SCIENTIFIC MANAGEMENT

FREDRICK TAYLOR

The pioneer behind this school is Fredrick Taylor.(1856-1917). He is regarded as the father of scientific
management because the principles in scientific school were developed as a result of his work. He
wanted to discover better ways to made and therefore conducted a wide variety of experiments.

Aims of experiments

 He wanted to find out how long is should take a worker or a machine to perform given task.

 He wanted to develop uniform standards of work.

 He wanted to learn better ways to supervise and motivate his employees.

 He wanted to find out a method for matching workers to jobs allowing for different skills.

Findings

 That management left the initiative of the working methods to employees and employees were
supposed to find their own methods of doing work.

 Due to poor pay, workers formed themselves to groups and labour unions in order to press for
better wages.

 Due to lack of good division of labour and better organised working method there was
overlapping of jobs.

 Workers deliberately restricted production in the daily book due to fear of unemployment and
lack of piece rate systems.

In order to solve the above problems he developed the following principles

 Each worker should have a clearly defined daily task through division of labour

 Each task should be scientifically designed.

 Workers must be scientifically selected and trained so as to be more productive in their jobs.

 High payment should be made for those who complete their tasks successfully and low or
no payment should be made when the performance is poor. He believed that money was a
major motivator.

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  He also advocated for friendly and close cooperation between the management and
employees.

 He also advised employees from engaging in time wasting activities and as a principle he
also said duplication of efforts should be avoided.

 Work should be done under standard conditions and the most efficient working methods
should be adopted.

 He believed that money was a major motivator.

Henry Gnatt
He insisted that willingness to use correct methods and skills in performing a task was as
important as knowing he methods and having the skills. He advocated for a bonus of 50% for
every worker who completed the assigned workload.

The foreman too was to earn a bonus for each worker who reached the daily standard, plus an
extra bonus if all workers reached it.

He developed the idea of rating all employees work publicly. Every workers progress was
recorded on individual bar chart inked in black on days he/she completed the standard and red on
days he fell below.

Gnatt originated a charting system of production control. i.e. used in time and resource
scheduling. The system called Gnatt Chart is still in use today. It shows each mans daily
performance in relation to a predetermined quota or standard of performance

Franklin and Lillian Gilbreths

They were husband and wife and supported Taylor in scientific management.They made their
contributions through study of motion and fatigue using fatigue and motion pictures camera to
find the most economic way of bricklaying.

They classified all movements employed in industrial work into 17 basic types called ‘therbligs’
and provided a shorthand symbol for each so that each analyst could easily and quickly jot down
each motion as he observed the work in action.

According to them this raised the workers morale not only because their obvious physical
benefits but because they demonstrated management concern for workers.

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They developed three position plan (3 position plan) to serve as an employee development

In this program, an employee will be doing the job, preparing for promotion and training
somebody to take over from him. This would reduce the time wasted in moving from one
position to another.

The two emphasized the application of scientific management and they argued that it is not the
monotony of work that causes dissatisfaction but it is the manager’s lack of interest.

They argued that if managers are to manage workers, then, they must first understand them.

Benefits or contributions of the scientific school

 It called for research in management practices.

 It led to improvement in working methods which in turn led to increase in productivity.

 It enabled employees to be paid by results and to take advantage of incentives.

 It stimulated the management into adopting a more positive role in leadership.

 The rational approach to organization of work enabled tasks to be measured with more
accuracy.

 It also made the management aware that the physical movement of tools that are used in a
given task can be made more efficient.

 It provided the foundation upon which modern work study can be based on.

Limitations

 It led to division of work which with time can be quite boring.

 Workers are supposed to follow set methods and procedures without questioning and this
limited their creativity and innovation.
 It put planning and control at the work place in the hands of management and this isolated the
workers.
 It encourages a carrot and stick approach to the motivation of employees by linking g/pegging
pay to output. I.e. pay is strictly geared towards output.
 It ruled out any realistic bargaining about wage rate since every job was measured, timed and
rated scientifically.
 It led to the employees overworking themselves so that they could increase their earnings.

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THE BUREAUCRATIC SCHOOL OF THOUGHT (MaxWeber)

Max Weber was the pioneer behind this school. He was a German sociologist who reacted to the abuse
of power by people in managerial positions. To reduce this, he recommended an organization system
that would be run by rules and regulations commonly known as bureaucracy.

Bureaucracy is a form of organization that emphasis on order, system rationality, uniformity and
consistency.

He proposed the following bureaucratic principles

 Hierarchy of authority. There is clearly defined hierarchy of authority involving superior

subordinate relationship and a chain of command.
 Division of labor and specialization. There is clear cut division of work based on competence
and functional specialization. This helps ensure that there is order which is one of the main
concerns of bureaucracy.
 Separation of management from owners. The ownership should be separated from
management. This will ensure that the organization is highly formalized.
 Impersonal relationship between organization members. Relationships existing in the
organization should be strictly, official. The managers should relate to the subordinates in his
capacity as the authority and never as a friend. This will ensure objectivity and impartiality
when it comes to decision making.
 Standardization of methods. He proposed a system of work procedures involving
standardization of methods. This will reduce bias in decision making.
 Merit based employee selection and tenure. Selection should be on merit. Thus when you get
it you deserve it.
 Maintenance of written records, communication and rules. Everything should be documented.
 Appointment of officials.
In a bureaucratic organization officials are appointed not elected.

Advantages of bureaucracy

1. There is division of labor which leads to increased efficiency.

2. There is consistence, predictability and order.
3. Division of labor eliminates conflicting job duties and responsibilities.
4. High level of discipline saves management time.
5. Bias is eliminated.
6. Less time is wasted in decision making since policies are well laid down and managers imply
make reference o the policies.
7. Merit based employee selection ensures the organization is staffed with competent workers and
this increased productivity.
8. Avoids irrational decision making. Managers make logical decisions i.e. uniformity of decisions
and actions.
Limitations of bureaucracy

 The principles are difficult to change to adapt to new circumstances. i,e rigidity
 It does not give room for participative management. Employees have no say.

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  Rules are taken to be too important and this makes them an obstacle to efficiency and
creativity.
 Decision making is too rigid since it is programmed hence discouraging search for other
alternatives and this kills creativity and innovation.
 It assumes that people generally obey the rules and it fails to see the fact that people are
capable of going against the rules.
 The rigid behavior is the organization damages relations between the organization and
customers because they do not get tailor made services but have to accept the standard set
within the rules. i.e lengthy procedures which may lead to waste of time.
 It looks at man as a rational economic being and ignores the psychological aspects. Man is
therefore seen as being motivated purely by economic incentives and nothing else.

THE NEOCLASSICAL THEORY OR SCHOOL OF THOUGHT

While the classical theory was more concerned with the mechanics and the structure of the
organization, the neo classical school of thought was concerned with the human factor in the
organization. That is people and their relationship in the organization.

The neo classical approach is divided into two

 The Human Relation school

 The Behavioural school

The Human Relations School

The pioneers behind this school include Mary Follet Parker and Elton Mayo

Mary Follet Parker

Contribution

 She recognized the potential important of the individual but advocated that no one could
become a whole person except by being a member of a group
 She also believed that a natural relationship need to exist between both managers who
give order and subordinates who take order
she believed that management and labour should be one group
.
Elton Mayo
He is referred to as the father of human relation movement. His focus was psychological satisfaction of
employees. He described how managers should interact with their employees so as to improve morale
as much as efficiency. He suggested that managers need to know why workers behave in a certain ay
and what they can do in order to create a good working relationship with the employees. For this

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reason , he and others carried out experiments in the early 1920s and 1930s at the Hawthorne
Electricity Company and pointed out new approaches on the problems of productivity.

He conducted experiments at Hawthorne Electrical Company in Chicago. His carried out four
experiments.

These are

 Illumination experiment
 Relay assembly test room
 Interview studies
 Observation studies

Contribution of the human relations school

 Individual workers cannot be treated in isolation but must be seen as members of a group
 The need to belong to a group and have status in that group is more important than
monetary incentives or good working conditions.
 Informal groups at work exercise a strong influence over the behavior of the workers.
 Supervisors need to be aware of employees’ social needs and cater for them if workers
are to collaborate.
 Employee centered, democratic an participative supervisor is more effective than task
oriented leadership.

Limitations of the school

 The human relations school emphasis much on the importance of workers and ignored
other variables such as structure of the organization, technology in use, authority and
responsibility etc.
 The believe that an organization can be turned into one big family where it is always
possible to find a solution which satisfied everybody is not correct because an
organization is made up of a number of diverse social groups.
 It assumed that satisfying workers is highly productive but this is not always true.
 In viewing people as the most important organizational variable, it committed the mistake
by earlier theorist of suggesting one best way of managing

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BEHAVIOURAL THEORIES

These theories were concerned with human behaviour. i.e. the why of human behaviour. They
recognized that human behaviour can be explained by the unmet needs that a man would be striving to
satisfy. There are several theories among them

Abraham Maslow - Hierarchy of needs

Mac Gregor - Theory X and Y

Hertzberg Two Factor Theory

Abraham Maslow hierarchy of needs theory

Abraham Maslow argued that human behavior can explained by the needs they struggle to satisfy. The
needs of human beings can be arranged in the form of a hierarchy and man will progress upwards
through a hierarchy. Needs and wants are not at the same level and satisfaction of lower level needs
leads to the emergence of a high level need. A lower level need must be satisfied before a higher level
need. Once a need is satisfied, it ceases to be a motivator.

Human need occur in a sequence according to a certain hierarchy as shown below:

 Self actualization
 Self esteem
 Ego needs
 Social needs
 Safety and security
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  Physiological need//basic needs-food, clothing, shelter

Physiological needs

These are basic needs such as food, shelter, and clothing. A man at this level will not be motivated by
anything else until these needs are met. Managers can motivate workers at this level by providing meals
at work place, housing quarters, uniforms etc.,

Safety/security

Every human being requires to be safe and secure. Protection from danger is important. Employees
need physical and economic security. Managers can motivate workers at this level by ensuring that the
environment is safe. Hiring workers on permanent terms, establishing a pension fund for workers and
providing job security.

Social needs

This is the need to belong and be associated .

The desire to love and be loved and to get a sense of belongingness. Workers can be motivated at this
level by being allowed to from informal groups, creating a family environment at the work place etc.

Self esteem/ego needs

These relate, to the desire to be esteemed by other and took esteem self. Workers can be given big
cars, big titles, credit cards, carpeted offices, given challenging work so they can derive a sense of
achievement, recognizing performance.

Self actualization

This is the highest order need and will only emerge after all other needs below the hierarchy have been
satisfied. It’s the desire to exploit ones full potential and to live ones live dream. Managers can
motivate workers who are at this level by creating an environment where they can explore themselves,
discover their potential and exploit them. E.g. firms can facilitate this by creating a research and
development dept.

Mac Gregory X and Y Theory

He Made the following assumptions

Theory Y assumes that

 For most people work is as normal as play or rest.

 Threat of punishment and external control are not the only means of making people work.
 Committed people are self-motivated and self-directed
 Under the right conditions the average person will seek and like responsibility

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  The ability to think creatively, to innovate and solve problems are widely distributed among
people
 Commitment to objectives is a foundation for rewards associated with their achievement
(particularly rewards that satisfy esteem and self actualization needs)

Theory Y assumes that

 The average person is lazy and has a natural dislike of work and regards it only as necessary for
survival
 Most people must be forced, controlled, directed and threatened with punishment if the
organization is to achieve its objectives
 The average person avoids responsibility, prefers to be directed, lack ambition and values
security.
 An average man has no self drive and lacks initiative.
 Motivation occurs only at the physiological and security levels.

Fredrick Hertzberg two factor theory or Hygiene motivation theory

Hertzberg developed the two factor theory engineers. From the study he discovered that satisfaction is
not the opposite of dissatisfaction, neither is demonization the opposite of motivation. This is because
he realized that there are certain factors that lead to job satisfaction while others lead to dissatisfaction.
The factors leading to job satisfaction are called motivator/growth factors while those leading to
dissatisfaction are called dissatisfies.

Factors causing satisfaction

He called these factors satisfiers or motivators (also growth factors). These factors include:

 Achievement
 Recognition
 Responsibility
 Advance on the job
 The work itself
 Growth

Factors causing dissatisfaction

The factors when not provided in sufficient quantity will cause the employee to be dissatisfied with the
work When provided in sufficient quality, they will only help to avoid dissatisfaction with job but will
not necessary motivate. They include

 Salary
 Job security
 Working conditions

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  Status
 Company policies and administration
 Supervision
 Quality of interpersonal relationship

MODERN PERSPECTIVES TO MANAGEMENT

Quantitative Management

The approach emphasizes the use of mathematics, statistics and information aids to support managerial
decision making and organization effectiveness. Three main branches have evolved. Namely

Management science or mathematical approach management

This is an approach aimed at increasing decision making effectiveness through use of sophisticated
mathematical models and statistical methods. Another name commonly used for management science
is operations research. E.g. linear programming, queuing or waiting line, routines or distribution models
etc.

Operations management

This is primarily used for managing the production and delivery of an organizations products and
services. It includes such areas as inventory management, work scheduling, production planning,
facilities location and design and quality assurance..

Management Information System

This field of management focuses on designing and implementing computer based information system
for use by management. Such systems change raw data into information that is useful to various levels
of management.

Contemporary management perspectives

The period runs from 1960s to date. Several theories have been developed

 Systems theory
 Contingency theory

Systems approach

This approach views the organization as system where a system is defined as a group of interrelated
parts that function as a whole to achieve a common purpose.

The approach aims at identifying the nature of the relationships among the various components of the
organization. The organization is regarded as a large system while the components are considered as the
subsystems.
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The focus must be on the total system rather than an individual subsystem the reason being that the
subsystems are important.

Managers therefore must stop analyzing problems in isolation but instead they should analyse the
problems from a holistic approach.

A system can be closed or open.

Open system

It interacts with the environment. i.e. it exchanges information energy and other materials within the
environment. For an open system to survive, it must import sufficient inputs (feedback) from the
environment. This enables it to maintain continued existence. An open system is flexible and adaptive
simply because it interacts with the environment.

Closed system

This does not interact with the environment, factor that makes it subject to entropy. i.e. the tendency to
run or break down. A closed system is not flexible or adaptive. Instead it is self-reliant, self-regulating
and self-contained. It has no time for the environment. It has an inbuilt system that regulates it
existence and gets little feedback from the environment.

All organization systems operate on the basis of four elements

Inputs - These could be the physical, human, finance or transformational resources that the organization
uses to produces goods and services.

Transformational process – This is the technology organizations use to transform or change inputs to
outputs.

Output - This refers to the goods and services that the organization offers to its customers or
environment.

Feedback – This refers to the knowledge of results or outcome.

Main characteristics of systems

 Every system is composed of many subsystems which are continually interacting with each other
 Subsystems are related in such a manner that a change in one system will affect change in
others.
 Every system has a specific purpose to which its parts and systems contribute to achieve.
 Every entity of the system receives information or energy from other parts within the system
and from the systems environment.
 Every entity processes this information in its own way and sends it output to the rest of the
system and to the external world.
 A system has a tendency to remain in equilibrium by maintaining a balance among its various
forces operating within and among it.

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  A system cannot exist in isolation. It must get input from some other system and its output
become inputs to some other systems.
Contingency theory
The theory argues that there is no one set of rules or method of management that is applicable to all
situations. Rather appropriate management action depends on the situation or contingency factors.

Every situation that a manager will face will be somewhat different and therefore will require different
reactions. The main contingency variables will include

 The environment
 The strategy of the firm
 The technology in use by the firm
 The size of the organization
 The culture of the firm
Thus situational approach requires that a manager diagnose the characteristics of the individual or
group involved, analyze the organization culture, organization process, and diagnose his or her own
characteristics and that of the situation before deciding on the best course of action.

Features of contingency approach

 It is situational oriented and the situations may be different.

 In order to tackle situations efficiently, management techniques and tools are prepared based
on situations at hand. The reason being different situations require different managerial
approach.
 The environment of the organization is ever changing and therefore provides different
situations.
 The management practices should meet the requirements of the situation.
 Success in management depends on the ability to cope up with management of the
environment and the manager must learn to anticipate the environmental changes.
 There is need to examine the relationship between the internal and external environment which
may result in different situations.

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BUSINESS ENVIRONMENT

Definition of environment

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This refers to the surroundings, circumstances and influences on the individual or organizations. The
effect of the environment can either be positive i.e. beneficial or negative

While managers exercise power their authority is always limited by the environment. Thus
organizations must adjust to the environment in which they exist.

Internal environment

Consists of all those factors, forces, and variables that are within the organization and affect the firm’s
ability to achieve its objectives, activities and existence.

The analysis will help managers identify the strengths and weaknesses of the firm. A strength is
anything within the firm favouring it. Strengths are also referred to as competencies.

Weaknesses refer to anything within the entity that disfavors the organization or puts it at a
disadvantage.

The following factors constitute the internal environment

Resources within the organization

The resources are always limited and the organization must make good use of what ever is available. It
should be able to regulate the resources within the organization e.g how much capital employ, how
mayn people to employ and with what qualifications and experience, the raw materials to use and the

An organization with enough resources has the advantage of utilizing the latest technology, acquiring
the best quality materials and giving proper financial rewards to employees to keep them motivated.
Enough finances will enable the firm to expand and also carry out research and development

Employees

Managers may be limited by personnel within the organization who may not have the necessary skills to
carry out a planned activity. When the employees have the right skills and attitude, they help the
organization achieve its objectives.

Policies, procedures rules and strategies

These are predetermined and places limits on what an organization can do or not do. E.g. a policy
specifying that all sales should be made to wholesales tells managers that sales will not be made to the
final consumers at all or rules against members of the same family working in the same organization.

Every organization sets them according to its needs.

Organization charters and guidelines

Many organizations have written documents e,g manuals that spell out/state what the organization is,
how it is expected to function and what limits are set on its activities.

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Culture

Every organization has got its own culture that differentiates it from others. It consists of norms and
beliefs that are held by the organization. It defines the unique ways of how things will always be done in
the organization

Management/leadership style

There are various levels of management each with its own task to carry out. E.g Policies procedures and
rules are made by top level management. They also develop the strategies used to achieve organization
objectives. By so doing, the top level managers dictate what lower level manager can or cannot do
because owner level managers have a responsibility to implement strategies made by top management.

The management style used by top management can influence the kind of decisions made.

Time: Time well utilized ensures that the organization does not incur losses associated with time
wastage.

External environment

The external environment consists of those factors that are outside the control of the manager but
which nevertheless affect managerial decision making.

Analysis of the external environment will help managers identify the opportunities and threats. An
opportunity refers to anything outside the organization favoring the organization or offering a chance to
the organization to exceed its objectives.

A threat on the other hand, refers to anything outside the organization disfavoring it or putting it at a
disadvantage

The following are the external factors that affect an organisation

 Political
 legal factors
 Economic
 Social-cultural
 Technological
 Ecological

Political environment

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The government of the day can provide a stable or unstable environment. E.g the post election crisis of
2008 caused political instability and many organizations had to close down. if a country is politically
stable, investors are willing to put their money in the country.

Legal environment

The laws made in a country affects a business operations e.g. tax laws, interest law s, gender issues,
discrimination , licensing, health etc. Managers must ensure that the organization operates within the
legal framework of the country in which they are doing business. A business can be closed down if it
does not operate within the law.

Economic environment

These are factors that affect the cost of operations and the level of profits. It is the overall wealth of an
economic system in which the company operators. It includes ;

 Inflation
 Interest rates
 Availability of capital
 Taxation levels
 Exchange rates
 Economic growth rates
 Distribution of income
 Regional development support
e.g. during inflation, firms pay more for raw materials, interest rates determine how much it will cost
the organization to borrow, unemployment influences supply of labour etc. Each of these conditions has
certain consequences for the organization.

Social-cultural environment

It provides the system of values for the society which in turn affects the functioning of the business.

This environment is made up of customs, values and traditions in which the company operates. It also
includes:

 Norms
 Tastes and preferences
 Fashion
 Education and education levels
 Gender issues etc
The above environment may be beyond the control of the management.

Technological environment

It consists of systems and procedures as well as methods that are used by a company to convert
resources to make goods. It nature and availability come from the environment. Changes in technology

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are dynamic and take place every day therefore affecting the products, the production methods, the
systems in use, quality and quantity and time taken to produce goods and services.

An organization therefore is forced to adjust its technologhy to fit the changes that might be taking
place. If it does not it will be rendered irrelevant. E.g. some firms have been slow to embrace
technological developments have been thrown out of business or are incurring much high costs and
there reducing their competitiveness.

Ecological Environment

The firm will obtain raw materials from the environment therefore there is need to protect and
conserve it. It should protect the environment and not pollute it. It should use packaging materials that
are recyclable and biodegradable. It should dispose of it waste in an acceptable and hygienic way and
should not pollute the environment in any way.

Competitive environment

This environment has a great effect upon the growth and development of a business. Competitors pose
challenges through their actions. Competitions place restrictions on what an organization can do ro not
do. Managers should be alert to the moves taken by their competitors. They should carry out research
about new products, advertising and sales promotion etc. they should also understand the strengths
and weaknesses of their competitors and respond to the moves made by their competitors.

Social cultural factors

This includes customs, values and traditions in which the company operates. Its also includes norms and
attitudes in the society, tastes and preferences, fashion, education levels, population growth rate,
gender issues etc.

Global environment

The world has become a common market place where exchange of information has become improved.
This environment therefore cannot be ignored because it has a direct effect upon the local businesses.
Importation of goods and services has had a major effect on the performance of the local industry.

An organization must understand its environment even though changes keep on taking place. It must
also be able to adjust to the environmental demands both internal and external so as to cope with
changes

Regular monitoring of the environment must take place in order to understand the changes in the
environment .

An organization must understand its strengths as well as weaknesses in trying to cope with the
environment.

Where there is a change in an environment an organization has to change. E.g

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  it can change its productions or production methods
 It can change its service
 It can change its structure
 It can revise its policies and program
 It can change its pricing system.
 It can change the caliber and number of its employees

BUSINESS /CORPORATE SOCIAL RESPONSIBILITY

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Stakeholders of a firm

A stakeholder is anyone who has potential to affect the well being of the firm, is affected by the
activities of firm and has any sort of interest financial or otherwise. A firm has internal and external
stakeholders

Corporate social responsibility

This can be defined as the infelt obligation of managers of firms acting in their official capacity to
contribute and enhance the well being of various stakeholders other than the shareholders.

It involves the managers making deliberate efforts to enhance the well being of various stakeholders
and refraining from avoiding any actions that can harm them. It is a management infelt obligation to do
above the minimum requirement of the law and contribute to the well being of various stakeholder and
not just the shareholders.

Social responsibility is meant to create a good image, good will and mutual understanding.

Organizations that are involved in social responsibility, their products are likely to be preferred by the
customers as compared to those that do not contribute to social responsibility. This concept has gotten
support and opposition from different quarters of business management professionals.

Areas of corporate social responsibility

Social responsibility toward employees

 Give fair remunerations

 Provide Fringe benefits like medical cover, free lunch
 Operate employee pension schemes
 Good working conditions-safe working conditions and conducive working environment.
 Provide protective garments like gumboots, gloves, aprons, masks etc
 Provide Better terms of service
 Providing them with economic security-security of job and constant flow of income, permanent
and pensionable terms, no threats of being sacked.
 Sponsored holidays
 Allowing them to form informal groups
 Practicing equity-no favoritism or nepotism
 Treat them with dignity

Customers

 Provide quality products

 Charge fair prices
 Ensure a steady supply of goods and services

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  Offering after sales service
 Giving right information about products not misleading information
 Making full disclosure of side effects of the contents
 of the product and ay likely negative effects.
 Giving credit facilities
 Provide advice on how the product is supposed to be used.


Suppliers and lenders

 Pay them promptly

 Treat them with dignity and respect
 Fair awarding of tenders
 Engage in fair negotiations
 Ensuring that contracts are not terminated before period expires

Government

 Pay taxes and not to avoid or evade tax

 Operate within the law. Do not engage in illegal business practice but comply with the law of
the land
 Contributing to the development of the country.

Community/society

 Giving to charity
 Responsible disposal of waste
 Providing employment to the locals.
 Improve the physical infrastructure e.g. recreational facilities
 Dealing fairly with communities
 Obtaining resources/raw materials from communities where they are available.

Responsibility to the environment

 Responsible disposal of waste.

 Protection of the environment e.g. planting trees and preventing soil erosion
 Use environmental friendly materials e.g. biodegradable materials

Distributors

 Fair commission
 Support services
 Offer transport

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  Communication any information regarding and inconvenience that a distributor may suffer.

Arguments for social responsibility /why it should involve itself

 A business is a part of the society and therefore it is expected to make a contribution

towards society.
 Since businesses also create some problems e.g pollution they should also help solve
them.
 Organizations have enough resources and should use some of the resources to help the
society
 Business, the government and the general public are partners in the society and they
should join hands in helping the society.
 Benefits from social responsibility will finally directly or indirectly go back to the
business.
 Businesses have many resources including finances, talented managers and specialists
and they use these to solve some for the problems of society.
 It is better to prevent social problems than to cure them eg. It is easier to employ
individuals than to cope with social unrest e,g street children. That’s why a business must
get involved before things get bad.
 Social involvement creates a favorable public image and thus a firm may attract
customers, employees and investors.
 A firm must live up to the society expectations. Organizations can only survive if the
society considers them to be suitable/fit.

Arguments against social responsibility

 The primary/main objective of a business is to make profit. Involvement in social

responsibility might reduce this profit.
 Social responsibility activities give corporations too much power and influence.
 In most cases there is lack of accountability for results of a business social responsibility
activities
 Organizations may lack the necessary expertise to be socially responsible.
 Conflicts on how money should be set aside for social responsibility should be used could
arise.
 Social involvement could result to extra cost for the business which it may try to pass on
to the customers through higher prices.
 It is a time consuming activity.

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BUSINESS ETHICS

ETHICS is the discipline that deals with what is good and bad, right and wrong, with morals duty and
obligation

Ethics are the standards of conduct or morals that a person sets for himself or herself regarding what
good or what’s bad, right or wrong.

Ethics often go beyond the law and are based on expectations of norms of the society, thus an action
can be legal and ethical or an action can be legal and unethical. Organizations play out different
functions and roles and in doing so they make choices between goals. The choices made may affect
employees, customers and others who may have an interest in the organization. Managers therefore
have to decide who has the right or who has the right to what and when. To do this they need to be
guided by ethics.

Managerial ethics are standards of conduct and moral judgement used by managers of organizations in
carrying out their business.

Management may face many ethical dilemmas especially in institutions that may seem right but which
may be conflicting.

Examples of unethical behavior

 Underpaying workers such that the wages are below subsistence levels., oppressing them
or mistreating them.
 Tribalism, nepotism or favoritism, discrimination.
 Sexual harassment
 Accepting bribes and kickbacks.
 Falsification of records

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  Making misleading claims about a product.
 Pollution of the environment
 Behaving unprofessionally. E.g teacher have carnal knowledge with their students
 Stealing from the firm-time. Money
 Tax evasion.
 Illegal business and political activities.
 Disclosure of the organizations secret to outsiders
 Payment of bribes to secure contracts.
 Payment of excessive remunerations to senior directors including large bonuses.

Factors that determine an individual’s ethics

 Family influence: a family plays a big role in determining an individual’s belief in

determining what right or wrong.
 Peer influence e.g friends
 Past experiences behaviour may be influenced by the past influence
 Situational factors e.g past events may change an individual
 Law and government
 Holy books e.g bible

Benefits of practicing ethical behavior

 The firm can built public trust which creates a good corporate favorable image.
 It can avoid fines and other legal expenses.
 The firm can gain business from customers who support and appreciate its policies.
 It can develop a good relationship with the people whom it deals e.g. employees,
customers, suppliers, distributors, labour unions,
 The organization is likely to grow and expand.
 It ensures unity of purpose.
 Helps to reduce conflicts as it ensures that the objectives of the organization are met.
 It safeguards the organization assets

23
PLANNING

Planning involves determining in the present what will be done in the future.

It is deciding in the present what will be done, when it will be done, how it will be done and why. i.e
making decisions on what action should be taken.

It involves coming up with future causes of action.

It is a systematic thought that precedes action.

It involves

Setting of objective, deciding the action to be taken to achieve them and deciding who will be
responsible for the action needed

Basically planning gives answers to the following questions

 Where are we now?

 Where do we want to going?
 Where are we going?
 How do we get there?
A plan is a blue print or framework used to describe how the organization is expected to achieve its
goals.

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Planning is simply the process of determining which path among several the organization wishes to
follow.

When you plan you come up with a map of where you want to go.

Importance of planning

It facilitates the achievement of the organization purpose and goals.

It gives direction to the activities of the oranisation. Without plans peoplewouldnot know what is
expected of them.

It facilitates coordination. Through planning, it si possible to divided labour, allocate resources to ensure
there is harmony between the ……………………….

It facilitates control because plans act as standard against which performance can be measure or
evaluated.

Planning guides decision making. Sound planning avoids hasty decisions and the plans established are
used as a point of reference during decision making.

Planning facilitates optimal allocation of resources among competing needs.

Planning precede/comes before all other managerial functions. It is impossible to execute other
managerial functions effectively without planning.

It provides a basis that helps individuals to work together in harmony.

Planning reduces uncertainty and risks. This is because mangers will predict circumstances in the future
and will not leave anything to chance and will prepare well.

Types of plans

Plans can be classified on the basis of organizational level and on the basis of time.

Classification of time on the basis of organizational level

Strategic Plans

 Develop by the top management

 They are broad types of plans
 They guide the general direction of the firm.
 They are developed from the mak or goals of the firm
 They indicate what business the firm is in or intend to be
 They are large scale and cover all areas of the organization
 They have an extended time frame(over ten years)

Tactical plans
25
  They are concerned with how to implement the strategic plans
 They focus on people and actions

Operational plans

 They have the narrowest focus

 Have shortest time frame
 Covers routine situations, identify projects, rules and regulations

Classification of plans on the basis of organizational level

Long range plans

They cover

They are developed by top level managers

They are mostly associated with activities like major expansion of products or facilities

Medium range plans

They take about one to five years

These plans are developed by to and middle level managers.

They help to achieve the long range plans.

Short range plans

They cover a time period of one year or less.

They focus on the day to day activities

They help in evaluating the progress towards the achievement of intermediate and long range plans

Characteristics of a good plan

 It should be simple to understand and interpret.

 It should be based on clearly defined objective
 It should be able to define clear actions and standards
 It should make best use of available resources.
 They should lead the organization towards success.
 They should be realistic and therefore achievable
 They should be flexible to accommodate changes that are likely to occur
 They should be stable because frequent changes can bring about problems

26
Principles observed when planning

 Plans should be based on clearly defined objectives

 All information available must be used when planning. This information can be obtained
through government institutions, interview, questionnaires, journals, newspapers etc
 Planning should be practical because if only theoretical it will ot work towards achieving
the desired goals and objectives
 It should take into account the position of existing organization eg. Its strengths and
weaknesses.
 It should be based upon simple plans which should be easy to understand.
 It should be flexible to ensure that if changes take palce, they can easily be
accommodated.

Planning process: the starting for the process of planning is the determination of the organization
mission which defines the purpose of the organizational existence.

It states the strategic goals and the strategic plans to achieve the strategic goals. Strategic goals define
where there organization should move at some point in the future. They are established by top
management and reflect the intention of the organization. Strategic goals and strategic pans become
the primary establishment of tactical goals

Tactical goals are established by middle level managers and focus on how the organization will achieve
the strategic goals. Tactical goals help determine the operational goals. Operational goals defines the
specific results to be accomplish by the department.

Organizational goals and plans at all three levels of management serve as a source of feedback for future
planning of activities

Steps in the planning process

Barriers to effective planning

 Planning suffers from the following limitations

 Planning is based on forecasts which are never one hundred per cent accurate.

27
  Planning is time consuming and expensive process
 Planning may result to inflexibility and rigidity
 Planning may create a false sense of security in the organization. E.g a manager may feel
that all problems will be solve once the plans are put into action but in reality this is not
always the case.
 Effective planning may be affected by external factors which may be beyond the control
of organizations. E.g government control, natural calamities may occur etc.
 Planning may involve change and due to fear of unknown security and other reasons
people might resist the change.

Overcoming the problems

 It should not be left to chance and a conducive climate should be created.

 It must start at the top. Support by top management is important for effective planning.
 Planning must be a well organised process.
 Participation by parties to be affected is also important
 It should also be time specific.
 Long range planning must be integrated with the short range planning..
 It must include awareness and acceptance of change as a necessary ingredient/assistance.
 To make planning effective, proper communication must be maintained
continuous monitoring of the environment must be adopted.
 Plans should be flexible to allow for change so as to adopt to the changing environment.
 Managers need to be educated and rained on the act of planning and the need for planning
should be emphasized.
 The plans should be reviewed regularly.

Elements in planning

Mission and vision of the firm

Vision and mission provide direction and the scope for the firm’s activities. They also provide guidance
for firm’s strategic objectives and strategies.

Vision

It addresses the question of where the firm wants to be “where do we want to be”. This is the first
question to be asked in a strategic planning process. It refers to what an organization is trying to do or
to be what it aspires to be in future.

It is the firms ideal future. This dream reflects the best of an organization.

Mission

It answers the question “What is our business. It is the main reason as to why the organization exists. It
states where the organization is now, where it wants to go and how it intends to get there.

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While vision focuses on future a mission statement is concerned with the present.

Forecasting

It is the process of estimating the relevant event of the future based on analysis of the present and
present behavior. It helps in the development of plans which in turn help in achieving the objectives. It
makes the management think ahead by concentration after the future.

Factors affecting forecasting

These factors are internal and external

Internal factors

Leadership
Employees
Raw materials
Fianance
Culture of the organization
External

Political
Ecological
Social
Technology
Economic
Legal
Competition
Global

Forecasting

 Planning is based on accurate forecasting

 Business objectives are attained upon carrying out accurate forecasting
 It provides importance for effective planning
 It bring a lot of coordination when people of different levels participate in forecasting
process
 It helps in controlling the business exercise
 It helps the managers no to operate on guess work.

Forecasting methods

There are two methods

Time series analysis

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Qualitative analysis

Time series analysis

It is a procedure which identifies information that forms pattern over a given period of time.

A projection is made through past experience. Trends are projected into the future.

Qualitative analysis

It is used when past data is not available for example: when new product is introduced into the market,
first data may not be available. In this case the customers or senior executive may be relied upon for
asstance e.g theirliikes, dislikes , expectation etc

Limitations of forecasting

 It is based on assumption which may not always be true

 It is time consuming and costly
 It indicates future events which may not be true

Goals and objectives

Goals

 It is a statement of where the organization wants to be at specific time in the futre.

 It is therefore a target that the organization wants to hit.
 Goals provide a clear purpose and direction for the organization activities.
 goals can be looked at as a result that an organization want to achieve.
 Every organsation must have a goal.

Purpose of goals

 It provides employees with a sense of direction concerning where the organization is

headed.
 Goals enable managers to use the resources available better.
 Provides basis for achieving coordination
 They help in evaluation of performance.

Objectives

These are goals, aims or purpose that the organization wishes to achieve over a certain period of time.
They are related to the future and they are an essential part of planning.

30
They are set by the top management and has a great influence on policy, leadership, control etc. their
determination is the responsibility of the top management and has a great influence on policy,
leadership control Etc.

Examples of objective

 To conduct research
 To produces goods which are not only beneficial to our customers but also at a fair price.
 to provide economic security to employees.
 To contribute towards general welfare of society.
Types of objectives

Objectives may be general or specific

General objectives

 They are determined by the board of directors

 They are concerned with the present and future of the business
 They are quite general
Specific objectives

 They have a time limit

 They are development under the framework of general objectives
 The time limit may focus on ding certain activities at a certain time.
they apply to a particular unit of an organization.
Feature of objectives

 They are multiple (many) in nature.

 They should be arranged in a hierarchy according to their importance.
 They vary in time span i.e. some are long term and others are short term.
 They are basic plans and provide the bases for all other plans.
Advantages of objectives

 They contain basic ideal concerning what the organization is trying to achieve.,
 They provide a basis for directing and guiding the enterprise.
 They provide ………..which enable effort to be observed and aided
 It helps to motivate people
 Provides sense of unity to various groups in the organization.
Objectives can be set in the following areas

 Productivity
 Profitability
 Workers performance
 Marking
 Managers performance and development
 Innovation

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  Physical and financial resource
 Social responsibilities

Management by objectives

It is a process that was developed to facilitate goal setting. It is a procedure used in planning. Under
MBO, the managers and subordinates anlyse the tasks to be achieved and specific targets and time
limits are set.

The manager and subordinates therefore work together in setting the subordinate goals. It links the
goals of the individual to those of the firm as a whole.

MBO starts with goal setting at the top and these are reflected downward throughout the organization.

HOW MBO works

 The process starts at the top of the organization wti the top management setting the
overall goals.
 The goals are then communicated to employees at all levels.
 Each employee then meets with his supervisor to discuss the supervisors goals and how
the employee can help achieve the goals.
 The two, manager and subordinate than agree on the goals to achieve.
 The superior then advices the employee on how to tackle the goals.
 The two then decide on what resources that ought to be used.
 The employees and manager hold periodic meeting to assess the process. At the end of
specified period, they hold a meeting to evaluate the degree of goal achievement.
 If the employee has succeeded, he is rewarded and the start the process again for the
goals of the next period.
 The manager and the subordinate therefore work together in deciding what to achieve and
how to achieve what is expected.
Advantages of MBO

 If well implemented, it can result in much improvement

 Managers are forced to clarify organization goals and objectives.
 It encourages employees to commit themselves to their goals.
 All managers have a clear idea of the important areas of their work and standards that are
required.
 Ir results in employees participation in decision making process which in turn lead to
commitment of decision made.
 It improves morale and motivation.
 It helps to improve the communication proves
 The performance of staff can be assumed and need of improvement highlighted.

Weaknesses of MBO

 It is a time consuming activity.

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  It is very expensive and involves a lot of paper work.
 Conditions of the environment change and it tends to affect MBO process.
 If not properly implemented subordinates can reject it easily.
 It may lead to inflexibility because the subordinates may stick to goals that have been set
even when the conditions have changed.
 Review of the process may be ineffective.

Policy

These are general guidelines governing relatively important actions within an organization. They help
decide issues before they become problems.

They are directives that are issued from higher authority and provide continuous framework for the
conduct of individuals in a business. They provide managers with broad guidelines when dealing with
important areas in decision making.

They express the means by which objectives are to be achieved and they ensure that decisions are
consistent. E.g prices to be charged, markets to be served.

They may take the form of statement or word of mouth where people are informed on how they should
act in specified circumstances.

Formulation of policy

This may begin at the level of top management and it may flow downwards or upwards but generally
policy may be formed by board of directors or senior management.

They may be passed up by chain of command until

They train subordinates to handle responsibility

Disadvantage

 It results to rigidity and may be a problem when changes are called for.
 They do not allow creativity and innovation.

Examples of policies

Product policies

Involves deciding upon the product to make and depends on factors such as marketing and finance

Production policy

Deals with what to make or buy.

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Marketing policy
Involves determining the distribution channel, price structure, type of advertising and sales promotion
to be made.

Purchasing policy:

It involves deciding what is going to be bought and where it will be bought

Human Resource Policy

Involves method of training, education, union relations, pension, skills and others.

Social Responsibility Policy

Involves an indication to what extent an organization involves itself in social responsibility affairs.

Advantages of policies

 It ensures consistency in decision making

 Misunderstandings are fewer since everybody know what is expected of everyone
 They provide uniformity in action
 They help in saving time since they avoid repeated analysis
 They train subordinates to handle responsibility.
Disadvantages

 It may result to rigidity and may problems when changes are required.
 They do not allow creativity and innovation.

Procedures

They are guidelines to an action

They define specific steps which must be followed in order to achieve particular task. E.g admission of
students
Most organizations have procedure manuals which are guide to action.

Advantages of procedures

 They can save time and other resources because steps are already known.
 It helps in training new employees
 It helps in handling emergencies.
 They create orderliness, coordination and consistency in management.
 They simplify work by eliminating unnecessary steps.
 They make managers work easy because they do not want to keep directing the subordinates.
 They ensure uniformity
 They facilitate delegation of authority and control
 They help to improve performance.

34
Requirements of sound procedures

 Should be simple to understand

 Should be in written
 Should be stated by implementation
 Should be communicated to those they affect
 Should be revised as needed
 Should be flexible and stable.
 Should be the best alternative of doing a particular activity
Demerits

 They discourage innovation and improvement in work performance

 It results in delays
 At times it might be quite forecasting\
 They inhibit logical thinking while doing the work

Rules

They prescribe how members of a group should behave.

They are necessary because there is no society or group or individual who can operate in an atmosphere
that does not have rules. They outline what should be done or not done. Failure to follow rules leads to
disciplinary action.
Rules therefore become necessary for the benefits of a group as a whole, the individual within it and the
society within which the group operates.

Advantages of rules

 They facilitate high discipline

 Enhance efficiency at work in that every employee is give task on duty and rules must be
followed in carrying out such tasks.
 Helps in coordination of activities of workers
 It standardize behavior and provide an organization uniqueness
 It provides the members with a sense of security i.e. onme knows in advance what is expected
to do or not to do
 It helps minimize accidents, breakages and claims.
Disadvantages

 It results to rigidity
 It discourages creativity and innovation.

Programs

It is a concrete scheme of action to achieve certain objectives. The lays down the exact steps that need
to be taken in order to accomplish a give objectives. It states the time to be taken for completion of
each task. E,g HIV Aids sensitization Program
35
Project

It is a one time set of activities that have a clear beginning and ending. E.g building an office block or
developing a new product. It is similar to a program but has a narrower scope/focus is very specific.

Decision making

A decision is a choice whereby a person forms a conclusion about a situation.

This represents what must or must not be done.

It is the selection of alternatives from two or more alternatives to determine an opinion or course of
action.

It is the point at which plans, policy and the objectives are translated into concrete actions.

When making a decision it is necessary that alternatives are considered. Decision making of managers
affect the organization in one way or another. There are two types of decisions.

Programmed decision

These decisions are routine or repetitive. Decisions are made over and over again.

Non programmed decisions

These are not routine or repetitive and may never occur again.

Decision making process

The following steps are followed when managers are making decisions

 Define the problem/idea/opportunity. A clear cut definition of the problem will help in
collecting the relevant data and finding the correct solution.
 Analyse the problem: the problem must be analyzed in terms of its nature, impacts,
effect etc before consideration can be made.
 Develop alternative solutions: for every problem, different alternatives may be
available and need to be developed.
 Analyzing the alternatives: Analysis and comparison of the alternatives is made and
merits and demerits of each are identified.
 Selecting the alternatives: A selection of alternatives is considered to be the best is
done noting the relevant factors.
 Implementing best alternatives: After selecting the best, implementation is done to
help in decision making process.
 Evaluation of result: It is done so as to make any adjustments where necessary.

36
Sources of information when making decisions

 Through past experience

 Through training
 Through medial i.e. billboards, TV, newspapers, magazines , journals et
 Through interviews
 Through observations
 From educational institutions e.g. colleges, universities
 From financial institutions .i.e. banks, cooperative societies, microfinance and stock
exchange
 Government institutions e.g. Kenya Bureau of standards
 Internet

Methods of collecting information

 Direct observation
 Interview
 Questionnaire
 Vision and graphical presentation of information e.g use of graphs

What affects the quality of decisions made

 Importance of the decision in that some decisions are more important than others.
 Characteristics of the organization: some organizations are keen when making decisions
while others are not..
 The personality of the decision maker influences the decision made.
 A person’s state of mind when making the decision.
 The time available when making the decision.
 The source of information when making a decision.

Budgeting as a planning tool

A budget is a plan that is quantified in monetary terms. Its is one of the tools used in budgeting.

It usually shows planned income to be generated and the expenditure to be incurred during a certain
period e.g. after a given financial year. It also includes the capital to be employed in order to attain a
given objectives.

It includes forecasting and preparing different financial statements such as balance sheet, profit and loss
account, and trading account, accounting ratios, cash flow statement etc all these facilitate planning as
well as control.

Guidelines of making an effective budget

 Budgeting must be flexible so as to allow for exchange whenever there is a need to do so.

37
  Those affecting by a budget should help in setting them up.
 Its request should be certified so that the resources are used wisely and effectively.
 It should serve as an incentive for the effective use of resources.

Advantages of budgeting

 Budgets force the managers to account for the way resources are used and how funds are
spent.
 It helps to establish target in each aspect of the company operations e.g the amount to be
paid on salaries, overheads, materials, equipment etc.
 It helps to identify those areas that can be improves. This helps in improving the
profitability and efficiency in the organization.
 It helps n improving coordination because all managers will follow the same set margins.
 It helps in control and areas of weaknesses can be improved.
 Deviation from a budget automatically indicates the need for corrective action.

Problems of budgeting

 It is time consuming i.e need to be rectified constantly.

 A lost of paper work is required and this is very expensive.
 Qualified personnel might be needed to make a budget and at times they are not
available.
 Changes take place and are likely to affect the budget especially if it has been set to cover
a long period of time.
 Budgetary control programs are sometimes cso detailed that they are cumbersome
meaningless and unnecessary expensive.
 Many people are resentful of the budget restrictions because of fear of iflexibility as hey
restrict the freedom of persons concerned to spend money and may be worried about
keeping within budgets than achieving objectives.
 They are based on historical trends which may not repeat in future.
 They may also be influenced by what top management would like to happen.
 Budgets are highly affected by changes in the environment and this may call for constant
adjustments.

Importance of creativity and innovation in planning

 It helps in creation of ideas.

 It helps to make own decisions without having to consult.
 Helps managers to separate themselves from the rest and become unique.
 Creativity allows for embracement of change since the world keeps on changing.
 Helps to set the path/pace for generation of new ideas in the future.
 Leadership persons today call for creativity and problem solving.

38
  When you are creative, you are your true self and you stop worrying about what other
people think about you as a manager.

Problem solving

A problem is a situation that presents difficulty. Examples of problems lack of enough resources such as
money, lack of customers, customers complaints, fast changing technology etc

Problems are at the center of what many people do at work every day. Problem solving consists of using
a variety of methods in an orderly manner so as to find solutions to problems.

 Creative thinking
 Brainstorming
 Critical thinking
 Analytical thinking-based on analyzing the issue

Problem solving method

 Define the problem

 Identify the root cause of the problem
 Generate possible solutions
 Evaluate possible alternatives
 Agree on the best solution
 Develop an action plan

39
ORGANISING

An organization exists where two or more people agree to come together and coordinate their activities
so as to achieve common objective.

Management must carry out different functions to enable the organization to achieve the objectives.

Organizing

It is the function of gathering resources, establishing orderly use of those resources and structuring tasks
to fulfill organizational plans. It is carried out after planning has been adequately done.

Guidelines for effective organization

 The line of authority should be clearly stated and should run from ktop to bottom of
organizations
 Each person in the organization should report to one boss.
 The responsibility and authority of each supervisor should be established clearly and in
writing.
 The higher managers are responsible for the acts of their subordinates.

40
  Authority and responsibility should be delegated as far down the hierarchy as possible.
This places decision making near the actual operations.
 The number of levels of management should be as few as possible.
 The span of control should be reasonable.
 The principle of specialization should be applied as much as possible.
 Organizations should be simple and flexible for easy management and quick adaptability
to changes.

Types of organizations

 Formal
 Informal

Formal organization

It is the official channel through which information passes. An organization is formal when two or more
persons consistently coordinate towards a given objective.

It comes to being when two or more people are able to communicate with one another, willing to work
together and also share a purpose.

Characteristics of formal organization

 It has official structure of rules and relationships and it is consistently planned and
deliberately created by management.
 It is based on delegation of authority.
 It is impersonal with emphasis on authority function and downward communication.
 It is pyramid shaped and bureaucratic in nature.
 Its goals, tasks and values are mainly economic oriented towards efficiency, pofuctivity,
profitability and growth.
 It has written rules and procedures.
 It can be drawn on an organization chart and guided by manuals of the organization.
 Formal authority is institutional. It attaches a position and a person exercises it by virtual
of his position.
 It has a prescribed system of behavior and rewards and penalties are given on the basis of
desired behavior.
 It is rational and created to lead organization goals .every individual belong to one work
group.

Informal organization

 It is an official and arises naturally without official arrangement of by management.

 It arises through social interaction between people.

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  It tends to be small.
it is personal with emphasis on informal relation and communication.
 It has no definite shape and there is no division of work and has no structure.
 Its tasks, goals, and values are mainly social.
 It has no place on the organization chart and manuals.
 It has no written rules and procedures.
 It arises to satisfy mans need for social satisfaction.
 It is relatively unpredictable.
 One person can be a member of several groups.
 One can be a leader of one group and a follower in another.
 It has written norms of behavior.

The informal organization operates under the umbrella of the formal.

ORGANISATION CHARTS
DEFINITION:
This is a visual or diagrammatical representation of an organization structure. It indicates the
levels of authority, the number of departments, the lines of communication, span of control and
nature of organization activities.

Features of an organization chart

 Levels of authority
 The number of departments
 Lines of communication
 Span of control
 Nature of organization activities

Types of organization charts

Vertical organization charts

This shows the organization structure in the form of a pyramid. The lines of communication
flow/proceed from top to bottom in a vertical manner.

Horizontal charts
Similar to vertical organization chart only that the line lie horizontally instead of standing in a
vertical form. The lines of authority run from left to right rather than from top to bottom.

Circular/spherical
This uses a circle to show the spheres of authority. The authority flows from the center of the
circle outwards. It is high at the centre and is reduced as one goes far from the center.

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Functions/importance of an organization chart
 It shows the organization structure at a glance.
 It shows the responsibility of each office worker
 It shows the chain of command of each worker.
 It clearly shows the lines of communication. i.e whom to consult when one has a
problem/need.
 It is used in restructuring a company in case of any changes
 It shows the relationship between the line and functional staff.

Advantages of an organization chart

 It is useful for training and induction of new staff. The can easily understand the
structure.
 It is easy to understand the organization at a glance.
 It minimizes organizational conflicts because responsibilities are fixed or well defined.
 Organization weaknesses can be displayed and rectified on the chart. E.g unattached
staff or overlapping authority so that appropriate action can be taken.
 It facilities the grading and setting of salary scales.
 It assists organization and methods (O&M) to conduct reorganization of departmental
systems of a company.
 It formalizes the position of the individual which makes it easy for them to accept their
authority.

Disadvantages of an organization chart

 It shows only a limited picture of the organization structure. i.e. it does not show the
duties and qualifications of each position and has to be supplemented by other document
such as the job description.
 It creates unjustified feeling of inferiority or superiority complex among staff and this
may be bad for the morale of staff. i.e juniors may find themselves at the bottom of the
chart.
 It only shows the formal authority and communication and does not show informal
relationships.
 It is static and inflexible and does not adopt to frequent changes in the organization.
 It may lead to misunderstanding about status if not properly drawn. E.g. where juniors
are placed above the seniors.
 It is expensive and requires the organization to set aside money, time and other resources
 It requires constant updating.

Organization structure

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Organization structure refers to the distribution of tasks and responsibilities within the organization.

It serves to indicate who is responsible to whom and or what at any level within the organization.

Line /Military

The organization is divided into department but each department is independent. The line of authority
and responsibility flows in a direct line from top to bottom. It is highest at the top and is reduced at
each level down the organization

Advantages

 It is simple to understand and operate.

 The lines of communication are clear as it follows scalar chain of command.

 Easy to supervise
 It is easy to maintain discipline as subordinates answer to only one supervisor.
 The lines of authority and responsibility are clearly defined
 Decision making is fast as departmental managers do not have to consult anybody before
making a decision.
 Departmental head are in direct control of their own departments.
 Each member of staff understands his/her position clearly and the status of other members of
staff.

Limitations

 It encourages autocratic and dictatorial leadership

 It is rigid/inflexible and tends to resist change.
 The goals of the department are considered first before the interests of the organization.
 There is no coordination between departments.
 Employees are not exposed to other departments and this may hinder job development.
 Managers are involved in empire building and this may result in leadership vacuum is an
executive dies or leaves the organization.

Functional/staff structure

The organization is divided into departments. Each department is supposed to perform a specific
function for the benefit of the whole organizations e.g. production, marketing etc. The department is
headed by a specialist.

Advantages

 There is specialization of work. This encourages staff to specialize in specific tasks.

 It is flexible and responds quickly to change
 There is better coordination between departments

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  Methods of operations are standardized within the organization
 There is good decision making as managers are experts
 There is better motivation of workers due to professional leadership.

Limitations

 It is expensive to run.
 Authority and responsibility is not well defined and this may cause confusion and dupoication of
work.
 It violates the unity of command principle because workers may report to two bosses.
 It is difficult to supervise and control because it lacks clear lines of authority.
 It can cause conflicts between line and staff managers. In case of failure it is difficult to know
who is responsible.

Line and staff structure

This is a combination of line and staff structures. The organization is divided into departments. Some
departments are independent while others are service departments. The staff officers give advice to the
line officers but they have no authority over the line.

Advantages

 It allows specialization and division of work.

 There is high quality decision making from the line and staff officers
 There is coordination between departments.
 Employees acquire a variety of skills leading to better prospects.

Limitations

 It may cause conflicts between line and staff officers which may spread to lower level employees
as they take sides.
 It is difficult to maintain accountability because line and staff officers blame each other for their
mistakes.
 It is expensive to run.
 Decision making is slow because of consultation between line and staff officers.

Committee

A committee is a group of persons to whom a specific task has been assigned. E.g a budget or staff
welfare committee. It may be permanent or ad hoc. Members of the committee deliberate/discuss
matters and then arrive at a final decision.

Advantages

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  Better decisions can be made since there is consultation among the members.
 The fear of delegating too much authority on one person is reduced.

 It is an excellent means of communication between staff and management.

 Committees may foster support for decisions- usually through the use of committees employees
are given the opportunity to participate in the decision making process as they are allowed to
represent their view points.
 Committees can lead to employees’ development. Because of the expansive contact with
people from different fields, committee member get to broaden their knowledge. Young
managers learn a lot by sitting on committees.

Limitations of committee
 Decision making is slow with many meetings leading to delays.
 The decisions made may be unrealistic because members are not experts.
 It may give too much power to the chairman of the committee who has power/right to cast
vote in one decisions.
 Decisions are likely to be the result of compromise hence they may not be taking seriously when
implementing.
 It may lead to conflicts where differences arise between committee members.
 No individual if responsible for the committee’s decision and disputes are hard to solve.
committees are expensive to run.

Ways of making committees effective

 The goals and limits of authority of the committee should be clearly specified in order to keep
the activities of the committee in focus.
 The committee should have a specific agenda to work from.
 Members of the committee should not devote/spend too much time to the committee and
forget their regular jobs
 The size of the committee should be appropriate. Small committees are suitable if matter is
highly confidential or if urgency is required and big committees are preferred if many experts
are needed and if the scope of the task is wide.
 The person heading the committee should be suited for the job i.e. the chairperson. He is the
person to set the mood and to be held accountable for the success of the committee. He should
be a person who possesses the following qualities: planning ability, objectivity, diplomacy
experience and efficiency.
 The committee should be provided with the needed or necessary information and resources to
accomplish the task. E.g. they should have the necessary staff assistance.
 The committee should be provided with realistic and reasonable deadlines for the completion of
its assignment. Frequent checks should be made on the committee’s progress to ensure that
they are still on track.
 The committee should be asked to provide final report writing and the report should be acted
upon.
 There should be an odd number of committee members to avoid deadlock on important
matters.

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Matrix organization

It’s a multiple command system type of organization that has two chains of command. The first
command is functional in which the flow of authority is vertical. The second chain is horizontal depicted
by a project team which is lead by the project or group manager who is an expert in his teams assigned
areas of specialization.

It is also known as two bosses structure because workers at the intersection of authority answer to two
bosses. The functional managers exercise authority downwards while the project managers exercise
authority across.

This type of structure is highly effective where a large number of small projects have to be completed.
It’s particularly suited to projects such as building and construction, weapon development

Advantages

 decision making is decentralized giving top management time to concentrate on strategic issues.
 Faster response to change as decisions are made at lower levels.
 Flexible use of human resources. Functional specialists can be added or reassigned.
 Efficient use of support systems such as computers, special equipment and software which can
be share d among many projects.

Disadvantages

 High administrative costs.

 Potential confusion over authority and responsibility.
 Chances of interpersonal conflicts are high.
 Excess focus on internal relationship. Individuals become preoccupied with internal relations at
the expense of clients projects or goals.
 Overemphasis on group decision making even where relatively minor decisions need to be
made.
 Possible slow response to change.
 Violates the unity of command principle.

Departmentation

Departmentation is the process of creating departments. It involves grouping individual jobs into
departments. The larger and complex organization is divided into smaller and flexible administrative
units. A department is distinctive area, unit or a sub-system of an organization over which a manager
has authority for performance of specified activities.

Basis for creating departments

 Function
 Product/services

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  Geographical or territorial
 Customer
 Process
Functional structure

Employees who are involved in the same or similar functions are grouped together. Most organizations
using this form of departmentalization end up with the four basic departments. Namely marketing,
production, finance and human resources. Can be used in all types of organizations e.g. hospitals,
professional football etc

Advantages

 There is specialization
 It is logical because it groups similar activities together.
 It contributes to organizational simplicity
 It leads to better utilization of resources.
 It reduces conflict since the functional departments are differentiated
 It is easy to delegate
 Eliminates duplication

Disadvantages

 It is ideal for small for organizations. As the firm grows and becomes complex other grouping
such as geographical may be preferred.
 Due to interdependence of the departments, failure in one department will lead to failure in the
entire system.
 People lack a broader view of the organization
 It limits growth of an individual as one will only interact with those of his or her department
 Tends to slowdown decision making because there has to be consultation.

Product/service

This is arrangement of departments according to the product or service provided by the organization.
Used in many retailing and manufacturing organizations

Advantages

 There is no interdependence and thus failure of one dept does not affect the other depts.
 It reduces the chain of command
 It facilitates the use of specialized capital. It is possible to identify the unprofitable products in
the product portfolio.
 Faster decision making
 There is inter-product competition which is healthy for the firm as each manager tries to outdo
each other
 Better quality product/services-the focus of the department is on the product

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  Co-ordination and control of activities is much simpler
 It leads to product innovation. Better products and better production methods.

Disadvantages

 There is a lot of duplication of effort and facilities

 There is under utilization of resources when demand of a particular product falls.
 It may be more expensive than functional departmentalization
 It complicates the organization structure where the firm has many products. This brings in
coordination problems to the senior managers.
 It may become difficult to achieve common organizational goals since little or no coordination
takes place between depts.
 Managers may become rivals.
 Rigidity. Resistance to change.

Geographical or territorial departmentalization

This occurs when the firm has activities in different regions of the country. Each region is organized as a
department. Banks, insurance companies, distribution agencies, etc

Advantages

 It is convenient to customers and it improves response time to customers

 Branches are able to react to local conditions more appropriately
 Managers are able to serve customers better.
 It facilitates the expansion of business to various regions.
 There is faster decision making because consultation with head office is minimal.
 Workers are sourced locally and this could be cheaper in terms of staff costs.

Disadvantages

 Expensive to maintain.
 It leads to duplication of staff and services at headquarters and regional level.
 It is difficult to maintain consistency of services and corporate image from one area to another
 Loss of control and coordination by headquarters
 Difficult to decide how much authority should be given to regional officers.
 Control problems could arise for regions that are in remote locations.

Customer departmentalization

Activities are grouped so that they serve the needs of specific customers used in business where
customers have heterogeneous characteristics e.g. local/foreign, industrial/domestic etc.

Advantages

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  High level of customer satisfaction
 Effective solutions to customer problems can be found.
 Helps managers understand customers better.
 Managers are able to collect relevant data which may help in making competitive decisions.
 Leads to increased sales and productivity.

Disadvantages

 Difficulty in maintaining co-ordination.

 It is expensive.
 Limited view of the organizational goals is experienced.

Process departmentalization

Under this, the entire production process is broken down into discreet stages and each stage is
organized as a department. In this case the firm has a processing department, packaging department,
assembly department, branding department.

Advantages

 Similar type of equipment and labour are brought together.

 Every department knows what it is supposed to do.
 Leads to specialization.

Limitations

 Requires very high coordination which at times may lack.

Delegation

The process by which a senior transfers part of his authority to a subordinate to make decision or to act.
It means to entrust authority to a subordinate in certain defined areas and make him/her responsible
for the results.

Features of delegation

 Delegation occurs when a manager grants some rights to a subordinate.

 A manager cannot delegate unless he himself possesses the authority.
 A manager can never delegate all his authority.
 Delegation does not imply reduction in the status of a manager.
 Delegation does not mean abdication of responsibility.

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Reasons for delegation

 Ensure there is continuity of work even if the manager is out on leave or is sick.
 Lack of time and energy. Managers have no time to follow petty things in an organization.
Manager handles the challenging issues.
 Delegation may be required where specialized knowledge is needed and the manager does not
possess.
 Need for training for succession. The need to equip employees in different knowledge
necessary for work performance (especially when manager is retiring or going to another
institution.
 To facilitate growth and expansion of the firm.
 The increasing size and complexity of an organization calls for specialization therefore a
manager has to delegate to people who will concentrate on some specifies tasks or function.

The process of delegation

 Identify the task to be delegated and the right person to delegate to.
 Specify the performance i.e. targets and standards expected of the subordinates.
 Assignment of the task. Formally assign the task to the subordinate who should formally accept.
 Allocate resources and authority to enable subordinates carry out delegated tasks at the
expected level of performance and implement decision within their domain.
 Leave the subordinate to perform the task. The subordinate assigned the task is morally
responsible to do his best.
 Creation of accountability. Making the subordinate answerable to someone for his actions
creates accountability i.e. An obligation to accept the consequences good or bad.
 Maintain contact to review the progress made and give constructive criticism.

Principle guidelines for the effective delegation of activities

 Grant proper amount of authority to the subordinate who is taking up the delegated tasks i.e.
responsibility should be equal to authority; in this regard responsibility for results should not be
greater than authority delegated. On the other hand, responsibility should not be less than
authority delegated.
 Define the results expected from the subordinates: i.e. the function to be performed, methods
of operations and the results expected must be clearly defined. This will help him decide on the
how much authority to delegate.
 The capabilities of the subordinate should also be considered. The experience, education
background as well as the intelligence of a person are important factors when delegating.
 Communication: Both responsibility and authority must be clearly specified, openly
communicated and properly understood. If not explained, problems are likely to develop. The
person in charge should be known to everyone involved in an activity.
 A subordinate should be responsible to one superior who is delegating authority in the first
place. i.e. follow unity of command.
 Management by exception: the manager should delegate the authority and responsibility for
routine operations and decision making to subordinate but must retain such tasks for
themselves for which they alone are uniquely qualified.
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Factors that influence a manager’s decision to delegate authority and assign duties to subordinates

 The manager’s workload. Where a manager work load is a lot, such a manager will make a
decision to delegate and vice versa
 The competence of the worker. Where the subordinates are competent he will delegate to
them.
 When a manager wants to motivate and raise the level of the morale, he will make a decision to
delegate
 When the manager wants to develop staff he will make a decision to delegate.
 When a manager wants to speed up decision making.
 When the manager lacks experience in certain area, he will delegate to the expert.
 Nature of work. Where the work is very sensitive, manager will not delegate
 Costliness of the decision. Where the decision involves a matter that is very costly and the cost
of the mistake could be high, then such a manager will decide not to delegate.
 Size and complexity of the organization. If the organization is large, the manager will delegate
and vice versa.
 Geographical dispersion of the activities of the firm. If activities are dispersed geographically the
manager will delegate.
 Nature of internal control system. If the systems are strong, delegation becomes easy.

Why managers are unwilling/reluctant to delegate

 Fear that the subordinates may outsmart them. i.e. lose power if subordinate does a job too
well.
 Fear of failure by subordinates. i.e. unwillingness to let others make mistakes.
 Lack of confidence and trust in subordinates.
 When the workload of the manager is not too much then he will be unwilling to delegate
 Culture of the firm. Managers do not delegate
 Misconception that delegation will reduce the manager’s status.
 Poor relationship with subordinates.
Reasons why subordinate may object to delegation

 Fear of failure due to incompetence.

 Lack of reward.(financial)
 Lack of appreciation where manager ends up taking the credit.
 Poor relationship with the manager.
 Lack of trust.
Barriers to effective delegation

 Incompetence of the subordinates.

 Poor relationship between managers and subordinates
 Sensitivity of the matter
 Reluctance of managers to delegate due to the reasons given earlier.
 Poor communication.
 Culture of the firm..
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  Reluctance of subordinate to accept delegated authority due to lack reward.
 Failure of managers to let go after delegating.
Advantages of delegation.

 It results in quick decision making.

 It gives managers/executives time to concentrate on strategic planning and policy making.
 It improves morale. This is because of job enrichment which enhances morale and
commitment.
 Junior offers are trained on jobs for higher levels,
 It enables decision to be made at the point of impact.
 Gives managers the opportunity to experience decision making and the consequences of their
decisions.
 It enables organizations to meet changing conditions more flexibly.
Limitations of delegation

 Risk of subordinates misusing delegated authority.

 Managers may lack trust and confidence in their subordinates.
 Some managers fear their subordinates may do the job better.
 Some managers may become lazy and delegate all their work loosing touch with the
organization.
 It may be expensive. i.e. extra payment for more work, mistakes are also made by subordinates.
 Subordinates may lack expertise and skill to handle the tasks.
 Delegation may not really reduce the manager’s workload as they are still responsible and have
to supervise the delegated tasks.

Span of control

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DIRECTING

Directing is a function of management that involves guiding, inspiring, overseeing and leading people
towards the achievement of predetermined goals.

Directing involves telling people what to do and seeing that they do it to the best of their ability.

Planning and organizing are preparation but work actually starts when directing is done.

Process of directing

Directing involves the following:

 Giving orders and instruction kto subordinates

 Continuous guidance and supervision of employees to ensure that they carry out their
assignments in a proper manner.
 Motivating the employees to do the jobs.
 Communicating with the employees in order to understand their needs, aspirations,
problems and suggestions.
 Maintaining discipline
 rewarding those who perform well

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  Providing good leadership to the employees.

Principles of directing

Communication: Directing involves to way flow of information both upwards and downwards.

Unity of command: A subordinate receive orders from and be accountable to only one superior.

Unity of objectives: When leading it is important for a leader to design s system that helps to satisfy the
needs of the individual and organization needs.

Direct supervision: Personal supervision improves motivation and morale and also the loyalty of
employees.

Use of appropriate techniques: When directing good techniques must be observed.

Effective leadership: A manager must be a good leader who can win the trust and confidence of his
subordinates.

Characteristics of directing

 It is dynamic (keeps on changing) and is a continuous function.

 It acts as a bridge between all other functions of management.
 It is practiced at all levels of management.
 It produces result by creating goal directed behavior.
 It involves human factor. That is it is concerned with relationship between people.
Benefits of directing

 It indicates action and hence achievement of results.

 It helps in getting maximum output of individuals.
 It brings together different individual effort.
 It facilitates change in an organization.

Leadership

Leadership is a process that influences, shapes or directs the activities of a group towards the
achievement of goals.

It is the relationship in which one person ( leader) influences others to work together willingly so as to
attain some goals.

Leadership refers to the quality of behaviour of individuals whereby they guide people to their activities
in an organised way.

It is he act of inspiring subordinated to perform their duties willingly and with a good heart .

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For any job to be done and for any organization to succeed. A leader is very important she has the
capacity to obtain the commitment of people so as to achieve the objectives of the organization.

Characteristics of leadership

 In leadership there is a leader and followers. There is no leadership without followers.

 It is a two relationship between the leader and the follower
 The leader and the follower influence each other.
 It involves common interest between the leader and its followers.
 It involves influence of behavior.

Functions of a leader

 The leader sets the goals, prepares plans and ensures that the plans are achieved.
 A leader is an expert in the activities being performed.
 A leader represents his group.
 He provides stability and security to the group.
 A leader acts as the role model to the group he represents.
 He acts as the ideal father/mother figure to the group
 He/she acts as an administrator, arbitrator and as a mediator.
 He controls the internal relationship within the organization.

Qualities of a good leader

There are certain traits and skills that are required for effective leadership. The traits and characteristics
of a successful leader are:

 Self confidence
 Reliable and dependable
 Ability to cope with stress
 Willingness to take up responsibility and accountability
 Alertness to change in the environment
 Ambitious and achievement oriented
adaptable to change in situations.
 Desire to influence.

Skills of a reader

 Creativity. This is the ability to come up with new knowledge

 Highly intelligent
 Diplomatic
 Purposeful
 Excellent communication skills
 Ability to identify problems and suggest workable situation.

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Importance of leadership

The success of an organization is a product of leadership. The failure of any organization is also a likely
reflection of its leadership.

Good leadership is necessary because

 It guides and organization efforts towards the achievement of goals.

 It gives direction to the effort of the workers.
 It provides motivation which guides the employees towards attaining objectives
 It is the benchmark through which an organization can realize its success.
 Good leadership is necessary in changing environment because it helps in adjustment to
the changes.
 For any successful organization, good leadership is a inevitable (it is a must)

Leadership styles

The method or style of leadership that a manager wishes to use greatly influences effectiveness as a
leader. Good leadership; combines with the environment can lead to achievement of both individual
and organizational goals…

If a good style is not applied than

 Goals will not be achieved

 Motivation will be low
 Employees will be dissatisfied
 Employees will feel insecure.
 Resistance to change will be experienced.
 Labour turnover will be high.
 Grievanceswill increase.

Autocratic leadership

In this style authority and decision making rest with the leader

The leader a makes all the decisions and exercises total control. The leader demands strict obedience
and relies on power. He commands the followers and expects them to obey failure to which they get
punished. Communication is one way. That is downwards. This type of leadership is disliked by people
and employees are under constant fear of punishment.

Advantages of autocratic

 It allows for faster decision making without wastage of time as there is no consultation.
 It ti very appropriate during an emergency.
 It is also good where the employees do not have knowledge of the subject.

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  It is also appropriate where subordinates are uncooperative.
Disadvantages

 One way communication without any feedback lead to misunderstanding and communication
breakdown.
 People work under fear and hence there is no sense of belonging.
 Lack of involvement in decision making makes people unaware of organizational goods.
 People are not machines to carry out instructions when they are told and so they dislike this
type of leader.
 It leads to dissatisfaction and resistance to change
.
Democratic leadership/participative leadership

This is also called participative/consultative leadership.

The leadership involves active participation of subordinates in decision making.

The entire group is involved in goal setting. Communication is two way and everybody is involved. The
leader is an important figure and he is involved in final decision making.

Advantages

 When people are involved in goals setting, they work hard to achieve them.
 Motivation and morale is improved because of participation.
 In his style members are like to welcome new ideas and resistance to change is reduced.
 Ideas are shared and different members bring different ideasl hence high quality decision
making
 It allows for individual growth.

Disadvantages

 It leads to wasted of time when discussing issues.

 Lack of control within the group especially where the leader is not strong.
 In some cases decisions are made out of compromise
 Too much freedom may also create indiscipline
 For some leader, ti may become a way of avoiding responsgility

Free Rein/laissez faire

This is a free style type of leadership.

The leader allows subordinates to do everything the way they wish. He allows the subordinates a high
degree of independence. The leader depends on the subordinates to set their own goals and the means
of achieving them. He only provides information and materials and facilitates them.

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The leader does not play any role.

Advantages

 It leads to high motivation and high morale.

 Subordinates own the decisions because they are allowed o participate.
 High quality decisions are achieved because of participation…….
Limitation

 Sit leads to wastage of time in decision making

 Too much freedom tends to be misused
 Lack of control may result in…..if not exercised properly.
 It requires highly competitive and disciplined group which is not always the case.

Theories of leadership

 Trait
 Behavioural
 situational
 transformational

Trait theory
This theory states that a successful leader is one who possesses certain traits and qualities. It states
that these can be identified in different leaders of the world. It led to the belief that leaders are born
not made but these traits can be acquired through training and experience.

These traits include

 Intelligence: The leader tends to have higher intelligence than their follower.
 Social maturity: Leader tend to be more mature and have broad range of interest.
 Inner motivation and achievement: leaders have got inner motivation and aim at
accomplishment of goal.
 Human relations: Leaders tend to have good work relations with others and also tend to respect
others.
 Loyalty: The leaders tend to be loyal to the company and give the best.
 They also tend to be brave
 Tend to be honest
 Are more compassionate.
 Self confidence
 Initiative and creativity
 Vision and foresight

Criticisms of the theory

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  Not all leaders possess these traits.
 Many people who are not leaders posses such traits.
 The theory does not tell us which of the traits are more important than others.
 It does not tell us how much of a trait a person should have.
 The traits are nothing but a pattern of behavior.

Behavioural theory

As a result of failure of trait theory to leadership, the focus shifted to individual behavior. The theory is
concerned with the leadership style of the leader based on behavior. The leadership style refers to the
way a leader behaves towards his group member or his followers. In this case, he can use autocratic,
democractic or free rein.

To adopt to either of the style, he is influenced by the behavior as an individual and the behaviour of the
people he is leading. If motivated to work, he is likely to adopt democratic or free rein style of
leadership but if members are badly behaved, he adopts the autocratic style.

Situational leadership

This theory believes that leaders are a product of a given situation and the style that they use depends
on the situation. Situations are different and contain different variables such as

 The organizational environment both internal and external

 The task or the job that is being performed.
 The time required to make the decision.
 The nature of the decision being made.

Situations are circumstances or condition under which a leader operates and they keep on changing
making a leader to behave differently in different situations.

If there is no enough money in the organization the budget will be tight but if funds are available, the
organization can allocate more funds.

Transformational

The word transformational comes from the work transform which means to change from one stage to
another.

In this theory, the leader is seen as a change agent. He therefore acts as a catalyst of change to ensure
that it happens and also happens faster.

Motivation

Definition of motivation

Motivation is the individual’s internal process that energizes, directs and sustains behavior.

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It is the personal forces that cause one to behave in a particular way.

Motivation refers towards achieving any goal. Motivation therefore is important to direct individual
behavior. Motivation stimulates one sel f or someone towards carrying out a particular action.

Motivation can be positive or negative. The organization must therefore be keen to ensure that
employees are positively motivated.

Characteristics of motivation

 Motivation is psychological
 An individual is motivated wholly and not in part.
 Motivation is created out of a certain aim or objective.
 Motivation is an unending process.
 Motivation is the strength of work
 Motivation is different from mental strength.

Importance of motivation

 It helps individuals give their best while at work

 Motivation improves performance of individual.
 Motivation helps to reduce complaints and grievances
 Good motivation helps to improve morale
 A well motivated workforce has less resistance to change
 Good motivation also helps to minimize
conflicts between management and workers and among the workers themselves.
 Where there is good motivation, fewer accidents are reported.
 Labour turnover is also low
 Performance will improve both in quality and in quantity
 Human relations will improve and teamwork will be encouraged.

Factors that affect motivation

Need is the starting point of motivation. In life people have different needs that they seek to satisfy.
These needs may include basic needs such as food, clothing and shelter. Therefore there are certain
factors that motivate people to work and they include financial and non financial factors.

Financial factors

Money is considered to be one of the most important individual motivational interest. With money
individuals can meet many individual needs and wants

Non financial motivators

 Challenging work

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  Recognition at work
 More responsibility and power
 Opportunity for personal growth
 Opportunity for advancement
good working conditions
 Participation in decision making
 Recognition of individual differences
 Matching people skills with relevant jobs
 Ensuring there is equity.

Theories of motivation

 Maslow hierarchy of needs

 Douglas McGregor
 Hertzberg two factor theory
 Maccland needs for achievement theory

Maccland needs for achievement theory

According to this theory, there are three needs. That is

Need for achievement

The need for affiliation

The need for power

Need for achievement

People who spend time thinking about how they can improve upon their work, People are also anxious
about how they can accomplish something and who derive greater satisfaction when they do good
work are considered to have a great/right need for achievement.

Characteristics of people who have high need achievement

 They set moderately difficult goals but which are realistic.

 They take calculated risks
 They like situations in which they can take personal responsibility for solving problems.
 They all like feedback about how they are performing
 They like to take full personal responsibility and control for their destiny.

Need for affiliation (social need/belonging)

 People who need affiliation are sensitive to others and especially the feelings of others.
 They also seek friendly relationships in their groups.
 They prefer jobs with pleasant social environment conducive to personal interaction.
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Need for power

 They are people who are always thinking about how they can use their influence and
control over others.
 They think of how they can use this influence to change peoples behavior.
 They like to gain authority and status
 This need is satisfied by manipulating and controlling others.
 Individuals with this need seek position of leadership in an organization.

Vrooms Expectancy Theory

This theory is based on the assumption that human behavior depends on the people’s expectation
concerning their ability to perform tasks and receive desired result.

The level of motivation is determined by the level of expectance.

The more the probability that the outcome will be good the more the effort.

Indicators of high motivation

 Good work performance

 Good human relation
 Adaptability to organization change
 Low turnover of employees
 Less complaints and grievances
 Less accidents at work.
Morale

Morale is the general attitude of employees towards their work.

It is an indicator of the kind of attitude that employees have towards their jobs, the employer as well as
the management t. If morale is high, it means that employees are satisfied in their work and this
increases the output and general efficiency in the office.

Significance/importance of morale

 Just as good health is important for any person, high morale is necessary for the success
of any group in the organization.
 When morale is high employees perform their work with more energy and devotion.
 High morale leads to job satisfaction
 High morale leads to self confidence as employees carry on with their work.
 It also results in pride as employees are proud of their work.
 It leads to better performance.
 The rate of absenteeism is low.
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  Complaints and grievances go down/reduce
 Employees welcome changes readily.

Consequences of low morale

 High rate of absenteeism

 High rate of labour turnover
 Excessive complaints and grievances
 Frustration and friction among the employees
resistance to change.
 Lack of job satisfaction.
 Poor performance.

Factors of morale

 Type of supervision given.

 The amount and form of remuneration (pay/salaries/wages)
 The nature of work that is being done by employees. E.g stressful working conditions
lower morale.
 Authority/responsibility relations which in turn affect human relations.
 Opportunities for advancement.
 Policy of the organization

Ways of raising staff morale

 Provision of good working condition

 Fair distribution of work
 Good relations between the supervisors and subordinates.
 Fair staffing policy. E.g. fair promotions
 Good supervision
 Good leadership.
 Fairness and being objective
 Provision of welfare facilities etc.

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CONTROLLING

Definition:

It involves the measurement and correction the performance of employees and other organizational
resources in order to ensure that everything is going on well according to the plans.

It is the process that ensures that events go on well as per plans.

Controlling is concerned with how well an organization is performing. It is therefore a regulating

function of management since it involves the regulation of organizational activities to maintain tem
within acceptable limits.

Principles of controlling

 Control should be simple and easy to understand.

 It must be set according to the nature of the job.
 It must be in line with the pattern of the organization.
 It must be based on planning.
 It must be supported by enough information through feedback.
 It must be flexible enough to accommodate any changes that are likely to take place.
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  Control must be forward looking.
 It must be able to bring past and future together.
 It is a continuous process.

Importance of controlling

 It facilitates decision making and corrective action to take place.

 Control stimulates action and provides the basis for future action.
 It enhances employees’ morale.
 It allows efficiency of operation e.g. monitoring of progress making adjustments, and
detecting problems.
 It ensures that actions go as planned.
 Existence of a control system has positive impact on employees behaviors. They become
more conscious with their work because they know that they are being observed.
 Control helps in minimization of errors.
 It enhances coordination.

Steps in the control process

Establishing the standards: Standards are set because they form the basis of control

Measurement of performance: Measure of performances needs to be expressed in quantitative or

qualitative terms. ,e.g. sales figures for a month, weekly, daily and this must be expressed in figures.

Comparison of performance with set standards: in this stage the two are compared . Performance
may be higher, lower or equal to the standard.

Corrective action: This is the final step after performance has been compared with the standards,
deviations are note and corrective action may be taken in order to correct the problem or improve the
situation.

Types of control used in organizations

A variety of techniques are available that help in controlling operations. This control devise help
managers to carry on effectively. They include the following:

The budget: A budget is a plan that is expressed in numerical terms for the purpose of controlling. It is
one of the most important control devices. It is normally for a specific period of time. E.g day, month or
year.

Non budgetary controls

Ratio analysis

Ratio analysis describes the relationship tht exists between various figures that are shown in an ration

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Uses of ratios

They show a relationship between groups of figures.

They enable large volumes of data to be summarized.

They serve as an aid to communication as people can more easily see the changes in a business.

They can be used to access profitability.

Examples of ratios

 Return on capital employed

 Quick ratio
 Current ratio
 Sales ratio
 Stock ratio
 Cost ratio

Auditing

An audit is an investigation of activities. it is concerned with the verification of financial records and
practices but it also refers to verification of non financial aspects of an organization. Audits can be
external or internal.

In internal audits an auditor is employed by the organization to carry out the audit.

External audits are conducted by persons outside the organization.

Reports

Reports can be used as useful control tools because they involve looking at a problems, analyzing it,
reporting the findings and giving of recommendations.

In an organization, numerous reports can be written on different activities in the various departments.

From the findings and recommendations, the management is able to ……….benefit of the organization.

Explain the merits and demerits of reposts as a control process.

Personal observation

Personal observation involves observing what is happening or what is being done. The manager can
gather a lot of information through observation and they can use this information to control activities.

It can be made through: walking around

Talking to people or employees

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Talking to the customers

Having a look at the metanaine and the methods to be used.

Explain the merits and demerits of personal observation as a control tool

Statistical data

This includes tables, graphs etc; they show a given rend concerning a given subject. Through them the
firm can be able to control performance.

Network analysis

It is used for extremely difficult subject. A project is divided into parts so that the nature and function
and the relate of each part.

The project can be evaluated in relation to other parts and in relation to time.

Control of human Resources

Control of human resources is important in business management.

It is based on the fact that the human resources are the most important resources that any organization
can have.

This resource makes a very big contribution n achievement of the organization.

In controlling employees need to be looked at as a valuable asset that helps in the achievement of
organizational goals.

Control of human resources should be a continuous activity by the management but it must be handled
with a lot of care using the right concepts, techniques and principles. E.g practice supportive
management, two way communication, provision of necessary machines and tools.

Control of materials and stock

 Wastage of materials and stock including stationery can be caused to various factors.
These include:
 Poor buying methods
 Overstocking
 Inadequate storage space
 Inadequate reorder and minimum levels.
 Poor system of control over issue.
 Acceptance of unsuitable materials as substitutes

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To control and reduce wastage, the following can be done:

 Stock levels must be set to include minimum, maximum and reorder levels
 Efficient buying must be observed using acceptable methods such as tender, quotation etc
 The stock room must be suitable in terms of space and it must be in good condition.
 Official authorization must be sought before issue of materials.
 Employees must be advised against wastage of materials.

STAFFING

Staffing is the process of procuring and managing the human resources that the organization needs in
order to achieve its objective.

It is also the management of human resource or management of human capital.

The staffing function is concerned with the acquisition, development and maintenance of employees in
an organization. Human resources are the most important resources of an organization. This resource
supplies talent, creativity as well as skills. Without them the organization will find it hard to pursue their
goals.

Process of staffing

As a managerial function, staffing deals with the following activities:

 Human resource planning

 Recruitment
 Selection
 placement and orientation
 Training and development
 Performance appraisal
 Compensation

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The composition of the organizations workforce changes over time. People get promoted, others get
laid off, some look for better jobs elsewhere, some are transferred, some retire, some die, new people
join the organization etc.

The staffing process is a continuous procedure to keep the organization supplied with the right people in
the right positions at the right time.

Human Resource Planning

This is the process of reviewing human resource requirements systematically to ensure that the required
number of employees with the required skills are available when they are needed.

It is the long term planning of the Human Resource requirement of an organization taking into account
both internal activities and the factors in the external environment.

Aim of Human Resource Planning

 To obtain the right number of employees.

 To obtain and retain qualified people in the organization.
 To make the best choice of available human resources.
 To be able to anticipate the future in terms of surplus or deficit of employees.

Human resource planning starts with job analysis

Job analysis

It is the process of describing and recording the:

 Purpose of a job and its major duties and activities

 The conditions under which it is performed and the necessary knowledge, skills and
abilities required.

A good job analysis consists of:

Job description:

A job description summarizes the duties involved in a certain job, the working conditions, the tools that
are required and materials and equipment used on the job. Therefore a job description focuses on the
job itself.

Job specification:

It is a statement of the minimum requirements that are needed to perform a given job e.g the minimum
education, qualification, skills and competencies, the experience etc. Therefore while the job
description focuses on the job, the job specification focuses on the job holder.

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Importance of job analysis

 It helps in defining each employees duties and tasks.

 It acts as a guide during recruitment.
 It provides justification for the existence of a certain job.
 It serves as basis for establishing staff development programs.
 It acts as a guide in work design.
 It acts as a reference when developing pay structures.

Forecasting the demand and supply of labour

This is the process of estimating the future quality and quantity of people that are required to work in
the organization. The people may be available in the organization or may be obtained from outside the
organization.

Matching the demand and the supply of labor

This last step involves balance between what is available and what exactly the organization needs. If
supply exceeds the demand then the organization then the organization can plan to obtain more
personnel.

On the other hand, if the organization has got more employees than needed, it can

 Layoff
 Terminate the services of some employees
 Plan for early retirement
 Transfer
If however the demand exceeds the supply the organization can recruit more, train and develop those
already in the organization .

Recruitment of staff

This process starts when an organization finds the need to hire more employees.

Recruitment is concerned with a set of activities that an organization uses to attract job candidates who
have the abilities and skills that are needed by an organization in the achievement of its goals.

The purpose of recruitment is to discover, explore and obtain the right people to fill up the available
positions.

Sources of recruitment. There are two sources of recruitment. Namely internal and external sources.

Internal sources

The internal sources involve the recruitment of staff from within the organization. It involves

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  Transfers
 promotion
 Present employees

Transferring of an employee:

Transfer means physical movement from one location to another. It may also mean movement of an
employee without changing the location but involving a substantial change in duties, responsibilities
without change in status or salary.

Promotion: unlike transfer which does not necessary need to change the duties and responsibilities,
when an employee is promoted, it means moving from lower to higher position which may bring about
change in duties authority as well as salary.

Present employees: in the event that there is a vacancy existing in the organization, the organization
can use its own employees to help them fill in the vacancies. They are requested to recommend friends
or relatives who have the skills and knowledge required for the job.

External sources

The external sources of recruitment are:

Advertisements: the organization can use the newspaper, posters or any other available media to
announce the existence of a certain position.

Personal consultants: Consultant firms act as intermediaries between applicants and firms. They
receive requisition from client companies, advertise jobs in newpapers or magazines. The consultant
may interview the candidate or pass over the names of short listed candidates to the interviewer.

Educational institutions: employers can result to students freshly graduating from colleges or
universities. Some professional institutions run their own employers bureaus to assist employers in the
recruitment activity and this helps their graduates to get jobs

Field trips

A team of experts may be sent to different places where the kind of personnel that is needed may be
found. It is necessary to give wide publicity to the date, venue and time when such a team would
interview candidates

Professional bodies: these maintain employment registers of qualified professional people who which
to improve or change their positions.

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Employment exchange: it serves as an important source of recruitment of personnel. They register the
names of job seeker and pass them to their employers who make them know the vacancies existing.
Mostly they deal with people who are not very skilled and those with less experience.

Advantages of external recruitment

 Wide choice because of large number of applicants

 Fresh outlook; candidates recruited from external sources being afresh or clean without
any inbuilt behavior or character.
 The organization gets the most qualified candidate
 There is originality.
 There is no favoritism.
 There is exposure.

Disadvantages

 It is expensive because of advertising and are at times paid travelling expenses.

 It kills the morale of people working in the organization.
 It consumes a lot of time and materials.
 Danger of maladjustment. If the person does not fit in the organization he/she may
have to be removed which may result in extra expense in looking for a placement.

Selection

Process of identifying the most qualified candidate to fill the post.

It involves sifting and shortlisting those who meet the basic/minimum qualifications. Those who meet
the minimum are interviewed. The interviews could be oral, written or even involve demonstrations.
after interviews, the best candidate is selected i.e the one who meets the selection criteria.

Placement

After a candidate has successfully passed the above stage, he will be offered the job. The act of offering
the job is termed as placement.

Principles to be considered at the time of placement

 Right people should be placed in the right jobs

 A candidate should be placed on the job according to the requirements of the job.
 A job should only be offered to the candidate who has the best qualification and
experience.
 At the time of placement the candidate should be educated about the job , working
conditions, target/output and expectation on the job.

Induction (orientation)
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Once employed the candidate is inducted in the job.

The main aim of induction is to prepare an employee for the new job and avoid anxiety, nervousness etc
because of the fact that he is a stranger to the people , the work environment and even the organization
itself.

Through induction both the employee and the organization get to know each other better.

The new employee is inducted on:

 What is expected of him.

 The rules and regulations and policies of the organization.
 Mode and channel of communication to be used in airing an idea or grievance.
 Disciplinary procedure of the organization as well as penalties.
 Reward for higher performance and action for non performance
 Authority relationship existing in the organization.

Contract of employment

This is an agreement between the prospective employee and employer. It is made at the time when an
applicant for the job undertakes/agrees to work for the employer. The contract of employment is
always done in writing.

Contents of the contract of employment

 Job title
 Date of commencement of employment
 The salary scale
 Terms and conditions relating to the working hours
 When the salary will be paid and at what interval
 Terms and conditions relating to pension and pension schemes
 The length of notice to be given if either side decides to terminate the
employment/contract
 Duration/length of leave.
 Disciplinary rules and procedures
 Grievance procedure to be followed by the employee
 Terms and conditions relating to probation period

Training

Training is a systematic development of attitude, knowledge and skills, behavior pattern required by an
individual in order to perform adequately given task or job.

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It is an organized procedure of increasing the knowledge and skills of people for definite purpose. The
purpose of training is to achieve a change of behavior those being trained and is often associated with
higher education.

The purpose of training is to maintain and improve performance.

Contents of an effective training program

 Must relate to business goals.

 It should account for individual inefficiencies.
 It should develop knowledge and skills
 Induction: once employed the candidate is inducted in the job.
 Provides practice and ensures success
 It should take into account the training costs.
 It should have a supportive climate especially from management

Values/importance of training

 Results in better performance.

 It reduces supervision
 Trained personnel make better and economical use of materials and equipment
 Morale of employees s increased if they ar given proper training
 A manager can make use of trained personnel to help him manager
 Training increases flexibility and stability.

The trainer

The trainer is required to have professional expertise in order to carryout his responsibilities. He must
base his training upon the needs o the organization. He should be able to explain and demonstrate step
by step. He should as much as possible involve trainees in the training etc e,g by asking questions.

Training period

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The length of the training period depends upon the skills to be imparted/acquired, the trainees learning
capacity as well as the methods that is used by the trainer. e.g visual material helps to reduce the
training costs

Promotion

It involves a change in status and usually means appointment to a higher grade with greater
responsibility.

It is an important aspect of management. The desire to advance and develop is satisfied and the morale
is also high. Staff who are condemned to routine work without a chance of promotion become
frustrated and un interested and the result is low productivity, indifference and high labour turnover.

Objectives of promotion

 To put the worker In a position where he feels that his experience in an organization is
suitably rewarded.
 To reward an employee and encourage him to perform better.
 To promote job satisfaction among the employees. This also helps to avoid labour
turnover.
 To attract suitable workers to join an organization.
 To build up the morale and loyalty and create a sense of belonging on the part of the
employees.
 To create a sense of contentment, satisfaction among the employees.

Selection for promotion

 It is based on a number of factors depending on the job and the level of management.
Most usual grounds for promotion are as follows:
 Education and qualification
 Length of service in the company and in the department.
 Practical capability
 Character and personality.

NB: Promotion on the basis for personal likes and dislikes can produce trouble for both the management
and the personal concerned.

Selection techniques for promotion

 Interviews to access the character an d personality

 Internal examination
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  Recommendation from the head of department
 Advertising internally or otherwise informing the existing staff about the vacancy so that
interested employees can apply.

Problems of promoting staff from within

 Lack of new ideas. e.g. old people with considerable experience may not have the right
skills and technology to drive the organization ahead.
 Internal source may be inadequate. E.g may not be enough.
 Sometimes the work of an individual goes unnoticed, they remain unpromoted. This
results to frustration.
 When the promotion form within an organization are on a large scale, they may result in
disorganization and distort the whole organization.

Difficulties in promotion

 Promotion is a difficult aspect of staff. Workers may not always realize that the worker
may not always be the best supervisor
 It may be difficult to promote if none of the existing staff possess the required skills
 Where there is more than one, candidate it is almost impossible to choose one from
among them.
 A good promotion may seem unfair to staff and this causes dissatisfaction and low
morale resulting in high labour turnover.
 A person being promoted may not like it because he knows the risks associated with the
post and therefore may fear to face the challenges.

How to avoid promotion problem

 Establishing a career structure for the staff

 Recruitment with the development of the staff rough the career structure in mind.
 Esablighing job grading and merit rating and regular staff appraisals.
 Encouraging supervisors to undertake informal staff appraisal frequently.

Characteristics of a good promotion policy

 It must be written or well laid down in order to be understood.

 Must be consistent and should not be changed anyhow. E.g if promotion is on the basis of
qualification then this should be followed consistently.
 It should be fair and unbiased and this should not favor some or others e.g on the basis of
tribe.
 It should be a planned activity in order to know who be promoted and when.

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  Equitable in order to create a feeling of satisfaction among employees
 Wide publicity should be give on likely openings for promotion
 Cases for promotion should be recommended by line manager and decided by
supervisory management.
 Employees should be rotated from ob to jot so that they are able to use their knowledge
and experience.
 Employees should have a right to complain about any case of promotion in which they
are dissatisfied.
 All promotions should be done with the approval of the employees and the will of the
concerned person should be considered.

Demotion

Causes of demotion

 Disciplinary measures against employees who comet serious mistakes or offences in their
job.
 Health this is when a person cannot perform his job because of a problem with his health.
E.g working in a chemical industry.
 Changes in technology. Eg introduction of new machines. One may be demoted if he is
not able to cope with the changing technology.
 When an individual fails to meet the job requirements and standards.
 In the process of reorganization, some departments may be combined resulting in
elimination of some jobs. In this case the employees will be required to accept a lower
position.

Elements of a good demotion policy

 Every organization should have a demotion policy. Such a policy is useful because it
helps the employees to taking their responsibilities seriously.
 Demotion should not be frequent; manager should look for other alternatives e.g transfer
rather than demoting employees.
 A clear list of rules should be in place and violation should be clearly communicated to
the employees in the organization.
 To set things right disciplinary action and training should be enhance rather than
promotion.
 There should be complete investigation of any case of violation
 If violation is discovered there should be a consistent and equitable application of the
penalty by the immediate supervisor.
 There should be provision for review.

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Transfer

Transfer means movement of staff from one job to another without involving substantial changes in the
duties, responsibility or salary.

Aims/purpose of transfer

To meet a workers own interest. A worker may be uncomfortable e.g work away from family. due to
this he may have an unhealthy working relationship with his supervisor and he may request to
management to transfer him to another place or another branch or from one department to another.
This is known as personal transfer.

To satisfy the need of an organization. E.g growing needs. An expanding organization may set up new
branch. An employee may be transferred from one unit to the other. This is known as production
flexibility transfer.

To adjust the work flow of one plant/branch to the other. Sometimes a particular branch may cut
down the number of employees it has ad the people working in such a branch may be transferred to
other branches that are operational.

To realize the potential of the employee. Sometimes an employee may not perform well in a particular
unit and it may be realized that he can perform better elsewhere and therefore the management may
transfer such s person . This is known as remedial transfer.

To increase the interest of the worker: when an employee is put on the same job for a long time his
level of competence gradually reduces and to sort this problem and increase the interest, transfer is
necessary.

To penalize employees. In order to penalize troublemaking employees a transfer may be made. E.g to a
remote village , etc.This especially happens to an employee who commits serious acts. It is known as
penalty transfer.

To employees work according to their environment: this is where employees are transferred form
morning to night and vice versa. This is known as shift transfer.

To replace an old employee with a new employee. Newly recruited employees may be transferred to a
department to replace an old employee. This is done to relieve the old employee of heavy workload.
This is known a replacement transfer.

Maintenance of the system: some organizations e.g banks, government dept. the senior
administrative officers may hold a job for a fixed period of time and when this period expiries, the officer
is transferred. e.g fiv e years. This is known as tenure transfer.

Features of a good transfer policy

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  It should clarify the types of transfers and condition under which the transfer is made.
 It should state the rate of pay to be given to the person who is transferred.
 The transfer should be made in writing and well communicated to the people that are
concerned.
 Transfer should not be made so frequent because they cause inconvenience to the
employee.
 Management should explain about the transfer to the person concerned well in advance
so that the may make arrangements for the transfer.
 The transfer policy should include the provision of the cost of transferring the household
items of the employee to the place of transfer.

Separation

 This happens when an employee leaves an organization. It happens

 At will
 When an employee falls sick and is unable to continue with his/her work for health
reasons.
 When an employee retires from employment.
 When an employee passes on or dies.

Compensation/Wage and Salary Administration

Workers render their services and salaries and wage compensation may be used in exchange for the
work.

A wage or salary is the remuneration made to the labour engaged in production.

Salary is the term used for payment to workers who have white color jobs. E.g clerical, administration,
and professional employees.

Wage level: is the money an average worker makes in a geographical area in an organization.

Wage structure: describes wage/salary relationship within a particular group. The group can be
according to the occupation. E.g wage structure for machine operator or the group can also be related
to the organization e.g wage structure for public servants.

Compensation

This is money received by an employee performing the assigned tasks. Pay requisites that come under
indirect compensation include life, accident, a health insurance contribution to provident fund,
employees contribution towards retirement or vacation etc.

Objectives of wage and salary administration

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The main objective is to establish and maintain an equitable and salary system because only properly
developed compensation system enables an employer to attract , obtain motivate, and retain people
acquired with the right skills and qualification in an organization.

The objectives can be seen from the point of view o f individual employees and the organization
concerned.

Objectives of wage and salary administration

The main objective is to establish and maintain an equitable salary system because only properly
developed compensation system enables an employer to attract, obtain, motivate and retain people of
required qualifications in an organization.

The objective can also be seen from the point of view of an individual employee and also form the
organization objective.

Organisatonal objective

The compensation system should be aligned with organization needs and should be flexible to allow
modification and response to change.

The objective of the system should be:

 To enable the organization have quality and quantity of staff that is required.
 Enable the organization motivate employees if performance is good for further
improvement in performance.
 Helps maintain equality and fairness in compensation of similar jobs.
 To achieve flexibility in the system in accordance with organization changes when they
take place.
 Should make the system cost effective.

Employee/ individual objectives

From individual /employee point of view, the compensation system should

 Ensure fair compensation.

 Provide compensation to employees according to employee worth acquired through
training.
 Should avoid possibilities of favoritism.
 Should be able to enhance employee morale and motivation.

Collective objectives

 Compensation with relation to inflation.

 Matching with market rate.
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  Increase in compensation reflecting increase in productivity of the company.
Principles of wage administration

There are three main principles that govern wages and salary fixation

 External equity
 Internal equity
 Individual work

External equity

This principle acknowledges that factor eternal to the organization influence levels of compensation in
an organization. E.g Demand and supply of labour in the market rate etc. If these variables are not kept
into consideration while fixing wage /salary level, the organization may not attract and retain employees
in an organization.

The principle of external equity ensures that jobs are fairly compensated in relation to similar jobs in the
labour market.

Principle of internal equity

Organizations have various jobs that are relative in value term. E.g the various jobs in an organization
are in competition. e.g in a department the pay level of teachers may be different as the perceived or
real difference between the value of jobs they perform.

This relative worth of jobs is ascertained by job evaluation. Thus an ideal compensation system should
establish and maintain appropriate differentials based on the relative values of jobs.

Individual worth

Individual should be paid as per their performance. The compensation system enables the individual to
be rewarded according to his contribution to the organization. This principle ensures that individual pay
is fair in comparison to others doing the same/similar job or equal pay for equal work.

Components of wages and salaries

Wages and salaries in the organization are determined by a variety of factors which can be classified into
categories

 Wages enhancement
 Prevalent wage rates
 Influence of trade unions
 Corporate philosophy
Factors affecting wage rates

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  Cost of living
 Productivity
 Prevailing wage rate
 Ability to pay
 Attraction/retention of employees

Cost of living

Workers need to be paid compensation that will help them maintain an acceptable standard of living.
This justifies the concept of maximum wages. However wages/salaries fixed once became inadequate
to maintain the required level of living due to increased cost of living .

The increased cost of living calls for fixation of compensation accordingly in order to offset increased
cost of living.

Productivity

If the productivity of a worker is low, one wage/salary rate tends to be low. This way shifts in
productivity has its impact on the wage level of the workers. As per the principle of payment by
performance if the productivity of a worker is low, ones wage/salary rate tends to be low. If increase in
productivity is not due to workers effort, alone, eg it could be due to technology developed or
otherwise, The (profit)available to the employees then need to be distributed in a manner acceptable
to all employees, management and customers.

This principle has been more theoretical than practical due to its complexity.

Prevailing wage rate

In order to maintain workers in an organization, wages are fixed as per the prevailing rate in the region
under what is called going wage rate.

This is a very commonly used criteria of wage/salary because of the following reasons

(i) Due to various government laws and judicial decision. The adoption of uniform wage
rate is mandatory.
(ii) Trade unions accept and encourage this system to ensure equal pay for equal work or
equal work across the industries and region. )
(iii) All firm related in an industrial require essentially the same quality of employee with
about the same skills and experience. However if wages/salaries paid by an
organization is not what is paid by other organization it would be difficult for the
organization to attract and maintain efficient quality and quantity of employees.

Ability to pay

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An organization should only pay the wages/salaries it is able to sustain in a competitive environment.
Organizations that earn high profits are therefore able to pay higher salaries. E.g Kenya breweries and
others.

Attraction and retention of employees

The quality and quantity of employees an organization needs to employ also determines the level of
wages/salary. Higher level of wages will be fixed if an organization needs quality people to be employed
and retained. If the jobs are scarce, the level of salaries/wage rate in the firms economic situation is
such that it cannot afford to pay the prevailing wage rate in the industry or region.

Managerial attitudes

The attitude of top management may have profound influence on the wages structure. That is the top
management desire to maintain or enhance the company’s prestige has been a major factor in the wage
policy of a number of firms characterized by a desire to improve or maintain morale to attract high
caliber of employees, to reduce turnover and to provide high living standards for employees as
possible.

Psychological and social factor

Its whe re employees perceive that higher wages will be identified with success of jobs while low wages
may result job insecurity.

Trade union bargaining powers

Powerful trade union characterized by large membership and strong leadership would set wage fixed by
management to be high.

How to device a wage/salary structure

 Ascertain and establish on the basis of market rate survey and salaries of exixisting slary
structure and ensure most of the jobs are covered by the salary structure.
 Draw up a salary grade structure based on the above point from the lowest limit to the
highest limit along with the salary.

SUPERVISION

Supervision implies an expert overseeing what other people are doing in order to ensure that there is
compliance with the set goals and objectives.

supervisors are in direct contact with employees unlike other people.

Supervision is an essential step in the process of directing.

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Functions of a supervisor

 Arranging work and tasks and assigning various responsibilities

 Giving orders and instruction to the employees
 Explaining management plans to the employees
 Establishing methods and procedures of work
 Enforcing rules and regulations
 Maintaining teamwork among the employees.
 Maintaining discipline and handling disciplinary issues.
 Ensuring that there is supply of tools materials, etc to the workers
 Listening to workers complaints and suggestions and communicating them to higher
authorities.
 Coordinating individual efforts and controlling the day to day operations.
 Recommending increase promotions, transfer etc
 Keeping the management informed of the progress of work and supplying them with data
on current operations

Characteristics of a successful supervisor

Confidence: The supervisor must be confident by understanding the rules and duties and should not be
afraid to make decisions.

Skills: He must have the right skills e;g human relation skills which enable him to bring people together
and also for him to work well with others.

Technical job knowledge: He must be technically competent to guide his workers in the best way of
doing their work.

Good communication skills: He must have the ability to communicate well bother orally and in writing.

Good Virtues: such as honesty, integrity, patience, loyalty etc.

Proper leadership: He must use appropriate style to the nature of the task and the type of workers.

Types of supervisors

The collaborator

 He is focused on the learning process as well as the job itself. H

 He asks questions
 He clarifies and explains why thing have to be done in a certain way
 He engages in dialogue and open discussion.
The coach

 He seeks and sets goals jointly with employees

 He is very ambitious on behalf of the employees
 He has a student/teacher role.
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  He believes he has to be a good supervisor in order to achieve good results.
The leisses /free rein

 He leaves the employees to do their work either because he believes they can do it or is
not committed.
 He is very friendly and also supportive
 He is relatively not active.
Authoritarian supervisor.

 He makes all the decisions

 Communication is only one way from him to the employees
 He creates fear among the employees.
 Employees mostly do not like him much.
Hand off supervisor

 He is generally unacademic with other responsible

 He can be good source of wisdom and advice.
 he allows employees to choose areas of great risk and significance to them

Ways to make supervision effective

 Training the employees to help achieve news skills and knowledge

 Delegation of duties to the employees
 Coaching employees in order to improve their skills
 Good communication
 Competency of the supervisor
 Clear guidance to the employees.

Importance of supervision

 Work is done well and on time.

 The supervisors are able to give direction to the employees.
 Supervision ensures rules and regulations are followed.
 Employees are linked to the management by their supervisor.
 Supervision ensures that there resources are available when needed. E.g machines, tools
and equipment.
 It improves the morale and motivation of the employees.
 Help to reduce industrial problems such as strikes because grievances are handled well
and on time.

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Explain five problems tat are likely to be experienced by a supervisor in the process of carrying out his
duties.

Explain five reasons as to why many small business fail as a result of technological related problems.

Explain the benefits that an organization may get from involving itself in corporate social responsibility.
Explain five problems that are likely to be experienced in an organization that offers poor remuneration
to its employees.

Explain five advantages of division of labour

Explain five problems that are likely to occur in an organization where unity of command principle is not
obeyed.

Common problems when making decisions

 Lack of accurate and reliable information

 Lack of supportive management environment
 lack of acceptance by subordinates

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  lack of effective communication
 Incorrect timing when making decisions
 Lack of organizational commitment to make decisions
Characteristics of a good decision

 Involves choice
 Decisions are made with a purpose
 Good decisions are simple to understand
 They are flexible and accommodate changes
 Involves evaluation of all choices available
 They are focused
 They are aimed at achieving certain objectives.

JULY 2011

1. Outline four ways in which an organization can be socially responsible to its employees. (4 marks)

2. State three benefits that may accrue to an organization that practices business ethics. (3 marks)

3. Highlight three reasons that may lead to the reluctance by some managers to plan. (3 marks)

4. State three limitations of a bureaucratic organization. (3 marks)

5. Outline three advantages of committees as a decision making tool in organizations. (3 marks)

6. Highlight four uses of an organization chart. (3 marks)

7. Outline three features of an effective control system. (3 marks)

 Should provide accurate data and information

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  Should provide timely information
 Should be simple kto understand
 Flexibility
 Cost effective
 realistic
8. Highlight three difficulties that may be faced by an organization that employs workers on a part-time
basis. (3 marks)

9. Highlight three uses of an office manual. (3 marks)

10. Outline three characteristics of an effective supervisor. (3 marks)

Confidence: The supervisor must be confident by understanding the rules and duties and should not be
afraid to make decisions.

Skills: He must have the right skills e;g human relation skills which enable him to bring people together
and also for him to work well with others.

Technical job knowledge: He must be technically competent to guide his workers in the best way of
doing their work.

Good communication skills: He must have the ability to communicate well bother orally and in writing.

Section B

11., (a) Highlight six supervisory duties of an office manager. (9 marks)

 Allocation of work
 Making of duty roster for staff in his dept.
 Provision of materials, tools and equipment
 Checking of working done
 setting of deadlines for work and ensuring that the deadlines are followed
 ensuring that the right quantity of work is produced
 maintaining discipline among staff

(b) Outline four sources of business ethics. (4 marks)

12., (a) Highlight six factors that may contribute to the failure of the organizational plans. (9 marks)

(b) Explain four factors that may lead to ineffective decision making in an organization. (8 marks)

13. (a) outline six difficulties that may be faced by an organization in the implementation of a financial
control system. (9 marks)

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(b) The use of money to motivate employees may sometimes be faced by limitations. Explain four such
limitations.

14., (a) Outline six contribution of the cameralists to the development of management thought. (9
marks)

(b) It is common practice by organizations to request medical examinations reports from job candidates.

Explain four benefits that such organizations may obtain from this practice.

15. (a) Outline six measures that management of a manufacturing organization may take in order to
reduce pollution in the environment. (9 marks)

(b) Explain four reasons that justify the supervision of employees in an organization. (8 marks)

NOVEMBER 2014

1. State two ways in which a business may be socially responsible to its suppliers. (2 marks)

2. Name three stages in the evolution of management thought. (3 marks)

3. State four leadership styles that may be adopted by managers in an organization. (4 marks)

4. Outline the procedure that should be followed when carry out control activities in an organization.

5. State three factors that may cause the dismissal of staff in an organization. (3 marks)

6. List three types of plans that an organization may develop on the basis of time. (3 marks)

7. List three categories of office staff that may be found in an organization. (3 marks)

8. Outline four benefits of involving employees in the making of decisions in an organization. (4 marks)

9. State three negative effects of failing to observe proper business ethics in an organization. (3 marks)

10. List three roles that a manager may plan in an organization. (3 marks)

SECTION b (68 MARKS)

11. (a) Outline six essentials that a good organizational plan should possess. (9 marks)

(b) Highlight four ways in which effective organization may lead to the success of a business

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 enterprise.
12. (a) Managers may find it necessary to change leadership styles from time to time. Highlight six
factors that may lead to such a situation. (9 marks)

(b) Explain four factors that may limit the use of modern technology in office operation. (8 marks)

13. (a) Explain six benefits that an organization may get from training its employees. (9 marks)

(b) Highlight four measures that an organization may take to ensure that its employees maintain
acceptable business ethics. (8 marks)

14. (a) Outline six benefits of using office manuals in an organization. (9 marks)

(b) State four functions that an office plays in an organization. (8 marks)

15. (a) Outline four benefits that may be obtained by an organization that adopts the scientific
approach to management. (8 marks)

(b) Explain six ways in which budgetary control may be useful to an organization. (9 marks)

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