1

UNIT-I
INTRODUCTION TO MANAGEMENT
INTRODUCTION:-

Management is universal in the modern industrial world and there is no

substitute for good management. It makes human efforts more productive and brings better
technology, product, and services to our society. It is a crucial economic resource and a life giving
element in business. Without proper management the resources of production cannot be converted
into production. Management is a must to accomplish desired goals through group action. It is
essential to convert the disorganized resources of Men, Material, Machines and Methods into a
useful and effective enterprise. Thus management is a vital function concerned with all aspects of
the working of an organization.

Management in all business and organizational activities is the act of getting

people together to accomplish desired goals and objectives efficiently and effectively. Management
comprises planning, organizing, staffing, leading or directing, and controlling an organization (a
group of one or more people or entities) or effort for the purpose of accomplishing a goal.
Resourcing encompasses the deployment and manipulation of human resources, financial
resources, technological resources, and natural resources.

MEANING:-

It is very difficult to give a precise meaning to the term management. The

concept of management is as old as the human race itself. Ever since people began forming groups
to accomplish aims they could not achieve as individuals, managing has been essential to ensure
the co-ordination of the individuals’ efforts.

Management is the function of getting things done through people and directing
the efforts of individual towards a common objective.

DEFINITION:-

Management is the art of getting things done through and with the people in formally organized
groups.
-Harlod Koontz
In the words of Henry Fayol – “To manage is to forecast and to plan, to organize, to command, to
co-ordinate and to control”.

According to F.W Taylor, management is the art of knowing what you want to do and then seeing
that is done in the best and cheapest way.

According to Peter.F. Drucker “management is a multi purpose organization that manages a

business and manages managers and manages worker and work”.

Concepts of Management:-

Management is relatively a new discipline. Being a new discipline, it has

drawn concepts and principles from economics, physics, and statistics so on. The result is that each
group has defined management differently. Thus taking all these points into view together it
becomes difficult to define management in comprehensive way. In this present context, the term
management is used in three alternative ways.
 2

Management as an academic discipline: Discipline refers to a field of study having well defined
concepts and principles. When we refer to management as a discipline, we include in it the various
relevant concepts and principles, the knowledge which aids in managing. From this point of view,
management can be treated either as an art or science, the two basic and broad principles.

Management as a team: As a team or a group of persons, management consists of all personnel

having managerial responsibility. Managers occupy positions at different levels of authority but
perform the same basic functions. Top-level managers have greater authority than middle-level
managers who in turn have greater authority than operating managers. In this way, a system of
authority is created in every organization.

Management as a process: Perhaps the best way to describe management is in terms of what
managers do. It involves organizing, directing and controlling human efforts to accomplish
predetermined goals. As a process, management refers to a series of interrelated elements or
functions. These are:
 Defining the aims or objectives of the organization.
 Formulating policies, procedures, programmes, etc. to attain these objectives efficiently and
economically.
 Bringing together men, money, materials, machinery and other factors of production.

Management as a human resource: The scientific management school developed by F.W.Taylor

laid exclusive emphasis on machines and neglected human factor in industry. The concept of
management as a human process was evolved by the behavioral scientists to recognize the role of
human factor in the industry. The advocates of this concept argue that in as much as a manager gets
things done through and with the help of people; the study of management should be centered
around the workers and their personal relations.

Management as an economic resource: Like land, labor capital and entrepreneurship

management is a vital factor of production. An entrepreneur establishes the organization as its
owner. But it is management that transforms the various resources into a productive entity. The
inputs of labor, capital and materials do not buy themselves ensure growth. They require the
catalyst of management to produce results. It is a management that coordinates various factors of
production. Therefore, management occupies a central place among productive factors. As a factor
of production, management can be made efficient through the training and development of
managers.

NATURE OR MANAGEMENT OR FEATURES OF MANAGEMENT OR

CHARACTERISTICS OF MANAGEMENT

The study and application of management techniques in managing the affairs of the
organizations have changed its nature over the period of time. Various contributions on the field
of management have changed its nature, for example for merely a practice to science also.
Similarly other changes have also occurred. Thus nature of management can be described as
follows:

Organized Activities: Management is a process of organized activities. Without organized

activities; two groups of people cannot be involved in the performance of activities. Where a
group of people are involved in working towards a common objective, management comes into
existence.

Existence of Objectives: An objective or set of objectives should exist towards which the
organized group activities are directed. Without objectives, it becomes difficult to define the
direction where organized group activities should lead to. The existence of objectives is a basic
 3

criterion of every human organization because all organizations are deliberate and purposive
creation and, therefore, they should have some objectives

Relationship among Resources: Organized activities meant to achieve common goals are
brought about to establish certain relationship among the available resources. Resources include
money, machine, materials and people. All these resources are made available to those who
manage; they apply knowledge, experience, principles for getting desired results. Thus the essence
of management is integration of various organizational resources.

Working with and Through People / management is people oriented: Management involves
working with people and getting organizational objectives achieved through them. The idea of
working through people is interpreted in terms of assigning activities to subordinates. The superior
– subordinate relationships are created because of organized activities. Through the process of
assignment and reassignment of activities, the actual work is performed by people at the operative
level which is the lowest level in an organization

Decision-Making: Management process involves decision making at various levels for getting
things done by others. Decision making basically involves selecting the most appropriate
alternative out of the several. The entire future of organizations resets on the degree to which the
right decision are made by managers. There fore, the success or failure of managers can be judged
by the quality of decisions that the make.
Management is a Multidisciplinary: Management is basically multi disciplinary. This implies
that, although management has been developed as a separate discipline, it draws knowledge and
concepts from various disciplines .It draws freely ideas and concepts from such disciplines as
psychology , sociology, anthropology, economics ecology, statistics, operation research, history
etc.,. Management integrated the ideas and concepts taken from these disciplines and presents
newer concepts which can be put in practice for managing the organizations

Management is Dynamic in Nature: Principles are a fundamental truth which establishes cost
and effect relationships of a function. This principal is flexible in nature and change with the
changes in the environment. In which an organization exists.

Management is situational in Nature: Management principals are relative not absolute and their
should be apply according to the need of the organization. Each organization may be different of
from others. The differences may be existence because of type, place, and socio-culture factors.
Etc. How ever, includes working with the same organization may also differ.

Management Science or art: Science means body of knowledge acquired by making through
experiments. Art means application of skills in finding a desired results. There is controversy
weather management is science or art. However, management is both a science and an art.

Management as Profession: Management has been regarded as a profession by many why many
have suggested that it has not achieved to status of a profession.

Universality of Management: Management is a universal phenomenon. However management

principles not universally applicable. But are to be modified according to the needs of situation.

Management is Goal Oriented: Management is goal oriented every organization tries to fulfill its
own goals. For reaching its goals it requires efficient management.
 4

LEVELS OF MANAGEMENT

The term ‘level’ means arrangement of persons in series. Thus the term level of
management refers to the arrangement of managerial positions in an organization. There is fixed
number of management levels for a particular organization. It all depends upon the size, technology
and the range of production of the organization. If the management levels are increased to an
unlimited extent, three main problems to be faced by the organization are:

 It makes Coordination and Control difficult.

 It increases the gap between top management and the rank and the subordinates.
 It complicates the communication problem.
Management levels determine the authority relationship in an organization.
There are three levels of management in view of authority and responsibility relationship. They are

Top Level Management: Top Management is the head of an organization. It consists of Board of
Directors and the Chief executive or the Managing Director. In the operation of an organization,
top management is the final source of authority. At this level, mission goals, corporate strategies,
Policies, Plans and Objectives are formulated. The performance of middle management is
evaluated and controlled by the top management.

Functions of top level management:-

a. To analyze and interpret changes in the external environment of the company.

b. To design long term corporate plans for the entire organization covering all areas of operation
c. To formulate and approve the master budget and departmental budgets.
d. To design broad organization structure
e. To select chief executives and key officials of the company.
f. To provide overall direction and leadership to the company.
g. To co-ordinate and integrate the activities of different departments and divisions of the company.
h. To exercise overall review and control of the functional and operating results of the company.
i. To make decisions regarding distribution of profits.
Middle Level Management: Middle Management generally consists of Heads of functional
departments. It consists of departmental managers, such as production manager, finance manager,
marketing manager, foremen, and others. It acts as a link between the top management and the
lower level management. Here, the managers plan, organize, direct, and control for the activities
with in their respective departments only.
Functions of middle level management:-

a. To interpret and explain the plans and policies formulated by the top level management to
lower level management.
b. Selecting suitable operative and supervisory Personnel.
c. Assigning duties and responsibilities for timely execution of plans.
d. To establish departmental goals and decide various ways and means for achieving these goals.
 5

e. Achieving coordination between different departments.

f. To train and Motivating personnel to achieve higher productivity.
g. To make recommendations to top management for better implementation of plans and policies.
Lower Level Management: Lower level / Supervisory management is the lowest level in the
hierarchy of management. It consists of Supervisors, Foremen, Accounts officers, and Sales
officers and so on. They are directly touched with “core group” of workers such as operators,
assemblers, mechanics, salesmen and clerk. They educate the core group about the method of
doing work. They assign specific jobs to the workers, supervise their activities, and evaluate their
performance and report to the middle management.
Functions of lower level management:-

a. To get the things done by the “core group” workers.

b. To issue orders and instructions to the workers regarding the being performed by them.
c. To prepare the plan for their activities, called “scheduling”. Scheduling lays down, what is to be
one, by whom it will be done, and how and when it will be done.
d. To assign the work to the workers and seek its completion with the given period of time and
quality specifications.
e. To guide, assist and help to the workers by explaining work procedures and solving their
problems.
f. To motivate the workers, to maintain team spirit and discipline.
g. To send periodical performance reports to the middle management.

s up e rviso r.)
ntnginee
plapres
e m ide ge r)
annt)
a r,
enio
sPres
off ur emana
ide
ic er xec
nt, Vi ce- ,
ger,
utive
tm eGMs ectio
ntal
e n, nnahe
,mBaOD g ads,
,er
Ma n ag eme nt (fore(C EO,
(De p m
ar
MTo LeLe
d dle
p L
e eve l
lvel
Lo wer/ Super vi sor y

FUNCTIONS OF MANAGEMENT
Management is a dynamic process consisting of several actions or activities or
elements. The activities or elements which every manager has to perform are known as the
Functions of management. These management functions have been classified by different experts.
 6

Henry Fayol - The Father of modern management theory, have listed the management functions as
—

Planning, Organizing, commanding, co-ordinating, and controlling.

His classification of functions has been widely accepted. But, Staffing, which
Fayol has ignored, has now come to be recognized as an important managerial function.

Koontz and O’Donnell: Have classified Managerial functions are classified into five groups of
activities of Planning, Organizing, Staffing, Directing and Controlling.

Luther Gullick: has given a catch word “POSDCORB” for functions of management.

“P” means Planning, “O” means organizing, “S” means Staffing, “D” ” means Directing,

“Co” means Controlling, “R” means Reporting, “B” means Budgeting.

Most of the modern authors agree with this view. Thus the functions of the management may be
classified as following.

Functions Organizational
Subordinates
Manager
Planning Efficiency

Organizing

Staffing

Directing

Controlling

Coordination

PLANNING: Planning is the process of “thinking before doing”. It is determination of goals, as

well as activities required undertaken to achieve the goals. Planning consists of selecting the
various organizational goals, policies, programmes, procedure, and other means of achieving the
goals.
Planning means it is a future course of action. It is present thinking about the
future action. Planning consisting of designing in advance
 What is to be done in the future; (i.e, determination of future objective)
 How it is to be done(i.e, determination of means to achieve the objective)
 Where it is to be done;
 When it is to be done;
 By whom it is done;

Planning process consists of following steps:

 Forecasting after the appraisal of internal and external environment;

 Establishment of planning premises;
 Development of alternative course of action;
 Evaluation of each alternative courses of action;
 7

 Making choice among the alternatives;

 Formulation of medium and short range plans;
 Making arrangements for effective implementation of plans;
 Review of existing plans;

ORGANIZING: As a function of management the term “organizing” refers to the process of---

a) Bringing together human and non- human resources, like materials, machines, and money
b) Defining and establishing authority- responsibility relationships for the achievement of
goals.
The outcome of organization process is creation of “organization structure and to establish the
relations among the organizational people to work for the achievement of organizational goals”.

The organization process consists of following activities:

a. Identifying the activities involved in achieving the objectives.

b. Grouping the activities.
c. Assigning the activities to employees.
d. Delegation of authority to carry out the activities
e. Integration of group activities.

STAFFING: The Managerial function of staffing involves manning the organizational structure
through proper and effective selection; appraisal and development of personnel to fill the role
designed in the structure.” staffing is a process of filing all positions in the organization with
adequate and qualified personnel”. It is a managerial function of attracting, acquiring, activating,
developing, and maintaining, human resources for achieving organizational goals efficiently.
Staffing includes well recognized activities as follows Human resource planning,
recruitment, selection, training, placement and orientation, training and development, Performance
appraisal, motivation, promotion and transfer, remuneration, of employees etc.
DIRECTING: According to Drucker—“directing is a process that activates the organizational
members to work efficiently and effectively for the attainment of organizational objectives”.
Directing is a process of issuing orders and instructions to guide and teach in the subordinates the
proper methods of work and ensuring that a perform their jobs as planned.

(a)Leading: It is a decisive function of the management in which the workers/employees are led
and directed so that the objectives of the organization will be successfully achieved. it is quite
likely that the workers willingly and enthusiastically perform their job, if they like their leader.

(b)Motivating: The process of stimulating the employees to perform more effectively using their
abilities and full potential is called motivating. The employee gets stimulated when his social and
physiological needs are met, in the process of contributing to the organizational goals.

(c)Communicating: It is the process of creating, transmitting, and interpreting messages, ideas,

facts, opinions, and feelings. The vital function of the manager is to communicate to his staff as to
what they should do through order, meetings, circulars, and notices.
 8

(d)Coordinating: Organization structure provides for division of labor. This calls for linking the
different parts of the organization in terms of performance to help achieve the given goals.
Coordination refers to the process of arranging group efforts in such a way that the common
purpose is achieved effectively and efficiently.

CONTROLLING: Controlling is the process of checking actual performance against the agreed
standards with a view to ensuring satisfactory performance. Controlling is the last function of
management. Planning is identifying the activities where as controlling is regulating that activities.
Controlling activities involves
(a) Measuring the actual performance of the employee,
(b) Comparing it with the target, and
(c) Taking follows up action, that is, corrective or remedial action for improving the performance,
if necessary.
PRINCIPLES OF MANAGEMENT
Fayol has given fourteen principles of management. He has made distinction
between management principles and management elements. While management principle is a
fundamental truth and establishes cause effect relationship, management element denotes the
function performed by manager. While giving the management principles, fayol has emphasized
two things:
1. The list of management principles is not exhaustive but suggestive and has discussed only those
principles which he followed on most occasions.
2. principles of management are not rigid but flexible .according to him ,”there is nothing rigid or
absolute in management affairs; it is all a question of proportion .
Therefore, principles are flexible and capable of being adapting to every need.
It is a matter of knowing how to make use of them which is a difficult art requiring intelligence,
experience, and proportion.” Various principles of management are as follows:
1. Division of work: It refers to the division of work among various individuals in the
organization to bring about specialization in every activity. Specialization tends to increase
efficiency and help to avoid waste of time and effort caused by changes from one work to another.
2. Authority and Responsibility: Authority is the power to give order to the subordinates.
Responsibility means the duty which the subordinates are expected to perform. Fayol suggested
that authority and responsibility should go hand in hand. Authority without responsibility promotes
irresponsible behavior on the part of management. Similarly responsibility without authority makes
management ineffective. Thus there should be parity between authority and responsibility.
3. Discipline: Discipline is highly essential for the smooth running of the organization. It
means obedience to rules and regulations of the organization. Maintenance of discipline in the
organization depends upon the quality of leadership, clear and fair agreement and so on.
 9

4. Unity of command: An employee should receive orders from one superior only for action
or activity. This principle is necessary to avoid confusion and conflict. Besides, when there is unity
of command it is easy to fix responsibility for mistakes. If this principle is violated, authority will
be undermined, discipline will be jeopardy, order will be disturbed and stability will be threatened.
5. Unity of direction: The principle of unity of direction states that for a group of activity
having the same objective. There should be one head and one plan. It alone can produce a sense of
loyalty and devotion among the employees.
6. Subordinates of individual interest to general interest: Common interest is above the
individual interest. Individual interest must be subordinate to general interest when there is conflict
between these two. So management should make sure that individual’s goals and objectives are
always matching to the organization goals and objectives. Management should take proper care
about the individual interest and motivate the subordinates towards group interest and group cause.
7. Remuneration of personnel: The remuneration of employees should be fair and just.
Employees who are paid decent wages will have high morals.
8. Centralization: Centralization refers to the concentration of authority at one level in the
organization. On the other hand decentralization is the dispersal of authority to the lower levels in
the organization. The degree of centralization may be different in various organizations in various
cases. But a balance should be maintained between centralization and decentralization to ensure the
best results.
9. Scalar chain: Scalar chain refers to the chain of superiors ranging from the final authority
to the lowest level in the concern. Scalar chain states superior – subordinate relationship through
out the concern. It is highly essential to ensure unity of command and effective communication in
organization. A

B L
C M
D N
E O

F P
Information flow from A to B, B to C and so on and vice versa.
A is superior to B; B is superior to C and so on.
B –L, C-M, D-N, E-O, F-P are peer groups.
10. Order: This principle implies “right man inn right place”. Fayol said there should be place
for every thing and every one. The management should get order in work through suitable
arrangement of men and materials.
 10

11. Equity: It means justice and kindness. Management should practice equity and equality of
treatment while dealing with the people. Equity ensures healthy industrial relations between
management and employee. It brings loyalty in organization.
12. Stability of tenure: No employee should be removed within short time. There should be
reasonable security of jobs. Stability of tenure is essential to get an employee accustomed to new
work and succeed in doing it well. Unnecessary turn over is both cause and effect of bad
management.
13. Initiative: With in the limits of the authority and discipline, managers should encourage
their employees for taking initiative. Initiative increases zeal and energy on the part of human
being.
14. Esprite de Corps: This is the principle of “union is strength” and extension of the unity of
command for establishing team work. The manager should encourage esprite de corps among the
employees.
IMPORTANCE OF MANAGEMENT:

Management plays a unique role in modern society. It regulates our productive activities by
organizing factors of production. A business which has all the resources like men, money, material
and machinery cannot satisfy customers unless they are efficiently managed. Thus, every business
needs repeated stimulus which can only be provided by management. The following points further
highlight the significance of management.

Management has been important to the daily lives of people in groups since long.
Therefore, a question is raised that if the management has been so important for human lives, that’s
why it has assumed added importance in present day society.

Effective Utilization of Resources: Management tries to make effective utilization of various

resources. The resources are scarce in nature and to meet the demand of the society, their
contribution should be maximum for the general interests of the society. Management not only
decides in which particular alternative a particular resource should be used, but also takes action to
utilize it in that particular alternative in the best way.

To Incorporative Innovations: Today, changes are occurring at very fast rate in both technology
and social process and structure. These changes need to be incorporated to keep the organizations
alive and efficient. Business organizations are moving from primitive to sophistication. Therefore,
they required high degree of specialization, high level of competence, and complex technology. All
these require efficient management so that organizations work in the most efficient way.

Integrating Various Interests Groups: In the organized efforts, there are various interests groups
and they put pressure over other groups for maximum share in the combined output. For example,
in the case of business organization, there are various pressure groups such as shareholders,
employees, government etc. These interests have pressure on an organization. In a more advanced
 11

and complex society, much more such pressure is on the organization. Management has to balance
these pressures from various interests groups.

Achieving of objectives: It is the management which makes optimum utilization of various

resources such as land, lab our, capital and enterprise. “No ideology, no ism, no political theory can
win greater output with fewer efforts, only sound management”.

Meeting challenges: All the policy decisions of an enterprise are taken by the management. It
keeps in touch with the current environment and predicts what is going to happen in future.
Through better planning and control, management steers a concern to meet the demands of the
changing environment.
Smooth running of business: Management helps in smooth running of business through better
planning and control.
Establishes Sound Organization: No overlapping of efforts (smooth and coordinated functions).
To establish sound organizational structure is one of the objective of management which is in tune
with objective of organization and for fulfillment of this, it establishes effective authority &
responsibility relationship i.e. who is accountable to whom, who can give instructions to whom,
who are superiors & who are subordinates. Management fills up various positions with right peers.
Essentials for Prosperity of Society: Efficient management leads to better economical production
which helps in turn to increase the welfare of people. Good management makes a difficult task
easier by avoiding wastage of scarce resource. It improves standard of living. It increases the profit
which is beneficial to business and society will get maximum output at minimum cost by creating
employment opportunities which generate income in hand sons, having right skills, training and
qualification. All jobs should be cleared to everyone. Organization comes with new products and
researchers beneficial for society.
SCIENTIFIC MANAGEMENT

The concept of scientific management was introduced by Fredrick Winslow Taylor in USA in the
beginning of 20th century. Taylor joined Midvale steel company in USA as a worker and later on
became supervisor. During this period he continued his studies and eventually completed his M.E
master of engineering in 1883. Later he joined Bethlehem steel company. At both these places he
carried experiments about how to increase the efficiency of people. All his contributions were
compiled in his book “Scientific Management”.

The term scientific management contains two words--scientific and management.

Scientific means systematic, analytical and objective approach, but management means getting
things done through others

F.W.Taylor has defined scientific management as

“Scientific Management is concerned with knowing exactly what you want men to do and then see
in that they do it in the best and cheapest way.”
 12

Since Taylor has put the emphasis on solving managerial problems in scientific way. Hence
he is called as Father of scientific management.

PRINCIPLES OF SCIENTIFIC MANAGEMENT:

Taylor’s scientific management is based on the following principles:

Replacement of old rule of thumb method: The substitution of rule of thumb by scientific
approach is one of the chief contributions of Taylor. Under scientific approach, decisions are made
on the basis of facts as developed by the application of scientific method to the problem concerned.
The scientific methods consist of research and experimentation, collection of data, analysis of data
and formulation of certain principles on the basis of such analysis.

Scientific selection and training: The selection of the right type of worker for the right job is very
significant. Under scientific management, the task of selection is entrusted to a central personnel
department. Then the selected workers are trained to teach the right methods of work.

Labor-management cooperation: Cooperation between labor and management maybe regarded

as the pedestal on which the structure of scientific management can be built. This can achieved
through a change in the mental attitudes of the workers and the management towards each other.
Taylor called it mental revolution.

Maximum output: The management and worker should try to achieve maximum output. This
will prove highly beneficial and useful to workers, management and society at large.

Equal division of responsibility: If management is responsible for planning and organizing, the
workers are responsible for the execution of work as per the instructions of management. This
principle is known as “equal division of responsibility”.

Mental Revolution: All the principles of scientific management will prove futile unless there is a
healthy cooperation between the workers and the employees. The idea behind the principle of
scientific management, therefore, is to change the mental attitude of the workers and employers
towards each other. Taylor called it ‘Mental Revolution’. He wanted to bring a revolutionary
change in the mental attitude of workers and employers, mainly to accomplish the enterprise
objectives of maximum productivity and prosperity. Thus the main aspects of mental revolution
are the following

(I) To create the spirit of mutual trust and confidence.

(II) To put in all efforts for increased production.
(III) To inculcate and develop the scientific attitudes towards problems.

TECHNIQUES OR ELEMENTS OF SCIENTIFIC MANAGEMENT:

To bring scientific management into practice, Taylor suggested the following techniques.

Scientific Task Setting: It is essential to set the standard task of every worker through scientific
investigation. Taylor called it, a ‘proper day’s work’. While setting the standard, care is taken to
see that a correct standard is set. It should be neither more nor less than the average capacity of the
worker.
 13

Work study: Work study means a systematic, objective and critical examination of operational
efficiency in an organization. It eliminates wasteful and unnecessary operations, reduces efforts
and increases productivity. The main aspects of work study are:

i) Method study: Method study is a preliminary survey of the production process. Its object is to
know the best method of doing a job and to familiarize the investigator with the tools, methods and
operations in process.

ii) Motion study: Motion study involves the study of the movement of a worker or a machine. Its
object is to eliminate useless and inefficient motions and to find out the best method of doing a
particular job

iii) Time study or work measurement: Time study is an art of observing and recording the time
required to do a job. It helps in fixing the standard time for doing a job under the given conditions.

iv) Fatigue study: Workers are human beings prone to fatigue on account of over work, stress and
strain, etc. Thus fatigue of all kinds—physical or mental—has an adverse effect on the workers
health and efficiency. This study helps in diminishing fatigue among the workers.

Rate setting: Positive measures should be adopted to fix wage rates in such a manner that the
average worker is induced to attain the standard. For this purpose, Taylor recommended the
differential piece rate system. Under this system, the standard daily output of a worker is fixed and
there are two piece rates. Workers who perform the standard task in the prescribed time are paid a
much higher rate per unit. Taylor was of the view that first-class men should be paid from 30 per
cent to 100 per cent more than the average workers

Planning the task: After setting the task of an average worker, the next step is to plan the
production. Taylor advocated that the planning function should be separated from the executive
function. The planning department should prepare detailed instructions and the information relating
to the type, shape and quality of products to be produced. Workers should not be allowed to choose
their own methods and decide what they have to do.

Specialization: Specialization is a kind of division of labor. Taylor recommended functional

foremanship even at the shop floor level. Under this scheme, an operator is under as many as eight
foremen- four belonging to the shop and four to the office work. The foremen to operate at the
office level are:

(I) Time and Cost Clerk-- to lay down standard time for completion of the work and to
make calculations in respect of the work.
(II) Instruction Card Clerk—to lay down the exact method of doing the work.
(III) Route Clerk—to lay down the route through which the productive process shall pass to
completion.
 14

Figure shows the Taylor’s functional foremanship

IV) Disciplinarian—to deal with the cases of discipline and absenteeism.

The foremen at the shop level are:

(I) Gang Boss—to assemble and set up machines and tools for a particular job.
(II) Speed Boss—to determine the appropriate speed to run the machine.
(III) Repair Boss—the foreman responsible for keeping the machines and equipment in
working order.
(IV) Inspector—to check quality functional foremanship.

Criticisms of scientific Management:

Taylor’s scientific management was criticized by the workers, managers, psychologists and the
public at large. The various grounds of criticism are as follows

1. The concept of functional foremanship is not feasible in practice as it violates the principle
of unity of command
2. Taylor’s is confined mostly to production management and fully ignores the areas of finance,
marketing, accounting, and personnel.
3. To use of the word ‘Scientific’ before ‘Management’ is objected to because what is actually
meant by scientific management is nothing but a scientific approach to management.
4. Trade unionists object to it as the wages of the workers are not increased in direct proportion
to the increase in productivity.
In spite of the criticism many of the recommendations are still being applied by modern business
undertakings.

HAWTHORNE EXPERIMENTS AND HUMAN RELATIONS

Many of the findings of earlier writers, particularly of scientific management

which focused attention on the mechanical and physiological variables of organizational
functioning were tested in the field to increase the efficiency of organizations. Surprisingly,
positive aspects of these variables could not evoke positive response in work behavior, and
researchers tried to investigate the reasons for human behavior at work .They discovered that the
real cause of human behavior was something more than mere physiological variables. Such
findings generated a new phenomenon about human behavior and focused attention on the human
beings in the organizations. As such, this new approach has been called human relations approach
of management.

Hawthorne experiments were conducted at the Hawthorne plant of the western

electric company in Chicago from 1924-1932. It employed about 30,000 employees at the time of
experiments. Although in respect of material benefits to the workers, this was the most progressive
company with pension and sickness benefits and other recreational facilities, there was great deal
of dissatisfaction among the workers and productivity was not up to the mark. The objective of the
experiment was to find out behavior and attitudes of employees under better working conditions.
On this basis, prof. Elton Mayo and his team conducted researches in four phases. They are:
 15

1. Illumination Experiments (1924-27)

2. Relay Assembly Test Room Experiments (1927-28)

3. Mass interviewing programme (1928-30)

4. Bank wiring observation room Experiments (1931-32).

1. Illumination Experiments:

This research was conducted to determine the effects of changes in lighting

on productivity. Under this experiment, 2 groups were formed. The first group was termed as
experimental group and the second group was termed as control group. In the case of experimental
group, variations in lighting were made periodically and the results were observed and noted. In the
case of control group, there is no change in lighting and the researcher was required to work, under
constant lighting system up to the end of the experiment. Interestingly, it was observed that the
output of both groups increase steadily.

This experiment revealed that there is no relationship b/w lighting and

productivity. As per this experiment, it is known that informal social relations among the group
members are the reason for increased productivity.

2. Relay Assembly Test Room Experiments:

Relay assembly test room experiments were conducted to determine the

effect of changes in working and productivity. For this purpose, the researchers set up a relay
assembly test room and two girls were chosen. These girls were asked to choose four more girls as
coworkers.

This group is formed With 6 girls. The girls were placed in a separate test
room. An observer was associated with the girls to supervise their work. The changes were made
with durations ranging from 4-12 weeks. Whenever a change is introduced, the girls were allowed
to express their views and opinions.

Following were the changes and resultant outcomes:

 Group’s bonus incentive scheme was the first change made. Under this, thus the
productivity is increase when compare to before.
 The changes of the variation of rests were the second one. They provide 2 rest breaks for
5min after this increase to 10min. It gives high production.
 The rest period was reduced to five minutes but frequency was increased. The Productivity
decreased slightly and the girls complained that frequent rest intervals affected the rhythm
of the work.
 The number of rest was reduced to two of ten minutes each, but in the morning, coffee or
soup was served along with sandwich and in the evening, snack was provided. The
productivity increased.
 After they withdraw snacks and increase breaks i.e. 4 times. The productivity is decrease
because of breaks.
 16

 The changes in working hours is the next step Saturday work will eliminated and half an
hour will be cut in working hours i.e. The girls were allowed to leave at 4:30 p.m. instead of
usual 5:00 p.m. and later at 4:00 p.m. This leads to high productivity.
 In this stage the researcher cut the benefits that are offer to group girls. It is found that
interestingly productivity increase further instead of going down.

3. Mass Interviewing Programme:

During the course of experiments, about 20,000 interviews were conducted between 1928 and 1930
to determine employees’ attitude towards company, supervision, insurance plans, promotion, and
wages. Only direct questions are asked by the researcher .so, the researcher was not able to find the
gross root of the problem. Hence the interview method was changed. The employees were asked to
discuss freely those issues which are relevant to the topics of their own choice. The interview
programme gave valuable insights about the human behavior in the company.

Some of the major findings are given below:

(a)Male workers were more economically oriented than the female.

(b)The personal situation of the worker is arising out of mode of arrangement of his desires.

(c)The individual behavior was being influenced by group.

4. Bank Wiring Observation:

There experiments were carried on between November 1931 and May 1932 with a view to analyze
the functioning of small group and its impact on individual behavior. For this 14male members
group was taken. In this 9 were wiremen, 3 were solider men and 2 inspectors. The aim of this is to
analyze how a group could influence a worker to restrict his output even in face of attractive
incentive schemes.

For example, group’s target for a day was connecting 6600 terminals against 7300 terminals set by
the company. The workers gave following reasons for the restricted output:

1. Fear of unemployment: The basic reasoning of workers was that if there would be more
production per head, some of the workers would be put out of employment.

2. Fear of Raising the Standards: Most workers were convinced that once they had reached the
standard rate of production, management would raise the standard of production reasoning that it
must be easy to attain.

3. Protection of Slower Workers: The workers were friendly on the job as well as off the job. They
appreciated the fact that they had family responsibility that required them to remain in the job.
Since slower workers were likely to be retrenched, the faster workers protected them by not
overproducing.

4. Satisfaction on the part of Management: According to workers, management seemed to accept

the lower production rate as no one was being fired or even reprimanded for restricted output.

Findings:

 Social
 17

 Group influence
 Production level
 Cordial relationship
 Motivation
 Supervision
 Communication
 Behavior of workers.

Criticisms:

Derecognization: This experiment did not give reorganization to the forces which are responsible
or productivity in work place.

Pro-mgt bias: mayo has concluded that management is always logical where as workers are
largely driven by emotions.

Lack of universal applications: This was conducted in the western electric company, which is not
representation of an industry.

Over looking social factors: It more emphasis on social factors that influence on human behavior.

Highlighting only know facts.

DECISION MAKING :

Decision making is an important job of every manager. Everyday a manager had to decide to work
or not work. A decision is nothing but selecting the best alternatives from the available alternatives.
So, a decision represents a course of behavior chosen from a no of possible alternatives. It is also
known as the selection based on criteria from two and more possible alternatives. It is also known
as the selection based on criteria from two or more possible alternatives.

Definition:-

“Decision making is a conscious and human process involving both individual and social
phenomenon based on factual and valued premises which concludes with a choice of one
behavioral activity among more alternatives”.

CHARACTERSTICS OF D.M:

 Decision making based on rational thinking.

 It is a process of selecting the best alternative from the available alternative
 Decision making is aimed to achieve organization goals.
 A decision may be positive or negative. It may direct others to do or not to do.
 Decision making involves certain commitments like policies, plan and objectives of the
organization.
 Decision making is a dynamic process.

DECISION MAKING PROCESS:

 18

Identifying Analyzing the Developing Weighting Choosing

Problem Alternative Alternative the Best
The problem Solution Solutions Solutions

Implementing
the Decisions

IDENTIFYING THE PROBLEM : This is the most important steps in decision making as all the other
steps in the process depend on the nature of problem, it depends on the nature of the problem.

ANALYZING THE PROBLEM : Once the problem has been correctly diagnosed, the next logical step
in decision making process is analyzing it. The most important aspects of problem analysis are to
find the limiting factor or the critical factor.

DEVELOPING ALTERNATIVE SOLUTIONS : This is also an aspect of search process involved in

decision making. There is not a single problem which can not be solved in more then one way.

WEIGHING ALTERNATIVE SOLUTIONS : The various consequences associated with each available
alternative solution should be analyzed and then various alternatives compares against one another
or against a decision criterion, such as a desired rate of return, sales volume etc.

CHOOSING THE BEST ALTERNATIVE : After the evaluation of available alternative solutions to the
problem, the next step in the process of decision making is the selection of the best solution.

Drucker suggested four criteria for selecting the best alternative

a) Risk- degree of risks involved in each alternative.

b) Economy of effort- cast, time and effort involved in each alternative.
c) Timing- whether the problem is urgent.
d) Limitation of resource- physical, financial and human resources available with the
organization.

IMPLEMENTING AND VERIFYING THE DECISIONS : Effectiveness of decision in achieving the

desired goal depends on its implementation. Best decisions are futile if not implemented
effectively.

THEORIES OF MOTIVATION

There are mainly three motivational theories. They are as follows:

MASLOWS NEED – HIERARCHY THEORY OF MOTIVATION:

All people have a variety of needs. At any given time, some of these needs are satisfied
and others are unsatisfied. An unsatisfied need to the starting point in the motivation process it
begins the changing of events leading to behavior when a person has an unsatisfied, need, how he
or she attempts to identify something that will satisfy the need.
 19

Probably the most widely known theory of individual need and motivation comes from
Abraham Maslow who was a clinical psychologist in U.S.A., Maslow. Maslow stated that people
have five basic levels of needs which they tend to satisfy in a hierarchical fashion. He proposed
that human needs can be arranged in a particular order from lowest level need to the highest level
need.

This hierarchy of human needs is as shown in following figure:

Maslow’s Needs Hierarch

SELF ACTUALIZATION
(Personal growth and fulfillment)

ESTEEM NEEDS
(Achievement, status, responsibility, reputation.)

SOCIAL / BELONGING NEEDS

(Family, affection, relationships, work groups etc.,)

SAFETY NEEDS (protection, security, order, law, limits, stability.)

BIOLOGOCAL AND PHYSIOLOGICAL NEEDS (Basic life needs- air, food, drink, shelter,
warmth, sleep, etc.,

1. Physiological needs:- physiological needs are those which arise out of basic physiology of life,
for example, the need for food, water, air etc. these are essential for the very survival of any human
being.

2. Security needs: - These needs are to feel from economic threat and physical harm. They
include, safety against physical dangers like fire, accidents etc and economic security against
unemployment, old age, sickness, disability etc.

3. Social needs: - These are needed to associate with other people and be accepted by them to love
and to be loved. Affection, friendship, belongings, or association with family, friends and other
groups of people, also fall part of social needs. Man finds a great satisfaction when these needs are
fulfilled and feel deprived of when it is not possible.

4. Esteem needs: - these relate to the social status and prestige. A need for dominance also is a
kind of esteem needs. They imply needs for independence, self-confidence, recognition and
achievements etc.

5. Self actualization needs:- needs to ones full potentiality i,e; like desire to become what one is
capable of becoming the need to be creative and to experience continuous self development.

The above mentioned needs are arranged in a hierarchy of importance. Out of them, the
physiological and safety needs are considered as basic or primary as they are to be satisfied first.
 20

Maslow suggested the following points:

1. There are five levels of needs.

2. All these needs are arranged in a hierarchy.

3. A satisfied need is no longer a need. Once a need or a certain order of need is satisfied its
ceases to be a motivating factor.

4. Once one level of need is satisfied, the next level of need will emerge as the depressed needs
seeking to be satisfied.

5. The physiological and security needs are finite but the needs of higher order infinite and are
likely to be dominant in persons at higher levels in the organization.

6. Maslow suggests that various levels are interdependent and overlapping. Each higher level
emerging before the lower level need has been completely satisfied. Even though a need is
satisfied it will influence behavior because of interdependent and overlapping characteristics of
needs.

CRITICISMS:

 There is no proof that every individual has the capacity to achieve the self-actualization.

DOUGLAS McGregor’s THEORY X AND THEORY Y

Introduction:

The management’s action of motivating human beings in the organization according to McGregor,
involves certain assumptions, generlisations, and hypothesis relating to human behavior and human
nature. Douglas Mc Gregor divides leadership in two styles labeled theory ‘X’ and theory ‘y’. The
traditional style of leadership and controls, stated in theory ‘X’ by Mc Gregor is exercised to
managers on the basis of his assumptions about human beings.

McGregor has characterized these assumptions in two opposite functions-Theory X and Theory Y. 

Theory X: This is the traditional theory of human behavior. In this theory, McGregor has certain
assumptions about human behavior. These assumptions as laid down or observed by Mc gregor for
theory X are:

1. Management is responsible for organizing the elements of productive enterprises-money,

materials, equipment; people-in all interest of economic ends.

2. With respect to people, this is a process of directing their efforts, motivating them, controlling
their actions modifying their behavior to needs of organization.

3. The average man is by nature indolent he works as little as possible.

4. He lacks ambition, dislikes responsibility prefers to be led.

5. He is inherently self-centered, indifferent to organizational needs.

 21

6. He is, by nature, resistant to change.

7. They do not show up any ambition but always seek security.

Theory Y : The assumptions of theory Y are described by McGregor in the following words:

1) Some employees consider work as natural as play or rest.

2) These employees are capable of directing & controlling performance on their own. They are
much committed to the objectives of organization.
3) Higher rewards make these employees more committed to organization.
4) Given an opportunity, they not only accept responsibility but also look for opportunity to
outperform others.
5) Most of them are highly imaginative, creative & display ingenuities in handling original
issues.

Comparison of theories X and Y

Both theories have certain assumptions about human nature. Infact they are reverse sides of a coin,
one representing a head and other represents a tail. Thus these assumptions seem to be mutually
exclusive. The difference between two sets of assumptions can be visualized as follows:

         THEORY   X                                                                          THEORY Y

1.   It assumes human beings to be inherently 1. It assumes that for human beings work is as
distasteful towards work. natural as play. 

2. It emphasis that people do not have ambitions and 2. The assumptions of theory Y are just reverse. 
try to avoid responsibilities in jobs. 
3. The capacity for creativity is widely distributed
3. Most people have little capacity for creativity. in the population. 

   4. Higher order needs are more important for

motivation though unsatisfied lower needs are also
4.motivation factors are the lower needs  important.

5.people lack self motivation and require to be 5. People are self –directed and creative and prefer
externally controlled and closely supervised to get self-control. 
max output from them
6. It emphasis decentralization and greater
6. It emphasis scalar chain system and centralization participation in the decision making process. 
of authority in the organization. 
7. It emphasis democratic and supportive
7. It emphasis autocratic leadership. leadership.

HERZBERG’S MOTIVATION-HYGIENE THEORY OR TWO FACTOR THEORY

Fredrick Herzberg and his associates developed the motivation hygienic theory,
commonly known as the two factor theory in the late 1950s and early 1960’s .Herzberg and his
 22

associates conducted a research based on the interview of 200 engineers and accountants who
looked for 11 different firms in Pittsburg area, USA.

Based upon the answers received from these 200 people  herb conclude that there are
certain factors that tend to be consistently related to job satisfaction and on the other hand ,there are
some factors, which are consistently related to job dissatisfaction. The last of job conditions, he
referred to as maintenance job dissatisfaction. The last of job conditions, he referred to as
motivational or hygiene factors.

The motivational factors are intrinsitic in nature and the hygiene factors are extrinsic in
nature. These two factors are described in detail as follows:

 1. Hygiene factors: Hygiene factors or the maintenance factors do not motivate people, they
simply prevent dissatisfaction. If these factors are not there it will lead to job dissatisfaction. In
other words, these factors do not provide any satisfaction but eliminate dissatisfaction. According
to Herzberg there are ten maintenance or hygiene factors:

 1. Company policy & administration

2. Technical supervision
3. Inter-personal relations with supervisor
4. Inter-personal relations with peer.
5. Inter-personal relations with subordinates
6. Salary
7. Job security
8. Personal life
9. Working conditions
10. Status

The word hygiene is taken from the medical science, where it means taking preventions to maintain
your health but not necessarily improve it. Similarly, hygiene factors in this theory prevent damage
to efficiency but do not encourage growth. As such, these are also called dissatisfies.

2. Motivational factors: These factors are intrinsic in nature and are related to job. The
motivational factors have a positive effect on job satisfaction and often result in an increase in total
output. Thus these factors have a positive influence on morale, satisfaction, efficiency and
productivity. Herzberg concluded that six factors the employee:

   1. Achievement
2. Advancement
3. Possibility of growth
4. Recognition
5. Work itself
6. Responsibility

Any increase in these factors will improve the level of satisfaction thus these factors can be used
for motivating the employees.

He further concluded that today’s motivational; factors are tomorrow’s hygiene factors.
Because once a need is satisfied, it stops influencing the behavior. Further, one person’s hygiene
may be another person’s motivator, because motivation is also influenced by the personality
characters of individuals.
 23

Evolution of management thought Introduction:

Modern managers use many of the practices, principal, and techniques developed from earlier
concepts and experience.
In 1975, Raymond E. Miles wrote Theories of Management: Implications for organizational
behavior and development.
In it, he evaluated management includes classical, human relations, and human resources
management.
The development of management thought has been evaluated in nature under the following four
parts:
1. Pre-Scientific Management Era (before 1880)
2. Classical management Era (1880-1930)
3. Neo-classical Management Era (1930-1950)
Modern Management era(1950-on word).
Classical Management: includes
1. Scientific Management School:
Frederick Taylor, known as the Father Of Scientific Management, Published Principals of
Scientific Management , in which he proposed work methods designed to increase worker
productivity.
Scientific Management focuses on worker and machine relationships.
Organizational productivity can be increased by increasing the efficiency of production processes.
The efficiency perspective is concerned with creating job that economizes on time, human energy,
and other productive resources. Job are designed so that each worker has a specified, well
controlled task that can be performed as instructed.
Principal of scientific management
1. Replacement of old rule of thumb method.
2. Scientific selecting and training.
3. Labor management co-operation.
4. Maximizes output.
5. Equal division of responsibility.

Evolution of management thought

Classical Management Era Neo- classical Management Era Modern Management

Era

Scientific management
school Human relation school Decision making school

Administrative Quantitative school

management
Behavioral management
 Bureaucracy management

Contingency approach
24

Administrative Management: Administrative Management emphasizes the manager and the

functions of management. Henri fayol known as the father of modern Management.
He wrote General and Industrial Management. His five function of managers were plan, organize,
command, co-ordinate, and control.
Principal of administrative management
1. Division of labor
2. Authority & responsibility,
3. Discipline,
4. Unity of command,
5. Unity of direction,
6. Subordination of individual interests to general interest,
7. Remuneration of personnel,
8. Centralization,
9. Scalar chain,
10. Order,
11. Equity,
12. Stability of tenure,
13. Initiative and
14. Esprit de crops (union of strength).
Bureaucracy Management: Max Weber known as father of modern Sociology analyzed
bureaucracy as the most logical & structure for large organization.
Features of Bureaucracy
Rational authority: This is based on law, procedures, rules, and so on.
Positional authority: Positional authority of superior over a subordinate stems from legal
authority. Charismatic authority: Charismatic authority stems from the personal qualities of an
individual.
Principal of Bureaucracy:
1. Clearly defined and specialized functions.
2. Use of legal authority;
3. Hierarchical form;
4. Written rules and procedures;
5. Technically trained bureaucrats;
6. Appointment to positions based on technical expertise;
7. Promotions based on competence;
8. Clearly defined career paths.
Neo- classical Management: includes
 25

Human relation school: Behavioral or human relations management emerged in the 1920s and
dealt with the human aspects of organizations. It has been referred to as the neo-classical school
because it was initially a reaction to the shortcoming of the classical approaches to management.
The human relations movement began with the Hawthorne studies.
The Hawthorne studies are significant because they demonstrated the important influence of human
factors on worker productivity.
There are four major phases to the Hawthorne studies:
1. The illumination experiment: Tried to determine whether better lighting would lead to
increased productivity.
2. The real assembly group experiments
3. The interviewing program and
4. The bank wiring group studies.
Behavioral Management school: The behavioral approach did not always increase productivity.
Thus, motivates and leadership techniques became a topic of great interest. The human resources
school understands that employees are very creative and competent, and that much of their talent is
largely untapped by their employers. Employee want meaningful work; they want to contribute;
they want to participate in decision making and leadership functions.
Modern Management: includes
1. Social system school
2. Decision theory school
3. Quantitative Management school
4. System Management school
5. Contingency Management school.
Nature of management principle:
1. Flexibility
2. Universal application
3. Principal are relative not absolute
4. Based on situation
5. General statement.
Modern Management concept: Modern Management concept is divided into following ways:--
1. Decision theory school:
Herbert Simon, Glurk and lyndall urwick the major contributors to this school of thought.
The main features of this theory are as follow:--
1. Decision is central to the study of organization.
2. The organization effectiveness depends on the quality of decision.
3. All factors affecting decision making are the subject matter of the study of Management.
4. The member of the organization is decision makers and problem solvers.
2. Contingency Management school / Situational approach: The latest approach to management
which interact the various approaches to management is known as the contingency approach or
open and adaptive systems approach. The work of Joan Woodward in the 1950s marked the
beginning of this approach in management.
 26

Contingency school states that management is situational & the study of management lies in
identifying the important variables in the situation.
It recognizes that all the subsystem of the environment are interconnected and interrelated. By
studying their interrelationship, the management can find solution to specific situation.
3. Systems approach: The word system is taken from a Greek word language which means to
bring together or to combine. A system is a set of inter-related, which work together to achieve
certain goal. Ludwig von bertalanffy is called the father of the system approach.
According to Ludwig von bertalanffy, “in order to understand an organized whole, we must know
both the parts as well as the relationship between them”.

4. Quantitative approach: In this approach we are using different quantitative tools in

management.

Emerging Management position:

New management viewpoints are emerging. Quality management emphasizes achieving customer
satisfaction by providing high quality goods & services.
Reengineering the organization redesigns the processes that are crucial to customer satisfaction.
INTRODUCTION TO ORGANIZATION:
Organization is the back bone of management and a means of multiplying the strength of an
individual. It takes the knowledge of individuals and uses it as the resource. To organize manpower
means to build a structure, not of wood and steel, but of human beings. The people are the material
for the construction, their loyalty is the foundation and their cooperative spirit the moral that holds
the structure together and gives it vitality.

The concept of organization has been perceived differently by different persons. The
biologists consider the human body as an organization. The sociologists think of society as an
organization and the political scientists think of government as an organization.

Definition:
McFarland has defined organization, “as an identifiable group of people contributing their efforts
towards the attainment of goals.
In the words of Klotz and O’Donnell, “organization involves the grouping of accomplish
goals and plans, the assignment of these activities to appropriate departments and the provision for
authority delegation and coordination.”
Organization as a process, therefore, is an executive function that consists of:
 Breaking up the entire work into different segments
 Assigning each segment to the qualified individuals
 Coordinating the efforts of job-holders to attain the organizational goals.
 27

Significance of Organizations:
An organization is not merely a chart or a lifeless structure. It is the mechanism
through which management directs, coordinates and controls the business. It is indeed the
foundation of management.

A good organization is important because:

1. It facilitates administration.
2. It makes growth and diversification possible.
3. It stimulates independent, creative thinking, and initiative through well-defined areas of work.
4. It provides for the optimum use of technological improvements.
FORMS OF ORGANIZATION:

There are mainly two different forms of organizations they are as follows:

Formal Organization: The formal organization refers to the structure of jobs and positions with
clearly-defined functions and relationships as prescribed by the top management. This type of
organization is bound by rules, systems and procedures and is deliberately built by the management
to accomplish organizational goals.

The formal organization is built around the key pillars of Division of labor, scalar
process, structure, and span of control. These may also be called the principles of formal
organization.

Def: According to Chester Barnard, “Formal organization is a system of consciously coordinated

activities or forces of two or more persons.”

Features:

 It is a prescribed structure of role and relationship consciously coordinate towards a

common goal.
 It is based on division of labour and specialization.
 Its structure is pre-determined by the top management.
 It does not consider the emotional aspect.
INFORMAL ORGANIZATION: Informal organization refers to the relationships between
people in an organization based not on procedures and regulations but on personal attitudes,
whims, prejudices, likes, dislikes, etc.
It arises from the personal and social relations of the people which cut across formal
channels to communicate with one another. Sometimes, it is afflicted with rumors’ and offers
resistance to the new ideas of management.

Features:

 It arises spontaneously.
 Its formation is a natural process.
 It reflects human relationships.
 Its membership is voluntary.
PRINCIPLES OF ORGANIZATION
 28

Principles denote a body of laws or a guide to action. Principles of organization, therefore, imply
that there exists a body of laws guides to help in organizing an enterprise. Taylor, Fayol and Uric
have advocated various principles for a sound organization. Some of these principles are as
follows:

Unity of objectives: An organization is a mechanism to accomplish certain objectives. The

principle of unity of objectives states that every part of the organization should pull together to
accomplish those pre-determined objectives.

Unity of command: There should be a unity of command in the organization for fixing
responsibility and avoiding conflict of command. The principle of unity of command states that
each subordinate should have only one superior and dual subordination should be avoided.

Unity of direction: Unity of command cannot exist without unity of direction. If command is a
personnel function, direction relates to the body corporate. The principle of unity of direction states
that there should be one plan for a group of activities having common objectives.

Division of work: The departments of a good organization must reflect the most efficient
breakdown of the organizational activities. This is also known as the principle of specialization.
The more a person concentrates on a specific job the better will be his performance.

Efficiency: An organization should function on the principle of efficiency to enable it to attain its
objectives at a minimum cost.

Efficiency: An organization should function on the principle of efficiency to enable it to attain its
objectives at a minimum cost.

Span of management. Span of control means the number of subordinates a manager can directly
supervise. There is a limit for it. But a span is said to be ideal when it facilitates effective control
and supervision.

Scalar principle: The scalar principle represents the vertical division of authority. For instance,
from the chief executive, a line of authority may proceed to departmental managers, to supervisors
or foremen and finally to workers. Thus scalar principle contemplates superior subordinate
relations from the top to the bottom of the organization.

Exception principle: The principle of exception states that only exceptionally complex problems
are to be referred to higher levels of management and the routine problems should be decided by
the subordinates themselves.

Principle of authority: Authority means power to command others. There should be free flow of
authority in an organization so as to enable people to take decision without delay.

Principle of responsibility: Responsibility means obligation to do a particular task. Authority and

responsibility should go and hand in hand. Although a subordinate is responsible to his superior,
the responsibility of the superior is absolute for the acts of the subordinates.

Balance: There should be balance in the formal structure of the organization between the factor
shaving conflicting claims.
 29

For example, between centralization and decentralization, between span of supervision and lines
of communication and authority allocated to departments and personnel at various levels.

Flexibility: Flexibility is the ability to change with the environment to maintain competitive
advantage. Thus a good organization should be flexible.

Simplicity: Simplicity ensures efficiency. An organization is said to be good if it is simple with a

minimum number of levels.

Continuity: Change is the law of nature. Thus, specific attention should be paid to implement
reorganization as a continuous process.

DESIGINING ORGANIZATION STRUCTURE:

Organization Structure: An organization structure denotes the pattern of relationship among the
positions and jobs within an organization. It is the structure of human relationships or the network
of horizontal and vertical dimensions designed to achieve common goals. It is a systematic
combination of people and facilities which may take the from of line, staff and line and staff.

The structure of an organization is generally shown in an organization chart. It shows the

authority and responsibility relationship between various positions in the organization.

Organization structure helps in the efficient functioning of concerns on account of the following
reasons:

1. It allocates authority and responsibility.

2. It lays down the pattern of communication and coordination.
3. It creates proper balancing of activities.
4. It facilitates growth of the enterprise.
5. It is adaptable to changes.

ORGANISATION CHART: An organization chart is “a diagrammatic representation of the

structure of an organization.” In other words, it is a graphic portrayal of positions in the
organization and of formal lines of communication among them. The organization chart provides a
bird’s eye view of the relationship between different departments of an organization of as well as
the relationship between the executives and the subordinates at various levels.In the words of
Louis A. Allen, “the organization chart is a graphic means of showing organization data.

Features:
1. It is a diagrammatical presentation.
2. It shows the relationship between different authorities.
3. It shows the kind of relationships prevailing in the organization.
4. It shows the authority and responsibility of various authorities.
The organization chart should not be confused with the organization structure. The organization
chart is a schematic representation of the formal organization as given in Figure:

Board of Directors

General Managers
Finance Production Personnel Marketing
(Manager) (Manager) (Manager) (Manager)
30

Superintendent plant 1 Superintendent plant 2

Foremen Foremen
\

Workers Workers

Benefits of the Organization Chart:

 It facilitates organizational planning and manpower planning.

 It helps to avoid overlapping of authority.
 It enables the executives to know and appreciate their own position vis-à-vis others in the
organization.
 It is a source of authoritative information about the organization.
 It helps to analysis an organization for effecting improvements

Limitations of the organization chart

 It does not guarantee an effective structure.

 It may induce rigidity.
 It requires frequent updating.
 It does not incorporate the informal organization.

TYPES OF ORGANIZATION STRUCTURES:

The classification of organization structure is based on the way; various

activities are grouped together to create deportments and units as prescribing their relationship in
the organization. Thus, there are seven types of organization structure-line, line and staff,
functional, divisional, project, matrix, and free form. Each of these emphasizes different
arrangement of organization activities.
1. LINE ORGANIZATION STRUCTURE: Line organization structure is also known as scalar,
military, or vertical organization. Line or military organization is the oldest and simplest form of
organization .Line structure is generally found in small business units, although this is the basic
framework of organization in large business units. Other forms are simply the modification of the
line structure.
 31

Under this system the authority flows vertically from top to bottom. On the other hand
responsible for his work and is accountable to his boss. Since authority and responsibility flow in
an unbroken straight line this type of organization is strictly based on the principles of 'unity of
command' and 'scalar chain’. Line organization can be designed in two ways .they are
1. Pure line organization
2. Departmental line organization
 1. Pure line organization: Under this form, similar activities are performed at a particular level.
Each group of activities is self-contained unit and able to perform the assigned activities without
the assistance of others. It may be depicted as follows.    
2. Departmental line organization: Under this form, entire activities are divided into different
departments on the basis of similarity of activities each department is placed under one
departmental superintendent. All persons in the department are subjected to control by the
departmental head. The basic objectives of this form are to have uniform control, authority, and
responsibility.
Characteristics of line organization structure:
 Lines of authority and instructions are vertical, that is they flow from the top to bottom.
 The unity of command is maintained in a straight and unbroken line.
 All persons at the same level of organization are independent of each other.
 Each position enjoys general authority over all the lower positions in the hierarchy.
 The principles of unity of command and scalar principle are followed.
 Responsibility goes upwards.
 There is no provision for the staff specialist. 

Board of directors

General Manager

Purchase manager Production manager Sales manager Finance manager

Purchase assistants Superintendent Supervisor Financial assistants

Workers Workers Workers Workers

Merits:
 32

1. Simplicity: This organization is quite simple in both understanding and implementation. Every
person knows clearly from whom he receives commands it avoids confusion in the workers mind.
2. Discipline: Since each position is subject to control by its immediate superior position, often the
maintenance of discipline is easy.
3. Orderly communication: This system of communication is easy to maintain, orderly in nature,
supports the authority of superior, and provides for closeness of contact thereby reducing changes
of miscommunication.
4. Easy supervision and control: The line organization provides for easy supervision and because
each subordinate is controlled by a single superior.
5. Economical: The line organization is quite economical because it does not use staff specialists
whose appointment is a costly affair especially for small organizations.
6. Stability: It is stable.
Demerits
1. Not suitable: It is not suitable for big organizations as specialization is absent.
2. Rigidity: It is rigid and inflexible.
3. Lack of expert advice: It suffers from lack of expert staff advice.
4. No proper communication:
There is no communication from bottom upwards as authority is concentrated at the top level.-9
5. Lack of specialization: The line organization does not offer scope for specialization. A
manager has to perform a variety of functions which may not necessarily be closely interrelated
Suitability: The line organization is not suitable for large-scale organizations because it cannot
fulfill the requirements of large organizations .However ,it quite suitable to small- organizations
where the number of subordinates is quite small .The need for small organization is centralized
control called only few levels of authority , direct interpersonal communication ,and direct control
and supervision.
2. FUNCTIONAL ORGANIZATION
Functional structure is a means of putting the specialists in top positions
throughout the organization. They have only a limited power of command. Their functional
authority remains confined to functional guidance of different departments. Under this system the
whole work of management and direction of subordinates are divided in accordance with the type
of work involved. At higher levels the functional organization refers to the structure that is formed
by grouping all the works into major functional departments.
The initial concept of the functional organization is credited to F.W.Taylor. He
suggested the scheme of functional foremanship. The functional foremanship recommended by
Taylor has already been explained in the fig is the functional organization at the management level
showing the direct authority of the personnel manager over the personnel in the works department.
 33

Suitability:
Functional organizational structure is the most widely used in the medium and large organizations
having limited number of products. As it grows   and  division  of labor leads  to specialization,  the
organization  has more  work to do, it adds new  specialties’ and  further divides  its presently
employed specialties.
Features of the functional organization
 Each functional area is put under the charge of one executive or specialist
 If anybody wants to take any decision relating to a particular function he has to consult the
functional specialist.
 Specialists often operate with considerable independence.
 Specialization by functions.
 Emphasis on goals.
 Line and staff division
 Functional authority relationships among various departments.                   
Advantages of the functional organization:
 It ensures division of labor and specialization based on individual proficiency and
specialized knowledge
 It ensures separation of manual and mental functions so as to facilitate quick decision and
mass production
 The limitations of one-man control under the line organization are largely alleviated here
 It ensures easy implementation and control of decision
 Fictionalization helps in better utilization of employees and development of there skills and
also better utilization of resources also.
 It promotes professional achievement as a person is restricted to his own area of
specialization. Thus, it provides satisfaction to specialists.
 There is a high degree of control and coordination of functions because all work of one kind
is under one manager.
Disadvantages of the functional organization:
 Functional structure offers usually line and staff conflict and inter departmental conflict.
The heightened degree of such a conflict becomes detrimental to organizational efficiency.
 It is difficult to establish because of the high degree of specialization.
 It is unstable because it weakens the discipline.
 Specialists are seldom all- rounder’s so that a deficiency of leadership is almost perennially
felt.
 Overlapping of authority and responsibility often leads to conflict among foremen of equal
status.
 34

 Difficulty in achieving control and coordination on account of considerable independence

of specialists.
Structure: Work manager

Accountant Superintendent Supervisor

Route Time and Gang Disciplarian Inspector Instruction Speed

clerk cost clerk boss card clerk Boss

3. Line and Staff organization

      Line and staff organization refers to a pattern in which staff specialists advice line manages to
perform that duties when the work of an executive increases , its performance requires the services
of specialists which he himself cannot provide because of his limited capabilities on these fronts

The line and staff system strikes a happy balance between the two in this system the administrative
work is divided into two divisions namely the

1. Staff function and

2. Line function
The staff is responsible for planning and the line for the actual execution of the work. The staff
personnel only give advice to the line officials but do not enforce it. They prepare plans and
recommend them to the line officials who implement them. Under the line and staff organization
the line is supplemented by the staff. The staff refers to officers who are not line managers. The
staff consists of:
1. Personal staff such as a personal assistant or adviser attached to a line executive.
2. Specialized staff such as accountant a personal manager a public relations officer ,etc and.
3. General staff such as other experts in different fields who advise the top management and
normally operate at higher levels.
Features of the line and staff organization 
1. The staff supplements the line.
2. This organization clearly distinguishes between the two aspects of administration, viz. planning
and execution.
3. Since the staff officers provide advice only to the line officers they do not have any power of
command over them.
 35

4. In the line and staff organization, line authority moves down in the same manner as in the line
organization.
Advantages of the line and staff organization [or] Merits
1. Planned specialization: Line and staff structure is based upon the principle of specialization
.the managers are responsible for operations contributing directly to the achievements of the
organizational objectives whereas staff people are there to provide expert advice on the matters of
their concern.
2. Quality of Decisions: The quality of decisions in line and staff structures is high because the
decisions come after careful consideration and thought. Each expert gives his advice in the area of
his specialization which is reflected in the decisions.
3. Prospect for Personal Growth: This system of organizing offers ample prospect for efficient
personal to grow in the organization. Not only has that it offered opportunity for concentrating in a
particular area, thereby increasing personal efficiency.
4. Training Ground for Personnel: It provides training ground for the personnel in two ways.
First, since everybody is expected to concentrate on one field, one’s training needs can easily be
identified.
5. Flexibility: The line and staff organization is highly flexible because new activities may be
introduced through additional staff without disturbing the line procedure.
Disadvantages of the line and staff organization [or] Demerits:
1. Lack of well defined Authority: Though it is easy to say about line and staff authority, often in
practice, it becomes difficult to differentiate clearly between line and staff because, in actual
practice, the authority is often diffused.
2. Conflict between line and staff: The line and staff relationships are often tenuous and lead to
numerous frictions and jealousies. There is a danger that the staff officers may encroach on the line
authority.
3. Confusion: Confusion may prevail when the line and staff relationship is not properly
understood
4. Loss of judgment and initiative:  Line managers may depend to much on staff experts. it may
therefore lead to loss of judgment and initiative on the part of line officials.
5. Ineffective staff: The staff experts may feel ineffective as they do not get the authority to
implement their recommendations.
6. Expensive: This type of organization may prove very expensive as a large number of specialists
are appointed.
 36

Committee organization structure: A committee does not represent a separate type of

organization like the line, line and staff or functional. It is rather a device which is used as
supplementary to or in addition to A committee does not represent a separate type of organization
like the line, line and staff or functional. It is rather a device which is used as supplementary to or
in addition to any of the above types of organizations. Committee is another form of formal group.
Committees are found in every large organization. Exact definition of a committee is slightly
difficult because there are too many variations in the scope and functions of committees.
In an organization, there can be several types of committee, for examples, finance
committee, budget committee, purchase   committee, grievance committee, and welfare committee
and so on.

Def: A committee is a group of people who meet by plan to discus or to make a decision for a
particular problem or subject.
Committee can be defined as body of persons appointed to meet on an organized basis for the
discussion and dealing of matters brought before it.
Based on this definition, following features of committee are identified. 
Features of committee
1. A committee as a group of persons. It implies that there should be at least two persons.
There are no limitations on the maximum number of persons in a committee.
2. A committee can deliberate only on matters that are brought before it. It cannot go for
action in all spheres of activities. When a committee is constituted,   there are strictly defined
jurisdictions within which it is expected to justify its existence.
3. Members of the committee draw authority though delegation. The authority of members is
usually expressed in terms of one for each member for deciding the matters.
4. The type of authority delegated to a   committee may vary from making final decisions on a
matter to mere submission of relevant information on the matter concerned
 37

5. A committee may be constituted at any level of the organization and its members can be
drawn from any level or function.
Reasons for use of committees
1. Pooling of knowledge and experience: The most important advantages in using committees are
that knowledge and experience can be pooled together and decisions can be arrived at through
group deliberations judgment. A committee works on the theme that “two heads are better than
one”.

2. Facility for coordination: Committees are very useful for coordinating activities among various
functional units. When it is necessary to integrate and unify various viewpoints which cannot
conveniently and effectively be coordinated by individuals, the committee may be useful in
bringing all those concerned together.
3. Representation on Interest Groups: Committees are often used to give representation to
various interest groups. Such types of committees are quite popular in government, educational and
other institutions where people from diversified groups should have their say in the functioning of
the organization. Even in business organization such committees may be set up,
For example board of directors, welfare committee.
4. Fear Too Much Authority in Single person: Sometimes committees are constituted to avoid
the concentration of too much authority in a single individual. This problem is more prominent in
government and educational organizations and less in business organizations. 
5. Transmission and sharing of information: Committees are useful for transmission and sharing
of information. All parties and persons interested in a problem have simultaneous face-to-face
communication through the proceedings of the committee meetings. Doubts and ambiguity may be
removed at the spot. This saves a lot of time in communication.
6. Motivation through Participation: People do better when they participate in decisions
affecting their working because when they participate in decision making, they accept and live with
that decision; they feel committed to the decision. This feeling of involvement and commitment
motivates them for better performance.
Managing director

Sales manager General Manager Personnel manager

Work manager Employment officer

Sales function

Production superintendent
 \
Workers Workers Workers
38

Benefits of committees:
1. Integrated group knowledge and judgment.
2. Representation of different interest groups.
3. Coordination of plans and policies.
4. Executive team work and personal interactions.
5. Wider participation and motivation.
6. Improved communication.
7. Training ground for executives.

Limitations of committees [or] Problems in committees

1. High cost: Constitution of a committee may be costly both in terms of time and money.
Committee meetings may take time of various managers which can be spent otherwise for the
organization
2. Slow Decisions: Committee decisions are essentially slow because of the basic nature of
decision-making process in a committee. This may require staff work to prepare a report giving
members the basic facts. It may take time. Similarly, in the meeting, deliberations take lot of time.
Each member is expected to be heard.
3. Splitting of Responsibility: People work more efficiently when they have clear authority and
responsibility. A major drawback in committee decision is that it splits the responsibility and no
member really feels responsible for group action.
VIRTUAL ORGANISATION
        The concept of virtual organization or corporation along with virtual team   and office has
entered management field very recently. The literal meaning of virtual is having the efficiency
without the material part unreal but capable of being considered as real for the     purpose.
Based on this concept, virtual corporation has been defined as follows.
        Virtual corporation is a temporary network of independent companies-suppliers, customers,
even erstwhile rivals-linked by information technology to show the skills, costs and access to one
another’s market. It will have neither    central office nor organization chart.  It will have no
hierarchy, no vertical integration.
 39

        Thus, virtual organization is temporary alliance between two or more organization that band
together to undertake a specified venture. Recently, in telecommunication sector in India, many
virtual organizations have been created to provide different services. Business Week has identified
five basic features of a virtual organization which are as follows.
Technology:  Informational networks will provide far-flunged companies   and entrepreneurs to
link up work together from start to finish. The partnerships will be based on electronic contrasts to
keep the lawyers away and speed the linkup.
Opportunism:  Partnership will be loss permanent, less formal and more opportunistic. 
Companies will band together to meet a specific market opportunity and, more often than not fall
apart once the need evaporates.
Excellence: Because each partner brings its core competence to the effort, it may be possible to
create a best-of-everything   organization .Every function and process could be world class-
something that no single company could achieve
Trust: These relationships make companies far more reliant on each other and require for more
trust than even before .They will share a sense of co-destiny, meaning that the fate of each partner
is dependent on other.
No Borders: The new corporate model redefines the traditional boundaries of the company. More
cooperation among competitors, suppliers, and customers makes it harder to determine where one
company ends and another begins.        
Reasons for Virtual organization

        The basic reason behind creating a virtual organization is to generate synergy through
temporary alliances
        However, management scholars have divided opinions over the effectiveness of virtual
organizations because of the trust that is required in creating such organization. Often, clash of
interest generates much sooner than expected. For example, one of the virtual organizations created
by Intel, USA and Japanese company could not work properly because the Japanese company was
not able to complete its part of the project, leaving Intel with a major product delivery problem.
Intel was not happy about that venture and decided not to participate any venture.  
 Virtual office
        Along  with virtual organizations, the concept of virtual offices has also emerged in which
physical office space and individual desks have been replaced with an array of portable
communication tools –email, cellular phones, voice mail system, laptop   computers, fax
machines ,modems, video conferencing systems etc. Employees armed with these tools perform
their works without going to their offices but do this from homes, cars, customer’s offices etc. 
Thus, the work is performed through telecommuting. .
 40

MATRIX ORGANIZATION STRUCTURE

Matrix organization structure is essentially a violation of unity of command and,
therefore, whole classical concepts related to the principle of unity of command are violated.
Matrix structure is the realization of two- dimensional structure which emanates directly from two
dimensions of authority. Two complementary structures -pure structure and functional structure-are
merged together to create matrix structure. Thus, matrix structure not only employs a multiple
command but also related support mechanism and associated organizational culture and behaviour.
Thus, it shows many organizational overlaps not only in terms of command system but also in
terms of whole organizational processes and behavior.
Design of Matrix Structure:
In matrix organization structure, a project manager is appointed to coordinate the activities of the
project. Personal are drawn from their respective functional departments. Upon completion of the
project these people may return to their original departments for further assignment. Thus, each
functional staff has two bosses-his administrative head and his project manager.
Suitability of Matrix Structure:- Matrix structure is of recent origin but its use has spread in
various fields. For example, Davis and Lawrence have observed that matrix structure can be
successfully applied to the following types of activities: manufacturing activities - aerospace,
chemicals, electronics, heavy equipment, industrial products and pharmaceutical; service activities-
banking, brokerage, construction, insurance and retailing; professional activities-accounting,
advertising, consulting, and law; and non -profit organizations-government agencies, hospital,
united nations and universities.
Merits of Matrix Structure: 1. Matrix structure focuses resources on a single project, permitting
better planning and control to meet the project deadline. In project management, time is of prime
importance and, therefore, it should be completed within the specified time.
2. It is quite flexible structure as compared to traditional hierarchical structure.
3. It emphasizes on professional by elaborating authority of knowledge rather than authority of
position.
4. It improves motivation because people can focus more directly on completion of one project
than they can in the traditional functional structure. It also improves communication.
5. Pin point’s profits responsibility.
Demerits of Matrix Structure: Matrix structure has many problems in practice because of its too
much flexibility. The major problems of matrix structure are as follows and managers should take
adequate precautions to overcome these.
1. There is always power struggle in matrix structure. The essence of matrix structure is dual
command, and to survive such a form, there needs to be balance of power.
 41

2. This structure may not work very well when there is economic crunch. In the case of economic
crunch, the organization may not be in the same position as there may be many changes in market
position, pressure on profit margin, and financial problems.
3. If matrix organization is not followed properly, there is delay in decision making. The
decision making process is such that many persons are involved in the decision.
4. Possibility Of disunity of command.
5. in effective human relations.

CEO / President

R&D Finance Marketing Personnel Production

specialists department department department department

Project A R&D Finance Marketing Personnel Production

specialists specialists specialists specialists specialists

Project
R&D Finance Marketing Personnel Production
B
specialists specialists specialists specialists specialists

TEAM:
In order to meet the challenges of dynamic business environment, more and more organizations are
replacing old hierarchies with teams of different types in the form of work teams or project teams.
A team is a group of people in the organization constituted for completing certain assignments. A
team is like a task force with a major difference. A task force is created to solve unusual problems
that an organization may face occasionally. In contrast to this, work teams are constituted quite
 42

frequently. For example, in information technology companies, most of the work is done by teams
which are constituted on project-to-project basis.

TYPES OF TEAM: In an organization, there may be different types of teams. Typology of teams
may be based on their constitution, purpose, power entrusted, duration, etc. The more common
type of teams that may be found in an organization are lead teams, cross-functional teams,
problem-solving teams, and self-managing teams. Several teams may be created in each type.
Lead Team: A lead team consists of managers and their direct subordinates. This is the most usual
form of team which works in every part of an organization. A basic feature of this type of team is
that it is created on the basis of hierarchical relationships as organizational administrative units.
Cross-functional Team: A cross-functional team is constituted by drawing personal from
different functional areas, particularly from those functions which have high interdependence. The
basic objective of such a team is to solve problems and take decisions in those areas which cannot
be done by a particular functional department. Because of the interdependence of various functions
in an organization.
Problem-solving Team: A problem-solving team, also known as corrective action team, is
constituted to solve specific problems which an organization may be facing. Team members for
such a team are drawn from those areas where the problems requiring solution exist.
Self-managing Team: In today’s context, more emphasis is given on self-managing teams, also
known as empowered or self-directed team.

Effective Team: An effective team is one which contributes to the achievement of organizational
objectives by performing the task assigned to it and providing satisfaction to its members.

FLAT AND TALL ORGANIZATIONS

Flat organizations are those, which have relatively few or even one level of management. Many
enterprises have adopted flatter structures to reduce levels of management and bureaucracy and
give their workforce greater decision-making responsibilities. A service organization with 3 equal
partners and 30 employees is the best example for a flat structure.

Flat organizations are known by their wider span of control. In other words, each manager
controls more number of employees at a given point of time. Flat structured organizations facilitate
communication across the organization.

Managing Director

Managing Director Managing Director Managing Director Managing Director

 43

Advantages:
 Fewer levels of management and decision-making.
 Lower supervision costs.
 The subordinates feel more satisfied on the job front with greater decision-making
authority.
Disadvantages:
 Makes it difficult to supervise the subordinates directly.
 Flat structures may not work as the business expands
TALL ORGANIZATION: Tall organizations have many levels of management. Tall structure
organizations focus on vertical communication through the levels of grades in it. Tall organization
structures involve a narrower span of management. Wide and narrower span of management are
evaluated as given below:

Managing Director

Additional Managing Director

Sales Production Personnel Finance

Manager Manager Manager Manager

Advantages:
 Allows for tight control and supervision.
 Communication with subordinates is easier.
Disadvantages:
 Subordinates may feel left out of the decision-making process and may lack motivation.
 Costs related to management and administrations tend to increase.
 Coordinating decisions of numerous managers becomes difficult.
 Too much supervision may hinder initiative and motivation.
To keep the organizations vibrant, cost-effective and competitive the modern trend is to reduce the
size and length of organizations to lean and flat. Most of the public and private organizations
announce ‘golden handshake’ schemes to motivate people to leave the organization.

BOUNDARY LESS ORGANIZATION

A boundary less organization is a contemporary approach in 0. It is an organization that is not
defined by, or limited to, the horizontal, vertical, or external boundaries imposed by a predefined
structure. This term was coined by former General Electric chairman Jack Welch because he
wanted to eliminate vertical and horizontal boundaries within the company and break down
 44

external barriers between the company and its customers and suppliers. To achieve Boundary less
Information Flow, an organization needs to put in place infrastructure services that bring data
sources together and provide that information to those users and applications that need it. Creating
the environment for integrated information has been a challenge. What were once regarded as
necessary boundaries between the different stages in operational processes designed to achieve the
benefits of specialization, now represent silos delivering outmoded solutions, which do not allow
for the sharing of information. Barriers at the business and technical levels must be broken down.
MERITS: Flexibility: A boundary less organization is flexible when compared with other
organization structures.
Quick decision-making: in case of boundary less organization decisions taken by top level
management is quick without losing any opportunities.
Quality: in case of boundary less organization quality decisions will be taken and qualitative
products will be produced.
Timeliness: corrective and proper actions will be implemented and timeliness in running of
business operations will be possible in case of boundary less organization.
DEMERITS: Difficult of maintenance: maintenance of different operations at all levels of
management is difficult in case of boundary less organization.
Lack of proper understanding: the lower level management people may not get clear cut division
of work which acts as one of the major limitation of boundary less organization
Costlier: it is very expensive to prepare reports in case of boundary less organization which acts
as one of the major limitation.
INVERTED PYRAMID STRUCTURE
Inverted pyramid structure is an alternative to the traditional chain of command. This is a structure
which is narrow at the top and wide at the base. It includes levels of management.
MERITS:
Unity of command: in case of Inverted pyramid structure only one manager will make commands
over lower level managers as well as employees and workers.
Span of control: power will be vests in the hands of one person and it’s the ability of manager to
control more number of employees.
Effective decision-making: effective decisions will be possible in case of Inverted pyramid
structure.
DEMERITS:
Overlapping of activities: the major limitation of Inverted pyramid structure is overlapping of
activities at the same point of time.
Time constraint: the major drawback of Inverted pyramid structure is lack of time in taking
decisions.
 45

Conflicts: there will be a chance of arising conflicts between levels of management in the
organization structure in case of Inverted pyramid structure.

CELLULAR ORGANIZATION STRUCTURE

In cellular organizations workers manufacture total product or sub assembles in teams [cells].
Every team of workers has the responsibility to improve or maintain the quality and quality of its
products. Each team is free to reorganize itself improve performance and product quality. The cells
comprise self managed teams.
MERITS: Improvement in performance: the performance of employees will be increased in
case of cellular organizations.
Quality: the quality in case of production and goods will be possible in case of cellular
organizations.
Understanding capacity: all the members will be able to understand the orders of managers in
cellular organizations.
DEMERITS: Problem in division: division of cells in the organization is the biggest problem in
cellular organizations.
Time constraint: lot of time is required for dividing the organization into different cells is a
problem in cellular organizations.