ABM-801

(UNIT-I)
DEFINITION OF MANAGEMENT
Management may be defined in many different ways. Many eminent authors on the subject
have defined the term "management", some of these definitions are reproduced below:
According to Lawrence A Appley - "Management is the development of people and not
the direction of things".
According to Joseph Massie - "Management is defined as the process by which a cooperative
group directs action towards common goals".
In the words of George R Terry - "Management is a distinct process consisting of planning,
organising, actuating and controlling performed to determine and accomplish the objectives
by the use of people and resources".

CHARACTERISTICS OF MANAGEMENT
An analysis of the various definitions of management indicates that management has
certain characteristics. The following are the salient characteristics of management.
1. Management aims at reaping rich results in economic terms: Manager's primary
task is to secure the productive performance through planning, direction and control.
It is expected of the management to bring into being the desired results. Rational
utilisation of available resources to maximise the profit is the economic function of
a manager. Professional manager can prove his administrative talent only by
economising the resources and enhancing profit. According to Kimball -
"management is the art of applying the economic principles that underlie the control
of men and materials in the enterprise under consideration".
2. Management also implies skill and experience in getting things done through
people: Management involves doing the job through people. The economic function
of earning profitable return cannot be performed without enlisting co-operation and
securing positive response from "people". Getting the suitable type of people to
execute the operations is the significant aspect of management. In the words of
Koontz and O'Donnell - "Management is the art of getting things done through
people in formally organised groups".
3. Management is a process: Management is a process, function or activity. This
process continues till the objectives set by administration are actually achieved.
"Management is a social process involving co-ordination of human and material
resources through the functions of planning, organising, staffing, leading and
controlling in order to accomplish stated objectives".
4. Management is a universal activity: Management is not applicable to business
undertakings only. It is applicable to political, social, religious and educational
institutions also. Management is necessary when group effort is required.
5. Management is a Science as well as an Art: Management is an art because
there are definite principles of management. It is also a science because by the
application of these principles predetermined objectives can be achieved.
6. Management is a Profession: Management is gradually becoming a profession
because there are established principles of management which are being applied in
practice, and it involves specialised training and is governed by ethical code arising
out of its social obligations.
7. Management is an endeavour to achieve pre-determined objectives:
Management is concerned with directing and controlling of the various activities of
the organisation to attain the pre-determined objectives. Every managerial activity
has certain objectives. In fact, management deals particularly with the actual directing
of human efforts.
8. Management is a group activity: Management comes into existence only when
there is an group activity towards a common objective. Management is always
concerned with group efforts and not individual efforts. To achieve the goals of an
organisation management plans, organises, co-ordinates, directs and controls the
group effort.
9. Management is a system of authority: Authority means power to make others
act in a predetermined manner. Management formalises a standard set of rules
and procedure to be followed by the subordinates and ensures their compliance
with the rules and regulations. Since management is a process of directing men to
perform a task, authority to extract the work from others is implied in the very
concept of management.
10. Management is Goal Oriented: Management is a purposeful activity. It is
concerned with the achievement of pre-determined objectives of an organisation.

SCOPE OF MANAGEMENT
It is very difficult to precisely state the scope of management. However, management
includes the following aspects:-
1.4.1 Subject-matter of Management
Management is considered as a continuing activity made up of basic management
functions like planning, organizing, staffing, directing and controlling. These components
form the subject-matter of management.
1.4.2 Functional Areas of Management
Management covers the following functional areas:-
l Financial Management: Financial management includes forecasting, cost control,
management accounting, budgetary control, statistical control, financial planning etc.
l Human Resource Management: Personnel / Human Resource Management
covers the various aspects relating to the employees of the organisation such as
recruitment, training, transfers, promotions, retirement, terminations, remuneration,
labour welfare and social security, industrial relations etc.
l Marketing Management: Marketing management deals with marketing of goods,
sales promotion, advertisement and publicity, channels of distribution, market
research etc.
l Production Management: Production Management includes production planning,
quality control and inspection, production techniques etc.
l Material Management: Material management includes purchase of materials,
issue of materials, storage of materials, maintenance of records, materials control
etc.
l Purchasing Management: Purchasing management includes inviting tenders for
raw materials, placing orders, entering into contracts etc.
l Maintenance Management: Maintenance Management relates to the proper care
and maintenance of the buildings, plant and machinery etc.
l Office Management: Office management is concerned with office layout, office
staffing and equipment of the office.

EVOLUTION OF MANAGEMENT THOUGHT

The origin of management can be traced back to the days when man started living in
groups. History reveals that strong men organized the masses into groups according to
their intelligence, physical and mental capabilities. Evidence of the use of the wellrecognized
principles of management is to be found in the organization of public life in
ancient Greece, the organization of the Roman Catholic Church and the organization of
military forces. Thus management in some form or the other has been practiced in the
various parts of the world since the dawn of civilization. With the on set of Industrial
Revolution, however, the position underwent a radical change. The structure of industry
became extremely complex. At this stage, the development of a formal theory of
management became absolutely necessary. It was against this background that the
pioneers of modern management thought laid the foundations of modern management
theory and practice.
Evolution of management thought may be divided into four stages
1. Pre-scientific management period.
2. Classical Theory
(a) Scientific Management of Taylor
(b) Administrative Management of Fayol
(c) Bureaucratic Model of Max Weber
3. Neo-classical Theory or Behaviour Approach
4. Modern Theory or Systems Approach
1 Pre-scientific Management Period
The advent of industrial revolution in the middle of the 18th century had its impact on
management. Industrial revolution brought about a complete change in the methods of
production, tools and equipments, organization of labour and methods of raising capital.
Employees went to their work instead of receiving it, and so, the factory system, as it is
known today, become a dominant feature of the economy. Under this system, land and
buildings, hired labour, and capital are made available to the entrepreneur, who strives to
combine these factors in the efficient achievement of a particular goal. All these changes,
in turn, brought about changes in the field of management. Traditional, conventional or
customary ideas of management were slowly given up and management came to be based
on scientific principles. In the words of L. F. Urwick - "Modern management has thrown
open a new branch of human knowledge, a fresh universe of discourse".
(A) Professor Charles Babbage (UK 1729 -1871): He was a Professor of
Mathematics at Cambridge University. Prof Babbage found that manufacturers
made little use of science and mathematics, and that they (manufacturers) relied
upon opinions instead of investigations and accurate knowledge. He felt that the
methods of science and mathematics could be applied to the solution of methods in
the place of guess work for the solution of business problems. He advocated the
use of accurate observations, measurement and precise knowledge for taking
business decisions.
(B) James Watt Junior (UK 1796 - 1848) and Mathew Robinson Boulton
(1770 - 1842): James Watt Junior and Mathew Robinson Boulton contributed to
the development of management thought by following certain management
techniques in their engineering factory at Soho in Birmingham. They are:-
Production Planning
Standardization of Components
Maintenance
Planned machine layout
Provision of welfare for personnel
Scheme for executive development
Marketing Research and forecasting
Elaborate statistical records
(C) Robert Owens (UK 1771 - 1858): Robert Owens, the promoter of co-operative
and trade union movement in England, emphasized the recognition of human element
in industry. He firmly believed that workers' performance in industry was influenced
by the working conditions and treatment of workers. He introduced new ideas of
human relations - shorter working hours, housing facilities, training of workers in
hygiene, education of their children, provision of canteen etc. Robert Owen, managed
a group of textile mills in Lanark, Scotland, where he used his ideas of human
relations. Though his approach was paternalistic, he came to be regarded as the
father of Personnel Management.

2 Classical Theory
Prof. Charles Babbage, James Watt Junior and Mathew Robinson Boulton, Robert Owen,
Henry Robinson Towne and Rowntree were, no doubt, pioneers of management thought.
But, the impact of their contributions on the industry as a whole was meagre. The real
beginning of the science of management did not occur until the last decade of the 19th
century. During this period, stalwarts like F.W. Taylor, H.L. Gantt, Emerson, Frank and
Lillian Gilberth etc., laid the foundation of management, which in due course, came to be
known as scientific management. This epoch in the history of management will be
remembered as an era in which traditional ways of managing were challenged, past
management experience was scientifically systematized and principles of management
were distilled and propagated. The contributions of the pioneers of this age have had a
profound impact in furthering the management know-how and enriching the store of
management principles.
F.W. Taylor and Henry Fayol are generally regarded as the founders of scientific
management and administrative management and both provided the bases for science
and art of management.
Features of Management in the Classical Period:
1. It was closely associated with the industrial revolution and the rise of large-scale
enterprise.
2. Classical organization and management theory is based on contributions from a
number of sources. They are scientific management, Administrative management
theory, bureaucratic model, and micro-economics and public administration.
3. Management thought focussed on job content division of labour, standardization,
simplification and specialization and scientific approach towards organization.

Contributions of Scientific Management:

1. Emphasis on rational thinking on the part of management.
2. Focus on the need for better methods of industrial work through systematic study
and research.
3. Emphasis on planning and control of production.
4. Development of Cost Accounting.
5. Development of incentive plans of wage payment based on systematic study of work.
6. Focus on need for a separate Personnel Department.
7. Focus on the problem of fatigue and rest in industrial work.

1.7.3 Neoclassical Theory

Neo-classical Theory is built on the base of classical theory. It modified, improved and
extended the classical theory. Classical theory concentrated on job content and
management of physical resources whereas, neoclassical theory gave greater emphasis
to individual and group relationship in the workplace. The neo- classical theory pointed
out the role of psychology and sociology in the understanding of individual and group
behaviour in an organization.
Hawthorne Experiment: In 1927, a group of researchers led by Elton Mayo and Fritz
Roethlisberger of the Harvard Business School were invited to join in the studies at the
Hawthorne Works of Western Electric Company, Chicago. The experiment lasted up to
1932. The Hawthorne Experiments brought out that the productivity of the employees is
not the function of only physical conditions of work and money wages paid to them.
Productivity of employees depends heavily upon the satisfaction of the employees in
their work situation. Mayo's idea was that logical factors were far less important than
emotional factors in determining productivity efficiency. Furthermore, of all the human
factors influencing employee behaviour, the most powerful were those emanating from
the worker's participation in social groups. Thus, Mayo concluded that work arrangements
in addition to meeting the objective requirements of production must at the same time
satisfy the employee's subjective requirement of social satisfaction at his work place.
The Hawthorne experiment consists of four parts. These parts are briefly described below:-
1. Illumination Experiment.
2. Relay Assembly Test Room Experiment.
3. Interviewing Programme.
4. Bank Wiring Test Room Experiment.

Contributions of the Hawthorne Experiment: Elton Mayo and his associates conducted
their studies in the Hawthorne plant of the western electrical company, U.S.A., between
1927 and 1930. According to them, behavioural science methods have many areas of
application in management. The important features of the Hawthorne Experiment are:-
1. A business organization is basically a social system. It is not just a techno-economic
system.
2. The employer can be motivated by psychological and social wants because his
behaviour is also influenced by feelings, emotions and attitudes. Thus economic
incentives are not the only method to motivate people.
3. Management must learn to develop co-operative attitudes and not rely merely on
command.
4. Participation becomes an important instrument in human relations movement. In
order to achieve participation, effective two-way communication network is essential.
5. Productivity is linked with employee satisfaction in any business organization.
Therefore management must take greater interest in employee satisfaction.

1.7.4 Modern Theory (System Approach)

The systems approach to management indicates the fourth major theory of management
thought called modern theory. Modern theory considers an organization as an adaptive
system which has to adjust to changes in its environment. An organization is now defined
as a structured process in which individuals interact for attaining objectives.
Meaning of "System": The word system is derived from the Greek word meaning to
bring together or to combine. A system is a set of interconnected and inter-related elements
or component parts to achieve certain goals. A system has three significant parts:
1. Every system is goal-oriented and it must have a purpose or objective to be attained.
2. In designing the system we must establish the necessary arrangement of
components.
3. Inputs of information, material and energy are allocated for processing as per plan
so that the outputs can achieve the objective of the system.

Characteristics of Modern Management Thought:

1. The Systems Approach: An organization as a system has five basic parts -
(1) Input
(2) Process
(3) Output
(4) Feedback and
(5) Environment.
It draws upon the environment for inputs to produce certain desirable outputs. The success
of these outputs can be judged by means of feedback. If necessary, we have to modify
out mix of inputs to produce as per changing demands.
2. Dynamic: We have a dynamic process of interaction occurring within the structure
of an organization. The equilibrium of an organization and its structure is itself
dynamic or changing.
3. Multilevel and Multidimensional: Systems approach points out complex multilevel
and multidimensional character. We have both a micro and macro approach. A
company is micro within a business system. It is macro with respect to its own
internal units. Within a company as a system we have:-
(1) Production subsystem
(2) Finance subsystem
(3) Marketing subsystem
(4) Personnel subsystem.
All parts or components are interrelated. Both parts as well as the whole are equally
important. At all levels, organizations interact in many ways.
4. Multimotivated: Classical theory assumed a single objective, for instance, profit.
Systems approach recognizes that there may be several motivations behind our
actions and behaviour. Management has to compromise these multiple objectives
eg: - economic objectives and social objectives.
5. Multidisciplinary: Systems approach integrates and uses with profit ideas emerging
from different schools of thought. Management freely draws concepts and
techniques from many fields of study such as psychology, social psychology,
sociology, ecology, economics, mathematics, etc.
6. Multivariable: It is assumed that there is no simple cause-effect phenomenon. An
event may be the result of so many factors which themselves are interrelated and
interdependent. Some factors are controllable, some uncontrollable. Intelligent
planning and control are necessary to face these variable factors.
7. Adaptive: The survival and growth of an organization in a dynamic environment
demands an adaptive system which can continuously adjust to changing conditions.
An organization is an open system adapting itself through the process of feedback.
8. Probabilistic: Management principles point out only probability and never the
certainty of performance and the consequent results. We have to face so many
variables simultaneously. Our forecasts are mere tendencies. Therefore, intelligent
forecasting and planning can reduce the degree of uncertainty to a considerable
extent.

Functions of Managers

Managers just don't go out and haphazardly perform their responsibilities. Good managers
discover how to master five basic functions: planning, organizing, staffing, leading, and
controlling.
• Planning: This step involves mapping out exactly how to achieve a particular goal. Say,
for example, that the organization's goal is to improve company sales. The manager first
needs to decide which steps are necessary to accomplish that goal. These steps may
include increasing advertising, inventory, and sales staff. These necessary steps are
developed into a plan. When the plan is in place, the manager can follow it to accomplish
the goal of improving company sales.
• Organizing: After a plan is in place, a manager needs to organize her team and materials
according to her plan. Assigning work and granting authority are two important elements
of organizing.
• Staffing: After a manager discerns his area's needs, he may decide to beef up his staffing
by recruiting, selecting, training, and developing employees. A manager in a large
organization often works with the company's human resources department to accomplish
this goal.
• Leading: A manager needs to do more than just plan, organize, and staff her team to
achieve a goal. She must also lead. Leading involves motivating, communicating,
guiding, and encouraging. It requires the manager to coach, assist, and problem solve
with employees.
• Controlling: After the other elements are in place, a manager's job is not finished. He
needs to continuously check results against goals and take any corrective actions
necessary to make sure that his area's plans remain on track.
 A planning is a predetermined course of action. It is a blue print for goal achievement. Simply
stated, it is setting goals and deciding how to achieve them. Planning is deciding in advance what
to do, how to do it, when to do it and who is to do it. It bridges the gap from where we are to
where we want to go Planning has a number of characteristics:

• Planning is goal-oriented: All plans arise from objectives. Objectives provide the basic
guidelines for planning activities. Planning has no meaning unless it contributes in some positive
manner to the achievement of predetermined goals.
• Planning is a primary function: Planning is the foundation of management. It is a parent
exercise in management process. It is a preface to business activities.
• Planning is all-pervasive: Planning is a function of all managers. It is needed and practiced at
all managerial levels. Planning is inherent in everything a manager does.
• Planning is a mental exercise: Planning is a mental process involving imagination, foresight
and sound judgment. Planning compels managers to abandon guesswork and wishful thinking. It
makes them think in a logical and systematic manner.
• Planning is a continuous process: Planning is continuous. It is a never-ending activity. It is an
ongoing process of adjustment to change. There is always need for a new plan to be drawn on the
basis of new demands and changes in the circumstances.
• Planning involves choice: Planning essentially involves choice among various alternative
courses of action. If there is one way of doing something, there is no need for planning. The need
for planning arises only when alternatives are available.

Process of Planning:

The process of planning consists of the following steps:

• Establishing objectives: The first step in the planning process is to identify the goals of the
organisation. The internal as well as external conditions affecting the organisation must be
thoroughly examined before setting objectives. The objectives so derived must clearly indicate
what is to be achieved, where action should take place, who is to perform it, how it is to be
undertaken and when is it to be accomplished. In other words, managers must provide clear
guidelines for organisational efforts, so that activities can be kept on the right track.
• Developing premises: After setting objectives, it is necessary to outline planning premises.
Premises are assumptions about the environment in which plans are made and implemented.
Thus, assumptions about the likely impact of important environmental factors such as market
demand for goods, cost of raw materials, technology to be used, population growth, government
policy, etc. on the future plans are made. Plans should be formulated by the management,
keeping the constraints imposed by internal as well as external conditions in mind.
• Evaluating alternatives and selection: After establishing the objectives and planning premises,
the alternative courses of action have to be considered. The pros and cons as well as the
consequences of each alternative course of action must be examined thoroughly before a choice
is made.
• Formulating derivative plans: After selecting the best course of action, the management has to
formulate the secondary plans to support the basic plan. The plans derived for various
departments, units, activities, etc., in a detailed manner are known as ‘derivative plans’. For
example, the basic production plan requires a number of things such as availability of plant and
 machinery, training of employees, provision of adequate finance, etc. To ensure the success of a
basic plan, the derivative plans must indicate the time schedule and sequence of performing
various tasks.
• Securing cooperation and participation: The successful implementation of a plan depends, to
a large extent, on the whole-hearted cooperation of the employees. In view of this, management
should involve operations people in the planning activities.
• Providing for follow-up: Plans have to be reviewed continually to ensure their relevance and
effectiveness. In the course of implementing plans, certain facts may come to light that were not
even thought of earlier. In the light of these changed conditions, plans have to be revised.
Without such a regular follow-up, plans may become out-of-date and useless. Moreover, such a
step ensures the implementation plans along right lines.

Types of Planning:

Any organization can have different plans. We can classify the types of plans
in the following ways:

On the basis of Nature:::

1. Operational Plan:
Operational plans are the plans which are formulated by the lower level
management for a short term period of up to one year. It is concerned
with the day to day operations of the organization. It is detailed and
specific. It is usually based on past experiences. It usually covers
functional aspects such as production, finance, human resources, etc.

2. Tactical Plan:
The tactical plan is the plan which is concerned with the integration of
various organizational units and ensures implementation of strategic
plans on day to day basis. It involves how the resources of an
organization should be used in order to achieve strategic goals. The
tactical plan is also known as a coordinative or functional plan.

3. Strategic Plan:
A strategic plan is a plan which is formulated by top-level management
for a long period of time of five years or more. They decide the major
goals and policies to achieve their goals. It takes in a note of all the
external factors and risks involved and makes a long-term policy of the
organization. It involves the determination of strengths and weaknesses,
external risks, missions, and control systems to implement plans.
On the basis of the Managerial Level:::
1. Top-level Plans:
Plans which are formulated by general managers and directors are
 called top-level plans. Under these plans, the objectives, budget,
policies, etc. for the whole organization are laid down. These plans are
mostly long term plans.

2. Middle-level Plans:
The managerial hierarchy at the middle level includes the departmental
managers. A corporation has many departments like the purchasing
department, sales department, finance department, personnel
department, etc. The plans formulated by the departmental managers
are called middle-level plans.

3. Lower level Plans:

These plans are prepared by the foreman or the supervisors. They take
the existence of the actual work and the problems connected with it.
They are formulated for a short period of time and called short term
plans.
On the basis of Time
1. Long Term Plan:
The long-term plan is the long-term process that business owners use
to reach their
2. business mission and vision. It determines the path for business
owners to reach their goals. It also reinforces and makes corrections to
the goals as the plan progresses.

3. Intermediate Plan:
Intermediate planning covers 6 months to 2 years. It outlines how the
strategic plan will be pursued. In business, intermediate plans are most
often used for campaigns.

4. Short-term Plan:
The short-term plan involves pans for a few weeks or at most a year. It
allocates resources for day-to-day business development and
management within the strategic plan. Short-term plans outline
objectives necessary to meet intermediate plans and the strategic
planning process.
On the basis of Use:::
1. Single Plan:
These plans are connected with some special problems. These plans
end the moment of the problems to be solved. They are not used, once
 after their use. They are further re-created whenever required.

2. Standing Plan:
These plans are formulated once and they are repeatedly used. These
plans continuously guide managers. That is why it is said that a
standing plan is a standing guide to solving the problems. These plans
include mission, policies, objectives, rules, and strategy.

COURSE OBJECTIVES:
Objectives may be defined as the goals which an organisation tries to achieve. Objectives
are described as the end- points of planning. According to Koontz and O'Donnell, "an
objective is a term commonly used to indicate the end point of a management
programme."
Objectives constitute the purpose of the enterprise and without them no intelligent
planning
can take place.

Features of Objectives:
• The objectives must be predetermined.
• A clearly defined objective provides the clear direction for managerial effort.
• Objectives must be realistic.
• Objectives must be measurable.
• Objectives must have social sanction.
• All objectives are interconnected and mutually supportive.
• Objectives may be short-range, medium-range and long-range.
• Objectives may be constructed into a hierarchy.

Process of Setting Objectives:

Objectives are the keystone of management planning. It is the most important task of
management. Objectives are required to be set in every area which directly and vitally
effects the survival and prosperity of the business. In the setting of objectives, the following
points should be borne in mind.
1. Objectives are required to be set by management in every area which directly and vitally
affects the survival and prosperity of the business.
2. The objectives to be set in various areas have to be identified.
3. While setting the objectives, the past performance must be reviewed, since past performance
indicates what the organisation will be able to accomplish in future.
4. The objectives should be set in realistic terms i.e., the objectives to be set should be reasonable
and capable of attainment.
5. Objectives must be consistent with one and other.
6. Objectives must be set in clear-cut terms.
7. For the successful accomplishment of the objectives, there should be effective communication.

STRATEGIES:
The term 'Strategy' has been adapted from war and is being increasingly used in business
to reflect broad overall objectives and policies of an enterprise. Literally speaking, the
term 'Strategy' stands for the war-art of the military general, compelling the enemy to
fight as per out chosen terms and conditions. A strategy is a special kind of plan formulated
in order to meet the challenge of the policies of competitors.
Haynes and Massier have defined strategy as “the planning for unpredictable contingencies
about which fragmentary information is available”.

Characteristics of Strategy:
(1) It is the right combination of different factors.
(2) It relates the business organisation to the environment.
(3) It is an action to meet a particular challenge, to solve particular problems or to
attain desired objectives.
(4) Strategy is a means to an end and not an end in itself.
(5) It is formulated at the top management level.
(6) It involves assumption of certain calculated risks.

Strategy Formulation:
There are three phases in strategy formation
• Determination of objectives.
• Ascertaining the specific areas of strengths and weakness in the total environment.
• Preparing the action plan to achieve the objectives in the light of environmental forces.

POLICIES:
• A policy is a standing plan. Policies are directives providing continuous framework for
• executive actions on recurrent managerial problems. A policy assists decision-making
• but deviations may be needed, as exceptions and under some extraordinary
circumstances.

Essentials of Policy Formulation:

The essentials of policy formation may be listed as below:
• A policy should be definite, positive and clear. It should be understood by everyone in
the organisation.
• A policy should be translatable into the practices.
• A policy should be flexible and at the same time have a high degree of permanency.
• A policy should be formulated to cover all reasonable anticipatable conditions.
• A policy should be founded upon facts and sound judgment.
• A policy should conform to economic principles, statutes and regulations.
• A policy should be a general statement of the established rule.

Importance of Policies:
Policies are useful for the following reasons:
1. They provide guides to thinking and action and provide support to the subordinates.
2. They delimit the area within which a decision is to be made.
3. They save time and effort by pre-deciding problems and
4. They permit delegation of authority to mangers at the lower levels.
SWOT ANALYSIS:
A SWOT analysis is a strategic planning tool that is used to assess the Strengths,
Weaknesses, Opportunities, and Threats involved in an organization, business or a
project. A SWOT analysis is particularly useful in identifying both internal and external
factors that are essential in decision-making.
These three steps are typically used in constructing a SWOT analysis:

1. Collecting information and data (company, industry/market, customers, news,

etc.)
2. Analyzing the factors
3. Constructing the SWOT chart

Management by objectives (MBO) is a strategic management model

that aims to improve the performance of an organization by clearly
defining objectives that are agreed to by both management and
employees. According to the theory, having a say in goal setting and
action plans encourages participation and commitment among
employees, as well as aligning objectives across the organization.

Management by objectives (also known as management by planning)

is the establishment of a management information system (MIS) to
compare actual performance and achievements with the defined
objectives. Practitioners claim that the major benefits of MBO are that
it improves employee motivation and commitment and allows for
better communication between management and employees.

Example: A company can set various goals with its employees. In the
case of a call center, an MBO could be to increase customer
satisfaction, say, by 10%, while reducing call times by one minute.
The onus is now on finding ways to achieve this goal. Once that’s
decided on, it’s important to get employees on board and then
monitor their progress, provide feedback, and reward those who do a
good job.

Management by Objectives (MBO) in 5 Steps:

MBO outlines five steps that organizations should use to put the
management technique into practice.

1. Either determine or revise organizational objectives for the entire

company. This broad overview should be derived from the
firm’s mission and vision.
2. Translate the organizational objectives to employees. In 1981,
George T. Doran used the acronym SMART (specific,
measurable, acceptable, realistic, time-bound) to express the
concept.
3. Stimulate the participation of employees in setting individual
objectives. After the organization’s objectives are shared with
employees from the top to the bottom, employees should be
encouraged to help set their own objectives to achieve these
larger organizational objectives. This gives employees greater
motivation since they have greater empowerment.
 4. Monitor the progress of employees. In step two, a key
component of the objectives was that they are measurable for
employees and managers to determine how well they are met.
5. Evaluate and reward employee progress. This step includes
honest feedback on what was achieved and not achieved for
each employee.
Advantages:
• Employees take pride in their work and are assigned goals they
know they can achieve that match their strengths, skills, and
educational experiences.
• Assigning tailored goals brings a sense of importance to
employees, boosting their output and loyalty to the company.
• Communication between management and employees is
increased.
• Management can create goals that lead to the success of the
company.
Disadvantages:
• As MBO is focused on goals and targets, it often ignores other
parts of a company, such as the culture of conduct, a healthy
work ethos, and areas for involvement and contribution.
• Strain is increased on employees to meet the goals in a
specified time frame.
• Employees are encouraged to meet targets by any means
necessary, meaning that shortcuts could be taken and the
quality of work compromised.
• If management solely relies on MBO for all management
responsibilities, it can be problematic for areas that don’t fit
under MBO.

ORGANIZING:
Organizing in any business activity involves the person who guide
and control the function of the business, he also coordinates and
regulates all the factors involve in the business operations.
 Organizing involves monitoring and taking responsibility of all
possible outcomes. Organizer is otherwise known as entrepreneur.

Purpose of organization:
• To identify and group desired activity
• Assigning these activities to position
• Dedication of authority to different persons

ORGANIZATIONAL PROCESS:
Organizing, like planning, must be a carefully worked out and
applied process. This process involves determining what work is
needed to accomplish the goal, assigning those tasks to
individuals, and arranging those individuals in a decision-making
framework (organizational structure). The end result of the
organizing process is an organization — a whole consisting of
unified parts acting in harmony to execute tasks to achieve goals,
both effectively and efficiently.
A properly implemented organizing process should result in a
work environment where all team members are aware of their
responsibilities. If the organizing process is not conducted well,
the results may yield confusion, frustration, loss of efficiency, and
limited effectiveness.
1. Review plans and objectives.
Objectives are the specific activities that must be completed to
achieve goals. Plans shape the activities needed to reach those
goals. Managers must examine plans initially and continue to do
so as plans change and new goals are developed.
2. Determine the work activities necessary to accomplish
objectives.
Although this task may seem overwhelming to some managers, it
doesn't need to be. Managers simply list and analyze all the tasks
that need to be accomplished in order to reach organizational
goals.
3. Classify and group the necessary work activities into
manageable units.
A manager can group activities based on four models of
departmentalization: functional, geographical, product, and
customer.
4. Assign activities and delegate authority.
Managers assign the defined work activities to specific
individuals. Also, they give each individual the authority (right)
to carry out the assigned tasks.
5. Design a hierarchy of relationships.
A manager should determine the vertical (decision-making) and
horizontal (coordinating) relationships of the organization as a
whole. Next, using the organizational chart, a manager should
diagram the relationships.
Authority:
Authority is the formal and legitimate right of a manager to make
decisions, issue orders, and allocate resources to achieve
organizationally desired outcomes. A manager's authority is
defined in his or her job description.
Organizational authority has three important underlying
principles:
• Authority is based on the organizational position, and
anyone in the same position has the same authority.
• Authority is accepted by subordinates. Subordinates
comply because they believe that managers have a
legitimate right to issue orders.
•Authority flows down the vertical hierarchy. Positions
at the top of the hierarchy are vested with more formal
authority than are positions at the bottom.
In addition, authority comes in three types:
Line authority gives a manager the right to direct the work
of his or her employees and make many decisions without
consulting others. Line managers are always in charge of
essential activities such as sales, and they are authorized to
issue orders to sub-ordinates down the chain of command.
Staff authority supports line authority by advising,
servicing, and assisting, but this type of authority is typically
limited. For example, the assistant to the department head
has staff authority because he or she acts as an extension of
that authority. These assistants can give advice and
suggestions, but they don't have to be obeyed. The
department head may also give the assistant the authority to
act, such as the right to sign off on expense reports or
memos. In such cases, the directives are given under the line
authority of the boss.
Functional authority is authority delegated to an individual
or department over specific activities undertaken by
personnel in other departments. Staff managers may have
functional authority, meaning that they can issue orders
down the chain of command within the very narrow limits
of their authority. For example, supervisors in a
manufacturing plant may find that their immediate bosses
have line authority over them, but that someone in
corporate headquarters may also have line authority over
some of their activities or decisions.

Responsibility: Responsibility is the duty to perform the

task or activity an employee has been assigned. An
important distinction between authority and responsibility
is that the supervisor delegates’ authority, but the
responsibility is shared. Delegation of authority gives a
subordinate the right to make commitments, use resources,
and take actions in relation to duties assigned. However, in
making this delegation, the obligation created is not shifted
from the supervisor to the subordinate — it is shared. A
supervisor always retains some responsibility for work
performed by lower-level units or individuals.