Business Management BBA

Principles & Fundamentals of Management
Concepts of Management
Right person at right place with right qualification for right job at right time is called
management. (Layman Language)
Management is an art of getting things done with and through others. Management can be

defined as, the process of getting things done with the aim of achieving organizational goals
effectively and efficiently
Efficiency and Effectiveness:
Efficiency means doing the task correctly at minimum cost through optimum utilization

of resources while effectiveness is concerned with end result means completing the task
correctly within stipulated time. Although efficiency and effectiveness are different yet they are
inter related. It is important for management to maintain a balance between the two.
Definitions:
Thought it is very difficult to give a precise definition of the term ‘management’. Different
scholars from different disciplines view and interpret management from their own angles. The
economists consider management as a resource like land, labor, capital and organization. The
bureaucrats look upon it as a system of authority to achieve business goals. The sociologists
consider managers as a part of the class elite in the society.
The definitions by some of the leading management thinkers and practitioners are given below:
(i) Management consists in guiding human and physical resources into dynamic, hard-hitting
organization unit that attains its objectives to the satisfaction of those served and with a high
degree of morale and sense of attainment on the part of those rendering the service.-
Lawrence A. Appley
(ii) Management is the coordination of all resources through the process of planning,
organizing, directing and controlling in order to attain stated objectives.- Henry L. Sisk.
(iii) Management is principally the task of planning, coordinating, motivating and controlling the
efforts of others towards a specific objective.- James L. Lundy
(iv)Management is the art and science of organizing and directing human efforts applied to
control the forces and utilize the materials of nature for the benefit of man.-
American Society of Mechanical Engineers
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(v) Management is the creation and maintenance of an internal environment in an enterprise

where individuals, working in groups, can perform efficiently and effectively towards the
attainment of group goals.- Harold Koontz and Cyrill O’Donnell
(vi)Management is the art of knowing what you want to do and then seeing that it is done in
the best and cheapest way.- F.W. Taylor
(vii) To manage is to forecast and to plan, to organize to command, to coordinate and to

control.- Henry Fayol
(viii) Management is the function of executive leadership anywhere.- Ralph C. Davis
(ix) Management is concerned with seeing that the job gets done; its tasks all centre on
planning and guiding the operations that are going on in the enterprise.- E.F.L. Breach
(x) Management is a distinct process consisting of planning, organizing, actuating and

controlling performed to determine and accomplish the objectives by the use of people and
resources.- George R. Terry
CONCEPTS OF MANAGEMENT
The term management has been interpreted in several ways; some of which are given below:
Management as an Activity Management is an activity just like playing, studying, teaching etc.
As an activity management has been defined as the art of getting things done through the
efforts of other people. Management is a group activity wherein managers do to achieve the
objectives of the group.
The activities of management are:
Interpersonal activities
Decisional activities
Informative activities
Management as a Process
Management is considered a process because it involves a series of interrelated functions. It

consists of getting the objectives of an organization and taking steps to achieve objectives. The
management process includes planning, organizing, staffing, directing and controlling functions.
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Management as a process has the following implications:
(i) Social Process:
Management involves interactions among people. Goals can be achieved only when relations
between people are productive. Human factor is the most important part of the management.
(ii) Integrated Process:
Management brings human, physical and financial resources together to put into effort.
Management also integrates human efforts so as to maintain harmony among them.
(iii) Continuous Process:
Management involves continuous identifying and solving problems. It is repeated every now
and then till the goal is achieved.
(iv)Interactive process:
Managerial functions are contained within each other. For example, when a manager prepares
plans, he is also laying down standards for control.
Management as a Team:
As a group of persons, management consists of all those who have the responsibility of guiding
and coordinating the efforts of other persons. These persons are called as managers who
operate at different levels of authority (top, middle, operating). Some of these managers have
ownership stake in their firms while others have become managers by virtue of their training
and experience. Civil servants and defense personnel who manage public sector undertakings
are also part of the management team. As a group managers have become an elite class in
society occupying positions with enormous power and prestige.
Management as an Academic Discipline:
Management has emerged as a specialized branch of knowledge. It comprises principles and

practices for effective management of organizations. Management has become as very popular
field of study as is evident from the great rush for admission into institutes of management.
Management offers a very rewarding and challenging career.
Management as a Group:
Management means the group of persons occupying managerial positions. It refers to all those
individuals who perform managerial functions. All the managers, e.g., chief executive
(managing director), departmental heads, supervisors and so on are collectively known as
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management. For example, when one remarks that the management of Reliance Industries Ltd.
is good, he is referring to the persons who are managing the company. There are several types
of managers which are listed as under:
(i) Family managers who have become managers by virtue of their being owners or relatives of
the owners of a company.
(ii) Professional managers who have been appointed on account of their degree or diploma in
management.
(iii) Civil Servants who manage public sector undertakings. Managers have become a very
powerful and respected group in modern society. This is because the senior managers of
companies take decisions that affect the lives of a large number of people. For example, if the
managers of Reliance Industries Limited decide to expand production it will create job for
thousands of people. Managers also help to improve the social life of the public and the
economic progress of the country. Senior managers also enjoy a high standard of living in
society. They have, therefore, become an elite group in the society.
Characteristics of Management:
Goal oriented Process: It is a goal oriented process, which is undertaken to achieve already
specified and desired objectives by proper utilization of available resources.
Pervasive: Management is universal in nature. It is used in all types of organizations whether

economic, social or political irrespective of its size nature and location and at every level.
Multidimensional: It is multidimensional as it involves management of work, people and

operations.
Continuous: It consists of a series of function and its functions are being performed by all

managers simultaneously. The process of management continues till an organization exists for
attaining its objectives.
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Group Activity: It is a group activity since it involves managing and coordinating activities of
different people as a team to attain the desired objectives.
Dynamic function: It is a dynamic function since it has to adapt according to need, time and
situation of the changing environment. For example, McDonalds made major changes in
its ‘Menu’ to survive in the Indian market.
Intangible Force: It is intangible force as it can’t be seen but its effects can be felt in the form of

results like whether the objectives are met and whether people are motivated or not and there
is orderliness and coordination in the work environment.
Objectives of Management:
(a) Organizational objectives of Survival (Earning enough revenues to cover cost); profit (To
cover cost and risk); & Growth (To improve its future prospects).
Survival: Management by taking positive decisions with regard to different business activities

ensures survival of business for long.
Profit: It plays an important role in facing business risks and successful running of business
activities.
Growth: Management must ensure growth which can measured by increase in sales no. of
employees, product, investment etc.
b) Social objectives of giving benefits to society like using environmental friendly practices and

giving employment to disadvantaged sections of society etc. Example: TISCO, ITC, and Asian
Paints.
c) Personal Objectives because diverse personal objectives of people working in the

organization have to be reconciled with organizational objectives.
Importance of Management:
a) Achieving Group Goals: Management creates team work
and coordination in the group. Managers give common direction to individual efforts in
achieving the overall goals of the organization.
(b) Increases Efficiency: Management increases efficiency by using resources in the best

possible manner to reduce cost and increase productivity.
c) Creates Dynamic organization: Management helps the employees overcome their resistance

to change and adapt as per changing situation to ensure its survival and growth.
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(d)Achieving personal objectives: Management helps the individuals achieve their personal

goals while working towards organizational objectives.
Objectives Of Management
The objectives of management are narrated as under.
(i) Organizational objectives: Management is expected to work for the achievement of the objectives of
the particular organization in which it exists. Organizational objectives include:
(a) Reasonable profits so as to give a fair return on the capital invested in business
(b) Survival and solvency of the business, i.e., continuity.
(c) Growth and expansion of the enterprise
(d) Improving the goodwill or reputation of the enterprise.
(ii) Personal objectives:
An organization consists of several persons who have their own objectives. These objectives are as
follows:
(a) Fair remuneration for work performed
(b) Reasonable working conditions
(c) Opportunities for training and development
(d) Participation in management and prosperity of the enterprise
(e) Reasonable security of service.
(iii) Social objectives:
Management is not only a representative of the owners and workers, but is also responsible to the
various groups outside the organization. It is expected to fulfill the objectives of the society which are
given below:
(a) Quality of goods and services at fair price to consumers.
(b) Honest and prompt payment of taxes to the Government.
(c) Conservation of environment and natural resources.
(d) Fair dealings with suppliers, dealers and competitors.
(e) Preservation of ethical values of the society.
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ROLE AND IMPORTANCE OF MANAGEMENT
Management is indispensable for the successful functioning of every organization. It is all the more
important in business enterprises. No business runs in itself, even on momentum. Every business needs
repeated stimulus which can only be provided by management.
According to Peter Ducker,“ management is a dynamic life-giving element in an organization, without it

the resources of production remain mere resources and never become production”.
The importance of management has been highlighted clearly in the following points:
(i) Achievement of group goals:
A human group consists of several persons, each specializing in doing a part of the total task. Each
person may be working efficiently, but the group as a whole cannot realise its objectives unless there is
mutual cooperation and coordination among the members of the group. Management creates team-
work and coordination in the group. He reconciles the objectives of the group with those of its members
so that each one of them is motivated to make his best contribution towards the accomplishment of
group goals. Managers provide inspiring leadership to keep the members of the group working hard.
(ii) Optimum utilization of resources:
Managers forecast the need for materials, machinery, money and manpower. They ensure that the
organization has adequate resources and at the same time does not have idle resources. They create
and maintain an environment conducive to highest productivity. Managers make sure that workers
know their jobs well and use the most efficient methods of work. They provide training and guidance to
employees so that they can make the best use of the available resources.
(iii) Minimization of cost:
In the modern era of cut-throat competition no business can succeed unless it is able to supply the
required goods and services at the lowest possible cost per unit. Management directs day-to-day
operations in such a manner that all wastage and extravagance are avoided. By reducing costs and
improving efficiency, managers enable an enterprise to be competent to face competitors and earn
profits.
(iv) Survival and growth:
Modern business operates in a rapidly changing environment. An enterprise has to adapt itself to the
changing demands of the market and society. Management keeps in touch with the existing business
environment and draws its predictions about the trends in future. It takes steps in advance to meet the
challenges of changing environment. Changes in business environment create risks as well as
opportunities. Managers enable the enterprise to minimize the risks and maximise the benefits of
opportunities. In this way, managers facilitate the continuity and prosperity of business.
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(v) Generation of employment:
By setting up and expanding business enterprises, managers create jobs for the people. People earn
their livelihood by working in these organizations. Managers also create such an environment that
people working in enterprise can get job satisfaction and happiness. In this way managers help to satisfy
the economic and social needs of the employees.
(vi) Development of the nation:
Efficient management is equally important at the national level. Management is the most crucial factor
in economic and social development. The development of a country largely depends on the quality of
the management of its resources. Capital investment and import of technical know-how cannot lead to
economic growth unless wealth producing resources are managed efficiently. By producing wealth,
management increases the national income and the living standards of people. That is why management
is regarded as a key to the economic growth of a country.
MANAGEMENT AND ADMINISTRATION
There has been a controversy on the use of these two terms-management and administration. Many
experts make no distinction between administration and management and use them as synonyms.
Several American writers consider them as two distinct functions.
The management experts like Elbourne, Unwick and Mary Follett regarded ‘administration’ and
‘management’ as synonymous and use them interchangeably in their works. But Schuze and Sheldon
found distinction between these two concepts. According to them the distinction is important to clearly
understand the role of people in administrative positions versus those in managerial positions.
Oliver Sheldon in his “The Philosophy of Management” defines ‘Administration as a function is

concerned with the determination of the corporate policy, the coordination of finance, production and
distribution, the settlement of the compass (i.e., structure) of the organization, under the ultimate
control of the executive.’ On the other hand, ‘Management is concerned with the execution of the
policy, within the limits setup by administration and the employment of the organization for the
particular objects before it. Thus Sheldon declares administration as a thinking process and
management as doing process. In other words, management is a concomitant of administration.
NATURE OF MANAGEMENT
To understand the basic nature of management, it must be analyzed in terms of art and science, in
relation to administration, and as a profession, in terms of managerial skills and style of managers.
Management is Combination of Art and Science Management knowledge exhibits characteristics of both
art and science, the two not mutually exclusive but supplementary. Every discipline of art is always
backed by science which is basic knowledge of that art. Similarly, every discipline of science is complete
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only when it is used in practice for solving various kinds of problems faced by human beings in an
organization or in other fields of social life which is more related to an art. Art basically deals with an
application of knowledge personal skill and know-how in a specific situation for efficiently achieving a
given objective. It is concerned with the best way of doing things and is consequently, personalized in
nature. During the primitive stages of development of management knowledge, it was considered as an
art. There was a jungle of managerial knowledge. It was not codified and systemized. People used it to
get things done by others, in their own way giving an impression that whosoever uses it, knows the art
of using it. This kind of loose and inadequate understanding of management supported the view that it
was an art.
Management as a Science
Science means a systematic body of knowledge pertaining to a specific field of study. It contains general
principles and facts which explains a phenomenon. These principles establish cause-and-effect
relationship between two or more factors. These principles and theories help to explain past events and
may be used to predict the outcome of actions. Scientific methods of observations, and experiments are
used to develop principles of science. The principles of science have universal application and validity.
Thus, the essential features of science are as follows:
(i) Basic facts or general principles capable of universal application
(ii) Developed through scientific enquiry or experiments
(iii) Establish cause and effect relationships between various factors.
(iv) Their Validity can be verified and they serve as reliable guide for predicting future events.
Let us now examine as to what extent management satisfies the above conditions:
(i) Systematic body of knowledge:
Management has a systematic body of knowledge consisting of general principles and techniques.
These help to explain events and serve as guidelines for managers in different types of organizations.
(ii) Universal principles:
Scientific principles represent basic facts about a particular field enquiry. These are objective and
represent best thinking on the subject. These principles may be applied in all situations and at all times.
Exceptions, if any, can be logically explained. For example, the Law of Gravitation states that if you
throw an object in the air it will fall on the ground due to the gravitational force of the earth. This law
can be applied in all countries and at all points of time. It is as applicable to a football as it is to an apple
falling from tree. Management contains sound fundamental principles which can be universally applied.
For instance, the principle of unity of command states that at a time one employee should be
answerable to only one boss. This principle can be applied in all types of organization-business or non-
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business. However, principles of management are not exactly like those of physics or chemistry. They
are flexible and need to be modified in different situations.
(iii) Scientific enquiry and experiments:
Scientific principles are derived through scientific investigation and reasoning. It means that there is an
objective or unbiased assessment of the problem situation and the action chosen to solve it can be
explained logically. Scientific principles do not reflect the opinion of an individual or of a religious guru.
Rather these can be scientifically proved at any time. They are critically tested. For example, the
principle that the earth revolves around the sun has been scientifically proved. Management principles
are also based on scientific enquiry and investigation. These have been developed through experiments
and practical experience of a large number of managers. For example, it has been observed that
wherever one employee has two or more bosses simultaneously, confusion and indiscipline are likely to
arise, with regard to following the instructions.
(iv) Cause and effect relationship:
Principles of science lay down a cause and effect relationship between related factors. For example,
when water is heated up to 100ºC, it starts boiling and turns into vapour. Similarly, the principles of
management establish cause and effect relationship between different variables. For instance lack of
balance between authority and responsibility will cause management to become ineffective.
(v)Tests of validity and predictability:
Validity of scientific principles can be tested at any time and any number of times. Every time the test
will give the same result. Moreover, the future events can be predicted with reasonable accuracy by
using scientific principles. For example, the Law of Gravitation can be tested by throwing various things
in the air and every time the object will fall on the ground. Principles of management can also be tested
for their validity. For example, the principle of unity of command can be tested by comparing two
persons, one having a single boss and other having two bosses. The performance of the first person will
be higher than that of the second. Thus, management is undoubtedly a science. It contains a systematic
body of knowledge in the form of general principles which enjoy universal applicability. However,
management is not as exact a science—Physics, Chemistry, Biology and other Physical sciences. This is
because management deals with people and it is very difficult to predict accurately the behaviour of
living human beings. Management principles are universal but they cannot be expected to give exactly
the same results in every situation. That is why management is known as a soft science. Management is
a social science. It is still growing, with the growing needs of human organizations.
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Management as an Art
Art implies the application of knowledge and skills to bring about the desired results. The essential
elements of arts are:
(i) Practical knowledge
(ii) Personal skill
(iii) Result oriented approach
(iv) Creativity
(v) Improvement through continuous practice
Let us judge how far management fulfills these requirements:
(i) Practical knowledge:
Every art signifies practical knowledge. An artist not only learns the theory but also its application in
practice. For example, a person may have adequate technical knowledge of painting but he cannot
become a good painter unless he knows how to make use of the brush and colours. Similarly, a person
cannot become a successful manager simply by reading the theory and getting a degree or diploma in
management. He must also learn to apply his knowledge in solving managerial problems in practical life.
A manager is judged not just by his technical knowledge but by his efficiency in applying this knowledge.
(ii) Personal skill:
Every artist has his own style and approach to his job. The success of different artists differs even when
all of them possess the same technical knowledge or qualifications. This is due to the level of their
personal skills. For example, there are several qualified singers but Lata Mangeshkar has achieved the
highest degree of success. Similarly, management is personalized. Every manager has his individual
approach and style in solving managerial problems. The success of a manager depends on his
personality in addition to his technical knowledge.
(iii) Result-oriented approach:
An art seeks to achieve concrete results. The process of management is also directed towards the
accomplishment of desirable goals. Every manager applies certain knowledge and skills to achieve the
desired results. He uses men, money, materials and machinery to promote the growth of the
organization.
(iv) Creativity:
Art is basically creative and an artist aims at producing something that had not existed before.
Therefore, every piece of art requires imagination and intelligence to create. Like any other art,
management is creative. A manager effectively combines and coordinates the factors of production to
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create goods and services. Moulding the attitudes and behavior of people at work, towards the
achievement of the desired goals is an art of the highest order.
(v)Improvement through people:
Practice makes one perfect. Every artist becomes more and more efficient through constant practice. A
dancer, for example, learns to perform better by continuously practicing a dance. Similarly, manager
gains experience through regular practice and becomes more effective. Thus, “management is both a
science as well as an art”. It is a science because it has an organized body of knowledge consisting of
certain universal facts. It is known as an art because it involves creating results through practical
application of knowledge and skills. However, art and science are complementary to each other. They
are not mutually exclusive. Science teaches one to know and art to do. Art without science has no guide
and science without art is knowledge wasted. For example, a person cannot be a good surgeon unless
he has scientific knowledge of human anatomy and the practical skill of applying that knowledge in
conducting an operation. Similarly, a successful manager must know the principles of management and
also acquire the skill of applying those principles for solving managerial problems in different situations.
Knowledge of principles and theory is essential, but practical application is required to make this
knowledge fruitful. One cannot become an effective manager simply by learning management principles
by heart. Science (theory) and art (practice) are both essential for the success of management.
Management as a Profession
A profession is calling that requires specialized knowledge and often, long intensive academic
preparation. The essential features of profession are as follows:
(i) Well defined body of knowledge
(ii) Restricted entry
(iii) Service motive
(iv)Code of Conduct
(v) Representative professional association
Let us examine to what extent management fulfills the above requirements:
(i) Specialized body of knowledge:
Every profession has a well-defined body of knowledge relevant to the area of specialization. In order to
practice a profession, a person requires specialized knowledge of its principles and techniques.
Moreover, he must make deliberate efforts to gain proficiency unit. There exists a substantial and
rapidly expanding body of knowledge in management. A manager must have intensive devotion and
involvement to acquire expertise in the science of management. In addition, there should be competent
application or judicious utilization of this knowledge in solving complex problems. Today, management
is a separate discipline having a specialized and organized body of knowledge.
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(ii) Restricted entry:
There exist institutions and universities to impart education and training for a profession. No one can
enter a profession without going through the prescribed course of learning. For example one must pass
the Chartered Accountancy examination to practice accountancy profession. Many institutes of
management have been set up in India and abroad which offer courses for specialized training in
management. Several management consultancy firms have also come into existence to offer advice for
solving managerial problems. Formal education and training has become very helpful in getting jobs as
managers. But no minimum qualification or course of study has been prescribed for managers by law.
(iii) Service motive:
A profession is a source of livelihood but professionals are primarily motivated by the desire to serve the
community. For example, a doctor earns his living from his medical practice. But he does not treat his
patients only for the sake of money. He has a concern for the suffering of others and a desire to help the
community. Therefore, a profession enjoys high community sanction or respect. Similar is the case with
managers. A manager of a factory is responsible not only to its owners, but he is also expected to
produce quality goods at a reasonable cost and to contribute to the well-being of the community.
(iv) Representative association:
In every profession there is a statutory association or institution which regulates that profession. For
example, the Institute of the Chartered Accountants of India establishes and administers standards of
competence for the auditors. In management also associations have been established both in India and
abroad. Managers have formed associations for the regular exchange of knowledge and experience. In
India, there is the All India Management Association. However, this association does not have the
statutory power to regulate the activities of managers. No university accepted criteria or standard exists
for their evaluation. Membership of this association is not compulsory in order to become a manager.
(v) Code of conduct:
Members of one profession have to abide by a code of conduct which contains rules and regulations
providing the norms of honesty, integrity and professional ethics. For example a chartered accountant is
not expected to commercially advertise his firm. The code of conduct is by the representative
association to ensure self-discipline among its members. Any member violating the code can be
punished and his membership can be cancelled. The All India Management Association has framed code
of conduct for managers. The code requires the managers to fulfill their social and moral obligations.
Members of the association are expected not to disclose the trade secrets of their employers and to
make personal gain from the knowledge of internal working of the organization. But this code does not
have legal sanctions. However, observing business ethics is always helpful in becoming a more effective
manager.
The above discussion reveals that management fulfills several essentials of profession. But like other
professions, management does not restrict the entry into managerial jobs to people with a special
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academic degree. No minimum qualifications have been prescribed for managerial personnel. No
management association has the authority to grant certificates of practice or to regulate entry into
management careers. Few managers have uniform background in terms of education and experience.
The management associations have no legal right to enforce their code of conduct. There is no single
group to which the majority of the managers belong and whose authority is recognized by law as a
sanction. Moreover, there is no single client group to which managers owe complete loyalty. Doctors
owe their loyalty to patients. But managers are responsible to the owners as well as to other social
groups. Thus, management is, not strictly speaking, a full-fledged profession like medicine, law or
chartered accountancy. Some experts believe that there should be no control over entry into
management careers. According to Peter F. Drucker, “Management is a practice rather than a science or
profession through containing elements of both. No greater damage could be done to economy and
society than to attempt to professionalize management by licensing managers or by limiting access to
management to people with special academic degree”.
1.7 PROFESSIONALISATION OF MANAGEMENT
That management is an art, science and profession is not merely an academic question but raises certain
issues which are concerned with future development of this branch of knowledge. Management still
remains a developing field; changes are taking place regularly in its nature, significance and scope. In a
modern society, it is occupying an important position which has brought in new dimensions. In the
recent past, society has been challenging ethical and moral basis of management decisions and
demanding professionalization of management. The following reasons may be given in favor of the
growing need of professionalization of management knowledge.
(i) In a popular firm of business organization, that is, joint stock Company, ownership has been
separated from its management and control. This situation has really contributed to the development of
management profession. Modern managers have to promote and protect the interest of many social
groups such as consumers, employers and the society, as a whole, and balance it with the profit motive.
For resolving conflicts, and integrating contradictory interests, professional outlook may be critical.
(ii) Rapid expansion and growth of universities and other institutions for imparting management
knowledge and growing significance of training programmers in business organizations are indicative of
the trend of professionalization in the days to come.
(iii) In a high-tech industrial society, manifold changes have occurred in the role of managers
(iv) In the context of globalization of economic operations many strategic areas have been developed
which require professional expertise and specialized knowledge such as strategic planning, control and
research and development activities and information systems. Multinational corporations have been
attempting to enhance their global market share strictly by adopting professional outlook and approach
towards management of operations.
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(v) Increased utilization of specialized management services like consultancy, human resource
development and training programmes which are linked with scientific attitude require a team of
professional managers.
1.8 SKILLS OF MANAGEMENT
In modern business the job management has become very difficult. Several skills are required to manage
successfully a large organization in a dynamic environment. These skills of managers have been classified
into four categories, namely technical, human, diagnostic and conceptual skills.
(i) Technical Skills
Technical skills refer to the ability and knowledge in using the equipment, technique and procedures
involved in performing specific tasks. These skills require specialized knowledge and proficiency in the
mechanics of particular job. Ability in programming and operating computers is, for instance, a technical
skill. There are two things a manager should understand about technical skills. In the first place, he must
know which skills should be employed in his particular enterprise and be familiar enough with their
potentiality to ask discerning questions of his technical advisors. Secondly a manager must understand
both the role of each skill employed and interrelations between the skills.
(ii) Human Skills
Human skills consist of the ability to work effectively with other people both as individual and as
numbers of a group. These are required to win cooperation of others and to build effective work teams.
Such skills require a sense of feeling for others and capacity to look at things from others point of view.
Human skills are reflected in the way a manager perceives his superiors, subordinates and peers. An
awareness of the importance of human skills should be part of a manager’s orientation and such skills
should be developed throughout the career. While technical skills involve mastery of ‘things’ human
skills are concerned with understanding of ‘People’.
(iii) Conceptual Skills
Conceptual skills comprise the ability to see the whole organization and the interrelationships between
its parts. These skills refer to the ability to visualize the entire picture or to consider a situation in its
totality. Such skills help the manager to conceptualize the environment, to analyses the forces working
in a situation and take a broad and farsighted view of the organization. Conceptual skills also include the
competence to understand a problem in all its aspects and to use original thinking in solving the
problem. Such competence is necessary for rational decision-making. Thus technical skills deal with jobs,
human skills with persons and conceptual skills with ideas. These types of skills are interrelated.
Technical skills are most important at the supervisory or operating level where a close understanding of
job techniques is necessary to guide workers. As one moves up the management hierarchy, technical
skills become less important. Higher level Managers deal with subordinate managers and specialized
technical knowledge is comparatively less important for them. Conceptual skills are very important for
top management in formulating long-range plans, making broad policy decisions, and relating the
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business enterprise to its industry and the economy. Thus, the relative importance of conceptual skills
increases as we move to higher levels of management. This would be self evident as management is the
process of getting things done through people. Human skills are equally important at all levels of
management because every manager has to deal with people.
(iv) Diagnostic Skills:
Diagnostic skills include the ability to determine by analysis and examination the nature and
circumstances of particular conditions. It is not only the ability to specify why something happened but
also the ability to develop certain possible outcomes. It is the ability to cut through unimportant aspects
and quickly get to the heart of the problem. Diagnostic skills are probably the most difficult ones to
develop because they require the proper blend of analytic ability with common sense and intelligence to
be effective.
1.9 SCOPE OF MANAGEMENT
The field of management is very wide. The operational areas of business management may be classified
into the following categories:
(i) Production Management:
Production management implies planning, organizing, directing and controlling the production function
so as to produce the right goods, in right quantity, at the right time and at the right cost. It includes the
following activities:
(a) Designing the product
(b) Location and layout of plant and building
(c) Planning and control of factory operations
(d) Operation of purchase and storage of materials
(e) Repairs and maintenance
(f) Inventory cost and quality control
(g) Research and development etc.
(ii) Marketing Management:
Marketing management refers to the identification of consumers’ needs and supplying them the goods
and services which can satisfy these wants. It involves the following activities:
(a) Marketing research to determine the needs and expectation of consumers
(b) Planning and developing suitable products
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(c) Setting appropriate prices
(d) Selecting the right channel of distribution, and
(e) Promotional activities like advertising and salesmanship to communicate with the customers
(iii) Financial Management:
Financial management seeks to ensure the right amount and type of funds to business at the right time
and at reasonable cost. It comprises the following activities:
(a) Estimating the volume of funds required for both long-term and short-term needs of business
(b) Selecting the appropriate source of funds
(c) Raising the required funds at the right time
(d) Ensuring proper utilization and allocation of raised funds so as to maintain safety and liquidity of
funds and the credit-Worthiness and profitability of business, and
(e) Administration of earnings Thus, financial management involves the planning, organizing and
controlling of the financial resources.
(iv)Personnel Management:
Personnel management involves planning, organizing and controlling the procurement, development,
compensation, maintenance and integration of human resources of an organization. It consists of the
following activities:
(a) Manpower planning
(b) Recruitments,
(c) Selection,
(d) Training
(e) Appraisal,
(f) Promotions and transfers,
(g) Compensation,
(h) Employee welfare services, and
(i) Personnel records and research, etc.
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What Is a System?
People seem to have systems for just about everything: how to get ready for work in the morning, how
to cut the lawn, and even how to do the dishes. The facts are we are a society of systems. Even people
that do not have a system, well, that is their system for doing things. One way or another, systems are
all around us, and they are part of our world.
Taking this a step further, the systems management theory believes that a system is a collection of
parts brought together to accomplish some end goal or objective. Looking at it from that perspective, if
one part of the system fails or is taken out, the system itself cannot work. Think about if you have a
system to get ready for work in the morning and part of that system is taking a shower. If there is no hot
water (or worse yet, no water at all), the system breaks down, and it is changed. There is still a system,
just not the one you are used to, and you have to change the system in order to get out the door and go
to work.
That concept is really the foundation of the systems management theory. For this theory, everything is
part of a system. All pieces go together, and while it can indeed function if one part is taken out, the
functionality is impaired and the system itself has changed.
The Company and the System
If we take that thought process behind this theory, it is safe to say we can begin to see how this theory
helps with a global representation. What I mean is if we have systems, and they work, we can reproduce
them all around the world (okay, with some modifications). Take McDonald's, for example. While the
food in other countries might be different (there are no hamburgers at McDonald's in India), the system
to get the food is the same: walk up, look at the menu on the board, order combo meal number 4, and
you're on your way.
Thus, the system is duplicated around the world, and it works. Again, we do have to make some
modifications, but I don't want you to think that one system works the same everywhere. But even with
modifications, the system makes it much easier for an organization to produce a similar customer
experience around the world. While McDonald's is only one example, there are many more, such as
Starbucks, Walmart, and boarding an airplane. The list goes on and on.
As you can see, there is usually a company behind the system, but the system is part of how the
company runs. In a few moments we are going to talk about different viewpoints on systems, and that
will also help you to understand the systems management theory. The best way to understand this
concept is to imagine transportation and different modes of transportation. We can say we are going to
California, but we could take a bus, car, or plane. The same applies to the different viewpoints of the
system types involved in systems management theory.
System Types
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While systems themselves can be duplicated and go global, there are aspects of system types (or
architecture, if you will) that help frame the type of system being used. In systems management theory,
we have three basic system types:
 Open System: A system that continually interacts with the environment around it. For example,
a manufacturer might use several different suppliers of flour to make the product they produce,
or an organization might have to move or change as the demands of consumers change.
 Closed System: Is the opposite of an open system. It is a system (or company) independent of
the environment around it. Usually when we look at closed systems, we are looking at very high
tech types of products that have limited sources of input and produce a consistent product or
output (like space satellites). In fact, satellites are produced in a protected environment, like a
lab, to ensure there is no contamination.
SCIENTIFIC MANAGEMENT:
In the late 19th century, management decisions were often arbitrary and workers often worked at an
intentionally slow pace. There was little in the way of systematic management and workers and
management were often in conflict. Scientific management was introduced in an attempt to create a
mental revolution in the workplace. It can be defined as the systematic study of work methods in order
to improve efficiency. Frederick W. Taylor was its main proponent. Other major contributors were Frank
Gilbreth, Lillian Gilbreth, and Henry Gantt.
Scientific management has several major principles.
(i) Science, not the rule of the thumb.
(ii) Harmony, not discord.
(iii) Co-operation, not individualism.
(iv) Maximum production, in place of restricted production.
(v) Development of each person to the greatest of his capabilities.
(vi) A more equal division of responsibility between management and workers.
(vii) Mental revolution on the part of management and workers.
Following is a brief comment on each of the above principles of scientific management.
(i) Science, not the rule of thumb:
The basic principle of scientific management is the adoption of a scientific approach to managerial
decision making; and a complete discard of all unscientific approaches, hitherto practiced by
managements.
(ii) Harmony, not discord:
Harmony refers to the unity of action; while discord refers to differences in approach.
(iii) Co-operation, not individualism:
Co-operation refers to working, on the part of people, towards the attainment of group objectives; while
regarding their individual objectives-as subordinate to the general interest.
(iv) Maximum production, in place of restricted production:
In Taylor’s view the most dangerous evil of the industrial system was a deliberate restriction of output.
As a means of promoting the prosperity of workers, management and society, this principle of scientific
management emphasizes on maximizing production and not deliberately restricting it.
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(v) Development of each person to the greatest of his capabilities:

Management must endeavor to develop people to the greatest of their capabilities to ensure maximum
prosperity for both-employees and employers.
(vi) A more equal division of responsibility between management and workers:
The principle of scientific management recommends a separation of planning from execution. According
to this principle, management must be concerned with the planning of work; and workers with the
execution of plans.
(vii) Mental revolution on the part of management and workers:
According to Taylor, scientific management, in its essence, involves a complete mental revolution on the
part of both sides to industry viz. workers and management (representing employers).
In fact, this principle of scientific management is the most fundamental one ensuring success of it. It is
like the foundation on which the building of scientific management must be erected.
An Outline Structure of Taylor’s Scientific Management:

Though Taylor’s work and practice of it is quite comprehensive and detailed; yet the major aspects of
work done by him could be summarized into the following outline structure:
(1) Determination of a fair day’s task for each worker through scientific methods (including the best way
of doing a job).
(2) Scientific selection and training of workers.
(3) Standardization of raw materials, tools and working conditions.
(4) Functional foremanship.
(5) Differential piece-rate system of wage-payment.
Following is a brief account of the above aspects of scientific management:
(1) Determination of fair day’s task for each worker through scientific methods (including the best way
of doing a job). For determining a fair day’s task for each worker, Taylor recommended the use of
scientific methods involving the conduct of the following three types of work studies, viz.,
(a) Time study
(b) Motion study
(c) Fatigue study
The following points are not worthy in this context:
(i) An average worker (or representative worker) is first selected for conducting the above work-studies.
In case otherwise, the standards of work fixed would be either too high or too low.
(ii) The above three work-studies (i.e. time, motion and fatigue studies) are to be considered together to
arrive at a fair day’s task.
(2) Scientific selection and training of workers:
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This aspect of scientific management is, in fact, the staffing angle of it. The workers, under scientific
management, must be properly selected by adhering to a carefully- designed selection procedure.
Further, selected workers must be imparted training in best methods of performing a job.
(3) Standardization of raw materials, tools and working conditions: By standardization, Taylor implies
two varieties of standardization:
(i) Raw materials, tools, machines and other facilities of work must be of a reasonably good quality; so
that the quality of production is reasonable.
(ii) Another variety of standardization which Taylor refers to is uniformity in providing work-facilities and
work conditions to all workers, doing a similar type of job.
(4) Functional Foremanship:
The scheme of functional foremanship recommended by Taylor is, in fact, an introduction of managerial
specialization-at the shop-level. In Taylor’s view, instead of a single foreman performing all the aspects
of the foremanship task, there must be a number of foremen-each concerned with only a particular
aspect of foremanship.
Each foreman, being a specialist in performance of his role, is a functional foreman.
In the context of the scheme of functional foremanship, Taylor compares workers with students in a
school class-room; where a student is imparted teaching in a particular subject by a specialized teacher
of that subject – instead of a single teacher teaching all the subject to students.
In the scheme of functional foremanship recommended by Taylor, there is a provision for eight
foremen of the following types:
(i) Route Clerk:
The route clerk is a foreman who would lay down the route (or journey) of raw materials from the raw-
material stage to the finished product stage as passing through different processes and machines.
(ii) Instructions Card Clerk:
The instructions card clerk is a foreman who would determine the detailed instructions for handling a
job; and prepare a card containing such instructions.
(iii) Time and Cost-Clerk:
The time and cost clerk is a foreman who would record the time taken by a worker in completing a job;
and would also compile the cost of doing that job.
(iv) Shop Disciplinarian:
The shop disciplinarian would look after the maintenance of discipline in the workshop and deal with
cases of absenteeism, misbehavior and other aspects of indiscipline.
(v) Gang Boss:
The gang boss is the supervisor proper. He would see to it that all work-facilities are made available to
workers and they start their work as per the instructions imparted to them.
(vi) Speed Boss:

The speed boss is a foreman who would determine the optimum speed at which machines are to be
operated; so that both-over speeding and under-speeding of machines are avoided. In this way, less
depreciation is caused to machines; industrial accidents are averted and quality of production is also
maintained.
(vii) Repair Boss:
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The repair boss is a foreman, who would look after and take care of the repairs and maintenance of
machines.
(viii) Inspector:
The inspector is a foreman who would look after the quality of production.
The following chart illustrates the functioning of the scheme of the functional foremanship:
Point to comment:
The scheme of functional foremanship results in a complete violation of the principle of unity of
command as advised by Fayol; because in this scheme, a worker is subject to the control and
superintendence of eight foremen. The scheme, therefore, involves multiple commands as against a
single command.
(5) Differential piece-rate system of wage-payment:
In order to motivate workers positively as also negatively to produce the standard output, Taylor
devised a scheme of wage payment, known as the ‘Differential piece-rate system of wage-payment.’
The inherent features of this scheme are:
(i)A standard output for each worker is determined in advance through scientific work studies.
(ii)Two rates of wage-payment (based on piece rate system) are established-
(a) A higher rate per unit of output; and
(b) A lower rate per unit of output.
(iii)Workers who produce the standard output or exceed the standard are paid according to the higher
rate for all the units produced by them. Those workers who are unable to come up to the standard are
paid according to the lower rate for all the units produced by them. Let us take an example to illustrate
the working of this system of wage payment. Suppose the standard output is 25 units; and the two rate
of wage payment are – Rs.2 per unit (the higher rate) and Rs. 1.80 p. per unit (the lower rate).
Now, if a worker produces 25 units or more; he would be paid on total production done by him
according to Rs.2 per unit. If, on the other hand, a worker produces only 24 units (taking the extreme
case); he would be paid on all the 24 units produced by him, according to the lower rate i.e. Rs. 1.80 p
per unit.
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In the latter case, the worker is not only suffering a shortfall of payment on one unit produced less by
him as against the standard of 25 units; but also suffering a shortfall of payment of 20 p. per unit on all
the 24 units produced by him. Thus there is a severe penalty for the inefficient worker in being paid
according to the lower rate on total production done by him.
All in All, Scientific management had a tremendous influence on management practice in the early
twentieth century. Although it does not represent a complete theory of management, it has contributed
to the study of management and organizations in many areas, including human resource management
and industrial engineering. Many of the tenets of scientific management are still valid today.
Merits of Scientific Management:
(i) More production and higher profits: Scientific management makes for a more systematized way of
managing-enabling employers (of course, through their managements) to have more production at the
minimum cost; and ultimately reap higher profits.
(ii) Job satisfaction: Under scientific management, a standardized work-environment (raw materials,
tools, machines, conditions of work etc.) is provided to workers which would enable them to derive
what is known as ‘job satisfaction’- the biggest happiness for workers, according to the psychologist.
(iv) Personality development: As one of the basic principles of scientific management is the
‘development of each person to the greatest of his capabilities’; workers get an opportunity, under
scientific management, to develop themselves fully according to their potential.
(v) Higher standard of living: Scientific management is oriented towards maximum production; which
would lead to more of consumption of goods on the part of people, in the society. This naturally, would
mean an increase in the standard of living of people.
Demerits of Scientific management:
(i) Unsuitable for the small employers: Scientific management is wholly unsuitable for the small
employers. Techniques like time, and motion studies, introduction of managerial specialization, etc. are
too costly to be afforded to by the small employers.
(ii) Unemployment: Scientific management leads to unemployment of workers; especially when
mechanical devices are introduced to replace manual labor.
(iii) Retarding human development: According to psychologist, scientific management aims efficiency at
the cost of initiative. It totally takes away initiative from workers. In fact, under scientific management,
workers are reduced to the status of machines; totally deprived of the thinking function.
BUREAUCRATIC MANAGEMENT:
Bureaucratic management focuses on the ideal form of organization. Max Weber was the major
contributor to bureaucratic management. Based on observation, Weber concluded that many early
organizations were inefficiently managed, with decisions based on personal relationships and loyalty. He
proposed that a form of organization, called a bureaucracy, characterized by division of labor, hierarchy,
formalized rules, impersonality, and the selection and promotion of employees based on ability, would
lead to more efficient management. Weber also contended that managers' authority in an organization
should be based not on tradition or charisma but on the position held by managers in the organizational
hierarchy. Bureaucracy has come to stand for inflexibility and waste, but Weber did not advocate or
favor the excesses found in many bureaucratic organizations today. Weber's ideas formed the basis for
modern organization theory and are still descriptive of some organizations.
THE BEHAVIORAL SCHOOL
The behavioral school of management thought developed, in part, because of perceived weaknesses in
the assumptions of the classical school. The classical school emphasized efficiency, process, and
principles. Some felt that this emphasis disregarded important aspects of organizational life, particularly
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as it related to human behavior. Thus, the behavioral school focused on trying to understand the factors
that affect human behavior at work.
HUMAN RELATIONS:
The Hawthorne Experiments began in 1924 and continued through the early 1930s. A variety of
researchers participated in the studies, including Clair Turner, Fritz J. Roethlisberger, and Elton Mayo,
whose respective books on the studies are perhaps the best known. One of the major conclusions of the
Hawthorne studies was that workers' attitudes are associated with productivity. Another was that the
workplace is a social system and informal group influence could exert a powerful effect on individual
behavior. A third was that the style of supervision is an important factor in increasing workers' job
satisfaction. The studies also found that organizations should take steps to assist employees in adjusting
to organizational life by fostering collaborative systems between labor and management. Such
conclusions sparked increasing interest in the human element at work; today, the Hawthorne studies
are generally credited as the impetus for the human relations school.
According to the human relations school, the manager should possess skills for diagnosing the causes of
human behavior at work, interpersonal communication, and motivating and leading workers. The focus
became satisfying worker needs. If worker needs were satisfied, wisdom held, the workers would in turn
be more productive. Thus, the human relations school focuses on issues of communication, leadership,
motivation, and group behavior. The individuals who contributed to the school are too numerous to
mention, but some of the best-known contributors include Mary Parker Follett, Chester Barnard,
Abraham Maslow, Kurt Lewin, Renais Likert, and Keith Davis. The human relations school of thought still
influences management theory and practice, as contemporary management focuses much attention on
human resource management, organizational behavior, and applied psychology in the workplace.
CONTINGENCY SCHOOL
The contingency school focuses on applying management principles and processes as dictated by the
unique characteristics of each situation. It emphasizes that there is no one best way to manage and that
it depends on various situational factors, such as the external environment, technology, organizational
characteristics, characteristics of the manager, and characteristics of the subordinates. Contingency
theorists often implicitly or explicitly criticize the classical school for its emphasis on the universality of
management principles; however, most classical writers recognized the need to consider aspects of the
situation when applying management principles.
The contingency school originated in the 1960s. It has been applied primarily to management issues
such as organizational design, job design, motivation, and leadership style. For example, optimal
organizational structure has been theorized to depend upon organizational size, technology, and
environmental uncertainty; optimal leadership style, meanwhile, has been theorized to depend upon a
variety of factors, including task structure, position power, characteristics of the work group,
characteristics of individual subordinates, quality requirements, and problem structure, to name a few.
A few of the major contributors to this school of management thought include Joan Woodward, Paul
Lawrence, Jay Lorsch, and Fred Fiedler, among many others.
14 Principles of Management developed by Henry Fayol:
Different management experts have explained different principles on the basis of their research. Henry
Fayol, a famous industrialist of France, has described fourteen principles of management in his book
General and Industrial Management.
Explaining the difference between ‘principles’ and ‘elements’ he makes it clear that the principles of
management are fundamentally true and establish a relationship between cause and effect, while the
‘elements’ of management point towards its functions. While presenting the principles of management
Fayol has kept two things in mind. Firstly, the list of the principles of management should not be long
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but should be suggestive and only those principles should be explained which become applicable in
most of the situations.
Secondly, the principles of management should be flexible and not rigid so that changes can be made in
them in case of need. The fourteen principles given by Fayol are as under:
(1) Division of Work:
This principle of Fayol tells us that as far as possible the whole work should be divided into different
parts and each individual should be assigned only one part of the work according to his ability and taste
rather than giving the whole work to one person.
When a particular individual performs the same job repeatedly, he will become an expert in doing that
particular part of the whole job. Consequently, the benefits of specialization will become available.
For example, a furniture manufacturer gets an order for manufacturing 100 lecture stands. He has five
workers who will do the job. There are two ways to complete this order. First, every worker should be
asked to complete 20 lecture stands.
The second method can be distributing different parts of the lecture stand-legs, top board, center
support, assembling and polishing-to all the five workers in a manner that only one worker does the
same job for all the 100 lecture stands. Here, Fayol’s indication is to the second way to do this job and
not the former one.
The principle of division of labor applies not only to the workers but also equally to the managers. For
example, if a manager is tuned to work on the same kind of activities for a long period of time, he will
certainly be an expert in his particular job. Consequently, more and beneficial decisions can be taken in
a comparatively less time by him.
Positive Effect advantages of specialization are obtained, such as increase in the quality of work,
increase in the speed of production, decrease in the wastage of resources.
Violating Effect the above-mentioned positive effects of specialization will not be available.
(2) Authority and Responsibility:
According to this principle, authority and responsibility should go hand in hand. It means that when a
particular individual is given a particular work and he is made responsible for the results, this can be
possible only when he is given sufficient authority to discharge his responsibility.
It is not proper to make a person responsible for any work in the absence of authority. In the words of
Fayol, “The result of authority is responsibility. It is the natural result of authority and essentially
another aspect of authority and whenever authority is used, responsibility are automatically born.”
For example, the CEO of a company has doubled the sales target of the sales manager for the coming
year. To achieve this target, authority for appointing necessary sales representatives, advertising
according to the need, etc. shall have to be allowed. In case these things are not allowed the sales
manager cannot be held responsible for not
(3) Discipline:
Discipline is essential for any successful work performance. Fayol considers discipline to mean
obedience, respect for authority, and observance of established rules.
Discipline can be established by providing good supervision at all levels, clearly explaining the rules, and
implementing a system of reward and punishment. A manager can present a good example to his
subordinates by disciplining himself.
For example, if the employees break their promise of working up to their full capacity, it will amount to
the violation of obedience. Similarly a sales manager has the authority to do business on credit.
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But in case he allows this facility not to the general customers but only to his relatives and friends, then
it will amount to ignoring his respect to his authority. (Note: Both these examples give a message of
indiscipline which is an undesirable situation.)
(4) Unity of Command:
According to the principle of unity of command, an individual employee should receive orders from only
one superior at a time and that employee should be answerable only to that superior. If there are many
superiors giving orders to the same employee, he will not be able to decide as to which order is to be
given priority. He thus finds himself in a confused situation.
Such a situation adversely affects the efficiency of the subordinates. On the other hand, when there are
many superiors, every superior would like his orders to be given priority. This ego problem creates a
possibility of clash. Consequently, their own efficiency is likely to be affected.
(5) Unity of Direction:
Unity of direction means that there should be one head for one plan for a group of activities having the
same objective. In other words, there should be one plan of action for a group of activities having the
same objective and there should be one manager to control them.
For example, suppose an automobile company is manufacturing two products, namely, scooters and
cars, hence having two divisions.
As each product has its own markets and problems therefore each division must have its own targets.
Now each division must plan its target as per its environmental conditions to get better results. It is
necessary to distinguish between the meaning of the unity of command and the unity of direction.
Unity of command means that there should be only one manager at a time to give command to an
employee, while the unity of direction means that there should be only one manager exercising control
over all the activities having the same objective.
Unity of Command & Unity of Direction

In this connection Fayol feels that for the efficient running of an organisation the unity of direction is
important, while the unity of command is important to enhance the efficiency of the employees.
(6) Subordination of Individual Interest to General Interest:
This principle can be named ‘Priority to General Interest over Individual Interest.’ According to this
principle, the general interest or the interest of the organisation is above everything. If one is asked to
place individual interest and the general interest in order of priority, definitely the general interest will
be placed at the first place.
For example, if a manager takes some decision which harms him personally but results in a great profit
to the company, he should certainly give priority to the interest of the company and take the decision
accordingly. On the contrary, if some decision helps the manager personally but results in a great loss to
the company, then such a decision should never be taken.
For example, a purchase manager of a company has to purchase 100 tons of raw material. His son
happens to be a supplier along with other suppliers in the market. The manager purchases the raw
material from the firm of his son at a rate higher than the market rate. This will profit the manager
personally, but the company will incur heavy loss. This situation is undesirable.
(7) Remuneration to Employees:
Fayol is of the opinion that the employees should get a fair remuneration so that the employees and the
owners find equal amount of satisfaction. It is the duty of the manager to ensure that employees are
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being paid remuneration according to their work. If, however, they are not paid properly for their work,
they will not do their work with perfect dedication, honesty and capacity.
As a result, the organisation shall have to face failure. Proper remuneration depends on some factors
like the cost of living, demand of labor and their ability. Fayol feels that in order to motivate the
employees, apart from general remuneration, they should be given some monetary and non-monetary
incentives.
For example, suppose that the things are getting dearer and dearer and the company is getting good
profits. In such a situation, the remuneration of the employees should be increased even without their
asking. If this is not done, the employees will leave the company at the first opportunity. Expenses shall
have to be incurred on new recruitment which shall bring loss to the company.
(8) Centralization and Decentralization:
According to this principle, the superiors should adopt effective centralization instead of complete
centralization and complete decentralization. By effective centralization, Fayol does not mean that
authority should be completely centralized.
He feels that the superiors should keep the authority of taking important decisions in their own hands,
while the authority to take daily decisions and decisions of less importance should be delegated to the
subordinates.
The ratio of centralization and decentralization can differ in different situations. For example, it is
advantageous to have more centralization in a small business unit and more decentralization in a big
business unit.
For example, the decisions in respect of determining the objectives and policies, expansion of business,
etc. should remain in the hands of the superiors. On the other hand, authority for the purchase of raw
material, granting leave to the employees, etc. should be delegated to the subordinates.
Positive Effect
(i) Decrease in the workload of superiors
(ii) Better and quick decisions
(iii) Increase in the encouragement to the subordinates
Violating Effect
(i) Unnecessary increase in the workload of the superiors in case of centralization and of the
subordinates in case of decentralization
(ii) Impatient and wrong decisions by the superiors in case of complete centralization and weak
decisions by the subordinates in case of complete decentralization
(iii) Decline in the encouragement to subordinates in case of complete centralization
(9) Scalar Chain:
(i) Meaning of Scalar Chain: It refers to a formal line of authority which moves from highest to the
lowest ranks in a straight line,
(ii) Fayol’s Opinion: This chain must be followed in a strict manner. It means each communication must
move from top to bottom and vice versa in a straight line. The important condition here is that no step
(post) should be overlooked during communication.
(iii) Fayol’s Ladder: Fayol has explained this principle with the help of a ladder. For example, in a
company the employee ‘F’ wants to have contact with the employee ‘P’. According to the principle of
scalar chain ‘F’ shall have to reach ‘A’ through the medium of E,D,C,B and then having contact with
L,M,N,0 shall reach ‘P’. Thus ‘F’ shall have to take the help of all the nine steps (posts) to have business
contact with ‘P’.
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(iv) Utility: Due to more clear system of authority and communication, problems can be solved faster.
(v) Gang Plank: It is the exception of the principle of scalar chain. This concept was developed to
establish a direct contact with the employee of equal rank in case of emergency to avoid delay in
communication.
For example, as shown in the diagram employee ‘F’ can have direct contact with employee ‘P’. But for
doing so employees ‘F’ and ‘P’ shall have to seek the prior permission of their immediate bosses ‘E’ and
‘O’. The details of their talk also shall have to be given to them.
(10) Order:
According to the principle of order, a right person should be placed at the right job and a right thing
should be placed at the right place. According to Fayol, every enterprise should have two different
orders-Materials Order for Physical Resources and Social Order for Human Resources.
Keeping the physical resources in order means that ‘a proper place for everything and everything in its
right place’. Similarly, keeping the human resources in order means ‘a place for everyone and everyone
in his appointed place’.
Maintaining these two orders properly will ensure that everybody knows his workplace, what he is to do
and from where he would get his required material. Consequently, all the available resources in the
organisation will be utilized properly.
Gang Plank: A Special Note
Gang Plank can only be established with the employees of the equal or same level. For example, in the
present example no gang plank can be established between F and O.
For example, an employee working in a factory should know the place or source from where he can get
his tools in case of need. Similarly, he should know the place where his supervisor will be available in
case of any need.
It is, however, important to note that it is not sufficient to have an allotted place for a toolbox and for
the supervisor but the availability of both at their decided place is absolutely important. If this is not the
case, it can lead to a heavy loss as a result of damage to the machines.
(11) Equity:
This principle tells that the managers should treat their subordinates in a just and kind manner so that
they develop a feeling of dedication and attachment for their work. All the employees should be treated
equally and impartially.
Fayol tells us in connection with this principle that there should not be any equality of treatment
between a person whose work is really good and a person who is a shirker by nature.
Rather, the latter should be treated sternly. Doing so would be equitable. It is because of this point of
view that Taylor has presented his differential remuneration method.
(12) Stability of Personnel of tenure:
From the point of view of management it is absolutely harmful to change the employees frequently as it
is a reflection of inefficient management. Therefore, according to this principle there should be stability
of tenure of the employees so that the work continues efficiently.
Fayol thinks that instability in the tenure of employees is a cause of poor management and results. High
rate of labor turnover will result in increased expenses because of selecting them time and again, and
giving them training afresh.
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It also lowers the prestige of the organisation and creates a feeling of insecurity among the employees
which keeps them busy in finding out new avenues of work. Consequently, the sense of dedication
cannot be created among them.
For example, it is true that if the workers in a company are not treated well and the atmosphere in the
company is also unhealthy, the employees will not stay for a long time. In other words, they will leave
the company at the first opportunity available. This situation is absolutely harmful.
For example, a laborer completes 10 units of goods in a day. Another laborer who happens to be a
relative of the supervisor completes 8 units but both get equal remuneration. This violates the principles
of equality. The second laborer should get less remuneration than the first one.
(13) Initiative:
Initiative means the capacity to work while expressing one’s thoughts. According to Fayol, it is the duty
of the manager to encourage the feeling of initiative among his employees for doing some work or
taking some decision but within the limits of authority and discipline.
It will be possible only when the manager will welcome the thoughts of his/her subordinates. By doing
so the subordinates will present new and useful ideas time and again and gradually they will become an
integral part of the organisation. In order to make this process a success a manager will have to abandon
his false sense of prestige.
For example, a salesman suggests to his sales manager to implement a new advertisement technique.
The sales manager sends him away by telling him that it is not possible and ignores the suggestion
altogether.
In such a situation the salesman, who has been admonished and belittled, will never venture to offer any
suggestion in future because his desire of taking initiative has been suppressed.
On the contrary, if his suggestion had been listened to carefully (even though not to be implemented) he
could have taken the courage to offer some suggestion in future. Such an action would simply have
encouraged his initiative.
Positive Effect
(i) Increase in the thinking power of the employees,
(ii) Cooperation of the employees in implementing decisions,
(iii) Increase in the sense of attachment to the organisation Violating Effect,
(iv) Decline in the thinking power of the employees,
(v) An atmosphere of non-cooperation,
(vi) Decline in the employees’ attachment to the company.
(14) Esprit de corps:
As per this principle, a manager should continuously make efforts to develop a team spirit among the
subordinates. To do this, he/she should use the word ‘We’ instead of” during the conversation with
subordinates. As it is known that TEAM can achieve what an individual cannot. It is also state that:
Together Everyone Achieve More (TEAM), therefore one has to look after is as well so that an
organization can be on the Top.
DELOPING EXCELLENT MANAGERS:
For many businesspeople, the last thing you want to worry about (or do) is managing people. You want
to get out there and meet customers and create awesome products and bring exciting new
opportunities through your front door. But unless you've hired people to take on the task of managing
your employees, then you're still on the hook. The good news is that you can make that task a little bit
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easier for yourself by remembering these 7 essential leadership keys, and your organization will benefit
as a direct result.
1. Delegate wisely: The key to leadership success is to learn to effectively delegate both the
responsibility for completing assignments and the authority required to get things done. Many bosses
feel that they need to control every little thing that their employees do. This is a recipe for disaster.
When you delegate work to employees, you multiply the amount of work you can accomplish while you
develop your employees' confidence, leadership and work skills.
2. Set goals: Every employee needs goals to strive for. Not only do goals give employees direction and
purpose, but they ensure that your employees are working towards the overall organizational goals. Set
specific and measurable goals with your employees, and then regularly monitor their progress toward
achieving them.
3. Communicate: Far too many bosses communicate far too little. It's often difficult for busy business
owners and executives to keep their employees up-to-date on the latest organizational news.
Regardless, you must make every effort to get employees the information they need to do their jobs
quickly and efficiently.
4. Make time for employees: Above all, leadership is a people job. When an employee needs to talk with
you--whatever the reason--make sure that you set aside the time to do so. Put your work aside for a
moment, put down your Smartphone, and focus on the person standing in front of you.
5. Recognize achievements: Every employee wants to do a good job. And when they do a good job,
employees want recognition from their bosses. Unfortunately, few bosses do much in the way of
recognizing and rewarding employees for a job well done. The good news is that there are many things
bosses can do to recognize employees that cost little or no money, are easy to implement, and that take
only a few minutes to accomplish.
6. Think about lasting solutions: No matter how difficult the problem, there is always a quick solution,
and leaders are happiest when they are devising solutions to problems. The trouble is that, in our zeal to
fix things quickly and move on to the next fire, we often overlook the lasting solution that may take
longer to develop. Although it's more fun to be a firefighter, the next time you have a problem to solve
in your organization, deal with the cause of the problem instead of simply treating the symptoms.
7. Don't take It all too seriously: Without a doubt, running a company is serious business. Products and
services must be sold and delivered, and money must be made. Despite the gravity of these
responsibilities, successful leaders make their organizations fun places to work. Instead of having
employees who look for every possible reason to call in sick or to arrive to work late or go home early,
organizations work hard and play hard end up with a more loyal, energized workforce.
CROSS CULTURE ISSUES IN MANAGEMENT:
Today's workforce is diverse and multi-cultural. Ever since to the advent of globalization, the doors of
the nations across the globe was opened for trade and investments. This led to greater development in
the areas of finance, marketing, technological innovations, etc. It always laid an impact on people, i.e.,
human resources. As people in the organization are the first to experience when any change occurs, it
was an immense impact of globalization on human resources all over the world. This gave scope to the
people to learn many new practices and techniques of completing the task. If we think bit more on this
part, we can also assume that people come from various backgrounds, customs, beliefs, languages.
Thus, there comes the prominence for understanding what cross culture is for any manager as he has to
deal with various people in the organization that come from different cultures, so it become to
understand the multi-cultural environment and its pros and cons.
Before moving on to "cross culture", it is very essential to know what "culture" is in actual sense. Culture
is the distinctive life-way of a people united by a common language and governed by rules and models
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for their beliefs and behavior. Thus, in a layman's terms, culture is what we live every day and what we
bring with us to the workplace.
CROSS-CULTURAL MANAGEMENT:
Cross-cultural management is examining human behavior within organizations from an international
perspective. Cross-cultural management describes organizational behavior within countries and
cultures; compares organizational behavior across countries and cultures; and seeks to understand how
to improve the interaction of co–workers, managers, executives, clients, suppliers, and alliance partners
from around the world. Thus here, we can experience that in present day's scenario where people
employed in multinational companies (MNCs) are from various cultures and each and every employee is
different in his attitudes, practices, behavior and values. Thus it becomes very difficult for a manager to
manage his subordinates who are diverse in their culture. There emerges need to understand and gain
knowledge on different cultures. It helps employees to know each other’s' cultures and languages. This
helps, in turn, in keeping the employees integrated in the organization so that they cooperate with each
other in attaining the goals of the organization.
Cross-cultural management focuses on reducing the cross-cultural differences and barriers and creating
cross-cultural awareness in order to have better communication and cooperation at the workplace. It is
the toughest job of a cross-cultural manager to keep his employees involved in the tasks by keeping
their differences aside. This will not only help in retaining the employees but also to stay in the
organization for a longer period of time. Hence, it is very necessary to recognize the business culture,
management values and methodologies across the globe. Every country follows a different way of
management style and it becomes difficult for an international manager to manage various cultures.
CROSS CULTURAL DIFFERENCES:
One of the main tasks of management is solving of problems that appear at encountering individual
company and national cultures. Managers of international companies often face challenges of cultural
differences. There are three sources of cultural differences.
1. Corporate company culture: The corporate company culture elements are such as history of the
company, company's experience, leadership and dominant coalition, ownership, stage of development
and business diversity.
2. Professional industry culture: The professional industry culture comprises of two elements; functional
orientation and industry norms. Functional orientation includes marketing, finance, engineering,
research and development functions. Industry norms include technology, change, key success factors,
and types of customers.
3. National ethnic culture: National ethnic culture includes elements such as country history, education,
social organization, religion and philosophy.
DIMENSIONS OF CROSS-CULTURAL DIFFERENCES:
The major cultural differences could be categorized into two major dimensions. One was given by Geert
Hofstede and the other by Fons Trompenaars. Both approaches propose a set of cultural dimensions
along which dominant value systems can be ordered. These value systems affect human thinking,
feeling, and acting, and the behavior of organizations and institutions in predictable ways. The two sets
of dimensions reflect basic problems that any society has to cope with but for which solutions differ.
They are similar in some respects and different in others. The dimensions can be grouped into several
categories:
1. Relations between people: Two main cultural differences have been identified. Geert Hofstede
distinguishes between individualism and collectivism. Fons Trompenaars breaks down this distinction
into two dimensions: universalism versus particularism and individualism versus communitarianism.
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2) Motivational orientation: Societies choose ways to cope with the inherent uncertainty of living. In this
category Hofstede identifies three dimensions: masculinity versus femininity, amount of uncertainty
avoidance, and power distance.
3) Attitudes toward time: Hofstede distinguishes between a long-term versus a short-term orientation.
Trompenaars identifies two dimensions: sequential versus synchronic and inner versus outer time. The
cultural differences could in any of the above mentioned dimensions. For more detailed understanding, I
have selected Hofstede's basic model. In his original work, Hofstede identified four key dimensions
which impact on natural cultural differences. These are: Individualism/collectivism: This dimension
reflects the extent to which individuals' value self-determination as opposed to their behavior being
determined by the collective will of a group or organization.
Power-distance: At the core of this dimension lies the question of involvement in decision making. In
low power-distance cultures, employees seek involvement and have a desire for a participative
management style. At the other end of this scale, employees tend to work and behave in a particular
way because they accept that they will be directed to do so by the hierarchy or the organization.
Uncertainty avoidance: This dimension is concerned with employees' tolerance of ambiguity or
uncertainty in their working environment. In cultures which have high uncertainty avoidance, employees
will look for clearly defined, formal rules and conventions governing their behavior.
Masculinity/femininity: This is possibly the most difficult dimension to use in an organization context. In
practice, the difficulty is more to do with terminology and linguistics, in Hofstede's work the dimension
related to values. In highly "masculine cultures" dominant values relate to assertiveness and material
acquisition. In highly "feminine cultures" values focus on relationship among people, concern for others
and quality of life.
STRATEGIES FOR MANAGING CROSS-CULTURAL DIFFERENCES:
As the managers and the employees in a multinational organization gradually understand the
dimensions and differences, it is the duty of both managers and the employees to adopt the strategies
to keep the diversity at bay. Following are the strategies which help us to overcome the obstacles of
cross-cultural differences;
1. Good knowledge of foreign culture: The first strategy is acknowledging and admitting the existence of
differences between cultures. This mainly includes differences in perceptions, interpretations and
evaluations of social situations and people who create them and act within them. These differences than
have to be named, described, explained and understood. Recognition of the culture of a partner is
considered to be the first condition of mutual understanding and good cooperation. This step is
definitely neither common nor easy.
2. Respect of a foreign culture: Respect of a foreign culture means most of all accepting their differences
without any judgment. It is not possible to claim that a certain culture is more perfect, "better" than
another culture. Cultures are different and for their members they represent optimum to manage life
situations in conditions they have been living in for a long time.
3. Helpful steps in the relationship to a foreign culture: The next strategy of the recommended process
should be the effort to find common solution, mutual understanding and simplification of the
complicated and demanding process of behaving in different cultural conditions. These helpful steps in
no case mean that the participating partners should give up their cultural background, but it suggests
that they should use their knowledge of own culture to gain knowledge about the partner's culture,
which can be quite easy after all. Very often it is enough to sacrifice something that is not too important
for us, but it means a lot for another culture. The main condition is a very good knowledge of partners
and their cultural environment, though.
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4. Ignore the cultural differences: In this strategy, a stage comes where the managers ignore the
differences. It later becomes irrelevant as the managers and employees would be having a good
understanding about each other’s' cultures and practices as earlier they would learn to respect the
cultures. The employees and managers feel in this type of strategy that "our way is the only way" as it is
also practices in parochial type of organizations. The ignorance of diversity precludes effective
management of cultural differences and also precludes the possibility of minimizing negative impacts
and increasing positive impacts of diversity.
5. Minimize differences: In this strategy, the managers recognize cultural differences but only as a
source of problems. This strategy is mostly adopted by ethnocentric organizations. In such organizations,
managers try to reduce the problems of differences by reducing cultural diversity. They do not think
about advantages of diversity. They try to either select a culturally homogenous workforce or attempt to
socialize all employees into behavior patterns of dominant culture.
6. Managing differences: This strategy is adopted by synergistic organizations. These organizations
recognize the impacts of cultural differences that lead to both advantages and disadvantages. The
managers in synergistic organizations believe that "our way and their way of believing and managing
differ, but neither is superior to other". In this case, the managers and employees minimize potential
problems by managing the impacts of cultural differences, not by minimizing the differences themselves.
Similarly, managers maximize the potential advantages by managing impacts of cultural differences,
rather than by ignoring them. The organizations which use the strategy of managing differences train
their managers and employees to recognize the cultural differences and to use cultural differences to
create advantages for the organizations.
The nutshell:
As the globalization is increasing, cultural differences are bound to be found in workforce. It becomes
very important for a manager to deal with complex issues arising out of the cultural differences and
mould the differences into benefits. The managers and employees in an organization should respect the
other cultures prevailing in the workforce. This will enable them to eradicate the differences and unite
them which further leads to attain the organizational objectives smoothly. The resources and potentials
of the organization could be utilized optimum when there are no such differences. The managers could
deal with their employees with sound coordination and delegation becomes easy as well. The cultural
differences in multinational companies are taken as positive factor and helps in building synergies. This
shapes the organization to equip the best to fight against the rivals and get more competitive advantage
of it. Once the cultural differences are managed in proper way by the managers, it becomes easy for the
organization to flourish in all cultures across the globe.
PLANNING:
It is said that “if you don’t plan, you plan to fail”. This statement states that why planning is very first
and foremost function of management.
Planning means looking ahead and chalking out future courses of action to be followed, it is a
preparatory step. It is a systematic activity which determines when, how and who is going to perform a
specific job. Planning is a detailed programme regarding future courses of action.
It is rightly said “Well plan is half done”. Therefore planning takes into consideration available &
prospective human and physical resources of the organization so as to get effective co-ordination,
contribution & perfect adjustment. It is the basic management function which includes formulation of
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one or more detailed plans to achieve optimum balance of needs or demands with the available
resources.
According to Urwick, “Planning is a mental predisposition to do things in orderly way, to think before
acting and to act in the light of facts rather than guesses”. Planning is deciding best alternative among
others to perform different managerial functions in order to achieve predetermined goals.
According to Koontz & O’Donnell, “Planning is deciding in advance what to do, how to do and who is to
do it. Planning bridges the gap between where we are to, where we want to go. It makes possible things
to occur which would not otherwise occur”.
The Nature and Purpose of Planning
Every manager has to select objectives for his enterprise, department, section, unit or group. Based on
the objectives he has to set goals for a specific period and make plans that contain ways of reaching the
set goals. Planning in general is explained as generating alternatives and selection of the most suitable
alternatives from among them for solving a problem. The problem in this context has positive
connotation also. How to achieve growth is a problem which has a positive implication only. Therefore
planning is deciding in advance what to do, how to do it, when to do it, and who is to it.
Essential nature of planning can be described by four major aspects:
1. Its contribution to objectives.
2. Its primacy among the manager's tasks.
3. Its pervasiveness
4. The efficiency of plans
1. Its contribution to objectives (Plans must have effectiveness).
Every major plan and its supporting plans should contribute to the accomplishment of the purpose and
objectives of the enterprise. It means plans have to be effective. They have to deliver the required
output. Organized enterprise exists for the accomplishment of group purpose through deliberate
cooperation that is voluntary involvement of people in the enterprise for achieving the objectives and
sharing the rewards.
2. Its primacy among the manager's tasks. Managerial operations of organizing, staffing (resourcing),
leading (executing) and controlling are done to accomplish the objective through plans. Hence planning
logically precedes the execution of all the other managerial functions. Planning is primary task of
managers.
3. Its pervasiveness: All managers from the first line supervisor to the chief executive officer of a
company are to do planning. At lower levels we may term it as operational planning and at higher levels
we may term it as strategic planning. The amount of time spent in planning may vary with the level.
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CEOs may spend more time planning and organizing and departmental heads may be there to take care
of resource acquisition, leading people in their departments and controlling the department
performance. But policy making and administering policies can be differentiated. Some managers at
higher levels may be more involved in policy making and some other managers are more involved in
taking decisions based on the policy.
4. The efficiency of plans: The effectiveness of a plan pertains to the degree to which it achieves the
purpose or objectives. The efficiency of the plan refers to the contribution to the objectives, offset by
the costs and other factors required to formulate and operate it. More simply stated if sales is taken as
an objective, the total sales revenue is the contribution of the plan to the objective and the profit which
is the difference between sales revenue and total cost is the efficiency. A plan may enhance the
attainment of an objective, say in can get more sales but at an unnecessarily high cost. Hence as a part
of planning, efficiency of the plan has to be analyzed and improved. Industrial engineering discipline
focuses primarily on the efficiency of engineering activities and plans and it was extended to other areas
like business processes and managerial processes in industrial and commercial concerns. Industrial
engineering was also embraced by hospitals in a big way.
Koontz and O'Donnell specially observed that efficiency aspect has to be applied not only in money
terms to various resources used in production and service activities but also to the individual and group
satisfaction of human resources.
Types of Plans
Objectives: Objectives are the ends toward which the activity of an organization is aimed.
Goals: Goals represent the rate at which objectives of an organization are achieved. Goals quantify the
objective with a time frame. For example, if a country has the objective of switching to unconventional
sources of energy, the goals could specified as so many giga watts of energy by end of year 2012.
Values: Values represent stable long lasting belief about what is important. They are evaluative
standards that help us define what is right or wrong, good or bad, in the world. Some organizations
declare their values and make them known to all. They are also subject to the planning process.
Grand strategies: According to R.N. Anthony strategies result from the processes of deciding "on
objectives of the organization", "on changes in these objectives", "on the resources used to attain these
objectives", and "on policies that are to govern the acquisition, use, and disposition of these resources."
The main meaning and usefulness of grand strategies are to describe a type of planning program of a
broad nature which gives over-all direction to the other and more detailed programs of an enterprise.
The emphasis in grand strategies is on the pattern of basic objectives of the organization and goals and
the major policies and plans for achieving them.
The purpose of grand strategy of an enterprise is to determine and communicate, through a system of
major objectives and policies, a picture of what kind of enterprise is envisioned. A framework is given in
the grand strategy which is a useful plan to guide company thinking.
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Koontz and O'Donnell give the opinion that strategy is not a new type of plan actually. It is a program.
But the concept of strategy is practically very useful and its importance in guiding detailed planning
justifies its separation as a different type of plan.
Competitive strategies
Competition exists where two or more persons strive for the same goals under conditions in which not
all can gain from them. Competitive strategy is a plan made in the light of the plans of a competitor. The
plans are made either with an estimate of plans or competitor or plan is a reaction to the strategic move
of competitor either announced or executed. To estimate the competitor's plans, a manager has to put
himself in his competitor's place and develop a set of plans for his competitor, using the knowledge has
regarding the objectives and the circumstances in which the competitor is operating. No doubt some
industrial espionage will be tried to get an understanding of competitor's plans.
Policies
Policies are general statements which guide or channel thinking in decision making of subordinates.
Policies delimit an area within which a decision is to be made and assure that the decision will be
consistent with and contribute to objectives. Policies tend to pre decided issues, and avoid repeated
analysis. Polices are based on analysis and once pronounced avoid repeated analysis.
Procedures: Procedures are plans and they establish a method of handling activities. They specify a
chronological sequence of required actions.
Rules: A rule is the simplest type of plan. A rule requires that a specific and definite action be taken or
not taken with respect to a situation.
Programs: A program is a complex of policies, procedures, rules, task assignments assembled to carry
out a given course of action. A program is supported by necessary capital and operating budgets.
Budgets: A budget is a plan. It is a statement of expected results expressed in numerical terms.
Objectives: Objectives are referred to some authors with different terms. Purposes, missions, goals or
targets are the terms used to refer to objectives. Mission is usually used in military enterprises and
occasionally in churches and government. "Goals" and "targets' often carry the notation of specific
quantitative end. Sometimes the end can be qualitative also. Koontz and O’Donnell used the chapter on
objectives to discuss all the various types of terms used in relation to objectives.
Social objectives: It is interesting to note that the discussion of objectives is started with the section
social objectives .The objectives of a private enterprise have to be in harmony with the ends for which a
society is organized. Whenever the actions and objectives of a private enterprise are thought be against
the objectives of the society, legal action is initiated to regulate it or suppress it.
United States has a statement of nation purpose set forth in the Declaration of Independence. The
preamble of the Constitution of USA states: We the people of the United States, in order to form a more
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perfect union, establish justice, insure domestic tranquility, provide for common defense, promote the
general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and
establish this Constitution for the United States of America.
All subordinate enterprises in USA, be it a school, church, hospital, government agency or business firm
should have objectives which are harmonious with and supportive to national objectives.
Enterprise Objectives: The plural form is used to stress the fact that enterprises have multiple
objectives. Drucker asserted that there are eight areas in which objectives of performance and results
have to set by all enterprises. They are: Market Standing, Innovation, Productivity, Physical and Financial
Resources, Profitability, Manager Performance and Development, Worker Performance and
Development, and Public Responsibility. For each area or function that company identifies as necessary
for survival there has to be objective.
Principles to be followed in setting objectives:
1. Objectives have to be practically achievable. The organization must be able to do something to

achieve each objective that it has set.
2. The objectives have to support the enterprise purpose, its contribution to the customer.
3. If long range objectives and short range objectives are specified, there must be integral relationship
between them.
4. At various points of time prioritization among objectives may be required.
5. Objectives have to be specific and actionable and verifiable
6. Objectives have to plan. There is the result of planning process or activity.
7. Objectives have to be communicated to those charged with building plans to meet them. These
different types of plans once again described in details in later articles which are summaries chapters
written on them.
It is important to remember that planning is rational approach to goal achievement.
Another interesting question is what should be the planning period.
Koontz and O'Donnell advise us to use commitment principle to answer that. The principle says logical
planning encompasses a future period of time necessary to fulfill, through a series of actions, the
commitments involved in decisions made today.
They clarify saying that long range planning is not really planning for future decisions, but visualizing the
future impact of today's decisions and satisfying ourselves that impact contribute to the achievement of
our objectives. A plan is actually a decision. Certain commitments of resources can only be recovered
over a long period of time and such decisions require long range planning. Certain commitments are
recovered quickly and can be reversed quickly also and short range planning is sufficient for them.
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Whenever a long term plan exists, short range plans must be in alignment with them. Therefore, all
managers must be informed of the long range plans adequately.
THE PLANNING PROCESS:
Following steps are taken in planning process:
1. Recognizing Need for Action:
The first step in planning process is the awareness of business opportunity and the need for taking
action. Present and future opportunities must be found so that planning may be undertaken for them.
The trend of economic situation should also be visualized. For example, if thinking of the government is
to develop rural areas as industrial centers, a farsighted businessman will think of setting up units
suitable to that environment and will avail the facilities offered for this purpose. Before venturing into
new areas the pros and cons of such projects should be evaluated. A beginning should be made only
after going through a detailed analysis of the new opportunity.
2. Gathering Necessary Information:
Before actual planning is initiated relevant facts and figures are collected. All information relating to
operations of the business should be collected in detail. The type of customers to be dealt with, the
circumstances under which goods are to be provided, value of products to the customers, etc. should be
studied in detail. The facts and figures collected will help in framing realistic plans.
3. Laying Down Objectives:
Objectives are the goals which the management tries to achieve. The objectives are the end products
and all energies are diverted to achieve these goals. Goals are a thread which binds the whole company.
Planning starts with the determination of objectives. The tie between planning and objectives helps
employees to understand their duties. Objectives are the guides of employees. It is essential that
objectives should be properly formulated and communicated to all members of the organization.
4. Determining Planning Premises: Planning is always for uncertain future. Though nothing may be
certain in the coming period but still certain assumptions will have to be made for formulating plans.
Forecasts are essential for planning even if all may not prove correct. A forecast means the assumption
of future events. The behavior of certain variables is forecasted for constituting planning premises.
Forecasts will generally be made for the following:
(a) The expectation of demand for the products.
(b) The likely volume of production.
(c) The anticipation of costs and the likely prices at which products will be marketed.
(d) The supply of labor raw materials etc.
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(e) The economic policies of the government.
(f) The changing pattern of consumer preferences.
(g) The impact of technological changes on production processes.
(h) The sources for supply of funds.
It is on the basis of these forecasts that planning is undertaken. The success or failure of planning will
depend upon the forecasts for various factors mentioned above. If the forecasts are accurate then
planning will also be reliable. The effect of various factors should be carefully weighed.
5. Examining Alternative Course of Action: The next step in planning will be choosing the best course of
action. There are a number of ways of doing a thing. The planner should study all the alternatives and
then a final selection should be made. Best results will be achieved only when best way of doing a work
is selected. According to Koontz and O’Donnell, “There is seldom a plan made for which reasonable
alternatives do not exist.” All the pros and cons of methods should be weighed before a final selection.
6. Evaluation of Action Patterns: After choosing a course of action, the next step will be to make an
evaluation of those courses of actions. Evaluation will involve the study of performance of various
actions. Various factors will be weighed against each other. A course of action may be suitable but it
may involve huge investments and the other may involve less amount but it may not be very profitable.
The evaluation of various action patterns is essential for proper planning.
7. Determining Secondary Plans: Once a main plan is formulated then a number of supportive plans are
required. In fact secondary plans are meant for the implementation of principal plan. For example, once
production plan is decided then a number of plans for procurement of raw materials, purchase of plant
and equipment, recruitment of personnel will be required. All secondary plans will be a part of the main
plan.
8. Implementation of Plans: The last step in planning process is the implementation part. The planning
should be put into action so that business objectives may be achieved. The implementation will require
establishment of policies, procedures, standards and budgets. These tools will enable a better
implementation of plans.
9. Follow up of plan: after implementing the plan it is vital to take proper follow up of the plan because
if the plan in going well so there is no issue but if any problem occurs so appropriate action can be taken
of plan can be changed to another or second best plan.
Principles of planning:
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Planning is a dynamic process, it is very essential for every organisation to achieve their ultimate goals,
but, there are certain principles which are essential to be followed so as to formulate a sound plan. They
are only guidelines in the formulation and implementation of plans. These principles of planning are as
follows:
1. Principle of Contribution: The purpose of planning is to ensure the effective and efficient
achievement of corporate objectives, in-fact, the basic criteria for the formulation of plans are
to achieve the ultimate Objectives of the company. The accomplishment of the objectives
always depends on the soundness of plans and the adequate amount of contribution of
company towards the same.
2. Principle of Sound and Consistent Premising: Premises are the assumptions regarding the
environmental forces like economic and market conditions, social, political, legal and cultural
aspects, competitors actions, etc. These are prevalent during the period of the implementation
of plans. Hence, Plans are made on the basis of premises accordingly, and the future of the
company depends on the soundness of plans they make so as to face the state of premises.
3. Principle of Limiting factors: The limiting factors are the lack of motivated employees, shortage
of trained personnel, shortage of capital funds, government policy of price regulation, etc. The
company requires monitoring all these factors and needing to tackle the same in an efficient
way so as to make a smooth way for the achievement of its ultimate objectives.
4. Principle of Commitment: A commitment is required to carry-on the business that is

established. The planning shall has to be in such a way that the product diversification should
encompass the particular period during which entire investment on that product is recovered.
5. Principle of Coordinated Planning: Long and short-range plans should be coordinated with one
another to form an integrated plan, this is possible only when latter are derived from the
former. Implementation of the long-range plan is regarded as contributing to the
implementation of the short-range plan. functional plans of the company too should contribute
to all others plans i.e. implementation of one plan should contribute to all the other plans, this is
possible only when all plans are consistent with one another and are viewed as parts of an
integrated corporate plan.
6. Principle of Timing: Number of major and minor plans of the organisation should be arranged in
a systematic manner. The plans should be arranged in a time hierarchy, initiation and
completion of those plans should be clearly determined.
7. Principle of Efficiency: Cost of planning constitutes human, physical and financial resources for
their formulation and implementation as well. Minimizing the cost and achieving the efficient
utilization of resources shall have to be the aim of the plans. Cost of plan formulation and
implementation, in any case, should not exceed the organizations output's monetary value.
Employee satisfaction and development, and social standing of the organisation are supposed to
be considered while calculating the cost and benefits of plan.
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8. Principle of Flexibility: Plans are supposed to be flexible to favour the organisation to cope-up
with the unexpected environments. It is always required to keep in mind that future will be
different in actuality. Hence companies, therefore, require to prepare contingency plans which
may be put into operation in response to the situations.
9. Principle of Navigational Change: Since the environment is always not the same as predicted,
plans should be reviewed periodically. This may require changes in strategies, objectives,
policies and programmes of the organisation. The management should take all the necessary
steps while reviewing the plans so that they efficiently achieve the ultimate goals of the
organisation.
10. Principle of Acceptance: Plans should be understood and accepted by the employees, since the
successful implementation of plans requires the willingness and cooperative efforts from them.
Communication also plays a crucial role in gaining the employee understanding and acceptance
of the plans by removing their doubts and misunderstanding about the plans also their
apprehensions and anxieties about consequences of plans for achievement of their personal
goal.
On the basis of Nature:

 Operational Plan: Operational plans are the plans which are formulated by the lower level
management for short term period of up to one year. It is concerned with the day to day
operations of the organization. It is detailed and specific. It is usually based on past experiences.
It usually covers functional aspects such as production, finance, Human Resources etc.
 Tactical Plan: Tactical plan is the plan which is concerned with the integration of various
organizational units and ensures implementation of strategic plans on day to day basis. It
involves how the resources of an organization should be used in order to achieve the strategic
goals. The tactical plan is also known as coordinative or functional plan.
 Strategic Plan: Strategic plan is the plan which is formulated by the top level management for a
long period of time of five years or more. They decide the major goals and policies to achieve
the goals. It takes in a note of all the external factors and risks involved and make a long-term
policy of the organization. It involves the determination of strengths and weaknesses, external
risks, mission, and control system to implement plans.
On the basis of managerial level:
 Top level Plans: Plans which are formulated by general managers and directors are called top-
level plans. Under these plans, the objectives, budget, policies etc. for the whole organization
are laid down. These plans are mostly long term plans.
 Middle-level Plans: Managerial hierarchy at the middle level includes the departmental
managers. A corporate has many departments like purchase department, sales department,
finance department, personnel department etc. The plans formulated by the departmental
managers are called middle-level plans.
 Lower level Plans: These plans are prepared by the foreman or the supervisors. They take the
existence of the actual workplace and the problems connected with it. They are formulated for a
short period of time and called short term plans.
On the basis of time:
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 Long Term Plan: Long-term plan is the long-term process that business owners use to reach
their business mission and vision. It determines the path for business owners to reach their
goals. It also reinforces and makes corrections to the goals as the plan progresses.
 Intermediate Plan: Intermediate planning covers 6 months to 2 years. It outlines how the
strategic plan will be pursued. In business, intermediate plans are most often used for
campaigns.
 Short-term Plan: Short-term plan involves pans for a few weeks or at most a year. It allocates
resources for the day-to-day business development and management within the strategic plan.
Short-term plans outline objectives necessary to meet intermediate plans and the strategic
planning process.
On the basis of use:
 Single Plan: These plans are connected with some special problems. These plans end the
moment of the problems to be solved. They are not used, once after their use. They are further
re-created whenever required.
 Standing Plan: These plans are formulated once and they are repeatedly used. These plans
continuously guide the managers. That is why it is said that a standing plan is a standing guide to
solving the problems. These plans include mission, policies, objective, rules and strategy.
Advantages and Limitations of Planning:
Advantages of Planning
Planning is considered as one of the most important features of management. It is a basic function of
management. Planning defines the goals of the organization and also the means that can be used to
achieve these goals. In this way without planning, there cannot be any proper organization and
guidance. As a result of the below mentioned factors, planning is considered as a significant function for
all the organizations.
1. Attention on objectives: with the help of planning, the management can clearly define the
organizational goals. Therefore the management can only concentrate on the achievement of these
goals. In the same way, planning also helps the managers in prioritizing the organizational goals.
Therefore, the objectives of the organization that are more important and need to be achieved first of
all can receive the attention of the managers while the other objectives can be achieved later on.
2. Better utilization of resources: a significant advantage provided by planning is that it helps the
managers in utilizing the resources available with the organization in a better way. Therefore, in this
process the resources that are available with the organization are identified first of all and then the
operations of the organization are planned on the basis of these resources. In this way, with the help of
planning, the managers are able to use all the resources of the organization in the best possible way.
3. Minimizing uncertainties: planning is always related the future. However it is also true that the future
cannot be predicted with certainty and a lot of changes keep on taking place in the business
environment. Therefore, with the help of planning, the managers try to predict what is going to happen
in future and then make plans to achieve the organizational goals. In this way, planning helps in reducing
the uncertainties of the future as the decisions are based on the past experiences and also the situation
that is being faced by the organization at present.
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4. Economy in operations: in case of planning, first of all the objectives of the organization are decided
and then the best course of action that can be adopted for achieving these goals is decided. In this way
the operations that are selected for this purpose are the better alternative out of all the alternatives that
are available and this result in an economy in operations. It also allows avoiding the method of trial and
error and at the same time, the resources of the organization are not wasted while making choices. Such
economy can be achieved by all the departments of the organization like production, sales and finance
etc.
5. Encourages innovation and creativity: A better system of planning is the system that is capable of
encouraging the managers to come up with new ways of doing things. In this way, it should encourage
creative thinking and innovation among the managers because in this case they think regarding new
ways while involved in the process of planning. This process should provide awareness regarding the
individual participation and at the same time it should encourage an atmosphere of openness which in
turn helps in achieving the goals of the organization.
6. Better coordination: as the organizational goals are common, all the persons make concerted efforts
to achieve these objectives. At the same time, planning also helps in avoiding the duplication of efforts.
in this way planning results in better coordination and ultimately results in the achievement of better
results.
7. Facilitates control: the process of planning and control cannot be separated from each other. The
process of planning helps in deciding the objectives of the organization, and also lays down the
standards of performance. This helps the management in evaluating the performance of different
persons in the organization. At the same time, if there is any deviation in performance, early steps can
be taken by the management to rectify this position.
8. Allows management by exception: the meaning of management by exception is that the management
of the organization is not required to be involved in all the activities. Therefore if certain things are going
well, there is no need that the management should focus on these things. Therefore, the management is
required to intervene only if things are not going according to plan. While the organizational objectives
are determined by the process of planning, all efforts can be made to achieve these objectives. The
management is required to interfere only when it appears that the things are not going well and these
objectives may not be achieved. In this way, when management by exception is introduced, the
managers have more time to indulge in the process of planning instead of spending time in directing the
routine activities of the organization.
9. Facilitates delegation: with the help of the process of planning, the management can dedicate the
powers. In this case, the goals are assigned to different persons. However, these persons may need the
authority to achieve these goals. In this way, the process of planning also facilitates the delegation of
authority within the organization.
Limitations of planning
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There are a large number of advantages associated with planning however there can be certain
obstacles and limitations faced by the process of planning. In the same way, it also needs to be noted
that planning cannot be considered as a remedy for all the problems faced by the organization. Planning
can only help in reducing the uncertainties of the future and that too, only up to a certain extent. In this
way, the limitations of planning can be described as follows:-
1. Lack of reliable data: The process of planning is based on different facts and figures that have been
provided to the managers while they are involved in the process of planning. However, in case the data
that has been provided to the managers is not reliable, it is possible that the decisions that are based on
this data can also be unreliable. In this way, the purpose of planning can be defeated if the managers are
not provided with relevant data at the time of planning.
2. Expensive: it also needs to be noted that the process of planning can be very expensive. For example,
collecting information and testing different course of action require much investment by the company.
In the same way, sometimes these expenses can be so high that it is very difficult for small enterprises to
become involved in planning. Therefore, particularly the long-term planning is out of reach for a large
number of organizations due to the heavy expenses that are involved in it. It is very important that the
utility that has been derived from planning should not be less than the expenses that have been
incurred on planning.
3. Time-consuming: the process of planning can be very time consuming and this in turn reduces the
practical utility of planning. It is a time-consuming process and the actions that need to be taken
regarding various operations can be delayed if proper plans have not been formulated on time. Such a
delay may also cause a loss of opportunities for the organization. Particularly when time is of essence,
the advanced planning is not of much help. In some cases, there can be circumstances where immediate
action is required and therefore it is not possible to wait that first of all the process of planning should
be completed.
4. Sudden emergencies: there can be certain cases where an emergency may arise. In such a case, quick
action is required by the organization and therefore advance planning is not possible. At the same time,
many times it is not possible to anticipate these situations. On the other end if these emergencies can
be anticipated or if they occur regularly, it may be possible to undertake planning in order to deal with
these emergencies also.
5. External factors may decrease the utility: apart from the internal factors, there can be certain external
factors that may have an adverse impact on planning. Among these factors, there are social, political,
economic and technological factors. In the same way, the general environment at the national as well as
international level also acts as a limitation when it comes to the effectiveness of the process of planning.
Resistance to change: generally, it has been seen that most of the people do not want to change. The
passive outlook of these persons towards the new ideas can also be considered as a limitation when it
comes to planning. Therefore there is a psychological barrier according to which the executives are also
more concerned with the present as compared to the future. The reason is that while the present is
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more certain as compared to the future, the present is also more desirable. In this way the business
organizations generally see the resistance to change
CONCEP AND NATURE OF OBJECTIVES

Objectives: objectives or the goals of the organization are the ends towards which every activity of the
organization is aimed at. Therefore, goals or objectives are the results that the organization tries to
achieve. Objectives are considered as a prerequisite for planning. The managers cannot make plans if
they have not established the organizational goals first. While the objectives of the enterprise are the
basic plans of the firm, it is also possible that various departments of the organization may also have
their own objectives. Therefore, even if the objectives of the departments are required to contribute to
achieving the objectives of the enterprise, but it is possible that the goals adopted by these two can be
totally different. For example, while the objective of the enterprise is to earn a particular amount as
profit but on the other hand, the goal of a particular department is to sell the products.
Setting goals and objectives is a task that is affected by the type of company, its environment and the
kind of employees. Goals can be categorized into three major types – those which can be clearly defined
by the type of industry and are long term; those that help in the smooth running of the organization and
are ongoing; and third, those that help solve immediate problems and are short term. So goals will differ
from department to department, as well as from person to person in the company’s hierarchy.
Long term goals for the organization and/or department
Long term goals and objectives by definition are set with a vision of what you want your company to be
like 10, 20 even 50 years hence. They are envisaged to be the pathway for overall expansion of the
organization, brand creation, globalization, turnover and profits that will be sustainable over a lengthy
period of time. Setting such goals is done by following a popular technique called SMART, which implies:
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 Specific – a goal that is focused on the overall vision of your organization,
 Measurable – that which can be quantified and checked for efficacy,
 Achievable – a goal that is attainable,
 Realistic – that which is feasible as well as viable,
 Time Bound – a goal that has a specified time within which it should be achieved.
This procedure will involve answering some questions like who sets the goals, who implements them
and how. These goals usually aim at aspects like restructuring of the company, downsizing, globalization,
diversification, etc that will affect the company as a whole.
Goals that keep the organization running smoothly
With the company’s vision in mind the top management will set some goals for the middle
management. Such goals and objectives aim at maintaining the company’s overall ethos and act as a
guidance for running the organization smoothly.
At this stage individual goals come into play in a subtle manner. The middle management gets an
opportunity to set goals for their departments and employees so that they and the company benefit as a
whole. Having the freedom to set the goals on their own gives them a chance for greater participation in
the company’s success and proving their worth.
This management technique is most useful where the outcome of the goals cannot be very clearly
predicted so a little leverage is necessary. Being a little non-specific and flexible, these goals refer mostly
to human resource management, maintaining cost versus profit ratio, customer relationships, public
relations, marketing and advertising, etc. where different people will act and react differently in similar
situations.
Short term job specific goals:
Here’s a scenario: Let’s say you are a job placement agency. A job fair has been organized in a metro city
and here’s your opportunity to get as many people as possible to register with your company. Your goals
will now be specific to the upcoming job fair. Right from obtaining a stall at the fair, deciding on who
should man it, how you should advertise and highlight your presence there; and how to lure qualified
job seekers to register with you – all these will be short term goals specific to this event. Initially, when
you are appraised about the job fair and you are in charge of setting the goals, your thoughts may be a
little unclear. But by breaking down the goal that is to be achieved into small tasks you can then list
them out and tackle them one by one. Now you have a clear direction in which you need to proceed.
Once your direction is set, you can then set very clear-cut goals for individuals who will be involved in
the event. There are four things that have to be kept in mind even if these goals are short term:
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(a) Whatever decisions you make even for a short term goal will always affect the company in the long
term,(b) the short term goals must be feasible, (c) the goals must be cost-effective and (d) the goals
must match the vision of the company without a clash of interests.
Who sets and uses which goals?
The long term goals are usually envisioned by top management and decision makers in coordination
with department heads. The department heads will set goals for the middle managers that are specific
to a particular department aiming at profits as well as efficiency. The middle managers will set short
terms goals for the employees. Also, at each level in the organization the people will have their
individual goals too. As long there is no mismatch between individual goals and company goals, an
organization runs smoothly and achieves its target, whether short term or long term.Many times the
goals of different individuals will overlap. For example, an HR Manager wants to implement automated
management systems that track employee efficiency. In coordination with the finance department and
top management, the HR Manager’s long term goal is to improve speed and efficiency of the employees
so that they are more productive. The Manager is now able to track performance, detect any problems
and correct the situation. In the long run there is complete coordination in the running of the business.
Here the goal of the finance and HR departments is actually the same. Without setting goals a company
is directionless. Hence, setting goals at all levels in an organization is imperative for success.
Objectively is a goals and objectives management application, from setting, to managing and tracking
them. Objectively: Driving Outcomes that matter, fulfilling Goals and Objectives, instead of losing focus;
managing day-to-day emergencies and “things to do”.
Types of Objectives:
Within the organization there are three levels of objectives: strategic goals, tactical objectives, and
operational objectives.
* Strategic Goals: "Broad statements of where the organization wants to be in the future are called
strategic goals”.
* Tactical objectives. "The results that major divisions and departments within the organization intend
to achieve are defined as tactical objectives".
* Operational objectives. "The specific results expected from departments, work groups, and individuals
are the operational objectives".
Management by Objectives (MBO)

The concept of management by objectives is a logical extension of Goal Setting theory. The Goal Setting
theory studies the processes by which people set goals for themselves and then put in efforts to achieve
them. Evidence proves that 90 percent of the time, performance improves with goal setting.
Comparatively high achievers set comparatively more difficult goals and they are more satisfied with
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intrinsic rewards than extrinsic rewards. Management by objectives is an extension of Goal theory as it
involves systematic and programmatic goal getting throughout an organization.
The concept of MBO was introduced by Peter Drucker in 1954 as a means of using goals to improve
people rather than to control them. Thus this concept of MBO is also known as Goal management. It is
based upon the assumption that involvement leads to commitment and when an employee participates
in goal setting as well as setting standards for measurement of performance towards that goal then the
employees will be motivated to perform better and in a manner that directly contributes to the
achievement of organizational objectives. Simply stated, “MBO is a process whereby both managers and
subordinates work together in identifying goals and setting up objectives and makes plans together in
order to achieve these objectives. Their objectives and goals should be consistent with the
organizational goals”.
What are the steps involved in the process of MBO?
The basic steps that are common in all the processes of management by objective (MBO) are:-
1. Central goal setting: defining and verifying organizational objectives is the first step in MBO process.
Generally these objectives are set by central management of the organization but it does so after
consulting other managers. Before setting of these objectives, an extensive assessment of the available
resources is made by the central management. It also conducts market service and research along with
making a forecast. Through this elaborate analysis, the desired long run and short run objectives of the
organization are highlighted. The central management tries to make these objectives realistic and
specific. After setting these goals it is the responsibility of the management that these are known to all
members and are also under stood by them.
2. Development and individual goal setting: After organization objectives are established by the central
management, the next step is to establish the department goals. The top management needs to discuss
these objectives with the heads of the departments so that mutually agreed upon objectives are
established. Long range and short range goals are set by each department in consultation with the top
management. After the department goals are established, the employees work with their managers to
establish their own individual goals which relate with the organization goals. These participative goals
are very important because It has been seen that employees become highly motivated to achieve the
objectives established by them. These objectives for individuals should be specific and short range.
These should indicate the capability of the unit of the individual. Through this process all the members
of the organization become involved in the process of goal setting.
3. Revision of job description: In the process of MBO resetting individual goals involves a revision of job
description of different positions in the organization which in turn requires the revision of the entire
structure of the organization. The organization manuals and charts may also have to be modified to
portray the changes that have been introduced by the process of MBO. The job description has to define
the objectives, authority and responsibility of different jobs. The connection of one job with all other
jobs of the organization also needs to be established clearly.
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4. Matching goals: The establishment of objectives cannot be fruitful unless the resources and means
required to achieve these objectives are provided. Therefore the subordinates should be provided
required tools and materials which enable them to achieve the objectives efficiently and effectively.
Resource requirements can be measured precisely if the goals are set precisely. This makes the process
of resource allocation relatively easy. Resource allocation should be made after consulting the
subordinates.
5. Freedom implementation: The task team of manager and his subordinates should be given freedom
in deciding the way to utilize their resources and the way to achieve their objectives. There should be
very little or no interference by the seniors as long as the team is working within the framework of
organization policies.
6. Establishing check points: The process of MBO requires regularly meetings between the managers
and their subordinates to discuss the progress achieve in the accomplishment of the objective
established for the subordinates. For this purpose the mangers need to establish the standards of
performance or check points to evaluate the progress of their subordinates. These standards need to be
specified as for as possible quantitatively and it should also be ensured that these are completely
understood by the subordinates. This practices needs to be followed by all managers and these should
lead to an analysis of key results has the targets are represented in terms of the results. The analysis of
key results should be recorded in writing and it generally contains information regarding :
(i) The overall objectives related with the job of subordinates.
(ii) The key results which must be achieved by the subordinate to fulfill his objectives.
(iii) The long term and short term priorities, a subordinate needs to adhere to.
(iv.) The extent and scope of assistance expected by a subordinate from his superior and other
departmental managers and also the assistance, the subordinates is required to extend to other
departments of his organizations.
(v.) Nature of information and the reports receive by the subordinate to carry out self evaluation.
(vi.) The standards use to evaluate the performance of the subordinate.
7. Performance appraisal: An informal performance appraisal is generally conducted in routine by the

manager; a periodic review of performance of the subordinates should also be conducted. Periodic
reviews are required as the priorities and conditions change constantly and need to be monitored
constantly. These reviews help the mangers as well as the subordinates to modify the objectives or the
methods whenever require. This significantly increases the chances of achieving the goals and also
ensures that no surprises are found at the time of final appraisal. Periodic performance appraisal needs
to be based on measurable and fair standards so that these are completely understood by the
subordinates and there are also aware of the degree of performance required at each step.
8. Counseling: Periodic performance review helps the subordinates in improving his future performance.
Advantages of MBO:
MBO develops a result-oriented philosophy: The Management by Objectives (MBO) process is all about
the delivery of results (outcome) as opposed to management by crisis (MBC)). While managers are
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expected to develop goals and objectives; action plans and provide their people with the resources they
need, employees are expected to do their part by making positive contributions towards the
organizational goals.
Formulation of clearer goals: In many organizations, goals are only set once a year. The goals that are
set in the MBO process are done in a way that makes them measurable and verifiable, whilst making
sure that each and every one can be attained. The idea is that problem areas are highlighted, with goals
put in place to iron out those issues, thus making everyone more effective in the job that they do. This
process encourages the active participation of every employee, with the end result being that the
organizational goals are met within the agreed timeframe.
Management by Objectives Facilitates objective appraisal: The evaluation process is designed to be fair
from the start, with all of the goals are put together in by the entire team. Giving individuals the
freedom to exercise their own creativity makes for a happier set of employees, all of whom become fully
committed to reaching the organizational goals.
Raises employee morale: Too many employees feel as though they are left out of the decision process,
but this is not the case with Management by Objectives. Since they play a part in setting goals, the
bigger picture becomes far clearer to everyone. This in turn leads to a companywide boost in morale.
MBO Facilitates effective planning: The Management by Objectives program makes organizational
planning much more effective. Everyone is forced to look at results as opposed to winging it when crises
arise. When effective planning is put in place, fewer of those problems tend to arise, allowing mangers
to focus on what is important.
Acts as motivational force: Since everyone is on the same page when it comes to reaching the goals of
the organization, there is a higher level of imagination and creativity that comes with that. With
everyone working together for a common goal, there is a much higher level of motivation to reach them.
Management by Objectives facilitates effective control: One of the main features of MBO is the
continual monitoring of progress. This allows everyone to measure their performance against the
standards that have been put in place. It is those clear standards that allow everyone to work towards a
very identifiable set of goals, all allowing for better control.
Management by Objectives facilitates personal leadership: MBO helps everyone within the
organization, but it gives mangers in particular the opportunity to display their leadership skills. Keeping
the entire group focused will paint a manager in a very positive light and make them more likely to
advance within the company.
Limitations of MBO:
Management by objectives (MBO) has certain limitations and weakness. While some of these limitations
are inherent in MBO, some limitations arise at the time of introduction and implementation of the
process of MBO. Some of these limitations and problems associated with MBO are as follows:–
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1. Lack of Support from Top Management: As the authority is vested in the top management in
traditional organizations and it flow from top to bottom but in the process of MBO, the subordinates are
also given an equal opportunity of participation, which is sometimes not liked by the top management.
MBO cannot be successful without full support from management at the top most level.
2. Resistance by Subordinates: The subordinates can also be resentful towards the system of MBO.
Sometimes, while setting the goals, they may be under pressure to get along with the management and
the objectives which are set may be unrealistically high or far too rigid. The subordinates, generally, feel
suspicious of the management and believe that MBO is another play of the management to make them
work harder and become more dedicated and involved.
3. Problems in enumerating goals and objectives: The MBO can be successful if the goals can be
established in proven terms. But if these are hard to enumerate and evaluate, it may not be achievable
to fathom the performance of the employees. Moreover, MBO does not have any subjectivity in
performance appraisal. It rewards only productivity without giving any consideration to the creativity of
the employees.
4. MBO is time consuming and costly process: MBO could be a time consuming and costly process. A lot
of paper work is required and a lot of meetings and reports need to be prepared, which add to the
responsibilities and burden of the managers. Because of these reasons managers generally resist of the
MBO.
5. Emphasis is on short term goals: Goals under MBO are set only for a short period ranging from six
months to one year. The reason could be that goals are quantitative in nature and thus it could be
difficult to go in for long range planning in MBO. Since the performance of the subordinate is to be
reviewed after every six months or one year, they tend to concentrate on their immediate objectives
without caring for the long range objectives of the organization. This emphasis on short term goals goes
against the organizational efficiency and effectiveness and is not beneficial for the organization.
6. Lack of training and adequate skills: Most of managers lack adequate skills knowledge and training
required in interpersonal interaction which is required in the MBO. Many managers tend to sit down
with the subordinate, dictate the goals and targets with no input permitted from the subordinates and
then demand that goals be achieved in a specified time. Whether the goals are realistic or not does not
enter the picture. In this type of environment, there is a lack of two way communication and objectives
are imposed on the subordinates. This could have an adverse impact on the morale, initiative and
performance of the employees.
7. Poor Integration: Generally, there is poor integration of MBO with the other system such as
forecasting and budgeting. This lack of integration makes the overall functioning of the system very
poor.
8. Difficulty in Follow up: Under the system of MBO, the superior must get in touch with the
subordinate at the appropriate time and at that time, the subordinate will inform the boss exactly what
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has been accomplished and how. If the superior delays the meeting, it will create hurdles in the
successful implementation of MBO as the subordinate will also start taking the program casually.
9. Difficulty in Achievement of group Goals: When the achievement of the goals of one department
depend upon the goals of another department, cohesion is difficult to maintain. In such cases, the
achievement of goals will also become very difficult.
10. Inflexibility: MBO could result in a rigid organization structure. As the goals are set after every six
months or one year, the manager may not like to review the goals in between, even if the need arises,
due to fear of resistance from the subordinates. The managers must learn to handle this situation,
because sometimes revision of short term goals is necessary for the achievement of long range
objectives.
11. Limited Application: MBO is useful largely for the managerial and professional employees. It is not
appropriate for all levels and for everyone because of the heavy demands made by it. It can be made
applicable only when both the subordinates and manages feel comfortable with it and are willing to
participate in it.
12. Gestation Period: It takes a lot of time, sometimes 3-5 years to implement the MBO program
properly and fully and some research studies have shown that these programs can lose their impact and
potency as a motivating force over a long period of time.
Strategies and Policies
Strategies: although earlier the word strategy was mainly used by formulating military action plans. The
term strategy was used in order to elaborate the plans that were made by keeping in view the probable
moves of the adversary. However these days, strategies are used by the managers in the field of
business operations also. In this way, strategies can be described as the comprehensive and integrated
plans that are designed by the managers with a view to make sure that the organization achieves its
objectives. Therefore the managers decide the long-term goals of the organization and then the
required resources are allocated so that the desired results can be achieved. The purpose behind making
strategies can be described as to portray a picture of the type of enterprise that is being envisioned.
However, the strategies do not try to provide the programs that are required to achieve the objectives
but they provide a framework that guides the thinking of the managers and also their actions.
Policies: policies can be described as the general statements or understanding that provides guidance to
the managers in decision-making. Policies are standing plans that guide the management that is
engaged in managerial operations. The policies of the organization also prescribe the boundaries within
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which the managers have to make decisions and it also ensures that all the decisions made by the
managers are directed towards achieving the goals of the organization. At the same time, the policies
also help in dealing with the issues before they take the shape of problems. In this way, with the help of
policies, the managers do not have to waste their time in analyzing the same situation whenever it
arises. Policies also allow the managers to delegate authority within the permissible parameters and still
the managers can retain control on these activities. Therefore, it can be said that policies encourage
initiative and discretion but also ensure that they remain within the limits.
Why Corporate Strategy?
Strategic management is basically needed for every organization and it offers several benefits.
1. Universal Strategy refers to a complex web of thoughts, ideas, insights, experiences, goals, expertise,
memories, perceptions, and expectations that provides general guidance for specific actions in pursuit of
particular ends. Nations have, in the management of their national policies, found it necessary to evolve
strategies that adjust and correlate political, economic, technological, and psychological factors, along
with military elements. Be it management of national polices, international relations, or even of a game
on the playfield, it provides us with the preferred path that we should take for the journey that we
actually make.
2. Keeping pace with changing environment: The present day environment is so dynamic and fast
changing thus making it very difficult for any modern business enterprise to operate. Because of
uncertainties, threats and constraints, the business corporation is under great pressure and is trying to
find out the ways and means for their healthy survival. Under such circumstances, the only last resort is
to make the best use of strategic management which can help the corporate management to explore
the possible opportunities and at the same time to achieve an optimum level of efficiency by minimizing
the expected threats
3. Minimizes competitive disadvantage It minimizes competitive disadvantage and adds up to

competitive advantage. For example, a company like Hindustan Lever Ltd., realized that merely by
merging with companies like Lakme, Milk food, Ponds, Brooke bond, Lipton etc which make fast moving
consumer goods alone will not make it market leader but venturing into retailing will help it reap heavy
profits. Then emerged its retail giant “Margin Free’ which is the market leader in states like Kerala.
Similarly, the R.P. Goenka Group and the Muruguppa group realized that mere takeovers do not help
and there is a need to reposition their products and reengineer their brands. The strategy worked.
4. Clear sense of strategic vision and sharper focus on goals and objectives:
Every firm competing in an industry has a strategy, because strategy refers to how a given objective will
be achieved. ‘Strategy’ defines what it is we want to achieve and charts our course in the market place;
it is the basis for the establishment of a business firm; and it is a basic requirement for a firm to survive
and to sustain itself in today’s changing environment by providing vision and encouraging to define
mission.
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5. Motivating employees: One should note that the labor efficiency and loyalty towards management
can be expected only in an organization that operates under strategic management. Every guidance as
to what to do, when and how to do and by whom etc, is given to every employee. This makes them
more confident and free to perform their tasks without any hesitation. Labor efficiency and their loyalty
which results into industrial peace and good returns are the results of broad based policies adopted by
the strategic management.
6. Strengthening Decision Making: Under strategic management, the first step to be taken is to identify
the objectives of the business concern. Hence a corporation organized under the basic principles of
strategic management will find a smooth sailing due to effective decision making. This points out the
need for strategic management.
7. Efficient and effective way of implementing actions for results Strategy provides a clear understanding
of purpose, objectives and standards of performance to employees at all levels and in all functional
areas. Thereby it makes implementation very smooth allowing for maximum harmony and synchrony. As
a result, the expected results are obtained more efficiently and economically.
8. Improved understanding of internal and external environments of business Strategy formulation

requires continuous observation and understanding of environmental variables and classifying them as
opportunities and threats. It also involves knowing whether the threats are serious or casual and
opportunities are worthy or marginal. As such strategy provides for a better understanding of
environment.
7. Efficient and effective way of implementing actions for results Strategy provides a clear understanding
of purpose, objectives and standards of performance to employees at all levels and in all functional
areas. Thereby it makes implementation very smooth allowing for maximum harmony and synchrony. As
a result, the expected results are obtained more efficiently and economically.
8. Improved understanding of internal and external environments of business Strategy formulation

requires continuous observation and understanding of environmental variables and classifying them as
opportunities and threats. It also involves knowing whether the threats are serious or casual and
opportunities are worthy or marginal. As such strategy provides for a better understanding of
environment.
Levels of strategy
Corporate strategy: Which describes a company’s overall direction towards growth by managing
business and product lines? These include stability, growth and retrenchment. For example, Coco cola,
Inc., has followed the growth strategy by acquisition. It has acquired local bottling units to emerge as the
market leader.
Business strategy: Usually occurs at business unit or product level emphasizing the improvement of
competitive position of a firm’s products or services in an industry or market segment served by that
business unit. Business strategy falls in the in the realm of corporate strategy.
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For example, Apple Computers uses a differentiation competitive strategy that emphasizes innovative
product with creative design. In contrast, ANZ Grind lays merged with Standard Chartered Bank to
emerge competitively.
Functional strategy: It is the approach taken by a functional area to achieve corporate and business unit
objectives and strategies by maximizing resource productivity. It is concerned with developing and
nurturing a distinctive competence to provide the firm with a competitive advantage.
For example, Procter and Gamble spends huge amounts on advertising to create customer demand.
Operating strategy: These are concerned with how the component parts of an organization deliver
effectively the corporate, business and functional level strategies in terms of resources, processes and
people. They are at departmental level and set periodic short term targets for accomplishment.
There are basically four approaches to crafting a strategy
1. The Chief Architect approach A single person the owner or CEO assumes the role of chief strategist
and chief entrepreneur, single handedly shaping most or all of the major pieces of strategy. This does
not mean that one person is the originator of all the ideas underlying the resulting strategy or does all
the background data gathering and analysis: there may be much brainstorming with subordinates and
considerable analysis by specific departments. The chief architect approach to strategy formation is
characteristic of companies that have been founded by the company’s present CEO. Michael Dell at Dell
Computer, Steve Case at America Online, Bill Gates at Microsoft, and Howard Schultz at Starbucks are
prominent examples of corporate CEOs who exert a heavy hand in shaping their company’s strategy.
2. The Delegation Approach: Here the manager in charge delegates big chunks of the strategy making
task to trusted subordinates, down the line managers in charge of key business units and departments, a
high level task force of knowledgeable and talented people from many parts of the company, self
directed work teams with authority over a particular process or function, or, more rarely, a team of
consultants brought in specifically to help develop new strategic initiatives.
3. The Collaborative or Team Approach: This is a middle approach when by a manager with strategy
making responsibility enlists the assistance and advice of key peers and subordinates in hammering out
a consensus strategy. Strategy teams often include line and staff managers from different disciplines and
departmental units, a few handpicked junior staffers known for their ability to think creatively, and near
retirement veterans noted for being keen observers, telling it like it is, and giving sage advice. Electronic
Data Systems conducted a yearlong strategy review involving 2,500 of its 55,000 employees and
coordinated by a core of 150 managers and staffers from all over the world. Nokia Group, a Finland
based global leader in wireless telecommunications, involved 250 employees in a strategy review of how
different communications technologies were converging, how this would affect the company’s business,
and what strategic responses were needed.
4. The Corporate Entrepreneur Approach: In the corporate entrepreneur approach, top management
encourages individuals and teams to develop and champion proposals for new product lines and new
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business ventures. The idea is to unleash the talents and energies of promising corporate entrepreneurs,
letting them try out business ideas and pursue new strategic initiatives. Executives serve as judges of
whom proposals merit support, give company entrepreneurs the needed organizational and budgetary
support, and let them run with the ball. W.L. Gore & Associates, a privately owned company famous for
its Gore Tex waterproofing film, is an avid and highly successful practitioner of the corporate
entrepreneur approach to strategy making. Gore expects all employees to initiate improvements and to
display innovativeness.
As Ongoing process:
Corporate strategy is a continuous ongoing process and extends companywide over a diversified
company’s business. It is a boundary spanning planning activity considering all the elements of the micro
and macro environments of a firm. The following are the key tasks of the process of developing and
implementing a corporate strategy:
 Exploring and determining the vision of the company in the form of a vision statement.
 Developing a mission statement of the company that should include statement of methodology
for achieving the objectives, purposes, and the philosophy of the organization adequately
reflected in the vision statement.
 Defining the company profile that includes the internal analysis of culture, strengths and
capabilities of an organization
 Making external environmental analysis to identify factors as threats, opportunities etc.
 Finding out ways by which a company profile can be matched with its environment to be able to
accomplish mission statement
 Deciding on the most desirable courses of actions for accomplishing the mission of an
organization
 Selecting a set of long term objectives and also the corresponding strategies to be adopted in
line with vision statement
 Evolving short term and annual objectives and defining the corresponding strategies that would
be compatible with the mission and vision statement.
 Implementing the chosen strategies in a planned way based on budgets and allocation of
resource, outlining the action programs and tasks.
 Installation of a continuous comparable review system to create a controlling mechanism and
also generate data for selecting future course of action.
Process of Strategic Management:
Strategic management consists of four basic elements.
1. Environmental scanning
2. Strategy formulation
3. Strategy implementation
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4. Evaluation and control
TOWS matrix
TOWS and SWOT are acronyms for different arrangements of the words Strengths, Weaknesses,
Opportunities and Threats.
By analyzing the external environment (threats and opportunities), and your internal environment
(weaknesses and strengths), you can use these techniques to think about the strategy of your whole
organization, a department or a team. You can also use them to think about a process, a marketing
campaign, or even your own skills and experience.
At a practical level, the only difference between TOWS and SWOT is that TOWS emphasizes the external
environment whilst SWOT emphasizes the internal environment. In both cases, this analysis results in a
SWOT (or TOWS) Matrix like the one shown below:
Strength, Weakness, Opportunity and Threats:
Identifying Strategic Options
SWOT or TOWS analysis helps you get a better understanding of the strategic choices that you face.
(Remember that "strategy" is the art of determining how you'll "win" in business and life.) It helps you
ask, and answer, the following questions: How do you:
 Make the most of your strengths?
 Circumvent your weaknesses?
 Capitalize on your opportunities?
 Manage your threats?
A next step of analysis, usually associated with the externally-focused TOWS Matrix, helps you think
about the options that you could pursue. To do this you match external opportunities and threats with
your internal strengths and weaknesses.
A TOWS analysis is a variant of a SWOT analysis and is an acronym for Threats, Opportunities,
Weaknesses and Strengths.
Similar to a SWOT, a TOWS analysis will involve the identification of an organization’s strengths,
weaknesses, opportunities and threats; however, often a key criticism of a SWOT analysis is that it
doesn’t show the relationships between the different factors and categories. For example, a particular
threat might make a weakness much more significant. Whereas a TOWS analysis will look to match
internal factors to external factors to help identify relevant strategic options that an organisation could
pursue. It can help an organisation to see how it can take advantage of opportunities, reduce threats,
overcome weaknesses and exploit any strength.
A TOWS is a commonly used strategic planning tool and can add real value to an organisation, helping to
take strategic planning one step further. Below is an example TOWS matrix.
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Let’s delve into this a bit more.

A TOWS analysis enables an organisation to match its internal strengths, and external opportunities (SO)
to develop ‘maxi-maxi’ strategies – those with the greatest potential for success. For example, strengths
such as high brand recognition or customer loyalty could be combined with the opportunity to launch a
new product or service.
At the other extreme, it highlights the organization’s vulnerability to threats based on its weaknesses
and facilitates the development of strategies that minimize these and avoid threats (WT) – ‘mini-mini’
strategies. For example, such strategies could include developing strategic alliances or a more drastic
strategy could be to withdraw from a specific market altogether.
In between, mini-maxi (WO) and maxi-mini strategies (ST) are designed to strengthen weaknesses,
utilizing opportunities, and minimize threats utilizing strengths. An example mini-maxi strategy (WO) is
that an organisation may have identified an opportunity to outsource some aspects of its business
operations, overcoming the weakness of lack of specific skills within the organisation.
It’s important to remember that a TOWS analysis will not point to which specific strategy to adopt, but it
does focus attention the areas where Action is required, and given some indication of the nature of that
action.
Portfolio matrix (BCG Matrix)

BCG matrix: (or growth-share matrix) is a corporate planning tool, which is used to portray firm’s brand
portfolio or SBUs on a quadrant along relative market share axis (horizontal axis) and speed of market
growth (vertical axis) axis.
BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic position of the
business brand portfolio and its potential. It classifies business portfolio into four categories based on
industry attractiveness (growth rate of that industry) and competitive position (relative market share).
These two dimensions reveal likely profitability of the business portfolio in terms of cash needed to
support that unit and cash generated by it. The general purpose of the analysis is to help understand,
which brands the firm should invest in and which ones should be divested.
Relative market share: One of the dimensions used to evaluate business portfolio is relative market
share. Higher corporate market share results in higher cash returns. This is because a firm that produces
more, benefits from higher economies of scale and experience curve, which results in higher profits.
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Nonetheless, it is worth to note that some firms may experience the same benefits with lower
production outputs and lower market share.
Market growth rate: High market growth rate means higher earnings and sometimes profits but it also
consumes lots of cash, which is used as investment to stimulate further growth. Therefore, business
units that operate in rapid growth industries are cash users and are worth investing in only when they
are expected to grow or maintain market share in the future.
There are four quadrants into which firms brands are classified:
Dogs: Dogs hold low market share compared to competitors and operate in a slowly growing market. In
general, they are not worth investing in because they generate low or negative cash returns. But this is
not always the truth. Some dogs may be profitable for long period of time, they may provide synergies
for other brands or SBUs or simple act as a defense to counter competitors moves. Therefore, it is
always important to perform deeper analysis of each brand or SBU to make sure they are not worth
investing in or have to be divested. Strategic choices: Retrenchment, divestiture, liquidation
Cash cows: Cash cows are the most profitable brands and should be “milked” to provide as much cash
as possible. The cash gained from “cows” should be invested into stars to support their further growth.
According to growth-share matrix, corporate should not invest into cash cows to induce growth but only
to support them so they can maintain their current market share. Again, this is not always the truth.
Cash cows are usually large corporations or SBUs that are capable of innovating new products or
processes, which may become new stars. If there would be no support for cash cows, they would not be
capable of such innovations. Strategic choices: Product development, diversification, divestiture,
retrenchment.
Stars: Stars operate in high growth industries and maintain high market share. Stars are both cash
generators and cash users. They are the primary units in which the company should invest its money,
because stars are expected to become cash cows and generate positive cash flows. Yet, not all stars
become cash flows. This is especially true in rapidly changing industries, where new innovative products
can soon be outcompeted by new technological advancements, so a star instead of becoming a cash
cow, becomes a dog. Strategic choices: Vertical integration, horizontal integration, market penetration,
market development, product development.
Question marks: Question marks are the brands that require much closer consideration. They hold low
market share in fast growing markets consuming large amount of cash and incurring losses. It has
potential to gain market share and become a star, which would later become cash cow. Question marks
do not always succeed and even after large amount of investments they struggle to gain market share
and eventually become dogs. Therefore, they require very close consideration to decide if they are
worth investing in or not. Strategic choices: Market penetration, market development, product
development, divestiture.
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Advantages and disadvantages:

Benefits of the matrix:
 Easy to perform;
 Helps to understand the strategic positions of business portfolio;
 It’s a good starting point for further more thorough analysis.
Growth-share analysis has been heavily criticized for its oversimplification and lack of useful application.
Following are the main limitations of the analysis:
 Business can only be classified to four quadrants. It can be confusing to classify an SBU that falls
right in the middle.
 It does not define what ‘market’ is. Businesses can be classified as cash cows, while they are
actually dogs, or vice versa.
 Does not include other external factors that may change the situation completely.
 Market share and industry growth are not the only factors of profitability. Besides, high market
share does not necessarily mean high profits.
 It denies that synergies between different units exist. Dogs can be as important as cash cows to
businesses if it helps to achieve competitive advantage for the rest of the company.
Although BCG analysis has lost its importance due to many limitations, it can still be a useful tool if
performed by following these steps:
 Step 1. Choose the unit
 Step 2. Define the market
 Step 3. Calculate relative market share
 Step 4. Find out market growth rate
 Step 5. Draw the circles on a matrix
Step 1. Choose the unit. BCG matrix can be used to analyze SBUs, separate brands, products or a firm as
a unit itself. Which unit will be chosen will have an impact on the whole analysis. Therefore, it is
essential to define the unit for which you’ll do the analysis.
Step 2. Define the market. Defining the market is one of the most important things to do in this analysis.
This is because incorrectly defined market may lead to poor classification. For example, if we would do
the analysis for the Daimler’s Mercedes-Benz car brand in the passenger vehicle market it would end up
as a dog (it holds less than 20% relative market share), but it would be a cash cow in the luxury car
market. It is important to clearly define the market to better understand firm’s portfolio position.
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Step 3. Calculate relative market share. Relative market share can be calculated in terms of revenues or
market share. It is calculated by dividing your own brand’s market share (revenues) by the market share
(or revenues) of your largest competitor in that industry. For example, if your competitor’s market share
in refrigerator’s industry was 25% and your firm’s brand market share was 10% in the same year, your
relative market share would be only 0.4. Relative market share is given on x-axis. Its top left corner is set
at 1, midpoint at 0.5 and top right corner at 0 (see the example below for this).
Step 4. Find out market growth rate. The industry growth rate can be found in industry reports, which
are usually available online for free. It can also be calculated by looking at average revenue growth of
the leading industry firms. Market growth rate is measured in percentage terms. The midpoint of the y-
axis is usually set at 10% growth rate, but this can vary. Some industries grow for years but at average
rate of 1 or 2% per year. Therefore, when doing the analysis you should find out what growth rate is
seen as significant (midpoint) to separate cash cows from stars and question marks from dogs.
Step 5. Draw the circles on a matrix. After calculating all the measures, you should be able to plot your
brands on the matrix. You should do this by drawing a circle for each brand. The size of the circle should
correspond to the proportion of business revenue generated by that brand.
Three Generic Competitive strategies:
According to Porter's Generic Strategies model, there are three basic strategic options available to
organizations for gaining competitive advantage. These are: Cost Leadership, Differentiation and Focus.
A firm's relative position within its industry determines whether a firm's profitability is above or below
the industry average. The fundamental basis of above average profitability in the long run is sustainable
competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost
or differentiation. The two basic types of competitive advantage combined with the scope of activities
for which a firm seeks to achieve them, lead to three generic strategies for achieving above average
performance in an industry: cost leadership, differentiation, and focus. The focus strategy has two
variants, cost focus and differentiation focus.
1. Cost Leadership: In cost leadership, a firm sets out to become the low cost producer in its industry.
The sources of cost advantage are varied and depend on the structure of the industry. They may include
the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other
factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve and
sustain overall cost leadership, then it will be an above average performer in its industry, provided it can
command prices at or near the industry average.
2. Differentiation: In a differentiation strategy a firm seeks to be unique in its industry along some
dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an
industry perceive as important, and uniquely positions it to meet those needs. It is rewarded for its
uniqueness with a premium price.
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3. Focus: The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to
serving them to the exclusion of others. The focus strategy has two variants:-
(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a
firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences
between a focuser's target segment and other segments in the industry. The target segments must
either have buyers with unusual needs or else the production and delivery system that best serves the
target segment must differ from that of other industry segments. Cost focus exploits differences in cost
behavior in some segments, while differentiation focus exploits the special needs of buyers in certain
segments.
Organizing
In the execution of the planning, it is very important to take certain steps that act as a great aid for the
present as well as the future but a major thing to be taken into the consideration here is that of the fact
that it is true that certain actions are performed, depending on the various situations that arise during
the process, for the execution of the plans but at the same time it is very important that these steps or
the actions are performed in the right way and also at the right time. For this, very good organization of
the different actions by establishing the suitable structure is needed.
Concept or Nature of Organizing or Organization:
There are two essential Concepts regarding with Organizing:
 Organization as a Process: The concept of organizing can be considered as a process, because a

large number of events or activities are done under the process of organizing with-a-view to
accomplish the preset goals in an appropriate way. In fact, organizing involves division of works,
determination of activities, grouping of activities, delegation of authority and the establishment
of proper co-ordination and balance among various departments of individuals towards the
attainment of predetermined goals. On the whole it is clear that the objectives of business firm
cannot be obtained by doing single activity, so organizing is set to be a process.
 Organization as a Structure of Relationship: Organization refers to a structure of relationship

due to involvement of a large number of groups. In fact, under the process of organizing the
relationship of departments to departments, groups to groups and individuals to individuals are
analyzed carefully through the process of communication system with a view to establish proper
unity and co-ordination among them. So that everyone can take initiative for the welfare of
enterprise. Thus it is clear that Organization can be considered as a structure of relationship.
Characteristics or Features of Organizing or Organization:
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 Organization is a group of Individuals: Organization can consider as a group of individuals who

comes together and make co-operative relationship with each-other and contributing their
efforts with a view to attain preset goals. Infect, in the absence of group of individuals there is
no existence of organization. Thus it is clear that organization is a group of individuals.
 Organization is a process: The feature of organization can put to be as a process, because a

large number of events are done under organizing process towards the attainment of
predetermined goals, such as determination of various activities, grouping of activities,
allocation of work amongst the employees and delegation of authority as well. Hence,
organization is a process.
 Organization is a ‘Means’ not an ‘End’: Organization is a means to reach out the goals of an
enterprise. In fact organization provides such platforms to enterprise where all the activities are
clearly predefined, as a result of this enterprise easily obtain its goals. Thus it is proved that
organization is a ‘Means’ not an ‘End’.
 Organization is an important Function of Management: It is an essential feature of

organisation. Organization refers to an important function of management because all other
functions of management like staffing, directing, controlling etc will become ineffective in the
absence of this function.
 Organization is related to its Objectives: Organization is directly concerned with the objectives
of enterprise. In the absence of objectives there is no life of organization. If there is an
organization then the objectives must be attached with it. Hence, Organization is related with its
goals.
 Communication is the life of organization: It is also an important feature of organization.

Communication can be treated as a life of organization, because in the lack of proper network of
communication there is no existence of organization. Infect the foundation of an organization
properly depends on communication. On the whole it is clear that organization is the system of
communication.
Few more Definitions of organizing:
Allen defines Organising as “the process of identifying and grouping of the work to be performed,
defining and delegating responsibility and authority and establishing relationships for the purpose of
enabling people to work most effectively together in accomplishing their objectives.”
Koontz and O’Donnell defines: as “ Organisation is the establishment of authority and relationships
with provision for coordination between them, both vertically and horizontally in the enterprise
structure.-Organising is the task of mobilizing resources-A structure involving a large number of
people engaging themselves in multiplicity of tasks, a systematic and rational relationship with
authority and responsibility between individuals and groups.
Process of organizing:
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The manager differentiates and integrates the activities of his Organisation-Differentiation - the
process of departmentalization or segmentation of activities on the basis of some similarity-
Integration – Process of achieving unity of effort among the various departments
1. Establishing Enterprise Objectives
2. Formulating Supporting objectives, policies and Plans
3. Identifying and classifying the necessary to accomplish
4. Grouping the activities in the light of human and material resources available
5. Delegating to the head of each group the activity necessary to perform
6. Tying the groups together horizontally and vertically through authority relationship and
information flows.
Principles of Organising
1. Objectives
2. Specialization
3. Span of Control
4. Exception – the higher level have limited time, only exceptionally complex problem should be
referred to them and routine matters be dealt by the subordinates at the lower levels
5. Scalar Principle / Chain of command – line of authority6.Unity of Command
7. Delegation
8. Responsibility
9. Authority
10. Efficiency
11. Simplicity
12. Flexibility
13. Unity of Direction
14. Personal ability
Span of Management Factors governing Span of Management: Appropriate span of Management must
be determined by the specific of the manager particular situation.
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1. Ability of the manager
2. Ability of the Employees
3. Type of work
4. Well defined authority & Responsibility
5. Geographic locations
6. Level of Management
7. Economic Consideration Orgn with Narrow span superior with less number of subordinate to
monitor.
Advantage: -Close supervision, close control, Fast Communication, Communication between

subordinates & superiors
Disadvantages: Superiors tend to get too involved in subordinate work -Many levels of Management-
High cost due to many levels Excessive distance between lowest level and top level
Orgn with wide span superior with more number of subordinate to monitor
Advantages:
Superiors are forced to delegate-Clear policies must be made-Subordinates must be carefully selected
Disadvantages:
Tendency of overloaded superiors to become decision bottlenecks-Danger of superiors loss of control-

Requires exceptional quality of manager.
SPAN OF MANAGEMENT:
The Span of Management refers to the number of subordinates who can be managed efficiently by a
superior. Simply, the manager having the group of subordinates who report him directly is called as the
span of management.
The Span of Management has two implications:
1. Influences the complexities of the individual manager’s job
2. Determine the shape or configuration of the Organization
The span of management is related to the horizontal levels of the organization structure. There is a wide
and a narrow span of management. With the wider span, there will be less hierarchical levels, and thus,
the organizational structure would be flatter. Whereas, with the narrow span, the hierarchical levels
increase, hence the organizational structure would be tall.
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The following image can describe it easily:-
Both these organizational structures have their advantages and the disadvantages. But however the tall
organizational structure imposes more challenges:
 Since the span is narrow, which means less number of subordinates under one superior,
requires more managers to be employed in the organization. Thus, it would be very expensive in
terms of the salaries to be paid to each senior.
 With more levels in the hierarchy, the communication suffers drastically. It takes a lot of time to
reach the appropriate points, and hence the actions get delayed.
 Lack of coordination and control because the operating staff is far away from the top
management.
The major advantage of using this structure is that the cross communication gets facilitated, i.e.,
operative staff communicating with the top management. Also, the chance of promotion increases with
the availability of several job positions.
In the case of a flatter organizational structure, where the span is wide, leads to a more complex
supervisory relationship between the manager and the subordinate. It will be very difficult for a superior
to manage a large number of subordinates at a time and also may not listen to all efficiently.
However, the benefit of using the wider span of management is that the number of managers gets
reduced in the hierarchy, and thus, the expense in terms of remuneration is saved. Also, the
subordinates feel relaxed and develop their independent spirits in a free work environment, where the
strict supervision is absent.
Factors determining span of management:
The span of management can be determined on the basis of a number of relationships that a manager
can manage. These are:
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1. Capacity of Superior: Here the capacity means the ability of a superior to comprehend the
problems quickly and gel up with the staff such that he gets respect from all. Also, the
communication skills, decision-making ability, controlling power, leadership skills are important
determinants of supervisory capacity. Thus, a superior possessing such capacity can manage
more subordinates as compared to an individual who lack these abilities.
2. Capacity of Subordinate: If the subordinate is trained and efficient in discharging his functions
without much help from the superior, the organization can have a wide span. This means a
superior can manage a large number of subordinates as he will be required just to give the
broad guidelines and devote less time on each.
3. Nature of Work: If the subordinates are required to do a routine job, with which they are well
versed, then the manager can have a wider span. But, if the work is complex and the manager is
required to give directions, then the span has to be narrower.Also, the change in the policies
affects the span of management. If the policies change frequently, then the manager needs to
devote more time and hence the span would be narrow whereas if the policies remain stable,
then a manager can focus on a large number of subordinates. Likewise, policies technology also
plays a crucial role in determining the span.
4. Degree of Decentralization: If the manager delegates authority to the subordinates then he is

required to give less attention to them. Thus, higher the degree of decentralization, the wider is
the span of management. But in case, subordinates do not have enough authority, then the
manager is frequently consulted for the clarifications, and as a result superior spends a lot of
time in this.
5. Planning: If the subordinates are well informed about their job roles, then they will do their
work without consulting the manager again and again. This is possible only because of the
standing plans that they follow in their repetitive decisions. Through a proper plan, the burden
of a manager reduces manifold and can have a wider span of management.
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6. Staff Assistance: The use of staff assistance can help the manager in reducing his workload by
performing certain managerial tasks such as collecting information, processing communications
and issuing orders, on his behalf. By doing so, the managers can save their time and the degree
of span can be increased
7. Supervision from Others: The classical approach to the span of management, i.e., each person
should have a single supervisor is changing these days. Now the subordinates are being
supervised by other managers in the organization such as staff personnel. This has helped the
manager to have a large number of subordinates under him.
8. Communication Techniques: The mode of communication also determines the span of

management. If in the manager is required to do a face to face communication with each
subordinate, then more time will be consumed. As a result, the manager cannot have a wider
span. But in case, the communication is in writing and is collected through a staff personnel; the
manager can save a lot of time and can have many subordinates under him.
The span of management is also called as the span of supervision or span of control, which influences
the complexity of the individual manager’s job and determines the shape or configuration of the
organization.
Line and Staff Relationship:

Much confusion has arisen among both scholars and managers as to what “line” and “staff’ mean. As a
result, there is probably no area of management that causes more difficulties, more friction, arid more
loss of time and effectiveness.
Yet the line-and-staff relationships of the members of an organization must necessarily affect the
operation of the enterprise.
One widely held view of line and staff is that line functions are those that have direct impact on the
accomplishment of the objectives of the enterprise.
On the other hand, Staff functions are those that help the line persons work most effectively in
accomplishing the objectives.
The people who adhere to this view almost invariably classify production and sales (and sometimes
finance) as line functions and accounting, personnel, plant maintenance, and quality control as staff
functions.
An organization structure which is composed of only line executives is termed as line organization.
Imaginary structure of such an organization may be as under:
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An organization structure which is composed of both line executives and staff executives is termed as
line and staff organization.
An imaginary structure of such a type is shown below;
A more precise and logically valid concept of line and staff is that they are simply a matter of
relationships.
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Line authority gives a superior a line of authority over a subordinate. It exists in all organizations as an
uninterrupted scale or series of steps. Hence, The scalar principle in organization: the clearer the line of
authority from the ultimate management position in an enterprise to every subordinate position is, the
clearer will be the responsibility for decision-making and the more effective will be organization
communication. In many large enterprises, the steps are long and complex; but even in the smallest; the
very fact of organization introduces the scalar principle. It, therefore, becomes apparent from the scalar
principle that line authority is that relationship in which a superior exercises direct supervision over a
subordinate authority relationship being in direct line or steps.
The nature of the staff relationship is advisory. The function of people in a pure staff capacity is to
investigate, research, and give advice to line managers.
Benefits of Staff
There are many advantages and benefits out of the use of staff. A few of them are:
1. Handling complex managerial functions: The necessity of having the advice of qualified staff
specialists in various areas of an organization can scarcely be overemphasized, especially as
operations become more and more complex.
2. Assisting in decision-making: Managers are now faced with the necessity of making decisions
that require expert knowledge in matters like environmental issues, strengths and weaknesses
of organization, so on and so forth.
3. Relieving an over-burdened top executive: Staff specialists devote their time to think, to gather
data, and to analyze them on behalf of their busy superiors.It is a rare top level executive, who
has the time, or will take the time, to do those things that a staff specialist can do so well.
Limitations of Staff
The use of staff specialists can ensure many benefits to organizations but the nature of staff authority
and the difficulty to understanding it lead certain problems in practice.
1. An escape clause for staff specialists Staff specialists only propose a plan; others must make the
decision to adopt the plan and put it into operation. This creates an ideal situation for shifting
blame for mistakes. The staff will claim that it was a good plan and that it failed because the
operating manager was inefficient and ineffective.
2. Line authority being undermined Operating (line) managers represent the main line of the
organization and they also gain a degree of indispensability. The staff specialists may, however,
forget that their value lives in the extent to which they strengthen line managers and also that
they are to counsel and not to order. They need to remember that if they undermine line
authority, they risk becoming expendable. As a matter of fact, if there is an expendable person
in an organization, it is most likely to be the staff specialist.
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3. Impracticality of staff recommendations

Since staff people do not implement what they recommend, it is possible that they may think in
a vacuum, thereby making their recommendations impractical and which in their turn, often
results in friction, loss of morale and sabotage.
4. Disunity in command Unity of command is unavoidable for the management of any

organization to reach its goal. So, multiple authorities, created out of the use of staff specialists,
may create disastrous consequences.
5. Complicacy in leadership and control The chief executive of a large organization may be so busy
dealing with the advice and recommendations of a large number of staff specialists that he finds
little time to devote for operating departments.
Line authority is responsible to run the organization according to is strategic plan. Staff authority plays
and advisory role as their job is to investigate, research, and give advice to line managers. For
organization to run properly both line and staff member’s contribution is required.
LINE AND STAFF CONFLICTS:
Whatever may be the way of structuring an organization, basically organizations are tightly knotted
together by the cord of authority relationships. Such relationships act as a cohesive force and integrate
the whole organization.
The types and degrees of authority vary with the decision-making levels. Different authority
relationships basically revolve around line and staff relationships. Line functions are those that directly
influence the accomplishment of objectives of an organization, while staff functions help the line staff to
work effectively and accomplish organizational objectives.
However, in reality it is difficult for us to separate direct and supportive functions. In fact, functions are
based on the nature of the organization. Hence such categorization of line and staff functions varies
from organization to organization. In a manufacturing organization, production and sales are considered
as line functions, while finance, purchase, personnel, maintenance, quality control, etc. are considered
as staff functions.
Line and staff distinctions are made on the basis of two viewpoints—functional viewpoint and authority
relationships viewpoint. Allen defined line and staff functions thus—”Line functions are those which
have direct responsibility for accomplishing the objectives of the enterprise and staff refers to those
elements of the organizations that help the line to work more effectively in accomplishing the primary
objectives of the enterprise.” Since organizational objectives determine the line and staff functions, any
change in objectives may result in changes in the line and staff functions.
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Line and Staff Conflicts:
Line and staff managers are supposed to work harmoniously to achieve the organizational goals. But
their relationship is one of the major sources of conflict in most organizations. Since such conflicts lead
to loss of time and organizational effectiveness, it is always desirable to identify the sources of such
conflicts and initiate necessary action to overcome them.
Theoretically, it is impossible to differentiate between line and staff functions and because of this,
conflicts cannot be avoided. However, line and staff conflicts can be grouped into three categories—
conflicts due to line viewpoint, conflicts due to staff viewpoint, and conflicts due to the very nature of
line and staff relationships.
Conflicts due to Line Viewpoint:
1. Lack of accountability: Line managers generally perceive that staff managers are not accountable for
their actions. Such lack of accountability on the part of staff leads to ignoring of the overall
organizational objectives. Staff takes the credit for achieving the results, which is actu ally achieved by
the line people. But if anything goes wrong, they blame the line. Such perception among the line
managers is one of the most important sources of line and staff conflict.
2. Encroachment on line authority: Line managers often allege that staff managers encroach upon their
authority by giving recommendations on matters that come within their purview. Such encroachments
influence the working of their departments and often lead to hostility, resentment, and reluctance to
accept staff recommendations.
3. Dilution of authority: Staff managers often dilute the authority and be- little the responsibilities of
line managers. Line managers fear that their responsibilities may be reduced and they even suffer from
a feeling of insecurity.
4. Theoretical basis: Staff being specialists, they generally think within the ambit of their specialization.
They fail to relate their suggestions to the actual reality and are unable to understand the actual
dimensions of the problems. This is because staff is cut-off” from the day-to-day operations. This results
in impractical suggestions, making it difficult to achieve organizational goals.
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Conflicts due to Staff Viewpoint:
1. Lack of proper use of staff: Staffs managers allege that line managers often take decisions without
any input from them. Line just informs staff after taking decisions. This makes staff managers feel that
line do not need staff. But even in such cases (where line takes its own decisions without consulting
staff), if anything goes wrong, staff is made responsible.
2. Resistance to new ideas: Line managers resist new ideas as they feel implementing new ideas means
something is wrong with the present way of working. Such rigidity of line managers dissuades staff from
implementing new ideas in the organization and adds to their frustration.
3. Lack of proper authority: Staff often alleges that despite having the best solutions to the problems
being faced in their areas of specialization, they fail to contribute to organizational goals. This is because
the staff lack the authority to implement the solutions and are unable to persuade the line managers
(who have the authority) to implement them.
Conflicts Due to the Very Nature of Line and Staff Relationships:
1. Different backgrounds: Line and staff managers are usually from different backgrounds. Normally line
managers are seniors to staff in terms of organizational hierarchy and levels. On the contrary, staff
managers are relatively younger and better educated. Staff often looks down upon the line. Such
complexes create an atmosphere of mistrust and hatred between the line and staff.
2. Lack of demarcation between line and staff authority: In practice it is difficult to make a distinction
between line and staff authority. Overlapping and duplication of work creates a gap between the
authority and responsibility of line and staff. Each tries to shift the blame to the other.
3. Lack of proper understanding of authority: Failure to understand authority causes misunderstandings

between the line and staff. This leads to encroachment and creates conflict.
To overcome the line and staff conflict, it is necessary for an organization to follow certain
approaches:
1. Clarity in relationships: Duties and responsibilities of both line and staff should be clearly laid down.
Relationships of staff with the line and their scope of authority need to be clearly defined. Similarly, line
managers should also be made responsible for decision making and they should have corresponding
authority for the same. Line should enjoy the freedom to modify, accept, or reject the recommendations
or advice of the staff.
2. Proper use of staff: Line managers must know how to maximize organizational efficacy by optimizing
the expertise of staff managers. They need to be trained on the same. Similarly, staff managers should
also help the line to understand how they can improve their activities.
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3. Completed staff work: Completed staff work denotes careful study of the problem, identifying
possible alternatives for the problem, and providing recommendations based on the compiled facts. This
will result in more staff work and pragmatic suggestions.
4. Holding staff accountable for results: Once staff becomes accountable, they would be cautious about
their recommendations. Line also would have confidence on staff recommendations, as staff is
accountable for the results.
DELEGATION:
Delegation means assigning some work to others and also giving them the authority to perform that
task. It involves the granting of the right of decision making in some identified areas and also giving the
responsibility of the completion of the task to a subordinate. As in this process a superior delegates a
part of his authority to a subordinate he cannot delegate the authority which he himself doesn’t have.
The subordinate is expected to work within the limitations that were put at the time of delegations.
Delegation could be written or implied, specific or general or formal or informal. It helps in reducing the
work load of the manager as they can delegate some of their work to others. It also helps in improving
motivation, morale, and the job satisfaction of the subordinates. It also enables a manager to utilize the
specialized knowledge and experience of a subordinate.
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The process of delegations involves the determination of accepted results and the assignments of duties
to the subordinates. The authority to perform these duties is also given to the subordinates so that they
can take decisions and use the available resources. The subordinates to whom the authority is delegated
are also made accountable for the performance of these duties.
Kinds of Delegation:
Specific or general delegation: specific delegation of authority is related with an assigned the task or a
particular function. The authority that has been delegated to the production manager in order to
perform this function can be considered as specific delegation of authority. The managers of various
departments had given specific authority so that they can complete their departmental duties.
When authority is conferred for performing general managerial functions like organizing, planning or
directing etc., these functions are performed by the subordinate managers and they enjoy the authority
that is needed for carrying out these responsibilities. In such a case, the chief executive has the overall
control and he also guides the subordinates regarding different matters.
Formal or informal delegation: the former delegation of authority is considered as a part of

organizational structure. Whenever, a particular task has been assigned to a person, then the necessary
authority is also conferred on such a person. This type of delegation is considered as a part of the
routine functioning of the organization. In such a case, authority is automatically provided to every
person, according to the duties assigned to such a person. For example, when powers are given to the
production manager to increase production, it is a case of the former delegation of authority to such
manager. On the other hand, the informal delegation of authority does not take place due to position
but it takes place according to the prevalent circumstances in the organization. A particular task may be
undertaken by a person not the reason that such task has been assigned to the person but because such
task is necessary to perform the normal work of the person.
Lateral Delegation: when authority is provided to a person to complete a task, the person may require
the assistance of several other persons. As it may take some time to formally get the assistance of these
persons, the person may indirectly as these persons for their help to complete the task and in this way,
cut short the time needed informal delegation. Therefore when authority is delegated informally, it is
known as lateral delegation.
Reserved authority and delegated authority: the person who is going to delegated authority may not
want to delegate the authority to the subordinates. In this way, the authority that the person keeps with
himself is known as reserved authority and the authority that has been conferred upon the subordinates
is known as the delegated authority.
Requirements for Delegation: Every superior in the organization wants to retain as much authority as
possible. The circumstances or the load of work may require the superior to delegate authority
downwards. But if the authority has not been delegated willingly, then it may not be easy to achieve the
desired results. Hence it is very significant that appropriate authority should flows downwards for the
purpose of ensuring that the work is completed smoothly and efficiently. For this purpose, the process
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of delegation of authority can be considered as complete only if the below mentioned requirements are
fulfilled.
Willingness to delegate: the first requirement in this regard is that there should be willingness on the
part of the superior to delegate authority to the subordinates. Unless the superior is mentally ready to
part with his authority, the delegation of authority cannot prove to be effective. Similarly if the superior
is forced to delegate authority downwards against his will, the superior will try to find out the ways to
interfere with the working of the subordinate. In such a case, the superior may overshadow the
subordinate to such an extent that each and every decision needs to be implemented after taking the
approval of the superior and the performance of the subordinate has to face the close scrutiny from the
superiors. Therefore, it will be better not to delegate authority at all unless the superior is willing to do
so.
Environment of trust and confidence: trust and confidence should be present between the superiors
and their subordinates in the organization. The subordinates are required to be provided opportunities
or real job situations where they may get a chance to use their talent and experience. On the other hand
if any mistake is made by the subordinates, the superiors should help and correct these mistakes.
Similarly the superiors should also have full faith in the abilities of their subordinates and they should
not treat their subordinates as their competitors. By creating an environment of trust and confidence in
the organization, the subordinates will be able to learn and grow and such environments will also help in
ensuring smooth process of delegation
Faith in the subordinates: there are certain cases where the superiors failed to delegate authority to the
fear that the subordinates will not be able to complete the job independently on their own. In such a
case, the superiors do not have faith in the abilities of the subordinates and they do not want to take
any risks. Such superiors are over conscious regarding their own skills and competence and the result is
that they do not want to delegate authority to their subordinates. However such situation should be
avoided by the superiors and they should have faith in the abilities of their subordinates. Similarly, the
superiors should help the subordinates in completing the job properly. The superiors should remember
that they have also learned a number of things from their own superiors and their subordinates will also
be able to complete difficult tasks if proper guidance is provided to them. Such an environment of faith
will allow the subordinates to learn things faster and they will be able to take more responsibilities in
the organization.
Fear of the supervisors: Generally, it has been seen that the superiors have a fear that their position
may not be overtaken by the subordinates if they are provided high responsibilities. However, all such
fears are unfounded and baseless. The superiors may provide a number of reasons for not delegating
authority but this view is the main cause. This type of thinking should be avoided by the superiors and
they should nurture positive attitude towards their subordinates. Similarly, they should encourage their
subordinates to take up more responsibilities and in turn, the subordinates will have more respect for
the abilities of their superiors.
HOW TO MAKE DELEGATION EFFECTIVE:
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The failure of the process of delegation can be the result of halfhearted approach adopted in this regard
by the superiors or the subordinate managers. Therefore, when the delegation is partial, unclear or, it is
inconsistent with the expected results, the process of delegation is bound to fail. In this regard, the
following steps need to be taken in order to make the process of delegation effective.
1. Defining assignments: It is very important that the work assigned to each person has been defined
properly. Similarly, the results that are expected from each person should also be described clearly.
These persons should be providing sufficient authority so that they can achieve the desired results.
2. Proper selection of persons: Appropriate persons should be selected to delegate authority keeping in
view the job that needs to be done. In this way, the process of delegation will be impacted by the
qualifications of the person. While assigning a particular task to a person, it is also required that the
required authority should also be provided to such a person. That is necessary for completing the task.
In case the person does not have the capacity to exercise such authority, then the purpose could not be
achieved. It is important for the HR manager to keep this thing in mind while selecting the appropriate
person for different positions.
3. Proper communication: It is very important to have an open line of communication within the
organization. When authority is delegated, the superiors do not abdicate their right to interfere and the
ultimate responsibility is still lies with the superior. On the other hand, there can be a change in the
circumstances due to which new plans may be required and the delegation has to be considered in the
new situation. Therefore it is very important to have a free flow of communication between the
superiors and their subordinates. The subordinates can provide information which may help the
superiors in making decisions and also to interpret them correctly. Hence, communication is very
significant for an effective process of delegation.
4. Establishing proper controls: The managers are not allowed to relinquish responsibility and as a
result, proper controls should be accompanied by delegation. The superiors are required to regularly
monitor the performance of the subordinates in order to see that they are functioning in accordance
with the plans. On the other hand, if the interference of control has to be avoided, in such a case it is
important to take steps so that information can be a danger regarding deviations.
5. Reward for proper implementation: Rewards should be provided to the subordinates for proper
delegation and successfully assuming authority. The managers should regularly monitor the
performance of different persons. The employees who proved to be successful in delegating the
authority properly and who have shown good results with the delegated authority need to be given
pecuniary or other rewards by the organization. Such rewards will encourage other employees to
improve their performance.
Centralization and Decentralization:
After the delegation of the authority, the delegation of the decision making is obtained and
consequently after this, the acts for the implementation are very much required. So it can be said that
the authority for taking the decisions can be spread with the help of the delegation of the authority.
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The centralization of the authority can be done with – in a few seconds, if complete concentration is
given on the decision making at any position. This concept is generally referred to as the centralization
of the authority. The centralization can be done with a position or at a level in an organization. Hence, it
can be said that the extension of the organization is referred to as the centralization of the authority.
Here the decision making must be concentrated in a few hands.
The advantages of the centralization of the authority can be summarized as the follows –
1. Very high speed.
2. Well defined responsibility.
3. Depends largely on the general consensus.
4. Decision making is very clear.
Decentralization of the Authority
In an organization, the decentralization of the authority can be referred to as allowing the large number
of the persons within an organization to take the decisions. In the decentralization of the authority, no
concentration is given on the decision making.
The major disadvantages of the decentralization of the authority can be summarized as the follows –
1. General slackness in the discipline.
2. Too much meddling in the process.
3. Existence of the political culture.
4. Loss in the effectiveness.
Advantages of Decentralization:
1. Quick decisions: In case of a decentralized system, the decision-making powers are delegated at the
level of actual execution. Therefore, when the need arises to take a decision, the particular executive
can decide immediately. Such executive is not required to make a reference to the top-level
management for most of the decisions. Therefore it returns the process of taking decisions.
2. Reduces the burden of top management: In a centralized system of authority, the top-level
executives are overburdened. Therefore they do not have any time to involve in activities like planning
etc. On the other hand in case of decentralized decision-making, the power is delegated to the lower
level of management, which relieves the top executives from some of the burden. In case of
decentralized system, the top executives only deal with the work that needs their personal attention
and every other word is assigned to the persons at the appropriate level. This significantly reduces the
burden of the top-level executives and they can effectively deal with their other responsibilities like
planning etc.
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3. Motivation of subordinates: In case of decentralization, the subordinates have an opportunity to take

the decisions independently. Such a situation fulfills the human need for power, status and
independence. At the same time, the subordinate managers also realize the significance in the
organization. Consequently, they make efforts to put in their maximum in order to improve their
performance. In such a situation, the subordinates also get a chance to take initiative and they can also
try new ideas. Hence, in a decentralized set up, the subordinates also feel motivated.
4. Sense of competition: In a decentralized system, the various departments or units of the organization
are considered as separate profit centers. The workers of different departments compete with each
other in order to exhibit better results. In this way, this sense of competition improves the performance
of all the departments of the organization.
5. Provides product/market emphasis: As in case of decentralization, the decision-making is scattered

throughout the organization and to the lower level of management, there is more product on the
market emphasis. The changes that take place in the tastes and fashion needs prompt decisions. A
decentralized system is able to respond quickly to such changes in the situation. The persons who are
related marketing can take quick decisions as required by the situation.
6. Effective control and supervision: In case of delegation of authority, the span of control is also
effective. As the executives at the lower level will have the complete authority to take significant
decisions, they will recommend awards or punishments according to the performance. This in turn will
improve supervision and the control.
7. Division of risk: The organization is separated into various departments under decentralization. The
management can experiment with new ideas in one department of the organization and therefore
without disturbing the other departments. Such a situation will reduce the risk in case things go wrong.
If the experiment proves to be successful, it can be implemented in the other departments also.
Therefore, in case of a decentralized, the risk element can also be limited.
Disadvantages of Decentralization:
1. Difficulty in control: As the different departments of the organization were independently, it becomes
difficult to control the activities of these departments. The top-level management is not in a position to
exercise effective control of these departments due to the reason that it is not in touch with the routine
activities of the different departments of the organization.
2. Lack of coordination: In case of decentralization, different departments, units of the sections of the
organization had significant powers. These powers are provided so that they can formulate their own
policies and programs. But in such a case, it becomes difficult to coordinate the activities of different
segments of the organization. Moreover, each department of the organization lays stress on its own
work and does not care for the other departments. This results in creating more problems in
coordinating the activities of different departments.
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3. Decentralization is costly: In the process of decentralization, heavy overhead expenses are involved.
Every decentralized unit of the organization needs to be self-sufficient concerning its activities like
marketing, production, personnel, etc. Therefore, a number of employees will be required to deal with
different activities. High salaries have to be paid to these employees which results in huge cost for the
organization. Therefore, it can be said that the process of decentralization is suitable for large
organizations. On the other hand, the small-scale organizations cannot afford to spend such high
amount on overhead expenses.
4. Lack of able managers: The process of decentralization can become successful only if competence
persons are available to manage different jobs in different departments of the organization. However,
sometimes, competence persons are not available as per the requirements of the organization.
Therefore the decentralization system may fail in the absence of competent personnel.
CONTROLLING
For making people act, different types of the methods like the planning, the organizing, the staffing, the
leading etc. are used. But after the people start acting, generally the result that is obtained seems to be
a mere waste. Now here, the role of the management of the organization is very critical and should be
performed very carefully. The main responsibility of the management here is that it should take proper
care of the fact that the results that are produced are strictly according to the objectives and none of
them is a waste or use – less in the nature. This responsibility of the management of the organization is
often referred to as the ‘Controlling’.
The Controlling acts as a very useful managerial function or the tool as it ensures that the actions
conform to the expected results with the help of the suitable feedback systems. This process also
includes correcting any deviation time in order to see that the results are ensured within the proper
time and the costs as per the planned standards. One very important point that should be kept in mind
is that for having the control, it is very necessary to plan the things i.e. without the planning, the control
cannot be obtained. The major reason behind this is that if we will not know about the things that are to
be achieved, the resources that are available, the various things that are to be taken care of etc., then it
will not be possible to carry on with the process in a controlled manner.
So now it can be said that the planning is very much needed both at the personal level as well as at the
organization level as it acts as a mental discipline and plays a very major role in the process of the
controlling. But one very important thing that should be taken care of is that the planning that is done
for controlling the process should be done very carefully and should not be vague in the nature i.e.
should be very meaningful so that it can help in the establishment of the controlling standards.
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Principles of the Controlling:
1. Goals
a. The establishment of the measurable goals acts as a prerequisite to the controlling.

b. For the implementation of the program, it is very necessary to have a conceptual document and this
document is referred to as the planning.
c. From here, the process of the planning goes through the conceptual to the measurable objectives.
d. At times these can also be qualitative in the nature and in such cases it becomes very necessary to
convert these into the measurable terms.
2. Establishment of the standards
a. The measurable goals that are created have to be converted into the standards.
b. In case of the measurable goals, the measure of weighing the results is fixed.
c. But in case of the standard, one expects for a minimum performance depending on the given efforts
and the time.
d. During this step, the measures of the efforts, the time, and the cost are fixed in the nature.
e. The performance can be judged by setting the minimum standards.
3. Nature of the controls
a. The controls must be economical in the nature not only in the implementation but also in correcting
the deviation by getting a signal on time.
b. The control costs in terms of the implementation.
c. The evaluation of the control in a tangible as well as the intangible form, depends greatly on the
judgment of the management.
4. Selection criteria of the critical points
a. It is very necessary to keep the costs of the control down, so hence it is not at all possible to have a
control over each stage in the process.
b. For this purpose, it is very important to select certain control points.
c. The selection largely depends on the individual testing skills, group output, its criticality to the
operation in the total activity etc.
d. The raw materials that cannot be reworked and returned must be selected as the critical point for the
control.
e. The selected critical points can be changed on a rotational basis and also by changing after the
feedback that is obtained from the results of the process.
5. Feedback system
a. The feedback should be very efficient and meaningful in the nature.

b. It is very essential that the control points are very well supported by the control systems as these
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points at any stage can be feed forward as well as backward.

c. With the help of the Feedback system, one can make a decision over the fact that whether the cost of
the continuity in the operations in the similar manner would be good in the customer’s interest or not.
d. This system helps in the determination of the fact that whether any type of the rework or correction
is required or not.
6. Discipline and Flexibility
a. Both the Discipline and the Flexibility are very much required in the process of the controlling and for
this, the presence of the control system is very essential.
b. Discipline can be achieved, if it is assured that the same process will be carried on during the
existence.
c. In case of any type of the changes or the deviations in the design of the product etc, then it is not at
all possible to continue with the same set of the control points.
d. Discipline can be maintained only if the various activities involved remain totally unchanged.
e. But sometimes such circumstances, like the results that are obtained at a particular point do not meet
the requirements expected of such a control, arise and then it becomes very necessary for the control
system to possess the flexibility.
f. One very important point to be kept in mind here is that the changes that are brought in the control
systems should be brought in, depending on the demands of the business.
g. As the environment present around the organization and that present within the organization keep on
changing continuously, so it is very important that the control systems possess the flexibility.
7. Development of the controls
a. The controls should be tailored in such a way that the whole organization should be able to read the
feedback reports.
b. The results of the control should be communicable and also actionable in the nature.
c. Any type of the difference in the output should be brought out by the various controls as with this, the
deviations can be easily pointed out without doing much work.
8. Corrections
a. With the help of the controls, one can find out the deviations in the planned performance.
b. If the control is ideally placed, its organization and the management can act in the self interest of the
business.
c. It is very necessary to direct the controls towards the corrections and then suitable corrective actions
should be taken.
Process of Control:
Following are the steps involved into the process of control:
1. Establish the Standards: Within an organization’s overall strategic plan, managers define goals for
organizational departments in specific, precise, operational terms that include standards of performance
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to compare with organizational activities. However, for some of the activities the standards cannot be
specific and precise.
Standards, against which actual performance will be compared, may be derived from past experience,
statistical methods and benchmarking (based upon best industry practices). As far as possible, the
standards are developed bilaterally rather than top management deciding unilaterally, keeping in view
the organization’s goals.
Standards may be tangible (clear, concrete, specific, and generally measurable) – numerical standards,
monetary, physical, and time standards; and intangible (relating to human characteristics) – desirable
attitudes, high morale, ethics, and cooperation.
2. Measure Actual Performance: Most organizations prepare formal reports of performance

measurements both quantitative and qualitative (where quantification is not possible) that the
managers review regularly. These measurements should be related to the standards set in the first step
of the control process.
For example, if sales growth is a target, the organization should have a means of gathering and reporting
sales data. Data can be collected through personal observation (through management by walking
around the place where things are happening), statistical reports (made possible by computers), oral
reporting (through conferencing, one-to-one meeting, or telephone calls), written reporting
(comprehensive and concise, accounting information – normally a combination of all. To be of use, the
information flow should be regular and timely.
3. Compare Performance with the Standards: This step compares actual activities to performance
standards. When managers read computer reports or walk through their plants, they identify whether
actual performance meets, exceeds, or falls short of standards.
Typically, performance reports simplify such comparison by placing the performance standards for the
reporting period alongside the actual performance for the same period and by computing the variance—
that is, the difference between each actual amount and the associated standard.
The manager must know of the standard permitted variation (both positive and negative). Management
by exception is most appropriate and practical to keep insignificant deviations away. Timetable for the
comparison depends upon many factors including importance and complexity attached with importance
and complexity.
4. Take Corrective Action and Reinforcement of Successes: When performance deviates from
standards, managers must determine what changes, if any, are necessary and how to apply them. In the
productivity and quality-centered environment, workers and managers are often empowered to
evaluate their own work. After the evaluator determines the cause or causes of deviation, he or she can
take the fourth step— corrective action.
The corrective action may be to maintain status quo (reinforcing successes), correcting the deviation, or
changing standards. The most effective course may be prescribed by policies or may be best left up to
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employees’ judgment and initiative. The corrective action may be immediate or basic (modifying the
standards themselves).
Importance of Control:
1. Guides the Management in Achieving Pre-determined Goals: The continuous flow of information
about projects keeps the long range of planning on the right track. It helps in taking corrective actions in
future if the performance is not up to the mark.
2. Ensures Effective Use of Scarce and Valuable Resources: The control system helps in improving
organizational efficiency. Various control devices act as motivators to managers. The performance of
every person is regularly monitored and any deficiency if present is corrected at the earliest.
Controls put psychological pressure on persons in the organization. On the other hand control also
enables management to decide whether employees are doing right things.
3. Facilitates Coordination: Control helps in coordination of activities through unity of action. Every
manager will try to coordinate the activities of his subordinates in order to achieve departmental goals.
Similarly the chief executive also coordinates the functioning of various departments. The control acts as
a check on the performance and proper results are achieved only when activities are coordinated.
4. Leads to Delegation and Decentralization of Authority: A decision about follow-up action is also
facilitated. Control makes delegation easier/better. Decentralization of authority is necessary in big
enterprises. The management cannot delegate authority without ensuring proper control.
The targets or goals of various departments are used as a control technique. Various control techniques
like budgeting, cost control; pre action approvals etc. allow decentralization without losing control over
activities.
5. Spares Top Management to Concentrate on Policy Making: For control processes management’s
attention is not required every now and then. The management by exception enables top management
to concentrate on policy formulation.
Why do people Oppose Control?
Many people are averse to the concept of control for the following reasons:
(i) New, more “organic” forms of organizations (self-organizing organizations, self- managed teams,
network organizations, etc.) allow organizations to be more responsive and adaptable in today’s rapidly
changing world. These forms also cultivate empowerment among employees, much more than the
hierarchical, rigidly structured organizations of the past.
(ii) Many people assert that as the nature of organizations has changed so must the nature of
management control. Some people go so far as to claim that management shouldn’t exercise any form
of control whatsoever.
84
They claim that management should exist to support employee’s efforts to be fully productive members
of organizations and communities – therefore, any form of control is completely counterproductive to
management and employees.
(iii) Some people even react strongly against the phrase “management control”. The word itself has a
negative connotation, e.g., it can sound dominating, coercive and heavy-handed. It seems that writers of
management literature now prefer use of the term “coordinating” rather than “controlling”.
(iv) People also oppose controls as they are thought of decreasing autonomy, stifling creativity,
threatening security, and perpetuating oppression. This may lead to change in expertise and power
structure, and social structure in the organisation.
Types of Control:
Controls can be numerous in kind. These may be classified on the basis of (a) timing, (b) designing
systems, (c) management levels, and (d) Responsibility
On the basis of timing:
Control can focus on events before, during, or after a process. For example, a local automobile dealer
can focus on activities before, during, or after sales of new cars. Such controls may be respectively called
as Preventive, Detective, and Corrective.
On this basis the control may be:
(i) Feed forward Control
(ii) Concurrent Control
(iii) Feedback Control
1. Feed forward Control:
The objective of feed forward control or preliminary control is to anticipate the likely problems and to
exercise control even before the activity has started or problem has occurred or been reported. It is
future directed.
This kind of control is very popular in airlines. They go in for preventive maintenance activities to detect
and prevent structural damage, which may result in disaster. These controls are evident in the selection
and hiring of new employees. It helps in taking action beforehand.
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In case of feedback control, one relies on historical data, which will come after the activity has been
performed. This means information is late and the rectification is not possible. One can make correction
only for future activities.
That means whatever wrong has been done is done, and it cannot be undone. Though, future-directed
control is largely disregarded in practice, because managers have been excessively dependent on
accounting and statistical data for the purpose of control. In the absence of any means of looking
forward, reference to history is considered better than no reference at all.
However, the concept of feed forwarding has been applied now and then. One common way managers
have practiced it is through careful and repeated forecasts using the latest available information,
comparing what is desired with the forecasts, and introducing program changes so that forecasts can be
made more promising.
2. Concurrent Control:
Concurrent control monitors ongoing employee activity to ensure consistency with quality standards
takes place while an activity is on or in progress. It involves the regulation of ongoing activities that are
part of transformation process to ensure that they conform to organizational standards.
The technique of direct supervision is the best-known form of concurrent control. Concurrent control is
designed to ensure that employees’ activities produce the correct results and to correct the problems, if
any, before they become costly.
In case of computer typing, if the spelling is wrong or construction is incorrect, the programme
immediately alerts the user. Many manufacturing operations include devices that measure whether the
items being produced meet quality standards.
Since concurrent control involves regulating ongoing tasks, it requires a complete understanding of the
specific tasks involved and their relationship to the desired and product.
Concurrent control sometimes is called steering, screening or yes-no control, because it often involves
checkpoints at which decisions are made about whether to continue progress, take corrective action, or
stop work altogether on products or services.
3. Feedback Control:
The control takes place after the job is over. Corrective action is taken after analysing variances with the
planned standards at the end of the activity. It is also known as ‘post action control’, because feedback
control is exercised after the event has taken place.
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Such control is used when feed forward or concurrent is not possible or very costly; or when exact
processes involved in performing a work is difficult to specify in advance.
The twin advantages of feedback control are that meaningful information is received with regard to
planning efforts, and feedback control enhances employee motivation.
On the basis of designing Control Systems:
Three approaches may be followed while designing control systems, viz., Market Control, Bureaucratic
Control, and Clan Control. However, most organizations do not depend only on just one of them.
1. Market Control:
Control is based upon market mechanisms of competitive activities in terms of price and market share.
Different divisions are converted into profit centers and their performance is evaluated by segmental
top line (turnover), bottom line (profit) and the market share.
Using market control will mean that the managers in future will allocate resources or create
departments or other activities in line with the market forces.
2. Bureaucratic Control:
Bureaucratic control focuses on authority, rule and regulations, procedures and policies. Most of the
public sector units in India go in for bureaucratic control.
If they do not go by the rulebook, the legislative committees and the ministries under whom they work
will reprimand them. In a hospital no medicine can be used unless the prescription is there and it is
recorded in the issue register, even if the patient may die in between.
3. Clan Control:
The control systems are designed in a way that give way to shared vision, shared values, norms,
traditions and beliefs, etc., part of the organizational culture.
It is not based upon hierarchical mechanisms, but work-related and performance measures. This kind of
control is most suitable for the organizations which use team style of work groups and where
technology changes very fast.
On the basis of Levels:
People at different level have different planning responsibilities, so do they undertake controlling. On
the basis of levels controls, can be categorized as Operational, Structural, Tactical, and Strategic.
1. Operational Control:
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Its focus remains upon the processes used by the organisation for transforming the inputs (resources)
into outputs (products/services). Operational controls are used at the lower management. It is exercised
almost every day. Quality control, financial controls are part of operational controls.
2. Structural Control:
Are the different elements of organisation structure serving their intended aims? Is there overstaffing? Is
the ratio of staff to line increasing? Necessary action is to be undertaken.
Two important forms of structural control can be bureaucratic control and clan control, about which we
have already talked. Structural control is exercised by top and middle management.
3. Tactical Control:
Since tactical control deals with the departmental objectives, the controls are largely exercised by
middle management levels.
4. Strategic Control:
Strategic controls are early warning systems. Strategic control is the process to determine whether the
effectiveness of a corporate, business and functional strategies are successful in helping organisations to
meet its goals. Strategic controls are exercised by top level management.
On the basis of Responsibility:
Who has the responsibility of controlling? The responsibility may rest with the person executing the
things or with the supervisor or manager. This way control may be internal and external.
Internal control permits highly motivated people to exercise self-discipline. External control means that
the thread of control is in the hands of supervisor or manager and control is exercised through formal
systems.
Requirements of Effective Control System:
A control system is not an automatic phenomenon but deliberately created. Though different
organizations may design their control systems according to their unique and special characteristics or
conditions, yet in designing a good and effective control system the following basic requirements must
be kept in view:
1. Focus on Objectives and Needs:
The effective control system should emphasize on attainment of organizational objectives. It should
function in harmony with the needs of the enterprise. For example, the personnel department may use
feed forward control for recruiting a new employee, and concurrent control for training.
At the shop level, control has to be easy, but more sophisticated and broad ranging controls may be
developed for higher level managers. Thus, controls should be tailored to plans and positions.
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2. Immediate Warning and Timely Action:
Rapid reporting of variations is at the core of control. An ideal control system could detect, not create
bottlenecks and report significant deviation as promptly as possible so that necessary corrective action
may be taken well in time. This needs an efficient system of appraisal and timely flow of information.
3. Indicative, Suggestive as well as corrective:
Controls should not only be able to point to the deviations, but they should also suggest corrective
action that is supposed to check the recurrence of variations or problems in future.
Control is justified only if indicated or experienced deviations from plans are corrected through
appropriate planning, organizing, staffing and directing. Control should also lead to making valuable
forecasts to the managers so that they become aware of the problems likely to confront them in the
future.
4. Understandable, Objective, and Economical:
Controls should be simple and easy to understand, standards of performance are quantified to appear
unbiased, and specific tools and techniques should be comprehensive, understandable, and economical
for the managers.
They must know all the details and critical points in the control device as well as its usefulness. If
developed and complex statistical and mathematical techniques are adopted, then proper training has
to be imparted to managers.
Standards should be determined based on facts and participation. Effective control systems must
answer questions such as, “How much does it cost?” “What will it save?” or “What are the returns on
the investment?”
The benefits of controls should outweigh the costs. Expensive and elaborate control systems will not
suit, for example to small enterprise.
5. Focus on Functions and Factors:
Control should emphasize the functions, such as production, marketing, finance, human resources, etc
and focus on four factors – quality, quantity, timely use and costs. Not one, but multiple controls should
be adopted.
6. Strategic Points Control:
Control should be selective and concentrate on key result areas of the company. Every detail or thing
cannot and is not to be controlled in order to save time, cost and effort.
Certain strategic, critical or vital points must be identified along with the expectations at those points
where failures cannot be tolerated and appropriate control devices should be designed and imposed at
those stages.
89
Controls are applied where failure cannot be tolerated or where costs cannot exceed a certain amount.
The critical points include all the areas of an organization’s operations that directly affect the success of
its key operations.
7. Flexibility:
Control must not become ends in themselves. It must be environment friendly and be able to make
modifications or revisions necessitated by the rapidly changing and complex business environment.
Flexibility in control system is generally achieved by the use of alternative plans or flexible budgets.
8. Attention to Human Factor:
Excess control causes corruption. It should not arouse negative reactions but positive feelings among
people through focus on work, not on people. The aim of control should be to create self-control and
creativity among members through enmeshing it in the organizational culture. Employee involvement in
the design of controls can increase acceptance.
9. Suitability:
Controls have to be consistent with the organization structure, where the responsibility for action lies,
position, competence, and needs of the individuals who have to interpret the control measures and
exercise control. The higher the quality of managers and their subordinates, the less will be the need for
indirect controls.
Control Techniques:
Many techniques have been developed to control the activities in management. The list is very long, and
it is difficult to describe them all.
Some of the important techniques are:
Financial Control:
Finance is related with mobilization of funds and their utilization and the return on them. Financial
control is exercised through the following:
1. Financial Statements:
Income statement (telling about expenses, segmental incomes, overall income and expenses, and the
net profit/loss), and Balance Sheet (shows the net worth at a single point of time and the extent to
which the debt or equity finance the assets)
2. Financial Audits:
Financial audits, either internal or external are conducted to ensure that the financial management is
done in line with the generally accepted policies, procedures, laws, and ethical guidelines. Audits may be
90
internal (by Organization’s own staff), external (statutory audit by chartered accountants), and
management audit (by experts).
3. Ratio Analysis:
Ratio analysis monitors liquidity, profitability, debt, and activity related aspects.
4. Budgetary Controls:
Budgetary control is the process of constructing budgets, comparing actual performance with the
budget one and revising budgets or activities in the light of changed conditions.
Budgetary control is as such not related only to finance area, but all functional areas do take help of
budgetary control. Budgets help not only in planning but also help to keep a tab on overall spending.
Budgeting may be top-down (managers prepare the budget and ask subordinates to use); bottom-up
(figures come from lower levels and adjusted at upper levels); zero-based (justifying allocation of funds
on the basis of activities or goals); and flexible budgeting (varying standards and varying allocations).
5. Break-even Analysis:
It is a tool of profit planning and deals with cost-volume-profit relationships.
6. Accounting:
Accounting includes responsibility accounting, cost accounting, standard cost approach, direct costing,
and marginal costing.
Marketing Control:
In the field of marketing, to see that customer gets right product at the right price at the right place and
through right communication, the control is exercised through the following:
Market Research:
It is to assess customers’ needs, expectations and the delivery; and the competitive scenario.
Test Marketing:
To assess consumer acceptance of a new product, a small-scale marketing is done. HUL uses Chennai for
most of its test marketing.
Marketing Statistics:
Marketing managers control through marketing ratios and other statistics.
Human resource control:
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Human resource control is required to have a check on the quality of new personnel and also to monitor
performances of existing employees so as to determine firm’s overall effectiveness.
Goal setting, instituting policies and procedures to guide them are to help them. Common controls
include performance appraisals, disciplinary programmes, observations, and development assessments.
Information Control:
All organizations have confidential and sensitive information to be kept secret. How to control access to
computer databases is very important. This has become a key contemporary issue in control.
Organizations keep a watch on employee’s computer usage in general and internet in particular.
Production Control:
To ensure quality production in right quantity at right time economically production controls are
required. Two of the important techniques include: Inventory control (ABC Analysis, Economic Order
Quantity, Just-in time inventory control), and quality control (through inspection, statistical quality
control).
Project Control:
Network analysis is most suitable for the projects which are not routine in minimizing cost and
completing project well in time. Network analysis makes use of two techniques – Programme Evaluation
and Review Technique (PERT), and Critical Path Method (CPM).
Information Technology in Controlling
1. The Introduction process of ensuring that actual activities To monitor performance, compare it
withconform to planned activities goals, and take corrective action as needed
2. Control is checking current performance againstDefinition pre-determined standards

contained in the plans, with a view to ensure adequate progress and satisfactory performance.
ELF Breach Controlling is the measurement and correction of performance in order to make sure
that enterprise objectives and the plans devised to attain them are accomplished. Harold Koontz
3. Definition That function of the system that adjusts operations as needed to achieve the plan, or
to maintain variations from system objectives within allowable limits
4. Characteristics Control is a continuous process Control is a management process Control is

embedded in each level of organizational hierarchy Control is forward looking Control is closely
linked with planning Control is a tool for achieving organizational activities Control is an end
process
92
5. Information Technology in Controlling
6. The Nature of Information tend to use the term Data and Information interchangeably, there is
distinction between the two concepts.
7. Data & Data are raw, unanalyzed numbers and facts Information , about events in contrast,
results when data are organized or analyzed in some meaningful way
8. Management Information System a management information system (MIS) is a system that

provides information needed to manage organizations efficiently and effectively. MIS
encompass three primary components: Technology, People (individuals, groups, or
organizations), and Data/Information for decision making.
9. Academically, the term is commonly used to refer to the study of how individuals, groups, and
organizations evaluate, design, implement, manage, and utilize systems to generate information
to improve efficiency and effectiveness of decision making, including systems termed decision
support system, Expert systems, and executive information systems.
10. Electronic Data Processing (EDP) Electronic Data Processing (EDP) can refer to the use of
automated methods to process commercial data Typically, this uses relatively simple,
repetitive activities to process large volumes of similar information For example: stock updates
applied to an inventory, banking transactions applied to account and customer master files,
booking and ticketing transactions to an airlines reservation system, billing for utility services.
11. InformationComputer Based Information System (CBIS) systems (IS) is the study of
complementary networks of hardware and software that people and organizations use to
collect, filter, process, Information system that goes create, and distribute data beyond the
mere standardization of data to add in the planning process.
12. Decision Support System Decision Support System (DSS) are computer program applications
used by middle management to compile information from a wide range of sources to support
problem solving and decision making. A properly designed DSS is an interactive software-based
system intended to help decision makers compile useful information from a combination of raw
data, documents, and personal knowledge, or business models to identify and solve problems
and make decisions.
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Principles & Fundamentals of Management

Management is an art of getting things done with and through others. Management can be

Efficiency and Effectiveness:

Efficiency means doing the task correctly at minimum cost through optimum utilization

American Society of Mechanical Engineers

(v) Management is the creation and maintenance of an internal environment in an enterprise

(vii) To manage is to forecast and to plan, to organize to command, to coordinate and to

(viii) Management is the function of executive leadership anywhere.- Ralph C. Davis

(x) Management is a distinct process consisting of planning, organizing, actuating and

The activities of management are:

Management is considered a process because it involves a series of interrelated functions. It

Management as a process has the following implications:

(i) Social Process:

(ii) Integrated Process:

(iii) Continuous Process:

Management as an Academic Discipline:

Management has emerged as a specialized branch of knowledge. It comprises principles and

Pervasive: Management is universal in nature. It is used in all types of organizations whether

Multidimensional: It is multidimensional as it involves management of work, people and

Continuous: It consists of a series of function and its functions are being performed by all

Intangible Force: It is intangible force as it can’t be seen but its effects can be felt in the form of

Survival: Management by taking positive decisions with regard to different business activities

b) Social objectives of giving benefits to society like using environmental friendly practices and

c) Personal Objectives because diverse personal objectives of people working in the

(b) Increases Efficiency: Management increases efficiency by using resources in the best

c) Creates Dynamic organization: Management helps the employees overcome their resistance

(d)Achieving personal objectives: Management helps the individuals achieve their personal

The objectives of management are narrated as under.

(b) Survival and solvency of the business, i.e., continuity.

(c) Growth and expansion of the enterprise

(d) Improving the goodwill or reputation of the enterprise.

(ii) Personal objectives:

(a) Fair remuneration for work performed

(b) Reasonable working conditions

(c) Opportunities for training and development

(d) Participation in management and prosperity of the enterprise

(e) Reasonable security of service.

(iii) Social objectives:

(a) Quality of goods and services at fair price to consumers.

(b) Honest and prompt payment of taxes to the Government.

(c) Conservation of environment and natural resources.

(d) Fair dealings with suppliers, dealers and competitors.

(e) Preservation of ethical values of the society.

ROLE AND IMPORTANCE OF MANAGEMENT

According to Peter Ducker,“ management is a dynamic life-giving element in an organization, without it

(i) Achievement of group goals:

(ii) Optimum utilization of resources:

(iii) Minimization of cost:

(iv) Survival and growth:

(v) Generation of employment:

(vi) Development of the nation:

MANAGEMENT AND ADMINISTRATION

Oliver Sheldon in his “The Philosophy of Management” defines ‘Administration as a function is

Thus, the essential features of science are as follows:

(i) Basic facts or general principles capable of universal application

(ii) Developed through scientific enquiry or experiments

(iii) Establish cause and effect relationships between various factors.

(i) Systematic body of knowledge:

(ii) Universal principles:

(iii) Scientific enquiry and experiments:

(iv) Cause and effect relationship:

(v)Tests of validity and predictability:

(i) Practical knowledge

(ii) Personal skill