Ch-1.

Organization:
An organization is a collection of people working together to achieve a common purpose
and goals. It is formed under certain rules and regulations. Organizations may be formed
in every sector. For instance, there are religious organizations, social organization, political
organizations, Business organizations, and so on. Therefore, our college or university,
hospitals, sport-clubs, government, etc. are organizations because they all share common
characteristics. All organizations develop deliberate structure so that people can do their
work easily and effectively. People are assigned duties, authorities, and responsibilities in
an organization. Hierarchy of authority is arranged level-by-level in a rational way. An
organization is the product of society.

Characteristics of Organization
 Common Objective/goals  Division of work
 Environmental influence  Continuity
 Collection of people  Use of technology
 Effective coordination  Goal oriented
 Hierarchy of authority  Structure

Types of organization
 Government organization  Service organization
 Business organization  International organization
 Professional organization

Changing perspectives of organization

 Mechanistic perspective  Cultural perspective
 Organic perspective  Learning perspective
 System perspective  Global perspective
Organizational goal
A goal is a statement of desired future an organization wishes to achieve. It describes what
the organization is trying to accomplish. An organizational goal is desired point or
destination toward which organization activities are focused. Organization goal is the
reason of existence of any organization. It is the source for inspiration and motivation to
all people associated with it.
Purpose of organizational goal
 To provide guidance and direction
 To promote good planning
 To serve as source of motivation
 To provide an effective evaluation and control
 To provide distinct image to the organization.
Types of organizational goals On the basic of
level nature time area formality

-Mission goal -Survival goals -Long-term goals -Production goals -Formal

-Strategic -Profit goals -Medium-term -- -HR goals goals
goal -Growth goals goals -Financial goals -Informal
-Tactical goal -Market share goals -Short-term goals -Marketing goals goals
-Operational -Productivity goals
goal -Social responsibility
goals

Features of Effective organizational goal:

 Specific: It should focus on what the organization intends to accomplish.
Organizational goals must be precise. It must be clearly defined and should be
understood by every concerned person.
 Measurable: Every goal should contain details about how particular aspects of
performance will be measured. It should be measurable in terms of quality and
quantity.
 Attainable: Organization goal should not be over ambitious it should be attainable
but is should be challenging.
 Relevant: It should be appropriate and consistent with the vision and mission of the
organization.
 Time Bound: Goal must be bounded by the time frame. There must be a clear
estimation of time period for accomplishment of goals in future.
Goal Formulation:
The aims toward which an organization directs its resources and efforts are known as
goals. Goals should be specific, measurable, acceptable and attainable, realistic, and time
based. Goal formulation is a complex and unique process in an organization.
Organizational goals should be formulated carefully. The process of goal formulation
differs organization to organization. It depends on size and nature of organization, attitude
of top management, efficiency of managers and participative culture.

Goal formulation process:

1) TO review the organization’s mission before setting goal
 The organization’s mission is its overarching goal
 Top management establishes objectives in order to achieve the organization’s
mission
 The mission of the organization should be addressed in organizational goals
2) Evaluate available resources
 Human, physical, financial, and informational resources can all be used to achieve
goals; yet, goals cannot be attained without proper exploitation of these resources.
3) Determine the goals
 Goals should be set by individuals or with input from others.
 They should flow from the organization’s mission an d represent the expected
outcomes.
 They should be explicit, quantifiable, attainable, relevant, and time-bound.
4) Write down and communicating the goals
 The management should write down the goals and communicate them to all relevant
people in the organization which aids n the effective implementation of the goals
5) Review of results
 It is necessary to ensure whether goals are being met or not?
 We can identify between goals and actual performance through review of results.
 It makes easier to take corrective action.

Factors affecting goal formulation process:

 Nature and size of organization  Environmental forces
 Level of participation  Attitude of higher management
 Organizational culture  Efficiency of managers
Approaches of Goal Formulation
1. Top down approach: It begins at the top level of management of the
organization. The vision and mission of the organization are established by a top level
manager. It also determines strategic goals and operational goals and are passed
down to the lower level of environment. the top-level manager or Chief Excecutive
Officer never participates in the goal formulation process.
2. Bottom-top approach: It begins at the lower level of management of the
organization. Lower-level management sets organizational goals and passes them to
the middle level management. This level evaluates the goals received from the lower
level of management and makes some corrections if necessary and passes them to
the top level of management for final approval. This level approved the goals
received from the lower level after evaluation and making some correction if
necessary.
3. Management by Operatives (MBO): It is a participative approach of goal
formulation which is also known as an interactive approach. It is a process by which
employees at different levels of the organization participate in setting goals. Top
level, middle level, and lower-level managers jointly set organizational goals. The
MBO goal setting approach involves discussion and co-operation among
management and employees.
Problems of Goal Formulation
 Lack of resources  Over emphasis
 Unattainable goal  Environmental uncertainties
 Inappropriate goal  Reluctance to change
 Lack of intellectual property  Inappropriate reward system
 Resource constraint

Goal Succession: If organizational goals are changed intentionally to adopt in

changing environment, this process in called goal succession. It is done in case of
achievements of predetermined organizational goals, change in business environment and
unachievable goals. Reasons: Achievement of original goals. Changes in environment.
Unachievable goals. Changes in priority.

Goal displacement: It refers to the unintended or forceful change in

organizational goal. It is done in case of goal conflict, abstract goals, negative attitude of
employees and goal substitution. Reason of Goal displacement: Goal conflict, Abstract
goals, Employee’s attitude, means end inversion, Excessive delegation of authority.
Ch-2. Principle of Management
Management:
Management is the process of getting jobs done through and with other people by using
available resources optimally with the aid of planning, organizing staffing directing and
controlling. The concept of management is applicable in all the organizations, private, public,
religious, political, business, government, non-government, social organization, etc. It is the
essence to achieve goals effectively and efficiently in dynamic business environment.
Characteristic of Management
 Goal focused  Situational process  Intangible
 Pervasive activity  Multidisciplinary  Both art and science
 Efficiency and  Environmental
effectiveness influence
The functions of management
Management has to perform various functions in course of attaining organizational goals.
Managers should perform many functions like planning organizing directing and as explained
below:
 Planning: Planning is the process of deciding in advance about what to do, how to do it,
when and where to do it, who is to do it, etc. Planning selects future course of actions from
among the available alternatives.
 Organization: Organizing is the process of creating organizational structure. Organizing
consists of job design departmentalization, staffing coordination, establishing authority-
responsibility relationships to give structure to organization. This process basically
establishes the formal relationship among vertical and horizontal units of organizations.
 Directing: Directing in simple sense, is a management function regarding instructing
guiding inspiring communicating and supervising subordinates for effective and efficient
performance towards organizational interest. It consists of leadership, motivation,
communication and supervision.
 Controlling: Controlling is the process of correcting organization performance toward goal
achievement. It is the process of measuring the deviations between the standard set by
an organization and actual results achieved and then taking corrective action whenever
and wherever required.

 Middle level management: The middle level Management is formed with

departmental level managers of a certain functional departments like marketing, finance,
accounting, production, sales, administrations etc.
 Lower level management: This level of management is formed by the first line
managers or supervisors
Principles of management:
1) Principle of policy making: Clear policy is necessary for effective management. The
policies should be applicable and acceptable.
2) Principle of balance: It is essential for organizational effectiveness. The chief executive
officer should take proper steps to balance at all levels and n all departments of the
organization
3) Principle of planning: It involves the creation and maintenance of plan. As such,
planning is a fundamental property of intelligent behavior.
4) Principle of cooperation: Cooperation is the action or process of working together to
the same result. It enhances mutual trust and respect by which it becomes easy to
achieve organizational goal.
5) Principle of leadership: There should be effective and dynamic leadership to achieve
organizational goal. The leadership motivates employs towards efficient and effective
4 performances.
6) Principle of authority and responsibility: Authority means the right of a superior to give
order to his/her subordinates and responsibility means obligation for performance and
results. This principle suggests that there must be parity between authority and
responsibility.
7) Principle of exception: According to this principle, the CEO should be left free from the
functions of day to-day or regular nature. The CEO should not waste his/her precious
nature works except in exceptional cases.
8) Principle of financial incentive: TO motive employees at work to develop feeling of
mutual cooperation, to enhance profitability of organization, to bear social
responsibility, etc. are the important purposes of any business organization. For this
purpose the manager should be able to utilize entire ability by fully satisfying
employees.
9) Principle of specialization: Specialization reduces production cost of production and
increases productivity and quality of product.
10) Principle of simplicity: Management is the act of doing organization activities
in a simple way. If the official procedures becomes lengthy and complex, performance
does not get effectiveness.

Management Hierarchy:
Hierarchy means a system with grades or levels or status from lowest to the highest and vice
versa. Generally, there are three levels of hierarchy in basic organization structure:
 Top level management: Top level management is also known as executive level of
management

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Emerging challenges for management:
1. Globalization: The world economy is becoming globalized. The major goods and
services produced by the multinational companies are easily crossing the national
boarder It creates threats to local businesses.
2. Quality and productivity: To produce more units with improved quality by using same
level of resources is another challenge for the present management
3. Ethics and social responsibility: Every organization has to behave and operate ethical
and social responsibility in relation to environmental problems. To fulfill all social
expectations is not easy task.
4. Technological advancement: Managers need to manage new technology at one
hand and at the other they need to advance level of knowledge in all employees and
managers. Because of all these things the scope of research and development is
increasing with increased expenses.
5. Human resources management: Work force diversity, temporary work force
tendency, high mobility, increasing concern in labor relation, etc. are creating more
challenges to the managers.
6. Change management: Managers are facing the challenges of managing change. They
need to be aware of specific changes, factors contributing them and their likely impact
on the practice of management.
7. Empowerment: Management need to empower its employees in terms of technical
and managerial competencies, social and economic status, etc. with adequate and
balanced authority. This is one of the most important challenges to managers.

Organization and Management (Interrelation)

 For utilization of resources  To make decision
 For environmental adaptation  To bear social responsibility
 For effective controlling  To achieve goal

 Conceptual skills: Conceptual skills involve the mental ability of the manager
having clear vision and concept about the policies, planning and other activities of the
organization.
 Human skills: Managers must have good knowledge of communication, motivation,
leadership, grievance handling and conflict management. Human skills are equally
required for all level managers in every organization for its goal achievements.
 Technical skills: Technical skills are abilities to perform specialized and specific task
under the scope of responsibility managers. Technical skill is mostly required for
operating level managers.
Managers:
Managers are those personalities in organization who bear special responsibility of
management functions and possess different managerial skills. They need to involve in
planning, implementation, supervision and controlling the organizational activities.
Types of Managers: There can be different types of managers in an organization
depending upon the levels of management and area of function. On the basis of levels,
mangers can be of top level, middle level and lower level. On the basis of functional area,
managers can be classified as marketing, financial, operation human resources, sales or
distribution managers etc.
1. Top level managers: Those managers who hold the top level position on
managerial hierarchy are known as top level managers. Top level managers include
Chief Executive Officer (CEO), Chairman President, Managing Directors (MD), etc.
2. Middle level managers.
The managers who are responsible to look after the departmental job i.e. middle
level functions of organizations are known as middle level managers. Middle level
manager are included as departmental heads from different departments like
production, human, finance, operation, marketing etc.
3. Lower level managers: Lower level managers are those who hold the bottom level
authority in the organization. They include supervisors, coordinators, office
managers etc.
Roles of managers: Roles are special responsibilities of managers to perform to
make the goals fruitful. Following three important roles are noticed in the organization:
1. Interpersonal role: These roles deal with interpersonal relationship. They target at
maintaining good human relations. Managers should provide leadership, direction
and supervision to subordinates and whole employees.
2. Informational role: These roles are directly related with obtaining and transmitting
the necessary information. All managers should collect process and distribute the
required information inside and outside the organizations.
3. Decisional role: Decision making roles emerges from responsibility for day to day
activities. Managers develop the policies, plans and strategies for negotiations and
handling uncertainties.

Managerial Skills: Skills are defined as ability and proficiency to do

something at acceptable standard. Managerial skills are special skills prevailing in the
managers required to accomplish all the managerial functions. Managers need three
special skills as below:

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Unit-3 CONCEPT OF MANAGEMENT THOUGHT
Management was developed along with human civilization. Once people started to live
in family unit and society, they required management. Family is taken as the basis of
development of management principles and techniques in traditional era. Even today we
are using such principles in the organizations. Today, management has many principles
and well developed literature. Most of these literatures were developed in the twentieth
century. Many scholars and practitioners have contributed in the development of
different management perspectives. Some of Management Theories are: The classical
theory, Human Relationship and Behavior Science theory, Behavior Science
Perspective, The Decision Science theory and management, Management Science
Theory, The System Theory of Management, The Contingency Theory

1. The Classical Theory

Classical perspectives are those which were propounded earlier. These perspectives
concern with efficiency and productivity through the one best way universally applicable
management principles and formal relationship based on hierarchy of job. This is
traditional theory which represents scientific management theory, administrative
management theory and bureaucratic theory.
i) Scientific Management Theory: This theory is developed by Frederick
Winslow Taylor. This theory focuses on job and states that productivity can be improved
endlessly through the use of scientific principles. Taylor wanted to solve the problems of
low quality, low productivity and high wastage. For this, he suggested that every job
should be done scientifically to solve these problems. Additionally, he emphasized on the
need of hiring on the basis of technical qualification and training workers them to
increase specialization, time and motion studies, use of differential piece rate wage
systems, need of standardized tools and equipments and enough rest to reduce fatigue.
Principles of Taylor's Scientific Management: Scientific management is the art of
knowing exactly what is to be done and how it is to be done. Taylor's scientific
management concludes following principles:
 Science, not rule of thumb
 Harmony, not discord
 Cooperation, not individualism
 Maximum output in place of restricted output
 Development of individuals for their greatest efficiency and propensity
ii. Administrative Management Theory: This theory is propounded by henry
fayol who was mining engineer by profession. He used administration in the
management first time. This theory focuses on universal application management
principles, tools, functions and skills.
Principles of administrative management theory
1. Division of Work 8. Remuneration of Personnel
2. Authority and Responsibility 9. Scalar Chain
3. Unity of Command 10. Order
4. Discipline 11. Stability of Tenure
5. Unity of Direction 12. Esprit de Corps
6. Subordination of Individual Interest 13. Equity
to General Interest 14. Initiative
7. Centralization
iii. The Bureaucratic Theory: This theory was developed by Max Weber who was a
German sociologist. According to him the ideal model for management is the ureaucratic
approach which ensures efficiency and effectiveness. He described the principles of
bureaucracy in his book titled "The theory of Social and Economic organization". He
defined bureaucracy as, "an ideal form of organization whose activities and objectives
are rationally thought out and whose divisions of labour are explicitly spelled out. This
theory stressed strictly defined hierarchy governed by clearly defined regulations and
lines of authority. Weber used this method to form an ideal-type bureaucracy with the
following principles:
 Well defined hierarchy of authority
 Job specialization (Division of labor)
 Clearly defined formal rules and regulations
 Impersonality of personal relations (social distance between superior and
subordinates)
 Formal selection of manpower and basis of technical qualification and examination
 Career orientation-professional officials rather than ownership of units, career in
the organization.
Contribution of classical theories
1. Basis for the development
2. Identification

Limitation of Classical Theories

 Mismatch with environment
 One best way of doing job  No right to raise voice
 Less useful for dynamic and  Mechanistic
complicated organization
 Neglects human aspect of worker
2) Human Relations and Behavior Science Theory
Elton Mayo and his research team from Harvard University conducted a series of
research studies during1922 to 1932 among several group of workers at the Hawthorne
Plant of the Western Electric Company in Chicago. The conclusions of Hawthorne study
are:
 Fellowship and self-respect influence the workers' behavior.
 Productivity is not only a technical but also a social aspect.
 Group or team sprit influences individual behavior significant effects on
productivity than working conditions.
 Physical factors and monetary incentives are not enough to decrease efticiency and
productivity.
 This experiment emphasizes on social, psychological and physiological factors of
workers and employees.
3. Behavioral Science Perspectives
There are many perspectives which deal with behavioral aspects of workers and their
productivity. Some of the important behavioral science perspectives are explained are
described below:
i. Theory of participative management: Mary Parker Follet contributed more
to develop this theory of management. According to Follet human element in the
workplace is an important factor. Management should achieve integrative unity through
co-ordination and co-operation. To make better efficiency and productivity, employees
should be involved in management decision making process.
ii. Theory of human needs: This theory is developed by Abraham Maslow. This
theory assumes that needs of human being form hierarchy and workers are motivated to
fulfill their needs. Maslow categorized human needs into five levels as physiological
need, safety need, social need, self-esteem need and self-actualization needs from lower
to higher level needs. According to Maslow, lower order needs like physiological and
safety needs should be satisfied first then only higher order needs like social, ego and
self-actualization needs can be emerged to fulfill them employees get motivation.
iii. Theory X and Theory Y: This is a motivational theory developed by Douglas
McGregor. He claims that there are two types of people in organization. These two types
of people are categorized into two groups X (for theory X) and group Y (for theory Y) on
the basis of their nature and attitude. Theory X represents the people with traditional
and negative assumptions about job and organization. According to theory X, most
people dislike the works and they avoid responsibility. Theory Y represents workers who
are naturally laborious, self-responsible, self-directed and self-controlled.
iv. Two factors theory: This theory is propounded by Frederick Herzberg as a
theory of motivation. According to this theory, all the factors cannot motivate
employees. Some of the factors just protect from demotivation while some of others can
motivate employees. Thus Herzberg classified factors into two major categories as
Hygiene factors and Motivating factors.
v. Theory Z: Theory Z is the name applied to Japanese Management Style (based on
Edwards Deming’s fourteen principles) popularized during the period of Asian economic
boom of the 1980s. Theory Z focused on increasing employee loyalty towards the
organization. This theory believes on job for life with a strong focus on the well-being of
the employee both on and off the job in order to motivate employees.
4. The Decision Science Theory of Management
Herbert Simon was main profounder of decision science theory who won the Nobel Prize
in 1986 for his outstanding work on decision science. According to this theory, managers
should be involved in decision making process regarding introduction of new products,
selecting new employees, adjusting organizational structure, setting organizational goals,
finalizing plans, purchasing fixed assets and many others day to day activities. Decisions
of managers must be rational.
5. Management Science Theory: The concept of operation research was
developed during the Second World War by British government period to find out the
unique solution of problems. The focus of this approach is on planning, designing and
implementing strategies through mathematical models. Managers should predict
everything on the basis of proved mathematical and statistical perspectives. This theory
is also known as mathematical or quantitative approach of management.
6. The System Theory of Management: A system is defined as a flow of group
of inter-related activities or parts working together as a whole. System theory may be
defined as a goal oriented organism composed of parts that are interacting and
interrelated in such a way that the total system is greater than the sum of its parts
operated individually. This theory is the unified view of management and looks at an
organization in its totality. All systems are composed of four basic elements: input,
process, output and feedback. System can be closed or open.
7. The Contingency Theory: According to this theory, management concepts are
contingent on a particular situation. This theory is the most recent development in
management school of thought. The conclusion of contingency theory is that there is no
one best way to solve problems uniformly in all the organizations. Each situation may be
unique and demands unique managerial action different from other situation. The major
contingency variables for the organization are: Size of organization, Task technology level
of organization, Environmental uncertainties and Individual differences.
Emerging Management Concepts
In order to cope with such complexities, new management concepts are being emerging.
Some of them are discussed below:
1. Work force diversity: Globalization and growing legal concern in the equality in
job position, the complexities of work force variation i.e. diversity is increasing rapidly. In
modern organizations, work force i.e. human resources are varying in terms of age,
gender, caste and race, economic status, social status, geographical variation, etc. They
carry different attitudes and needs differently.
Benefits of workforce diversity
 Variety of perspectives  Better decision making
 Increased creativity  Higher employee engagement and
 Increased productivity reduced turnover
 Improved performance  Improved hiring results
 Brand reputation
Limitations of workforce diversity
 Poor focus on leadership qualities  Creating communication problems
 Chances of conflict  Increase in complaint
 Decrement in mutual trust  Difficult to apply

2. Knowledge management: Knowledge management is the process of

capturing value, knowledge and understanding of corporate information. This concept
creates, uses and reuses the knowledge by using information technology systems.
Knowledge management efforts typically focuses on organizational objectives such as
improved performance, competitive advantage, innovation, the sharing of lessons
learned, integration and continuous improvement of the organization.
Knowledge management process:
 Knowledge discovery  Knowledge capture
 Knowledge sharing  Knowledge application

Core Considerations for a Knowledge Management Program:

 Processes  Structure
 People  Culture
 Technology
Steps to Knowledge Management Implementation:
 Establish knowledge management
program objectives
 Prepare for change management
 Define a high-level process as a
foundation
 Determine and prioritize technology
needs
 Assess current state
 Build a knowledge management
implementation roadmap
 Implementation
 Measure and Improve the
Knowledge Management Program

3. Outsourcing: In this concept, organizations contract for the product or services

to the other organization in which other organizations are more competent. They can
contact for whole process for particular product or parts or for only certain processing in
which they low competency. Nowadays, business organizations are outsourcing for the
following sectors:
 Management professionals  Supply of human resources
 Certain processes of final  Complete production
production  Distribution

4.Learning organization: This concept explains as the organization should be

converted into a learning center to create new knowledge and methods to solve
different problems. Only the knowledge is the way to lead today's competitive
market. So, it is most important to give emphasis on learning different techniques
to become more competitive. Knowledge is not bounded with age, gender, and
level of the organization. So, managers need to create free learning environment to
its employees within the organization to make them globally competent.

Features of learning organizations

 Systems thinking
 Mental models
 Team learning
 Personal mastery
 Shared vision
Unit 4: Concept of Business Environment
Business environment is the overall business climate created by the Composition
environment of internal and external forces within which an enterprise operates for its
economic activities. A business environment thus, can be defined as the composite set of
internal and external forces which affects to the whole business cycle directly and
indirectly toward the dynamic situations. Generally organizations are influence by two sets
of environment factors. The environment that affects directly to the business organization
is internal factor. Such factors can be controlled by the management through its functions,
planning and policies, organization structure organization culture, etc. The environment
which affects the organization indirectly is called external environment, it is compose of
political- legal, economic, socio-cultural, technological, etc. factors. External factors are
beyond the control of an organization. Factors of external environment are uncertain and
complex to estimate and predict their effects.

Types of Business Environment

Business environment can be divided into two types as internal environment and external
Environment.

1) Internal Environment: Organizations have their own environment

consisting of many forces situated within organization which is known as internal
environment. Factors of internal environment are controllable. Internal environment
of the business provides strength and weakness to it. The internal environment of
the organization consists of following factors:
 Organizational resources  Organization goals and principles
 Organization structure  Organization culture

2) External Environment: External environment is composed of the factors

consisting beyond the organizational scope. They cannot be controlled by
organizational management. External environment provides opportunities and
threats. External environment further can be classified into two parts i.e. task and
general environment.

a) Task environment: An organization is formed with many stakeholders like

customers, suppliers, competitors, financial institution, distributors and other
interested groups. They are called factors of task environment as they affect the task
or activities of the organization. The main components of task environment are as
follows:
 Customers  Suppliers and Distributors
  Financial institutions  Government
 Interest and Pressure groups  Competitors

b) General Environment: The general environment is the main part of external

environment. It is the set of broader forces in organization's surroundings. These
factors are located outside the organization and cannot be controlled by the
organization. The major external environmental factors are explained below:
 Economic environment:
 Economic system  Economic policy
 Economic condition of country  Globalization economic situation
 Political environment
 Constitution of country  Political system
 Separation of power relationship  Government-business
 International political events  Other factors
 Social-cultural environment
 Social institutions  Attitudes and Beliefs
 Demographic factors  Social class
 Religion and Language  Other factors
 Technological environment
 Level of technology  Pace of technological change
 Acquisition or making policy  Technology transfer policy
 ICT
Social Responsibility of Business:
Social responsibility is the obligation of decision makers on behalf of organization, to take
decision that assures actions protect and improve the welfare of the society along with
their own interest. It implies safeguarding the interest of stakeholders of the entire society
such as investors, customers, employees, government and community.

Approaches of Social Responsibility

Managers adapt a wide range of approach toward social responsibility ranges from lowest
to highest, which are:
 Social obstruction approach: This is an approach towards social responsibility
managers think there is no need to bear any social responsibility. Firms with this
approach cross the ethical or legal line that separates acceptable from unacceptable
practices, i.e. their typical response are concentrated to deny or just cover up legal
actions.
 Social obligation approach: Under this approach, organizations conduct
everything only for formalities but nothing more. Managers who take a social obligation
approach that insist is that required their job is to generate profits with little social
contribution.
 Social response approach: A firm that adopts the social response approach
meets its legal and ethical requirements but only in selected cases. Such firms
voluntarily agree to participate in social programs
 Social contribution approach: Organizations with this approach view
themselves as citizens in a society and proactively seek opportunities to contribute.
They believe the social responsibility is just cultivating their business for future.

Area of Social Responsibility

Organizations can contribute to them in the following ways
 Responsibility toward Consumers
 Responsibility towards Employees
 Responsibilities towards Government
 Responsibilties towards community
 Responsibility towards Investors
Business Ethics:
Business ethics is the study of business situations, activities, and decisions where issues of
right and wrong are addressed. By the business ethics, we can differentiate between the
correct and false business activities of the business organizations. Business ethics is the
ethics of responsibility in which the businessman must promise that he will not harm to
the society knowingiy.
Features of Business Ethics
 Code of conduct  Framework for business activities
 Moral and social values based  Relative term
 Focus on protection to stakeholders  Voluntary
 Comprehensive  Comparatively new concept
Significance of Business Ethics
 Prevents malpractices  Supportive employees
 Survival and growth of business  Improved confidence
 Develops good relations  Protection of consumers' rights
 Protects employees and  Good organization image
shareholders  Healthy competition
 Smooth functioning  Consumer satisfaction
Management Ethics
Managerial ethics is the standard of behavior that guides individual manager in their
works. Significance of Management Ethics
 How the organization treats its employees
 How employees treat the organization
 How the organization treats economic agents

Emerging business environment in Nepal

1. Economic system and policy
2. Increasing buying power of consumers
3. Political instability
4. Increasing female involvement in economic activity
5. Excessive use of communication technology
6. Changing attitude of consumers
7. Rapid technology change
8. Natural calamities and pandemic
9. Increasing consumerism
Ch-5 Concept of Planning:
Planning can be defined as the process of formulating goals, identifying activities to be
undertaken and choosing the means to achieve the goals. Planning arises from the
recognition that some interventions is necessary to bring about the change from the
present state to some desired alternative (future state).

Characteristics of planning
 Primary function: Planning is one of the primary functions of
management. Organizational activities are the result of managerial plans.
Each function of the organization is initiated along with plans. All other
functions like organizing, staffing, directing, leading, coordinating,
motivating, communicating as well as controlling are conducted on the basis
of plans.
 Intellectual function: Planning is an intellectual function as plans are
prepared by managers with rigorous thinking and analysis. Planning
requires creativity, imagination, evaluation and analysis. Managers should
have adequate skills, knowledge and experience to prepare effective plan.
Plan is the output of mental work with much exercise.
 Goal focused: Planning focuses on achieving the predetermined goals of
organization. Course of actions are prepared defining what to do, when to
do, how to do and who will to do. Plans are prepared for optimal use of
available resources so that goals of the organizations can be attained
effectively. Thus, planning is goal focused function.
 Future oriented: Plans are prepared for future courses of actions for
optimal utilization of available resources to attain organizational goals
effectively and efficiently. Action plans, strategy, directions, guidelines, etc.
are prepared to guide future actions of organizations. Planning process uses
different tools and techniques to estimate the future action that could be
the best.
 Guidelines for action: Plans are prepared to guide the actions of the
organization to attain the predetermined goals. Effective plans should be
realistic and feasible so that it can be implemented easily. Plan includes
 strategic actions and specific directions for each goal. Employees can easily
accomplish their responsibilities with proper guidelines.

 Flexibility: As we know, business environment is dynamic. There might be

several changes in the components of business environment. Plans may be
affected by the environmental changes. To cope with the change, plans
need to be changed or modified as per the needs. Thus, planning should
possess adequate flexibility so that actions, directions and guidelines can be
adjusted according to the environmental changes
 Continuous process: Plans are prepared to attain the objectives of
organizations. Organization sets next goal and objectives if the first goal is
attained or it is confirmed not attainable. To make the organization alive i.e.
working continuously, new set of plans need to be prepared either changing
the existing plans or by modification in existing plans. Continuity in planning
process makes the organization continuous. Thus, planning is a continuous
process.
 Basis of existence: Plan is the means of efficiency and economy of the
organizational activities. Appropriate and real plan based on detailed
analysis of business environment provides the directions for actions.
Appropriate plans reduce the cost of production as well as the risk of
failure. Proper plan ensures that the desired result can be attained within
the standard. Best plan helps for optimal utilization of available resources.
Thus, planning is the function to make the organization existing.
Types of Plan
Different plans are prepared for different purposes at different situations. This means,
there can be different types 8of plans depending upon situation, purpose and nature.
Plans can be classified into different types on various bases as discussed below

1. Plans on the basis of managerial hierarchy and authority

As there are three different levels of management i.e. corporate level, department
level and operational level, each level prepares plans for different purposes within
their responsibility area. Depending upon the level of management, plan; plans can
be
 Corporate level plan: Overall vision, mission, goals and strategies of the
organization are
 Prepared by top level i.e. corporate level which are called the corporate plans.
They are the long term plans prepared to justify the existence and growth of
organization.
 Department level plan: Department level plans are prepared by middle level i.e.
department level management for their respective activities. Such plans translate
strategic i.e. corporate goals and plans into specific goals and plans according to
departmental responsibilities.
 Operational level plan: Operational level plans are the plans prepared for
operational units to set their goals and specific actions. Such plans are prepared
by operational units to attain plans of their department. Operational plan should
be consistent with strategic and tactical plans.
2. Plans on the basis of frequency of use
Some of the plans are used constantly for long time while some others may have
short time use and few plans have only one time use. On the basis how frequently
the plans can be used, they can be classified into two categories as single use plan
and standing use plan.
 Single use plans: Single use plans are prepared just for one time use. This
means that single use plans are not repetitively used. Such plans are
developed to solve particular problem in particular situation. They are
prepared to fulfill requirements of non-programmed decisions.
 Standing use plans: Standing use plans are prepared for long time use i.e.
repetitive activities like mission, strategy and goal of the organizations. Such
plans are suitable for programmed decisions and routine functions.
3. Plans on the basis of flexibility
Some plans can be modified according to the situations while some others cannot
easily be done On the basis of the extent of flexibility i.e. provision of change,
 amendment or modification, plans can be classified into flexible plan and specific
plan.
 Flexible plans: If the plans can be modified or changed according to the needs
of situation, then the plans are called flexible plans. Flexible plans provide
general guidelines to perform the activities. Such plans cannot provide
specific objectives and procedures. It can be changedor modified according to
the changing situations. They are also known as directional plans. Such plans
have no effects on long term goals and objectives of the organization.
 Specific plans: If the plans are more specific and can be used for long time
without any change or modification then the plans are called specific plans.
Specific plans are clearly deined and have specific long term objectives. There
is no ambiguity and no chance for miss-interpretation of such plans.
Organizational vision, mission and goals are the specific plans.
4. On the basis of Time Horizon
Plans are usually prepared for specific time period. Some plans become useless
after that time. Thus, plan can be classified on the basis of the time period to which
the plans are prepared into long term plans, medium term plans and short term
plans as below:
 Long term plans: Long term plans are formulated for long time, specially for
more than five years. Mission and strategies of organization are long term
plans. Long term plans are basically prepared to attain the organizational
success. These plans are prepared by top level of the organization.
 Medium term plans: Medium term plans are prepared for intermediate terms
specially for two to four years. Such plans are the departmental plans which
are prepared by department level management of the organization.
 Short term plans: Short term plans are prepared for less than one year.
Budgets and operational plans are short term plans. Operational plans are
prepared by respective work unit.
5. Contingency plan:
Contingency plan is the alternative course of action prepared in case the intended
plan of action is unexpectedly disrupted or found inappropriate. In few cases, the
well set plan does not work or gets failed during implementation, management needs
to formulate another plan either to correct that plan or replace the plan in
emergency. Such plan prepared in an emergency instead of continuous of
organizational activities uninterrupted is called the contingency plan.
Hierarchy of Planning:
Planning can be defined as the process of formulating goals, identifying activities to be
undertaken and choosing the means to achieve the goals A certain type of hierarchy is
formed in planning. lt flows down from higher level to lower levels. The important
outputs of planning system are inter-linked in a hierarchy. Higher level plans are
represented by mission, goals, strategies and policies whereas lower level plans are
procedure, rule, programs and budget.

 Mission: Mission of an organization defines its business which served as a basis of

a planning It reflects the long term commitment of an organization. It provides the
reasons of existence of organization.
 Goals: Goals are the result to be achieved by organization in certain period of
time. It is developed to achieve mission. It provides the direction to the activities of
an organization and state about how mission will be accomplished over the years.
 Strategy: Strategy reflects to grand plan and broad objectives. It is designed by
top level management which represents broad choice made for planning.
 Policy: Policy refers to general guideline for decision making to achieve goals. It
specifies general response to problem situation. It can be rational and set for
different functional levels like production, marketing, research, etc.
 Procedure: Procedures are the steps for handling activities systematically. They
are also known as standing operating procedures (SOP). It helps in evaluation and
control the performance according to policies and overall plans.
 Rules: Rules are guidelines to carry out specific activities. Rules specify the system
or guidelines or regulations for work performance. Proper rules must be developed
to achieve the pre- determined goals and objectives within disciplined manner.
Rules are related to law and can't be rational or person specific.
 Programs: Programs are integrated action plans as large set of activities. Program
and activities are ranked in the order of their importance. Programs are set in order
to set priorities of activities to be executed. Organization should allocate all its
resources on the basis of such order and priority.
 Budget: Budgets are financial plans. It is an instrument for allocating resources on
the basis of priority. Budgets are prepared for a specific period like monthly,
quarterly, one year,
PLANNING PROCESS
Every organization prepares own plans. All organizations are engaged in planning
activities but no two organizations plan in exactly the same way. The planning process
itself can be best thought of a generic activity. Planning process involves series of
activities or steps as follows:

 Establishes goals: Goal setting is the first step in planning process. Goals of whole
organization, departments and every units of organization should be clearly stated.
Goals must be specific, measurable, accessible, realistic and with time frame. Only
quantified goals can be measurable.
 Identifying the planning premises: The second step in planning process
includes identifying the planning premises in which plans depend. Premises are the
assumptions of future condition in which the current plan is to be implemented. It is
simply forecasting about internal and external environmental factors, market
conditions, availability of resources, sales, incomes of organization, socio-economic
condition etc.
 identifying alternatives: There can be many alternatives to attain the goals in
various specific situations i.e. premises So while planning, each alternative should be
identified in order to analyze in terms of cost quality and contribution to goal
achievements. Most suitable and important alternatives are short listed in this step.
 Evaluating the alternatives: After identifying alternatives, planners must
evaluate the positive and negative aspects of each short listed alternative. Each
alternative should be examined on the base of strong and weak points like payback
period, cost of production, cost of implementation of plan cash flow, probability,
availability of resources, etc. Organization can use quantitative techniques and
computer software for effective evaluation of alternatives.
 Selecting the best alternatives: The next step in planning process is the
selection alternative plan with reference to the quantitative and qualitative
evaluation. Organization will select single alternative or suitable combination of more
alternatives. The selected alternating the main part of plan. It should be clearly spelled
out. This is the real point of decision making for announcing the final plan.
IMPORTANCE OF PLANNING
Planning is required for every organization in order to attain goals as planning provides
direction for each activity. Without planning the activities cannot be systematic. Plans
help in proper utilization and mobilization of different resources like human resources,
natural resources, capital resources etc. Planning is essential function for each and every
organization due to the following reasons:
 Uncertainty reduction: Forecasting and environmental scaining helps
anticipate future uncertainty. It forces managers to think ahead, anticipate change
and develop appropriate response for the change. Thus planning helps reduce risk
and uncertainty through pre- determined activities.
 Goals focus: Planning helps organizations to focus their attention on certain
selected actions to achieve the desired state. It eliminates the alternative activity
and classifies the means and ends. It fixes the procedures and rules of action to
achieve the short-term and long-term goals.
 Better coordination: Planning facilitates effective coordination and allocation
of resources. It can manage integrated efforts throughout the organization. Activities
are pulled together for achieving interdepartmental coordination and cooperation. It
helps avoid confusion.
 Increases efficiency: Panning facilitates effective use of resources. It is a
rational approach for goal achievement which minimizes the cost of production,
reduces wastage rate and avoids duplication in activity. It helps doing the job
correctly which absolutely increases the productivity.
 Environmental adoption: Planning identifies environmental opportunities and
threats. It helps to manage the changes. Planning anticipates the future events and
develop action plans to suit those event. Planning encourages innovation and
creativity to minimize the negative impacts of changes.
 Basis for control: Planning provides the standards against which the actual
performance is compared. It measures the deviations and helps to identify the
corrective actions. Planning makes the control more effective and meaningful.
 Avoid random activity: Planning makes the activities more systematic,
integrative and orderly which avoids the random activity. It avoids the need for snap
decisions based on impulse and intuition.
 Increase commitments: Planning ensures the commitment of managers and
employees towards the goal and the process of actions. It facilitates the
internalization of individual goals with organizational goals which encourages the
sense of involvement and team spirit.
Environmental scanning:
Environmental scanning is the process of collecting business related information in the
organization. It is thus, act of accumulating organizational internal and external
environmental factors which may have direct or indirect, immediate or long term,
operational or strategic issues.
Importance of Environmental Scanning
 SWOT Analysis
 Helps in decision making
 Business strategy formulation
 Optimal use of resources
 Growth and stability of business
Methods of Environmental Scanning
 Extrapolation method
 Intuitive reasoning8
 Historical analogy
 Scenario building
 Cross-impact matrix
 Morphological analysis
 Model building
 Expert opinion method
 Network methods
 Executive opinion method
 Delphi technique
Environmental Scanning Process
 Scanning need identification
 Information processing and synthesizing
 Information acquisition
 Information distribution
 Information evaluation and use

SWOT Analysis: SWOT analysis is a systematic identification of internal strengths

and weaknesses of a business and environmental opportunities and threats facing that
business which help to formulate the strategies that reflect the best match between them.
It is based on the logic that an effective strategy maximizes a business strengths and
opportunities but at the same time minimizes its weaknesses and threats.
Strategic planning:
Strategic planning is the process of reviewing market condition, customer needs,
competitive strength and weaknesses, external factors of business and the availability of
resources that lead to the specific opportunities and threats. Strategic planning is the
plan which is prepared with analyzing organizational strengths, weaknesses,
opportunities and threats.
Fundamental of Strategic Element:
 Vision Statement  Value
 Mission  Objectives

Formulation of Strategic plans

 Identify the mission, goals and objectives
 Analyze the external environmental factors
 Identify the opportunities and threats
 Analyze the internal environmental factors
 Formulation of strategy
 Implementation of strategy
 Evaluate the results

Implementation of Strategic Plan

 Organizational structure should be matched with strategy.
 Goals should be determined clearly in qualitative figures.
 Strategy must be institutionalizing.
 There must be open and two ways communication systems.
 Performance based rewards and incentives also help implement the plan effectively.
 Maximum number of managers and employees should be involved in formulating and
implementing processes.
 Leadership plays vital role in effectiveness of the plans. It must be supportive and
motivating to the employees.
Quantitative tools for planning
Organizations can use various tools and techniques for effectiveness and efficiency of
planning. Such techniques are generally based on principles of statistics, probabilities,
sampling, accounting, finance and broadly econometrics. The following techniques are
important for planning:
 Forecasting method  Gantt chart method
 Network method  Other methods
 Break-Even-Point Method (BEP)
Concept of decision making:
Decision making is the process of selecting best course of action from the available
alternatives. Managerial decisions are the output of decision making process.
During the decision making process, managers need to identify all available alternative
patiently, evaluate all alternatives in terms of pros and cons and choose the best
combination of alternatives carefully. Managers use quantitative tools and techniques
for effective decision making.
Approaches to Decision Making
The Classical approach, The Rational approach, The Administrative approach
Types of Decision Making
1) On the basis of frequency of recurrence
 Programmed decisions  Non-Programmed decisions
2) On the basis of Nature of the decisions
Tactical decision, Strategic decision, Operational decision
3) On the basis of the participant's involvement
 Individual decision  Group decisions
Decision making styles
Analytical style, Directive style, Behavioral style, Conceptual style

DECISION MAKING SITUATIONS/CONDITIONS

1) Certainty condition: Decision making under certainty condition exists when
decision maker knows with reasonable certainty about what the alternatives are and
what conditions are associated with each alternative. There is little ambiguity and
very low chance of making Wrong decisions. The complexity, tolerance condition of
business and increasing challenges of the contemporary business world make such
situations rarely found in practice.
2) Decision Making under Risk condition: A state of risk exists when the
manager is aware about the available alternatives but is unaware about the
outcomes of decisions. While making the decisions under risk, managers must
determine the probability associated with each alternative.
3) Decision Making under Uncertainty condition: A state of
uncertainty exists when the managers are unaware about alternatives and outcomes
of decisions. There may not be possible to calculate the probabilities in the changing
environment. Possibility of making wrong decision is higher under this condition.
Intuition, experience, creativity and judgment play an important role in decision
making process under uncertainty condition.
Problem solving: Problem solving is the process of identifying problem, its
intensity, causes and finding the most suitable solution for it from available alternatives.
It is an art of decision making.

Types of Problems
On the basis of Frequency
 Exceptional problems  Routine problems
On the basis of Timeframe
 Medium term problems  Long term problems
 Short term problems
On the basis of Impact
 Partially Impact problems  Overall Impact problems
On the basis of urgency
 Urgent problems  Non-Urgent problems
On the basis of Source of Problem
 Human problem  Environmental problem
 Technical problem

PROBLEM SOLVING STRATEGIES

Managers should solve the problems of organization. They must have the adequate skills
for analyzing the problems. To do so, problems should be defined clearly and find all
potential ways to remove those causes and problems. The following point are important
for problem solving as strategies:
 To identify the real situation of problem, the person should be separated from the
problem. If anybody makes a mistake, it should not take personally.
 Managers should listen all types of problems carefully. They should not dismis the
complaints and rumors.
 To solve the problem, managers need to get as much information as possible.
 It is most important to develop the potential alternatives to solve the problems
effectively and efficiently
 Managers should decide what to do about the problem. They should try to make
agreements and understanding with involved parties.
 Managers should define who will be responsible for each phase of process. For this,
they should create accountability.
 Managers must monitor the process of performance. They should be flexible and
open to make adjustments as required to accomplish the objectives.
 Managers must be sure to recognize the contribution of those who involved in
resolving the problems. They should give credit where it is due.
Centralization and Decentralization
 Centralization is the process of systematically retaining power and authority at the
top-level. In a relatively centralized organization, considerable authority and
accountability remains at the top of the hierarchy top level management makes all
decision and sub-ordinates help to implement them. In other words, centralization is
the reservation of authority in few hands of central points of line organization.
Centralization is prepared in stable and predictable business environment.
 Advantages
 1. Chief executives enjoy power and prestige.
 2. Uniformity of policies, practices and decisions are fostered.
 3. Duplication of functions is minimized.
 4. A strong coordinated team of top management is developed.
 5. Full utilization of the main office facilities is realized.
 Disadvantages
 1. Work load to the top management.
 2. Rising inequality in the distribution of authority.
 3. Less opportunity for development for middle and lower level managers.
 4. Close supervision de-motivate educated and trained managers.
 Decentralization:
 Decentralization is the philosophy of systematically delegating the authority to middle
and lower level management in accordance with their responsibilities. In other words, it
is the process of pressing the authority and decision making power as close as possible
to the level at which the work is done. The level of decentralization is influenced by the
nature and level of an organization, attitude of top-level management, availability of
competent and qualified sub ordinates, organizational business environment, cost
associated with decentralization, growth level of management etc.
 Advantages
 1. Encourage other managers to make decision and take authority and responsibility.
 2. Motivates employees at work.
 3. Develops skills of managers and ensures their growth.
 4. Coordination of activities can be increased.
 5. Facilitates product diversification.
 Disadvantages
 1. Difficult to have uniform policy and procedures.
 2. Loss of power in certain cases by the top management
 3. Chances of misuse when managers are not skilled and qualified.
 4. Increase cost in training and development of new managers.
 5. Not Practical without proper mechanisms of planning and controlling.
 UNIT 6 - ORGANIZING FUNCTION
Concept of organizing function:
Organizing can be broadly defined as a process of identifying, grouping and establishing
orderly use of resources within the management system. It is the process of dividing and
designing the jobs, setting the proper job relation, grouping the jobs to make the
departments, assigning them to the employees, properly allocating the resources, and
coordinating the efforts within the organizational members. Without effective
organizing, none of other functions of management can be performed properly.
Principle of Organizing:
Principles are guidelines which provide the general guidelines for designing the
organizational structure. Some basic principles of organizing are as follows:
 Principle of Unity of Goals/ Objectives  Principle of Delegation of Authority
 Principle of Span of Control  Principle of Authority
 Principle of Specialization  Principle of Simplicity
 Principle of Exception  Principle of Balance
 Principle of Scalar Chain Principle of Efficiency
 Principle of Unity of Command Principle of Flexibility
 Principle of Responsibility Principle of Direction
Approaches to organizing
1.Classical Approach: Classical approach emphasizes on job specialization and
financial incentives as motivational tools. This approach provides the universal approach
to organizational structure that would be best in all situations. This approach is very
rational and mechanistic.
2. Behavioral Approach: This principle focuses an employee's behavior and human
elements. It emphasizes on psychological and social aspects of employees. Elton Mayo,
Dauglas Mcuregar, Mary Parker Follet, Abraham Maslow etc. are the main contributors
of this approach, which assumes at successful management depends on a managers
ability to understand the employee's behaviour and world relations with people who
have a different backgrounds, needs, interest, perceptions etc.
3. Contingency Approach: This is a situational approach in organizing. It believes that
there may be a number of ways to solve problems and situational circumstances
depending upon the situation, geography and time. The nature, size, objectives,
environmental context, employees' behavior, attitudes, leadership style, needs and
interests differs from organization to organization and person to person.
Organizing Process:
1. Job design and Re-design: Jobs can be designed by one or more methods among job
rotation, job enlargement, job enrichment, job empowerment, making semi-
autonomous groups and providing alternative work arrangement.
2. Departmentation: Departmentation is the process of grouping similar activities to
make a job simpler and interesting. This is the second step in structuring an organization
which involves in creating departments, sections, branches, etc. with the logical grouping
of similar activities.
3. Fixation of responsibility and delegation of authority: After creating departments,
various job responsibilities or positions should be designed so that every person
becomes more responsible and accountable towards the job. This makes superior sub-
ordinate relationship more clear and meaningful.
4. Establishment of communication and coordination: Co-ordination is the process
of integrating the works of different departments of the organization to achieve overall
(organizational) goals. It includes the co-ordination of activities or efforts of employees,
departments, units and resources.
Departmentalization: (Deparmentation)
Departmentation is the process of logical grouping of similar nature of functions into
manageable units for the purpose of overall co-ordination of organizational resources. It
divides the large and complex functions into smaller and flexible units to accomplish all
the jobs in effective and efficient manner.

Types of Departmentation
1. Departmentation by Function: The method of departmentation under
which the employees who performs similar works are grouped together into one
functional unit is called functional departmentation. Under this method, jobs are
categorized into functional areas such as production and manufacturing, sales and
marketing, HRM, R&D, Account, Finance, etc.
2.Departmentation by Products: This is the departmentation of organization
on the basis of products or services producing by the organization. This involves of
grouping and arranging activities around products and product processes.
3. Departmentation by Geography/Territory: It is the process of
grouping the jobs to be carried out for the different geographical territories. This method
is suitable for large organizations having wide network such as transportation related
organizations, financial institution etc.
4.Departmentation by Time: Departments can be formed on the basis of time
which is suitable for those organizations that may have full day operation (24 hours) like
hospitals, hotels, airports etc. Normally, job responsibility needs to be shifted at every 8
hours. In this situation, three shifts as morning shift, day shifts and night shift are formed
as per necessity.
5. Departmentation by Process: If departments are prepared on the basis of
progress or working stages, the method is called departmentation by process. If series of
complex steps should be followed to produce the final products, then this method of
departmentation becomes more fruitful. Generally, departmentation by process may be
effective for manufacturing organizations like textile companies, cement companies etc.
6. Departmentation by Process Customer: Organizations need to serve
different customers on the basis of volume of sales or types of the products. In general,
departmentation by customer is suitable for trading organizations like departmental
stores.
Delegation of Authority:
Delegation of authority is the process by which managers assign a position of their total
work to their sub-ordinates along with rights for making decisions to accomplish the job
effectively and efficiently. It establishes a pattern of authority between superiors and
sub-ordinates. The basic reason for delegating is to enable the managers to get more
works done through others.
Features
1. Assigning responsibility: It creates obligation on the part of the receiver to perform
the assigned duty.
2. Granting authority: It grants sufficient authority to accomplish the giver assignment.
3. Creation of accountability: Accountability is a system making people answerable
towards those who delegate them authority in the management hierarchy. Thus,
delegation of authority creates the accountability towards the superior.
Advantages
 It provides managers the opportunity to seek and accept increased responsibility
from higher-level management.
 It reduces the workload to top management. It can concentrate on important and
strategic issues.
 It causes employees to accept accountability and exercise judgment.
 It leads to better decisions, because the decision maker is close to place of action and
has a clearer view of facts.
 It is an important method of developing managers and staffs in decision making. This
also creates in them a sense of accountability.

Barriers /Problems of Delegation of Authority

 Barriers Related to Top Managers Delegating the Authority
-Lack of direction ability, Lack of trust, Fear of subordinates, showing personal
importance.
 Barriers Related to Subordinates
Lack of self-confidence, Lack of incentive, Lack of information and resources, fear of
criticism, Habit of depending upon manager.
Organic and Mechanistic perspective of organization
1. Organic perspective: This is the modern view on organization. It emphasizes the
socio-psychological aspects of human beings in organization. Manager should analyze
socio-psychological aspect to motivate them. This view was developed by those
management experts who criticized the mechanistic view of organization.
2. Mechanistic perspective: This is the most traditional view on organization.
Many classical theories of organizations represent mechanistic view. Many management
experts, economist scholars contributed to develop mechanistic theories of organizations
and managements. Such experts are F.W Taylor, Henry Fayol, Adam Smith, and Moony.
This perspective has commonly used and prevalent theory of management in
organization. It is only suitable to stable environment which lacks environment
adoptability.

Organizational Structures:
Organizational structure is the formal system of hierarchical arrangement of different
position in an organization. It provides a framework for the group of individuals that
shows the vertical flow of authority, responsibility and accountability of each employee.
Simply, organizational structure refers the formal relationship between responsibility
and authority in organization. Organizational structure is fixed as the responsibility
should be assigned as per specialization and hence the authority of taking positional
decision at the Job.
Modern organizational structures
i. Matrix Organization Structure: A matrix organizational structure looks like a
grid, and it shows cross-functional teams that form for special projects. For
example, an engineer may regularly belong to the engineering department (led by
an engineering director) but work on a temporary project (led by a project
manager). The matrix org chart accounts for both of these roles and reporting
relationships.
Advantages
1. Allows supervisors to easily choose individuals by the needs of a project.
2. Gives a more dynamic view of the organization.
3. Encourages employees to use their skills in various capacities aside from their
original roles.
Disadvantages
1. Presents a conflict between department managers and project managers.
2. Can change more frequently than other organizational chart types.
ii. Virtual or Network Organization Structure: These days, few businesses
have all their services under one roof, and juggling the multitudes of vendors,
subcontractors, freelancers, offsite locations, and satellite offices can get
confusing. A network organizational structure makes sense of the spread of
resources. It can also describe an internal structure that focuses more on open
communication and relationships rather than hierarchy.
Advantages
1. Visualizes the complex web of onsite and offsite relationships in companies
Allows companies to be more flexible and agile
2. Give more power to all employees to collaborate, take initiative, and make
decisions
3. Helps employees and stakeholders understand workflows and processes
Disadvantages
1. Can quickly become overly complex when dealing with lots of offsite processes
2. Can make it more difficult for employees to know who has final say

iii. Work Team Concept: It’ll come as no surprise that a team-based

organizational structure groups employees according to (what else?) teams
think Scrum teams or tiger teams. A team organizational structure is meant to
disrupt the traditional hierarchy, focusing more on problem-solving, cooperation,
and giving employees more control.
Advantages
1. Increases productivity, performance, and transparency by breaking down silo
mentality
2. Promotes a growth mindset
3. Changes the traditional career models by getting people to move laterally
4. Values experience rather than seniority
5. Requires minimal management
6. Fits well with agile companies with Scrum or tiger teams
Disadvantages
1. Goes against many companies’ natural inclination of a purely hierarchical
structure
2. Might make promotional paths less clear for employees
Unit 7: LEADERSHIP & Conflict
Leadership is a process of influencing people so that they will strive willingly and
enthusiastically toward the achievement of group goals. A leader directs, leads, supervises and
motivates employees, determine course of action, giving orders and instruction. A person can
be a manager, a leader, both, or neither. Leadership and management are related, but they are
not the same.
Manager vs Leader:
Manager makes a plan and prepares Leader formulates the vision
budget
Has Short term focus Long term focus
They motivates subordinates It directs the followers
Manager becomes realistic Leaders becomes idealistic
They enforces policies They projects procedures
Managers focus on minimizing risks They take risks
Controls and supervises Empowers people
Enforces uniformity Tolerates diversity
They want result They want achievement

Leadership Styles:
The behavior and approach of directing, implementing plans and motivating people in an
organization is Leadership Sytle.
Two widely recognized leadership styles are
1) Authoritative style:
An authoritative leader is one who sets the goals, determine the process and oversees all
steps it takes to reach the goals with little or no inputs from team members. Further
classified into:
a) Autocratic leadership style:
It implies dictatorial in nature where total authority is centralized into top level,
leaving no scope for discussion and communication.
Benefits:
 All employees work in strict discipline so urgent work can be accomplished in time.
 Quick decision making process
 Leaders evaluate the performance of employees on the basis of own judgment.
 Leaders expect the desired output at desired time at any cost from their followers.
Disadvantages:
 Do not participate employee in decision making.
 Employee satisfaction might be low since only one way communication.
 Not suitable for large and diversified organization.
b) Democratic leadership style:
It adopts two way communication. Leaders make decisions with the consent of followers. They
seek followers suggestion and advice in the decision making. So, Employees are encouraged for
creativity and initiations.
Benefits:
 Established two way communication between leaders and employees
 Employee's job satisfaction and motivation remains at highest level
 Full potential of employees can be utilized
Disadvantages:
 Chances of conflict between leaders and subordinates
 Decision making process is time consuming
 Less experienced, unskilled emplyees can't make effective decisions.
c) Laissez-faire leadership style:
Leader entrusts the decision making authority to the subordinates. The leader delegates or
decentralizes all of authority to subordinates and subordinates take necessary decisions.
Benefits:
 Decisions are made by employees themselves
 Emplyees are self directed and guided
Disadvantages:
 Not suitable for organization having unskilled and semi-skilled manpower
 Coordination betwenn employees may decrease gradually since self-centric employees
Functions of Leadership:
1. Directing: Leadership inspires and influences others to give their maximum efforts and
cooperation for the attainment of group objectives. Thus, Leader share mission & goals,
defining and set performance standard, explain plans, and decision and motivate
employees to bring out the best of them.
2. Supervising and coaching: Supervision is concerned with the training, coaching and
development of the group members. It includes the checkups required to assure the
proper and prompt execution of orders, and thus it is also called controlling function.
3. Motivating: Motivating employees is another important function of leadership. It creates
a good work climate along with a personal sense of belonging to the organisation, which
helps to motivate employees toward their tasks.
4. Communicating: Communicating with employees is a necessary part of leadership
function. Communication helps to generate ideas, create mutual understanding and
coordination, so providing information and facilitating communication reduce conflict
among group members.
5. Maintaining: Maintenance function is related to retaining the members in a group. It is
concerned with providing safe work condition, good working environment in the
workplace and addressing the grievances of employees and solving them in effective
way.
6. Goal determination 8. Environmental Adaption
7. Initiation 9. Encouraging Teamwork
Features of leadership
 Leaders and followers  Unequal distribution of authority
 Ability to influence  Situational motivation
 Common objectives  Reciprocal relation
 Continues process  Motivational function
Qualities of good leadership:
An effective leader should have following qualities.
1. A clear sense of purpose: Leader must be able to define and share the
vision and mission with subordinates.
2. Self-confidence: Leader should believe in his/her ability and skill to achieve goals.
3. Good Judgment: Leader should be able to judge the environment and take
necessary decisions and understand their consequences.
4. Objectivity: Leader should be able to see all sides of a situation, and be
impartial in reaching conclusions.
5. Emotional Maturity: Leader should be able to acknowledge subordinates
thoughts and their importance.

6. Integrity: Leader should be honest, and fair in implementing organizational

policies and decisions.
7. Adaptability: Leader should be able to adapt quickly to new situation and
lead the organization to overcome the new situation effectively.
Approaches of Leadership:
1) The trait approach: This approach also known as the great-man theory of
leadership. According to this theory, people are described in terms of qualities and
competencies to understand their leadership behavior. Traits such as drive,
originality, charisma, energy, intelligence, strength, self-confidence, decisiveness,
extroversion, and introversion are important to distinguish leaders from non-
leaders. Basic assumptions of trait theory are:
- Leaders get leadership traits or qualities by birth
- Leadership traits remain unchanged across time
- Leaders differ from their followers because of traits.
Limitations:
- No common trait applicable for all.
- Personal characteristics as a leadership quality without evaluating whether that
quality can be useful to the organizational success raises problem in perception.
- Difficult to decide whether leadership is a cause or effect of trait
2) The behavioral approach:This approach describes that the specific behaviors
 differentiate leaders from non-leaders. There are three important research studies,
which attempted to analyze the leadership behaviors.
1. Ohio State Studies:
Famous studies were undertaken in the 40s and 50s at Ohio State
University to find what behaviors make leadership effective? From
their study, two dimension of leadership behavior were identified.
a. Consideration: They describe consideration behavior is people oriented leadership
dimension where leader are sensitive to make people happy at work. They try to
provide pleasant work environment and are highly employee centered.
b. Structure: Leader who focus on initiation of structure are more concerned with
defining work and task, maintaining standards, meeting deadlines method of works
and roles. Higher structure behavior and lower consideration behavior result in
higher performance of employees, but lower level of their satisfaction and vice-versa
.Higher structure and consideration behavior is the best all-round style which not
only increased the performance but also provides maximum satisfaction at work
2. University of Michigan Studies:
From this study the leaders behavior was categories as job centered
and employee centered.
Employee centered leader are more employee welfare oriented
whereas job centered leader are more concerned with getting work
done.
3. Managerial Grid:
The leadership grid states the leadership’s effectiveness behavior in terms of leaders’
orientation to either people or production. Some leaders have people concerned
orientation while other is production oriented. five main perspectives of this theory
are:
i) Authority type (9, 1):-Leaders with such style show High degree of concerned
for production, concentrate on work efficiency and arranging work condition.
ii) Country Club (1, 9) : - High degree of concerned for people. Try to satisfy the
needs of people and maintain good relation
iii) Team management (9, 9): - High degree of concerned on people and
production, maintain good relationship of trust and respect through
committing people to work for common goals.
iv) Improvised Management (1, 1): - Low degree of concern of both people and
production
v) Organization Management (5, 5):- Optimum level of concerned for people and
production, balance between the work with need satisfaction of people.

3) Situational approach: A situational approach determines the effectiveness of the

leader. i.e., if the situation changes the leadership role will also change. This
approach rejects the one best leadership style applicable to all the situations.Two
important situational approaches are Contingency model and Path goal theory.
Group Formation:
A group is two or more individuals, interacting and interdependent, who have come
together to achieve particular objective. Groups are formed to satisfy the need of the
individuals and organizational. There are five basic stage of group formation.
Five basic stage of group formation.
i. Forming: IN this stage, members join the group and try to be clear about their role
and relationship, procedure to work and familiarize them with other member with
a view to performing group task.
ii. Storming: In this stage, conflict and differences of opinion emerge among
members. Members compete for sharing resources and play different roles in the
group. Similarly, there is conflict over the leadership issue.
iii. Norming: In this stage individual group members start to understand one another
feeling and develop cohesive behavior and forms a consensus around the given
group objectives.
iv. Performing: In this stage, members begin to perform their assigned task.
v. Adjourning: Once the given task is completed, the group will adjourn. However,
some group are more functional and will work for long time in the
organisation.(stop functioning)
Types of groups: Groups are categorized in two broad types.
1. Formal group: The group with legal and formal authority in an organization is formal
group. E.g. board of directors, departments, sections etc. The rules and work
procedures are already defined and members have to follow these rules and
procedure in order to achieve their goals. .
a. Command group: This is a permanent type of group in which members report
functionally in the manner shown in an organizational chart. (Department, units etc.)
b. Task group: This type of group is created to undertake a certain task and after
completion of task the group is dissolved.
2. Informal group: Informal group are formed naturally without consent of
management or without any formal orders of any command force.
a. Friendship group: Friendship group are composed of employees who enjoy each
other’s company. E.g. group to see a movie, cup of tea .etc. this group extends
relations beyond the work place in order to satisfy employees’ different social needs.
b. Interest group: This group formed because of their shared common
interest rather than anything else.
Characteristics of Groups: The main characteristic of the group are as follows:
1. Interdependent relation: Members of group are interdependent. They share
common concerns, resources and interest that are imposed internally and initiated
externally.
2. Self perception as a group: Group member perceive themselves as a group
members and try to distinguish them from non-members.
3. Common goal: Goals and ideas of groups are common.
4. Group Norms: Every group has to own norms, rules and code of conduct. All
members are supposed to follow these norms and standard.
 5. Groups are dynamic: Groups are not static but dynamic. Groups are subject to
change its structure, norms etc due to external and internal forces

Team:
Teams are special form of task group having complementary skill required working
together to achieve common objectives. Team is self managed, self guided and self-
supervised group of employees devoted for achieving organizational goals through
coordinated effort and positive synergy.

Types of teams: Four must common types of team are as follow:

1. Problem solving team: Team is composing of 5-12 hourly employees from
the same department who met for a few hours each week to discuss ways
of improving quality, efficiency and the work environment.
2. Self managed teams: Self managed team is group of employed (typically 10-
15) who perform highly related or interdependent jobs and take on many of
the responsibilities of their former supervisors. Fully self-managed teams
set their goalss themselves, establish performance standard, measure their
performance and initiate control activites.
3. Cross functional teams: These teams are made up of employee from about
the same hierarchical level but from different work areas(functional units),
who come together to accomplish the task. Such team conducts regular
meeting to solve particular problems. They discuss eachother to share
information, develop new ideas, solve problems, and coordinate complex
projects. Though such teams take long time to form and develop trust, such
team work with greater diversity to realize greater performance.
4. Virtual teams: Teams that use computer technology to tie together
physically dispersed members in order to achieve a common goal. Team
members are connected by means WAN, video conferencing or email. These
are very popular nowadays.
Characteristics of Effective Teams:
 Complementary skills of members: Team members have complementary
skills required to accomplish certain task
 Mutual trust among members: Each member respect one another and one's
idea, views or decisions are cordially accepted by each member.
 Inspiring goal & unified commitment: Has a clear goal and unified team
members
 Principled leadership: A team contains well accepted leadership who
motivates them, guides them towards accomplishment of task.
 Realistic Deadlines: Each team has specific task and realistic time frame to
accomplish the task.
 CONFLICT
Conflict is a disagreement among two or more individuals, groups, or organizations. This
disagreement may be relatively superficial or very strong. It may be short-lived or exist
for months or even years, and it may be work related or personal.
Types of conflict:
1) Intrapersonal Conflict: Conflict that occurs within an individual is intrapersonal
conflict. This is the conflict between two or more roles within an individual.
Such conflict arises when a person has to choose two equally desirable
alternatives or two undesirable goals.
2) Interpersonal Conflict: Such Conflict occurs between two individuals whether
they be two managers, two subordinates or between manager and
subordinate.
3) Intra team Conflict: Conflict that occurs within a team i.e. between members of
a team .It occurs due to conflict over ideas, plans and policies .Such conflict
decreases team performance.
4) Inter team conflict: Conflict that occurs between two teams of organization is
inter team conflict. Different functional teams within the organization may
come into such conflict because of differences in objectives, resource access,
organizational priorities,etc.
5) Inter organizational conflict: Conflict that occur between two organizations of
same industry or organizations in the same business network. e.g., conflict
between suppliers and buyer organization
Techniques of Managing Conflict:
Some managers use techniques for reducing and preventive measures for conflict
management whereas sometimes conflict needs to be stimulated for better result.
1) Stimulating Conflict:
This techniques is based on notion that if there is no conflict, there will be no
innovation and creativity. Thus, managers need to create optimal level of conflict
and manage it for optimal level of performance.
Some ways of stimulating conflicts are:
-Increasing competition among individuals and teams
-Hiring outsiders to shake things up
-Changing established procedures i.e. restructuring an organization
2) Controlling Conflict:
Controlling techniques for conflict involves:
-Expansion of resource base: Proper allocation of resources for all employees
well in time helps to minimize the chances of conflicts since conflicts mostly
occur due to the shortage of different resources.
 -Solving problems immediately: Managers should solve problems in time by
discussing and sharing the views with conflicting parties if any and find viable
solutions for such.
Other techniques include Altering the human variable so as to avoid conflict
between individuals, improving communication systems and soon.
3) Resolving and Eliminating Conflict:
Despite everyone’s best intentions, Conflict may result decreasing performance
of organization. If it is disrupting the workplace, creating too much hostility or
harming the organization, attempts must be made to resolve it.
Some ways of resolving conflicts are:
-Avoiding conflict: Avoidance may sometimes be effective in the short run for
some kinds of interpersonal disagreements, but it does little to resolve long-run
or chronic conflicts
-Compromise: Convincing conflicting parties to compromise
-Problem Solving: It consist of bringing conflicting parties together to confront
and negotiate conflict. The parties discuss the nature of their conflict and
attempt to reach an agreement or a solution. If handled well, this approach can
be an effective means of resolving conflict.

Managing Conflicts in organization:

Conflicts is natural phenomena among the people so it is also common in the
organization. It can be constructive or destructive in nature based on whether the
consequences are positive or negative to the organization. Conflict is most essential to
develop creativity and enhance the productivity. Manager should apply suitable
techniques depending upon the sources of the conflicts. Some of techniques of managing
the organizational conflicts are:
A.Stimulating Conflict
 Reorganizing  Encouraging Competition
 Communication  Bringing Competition
B. Resolving Conflict
 Problem solving  Compromising
 Smoothing  Avoidance
C. Preventing Conflict
 Solving the problem immediately
 Expansion of resources
 Changing the structural variable
 Altering the human variable
 Improving communication systems
Unit 9: Concept of communication:
Communication can be defined as an exchange process of ideas, facts, opinions,
information, and understanding between two or more people or organizations. it
is the transmission and reception of information. Communication is the primary
function of management.
Features of communication
 Involvement of two parties  Indispensable function
 Two-way process  Coding and decoding
 Pervasiveness  Channel based
 Different forms  Noise

Importance of communication:
 Basis of decision making and planning: The quality of decision depends upon
the quality of communication. Further, the decisions of management need to
be communicated to subordinates. Without proper and effective
communication, managers cannot delegate orders, instructions a guidance.
Effective communication helps in proper and effective implementation of plans
and policies
 of the management. Without communication, no information for decisions and
plans can be obtained.
 Fosters coordination: Communication helps to exchange ideas and information
with coworkers, supervisors, subordinates and all other concerned people and
parties. This brings unity of action in pursuit of common objectives. Effective
communication system brings people together and facilitates coordination to
achieve organizational goals.
 Effective leadership: Leadership becomes more effective because of effective
communication between the leader and the subordinates. Communication
maintains leaders and follower relationship. It binds manager and subordinates
in contact in terms of responsibility-authority relationship and develops
harmonious relations.
 Increases managerial efficiency: Effective and efficient communication increases
managerial efficiency. Communication is that technique which is used to
convey the goals and objectives of the organization, expected level of output,
issues and instructions and guidelines to the employees. It helps understand
allocation of resources, duty and responsibility. With the help of
 communication, managers can evaluate performance of staff and give
feedback.
 Motivation and moral: Employee motivation and morality are the life blood of
any organization. Effective communication motivates employees to achieve
common organizational goal and boost their morality.
 Effective control: Business plans and expected output i.e. job standard should
have to communicate to the concerned employees. Actual performance has to
be measured and communicated to the top management and necessary
corrective action has to be taken to achieve the desired goal. All these control
functions become possible only through effective and efficient communication
system.
 Smooth functioning: Communication plays vital role for the smooth and
efficient running of the organization. Communication serves as the lubricant,
fostering for the smooth operations 0f management process. It is only through
communication that the management changes a regulates the action of
subordinates in the desired direction. Without communication, we can adopt
the change.
 Job satisfaction: Only effective communication develops mutual trust and
confidence between management and employees. Communication brings
different level managers, supervisors, employees which reduce the level
barriers., Effective and efficient communication can reduce the gap between
management and employees. It develops the sense of belongingness a
employees and improves enthusiasm and job satisfaction.
 Increases productivity: Effective and efficient communication increases the
productivity through and waste minimization. Communication helps reduce
cost as it timely serves instructions and guidance.
 Public relation: Effective and efficient communication helps management in
maintaining good relations with the workers, customers, suppliers,
shareholders, government, the community and the world as well. This enables
every business organization for growth and diversification of the business.
Structure of communication:
A structure of communication represents the pattern of contacts among
members for flow of required information in an organization. structure is also
known as network or channel of communication.
Type of communication structure
1. Chain structure: In the chain structure, one person of communication network
communicates with only one person either vertically up or down. They must
follow the chain of command. Communicating person should not skip the
immediate person in chain. In the long organization structure, this network
becomes less effective as it takes long time to convey the message up to target
receiver.
2. Y-structure: The structure in which all information is controlled by two main
persons at the top level of structure is called Y Manager A structure. The shape
of the structure becomes like Y. Only limited information is disseminated by the
top level managers through single chain of command. This structure is more
popular in the functional organization structure.
3. Wheel structure: The wheel structure looks like wheel of a car or motorcycle
where central person is pivotal. In this structure, subordinates communicate
with and through one manager. Manager is central authority in communication
process. This type of structure is generally found in centralized organizations.
There is no excess of communication between the subordinates or same level
person in the organization.
4. Circular structure: In circular network, the message moves in a circle. Each
person can communicate with two neighborhood colleagues at the right and
left only. A disadvantage of circular network is that the communication
becomes very slow.
5. Free flow structure: Under such communication structure, there is no
restriction on the flow of communication. Everyone is free to communicate with
anyone in the organization. There is no restriction of level and chain of
command in communication.
Communication Process
Communication system or process consists of following steps:
 Sender: Sender of the message is the source of information.
 Message: Message is the subject matter of the communication. It is in the form
of information, command, instruction, guideline or legal documents.
 Encoding: Encoding is the process of translating message into understandable
form so that it will be easy to communicate.
 Medium or Channel: Every message or information needs to be transmitted to
the target receiver through a medium or channel like print, sight, sound,
equipment, devices, picture, etc.
 Receiver: Receiver is person who receives or perceives the message of sender.
Decoding: it is a process whereby the receiver interprets encoded message into
meaningful information.
 Feedback: It is the response or reaction of the communication process. It is
directed towards the communicator to facilitate future communication.

Types of communication
 Formal communication: Formal communication represents communication
made through formal channel of organization. Formal communication can be
further classified into downward communication, upward communication,
horizontal communication and diagonal communication.
 Informal communication: Informal communication implies communication
among people through informal contacts or relations or indirect channel. It
does not follow the formal chain of command. Grapevine and rumors are two
important informal communication.
 Interpersonal communication: interpersonal communication implies
communication between and among two or more individual in the
organization. It is the sharing of information between two or more people
face-to-face or through any other direct channels. Inter-personal
communication can be oral, written or nonverbal.
 Nonverbal communication: Communication through gesture or body posture is
often referred as nonverbal communication. If there is a face to face
conversation between two persons, they can better understand feeling,
attitude and emotions with the help of nonverbal communication. Similarly,
gestures taken by the listener can be used by the communicator to know their
reaction.
Barriers to effective communication
Communication can be more effective when receiver can understand the message
with the actual meaning of it as set by the sender. But it is not always possible
because of various obstacles. Such obstacles create problems in transmission.
Such obstacles of the communication are called barriers of effective
communication. Some of the important barriers of effective communication are
described below:
 Process barriers:
 Excessive use of symbols in  Organizational noises
encoding  Lack of using feedback and
 Filtering and screening out the follow-up
information  Lack of openness and frankness
 The environment of fear and
mistrust

 Physical barriers:
 Physical distance  Organizational structure
 Organizational design  Large organizations

 Psychological barriers:
 Lack or less interest
 Difference in the perception
 Emotional factors
 Resistance to communicate
 Reference group and
interest groups influence
 Image or impression
 Status symbol of superior.

 Semantic Barriers :
 Ambiguous sentences
 Long and complex
 Unfamiliar jargons and technical words

 Technological barriers :
 Information overloads  Low capacity and busy schedule
 Timing difference  Lack of familiarity
 Malfunctioning
Enhancing effective communication
Managing communication process requires recognizing the barriers to effective
communication and understanding how to overcome them. Barriers can be
located both individual and organizational levels. Following measures can be
taken to enhance effective organizational communication:
 Improving communication processes :
 Clarity of the idea  Complete message
 Maintain consistency  Use appropriate channels
 Use feedback
 Reducing physical barriers:
 Simplified Structure
 Scientific layout and departmentalization

 Encourage the informal communication

 Simplifying the language

 Encouraging to communication:
 Mutual trust and confidence
 Encourage for team work
 Improve listening
 Remove time pressure
 Improve interpersonal relationship
 Adjustment with communication technology
Unit 10: Concept of control system:
Controlling is the process of setting standard for output, measuring actual output, finding
deviation, if any, and initiating corrective actions to eliminate or at least minimize the
Deviation between predetermined output and actual output. The system of regular
control to ensure the optimal utilization of resources to attain organizational objective is
the controlling system.
Purpose of Controlling System
 Guide to operation, Policy verification, Managerial accountability, Employee
morale, Psychological pressure, Coordination in action, Conformity to norms
Features of Controlling system
 Pervasive function, Future oriented, Continuous action, Dynamic function,
Indispensable with planning, Effective control, Corrective action
Process of Controlling
1. Establishing standards: Control process first sets the standards which are criteria or basic
level of Expected output. On the basis of standards; actual performance is to be evaluated
2. Measuring performance: Actual output or performance is measured against the desired
result.
3. Comparing actual performance with standard performance: In the controlling process,
the actual Performance is then, compared with prescribed standard in order to identify
deviation if any; by Ascertaining extent of deviation.
4. Taking corrective actions: Corrective actions should be selected on the basis of the
deviations such as training and development, review of strategy and policy, change in
resources etc. In order to Remove or reduce the causes of deviation.
Types of Control System
Controlling system consists of set of actions, guidelines, procedures and desired outputs of any
individual, work unit, department and the organization. Control system should be regular,
dynamic and Consistent. They are described below:
Pre-control (Free forward control): Initiating the controlling system before starting
activities in advance is called pre-control. For this, feedback of past performance or experience
is used as the key information for control Sometimes, input variables are immeasurable (e.g.
the values an employee brings to the job) or are not detected at the feed forward point. In
such situations, feedback is necessary in any continuous activities. Pre-control ensures there
will be no deviations during the course of action. This helps to attain organizational goals even
by using scarce resources optimally. Pre-control can also be called proactive control measure.
Concurrent control: The control which goes along with the activities is called concurrent
control. It is also known as real time control or side by side control. Under this control,
activities being conducted are observed, analysed and problems if any are identified and
corrective actions are initiated immediately. It is concerned with the adjustment of
performance before any major problem occurs. For example, the navigator of a ship adjusts its
movements continuously or the car driver adjusts its steering continuously depending upon
the direction of destination, obstacles, and other factors.
Post-control (Feedback control): This is the control in which evaluation and initiation
take place completing the project. Main purpose of this control is to collect feedback of current
performance for the future reference. On the basis of post-control, managers adjust the
controlling performance for them for future projects. Analysis of financial statement, standard
cost analysis, employee's performance evaluation, quality control, customer satisfaction
survey, etc. are some examples of post control.
Characteristics of Effective Control System
 Suitability: Control system should be according to the requirement, size and necessity of
organization. It must be suitable for jobs, for level of employees, and according to the
external environment.
 Simplicity: Control system must be easily understandable and simple to administer.
 Economically realistic: The cost of implementing a control system should be less than or at
most equal to benefits derived from the control system. Control system should not create
financial burden to the organization.
 Integrated: Control system must be linked with planning of the organization. Goals,
strategies, objectives etc. must be linked with controlling measures to make more effective.
 Flexible: Objectives, plans, activities, external conditions, etc. need to change over the time
as such controlling system also needs to be adjusted accordingly. So control system must be
flexible to adapt the changed circumstances.
 Objectivity: As far as possible, standard performance and their measurement should be
objective, verifiable, and specific. They should be based on facts and participation so that
control is acceptable and workable.
 Accuracy: Control is the function performed on the basis of feedback which serves as
information to be provided in order to make the control system effective. The information
gathered should be accurate and reliable for effective control.
 Strategic focus: Control to be effective and efficient must be designed to point out
exceptions. There must be strategic focus on the specific area and control.
 Acceptable: The control system should not be imposed to the employees rather it should be
accepted by all. If it is acceptable then it is convenient in the implementation phase.
 Quick: the aim of control is to see that actual performance conforms to be predetermined
goals or standards.
 Corrective: Main purpose of control is to correct the activities so that standard performance
can surely be attained.
 Forward looking: The control system should focus attention on providing early information
regarding the changes which are likely to occur in the environment.
Barriers to successful controlling *Overemphasis on quantitative data*influences of
external factors*Lack of satisfactory standards*Poor ownership*Over control*To
liberal*Expensive*Poor visioning
Concept of quality:
Quality is the distinguishing features of the product that affects its ability to satisfy stated and
implied needs of the consumers. The term quality is often felt to be something that cannot be
explained in quantitative terms or defined precisely. A quality controlling is the functioning of
ensuring that the product or service quality confirms the redetermined standards. A quality
control program involves determining minimum standards of acceptability. If there is serious
gap between the standards and actual performance, corrective measures may be necessary.
Quality controlling implies the general activities of the controlling process.
Factors affecting Quality
 People: Except material, design, and equipment, employees are the vital contributor to
quality. The employees are responsible to take the ingredients and process them into a final
product or service of quality.
 Materials: The finished product would be as per expectation only when good or quality
materials are used to produce it therefore, management of an organization should establish
standards of raw materials to prevent the entry of lower quality material for the production
process.
 Policy: Management establishes policies concerning product quality. Management policy
regarding the quality largely determines the quality of product produced by the
organization.
 Engineering and design: The engineer or designer must create a product that will appeal to
customers at a reasonable cost. Engineering and design are the basic factors to define
shape, size, color, texture, etc. which make the product competitive.
 Equipments and technology: Quality of equipments, tools, machines and technologies used
in the production, promotion and the distribution process are vital determinants of quality.
These elements determine the cost, quality and efficiency of the product
 Strategic commitments: Top management of organization should have strategic
commitment for quality improvement.
 Research and development: It is essential to satisfy the customer needs, fashions, desires
and interest by providing quality of the product.
IMPORTANCE OF QUALITY It is important for the following reasons:
 Improving competitiveness: Quality satisfies customers' needs so that they always prefer
the same product. This helps beat the immense competition in the market.
 Improving image: Quality reflects the images of the organization i.e. producer.
 Improving productivity: Quality is directly related with productivity. In order to improve
quality one must think to improve productivity. This is why, to improve quality, productivity
is also improved side by side.
 Improving cost effectiveness: By improving quality, wastage and defects can be
reduced Substantially. Resources can be properly utilized and hence the cost of
production gets reduced. >>> Improving the market position: As the image of the
organization is improved by improving quality, satisfying the needs of the customers.
Total Quality Management (TQM)
TQM refers to the strategic commitment of top-level management for planning continuous
improvement in quality of product to meet the requirements of customers. It focuses not only
on the product quality but also for the improvement of quality of work life of all employees.

Techniques of TQM (Tools):

1. Benchmarking: Benchmarking is a process of comparing organization's performance
continuously with the best performing unit within the organization or company in the market
and adopting the best ways to improve the quality as the comparing organization is doing. Such
a comparison may be in terms of various dimensions as general practices, services, product
design, business process and/or administrative processes. Benchmarking involves steps:
planning, collection of information, analysis of data, implementation, monitoring.
2. Outsourcing: Outsourcing is the process of subcontracting some of the subsidiary jobs,
services and operations to other firms that can provide at cheaper rate and better quality. This
system of outsourcing improves efficiency, reduces cost, enhances productivity, and improves
quality. It helps to play management to focus the attention only on core activities and strategic
issues.
3. Speed: Speed is the time required to the organization to get something accomplished. It can
be emphasized in any area including developing producing promoting and distributing goods and
services. The organization can get competitive advantages over others only when it is better,
smarter, and faster than their competitors. Thus, speed of operation is one of the major aspects
in managing total quality of products.
4. ISO 9000: It is a set of global quality standards established by the International Standard
Organisation in Geneva ISO 9000 has fixed provisions for five sets of standard quality, product
testing, employee training, record keeping, supplier relation, repair policies and procedures.
5. Statistical Quality Control (SQC): SQC is a set of specific statistical techniques that can
be used to monitor quality. This method extremely uses the sampling probability and other
statistical techniques to control the quality. It is also one of the major tools used for quality
assurance.
Benefits of Statistical Quality Control: *It identifies the bottlenecks and trouble spots. *It
provides a means of detecting error at inspection. *It leads to more uniform quality of
production. *It helps increase the customer satisfaction through uniform goods and services.
*SQC helps reduce inspection costs.
6. Just in Time (JIT): JIT is the management philosophy that believes in the right product at
the right or just in time of demand. JIT is the technique that assures the material, man and
machinery at the ready position at the optimal level so that inventor cost remains low and at the
same time product delivery becomes effective.
7. Right First Time: This philosophy aims for zero defects in production process and products.
Employees ensure doing the right things first time.
Deming Management:
Deming management is application of Edward Deming's principle in the field of quality
control. His approach is directed towards revitalizing the production system through
making it more responsive to people, more democratic and more efficient Deming
approaches TQM form from philosophical angle and pronounced his points. According to
Deming Management, top management primary responsibility for achieving product
quality and should give high attention.
Deming has proposed the five principles of quality management:
a. Quality improvement drives the entire economy.
b. The customer always comes first.
c. A person should not be blamed for quality problems; a system of quality management
must be fixed.
d. Plan-do-check act (PDCK) should be enforced. Continuous improvement should be
sought through extensive training, leadership, team work and self-improvement.

Techniques of Deming's Quality Management: Deming recommended

fourteen techniques for improving quality. They are as follows:
1. Create consistency: Organisation must be consistent on improving product and services
to remain competitive in the market.
2. Philosophy of co-operation: Adopting the philosophy of cooperation (win-win) helps
everybody to win and put it into practice by teaching it to employees, customer and
suppliers.
3. Stop dependence on mass inspection: Inspection for faulty products is unnecessary if
there is the system of inbuilt inspection process from the very beginning.
4. Avoid the constant search for lowest-cost suppliers: Build long-term loyal ad trusting
relationship with single suppliers.
5. Improve constantly: Continuous improvement in the system of production, services,
planning and any activity should be there in an organisation. This will improve quality and
productivity and decrease cost.
6. Institute training: There should be regular training to employees who need to up to
date their skill and knowledge in changing context.
7. Leadership for management of people: Leader in an organisation must concentrate on
helping people for better job instead of just telling them about jobs.
8. Drive fear and develop trust: It is essential to create an environment where employees
work with fear and always ready to contribute, cooperate and delegate authority and
responsibility.
9. No barriers between departments: There should be cooperation between departments
and all should work as a steam for the achievement of quality goal.
10. Eliminate slogans and targets: The employees should not be pressurized for product
quality. There should be direction and encouragement.
11. Eliminate numerical: Employees should not be pressurized for numerical goals.
Instead, there should be given autonomy in predication system in determining the
production goal.
12. Remove barriers: Organisation must remove all kinds of barriers that hinder the joy of
people at work.
13. Program for education and self-development: There should be program for education
and training which facilitates career development.

Deming PDCA Cycle: W. Edwards Deming Suggested cyclic diagram to illustrate this
continuous Process which is commonly known as PDCA cycle. PDCA stands for Plan, Do,
Check, Act.
*Plan: Management must plan product development.
*Do: Management should produce the goods and services as the plan.
*Check: After the production is started, management should start checking to find any
deviations if any.
*Act: This step is for the research and development of products and services.
QUALITY IMPROVEMENT PROCESS
The incremental improvement process: Incremental improvement is an approach to
process Improvement in which organization focuses on the efforts on small but steady
solutions that ascertain the Improvements in organizational process and progress. These
ideas are typically low-cost and low-risk, and are implemented by employees in the
entire organization.
Process of incremental improvement
>Choose an area of improvement, Organize a quality improvement team, Identify
benchmark, Perform analysis of current performance, Perform pilot study, Management
implements the improvements

Emerging Issues in Quality Management

 Motivation of employees
 Work force diversity
 Technological advancement
 Improving quality of service
 Innovation and change
 Reengineering organization structure
 Knowledge management
 Benchmarking
 Total quality management
Unit 8: Concept of motivation:
Motivation is an inner state that energies, activates and directs behavior of employees
towards achieving organizational goals. Motivation reflects an impulse, drive, or urges to
move in a specific direction to achieve the specific goals. As a function of management,
motivation is the process of inspiring and impelling people to take required actions by
providing stimuli that satisfy their needs and motives.
Importance of Motivation
Motivation is the only tool to persuade employees for effective and efficient work which
assures materialization of organizational goals. In broad sense, its importance can be discussed
under the following points:
 Improves productivity: Motivation encourages employees for the optimal use of
available resources in the organization. It enhances the ability, potentiality, efficiency,
etc. of the employees. This helps to decrease the wastage of resources at one hand
and at the other hand it improves the quality of work. Motivation leads improvement
in productivity of the employees as well as organization.
 Creates willingness: Employees are motivated with different forms of financial and
non-financial incentives to the employees. Such motivational tools create willingness
amongst the employees to do the work, effectively and honestly. Their willingness
makes them creative and initiative.
 Develops positive attitude: Motivated employees always become positive towards the
organization and management. Poorly motivated or negatively motivated of employees
develop negative attitude towards the organization and they do not actively participate in
realizing the organizational goal. Employees having positive attitude work for organizational
benefit rather than personal and competitor's benefits.
 Optimal use of resources: The motivated employees use available resources in
organization in such a way as private properties. Because of optimal utlization of
resources, employees get maximum satisfaction even from the minimum resources.
Through the optimal use of organizational resources, motivation provides chances for
organizational success.
 Reduces absenteeism and turnover: If employees are positively motivated, they get
satisfied with managers and whole organization. Such employees do not want to be
absent at job and to leave the job. They work in the organization for long time. At the
other hand, if employees are not motivated, employees do not get job satisfaction.
They always search new job and organization.
 Managing change: For organizational as well as personal growth, change is the must.
But most of the employees do not want to change in goals and way of doing things i.e.
responsibility. Only through motivation, managers can change the behavior of
employees for managing change.
Theories of Motivation (Reward system👇)
There are number of motivational theories propounded by researchers, scholars and
behavioral scientists. Among them various theories, some of them are explained as below:
 Maslow's Need Hierarchy Theory: This theory is developed by well-
known psychologist Abraham Maslow. He classified all human needs into a
hierarchical manner ranging from lower to higher order. This theory is based on the
notion that satisfied needs do not satisfy the employees. If one level of needs is
fulfilled, new and higher level of needs will emerge. Employees can be more
motivated because of new level of emerged needs to fulfill. He identified the following
needs in hierarchy starting from lower to higher level as Physiological Needs, Safety
Needs, Social Needs, Esteem Needs and Self Actualization Needs.
 Motivation-Hygiene Theory: The psychologist Frederick Herzberg
extended the work of Maslow and proposed a new motivation theory popularly
known as Motivation-Hygiene (Two Factors) theory. He labels the job satisfiers as
motivators, and job dissatisfies as hygiene or maintenance factors. The distinction of
motivational and maintenance factors will help managers in encouraging individuals
to pick performance. The most basic implication of this theory is that, in order to
maximize human productivity, it is absolutely necessary to satisfy employee's
maintenance needs and provide the opportunity to gratify their motivation needs.

Reward system to motivate performance:

Reward system refers to formal and informal mechanism in which performance of the
employees is defined, evaluated, and rewarded. Reward system is the set of rules,
procedures and standard for defining, determining and allocation of benefits and
compensation to the employees. Reward system carries positive impact on willingness of
the employees which ultimately improves their performance and productivity. Reward
system must be reliable, transparent, economic, performance based and reflecting
importance.
Types of reward
 Financial or Non-financial reward: Financial reward s directly linked with monetary
terms i.e. salary, wages, commission, allowances, etc. Non-financial rewards can be
anything based on the company behavior and culture.
 Intrinsic or Extrinsic rewards: Job design, job enlargement, job enrichment,
empowerment, etc. are internal rewards, and salary, bonus, allowances, promotions,
authority are extrinsic rewards.
Features of Effective Reward System
>>>Transparent, Based on needs, Equitable, Related with performance, Economic,
Variety in rewards, Reinforcement based
Motivation through Employee Participation
Participatory management is a philosophy and practice in which the employees are
actively involved in every function of management like planning and decision making,
organizing, leadership, communication and etc. Employee participation in management
helps improve the dignity, respect, honor and job satisfaction. There are two techniques
to encourage and empower the employees under as follows:

1. Quality of work life (QWL): Quality of work life (QWL) refers to the
quality of relationship between employees and total working environment. It aims at
integrating the socio-psychological needs of people in the organization, processes and
the existing socio-cultural environment. To motivate the employees through employee
satisfaction, following techniques can be applied:
 Flexibility in work schedule: Work shift or schedule can be made flexible. Nowadays,
many organizations provide flexibility at the office hours. This provision provides the
employees to balance family life and professional life. It helps to choose the favorable work
schedule so that employees can reduce the job stress level. It increases the satisfaction level
of the employees.
 Autonomous work group: An autonomous work group is a team of employees granted
autonomy or independence over the work they do within an organization. Such groups hold
authority of decision-making to specific work functions, projects or jobs. This satisfies the
employees and motivate for improving performance of the group.
 Job enrichment: Job enrichment is a management concept that involves redesigning
the jobs so that they become more challenging and less repetitive work to the
employees. The purpose of job enrichment is to make the position more satisfying to
the employee.
 Opportunity for growth: Majority employees wish to have growth in overall sectors,
for example, in financial sector, social sector, career sector, etc. Management should
ensure the rewards to guarantee their growth. Through participation, employee can
grow their skills, knowledge and expertise at different avenues of the profession. This
helps satisfy employees.
 Participation: Management need to make decisions regarding long term goals,
strategies, and work procedures for various occasions. If the employees personally or
through their representatives are participated during the decision making process,
they feel gratified. Their level of satisfaction will be high.
 Communication: Proper communication could be another tool to improve the quality
work life. Proper communication system ensures adequate information and channel
of communication. Each employee feels participated in organization process. Getting
information and involved in communication process, employees get satisfied and
motivated.
2. Self-managed teams: Self-managed teams are autonomous self-contained
work units. They have the authority to implement solution and thus have responsibility
for action. Self-managed teams measure their own performance like service quality,
meeting scheduled deliveries, productivity and cost control by different self-set
standards. Being participated in decision making process, employees get satisfied and
motivated.
Nowadays, self-managed teams are treated as one of the important instruments to get
higher productivity from the employees. It has significant positive impact on work
environment and productivity. Self-managed teams are emerging as more productive,
having more cost efficient, providing better customer service, providing higher quality
and being more satisfying for members. Self-managed teams are formed by 10 to 15 self-
motivated, disciplined and dedicated employees.
Self-managed teams possess following common characteristics:
 Team holds authority to determine working procedure, making work routine, handing
over work etc.
 Each team member becomes responsible for team performance.
 Each team member will be accountable towards team.
 The teams become responsible for the complete work.
 The member contains various qualities and skills.

Strategies for Motivating Employees:

 Managerial communication
 Theory X – Theory Y
 Job design
 Goal setting

Emerging Issues in Motivation

 Motivating Professionals
 Growing contingent workers
 Motivating diversified workforce
 Motivating low-skilled service workers
 Motivating people doing highly repetitive tasks
Unit 11: GLOBAL CONTEXT OF MANAGEMENT
Concept of globalization:
Globalization is the word used to describe the growing interdependence of the world's
economies, cultures, and populations, brought about by cross-border trade in goods and
services, technology, and flows of investment, people, and information. Globalization is
the word used to describe the growing interdependence of the world's economies,
cultures, and populations, brought about by cross-border trade in goods and services,
technology, and flows of investment, people, and information. Globalization helps to
extend the business into global market so that it provides ample opportunities to the
business organization. Through market expansion, business organizations can utilize the
low-cost resources and reduce the cost of production which facilitates to increase the
price competitiveness

Methods of globalization:
Different methods are being used for globalization. These methods are also referred as
foreign market entry strategies. Some common methods of globalization are described
below:
1. Importing and Exporting: It is the most traditional and common method of
globalization. Importing and exporting involves buying and selling products from
and to other countries without establishing manufacturing facilities in concerned
countries. Import and export can be done directly or by using intermediaries.
Exporting is preferable when the cost of production in the home countries is
substantially lower than cost of producing goods in foreign markets.
2. Joint Ventures: Joint venture is the process of sharing ownership with foreign
companies. It is a very popular method of globalization in recent years especially
to those countries where the FDI is not possible. Joint venture is effective for
transferring the technologies, technical knowledge, ideas, and capital to the
developing countries with the joint capital investment from developed countries.
3. Licensing and Franchising: Licensing is a process of assigning the rights to
certain technical knowhow, design, intellectual property, etc. to a foreign company
in return of royalties. Franchising is a form of licensing in which a parent company
i.e., the franchiser grants the right to do businesses in a prescribed manner to
another independent organization called the franchisee. When an organization
negotiates a licensing and franchising agreement, it is granting the right to
produce or sales the firm's product in host country. This strategy is frequently
used for entry into less developed country having restricted or regulated
economy.
4. Strategic Alliances: When two firm make alliances to take market advantage is
called strategic alliances. These alliances do not have any joint management of
asset so they can be separated easily whenever they want.
5. Foreign Direct Investment (FDI): FDI is new approach of entering into
foreign country market through direct investment without the support or joint
venture of the domestic organization. FDI is the investment alternative in foreign
land with hundred percent capital investment of the company. It is the commonly
used method of globalization since last 30 years in China and Asian countries by
the western countries and their multinationals.
6. Merger and Acquisition: Merger and acquisition are familiar globalization
procedures. It is a process of creating full ownership of the firm. Two firms of
different country can merge for making their firm more commercial, bigger and
global. In acquisition, a large and strong firm purchase running firm of foreign
country. This method is very effective forms of globalization until 1980s.
Effects of Globalization:
Positive effects:
1. Enhances production and income: Multinational companies, through
globalization, are seeking cheapest resources and adding value to those materials
throughout the world. Globalization results in high productivity and income.
Specialization at production with economies of large-scale production is possible
only due to the developed technology. Thus, globalization helps enhance the
specialization and economies of scale.
2. Transfers and use of resources: The resources like raw material, labor,
knowledge, and technology are easily transferred from surplus area to shortage
area. Technological development is widespread, cheap labor is utilized to produce
goods all over the world. Globalization has encouraged producing products at
cheapest area because of which unutilized and under-utilized natural resources
and man power can be used.
3. Increases international trade: globalization facilitates in free flow of goods
and services. This has substantially increased the international trade i.e., export
and import. Rate of increasing multinational companies in developing countries is
increasing because of which they are able to export their products in developed
countries.
4. Increases employment: People in developing and underdeveloped countries
are getting more employment opportunities due to the establishment of huge
multinational companies. Business corporations are getting low-cost labor from
developing countries. This has further increased the business activities.
Opportunities of employment in developing countries have solved many social
unrest and crimes as well.
5. Emergence of industrialized countries: Some developing countries like
Singapore, Thailand, Malaysia, Taiwan, China, South Korea are emerging as new
industrial countries. They are getting supernormal growth in their economy. They
are growing as new economic miracle.
6. Foreign Direct Investment: FDI is increasing in different sectors of developing
countries from developed countries. Developing countries are getting benefits
from FDI and using their resources effectively. Due to this, employment is
generated, export is encouraged, and free trade is facilitated resulting in high
economic growth.
7. Increased social benefits:
Multinational companies, through social responsibility are providing facilities to
the societies in different sectors. They provide budgets for education, health and
other basic purposes to the society. Interaction of different group of people from
business creates new socio-economic environment that may be much beneficial
for the development of the society.

Negative Effects:
1. Loss of domestic firms: Domestic firms cannot compete with multinational
companies in terms of quality and price. So, domestic firms gradually lose their
market because of globalization. For instance, about dozens of Nepali aluminum
industries have already been closed, and the Nepali garment industries are
running with poor performance as a consequence of globalization.
2. Eroding of national sovereignty: National sovereignty is affected by the
policies and strategies of globalization. Developing nations are compelled to
accept those policies for receiving the grants, debts, and attract FDI. Large
multinational companies and even their home nation government pressurize to
the host countries to formulate policies in favor of their companies.
3.Threat to social and cultural value: Indigenous cultural and social values are
damaged because of transferred cultures from developed countries to developing
countries. Religion and cultures are changing by losing their main themes and
values. International crime, drug trafficking, international terrorism, child sex
abuse, prostitutions, etc. are increasing because of business practices of
globalization. Life style has been changed and to maintain such changes people
may follow socially unexpected behaviors.
4. Environmental degradation: Due to the globalization, the earth is facing
problem of global warming, depletion of the ozone layer, acute loss of bio-
diversity, and over consumption of natural resources. It is creating water, air, soil
and noise pollution in big cities. Increased number of multinational companies are
responsible for the degradation of the global environment.
Multinational Companies: Multinational companies are generally
defined as a company engaged in producing and selling goods or services in
more than one country. They are operating worldwide in different forms and
subsidiaries or affiliates. According to Daniels and Radegaugh, “A company that
has worldwide approach to markets and production is known as MNE. It usually
undertakes nearly every type of international business practice”

Types of Multinational companies: MNCs types depends upon their

purpose and coverage area. Different management experts have given different
opinion regarding types of MNCs. Shapiro (1996) classified MNCs in to three types
as follows:
1. Raw materials seekers: If multinational companies are extending their
business with the motive of getting the raw materials are called raw material
seekers. The main aim of such MNCs is to exploit raw materials available in foreign
countries at the cheap price. Such MNCs search mines, oil, gas, and other raw
material required for manufacturing process.
2. Market seekers: These are the most common type of MNCs in the modern
economy. They establish their branches in foreign countries to produce and sell
their products in those new markets. They invest in production facilities and spend
heavily for market development.
3. Cost minimizers: Those MNCs which extend their business in order to reduce
the cost of production, taxation and transportation are called cost minimizers.
Such MNCs work in those parts of the world where labor and other factors of
production are very cheap. Their main objective is to enhance the competition
capacity by reducing the cost of production.

Advantages and Disadvantages of MNCs: Advantages:

1. Transfer of capital and technology: The capital and technology are the
major requirements for the economic development of any country. Multinational
companies transfer capital and technology in the host countries through
subsidiaries and other business operations.
2. Provide quality products: MNCs use advanced and sophisticated technology.
They need to compete at the world level. So, they produce and sell standard
goods and services. They provide ample opportunities to serve the consumers of
developing countries for the quality goods and services at competitive price.
3. Create employment opportunity: Multinational companies are large
companies extending business in many countries. They invest a large sum of
money for utilization of natural resources available in those countries.
4. Earn foreign currencies: Multinational companies earn foreign currencies
through royalty, transfer of technology, export of goods and dividends from
subsidiaries companies. They are major sources of foreign currencies for many
countries. As a result, the countries may have favorable balance of trade.
5. Establishment of international relations: Multinational companies help in
developing international relations at the political as well as business levels. They
link several countries and promote such relations with host countries.
6. Promote healthy competition: Multinational companies create an
environment of healthy competition in the domestic as well as international
market.
7.Improve trade balance: 8. Improve in quality of life:
Disadvantages:
1. Neglect national priorities: Multinational companies usually invest their
capital in profitable sectors as per the interest of parent company. They neglect
the national priorities of host countries. As a result, most of the under developed
sectors of host country's economy remain unchanged.
2. Threaten national sovereignty: Host countries face the threat of losing their
sovereignty because of multinational companies. Multinational companies are
economically and technically much powerful. They can easily interfere in the
internal affairs of the host countries.
3. Cultural degradation: Multinational companies generally produce and sell
those goods and services which are popular in the developed countries. However,
such goods and services may not be compatible to the values, customs and
culture of host countries. As a result, the culture of the local people is generally
diluted with the culture of the developed countries.
4. Monopoly business: Multinational companies conduct business at large scale.
They provide quality goods and services at cheap price at the beginning days. But
when they extend their business, they totally displace local industries. In such
ways, they conduct monopoly business.
5. Economic exploitation: 6. Out flow of capital:
7. Causing social unrest:
 Unit 12 Management Trends and Scenario in Nepal
“Growth will largely be supported by the ongoing vaccination campaign against
COVID-19 as the national immunization plan remains key to Nepal’s economic
recovery,” said ADB Country Director for Nepal Arnaud Cauchois. “Downside risks
include the uncertain trajectory of COVID-19, a possible surge in COVID-19 cases, and
subsequent strict containment measures, which could reverse the gradual economic
recovery in FY2021.”
According to the report, growth in Nepal’s agriculture will likely be boosted by
increased paddy plantation amid abundant rainfall this monsoon season. Industry
output is expected to grow, thanks to a large increase in export volume and stronger
domestic demand, as rollout of the national vaccination plan will reduce infection rates
over time.
The government’s fiscal policy for 2022 largely focuses on strengthening the nation’s
health care system. Monetary policy will remain accommodative through a dedicated
refinancing facility, concessional lending for priority projects and for affected
businesses. Growth in services will accelerate because of increased economic activities
in the wholesale and retail trade, transport, and financial services along with the vaccine
rollout nationwide.
International tourism arrivals, which declined by 80.8% in 2020, may gradually recover,
as trekking routes and expeditions resume. Hotels and restaurants, travel, and tourism
will likely take more time to recover to pre-pandemic level until the sustained
containment of COVID-19.The report says the country’s inflation will rise modestly to
5.2% in FY2022, up from the projected 3.6% in FY2021, due to higher global oil prices
and a gradual recovery in domestic demand.
Growth in non-oil imports will likely remain high in FY2022, as investments rise on the
gradual revival of the economy. On the other hand, growth in oil imports may be slow,
because an increase in hydroelectricity generation may partially offset a rise in fossil
fuel consumption. Even with continued strong growth in exports and remittances, the
current account deficit will remain high, at an estimated 5.0% of GDP, though down
from 8.0% a year earlier.
Other downside risks include natural hazards such as erratic monsoons and floods,
which could reduce farm output and damage infrastructure. Heavy rainfall since mid-
June 2021 has triggered landslides and floods and led to the loss of lives and
livelihoods in some mountainous districts of Nepal.
The report says fiscal spending by provincial and local governments can be improved if
they address the persistent capacity deficiencies in investment planning, financial
management, project readiness, procurement, and contract management.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia
and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in
1966, it is owned by 68 members—49 from the region.
Major industries of Nepal: Major industries of Nepal are classified into
manufacturing industries, export-oriented industries, import-substitution industries and
service sector.
1. Manufacturing industries
The manufacturing industries in Nepal have important role for the overall development of
country. Manufacturing industries manufacture many goods either for domestic
utilizations or for exporting. The first organized industry in the country was Biratnagar
Jute Mill, established in 1936 AD. Further, the manufacturing industries have been
divided into the following sub-sectors:
*Food, Beverage and Tobacco Industry,
*Carpet and Textile Garment Industries
*Leather and Footwear Industries,
*Non-metallic Mineral Industries,*Chemical Industries,
*Mechanical Engineering Industries,
*Electrical and Electronic Industries.
Problems in Manufacturing Industries:
*Lack of business confidence among the investors,
*Lack of proper industrial security,
*Lack of technological advancement
*Situation of running under capacity
*Lack of proper planning
*Excessive political intervention in public sector manufacturing industries
*Lack of proper government support
*Lack of advertisement of Nepalese products in international markets
*Problem of open boarder.
2. Export-oriented industries Nepal has very short history of industrial
development. There are not large and internationally recognized export industries in Nepal
but Nepal is exporting some unique goods in many European and American countries.
The trend of exporting goods and quantity has been changing over the years. For the last
two decades carpet, garment, handicrafts, leather, agro-based and forest-based products
are exporting in different countries.
i. The major problems of carpet industry:
*Use of child labor and its publicity in western importer countries
*Lack of standardizations for quality
*Dependence of raw materials with Tibet and New Zealand
*Increasing competition
*Transportation problems
*Concentration in single country supply i.e. no market diversification
*Environmental pollution problem
*Poor human resource development
*Weak institutional support
*High cost of raw material and low level of value adding.
ii. Problems of garment industry
*No market diversifications i.e. depending with USA only
*High cost (10-20 % high than other south Asian competitors)
*Lack of international quality materials
*Depending on Indian raw materials and skilled manpower
*Lack of effective Human Resource Management
*Unsupportive government policies
*Poor R&D for satisfying changing needs of customers.
*Lack of technological adaptations
iii. Problems of leather industry
*Outdated technology
*Open border
*Weak government support
*Lack of skilled and updated manpower
*Lack of diversification of export
*Low quality of raw material.
3. Import substituting industry: Import substituting is defined as the substitution of
a foreign product by a domestic production and supply. Import substitution is one of the
main components of commercial policy of developing countries that helps minimize the
problems of foreign exchange scarcity and trade deficit. Nepal imports many consumer
goods, which can easily be manufactured in Nepal. The key import substituting goods are
food and beverages like noodles, biscuits, chocolates, beer and alcohols. vegetables ghee,
sugar, tobacco, chemical products like plastic, soap, matches, detergent powder, paints,
rubber, paper, electronic electrical goods, pharmaceuticals, cements, meat, etc. Nepal
achieved high level of progress in the production of iron and steel, cement, noodles, beer
and liquors, cigarette, wire and cables, soap and toothpaste, plastics, vegetable ghee,
pharmaceuticals, etc. in last decade. Such goods substitute high level of import and save
foreign exchange and accelerate economic growth. But unfortunately their capacity is not
fully utilized because of various internal and external reasons.
Import substituting industries in Nepal are basically classified into following category :
*Food and beverage industry *Tobacco industry
*Pharmaceutical industry *Paper industry
*Cement industry *Brick and Tile industry
*Iron and Steel industry *Electrical industry
*Chemical industry *Electronic industry
*Sugar industry *Rubber industry
Problems of import substituting industry
*Lower capacity utilization
*Resource constrains
*Improper competition with smuggling goods
*Marketing problems
*Unstable political environment
*Lack of peace and security
*Labor problems Lack of identification of customers exact needs
*Lack of quality up gradation timely
*Lack of sufficient capital
*Lack of committed and competent manpower.
4. Service Sector Industries: Industries established to attain their goal by
providing service to their customers are called service sector industries. Service sector
industries have a significant role in the national economy in term of employment, capital
investment and scope of activities. Major service sector industries of Nepal are tourism,
transports, construction, consultancy, trade and services, financial services, etc.
i. Problems of tourism industry
*Declining economic growth *Political disturbances, strike and bandh
*Lack of quality services etc.
*Lack of transportation and *Lack of skilled and trained work force
infrastructures facilities *Environmental and climatic problems
*Ineffective marketing *Poor safety and security
ii. Problems of transport industry
*High cost especially in road transport
*Low quality infrastructures
*Poor institutional capacity
*Resources constraints
*Weak private sector and inefficient government activities
*More number of vehicles than the road capacity
*Poor safety measurement and high accident rate
*Pollution by old motor vehicle
*Poorly equipped airports, old aircrafts and inefficient airlines.

iii. Problem of construction and consultancy sector

*Lack of financial and technical capabilities
*Lack of skilled work force
*Unhealthy competition
*Poor capacity
*Taxation hassles
*Law institutional support
Existing management practices in Nepal
Management is the pivotal for the successful history of any organization. To fulfill
organizational objectives, management practices must be effective. In Nepali
organization, following management practices are common :
1. Planning practice: In most of Nepalese organizations, plans are prepared in
traditional fashion. Managers make plans without conduction of SWOT analysis. They
neither conduct trend analysis nor PEST analysis. Instead of this, they make plans with
their self intuitions. Because of which, plans in Nepali organizations becomes less
effective.
2. Decision making practice: In most of Nepalese organizations, decisions are made
only by central level managers. They do not participate employees. Decision making
tools, scientific methods of decision making process, etc. are still negligible. Decisions
made by central level by top level managers without participation of employees become
less effective. Employees hardly participate in implementation process.
3. Organizing practice: In most of Nepalese organization, organizing practice is too
poor. Structures are complex to understand. Decision making authority and roles become
conflicting. Mainly, Nepalese organizations follow vertical structure. They are not
practicing for matrix organization structure.
4.Human resource management practice : In Nepali government organizations,
human resource management practice is dominated by political influence and prioritizing
family members. There is no fair job evaluation and reward management system. Such
practices discourage honest, dedicated and skilled employees.
5. Leadership practice: In most of the organizations, central leadership style is in
practice. Managers hesitate participating employees in decision making. Leaders try to
create conflict between employees and try to be leader forever. Because of autocratic
leadership at the central level, skilled employees do not want to continue in organization.
This results in high job turnover ratio. Management leadership does not wish to adapt two-
way communication and joint effort for goal accomplishment

plan. At the other hand, purchasing power of people is too low. In such situation, cost of
production becomes high which leads to decreasing competitive power of any product. So,
it is urgent to plan to export the product in foreign market with improved quality.
8. Mutual trust related problems: Business management, government and
employees should have good relationship. But, business management does not trust to
government as well as employee union. At the same time, government does not play
supportive role to business and always suspects to business organizations for tax hiding.
Labor union also makes plans and policies against the management. In this way, these
three components have poor mutual trust among them. This also hinders the success of the
business.
Major problems of Business in Nepal
There are countless problems in Nepalese business in current days especially after
entering into global business. Major problems are discussed below:
1. Policy related problems: For effective growth of business, different policies like
economic policy, fiscal policy, industrial policy, elective most important. They should be
clear and business friendly. But in Nepalese practice, such policies are more clear and
business friendly. They are vague and conflicting to each other. Tax provisions and
criteria get changed frequently. In Nepal, the provision of establishment of business takes
longest time in the world.
2. Capital and technology related problems: Most of Nepalese business
organizations are suffering badly from inadequacy of capital and technology. For business
purpose, debt is not available easily and it takes long procedure and hassles. Interest rate is
too high which discourages the business to expand. Payback period of project becomes
long but because of flexible political and economic situation business does not make
profit. Technology is traditional because of which cost of production remains high.
Nepalese organizations are laying behind in quality management and uniformity.
3. Infrastructure related problems: Road, electricity, transportation,
communication, etc. are most important infrastructures for success of business. Poor
infrastructural facility increases the cost of transportation and procurement. In Nepal such
infrastructures are in poor condition. So, infrastructure related problems are other
important business problems in Nepal.
4. Labor related problems: In the current days especially after the restoration of
democracy, business organizations are suffering from labor related problems. Labor
unions are being stronger even in hiring employees and managing facilities. Labor unions
guided by different political ideologies give first priority to the manifesto of
corresponding parties which affects the business negatively. Employees are being less
committed for the organizational benefits.
5. Raw material related problems: Raw material for the production related business
is the vital input to satisfy the customer's needs. In Nepal, such business depends on either
foreign suppliers who charge high rate for low quality products or for the domestic source
with low quality technology. At the same time, because of various reasons, raw materials
may not be available at the right time. These factors are being serious for upgradation of
the business.
6. Politics related problems: Political ideology sets the economic, fiscal and
industrial policy of the country. These policies need to be clear, stable and favorable for
the business. For this, political stability is must. But in case of Nepal, politics is being
most volatile since long. In such situation, business organization cannot formulate long
term strategies and policies which hinders the business success
7. Demand related problems: Nepalese market is small in comparison to
neighborhoods. Demand is unstable so business organizations cannot prepare the sales 👉