Ba-331 Management Practice PDF

BA-331
Management Practice
By
Silvester Chan
1
BA331 MANAGEMENT PRACTICE
UNIT 1
Introduction to Management
1.1 The Concept of Management
No one definition has been universally accepted.
Management as a discipline is so new that many of its related terms and

concepts have not yet been standardized. There are many definitions
written in the management textbooks.
 Management is the art of getting things done through people.
Mary Parker Follet

Managers achieve organisation goals by arranging for others to perform
whatever tasks may be necessary.
 Management has been called the art of decision-making.
 Managers spend much of their time choosing among alternative
solutions to business problems.
Appleby
Management as a series of roles.
 Management has been described as a process whereby the
resources of an organisation are utilised to achieve the organisational
objectives. It entails 5 basic functions - planning, organising, staffing,
directing and controlling. By performing well on each of these areas,
the manager can get things done through people.
Input – (Resources) + Management/process = Output
* Planning
* Manpower *
* Money Organising Goals of
* Materials * Staffing firm ,
* Machinery * Directing
* Methods & * Profits
Systems Controllin
g
*
Communic
ating
*
Motivating
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Environmental Forces
Fig 1.1 The Management Process

1.2 The Importance of Management
A business enterprise with access to materials, machines and manpower

will fail if the most important element is missing - the ability to make use
of these resources.
Many businesses have failed because of mismanagement.
Resources can only be put to proper use by an effective manager.
The experience of many developing countries well-endowed with natural

resources illustrates the importance of proper management.
Management is especially important as the business enterprise grows in

size.
Without effective management, the organisational goals may not be

achieved.
1.3 Management Functions
The functions of a manager are planning, organising, directing and

controlling, communicating and motivating.
1.3.1 Planning
Planning involves first defining the goals of the organisation and then
determining the activities and resources required to achieve them.
Managers need to plan so that:
 Workers activities are consistent with the organisation's goals, and

 The correct type of amount of resources can be acquired.
Senior management decides on the overall goals for the organisation,

taking into consideration the business environment. These goals would in
turn be broken down into more specific objectives or budgets for each of
the division. Programmes of activities and resources are then drawn up.
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Planning requires information (eg. about competition and methods of

production), judgement and decision making. Through planning, the
manager takes into account the variables in his environment and so is able
to foresee and reduces the risks he faces (see Figure 1-3). These risks
include the economic, social, political, legal and technological factors that
can prevent the manager from achieving the aims of his organisation.
Risks
Planning
Res Aim
our s
ces
The Business Environment
Fig 1.2 The Nature Of Planning
1.3.2 Organising
Organising involves acquiring the resources that the organisation needs to
achieve its aims. In many organisations, staffing and the sourcing of funds
and raw materials take up much time and effort. To be effective,
management has to ensure that the activities of the various groups are
integrated and coordinated so that there is unity of purpose.
Organising also means creating an organisational structure that is suitable
for the achievement of the agreed objectives. Work has to be allocated,
lines of authority and responsibility defined, and a system of rules and
procedures which guide the conduct of employees laid down. The
structure should not be regarded as permanent but as constantly changing
to suit the organisation's needs.
 Organising is allocating of tasks and duties to the staff, and to co-
ordinate them in order to achieve the organization objectives.
1.3.3 Directing
Management must provide direction and leadership to motivate his staff to
perform the essential tasks within the required time frame and with the
most efficient use of resources. It is management's function to create the
right level of communication and cooperation where everyone is
committed to the common objectives, Productivity, waste reduction and
cost savings would all be possible then.
1.3.4 Controlling
The controlling function involves three elements:
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 Steps must be taken to set work standards and

 To communicate them to the staff.
 A system of measures must be devised to assess staff performance
according to these work standards.
 Where there is a variance between actual performance and the
acceptable work standards, the causes must be identified and
 Corrective action taken.
1.3.5 Staffing
This means that managers must ensure all labour requirements are met.
Vacancies must be identified, staff recruited and trained. People who have
potential must be developed for higher responsibilities in the company.
1.3.6 Interrelationship
It is important to realise that the four basic elements, ie planning,
organising, directing and controlling, are of equal importance and
interrelated. For example, one cannot plan without regard to the feedback
from the controlling function.
Some writers, eg. Brech, prefer to think of coordination as a separate
function. As Sune Caslson puts it: 'The concept of coordination does not
describe a particular set of operations but all operations which lead to a
certain result, "unity of action" '
In his daily working life, the manager's role is a combination of the four
basic elements. The relative emphasis on each of these functions depends
on the manager's rank in the organisation, his responsibility and
accountability, and his personal skill and style.
1.3.7 Managerial Roles

A role is an organized set of behaviours that is associated with a particular
office or position. Positions usually entail multiple roles. In the activities
of the managers, there are three general types of roles: Interpersonal,
Informational and Decisional.
 Interpersonal Roles
Interpersonal roles grow directly out of the authority of a manager’s
position and involve developing and maintaining positive relationships
with significant others. More specifically, the figurehead role entails
symbolic duties that are associated with the manager’s position and
authority. The leader role involves building relationships with
subordinates and includes communicating with motivating and coaching
subordinates.
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 Informational Roles
Informational roles pertain to receiving and transmitting information so
that managers can serve as the nerve centers of their organizational units.
One informational role (i) the monitor role, seeking information both
internally and externally about issues that can affect the organization (ii)
disseminator role is aimed at transmitting information internally.
 Decisional Roles
Decisional roles involve making significant decisions that affect the
organization.
1.3.8 Managerial Knowledge, Skills and Performance

For managers to develop work agendas, act out roles, and engage in
planning, organizing, leading and controlling, they need a sound
knowledge base and key management skills. In this section, we discuss
these essential elements in the management process and explain how they
relate to the issue of performance.
Knowledge Base
A knowledge base can include information about an industry and its
technology, company policies and practices, company goals and plans,
company culture, the personalities of key organization members and
important suppliers and customers.
1.3.9 Management Skills

A skill is the ability to engage in a set of behaviours that are functionally
related to one another and that lead to a desired performance level in a
given area. For managers, the three key skill types are Technical, Human
and Conceptual.
 Technical Skills
Technical Skills are skills that reflect both an understanding of and a
proficiency in a specialized field. For example, a manager may have
technical skills in a specialized field such as accounting, finance,
engineering, manufacturing or computer science.
 Human Skills
Human Skills are skills associated with a manager’s ability to work well
with others both as a member of a group and as a leader who gets things
done through others. Managers with effective human skills typically are
particularly adept at communicating with others and motivating them to
develop themselves and perform well in pursuit of organizational goals.
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 Conceptual Skills
Conceptual Skills are skills related to the ability to visualize the
organization as a whole, discern interrelationships among the
organizational parts and understand how the organization fits into the
wider context of the industry, community and world. Managers need to
recognize these various elements and understand the complex relationships
among them so that they can take actions that advance the goals of the
organization. Conceptual skills, coupled with technical skills, human
skills and a knowledge base, are important ingredients in organizational
performance.
1.3.10 Management Performance
What constitutes high performance in an organisation? It basically

constitutes of two important dimensions: Effectiveness and Efficiency.
Effectiveness is the ability to choose appropriate goals and achieve them.

Effectiveness then has two parts. First, goals must be appropriate. Second,
goals must be reached.
Efficiency is the ability to make the best use of available resources in the
process of achieving goals.
The Organizations need to exhibit both effectiveness (doing the right

things) and efficiency (doing things right) in order to be good performers.
1.3.11 Managerial Job Hierarchy
Hierarchical Levels
Managerial jobs in organizations fall into three categories: First-Line,

Middle and Top Management.
TOP
MIDDLE
FIRST-LINE
Fig 1.3 Levels of Management
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First-Line Managers ( or first-line supervisors ) are managers at the

lowest level in the hierarchy who are directly responsible for the work of
operating ( non-managerial ) employees. They often have titles that
include the word “supervisor”. First-line managers are extremely
important to the success of an organization because they have the major
responsibility of seeing that day-to-day operations run smoothly in pursuit
of organizational goals.
Middle Managers are managers beneath the top levels of the hierarchy
who are directly responsible for the work of other managers below them.
The managers for whom they have direct responsibility may be other
middle managers or first-line managers. Middle managers also sometimes
supervise operating personnel, such as administrative assistants and
several specialists.
Top Managers are managers at the very top levels of the hierarchy who
are ultimately responsible for the entire organization. Top-level managers
are few in number; their typical titles include “chief executive officer”
(CEO), “president”, “executive vice-president”, “executive director”,
“senior vice-president”, and sometimes “vice-president”.
Management Skills. The three levels of management also differ in the

importance attached to the three key management skills. Generally,
conceptual skills are most important at the top management level. The
reason is that top managers have the greatest need to see the organization
as a whole, understand how the various parts of the organization relate to
one another, and associate the organization to the world outside.
1.3.12 The Distribution of Management Time
Planning
Organizing
Leading
Controlling
First-Line Middle Top

Managers Managers Managers
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All three levels of management must have strong human skills because
they all must get things done through people.
1.3.13 Qualities of a Manager
Self-Confidence - the ability to deal effectively with difficult situations

and problem solving.
Initiative - the ability to take action on his own accord without having to
be prompted.
Drive - the urge and enthusiasm to stimulate action, both personal and in
other people.
Decisiveness - the ability to think positively and show determination and

firmness willing To Accept Responsibility
Judgment - the ability to analyze a situation and formulate appropriate

action.
Adaptability - the ability to change as circumstances changes
Stamina - the ability to work long and hard hours without undue stress
Emotional Maturity - the ability to exercise self-discipline and self-

control; and the ability to analyze a situation without prejudice.
Human Understanding - ability to work with other people with

understanding and sympathy; willing to listen to staff problem.
Adequate Education Standard
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UNIT 2
Schools of Management Theory
The School of Management contributed to the development of
management thought.
2.1 Classical School
Henry Fayol is one of the pioneer of management thought and is
acknowledged as the founder of the Classical Organization Theory. He
divided business activities into six areas:
Technical - producing and manufacturing products;

Commercial - buying raw materials and selling manufactured goods;
Financial - getting the capital necessary for the business;
Accounting - recording and taking stock of costs and profits;
Managerial fuctions - planning, organising, commanding, co-ordinating, and controlling;
Protecting the assets of the organization.
Fayol also introduced 14 principles of management or principles of

organising that managers are encouraged to apply to their organisations.
These are:
i) Division of labour
ii) Authority and responsibility
iii) Discipline
iv) Unity of command
v) Unity of direction
vi) Subordination of individual interest to the organisation's interest.
vii) Remuneration
viii) Centralisation
ix) Hierarchy
x) Order
xi) Equity
xii) Stability of staff
xiii) Initiative
xiv) Esprit de Corps
Contributions of the Classical School
1. The classical school has made planners aware that there are certain management
principles that make for effective management not only in business but in other fields
as well.
2. This school isolated some areas of practical concern to managers that are still
relevant today, e.g. the division of labour and the use of managerial authority.
2.2 Scientific Management School
Frederick W Taylor turned to scientific analysis to better ways of

managing. Taylor stresses the importance of:
 the need to eximine and analyse the different elements of a task;
 the selection and training of staff;
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 communicating and co-operating between and staff;

 equitable division of labour and responsibility.
Taylor’s work led to the development of principles and practices that were
applied to business operations, such as line and staff organization, methods
analysis, standardisation of procedures, incentives plan and budgeting.
He was a practical man who believed in the division of work. From his
experiments, he developed 4 principles of Scientific Management:
3. Management should observe and analyse all jobs in order to determine the best
method to accomplish them.
4. Management should scientifically select and train the best man for the job.
5. Management should pay the worker on an incentive basis commensurating salary

with productivity.
6. Management should be put in charge of planning, preparing and inspecting work.

Workers should simply carry out the manager's directives.
Contributions of Scientific Management School
7. The scientific management theory led to the development of the efficient production
line technique through time and motion studies.
8. The stress it places on the scientific selection of workers has made us recognise the
importance of ability and training in increasing the effectiveness of the workers.
9. The development of work design has led managers to seek the ‘one best way’ to get a
job done.
2.3 Behavioural School

This school emerged in part because managers found that technical
efficiency was not accomplished by harmony in the workplace. There was
the need to help managers deal more effectively with the "human aspect"
of management.
Behavioural School began with the Human Relations movement. "Human
Relations" is a general term to describe the way in which managers
interact with their subordinates. To create good human relations,
managers must know why employees act as they do and the social and
psychological factors that motivate them.
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Elton Mayo (1880 - 1949)
Mayo and his Harvard associates conducted a famous study of human

behaviour at the Hawthorne plant of Western Electric Company from 1927
- 1932.
The Hawthorne Experiments can be divided into 3 phases:
10. Test Room Studies
11. Interviewing Studies
12. Observational Studies
Results of the experiments led Mayo to the following conclusions:
 When special attention is given to workers by management,

productivity is likely to increase, regardless of actual changes in the
working conditions ("Hawthorne Effect").
 Economic rewards (eg. incentive pay) by themselves have little
effect in production levels. Many workers fear loss of attention and
respect from co-workers than they desire increased pay. Informal
work groups and the social environment have great influence on
productivity.
 Leadership is a crucial element in the work situation and there is a
difference in formal and informal leadership.
Contributions of the Behavioural School
13. They discovered that a genuine concern for the individual worker leads to increased
productivity.
14. Mayo’s teaching put an emphasis on the manager’s style and drastically changed the
training of managers. As a result, the teaching of people skills has become an
important aspect of management training.
2.4 System Approach

This approach looks at the organisation as a series of inter-dependent
systems and sub-systems. All sub-units have to work together for the
benefit of the organisation as a whole. The system approach helps
managers to realise the importance of cooperation and coordination
between departments.
In the system approach to management, the first step is to formulate the

major sub-systems. Then, planning and control sub-systems are defined for
each of the major sub-systems. This is followed by sub-systems which cater
for specific areas of management, e.g., motivation, conflict resolution,
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technological innovation. The information and data processing needs for all
these sub-systems are studied and defined.
Contributions of the System Approach
15. The system approach helped managers to accept conceptually that seemingly
contradictory ideas underlying management theory were actually related. As a result,
managers of different specialisations have begun to look at how their work relates to
the work of others in the achievement of the organization objectives.
16. The system approach has made possible the better use of simulation models and
operations research as in the development and refinement of the sub-systems. When
computerised, these methods of problem solving save time and effort and help
managers predict and thus avoid possible areas of conflict. Decision-making is
facilitated and improved.
2.5 Contingency Approach

This approach stresses the importance of circumstances or environmental
factors which surround the firm. Many variables affect the profitability
and productivity of the firm.
Managers are made to realise that internal and external factors must be
considered in decision making.
In the contingency approach, all ideas are examined and analysed to see
how each fits into the aims, structure, capacity, resources and leadership of
the organization.
Contributions of the Contingency Approach
17. The major contribution of the contingency approach has been to provide managers in
real life situations with a method of decision-making based on all aspects of the
internal and external environment.
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UNIT 3
Legal Structure of Firms
3.1 Introduction
 There are many types of businesses found in the economy, ranging

from small 'one-man shows' to large multi-national enterprises. The
choice of the business ownership is an important decision.
3.2 Private Sector
 Firms in the private sector are run by individuals, not the
government. Such firms compete for resources and the consumer's
spending money. They need to make profits to ensure their continued
growth and survival. There are three types of businesses in the private
sector.
3.2.1 Sole Proprietorship
This is probably the oldest form of business ownership. Many large

companies started as a sole proprietorship. Any individual who is eligible
to set up a business as a sole trader, must register with the Registrar of
Businesses. Once approved, the individual is able to commence business.
Sole proprietorships are found in many industries, such as boutiques, hair
dressing salons, sundry shops.
Advantages
Easy to set up as legal procedures involved in setting up is minimal. A simple registration
form is filled up and business can start operating in a short time.
The sole proprietor can decide how he can run his business. Any decisions made can be
implemented quickly.
Since the sole proprietor is usually a small business, the owner can build up a good
relationship with his staff. The staff like the family type of atmosphere usually found
in such a firm.
The sole trader can also be closer to his customers and build up a good rapport with them.
In this way, customers will continue to do business with him.
The business is flexible, because the sole trader can make changes quickly and respond to
the needs of his customers. This keeps customers satisfied.
The profits of the business goes directly to the sole proprietor. This is motivation for him
to work hard and put effort into his business.
The sole trader is able to maintain privacy in his business matters as there is no need for
him to inform anyone, except file his income tax returns to the Government.
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Disadvantages of sole proprietorship
18. It is not easy for sole proprietor to get loans from banks since business is often is
small and carries high risk. His capital is limited to his own saving s or personal
loans from family and friends.
19. Since the amount of capital available is limited, sole trader will often find it difficult
to expand his business.
20. It is difficult for sole trader to recuit professional because most prefer to work for
bigger companies, which offer them higher salaries and career promotion. This
means the lack of business management skill available to him.
21. The life of the sole proprietor is limited as death or insanity will automatically
terminate the business. Also, the heirs may not be interested in continuing the
business.
22. The sole trader has the problem of limited liability, which means that the personal
assets of the owner are taken away to settle his debts. The may lead to the sole trader
becoming bankrupt.
3.2.2 Partnership
A partnership is an association of two or more people getting together to
conduct business. The maximum partners allowed is 20. Most of the
partnerships have unlimited liability although sometimes certain partners
may have limited liability. The business must also be registered with the
Registrar of Businesses.
Any individual entering into a partnership should insist on a written
agreement. This agreement should spell out the duties of each partner,
details of how the business is going to be run and managed. The important
details would be the amount of capital invested by each partner and how
the profits are going to be shared.
Advantages of Partnership
23. The firm has more capital available to start and operate the business. At the same
time, expansion of the business would be easier. Partnerships can borrow money
from banks more easily than a sole proprietor.
24. Each partner brings different knowledge and skills. Partners can specialise in specific
duties, which make the management more efficient.
25. There is more business coming into the firm, as each partner has his own contacts
and recommends the firm to them.
26. There would be less stress and tension on the partners since the risk and
responsibility of business is spread out among the partners.
27. There is opportunity to bring in new partners from time to time. New partners will
bring in new ideas, more capital, and customers.
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Disadvantages of Partnership
28. There is the problem of unlimited liability for the partners, except in special cases, as
for sleeping partners. In fact, the risk to the partners may be even greater, as each
partner is an agent of the firm and any wrong decision make by one of the partners
may get his other partners in trouble.
29. There is still lack of continuity as death or bankruptcy of any partner will dissolve the
partnership. The can be avoided if the partners have previously agreed prior to some
other agreement or partners may buy insurance on each other.
30. Due to the fact that each partner has certain authority and control over the business,
conflicts and disagreements often arise. Partners may not be able to agree on all
aspects of the business.
3.2.3 Companies
A Company is vastly different from the Sole Proprietorship or the

Partnership. To register a Company, a lot of procedures need to be
followed. Companies are owned by shareholders. A Company is registered
under the Companies Act.
Legal documents such as the Memorandum of Association and the
Articles of Association need to be submitted when registering a
Company. There are two types of companies:
The Public Limited Company and

The Private Limited Company.
Their main differences are as follows:
Public Limited Company Private Limited Company
1. The number of The number of shareholders is from two to maximum

shareholders is from of fifty.
seven to unlimited.
2. The Company shares are The shares are not listed in the Stock Exchange.
listed on the Stock
Exchange.
3. Shares are freely bought Shares cannot be easily sold or transferred to outsiders.
and sold by members of
the public
4. Company must publish There is no requirement to publish financial statements

its financial reports for for public circulation.
public circulation.
5 The Name of the The Name of the company ends with the words ‘
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company ends with the Private Limited ’ or ‘ Pte Ltd ’

words ‘ Limited ’ or
‘ Ltd. ’
Advantages of Limited Companies

 Sharesholders have limited liability which makes it attractive for them to
invest their money into the business. This means that companies can raise a
much larger sum of capital compared to the sole proprietor and partnership.
 Companies can also easily borrow from financial institutions such as banks.
They can also grow and expand very fast.
 Companies have perpetual life. This means that the business can continue
more or less forever, unless majority of the shareholders decide to terminate it.
The death or withdrawal of shareholders does not affect the continuity of the
business.
 Professional managers and staff can be employed to manage the business. This
leads to efficientcy of operations.
Limitations of Companies
 In the case of Public Limited Companies, where the shares are listed on the
Stock Exchange, it may be taken over by another company.
 Companies are required to keep proper accounting records and submit all
financial records to the authorities. Companies are tightly controlled and
regulated by the government.
 It is more difficult for companies to maintain secrecy of the business, since
their accounting details are open to the public (especially for public listed
companies).
 In Singapore, companies pay a high tax rate of 23% of the net profit to the
government. Whereas the sole proprietor and partnerships the tax paid is
progressive tax.
 The decision- making is rather slow due to the many management levels in the
company structure.
 Shareholders who are actual owners of the company, do not get involved in
the day-to-day matters of the business and therefore have no personal loyalty
to the business.
3.4 Other Forms of Organisations
3.4.1 Cooperatives
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When producers, consumers or other groups have similar products to buy

and sell, a cooperative may be set up. It is a collective arrangement
whereby members pool their resources together. Some examples of
cooperatives are producers' cooperatives, consumer's cooperatives, retail
cooperatives. Membership is open to any interested persons and the shares
are not listed on the Stock Exchange. Any surplus profits are distributed to
members in the form of rebates.
CO-OPERATIVE
This is actually a club of members who combine their money to buy goods in bulk
and re-sell among themselves. The first co-operative was founded in Rochdale,
England, in 1844 based on the following principles which have now been adopted
by co-operatives throughout the world:
 Membership open to all

 One member has only one vote
 Distribution of surplus in proportion to purchases made at the co-
operative Payment of a limited interest on capital
 Political and religious neutrality
 No credit extended to customers
 The encouragement of education
3.4.1 Advantages
I The customers of the co-operative acquire good quality products at fair prices
and enjoy a share of the profits made.
2 The market is fairly stable since members and lower income groups prefer to
buy their basic necessities from the cooperative, though they go to other retail
outlets to purchase more stylish goods.
3 Members have a say in the way the co-operative is being run though this is
becoming less easy since professional marketing, administrative and managerial
staff have been appointed. The ordinary members have begun to abdicate their
responsibilities and this led to many instances to mismanagement, fraud and the
abuse of funds. The only way to prevent such abuse is for members to take a keen
personal interest in co-operative matters.
4. The co-operative provides a wide range of benefits for members, e.g. dental
care at special rates, child care centers, assistance with the education of member's
children up to university level, computer appreciation courses, Basic Education
for Skills Training (BEST) programmes and assistance with funeral expenses.
However, in spite of all these benefits, there has been a steady decline in
membership of co-operatives as the general economic prosperity of the working
classes increases and the standard of living rises.
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For its part, the cooperative has tried to introduce benefits like immediate
discounts on purchases instead of year end rebates. They have tried to make their
stores as attractive as those of other retailers but they have been unable to locate
themselves in the main city shopping areas. The high rentals would simply force
prices up and lead to a decline in the number of customers. However, in customer
surveys, the co-operatives remains unbeaten for the purchase of basic household
needs such as rice, sugar, cooking oil and soap.
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UNIT 4
Business Environment
4.1 Introduction
An organisation does not exist in a vacuum. It exists in its environment,
which provides resources and limitations. If an organisation adapts to its
environment, it will prosper, otherwise it will fail. An organisation and its
environment are interdependent and interact very intensively. The
organisation depends upon its environment for the resources and
opportunities necessary for its existence. The environment contributes
resources to the organisation only if the organisation returns desired goods
and services to it.
4.2 Effects of the Environment on the Organisations
Environmental factors affect an organisation in 2 ways. They set limits

and pose threats and they also provide opportunities and challenges. A
change in the government export policy may suddenly threaten an export
oriented organisation. A reduction in the rate of interest may provide
cheap finance to an organisation.
4.3 Effect of Organisation on the Environment
Effects of the organisations on its environment is quite obvious in the case
of cigarette manufacturing; liquor manufacturing, film making,
pharmaceutical companies, etc. These organisations have an obvious
impact on its environment.
4.4 Elements of the Environment
The business environment that firms operate in can be divided into the
internal environment and the external environment.
4.5 Internal Environment
This refers to all the factors or forces that affect the day to day activities of
the business.
Customers
 As Peter Duckers has put it, "The ultimate aim of all business organisation is -
to create a customer". These days, for most products and services, the market
belongs to the buyer. The customers expect the management to provide them
with quality goods at reasonable prices which allow for appropriate rate of
return to its owners. Management on the other hand seeks to win customers
loyalty through factual information about their products which have been
designed and developed, keeping in view the customers expectations.
Suppliers
 The suppliers are responsible for continuous and uninterrupted supply of raw
materials to feed the production cycle which converts them into finished
goods. Inferior or substandard quality of raw materials or delayed supply of
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raw material will only hamper the production process thereby increasing cost
of finished goods. Management on the other hand must purchase quality raw
materials from reliable suppliers, pay them properly when the money is due.
The enlightened management always cultivates suppliers who are a valuable
source of information on future trends in the raw material market.
Competitors
 In capitalism, it is the market force that will decide the organisations which
will prosper and the ones that will perish. In pursuit of survival and growth,
organisations must compete with one another. In a buyers market, the
competition to win customers is even more fierce. However, the presence of
competition and rivalry forces each organisation to offer quality products at
minimum prices. The enlightened management encourage customers to make
a decision on the basis of factual information rather than aggressive
advertising campaigns or discounting quality of the competitors products.
Competition indeed brings out the best in an organisation and requires the
management to constantly strive for excellence.
Shareholders
 The shareholders of the firm can actually influence the policies and procedures
of the firm. They do this by exercising their voting rights. Company directors
and managers are now becoming more conscious of the decisions they make
and how they carry out their responsibilities.
Financial Institutions
 Firms depend on banks, insurance companies and other financial organisations

to provide them with capital to carry out their business activities.
Employees
 The organisation labour force comprises of all the individuals who are
employed or could be employed by the firm. The firm must take care of the
needs of its employees by providing a conducive environment for them.
4.6 External Environment
This comprises the major forces outside the organisation that have the
potential to significantly influence the likely success of the firm.
31. Physical Environment
This includes the supply and availability of resources and raw
materials. Availability of resources affects the location of the
industries. Constraints in the physical environment determine the type
of business activities that are carried out. The physical elements also
include the infrastructure and facilities available in the place of
operation.
Political - Legal
This comprises the laws and regulations that are passed by the
government to control the business activities. These laws act as
guidelines within which the business must operate. Government
4 - 21
departments have been set up to promote trade and assist business

firms.
Economic Environment
This refers to the state of the economy in the country, the level of
unemployment, the inflation rates, trading and business arrangements.
Basically, the economic environment includes all aspects that affect the
economic growth and business activities within the country.
Social Environment
The social elements of a country have an impact on the business firm.
The products and services that a firm provides depends very much on
the composition of the population and its demographics, the values and
attitudes that people have and the culture of the society. Whether
product/service succeeds or fails is dependent on the society's customs
and ways.
Technological Environment
This part of the external environment refers to the current state of
technological knowledge and know-how. Breakthrough in technology
can affect a business by allowing it to take advantage of new methods
of production, new materials for manufacturing goods. The firm is
also able to provide better services to its clients, using current
computer technology.
4.7 Social Responsibility of Business
Business organisations are primarily economic in nature; the justification
for existence is economic performance. If they cannot make profits, they
will eventually perish. Some critics maintain that socially oriented
activities weaken the firm's goal of profit maximisation. The money spent
on social projects could have been invested in business opportunities.
However, others have argued that the motive for profit can be pursued
together with expression of social responsibility. Money spent on social
projects improves external environment and in turn allows the
organisations to prosper. If the business shrinks its responsibility to
society altogether, then the government, prompted by the will of people,
shall pass laws controlling the organisation.
The question is "to whom should the firm be responsible?" A few major
groups are shareholders, employees, the customers, the general society.
Most of these factors have been mentioned in the discussion on internal
environment. Here, we concentrate on the firm's responsibility in general.
Sound responsibility is the responsibility of the firm to the community or
public at large, eg. in their pricing, product quality, treatment of the
environment, their advertising strategies, employment policies.
Businesses must ensure that they conduct their activities legitimately and
cater to the needs of the society. Before a firm can undertake socially
desirable objectives, it must first make enough profit to maintain the
support and confidence of its shareholders.
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Areas of Concern for the Socially Responsible Firm

32. Employee relations
 Education and training of staff
 Working environment
 Job satisfaction
 Attitudes to disadvantaged groups
Consumer protection
 Product safety
 Misleading advertising
 Complaints from customers
The environment
 Pollution
 Noise
 Restoration of land to natural uses
Financial honesty and openness

 Bribery and corruption
 Company control and ownership
 Executive pay and compensation
 Contributions to political parties
Conflict between Social Responsibility and Profitability

33. Money invested in social responsibility comes out of the company's profits.
If shareholders do not receive what they believe to be a fair return on their investment they are
unlikely to contribute to the future requirements of the company.
Managers of the business are evaluated strictly upon economic performance; rewards go to
managers who keep costs down.
Therefore, social responsibility cannot be left to the whims of individual firms and
managers must be enforced by law.
4 - 23
UNIT 5
Organisation and Organising (I)
An Organisation is
 A collection of people
 Working together
 For some common objectives
 In modern society, people have become more and more dependent

on organised activities to meet their needs.
Organising
Is the process by which management seeks its objectives by combining the efforts of
people under its supervision.
Involves
 Identifying the tasks that have to be done.
 Allocating the tasks among members
 Integrating efforts to achieve its goals.
Largely done by the design of an organisation structure that would as far as possible
run itself.
5.1 Why do People form Organisations?
 Enable people to accomplish things individuals alone would find it

difficult or impossible to achieve.
 Helps overcome our limitations as individuals.
 Provide continuity of knowledge

 They store and protect most of the important knowledge that our civilisation has gathered and
recorded.
 Provide a foundation of knowledge on which we can build on and acquire more learning and
achieve greater results.
 As a source of career
 Provide their employee with a source of livelihood and perhaps even personal satisfaction and
self-fulfillment.
 Gains in productivity
 Because they make possible specialisation and exchange.
 Synergy occurs
 i.e. Total output is greater than the sum of its input, eg. when Alan, Alfred and Allison work
together, their collective effort should be better than the sum of what Alan, Alfred and Allison
can produce individually.
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 Overall to satisfy personal needs: educational, social, economic, physical and psychological.
5.2 Organisation Structure

This can be defined as the total pattern of human relationships that exists
The organisation structure is divided into 2 parts, Formal and Informal
Organisations
Formal Organisation
 A system of jobs, authority relationships, responsibility and accountability designed by

management to get the work done
 A creation of management
 Has clearly defined roles for every member
 Specifies reporting relationship and authority structure
 Official network through which information passes (also called the chain of command)
 A formal plan for achieving an efficient division of labour and effective coordination of
members' activities
 Consists of all formal groups found in the firm such as committees, task force, project teams.
A) Informal Organisation
 Network of personal and social relationships that may have nothing to do with formal
authority relationships
 Not formally planned
 Develops spontaneously from people's interaction
 Loosely organised, flexible, ill-defined
 Unofficial channel of communication (also called 'grapevine')
5.3 Creating the Organisation Structure

Aids to organisation design.
5.3.1 Organisation Charts
 Pictorial representation of the company's internal structure at a
particular point in time.
Portrays the formal relationships developed from organising
 The functions, departments or positions of the organisation
 The reporting relationships
 The main lines of communication and the downward flow of
authority
A properly constructed chart provides a view of the general structure of the
company's work and work relationships and can be used for the following
purposes.
 It serves as an informational device for orientating new employees
 A work plan for considering expanding the business.
 An information piece for the general public/special groups as
needed.
5 - 25
While an organisation chart shows reporting relationship and areas of

responsibilities, it does not give a perfect explanation of the workings of a
business organisation.
Limitations of the Organization Chart

There is a lack of clarity as to who does what as it does not provide job descriptions
which describe in detail each job's title, duties and tasks etc.
It does not indicate the organisation's informal relationships and channels of
communication which may exert their influences.
It does not reflect the power and status at each management level. 2 managers on the
same level may vary significantly in their capacity to influence the firm's operation.
Many businesses may depend to a large extent on outside specialists of many kinds and
this is not shown on the organisation chart although their influence is substantial.
5.4 Bureaucratic Organization

Bureaucratic Structures are intended to provide for equal treatment for all
employees, a reliance upon the expertise skills and experience relevant to
the job, the maintenance of records as work and output and the setting up
the enforcement of rules and regulations that serve the interests of the
organizations.
5.4.1 Characteristics of a Bureaucratic Structure

 Specialisation - Duties and responsibilities are divided among
organization members so as to maximize efficiency.
 Hierarchy - All positions within the bureaucracy are arranged in a
hierarchy. Each lower office would be under the control of a higher
one and there would be a chain of command.
 Rules - Activities should be carried out in accordance with rules
and standard operating procedures.
 Impersonality - Individuals should be treated in the same manner
regardless of their personal characteristics.
 Hiring by qualifications and promotion by merit - Employees
should be hired on the basis of past experience and qualifications, not
their relationship with current organization members. Individuals
should be promoted on the basis of past performance and merit.
 Written Records - To provide the organization with a permanent
record of past actions and continuity over time.
5.4.2 Advantages of Bureaucracy

 Provide equal treatments for all employees.
 Maintenance of records as work and output.
 Set up of rules and regulations that serve the interests of the
organization.
5 - 26
 Establish a framework of rules and systems within which decision

making can be delegated with reasonable predictable results.
5.4.3 Disadvantages of Bureaucracy

 Produce rigidity and make it difficult for an organization to change.
 Reduce the motivating potential of employee performance.
 Reduce individual discretion.
 Stifles upward communication.
 Stifles personal growth.
5.5 Types Of Organization
5.5.1 Line Organization
Here, the organization is divided into various departments, and each
department having a controlling head who is the departmental manager.
This form of organization has the following advantages and disadvantages:
Advantages of Line Organization
 It is simple and readily understood.
 It promotes rapid decisions because of the direct nature of the chain
of command.
 For the same reason, it simplifies coordination between personnel
in the same department.
 Effective delegation is facilitated, and because of the direct line of
control, inspection of the work of delegates is relatively easy to arrange
and maintain.
 All members of the department can be made aware of, and readily
understand, their position and status in the departmental hierarchy.
 Staff discipline is easier to maintain than in other forms of
organization.
 The extent of responsibility, authority and duties can be clearly
defined and recognized by those concerned.
Disadvantages of Line Organization
 It is potentially rigid and inflexible because each department is
virtually self-contained and there are limited opportunities to gain
experience of other departments.
 Its effectiveness is very much dependent on the capacity of the
head of department.
 For the same reason, expansion of the department may prove
difficult.
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 Cooperation and coordination between different departments may

provide difficult, and is very much dependent on the attitude of the
departmental head.
Fig 5.1 Specimen of a Line Organization Chart
Chief
Executive
Chief Marketing Transport

Accountant Manager Manager
Assistant Cost Vehicle Vehicle

Accountant Accountant Maintenance Drivers
Manager
Accounts Cost Maintenance

Clerks Clerks Staff
Home Sales Export

Manager Manager
Sales Export
Representatives Agents
5 - 28
5.5.2 Line and Staff Organization
A third basic type of organization is line and staff organization, which

attempts to combine the benefits of the previous two. In this form of
organization, there are again functional experts appointed but in this
instance they have no executive powers and act in an advisory capacity
only.
An obvious example is that of a personnel manager (staff) advising an

accountant (line) in the recruitment of new members of staff.
Line and staff organization is commonly found in many companies.
Advantages
 Direct lines of responsibility and authority are maintained.
 Control of departments remains with the departmental heads.
 The advantage of having specialist knowledge and experience
available to line managers and supervisors promotes departmental
efficiency.
 Departmental and inter-departmental coordination and cooperation
are facilitated because the specialists’ interests spread throughout the
undertaking.
Disadvantages
 Line officers are not bound to follow the advice of the staff
officers, and sometimes do not. This can lead to inefficiencies and a
waste of the expensive skills of the expert functional specialists.
 Staff officers can sometimes try to usurp the authority of line
officers, which can lead to bad feelings. It can also result in some
diminution of the authority of the line managers and supervisors over
their staff.
 This form of organization can be confusing for the workers,
especially where there is a sharp difference of opinion between the line
and the staff officers.
5 - 29
Fig 5.2 Specimen of a Line and Staff Organization Chart
Chief
STAFF
LINE Executive (Advisory)
Chief Marketing
Accountant Manager
Accountant Cost
Accountant
Management
Services
Accounts Cost
Manager
Clerks Clerks
Personnel
Manager
Home Sales Export

Manager Manager
Sales Export
Representatives Agents
LEGEND
Advisory relationship
5 - 30
5.5.3 Line and Staff Conflicts
34. Staff specialists tend to overstep by asserting authority that belongs to line personnel,
causing friction and misunderstanding.
 Line managers bear ultimate responsibility for results and therefore recent staff intrusion into
their prerogatives.
Line managers think that staff members do not give sound advice.
 Staff members may be cut off from the day-to-day operations of the business. Therefore, their
suggestions may lack applicability.
Line managers think that staff members steal credit from line members.
 Line managers think that 'when things go wrong, we get the blame, but when things go right,
they take the bonus'.
Line feel that staff members have narrow perspectives.

 They tend to be specialists and fail to relate their suggestions to the organisation's overall
needs and goals.
On the other hand...
35. Staff members feel that line managers do not use staff properly
 Line managers resist calling in a staff manager
Staff may be called in only when the situation has completely deteriorated.
Staff members think line managers resist new ideas.

 Staffs resent it when their suggestions are not supported and implemented by line managers.
Yet they are not given the authority to implement new ideas.
Staff members tend to be younger, better educated, more ambitious and more
individualistic. With such differences in points of view, the line and staff structure is
often a source of tension.
What are some ways to prevent such problems from arising?
There are a few things we can do to smooth out or reduce line-staff
conflicts.
a) Line and staff responsibilities should be clearly spelled out.
 Line members should remain responsible for operating decisions of the organisation. Staff
members should give advice when they feel it is needed, eg. make it clear where staff's
authority ends and lines begin including exactly what their jobs are, who does what, who
reports to whom and so forth.
Integrate line and staff activities.
 Staff members should consult line members early in the process of developing their
suggestions. Line and staff should work closely together in all aspects of their work, keeping
each other informed at all times.
5 - 31
Educate line to use staff properly.

 Line managers will make more effective use of staff when they know what the specialist can
do for them.
Hold staff accountable for results.
 Staff should be held liable for the failure of their suggestions. This responsibility should not
be left with line managers.
Make sure that staff people have some prospect for promotion (perhaps higher up in
the parent line).
 So as not to give line managers the idea that the staff people have nowhere to go in the
organisation since they are outside line hierarchy.
5.5.4 Committee Organization

Committee Organization occurs where management decisions are
formulated by a group instead of being made by an individual. Members
may be appointed or may be elected.
It is quite impossible for an organization to be managed entirely by
committee.
Advantages
 More than one point of view on any problem can be considered.
 The advice of experts on particular matters can be made available.
 Full discussion and consideration can be given to any problem
before the organization is committed to a particular solution.
 Because committee members normally come from different
activity areas, it is likely that the implementation of decisions will be
well- coordinated and that cooperation between different sections of
the organization will be better assured.
Disadvantages
 Because of the number of people involved and the lengthy
discussions that take place, committees are often slow in reaching
decisions.
 Because of the collective nature of committees no individual
responsibility can be fixed for decisions reached, and so no individual
accountability for failure can be apportioned.
 Decisions are likely to be the result of compromise and are
therefore likely to lead to less positive action than would be the case
where an individual made the decisions.
 Differences of opinion between members of the committee may
result in decisions being postponed to another meeting, with the result
that day-to-day operations may suffer.
It is often not possible to obtain rapid decisions from individual members
of a committee where urgent action may be required, on the grounds that
no authority is vested in individuals
5 - 32
UNIT 6
Organisations and Organising (II)
6.1 Approaches to Organisation in Larger Firms
Departmentation
Process through which tasks or activities are grouped logically into distinct areas and
assigned to managers
Organisation - wide division of labour
When deciding upon the method of grouping or division of work, the main objective
of the business must be considered.
Management needs to develop a structure that will
 Be flexible
 Meet the needs of the firm
 Permit growth and development
The organisation structure must be modified as the firm grows and more complex
tasks have to be accomplished.
The Main Types of Departmentation:

 By Function or Functional Departmentation
 By Product or Product Departmentation
 By Geographical Location
 By Customers
 By Matrix
6.1.1 Functional Departmentation
This is the most widely used basis.
Activities are grouped on the basis of the essential functions that must be
performed to attain the enterprise's goals.
The tasks to be performed depend on the nature of the business. Those

needed by a community college will be very different from those needed
by a hospital or a large steel manufacturer. Most organisations perform 3
key functions:
A wholesaler would speak of his activities as 'buying', 'selling' and

'finance'.
Advantages
6 - 33
b) This method is widely used, logical and time proven. Also known for its simplicity
and cleanness.
It follows the principle of specialisation and economic result.

 Work is done by specialists who can develop an intensive understanding of their jobs
 Leads to increased organisational productivity
It makes it easier to mobilise specialised skills and bring them to where they are most
needed.
Since managers tend to be specialised, this simplifies recruiting and training.

 It is not necessary to look for or train 'general managers'
It makes easy tight control by top management

 Since managers are only familiar with a part of the 'big picture' of the company.
Fig 6.1 Diagram of Departmentation by Functions

(It allows each major function to report to the Managing Director.)
THAMES PTE LTD
Managing Director
Production Manager Personnel Manager Marketing Manager
6.1.2 Product Departmentation

In departmentation by product, a production unit is set up for each good
and service.
Most large, multiproduct companies are organised according to a product
structure.
 E.g. a large food corporation can have a different division for each
of its major types of food products.
 E.g. General Motors have a truck division, sports cars division,
mini cars division, etc.
6 - 34
When sheer size and diversity of products make servicing by functional

departments too unwieldy, semi autonomous divisions are created, each of
which designs, produces and markets its own product.
ie. each division (quite independent) is responsible for a product or a

related family of products, including the production, marketing and
distribution of the products.
 Organising along the product line results in specialising in

activities according to each product grouping
 Product divisionalisation is the logical pattern to follow when a

product type calls for manufacturing techniques and marketing
methods that differ greatly from those used in the rest of the
organisation.
Fig 6.2 Diagram of Departmentation by Product
THAMES DEPARTMENTAL STORES
Managing Director
Purchase Operations Marketing

Manager Manager Manager
Toy Cosmetic Imitation Garment

Dept. Dept. Jewellery Dept. Dept.
Music Stationery Electronics

Dept. Dept. Dept.
6.1.3 Territorial Departmentation
(Departmentation by geographical area/location)
6 - 35
Bringing together all activities in a particular location or region.
 A manager is put in charge of the area and is given responsibility

for all aspects of the unit's activities. Local factors are not neglected in
decision making.
 Especially attractive to large-scale firms whose activities are

geographically dispersed, eg. services, financial and other non-
manufacturing firms are generally organised on a geographical basis.
The Organisation of A Departmental Store :
Fig 6.3 Diagram of Departmentation by Geographical Location
THAMES INSURANCE COMPANY
Managing Director
Marketing Finance & Admin Operations Personnel

Manager Manager Manager Manager
North South Central East West

Zone Officer Zone Officer Zone Officer Zone Officer Zone Officer
A firm may be organised along geographical lines for the following

reasons:
c) Lower cost of operating
 If a firm's plants are located close to the market, transporting costs are cut down.
 Plants for manufacturing and assembly can be so located as to reduce transport costs.
eg. manufacturers of bulky products tend to divide their work on a

territorial basis, with a separate plant to serve each area or district.
Others may be located near the sources of materials such as wood logs
and cotton which are bulky and expensive to transport.
6 - 36
6 - 37
Convenience to customers
e.g. chain restaurants and chain supermarkets to be close to the
customers
Knowledge of local circumstances helps decision making and aids the creation of
customer goodwill
Provides a good training ground for managers
Legal and political considerations
6.1.4 Departmentation by Customer
Fig 6.4 Diagram of Departmentation by Customers

(It is quite prevalent amongst advertising agencies which cater to media
campaigns for big corporations having several product line.)
THAMES ADVERTISING COMPANY
Chief Executive
Officer
Personnel Finance & Operations Business Dev.

Manager Admin Manager Manager Manager
Residential Offices School Hotel
Restaurant Factory Hospital
6 - 38
This grouping of activities reflects a paramount interest in the customer.

The customer is the key to the way activities are grouped when the things
an enterprise does for him are managed by one department head.
Reason for use: It caters for customers of different needs and brings
benefits of specialisation
 The special and widely varied needs of customers for clearly
defined service impel many suppliers to departmentalize on this basis.
 E.g. the manufacturer who sells to both wholesalers and industrial buyers frequently finds that
the needs of the two markets can best be met by specialised salesmen.
 E.g. departmental stores can be divided into adult and junior sections.
 E.g. educational institutions offer regular and extension courses to serve different groups of
students.
Summary: When to use Departmentation
 Where the company's products, customers, market channels, or
areas are very diverse.
 Where the company is so large that one man can no longer alone
coordinate the functions, (production, marketing, etc) for all products,
customers, market channels, or areas
 Where being sensitive and adaptive to the "purpose's" changing
needs is more important than being efficient
 Where adequate controls can be implemented by top managements
so as to prevent a division's "drifting away."
 Where developing "general" managers is a major consideration.
Though there are many ways to departmentalize organisations as seen
from above, most types of departmentation can be classified as either
purpose (divisionalisation) or process (function). Departmentalizing a
company by business functions or process is probably the most familiar
form of division of work. Purpose type of department results in a
decentralised organisation as authority is delegated for a wider range of
decisions to division managers such as production, sales or personnel than
if for only one specific function. Products, customers and locations are 3
popular purposes around which divisions can be built. Purpose types of
departmentation are very useful for insuring continuous responsive and
undivided attention to some product, customer, market or area. Process
types of departmentation on the other hand tend to be more efficient and
have less duplication of effort.
6.1.5 Matrix Departmentation

These are relatively new types of structures, which have come about as a
result of co-ordination problems in highly complex industries such as
Aerospace and the Construction Industry where the functional and
product type of structures have not been able to meet the demands of the
variety of activities and relationships created by the work.
6 - 39
A matrix structure usually combines a functional form of structure with a

project-based structure.
The functional managers provide technical expertise whereas the project
manager provides the leadership required to steer the project through
during its relatively temporary lifetime. The functional and purpose forms
of departmentation are combined in the same organisation structure with
functional managers in charge of essential functions and an overlay of
project managers responsible for the end product/purpose a project.
Fig 6.5 Diagram of Departmentation by Matrix
THAMES CONSTRUCTION COMPANY
Chief Executive
Officer
Architect & Resources Finance Legal

Civil Engineer Manager Manager Advisor
Project W
Manager
Project X
Manager
Project Y
Manager
Project Z
Manager
Advantages of Matrix Organization

 It combines lateral with vertical lines of communication and
authority.
 Better control of project ; greater security.
 Better customer relations and higher morales of staff.
 Shorter project development because of division of labour.
 It focuses on the requirements of the project group and links
responsibility for completion to the project manager.
6 - 40
 It encourages functional managers to co-ordinate with project

managers and contribute their resources to successful completion of
the project.
 Help in the development of managers, as their work include wider
responsibilities.
Disadvantages of Matrix Organization
 The functional specialist and the project groups may experience
conflict in the area of allocation of resources and priorities.
 Disunity of command leads members of the project teams to
division of their loyalties between project manager and functional
specialist.
 More complex internal operation.
 More difficult to manage and possible inconsistent application of
company policy in different managers.
 Functional managers may neglect their job and let project manager
do everything.
 Too much shifting of staff from project to project may hinder
training of new employees.
6 - 41
UNIT 7
Dimensions of the Organisation Structure (I)
Many factors have to be considered in determining the appropriate

structure for an organisation. Authority and responsibilities must be
clearly designated to ensure efficiency and effectiveness.
7.1 Authority
Authority has been defined in a number of ways.
 The right to give orders and the power to exact obedience.
 The power to make decisions which guide the actions of another.
 The right that a manager has to request a subordinate to do
something to accomplish organisation goals (authority gives position
holders the right to expect compliance from subordinates). Sources of
authority:
7.1.1 'Top-down' authority

 Authority often comes from one's superiors
 e.g. a department head gets his authority from his boss who is a Managing Director the MD
gets his authority from the Chairman is allowed to act because of the authority granted by the
BODs in turn, the BODs gets its authority from the company's shareholders.
7.1.2 'Bottom-up' authority

 Authority also comes from one's subordinates.
 It starts at the worker level and moves upward.
 Subordinates can give or take away authority. If they refuse to do a
good job, they reduce their boss's authority.
 Authority can be effective only when they accept it.
7.2 Power
Power is the ability to do something.
While authority is one source of power, a manager's source of power and
influence could be derived from other sources. Authority is not power.
Power is the product of personality in a specific situation. Authority can
be delegated; power cannot. Either it exists or it does not.
Sources Of Power
Reward power
 The person having this power has the ability to reward
7 - 42
 Managers frequently have reward power in that they can give increases or incentive pay and
promotions to their subordinates.
 The ability to reward is important, but it must be handled properly, a manager should not
boast of power that he does not possess.
 If a manager is perceived as having power and really does not but he does not use it,
subordinates may be disappointed.
Coercive power
 Is the actual and perceived power to threaten and/or punish.

 Is based on fear that failure to comply with rules/instructions will result in some form of
punishment, eg. fines, suspension or dismissal.
 There is a tendency generally to minimise the use of coercive power.
Legitimate power
 Is derived from authority
 It involves subordinates compliance with rules, orders and instructions by the leader when
these are perceived by subordinates to be legitimate in terms of the leader's scope of authority.
Referent power
 Is based on identification and attraction
 This type of power comes from the feeling/desire on the part of the other persons to identify
with a person.
 The other persons want to identify with the powerful person regardless of the outcome.
e.g. some religious and political leaders have tremendous charisma/personal
magnetism and their followers are very loyal and dedicated.
Expert power
 Managers have expert power to the extent that the other employees attribute knowledge and
expertise to them.
 The experts are seen to have knowledge/ability only in well-defined areas.
e.g. engineers may have expert power in their area of specialisation but not
outside of it.
Reward, coercive and legitimate powers are largely determined by the
organisation for each formal leadership position. Consequently, they are
referred to as 'position power'.
Referent and expert power depend largely on the traits and behaviour of
the person who occupies a leadership position, they are often referred to as
'personal power'.
To be efficient, a manager must draw upon as many sources of power as
possible.
7.3 Responsibility
Is the obligation to perform certain functions on behalf of the organisation.
7- 43
Embodies three characteristics:

 Obedience, dependability and compliance
Responsibility and authority do not exist in isolation, they must inevitably
go hand in hand. A manager must be given sufficient authority to fulfill
his responsibility.
 E.g. it would be inappropriate for you to assign a subordinate the
responsibility for designing a new product and then tell her she hasn't
the authority to hire designers or choose the best design.
 E.g. sales managers are responsible for the performance in the sales
department but if he did not have the formal authority to assign
territories, reward the most effective salespeople and fire incompetents,
he would not be able to fulfill his obligations.
 i.e. for individuals in the organisation to perform their assigned tasks effectively, they must be
delegated sufficient authority to do so.
If an individual does not want to be responsible for an assignment, he
should reject it. However, this could not lead to disciplinary action by his
superiors.
7.4 Accountability
Concerns with the fact that each person who is given authority and
responsibility must recognise that the executive above him will judge the
quality of his performance.
By accepting authority, a person denotes his acceptance of responsibility
and accountability. The person who is delegating requires subordinates to
allow their performance to be reviewed and evaluated and holds them
accountable for results.
Accountability, by itself, cannot be delegated.
 i.e. the person who delegates authority remains accountable to his
superior for what he has delegated.
 e.g. the manager submits a report (typed by his clerk) which contains some errors over which
he is quite embarrassed. Though he has delegated the typing or even the checking for errors
(to his secretary) he, as a manager, is still accountable for the errors. This does not imply that
his typist or secretary bears no responsibility. She is accountable to him.
Hence, the act of delegating to subordinates in turn makes them
accountable to him, for ultimately he is still responsible.
7.5 Delegation of Authority
Delegation is
 Pushing down of authority from superior to subordinate (Dessler)
Decision-making passed down from superior to subordinates
(Longnecker and Pringle)
 Assignment of responsibility (obligation) and authority by a
superior to a subordinate to carry out specific activities (Stoner).
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 e.g. a department manager in a retail store who is granted authority to purchase goods sold in
the department is expected to exercise authority in such a way as to bring profit to the
company.
 While authority can be delegated, responsibility cannot. You are

still ultimately responsible for seeing to it that the job gets done
properly. Your subordinates automatically become accountable to you
for the performance of the tasks assigned to them.
 Through delegation, a manager is given the right to plan the
activities of a unit, direct the work of subordinate personnel, and make
other decisions pertinent to the operations of the organisation.
 If authority is delegated to an operative employee, the right is that
of deciding various details of the work and using property and supplies
belonging to the employer
 The more the managers delegate, the more the organisation is
decentralised.
7.5.1 Importance of Delegation
A manager gets things done through others, and so delegating is a skill that
effective managers have to develop.
Advantages of effective delegation:
Relieves the delegator of certain time-consuming work
 A manager who is constantly immersed in the details of work that could be accomplished by
subordinates is unable to care for the major responsibilities of the position. Delegation
contributes to the improvement of department productivity.
The more tasks managers are able to delegate, the more opportunity they have to seek and
accept increased responsibilities from higher-level managers.
 The managers can be free to function with maximum effectiveness for their organisations.
Delegation frequently leads to better decisions since subordinates closest to the 'firing
line' are likely to have a clearer view of the facts.
Effective delegation speeds up decision-making.
 Valuable time is lost when subordinates must check with their superiors before making a
decision.
Delegation contributes to development of subordinates.
 Delegation causes subordinates to accept responsibilities and exercise judgement, and learn to
make decisions - improve their self-confidence and willingness to take initiative.
General personnel respond to delegated authority favourably.
 Satisfy subordinates' need for esteem and self-actualisation thereby improves morale.
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7.5.2 Reasons Why Managers Do Not Delegate Authority
36. Some managers get trapped in the 'can do it better myself' fallacy.
Often it just seems quicker to do the task than explain it to someone

else.
The feelings of importance attached to the exercise of power.
Managers sense their own importance as subordinates come to them
with questions and refer problems to them for decisions.
A manager's feeling of insecurity.
He feels it necessary to keep in close touch with work for which he is

responsible.
Fear loss of power if subordinate does too good a job.
Manager's lack of ability.
 Some managers may simply be too disorganised or inflexible to plan ahead system so that
subordinates' actions can be monitored.
 Some managers lack the ability to direct their subordinates. They are not good at organising
their thoughts or giving orders.
Some managers lack confidence in their subordinates.
 In the short-run, this lack of confidence may be justified if subordinates lack knowledge and
skills.
 In the long run, there is no justification for failing to train subordinates.
7.5.3 Other Barriers to Effective Delegation
Reluctance to accept delegation.
Reasons why subordinates avoid being delegated tasks:
 Many subordinates fear criticism for mistakes
 Some hesitate to accept new assignments when there is a lack of

necessary information and resources to do a good job.
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 Some subordinates lack self-confidence, and are apprehensive

about accepting authority.
 Some subordinates just find it easier to ask the boss to decide for
themselves how to deal with a problem.
 Rewards for assuming the additional job may be inadequate.
 Insecurity - some subordinates want to avoid responsibilities nd

risks and so would like their bosses to make all the decisions.
7.6 Chain of Command
Delegation creates a 'chain of command' which is important as it provides

a framework for transmitting authority and aid communication and
coordination.
Direct authority flows from upper management levels to each lower

management position.
The chief executive officer gives directions to the chief operating office,
who directs the vice-presidents, who in turn give orders to their
subordinates.
In this arrangement, each person knows who is responsible to whom.

From top to bottom, everyone is accountable to someone.
Problems arise when the chain of command is too long.
 Complexity of communication and coordination problem exists in
organisations when a large number of managers are involved.
 The longer the chain of command and the more levels of
management that communication must pass through, the more diluted
and inaccurate information is likely to become and more time it takes
for instructions to pass downward and for information to travel
upward. In effect, the decision and communication process takes
longer and is of poorer quality.
 Depersonalisation and deterioration of management-employee
relations results. The tall organisational structure may cause lower-
level subordinates to be demoralised as they feel that upper
management is out of touch with the situation at their level of
operation.
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 Information must be carried through several levels of officials for

decision and then back downwards in the form of instructions. This
causes undue delay and leads to the label of 'red tape' being given.
Large business firms have at least 3 main levels of management - often

referred to as the management pyramid.
(titles)
(position)
Executives Top 3rd Level
Dept. Mgrs Middle 2nd Level
Supervisors/ Operating 1st

Level
Mgt.
7.6.1 Top Management
 Includes the BODs, the President, and other officers of the

corporation such as the Secretary, the treasurer, the Vice-Presidents
and the General Managers.
 The duties of these groups are to develop overall organisational

goals, establish operating policies, set long-range objectives and
evaluate overall progress.
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7.6.2 Middle Management
 Reports directly to the managers
 Consists of plant managers, department managers, chief engineers,

controllers and superintendents.
 Can encompass many levels of management
 The duties of this group are to carry out the long-range objectives
set by top management. They are more interested in the day-to-day
activities than their superiors.
7.6.3 Supervisory Management
 Reports directly to the middle managers.
 Consists of the lowest level of management including foreman,

supervisors and unit heads.
 Supervise workers who perform the day-to-day operation. Watch

and direct workers, responsible for seeing that performance very
closely. If problems arise, they will often take corrective action right
on the spot.
 Operating managers are very concerned with specific jobs and

performance, while top managers are more interested in the overall
objectives and long range planning.
Features of a Tall Organization Structure
 Characteristic of larger organizations

 Numerous levels of authority and management
 Narrow Span of Control
 Long chain of command
 More formality, specialization and standardization
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7.7 Span of Control
The span of control refers to the number of subordinates reporting directly

to a supervisor.
There is a limit to the number of persons and activities that a manager can
effectively manage.
In developing the organisation structure, the choice of an appropriate span

of control is important to ensure effective utilisation of managers and
subordinates.
 Too wide a span causes managers to be overextended (overburden)

and subordinates to receive too little guidance.
 Too narrow a span results in managers being underutilised and

subordinates being over-controlled.
There is a relationship between span of control and the levels of

organisation.
 A narrow span of results in a 'tall' organisation with many levels of

organisation
 A wide span results in a 'flat' structure with fewer levels between

top management and the lowest organisational level.
Narrow span offers some advantages
 It allows closer and more frequent personal contact between

supervisors and subordinates.
 Better guidance, managers can give feedback to subordinates performance and help them to
achieve the objectives he has set for them.
 It offers tight control and close supervision.
 Improve performance by permitting managers to closely supervise their subordinates.
 Early management writers recommended a very 'narrow span'. The

boss should keep a closer eye on each subordinate.
 Executives can give more time to planning and decision-making

since they have fewer subordinates to supervise.
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 Managers can better manage fewer/more specialised people and

activities.
 You necessarily develop a greater number of managers, since there

are more management positions to be filled.
Disadvantages of narrow span

 There are additional costs for managers and their staff. Most of the
staff are senior personnel, hence command a higher salaries.
 i.e. administrative costs are excessive, also added expenses of executive offices, secretaries
and fringe benefits.
 Complexity of communication and coordination problems may

exist in the organisation when a large number of managers are
involved.
 With many managers in an organisation, more people have power and authority to make
decisions and issue orders. The channels of communication also become more numerous and
complex and coordination becomes difficult.
 Also, the longer the chain of command and the more levels of management that
communication must pass through, the more diluted and inaccurate information is likely to
become and the more time it takes for instructions to pass downward and for information to
travel upward. In effect, the decision and communication process takes longer and is of
poorer quality.
 Deterioration of management-employee relations

 The resultant 'tall' organisational structure may cause lower level subordinates to be
demoralised as they feel that upper management is out of touch with the situation at their level
of operation.
Wide span offers these advantages
 Reduced costs for fewer managers and their staff.
 Better and easier communicational structure, communication

passes through fewer levels of management and is less likely to be
distorted/inaccurate. It also takes a shorter time for information to be
passed down from the top management level to the operating level and
vice versa.
 As there are fewer managers, channels of communication are less complex and meetings can
be held easily and regularly and hence reduced problems of coordination.
 Subordinates are forced to make more decisions, take more

responsibilities and act more on their initiative since they cannot be
running constantly to supervisors for approval of their actions.
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 This results in improved management development (subordinates become more matured

quickly)
 Better and quicker decisions are made and more direct actions taken because individuals
closer to the point of action are more familiar with the local conditions.
 Morale tends to be higher since a wide span prevents supervisors

from meddling too much in the business of their subordinates. Each
subordinate has more of the feeling that he is his 'own boss'.
Disadvantages of wide span
 The manager is unable to exercise direct control and supervision.
 Less able to establish a close rapport with his subordinates, (impersonal, little understanding
between him and his subordinates and work-related problems)
 Higher quality and more costly people are needed in the

organisation because they must have larger jobs and act more
independently.
 Management has to pay more for each management personnel.
 The manager's day is overly occupied with supervision, leaving too

little time for effective planning.
7.7.1 Factors Affecting Appropriate Span of Control
The number of people a manager can effectively supervise is influenced by

many factors. The boss should consider the following factors before
determining the appropriate span:
37. Competence of the manager
 If the manager is trained, competent, experienced and committed to his job, he can effectively
supervise more subordinates. Whereas the manager who is incompetent may not be even good
at supervising one subordinate.
Complexity of the job functions supervised.
 Simple and repetitive tasks allow for a wider span compared to highly complex and varied
tasks.eg a manager able to supervise 30 factory operators ( all doing the same task ).
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Whereas another manager may have to supervise different tasks

like sales, store, purchasing, and security. This manager should be
given narrow span of control in order to be effective.
Similarity of functions supervised.
 The more identical are the subordinates tasks, the wider can his span of control be due to the
fact that all the workers are doing the same task. For example, if the salespersons are serving
essentially the same markets, then a wider span is possible.
Direction and control needed by subordinates.
 The competence of the subordinates, if they are well trained and experienced, or do they
require much guidance and direction hence the manager is able to manage a wide span.
If subordinates were untrained, inexperienced, unskilled, in order
to be effective in the staff control - narrow span of control is
advisable.
The geographical dispersion of subordinates
 Would the subordinates be located in different parts of the country, or would they be in the
same location or building? If they were all in one location a wide span is possible.
If all the subordinates were all over a wide regions, narrow span of
control is advisable, in order to be effective.
7- 53
UNIT 8
Dimensions of the Organisation Structure (II)
This lesson looks at other important factors that managers have to consider
in designing an appropriate structure.
8.1 Centralisation and Decentralisation
In departmentation, the consideration is essentially how to divide labour

horizontally i.e. what kind of tasks each unit should perform.
Another important consideration in designing an organisation structure is

vertical division of labour i.e. the amount of power sharing along the
organisational hierarchy.
During organising, top management must decide where in the hierarchy

major decisions should be made.
What we are referring to here is the relative amount of authority delegated

to different positions in the structure.
 i.e. the extent to which authority has been passed down to lower
levels or has been retained at the top of the organisation.
Generally, authority may be centralised or decentralised.
A decentralised organisation is one in which authority is distributed to

lower levels, i.e. authority is delegated to the broader base of executives
who are at the lower levels of the hierarchy.
The more decision-making is delegated to lower levels of the organisation,

the more coordination is needed.
In highly centralised organisations, authority and control are retained at the

top of the organisation.
 The geographical dispersion of subordinates
 Would the salespersons be located in different parts of the country, or would they be in the
same location or building.
8 - 54
In practice, no organisation is purely centralised or decentralised. (These

are extremes of a continuum, the organisation falls somewhere in
between).
 They range from retaining most if not all, authority to make

important decisions at higher levels to allowing levels below the top
considerable decision-making authority.
 An organisation may fall at any point along the spectrum.
 i.e. decentralisation is a matter of degree. Basic decisions must receive attention at the top
levels.
8.1.1 Characteristics of Decentralised Organisations
Greater number of decisions are made at lower levels in the organisation.
The closer the level at which the decisions is made in relation to the point where the
problem arose.
The more important are the decisions that can be made at the lower levels.
The lesser a subordinate has to check with his supervisor before making decisions.
8.1.2 Advantages of Decentralisation
Decentralisation reduces the workload on over-burdened executives.

 There may be a better utilisation of the time and ability of the executives, eg. allows top
executive more time for policy formation and long-term planning thus increase efficiency.
Decisions can be made much faster.

 This makes the organisation (or at least elements of it)more adaptive, eg. pressing problems
faced by lower level managers can be dealt with more quickly when they have authority to
make immediate decisions rather than having to refer problems to higher levels. This may
prevent loss of time and customers.
Decentralisation can result in better decisions.

 Individuals close to a problem are normally more familiar with local conditions: hence they
can often make better decisions than people at higher levels.
 It does not follow that managers at a high level in an organisation are best equipped by
experience and knowledge to make all decisions at lower levels because many problems in the
organisation are technical in nature.
People learn faster when they can participate or have the responsibility for performance -
decentralisation is therefore important in developing talents.
8 - 55
Decentralisation can improve morale.
 It provides the freedom which contributes to an employee's independent status opportunity for
self-actualisation.
 For many people, it is extremely motivational.
 Managers may resent not being expowered to act or to make decisions in areas which they feel
competent.
Disadvantages of Decentralisation
38. Control at the top may be more difficult.
The further decisions are removed from the highest level, the more
difficult it is to pinpoint problem areas and effectuate corrective action.
Lack of uniformity of standards and policies among organisation units.
Creates problems of coordination between separate organisational units.
Capable managers are not always available or willing to participate in decision-making.
Duplication of efforts may arise.
8 - 56
8.1.3 Centralisation
Advantages
39. The top executives are more aware of the overall needs of the organisation and are
more likely to make decisions in the organisation's best interests.
There is greater uniformity of action and policy when decisions are made by the executive
office. This allows all units to follow a uniform plan of action.
It is easier to maintain the secrecy of strategic plans and proposals.
Disadvantage
40. Offers junior managers no opportunity in making decisions because virtually all
important decisions are made at the top.
Top managers are unnecessarily burdened by routine and less important details.
Reduce initiatives and morale
Information may get distorted as it travels down.
8.3 Co-ordination
Coordination is the process of integrating the objectives and activities of

the separate units of an organisation in order to achieve organisational
goals efficiently.
Its purpose is to see that individuals synchronise their efforts in pursuing

the objectives of the enterprise - that things happen, at the right time and
place and in the correct order.
Co-ordination is the process of integrating the work of different sections

and departments of an organisation towards the effective achievement of
the organisation's goals and tasks.
8 - 57
Co-ordination is vital:
d) The timing of activities is 'synchronized' for maximum usage of labour and effort.
The direction of activities (allocation of man, money and material resources) is

planned for maximum efficiency and effectiveness.
Service or staff functions provide the basis and backup for the line departments of
production, marketing and finance, so that they can meet objectives.
Control procedures can be implemented for comparing actual with desired results:
are all necessary tasks being performed in the most efficient and effective way?
Why Co-ordination Failed
There are various reasons why co-ordination might be difficult to achieve:
e) Poor communications both horizontally and vertically within the organisation.

Poor communications might be a symptom of conflict.
Management might fail to provide a plan for the organisation which is acceptable to
everyone within the organisation. Different departments, for example, might
have different views about how the goals of the organisation will best be
achieved.
Differences in leadership style within the organisation. If the manager of department

X is strictly authoritarian, whereas the manager of department Y is democratic
and encourages the interest and participation of subordinated in decision-
making, it might be difficult for members of department X to co-operate
efficiently within members of department Y.
Co-ordination also depends on the design of the organisation structure. If the

structure is tall, than the chain of command is long, co-ordination becomes
difficult.
8 - 58
Organisation's performance might be uncoordinated. Each manager in each

department might recognise different key areas for control. The sales manager is
concerned with the sales quota and hence may not want to co-operate with the
accountant in complying with the budget imposed upon him. Whereas the
production manager may not want to co-ordinate with the purchasing because of
the quality and quantity output are the main objectives rather than costs which is
the concerned with the purchasing.
Inter-personal or inter-departmental jealousies and dislike.
Improving Co-ordination
Co-ordination may be improved in the following ways:
 Conflict should be controlled, by improving informal relationship.
 An organisation structure should be designed so that when two

departments have to integrate their activities. a co-ordinating level of
management exists to ensure that their work harmonizes properly.
 Appointment of liaison or integration officers who co-ordinate the

efforts of different departments.
 Appointment of committees or project groups which include

representation from all the departments whose work need to be co-
ordinated.
 Friendly, informal communication should be build up between

managers of different departments, enabling managers to co-ordinate
their activities.
 The system of planning and control within the organization should

recognise the need for integration of different departmental interests in
the pursuit of organisational goals.
 Policies, systems and procedures should be formulated, so that

fresh decisions do not have to be made on routine matters.
8 - 59
UNIT 9
Planning/Corporate Planning
Planning involves selecting enterprise goals and department objectives

then finding ways of achieving them.
Planning is deciding in advance what to do, how to do it and who is to do

it. Planning bridges the gap from where we are to where we want to go.
A plan is the route to an objective. If an organisation is to achieve the

objectives it has set itself, then clearly it must plan courses of action that
will enable it to attain these goals. Without proper planning the
organisation will be at the mercy of management whims and external
pressures that may make it lose sight of its objectives: yet it is surprising
how many businesses do not, in fact, have any significant forward plans
but are content to carry on operations virtually on a day-to-day basis.
9.1 Corporate Planning
Strategic planning was considered to be the province of top management,

tactical planning that of senior executives and operational planning that of
lower management. The results of this approach is the fragmentation of
the planning operation possibly resulting in conflict of interests in various
parts of the enterprise. As organisations have become large, either by
natural grown or by amalgamation, this approach has become less
efficient, and it has been realised by very many managements that a
different approach is necessary. This new approach is corporate planning,
and although not new in concept has been slow in being widely adopted.
9.1.1 A Definition of Corporate Planning
Corporate planning is specifically strategic in nature: in fact it is frequently

termed "strategic" planning by some authorities though this term is also
used by others to mean simply long-range planning by top management.
Corporate planning may be defined as "a systematic and comprehensive

process of long-range planning taking account of the resources and
capability of the organisation and the environment within which it has to
operate and viewing the organisation as a total corporate unit.
9 - 60
9.1.2 Steps in the Planning Process
Establishing a mission/goal
 A statement of organisational mission broadly addresses the overall

goals of the organisation. It states why the organisation exists and
what it should become.
 Without a clear definition of goals, organisations spread their

resources too broadly. Identifying priorities and being specific in their
aims enable organisation to focus their resource effectively.
Analysing external environment
 Managers must scan the external elements such as competitors,

social factors. Environmental scanning should be done systematically
and regularly. It should address all possible influences on the
organisation. Such analyses highlight the threats and opportunities
facing the firm.
Analysing internal situation
 Equally important is the analysis of the internal situation of the

firm. This provides information about the organisation's strengths and
weaknesses. Such strengths and weaknesses determine the firm's
ability to pursue certain strategic paths.
 The 2 steps above are known as the SWOT analysis.
SWOT is the acronym for strength, weaknesses, opportunities and threats,

and is in effect a distillation of all the steps and considerations that should be
taken to formulate an effective corporate strategic plan.
Strengths
 In this area will be found all the advantageous aspects of the organisation. Examples would
be exceptional customer goodwill and brand l
 yalty, highly efficient technical staff, adequate financial resources and an enthusiastic sales
force. The strengths represent the foundations on which continued success can be built.
Weaknesses
 These must be honestly investigated and faced because they represent retarding influence on
the success and growth of the organisation. Remedies must be sought to overcome them.
9 - 61
Weaknesses occur in all areas of all enterprise, some examples of

which could be obsolescent machinery, no provision for senior
management succession, inadequate research and development
facilities resulting in lack of new products to succeed current
production models. What remedies to apply would depend upon
the weaknesses revealed. In the given examples, the organisation
should consider carefully investment in new machinery, the
promotion of management training schemes and increased
investment in research and development.
 If finance is a strength then these remedies would not be difficult to implement; if it is a

weakness, this would have to be given attention first.
Opportunities
 Whereas strengths and weaknesses emanate chiefly (though not entirely) from inside the
organisation, opportunities are usually external. They may come about fortuitously or by the
application of some research. The important point is that they should be recognized and
grasped firmly when they arise. Some examples of opportunities are a new market opening up
that could be filled from existing resources, the opportunity to take over another company
which would improve the organisation's capabilities, such as a manufacturer taking over a
retailing chain, or the opportunity to take on to the management team an expert in some
appropriate field who would improve the organisation's performance.
 Opportunities abound if they are sought for and recognised. They are important for the
organisation. Its management should be ready for them so that they are able to be taken when
they occur, provided they coincide with the main objectives of the firm.
Threats
 Like opportunities, threats are most often from outside, and like opportunities must be
recognised and steps taken to deal with them. Though the actual threats are mostly external,
their disadvantageous repercussions on the organisation are chiefly due to weak or inept
management and management planning. Some examples of threats are changing technology,
thrusting competition especially from overseas, economic and political uncertainty.
 However, two very important threats emanating internally must be mentioned. The first is
management complacency and the other inadequate financial management. Complacency
results from the assumption that things will always remain as they are and management
therefore has no plans to meet technological or other change, or the consequent strong
competition. Examples of this abound in lost or reduced industries both in Europe and in
America. These include radio and television equipment, photographic equipment,
motorcycles and office machinery, where technical innovation by manufacturers in Japan and
elsewhere has overtaken the slow to change Western manufacturers.
The advantage of the SWOT approach to corporate planning is that

it requires management to look very closely and analytically at
every aspect of its operations so that objectives can be assessed as
attainable, and a clear picture built up of the strategies that must be
adopted to achieve them. Every strategy must also be examined
with care so that the constraints under which operations have to be
9 - 62
conducted will be recognised. Some of these constraints, which

may cause certain strategies to be abandoned, will be external and
some internal.
Some external constraints may be outside management's control

altogether: these include raw material price rises, government
legislation and the economic climate. Others may be
circumvented, examples being the substitution of an alternative
material for one whose supply has ceased, of finding a new outlet
for products whose overseas market has ceased to exist because of
import bans.
Internal constraints include the lack of specialist labour, bad

industrial relations and development support. Such constraints
may require corporate strategies to be re-examined, and the
planners and management will have to consider the alternatives of
abandoning some strategies or of remedying the constraints.
Develop Strategic Options
 Once SWOT analysis has been completed, the managers can

develop options for achieving their mission. Examples of such options
may be global expansion, regional growth, product diversity. With
several alternatives before them, senior managers are able to select the
approach or strategy, that best fits the organisation.
9 - 63
9.2 The Advantages of Corporate Planning
The advantages and benefits that an organisation can reap from efficient
strategic planning and its careful implementation may be summed up as
follows :
It requires management to make a close, analytical examination of the organisation

for which it is responsible.
Provided the planning is carefully carried out and properly implemented, it ensures
the continued progress of the organisation.
Provided full consultation takes place, it ensures that all levels of management are
involved in the planning operation and procedures. This helps the
implementation of the plans and helps to generate the personal interest of all
those concerned in carrying them out.
It requires that adequate attention be paid to the future over the long period.
Because of the need for adequate and relevant information in regard to all activities,
it becomes necessary to have a proper management information system. An
adequate information flow is essential for effective management whatever the
range of the plan. Short-term planning also benefits from this requirement.
It helps to concentrate attention on corporate goals and broadens the horizons of

those whose main preoccupation is that of tactical planning.
Those at lower level of management and supervision are enabled to appreciate how
their operational plans fit into the grand scheme of the organisation.
9.3 Barriers to Planning
41. Reluctance to establish goals and objectives

 Some managers are reluctant to set goals and objectives because they do not know enough
about their organisation or the environment. Others fear failure. To set goals and to work
towards achieving them involves a certain amount of risk-taking. Managers fear that failure
will lower their self-esteem, rob them of the respect that others have for them and even
threaten their job security. Hence, they are unwilling to set goals to achieve.
Resistance to change
 There appears to be no simple reason why managers and staff should fear new plans. Perhaps
it is the fear of the unknown and what it brings. Many people want the security of familiar
things and resist having to face new situations and responsibilities. They do not want to be
made to change because other people want them to do so. Thus, if managers can get their
staff fully involved in planning new activities, this will help overcome the resistance to
change.
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 Sometimes members of an organisation resent change because it conflicts with their interests.
For example, workers may resent changes in compensation that result in their having to do
more for the same salary. Managers may object to changes which involve a reduction in the
size of their staff.
Non-supportive management philosophy
 Some managers are not in favour of planning and give a variety of reasons, including:
Planning cramps management style
Planning techniques developed are inappropriate for small firms
Planning leads to much higher expenses.
Planning over-emphasises data to the detriment of customers and sales.
Planning cannot foresee sudden changes in the business environment.
These fear can be overcome by the following ways
f) Managers can select a planning method that is compatible with their management
style.
Managers of small firms can select the elements in the planning process that are most
suited to the needs of their organisation.
Managers must distinguish between the 'essentials' of planning and the 'trappings'. In
this way, expenses can be controlled.
Managers can be trained so that the plans of the company have flexibility, and
alternatives and options are carefully developed.
In general, the trend has been for managers to accept planning. There is a
better understanding of what planning can achieve. More importantly,
managers are becoming more skilled in the techniques of planning and the
selection of systems most appropriate for their organisations.
In a recent study of Singapore companies, the reasons stated for the

introduction of planning were:
 Effective diversification into new markets
 Rational allocation of resources
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 Increased profits
 Higher growth rate
9.4 The Principles of Planning
Whatever the planning period certain principles are involved, which can be
set out as follows:
g) The purpose of the plan must be determined. Planning cannot be done in a

vacuum and the goals to be achieved must be clearly identified.
Plans must be formulated on clearly defined data and information. Forecasts

help in this direction but other sources must also be used, such as past records,
performance experience and the like. The planner's own past experiences can be
utilised, but in this connection, it is vital to separate fact from opinion or
prejudice. However, an excess of source material must be avoided if planning is
not to become too complicated.
Plans of the various sections of the organisation must be coordinated, otherwise

confusion is likely to result. The effects of one department's plans on those of
others must be recognised and accommodated. Coordination is relatively easy at
operational planning level because times are short and the personnel involved are
in close contact with each other. Coordination becomes progressively more
difficult as it reaches the level of long-range tactical planning largely because the
staff involved are remote from the operational level. Of course, the ultimate aim
should be total coordination, one of the aims of corporate planning.
Standards to be achieved by the plans must be set and performance monitored.
Failure to attain the set standards may be caused by over-optimism by the
planners or by external factors not previously foreseen.
Plans must be flexible to allow for modification in the light of experience. Failure
to attain standards is one of the indicators of the need for modification.
Full communication to all concerned in operating the plans, at any level, is

essential : consultation with them during the formulation of the plans should
also take place. Involvement by all concerned is an important factor in
successful planning.
Plans must be seen to be achievable. Over-ambition must be avoided as this leads

to discouragement and frustration in the failure to attain the goals set. On the
other hand, under-ambition in planning provides no incentive and encourages
inefficiency.
9.5 Management by Objectives
The fundamental feature of MBO is its positive attitude towards people.

People want to work, enjoy working under the right circumstances, and
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can do a good job. MBO helps managers under the right circumstances,
and can do a good job. MBO helps managers bring the best out of people.
In MBO, managers and their staff work together to set common goals. A
worker's major area of responsibility are clearly defined in terms of
measurable results (objectives). These objectives are used by workers to
plan their work and by managers to measure the progress of their staff.
Periodic appraisals of performance are made to see if progress towards the
objectives is made.
All effective MBO programmes, no matter what their names, have the
following characteristics.
42. Total commitment to the programme from top management down to the worker.
Clearly defined goals and planning by top management.
Objectives set by individual managers and their staff and related to the organisation's
goals.
Employee participation in setting goals.
5. Within agreed limits, freedom for individual managers and their staff
in choosing the resources to achieve their objectives.
6. Regular reviews to appraise progress towards the objectives.
9.6 Strengths of MBO
43. It lets individuals know what is expected of them.
It aids planning by making managers establish goals.
Communications improve between managers and their staff.
Everybody in the organisation becomes more aware of the organisation's goals.
The evaluation process becomes fairer because people are measured on specified targets
and they know how well they have done in achieving the goals of the organisation.
Since objectives are clearly spelt out, suggestions for improvement can be obtained from
all levels of management.
Every manager has a clear idea of the vital areas of his responsibility and the standards
that are required of him. In this way, he knows where to focus his attention and his
resources.
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Morale and communication are greatly enhanced because there is greater participation.
There is a sense of belonging in the organisation and a better sense of commitment.
The whole organisation is fired by a new zeal.
9.7 Weaknesses of MBO
MBO cannot be expected to solve all the problems that face an

organisation.
44. Much time and effort is needed to implement MBO effectively.
Many managers complain that the MBO process involves too much paper work.
Some manages pursue goals at any cost. For example, there have been instances of
machine and vehicles maintenance being deferred in order to show cost reduction.
Some managers raise targets by large margins after many periods of steady growth
placing pressure on junior managers and their staff. At this stage, the junior
managers and their staff do not agree to these objectives and there is considerable
resistance to MBO.
MBO calls for a participative style of management and this cannot be implemented in an
organisation when the management style is authoritarian.
Before MBO can be implemented, many changes have to be made in the organisation
structure, control procedures and even the general style of management.
MBO emphasises the interpersonal skills of discussion, goal setting and reviewing. Many
managers and supervisors do not have the natural ability or the previous experience
of such skills. Training in counselling and interviewing is needed.
Managers get confused when asked to set realistic yet challenging goals. If goals are set
too high, workers lose the confidence to achieve them. On the other hand, when
goals are set too low, complacency sets in. At the same time, managers must be able
to make these goals measurable.
There must be enough support for goal achievement. All too often managers complain
that after goals are set, the support needed to achieve these goals is not forthcoming.
Objectives must be reviewed and revised because the conditions in the organisation
change. Senior managers need to communicate the need for change in duties to their
staff so that morale is maintained and support for the MBO programme is sustained.
MBO should not stifle creativity in managers and their staff. If MBO puts an emphasis
on strict adherence to objectives but does not allow individual innovation, then the
organisation will lose opportunities. Managers can write in the commitment to
change and innovation when establishing goals.
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UNIT 10
Decision Making
A decision is a choice or a judgement of what we need to do to achieve a

certain objective. Decision making therefore involves planning a course of
action and setting controls to check if the plan is proceeding towards the
objective. The quality of the decisions made has a direct effect on the
success or failure of a business. It requires information of past experiences
and predictions of future events. Because the future is unknown, each
decision made carries a risk.
The probability and magnitude of the risk should dictate the level at which
a decision is made in the organisation. Top management should make
those decisions which carry the highest risk, are most costly to correct and
have the greatest impact on the organisation's well being.
10.1 Types of Decisions
There are different types of decisions that an organisation has to make.
10.1.1 Organisational vs. Personal Decisions

 Organisational decisions are those made by managers in their
official capacity in accordance with the organisation's objectives.
Personal decisions, on the other hand, reflect the managers' personal
choices or preferences.
10.1.2 Programmed vs. Unprogrammed Decisions

 Programmed decisions are low risk and can be standardised into a
procedure. They are thus routine, can be easily delegated and are made
at lower levels of the organisation. Unprogrammed decisions are non-
routine and high risk. These decisions are usually made by senior
management.
10.1.3 Strategic vs. Tactical Decisions

 Strategic decisions affect the long term survival, development and
growth of the organisation. They are top level decisions. Tactical
decisions are concerned with the day-to-day operations. Unlike
strategic decisions, they are routine.
10.1.4 Decision Making At Different Management Levels
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10.2 The Decision Making Process
Decision making can be defined as the process by which a course of action

is selected as the solution to a specific problem. Since it is a process,
decision making involves a series of steps.
Steps In An Effective Decision Making

10.2.1 Identifying the Problem
The first step in the managerial decision making process is to identify the
problem. Managers must be aware of a problem and analyze its scope and
nature before they can take any steps to solve it. To identify a problem,
managers must recognize that a problem exists, define it, and then
diagnose the situation.
 Recognize the Problem - managers recognize a problem by

noticing changes in their organization’s performance or changes in
their internal or external environment that can potentially affect
performance.
 Define the Problem - once managers recognize the problem exists,

they need to consider the elements that make up the problem and the
relationships among the elements. Managers cannot develop a good
solution if the question is not framed correctly, so they try to include
the right elements in the problem definition; they try not to exclude
anything that may be vital, and they try to be as specific as possible.
 Diagnose the Situation - managers gather additional information

and consider the causes of the problem so that they can come up with
meaningful alternatives. If this part of the process is rushed, managers
may prematurely pounce on a probable cause without looking further
for confirmation.
10.2.2 Developing Various Alternative Solutions
After the problem has been identified and analyzed, managers move to the
second step of the decision making process - generating alternatives. In
this step, managers try to develop as many possible alternative courses of
action as they can, including the most obvious as well as the most creative,
but without passing judgment on any of the ideas.
Some alternatives may come from past experiences or from competitive

practices; others may be generated by creative techniques such as
brainstorming.
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Regardless of the methods they use to generate the alternatives, managers

can make better decisions when they have a large range of alternatives to
consider, because they will not feel pressured to choose an option simply
because it seems to be the only available solution.
10.2.3 Evaluate and Analyse the various Alternatives Solutions
The third step is evaluating the alternatives by considering the

implications, the advantages and disadvantages and also the likely
consequences of each. Managers assess each alternative and weed out
those that seem unfeasible, inadequate, too expensive, or otherwise
unacceptable.
10.2.4 Select the Best Alternative
For the entire decision making process to be successful, considerable

thought must be given to implementing and monitoring the chosen
solution. It is possible to make a “good” decision in terms of the first three
steps and still have the process fail because of difficulties at this final step.
Four Criteria Can Be Applied when Deciding The Best Alternative:
 The risk related to the expected gain;

 The amount of effort required;
 The timing, e.g. whether change should be immediate or gradual;
 The availability of resources, especially human resources.
10.2.5 Implement the Decision - Take Action
After selecting the best alternative, managers implement the decision.

Decision making managers generally depend on others to carry out
decisions, they must carefully consider how implementation will affect
those people and their functions. By openly discussing anticipated
changes and expected results, managers can help their employees adjust to
any changes that stem from the decisions.
An effective way to enlist support in implementation is to involve the

affected people in the decision making process whenever possible.
Especially when alternatives are being developed and evaluated,
employees can make valuable contributions by spotting hidden difficulties
by uncovering additional resources.
In general, successful implementation depends on the manager’s

communication skills and sensitivity about people’s reaction to change.
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10.2.6 Evaluate the Results and Provide Feedback
The final step is to evaluate the results and provide feedback about the
decision and its implementation. This allows managers to see whether the
results meet expectations and to make any changes needed to improve the
decision or its implementation. If the original decision does not achieve
the desired results, then perhaps the problem was incorrectly defined, or
perhaps another alternative should be substituted. It is important to give
the decision enough time to work before retracing the decision making
process in search of other solutions.
Fig 10.1 Model of the Decision Making Process
Step 1 Step 2 Step 3
Identify Develop Analyze

the Alternative the
Problem Solutions Alternatives
Step 6 Step 5 Step 4
Monitor Implement Select

the the the Best
Results Decision Alternatives
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Barriers to Effective Decision Making
 Imperfect or Incomplete Information
 Inaccurate identification of problem or alternatives
 Biases
 Overcommitment or Undercommitment
Tools For Effective Decision Making
 Decision Timing
 Realistic Decision Constraints
 Critical Thinking Skills
 Experience and Expertise
 Intuition
 Analyse and define the problem with information from the external and internal business
environment.
 State the alternative solutions.
 Select the best alternative.
 Plan the course of action.
 Implement the plan.
 Control and review the results.
10.2.7 Advantages and Disadvantages of Group Problem Solving and

Decision Making
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10.3 Improving Decision Making

10.3.1 Information
Managers can become more effective at decision making if they acquire

relevant information. The quality of the final decision rests on the quality
of information that managers have at their disposal.
There are four aspects of information:
 Quality
 The amount of information needed is important.
 The degree of accuracy needed also varies with the situation. If information of higher quality
does not add materially to the quality of a manager's decision-making, then it is not worth the
cost of collection.
 Timeliness
 Information is useful only if it is timely. Out-dated information is of no use. Information

must reach the user before decisions are made.
 Quantity
 Managers cannot be expected to use quality and timely information if there is not enough of it.
On the other hand, some managers have complained that they have been inundated with so
much relevant and useless information that they sometimes overlook serious problems.
 Relevance
 Information received should be relevant to the decision that has to be made in order to be
useful. For example, a Purchasing Manager needs information about stock levels, production
quotas. He does not need information that is not directly relevant to his decision.
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UNIT 11
Motivation
Since managers work with and through people, they need to have a good
understanding of what motivates people. Motivation refers to the way
drives, needs, and aspirations of human beings direct or control or explain
their behaviour. It explains how and why people behave as they do.
11.1 Human Needs
Psychologists make these basic assumptions when interpreting human

behaviour.
 All human behaviour has a cause, which itself is the consequence

of the combined effects of heredity and environment.
 At the root of human behaviour are needs, or wants or motives.

Need is the term usually employed in this connection.
 Human behaviour is goal seeking; people try to achieve objectives

or goals which, when reached, will satisfy their needs. For example,
food will satisfy the hunger need.
11.2 The Hierarchy of Needs
The American psychologist, A H Maslow, has divided human needs into

the following classes.
Physiological or Basic Needs

 People must satisfy these needs just to keep alive. They include, for example, hunger, thirst
and sleep. In the work environment, the fundamental purpose of a wage or salary is to provide
the means of satisfying basic needs.
Security or Safety Needs

 These are concerned with self-protection, with the avoidance of harm and, to some extent,
with provision for the future. Examples are needs for shelter, warmth and self-defence. At
work the wish for security of tenure, the existence of restrictive practices, and many aspects of
trade unionism show how employees try to satisfy needs of this kind.
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Social or Affection Needs

 Everyone, in various degrees, wishes to give others for recreational purposes are examples of
these needs. Note that, for example, people may join with others partly to satisfy affection
needs and partly for greater security.
Esteem or Ego Needs

 These include the needs to become independent, to receive the esteem of others, to dominate
and to acquire possessions. As it is possible for needs of this kind to be satisfied through
social activity, there is again overlapping between needs of groups. At work a position of
authority, a company car, an office carpet or a special type of overall are means by which
these needs are satisfied.
Self-Actualisation Needs
 This final group comprises the needs to make the fullest use of one's capabilities, to develop
oneself and to be creative. In the working environment the majority of employees find few
opportunities to satisfy needs in this class; skilled men, professional workers and managers are
the most likely to be satisfied in this way.
Maslow has suggested that the classes of needs, in the order shown,
form a hierarchy; people tend to satisfy their needs in a certain
order of precedence. In general, when physiological and security
needs have been satisfied, the higher needs (belonging, esteem and
self-actualisation) become important, usually, according to
Maslow, in the order of the hierarchy. For example, a manager
who receives a substantial salary, and thus adequately satisfies his
lower needs, regards status symbols like a well-furnished office as
important, but a former manager who has been unemployed for a
long time will eventually take any available job that brings him a
reasonable income, even though it is of low status.
11.2.1 Modifications to Maslow's Theory
Maslow's theory is widely accepted, easy to understand and can be used to

explain much, but not all, behaviour at work. Alderfer has proposed
instead a modification of the theory, consisting of three levels of need.
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Existence needs
 Approximately equivalent to Maslow's physiological and security needs.
Relatedness needs
 Including affection needs and that part of esteem which is concerned with personal
relationships.
Growth needs
 Including self-actualisation needs and that part of esteem needs concerned with individual
effort.
The theory (often known as the ERG theory) agrees with Maslow
in saying that as one level becomes satisfied the level above
becomes important, but adds a further proposition that if one level
is not sufficiently satisfied the level below becomes more
important, eg. a disappointment in promotion (growth needs) may
produce a greater wish for social involvement (relatedness needs).
Alderfer claims that his theory provides a more comprehensive
explanation of behaviour than Maslow's.
11.2.2 Discussion of Maslow's Work
Maslow's theory has been criticised on the following grounds.
 The theory asserts that people seek to achieve higher-level needs

after lower level ones have been fulfilled. Yet some individuals seek
higher level needs before lower level needs. For instance, a poor
person may yearn for status symbols even though his or her immediate
physical and security requirements have not been properly met.
 Individuals might not rank the various types of need in the manner
suggested. For some men and women, esteem needs are more
important than needs for affection. Indeed, some of the needs in
Maslow's hierarchy might not exist in certain people; and what is
considered essential by one person might be trivial to someone else.
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 Note, moreover, that whether someone feels the need for

something depends greatly on that person's perceptions, which
themselves depend critically on the traditions, cultures and life-styles
of the society in which he or she lives. Many desires are in actually
learned responses to environmental pressures with societal rather than
physiological origins. For example, advertising can cause people to
feel needs for things they never previously considered.
 A person may find that he wishes to satisfy two needs

simultaneously, but that they are usually exclusive; if he satisfies one,
he cannot satisfy the other. For example, if he wishes to retain his job
he may have to carry out his work in a way he dislikes, or his boss may
expect him to stay late frequently although this has adverse effects on
his family life. A situation of this kind, where an individual is pulled
in two ways at once, is called a conflict of needs.
11.3 Herzberg's Hygiene Theory
The American psychologist Frederick Herzberg has propounded a theory

of motivation at work which divides the factors of the work environment
into classes : motivators or satisfiers on the one hand; and hygiene
factors or maintenance factors on the other.
Herzberg developed his theory by analysing the answers to two basic

questions he and his collaborators put to engineers and accountants.
 What events at work have resulted in a marked increase in your job

satisfaction?
 What events at work have resulted in a marked reduction in your

job satisfaction?
The replies showed that, in general, the experiences which were regarded
as exceptionally satisfying were not the opposite of those which were
exceptionally dissatisfying. For example, someone might say that he
disliked a job because of poor working conditions, but very rarely would
he say that he liked a job because of good working conditions.
The Motivating Factors are as follows :-
45. Achievement;
Recognition;
Responsibility;
Promotion prospects;
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Work itself. - Job Satisfaction

The Hygiene Factors are as follows :-
46. Pay; Salaries

Relations with others;
Type of supervision;
Company policy;
Physical working conditions;
Fringe benefits.
Herzberg called these hygiene factors (because, using the analogy of

drains and refuse collection, they made the job environment fit to occupy),
or maintenance factors (because they tended to maintain an employee in
his job.) He said that an employee might leave a firm because he disliked
its working conditions or thought the pension scheme inadequate, but he
would not be motivated to work harder or better if working conditions or
the pension scheme were improved (provided they were already
reasonably adequate).
On the other hand, the absence of achievement or responsibility, for

example, would be unlikely to cause an employee to leave, but if these
could be increased the employee would be more motivated in his work.
Herzberg recognised that individuals varied in the relative importance they
attached to motivators or hygiene factors; some were very concerned to
seek achievement, recognition, etc. in their jobs, while others were
interested particularly in pay, personal relationships, etc.
11.3.1 Discussion of Herzberg's Theory
When Herzberg's enquiries have been repeated using his methods, his
findings have been confirmed to a large extent. However, when other
methods have been used, for example questionnaires, different results have
emerged. Very few enquiries appear to have been conducted with manual
workers. Herzberg's method of investigation, which may be described as
anecdotal self-report, is likely to produce answers of a certain type.
Someone will probably describe his good work experiences in terms which
reflect credit on himself - success, greater responsibility or recognition.
He will always be tempted to attribute bad work experiences to things
beyond his own control - uncongenial colleagues, an unpleasant boss or
poor working conditions. Thus he will take the credit for the good
experiences and blame others for the bad experiences.
The main application of the theory has been in the enlarging or enriching
of the jobs of non-manual workers. It would be possible to find theoretical
justification for this in the hierarchy of needs would explain this because
working conditions are relevant to the lower needs, which in modern
industry and commerce are usually adequately satisfied.
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11.4 Work and Need-Satisfaction

11.4.1 Definition of Work
Work may be defined as an activity which is directed by others as regards

purpose, methods, materials, time and space. Its usual aim is to contribute
towards the production of goods and services. In contrast to leisure, which
is primarily concerned with things that others require and are willing to
pay for. The way jobs are designed has a big impact on employee
motivation to perform well.
Job Rotation
Job Rotation Might Take Two Forms:
h) An employee might be transferred to another job after a period of say, 2-4 years in an
existing job, in order to give the employee a new interest and challenge and to bring a
fresh person to the job being vacated.
Job rotation might be regarded as a form of training. Trainees might be expected to

learn a bit about a number of different jobs by spending 3 months or 6 months in
each job before being moved on. The employee is regarded as a “trainee” rather
than as an experienced person holding down a demanding job.
Job Enlargement
Job enlargement is the attempt to widen jobs by increasing the number of

tasks and duties in which a job holder is involved.
This has the effect of lengthening the “time cycle” of repeated operations
and by reducing the number of repetitions of the same work, the dullness
of the job should also be reduced. Job enlargement is therefore a
“horizontal” extension of an individual’s work, whereas job enrichment is
a “vertical” extension.
A well-designed job should:
 give the individual scope for setting his own work standards and
targets;
 give the individual control over the pace and methods of working;
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 give the individual a chance to add his comments about the design
of the product, or his job;
 provide feedback of information to the individual about his

performance.
Job Enrichment
Job enrichment is planned, deliberate action to build greater responsibility,

breadth and challenge of work into a job. This is the vertical extension of
authority and power delegated to the employee from the Management
A job may be enriched by :
 giving it greater variety of work and giving power and authority to

execute their work.
 allowing the employee in the job greater freedom to decide for

himself how the job should be done;
 encouraging employees to participate in the planning decisions of

their superiors;
 ensuring that the employee receives regular feedback on his

performance, comparing his actual results against his targets.
If job is enriched, employees will expect to be paid fairly for what they are
doing. It might be more correct therefore to say that job enrichment might
improve productivity through greater motivation but only if it is rewarded
fairly.
For job enrichment to work, it seems that two criteria are of importance.
Firstly, the tasks assigned must provide employees with the opportunity to
contribute to organizational objectives. Secondly, the tasks must
themselves be motivational i.e. exploit motivating factors. A familiar
example of job enrichment is flexi-time.
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UNIT 12
Leadership
 Leadership is the ability of management to induce subordinates to
work towards group goals with confidence and keenness. (Appleby)
 Leadership is a means of direction. A leader's actions are devoted

to helping a group to attain its objectives.
 Leadership occurs whenever one person influences another to work

toward some pre-determined objectives. (Dessler)
 Managerial leadership is the process of directing and influencing

the task-related activities of group members. (Stoner)
 Leadership is the effort to influence others to behave with

enthusiasm and diligence to contribute voluntarily to the achievement
of group tasks in a given situation.
The essence of good leadership is that people will follow you.
12.1 Leadership Theories
Leadership theories aim to understand, explain, and predict why some

leaders are more effective than others.
 Leaders play a critical role in helping groups,

organisations/societies achieve their goals. If we would identify the
quantities associated with leadership, our ability to select effective
leaders would be increased.
 If we could identify effective leadership behaviour and techniques,

we would presumably be able to learn these behaviour and techniques
thereby improving our personal and organisation effectiveness.
There are 3 basic approaches to determine the significant factors in

effective leadership. These are the :
Trait Approach
 Personal qualities of an individual
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Behavioural Approach
 How the leader behaves towards followers
Situational Approach
 Depends on the situation, different situations call for different behaviour and approaches.
12.1.1 Trait Approach (Qualities of a good leader)
Early research on leadership attempted to identify a specific set of traits

associated with all leaders.
The assumption was : a leader's personal characteristics determine

leadership success.
If these traits could be identified, people could learn to develop them and
thereby become effective leaders.
47. Strength and willing to work hard
Perseverance and determination
Knowledge and understanding of commerce and business operation
Audacity - a willingness to take calculated risks
Ability to inspire enthusiasm
Toughness amounting in some men to ruthlessness
Chester Barnard thinks that a leader should have the following attributes:
 Skill, technology, perception, knowledge, physique, memory,

imagination, determination, endurance and courage.
Also, the elements of persuasion, compulsion and example may be

considered essential to affect leadership.
It must be noted that the leadership qualities that are needed in a particular
situation are not usually found in any one individual.
12.1.2 Behavioural Approach
Behavioural theory attempts to explain leadership on the basis of what the

leader does rather than what the leader is.
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 It is not the characteristics of the leader but rather the way the
leader behaves toward followers that determine effectiveness.
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An outgrowth of the behavioural approach was the classification of

leadership theories is that there are 3 major functions that the leaders
perform:
The basic assumption underlying the behavioural leadership theories is

that there are 2 major functions that leaders perform:
Accomplishing the task (task-oriented leader), or
Satisfying the needs of group members (people-oriented leader)
The terminology used by researchers to describe these two dimensions of

leader behaviour varies.
i) Concern for task is sometimes addressed under the labels of initiating structure,
job-centeredness, task orientation
Concern for people is also referred to as consideration, employee-centeredness, and

relationship orientation.
Regardless of the terminology used, the focus is on the degree to which a

leader's behaviour vis-à-vis followers’ evidence.
 Concern for the task to be accomplished
 Concern for the people doing the work.
A leader who has a high regard for task emphasises behaviour that:
 Plan and define work to be done
 Assign talk responsibilities
 Set clear standards
 Job routines are established and deadlines are set
 Urge task completion and monitor results
 The task-oriented leader perceives his role as accomplishing the

operations of the unit.
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A leader who has high regard for people emphasizes behaviours that
convey:
 Warmth and social rapport with subordinates
 Respect for the feelings of others
 Sensitivity to others' needs
 The leader's role is to help operates as a unit by fostering social ties
 Attention is on individual
 Suggestions are encouraged, freedom is permitted in how work is

done and subordinates' personal problems receive attention
 This style is characterised by trust, mutual respect and an emphasis

on interpersonal relations.
 This is to ensure that the activities necessary to maintain the group

are carried out. If conflict and hostility destroy cooperation, then
obviously the goals will not be achieved.
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TYPES OF LEADERSHIP
There are 3 types of leadership, namely:-

a) Autocratic
b) Democratic
c) Laissez faire
12.1.3 Autocratic Leadership (Theory X)

 Persons showing high concern for the task and low concern for
people.
Could be termed "tellers" as they usually feel that they know what they
want and tend to express those wants as direct orders to their
subordinates.
 Autocratic leaders usually keep decisions and controls to
themselves.
In a sense, their subordinates are protected from making bad decisions,
since autocratic leaders have assumed full authority and responsibility
for decision-making.
In order to be successful, autocratic leaders must have a broad and
diversified background. Autocratic leaders usually structure the entire
work situation for their workers who merely do what they are told, i.e.
follow orders.
Followers frequently lack adequate information about their functions and
fear using their initiative in their work. Thus, individual growth is far
more difficult to attain within an autocratic framework.
 Because the autocratic leader depends on his ability to reward and
punish to get work out, the motivational technique is largely induces.
 The autocratic leader does not try to get too close to his group
members remaining aloof while he issues orders. He rarely offers
explanations/reasons for his action.
12.1.4 Participative or Democratic Leadership (Theory Y)

 Persons showing a high concern for both people and task.
 Share decisions with the group, encourage participation, and
support the task efforts of others.
 Individual members of a group who take part in decision-making
often have a far greater commitment to the objectives and goals of the
organisation.
 Most major decisions are made after discussion with group
members.
 The leader strives to maintain high rapport within the group and
subordinates' feelings are considered in making decisions.
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 Emphasis is on cooperation and participation so that the maximum

potential of the group can be achieved.
12.1.5 Laissez-faire Leadership (extreme Theory Y)

Person showing a low concern for both people and task.
Turn most decisions over to the group and show little interest in the work
process or its results.
 Absence of direct leadership.
 A task is ordinarily presented to the group, which established its
own goals and works out its own techniques for accomplishing those
goals within the framework of organisational policy.
 The leader acts principally as a liaison between outside sources and
the group and ascertain that necessary resources are available to the
group.
 The leader allows his subordinates complete freedom in planning
their activities and offers guidance only in response to direct questions.
 The emphasis is on encouraging individual performance by
providing an unrestricted environment.
12.2 The Advantages and Disadvantages of the Various Types of
Leadership
12.2.1 Autocratic Leadership
Advantages
 Results in central control and coordination
 More consistency in policy interpretation and implementation
 Quicker decisions. Others do not have to be consulted.
 Contributes to strong leadership that is important in generating
change and meeting crises.
Disadvantages
 Results in low morale because people do not like to be closely
controlled.
 Not as much opportunity for people to develop their potential
 One-way communication does not lead to understanding
 Results in hostility, alienation and inflexibility, if overdone.
12.2.2 Democratic Leadership

Advantages
 Extremely motivational because of personal freedom and appeal to
psychological needs.
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 Makes better use of the skill and knowledge of the group.
 People are more committed to an organisation and its activities

when they have a say in what is done.
 Emphasises the importance of the individual. Builds human
values, trust, and openness.
 People are better informed. Also through participation, they
develop personal skills, especially managerial ones.
 Encourages open communication.
Disadvantages
 Takes time to get others involved.
 This is difficult for busy executives who are making urgent decisions.
 Results in compromise and watered-down decisions.

 Inaction can result from the diffused responsibility associated with
participation.
 Participation may hold down the innovative, far-sighted leader.
 Participative styles are difficult to learn.
 They are contrary to the ego drives characteristic of leaders.
 Works well only under certain conditions

 Is best when members all have approximately equal knowledge and status.
12.2.3 Laissez-faire Leadership

Advantages
 Highly motivational to those people who seek freedom and
independence.
 Maximises the potential of the individual.
 Encourages a free-flowing adaptive organisation.
Disadvantages
 Can result in chaos because of lack of central control and
coordination.
 Personal rather than group goals may predominate
 Easy for conditions to get out of hand before corrective action is
taken.
Laissez-faire styles are not as common as the others, but do have
beneficial application. Examples are sales representatives, scientists, and
professionals like doctors, and professors. Within the context of formal
organisation, it is not likely that many supervisors and managers would
care to risk the loss of control inherent in the laissez-faire style.
12.3 Situation/Contingency Approach
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Most recent research demonstrated that additional factors may play a

determining role in leadership effectiveness.
The situational factors include:
 the needs and characteristics of followers
 the nature of the task
 environmental pressures and demands
 how much information is available to the leader.
Therefore, contemporary leadership theory has moved toward a
situational/contingency approach.
 Findings indicate that the different ways of leading are more/less
appropriate depending on the characteristics of the overall situation.
 The basic contingency assumption is that the match of leadership
style and situation determines leadership success.
One theory to illustrate this is the Life Cycle Approach to Leadership.
This theory focuses on the maturity of subordinates and how managers
should manage their leadership style. When subordinates are new to the
firm and are relatively "immature", they need to be closely guided and
controlled. As such, an autocratic approach might be appropriate. As
employees mature, management has to change to a more participative
style.
12.4 Factors Affecting Leadership Style

 Ability, skill and knowledge of the subordinates
 Manager's personality/preference, training, education, and

background.
 Nature of task
 Organisational culture and climate
 The expectation of the superior
 The expectation from colleagues or peers

Grid Organisation Development
This technique developed by Robert R. Blake and Jane S. Mouton is
described in their book The Managerial Grid III. The managerial grid
shows managerial orientation in terms of two variables - concern for
people and concern for production.
A series of exercises is used to enable managers to analyse their existing
positions on a two dimensional grid that range for 1,1 improvised
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management to the ideal 9,9 position in which concern for both production
and people is integrated. The format of the managerial grid is shown
below:
1, 9 9, 9
HIGH
9
Country Club Management Team Management

8 Through attention to needs of Work accomplishment is from
C
people committee people; inter-
O
N for satisfying relationships dependence
C leads to through a “common stake” in
E 7 a comfortable friendly organization purpose leads to
R organization relationships of trust and
N respect.
6 Organization Man Management
F
O Adequate organization5, 5
R performance is
possible through balance
P 5 of the necessity to get work out
E with maintaining morale of
O people
P at a satisfactory level.
L 4
3
E
Impoverished Management
Exertion of minimum effort to
2 get required work done is Authority-Obedience
appropriate to sustain Efficiency in operations
organizational membership results
from arranging work
1 1, 1 conditions 1, 9
LO that human elements
W 0,0
1 2 3 4 5 6 7 8 9
CONCERN FOR TASK
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UNIT 13
Communication in Organisation
Communication touches every aspect of a manager's job. In order to

execute orders and achieve organisational goals, a manager needs to be
able to communicate effectively. With effective communication, rapport
is enhanced and activities properly coordinated.
Communication can be defined as the process by which information is

exchanged and understood by two or more people, usually with the intent
to motivate or influence behaviour.
13.1 Communication Process
People think that communication is simple because they often

communicate without conscious thought or effort. However,
communication is usually a complex process.
Sender Encoding Channel Decoding Receiver

® ® ® ®
Feedback
Fig. 13-1 The Communication Process
The sender needs to encode his message by translating his thoughts into
symbols that can be understood, such as words or pictures. The channel is
the media through which the message is transmitted, such as written
(letters), oral (telephone). Noise is anything that interferes with the
communication flow.
13.2 Purposes Of Communication
The specific purposes of communication are as follows: -
to convey information ;
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to explain the nature and implications for the business ;
to establish rules for dealing with different situations;
to stimulate action ;
to create relationships between the members of the organization;
to form collective decisions and render them generally acceptable;

to instruct : Instruction manual for operating a computer;
to evaluate : Performance appraisal records;
to meet Human and Cultural needs.
Communication should be to the right person
Communication should be accurate and complete
Communication should be timely
Communication should be understandable
Communication should be brief
Communication should not involve excessive cost
13.3 Formal Communication
The Formal Communication network is based on the chain of command,

and its line of authority flows from the top of the organisation down.
The Formal Communication network is used to transmit official messages,

policies, procedures, directives, and job instructions.
Although the Formal Communication is used mainly for communication

downward in the organisation, provision is usually made for formal
upward communication such as attitude surveys, grievances, suggestions
and performance appraisals.
The accepted formal channel for a particular communication may be :
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 a memorandum or report to an immediate superior (to be handed

on by him as required);
 a memorandum to an immediate subordinate with instructions,

notice of a meeting etc., again to be passed down the line of authority
as required;
 interdepartmental memoranda authorized and routed through

department heads;
 a formal request for an interview or hearing (especially for
grievances or disciplinary action).
13.4 Informal Communication
The grapevine is an informal communication network in which messages

are rapidly transmitted, usually orally on a one-to-one basis.
Rumors about company matters such as a proposed merger, relocation of

the headquarters office, or cutback in the workforce are often spread by
means of the grapevine. Grapevine is often viewed negatively by manager
and employees since the messages transmitted are either groundless or
have been distorted in some ways.
On the other hand, the grapevine provides office managers with an

excellent means of finding out what their workers think and feel. As a
very informal way of quickly spreading information, the grapevine
provides workers with a means of finding answers to their questions and
aids in filling communication voids.
Office managers should accept the fact that the grapevine cannot be
eliminated, even if it were desirable to do so. Instead, an attempt should
be made to analyze and understand any rumors being circulated and then
positive steps to prevent their recurrence.
Grapevine may work favorably for the firm. For example, the grapevine
can clarify and publicize a company directive often in more
understandable language and far more rapidly than the formal
communication network.
13.5 Direction Of Communication
Communication within the formal organization structure may be :
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j) Vertical Downwards Communication (i.e. from superior to subordinate);

Upwards Communication (i.e. from subordinate to superior);
Or
Horizontal or Lateral (i.e. between people of the same rank, in the same section or
department, or in different sections or departments). There is no authority
flowing along this line of communication. The communication effectiveness
depends on the co-operation and the relationships between the people involved.
13.5.1 Downward Communication (From Managers to subordinates)
 Telling a subordinate to perform a task i.e. delegating work. This

involves giving information about targets, job instructions etc. The
information might be verbally communicated, or it might be contained
in a formal job description or terms of reference;
 Information about procedures and practices in the organization e.g.

safety posters or an organization manual;
 Telling the subordinate what the role of his job is in relation to the
objectives of the company as a whole - telling him about budgeted
expenditure limits or agreed work procedures and productivity levels
for his work;
 Informing the subordinate how well or badly he is doing his job;

such expressions of satisfaction or disappointment are often conveyed
face-to-face in an interview;
 Encouraging the employee to understand and share in the

organization’s goal - motivation.
13.5.2 Upward Communication - (From subordinates to managers)
 Information from a subordinate about himself, his performance and

his problems and grievances;
 Information about others and their problems;
 Comments about organizational practices and policies;
 Suggestions about what needs to be done and how it could be done;
 Reports on what has been done;
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 Workers asking a superior for more instructions, orders or

guidance.
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13.6 Barriers To Communication
Lack of technical skills in writing, speaking, listening, presentation and planning.
Failure to keep all employees informed on matters of interest to them.
Problems with an extensive organizational structure, leading to inflexibility, poor co-

ordination or long lines of communication (Direct lines of communication, with few
steps in the chain of command, are preferable).
Personality factors intervening between the presentation, reception and interpretation of

the message.
An overload of excess of communication leading to an arbitrary system of priorities,

“information switch-off” etc....
Misjudging the situation, misinterpreting information or actions or selectively receiving

the message (depending upon background, previous experience and perception).
Non-verbal signals or cues (e.g. body language, posture, facial expression, eye contact)
which contradict the message.
Medium of communication unfamiliar to the recipient and therefore, interfering with the
message.
Lack of background knowledge or interest in the topic.
Suspicion about the motives of management.
Lack of feedback, which may deprive the sender of the message from knowing whether
the communication has been effective.
Uncertain of area of responsibility and overlap of duties between departments or

individuals.
Physical barriers - failure to see or hear, failure of equipment, background noise.
Language difficulties - dialect, accent, nationality, use of technical language or jargon.
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13.7 Checklist For Effective Communication
 Identify the purpose of the communication
 Consider the recipient’s needs, personality, prejudices etc - plan the

impression to be created
 Identify the topic or theme
 Select the medium which will convey the message most

effectively: consider speed, accuracy, confidentiality, cost, image,
convenience, need for evidence, distance, access for sender and
recipient, quantity of information to be transmitted.
 Prioritize, distinguish between major and minor issues
 Gather the facts and arrange the ideas in a logical sequence
 Assess whether the purpose of the communication has been

achieved: did it produce a satisfactory response?
13.8 Conclusion
Organizations are concerned in essence with the processing of information.

Each of the individual sections or departments contained in any one
organization will be concerned with:
 the receipt of information;
 the recording and arrangement of information;
 the storage and security of information;
 the communication of information.
If any sections or departments fail to process information, then the overall

objectives of the organization may not be attained.
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UNIT 14
Managing Conflict And Change

14.1 Nature of Conflict
In many organisations, conflicts within and between groups are common.

A conflict is defined as a perceived difference between 2 or more parties
that results in mutual opposition. Conflict is often considered as a
negative factor. However, it can have constructive, as well as destructive,
consequences.
When tensions are so high that people do not cooperate and are not
productive, conflict should be reduced so that they can work together to
accomplish their objectives. Modern managers do not necessarily try to
eliminate conflict; rather they manage it so that it contributes to the
individual's and organisation's productivity.
Conflict in organisations can exist between individuals, groups, units,

departments or organisational levels.
14.2 Causes of Conflict
There are many reasons why we see conflict in organisations.
14.2.1 Scarce Resources
 Resources include money, information, supplies. In their desire to achieve goals, individuals
may wish to increase their resources, which throws them into conflict.
14.2.2 Unclear Responsibilities
 Conflicts emerge when job boundaries and responsibilities are not clearly defined. When
duties are clearly specified, people know where they stand. When they are unclear, people
may disagree about who has responsibility for specific tasks or who has a claim on resources.
14.2.3 Communication Breakdown
 Poor communication results in misperceptions and misinterpretation. In some cases,

information may be intentionally withheld, which can jeopardise trust among employees and
lead to lasting conflict.
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14.4.4 Personality clashes
 This happens when people simply do not get along or don't see eye to eye. Such differences
could be due to differences in characteristics, values and beliefs.
14.4.5 Status Differences
 Power and status differences occur when one party has disputable influence over another.
People may engage in conflict to increase their power and influence.
14.4.6 Goal Differences
 Conflict occurs because people are pursuing conflicting goals. Individual salespeoples' targets
may put them in conflict with one another or with the sales manager. Moreover, the sales
department may have goals that conflict with manufacturing or finance.
14.3 Managing Conflict
The challenge for managers is to manage conflict in such a way that it

contributes to the organisation.
14.3.1 Conflict between Individuals
Such conflict can be handled by using the following styles:
Competing Style
 This reflects a person's assertiveness to get his/her own way and should be used when quick,
decisive action is required. This may be the case when making important or unpopular
decisions such as during emergencies.
Avoiding Style
 This reflects neither assertiveness nor cooperativeness. This is appropriate when issues
debated are trivial, when there is no chance of winning or when a disruption may be very
costly.
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Compromising Style
 This style reflects a moderate amount of assertiveness and cooperativeness. It is appropriate

when the goals on both sides are equally important, when opponents have equal power.
Accommodating Style
 This shows willingness of individuals to cooperate and can be used when both parties realise
they are wrong or when maintaining harmony is important.
Collaborating Style
 This enables both parties to win, although it requires substantial bargaining and negotiation.
The various styles above can be used when an individual disagrees with
another.
14.3.2 Techniques of Resolving Conflicts
Several techniques can help managers resolve conflicts that arise between
members of one group or between different teams.
48. Bargaining/Negotiation
 Both parties engage one another in an attempt to systematically reach a solution. They
attempt logical problem solving to identify and correct conflict.
Mediation
 Using a third party to settle a dispute is called mediation. The mediator may be a supervisor,
manager. Mediator can discuss the conflict with each party and work toward a solution.
Well- defined tasks
 Managers can reduce conflict by clearly identifying responsibilities and duties.
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Facilitating communication
 Managers can provide opportunities for parties to communicate more effectively. As they
learn about each other, suspicions diminish and improved teamwork becomes possible.
14.4 Introduction to Change
We live in a dynamic and exciting world where change is always taking

place and affects both individuals and organisations. As individuals, we
regularly experience change in our everyday lives. In recent years, lives
have been changed by the introduction of computers and other
innovations. In order to survive and prosper in a competitive world,
organisations have to change too. Organisational change is defined as the
adoption of a new idea or behaviour by an organisation.
14.5 Forces for Change
There are many factors or forces that make change necessary for
organisations.
a) External Forces
As discussed under the topic of environment, external changes take

place in all sectors, including consumers, competitors, economic,
political and social and technological environments.
b) Internal Forces
These arise from internal activities and decisions. If managers select a

goal of rapid growth, internal actions will have to be taken to
accomplish this objective. New departments or technology may need
to be introduced. Demands by employees, unions and others may
mean changes.
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14.6 Resistance To Change
Often, members in an organisation do not easily welcome and accept

changes. Even though workers may see the need for change, it is still not
easy for them to accept it. Some of the reasons why change may be
resisted include:
a) Self Interest
 Employees will resist change if they feel that the change will take away something of value to
them. A proposed change in structure, job design or technology may lead to a perceived loss
of power and prestige.
b) Lack of Understanding
 Employees often do not understand the purpose or need for the change or distrust the
intentions behind it. If previous changes have been made and have been negative, then
resistance will arise in future.
c) Uncertainty
 Employees may not have adequate information about future events. It represents a fear of the
unknown. They do not know how the change will affect them. Employees may fear that they
will not be able to cope or keep up with the demands of a new procedure or technology.
d) Different Goals and Objectives
 Managers in each department pursue different objectives and a change may affect whether
they can meet their objective.
10 things that might cause an employee to resist planned organisational changes.

1. Fear of the unknown 6. Poor Timing.
2. Loss of control 7. Force of habit
3. Loss of face 8. Lack of support
4. Loss of competency 9. Lack of confidence
5. Need of security 10. Lingering resentment
14.7 Implementing Change
Managers should not ignore the above concerns of their employees but
must diagnose the reasons and design strategies to gain their acceptance.
Overcoming Resistance to Change

a) Communication and Education
 This is used when solid information is available that the proposed changes will benefit the
users and the firm. It is especially useful when change involves new technical knowledge.
Education helps workers to see the benefits and accept them more easily.
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 Use of one to one discussions, presentation to groups, memos, reports and demonstrations to
educate people.
b) Participation and Involvement

 This tactic involves the users from the start of the change process. It is time consuming but it
pays off because users understand what is happening and become committed to the change. It
allows employees to offer their personal ideas to make it successful and consequently
improving the outcome.
 Allowing employees to help design an implement the change, asking individuals to contribute
ideas and advice.
c) Negotiation and agreement
 This uses formal bargaining to win acceptance and approval from the employees for the
changes. This tactic is especially necessary when dealing with trade unions. The change
becomes part of the new contract.
d) Facilitation and support
 Providing emotional support for the hardships of change, activity listening to
complaints and problems, providing training.
e) Manipulation and co-optation
 Use of converts to influence others. Providing selective information to
influence others to agree to change.
d) Coercion
 This means that managers use formal power and authority to force employees to change.
Employees are told to accept the changes or lose certain benefits or even their jobs. This is
used as a last resort in cases where a crisis may exist.
14.8 Types of Changes
The different types of changes that can be carried out in organisations

include the following:
a) Technology Changes
 Such changes are related to the firm's manufacturing activities. They are designed to make the
production process more efficient. Such changes should be made by inviting suggestions
from the workers involved in such activities. Employees at lower levels understand the
technical aspects better and can contribute to the change successfully.
b) Product Changes
 This involves a change in the company's products or services. These changes usually are in
response to customers' demands or competitors new products. Marketing, production and
research departments have to work together in developing new product ideas.
c) Structural Changes
 Such changes involve the hierarchy of authority, goals, administrative procedures. For
example, the implementation of a no-smoking policy in the firm can be considered a structural
or administrative change.
d) Culture/People Changes
 A culture or people change refers to a change in employees' values, attitudes, beliefs and
behaviour. These changes pertain to how people think. It could involve just a few people or
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the entire organisation. For example, a change in leadership style from autocratic to
democratic is a cultural change.
14.9 Conclusion
For change to take place successfully, those affected must be

psychologically willing to make the effort. Any change process involves
unlearning old things and learning new skills. Change is difficult if there
is no motivation to change. Inducing this motivation is often the most
difficult part of the change process.
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UNIT 15
Control and Budgetary Control

15.1 Definition of Control
 To control means to check or to regulate, or to give directions, so

as to ensure that action is taken to achieve a goal or target, or to
conform to expectations. A control is a device or technique for putting
control into practice.
 Control is a function of management which is inseparable from

planning, and 'control and monitoring' has been defined as 'the
continuous comparison of actual results with those planned, both in
total and for separate subdivisions, and taking management action to
correct adverse variances or to exploit favourable variances' (CIMA
Management Accounting: Official Terminology).
15.2 Tools Of Control
 Policies and Plans. To ensure standards are adhered to, there

should be written policy manuals.
 Delegation of work to the subordinates. Make the respective staff

accountable for his activities.
 Monitoring and spot-check on the workers’ performance.
 Quality and Quantity Controls. This is to be carried out by

actually measuring the amount of work done - by count, by weight and
by comparing results with the standard set.
 Expenditure Control. Budgets covering sales and expenditure and

these budgets will be incorporated in a master budget.
 Reporting. Mostly monitoring of activities is done by reporting in

one form or another.
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15.3 The Importance Of Control
Controls can help in assisting Managers with five particular challenges:

coping with uncertainty, detecting irregularities, identifying opportunities,
handling complex situations, and decentralizing authority.
 Coping with Uncertainty
Uncertainty arises because organizational goals are set for future events on
the basis of the best knowledge at the time, yet things do not always go
according to plan. A variety of factors in the environment typically
operate to bring about changes in such areas as customer demand,
technology, and the availability of raw materials. By developing control
systems, Managers are able to monitor specific activities and react quickly
to significant changes in the environment more efficiently.
 Detecting Irregularities
Controls also help Managers detect undesirable irregularities, such as
product defects, cost overruns or rising personnel turnover. Early
detection of such irregularities often can save a great deal of time and
money by preventing minor problems from mushrooming into major ones.
Finding aberrations early also sometimes avoid problems that can be
difficult to rectify, such as missing important deadlines or selling faulty
merchandise to customers.
 Identifying Opportunities
Controls also help highlight situations in which things are going better
than expected, which alerts Management to possible future opportunities.
 Handling Complex Situations
As organizations grow larger or engage in more complex operations and
projects, controls enhance coordination. Controls help Managers keep
track of various major elements to be sure that they are well synchronized.
Operating on an international basis often increases complexity and calls
for further consideration of necessary controls.
15.4 The Principles Of Effective Control

 Future-Oriented
To be effective, control systems need to help regulate future events, rather
than fix blame for past events.
 Control systems must be high but achievable
The control system should be fair, observable, measurable, specific,
relevant and participatively set.
 Acceptable to Organization Members
The control system should be tailored to the culture of the Organization.
 Control systems should be simple
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Control system should not be too sophisticated.

 Cost Effective
Control should be economical - i.e. the controls installed should not cost
more than they will save.
 Accurate
Since control provides the basis for future actions, accuracy is vital.
 Realistic
Control systems should incorporate realistic expectations about what can
be accomplished.
 Timely
Control systems are designed to provide data on the state of a given
production cycle or process as of a specific time, a monthly sales report, a
weekly update on a project, a daily production report or quality inspections
on a production line. Corrective action should be taken promptly and
consistently.
 Monitorable
Control systems should be monitorable to ensure they are performing as
expected. Feedback information must be available to the Management in
time for corrective action to be taken before matters have gone too far
wrong.
 Flexible
Control systems need to be flexible enough to respond rapidly to changing
environments, to meet new or revised requirements.
15.5 The Problems Of Control
Control theory may sound all well and good, but there are a number of
serious problems to overcome in applying theory to practice. The
problems are:
 Preparing a standard or plan in the first place, which is reliable, and

acceptable to the Managers who will be responsible for the
achievement of the standard or plan.
 Measuring actual results with sufficient accuracy; this may be

particularly difficult in service departments such as offices, since
clerical work is not often directly measurable as “output”.
 Measuring actual results with suitable feedback periods - keeping

the reporting cycle time sufficiently short to give Managers a chance to
take prompt control action when serious deviations from plan occur.
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 Identifying the causes of variations between actual results and the

standard or plan, and distinguishing controllable from uncontrollable
causes.
 Drawing the attention of Managers to a deviation between actual

results and plan, and persuading them to do something about it.
 Co-ordinating the plans and activities of different departments in

the Organization.
 Everybody who needs to be informed about how results are going

must be kept in touch in a way that they can understand. In actual
work environment, this may be difficult to achieve.
15.6 Budgetary Control
Budgets are formal quantitative statements of the resources set aside for
carrying out planned activities over given periods of time. As such, they
are the most widely used means for planning and controlling activities at
every level of the Organization.
15.7 Purposes Of Budgets
 To Compel Planning
This is the most important feature of budgeting because Management is
forced to look ahead, setting targets, anticipating problems and giving the
Organization purpose and direction.
 To Communicate Ideas & Plans to Everyone Affected by Them
A formal system is necessary to ensure that each person is aware of what
he or she is supposed to be doing.
 To Co-ordinate the Activities of Different Departments
This concept of co-ordination implies, for example, that the purchasing
department should base its budget on production requirements and that the
production budget should in turn be based on sales expectations.
 To Establish A System of Control
By having a plan against which actual results can progressively compared.
 To Motivate Employees to Improve Their Performance
Two levels of attainment could be set, a minimum expectations budget,
and a “desired standards” budget, which provides some sort of challenge to
employees.
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MONTHLY BUDGET REVIEW STATEMENT
Department: _______________ Month: ______________
Budgeted Activity: _______ % Actual Achieved: _______ %
Month Variance Remarks

Expense
Budget Actual This Year
Month to date
TOTALS
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15.8 Advantages Of Budgetary Control
 The expenditure limits set do impose a brake on extravagance and

unthinking financial commitments: they ensure that serious
consideration is given before expenditure is indulged instead of
afterwards.
 The preparation of budgets requires all concerned to examine very

closely the working of their departments. These actions tend to impose
restraints on unrealistic ambitions and emphasize the need for practical
and attainable goals.
 All budgets are interdependent; budgetary control has a positive

effect on co-ordination. Related departments must work together in
order that their budgets may be compatible.
 Periodical budget review statements and the holding of regular

budgetary control review meetings ensure constant monitoring of
budget performances.
 Monitoring has two effects. The first, is that Managers and others
responsible for budgets are disposed to try to ensure that the budget
figures are adhered. The second, is the non-compliance with budgeted
performance is brought to management’s attention at an early stage so
that remedial action can be taken with the minimum of delay.
 Monitoring may also reveal that the original budgets have been
unrealistic and that the figures may have to be adjusted in the light of
internal or external conditions.
 Managers are responsible for their own budget figures they have an
incentive to keep within the limits set, and to ensure that their staff
comply with the constraints put upon the department.
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15.9 Disadvantages Of Budetary Control
 A budget is a monitoring aid, it is not a regulator. If expenditure is

necessary outside the scope of the budget to ensure efficient operation,
this additional cost must be argued for and in many cases, not
approved by Management.
 When a budget surplus is available, departments tend to have the

“must be used up” attitude.
 Any surplus from one budget will not be passed over to a budget
likely to be in deficit, even though for practical reasons, this may be
highly desirable. This does not benefit the Organization as a whole.
 In times of fluctuating prices, budgeting becomes difficult and

when high rates of inflation occur, budgets become out-of-date very
quickly.
 Budget planning and meeting is time consuming, management

personnel spent too much of their resources to get them done.
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UNIT 16
Human Resource Management 1
6.1 Introduction
The human resource function emphasises the importance of the employees

to an organisation. While it is true that most of the human resource
activities are carried out by the formal personnel department, all managers
need to be aware of the issues relating to personnel management. Human
Resource management therefore includes all activities for staffing the
organisation and sustaining high employee performance.
16.2 Human Resource Planning
This is the process of ensuring that the firm has the right number and kinds
of people at the right places, who can handle the tasks required. It
comprises the following stages:
16.2.1 Assessing Human Resources
 Management begins by reviewing the current human resource

status. It needs to know the current number and type of employees
available, their qualifications, working experience and other details.
16.2.2 Assessing Future Human Resource Needs
 These are determined by the firm's objectives and strategies. It is

the result of demand for the firm's products and services.
16.2.3 Developing a Plan to Meet Future Needs
 Management is now able to estimate shortages, both in number and

type of workers required and to highlight areas in which the
organisation is overstaffed. A programme can then be planned to
match the supply with the demand.
16.3 Functions Of Personnel Department
The functions given below are by no means those undertaken by personnel

departments in all organizations. They represent, however, the range of
responsibilities normally covered by the personnel function throughout
industry and commerce and largely reflect the practice in those companies
where the personnel function has been established for some time.
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16.3.1 Employment
 Manpower planning
 Liaison with the Department of Employment and all other sources

of labour supply.
 Application of company’s terms and conditions of employment.
 Interview of applicants; engagements; transfers; promotions;

terminations.
 Maintenance of personnel records and statistics
 Employee interviews and consultations
 Legislation relating to employment
16.3.2 Training and Education
 Co-operation with appropriate Industrial Training Boards
 Management development
 Supervision and control of notice boards and information bulletins
 Provision of suggestion schemes, working hours, a library and the

maintenance of a staff magazine.
 Encouragement for further education through correspondence

colleges, day continuation schools, attendance at technical and evening
institutes, evening classes and lectures.
16.3.3 Wages and Salaries

 Maintenance of company’s wage structure
 Assessment and control of differential rates and special payments
 Consultation when necessary with time study or organization and
method consultants in respect of incentives.
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16.3.4 Industrial Relations
 Negotiation with trade unions
 Provision of information on conciliation and arbitration procedure
 Maintenance of machinery for joint consultation, i.e. joint

production committee, work councils.
 Interpretation and dissemination of company personnel policy.
 Acting as company representative in outside negotiations affecting

personnel.
 Advice on administering industrial relations legislation.
16.3.5 Welfare and Employee Benefits (including health and safety)
 Administration of canteen, in-house clinics and savings schemes
 Pension and long service grants
 Legal aid and other advice on individual problems
 Transport, housing and other related problems of staff where

applicable
 Provision of social and recreational facilities
 Application of the provisions of the Health and Safety at Work Act.
 Accident prevention and participation in safety committees, safety

education, investigation of accidents, accident statistics etc.
 Administration of workmen’s compensation.
16.4 Recruitment
Recruitment is the process of finding and attempting to attract job

candidates who are capable of effectively filling job vacancies. Job
descriptions and job specifications are important in the recruiting process
because they specify the nature of the job and the qualifications required of
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serious job candidates. Recruiting can be conducted both internally and

externally.
16.4.1 Internal Recruitment
 Most vacant positions in organizations are filled through internal

recruitment, the process of finding potential internal candidates and
encouraging them to apply for and/or be willing to accept
organizational jobs that are open.
Advantages of Internal Recruitment
Candidates are already oriented to the organization.
Reliable information is available about candidates.
Recruitment costs are lower.
Internal morale is increased due to upward mobility opportunities.
Good performance is rewarded.
Disadvantages of Internal Recruitment
49. There may be fewer new ideas.
Unsuccessful contenders may become upset.
Selection is more susceptible to office politics.
Expensive training may be necessary.
Candidates’ current work may be disrupted.
16.4.2 External Recruitment
 Organisations recruit from the outside only when there are no

suitable internal candidates for particular positions. External
recruitment is the process of finding potential external candidates and
encouraging them to apply for and/or be willing to accept
organizational jobs that are open.
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Advantages of External Recruitment
 Candidates are a potential source of new ideas.
 Candidates may have broader experience.
 Candidates may be familiar with competitors.
 Candidates may have new specialties.
Disadvantages of External Recruitment
 The probability of mistake is higher because of less reliable

information.
 Potential internal candidates may be resentful.
 The new employee may have a slower start because of the need for
orientation to the organization.
 The recruitment process may be expensive.
Recruitment Could Be Done Through :-
50. Advertising - which should be in the right media on the right day of the week and of the right
format. Particular attention should be paid to ensuring that there is no discrimination on sex
or race grounds.
Department of Employment facilities - Job Centres, The Professional and Executive

Register, Skills Centres.
The Educational Sector - University appointments boards, career offices.
Professional Organizations e.g. accountants, engineers keep registers of members

seeking work.
Employment Agencies e.g. for office, secretarial and administrative staff.
Executive Search Agencies e.g. “headhunters”.
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16.5 Interviews
Interviews. The purposes, types, structure and disadvantages of

interviews should be known :-
Purposes. In general, the purposes of an interview are:-
 To provide the applicant with information about the employer and

the job.
 To enable the prospective employer to provide the employee with

the opportunity of obtaining information additional to that given on the
application form.
 To let the applicant feel that his or her application has been
courteously, seriously and fairly considered, so that the candidate
departs with a genuine feeling of regret if not appointed.
16.6 Types Of Employment Interview

a) The “One-To-One” Interview
 This provides the most favourable conditions for establishing rapport between interviewer and
interviewee, but has the disadvantage of making the interviewer solely responsible for the
appointment. There is also greater opportunity for subjective bias on the part of the
interviewer. To avoid the latter objections, variants of the one-to-one interview include a
series of one-to-one interviews at the end of which the interviewers compare notes on the
candidate.
b) Tandem Interview
 In which the candidate is evaluated by two interviewers.
c) Panel Interview
 In which the candidate is interviewed by a board, the members of which accept collective
responsibility for the appointment.
There are interviews in which the candidate is seen by a comparatively

small number of people simultaneously. The usual membership of a panel
is three of four; anything larger than this would best be described as a
board.
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 A panel interview has the following advantages:
 The candidate’s time is saved as compared with successive interviews.
 Each interviewer can specialize in asking questions in which he is expert.
 There is time for each interviewer to ask several questions.
 All the interviewers are able to take part in the joint assessment of the candidate and express
their own views.
 The disadvantages of the panel interview are as follows:
 It is less easy to establish rapport with the candidate than it is in a one-to-one interview.
 The questioning may be disorganized and repetitive.
 Occasionally, the interviewers transact company business during the interview.
The Five Grading System assesses candidates in respect of :-
51. Impact on Others - Physical make-up, appearance, acceptable speech and manner.
Qualifications and Experience - General education, vocational training, working

experience.
Innate Abilities - Natural quickness of comprehension and learning attitude.
Motivation - The goals set by the individual, consistency and determination in following
them up and success in achieving them.
Adjustment - Emotional stability, capacity for stress and ability to get on with people.
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The Seven Point System covers :-
52. Physical Make-Up - Health, physique, appearance, disabilities of vocational importance,

acceptable speech and manner.
Attainments - General education, vocational training, work experience.
General Intelligence - Innate intellectual capacity.
Special Aptitudes - Mechanical, manual, linguistic.
Interests - Intellectual, practical, physically active, social, artistic.
Disposition - Acceptability, influence over others, steadiness, self-reliance,

dependability.
Circumstances - Domestic circumstances, family responsibilities and mobility.
16.7 The Various Interviewing Tests

Time limitation, interviewer bias and the impression made by a candidate
at the interview is not always reflected in job performance. Interviewing is
often supplemented by some form of further testing.
a) Testing.
A test is a standardized type of examination given to an individual.
these include, medical examinations, attainment testing, psychological
tests and observation of the candidate in-group situations.
b) Medical Examinations.
The purpose of such examinations include the elimination of
candidates with health problems that might affect their attendance at
work or endanger the health or safety of colleagues and to protect
prospective workers from being employed on work for which they are
physically unsuitable.
c) Attainment (or achievement) Tests.
The purpose of such tests is to ascertain the candidate’s actual level of
competence. Examples include dictation tests for secretaries, skill tests
for mechanics and requiring sales persons to make a product
presentation.
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d) Psychological Tests
Includes intelligence, aptitude and personality testing. In many cases,
psychological tests can only be administered by persons who have had
appropriate training.
e) Intelligence Tests
Involve the setting of some kind of task or problem, either as an item
in a scale or alone as a means of measuring or estimating the mental
development of an individual. Intelligence may be loosely defined as
the “capacity to see relationships”.
f) Aptitude Tests
Aim to measure some inborn potentiality of a certain kind, rather than
acquired skill or knowledge. In employment, such tests can be used to
find out before training which of a group of applicants will perform the
job most efficiently after training, thus where efficiency on the job
requires a high degree of dexterity and the coordination of eye and
hand movement.
g) Personality Tests
Aim to reveal “ what a person really is ” or how a person would react
in certain situations. The importance of personality in employment is
that what people are determines what they do. A typical personality
test asks people to report on their likes, dislikes, attitudes and what
they would do in certain circumstances.
16.8 Selection For Training
Selection is the process of determining which job candidates best suit

organizational needs. During the process of selection, managers must
determine the extent to which job candidates have the skills, abilities, and
knowledge required to perform effectively in the positions for which they
are being considered.
16.9 Training And Development
Training and development is a planned effort to facilitate employee

learning of job-related behaviours in order to improve employee
performance. Experts sometimes distinguish between the term “training” -
denoting efforts to increase employee skills on present jobs - and the term
“development” - referring to efforts oriented toward improvements
relevant to future jobs.
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16.9.1 Phases of Training Process
Training efforts generally encompass THREE main phases.
53. Assessment Phase - involves identifying training needs. A needs analysis is an assessment of
an organization’s training needs that is developed by considering overall organizational
requirements, tasks (identified through job analysis) associated with jobs for which training is
needed and the degree to which individuals are able to perform those tasks effectively.
Training, Design and Implementation Phase - involves determining training methods,

developing training materials and actually conducting the training.
Information presentation methods entail teaching facts, skills,

attitudes or concepts without expecting trainees to put what they are
learning into practice during the training.
Simulation training methods involve providing artificial situations

that offer trainees a means of practising their learning during the
training.
On-the-job-training (OTJ) methods focus on having the trainee learn

while actually performing a job, usually with the help of a
knowledgeable trainer.
Evaluation Phase - entails assessing the results of the training against the criteria
developed during the assessment phase. Major ways to evaluate training include
measuring participants’ reactions to the training to determine how useful they
thought it was, assessing actual learning (perhaps through tests before and after the
training), determining the extent of behavioural change (possibly by having the
supervisor or subordinates of a trainee assess changes in the individual’s behaviour),
and measuring actual results on the job (such as increased output).
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UNIT 17
Human Resource Management 2
17.1 Training
Training means education to upgrade skills for a specific purpose. In

contrast, development is intended to provide general knowledge about
management principles and practices. Training is usually for non-
management employees; development is usually for executives.
17.2 The Role of the Training Officer
Ensure that his management have a training policy.

 advice management on training policy
 Implement the training policy laid down
Investigate his Company to establish needs for training.

 Interview managers to forward the need for training for their subordinates.
 Convince managers of their responsibility to upgrade their staff.
Set training objectives

 Design training programmes
 To run these programmes
 Coach and guide others to run appropriate sessions in a training programme.
Administer the Training Function
Study and Learn

 To make use of published materials for improving his performance in his function.
Keep himself informed about what training is available both within his organization and
outside by personal contact.
17.3 Performance Appraisal
Performance Appraisal is the process of defining expectations for

employee performance; measuring, evaluating and recording employee
performance relative to those expectations; and providing feedback to the
employee.
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17.3.1 The Purpose of Appraisal

 To ensure employees are given credit for good work or service.
 To motivate employees.
 To ensure that good or poor work is recorded. While managers
may have a high regard for an employee, this credit may be lost if the
managers retires or dies. Conversely, poor work should with the
appraisee’s knowledge be recorded, at least temporarily to indicate the
need for improvement. Such adverse records should normally be
expunged when the desired improvement is achieved.
 To improve employee performance.
 To assist manpower planning.
 To identify potential.
 To identify objectives.
 To identify and set objectives.
 To reward merit and determine wage or salary increases.
 To provide an opportunity for counselling.
17.3.2 Methods of Appraisal

These can be categorized as Qualitative and Quantitative.
a) Qualitative Appraisal
Usually entails the preparation by the appraiser of an unstructured
report. Such reports may omit important areas on which information
should required. To obviate such omissions, appraisers may be given
guidance on the areas on which to provide comment. Such an
approach:
i) depends on the appraiser’s ability to express himself in writing;
ii) often results in meaningless, neutral comments.
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b) Quantitative Appraisal
Usually involves the use of some kind of rating form on which the
appraisee is graded “ poor ”, “ average ” or “ excellent ” or “
unsatisfactory ”, “ fair ”, “ good ”, “ very good ” or “ exceptional ”
against specified factors such as job knowledge, interpersonal
relationships accuracy, organizing ability etc.
In merit rating, now largely discarded, grading is based on numerical

values, e.g. scale of 1 - 20, attached to each characteristics the ratings
are then added up to produce a total scope. Some appraisal schemes
such as Management by Objectives ( MBO ).
Merit rating is concerned with the grading of clerical work. It

encourages management to appraise the overall performance of the
office staff. Managers are constantly observing the manner in which
their staff carry out their tasks and forming impression as to their
relative worth to the organization. This scheme acts as an incentive to
office staff.
17.3.3 Factors In Successful Appraisal
 The purpose of the appraisal is clearly understood by both

appraiser and appraisee.
 Appraisers have had training to enable them to interview
effectively.
 Where the climate of the interview is one of trust rather than one of
hostility and conflict.
 Where the attitude of the appraiser is constructive rather than
judgmental.
 Appraiser is aware of such factors as empathy, sensitivity and the
importance of careful listening.
 Honesty and Openness.
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APPRAISAL REPORT
NAME : TIME IN POSITION:
POSITION : PERIOD OF REVIEW :
DEPARTMENT : AGE :
Overall Assessment A B C D E Comment
Job Knowledge
Effective Output
Co-operation
Initiative
Time-Keeping
Other Relevant Factors (specify)
A = Outstanding B = Above Standard C = To Required Standard

D = Short Of Standard In Some Aspects E = Not Up To Required Standard
Potential A B C D E Comments
A = Overdue for promotion B = Ready for promotion C = Potential for promotion

D = No avoidence of promotion potential at present E = Has not worked long enough
for me for judgement
Training, if required
Assessment discussed with employee? Yes No
Signed: The Formation of the Contract of Employment
Confirmed : Date :
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17.4 Contract Of Employment

54. The names of the parties, the date employment commenced and the date on which the
employee's period of continuous service began (taking account of any employment
with a previous employer counting towards that service).
The scale or rate of remuneration and the method of calculation.
The intervals at which remuneration is paid.
Normal hours of work and other conditions relating to hours.
Holiday entitlement (including public holidays) and holiday pay.
Terms and conditions relating to incapacity for work including sickness and injury pay.
Terms and conditions relating to pensions.
Notice required to terminate the contract on both sides.
The job title.
Additionally, the written statement must have a note stating what

disciplinary rules are applicable, to whom the employee can appeal against
a disciplinary decision or to whom the aggrievance can be taken. Any
appeals procedure must also be stated.
It is important to recognise that the provision of the Act does not state that
the employee must have a written contract. What the employer must do is
to state the main terms of the contract in writing. The information in the
note can be given in Employee Handbooks or similar documents.
17.5 Termination of Contract

As defined by the Act dismissal covers :
i) Termination by the employer with or without notice;
ii) Non-renewal of a fixed contract;
iii) Constructive dismissal i.e. termination of the contract by the employee with
or without notice due to the employer's conduct.
At common law, a Contract of Employment can be terminated by the

employer giving notice in accordance with the terms of the contract. If the
period of notice is not stated it must be 'reasonable' having regard to such
facts as the employee's age, status, length of service and intervals at which
remuneration is paid.
Important aspects of dismissal are Summary, Unfair and Constructive
Dismissals.
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17.5.1 Summary Dismissal
It is where the employee is sacked without the notice stated in the contract
of employment. The general principle justifying summary dismissal is that
the employee's conduct prevents further satisfactory continuance of the
employer-employee relationship e.g. misconduct including disobeyance,
insolence and rudeness, committing a criminal act such as stealing and
carelessness.
17.5.2 Unfair Dismissal
By Section 54 of the Act, the basic requirement of all dismissals with or

without notice is fairness. Examples of unfairness per-se are for reasons of
pregnancy (Section 60) unless pregnancy effectively stops the woman
from doing her job properly or is against some legal requirement imposed
on her or her employer, and selective dismissals during and because of
strict action. It is unfair to dismiss an employee for refusing to join a trade
union and if he objects on grounds of conscience or other deeply held
personal conviction to being a member of any union or any particular
union.
Three Circumstances Give Rise to Unquestionably Unfair Dismissals:-
 Sacking a pregnant woman simply because she is pregnant;
 Dismissal for union membership or activity, or for refusing to join

a union;
 Dismissal of workers when a business changes hands - unless

significant technical, economic or organisational changes warranting
the dismissal of staff also occur immediately.
17.5.3 Constructive Dismissal
This is indirect dismissal such as when an employer invites an employee to

resign rather than be dismissed. The employee may be able to claim
dismissal on the ground that due to the actions of the employer he had no
option but to resign and that the actions complained were of effectively
unfair dismissal. Examples of such action would be physical assault,
demotion, reduction in pay, change in the location of employment or a
significant change in duties.
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17.6 Redundancy
Basically, any dismissal is presumed to be by reason of redundancy i.e. it

is attributable wholly or mainly to the fact:-
 That the employer has ceased or intends to cease ;
 To carry on the business upon which the worker was employed or
 To carry on that business at the place where the worker was

employed, or
 That the requirements of the business for the employee to carry out
work of a particular kind at this workplace or elsewhere have ceased or
diminished or it is expected that they will do so.
The two most important legal requirements relating to redundancy relate to

notice and compensation.
Notice.
Employers contemplating redundancies are obliged under the Employment

Protection Act 1975 as amended, to consult with trade union
representatives. No time scale for consultation is prescribed where the
number of employees to be dismissed as redundant does not exceed 9.
Where the numbers to be made redundant at one establishment are as
shown below the minimum period of reduction are :
No. Of Employees Minimum Notice

10 – 99 30 days
100 or more 90 days
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The Employer must disclose to the representative of the Trade Union

in writing :
 The reason for the dismissals.
 The number and description involved.
 The proposed method of selection.
 The method of carrying it out.
 The total work force at the establishment.
Any representative made by the union must be considered by the

employer. The employer must replay in writing to the union giving
reasons why, and or, all of its representations are rejected.
When ten or more employees are involved notice must also be given to the
Ministry of Labour.
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UNIT 18
Case Study
18.1 Introduction
The case study method, as we understand it today, is concerned with the

teaching of administration and management subjects through the
presentation and analysis of a succession of case histories and case studies.
It was a method of management education developed in the 1910s in the
USA at the Harvard Business School with the aim of providing
concentrated practical experience in the classroom. The study of business
cases was based on a method originated in the Harvard Law School in
1870 - from the analysis of the case the student was expected to make
well-founded generalisations and to anticipate legal decisions based on
sound rules of law. Business cases were developed to prepare
administration and management students for more senior positions by
developing skills needed for analysing a situation and making tough
decisions.
The main focus of the case study method is the case history, which is
derived from true or fairly realistic stories of commercial and business
situations, used to illustrate concepts, theories and everyday problems
encountered at work. These histories are studies to develop judgement and
'know-how' in students, who are required to evolve possible solutions, in a
way similar to that in which legal niceties are still learned by law students
when case histories are used as a basis for argumentation.
The case history you will encounter is usually presented as a written-up

description of an actual administrative or management situation.
Occasionally, it is narrated and acted out in a film in classroom and
training situations. The case often stops short of presenting all the actions
taken by the manager, and thus allows the student a selection of actions
which should be taken to satisfy the situation. It is expected that the
students will read and consider all the circumstances described in the case
history and come to their own conclusion about what should be done.
They can then discuss the main events and features of the case and their
proposed solutions, describing and defending their suggested courses of
action.
Examination of the student's knowledge and skill after a period of study

often relies upon the case study method. It is widely used in the final
examinations conducted by many of the educational bodies and
professional management and supervisory institutes.
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As the case study method has a very important role to play in the learning
process and in skill development, and features in the final examinations of
professional bodies these notes have been written with a view to helping
students who may be looking for some practical guidance.
18.2 Preparation
It is generally agreed by most educationalists that students should carry out

set reading and studies before attempting to analyse and decide upon
business cases. You must be able to place yourself in the role of the
responsible manager in the case, and make the decision and plan the action
called for in accordance with the best known organisational practices. If
you are going to apply fully the concepts and theories of administration
and management, you must be prepared beforehand. You cannot give a
good presentation, or understand the arguments and propositions without a
basic knowledge of business.
18.3 Studying the Case
A typical case consists of one or two pages of prose description. Often it

includes some quantitative material such as tables, charts or graphs. It
may also include other exhibits and diagrams like organisation charts,
factory layout plans or maps. Cases may include almost any type of
printed material that might be encountered in an enterprise or found in the
manager's daily work. The writer of the case history may supplement the
prose description with illustrative material to appraise you of the quality of
the facts or evidence. All the written and illustrated material must be read
and studied. Cases are not written to demonstrate how people are
supposed to act or how organisations may function. They are written with
careful attention to reproducing what was actually going on in the situation
- no matter how confusing or contradictory some of the facts or events
might seem. Of course, cases do not and could not contain all the relevant
information about a situation, and some assumptions may be made about
any "missing" information, but in all cases your assumptions must be
stated in your answers to clarify and justify your analysis or
recommendations.
It is not possible for the case study examination paper to cover every
aspect of the syllabus in each subject, but the student should be familiar
with the major divisions within the subject. If students are weak in any
division that is basic to the analysis, the resulting solutions are likely to be
poor. Revision of course material and integration of the syllabus should be
a continual process, starting from the very beginning of your studies. An
organised and methodical approach to revision will establish a rhythm of
work which will encourage you to internalise the main concepts and
formulate ideas. And of course your tutor will also indicate areas where
extra effort or reading is required.
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You may encounter a situation with problems that are commonly seen in
organisations, but you should not take for granted that all organisations are
like your own. The case history may describe an organisation with
characters in the public or private sectors of industry or commerce: the
organisation may be a large multi-national trenched in local operations;
and the characters may be young or old, men or women, trade unionists or
professional staff, full-time or part-time, manual as well as administrative,
clerical and technical staff. Case histories of these various types provide
an exciting challenge and an opportunity to exercise your abilities to study,
analyse and solve problems in a logical competent manner. Reading and
studying the case entails a systematic approach. It is important to immerse
yourself in the situation and grasp all the details of what happened or what
is happening.
18.4 Handling Case Information
Simple statements such as "the ABC company was founded in

Birmingham in 1928", or "Harding and Sons is a public company who
make and supply educational material, everything from blackboards to
prefects 'badges' "you may accept as 'true' in the sense that, had you visited
the firm and gathered the information yourself, this is what you have
discovered.
A statement like, "the car showroom appeared almost empty at the line of
the customer's visit" is another kind of 'true' statement, yet it allows you to
question, by analysing other case evidence, whether the period of the
customer's visit was typical of affairs in general.
Another substantial category of statements is that which represents the

opinions of people involved in the case situation. These people are usually
called the "case characters". The opinions of the case characters are very
powerful expressions since they will have a bearing on what develops
during the case. However, you must be careful not to treat all such
opinions as 'true facts' until and unless the other evidence in the case
verifies these opinions. These opinions are usually expressed in direct
speech, enclosed in quotation marks, eg. "Believe me, you couldn't wish
for a better man to work for." Opinions may also be signalled in such
statements as "Mr Jones believed that he was appointed to bring the
division to heel."
You may find another kind of evidence in the quantitative or financial

information. Although you should not be unduly suspicious of the figures
presented, particularly when these are copied from audited reports, it is
well to remember that these may contain simple or deliberate errors in the
calculations. As you study these 'truths' you have a responsibility to judge
for yourself what they mean, and how accurate they are.
18 - 135
Lastly, it is usual for cases to be written in the past tense. This is done so
that an appropriate date can be used for the case event, eg. "In June 1978
Mr Black was studying his firm's sales figures:” This dating of the case
may be important in some instances where there are generally well-
organised external events, such as changes in legislation, periods of
economic recession or energy crises. Dates should always be considered
as they may be relevant to the case.
18.5 Reading the Case
Careful reading of the case allows you to enter into the experience or the
dilemma of the decision-maker and enables you to consider all the relevant
information presented. The case provides an opportunity for identifying
problems, analysing them, deriving solutions, and considering the
difficulties in implementing these proposals and recommendations. Each
of these stages should be tackled in a systematic way following on from
the initial reading. The examination regulations usually allow 15 minutes'
reading time before commencing the test. Use this time wisely. Acquaint
yourself thoroughly with the situation before attempting to solve the
problems. Consider each and every sentence and paragraph in the written
case. Take nothing for granted.
With these points in mind, you should be able to begin to consider the
reading stages necessary in studying the case. For most cases at least
THREE different kinds of reading should be undertaken by students:
FIRST READING: Read the case straight through very quickly once or
twice. This reading is to familiarise you with the topic, the cast of
characters, the leading characters in the case, the general nature and
quality of the evidence with which you must work, and give some idea of
the problem or problems that must be solved. This is NOT an opportunity
to generate or search for possible solutions. This reading is a first visit to
acquaint you with some of the main landmarks.
SECOND READING: Read the case again more thoughtfully, at a much

slower speed, taking notes of the important facts. You may find it helpful
to use a coloured pen to underline words, names or phrases which signify
facts or opinions you may consider require analysis. At the end of this
second type of reading of the case you should be able to abstract from the
case a statement of the problems involved, the nature of the decision
facing the manager, and many of the factors (resources, constraints and
opportunities) which will influence the actions the manager can take.
18 - 136
THIRD READING: Re-read the case in order to check the various

features you have previously identified in your notes and to ensure that
your view is consistent with the situation presented. It is at this point that
you will be ready to prepare your analysis and recommendation using
either the general problem-solving technique described in the next section
or some more specific problem-solving techniques that you are familiar
with.
If you are not satisfied that you have abstracted a sufficient statement of
the problems involved in the case or if you are unsure of the decisions and
factors influencing the actions to be taken, read the case through a fourth
or fifth time. The Institute of Administration Management case study
examination papers allow students time to acquaint themselves thoroughly
with the case before attempting to answer it. Use this time wisely. The
first stage in handling a case must entail reading and understanding the
situation as it is presented to you.
18.6 Written Presentation
The examiners are looking for a professional presentation and will award
marks accordingly. An orderly presentation of your examination script
will make it easier for the examiner to assess. If you make it difficult for
him, he is likely to miss those pearls of wisdom you have unwittingly
hidden from view.
Think about your presentation, what you are going to say, and how you are
going to say it, before you start writing. Plan your approach, on the
examination script, and strike it out clearly before you start your answer.
Examiners are impressed by candidates who take care and time to plan.
If your answer should be required in the form of a report ensure that the
sections are clearly and appropriately headed and logically numbered.
Address the report correctly, date it and begin it in the name of the
individual whose role you have been given. A general report format will
include :
Introduction
Body
Conclusions/Recommendations
Appendices - including diagrams/charts, etc.
Should the question indicate a more discursive approach, set out your
answer logically and clearly, giving the reasons for any assumptions you
may make and any constraints you may envisage. It is important to show
the examiner that you understand the various administrative theories,
practices and methods you have studied.
CASE STUDY 1
Human relations for scientist
18 - 137
Asia Pacific Petroleum Company is a large petroleum refinery company in

Singapore. It employs about 1,200 people. The Research and
Development Division of this company is located in Singapore with
twenty researchers engaged in new product and precess development.
Michael Tan is one of the best research minds that has ever worked for the
company. He obtained a Chemical Engineering degree from the National
University of Singapore and had recently completed his master's degree in
the United Kingdom. Michael, an introvert by nature, enjoys doing
research, seldom coming into contact with other researchers or employees
in the company.
He was solely responsible for developing a new product and making a few
innovative process-related suggestions. The top management was
impressed by his outstanding contributions to the company and promoted
Michael to coordinate the research work of six to eight young researchers
in the product development department.
In his new responsibility, Michael tended to ignore the administrative

matters in his job but was always ready to help his researchers solve any
technical problems that arose. On the human relations side, Michael was
very poor in dealing with his subordinates. His superior was aware of this
problem but was hesitant to confront him.
Questions
Do you think that Michael should not have been promoted to coordinate the work of
young researchers? Why?
What special leadership qualities are needed to coordinate the work of subordinates?
Assuming that you are Michael Tan's supervisor, what should you do now?
18 - 138
UNIT 19
Case Study 2
Change for the Better?
John Tan, the service manager, had Ronald Lim as a supervisor in the
Equipment Service Section to oversee the work of servicemen. The
supervisor was a nice person but a bit soft in dealing with people. After
working for four years, Ronald Lim left the company for a new job
elsewhere. A new supervisor was recruited from outside.
Robert Lee, a senior technician who had ten years of service with the
company was disappointed because he was not considered for the
supervisor's post. Robert had maintained a good record all along and in
fact came up through the ranks from trainee to senior technician.
The new supervisor, Albert Gan, was generally a more aggressive person.
Shortly after taking over the job, he started asking his subordinates to
record the actual hours spent on various activities and idle time, if any.
(Prior to this, the hours spent on each job were based on some kind of
estimate). The technicians were not happy with this but unwillingly
complied with the demand.
The relationship between the supervisor and his workers deteriorated when
Albert started to change certain routine matters which were supposedly to
improve the flow of work and reduce overtime.
A few months later, two servicemen resigned. Then the senior technician
also tendered his resignation and complained to the service manager
accusing Albert for trying to create more work for them unnecessarily.
However, these complaints were found to be not fully justifiable, but to a
great extent were the results of misunderstanding between Albert and his
men.
The service managers did not want to lose the senior technician and
managed to persuade him to stay on and reconcile with the supervisor.
Shortly after, the superior left the company.
Questions
Do you consider the actions taken by the new supervisor not tactful enough?
What would have been the tactful approach?
There is a general tendency for employees to resist changes in routine particularly when
such changes may encounter initial teething problems and affect the morale of the
employees. In view of this, what should be the right approach in implementing
changes?
If you were the service manager, would you let the senior technician or supervisor go?
What are your reasons? Is there any other way of handling this situation?
24 - 139
UNIT 20
Case Study 3
Getting control
Wallace Struthers, the president of the GlenAire Bank and Trust, is
discussing the statistics from his comptroller's report on the problems with
the bank's automated teller machines, with the members of his executive
committee. The figures are getting worse. According to a study by the
American Bankers Association, about 18,000 crimes were committed at or
with automated teller machines nation-wide. GlenAire's experience with
losses from their ATMs parallels the nation-wide losses. About 90% of
their losses come from people using stolen or lost ATM cards, about 5%
from vandalism and break-ins to the ATMs, and the remaining 5% from
robberies and muggings of customers at the remote ATM locations. Last
year, the bank lost $12,954 because of these ATM related crimes.
Struthers notified the rest, "This year, the comptroller estimates that the
bank's loses will exceed $15,000. Ladies and gentlemen, we have to
tighten up on our controls over our three ATMs."
The bank's three automated teller machines are located as follows: One is
at the bank, next to the drive-through lanes; the second is at the train
station about fifty feet from the passenger depot, in a telephone booth-like
structure; and the third is outside the local supermarket in a similar
structure. All these machines are sheltered from the wind and rain and
well lighted except for the occasional vandalism that breaks glass and
destroys the lighting fixtures. All three have entrances that face a street
and use folding doors. The booth at the train station has been the source of
nearly 75% of the bank's losses to theft, vandalism and fraud committed
with stolen or lost cards.
The bank has only had automated teller machines for two years and has
not installed any kind of surveillance equipment. It has relied on visual
observation by bank personnel during the banking hours for the machine at
the bank and on public locations with high visibility from the street at the
other locations. Obviously, this has not been adequate. Local police drive
by all the machine locations at least once every hour of the day and night.
The ATMs do not have any alarm devices to detect break-ins or tampering
with them.
The problem with the stolen or lost cards is a tough one to deal with.
Customers are issued with a card when they sign up for the ATM service.
Each cardholder has a six-number code that must be entered before the
machines will accept the card. Once the numbers are entered, the card is
inserted in a slot and the transaction buttons are pressed to take the cash
from the cardholder's bank account. When the task is completed, the card
is returned to a drop slot. Most cards that are lost have been left with the
machine by the customers after each transaction. Obviously, the bank
cannot do anything about stolen or lost cards until the customer notifies the
1 - 140
bank. Then the bank programs its computer to reject any transaction using
that card and its cardholder code. So far, more than 280 cards have been
reported lost or stolen by customers.
Questions
As a member of the bank's executive committee, what security measures do you

recommend to deal with the unauthorised use of ATM cards?
What kind of controls would you recommend to deal with the vandalism problems?
What kinds of controls would you recommend to deal with the problems of robbery and
muggings at the ATM machines?
1 - 141
UNIT 21
Case Study 4
Dancing to the tunes
Mr Roger Tan is thinking about buying a dance studio. Roger learned
about the business opportunity from the owner himself. He takes dancing
lessons every Wednesday evening from a school in Orchard Road. One
day, after finishing his lesson, he was in Burger King having some French
fries and coffee when the owner, Mr Lim came by. Mr Lim told Mr Roger
Tan that he had been talking to his accountant about selling the business.
"I have owned this studio for 23 years", Mr Lim told Tan, "and now I want
to sell out and retire. I'm looking around right now for someone who
would like to buy the business." Roger was excited about the prospect and
asked Mr Lim many questions about the dancing business operations.
From what Roger could determine from the conversation, Mr Lim has six
full-time instructors and nine part-time instructors. He also has
approximately 130 customers a week who takes lessons. Some of these
individuals signed 10 and others 20 lessons contract, while others are
walk-in customers and ask for a particular dance lesson.
Mr Roger Tan does not know anything about owning a dance studio. He is
in the insurance business. However, he did spend an evening looking over
Mr Lim's operations earlier this week and found that it was very difficult
to tell from the records exactly how much revenue Mr Lim has taken in
this year. Some people pay by cheque and others with cash. Not all of
these amounts have been entered in the books. Nor is it possible to
pinpoint how many people actually come in for lessons because the part
time instructors sometimes collect the money and if it is in cash, take their
daily rate share and give Mr Lim the rest of the collection. In addition, Mr
Lim has had 3 good years and 2 poor ones for the last five years. Last year
was one of the good ones.
Finally, Mr Lim does not seem to know (or at least he is telling Tan) a
great deal about the customers who come in for lessons. However, he does
run an advertisement every week in the Sunday edition of the Straits Times
and believes that this is how people learn about his dance studio, in
addition, of course, by word-of-mouth advertising from his clientele.
Mr Lim also believes that he, himself, helps account for some of his
business because he arrives at the studio every day at mid-morning and
does not go home until the last session.
After thinking the matter over, Mr Roger Tan is not sure whether this
venture is good one. There seems to be so much information that he does
not have about the business that it will be very difficult to make a decision.
However, he has told Mr Lim that he will let him know within two weeks.
1 - 142
Questions
From which of the specific causes of business failure does Mr Lim's operations suffer?
List them.
Into which of the management failures has Mr Lim fallen. Explain?
What would you advise RogerTan to do? Why?
UNIT 22
Case Study 5
Electronics Company
The Chang Electronics Company started as a small organisation interested

in integrated circuits. Over the past 10 years, the company has expanded
steadily and consistently and recently has received some large orders for
T.V. games. The office expansion that has taken place has been under
three managers each of whom is in charge of one of the functions of
production, distribution and finance. No one person has been in charge of
the office services.
Each functional manager maintains his own filing, typing, mailing and
duplication services. Supervisors are in charge of the functional activities
under the headings of production, distribution and finance. Under
production, the organisation chart indicates that there are supervisors in
charge of purchasing, receiving, storing accounts payable, factory payroll,
cost accounting and shipping. Under the heading of distribution, there are
supervisors in charge of sales, advertising, credit and accounts receivable.
Under the direction of the manager in charge of finance are financial
accounting, taxes, government reports and returns and office payrolls.
Total office staff of 160.
Many of the supervisors of these activities are persons who have been
shifted into supervisory positions with little knowledge of systems or
methods. The supervisors are hard pressed to get out the work because of
inefficiency, lack of knowledge and needless duplication of records and
work. Office equipment have been ordered from time to time and placed
where it was thought it would be used later.
The General Manager of the company, Mr Mike Chang has recently been
overwhelmed by the fact that whenever he wants information he must go
to several sources and waste much time in locating it. He is also beginning
to notice the ideal equipment in the offices and the delay in the preparation
of certain operating reports.
1 - 143
Mr Chang has recently had a conference with the 3 managers in charge of
production, distribution and finance activities and indicated his
dissatisfaction. Neither the production manager, the marketing manager,
not the treasure feels that he can give up or change any of his work
routines or his present personnel.
Mr Chang feels that something must be done in the interests of a more

efficient organisation and lower costs. He has called upon you to find out
how it might be possible to reorganise the office services so that a better
utilisation of present personnel and equipment might achieve the
objectives of greater and faster output and reduced costs.
In dealing with this case study, you are required to make clear any
reasonable assumptions you feel are necessary, over and above what is
mentioned in the script. Make clear any national circumstances if you are
not basing your answer in the context of the Singapore.
Questions
a) Prepare a chart showing the current organisation and another chart indicating the
changes you would make in the organisation structure.
b) Write brief notes justifying the changes.
Discuss the possibility of centralised services in this organisation.
How would you attempt to rationalise the situation for individual personnel after the re-
structuring of the organisation.
1 - 144
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BA-331

No one definition has been universally accepted.

Management as a discipline is so new that many of its related terms and

Mary Parker Follet

Input – (Resources) + Management/process = Output

Fig 1.1 The Management Process

A business enterprise with access to materials, machines and manpower

Many businesses have failed because of mismanagement.

Resources can only be put to proper use by an effective manager.

The experience of many developing countries well-endowed with natural

Management is especially important as the business enterprise grows in

Without effective management, the organisational goals may not be

1.3 Management Functions

The functions of a manager are planning, organising, directing and

 Workers activities are consistent with the organisation's goals, and

Senior management decides on the overall goals for the organisation,

Planning requires information (eg. about competition and methods of

The Business Environment

Fig 1.2 The Nature Of Planning

 Steps must be taken to set work standards and

1.3.7 Managerial Roles

1.3.8 Managerial Knowledge, Skills and Performance

1.3.9 Management Skills

1.3.10 Management Performance

What constitutes high performance in an organisation? It basically

Effectiveness is the ability to choose appropriate goals and achieve them.

The Organizations need to exhibit both effectiveness (doing the right

1.3.11 Managerial Job Hierarchy

Managerial jobs in organizations fall into three categories: First-Line,

Fig 1.3 Levels of Management

First-Line Managers ( or first-line supervisors ) are managers at the

Management Skills. The three levels of management also differ in the

1.3.12 The Distribution of Management Time

First-Line Middle Top

1.3.13 Qualities of a Manager

Self-Confidence - the ability to deal effectively with difficult situations

Decisiveness - the ability to think positively and show determination and

Judgment - the ability to analyze a situation and formulate appropriate

Adaptability - the ability to change as circumstances changes

Emotional Maturity - the ability to exercise self-discipline and self-

Human Understanding - ability to work with other people with

Technical - producing and manufacturing products;

Fayol also introduced 14 principles of management or principles of

Contributions of the Classical School

2.2 Scientific Management School

Frederick W Taylor turned to scientific analysis to better ways of

 communicating and co-operating between and staff;

5. Management should pay the worker on an incentive basis commensurating salary

6. Management should be put in charge of planning, preparing and inspecting work.

Contributions of Scientific Management School

2.3 Behavioural School

Elton Mayo (1880 - 1949)

Mayo and his Harvard associates conducted a famous study of human

The Hawthorne Experiments can be divided into 3 phases:

10. Test Room Studies

11. Interviewing Studies

12. Observational Studies

Results of the experiments led Mayo to the following conclusions:

 When special attention is given to workers by management,

2.4 System Approach

In the system approach to management, the first step is to formulate the

Contributions of the System Approach

2.5 Contingency Approach