428 ndustrial Engineering and Management

waiting to be repaired. average number of machines waiting to be repaired plus being repaired, and
CHAPTER, 19
average time of waiting machine in the queue to be repaired
5. The breakdown rate of the machines in a workshop is 5 per hour and follows a Poisson distribution. Principles of Management
Tiwo mcchanics are employed to repair the machines. The services rate of the mechanics is 5 machines
per hour and also follows the Poisson distribution. Find the utilization of mechanics, probability
of the mechanics renmaining idle, average number of the machines waiting in queue to be repaired,
average number of machines in the systenn, the average time of the machine waiting in the queue
and average time of the machine waiting in the system.
6. The arival rate otf customer at a cinema hall booking counter is 600 per day. The cinema hall has
three parallel counters for ticket booking. The service rate of individual counter is 300 customers
per day. The arrival rate and service rate follow the Poisson distribution. At a point in time, the
maximum number of customers permitted in the system is 30. Find the probability that the booking
19.1 INTRODUCTION
clerk remaining idle, average number ofcustomers in the queue, average number of the customers in
the system, the average waiting time for customer in the queue and average waiting time of the Management is a very broad term and defined in a number of ways. But, all the definitions
customer in the system. focus on the effective and efficient utilization of resources to achieve the goal. Management is
the process of using organizational resources to achieve the organization's goals by planning,
organizing, leading and controlling. In a simple way, management can be defined as an art and
REFERENCES AND FURTHER READ NGS science used to get the work done. Some more definitions of management are given below:

.Albright. S. Christian, and Wayne Winston (2005), Essentials of Practical Management Science Management is the coordination of all resources through the process of planning,
(Mason. OH: Cengage). organizing, directing and controlling in order to attain stated objectives.
2. Gross, D. and Harris. C. M. (1997). Fundamentals of Queueing Theory (New York, NY: Wiley). -Henry L. Sisk
3. Hall. Randolph W. (199). Queueing Methods for Services and Manufacturing (Englewood Cliffs,
NJ: Prentice-Hall).
Management is the art and science of organizing and directing human cfforts applied to
4. Hiller. F. S. and Lieberman, G. J. (2001), Introduction to Operations Research, 7h edition (New Delhi:
control the forces and utilize the materials of nature for the benefit of man.
Mc-Graw Hill).
5. Paneerselvam, R. (201 1), Operations -ASME
Research, 2nd edition (New Delhi: Prentice-Hall).
6. Prabhu, N. (1997), Foundations
U. of Queueing Theory (Boston, MA: Kluwer Academic Publishers).
7. Sharma, J. K. (2007), Operations Research: Theory & Applications, 3 edition (New Delhi: Macmillan Management is the art of knowing what you want to do and then seeing that it is done
India Ltd). in the best and cheapest way.
Verma, A. (2008), Operations Research, 4 edition (Ncw Delhi: Kataria & Sons). -F. W. Taylor

19.1.1 Nature of Management

Some important characteristics of management are described below.

(a) Management is an art as well as science: Management uses theoretical knowledge to

as art, and at the same time,
manage the activities task, which is known
or management
uses a number of mathematical/scientific tools and techniques to improve the efficiency
of a system, which is a part of science. Thus, we can say that
management has twoo
faces of a coin: on one side, it is art and on the other it is science.
Management has got
scientific principles which constitute the elements of science and skill and talent which
are the attributes of art.
(b) Management is goal-oriented: The basic
goal of management is to improve the
eticiency and economy in the utilization of all the available resources. The
effectiveness
 430 Industrial Engineering and Management
Principles of Management 431

of management is imeasured by the extent to which the established organizational or

other goals are achieved. Productionthe management: Production management consists of manufacturing activitics
(c) Management is a
profession: Management is used as profession and profession requires to produce right product oftheright quality at the right time in the right quantity and
at the right cost. It includes the following activitics:
specialized knowledge and oftcn, long intensive academic preparation. The essential
features of a (a) Product design and development
profession arc: a wvell-dcfincd body of knowledgc, restricted entry, service
motive. code of conduct, representative professional association. (6) Facility location and layout
d) (C)Production planning and control
Managenment is universal: Management an is
essential part of all the activities
irrespective of nature. All the difterent types of organizations or businesses require (d) Sourcing and outsourcing activities
management regardless of size. The principles of management are applicable in all () Inventory and store management
arcas of organized activities.
Managers at all levels and in all organizations perform the (9 Manufacturing
same basic functions. (g) Maintenance management
(c) Management is
integrative force:
an The (h) Quality management
importance of management lies in the
coordination; it facilitates among the people in an organization. 2. Marketing management: Marketing management refers to recognizing the consumer
the individual goals to organizational goals. It
Management relates
integrates all the different resources. needs and fulfilling them. It involves the following activities:
)Management is multidisciplinary: Management consists of knowledge derived (a) Need recognition and expectation of consumers
from several disciplines such as engineering,
sociology, psychology, economics and (b) Product planning and development
anthropology. Thus, it is multidisciplinary in nature. (c) Price estimation
g) Management is a social process.: Human relation is the most (d) Selection of market channel and distribution of products
important part of
management. According to Appley, 'Management is the development of people not the
(e) Retailing
direction of things. It is the pervasiveness of human element which () Sales promotion and advertisement
gives management
its special character as a social
process. 3. Financial management: Financial management ensures the provision of the funds at the
(h) Management is a continuous process: The cycle of management continues to operate right time and at reasonable cost. It comprises the following activities:
until its objective or goal is achievcd.
(i) Management is
intangible: Management is an intangible activity. It cannot be seen (a) Fund estimation for both long- and short-term needs
directly, but its presence can be felt everywhere in the form of results. However, the 6) Selection of appropriate sources of funds
managers who perform the funetions of nmanagement are very much () Raising the required funds at the right time
tangible and visible. (d) Proper utilization and allocation of funds
19.1.2 (e) Administration of carnings
Scope of Management
4. Personnel management: Personnel management involves planning, organizing and
Management is applicable in marketing, finance, production and personnel area. The scope of controlling the selection, recruitment, compensation and integration of human resources
management (Figure 19.1) may be classified into the following areas: of an organization. It consists of the following activities:
(a) Manpower planning
Finance (b) Recruitment and selection
(c) Training
(d) Appraisal
(e) Promotions and transfers
Management (f) Compensation
(g) Employee welfare services
(h) Personnel records and research

Personnel
19.2 CLASSICAL SCHOOL OF MANAGEMENT
Classical management theory was developed during the Industrial Revolution. In those
Figure 19-1: Scope of management days,
managers were searching the way how to train employees or deal with increased labour
432 Industrial Engineering and Management
Principles of Managerment 433

dissatistaction, they began to test solutions. As a result, the classical

so
management theory was
developed to find the 'one best way' to perform and manage tasks. This school 2. Taylor's critics objected to the speed-up condition
up of two schools: of thought is made employees to perform faster and faster.
that placed undue pressure on

3. The
Classical scicntific school. emphasis on productivity and by extension
exploit both the workers and customers. profitability led some managers to
on

Classical administrative school.

4 Owing to the above-listed adverse effects, more workers
a joined unions thus reinforcin
pattern of suspicion and mistrust that clouded labour relations
19.2.1 Classical Scientific School for decades.

Seientifie management is devoted to determine the best 19.2.2 Classical Administrative School
way to do a job using scientific methods.
Frederick W. Taylor. known as the father of scientific
the tield. Using his principles of scientific management, was the major contributor in Scientific management concentrates on only increasing the
management, Taylor was able to define the "one best administrative approach to management concentrates on the totalproductivity, but thc classical
way for doing each job.
on the organization. The emphasis is
development of managerial principles rather than work methods. The main contributors
Frank B. Gilbreth and Lillian M. Gilbreth were
inspired by Taylor's work and procecded to theclassical administrative theory include Max
Weber, Henri Fayol, Mary Parker Follett and
to study and develop their own methods of scientific Chester Barnard. These theorists studied the
focuscd on increasing worker management. Frank and Lillian Gilbreth flow of information within an
productivity through the reduction of wasted hand and body emphasized the importance of understanding how
and organization
motions. They
experimented with tools and equipment to optimize work performance and
an
organization operated.
developed the micromotion study to analyse the worker's motions and (A) Max Weber's Bureaucracy
optimize performance.
They labciled 17 basic motion elements called therbligs' in order to climinate In the late1800s, Max Weber disliked that many European
waste
Therbligs is guidelines devised by Taylor and others to improve production motionsare
organizations were being managcd on
efficiency
a personal family basis and that employees were loyal to individual supervisors rather than the
still used in today's
organizations. The therblig is used in the study of motion economy in the organization. He believed that organizations should be managed impersonally and that a formal
workplace. A workplace task is analysed by recording cach of the organizational structure, where specific rules were followed,
with the results used for therblig units for a process, theory of bureaucracy that is explained below.
was important. Max Weber gave the
optimization of manual labour by eliminating unneeded movements.
A basic motion clement is one of a set of
fundamental motions required for a worker to Characteristics of Bureaucracy
manual operation or task. The set consists of 17 perform a
elemcnts, each describing a standardized activity.
The detail 1. A well-defined hierarchy: All positions within a bureaucracy are structured in a way that
of therbligs has been already discussed in Chapter 11 (Work Study and Ergonomics).
permits the higher positions to supervise and control the lower positions. There should
Taylor's Four Basic Principles of Scientific Management be a clear chain of command, control and order
throughout the organization.
(a) Development of a true science of 2. Division of labour and specialization: All
management so that the best method for performing responsibilities, specialties
and expertisec
each task could be determined. should be divided among the employees. One should not be a
jack of all trades.
(b) Scientific selection of workers Rules and regulations: There should be a practicc to follow standard rules and
so that cach worker could be
given responsibility for the tions in the whole
regula-
task for which he/she was best suited. organization.
4. Impersonal relationships between managers and employees: Managers should maintain
(c) Putting a right worker in the right job is not enough; system
a of financial inccntives is
an impersonal
also needed to motivate the workers. relationship with employees so that favouritism and personal prejudice
(d) The functional division of labour between do not influence their decisions.
management and workers improves the S.
productivity and intimates friendly cooperation betwecn management and labour. Competence: Competence of the employees should
in hiring, job assignments and
be the basis for all decisions made
promotions to
foster an ability
and merit the as primary
Drawback of characteristics of a bureaucratic organization, not the relationship or acquaintance with
Taylor's Scientific Management the employees.
The following are the drawbacks of Taylor's scientific
management: 6. Records: A bureaucracy needs to maintain records of all its activities.
1. Taylor was able to increase the
productivity and pay in ä number of instances, but (B) Henri Fayol's 14 Principles of Management
workers and unions began to oppose his
approach
because feared that they working
harder or faster would exhaust whatever work available Henri Fayol, a French mining engineer, developed 14 principles of management based
was
causing layolts. on his
management experiences. These principles are described as follows.
434 IndustrialEngineeringand Management
Principles of Management 435

1. Division of work: Division of work and specialization improvcs the productivity with
the same ellort. accomplish its goals. Barnard felt that it was
particularly important for managers to develop a
2. Authority and responsibility: Authority is the right to give orders and the power to exact sense of common purpose which
with
greatly the willingness to cooperate. He is credited
encourages
obedience. Authority creates responsibility for getting the work completed. developing the acceptance theory of management, which emphasizes the willingness of
3. Discipline: Obedience, respect and proper behaviour within an organization are employees accept that managers have legitimate authority to act.
to

absolutely esscntial.
4. Unity of command: An cmployce should receive orders from only one superior. 19.3 SYSTEMS APPROACH
5. Unity of direction: Organizational activities must have one central authority and one
plan of action. During the 1960s,researchers began to analyse organizations from a systems
on the physical sciences. The perspective based
systems approach to management propounds that organizations
6.
Subordination of
individual to general interest: The interests of one employee
interest are not self-contained, but
they rely on and are affected by factors in their external environment.
or group employces are subordinate to the interests and goals of the organization.
of A system is a set of interrelated and
7.
Remuneration of personnel: Salaries -the
price of services rendered by employees interdependent parts arranged in a manner that produces a
unified whole. The two basic types of systems are open system and closed
should be fair and should provide satisfaction to both the employee and the employer. system.
A closed system is not influenced
8. Centralization: The objective of centralization is the best utilization of personnel. The by and does not interact with its environment. An open system
interacts with its environment. Using the systems
degree of centralization varies according to the dynamics of each organization.
as a body with
approach, managers evision an organization
9. A of that is, scalar chain, exists from the highest many interdependent parts, cach of which is important for the
Scalar chain: chain authority, entire organization. Managers coordinate the work activities of well-being of the
organizational authority to the lowest ranks. various parts of the
10. order for materials and personnel is essential. Right materials realizing that decisions and actions taken in one organizational area will affect other organization,
Order: An organizational
and right cmployees are necessary for cach organizational function and
arcas.

activity. 19.4 CONTINGENCY APPROACH

11,
Equity: In organizations, equityis combination
a of kindlincss
and justice.
and equality of treatment should be considered when dealing with employees.
Both equity
The contingcncy approach to the management proposes that different organizations require
12.
Stability oftenure of
personnel: To attain the maximum productivity of
a stable workforce is needed.
personnel different ways of managing. The contingency
approach subscribes to view that the organization
recognizes and responds to situational variables as they arise. The contingency
13. Initiative: Thinking out a plan and ensuring its success is an extremely strong motivator. to approach
Zeal, energy and initiative are desired at all levels of the organizational ladder.
management assumes that there is no universal answer to all the questions related to the
management because organizations, people and situations vary and change over time.
14. de
Esprit corps: Teamwork is fundamentally important for an organization. Work teams the right thing to do Thus,
and extensive facc-to-face verbal communication depends on a complex variety of critical environmental and internal
encourage teamwork. contingencies.
(C) Mary Parker Follett
19.5 BEHAVIOURAL APPROACH
Mary Parker Follett focusced her efforts on ethics, power and leadership. She encouraged
employce involvement or participation in decision-making process. She stressed the importance Organizational behaviour (OB) is the field of study that is concerned with the actions (bchaviours)
of of people at work. The OB research has contributed much of what we know about human
men rather than methods, a concept developed in scientific management before her time. As a
result, she was a pioneer but was often not taken seriously by management scholars of her time. resources management and contemporary views of motivation, leadership, trust, teamwork
But, times change and her innovative ideas from the past sudden take on new meanings. These and conflict management. Thc early advocates of the
organizational behaviour approach were
innovative idcas are related to reciprocal relationships in understanding the Robert Owen, Hugo Munsterberg, Mary Parker Follett and Chester Barnard.
dynamic aspects of as the foundation for
Their idcas served
the individual in relationship to others, the
principle of integration and power sharing among employec selection procedures, motivation programmes, work teams and
the people. Her ideas on negotiation, power and organization-environment management techniques.
employce participation were influential in the
development of organizational studies
Hawthorne Studies
(D) Chester Barnard The Hawthorne studies (also referred to as the observer
effect) were the most important
Chester Barnard worked as president of New
Jersey Bell Telephone Company. He introduced contribution to the development of OB. This series of
the idea of the informal to the early 1930s at western Electric
experiments were conducted from 1924
organization cliques (exclusive groups of peoplc) that naturally form company's Hawthorne works in Ciccro, Illinois, USA.
within a
company. He felt that these informal Initially, these were devised as a scientific management experiment to assess the
organization cliques served necessary and vital
communication functions of the entire organization and that they could help the changes in various physical environment variables such as illumination of impact of
organization light on the employee
productivity. After Harvard professor Elton Mayo and his associates
joined the Hawthorne studies
436 Industrial Engineering and Management
Principles of Management 437

as consultants, other experiments were included to look at redesigning jobs, make changes in
3. Staffing
workday and workweck length, introduce rest periods and introduce individual versus group
Directing
wage plans. It was observed that there is no effect of change in illumination of light on worker's 5. Controlling
productivity.significantly. The main factors of consistant productivity was manager's attention
towards the workers.
The researehers concluded that social norms or group standards were key determinants Planning
of individual work behaviour. Athough enticized on procedures, analyses of findings and
conclusions. the Hawthorne studies stimulated interest in the human behaviour in organizational
Planning is a preparation or preproduction phase. In other words, it outlines what is to be done,
when it is to be done, how it is to be done and
In
why it is to be done. Planning involves problem-
setings. the present context, the behavioural approach assists managers in designing jobs that
motivate workers, in working with employee teams and in facilitating the flow of communication
solving and decision-making. Whenever there is a problem, the manager should know how to
solve it and what are the alternatives? The main
within organizations. part of planning consists of setting goals and
schedules of activities.

19.6 QUANTITATIVE APPROACH Organizing

After planning, the management has to
The quantitative approach to management, also known as operations research or decision science, organize organizational activities. Managers determine
what activities are required to achieve organizational
uses quantitative techniques to improve decision-making. This approach includes application of objectives and how these activities should
be divided among the departments and employees. The
statistics. optimization models, information models and computer simulations. The quantitative production work is given to the production
approach originated during World War I1, as mathematical and statistical solutions to military
department; finance department is assigned the work of arranging funds; personnel department
has to recruit and train the people with required skills, and the sales
department is to take care
problems were
developed for wartime Today, the
use. quantitative approach has contributed most
dircctly to managerial decision-making, paticularly in planning and controlling. The availability
of sales. The organizing function of management involves
creating departments and defining the
duties and responsibilities of people in different positions within each
of sophisticated computer sofiware programs has made the use of quantitative techniques quite department.
feasible for managers.
Staffing
Staffing isconcerned withhiring/employing of people for the various activities to be performed.
19.7 FUNCTIONS OF MANAGEMENT The objective of staffing is to ensure the right type of people for different
positions. Stafing
includes the function of recruitment, selection and placement of
The five major functions of management, as depicted in Figure 19.2, are as follows employees.
. Planning Directing
2. Organizing
The directing function of management includes leading the subordinates, supervising their
performance, communicating information and motivating them. A manager should be a good
leader. He/she should be able to instruct and guide the people in the work assigned to them.

Helshe should keep watch the performance

a on of his/her subordinates and help them out
whenever they comeand
across any difficulty. The communication, that is, the exchange of in formation
Control ing Functions
of
Organizin9 between managers should
delay. Information
workers, should take place in clearly understandable words and without
fow from managers to workers and from workers to managers at the
right time. Managers should also understand the needs of their subordinates and accordingly
Management inspire them in their work.
Directi
cting

Staf ing Controllingg

The management has to ensure that the performance of work is in accordancc with the plans.
The controlling means to compare the actual performance of the employee with the standard
one. If ditferences are noticed, corrective
steps are taken which may includc revision of plans,
Figure 19-2: Functions of management
improvement in the division of work and providing better guidance.
 438 Industrial Engineering and Management
Principles of Management 439
19.8 LEVELS OF MANAGEMENT
7. To select key officials and executives
for the organization.
We have already stated how managers jointly perform the various functions. The managers at 8. To coordinate various
sub-systems of the organization.
different levels perform different types of duties. Some 9. To maintain liaison with outside
managers decide about the objectives parties having a stake in the business, such as
of the business as a whole; some government, trade union and tradc associations.
managers perform functions to accomplish these objectives
in ditterent
departments, like production and sales; and some managers are concerned with the 10. To formulate basic policies and
providing direction and leadership to the organization
supervision of day-do-day activities of wvorkers. The various levels of management are as follows: as a whole.

1. Top-level management Middle-level Management

Middle-level management The middle-level
3. Lower-level management (First-level supervisors)
management exists between strategic and operational levels. They exist at the
tactical level. They are responsible to find the
way how to convert the strategy or policy into
Figure 19.3 depicts the functions, positions and relations operations. It consists of departmental managers, deputy managers, foremen and administrative
of different levels of management. officers. These executives are mainly concerned with the overall
functioning of their respective
departments. They act as a link between top- and lower-level managers. The activities of middle-
level managers centre on
determining departmental goals and devising ways and means for
Top- accomplishing them. The main functions of middle-level managers are enumerated as follows:
level
managers 1. To prepare departmental plans
covering all activities of the respective departments
within the basic framework of the
corporate plan.
To establish departmental goals and to decide
upon various ways and means of achieving
Middle-level managers these goals to contribute to organizational
goals.
3. To perform all other managerial functions with
regard to departmental activities for
securing smooth functioning of the entire department.
First-level supervisors To issue detailed orders and instructions to lower-level
managers and coordinate the
activities of various work units at lower level.
The middle-level managers explain and
Organizational hierarchy 0% Per cent Effort 100%
interpret policy decisions made at the top level
to the lower-level
managers.
Figure 19-3: Levels of management
Lower-level or Supervisory-level Management
The lower-level management is known as supervisory or
Top-level Management operational management. They are
The responsible to implement the decision taken by middle-level managers. It consists of factory
top-level management is generally occupied by governing body or ownership group. They
supervisors, superintendents, foremen, sales supervisors and accounts officers. They are
arc at strategic level and deals with strategy and policy-related matters. The major functions of
the top-level management are as follows: concerned with personal oversight and direction of operative employees. They directly guide
and control the performance of the rank and file workers. They issue orders and instructions and
1. To make corporate plan for the entire organization covering all arcas of
a guide day-to-day activities. They also represent the grievances of the workers to the higher levels
2 decide upon the matters which are vital operations. of management. The
for the survival, profitability and growth of supervisory management performs the following functions:
the organization, such the introduction
and
as
of a new product, shifting to a new technology 1. Planning of day-to-day work
opening a new plant. and issuing orders and instructions
3. To decide corporate goals. 2. Assignment of jobs
Supervising and guiding workers
4. To decide the structure of the
organization, creating various positions therein. 4. Maintaining close personal contacts with workers to ensure
5. To excrcise overall managerial control
through the process of reviewing overall financial discipline and teamwork
5. Evaluating operating performance
and opcrating results.
6. To make decisions regarding
disposal and distribution of profits. 6.7. Sending reports and statements to higher authorities
Communicating
the grievances and suggestions of workers to higher authorities
440 Industrial Engineering and Management
Principles ofManagement 441

19.9 SKILLS OF MANAGER

techniques is necessary to guideworkers. As one
moves up the
management hierarchy, technical
In modern business, the skills become less
management job requires several skills to manage an organization important. The higher-level
managers deal with subordinate managers. For
successtully. These skills expected from managers have been classificd into threc
categories, them, specialized technical knowledge is comparatively less
namely, technical. hunman and eonceptual skills. very important for the top management in
important. Conceptual skills are
formulating long-term plans, making broad policy
decisions and relating the organization to its
Technical Skills industry and the economy.
Technical skills refcr to the ability and knowledge of using the equipment, technique and
procedures involved in performing vanious managerial tasks. First, a manager must know which 19.10 MANAGERIAL ROLES
skills should be employed in his her organization and be familiar
enough with their potentiality Managerial roles fit into three broad categories as described below.
to ask discerning questions to his/her technical advisors.
Second, a manager must understand the
role of each skill employed and the interrelationship between differcnt skills.
Interpersonal Role
Human Skills Managers are expected to coordinate and interact with employees and provide direction to
Technical skills involve mastery of things, whereas human skills are concerned with the organization. Here comes into play their
understanding interpersonal role. Three parts of the manager's
the people. Human skills imply the ability to work effectively with other people, both as an interpersonal role are as follows:
individual and in a group. These are
required to win the cooperation of others and to build 1.
etfective work teams. One should have a sense of feeling for others and a
Figurehead role: It symbolizes the organization and what it is trying to achieve.
capacity to look at 2. Leader role: The manager is expected to train, counsel, mentor and
encourage high
things from others' point of view.
employce performance.
Conceptual Skills 3. Liaison role: The manager should coordinate with and link people inside and outside
These skills refer to the ability to visualize the entire the organization to help achieve organizational goals.
picture or to consider a situation in its totality.
Such skills help the manager to conceptualize an environment,
analyse the forces working in a Informational Role
situation and take a broad and far-sighted view of the organization.
Conceptual skills also include
the competence to understand a
problem in all its aspects and to use original thinking in solving This role is associated with the tasks needed to obtain and transmit information for management
the problem. Such competence is necessary for rational of the organization. Three parts of the informational role are as follows:
Thus, technical skills deal with jobs, human skills with
decision-making
persons and conceptual skills 1. Monitor role: Analysing information from both the internal and external environments.
with ideas. These three types of skills are interrelated. However, the
proportion and relative 2. Disseminator role: Transmitting information to influence attitudes and behaviour of
significance of these skills vary with the level of management as shown in Figure 19.4. Technical
skills are most
important at the supervisory or operating level where close
employees.
a understanding ofjob 3. Spokesperson role: Using information to positively infuence the way people in and out
of the organization would respond to it.

lop Decisional Role

managers
The decisional role is associated with the methods managers use to plan strategy and utilize
resources to achieve organizational goals. Four parts of the decisional role are as follows:
Middle-level
managers 1. Entrepreneur role: Deciding upon new projects or programs to initiate and invest.
2. Disturbance handler role: Assuming responsibility for handling an unexpected event or
Lower-level crisis.
managers
3. Resource allocator role: Assigning resources between functions and divisions, setting
Conceptual Human Techincal budgets of lower-level managers.
skills skills skills 4. Negotiator role: Seeking to negotiate solutions between other managers, unions,
customers or shareholders.
Figure 19-4: The relationship between the level of management and skills required
 442 IndustrialEngineering and Management
Principles of Management 443

19.11 THEORY OF MOTIVATION

19.11.3 Herzberg's Two-Factor Theory
Motivation is
psychological process that causes the arousal, direction and persistence of
a
Job satisfaction and job dissatisfaction are created
voluntary actions that are goal directed. It is the
process by which a person's eftorts are energizcd, by two factors: hygiene and motivators.
directed and sustaincd towards attaining a goal. Motivation is the result of an interaction Hygiene or extrinsic (environmental) factors create job dissatisfaction and
between motivators or intrinsic
the person and a situation: it is not a
personal trait. Motivation works best when individual needs (psychological) factors create job satisfaction. Hygienefactors are supervision, company
are compatible with
organizational goals. There policy, relationship with supervisor, working conditions, salary,
are
following early theories of motivation: life, relationship with peers, personal
relationship with subordinates, status, security, etc. Motivators are achievement,
(a) Maslow s Hierarchy of Needs work itself, responsibility, advancement, recognition.
growth,
etc.
(b) MacGrcgor's Theorices X and Y
(c)Herzbeng's Two-Factor Thcory
19.12 ADMINISTRATION AND MANAGEMENT
19.11.1 Maslow's Hierarchy of Needs Many researchers like Henri Fayol, William Newman, Chester Barnard,
Allen, Koontz and O' Donnell make no distinction between
George Terry, Louis. A.
Maslow's hicrarchy of needs is shown in Figure 19.5. The needs are classified into five management and administration.
categories: According to Newman, management or administration is 'the guidance, leadership and control
physiological. safety. social. esteem and self-actualization. Physiological needs include basic of the efforts of a group of individuals towards some
common goals'.
requiremets of the human body: food wate, sleep, sex, ctc. Safety necds include desires of According to Fayol, all
undertakings require the same functions and all must observe the same principles. There is one
a person to be protected from physical and economic harm. Social or
necds include a desire to give and receive affection, be in the
belongingness and love common science which can be
applied equally well in public and private affairs. Therefore,
company of others, etc. Esteem the distinction between administration and
needs include self-confidence and sense of management is superfluous or academic. In actual
self-worth, esteem from others, self-esteem (feeling practice, the two terms are used interchangeably. The term 'administration' is more popular in
of self-confidence and self-respect). Self-actualization needs include desire
for self-fulfilment. government and other public organizations while the term 'management' is more commonly used
in the business world where economic
performance is of primary importance. However, some
basic diferences between administration and
management can be observed regarding nature,
of
type work, level of authority, influencing factors, the direction of human etforts, main function
Self- and used. These differences are summarized in Table 19.1.
Actualization
Esteem Table 19-1: Distinction between administration and
management
Social
Points of distinction
Safety 1. Nature
Administration Management
Thinking function Executive function
Physiological 2. Type of work Determination of major objectves Implementation of plicies
and policies
Figure 19-5: Maslow's hierarchy of needs 3. Levels of authority Top-level function Normally, middle- and lower-level
function
4. Influencing factorss Influenced by public opinion and Infiuenced by the organization's
19.11.2 MacGregor's Theories X and Y outside factors policy and objectives
5. Direction of human Not concerned with the direction of Concerned with the direction of
Theory X assumes that the workers have little ambition, dislike
work, avoid responsibility efforts human efforts human efforts for implementation
and require close supervision. According to the Theory X,
managers believe the workers are management policies
irresponsible and resistant to change, dislike work, lack ambition and prefer to be led. Theory Y
6. Main function Planning and control Directing and organizing
assumes that workcrs can exercise self-direction, desire
responsibility and like to work. According 7. Skills required Conceptual and human skills Technical and human skills
to the Thcory Y, managers believe workers are
willing to work, imaginative and creative, self1 8. Uses Government and public sector
directed, capable of' sel I-control and accept responsibility. The main requirement is Business organizations
appreciation 9. lustrations Commissioners, registrars,
and motivation. Managing directors, managers,
vice-chancellors Supervisors
444 IndustrialEngineering and Management
Principles of Management 445

8. The quantitative approach to management has also been referred

SUMMARY (a) sales optimization
as

(6) operations research

In this chapter, evolution
of the concepts in (c) managerial theory
management has been discussed in detail. The (d) statistical reformulation
nature and scope of management have been explored. Various schools of
management have becn 9. Which four theorists are associated with the
early
highlighted. Diferent functions. skills, roles and levels of organizational behaviour approach?
been discussed and explained. Also, administration and
theory of management,
have motivation (a) Barnard, Follet, Munsterberg and Owen
management have been differentiated (b) Munsterberg, Taylor, Fayol and Follett
brictly
(c) Taylor, Fayol, Weber and Barnard
(d) Follett, Barnard, Munsterberg and Weber
MULTIPLE-CHOICE QUESTIONNS
10. Without question, the most important contribution to the
The management has following nature developing field of organizational behaviour
came out of the
(a) It is an art as well as science. (6) It is goal-oriented. (a) Taylor studies (b) Porter studies
(c) It is à profession.
(d) All the above. () Parker studies (d) Hawthorne studics
2. Wealth of Nations, Adam Smith described the breakdown
In
of jobs into narrow and repetitive tasks, 11. The Hawthorne studies initially devised
which is called as:
were to study
(a) productivity levels of groups versus individuals
(a) assembly lines
(6) work denomination (b) the effect of noise on employee productivity
(c) division of labour
(d) greatest common factor of work (c) the effect of illumination levels on employee
productivity
3. Frederick W. Taylor advocated which of the
following management principles? (d) the efect of cooperative versus competitive organizational environments on productivity
(a) Work and responsibility should be divided almost
equally betwcen
managers and workers. 12. A manager who believes that no one set of principles applies equally to all work environments is
(b) Workers should perform all work, while the
management should maintain responsibility for the mostlikely advocating which management approach?
work performed.
(a) contingency (b) workplace diversity
(c) Managers should perform more work than workers, because managers are
generally more skilled.
)organizational behaviour (d) knowledge management
(d) Workers can be highiy productive even if they are randomly selected for a job.
13. Which of the following is not concerned with the theory of motivation?
Frank and Lillian Gilbreth were the first researchers to utilize motion pictures to the study of (a) Maslow's hierarchy of needs
(a) reactions of workers in group (b) MacGregor's theories X and Y
settings (c)Herzberg's two-factor theory (d) 14 principles of Deming
(b) motion of the body parts
(c) workers reactions to pay increases 14. According to Maslow's hierarchy of needs, which one is the most basic need of human
a
being?
(d) groups of workers in tense situations where (a) Physiological (b) Social
they are
assigning each other tasks
(c) Esteem (d) Self-actualization
5. Which of the following phrases of F. W. Taylor is most associated with scientific
management?
(a) management relations 15. Theory X assumes that
(b) one best way
(C)supply and demand (a) workers have little ambition, dislike work, avoid responsibility and require close supervision
(d) quality control
6.
6) workers can exercise self-direction, desire responsibility and like to work
The primary issue that motivaled 'Tlaylor to create a more scientific approach to
(a) worker cthciency
management was (c)workers are incapable and employed wrongly
(b) worker cffectiveness (d) None of these
(c) worker absenteeism and turnover
(d) workplace safety
7. Which of the following is NOT of
one Fayol's principles of
management? Answers
(a) division of work
(b) unity of command
(c) discipline
(d) cquality (d) 2. C) 3. (a) 4. (b) 5. (b) . (a) 7. (d) 8. (b) 9.
10. (d) II. (c) 12. (a) 13. (d) 14.
(a)
(a) 15. (a)
 Firm'sOwnership, Organizational Design and Structure 459

Divisional departmentalization:This type of departmentalization is done on the basis

of separate or independent division all the divisions contribute to the corporation's
profitability. This type of the design is called divisional departmentalization.

20.10 CLASSIFICATION OF ORGANIZATIONS

three basic types of organizations: line
On the basis of administrative procedures, there are
There are some other classes
organization, line and stafforganization, and functional organization.
etc. In project organization
of organizations such as project organization, matrix organization,
various projects are running and the persons or the
staff are especially involved in only one
that
functional staff is responsible for all the projects for
project. But in matrix organization, one for the recruitment of people
function; for example, a human resource manager is responsible

for all the projects.

20.10.1 Line Organization

In this organization, the authority flows
from top to
It is the simplest form of organization.
out from top to bottom. This is the reason for calling
bottom, i.e. the line of command is carried of
scalar chain of command is a part and parcel
this as scalar or line organization which means
characteristics of line organization:
thistype of organization. There are following
1. It is the simplest form of organization.
2. Line of authority flows from top to bottom.
do not take place in this organization.
Specialized and supportive services
3.4. Unified control by the line officers can be
since
maintained can independently
they take

decisions in their areas and spheres.

in communication and
5. This line of the organization always helps in bringing efficiency
bringing stability to a concern.
Merits of Line Organization
oldest method of administration.
1. Simplest: It is the most simple and is
superior-subordinate relationship
2. Unity of Command: In these organizations, to bottom.
maintained and scalar chain of command
flows from top
and therefore, he
unified and concentrates on one person
3. Strong discipline: The control is ensures better discipline.
own. Unified control
can independently make
decisions of his
line executive has got fixed
4. Fixed responsibility: In this type of organization, every
attached to every authority.
authority, power and fixed responsibility most authority and bottom
line
5 Flexibility:There is a co-ordination between the top
are independent and
relationships are clear, line ofticials
authority. Since the authority
satisfaction of line executives.
can flexibly take the decision. This flexibility gives
to the factors of fixed responsibility
and unity of command, the
6. Quick decision: Due
officials can take prompt decision.
 Firm'sOwnership, Organizational Design and Structure 461
460 IndustrialEngineering and Management_

Demerits of Line Managing director

Organization
Over-eliance: The line exccutive's decisions are implemented to the bottom. This
results in over-roly ing on the line oficials.
A line organization flows in
Lack there
of specialization: a scalar chain from top to bottom
is Production
and scope for specialized functions. For example, expert advices whatever
no

decisions are taken by line managers are implemented in the same way. manager
Marketing
manager
Finance
manager
3 Inadequate communication: The policies and strategies which are framed by the top
authority end.carried
ane out in the way. This leaves
same scope for communication from
no
Plant Mar Chief
the other The complaints and suggestions of lower authority not communicated
back to the top authonty. So there is one way communication.
are
supervisor supervisor assistant

Lack of co-ordination: Whatever decisions are taken by the line officials, in certain
situations wrong decisions, are carried down and implemented in the same way. Foreman Salesman Accountant
Therefore. the degree of efiective co-ordination is less.
Authority leadership: The line officials havetendency to misusetheir authority positions.
Figure 20-1: Structure of line and staff organization
This leads to autocratic leadership and monopoly in the concern.

20.10.2 Line and Staff Organization 2. Expert advice: The line and staff organization facilitates expert advice to the line
executive at the time of need. The planning and investigation, which is related to
Line and statforganization is an extended form of line organization and it is more complex than line
different matters, can be done by the staff specialist and line officers can concentrate on
organization. According to this administrative organization, specialized and supportive activities
are attached to the line of command by appointing staff supervisors and staff specialists who are execution of plans.
3. Beneft of specialization: Line and staff through division of the whole concern into two
attached to the line authority. The power of command always remains with the line executives, and
types of authority divides the enterprise into parts and functional areas. This way every
stafî supervisors guide, advice and counsel the line executives. Personal Secretary to the Managing
officer or official can concentrate in its own area.
Director isa There are following characteristics of line and
staff official. staff organization:
I. There are two types of staff: (a) Staff Assistants- P.A. to Managing Director, Secretary
4. Better co-ordination: Line and staff organization through specialization is able
to provide better decision-making and concentration remains in few hands. This
to Marketing Manager. (b) Staff Supervisor-Operation Control Manager, Quality in work every official is concentrating in
feature helps in bringing co-ordination as

Controller, PRO. their own area.

the advice of specialized staff, the line
Line and staff organization is more complex than the line concern. 5. Benefts of research and development: Through
Division of work and specialization takes place in line and staff organization. executives get time to execute plans by taking productive decisions which are helpful
The whole organization is divided into different functional areas to which staff'specialists for a concern. This gives a wide scope to the line executive bring
to innovations andgo
are attached. for research work in those areas. This is possible due to the presence of staff specialists.
and their
expert advice serves as
5. Efficiency can be achieved through the features of specialization. 6. Training: Due to the presence of stati specialists
due concentration to their
6. There are two lines of authority which flow at one time in a concern: line authority and ground for training to line oficials. Line executives can give
This in itself is a training ground for them.
staff authority. decision-making.
in
7. Power of command remains with the line executive and staff' serves only as counsellors. 7. Balanced decisions: The factor of specialization which is achieved by line staff helps
the line official to take
An example of hierarchy of line and staff organization is shown in Figure 20.1. bringing co-ordination. This relationship automatically ends up
a better and balanced decision.
Unity of action is result of unified control. Control and its effects take
Merits of Line and Staff Organization 8. Unity of action: a

the line and staff authority all the

There are following merits of line and staff organization: place when co-ordination is present in the concern. In
ofticials have got independence to make decisions. This serves as effective control in the
1. Relief to line of executives: In a line and staff organization, the advice and counselling whole enterprise.
which is provided to the line executives divides the work between the two. The line
executivc can concentrate on the exccution of plans and they get relieved of dividing
their attention to many areas.
 Firm's Ownership. Organizational Design and Structure 463
462 IndustrialEngineering and Management

4. Economy: Specialization compiled with standardization facilitates, maximum

Demerits of Line and Staff Organization production and economical costs.
5. Expansion: Expert knowledge of functional manager facilitates better control and
1. Lack of understanding: In a line and staff organization, there are two authorities flowing
supervision.
at one time. This results in the confusion between the two. As a result, the workers are
not able to understand as to who is their commanding authority. Hence the problem of
Demerits of Functional Organization
understanding can be a hurdle in effective running.
Lack of sound advice: The line official gets used to the expertise advice of the staft. 1. Poor coordination: The functional system is quite complicated to put into operation,
At times the staff specialist also provides wrong decisions which the line executive has especially when it is carried out at low levels. Therefore, co-ordination becomes difficult.
to consider. This can affect the efficient running of the enterprise. 2. Lack of command: Disciplinary control becomes weak as a worker is commanded not
3. Line and staffconficts: Line and staff are two authorities which are flowing at the same by one person but a large number of people. Thus, there is no unity of command.
time. The factors of designations, status, influence sentiments which relate to their 3. Difficulty in firing responsibility: Because of multiple authorities, it is difficult to fix
relation, can pose a distress on the minds of the employees. This leads to disturbing the responsibility.
co-ordination which hampers a concern's working. 4. Conflicts: There may be conficts among the supervisory staff of equal ranks. They may
4. Costly: In line and staff concen, the concerns have to maintain the high remuneration not agree on certain issues.
of staff specialist. This proves to be costly for a concern with limited finance. 5. Costly: Maintenance of specialist's staff of the highest order is expensive for a concern.
5. Assumption of authority: The power of concem is with the line official, but the staff
dislikes it as they are the one more in mental work. 20.11 DELEGATION OF AUTHORITY
20.10.3 Functional Organization Dclegation of authority means the division of authority and powers downwards to the subordinate
Delegation is about entrusting someone else to do parts of your job. Delegation ofauthority can
In this organization, the entire organization is divided into different functional departments such be defincd as subdivision and sub-allocation of powers to the subordinates in order to achieve
as marketing, finance, production, personnel departments, etc. The functional authority remains effective results. There are following elements of delegation:
confined to functional guidance to their departments. This helps in maintaining the quality and
uniformity of performance of different functions throughout the enterprise. There are following Authority: In the context of a business organization, authority can be defined as the power
characteristics of functional organization: and the right of a person to use and allocate the
resources efficiently, take decisions and
to

1. The entire organizational activities are divided into specific functions such as operations,
to give orders so as to achieve the organizational
objectives. Authority must be well defined.
All people who have the authority should know what is the scope of their authority and they
finance, marketing and personal relations. shouldn't misuse it. Authority is the right to give commands, orders and get the things done.
2. A complex form of administrative organization compared to the other two. The top-level management has greater authority. Authority always flows from top to bottom.
Three authorities exist-Line, staff and function. It explains how a superior gets work done from his subordinate by clearly explaining what is
Each functional area is put under the charge of functional specialists and he has got the
expected of him and how he should go about it. Authornty should be accompanied with an equal
authority to give all decisions regarding the function whenever the function is performed
amount of responsibility. Delegating the authority to someone else does not imply escaping from
throughout the enterprise.
accountability.
5. The principle of unity of command does not apply to such organization as it is present
in the line organization. Responsibility: It is the duty of a person to complete the task assigned to him. A person who is
given the responsibility should ensure that he accomplishes the tasks assigned to him. If the tasks
Merits of Functional Organization for which he was held responsible are not completed then he should not give explanations or
1. Specialization: Better division oflabour takes place, which results in specialization of excuses. Responsibility without adequate authority leads to discontent and dissatisfaction among
function and its consequent benefit. the person. Responsibility flows from bottom to top. The middle- and lowerlevel management
hold more responsibility. The person held responsible for a job is answerable for it.
2. Effective control: Management control is simplified as the mental functions are separated
from manual functions. Checks and balances keep the authority within certain limits. Accountability: It means giving explanations for any variance in the actual performance from
Specialists may be asked to judge the performance of various sections. the expectations set. Accountability cannot be delegated. For example, if 'A' is given a task with
3. Eficiency: Greater efficiency is achieved because ofevery function performing a limited sufficient authority, and 'A' delegates this task to B and asks him to ensure that task is done well.
number of functions.
 Firm's Ownership. Organizational Design and Structure 465
464 Industrial Engineering and Management

3. One of the main disadvantages of the solc proprietorship is

responsibility rest with 'B, but accountability still rests with 'A'. The top-level management is (a) all losses is to be borne by the owner
most accountable. Being accountable means being innovative as the person will think beyond his (b) direct control of business
scope of the job. Accountability can't be escaped. It arises from responsibility. (c) ease of open and close
(d) no special taxation
Differences between Authority and Responsibility
4. A corporation can
The differences between authority and responsibility are mentioned in Table 20.2 (a) enter into contracts

Table 20-2: Differences between authority and responsibility (b) own property
(C)sueand be sued
Authority Responsibility (d) all the above
It is the legal right of a person to command his It is the obligation of subordinate to perfom the
5. Cooperatives are
subordinates. work assigned to him.
(a) cither market focused
Authority is attached to the position of a superior Responsibility arises out of superior-subordinate
relationship in which subordinate agrees to carry b) just another form of a corporation
in concern.
out duties given to him. (c) going to pay both state and federal taxes

Authority can be delegated by a superiortoa
subordinate
It flows from top to bottom.
Responsibility cannot be shifted and is absolute (d) none of these
6. In limited liability,
It flows from bottom to top.
(a) all shareholders must hold a minimum of 20 shares in a company.
(b) all shareholders are equally responsible for all the debts of the company.

(c) the responsibility of shareholders for the debts of a company is limited to the number of debentures
they hold in the company.

SUMMARY
In this chapter, we have discussed about difierent types of firm's ownerships, their characteristics,
merits and demerits. These firm's ownerships are sole partnership,
cooperative society,
partnerships, corporation, joint Hindu family business, joint stock company, multinational
company, etc. Finally, we have classificd the organization based on administrative structure and
discussed their advantages and limitations.
(d) the responsibility of shareholders for the debts of a company is limited to the amount they agreed
to pay for the shares when they bought them.
7. Which of the following is an advantage of a partnership?
(a) The partnership usually consists of up to 50 people.
(b) Shares can be issued to the general public.
(c) The owners of such enterprises do not need to publish their accounts.
(d) All the above

MULTIPLE-CHOICE QUESTIONS 8. Which of the following describes a holding company form of business organization?
(a) A company that controls more than 33 per cent of the cquity of another company.
1. Which of the following is NOT one of the three major categories of firm ownership?
(6) A company that usually acts as a market leader in an industry.
(a) sole proprietorshipP
(c) A single company that organizes its activity into a matrix format
(b) partnership
(d) A
company that oten exists only to hold over 50 per cent of the cquity of a group of subsidiary
(C) corporation
companiCs.
(d) mutual agreement
9. A major difference between a public limited company and
2. One of the main advantages of sole proprietorship is
a
private limited company is
(a) The public limited company has limited liability.
(a) unlimited liability (b) The public limited company has a limited number of shareholder.
(b) personal time commitment (c) The public limited company can sell shares on the open market.
(c) relative freedom from government regulation (d) The public limited company has shareholders.
(d) limited managerial expertise