According to this approach there is a direct relationship between job satisfaction and
rewards. They said that employees will be their productive best and committed when

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they are rewarded appropriately for their work. They laid down five core dimensions that
can be used to describe any job - skill variety, task identity, task significance, autonomy
and feedback.

1. Skill variety: The employees must be able to utilize all their skills and
develop new skills while dealing with a job.
2. Task Identity: The extent to which an identifiable task or piece or work is
required to be done for completion of the job.
3. Task Significance: How important is the job to the other people, what
impact does it create on their lives?
 4. Autonomy: Does the job offer freedom and independence to the
individual performing the same.
5. Feedback: Is feedback necessary for improving performance.

These are different approaches but all of them point to more or less the same
factors that need to be taken into consideration like interest, efficiency, productivity,
motivation etc. All these are crucial to effective job design.

Issues in Job Design

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responsibilities, functions and duties. It is a continuous process of integration of content
related to job in order to achieve certain objectives. The process plays a vital role as it

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affects the productivity of employees and organizations. However, there are a number
of existing issues emerged recently while designing the jobs in organizations. These are

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alternative work patterns that are equally effective in handling organization’s functions.

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 Telecommuting / Work from Home: Telecommuting or work from home is
considered as the best alternative of working from the actual office. By using
computer networks, fax machines, telephones and internet connection, employees
can communicate and perform the job from home. It eliminates the need of coming to
office everyday and offers employees the convenience to work at the comfort of their
home.
Though there are lots of advantages associated with this working style but it

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suffers from many limitations. It allows employees to stay at home and manage their
job tasks and functions without actually being present in the office but it doesn’t allow

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them to communicate with other employees and establishing relationships with them.
They only deal with machines whole day, thus lose creativity. Moreover, it is a great

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hindrance in their way as it does not allow skill upgradation.

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 Job Sharing: It is the second most preferable alternative of traditional working styles

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where two or more individuals share the responsibilities of a full time job. They divide
the tasks, responsibilities and compensation according to their mutual consent. This

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option is generally used by women who are on maternity leave or have family and

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kids to look after but want to continue their job. These days, organizations are open

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to this kind of working style where two or more individuals can share a job.

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 Flexi-Working Hours: These days, organizations allow their employees to work
according to the timings that suit them best. There are 3-4 working schedules and
individuals can choose any one of them depending upon their availability. Employees
can work in early hours as well as night hours. This is good for those individuals who
have colleges or some other engagements during the day or specific hours of the
day. The best part is that unlike telecommuting, flexi-timings give them chance to
communicate with other employees too.
 Alternative Work-Patterns: Companies these days allow their employees to work on
alternate months or seasons. Though the concept is not that common in India but can
be seen in European and American world of work. They also have the option of
working two to three full days and can relax after that.
According to the latest concept, employees can work for fixed number of hours
and then can attend to their personal needs during the left days.

 Techno stress: It is the latest technology to keep a check on employees’

performance even when they choose to work from home. Because of the introduction

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of new machines, there performance can be electronically monitored even when they

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are not aware of it.

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 Task Revision: Task revision is nothing but modification of existing work design by
reducing or adding the new job duties and responsibilities to a specific job.

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FACTORS AFFECTING JOB DESIGN
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A well defined job will make the job interesting and satisfying for the employee.

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The result is increased performance and productivity. If a job fails to appear compelling

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or interesting and leads to employee dissatisfaction, it means the job has to be
redesigned based upon the feedback from the employees.

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Broadly speaking the various factors that affect a job design can classified under
three heads. They are:

1. Organizational Factors
2. Environmental Factors
3. Behavioural Factors

Organizational Factors

Organizational factors that affect job design can be work nature or

characteristics, work flow, organizational practices and ergonomics.
  Work Nature: There are various elements of a job and job design is required
to classify various tasks into a job or a coherent set of jobs. The various tasks
may be planning, executing, monitoring, controlling etc and all these are to be
taken into consideration while designing a job.
 Ergonomics: Ergonomics aims at designing jobs in such a way that the
physical abilities and individual traits of employees are taken into
consideration so as to ensure efficiency and productivity.
 Workflow: Product and service type often determines the sequence of work
flow. A balance is required between various product or service processes and

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a job design ensures this.

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the work places. Practices are methods or standards laid out for carrying out

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a certain task. These practices often affect the job design especially when the
practices are not aligned to the interests of the unions.

Environmental Factors
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Environmental factors affect the job design to a considerable extent. These

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factors include both the internal as well as external factors. They include factors like

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employee skills and abilities, their availability, and their socio economic and cultural
prospects.

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Employee availability and abilities: Employee skills, abilities and time of

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availability play a crucial role while designing of the jobs. The above
mentioned factors of employees who will actually perform the job are taken
into consideration. Designing a job that is more demanding and above their
skill set will lead to decreased productivity and employee satisfaction.
 Socio economic and cultural expectations: Jobs are nowadays becoming
more employee centered rather than process centered. They are therefore
designed keeping the employees into consideration. In addition the literacy
level among the employees is also on the rise. They now demand jobs that
are to their liking and competency and which they can perform the best.
Behavioural Factors

Behavioural factors or human factors are those that pertain to the human need
and that need to be satisfied for ensuring productivity at workplace. They include the
elements like autonomy, diversity, feedback etc. A brief explanation of some is given
below:

 Autonomy: Employees should work in an open environment rather than one

that contains fear. It promotes creativity, independence and leads to
increased efficiency.

ww  Feedback: Feedback should be an integral part of work. Each employee

should receive proper feedback about his work performance.

w.E  Diversity: Repetitive jobs often make work monotonous which leads to
boredom. A job should carry sufficient diversity and variety so that it remains

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as interesting with every passing day. Job variety / diversity should be given

 En
due importance while designing a job.
Use of Skills and abilities: Jobs should be employee rather than process

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centered. Though due emphasis needs to be given to the latter but jobs

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should be designed in a manner such that an employee is able to make full
use of his abilities and perform the job effectively.
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Human resources management
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Human resources management (HRM) is a management function concerned with

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hiring, motivating and maintaining people in an organization. It focuses on people in
organizations. Human resource management is designing management systems to
ensure that human talent is used effectively and efficiently to accomplish organizational
goals.

According to the Invancevich and Glueck, “HRM is concerned with the most effective
use of people to achieve organizational and individual goals. It is the way of managing
people at work, so that they give their best to the organization”.
According to Dessler (2008) the policies and practices involved in carrying out the
“people” or human resource aspects of a management position, including recruiting,
screening, training, rewarding, and appraising comprises of HRM.

The following constitute of HRM

1. HRM Involves the Application of Management Functions and Principles. The

functions and principles are applied to acquiring, developing, maintaining and
providing remuneration to employees in organization.

ww2. Decision Relating to Employees must be integrated. Decisions on different

aspects of employees must be consistent with other human resource (HR)

w.E decisions.
3. Decisions Made Influence the Effectiveness of an Organization. Effectiveness of

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an organization will result in betterment of services to customers in the form of

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high quality products supplied at reasonable costs.
4. HRM Functions are not confined to Business Establishments Only but applicable

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to non business organizations such as education, health care, recreation and
like.
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Meaning Human Resource Planning:
g.n
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Human resource is the most important asset of an organization. Human resources
planning are the important managerial function. It ensures the right type of people, in
the right number, at the right time and place, who are trained and motivated to do the
right kind of work at the right time, there is generally a shortage of suitable persons.

In order to cope human resource requirements, an enterprise will have to plan in

advance its needs and the sources. The terms human resource planning and manpower
planning are generally used interchangeably. Human resource planning is not a
substitute for manpower planning. Rather the latter is a part of the former i.e.,
manpower planning is integrated with human resource planning.
Definition Human Resource Planning:

According to E.W. Vetter, human resource planning is “the process by which a

management determines how an organization should make from its current manpower
position to its desired manpower position.

Dale S. Beach has defined it as “a process of determining and assuring that the
organization will have an adequate number of qualified persons available at the proper
times, performing jobs which meet the needs of the enterprise and which provide
satisfaction for the individuals involved.”

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In the words of Leon C. Megginson, human resource planning is “an integration
approach to performing the planning aspects of the personnel function in order to have

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a sufficient supply of adequately developed and motivated people to perform the duties
and tasks required to meet organizational objectives and satisfy the individual’s needs

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and goals of organizational members.”

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Features of Human Resource Planning:

1. Well Defined Objectives:

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Enterprise’s objectives and goals in its strategic planning and operating planning may

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form the objectives of human resource planning. Human resource needs are planned on
the basis of company’s goals. Besides, human resource planning has its own objectives

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like developing human resources, updating technical expertise, career planning of
individual executives and people, ensuring better commitment of people and so on.

2. Determining Human Resource Reeds:

Human resource plan must incorporate the human resource needs of the enterprise.
The thinking will have to be done in advance so that the persons are available at a time
when they are required. For this purpose, an enterprise will have to undertake
recruiting, selecting and training process also.
3. Keeping Manpower Inventory:

It includes the inventory of present manpower in the organisation. The executive should
know the persons who will be available to him for undertaking higher responsibilities in
the near future.

4. Adjusting Demand and Supply:

Manpower needs have to be planned well in advance as suitable persons are available
in future. If sufficient persons will not be available in future then efforts should be .made
to start recruitment process well in advance. The demand and supply of personnel

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should be planned in advance.

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5. Creating Proper Work Environment:

Besides estimating and employing personnel, human resource planning also ensures

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that working conditions are created. Employees should like to work in the organization
and they should get proper job satisfaction.

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Recruitment gin
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Recruitment is the process of identifying and attempting to attract candidates who are
capable of filling job vacancies appropriately.


ing

To attract those applicants who are best qualified to fill the vacancies.
Effective selection depends on effective recruitment. .ne
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Job analysis

 Analyzing the environment (nature of competition, customers etc.…) in which

employees work
 Determining duties and responsibilities to be discharged
  Observing and recording the various tasks of the job as they are actually
performed

Job analysis is often done through interviews, direct observation or by using a

questionnaire that is completed by the person current holding the job and his immediate
supervisor. It forms the basis for job description and job specifications.

Systematic job analysis

 Functional job analysis (FJA)

 The data, people and jobs pertaining to

ww Input and job activities


individual’s job.

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Method and techniques that the individual
uses of the job

a
Output and job performance syE 
Tools and equipment used by the worker

Products and services produced by the

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worker

Components of job analysis

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Position analysis questionnaire (PAQ)

(a) The source of information that are critical to job performance

(b) Information processing and decision making critical to job performance
(c) The amount of physical activities and skill required for the job
(d) Physical working conditions and reactions of individuals to those conditions
(e) Other characteristics of the job, such as work schedules and work
responsibilities.

Sources of Recruitment

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

Internal Recruitment
External Recruitment

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Comparison of Internal & External Recruitment

Sl. No. Criteria

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Internal Recruitment External Recruitment

1
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Familiarity of candidate with Influx of new ideas

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organisation’s
procedures and
policies,
culture

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Candidates who are culture
recruited from competitors
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provide valuable information
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2
Advantages observation by superiors from
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Available information and Candidates who are recruited
competitors provide
facilitates easier selection. valuable information about
competitors moves and
strategies

3 Selection and socialisation Facilitates recruitment of

of job incumbents involves candidates with deserve skills
less time and money and expertise and vast
experience
4 Enhances employee morale
by offering opportunities for
upward mobility.

5 Prevents high – quality

employees from leaving the
Organisation.

1
ww Lack of new ideas Lack of reliable information

w.E increases
committing
the probability
mistakes
of
in

asy selection.

2 Need
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training programs
expensive Expensive process.

3
Disadvantages
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Can breed nepotism and Orientation process may

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political operations consume a lot of time.

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Leads to “Ripple Effect”
4

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Raises offense among hopeful
internal candidates.

5 May leave unsuccessful

contestants angry
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External Recruitment process

 Advertising
 Educational Institutions
 Employment Agencies
 Voluntary Applicants
  Referrals by Current Employees

Selection processes

The selection process refers to the steps involved in choosing people who have
the right qualifications to fill a current or future job opening. Usually, managers and
supervisors will be ultimately responsible for the hiring of individuals, but the role of
human resource management (HRM) is to define and guide managers in this process.
Similar to the recruitment process, the selection process is expensive. The time for all

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involved in the hiring process to review resumes, weight the applications, and interview
the best candidates takes away time (and costs money) that those individuals could

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spend on other activities. In addition, there are the costs of testing candidates and
bringing them in from out of town for interviews.

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The selection process consists of five distinct aspects:

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1. Criteria development. The first aspect to selection is planning the interview

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process, which includes criteria development. Criteria development means

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determining which sources of information will be used and how those sources will
be scored during the interview. The criteria should be related directly to the job

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analysis and the job specifications. In fact, some aspects of the job analysis and

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job specifications may be the actual criteria. In addition to this, include things like

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personality or cultural fit, which would also be part of criteria development. This
process usually involves discussing which skills, abilities, and personal
characteristics are required to be successful at any given job. By developing the
criteria before reviewing any resumes, the HR manager or manager can be sure
he or she is being fair in selecting people to interview. Some organizations may
need to develop an application or a biographical information sheet. Most of these
are completed online and should include information about the candidate,
education, and previous job experience.

2. Application and resume review. Once the criteria have been developed,
applications can be reviewed. People have different methods of going through this
 process, but there are also computer programs that can search for keywords in
resumes and narrow down the number of resumes that must be looked at and
reviewed.

3. Interviewing. After the HR manager and/or manager have determined which

applications meet the minimum criteria, he or she must select those people to be
interviewed. Most people do not have time to review twenty or thirty candidates, so
the field is sometimes narrowed even further with a phone interview.

4. Test administration. Any number of tests may be administered before a hiring

ww decision is made. These include drug tests, physical tests, personality tests, and
cognitive tests. Some organizations also perform reference checks, credit report

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checks, and background checks. Once the field of candidates has been narrowed
down, tests can be administered.

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5. Making the offer. The last step in the selection process is to offer a position to the

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chosen candidate. Development of an offer via e-mail or letter is sometimes a
more formal part of this process. Compensation and benefits will be defined in an
offer. gin
OBJECTIVE OF HRM
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g.n
The primary objective of HRM is to ensure the availability of competent and

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willing workforce to an organization. The specific objectives include the following:

1. Human capital : assisting the organization in obtaining the right number and types of
employees to fulfill its strategic and operational goals

2. Developing organizational climate: helping to create a climate in which employees

are encouraged to develop and utilize their skills to the fullest and to employ the
skills and abilities of the workforce efficiently

3. Helping to maintain performance standards and increase productivity through

effective job design; providing adequate orientation, training and development;
 providing performance-related feedback; and ensuring effective two-way
communication.

4. Helping to establish and maintain a harmonious employer/employee relationship

5. Helping to create and maintain a safe and healthy work environment

6. Developing programs to meet the economic, psychological, and social needs of the
employees and helping the organization to retain the productive employees

7. Ensuring that the organization is in compliance with provincial/territorial and federal

laws affecting the workplace (such as human rights, employment equity,

wwoccupational health and safety, employment standards, and labour relations

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legislation). To help the organization to reach its goals

8. To provide organization with well-trained and well-motivated employees

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9. To increase the employees satisfaction and self-actualization

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10. To develop and maintain the quality of work life

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11. To communicate HR policies to all employees.

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12. To help maintain ethical polices and behavior.

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TRAINING AND DEVELOPMENT
g.n
Training and development is a function of human resource management

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concerned with organizational activity aimed at bettering the performance of individuals
and groups in organizational settings. It has been known by several names, including
"Human Resource Development", "Human Capital Development" and "Learning and
Development". These definitions, of course, are viewed within the context of
organizational learning rather than other contexts (e.g. personal) of training and
development.

Activities of Training and development

1) Training

2) Education
 3) Development.

Training: This activity is both focused upon, and evaluated against, the job that
an individual currently holds.

Education: This activity focuses upon the jobs that an individual may potentially
hold in the future, and is evaluated against those jobs.

Development: This activity focuses upon the activities that the organization
employing the individual, or that the individual is part of, may partake in the future, and
is almost impossible to evaluate.

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The need for Training and Development

Training is necessary for the individual development and progress of the

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employee. We also require training update employees of the market trends, the change

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in the employment policies and other things.

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The following are the two biggest factors that contribute to the increased need to
training and development in organizations:

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1. Change: The word change encapsulates almost everything. It is one of the biggest

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factors that contribute to the need of training and development. There is in fact a

g.n
direct relationship between the two. Change leads to the need for training and
development and training and development leads to individual and organizational

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change, and the cycle goes on and on. More specifically it is the technology that is
driving the need; changing the way how businesses function, compete and deliver.

2. Development: It is again one the strong reasons for training and development
becoming all the more important. Money is not the sole motivator at work and this is
especially very true for the 21st century. People who work with organisations seek
more than just employment out of their work; they look at holistic development of
self. Spirituality and self awareness for example are gaining momentum world over.
People seek happiness at jobs which may not be possible unless an individual is
aware of the self.
Method of Training and Development

1. Classroom Lecture Method:

This is the most commonly used, simple, cost effective and conventional method. It
is time saving because it covers maximum number of people in a short period of
time. It involves a speech by the instructor with very limited discussions. Clear and
direct methods of presentation. Weaknesses of the method are that, lecture time is
more than the normal human attention span of fifteen minutes and the contents of

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the lecture could be easily forgotten. Since the method does not provide for active
participation on the part of the trainees, the extent of take-home learning is not to be

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known clearly. Moreover, lecture might be useful only if the presentation is made
skillfully. While lecture is a useful method in so far as information dissemination is

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the objective, it has not been highly successful in modifying human behavior or in

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building commitments in the audience’s minds. An improvisation of this method is
the lecture-cum-demonstration method in which the lecturer reemphasizes a skill or

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information by displaying the same in action.

2. Group Discussion Method:

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It is a method used to knowledge and attitudinal development of trainees. In this

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method, sets of people examine several empirical studies to find out commonalities

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to derive the underlying general principles. They then combine their ideas and focus
their attention on a given problem at a time, speaking from multiple points of view
within a group. An instructor is optional, while a leader is necessary in this method.
The various advantages of the method are

 More ideas can be generated from each session. Moreover

 Each member gets an opportunity to present one’s own ideas and get
feedback from members of the same group.
 Peer pressure and commitments made to groups serve to ensure adherence
to decisions jointly taken in the group.
 As a precaution, care must be taken to secure the participation of all members and
make sure that a few members do not pre-determine the course of discussions or
dominate the whole proceedings.

3. Simulation Exercises Method:

Simulators are a group of training devices of varying degrees of complexity that

model the real world. They range from simple paper mock-ups of mechanical
devices to computerized creations of total environments. In fact, some argue that
case-study, role-play and a host of other methods can be brought under the

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category of simulation.

The advantage of simulation methods is

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 They improve the possibility of learning without damaging the equipments or

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human life or facing the numerous risks involved in actual performance.

For example, most of traffic rules, signals and procedures of driving could be taught

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in a park that resembles main road or through a video game featuring car or two

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wheeler driving. Piloting planes are taught using more complex simulations. The

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methods are indirect but could also be expensive. The method calls for a certain
level of grasp and information processing capability and transfer of learning on the
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4. Role Playing Method:
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Role is a set of expectations around a given position and is determined by the role
partners. Roles are always reciprocal and described in pairs such as

 Trainer-trainee,
 Buyer-seller, and
 Interviewer-interviewee and so on.

Playing roles would entail practical problems like

 Inter-role conflicts
 Intra-role dilemmas
 Role overloads
  Role under loads.

As a result of these hurdles, role confusion develops. In order to be trained to

perform roles, trainees must attain role clarity. This may involve negotiation among
the role senders and role receivers with regard to their expectations with counter
expectations upon one another.

Participants in role-play method are required to respond to specific problems and

expectations of people that they might actually encounter in their jobs.

Role-playing is often used to teach such skills as interviewing, negotiating,

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grievance handling, performance appraisal, and buying and selling and effective
communication. It promotes healthy human relations skills among people.

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5. Case Study Method:

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Case study can be interest creating and thought stimulating for the participants. It
helps to develop analytical, reasoning and problem-solving skills of the participants.

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As it shows and reduces gaps in understanding, a holistic understanding of reality is

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made possible through case study method. It also helps to reemphasize messages

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provided during lectures, group discussions and other methods. The disadvantage of
the method might be the difficulty in drawing adequate number of stimulating cases
that actually represent the real life situations of the trainees. rin
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6. Sensitivity Training or T Group Training or Laboratory training Method:

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T-groups are concerned with the real problems existing within the group itself.
People are helped to become more responsive to others’ sensitivities and work more
harmoniously and responsibly together by encouraging them to interact freely and
actively. The members are enabled to recognize group dynamics and diagnose
human relationship problems. The participants are encouraged to communicate
thoughts and feelings with each other in an open, unstructured, warm and honest
manner than is typically done in the usual work or social situation. A beneficial
outcome of the method is that participants find better means of behavior for effective
interpersonal relationships without the aid of power or authority over others. The
method has to be used carefully as people may resent negative feedback and show
 anger in response. People have to be first prepared well to accept criticism in a
constructive manner so that conflicts could be managed properly.

7. Management Games Method:

Games are used as a training tool, than as mere pastimes or amusement. Trainees
are divided into teams and are given common tasks on which they would be
competing to arrive at decisions, and then jointly implementing and evaluating the
decisions taken with regard to the games.

For example, blocks of wood would be supplied to every team and one of the

wwmembers would be blind-folded with a piece of cloth. The person would have to
arrange the blocks one above the other, as per the instructions and guidance of the

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other members. As they set on to reach greater target heights, the rewards would
also grow exponentially. This game is used to bring out the nuances of teamwork,

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leadership styles and communication patterns exhibited by the members while

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playing the game. The demerits of the method are that, at times, games might result
in lack of seriousness in some trainees and that the learning is indirect and slow. But

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it helps to convey messages in a non-threatening and fun-filled manner.

8. Outward Bound Training (OBT) Method:

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As part of OBT, managers and other staff members meet and cohabitate as teams

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at unfamiliar wilderness out of the workplace and away from the hustles and bustles

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of daily life, where they would live in cabins or tents for a certain number of days.
They test their survival skills and learn about their own personality and hidden
potentials for creativity, cooperation and leadership. Participants get opportunities to
learn their limits and capabilities. Participants irrespective of their official position and
seniority would have to learn to be natural in their behavior and get rid of masks
worn in an office situation. It is an expensive method and the learning might not be
transferable to others or to other situations.

9. In-basket Training (IBT) Method:

IBT is a method where the trainee is required to examine a basket full of papers and
files relating to his area of work and make recommendations on problems contained
 in them. This method is meant for trainees in a managerial level to improve their
decision-making and problem-solving abilities. This is a form of simulation training
designed around day to- day business situations and hence is transferable to the job
experiences. The participant is usually asked to establish priorities for and then
handle a number of office papers, such as memoranda, reports, telephone
messages and emails that would typically cross a manager’s desk. The method has
at least two main stages. At the outset, the participant starts by working through the
case within a specified time limit all by himself without discussing the details with
anyone. Subsequently, other participants analyze and discuss the questions of

wwwho’s, which’s, how’s, what’s, where’s, why’s and when’s of each decision or step.
The merits of this method include the best of traditional case study at the same time

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combining the refinements to allow greater flexibility, realism and involvement.

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The emphasis here is to understand things thoroughly, which is an opportunity too
rarely presented during busy working days. It is done in a permissive atmosphere of

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experimenting and learning, rather than within the confines of a boss subordinate
relationship.
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10. Vestibule Training Method:
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This kind of training takes place away from the production area on equipment that
closely resembles the actual ones used on the job. It is a type of off-the-job training

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in which employees get training in a realistic job setting but in a location different
from the one in which they would be working.
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For example, a group of lathes may be located in a training center where the
trainees will be instructed in their use. The method is used frequently for training
typists and bank tellers, among others. The word ‘vestibule’ means entrance. Thus
vestibule training serves to facilitate full-fledged entry into job. A primary advantage
of vestibule training is that it removes the employee from the pressure of having to
produce while learning. Disturbance of production or supervisor during training is
minimized. The disadvantages include the extra investment on equipment and
additional persons to be employed as trainers.
11. Apprenticeship Training Method:

It combines classroom instructions with on-the-job training. It is a method in which

trainees at a novice stage called ‘apprentices’, work under the guidance of skilled,
licensed instructor and receive lower pay than workers. The method is a combination
of education and employment and is aimed at preparing workforce with certain levels
of qualification to meet the growing needs of the industry. The method develops
special skills like mechanical, electronic, tailoring, etc. Apprenticeship is traditionally
used in skilled jobs, such as those of plumber, carpenter, machinist and printer. The

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extensive nature of the training assures quality outputs, though time consumed is
long. Employees recruited from the apprenticeship program are expected to hit the

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ground running, implying that they would have to start performing with efficiency. But
uniform duration of apprenticeship training does not permit slow learners to reach

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the levels of mastery like others.

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12. Work shadowing Method:

This training method is chosen while preparing a second-line leader to take up the

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role of the headship, in which case, the candidate could not benefit by sending them

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to any other formal training program. The best way to be trained for a future

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executive position would be through direct participant observation of the crucial
events that take place in the present incumbent’s work life. The trainees are made to

g.n
remain in the company of the role model whose work is to be learnt by the trainees.

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Trainees learn the intricacies of a job of high level, by physically being in the
presence of the job-holder. Closely following the styles of working permits greater
degree of learning besides helping the trainee to imbibe the values and principles
adhered to by the model. Yet, care needs to be taken to avoid situations wherein
trainees are not warmly welcomed and are seen by supervisors in the department as
obstacles to their routines.

13. Programmed Instruction Method (PIM):

PIM provides instruction without the face-to-face intervention of an instructor. To

ensure a sequential approach to learning, instructions are designed in such a way
that all future learning depends on acquisition and retention of previous learning.
 With this method, information is broken down into small portions called ‘frames’. The
learner reads each frame in sequence and responds to questions designed to verify
learning. Based on the answers given by the trainees they are provided with
immediate feedback on response accuracy. If the learners have got all the answers
right, they proceed to the next frame. If not they repeat the frame. Primary features
of this approach are immediate reinforcement and the ability of learners to proceed
at their own pace. Programmed instructions may be presented in a book or in
computers.

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14. Large Scale Interactive Events (LSIE) Method:

The method has a lot of unique advantages when compared to other methods. First,

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this method stresses upon the sharing of expertise by all the participants, unlike
other methods where the instructor supplies most of the inputs and might even look

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down upon trainees as people who are ignorant or unskilled in the topic being

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covered. LSIE is based on the belief that all the participants, by virtue of being in
their job for a certain period of time, possess some degree of expertise that need to

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be shared and combined with that of others.

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Second advantage is that this method transcends the limitation of other methods in

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terms of the number of people who could be trained per batch. The major advantage
of this method is that a group as large as 300 – 400 members could be trained

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simultaneously without losing the effectiveness of other training methods. The third

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advantage is the use of group processes. While the trainer limits his role with a brief
but inspiring presentation to stimulate thinking of the participant, the methods paves
way for active involvement of all the participants who are assigned various roles
such as sub-group leader, recorder, summarizer, presenter etc. A fourth advantage
of the LSIE is that the group emphasizes on extensive on-the-spot documentation of
viewpoints expressed by people. Finally, the method culminates in the entire large
group addressing to the common issues. At this stage, priority is to be set on areas
of intervention and a plan of action is drawn and accepted based on voting by
members, thereby building commitment of all the participants to implement the
 agreed upon plans. A disadvantage of the method could be that it requires a lot of
volunteers to assist the proceedings.

15. Personal Coaching Method:

It is an on-the-job approach in which a manager has the opportunity to teach an

employee, usually his immediate subordinate, on a one-to-one basis. Coaching is
helping self and others gain new perspectives their intentions and behaviors, to
understand what’s possible and how to access inner resources such as motivation,
commitment, passion, etc. as a coach, the supervisor gently confronts employees

wwwith their shortcomings and makes suggestions for corrective actions. The
supervisor is also alert to encouraging good performance. Coaching is considered to

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be one of the most effective management development techniques. Constant
guidance makes the trainee learn quickly.

16. Mentoring Method:

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Mentoring is an on-the-job approach to training in which the trainee is given an

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opportunity to learn on a one-to-one basis from more experienced members of the
organization. The mentor is usually an older, experienced executive who serves as a

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host, friend, confidant and advisor to a new member of the firm. The mentor is given

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the charge of protecting and responsibility of helping the new employee. The

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relationship may be formally planned or it may develop informally. For mentoring to
be productive, the parties’ interests must be compatible and they must understand

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each other’s learning styles and personalities. If mentors form overly strong bonds
with trainees, unwarranted favoritism might result. A highly successful mentor-
protégé relationship might create feelings of jealousy among other colleagues who
are not able to show equally good results out of the mentoring process.

17. Job Rotation Method:

This method of training involves the shifting of trainees from one job to another so as
to widen their exposure and enable them to obtain a general understanding of the
totality of the organization. Besides helping them to overcome boredom, job rotation
permits direct interaction with a large number of individuals within the organization,
 thereby facilitating future working relationships. The method should be used at
sufficient gaps to permit the development of a strong degree of expertise in the
trainee in an assigned position. Care should be taken by the organization to ensure
that work efficiency does not suffer when a few trainees are rotate into new jobs
where they would be taking time to learn and perform. There could be some
disadvantages of using the method of Job Rotation.

Trainees have to be prepared to face contrasting styles of operation and standards

that vary according to superiors. Some trainees might feel more like visiting casual

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observers in the departments than being a part of the workforce, which would negate
the purpose of job rotation. Employees who are looking for more challenging

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assignments might feel frustrated when asked to perform different kinds of simple
jobs at the same level.

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18. Computer-Based Training (CBT) Method:

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CBT is a technology-driven training method that takes full advantage of the speed,
memory and data manipulation capabilities of the computer for greater flexibility of

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instruction. It involves the trainee sitting in front of a computer terminal rather than

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listening to an instructor. Learning is enhanced through presentations combining

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automation, stereophonic sound, full motion video and graphics. Increased speed
and decreased dependence on instructor are the strengths of this method.

g.n
Computer-Managed Instructions (CMI) is a system that automatically generates and

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scores tests, tracks trainees’ performance and prescribes activities for students. An
orderly, step-by-step manner is possible by using this method. As additional
advantages, CBT allows reuse of the program for any number of time and allows for
varying time for fast and slow learners.

But CBT method cannot reduce the learner’s anxiety and fear, which can be done
only by a trained instructor. CBT is well suited for teaching facts but is less useful for
teaching human skills or changing attitudes.
19. Behavior Modeling Method:

This method involves emulation of behavior from a reference group or a role model
whose behavior is shown live before the trainees or by using videotapes or Compact
discs (VCD). The method entails recording and producing events or situations with
clear descriptions in order to cover certain subjects. The footage could be viewed,
reviewed and discussed to enhance learning quality. The advantages of using this
method are many. Many events and discussions can be put on one tape or CD. It is

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a handy method for small firms that cannot afford more expensive approaches. It is
particularly helpful for first-line supervisors.

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Observing a powerful model in the audiovisual form could help learn activities like
mediating during conflict situations, handling customer complaints and grievances.

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The challenges involved in using the method include the high level of one-time

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production costs in the initial stage. Moreover, projectors and other expensive
gadgets would be required along with continuous power supply.

20. Internship Method: gin

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Internships involve placing young college and university students in temporary jobs

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in which they can earn while they learn, with no obligations towards any regular

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employment from the side of the employer or from the trainee. Such an arrangement

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enables to provide a fresher the much-needed exposure to an organization and also
to determine the person organization fit. Students divide their attention between
academic activities and practical work assignments, which help them to internalize
the theory and practices. However, care must be taken to prevent the whole process
from getting reduced to the fulfillment of merely an academic requirement rather
than being treated as a stepping-stone towards an illustrious career.

21. Development Centre Method:

This method is designed based on the structure, styles and contents of assessment
centres used to assess the potential of an individual to meet the demands of a
higher-level managerial position. Multiple facilitators observe the members
 performing multiple tasks according to multiple criteria, using multiple methods.
However, the difference in development centers is that they focus their attention on
helping to improve the potential of the persons participating in the sessions. This
method of training is found effective in building leadership, decision-making, goal
setting and counseling skills in experienced trainees.

PERFORMANCE MANAGEMENT

Performance management is the process of creating a work environment or

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setting in which people are enabled to perform to the best of their abilities. Performance
management is a whole work system that begins when a job is defined as needed. It

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ends when an employee leaves your organization.

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A performance management system includes the following actions.

Developing clear job descriptions and employee performance plans which

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includes the key result areas (KRA') and performance indicators.

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Selection of right set of people by implementing an appropriate selection


process.

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Negotiating requirements and performance standards for measuring the
outcome and overall productivity against the predefined benchmarks.

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Providing continuous coaching and feedback during the period of delivery of


performance.
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Identifying the training and development needs by measuring the outcomes
achieved against the set standards and implementing effective development
programs for improvement.
 Holding quarterly performance development discussions and evaluating
employee performance on the basis of performance plans.
 Designing effective compensation and reward systems for recognizing those
employees who excel in their jobs by achieving the set standards in
accordance with the performance plans or rather exceed the performance
benchmarks.
  Providing promotional/career development support and guidance to the
employees.
 Performing exit interviews for understanding the cause of employee
discontentment and thereafter exit from an organization.

The major objectives of performance management are discussed below:

 To enable the employees towards achievement of superior standards of work

performance.

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performing the job efficiently as this would drive their focus towards

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
performing the right task in the right way.

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Boosting the performance of the employees by encouraging employee
empowerment, motivation and implementation of an effective reward
mechanism.
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Promoting a two way system of communication between the supervisors and
the employees for clarifying expectations about the roles and accountabilities,

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communicating the functional and organizational goals, providing a regular

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and a transparent feedback for improving employee performance and


continuous coaching.
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Identifying the barriers to effective performance and resolving those barriers


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through constant monitoring, coaching and development interventions.
Creating a basis for several administrative decisions strategic planning,
succession planning, promotions and performance based payment.
 Promoting personal growth and advancement in the career of the employees
by helping them in acquiring the desired knowledge and skills.

The performance management process evolved in several phases.

 First Phase: The origin of performance management can be traced in the

early 1960’s when the performance appraisal systems were in practice.
During this period, Annual Confidential Reports (ACR’s) which was also
 known as Employee service Records were maintained for controlling the
behaviors of the employees and these reports provided substantial
information on the performance of the employees.
Any negative comment or a remark in the ESR or ACR used to adversely
affect the prospects of career growth of an employee. The assessments were
usually done for ten traits on a five or a ten point rating scale basis. These
traits were job knowledge, sincerity, dynamism, punctuality, leadership,
loyalty, etc. The remarks of these reports were never communicated to the
employees and strict confidentiality was maintained in the entire process. The

ww employees used to remain in absolute darkness due to the absence of a

transparent mechanism of feedback and communication. This system had


w.Esuffered from many drawbacks.
Second Phase: This phase continued from late 1960’s till early 1970’s, and
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the key hallmark of this phase was that whatever adverse remarks were

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incorporated in the performance reports were communicated to the

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employees so that they could take corrective actions for overcoming such
deficiencies. In this process of appraising the performance, the reviewing

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officer used to enjoy a discretionary power of overruling the ratings given by

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the reporting officer. The employees usually used to get a formal written

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communication on their identified areas of improvements if the rating for any
specific trait used to be below 33%.
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Third Phase: In this phase the term ACR was replaced by performance
appraisal. One of the key changes that were introduced in this stage was that
the employees were permitted to describe their accomplishments in the
confidential performance reports. The employees were allowed to describe
their accomplishments in the self appraisal forms in the end of a year.
Besides inclusion of the traits in the rating scale, several new components
were considered by many organizations which could measure the productivity
and performance of an employee in quantifiable terms such as targets
achieved, etc. Certain organizations also introduced a new section on training
needs in the appraisal form. However, the confidentiality element was still
 being maintained and the entire process continued to be control oriented
instead of being development oriented.
 Fourth Phase: This phase started in mid 1970’s and its origin was in India as
great business tycoons like Larsen & Toubro, followed by State Bank of India
and many others introduced appreciable reforms in this field.
In this phase, the appraisal process was more development driven, target
based (performance based), participative and open instead of being treated
as a confidential process. The system focused on performance planning,
review and development of an employee by following a methodical approach.

ww In the entire process, the appraise (employee) and the reporting officer

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mutually decided upon the key result areas in the beginning of a year and
reviewed it after every six months. In the review period various issues such as

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factors affecting the performance, training needs of an employee, newer
targets and also the ratings were discussed with the appraisee in a

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collaborative environment.

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This phase was a welcoming change in the area of performance
management and many organizations introduced a new HR department for


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taking care of the developmental issues of the organization.

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Fifth Phase: This phase was characterized by maturity in approach of

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handling people’s issues. It was more performance driven and emphasis was
on development, planning and improvement. Utmost importance was given to

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culture building, team appraisals and quality circles were established for
assessing the improvement in the overall employee productivity.

Any effective performance management system includes the following

components:

 Performance Planning: Performance planning is the first crucial component

of any performance management process which forms the basis of
performance appraisals. Performance planning is jointly done by the appraise
and also the reviewed in the beginning of a performance session. During this
 period, the employees decide upon the targets and the key performance
areas which can be performed over a year within the performance budget.,
which is finalized after a mutual agreement between the reporting officer and
the employee.
 Performance Appraisal and Reviewing: The appraisals are normally
performed twice in a year in an organization in the form of mid reviews and
annual reviews which is held in the end of the financial year. In this process,
the appraisee first offers the self filled up ratings in the self appraisal form and
also describes his/her achievements over a period of time in quantifiable

ww terms. After the self appraisal, the final ratings are provided by the appraiser

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for the quantifiable and measurable achievements of the employee being
appraised. The entire process of review seeks an active participation of both

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the employee and the appraiser for analyzing the causes of loopholes in the
performance and how it can be overcome. This has been discussed in the

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performance feedback section.
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Feedback on the Performance followed by personal counseling and
performance facilitation: Feedback and counseling is given a lot of

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importance in the performance management process. This is the stage in

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which the employee acquires awareness from the appraiser about the areas

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of improvements and also information on whether the employee is
contributing the expected levels of performance or not. The employee

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receives an open and a very transparent feedback and along with this the
training and development needs of the employee is also identified. The
appraiser adopts all the possible steps to ensure that the employee meets the
expected outcomes for an organization through effective personal counseling
and guidance, mentoring and representing the employee in training
programmes which develop the competencies and improve the overall
productivity.
 Rewarding good performance: This is a very vital component as it will
determine the work motivation of an employee. During this stage, an
employee is publicly recognized for good performance and is rewarded. This
 stage is very sensitive for an employee as this may have a direct influence on
the self esteem and achievement orientation. Any contributions duly
recognized by an organization helps an employee in coping up with the
failures successfully and satisfies the need for affection.
 Performance Improvement Plans: In this stage, fresh set of goals are
established for an employee and new deadline is provided for accomplishing
those objectives. The employee is clearly communicated about the areas in
which the employee is expected to improve and a stipulated deadline is also
assigned within which the employee must show this improvement. This plan

ww is jointly developed by the appraisee and the appraiser and is mutually

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approved.
 Potential Appraisal: Potential appraisal forms a basis for both lateral and

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vertical movement of employees. By implementing competency mapping and
various assessment techniques, potential appraisal is performed. Potential

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appraisal provides crucial inputs for succession planning and job rotation.

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 An effectively implemented performance management system can benefit the
organization, managers and employees in several ways as depicted in the table given
below:

Organization’s Benefits Improved organizational performance, employee retention

and loyalty, improved productivity, overcoming the barriers to
communication, clear accountabilities, and cost advantages.

Manager’s Benefits Saves time and reduces conflicts, ensures efficiency and

ww consistency in performance.

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Employee’s Benefits Clarifies expectations of the employees, self assessment
opportunities clarifies the job accountabilities and contributes

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to improved performance, clearly defines career paths and

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promotes job satisfaction.

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Clearly defined goals, regular assessments of individual performance and the

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company wide requirements can be helpful in defining the corporate competencies and

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the major skill gaps which may in turn serve as a useful input for designing the training
and development plans for the employees. A sound performance management system
can serve two crucial objectives:
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Evaluation Objectives


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By evaluating the readiness of the employees for taking up higher
responsibilities.
 By providing a feedback to the employees on their current competencies and
the need for improvement.
 By linking the performance with scope of promotions, incentives, rewards and
career development.
Developmental Objectives

The developmental objective is fulfilled by defining the training requirements of

the employees based on the results of the reviews and diagnosis of the individual and
organizational competencies. Coaching and counseling helps in winning the confidence
of the employees and in improving their performance, besides strengthening the
relationship between the superior and the subordinate.

In a nutshell, performance management serves as an important tool for realizing

organizational goals by implementing competitive HRM strategies. It helps in aligning

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and integrating the objectives with the KPI’s in an organization both vertically and
horizontally across all job categories and the levels and thus helps in driving all the

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activities right from the bottom level towards one single goal.

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CAREER PLANNING IN AN ORGANIZATION

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Career planning is the process by which one selects career goals and the path to

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these goals. The major focus of career planning is on assisting the employees achieve
a better match between personal goals and the opportunities that are realistically
available in the organization. ee rin
Career planning is not an event or end in itself, but a continuous process of

g.n
developing human resources for achieving optimum results. It must, however, be noted

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that individual and organizational careers are not separate and distinct. A person who is
not able to translate his career plan into action within the organization may probably quit
the job, if he has a choice. Organizations, therefore, should help employees in career
planning so that both can satisfy each other’s needs.

Career Planning vs. Human Resource Planning

Human Resource planning is the process of analyzing and estimating the need
for and availability of employees. Through Human Resource planning, the Personnel
Department is able to prepare a summary of skills and potentials available within the
organization.
 Career planning assists in finding those employees who could be groomed for
higher level positions, on the strength of their performance.

Human Resource planning gives valuable information about the availability of

human resources for expansion, growth, etc. (expansion of facilities, construction of a
new plant, opening a new branch, launching a new product, etc.). On the other hand,
career planning only gives us a picture of who could succeed in case any major
developments leading to retirement, death, resignation of existing employees.

Human Resource planning is tied to the overall strategic planning efforts of the

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organization. There cannot be an effective manpower planning, if career planning is not
carried out properly.

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Need for Career Planning

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Every employee has a desire to grow and scale new heights in his workplace
continuously. If there are enough opportunities, he can pursue his career goals and

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exploit his potential fully. He feels highly motivated when the organization shows him a

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clear path as to how he can meet his personal ambitions while trying to realize
corporate goals.

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Unfortunately, as pointed out by John Leach, organizations do not pay adequate

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attention to this aspect in actual practice for a variety of reasons. The demands of

g.n
employees are not matched with organizational needs; no effort is made to show how

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the employees can grow within certain limits, what happens to an employee five years
down the line if he does well, whether the organization is trying to offer mere jobs or
long-lasting careers, etc. When recognition does not come in time for meritorious
performance and a certain amount of confusion prevails in the minds of employees
whether they are ‘in’ with a chance to grow or not, they look for greener pastures
outside. Key executives leave in frustration and the organization suffers badly when
turnover figures rise. Any recruitment effort made in panic to fill the vacancies is not
going to be effective. So, the absence of a career plan is going to make a big difference
to both the employees and the organization. Employees do not get right breaks at a
right time; their morale will be low and they are always on their toes trying to find escape
routes.
 Organizations are not going to benefit from high employee turnover. New
employees mean additional selection and training costs. Bridging the gaps through
short-term replacements is not going to pay in terms of productivity. Organizations,
therefore, try to put their career plans in place and educate employees about the
opportunities that exist internally for talented people. Without such a progressive
outlook, organizations cannot prosper.

Objectives

Career planning seeks to meet the following objectives:

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
Attract and retain talent by offering careers, not jobs.
Use human resources effectively and achieve greater productivity.

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
Reduce employee turnover.

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Improve employee morale and motivation.
Meet the immediate and future human resource needs of the organization on
a timely basis
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Career Planning Process
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The career planning process involves the following steps:
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1. Identifying individual needs and aspirations:
g.n
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Most individuals do not have a clear cut idea about their career aspirations,
anchors and goals. The human resource professionals must, therefore, help an
employee by providing as much information as possible showing what kind of work
would suit the employee most, taking his skills, experience, and aptitude into account.
Such assistance is extended through workshops/seminars while the employees are
subjected to psychological testing, simulation exercises, etc. The basic purpose of such
an exercise is to help an employee form a clear view about what he should do to build
his career within the company. Workshops and seminars increase employee interest by
showing the value of career planning. They help employees set career goals, identify
career paths and uncover specific career development activities (discussed later).
These individual efforts may be supplemented by printed or taped information. To assist
employees in a better way, organizations construct a data bank consisting of
information on the career histories, skill evaluations and career preferences of its
employees (known as skill or talent inventory).

2. Analyzing career opportunities:

Once career needs and aspirations of employees are known, the organization
has to provide career paths for each position. Career paths show career progression
possibilities clearly. They indicate the various positions that one could hold over a
period of time, if one is able to perform well. Career paths change over time, of course,

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in tune with employee’s needs and organizational requirements. While outlining career
paths, the claims of experienced persons lacking professional degrees and that of

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young recruits with excellent degrees but without experience need to be balanced
properly.

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3. Aligning needs and opportunities:

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After employees have identified their needs and have realized the existence of

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career opportunities the remaining problem is one of alignment. This process consists of
two steps: first, identify the potential of employees and then undertake career
development
ee rin
programmers (discussed later on elaborately) with a view to align employee

g.n
needs and organizational opportunities. Through performance appraisal, the potential of

employees who need further training, employees who can take up added et
employees can be assessed to some extent. Such an appraisal would help reveal

responsibilities, etc. After identifying the potential of employees certain developmental

techniques such as special assignments, planned position rotation, supervisory
coaching, job enrichment, understudy programs can be undertaken to update employee
knowledge and skills.

4. Action plans and periodic review:

The matching process would uncover gaps. These need to be bridged through
individual career development efforts and organization supported efforts from time to
time. After initiating these steps, it is necessary to review the whole thing every now and
then. This will help the employee know in which direction he is moving, what changes
are likely to take place, what kind of skills are needed to face new and emerging
organizational challenges. From an organizational standpoint also, it is necessary to find
out how employees are doing, what are their goals and aspirations, whether the career
paths are in tune with individual needs and serve the overall corporate objectives, etc.

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CAREER PLANNING MODELS nee
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There are many models one may use while career planning. The two main models are

1. The SODI Career Planning Model g.n

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Given the complexity of career development and the fluidity of the world of work, we
need to be able to navigate our career paths with purpose and clarity.

Law and Watts (1977) devised a simple model of career education which has stood
the test of time. This model has been changed slightly to become a career planning,
rather than a career education model and named the SODI model where the last
element is ‘implementation’ rather than ‘transition learning’, and ‘decision learning’
becomes ‘decision making and planning’.

The model encapsulates four concepts which are:

Self-awareness – individual having knowledge about and understanding of their own
personal development. Self-awareness in a careers context involves an understanding
of kind of personal resources (both actual and potential) they bring to world.

Opportunity awareness – an understanding of the general structures of the world of

work, including career possibilities and alternative pathways.

Decision making and planning – an understanding of how to make career decisions,

and being aware of pressures, influences, styles, consequences and goal setting.

Implementing plans – having the appropriate skill level in a range of areas to be able

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to translate job and career planning into reality

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2. Waterloo University Model

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CAREER MANAGEMENT

Career management is the combination of structured planning and the active

management choice of one's own professional career.

The outcome of successful career management should include personal

fulfillment, work/life balance, goal achievement and financial security.

A career includes all types of employment ranging from semi-skilled through

skilled, and semi professional to professional. Careers have often been restricted to an

ww
employment commitment to a single trade skill, profession or business firm for the entire

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working life of a person. In recent years, however, a career now includes changes or
modifications in employment during the foreseeable future.

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The following classification system with minor variations is widely used:

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1. Development of overall goals and objectives
2. Development of a strategy (a general means to accomplish the selected
goals/objectives)
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implement the strategy, and ee
3. Development of the specific means (policies, rules, procedures and activities) to

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4. Systematic evaluation of the progress toward the achievement of the selected
goals/objectives to modify the strategy, if necessary.
g.n
Career management is the process through which employees:
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 Become aware of their own interests, values, strengths, and weaknesses
 Obtain information about job opportunities within the company
 Identify career goals
 Establish action plans to achieve career goals

Why Is Career Management Important?

From the company’s perspective

 The failure to motivate employees to plan their careers can result in:

 A shortage of employees to fill open positions

 Lower employee commitment
 Inappropriate use of duty allocated for training and development programs

From the employees’ perspective

Lack of career management can result in:

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
Frustration
Feelings of not being valued by the company

w.E  Being unable to find suitable employment should a job change be necessary
due to mergers, acquisitions, restructuring, or downsizing

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Career Motivation
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Career motivation refers to:
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
 ee
Employees’ energy to invest in their careers

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Their awareness of the direction they want their careers to take

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The ability to maintain energy and direction despite barriers they may encounter

Career motivation has three aspects:

 Career resilience et
o The extents to which employees are able to cope with problems affect
their work
 Career insight
o How much employees know about their interests, skill strengths, and
weaknesses
o The awareness of how these perceptions relate to their career goals
 Career identity
 o The degree to which employees define their personal values according to
their work

Types of career

 Traditional Career
o Sequence of positions held within an occupation
o Context of mobility is within an organization
o Characteristic of the employee
 Protean Career

ww o Frequently changing based on changes in the person and changes in the

work environment

w.E o Employees take major responsibility for managing their careers

o Based on self-direction with the goal of psychological success in one’s
work
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Comparison of Traditional Career and Protean Career:

Goal
Dimension
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Traditional Career

Promotion
Protean Career

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Psychological success

Salary increase
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Psychological contract Security for commitment
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Employability for flexibility

Mobility Vertical Lateral

Responsibility for Company Employee

Management

Pattern Linear and expert Spiral and transitory

Expertise Know how Learn how

Development Heavy reliance on formal Greater reliance on
training relationships and job
experiences

Career Management Process:

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 Self-Assessment
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En
o Use of information by employees to determine their career interests,
values, aptitudes, and behavioral tendencies

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o Often involves psychological tests
 Reality Check
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o Information employees receive about how the company evaluates their
skills and knowledge and where they fit into company plans
 Goal Setting
g.n
objectives et
o The process of employees developing short- and long- term career

o Usually discussed with the manager and written into a development plan
 Action Planning
o Employees determining how they will achieve their short- and long-term
career goals

Employees’ Role in career management

o Take the initiative to ask for feedback from managers and peers
regarding their skill strengths and weaknesses
 o Identify their stage of career development and development needs
o Seek challenges by gaining exposure to a range of learning opportunities
o Interact with employees from different work groups inside and outside the
company
o Create visibility through good performance

Managers’ Role in Career Management

Roles Responsibilities

ww Coach o Probe problems, interests, values,

needs Listen

w.E o Clarify concerns

asy o Define concerns

Appraiser
En o Give feedback

o Clarify company standards

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o Clarify job responsibilities

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o Clarify company needs

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Advisor
relationships g.n
o Generate options, experiences, and

o Assist in goal setting

o Provide recommendations
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Referral agent o Link to career management
resources

o Follow up on career management

plan
HR Manager’s Role in Career Management

 Provide information or advice about training and development opportunities

 Provide specialized services such as testing to determine employees’ values,
interests, and skills
 Help prepare employees for job searches
 Offer counseling on career-related problems

Company’s Role in Career Management

 Companies are responsible for providing employees with the resources needed

ww to be successful in career planning:

o Career workshops

w.E o Information on career and job opportunities

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o Career planning workbooks
o Career counseling
o Career paths
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Evaluating of career management system


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Career management systems need to be evaluated to ensure that they are
meeting the needs of employee and the business
o Two types of outcomes rin

g.n
Reactions of the customers (employees and manager) who use the


career management system
Reactions career management system et
 Evaluation of a career management system should be based on its objectives.
 PRINCIPLES OF MANAGEMENT

UNIT V
Control
Process of controlling- Types of control- Budgetary and non-budgetary control
techniques- Managing productivity- Cost control- Purchase control- Maintenance control-
Quality control- Planning operations.

Table of Contents
5.1 Meaning & Definition .................................................................................................................. 1
5.1.1 Control Process ...................................................................................................................... 2
5.2 Barriers For Controlling................................................................................................................ 4

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5.3 Types Of Control Systems............................................................................................................ 5

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5.4 Classification Of Budgets ............................................................................................................. 7
5.5 BudgetaryControlTechniques ....................................................................................................... 9

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5.6 Productivity ................................................................................................................................ 13
5.7 PROBLEMS IN MEASUREMENT OF PRODUCTIVITY OF KNOWLEDGE WORKERS. 15

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5. 8 COSTCONTROL ...................................................................................................................... 15

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5.9 PurchaseControl.......................................................................................................................... 16
5.10 MaintenanceControl.................................................................................................................. 17

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5.11 QualityControl .......................................................................................................................... 18

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5.12 PlanningOperations ................................................................................................................... 19

g.n
5.1 Meaning & Definition
Control is the process through which managers assure that actual activities conform to
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planned activities.
In the words of Koontz and O'Donnell - "Managerial control implies measurement of
accomplishment against the standard and the correction of deviations to assure attainment of
objectives according to plans."

Nature & Purpose of Control

• Control is an essential function of management
 PRINCIPLES OF MANAGEMENT
• Control is an ongoing process
• Control is forward – working because pas cannot be controlled
• Control involves measurement
• The essence of control is action
• Control is an integrated system

5.1.1 Control Process

The basic control process involves mainly these steps as shown in Figure

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a) The Establishment
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Standards:

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Because plans are the yardsticks against which controls must be revised, it follows logically that

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the first step in the control process would be to accomplish plans. Plans can be considered as

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the criterion or the standards against which we compare the actual performance in order to
figure out the deviations.
Examples for the standards g.n
•
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Profitability standards: In general, these standards indicate how much the company
would like to make as profit over a given time period- that is, its return on investment.
• Market position standards: These standards indicate the share of total sales in a
particular market that the company would like to have relative to its competitors.
• Productivity standards: How much that various segments of the organization should
produce is the focus of these standards.
• Product leadership standards: These indicate what must be done to attain such a
position.
• Employee attitude standards: These standards indicate what types of attitudes the
company managers should strive to indicate in the company’s employees.
 PRINCIPLES OF MANAGEMENT
• Social responsibility standards: Such as making contribution to the society.
• Standards reflecting the relative balance between short and long range goals.

b) Measurement of Performance:

The measurement of performance against standards should be on a forward looking basis so

that deviations may be detected in advance by appropriate actions. The degree of difficulty in
measuring various types of organizational performance, of course, is determined primarily by
the activity being measured. For example, it is far more difficult to measure the performance of

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highway maintenance worker than to measure the performance of a student enrolled in a
college level management course.

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c) Comparing Measured Performance to Stated Standards:

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When managers have taken a measure of organizational performance, their next step in

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controlling is to compare this measure against some standard. A standard is the level of activity

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established to serve as a model for evaluating organizational performance. The performance

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evaluated can be for the organization as a whole or for some individuals working within the
organization. In essence, standards are the yardsticks that determine whether organizational
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d) Taking Corrective Actions:
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After actual performance has been measured compared with established performance standards,
the next step in the controlling process is to take corrective action, if necessary.
Corrective action is managerial activity aimed at bringing organizational performance up to the
level of performance standards. In other words, corrective action focuses on correcting
organizational mistakes that hinder organizational performance. Before taking any corrective
action, however, managers should make sure that the standards they are using were properly
established and that their measurements of organizational performance are valid and reliable.
At first glance, it seems a fairly simple proposition that managers should take corrective action
to eliminate problems - the factors within an organization that are barriers to organizational goal
 PRINCIPLES OF MANAGEMENT
attainment. In practice, however, it is often difficult to pinpoint the problem causing
some undesirable organizational effect.

5.2 Barriers For Controlling

There are many barriers, among the most important of them:
• Control activities can create an undesirable overemphasis on short-term production as
opposed to long- term production.
• Control activities can increase employees' frustration with their jobs and thereby reduce

ww morale. This reaction tends to occur primarily where management exerts too much
control.

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Control activities can encourage the falsification of reports.
Control activities can cause the perspectives of organization members to be too narrow

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for the good of the organization.

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Control activities can be perceived as the goals of the control process rather than the
means by which corrective action is taken.

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Requirements For Effective Control

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The requirements for effective control are
a) Control should be tailored to plans and positions
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This means that, all control techniques and systems should reflect the plans they are designed to

characteristics.
b) Control must be tailored to individual managers and their responsibilities
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follow. This is because every plan and every kind and phase of an operation has its unique

This means that controls must be tailored to the personality of individual managers. This
because control systems and information are intended to help individual managers carry out
their function of control. If they are not of a type that a manager can or will understand, they will
not be useful.
c) Control should point up exceptions as critical points
This is because by concentration on exceptions from planned performance, controls based on
the time honored exception principle allow managers to detect those places where their
 PRINCIPLES OF MANAGEMENT
attention is required and should be given. However, it is not enough to look at exceptions,
because some deviations from standards have little meaning and others have a great deal of
significance.
d) Control should be objective
This is because when controls are subjective, a manager’s personality may influence judgments
of performance inaccuracy. Objective standards can be quantitative such as costs or man hours
per unit or date of job completion. They can also be qualitative in the case of training programs
that have specific characteristics or are designed to accomplish a specific kind of upgrading of the
quality of personnel.

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e) Control should be flexible
This means that controls should remain workable in the case of changed plans, unforeseen

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circumstances, or outsight failures.Much flexibility in control can be provided by having
alternative plans for various probable situations.
f) Control should be economical
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This means that control must worth their cost. Although this requirement is simple, its practice is
often complex. This is because a manager may find it difficult to know what a particular system
is worth, or to know what it costs.
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g) Control should lead to corrective actions

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This is because a control system will be of little benefit if it does not lead to corrective action,
control is justified only if the indicated or experienced deviations from plans are corrected
through appropriate planning, organizing, directing, and leading.
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5.3 Types Of Control Systems
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The control systems can be classified into three types namely feed forward, concurrent and
feedback control systems.
 PRINCIPLES OF MANAGEMENT

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a) Feed forward controls: They are preventive controls that try to anticipate problems and take

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corrective action before they occur. Example – a team leader checks the quality, completeness
and reliability of their tools prior to going to the site.

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b) Concurrent controls: They (sometimes called screening controls) occur while an activity is

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taking place. Example – the team leader checks the quality or performance of his members
while performing.
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c) Feedback controls: They measure activities that have already been completed. Thus
corrections can take place after performance is over.
engineers regarding the completed job.
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Example – feedback from facilities

BUDGETARY CONTROL

Definition: Budgetary Control is defined as "the establishment of budgets, relating the

responsibilities of executives to the requirements of a policy, and the continuous comparison of
actual with budgeted results either to secure by individual action the objective of that policy or to
provide a base for its revision.
 PRINCIPLES OF MANAGEMENT

Salient features:
a. Objectives: Determining the objectives to be achieved, over the budget period, and the
policy(ies) that might be adopted for the achievement of these ends.
b. Activities: Determining the variety of activities that should be undertaken for achievement of
the objectives.
c. Plans: Drawing up a plan or a scheme of operation in respect of each class of activity, in
physical a well as monetary terms for the full budget period and its parts.
d. Performance Evaluation: Laying out a system of comparison of actual performance by each

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person section or department with the relevant budget and determination of causes for the
discrepancies, if any.

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e. Control Action: Ensuring that when the plans are not achieved, corrective actions are taken;
and when corrective actions are not possible, ensuring that the plans are revised and objective
achieved
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5.4 Classification Of Budgets En
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Budgets may be classified on the following bases –

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a) BASED ON TIME PERIOD:

(i) Long Term Budget
Budgets which are prepared for periods longer than a year are called LongTerm
 PRINCIPLES OF MANAGEMENT
Budgets. Such Budgets are helpful in business forecasting and forward planning.
Eg: Capital Expenditure Budget and R&D Budget.
(ii) Short Term Budget
Budgets which are prepared for periods less than a year are known as ShortTerm
Budgets. Such Budgets are prepared in cases where a specific action has to be
immediately taken to bring any variation under control.
Eg: Cash Budget.
b) BASED ON CONDITION:

(i) Basic Budget

ww A Budget, which remains unaltered over a long period of time, is called Basic
Budget.

w.E(ii) Current Budget

A Budget, which is established for use over a short period of time and is related to

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the current conditions, is called Current Budget.

c) BASED ON En
CAPACITY:
(i) Fixed Budget
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It is a Budget designed to remain unchanged irrespective of the level of activity

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actually attained. It operates on one level of activity and less than one set of
conditions. It assumes that there will be no change in the prevailing conditions, which
is unrealistic.
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(ii) Flexible Budget
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It is a Budget, which by recognizing the difference between fixed, semi variable and
variable costs is designed to change in relation to level of activity attained. It consists
of various budgets for different levels of activity

d) BASED ON COVERAGE:
(i) Functional Budget
Budgets, which relate to the individual functions in an organization, are known as
Functional Budgets, e.g. purchase Budget, Sales Budget, Production Budget, plant
Utilization Budget and Cash Budget.
 PRINCIPLES OF MANAGEMENT
(ii) Master Budget
It is a consolidated summary of the various functional budgets. It serves as the basis
upon which budgeted Profit & Loss Account and forecasted Balance Sheet are built
up.

5.5 BudgetaryControlTechniques

The various types of budgets are as follows

i) Revenue and Expense Budgets:
The most common budgets spell out plans for revenues and operating expenses in

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rupee terms. The most basic of revenue budget is the sales budget which is a formal and

etailed expression of the sales forecast. The revenue from sales of products or services furnishes

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the principal income to pay operating expenses and yield profits. Expense budgets may deal
with individual items of expense, such as travel, data processing, entertainment, advertising,
telephone, and insurance.
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ii) Time, Space, Material, and Product Budgets:

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Many budgets are better expressed in quantities rather than in monetary terms. e.g. direct-

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labor-hours, machine-hours, units of materials, square feet allocated, and units produced. The

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Rupee cost would not accurately measure the resources used or the results intended.

iii) Capital Expenditure Budgets:

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Capital expenditure budgets outline specifically capital expenditures for plant,
machinery, equipment, inventories, and other items. These budgets require care because they
give definite form to plans for spending the funds of an enterprise. Since a business takes a
long time to recover its investment in plant and equipment, (Payback period or gestation period)
capital expenditure budgets should usually be tied in with fairly long-range planning.

iv) Cash Budgets:

The cash budget is simply a forecast of cash receipts and disbursements against which
actual cash "experience" is measured. The availability of cash to meet obligations as they fall
due is the first requirement of existence, and handsome business profits do little good when tied
up in inventory, machinery, or other noncash assets.
 PRINCIPLES OF MANAGEMENT

v) Variable Budget:
The variable budget is based on an analysis of expense items to determine how
individual costs should vary with volume of output.
Some costs do not vary with volume, particularly in so short a period as 1 month, 6
months, or a year. Among these are depreciation, property taxes and insurance, maintenance of
plant and equipment, and costs of keeping a minimum staff of supervisory and other key
personnel. Costs that vary with volume of output range from those that are completely variable
to those that are only slightly variable.

ww The task of variable budgeting involves selecting some unit of measure that reflects
volume; inspecting the various categories of costs (usually by reference to the chart of

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accounts); and, by statistical studies, methods of engineering analyses, and other means,

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determining how these costs should vary with volume of output.

vi) Zero Based Budget:

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The idea behind this technique is to divide enterprise programs into "packages" composed

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of goals, activities, and needed resources and then to calculate costs for each package from the

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ground up. By starting the budget of each package from base zero, budgeters calculate costs

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afresh for each budget period; thus they avoid the common tendency in budgeting of

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looking only at changes from a previous period.

Advantages
There are a number of advantages of budgetary control:
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• Compels management to think about the future, which is probably the most important
feature of a budgetary planning and control system. Forces management to look ahead, to
set out detailed plans for achieving the targets for each department, operation and
(ideally) each manager, to anticipate and give the organization purpose and direction.
• Promotes coordination and communication.
 PRINCIPLES OF MANAGEMENT
• Clearly defines areas of responsibility. Requires managers of budget centre’s to be
made responsible for the achievement of budget targets for the operations under their
personal control.
• Provides a basis for performance appraisal (variance analysis). A budget is basically a
yardstick against which actual performance is measured and assessed. Control is provided
by comparisons of actual results against budget plan. Departures from budget can then be
investigated and the reasons for the differences can be divided into controllable and non-
controllable factors.
• Enables remedial action to be taken as variances emerge.

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Motivates employees by participating in the setting of budgets.
Improves the allocation of scarce resources.
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Economises management time by using the management by exception principle.

Problems in budgeting
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Whilst budgets may be an essential part of any marketing activity they do have a number
of disadvantages, particularly in perception terms.
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Budgets can be seen as pressure devices imposed by management, thus resulting in:

a) bad labour relations

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b) inaccurate record-keeping.
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• Departmental conflict arises due to:
a) disputes over resource allocation g.n
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b) departments blaming each other if targets are not attained.
It is difficult to reconcile personal/individual and corporate goals.
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• Waste may arise as managers adopt the view, "we had better spend it or we will lose it".
This is often coupled with "empire building" in order to enhance the prestige of a
department.
• Responsibility versus controlling, i.e. some costs are under the influence of more than
one person, e.g. power costs.
• Managers may overestimate costs so that they will not be blamed in the future should
they overspend.
 PRINCIPLES OF MANAGEMENT

NON-BUDGETARYCONTROLTECHNIQUES
There are, of course, many traditional control devices not connected with budgets, although some
may be related to, and used with, budgetary controls. Among the most important of these are:
statistical data, special reports and analysis, analysis of break- even points, the operational audit,
and the personal observation.

i) Statistical data:

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Statistical analyses of innumerable aspects of a business operation and the clear presentation of
statistical data, whether of a historical or forecast nature are, of course, important to control.

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Some managers can readily interpret tabular statistical data, but most managers prefer
presentation of the data on charts.

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ii) Break- even point analysis:

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An interesting control device is the break even chart. This chart depicts the relationship of sales

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and expenses in such a way as to show at what volume revenues exactly cover expenses.

iii) Operational audit:

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Another effective tool of managerial control is the internal audit or, as it is now coming to be
called, the operational audit. Operational auditing, in its broadest sense, is the regular and

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independent appraisal, by a staff of internal auditors, of the accounting, financial, and other
operations of a business.

iv) Personal observation: et

In any preoccupation with the devices of managerial control, one should never overlook the
importance of control through personal observation.

v)PERT:
The Program (or Project) Evaluation and Review Technique, commonly abbreviated PERT, is a
is a method to analyze the involved tasks in completing a given project, especially the time
needed to complete each task, and identifying the minimum time needed to complete the total
project.
 PRINCIPLES OF MANAGEMENT

vi) GANTT CHART:

A Gantt chart is a type of bar chart that illustrates a project schedule. Gantt charts illustrate the
start and finish dates of the terminal elements and summary elements of a project. Terminal
elements and summary elements comprise the work breakdown structure of the project. Some
Gantt charts also show the dependency (i.e., precedence network) relationships between
activities.

5.6 Productivity

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Productivity may be conceived of as a measure of the technical or engineering efficiency of
production. As such quantitative measures of input, and sometimes output, are emphasized.

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Typical Productivity Calculations

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Measures of size and resources may be combined in many different ways. The three common

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approaches to defining productivity based on the model of Figure 2 are referred to as physical,
functional, and economic productivity. Regardless of the approach selected, adjustments may

delivery. ee
be needed for the factors of diseconomy of scale, reuse, requirements churn, and quality at

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a) Physical Productivity
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This is a ratio of the amount of product to the resources consumed (usually effort). Product may
be measured in lines of code, classes, screens, or any other unit of product. Typically, effort is
measured in terms of staff hours, days, or months. The physical size also may be used to estimate
software performance factors (e.g., memory utilization as a function of lines of code).

b) Functional Productivity

This is a ratio of the amount of the functionality delivered to the resources consumed
(usually effort). Functionality may be measured in terms of use cases, requirements, features, or
function points (as appropriate to the nature of the software and the development method).
 PRINCIPLES OF MANAGEMENT
Typically, effort is measured in terms of staff hours, days, or months. Traditional measures of
Function Points work best with information processing systems. The effort involved in
embedded and scientific software is likely to be underestimated with these measures, although
several variations of Function Points have been developed that attempt to deal with this issue.

c) Economic Productivity

This is a ratio of the value of the product produced to the cost of the resources used to
produce it. Economic productivity helps to evaluate the economic efficiency of an organization.

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Economic productivity usually is not used to predict project cost because the outcome can be
affected by many factors outside the control of the project, such as sales volume, inflation,

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interest rates, and substitutions in resources or materials, as well as all the other factors that affect
physical and functional measures of productivity. However, understanding economic productivity

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is essential to making good decisions about outsourcing and subcontracting. The basic calculation

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of economic productivity is as follows:

Economic Productivity = Value/Cost

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5.7 PROBLEMS IN MEASUREMENT OF PRODUCTIVITY OF KNOWLEDGE
WORKERS
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Productivity implies measurement, which in turn, is an essential step in the control
process. Although there is a general agreement about the need for improving productivity, there
is little consensus about the fundamental causes of the problem and what to do about them.
The blame has been assigned to various factors. Some people place it on the greater proportion of
less skilled workers with respect to the total labor force, but others disagree. There are those who
see cutback in research and the emphasis on immediate results as the main culprit.
Another reason given for the productivity dilemma is the growing affluence of people, which
makes them less ambitious. Still others cite the breakdown in family structure, the workers’
attitudes, and government policies and regulations. Another problem is that the measurement
 PRINCIPLES OF MANAGEMENT
of skills work is relatively easy, but it becomes more difficult for knowledge work. The
difference between the two kinds is the relative use of knowledge and skills.

5. 8 COSTCONTROL

Cost control is the measure taken by management to assure that the cost objectives set
down in the planning stage are attained and to assure that all segments of the organization
function in a manner consistent with its policies.

Steps involved in designing process of cost control system:

•
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Establishing norms: To exercise cost control it is essential to establish norms, targets or

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parameters which may serve as yardsticks to achieve the ultimate objective. These standards,
norms or targets may be set on the basis of research, study or past actual.

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Appraisal: The actual results are compared with the set norms to ascertain the degree of
utilization of men, machines and materials. The deviations are analyzed so as to arrive at

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the causes which are controllable and uncontrollable.

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Corrective measures: The variances are reviewed and remedial measures or revision of
targets, norms, standards etc., as required are taken.

Advantages of cost control

• Better utilization of resources
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• To prepare for meeting a future competitive position.
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Reasonable price for the customers
Firm standing in domestic and export markets. et
Improved methods of production and use of latest manufacturing techniques which have
the effect of rising productivity and minimizing cost.By a continuous search for
improvement creates proper climate for the increase efficiency.
• Improves the image of company for long-term benefits.
• Improve the rate of return on investment.

5.9 PurchaseControl

Purchase control is an element of material control. Material procurement is known as the

purchase function. The functional responsibility of purchasing is that of the purchase manager
 PRINCIPLES OF MANAGEMENT
or the purchaser. Purchasing is an important function of materials management because in
purchase of materials, a substantial portion of the company's finance is committed which affects
cash flow position of the company. Success of a business is to a large extent influenced by the
efficiency of its purchase organization. The advantages derived from a good and adequate system
of the purchase control are as follows:

a) Continuous availability of materials: It ensures the continuous flow of materials. so

production work may not be held up for want of materials. A manufacturer can complete
schedule of production in time.

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b) Purchasing of right quantity: Purchase of right quantity of materials avoids locking up of
working capital. It minimizes risk of surplus and obsolete stores. It means there should not be

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possibility of overstocking and understocking.
c) Purchasing of right quality: Purchase of materials of proper quality and specification avoids

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waste of materials and loss in production. Effective purchase control prevents wastes and

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losses of materials right from the purchase till their consumptions. It enables the management to
reduce cost of production.

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d) Economy in purchasing: The purchasing of materials is a highly specialized function. By

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purchasing materials at reasonable prices, the efficient purchaser is able to make a valuable
contribution to the success of a business.
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e) Works as information centre: It serves as a function centre on the materials knowledge

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relating to prices, sources of supply, specifications, mode of delivery, etc. By providing

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continuous information to the management it is possible to prepare planning for production.
f) Development of business relationship: Purchasing of materials from the best market and
from reliable suppliers develops business relationships. The result is that there may be smooth
supply of materials in time and so it avoid disputes and financial losses.

g) Finding of alternative source of supply: If a particular supplier fails to supply the materials
in time, it is possible to develop alternate sources of supply. the effect of this is that the
production work is not disturbed.
h) Fixing responsibilities: Effective purchase control fix the responsibilities of operating units
and individuals connected with the purchase, storage and handling of materials.
 PRINCIPLES OF MANAGEMENT
In short, the basic objective of the effective purchase control is to ensure continuity of supply of
requisite quantity of material, to avoid held up of production and loss in production and at the
same time reduces the ultimate cost of the finished products.

5.10 MaintenanceControl

Maintenance department has to excercise effective cost control, to carry out the
maintenance functions in a pre-specified budget, which is possible only through the following
measures:

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First line supervisors must be apprised of the cost information of the various materials so that

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the objective of the management can be met without extra expenditure on maintenance
functions

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A monthly review of the budget provisions and expenditures actually incurred in respect of each

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center/shop will provide guidlines to the departmental head to exercise better cost control.

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The total expenditure to be incurred can be uniformly spread over the year for better budgetary
control. however, the same may not be true in all cases particularly where overhauling of

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equipment has to be carried out due to unforseen breakdowns. some budgetary provisions must
be set aside, to meet out unforeseen exigencies.
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The controllable elements of cost such as manpower cost and material cost can be discussed with

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the concerned personnel, which may help in reducing the total cost of maintenance.
Emphasis should be given to reduce the overhead expenditures, as other expenditures cannot be
compromised.

It is observed through studies that the manpower cost is normally fixed, but the same way
increase due to overtime cost. however, the material cost, which is the prime factor in
maintenance cost, can be reduced by timely inspections designed, to detect failures. If the

inspection is carried out as per schedule, the total failure of parts may be avoided, which
otherwise would increase the maintenance cost. the proper handling of the equipment by the
 PRINCIPLES OF MANAGEMENT
operators also reduces the frequency of repair and material requirements. Operators, who
check their equipment regularly and use it within the operating limits, can help avoid many
unwanted repairs. In the same way a good record of equipment failures/ maintenance would
indicate the nature of failures, which can then be corrected even permanently.

5.11 QualityControl

Quality control refers to the technical process that gathers, examines, analyze & report
the progress of the project & conformance with the performance requirements

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The steps involved in quality control process are

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1) Determine what parameter is to be controlled.
2) Establish its criticality and whether you need to control before, during or after results are
produced.
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3) Establish a specification for the parameter to be controlled which provides limits of

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acceptability and units of measure.

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4) Produce plans for control which specify the means by which the characteristics will be

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achieved and variation detected and removed.
5) Organize resources to implement the plans for quality control.

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6) Install a sensor at an appropriate point in the process to sense variance from
specification.
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7) Collect and transmit data to a place for analysis.
8) Verify the results and diagnose the cause of variance. et
9) Propose remedies and decide on the action needed to restore the status quo.
10) Take the agreed action and check that the variance has been corrected.

Advantages and disadvantages

Ø Advantages include better products and services ultimately establishing a good
reputation for a company and higher revenue from having more satisfied customers.
Ø Disadvantages include needing more man power/operations to maintain quality control
and adding more time to the initial process.
 PRINCIPLES OF MANAGEMENT

5.12 PlanningOperations
An operational planning is a subset of strategic work plan. It describes short-term ways
of achieving milestones and explains how, or what portion of, a strategic plan will be put into
operation during a given operational period, in the case of commercial application, a fiscal year
or another given budgetary term. An operational plan is the basis for, and justification of an
annual operating budget request. Therefore, a five-year strategic plan would need five operational
plans funded by five operating budgets.

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Operational plans should establish the activities and budgets for each part of the organization
for the next 1 – 3 years. They link the strategic plan with the activities the organization

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will deliver and the resources required to deliver them.
An operational plan draws directly from agency and program strategic plans to describe agency

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and program missions and goals, program objectives, and program activities. Like a strategic
plan, an operational plan addresses four questions:
• Where are we now?
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Where do we want to be?
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• How do we measure our progress?
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The OP is both the first and the last step in preparing an operating budget request. As the first

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step, the OP provides a plan for resource allocation; as the last step, the OP may be modified to
reflect policy decisions or financial changes made during the budget development process.

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Operational plans should be prepared by the people who will be involved in implementation.
There is often a need for significant cross-departmental dialogue as plans created by one part of
the organization inevitably have implications for other parts.
Operational plans should contain:
• clear objectives
• activities to be delivered
• quality standards
• desired outcomes
• staffing and resource requirements
• implementation timetables
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