UNIT-I

INTRODUCTION
Every organization has goals to achieve. It is, therefore, necessary that steps should be taken to
ensure that the goals are achieved as efficiently as possible. People who are responsible for
taking these steps are known as managers, and their functions taken together may be called
management. In this lesson, we hall discuss various aspects of management; describe the nature
and characteristics of management and related matters.

MEANING OF MANAGEMENT
In simple words, management means managing an activity. When we talk of managing an
activity, we really mean to make the activity a success. In other words, we have in mind some
goal and we decide about the ways of carrying out the activity so as to achieve the goal.

Consider a situation. When a person goes for shopping, his primary aim is to buy what he
requires at a reasonable price. He has a number of questions in his mind—what should he buy?
From where to buy? How will he reach there? Will he be able to come back at the right time?
and so on. To make his shopping a success, he should think of these questions in advance.

From the above example, we can conclude that management is very useful in our day-to-day
activities—it is important while preparing for examination, planning for holidays, studies,
preparing home budget, celebrating social functions and so on. Management is equally important
in business. In olden days, many individuals used to operate small firms or business which didn’t
require much planning. But now a days business employ hundreds of people, use costly
machines, sell products throughout the world. How can they afford running their business
without planning in advance? Suppose a factory manager proposes to start a sugar mill which
can manufacture 100 tons of sugar per day. His objective is to earn profits through the
production and sale of sugar. He has to make a number of decisions in advance e.g. how much
space is required for the factory premises, how many crusher machines are required and from
where these will be bought? How much sugarcane will be required and how will that be procured
from the farmers, how many workers would be required and what wages should be paid to them,
how the crushed sugarcane fibers will be disposed of and so on. Management helps him in taking
every action or decision with due care.

Management is needed wherever people work together and strive to achieve a common goal. In
any work place, we find workers of different skills and capabilities. People who are senior and
experienced are generally given the responsibility of directing the efforts of other people at work.
Such persons are called managers. Efficient management depends upon the skill and judgment of
managers. Managerial work should be differentiated from non-managerial work. Those who
perform non-managerial work are known as operatives. Managers have to achieve certain goals
with the cooperation of their subordinates, fellow-managers and outsiders like suppliers.
Operatives have to perform their work only in cooperation with fellow operatives, if any. They
have no subordinates.
Managers are responsible for getting tasks accomplished well. They are also responsible for the
performance of their subordinates. But operatives are only responsible for the particular tasks
assigned to them. Also, managers can achieve more than operatives. This is because managers
have sub-ordinates, and operatives have to depend only on their own efforts. In short, managerial
work involves creating an environment in which non- managerial work can be performed
efficiently. Those who are engaged in doing particular tasks assigned to them are operatives and
they perform non-managerial work.

Management Definition

Koontz and Weihrich define management in a simple form as; “management is a process of
designing and maintaining an environment in which individuals working together in groups,
efficiently accomplish selected aims”.

According to FW Taylor –“management is the art of knowing what you want to do and then
seeking that it is done in the best and cheapest way.

In the words of S George- “Management consist of getting things done through other manager is
one who accomplishes the objectives by directing the efforts of others”.

CHARACTERISTICS OF MANAGEMENT
(i) There is always a definite objective of management and managers help in achieving that
objective successfully. Management, thus, is a goal directed activity.

(ii) In a group activity, the manager alone cannot achieve the objectives. He has to take the help
of others. He has to see that different employees perform their activities in such a manner that
there is no conflict, that work is performed in an orderly manner and completed at the right time.
Besides, different activities should support each other. This is called co-ordination. It shows that
management is concerned with arranging group activity in a co-ordinated manner.

(iii) Managers have to make a number of decisions to manage the activities properly. Suppose a
factory manager aims at increasing the profits through increased production and sales. Then he
will first have to take steps to increase the level of production and then try to sell the goods
produced. To increase production there may be a few alternatives, e.g. increase in working hours,
installing another machine, hiring more workers, improvement in the methods of work and so on.
He has to choose the most suitable alternative to achieve his objective. This is known as decision
making. Managers are involved in decision making, which is, choosing between alternative
courses of action at all stages of management.

(iv) Management aims at securing maximum results with minimum of effort and cost. Managers
use various methods to reduce wastes and increase the efficiency of work. Management, in this
sense, is an economic-activity.
(v) Managers have to get work done in different types of situations with the help of people
having different types of skills. Managers have, therefore, to think of different ways of getting
things done. In this sense management is a creative activity.

DIFFERENT INTERPRETATIONS OF THE WORD ‘MANAGEMENT’

Though management is a commonly used word, it has been interpreted differently for different
purposes. The word ‘Management’ is interpreted as:
 A discipline
  A body of individuals
 A process
 A profession

We shall examine them in detail.

(a) Management as a Discipline

Ordinarily the word ‘discipline’ is understood to mean orderly behaviour in day to day life. This
word also means an independent branch of knowledge. For instance, history, geography,
economics, physics, chemistry, etc. are regarded as disciplines. Management is also recognized
as a discipline in the same sense. Like other disciplines, it also consists of certain principles,
theories and methods. The body of knowledge in management has been developed on the basis
of thinking of experts and practitioners in the field of management. For instance, Henry Fayol
and F.W.Taylor have suggested various principles of management to make management more
systematic and scientific in practice. Taylor’s principles of Scientific Management suggest that
instead of traditional methods, managers should adopt scientific methods for the solution of
business problems. Henry Fayol has given fourteen principles of management (you will see the
explanation in other sections of this lesson). Management, as a discipline, will be more scientific
as knowledge of management expands and there is systematic thinking on management.

(b) Management as a body of individuals

As managers perform their functions jointly in a group, they are often collectively known as
‘Management’. The success of a business depends upon the efficiency of not one but more than
one manager. They have to work as a team so that the objectives of the business as a whole may
be fully achieved. Hence, it is proper that the word ‘management’ should not be related to any
single manager but to the team of managers. To run any business successfully, the group of
managers must work with a team spirit. Also there are certain levels of management divided on
the basis of the nature of duties and responsibilities. The managers at different levels should
work in co-operation to make sure that their joint efforts lead to the best possible result. We have
discussed it in detail later in this lesson under ‘Levels of Management’.

(c) Management as a Process

By ‘process’ we mean a series of steps which have to be taken in sequence to perform any
activity. When activities are continuously performed, the process also continues. Management is
also a process in the sense that the work of a manager is performed by taking different steps in
proper sequence. For example, planning must be done first of all before carrying out any
activity. This is the first stage in the management process. This stage should be followed by
deciding on the manner in which the work is to be arranged and distributed among the people.
This is known as organizing. The next step should consist of selecting the right type of persons
for the jobs to be performed. This is staffing. This is followed by directing which comprises
arranging for the supervision of work. The last stage is to check that the actual work is in
accordance with plans. This is known as controlling. Thus, planning, organizing, staffing,
directing and controlling are the steps to be taken, together in sequence and known as the
‘process of management.
Business activities use men, materials, machines and money to produce goods and services. The
value of goods and services produce is greater than the value of resources used. Thus planning,
organizing, staffing, etc. are steps taken by management which really mean a transformation
process whereby material resources are converted into valuable goods and services.

(d) Management as a Profession

In the company form of organization, it is not possible for all the shareholders to take part in the
management of the company. The management of company is entrusted to the elected
representatives of the shareholders called the directors. These directors appoint managers to
manage the day-do-day activities. Thus, there is a separation between ownership and
management. Managers of a company should, therefore, possess expert knowledge and skill in
management which can be acquired through education and training. Managers of other types of
organizations are also expected to possess expert knowledge. They are expected to observe some
principles in the conduct of business affairs. They are also expected to take care of the
responsibilities of the company towards the society. They should not do anything which is
unethical and illegal, eg avoiding payment of taxes, earning profits through improper means, etc.
Any occupation is known as a profession if it fulfills the following requirements:

i) There is a systematized body of knowledge.

ii) Specialized knowledge is acquired through education and training.
iii) Service is considered to be more important than earning profits.
iv)Those engaged in the occupation observe certain standards in the conduct of affairs. (These
standards are embodied in ‘Code of Conduct’, which differ from profession to profession).
v) There should be an association of the persons in the profession to regulate their occupational
behavior.

Management is the occupation of managers and it fulfils some of the requirements of profession
e.g. there is a systematized body of knowledge; there are institutes for the education and training
of managers; there are associations of managers which have developed ‘Codes of Conduct’ for
managers. However, management has not yet developed fully as a profession like the professions
of law, medicine, etc. This is because there is no uniformity regarding the formal qualifications
of managers. Moreover, the ‘Code of Conduct’ is not a legal binding on managers.

NATURE OF MANAGEMENT: Is it a SCIENCE or an ART?

Management as a Science
Science is a systematic body of knowledge relating to a specific field of study that contains
general facts which explains a phenomenon. It establishes cause and effect relationship between
two or more variables and underlines the principles governing their relationship. These principles
are developed through scientific method of observation and verification through testing.          
Science is characterized by following main features:
1. Universally accepted principles – Scientific principles represents basic truth about a
particular field of enquiry. These principles may be applied in all situations, at all time & at all
places. E.g. – law of gravitation which can be applied in all countries irrespective of the time.
Management also contains some fundamental principles which can be applied universally like
the Principle of Unity of Command i.e. one man, one boss. This principle is applicable to all type
of organization – business or non business.
2. Experimentation & Observation – Scientific principles are derived through scientific
investigation & researching i.e. they are based on logic.
E.g. the principle that earth goes round the sun has been scientifically proved. Management
principles are also based on scientific enquiry & observation and not only on the opinion of
Henry Fayol. They have been developed through experiments & practical experiences of large
no. of managers.
E.g. it is observed that fair remuneration to personal helps in creating a satisfied work force.

3. Cause & Effect Relationship – Principles of science lay down cause and effect relationship
between various variables.
E.g. when metals are heated, they are expanded. The cause is heating & result is expansion.
The same is true for management; therefore it also establishes cause and effect relationship.
 E.g. lack of parity (balance) between authority & responsibility will lead to ineffectiveness. If
you know the cause i.e. lack of balance, the effect can be ascertained easily i.e. ineffectiveness.
Similarly if workers are given bonuses, fair wages they will work hard but when not treated in
fair and just manner, reduces productivity of organization.

4. Test of Validity & Predictability – Validity of scientific principles can be tested at any time
or any number of times i.e. they stand the time of test. Each time these tests will give same
result. Moreover future events can be predicted with reasonable accuracy by using scientific
principles.
E.g. H2 & O2 will always give H2O.
Principles of management can also be tested for validity.
E.g. principle of unity of command can be tested by comparing two persons – one having single
boss and one having 2 bosses. The performance of 1st person will be better than 2nd.
It cannot be denied that management has a systematic body of knowledge but it is not as exact as
that of other physical sciences like biology, physics, and chemistry etc. The main reason for the
inexactness of science of management is that it deals with human beings and it is very difficult to
predict their behaviour accurately. Since it is a social process, therefore it falls in the area of
social sciences. It is a flexible science & that is why its theories and principles may produce
different results at different times and therefore it is a behaviour science.
Management as an Art
Art means application of knowledge & skill to get the desired results. An art may be defined as
personalized application of general theoretical principles for achieving best possible results. Art
has the following characters –
Practical Knowledge: Every art requires practical knowledge therefore learning of theory is not
sufficient. It is very important to know practical application of theoretical principles.
 E.g. to become a good painter, the person not only should know about the different colour and
brushes but different designs, dimensions, situations etc to use them appropriately. A manager
can never be successful just by obtaining degree or diploma in management; he must have also
known how to apply various principles in real situations, by functioning as a manager.
Personal Skill: Although theoretical base may be same for every artist, but each one has his own
style and approach towards his job. That is why the level of success and quality of performance
differs from one person to another.
E.g. there are several qualified painters but M.F. Hussain is recognized for his style. Similarly
management as an art is also personalized. Every manager has his own way of managing things
based on his knowledge, experience and personality, that is why some managers are known as
good managers (like Aditya Birla, Rahul Bajaj) whereas others as bad.
Creativity: Every artist has an element of creativity in line. That is why he aims at producing
something that has never existed before which requires combination of intelligence &
imagination. Management is also creative in nature like any other art. It combines human and
non-human resources in an useful way so as to achieve desired results. It tries to produce sweet
music by combining chords in an efficient manner.
Perfection through practice: Practice makes a man perfect. Every artist becomes more and
more proficient through constant practice. Similarly managers learn through an art of trial and
error initially but application of management principles over the years makes them perfect in the
job of managing.
Goal-Oriented: Every art is result oriented as it seeks to achieve concrete results. In the same
manner, management is also directed towards accomplishment of pre-determined goals.
Managers use various resources like men, money, material, machinery & methods to help in the
growth of an organization.
Thus, we can say that management is an art therefore it requires application of certain principles
rather it is an art of highest order because it deals with shaping the attitude and behaviour of
people at work towards theS desired goals.
Management as both Science and Art
Management is both an art and a science. The above mentioned points clearly reveal that
management combines features of both science as well as art. It is considered as a science
because it has an organized body of knowledge which contains certain universal truth. It is called
an art because managing requires certain skills which are personal possessions of managers.
Science provides the knowledge & art deals with the application of knowledge and skills.
A manager to be successful in his profession must acquire the knowledge of science & the art of
applying it. Therefore management is a well-judged combination of science as well as an art
because it proves the principles and the way these principles are applied is a matter of art.
Science teaches to ’know’ and art teaches to ’do’. E.g. a person cannot become a good singer
unless he has knowledge about various ragas & he also applies his personal skill in the art of
singing. Same way it is not sufficient for manager to first know the principles but he must also
apply them in solving various managerial problems that is why, science and art are not mutually
exclusive but they are complementary to each other (like tea and biscuit, bread and butter etc.).
To conclude, we can say that science is the root and art is the fruit.    

Management and Administration

Administration

Administration can be defined as the common process of organising people and resources
efficiently in order to express actions towards common goals and objectives.

The five elements of administration are:

• Planning: The process of planning involves making decisions about what needs to be
done, how it needs to be done and who should do it in advance. It maps the path from where the
organisation is to where it wants to be. The planning function involves establishing goals and
arranging them in logical order. Administrators have an interest in both short-term and long-term
planning.

• Organising: The process of organising involves discovering the responsibilities to be

carried out, delegating responsibilities to departments or divisions and maintaining
organisational relationships. The organiser must consider the delegation of authority and the
responsibility and span of control within managerial units.

• Coordinating: the process of coordinating involves keeping everything in order, sequence and
harmony between the various managerial levels or departments in an organization.

• Staffing: The process of staffing involves selecting the right people at the right time for the
right job or task.

• Directing (Commanding): The process of directing involves leading the people or members of
the organisation in the correct direction, so that they can achieve the objectives of the
organisation.

• Controlling: It is the process where the actual performance is measured with the standard
performance and corrective actions are taken if there are any deviations.

Management

Management is like investment. Managers have resources to invest their own time and skill as
well as human and financial resources. The goal or function of management is
maximum utilisation of those resources by getting things done efficiently. This does not
entail being mechanical. The manager's style is not rigid, it is dynamic and situational. With
highly skilled, self-motivated and experienced workers, the manager can be very empowering.
Where the workforce is less skilled or motivated, the manager may need to monitor output more
meticulously. Management simply makes the best use of all resources even when only an
individual is in charge. Hence, management does not necessarily entail a dictatorial, controlling
supervisor. Skilled managers know how to coach and motivate diverse employees. Getting things
done through the right people is what they do. The aim of management is to deliver results cost
effectively as per the customer expectations and profitably, in the case of commercial
organisations. Inspiring leaders move us to change direction, while inspiring managers motivate
us to work harder.

Management is a vital function due to the complexity of modern organisational life. The need to
coordinate the input of so many diverse stakeholders, experts and customers requires enormous
patience as well as highly developed facilitative skills. Excellent managers know how to bring
the right people together and by asking the right questions, draw the best solutions out of them.
Efficient facilitation requires managers to work very closely with all relevant stakeholders.

Differences between Management and Administration

• Administration is concerned with the determination of major policies, while management

is concerned with the execution of these policies.
• Administration is the thinking and the determination of functions, while management is
the doing of these functions.
• Administration makes major decisions of the business while, management executes these
decisions within the framework that is set by administration.
• Administration is a top-level activity of any business, while management is a middle
level activity of any business.
• Administration is made up of the owners of the business who have invested their capital
in it and receive profits as a reward, while management is a group of persons who render
their skilled services to the business and get payments in form of salaries. This group of
persons is termed as employees.
• Administration is a term that is common in governments, military, education and
religious organisations, while management is a term that is common in business
organisations.
 Administration is not concerned with directing human efforts in the implementation of
plans and policies of any business organisation, while management is concerned with the
directing of human efforts towards implementation of plans and policies of any business
organisations.
• In Administration, planning and organisation functions are involved, while in
management motivation and control functions are involved.

To summarise the distinctions, administration is concerned with the setting of major objectives,
determination of policies and decisions while management executes these policies and decisions.

Levels of Management:

Management has the following three levels. They are as given under:

 Top level management.

  Middle level management.
 Low or operational or bottom level or first line or supervisory level management.

Top level Management

Top level management is responsible for framing policies of the business. All important
decisions are also made at this level. This level of management is concerned to the various
administrative functions. Top level management consists of board of directors, managing
director, general manager and senior most managers. Top level management is administrative in
nature.

Following are the important functions performed by top level management:

 They determine objectives of the business enterprise.

 Top level management formulating abroad policies of the business.
 Taking important business decisions.
 Deciding future course of action taking into considering economic policies, public
opening and other social, national and international factors.
 Assembling the resources needed to making plans into operation, and
 Issuing guidelines to medium level managers.

Middle level Management

Middle level management is the link between top level and low level management and executory
by nature. The heads of the various departmental heads receive orders and instruct from the top
level management or managers and pass it to their subordinates (lower level managers). These
managers supervise, direct and control the activities of foremen, inspectors and supervisors.
They receive reports of actual performance from their low level managers. They study reports
and issue necessary instructions. Middle level managers bridge the gap between two. It helps in
removing misunderstanding and create cordial relationship among the levels of management.

Important functions performed by the middle level management are as follows:

 Managers are held responsible for interpreting and communicating the policies of the top
level management.
 They determine organizational set up of their departments.
 They issue instructions to low level managers which they are received from the top level
management.
 They also perform in motivating subordinates for higher productivity and awarding them
for their outstanding performance.
 Their duty is to compiling statistical reports for top level management and preparing
records of their department.
 They also recommend revised and amended policies of their respective departments.

Low level Management

Low level management is line between middle level management and workers. There manages
are directly stated to workers. They are also help building image of the enterprise before workers
and also help in creating the sense of belongingness among them towards the enterprise. Low
level management is also known as bottom level or first line supervisory level of management. It
is also called as operation all level management. Managers of this level are directly related with
the routine functions of the firm.

Following are important functions performed by the low level management:

 Management concerned with operative working force of the enterprise. i.e., working
force is link between middle level management and workers.
 They assigning duties to individual workers inspecting and supervising workers under
command at work. They attend workers' problem and helps in solving by removing
doubts in their mind and inspiring them for maximum productivity.
 Receiving instructions from middle level management and implementing them in the
day-to-day affair of the business.
 They ensuring safety of workers tools and machines and equipments etc.
 They help in creating sense of belongingness among workers which helps in building the
image of the enterprise. These low level bosses have to work in real situations of the
work and thus, they are known as operational managers. This level of management
consists of supervisors, inspectors, foremen and superintendents.
Top level management can be said to be determinative, middle level management as executory
management and low level as operational management. Without combination, and coordination
among these three levels of management an enterprise cannot prosper or progress. So, every
managers' at each level shall responsible in performing their duties efficiently to make maximum
productivity of the firm / enterprise as a whole.

TYPES OF MANAGERS

 Purchase manager: procurement of raw materials

 Production manager: looks after manufacturing process

 IT manager: deals with computing and IT communication related issues

 Marketing manager: looks after promotion and advertisement

 Sales manager: looks after setting target and sales department

 Financial manager: looks after financial transaction

 Human Resource manager: functions like recruitment, payroll, attendance, employee

exit are seen here.

 Product development manager: technical division for new product design and product
innovation

MANAGERIAL SKILLS

What makes a good manager? Innate traits or acquired skills? Assuming that a manager is one
who directs the activities of other persons and undertakes the responsibility for achievement of
objectives through such efforts, successful management seems to rest on three basic developable
skills: technical, human and conceptual. The relative importance of these three skills varies with
the level of managerial responsibility. (See diagram, below.)

Technical Skill

The technical skill implies an understanding of and proficiency in a specific kind of activity,
particularly one involving methods, processes, procedures, or techniques; it involves specialised
knowledge, analytical ability within that specialty, and facility in the use of the tools and
techniques of the specific discipline. Vocational and on-the-job training programmes largely do a
good job in developing this skill.

Human Skill

This refers to the ability to work with, understand and motivate other people; the way the
individual perceives (and recognises the perceptions of) his superiors, equals, and subordinates,
and the way he behaves subsequently. The person with highly developed human skills is aware
of his own attitudes, assumptions, and beliefs about other individuals and groups; he is able to
see the usefulness and limitations of these feelings. He is sufficiently sensitive to the needs and
motivations of others in his organisation so that he can judge the possible reactions to, and
outcomes of, the various courses of action he may undertake.

Human skills could be usefully divided into (a) leadership ability within the manager's own unit
and (b) skill in intergroup relationships. Experience shows that outstanding capability in one of
these roles is frequently accompanied by mediocre performance in the other. Intragroup skills are
essential in lower and middle management roles and intergroup skills become increasingly
important in successively higher levels of management.

To acquire the Human Skill, the executive must develop his own personal point of view toward
human activity so that he will (a) recognise the feelings and sentiments which he brings to a
situation, (b) have an attitude about his own experience which will enable him to re-evaluate and
learn from them, (c) develop ability in understanding what others by their actions and words are
trying to communicate to him and (d) develop ability in successfully communicating his ideas
and attitudes to others.

The process of acquiring this ability can be effectively aided by a skilled instructor through use
of case problems coupled with impromptu role playing. It is important that the trainee self-
examines his own concepts and values, which may enable him to develop more useful attitudes
about himself and about others.

Conceptual Skill

This skill involves the ability to see the enterprise as a whole; it includes recognising how the
various functions of the organisation depend on one another, and how changes in any one part
affect all the others; and it extends to visualising the relationship of the individual business to the
industry, the community, and the political, social and economic forces of the nation as a whole.

The conceptual skill involves thinking in terms of the following: relative emphasis and priorities
among conflicting objectives and criteria; relative tendencies and probabilities (rather than
certainties); rough correlations and patterns among elements (rather than clear-cut cause-and-
effect relationships).

Training can enhance previously developed conceptual abilities. In developing the conceptual
skill, some of the best results have been achieved through "coaching" of subordinates by
superiors. One way a superior can help "coach" his subordinate is by assigning a particular
responsibility, and then responding with searching questions or opinions, rather than giving
answers.

Another excellent way to develop this skill is through trading jobs: by moving promising young
men and women through different functions of the business but at the same level of
responsibility. Special assignments, particularly the kind which involve inter-departmental
problems, can also help develop this skill.

Relative Significance of Managerial Skills

 Conceptual Conceptual

Conceptual
Human
Human

Human
Technical
Technical
Technical *

Supervisory level Middle mgmt level Top mgmt level

Functions of Management or Management Functions

Different experts have classified functions of management. According to George & Jerry,
“There are four fundamental functions of management i.e. planning, organizing, actuating and
controlling”. According to Henry Fayol, “To manage is to forecast and plan, to organize, to
command, & to control”. Whereas Luther Gullick has given a keyword ’POSDCORB’ where P
stands for Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R
for reporting & B for Budgeting. But the most widely accepted are functions of management
given by KOONTZ and O’DONNEL i.e. Planning, Organizing, Staffing, Directing and
Controlling.

1. Planning: generating plans of action for immediate, short term, medium term and long
term periods.
2. Organizing: organizing the resources, particularly human resources, in the best possible
manner.
3. Staffing: positioning right people right jobs at right time.
4. Directing (includes leading, motivating, communicating and coordinating):
Communicate and coordinate with people to lead and enthuse them to work effectively
together to achieve the plans of the organization.
5. Controlling (includes review and monitoring): evaluating the progress against the plans
and making corrections either in plans or in execution.

Each of these functions is explained in some detail below.

1. Planning
  Planning is decision making process.
 It is making decisions on future course of actions.
 Planning involves taking decisions on vision, mission, values, objectives, strategies and
policies of an organization.
 Planning is done for immediate, short term, medium term and long term periods.
 It is a guideline for execution/implementation.
 It is a measure to check the effectiveness and efficiency of an organization.

2. Organizing

 Organizing involves determination and grouping of the activities.

 Designing organization structures and departmentation based on this grouping.
 Defining the roles and responsibilities of the departments and of the job positions within
these departments.
 Defining relationships between departments and job positions.
 Defining authorities for departments and job positions.

3. Staffing

 It includes manpower or human resource planning.

 Staffing involves recruitment, selection, induction and positioning the people in the
organization.
 Decisions on remuneration packages are part of staffing.
 Training, retraining, development, mentoring and counseling are important aspects of
staffing.
 It also includes performance appraisals and designing and administering the motivational
packages.

4. Directing

 It is one of the most important functions of management to translate company's plans into
execution.
 It includes providing leadership to people so that they work willingly and
enthusiastically.
 Directing people involves motivating them all the time to enthuse them to give their best.
  Communicating companies plans throughout the organization is an important directing
activity.
 It also means coordinating various people and their activities.
 Directing aims at achieving the best not just out of an individual but achieving the best
through the groups or teams of people through team building efforts.

5. Controlling
 It includes verifying the actual execution against the plans to ensure that execution is
being done in accordance with the plans.
 It measures actual performance against the plans.

 It sets standards or norms of performance.

 It measures the effective and efficiency of execution against these standards and the
plans.
 It periodically reviews, evaluates and monitors the performance.
 If the gaps are found between execution levels and the plans, controlling function
involves suitable corrective actions to expedite the execution to match up with the plans
or in certain circumstances deciding to make modifications in the plans.

Roles of Manager

Category Role Activity

Seek and receive information, scan papers and reports,

Monitor
maintain interpersonal contacts.
Forward information to others, send memos, make phone
Informational Disseminator
calls

Spokesperson Represent the units to outsiders in speeches and reports

Figurehead Perform ceremonial and symbolic duties and receive visitors

Interpersonal Leader Direct and motivate subordinate, train, advise, and influence

Liaison Maintain information links in and beyond the organization

Decisional Entrepreneur Initiate new projects, spot opportunities, identify area of

business development
 Disturbance Take corrective action during crises, resolve conflicts
handler amongst staffs, adapt to external changes

Resource allocator Decide who gets resources, schedule, budget, set priorities.

Represent department during negotiation with unions,

Negotiator
suppliers, and generally defend interests.

I. Informational Role

 Monitor: Duties include assessing internal operations, a department's success and the
problems and opportunities which may arise. All the information gained in this capacity
must be stored and maintained.
 Disseminator: Highlights factual or value based external views into the organisation and
to subordinates. This requires both filtering and delegation skills.
 Spokesman: Serves in a PR capacity by informing and lobbying others to keep key
stakeholders updated about the operations of the organisation.

II. Interpersonal Role

 Figurehead: All social, inspiration, legal and ceremonial obligations. In this light, the
manager is seen as a symbol of status and authority.
 Leader: Duties are at the heart of the manager-subordinate relationship and include
structuring and motivating subordinates, overseeing their progress, promoting and
encouraging their development, and balancing effectiveness.
 Liaison: Describes the information and communication obligations of a manager. One
must network and engage in information exchange to gain access to knowledge bases.

III. Decisional Role

 Entrepreneur: Roles encourage managers to create improvement projects and work to

delegate, empower and supervise teams in the development process.
 Disturbance handler: A generalist role that takes charge when an organisation is
unexpectedly upset or transformed and requires calming and support.
 Resource Allocator: Describes the responsibility of allocating and overseeing financial,
material and personnel resources.
 Negotiator: Is a specific task which is integral for the spokesman, figurehead and
resource allocator roles.
 MANGER VS ENTREPRENEUR

Basis Entrepreneur Manager

The main motive of an entrepreneur is to But, the main motive of a manager is to

start a venture by setting up an enterprise. render his services in an enterprise
Motive
He understands the venture for his already set up by someone else i.e.,
personal gratification. entrepreneur.
Servant in the enterprise owned by the
Status Owner of the enterprise entrepreneur

Reward Profit but uncertain Salary is certain and fixed

Being the owner assumes all risks and

Risk bearing uncertainty involved in running the As a servant does not bear any risk.
enterprise

Entrepreneur himself thinks over what But, what a manager does is simply to
and how to produce goods to meet the execute the plans prepared by the
Innovation changing demands of the customers. entrepreneur. Thus, a manager simply
Hence, he acts as an innovator also called translates the entrepreneur’s ideas into
a ‘change agent’ practice.
An entrepreneur needs to possess
On the contrary, a manager needs to
qualities and qualifications like high
Qualification possess distinct qualifications in terms
achievement motive, originality in
s of sound knowledge in management
thinking, foresight, risk -bearing ability
theory and practice.
and so on.

Launching and sustainability of a Concern with effective and efficient

Concern
business operation of an ongoing business.

Generalist (little knowledge in

everything)
Knowledge Trained professional institution.
Street smarts (learn from their own
mistakes and mistakes of others)

Utmost
Financial freedom to do what they want, Security in terms of pay, pension and
priority
live and make choice promotion.
advantage

Doses of charisma and manipulativeness, Have a well defined organization culture

Culture
since he himself set the culture. in the company
Organization
Informal ,flexible organized
structure

MANAGEMENT THOUGHT

I. SCIENTIFIC MANAGEMENT

1. Frederick Winslow Taylor (1856-1915) is the father of scientific management. He exerted

great influence on the development of management thought through his experiments and
writings. During a career spanning 26 years, he arranged a series of experiments in three
companies: Midvale Steel, Simonds Rolling Machine and Bethlehem Steel.

• Time and motion study: Since Taylor had been an operator himself; he knew how
piecework workers used to hold back production to one-third its level. The workers
feared that their employers would cut their piece rate as soon as there was a rise in
production. The real trouble, Taylor thought, was that no one knew how much work was
reasonable for a man to do. Therefore, he established the time and motion study, where
every job motion was supposed to be timed by using a stopwatch and shorter and fewer
motions. Thus, the best way of keeping an account of work performance was found. This
had replaced the old rule-of-thumb-knowledge of the worker.

• Differential payment: Taylor had founded the differential piecework system and the
related incentives with production. Under this plan, a worker received a low piece rate if
he produced the standard number of pieces and a high rate if he surpassed the standard.
Taylor also comprehended that the attraction of a new high piece rate would encourage
the workers to increase production.

• Drastic reorganisation of supervision: Taylor developed two new concepts: (i) Division
of planning and doing and (ii) Functional foremanship. In those days, it was customary
for each worker to plan his own work. The worker himself used to select his tools and
decide the sequence of performance of operations. The foreman essentially told the
worker what jobs were to be performed, not how they were to be performed. Taylor
suggested that the work should be designed by a foreman and not by the worker. He
stated that there were distinctive functions involved in doing any kind of job and that
each of the foremen should give orders to the worker in his specialised field.

• Scientific recruitment and training: Taylor also gave importance to the scientific
selection and development of the worker. He said that the management should develop
and train every worker in order to bring out his best output and to enable him to perform
a superior, more interesting and profitable class of work than he has done in the past.

• Intimate and friendly cooperation between the management and workers: Taylor
said that, “a complete mental revolution” on the part of management and labour was
 necessary to make the organisation successful. Rather than argue over profits, they should
both try to increase production. Consequently, profits will also increase manifold, which
will leave no room for further disagreements. Taylor realised that both, the management
and labour, had a common interest in maximising production.

2. Gantt identified the significance of the human element in productivity and suggested the
concept of motivation. He introduced two new features in Taylor’s incentive scheme, which was
found to have minimal motivational impact. First, every worker who finished a day’s assigned
workload was to win a 50-cent bonus for that day. Second, the foreman was to get a bonus for
each worker who achieved the daily standard, plus an extra bonus if all the workers reached it.

3. Frank and Lillian Gilbreth contributed to the scientific management movement as a

team. They made motion and fatigue study their lifework. Using motion picture cameras,
Frank Gilbreth tried to find the most economical motions for bricklaying. He classified all
movements employed in industrial work into 17 basic types called 'Therbligs' (A Therblig is the
name for one of a set of fundamental motions required for a worker to perform a
manual operation or task. The set consists of 18 elements, each describing a standardized
activity) and provided a shorthand symbol for each so that the analyst could easily and quickly
jot down each motion as he observed the worker in action. The eighteen elements were: search,
find, select, grasp, hold, position, assemble, use, disassemble, inspect, transport loaded, transport
unloaded, pre-position for next operation, release load, unavoidable delay, avoidable delay, plan,
rest to overcome fatigue. According to the Gilbreths, motion and fatigue studies increased
workers’ morale, physical benefits etc.

Contributions and Limitations of Scientific Management

Firstly, through the time and motion studies we understand that the tools and
physical activity concerned in a job can be made better balanced and organised. Secondly,
scientific management discovered how important scientific selection of workers was and
comprehended that without capability and training, a person cannot be expected to do his job
properly. Finally, the significance that scientific management gave to work design encouraged
managers to seek the ‘one best way’ of doing a job. Thus, scientific management has developed a
rational approach to solve the organisation's problems and contributed a great deal to the
professionalism of management. Scientific management is criticised on the following grounds:

• Taylor’s conviction that monetary incentives are strong enough to motivate workers for
improved production has been proved wrong. No man is entirely 'an economic man’ i.e. a
man’s behaviour is not always dictated by his financial needs. He has different types of
needs such as security needs, egoistic needs or social needs which motivate him far more
than his desire for money, at least after he has risen above the starvation level.
• Taylor’s time and motion study is not accepted as entirely scientific.
• Newer methods and better tools and machines led to the removal of some workers, who
found it challenging to get other jobs. This caused discontent among them.

II. ADMINISTRATIVE MANAGEMENT

While Taylor is considered the father of scientific management, Henri Fayol (1841- 1925) is
considered as the father of the administrative management theory, with a focus on the
development of broad administrative principles applicable to general and higher managerial
levels. Fayol was a French mining engineer-turned-leading industrialist and successful manager.
In 1916, he authored a book in French titled General and Industrialist Administration.

Fayol opined that all actions of business enterprises could be divided into six groups: technical,
commercial, financial, accounting, security and administrative or managerial. Fayol’s primary
focus was on this last managerial activity because he felt that managerial skills had been the most
neglected aspect of business operations. He explained management in terms of five functions:
planning, organising, commanding, coordinating and controlling.

Fayol's 14 principles of management are as under:

 Division of work: Division of work in the management process produces increased and
improved performance with the same effect. Various functions of management like
planning organising, directing and controlling cannot be performed efficiently by a single
proprietor or by a group of directors. They must be entrusted to the specialists in the
related fields.

 Authority and responsibility: A manager may exercise formal authority and personal
power. Formal authority is derived from his official position, while personal power is the
result of intelligence, experience, moral worth, ability to lead, past service etc.
Responsibility is closely related to authority and it arises wherever authority is
implemented. Both responsibility and authority are equally important.

 Discipline: Discipline is necessary for the smooth functioning of a business. By

discipline, we mean the obedience to authority, adherence to the rules of service and
norms of performance, reverence for agreements, sincere efforts for completing the
delegated responsibility, deference for superiors etc. The best measures of maintaining
discipline are (a) good supervisors at all levels, (b) transparent, unambiguous and
unbiased agreement between the employer and (c) judicious application of penalties. In
fact, discipline is what leaders make it.

 Unity of command: Every employee should receive orders from only one superior.
There should be a clear-cut chain of command.

 Unity of direction: This means that there must be complete congruency between
individual and organisational goals on the one hand and between departmental and
organisational goals on the other.

 Subordination of individual interest to general interest: In a firm, an individual is

concerned with making the most of his own satisfaction through more money,
recognition status etc.
 Remuneration: The remuneration paid to the employees of the firm should be fair. It
should be based on general business conditions, cost of living, productivity and efficiency
of the concerned employees and the capacity of the firm to pay. Just and adequate
remuneration increases employee effectiveness and confidence and maintains good
relations between them and the management. If the compensation is not sufficient, it will
lead to dissatisfaction and employee relinquishment.

 Centralisation: If subordinates are given a greater role and importance in the

management and organisation of the firm, it is known as decentralisation but if they are
given a smaller role and importance, it is known as centralisation. The management must
decide the degree of centralisation or decentralisation of authority based on the nature of
the circumstances, size of the undertaking, the category of activities and the characteristic
of the organisational structure. The objective or purpose should be the optimum
utilisation of all faculties of the personnel.

 Scalar chain: As per this principle, the orders or communications should pass through
proper channels of authority along the scalar chain.

 Order: To put things in an order takes effort. On the other hand, disorder does not
require any effort. It evolves by itself. The management must bring about order, harmony
and regulation in work through appropriate organisation. The management should
observe the principle of 'right place for everything and for every man'. To view this
principle, there is a need for the selection of competent personnel, right assignment of
duties to employees and good organisation.

 Equity: Equity results from a mixture of kindness and justice. Employees expect the
management to be equally just with everybody. It requires managers to be free from all
prejudices, personal likes or dislikes. Equity provides healthy industrial relations between
management and labour, which is necessary for the successful functioning of the
enterprise.

 Stability of tenure of personnel: In order to motivate workers to perform additional and

improved quality and quantity of work, it is necessary that they be assured of the security
of their job by the management. If they have a fear of insecurity of their job, their morale
will be low and they cannot deliver sufficient quality and quantity of work. Further, they
will not have any sense of attachment to the firm and they will always be on the lookout
for a job elsewhere.

 Initiative: Initiative is to think and implement a plan. The zeal and energy of employees
is augmented by initiative. Innovation, which is the hallmark of technological progress, is
possible only where the employees are encouraged to take initiative. According to Fayol,
“initiative is one of the keenest satisfactions for an intelligent man to experience” and
 hence, he advises managers to give their employees ample scope to take the initiative.
Employees should have a positive attitude and make suggestions freely.

 Esprit de Corps: This means team strength. Only when all the personnel unite as a team,
is there scope for realising the objectives of the concern. Harmony and solidarity among
the staff is a great source of strength for the undertaking. To achieve this, Fayol
suggested two things. One, the motto of divide and rule should be avoided and two,
verbal communication should be used for removing misunderstandings. Differences
further deteriorate through written communication.

III. MATHEMATICAL AND BEHAVIOURAL SERIAL SCHOOLS OF MANAGEMENT

1. BEHAVIOURAL APPROACH
This approach is an enhanced and more developed version of the human relations approach to
management. Douglas McGregor, Abraham Maslow, Kurt Lewin, Chester Barnard, Mary Parker
Follett, George Romans, Rensis Likert, Chris Argyris and Warren Bennis are some of the
foremost behavioural scientists who made significant contributions to the development of the
behavioural approach to management. These scientists were more rigorously trained in various
social sciences (such as psychology, sociology and anthropology). They use more sophisticated
research methods.

Behavioural scientists consider organisations as groups of individuals with objectives. They

have, conducted extensive studies of human groups- large and small. They have studied the
problems relating to groups, process, and group cohesiveness and so on.

Behavioural scientists have completed vast studies on leadership. To behavioural scientists, the
realistic model of human motivation is complex. This model suggests that different people react
differently to the same situation or react the same way to different situations. The manager
should alter and customise his approach to control people according to their individual needs.

The behavioural approach to organisational differences and change is quite practical. It

recognises that (a) conflict is inevitable and sometimes is even desirable and should be faced
with understanding and determination, (b) every organisational change involves technological
and social aspects, also it is generally the social aspect of a change that people resist.

2. MANAGEMENT SCHOOL OF THOUGHT

A new school of thought known as the management process school came into existence, which
drew motivation from Fayol. According to Harold Koontz and Cyril O’Donnell, "Management is
a dynamic process of performing the functions of planning, organising, staffing, directing and
controlling". They also believe that these functions and the principles on which they are based
have general or universal applicability. Managers, whether they are managing directors or
supervisors, perform the same functions of planning and control, although the degree of
complexity may differ. Similarly, management functions are not confined to business enterprises
alone but are applicable to all organizations wherever group accomplishment and enterprise is
involved. Management theory is not culture-bound but is adaptable and flexible from one
environment to another.

3. THE HUMAN RELATIONS MOVEMENT

Managers face many problems because employees do not follow predetermined and balanced
patterns of behaviour. Thus, there is an increase in interest to help managers deal more
effectively with the ‘people side’ of their organisations. The original inspiration for the
movement, however, came from the Hawthorne experiments, which were done by Prof. Elton
Mayo and his colleagues at the Western Electric Company’s plant in Cicero, Illinois from 1927
to 1932.

The experiments are described below:

1. Illumination experiments
2. Relay assembly test room
3. Interviewing programme
4. Bank wiring test room

The following paragraphs briefly examine these experiments and their results.

1. Illumination experiments: This was the initial step of this study. Experiments were
conducted on a group of workers. When their productivity was measured at various levels of
illumination, the results were unpredictable. Puzzled by this, the researchers improved their
methodology. This time, they set up two groups of workers in different buildings. One group,
called the control group, worked under a consistent and constant level of illumination and the
other group, called the test group, worked under changing levels of illumination. The post-test
productivity was compared and it was found that production was affected by illumination.

2. Relay assembly test room: In this phase, the objective of the study was crucial. It now aimed
at knowing not only the impact of illumination on production but also the impact of such factors
as the length of the working day, relaxation intermission and their frequency and duration and
other physical conditions. A group of six women workers, who were friendly with each other,
were selected for this experiment. These women workers were asked to work in a very informal
and relaxed atmosphere, with a supervisor-researcher present in a different room. The
supervisor-researcher acted as their friend and guide. During the study, several variations were
made in the working conditions to find which combination of conditions was the most ideal for
production. Surprisingly, the researchers found that the production of the group had no
correlation to the working conditions. Researchers then comprehended and established that this
incident was due to the following factors:

a. Feeling of importance and acknowledgement among the women because of their participation
in the research and the attention they got.
b. The familiarity in the small group and the relaxed and familiar interpersonal and social
relations owing to the relative freedom from stringent supervision and rules.
c. High group-cohesion among the women was also another factor.
3. Interviewing programme: The information about the informal group processes which were
acquired in the second phase made them design the third phase. In this phase, they wanted to
identify the basic factors responsible for human behaviour at work. For this, they interviewed
more than 20,000 workers. This study revealed that the workers’ social relations inside the
organisation had a clear influence on their attitudes and behaviours.

4. Bank wiring observation room: Workers would produce only a certain amount and no more,
thereby defeating the incentive system.

3. MATHEMATICAL/QUANTITATIVE APPROACH
1. Management science and MIS: Management science (also called operations research) uses
mathematical and statistical approaches to solve management problems. It originated during
World War II, as strategists tried to apply scientific knowledge and methods to the complex
problems of war. Industry began to apply management science after the war. George Dantzig
developed linear programming, an algebraic method to determine the optimal allocation of
scarce resources. Other tools used in industry include inventory control theory, goal
programming, queuing models and simulation. The advent of the computer made many
management science tools and concepts more practical and applicable for the industry.
Increasingly, management science and management information systems (MIS) are
interconnected. MIS focuses on providing needed information to managers in a useful format and
at the proper time. Decision support systems (DSS) attempts to integrate decision models, data
and the decision maker into a system that supports better management decisions.

2. Production and operations management: This school focuses on the operation and
Control of the production process that transforms resources into finished goods and services. It
has its roots in scientific management but it developed into an identifiable area of management
study after World War II. It uses many tools of management science. Operations management
emphasises the productivity and quality of both manufacturing and service organisations. W.
Edwards Deming exerted tremendous influence in shaping modern ideas about improving
productivity and quality. Foremost areas of study within operations management include
capacity-planning, facilities location, facilities layout, materials requirement planning,
scheduling, purchasing and inventory control, quality control, computer integrated
manufacturing, just-in-time inventory systems and flexible manufacturing systems.

IV. SYSTEMS APPROACH

A recurrent drawback of the classical, behavioural and quantitative schools is that they lay more
emphasis on one aspect of the organisation at the expense of another. However, it is difficult to
know which aspect is most functional, constructive and appropriate in a given situation. What is
needed is a singular expansive, detailed, conceptual framework that can help a manager diagnose
a problem and decide which tool or combination of tools will accomplish the task best. The
systems approach helps in obtaining an integrated approach to management problems. Some
important contributors of the systems approach are Chester Barnard, George Homans, Philip
Selznick and Herbert Simon. The following are the key concepts of this approach:
 A system is a set of interdependent parts, which together form a unitary whole that
performs some function. An organisation is also a system composed of four
interdependent parts, namely, task, structure, people and technology.
  A system can be either open or closed. A system is considered open if it interacts with its
environment. All biological, human and social systems are open systems because they
constantly intermingle with their environments. A system is considered closed if it does
not interact with the environment. Physical and mechanical systems are closed systems
because they are insulated from their external environment. Traditional organization
theorists regarded organisations as closed systems while, according to the modern view,
organisations are open systems, constantly interacting with their environments.

Each system, including an organisation, has its own boundaries, which separate it from other
systems in the environment. The boundaries for open systems are however, ‘permeable’ or
penetrable, unlike those of the closed systems. They are quite flexible and adjustable, depending
upon their activities. The confines for closed systems are rigid. The function of management is to
act as a boundary-linking pin among the various subsystems within the organisational system, on
the one hand and between the organisation and the external environmental system, on the other.
In the context of a business organisation, it has many boundary contacts or ‘interfaces’ with
many external systems like suppliers, creditors, customers, government agencies etc.

Every system has flows of information, material and energy. These enter the system from the
environment as inputs and exit the system as outputs. The inputs of a business organisation are
raw materials, equipment, human effort, technology and information. The organisation converts
these inputs into outputs of goods, services and satisfactions. This process of change is known as
‘throughput’.

It should be remembered that the output of a system is always more than the combined output of
its parts. This is called ‘synergy’. In organisational terms, synergy refers to the increase in
productivity when separate departments within an organization cooperate, coexist and interact as
compared to the productivity when they acted in isolation. In other words, as separate
departments within an organisation cooperate and interact, they become more productive than if
they had acted in isolation. For example, it is obviously more efficient for each department in a
small firm to manage one finance department than for each department to have a separate finance
department of its own.

V. CONTINGENCY APPROACH
According to this approach, management values and concepts of various schools have no
universal applications. In other words, there is no optimal or single best way of doing things
under all conditions. Methods and techniques, which are highly effective in one situation, may
not work in other situations. Results differ because situations differ. Accordingly, the
contingency approach suggests that the task of managers is to try to identify which technique
will best contribute to the attainment of management goals in a particular situation. Thus,
managers have to employ a sort of situational sensitivity and practical selectivity.

TYPES OF BUSINESS ORGANIZATIONS

When organizing a new business, one of the most important decisions to be made is choosing the
structure of a business.

a) Sole Proprietorships
The vast majority of small business starts out as sole proprietorships . . . very dangerous. These
firms are owned by one person, usually the individual who has day-to-day responsibility for
running the business. Sole proprietors own all the assets of the business and the profits generated
by it. They also assume "complete personal" responsibility for all of its liabilities or debts. In the
eyes of the law, you are one in the same with the business.

Merits:
• Easiest and least expensive form of ownership to organize.
• Sole proprietors are in complete control, within the law, to make all decisions.
• Sole proprietors receive all income generated by the business to keep or reinvest.
• Profits from the business flow-through directly to the owner's personal tax return.
• The business is easy to dissolve, if desired.

Demerits:
• Unlimited liability and are legally responsible for all debts against the business.
• Their business and personal assets are 100% at risk.
• Has almost been ability to raise investment funds.
• Are limited to using funds from personal savings or consumer loans.
• Have a hard time attracting high-caliber employees, or those that are motivated by the
opportunity to own a part of the business.
• Employee benefits such as owner's medical insurance premiums are not directly deductible
from business income (partially deductible as an adjustment to income).

b) Partnerships
In a Partnership, two or more people share ownership of a single business. Like proprietorships,
the law does not distinguish between the business and its owners. The Partners should have a
legal agreement that sets forth how decisions will be made, profits will be shared, disputes will
be resolved, how future partners will be admitted to the partnership, how partners can be bought
out, or what steps will be taken to dissolve the partnership when needed. Yes, its hard to think
about a "break-up" when the business is just getting started, but many partnerships split up at
crisis times and unless there is a defined process, there will be even greater problems. They also
must decide up front how much time and capital each will contribute, etc.

Merits:
• Partnerships are relatively easy to establish; however time should be invested in developing the
partnership agreement.
• With more than one owner, the ability to raise funds may be increased.
• The profits from the business flow directly through to the partners' personal taxes.
• Prospective employees may be attracted to the business if given the incentive to become a
partner.

Demerits:
• Partners are jointly and individually liable for the actions of the other partners.
• Profits must be shared with others.
• Since decisions are shared, disagreements can occur.
• Some employee benefits are not deductible from business income on tax returns.
• The partnerships have a limited life; it may end upon a partner withdrawal or death.
c) Corporations
A corporation, chartered by the state in which it is headquartered, is considered by law to be a
unique "entity", separate and apart from those who own it. A corporation can be taxed; it can be
sued; it can enter into contractual agreements. The owners of a corporation are its shareholders.
The shareholders elect a board of directors to oversee the major policies and decisions. The
corporation has a life of its own and does not dissolve when ownership changes.

Merits:
• Shareholders have limited liability for the corporation's debts or judgments against the
corporations.
• Generally, shareholders can only be held accountable for their investment in stock of the
company. (Note however, that officers can be held personally liable for their actions, such as the
failure to withhold and pay employment taxes.)
• Corporations can raise additional funds through the sale of stock.
• A corporation may deduct the cost of benefits it provides to officers and employees.
• Can elect S corporation status if certain requirements are met. This election enables company to
be taxed similar to a partnership.

Demerits:
• The process of incorporation requires more time and money than other forms of organization.
• Corporations are monitored by federal, state and some local agencies, and as a result may have
more paperwork to comply with regulations.
• Incorporating may result in higher overall taxes. Dividends paid to shareholders are not
deductible form business income, thus this income can be taxed twice.

d) Joint Stock Company:

Limited financial resources & heavy burden of risk involved in both of the previous forms of
organization has led to the formation of joint stock companies these have limited dilutives.
The capital is raised by selling shares of different values. Persons who purchase the shares are
called shareholder. The managing body known as; Board of Directors; is responsible for policy
making important financial & technical decisions.

There are two main types of joint stock Companies.

(i) Private limited company.
(ii) Public limited company

(i) Private limited company: This type company can be formed by two or more persons. The
maximum number of member ship is limited to 50. In this transfer of shares is limited to
members only. The government also does not interfere in the working of the company. (ii) Public
Limited Company: Its is one whose membership is open to general public. The minimum
number required to form such company is seven, but there is no upper limit. Such company’s can
advertise to offer its share to genera public through a prospectus. These public limited companies
are subjected to greater control & supervision of control.

Merits:
• The liability being limited the shareholder bear no Rick& therefore more as make persons are
encouraged to invest capital.
• Because of large numbers of investors, the risk of loss is divided.
• Joint stock companies are not affected by the death or the retirement of the shareholders.

Disadvantages:
• It is difficult to preserve secrecy in these companies.
• It requires a large number of legal formalities to be observed.
• Lack of personal interest.

e) Public Corporations:
A public corporation is wholly owned by the Government centre to state. It is established usually
by a Special Act of the parliament. Special statute also prescribes its management pattern power
duties & jurisdictions. Though the total capital is provided by the Government, they have
separate entity & enjoy independence in matters related to appointments, promotions etc.

Merits:
• These are expected to provide better working conditions to the employees & supported to be
better managed.
• Quick decisions can be possible, because of absence of bureaucratic control.
• More flexibility as compared to departmental organization.
• Since the management is in the hands of experienced & capable directors & managers, these ate
managed more efficiently than that of government departments.

Demerits:
• Any alteration in the power & Constitution of Corporation requires an amendment in the
particular Act, which is difficult & time consuming.
• Public Corporations possess monopoly & in the absence of competition, these are not interested
in adopting new techniques & in making improvement in their working.

f) Government Companies:
A state enterprise can also be organized in the form of a Joint stock company; A government
company is any company in which of the share capital is held by the central government or
partly by central government & party by one to more state governments. It is managed b the
elected board of directors which may include private individuals. These are accountable for its
working to the concerned ministry or department & its annual report is required to be placed ever
year on the table of the parliament or state legislatures along with the comments of the
government to concerned department.

Merits:
• It is easy to form.
• The directors of a government company are free to take decisions & are not bound by certain
rigid rules & regulations.

Demerits:
• Misuse of excessive freedom cannot be ruled out.
• The directors are appointed by the government so they spend more time in pleasing their
political masters & top government officials, which results in inefficient management.

THE ORGANIZATION’S CULTURE

 The Shared Values, principles, traditions, and ways of doing things that influence the
way organizational member act.

 “The way we do things around here.” Values, symbols, rituals, myths, and practices

 Implications:

 Culture is a perception.

 Culture is shared.

 Culture is descriptive.

 Innovation and Risk-taking. The degree to which employees are encouraged to be

innovative and to take risks.

 Attention to Detail. The degree to which employees are expected to exhibit precision,

analysis and attention to detail
  Outcome Orientation. The degree to which managers focus on results or outcomes
rather than on techniques and processes used to achieve these outcomes.

 People Orientation. The degree to which management decisions take into consideration
the effect of decisions on people within the organization

 Team Orientation. The degree to which work activities are organized around teams
rather than individuals.

Strong versus Weak Cultures

• Strong Cultures

 Are cultures in which key values are deeply and widely held

 Have a strong influence on organizational members

• Factors Influencing the Strength of Culture

 Size of the organization

 Age of the organization

 Rate of employee turnover

 Strength of the original culture

 Clarity of cultural values and beliefs

CLASSIFICATION OF ENVIRONMENTAL FACTORS

On the basis of the extent of intimacy with the firm, the environmental factors may be classified
into different types namely internal and external.

1) INTERNAL ENVIRONMENTAL FACTORS

The internal environment is the environment that has a direct impact on the business. The
internal factors are generally controllable because the company has control over these factors.
It can alter or modify these factors. The internal environmental factors are resources, capabilities
and culture.

i) Resources:
A good starting point to identify company resources is to look at tangible, intangible and human
resources.
Tangible resources are the easiest to identify and evaluate: financial resources and physical
assets are identifies and valued in the firm’s financial statements.
Intangible resources are largely invisible, but over time become more important to the firm than
tangible assets because they can be a main source for a competitive advantage. Such intangible
recourses include reputational assets (brands, image, etc.) and technological assets (proprietary
technology and know-how).
Human resources or human capital are the productive services human beings offer the firm in
terms of their skills, knowledge, reasoning, and decision-making abilities.

ii) Capabilities:
Resources are not productive on their own. The most productive tasks require that resources
collaborate closely together within teams. The term organizational capabilities are used to refer
to a firm’s capacity for undertaking a particular productive activity. Our interest is not in
capabilities per se, but in capabilities relative to other firms. To identify the firm’s capabilities
we will use the functional classification approach. A functional classification identifies
organizational capabilities in relation to each of the principal functional areas.

iii) Culture:
It is the specific collection of values and norms that are shared by people and groups in an
organization and that helps in achieving the organizational goals.

2) EXTERNAL ENVIRONMENT FACTORS

It refers to the environment that has an indirect influence on the business. The factors are
uncontrollable by the business. The two types of external environment are micro environment
and macro environment.

a) MICRO ENVIRONMENTAL FACTORS

These are external factors close to the company that have a direct impact on the organizations
process. These factors include:

i) Shareholders
Any person or company that owns at least one share (a percentage of ownership) in a company is
known as shareholder. A shareholder may also be referred to as a "stockholder". As organization
requires greater inward investment for growth they face increasing pressure to move from private
ownership to public. However this movement unleashes the forces of shareholder pressure on the
strategy of organizations.

ii) Suppliers
An individual or an organization involved in the process of making a product or service available
for use or consumption by a consumer or business user is known as supplier. Increase in raw
material prices will have a knock on affect on the marketing mix strategy of an organization.
Prices may be forced up as a result. A closer supplier relationship is one way of ensuring
competitive and quality products for an organization.

iii) Distributors
Entity that buys non-competing products or product-lines, warehouses them, and resells them to
retailers or direct to the end users or customers is known as distributor. Most distributors provide
strong manpower and cash support to the supplier or manufacturer's promotional efforts. They
usually also provide a range of services (such as product information, estimates, technical
support, after-sales services, credit) to their customers. Often getting products to the end
customers can be a major issue for firms. The distributors used will determine the final price of
the product and how it is presented to the end customer. When selling via retailers, for example,
the retailer has control over where the products are displayed, how they are priced and how much
they are promoted in-store. You can also gain a competitive advantage by using changing
distribution channels.

iv) Customers
A person, company, or other entity which buys goods and services produced by another person,
company, or other entity is known as customer. Organizations survive on the basis of meeting
the needs, wants and providing benefits for their customers. Failure to do so will result in a failed
business strategy.

v) Competitors
A company in the same industry or a similar industry which offers a similar product or service is
known as competitor. The presence of one or more competitors can reduce the prices of goods
and services as the companies attempt to gain a larger market share. Competition also requires
companies to become more efficient in order to reduce costs. Fast-food restaurants McDonald's
and Burger King are competitors, as are Coca-Cola and Pepsi, and Wal-Mart and Target.

vi) Media
Positive or adverse media attention on an organisations product or service can in some cases
make or break an organisation.. Consumer programmes with a wider and more direct audience
can also have a very powerful and positive impact, forcing organisations to change their tactics.

b) MACRO ENVIRONMENTAL FACTORS

An organization's macro environment consists of nonspecific aspects in the organization's
surroundings that have the potential to affect the organization's strategies. When compared to a
firm's task environment, the impact of macro environmental variables is less direct and the
organization has a more limited impact on these elements of the environment.
The macro environment consists of forces that originate outside of an organization and generally
cannot be altered by actions of the organization. In other words, a firm may be influenced by
changes within this element of its environment, but cannot itself influence the environment. The
curved lines in Figure 1 indicate the indirect influence of the environment on the organization.

Macro environment includes political, economic, social and technological factors. A firm
considers these as part of its environmental scanning to better understand the threats and
opportunities created by the variables and how strategic plans need to be adjusted so the firm can
obtain and retain competitive advantage.

i) Political Factors
Political factors include government regulations and legal issues and define both formal and
informal rules under which the firm must operate. Some examples include:
• tax policy
• employment laws
• environmental regulations
• trade restrictions and tariffs
• political stability

ii) Economic Factors

Economic factors affect the purchasing power of potential customers and the firm's cost of
capital. The following are examples of factors in the macro economy:
• economic growth
• interest rates
• exchange rates
• inflation rate

iii) Social Factors

Social factors include the demographic and cultural aspects of the external macro environment.
These factors affect customer needs and the size of potential markets. Some social factors
include:
• health consciousness
• population growth rate
• age distribution
• career attitudes
• emphasis on safety

iv) Technological Factors

Technological factors can lower barriers to entry, reduce minimum efficient production levels,
and influence outsourcing decisions. Some technological factors include:
• R&D activity
• automation
• technology incentives
• rate of technological change

TRENDS AND CHALLENGES OF MANAGEMENT IN GLOBAL

SCENARIO
The management functions are planning and decision making, organizing. leading, and
controlling — are just as relevant to international managers as to domestic managers.
International managers need to have a clear view of where they want their firm to be in the
future; they have to organize to implement their plans: they have to motivate those who work lot
them; and they have to develop appropriate control mechanisms.

a) Planning and Decision Making in a Global Scenario

To effectively plan and make decisions in a global economy, managers must have a broad based
understanding of both environmental issues and competitive issues. They need to understand
local market conditions and technological factor that will affect their operations. At the corporate
level, executives need a great deal of information to function effectively. Which markets are
growing? Which markets are shrinking? Which are our domestic and foreign competitors doing
in each market? They must also make a variety of strategic decisions about their organizations.
For example, if a firm wishes to enter market in France, should it buy a local firm there, build a
plant, or seek a strategic alliance? Critical issues include understanding environmental
circumstances, the role of goals and planning in a global organization, and how decision making
affects the global organization.

b) Organizing in a Global Scenario

Managers in international businesses must also attend to a variety of organizing issues. For
example, General Electric has operations scattered around the globe.The firm has made the
decision to give local managers a great deal of responsibility for how they run their business. In
contrast, many Japanese firms give managers of their foreign operations relatively little
responsibility. As a result, those managers must frequently travel back to Japan to present
problems or get decisions approved. Managers in an international business must address the
basic issues of organization structure and design, managing change, and dealing with human
resources.

c) Leading in a Global Scenario

We noted earlier some of the cultural factors that affect international organizations. Individual
managers must be prepared to deal with these and other factors as they interact people from
different cultural backgrounds .Supervising a group of five managers, each of whom is from a
different state in the United States, is likely to be much simpler than supervising a group of five
managers, each of whom is from a different culture. Managers must understand how cultural
factors affect individuals. How motivational processes vary across cultures, how the role of
leadership changes in different cultures, how communication varies across cultures, and how
interpersonal and group processes depend on cultural background.

d) Controlling in a Global Scenario

Finally, managers in international organizations must also be concerned with control. Distances,
time zone differences, and cultural factors also play a role in control. For example, in some
cultures, close supervision is seen as being appropriate, whereas in other cultures, it is not
Likewise, executives in the United States and Japan may find it difficult to communicate vital
information to one another because of the time zone differences. Basic control issues for the
international manager revolve around operations management productivity, quality, technology
and information systems.

• Globalization
 Management in international organizations
 Political and cultural challenges of operating in a global market
• Ethics
 Increased emphasis on ethics education in college curriculums
 Increased creation and use of codes of ethics by businesses
• Workforce Diversity
 Increasing heterogeneity in the workforce
• More gender, minority, ethnic, and other forms of diversity in employees
 Aging workforce
• Older employees who work longer and not retire
• The cost of public and private benefits for older workers will increase
• Increased demand for products and services related to aging
• Entrepreneurship Defined
  The process whereby an individual or group of individuals use organized efforts
to create value and grow by fulfilling wants and needs through innovation and
uniqueness.
• Entrepreneurship process
 Pursuit of opportunities
 Innovation in products, services, or business methods
 Desire for continual growth of the organization
• Knowledge Management
 The cultivation of a learning culture where organizational members systematically
gather and share knowledge with others in order to achieve better performance.
• Learning Organization
 An organization that has developed the capacity to continuously learn, adapt, and
change.
• Quality Management
 A philosophy of management driven by continual improvement in the quality of
work processes and responding to customer needs and expectations
 Inspired by the total quality management (TQM) ideas of Deming and Juran
 Quality is not directly related to cost.
• E-Business (Electronic Business)
 The work performed by an organization using electronic linkages to its key
constituencies
 E-commerce: the sales and marketing component of an e-business
Categories of E-Businesses
 E-business enhanced organization
 E-business enabled organization
 Total e-business organization