Principles of Management and Organization Instructional Materials

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Principles of Management and Organization-Instructional

Materials
Management Principles and Dynamics (Polytechnic University of the Philippines)
Studocu is not sponsored or endorsed by any college or university

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Republic of the Philippines

Polytechnic University of the Philippines
College of Business Administration
Department of Human Resource Management
INSTRUCTIONAL MATERIALS FOR

MANA02BC: PRINCIPLES OF
MANAGEMENT AND ORGANIZATION
COMPILED BY:
PROF. EDRIAN G. BLASQUINO
PUP A. Mabini Campus, Anonas Street, Sta. Mesa, Manila 1016

Direct Line: 335-1730 | Trunk Line: 335-1787 or 335-1777 local 000
Website: www.pup.edu.ph | Email: inquire@pup.edu.ph
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by Mary Jasmine Fermato (jasminefermato891@gmail.com)
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INTRODUCTION
This instructional material aims to provide the students a complete grasp of the
principles and functions of management including its historical development up to the current
management theories and practices that permeates every organization‘s global
competitiveness. This material includes the distinction and interrelation of the functions of
management that would build student‘s strong foundation of any business course. This
instructional material is organized around the well-established planning, organizing, staffing,
directing and controlling framework also known as P-O-S-Di-Con abbreviation. The first two
chapters will introduce you to the management context, while the remaining chapters are
mapped to the different functions of management. This instructional material is developed to
be utilized for the modular learning approach in the new normal of education while we are still
facing the threats of the pandemic. Moreover, the contents and ideas in this instructional
material are compiled and summarize for a convenient way of students learning. Our
endeavour has been to present the lessons in a very lucid manner so that they can be
understood and assimilated by an average distance learner of the course. In fact, each
chapters are like the lecture notes of teachers that starts with the learning objectives or
learning outcomes and ends with an activity/assessments in multiple choice and essay type
At the end of each chapters, there are activities/assessments and case studies that the
students are expected to answer and accomplished the midterm and final exams attached in
this instructional material.
We hope that the students will not find much difficulty in understanding the lessons by
themselves and will need only a little help from tutor.
Principles of Management and Organization

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CONTENT
TITLE PAGE
NO.
Lesson 1
NATURE AND CONCEPT OF MANAGEMENT 5 - 21
Lesson 2
THE FIRM AND ITS ENVIRONMENT 22 - 31
Lesson 3
PRINCIPLES OF MANAGEMENT FUNCTION 32 – 35
Lesson 4
CONCEPT OF PLANNING FUNCTION 36 – 45
Lesson 5
CONCEPT OF ORGANIZING FUNCTION 46 - 53
Lesson 6
CONCEPT OF STAFFING FUNCTION 54 – 69
Lesson 7
CONCEPT OF DIRECTING/LEADING FUNCTION 70 – 78
Lesson 8
CONTROLLING FUNCTION OF MANAGEMENT 79 - 86

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COURSE OUTCOMES
At the end of the semester, the student will be able to:
 Explain the fundamental concepts, principles and processes of business

management and organizations
 Understand and apply these functional areas of management in business and

organization situations
 To use analytical thinking and problem-solving skills to address specific problems

in the areas of management and organization
 Evaluate the global context for taking managerial actions of planning, organizing,
staffing, directing and controlling
 Assess global situation, including opportunities and threats that will impact
management of an organization
 Integrate management principles into Management practices

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LESSON 1:
NATURE AND CONCEPT OF MANAGEMENT
Overview:
Management is a distinct process consisting of activities, planning, organizing, actuating,
and controlling, performed to determine and accomplish stated objectives with the use of
human beings and other resources. (Terry and Franklin)
Management is a process of designing and maintaining an environment in which

individuals, working together in groups, efficiently accomplish selected aims. (Koontz and
Weihrich)
Management is an art of knowing what is to be done and seeing that it is done in the
best possible manner. (F.W Taylor)
Management is to forecast, to plan, to organize, to command, to coordinate, and

control activities of others. (Henri Fayol)
Learning Objectives:
After successful completion of this lesson, you should be able to:
• Discuss the meaning and concepts of management

• Explain the various types of management theories
• Explain the functions, roles, and skills of a manager
Course Materials:
What is the role of management? The role of the Management is to move an
organization towards its purposes or goals by assigning activities that the organization
members perform. It provides new ideas, imaginations and visions to the group working to
account for better results or performances. Since most of the human aims can be well
realized only through collective action, management is universally called for in all such
organizations of the society.
DEFINITIONS AND FUNCTION OF MANAGEMENT
Management is a distinct process consisting of activities, planning, organizing,

actuating, and controlling, performed to determine and accomplish stated objectives with the
use of human beings and other resources. (Terry and Franklin)
Management is a process of designing and maintaining an environment in which

individuals, working together in groups, efficiently accomplish selected aims. (Koontz and
Weihrich)
Management is an art of knowing what is to be done and seeing that it is done in the
best possible manner. (F.W Taylor)
Management is to forecast, to plan, to organize, to command, to coordinate, and control
activities of others. (Henri Fayol)

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MANAGEMENT DEFINITION
- is the co-ordination of all resources through the process of planning, organizing,
directing, and controlling in order to attain stated objectives
- is the art of knowing what you want to do and then seeing that it is done in the
best and cheapest way
- is concerned with seeing that the job gets done; its tasks all centre on planning
and guiding the operations that are going on in the enterprise
- is a multipurpose organ that manages a business and manages managers and
manages workers and work
- consists in guiding human and physical resources into dynamic, hard-hitting
organization unit that attains its objectives to the satisfaction of those served and
with a high degree of morale and sense of attainment on the part of those
rendering the service
- is an aspect of the business that doesn‘t have the same specific duties some of
the other parts of the business have
- is a process with a social element. It requires the efficient use of resources
combined with the guidance of people in order to reach a specific organizational
objective. It involves responsibility to achieve the objectives and to fulfil specific
organizational purposes through economical and effective planning and
regulation. It‘s about taking charge and ensuring focus is placed on the things
and aspects of the business that help achieve the vision and the goals.
OBJECTIVES OF MANAGEMENT
a. Organizational Objectives – Reasonable profits, survival and growth of
business, improving the goodwill of the enterprise, etc.
b. Personal Objectives – Fair remuneration for work performed, reasonable
working conditions, opportunities for training and development, reasonable
security of service, etc.
c. Social Objectives – Quality of goods and services at fair price to customers,
honest and prompt payment of taxes, conservation of environment and natural
resources, preservation of ethical values of the society, etc.
Three key characteristics define the process of management

1. Management is a process of continuing and related activities. Each of the
functions is related to each other and the functions complement each other. It is
hard to consider the functions in isolation, as management requires each activity
to complement one another. When you as a manager engage in one function,
you in effect also start the process of another function.
2. Management is about it involving and concentrating on organizational goals.
Management is largely focused on achieving the key mission of the organization,
its vision. Whilst there are detailed objectives it might focus on, management is
mainly interested in identifying the wider organizational goals and using the
different functions in order to achieve the objectives. Each function takes the
organization closer to achieving its vision.
3. Management achieves the organizational goals by working with people and
organization resources. You might use different financial resources or physical
equipment as part of the process, while also directing and guiding the staff
towards the objectives. The manager is in charge of supporting the people and
connecting the right person with the right resources.

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ROLES OF MANAGEMENT
The role of the Management is to move an organization towards its purposes or goals by
assigning activities that organization members perform. It provides new ideas, imaginations
and visions to the group working to account for better results or performances. Since most of
the human aims can be well realized only through collective action, management is universally
called for in all such organizations of the society.
```IMPORTANCE OF MANAGEMENT
1. It helps in Achieving Group Goals- Management converts disorganized resources

of men, machines, money etc. into useful enterprise.
2. Optimum Utilization of Resources- Management utilizes all the physical & human
resources productively.
3. Reduces Costs- It gets maximum results through minimum input by proper
planning and by using minimum input & getting maximum output.
4. Establishes Sound Organization - Management fills up various positions with
right persons, having right skills, training, and qualification. All jobs should be
cleared to everyone.
5. Establishes Equilibrium- It enables the organization to survive in changing
environment.
6. Essentials for Prosperity of Society- Efficient management leads to better
economical production which helps in turn to increase the welfare of people.
FUNCTIONS OF MANAGEMENT
Planning – According to KOONTZ, ―Planning is deciding in advance - what to

do, when to do & how to do. It bridges the gap from where we are & where we
want to be‖.
Organizing – According to Henry Fayol, ―To organize a business is to provide it
with everything useful or its functioning i.e. raw material, tools, 5 capital, and
personnel‘s‖.
Staffing – According to Kootz & O‘Donell, ―Managerial function of staffing
involves manning the organization structure through proper and effective
selection, appraisal & development of personnel to fill the roles designed in the
structure‖.
Directing – Direction is that inert-personnel aspect of management which deals
directly with influencing, guiding, supervising, motivating sub-ordinate for the
achievement of organizational goals. Direction has following elements:
- Supervision
- Motivation
- Leadership
- Communication
Controlling – According to Theo Haimann, ―Controlling is the process of
checking whether or not proper progress is being made towards the objectives
and goals and acting if necessary, to correct any deviation‖.
EVOLUTION OF MANAGEMENT THEORIES

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The simplest definition of management is getting things done through people. It implies that
an organization, whether small, medium, or large, is composed of people. A business
organization exists for a purpose.
Management is a function that directs and coordinates the efforts of the people to
accomplish goals and objectives by using available resources efficiently and effectively. It is
also a process of accomplishing the organization‘s goals by working with and through
people. Its task includes planning, organizing, staffing, leading or directing, and controlling.
1910s-1940s: Management as Science

Management as Science was developed in the early 20th century and focused on increasing
productivity and efficiency through standardization, division of labor, centralization, and
hierarchy. A very ‗top-down‘ management with strict control over people and processes
dominated across industries.
1950s-1960s: Functional Organizations

Due to growing and more complex organizations, the 1950s and 1960s saw the emergence
of functional organizations and the Human Resource (HR) movement. Managers began to
understand the human factor in production and productivity and tools such as goal-setting,
performance reviews, and job descriptions were born.
1970s: Strategic Planning

The focus is from measuring function to resource allocation and tools like Strategic
Planning, Growth Share Matrix, and SWOT (identification and analysis of the company‘s
Strengths, Weaknesses, Opportunities, and Threats) were used to formalize strategic
planning process. After several decades of ‗best practice‘ and ‗one size fits all‘ solutions,
academics began to develop contingency theories.
1980s: Competitive Advantage

As the business environment grew increasingly competitive and connected, and with a
blooming management consultancy industry. Competitive Advantage became a priority for
organizations in the 1980s. Tools like Total Quality Management (TQM), Six Sigma, and
Lean Management were used to measure processes and improve productivity. Employees
were more involved by collecting data, but decisions were still made at the top, and goals
were used to manage people and maintain control.
1990s: Process Optimization

Benchmarking and business process reengineering became popular in the 1990s, and by
the middle of the decade, 60% of Fortune 500 companies claimed to have plans for or have
already initiated such projects. TQM, Six Sigma, and Lean remained popular and more
holistic, organization-wide approach and strategy implementation took the stage with tools
such as Strategy Maps and Balance Scorecards.
2000s: Big Data

Largely driven by the consulting industry under the banner of Big Data, organizations in the
2000s started to focus on using technology for growth and value creation. Big data is a
broad term for data sets so large or complex that traditional data processing applications are
inadequate. Accuracy in big data may lead to more confident decision-making. And better
decisions can mean greater operational efficiency, cost-reductions, and reduced risk.
After several decades of trying to manage people through the different management
theories, one has to realize that what worked before just simply is not enough anymore.
Traditional Management is fine if one wants compliance, but if one wants innovation and

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growth, management has to engage its people on a whole new level. Top down control is a
thing of the past. Succeeding in today‘s environment requires a management style that
inspires and is participatory.
The Famous Theories on the Functions of Management

Since management involves solving the problems within an organization in order to
reach the desired objectives, the focus is on understanding the functions that make up the
process. As experts began studying and theorizing the essence of management, different
ideas and concepts regarding the functions were born.
Although the theories about the functions of management lead to rather similar results, it
can be helpful to study the differences as well as the historical journey to our current
understanding of the functions. Here are a few of the most influential theories and theorists,
who‘ve outlined their ideas about the functions of management.
a. Henri Fayol
Henri Fayol was the first to attempt classifying managerial activities into specific
functions. The French engineer established the first principles of the classical
management theory at the start of the last century. Fayol is considered the founding
father of concepts such the line and staff organization. When Fayol developed his
strategies and ideas, managers in organizations didn‘t have any kind of formal training
and therefore Fayol‘s ideas were ground-breaking. As well as setting out 14 general
principles of management, Fayol also defined the five core functions of management,
which are still used and which form the basis of much of the later theories. To Fayol,
manages is a process, which includes forecasting, planning, organizing, commanding
and controlling. These are the foundation of setting the relationship between the
subordinates and the superior and the five core functions help the management to solve
problems in the relationship or within the organization in a creative manner.
Henri Fayol is claimed to be the real father of modern management. He was a

Frenchman born in 1841 and was working as an engineer with a mining company. He
improved the condition of the company from virtual bankruptcy to high success. From his
practical experience, he developed some techniques. He brought out some 14 basic
management principles, which he felt, could be used in all management situations,
irrespective of the organizational framework.
He wrote a book entitled, General and lndustrial Management, in French that was later
on translated into English. It is now considered as one of the classics of management
literature. The book mainly covers the aspects of the immutable and repetitive character
of the management process and the concept that management can be taught in the
classroom or the workplace. He also laid down the principles of management, which he
deemed important for any organization.
Henri Fayol‟s 14 Principles of Management

1. Division of Work: This is the principle of specialization, which is very well expressed
by economists as being a necessary factor for efficiency in the utilization of labor.
2. Authority and Responsibility: In this principle, Fayol conceives authority as a

combination of official authority deriving from a manager‘s official position and
personal authority, which is compounded of intelligence, experience, moral worth,
past services etc.

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3. Discipline: Holding the notion that discipline is ‗respect for agreements which are
directed as achieving obedience, application, energy and the outward marks of
respect‘, Fayol declares that discipline requires good superiors at all levels, clear and
fair agreements and judicious application of penalties.
4. Unit of Command: This is the principle, which states that on employee should
receive orders from one superior only.
5. Unity of Direction: According to Fayol, the unity of direction principle implies that
each group of activities having the same objectives must have one head and one
plan. As distinguished from the principle of unity of command, Fayol perceives unity
of direction as related to the functioning of personnel.
6. Subordination of Individual Interest to General Interest: In any group, the interest

of the group should supersede that of the individual. When the interests differ, it is
the function of the management to reconcile them.
7. Remuneration of Personnel: Fayol perceives that remuneration and methods of

payment should be fair and also should be able to afford the maximum satisfaction to
employee and employer.
8. Centralization: Although Fayol does not use the term, Centralization of Authority, his
principle definitely refers to the extent to which authority is concentrated or dispersed
in on enterprise. Individual circumstances determine the degree of centralization that
gives the best overall yields.
9. Scalar Chain: Fayol thinks of the scalar chain as a line of authority, a chain of
superiors from the highest to the lowest ranks. And, because it is an error of a
subordinate to depart needlessly from the lines of authority, the chain should be
short-circuited.
10. Order: Breaking this principle into material order and social order, Fayol thinks of it
as a simple edge for everything. This organization is the principle, which refers to
arrangement of things and persons in an organization.
11. Equity: Fayol perceives this principle as one of eliciting loyalty and devotion from
personnel with a combination of kindliness and justice in managers while dealing
with subordinates.
12. Stability of Tenure of Personnel: Finding that instability is both the cause and
effect of bad management, Fayol points out the dangers and costs of unnecessary
turnover.
13. Initiative: Initiative is conceived as the process of thinking out and executing a plan.
Since it is one of the keenest satisfactions for an intelligent man to experience, Fayol
exhorts managers to sacrifice personal vanity in order to permit subordinates to
exercise it.
14. Esprit de corps: This principle implies that union is strength and an extension of the
principle of unity of command. Fayol here emphasizes on the need for teamwork and
the importance of communication in obtaining it.

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b. George R. Terry
After Fayol, many theorists have looked at the functions and crafter their own ideas,
deviating only slightly from Fayol‘s core functions. George R. Terry wrote a book
Principles of Management in 1968 and outlined his view on the principles. Terry believed
there to be four core functions, each function posing and responding to a specific
question the management must solve. The question, the fundamental function and the
resulting action are outlined in the below graph:
The Question The Function The Result

Objectives, policies, procedures and
What is the need? Planning
methods
Where should actions take
Work division, work assignment, and
place and who should do Organizing
authority utilization
what work?
Leadership, communication, development,
Why and how should group
and incentives
members perform their Actuating
tasks?
c. Harold Koontz and Cyril O‟Donnell
In 1976, Harold Koontz and Cyril O‘Donnell published an essay Management: A
Systems and Contingency Analysis of Managerial Functions. They felt the previous
studies have been effective in describing the functions, but believed the division should
be more detailed. Koontz and O‘Donnell believed there to be five key functions of
management: Planning, Organizing, Staffing, Directing/Leading,and Controlling. These
five functions of management have become perhaps the most cited and they are
explained further in the following section. Overall, the quick outlook would hopefully have
highlighted the alignment of the functions of management in different management
theories.
WHERE DID MANAGEMENT THEORIES ORIGINATE?
Mass production and the Industrial Revolution brought about new requirements for managing
people and processes. As companies began to grow and production, business owners
increasingly needed managers to run their daily operations. Prior to the Industrial Revolution,
only a few organizations and militaries required theories for management. As a result of
expanding industry, the practice of management became a major theoretical consideration in
the study of business.
HOW ARE MANAGEMENT THEORIES CLASSIFIED?
Certain management theories have become integral to modern business practices. There are
three major classifications for management theories: Classical Management Theory,
Behavioral Management Theory and Modern Management Theory. These classifications
represent a different era in the evolution for management theories. Each of these
classifications further contain multiple sub-theories. Classical Management Theory centers
around execution and maximizing production. Behavioral Management Theory focuses
increasingly on human elements and viewing the workplace as a social environment. Modern
Management Theory builds on the previous two theories, while incorporating modern
scientific methods and systems thinking.

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Classical Management Theory is the oldest management theory. Classical Management

Theory focuses on operations and the creation of standards to increase production output. In
Classical Management Theory, compensation is considered the primary motivation for
employees. A manager practicing Classical Management Theory would be focused on
improving output and rewarding high-performing employees through wages or bonuses.
There are three primary theories that comprise the Classical Management Theory:
a. Scientific Management Theory is a very early management theory focused on

minimizing waste and reducing production times. It was developed by Frederick Taylor,
who attempted using a scientific approach for improving operations. Taylor‘s theory
emphasizes incentivizing employee performance and reducing ―hit and trial‖ practices.
American mechanical engineer Frederick Taylor, who was one of the earliest
management theorists, pioneered the scientific management theory. He and his
associates were among the first individuals to study work performance scientifically.
Taylor‘s philosophy emphasized the fact that forcing people to work hard was not the
best way to optimize results. Instead, Taylor recommended simplifying tasks to increase
productivity. According to Taylor, money was the key incentive for working, which is why
he developed the ―fair day‘s wages for a fair day‘s work‖ concept. Since then, the
scientific management theory has been practiced worldwide. The resulting collaboration
between employees and employers evolved into the teamwork that people now enjoy.
b. Administrative Management Theory- Administrative Management Theory was

developed by Henri Fayol, who is a founder of management theory. This theory
considers all the many activities that a business must conduct. Management is
considered a primary business activity and this theory provides detailed guidelines for
managers.
It attempts to find a rational way to design an organization. The theory generally calls for
a formalized administrative structure, a clear division of labor, and delegation of power
and authority to administrators relevant to their areas of responsibilities.
c. Bureaucracy Theory- Bureaucracy Theory promotes reason to guide management

decisions, rather than charisma or nepotism. Developed by sociologist Max Weber, this
theory emphasizes formal authority systems. Unity and the authority of organizational
hierarchies are central to Bureaucracy Theory.
It is the basis for the systematic formation of any organization and is designed to ensure
efficiency and economic effectiveness. It is an ideal model for management and its
administration to bring an organization‘s power structure into focus.
Behavioral Management Theory Increasingly complex industries and organizations gave

rise to more human interests in the workplace. Management theories began to include more
people-oriented methods. Human behavior and satisfying the interpersonal needs of
employees became more central to management. A manager practicing Behavioral
Management Theory might motivate teamwork through fostering a collaborative atmospher
There are two major theories that make up Behavioral Management Theory:
a. Human Relations Theory- Human Relations Theory considers the organization as a

social entity. This theory recognizes that money alone is not enough to satisfy
employees. Morale is integral to employee performance. The major weakness of this
theory is that it makes several assumptions about behavior.

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b. Behavioral Science Theory- Behavioral Science Theory combines elements of

psychology, sociology, and anthropology to provide a scientific basis. It examines why
employees are motivated by specific factors, such as social needs, conflicts, and self-
actualization. This theory recognizes individuality and the need for managers to be
sociable.
Modern Management Theory Modern organizations must navigate constant change and
exponential complexities. Technology is an element that can change and upend businesses
very rapidly. Modern Management Theory seeks to incorporate these elements with human
and traditional theories. A manager practicing Modern Management Theory might use
statistics to measure performance and encourage cross-functional cooperation.
Three major modern theories comprise Modern Management Theory:
a. Quantitative Theory- Quantitative Theory arose out of the need for managerial
efficiency during World War II. It was developed using experts from multiple scientific
disciplines to solve the issues around integrating systems of people, materials, and
systems. This theory was developed primarily to enhance and support military
decision-making.
b. Systems Theory- Systems Theory views management as an interrelated

component of the organization. Instead of viewing the organization as a series of
silos, each department is part of an overall system or organism. Management must
support goals and process flows that serve the overall organizational health.
c. Contingency Theory- Contingency Theory was developed by sociologist Joan

Woodward after she examined why some companies performed better than others.
She found that high performing organizations make better use of technology and
their managers made better decisions in situational contexts. This theory recognizes
that effective managers must be adaptable to unique situations and circumstances.
MANAGEMENT PRACTICES:
Management practices are the working methods and innovations that managers use to make
the organization more efficient. It sounds good, right? Well, I‘m happy to tell you that it‘s
backed by research. It has no surprise then that every company wants to improve their
management practices, but the question is how?
Economic incentives for everyone. Managers should not be the only ones with extra
pay. Do not underestimate how much financial incentives can motivate the rest of the
workers, just make sure they deserve it.
Give regular, meaningful feedback. Employees always respond better to a manager that
takes its time to provide useful feedback, even if it is negative. It shows that they care
about their work.
Employees are also individuals, show them respect. To put it simply, do not treat your
employees like rubbish. An employee that feels respected will do its best to correspond
that respect.

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Managers must train. Learning does not stop with a degree. Make sure you keep training
your managers, new problems require new skills.
Support your employees. Let your employees know you are there for them when they
need it. I assure you they will remember it.
Acknowledge the employee‟s emotions. You must understand that workers have
feelings and how to deal with them, they are people, not machines.
Leadership by example. Practice what you preach. Managers who act in ways that the
employees do not respect, like hypocrisy, will find its employees unmotivated.
Keep up with new technologies. You need to stay informed regarding the new
technologies available to your organization if you want to stay competitive. Upgrade or die,
simple as that.
IMPORTANCE OF MANAGEMENT THEORY
Why Study Management Theories?
1. Increasing Productivity One of the reasons why managers should be interested in

learning management theories is because it helps in maximizing their productivity.
Ideally, the theories teach leaders how to make the most of the human assets at their
disposal. So, rather than purchase new equipment or invest in a new marketing strategy,
business owners need to invest in their employees through training.
It can be seen in Taylor‘s scientific management theory. As mentioned earlier, Taylor
proposed that the best way to boost workers‘ productivity was by first observing their
work processes and then creating the best policies.
2. Simplifying Decision Making Another area where management theories have proven
to be useful is in the decision-making process. Max Weber proposed that hierarchical
systems encourage informed decision-making. A report written by the Institute for
Employment Studies suggests that flattening the hierarchy paves the way for local
innovation while speeding up the decision-making process. Flattening out entails getting
rid of job titles and senior positions to inspire a cohesive work environment.
3. Encouraging Staff Participation- Management theories developed in the 1900s,

aimed at encouraging interpersonal relationships in the workplace. One such theory that
encouraged a collaborative environment is the human relations approach. According to
this theory, business owners needed to give their employees more power in making
decisions.
Concepts at the Workplace – Theoretical concepts in the workplace determine the company
culture of an office or place of business. Concepts should be conscious decisions by company
management and executives and should be clearly communicated to employees so there is
no confusion. Theoretical concepts in the workplace range from how employees work, dress,
or act, as well as any other concept that affects the working environment in a workplace.
Behavior – One workplace concept relates to the behavior of employees in the workplace.
Some aspects of this concept are determined by the law, such as sexual harassment policies
and other types of behavior that violate the law. Other aspects are determined by the

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company. For example, some companies are conservative when it comes to socializing with
other employees, while other companies encourage frequent social interaction as the
executives believe that when you work with friends in a comfortable environment, you are
more productive
Work Style – A company's work style is also a workplace concept. For example, one style
might be to assign individual tasks to people, who work on those tasks alone for the most part.
Another might be to group employees into small teams and give those teams projects to
collectively work together.
Dress and Appearance – The overall appearance of employees is another concept executive
should discuss. For example, some companies require employees to dress up for work, while
others allow shorts and flip flops. Business casual is a common style of dress for many
companies, which is slightly dressed up but still comfortable. The appearance of a company's
employees should reflect the overall company culture and be appropriate for the industry;
financial and legal institutions typically have more formal dress codes than small software
companies.
Workplace Atmosphere – The appearance of the workplace is also a workplace concept to

determine. For example, some offices are divided into cubicles, while other companies prefer
large, open spaces to form more of a community feel. Also, some executives bring in games
or recreational areas for employees to unwind and take breaks from work, and make the
workplace fun, while others see those elements as distractions.
Communication – it is an important part of any workplace. Executives should decide how

employees will communicate with each other in the workplace. Technology has created a
number of ways to communicate by email, phone calls, instant messaging and online forums.
These methods often replace the most traditional form of communication -- face to face
conversation -- for many companies.
MOTIVATION MANAGEMENT THEORIES

1. Maslow‟s Hierarchy of Needs According to Smith & Cronje (1992), the way Maslow‘s
theory is explained relies on the fact that people want to increase what they want to
achieve in life and their needs are prioritized according to their importance. Deriving from
the hierarchy of needs by Maslow, content theories of job satisfaction revolve around
employees‘ needs and the factors that bring them a reasonable degree of satisfaction (Saif
et al., 2012). Based on the basic physical, biological, social, and psychological needs of
human beings, Maslow came up with a five-stage theory that places the needs of the
individual in different categories and prioritizes their attainment. These categories, in order
of decreasing priority, are:
• physiological needs (food, shelter, clothing);
• safety and security needs (physical protection);
• social needs (association with others);
• esteem needs (receiving acknowledgement from others); and
• self-actualization needs (the desire for accomplishment or to leave behind a
legacy).
Maslow‘s hierarchy of needs forms the basis of theories that try to explain job satisfaction.
Teachers, like all people, have needs that have to be satisfied. Besides the basic needs for
food, shelter and clothing, safety from physical, harm, and social interaction, they also need the
recognition and appreciation of students, colleagues, and parents.

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2. Herzberg‟s Two-Factor Theory/Motivator-Hygiene This theory, also known as Motivator-

Hygiene, emanated from a study conducted among accounts and engineers to determine what
makes an individual feel good or bad about their job (Saif et al., 2012). Regarding ‗satisfiers‘,
Herzberg noted that there were five features of work that bring about satisfaction, namely
achievement, recognition, the job itself, responsibility and advancement. Golshan, Kaswuri,
Agashahi and Ismail (2011:12) assert that organizations are increasingly applying Herzberg‘s
theory to create opportunities for ―personal growth, enrichment and recognition‖ among their
employees. Employees should be promoted after completing certain stages of their career and
should receive recognition for special achievements – for example, when they produce
exceptional results in their subject areas; on a more basic level, they should also be given
responsibility to determine how to handle tasks that relate to their jobs.
2. McGregor‟s X and Y Theories, do you believe that every individual gets maximum
satisfaction from the work they do? Or are you of the opinion that some view work as a
burden and only do it for the money? Such assumptions influence how an organization is
run. The assumptions also form the basis of Theory X and Theory Y.
Douglas McGregor is the theorist credited with developing these two contrasting concepts.
More specifically, these theories refer to two management styles: the authoritarian (Theory
X) and participative (Theory Y).
In an organization where team members show little passion for their work, leaders are
likely to employ the authoritarian style of management. But if employees demonstrate a
willingness to learn and are enthusiastic about what they do, their leader is likely to use
participative management. The management style that a manager adopts will influence
just how well he can keep his team members motivated.
Theory X holds a pessimistic view of employees in the sense that they cannot work in the
absence of incentives. Theory Y, on the other hand, holds an optimistic opinion of
employees. The latter theory proposes that employees and managers can achieve a
collaborative and trust-based relationship. Still, there are a couple of instances where
Theory X can be applied. For instance, large corporations that hire thousands of
employees for routine work may find adopting this form of management ideal.
3. McClelland‟s Need Achievement Theory McClelland‘s need achievement theory

postulates that some people are driven to success through seeking ―personal achievement
rather than rewards themselves‖ (Saif et al., 2012, p.1387). This theory is readily
applicable to academic environments and explains why some teachers are high achievers,
despite the difficulties they face: they set themselves high goals and achieving these goals
is what drives them. Alderfer‘s ERG theory is related to Maslow‘s hierarchy of needs but
reduces Maslow‘s five categories of a need to three; namely, relatedness being
(esteem/social needs), then growth being (self-actualization) and existence which is
(security/physiological needs).
4. The Equity Theory Adams' Equity Theory is named for John Stacey Adams, a
workplace and behavioral psychologist, who developed his job motivation theory in
1963. Much like many of the more prevalent theories of motivation (such as Maslow's
Hierarchy of Needs and Herzberg's Two-Factor Theory), Adams' Equity Theory
acknowledges that subtle and variable factors affect an employee's assessment and
perception of their relationship with their work and their employer. The theory is built
on the belief that employees become de-motivated, both in relation to their job and their
employer, if they feel as though their inputs are greater than the outputs.

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5. Value – Percept Theory Individual‘s values determine their satisfaction on their job
because employees in organizations hold different value systems, therefore based on
this theory, their satisfaction levels will also differ. Having a look at Value – Percept
theory, discusses that job satisfaction depends on whether you grasp that your job
supplies the values that you value the most.
6. Vroom‟s Expectancy Theory Assumes that behavior results from conscious choices
among alternatives whose purpose it is to maximize pleasure and to minimize
pain. Vroom realized that an employee's performance is based on individual factors
such as personality, skills, knowledge, experience, and abilities.
7. Porter-Lawler Model the Porter and Lawler theory of motivation assumes that rewards
cause satisfaction and that sometimes performance produces reward. They hypothesize
that the relationship between satisfaction and performance is linked by another variable
rewards. They see good- performance leading to reward which lead to satisfaction. It is a
multi-variable model and explains the complex of relationship among motivation,
performance, and satisfaction.
They argue that satisfaction does not always lead to performance. Rather is reverse is
true because people can become complacent after having achieved satisfaction once.
On the other hand, performance can lead to satisfaction if the reward systems are
effective
FUNCTIONS, ROLES AND SKILLS OF A MANAGER
FUNCTIONS OF A MANAGER
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.

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- 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.
All managers at all levels of every organization perform these functions, but the amount
of time a manager spends on each one depends on both the level of management and
the specific organization.
SKILLS OF A MANAGER
Good communication – Having good Communication skills is probably the most
important skill of all for managers to have. Unless you can properly communicate with
those you supervise, the rest of the skills really will not matter. In numerous types of
management tasks, the most common and first thing that needs to be done is to
communicate your opinions, expectations and needs to others. You should not be a
Manager if you do not enjoy working with people. You also need to be able to send
others the right messages and make sure that they understand you. The type of power
that you use for persuading others on your views is also very important.
Good Organization – Probably the second most important skill that you can have as a
Manager is the ability to organize. You need to be able to come up with a plan and then
schedule, organize, and follow it. This also involves understanding your company's
processes and rules as well as among individuals. You must be able to predict what will
happen and at what time.
Team Building – Good Managers know how to keep their teams intact. The well-being
of team members does not benefit from having competition within the team. However,
competition between teams can be very stimulating and healthy. If one of the team
members speeds ahead and leaves the rest of the members behind without helping
them, the team will most likely fail. A good Manager will notice these irregularities very
easily. He or she will attempt to correct the situation through having discussions with the
team, mostly through listening to members. To a great extent, a successful and healthy
team relies on the trust between members and with the Manager. If a Manager can build
trust systematically, the team members will feel much more committed and appreciated.
Leadership – It is not enough to just listen to the problems of coworkers. A good

Manager needs to solve these problems and prove that he or she is committed to the
goals of the team. It is also the Manager's responsibility to define goals along with team
members and then assign responsibility to various team members clearly. A good
Manager will have a clear vision in terms of the direction he or she wants the team to be
headed in. Team members need to be 'infected' with this vision so that everyone is
headed in the same direction.
Ability to Deal with Changes Effectively – Many Managers are thoroughly familiar with
the entire working process. This allows them to do things in an almost automatic
manner. A good Manager is adaptable and flexible. When faced with obstacles, he or
she can react quickly. Stress does not prevent the Manager from making the right
decisions for the team and company.

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Domain Knowledge – Good Managers have a thorough understanding of the process

he or she is managing, including the type of tasks that team members are performing
and how they are working. This skill is not quite as important as the other ones are.
However, in some cases, not having it will mean that the Manager and the team do not
ever work at maximum capacity or use all their potentials due to a lack of understanding
of one another.
ROLES PERFORMED BY MANAGERS

A manager wears many hats. Not only is a manager a team leader, but he or she is also
a planner, organizer, cheerleader, coach, problem solver, and decision maker — all
rolled into one. And these are just a few of a manager's roles.
In addition, managers' schedules are usually jam‐packed. Whether they're busy with
employee meetings, unexpected problems, or strategy sessions, managers often find
little spare time on their calendars. (And that doesn't even include responding to e‐mail!)
In his classic book, The Nature of Managerial Work, Henry Mintzberg describes a set of
ten roles that a manager fills. These roles fall into three categories:
a. Interpersonal: This role involves human interaction.
b. Informational: This role involves the sharing and analyzing of information.
c. Decisional: This role involves decision making
Not everyone can be a manager. Certain skills, or abilities to translate knowledge into
action that results in desired performance, are required to help other employees become
more productive. These skills fall under the following categories:
a. Technical: This skill requires the ability to use a special proficiency or expertise to perform
particular tasks. Accountants, engineers, market researchers, and computer scientists, as
examples, possess technical skills. Managers acquire these skills initially through formal
education and then further develop them through training and job experience. Technical
skills are most important at lower levels of management.
b. Human: This skill demonstrates the ability to work well in cooperation with others. Human
skills emerge in the workplace as a spirit of trust, enthusiasm, and genuine involvement in
interpersonal relationships. A manager with good human skills has a high degree of self‐
awareness and a capacity to understand or empathize with the feelings of others. Some
managers are naturally born with great human skills, while others improve their skills
through classes or experience. No matter how human skills are acquired, they're critical for
all managers because of the highly interpersonal nature of managerial work.
c. Conceptual: This skill calls for the ability to think analytically. Analytical skills enable
managers to break down problems into smaller parts, to see the relations among the parts,
and to recognize the implications of any one problem for others. As managers assume ever‐
higher responsibilities in organizations, they must deal with more ambiguous problems that
have long‐term consequences. Again, managers may acquire these skills initially through
formal education and then further develop them by training and job experience. The higher
the management level, the more important conceptual skills become.

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Activities/Assessments:
A. ESSAY. ANSWER THE FOLLOWING QUESTIONS.
1. ―Management is the art of getting things done through people in formally organized
groups.‖ Explain by defining management and its scope.
2. Explain the different types of management theories and why it is important in an

organization.
3. As a manager, why do the functions, roles and skills of a manager an essential part of
the organization‘s success. Explain.
B. CASE SOLUTIONS: Nature and Concept of Management
George David has been CEO of United Technologies Corporation (UTC) for more than a
decade. During that time, he has received numerous accolades and awards for his performance
as a CEO. Under his leadership UTC, a $343 billion conglomerate whose operating units
include manufacturers of elevators (Otis Elevator), aerospace products (including Pratt &
Whitney jet engines and Sikorsky helicopters), air conditioning systems, and fire and security
systems, has seen earnings grow at 10–14 percent annually—impressive numbers for any
company but particularly for a manufacturing enterprise.
According to David, a key to United Technologies‗ success has been sustained

improvements in productivity and product quality. The story goes back to the 1980s when David
was running the international operations of Otis Elevator. There he encountered a Japanese
engineer, Yuzuru Ito, who had been brought in to determine why a new elevator product was
performing poorly. David was impressed with Ito‗s methods for identifying quality problems and
improving performance. When he was promoted to CEO, David realized that he had to lower the
costs and improve the quality of UTC‗s products. One of the first things he did was persuade Ito
to work for him at UTC. Under Da vid, Ito developed a program for improving product quality
and productivity, known as Achieving Competitive Excellence (ACE), which was subsequently
rolled out across UTC. The ACE program has been one of the drivers of productivity
improvements at UTC ever since.
Early in his tenure as CEO, David also radically reorganized UTC. He dramatically cut
the size of the head office and decentralized decision making to business divisions. He also
directed his accounting staff to develop a new financial reporting system that would give him
good information about how well each division was doing and make it easier to hold divisional
general managers accountable for the performance of the units under them. He then gave them
demanding goals for earnings and sales growth and pushed them to improve processes within
their units by implementing the ACE program.
At the same time David has always stressed that management is about more than goal
setting and holding people accountable. Values are also important. David has insisted that UTC
employees adhere to the highest ethical standards, that the company produce goods that have
minimal environmental impact, and that employee safety remain the top consideration in the
workplace.

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When asked what his greatest achievement as a manager has been, David refers to
UTC‗s worldwide employee scholarship program. Implemented in 1996 and considered the
hallmark of UTC‗s commitment to employee development, the program pays the entire cost of
an employee‗s college or graduate school education, allows employees to pursue an y subject
at an accredited school, provides paid study time, and a wards UTC stock (up to $10,000 worth
in the United States) for completing degrees. Explaining the program, David states, ―One of
the obligations that an employer has is to give employees opportunities to better themselves.
And we feel it‗s also very good business for us because it generates a better workforce that
stays longer.‖
David states that one of his central tasks has been to build a management team that
functions smoothly over the long term. ―People come to rely upon each other,‖ he says. ―You
have to have the same trusting relationships. You know people; they know you. You can predict
them; they can predict you. All of that kind of begins to work, and it accelerates over the tenure
of a CEO. If you have people bouncing in and out e very two to three years, that‗s not good.‖
According to Sandy Weill, former chairman of Citicorp and a UTC board member, David
has the right mix of toughness and sensitivity. ―When somebody can‗t do the job, he‗ll try to
help; but if that person is not going to make it work, that person won‗t be on the job forever.‖ At
the same time Weill says, ―He does a lot of things that employees respect him for. I think he is
a very good manager. Even though David is demanding, he can also listen—he has a receive
mode as well as a send mode.‖
CASE DISCUSSION QUESTIONS
1. What makes George David such a highly regarded manager?

2. How does David get things done through people?
3. What evidence can you see of David‗s planning and strategizing, organizing,
controlling, leading, and developing?
4. Which managerial competencies does David seem to possess? Does he seem to
lack any?

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LESSON 2:
THE FIRM AND ITS ENVIRONMENT
Overview:
Firm is a commercial enterprise, a company that buys and sells products and/or services
to consumers with the aim of making a profit.
A business entity such as a corporation, limited liability company, public

limited company, sole proprietorship, or partnership that has products or services for
sale is a firm
Business Firm consists of a set of internal factors and is confronted with a set of external
factors (ie. Environment). This is the relation between a firm and its environment. The internal
factors are regarded as controllable factors, as the firm has got control over these factors.
Environment refers to the factors or elements affecting business organization. It divided

into the External and Internal Business.
• Identify various forces or elements of the firm‘s environment

• Summarize these forces using the PESTEL and SWOT Analyses
• Describe the local and international business environment of a firm
• Explain the role of business in relation to the economy
• Discuss the different phases of economic development
Course Materials:
The business environment may be classified into two types. We have the External
Business Environment and Internal Business Environment. External Business Environment
refers to the forces/factors outside the organization which may affect either positively or
negatively the performance of the organization, while the Internal Business Environment
refers to the forces/factors within the organization which may affect either positively or
negatively the performance of the organization.
THE FIRM AND ITS ENVIRONMENT
Firm is a commercial enterprise, a company that buys and sells products and/or services
to consumers with the aim of making a profit.
A business entity such as a corporation, limited liability company, public

limited company, sole proprietorship, or partnership that has products or services for
sale is a firm
Business Firm consists of a set of internal factors and is confronted with a set of external
factors (ie. Environment). This is the relation between a firm and its environment. The internal
factors are regarded as controllable factors, as the firm has got control over these factors.

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Environment refers to the factors or elements affecting business organization. It divided

into the External and Internal Business.
The business environment may be classified into two types:
a. EXTERNAL BUSINESS ENVIRONMENT - refers to the forces/factors outside the

organization which my affect, either positively or negatively, the performance of the
organization.
GENERAL EXTERNAL BUSINESS ENVIRONMENT includes:
• Economic
• Socio-cultural
• Politico-legal
• Demographic
• Technological
• World and ecological situations
SPECIFIC EXTERNAL BUSINESS ENVIRONMENT includes:

 Stakeholders
 Customers
 Pressure groups
 Investors
 Employees
b. INTERNAL BUSINESS ENVIRONMENT - refers to the forces/factors within the

organization which my affect, either positively or negatively, the performance of the
organization.
INTERNAL BUSINESS ENVIRONMENT includes:
• The organizations‘ resources
• Research and development
• Production
• Procurement of supplies
• Products and services offered
ENVIRONMENTAL FORCES
It is defined as external and internal factors which affect the future success of the organization
business or company. These forces constantly change and may arrive unexpectedly. This
environmental forces requires a regular monitoring to cope up with these factors to help in
decision making.
There are two Aspects of Environmental Forces:
1. CONTROLLABLE- this aspect of the environmental forces are normally the factors that
happens internally or inside the organization. That‘s why these factors are the things that
can also be controlled by the organization. These factors can be assess using the SWOT
analysis developed by Jerome McCartney.
2. UNCONTROLLABLE- while in the uncontrollable aspect of the environmental forces are

normally the factors that happens outside the organization or externally. Since these
forces happens outside the environment of the organization, these can‘t be controlled by

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the organization itself but it is possible for them to adapt and adjust to these factors that
might affect the organization.
Analyses Used to Assess and Evaluate the Environmental Forces in the

organization. There are two common analyses being used by the organization for them to
evaluate what are the controllable and uncontrollable aspects that each organizations will
encounter and help the organization to cope up and overcome those environmental forces,
the SWOT ANALYSIS and PESTEL ANALYSIS.
What is SWOT Analysis

This is a framework used to evaluate an organization‘s competitive position and to develop
strategic planning developed by Jerome McCarthy. SWOT analysis assesses internal and
external factors, as well as current and future potential. This is also the close study of the
internal and external environment of an organization that will reveal some very valuable
information such as the organization‘s strengths, weaknesses, opportunities and threats.
 Strength- this refers to the internal factor and positive attributes of the business
and organization.
 Weakness- refers to internal factor and are negative factors that detract from your
strengths. These are things that you might need to improve on to be competitive.
They are areas where the organization needs to improve to remain competitive.
 Opportunities- this refers to the favorable factors that could give an organization
a competitive advantage.
 Threat- this refers to the factors that have the potential to harm an organization.
What is PESTEL Analysis
This is a framework or tool used to analyze and monitor the external environmental
factors that may have a profound impact on an organization‘s performance. The letters
stand for Political, Economic, Social, Technological, Environmental and Legal.
 Political Factors – these determine the extent to which government and

government policy may impact on an organization or a specific industry. This
would include political policy and stability as well as trade, fiscal and taxation
policies that the organization need to consider before they plan and
implement actions for their organization themselves.
 Economic Factors – these factors impact on the economy and its
performance, which in turn directly impacts on the organization and its
profitability. Factors include interest rates, raw material cost and foreign
exchange rates.
 Social Factors – these factors focus on the social environment and identify
emerging trends. This helps the management of the organization to further
understand their customer‘s needs and wants. Factors include changing
family demographics, education levels, cultural trends, attitude changes and
changes in lifestyles.
 Technological Factors – these factors consider the rate of technological
innovation and development that could affect a market or industry. Factors
could include changes in the digital or mobile technology, automation,
research and development. There is often a tendency to focus on
developments only in digital technology, but consideration must also be given
to new methods of distribution, manufacturing and also logistics.

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 Legal Factors – an organization must understand what is legal and allowed

within the territories they operate in. They also must be aware of any change
in legislation and the impact this may have on business operations. Factors
include employment legislation, consumer law, healthy and safety,
international as well as trade regulation and restrictions. Political factors do
cross over with legal factors, however, the key difference is that political
factors are led by government policy, whereas the legal factors must be
complied with.
A PESTEL analysis helps an organization identify the external forces that could impact their
market and analyse how they could directly impact their business. It‘s important when
undertaking such analysis that the factors affecting the organization are not just identified but
are also assessed- for example, what impact might they have on the organization? The
outcomes of a PESTEL analysis can then be used to populate the opportunities and threats in a
SWOT analysis.
FORCES/ELEMENTS OF THE FIRMS ENVIRONMENT
1. Sociocultural Factors - It consists of customs, lifestyles, and values that characterize the
society in which the firm operates. Socio-cultural components of the environment influence
the ability of the firm to obtain resources, make its goods and services, and function within
the society. Sociocultural factors include anything within the context of society that has the
potential to affect an organization.
a. Population Changes - have many potential consequences for organizations. As the

total population changes, the demand for products and services also changes.
b. Rising educational levels - allow people to earn higher incomes than would have
been possible otherwise. The increase in income has created opportunities to
purchase additional goods and services, and to raise the overall standard of living of a
large segment of the population. The educational level has also led to increased
expectations of workers and has increased job mobility.
c. Norms and values - Norms (standard accepted forms of behavior) and values
(attitudes toward right and wrong), differ across time and between geographical
areas. Lifestyles differ as well among different ethnic groups.
d. Social responsibility - Social responsibility is the expectation that a business or

individual will strive to improve the welfare of society.
2. Technological factors -Changing technology may affect the demand for a firm's products
and services, its production processes, and raw materials, may create new opportunities
for the firm, or threaten the survival of a product, firm, or industry. Technological innovation
continues to move at an increasingly rapid rate.
a. Demand -Technology can change the lifestyle and buying patterns of consumers.
Technology may also cause certain products to be removed from the market.
b. Production processes - The introduction of products based on new technology

often requires new production techniques. New production technology may alter
production processes.

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3. Political and Legal Factors -The Legal Politic elements includes the legal and
governmental systems within an organization must function. Such us, trends in legislation,
politics, and aspects of the Legal-Political element. Political factors are usually bigger
picture topics such as tax policy, trade policy, or foreign trade policy, whereas legal factors
tend to be more specific and relate to topics such as discrimination laws, antitrust laws, or
intellectual property laws. However, they do overlap. Take, for example, labor laws which
we consider a political factor and workplace health and safety laws, which we consider a
legal factor
4. Economic Factors - it includes interest rates, tax rates, law, policies, wages, and
governmental activities. These factors are not in direct relation with business, but it
influences the investment value in the future. It encompasses the general economic health
of the region in which the organization operates. Such as, unemployment rate, consumer
purchasing power and interest rates.
5. International Factors -The actions of other countries or groups of countries affects the
organization. Governments may act to reserve a portion of their industries for domestic
firms or may subsidize types of businesses to make them more competitive in the
international market.
Some countries may have a culture or undergo a change in leadership that limits the ability
of firms to participate in the country's economy. As with the other elements of the macro-
environment, such actions are not directed at any single company, but at many firms. In its
traditional form of international trade and finance as well as its newest form of multinational
business operations, international business has become massive in scale and has come to
exercise a major influence over political, economic and social from many types of
comparative business studies and from a knowledge of many aspects of foreign business
operations. In fact, sometimes the foreign operations and the comparative business are
used as synonymous for international business.
INTERNATIONAL BUSINESS FIRM IN THE ENVIRONMENT
It is a multidimensional industry that focuses on manufacturing products, it is also the process

of trading beyond the borders of the County. it encompasses the political risks, cultural
differences, risks in exchange, legal and taxation issues, and technological environments.
Moreover, it also includes everything connected with commercial activities like sales,
investments, and logistics in which two or more countries are involved.
What is Purchasing Power Parity (PPP)?

A popular theory that is being used by macroeconomic analysts that is being used to compare
different countries‘ currencies through a ―basket of good approach‘‘ (it refers to the fixed set or
consumers‘ services and products that are being valued on an annual basis.) The purchasing
power of the countries involved should be equal and the same. Additionally, the exchange rate
should be equal to one or the ratio of price to exchange rate is equal to one. This theory is
considered as very helpful to traders as it predicts fluctuations in international currency and
indicate weakness.
ROLE OF BUSINESS IN THE ECONOMY
The role of Business in the Economy is huge. It is the engine of an economy because it
provides jobs that allow people to make money and goods and services that people can buy
with the money they make. Without businesses, the economy would be very inefficient and/or
very primitive. Businesses benefit each of us by producing the goods and services that we
desire. Instead of having to produce everything we consume on our own, businesses facilitate
trade between people and allow for greater variety, quantity, and quality of products and

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services at lower prices. Overall, the presence of business in the economy results in a higher
standard of living for each of us.
What is Economic Environment?
The Economic Environment refers to all the economic factors that affect commercial and
consumer behavior. It consists of all the external factors in the immediate marketplace and the
broader economy. These factors can influence a business on how it operates and how
successful it might become.
According to the Business Development Bank of Canada, the term economic environment
refers to all the external economic factors that influence buying habits of consumers and
businesses and therefore affect the performance of a company and These factors are often
beyond a company‘s control, and maybe either large-scale (macro) or small-scale (micro).
The economic environment consists of microeconomic and macroeconomic factors.
The microeconomic factors refer to the things that happen at the individual company or
consumer level. It does not affect the whole economy. Such as demand, market size,
suppliers, supply, and distribution chain. While the Macroeconomic factors refers to the
things that affect the entire economy. Such as unemployment, inflation, interest rates, GDP
or Gross Domestic Product, taxes, and exchange rates.
IMPORTANCE OF SMALL BUSINESS IN THE ECONOMY
Generate New Employment -Small businesses generate employment by creating job

opportunities. Small firm also serve as a training ground for employees who become valued
employees of larger companies because of their comprehensive learning experience and
risk taking. The Small Business Administration reports that from 2005 to 2008, small
businesses were responsible for creating 81.4 percent of the net new jobs in the U.S.
Integral Parts of Local Economies -Small businesses are integral parts of local
economies, helping to create webs of financial interdependence that foster broad-based
prosperity. The more that small businesses leverage their potential to support each other,
the greater their capacity to create a thriving local business community.
Growing a Small Business to a Corporation -Small businesses do not always stay

small. Large corporations, such as Nike and Ben and Jerry‘s, started off as small
businesses and grew to become major players in the national and international
marketplace. Having a large corporation headquartered in a community can further help
provide employment and stimulate the local economy, creating a market that favors the
development of additional small businesses.
Encourage Innovation and Flexibility-Employees from small business are given more
freedom to innovate, work independently and make decisions than from large corporations.
When a business lacks the resources of a large corporation, employees have to get
creative — and inventions from necessity are born.
Diversity -Small businesses also have more flexibility and can be started by almost
anyone. That makes them more diverse in form, function, culture, and potential than large
corporations. The greater diversity we have in the economy, the easier it is for the economy
to withstand Tough conditions.

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Exporting Importance -Small businesses are important due to their role in exporting to
other nations. Ninety-seven percent of identified exporters are small businesses, and they
produce 26 percent of the export value through their products they ship to consumers in
other countries. Exporting U.S. goods to other nations also helps to keep the U.S.
economy strong.
ECONOMIC DEVELOPMENT
Economic development is the process whereby simple, low-income national economies are
transformed into modern industrial economies. It is also known as economic growth, which
describes a change in a country‘s economy involving qualitative and quantitative
improvements that also consider the social, political, cultural, and spiritual aspects of the
country‘s growth.
a. Local Development- It is the increase in the local economy‘s capacity to create

wealth for residents.
b. Local Welfare - It is the existence of significant agglomeration externalities is the
most importance efficiency rationale for local based incentives. This hinges on whether
the attraction of new businesses generates some forms of external benefits to other
firms in the same locality
PHASES OF ECONOMIC DEVELOPMENT
1. First Industrial Revolution (1760-1850)
There is a drastic transformation both in internal structures and processes and its
relationships with the external environment. Hundreds of salaried workers were
concentrated during the first industrial revolution (which occurred in Britain from the last
decade of 18th century to the 1850s). The ―rise of the factory‖ as the dominant
organizational form is one of the most intriguing issues in business and economic history.
Main reasons are the ff:
a) The requirements of the new technologies of production (economies of scale and

division of labor).
b) The inadequacy of the previous organizational forms to cope with an increased
dynamism in market demand (transaction and information costs).
c) A more efficient exploitation of the workers by the entrepreneurs.
d) The radical change knowledge.
The factory relied heavily on low-powered incentives. Main technological features:
-New infrastructure (railways)

-New source of power (steam engine)
-New machine tools
2. Second Industrial Revolution (1920s)
New and advance technology was produced and adopted in many industries especially in
capital-intensive industries such as steel, chemicals, and food processing. The spread of
railway network at a national and transnational level fostered the formation of a wide
system of distribution that made it necessary for large corporation to adopt economies of
scale.

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a. Telegraph became popular which made the communication between people faster.
b. “Multidivisional form” (M-form) rose as a new firm organization which was the
most significant during this period.
c. Mass distribution was also developed as an impact of the railway and telegraph
European corporations have been generally characterized by the persistence of family

leadership, accompanied by collaborative relations with the trade unions and by close links
with powerful financial institutions. The legal structure of the large firms in US also
changed from individual firm and partnership to the joint-stock corporation. As a result of
the new transportation technology, the firm became more hierarchical: middle and top
managers were appointed to monitor the work process.
3. Information and Communication Technology (ICT) Revolution
This period gradually emerges Project-based firms, it significantly changed the character of
work: knowledge has become the crucial input, it also Extend and Globalize markets. New
Industries are developing such as.
a) Internet technology
b) the information industry,
c) biotechnology, etc.
Today‘s firms are greatly focusing on core competencies or core intellectual and service
competencies. It stimulates competition and entrepreneurship in an economy.
ROLES OF ECONOMIC DEVELOPERS IN ECONOMY:
a. they are responsible for planning, designing, and implementing economic development
strategies,
b. they act as a key liaison between public and private sectors and the community,
c. they help to leverage finances from both the public and private sectors. Key facilitators in
creating public-private partnership,
d. they aid where markets and institutions cannot or will not meet the community‘s needs.
e. they provide technical or trade assistance.
1. Analyze the various environmental forces affecting the firm in the Philippines and
summarize these using PESTEL and SWOT Analyses
2. How will you describe the business environment of the firms here in the Philippines
compared to the international business environment firms?
3. What is the role of business in relation to the economy?
4. Discuss the different phases of economic development in the Philippines.

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B. CASE PROBLEM:
Managers in pharmaceutical firms face a dynamic and challenging task environment that
creates both opportunities and threats. Demand for pharmaceuticals is strong and has been
growing steadily for decades. Between 1990 and 2005 there was a 12.5 percent annual
increase in spending on prescription drugs in the United States. This strong growth was driven
by favorable demographics. As people grow older, they tend to consume more prescription
medicines, and the population in most advanced nations has been growing older as the post–
World War II baby boom generation ages.
Moreover, successful new prescription drugs can be extraordinarily profitable. Consider

Lipitor, the cholesterol-lowering drug sold by Pfizer. Introduced in 1997, by 2005 this drug
generated a staggering $12 billion in annual sales for Pfizer. The costs of manufacturing,
packaging, and distributing Lipitor amounted to only about 10 percent of revenues, or around
$1.2 billion. Pfizer spent close to $400 million on advertising and promoting Lipitor and perhaps
as much again on maintaining a sales force to sell the product. That still leaves Pfizer with a
gross profit from Lipitor of perhaps $10 billion.
Lipitor is highly profitable because the drug is protected from direct competition by a 20-year
patent. This temporary monopoly allows Pfizer to charge a high price. Once the patent expires,
other firms will be able to produce generic versions of Lipitor, and the price will fall—typically by
80 percent within a year—but that is some time away.
Competing firms can produce drugs that are similar (but not identical) to a patent-protected
drug. Drug firms patent a specific molecule, and competing firms can patent similar, but not
identical, molecules that have a similar pharmacological effect. Thus, Lipitor does have
competitors in the market for cholesterol-lowering drugs—such as Zocor, sold by Merck, and
Crestor, sold by AstraZeneca. But these competing drugs are also patent protected. Moreover,
due to Federal Drug Administration regulations and requirements for demonstrating that a drug
is safe and effective, the costs and risks associated with developing a new drug and bringing it
to market are very high. Out of every 5,000 compounds tested in the laboratory by a drug
company, only five enter clinical trials, and only one of these will ultimately make it to the
market. On average, estimates suggest that it costs some $800 million and takes anywhere
from 10 to 15 years to bring a new drug to market. Once on the market, only 3 out of 10 drugs
ever recoup their R&D and marketing costs and turn a profit. Thus, the high profitability of the
pharmaceutical industry rests on a handful of blockbuster drugs. To produce a blockbuster, a
drug company must spend great amounts of money on research, most of which fails to produce
a product. Pfizer, for example, spent over $7.4 billion on R&D in 2005 alone, equivalent to 14.6
percent of its total revenues.
In addition to R&D spending, the incumbent firms in the pharmaceutical industry spend much
money on advertising and sales promotion. Although the $400 million a year that Pfizer spends
promoting Lipitor is small relative to the drug‘s revenues, it is a large amount for a new
competitor to match, making market entry difficult unless the competitor has a significantly
better product.
There are also some big opportunities on the horizon for firms in the industry. New scientific
breakthroughs in genomics portend that within the next decade pharmaceutical firms might be
able to bring new drugs to market that treat some of the most intractable medical conditions,
including Alzheimer‘s, Parkinson‘s disease, cancer, heart disease, stroke, and HIV.
On the other hand, managers in the industry face serious challenges. Many patent-protected
medicines are scheduled to come off patent in the next decade, and to maintain profitability,

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pharmaceutical firms must find new drugs to replace them. In addition, as spending on health
care rises, seniors are complaining about the high costs of prescription medicines, and
politicians are looking for ways to limit this. One possibility is some form of price controls on
prescription drugs. Pharmaceutical price controls are already in effect in most developed
nations, and although they have not yet been introduced in the United States, that could
happen. Another possibility is to make it easy for U.S. residents to purchase pharmaceuticals
from foreign nations where prices are lower.
A further challenge is associated with the growth of large health care providers, who have
millions of subscribers and are starting to use their power to reduce the drug prices their
subscribers pay. In some cases, they are refusing to provide insurance coverage for high-priced
pharmaceuticals when lower-priced generic alternatives are available.
1. What are the barriers to entry into the pharmaceutical industry? To what extent do you think
these entry barriers protect established pharmaceutical companies from new competitors?
2. The pharmaceutical industry has long been one of the most profitable in the United States.
Why do you think this is the case?
3. What forces in the general environment influence the nature of competition in the task
environment facing pharmaceutical firms?
4. Are there reasons for believing that the profitability of the industry might come under threat
over the next decade? What do you think managers in the industry should do to counter this
threat?

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LESSON 3:
Principles of Management Functions
Overview:
Management in some form or another is an integral part of living and is essential
wherever human efforts are to be undertaken to achieve desired objectives.
It is a set of principles relating to the functions of planning, organizing, directing, and
controlling.
Management Functions means getting things done through others – individually, in
groups, or in organizations. It provides direction and coordination and was developed by
Henri Fayol.
• Discuss the different functions of management

• Differentiate each functions of management
• Apply the different functions of management in business cases and situations.
Course Materials:
For management functions, the objective of the specific activity remains largely the
same, even though the manifestation might be different depending on the specific situation.
Management functions are the same, but the management processes people use can
differ. A management style or process can depend on the organization, the manager in
question, and even the objectives. You‘re likely to change management style if you are
directing a single person or being in control of a team.
PRINCIPLES OF MANAGEMENT FUNCTION
Management in some form or another is an integral part of living and is essential

wherever human efforts are to be undertaken to achieve desired objectives. It is a set of
principles relating to the functions of planning, organizing, directing, and controlling.
Management Functions means getting things done through others – individually, in groups,
or in organizations. It provides direction and coordination and was developed by Henri
Fayol.
Who is Henri Fayol?
An engineer and a theorist of business administration, who developed 14 principles of
management, and 5 principles of management function

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5 PRIMARY FUNCTION OF MANAGEMENT
Figure 1.
Diagram of Henri Fayol’s Five
Principles of Management
Function
1. Planning - is future-oriented and determines an organization‘s direction. It is a rational and

systematic way of making decisions today that will affect the future of the company. It is a kind of
organized foresight as well as corrective hindsight. It involves predicting of the future as well as
attempting to control the events. It involves the ability to foresee the effects of current actions in the
long run in the future. Peter Drucker has defined planning as follows: “Planning is the continuous
process of making present entrepreneurial decisions systematically and with best possible
knowledge of their futurity, organizing systematically the efforts needed to carry out these decisions
and measuring the results of these decisions against the expectations through organized and
systematic feedback”.
An effective planning program incorporates the effect of both external as well as internal factors.
The external factors are shortages of resources; both capital and material, general economic trend
as far as interest rates and inflation are concerned, dynamic technological advancements,
increased governmental regulation regarding community interests, unstable international political
environments, etc.
2. Organizing -requires a formal structure of authority and the direction and flow of such authority
through which work subdivisions are defined, arranged and coordinated so that each part relates to
the other part in a united and coherent manner to attain the prescribed objectives.
According to Henry Fayol, “To organize a business is to provide it with everything useful or its
functioning i.e. raw material, tools, capital and personnel’s”. Thus, the function of organizing
involves the determination of activities that need to be done in order to reach the company goals,
assigning these activities to the proper personnel and delegating the necessary authority to carry
out these activities in a coordinated and cohesive manner.
the function of organizing is concerned with:
a. Identifying the tasks that must be performed and grouping them whenever necessary
b. Assigning these tasks to the personnel while defining their authority and responsibility.
c. Delegating this authority to these employees
d. Establishing a relationship between authority and responsibility
e. Coordinating these activities

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3. Staffing- the function of hiring and retaining a suitable workforce for the enterprise both at
managerial as well as non-managerial levels. It involves the process of recruiting, training,
developing, compensating and evaluating employees and maintaining this workforce with proper
incentives and motivations. Since the human element is the most vital factor in the process of
management, it is important to recruit the right personnel.
This function is even more critically important since people differ in their intelligence, knowledge,
skills, experience, physical condition, age, and attitudes, and this complicates the function. Hence,
management must understand, in addition to the technical and operational competence, the
sociological and psychological structure of the workforce.
According to Kootz & O‘Donnell, “Managerial function of staffing involves manning

the organization structure through the proper and effective selection, appraisal &
development of personnel to fill the roles designed in the structure”.
4. Directing/Leading is said to be a process in which the managers instruct, guide, and oversee the
performance of the workers to achieve predetermined goals. It is said to be the heart of
management process. Initiates action and it is from here actual work starts. Direction is said to be
consisting of human factors. In simple words, it can be described as providing guidance to workers
is doing work. In field of management, direction is said to be all those activities which are designed
to encourage the subordinates to work effectively and efficiently.
According to Human, ―Directing consists of process or technique by which instruction can be issued
and operations can be carried out as originally planned‖ Therefore, Directing is the function of
guiding, inspiring, overseeing and instructing people towards accomplishment of organizational
goals. Consistent with company policies, and every manager should treat subordinates in line with
the standards of the company It is concerned with leadership, communication, and supervision for
employees to work in the most efficient manner. Giving instructions and guiding subordinates about
procedures and methods. Motivation and proper communication are vital.
ELEMENTS OF DIRECTING
1. Leadership element involves issuing of instructions and guiding the subordinates about
procedures and methods.
2. Communication must be open both ways so that the information can be passed on to the
subordinates and the feedback received from them.
3. Motivation is very important since highly motivated people show excellent performance with
less direction from superiors.
4. Supervising subordinates would lead to continuous progress reports as well as assure the
superiors that the directions are being properly carried out.
5. Controlling -consists of those activities that are undertaken to ensure that the events do not
deviate from the pre-arranged plans. The activities consist of establishing standards for work
performance, measuring performance and comparing it to these set standards and taking
corrective actions as and when needed, to correct any deviations. It also consists of verifying
whether everything occurs in conformities with the plans adopted, instructions issued, and
principles established. It measures the deviation of actual performance from the standard
performance, discovers the causes of such deviations and helps in taking corrective actions.
According to Koontz & O‘Donnell, “Controlling is the measurement & correction of performance
activities of subordinates in order to make sure that the enterprise objectives and plans desired to
obtain them as being accomplished”. According to Brech, ―Controlling is a systematic exercise
which is called as a process of checking actual performance against the standards or plans with a
view to ensure adequate progress and also recording such experience as is gained as a
contribution to possible future needs.‖
The controlling function involves:

1. Establishment of standard performance.
2. Measurement of actual performance.
3. Measuring actual performance with the pre-determined standard and finding out the deviations.

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4. Taking corrective action
We will discuss further each of the different functions of management on the succeeding
chapters in this instructional material.
A. CASE PROBLEM
Discuss in your own words the different functions of management and as a manager,
how these functions of management can be applied in the businesses and
organizations during a pandemic crisis of Covid-19.

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LESSON 4:
CONCEPT OF PLANNING FUNCTION
Overview:
Planning is one of the major functions of management. It is a process that involves the
setting of the organization's goals, establishing strategies for accomplishing those goals and
developing plans of actions that managers intend to use to achieve said organizational goals.
It is a process that involves the setting of the organization‘s goals, establishing

strategies for accomplishing those goals and developing plans of actions that managers
intend to use to achieve said organizational goals.
It is the primary function of management; it provides the foundation from which all
future management function arises.
It is goal oriented, since plans arise from objectives, and objectives provide guidelines
for planning. It is a Continuous Process of adapting the organization with the changes in
business.
Planning is Flexible, it selects the best alternative based on assumptions, there is a

possibility that there is a dead log in the function of management, It has one more alternative
suit for future situation
It is a Managerial Function; it is found in all levels and all departments of an

organization. It involves choosing the future course of action from among alternatives.
• Discuss the nature of planning

• Compare and contrast the different types of plans
• Describe planning at different levels in the firm
• Apply appropriate planning techniques and tools
• Formulate a decision from several alternatives
Course Materials:
The first managerial function involves planning. The function is about creating a
detailed plan towards achieving a specific organizational objective. When you are planning,
you are identifying the tasks, which are required to achieve the desired goals, outlining how
the tasks should be performed, and identifying when and by whom they must be performed.
The focus of planning is about achieving the objectives and it does require knowledge of the
organization‘s objectives and vision. You will need to look both at the short- and long-term
success of the organization as part of the plan.

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CONCEPT OF PLANNING FUNCTION
Definition and Nature of Planning

Planning is one of the major functions of management. It is a process that involves the setting of
the organization's goals, establishing strategies for accomplishing those goals and developing plans of
actions that managers intend to use to achieve said organizational goals.
It is a process that involves the setting of the organization‘s goals, establishing strategies for
accomplishing those goals and developing plans of actions that managers intend to use to achieve said
organizational goals.
It is the primary function of management; it provides the foundation from which all future
management function arises.
It is goal oriented, since plans arise from objectives, and objectives provide guidelines for
planning. It is a Continuous Process of adapting the organization with the changes in business.
Planning is Flexible, it selects the best alternative based on assumptions, there is a possibility
that there is a dead log in the function of management, It has one more alternative suit for future
situation.
It is a Managerial Function; it is found in all levels and all departments of an organization. It

involves choosing the future course of action from among alternatives.
TYPES OF PLANNING
1. Operational Planning- This type of planning typically describes the day-to-day running of
the company. It is often described as single use plans or ongoing plans. Single use plans
are created for events and activities with a single occurrence (such as a single marketing
campaign). Ongoing plans include policies for approaching problems, rules for specific
regulations and procedures for a step-by-step process for accomplishing objectives.
2. Strategic Planning- Includes a high-level overview of the entire business. It is the

foundational basis of the organization and will dictate long-term decisions. The scope of
strategic planning can be anywhere from the next two years to the next 10 years.
Important components of a strategic plan are vision, mission, and values.
3. Tactical Planning -It supports strategic planning. It includes tactics that the organization
plans to use to achieve what is outlined in the strategic plan. Often, the scope is less than
one year and breaks down the strategic plan into actionable chunks. Tactical planning is
different from operational planning in that tactical plans ask specific questions about what
needs to happen to accomplish a strategic goal; operational plans ask how the
organization will generally do something to accomplish the company‘s mission.
4. Contingency Planning -are made when something unexpected happens or when

something needs to be changed. Contingency planning can be helpful in circumstances
that call for a change. Although managers should anticipate changes when engaged in
any of the primary types of planning, contingency planning is essential in moments when
changes cannot be foreseen. As the business world becomes more complicated,
contingency planning becomes more important to engage in and understand.

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IMPORTANCE OF PLANNING
1. Efficient Use of Resources- All organizations, large and small, have limited resources. The
planning process provides the information top management needs to make effective
decisions about how to allocate the resources in a way that will enable the organization to
reach its objectives. Productivity is maximized and resources are not wasted on projects
with little chance of success
2. Establishing Organizational Goal- It is one of the key aspects of the planning process.
Goals must be aggressive, but realistic. Organizations cannot allow themselves to become
too satisfied with how they are currently doing – or they are likely to lose ground to
competitors.
3. Managing Risk and Uncertainty- is essential to an organization‘s success. Even the largest
corporations cannot control the economic and competitive environment around them.
Unforeseen events occur that must be dealt with quickly before negative financial
consequences from these events become severe. Planning encourages the development
of ―what-if‖ scenarios, where managers attempt to envision possible risk factors and
develop contingency plans to deal with them. The pace of change in business is rapid, and
organizations must be able to rapidly adjust their strategies to these changing conditions.
4. Team Building and Cooperation- When the plan is completed and communicated to
members of the organization, everyone knows what their responsibilities are, and how other
areas of the organization need their assistance and expertise in order to complete assigned
tasks. They see how their work contributes to the success of the organization as a whole
and can take pride in their contributions. Potential conflict can be reduced when top
management solicits department or division managers‘ input during the goal setting
process. Individuals are less likely to resent budgetary targets when they had a say in their
creation.
5. Creating Competitive Advantages- organizations get a realistic view of their current
strengths and weaknesses relative to major competitors. The management team sees
areas where competitors may be vulnerable and then crafts marketing strategies to take
advantage of these weaknesses. Observing competitors‘ actions can also help
organizations identify opportunities they may have overlooked, such as emerging
international markets or opportunities to market products to completely different customer
groups.
GOAL SETTING
Goal is an idea of the future or desired result that a person or a group of people envision,
plan, and commit to achieve.
The definition of goal setting is the process of identifying something that you want to
accomplish and establishing measurable goals and time frames.
TYPES OF GOALS
Short Term Goals - a short term goal is something you want to do soon. The near
future can mean today, this week, this month or even this year. A short-term goal is
something you want to accomplish soon.
Long Term Goals - a long term goal is the goal that takes time to achieve.

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IMPORTANCE OF GOALS
o It gives you short term vision and long-term motivation.
o It focuses your acquisition of knowledge and helps you to organize your time and
your resources, so that you can make the very most of your life.
o It allows to measure your progress because you always have a fixed endpoint or
benchmark to compare with.
THREE (3) LEVELS OF ORGANIZATIONAL PRIORITIES
a) Purpose —a broad, general statement that tells why your organization exists; it
usually does not change from year to year and is often the first statement in your
constitution.
b) Goals—statements describing what your organization wishes to accomplish,
stemming from your purpose. Goals are the ends toward which your efforts will be
directed and often change from term to term or year to year, depending on the nature
of the group.
c) Objectives—descriptions of exactly what is to be done, derived from the goals. They
are clear, specific statements of measurable tasks that will be accomplished as steps
toward reaching your goals. They are short term and have deadlines.
STEPS FOR SETTING GOALS
1. Brainstorm goals as a group. (People support what they create and will accept
responsibility more easily.)
2. Choose from the brainstormed list those you want to attend to.
3. Prioritize as a group.
4. Determine objectives and plans of action for each goal. Be specific and include
deadlines.
5. Move into action. Follow through.
6. Continually evaluate your progress.
7. Be flexible; allow your objectives to change to meet your new circumstances.
THREE (3) DIFFERENT LEVELS OF PLANNING IIN THE FIRM
FIRM - A commercial organization that operates on a for-profit basis and participates in selling
goods or services to consumers.
1. CORPORATE LEVEL- Most corporation of even moderate size have a corporate

headquarters. The heads of these groups are typically part of the group of senior
executives at the corporate headquarters. Executives at the corporate level in large
firms include both those in the headquarters and those heading up the large corporate
groups such as finance, human resources, marketing etc.
These corporate-level executives primarily focus on the questions such as:
a) What industries should we get into?

b) What markets should the firm be in?
c) In which business should the corporation invest money?
d) What resources should be allocated to each business?
2. BUSINESS LEVEL- At this level managers focus on determining how they are going
to compete effectively in market.

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At this level, managers attempt to address questions such as:
a) Who are our direct competitors?

b) What are their strengths and weaknesses?
c) What are our strengths and weaknesses?
d) What advantages do we have over competitors?
3. FUNCTIONAL LEVEL- At this level managers focus on how they can facilitate the
achievement of the competitive plan of the business. These managers are often the
heads of departments such as finance, marketing, human resources, or product
development. This can include managers responsible for business within a specific
geographic region or managers responsible for specific retail stores.
Functional managers attempt to answer questions such as:
a) What activities does my unit need to perform well to meet customer expectations?
PLANNING TECHNIQUES AND TOOLS
BRAINSTORMING the Basic brainstorming is not complex—though there are important

techniques for ensuring success. Here, is how basic brainstorming works.
1. Get a group of people together to address a problem, challenge, or opportunity.
2. Ask your group to generate as many ideas as possible—no matter how ―off the wall‖
3. Review the ideas, select the most interesting, and then lead a discussion about how to
combine, improve, and/or implement the ideas.
While this process may be simple in theory, however, it is not always easy to generate new
ideas out of nowhere. And that is why so many interesting and inspirational brainstorming
techniques have been developed. Brainstorming is a terrific technique for idea
generation, coming up with alternatives and possibilities, discovering fatal flaws, and
developing creative approaches. But it is only as good as its participants and facilitator. The
better you are at selecting participants, setting the stage, and encouraging discussion, the
better your outcomes are likely to be.
TYPES OF BRAINSTORMING
Analytic Brainstorming- it focuses on problem solving, it can be useful to analyze the

problem with tools that lead to creative solutions. Analytic brainstorming is relatively easy for
most people because it draws on idea generation skills they have already built in school and
in the workplace. No one gets embarrassed when asked to analyze a situation.
Quiet Brainstorming- In some situations, individuals are so cramped for time that a
brainstorming session would be impossible to schedule. In other situations, team members
are unwilling to speak up in a group or to express ideas that others might not approve of.
When that is the case, you might be well served with brainstorming techniques that allow
participants to generate ideas without meeting or without the need for public participation.
Role Play Brainstorming- it allows your team to ―become‖ their own clients, which often
provides surprisingly potent insights into challenges and solutions. Another plus of role play is
that, in some cases, it lowers participants‘ inhibitions.
Brainstorming with Support- For groups that are not intrinsically creative or communicative
or are likely to get stuck once the most obvious ideas have been suggested, help is in order.
You can provide that help up front by setting up the brainstorming process to include everyone
in a structured, supportive manner.
Radically Creative Brainstorming - If your team seems to be stuck on conventional answers

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to brainstorming challenges, you may need to stir the pot to help them generate creative
ideas by using techniques that require out-of-the-box thinking. These may include the
Charrette approach and "what if" challenges. It is one of the best-known techniques available
for creative problem solving. It can be used for tasks including internal procedures, company
structure and written articles. Its primary objective is to get your mind out of the box by
producing as many solutions (or ideas), or marketing campaigns as possible.
1. Problem Statement Guidelines- it is a statement about an area of concern, a condition

to be improved upon, a difficulty to be eliminated, or a troubling question that exists in
theory or in practice that points to the need for meaningful understanding and deliberate
investigation.
Key elements of an effective problem statement include:
a) Gap: Identify the gap (problem) that exists today.

b) Timeframe, location, and trend: Describe when and where the problem was first
observed and what kind of trend it is following.
c) Impact: Quantify the gap (cost, time, quality, environmental, personal, etc.)
d) Importance: To the organization, the individual, etc. to better understand the urgency.
2. Strengths, Weaknesses, Opportunities & Threat Analysis (SWOT Analysis)-

requires you to be candid and provide an honest assessment of the state of things.
Eventually, you focus on the key issues. Strengths is the resource or capacity the
organization can use effectively to achieve its objectives. Weakness Is the limitation,
fault, or defect in the organization that will keep it from achieving its objectives.
Opportunities is any favorable situation in the organization‘s environment. It is usually a
trend or change of some kind or an overlooked need that increases demand for a product
or service and permits the firm to enhance its position by supplying it. While Threats is
any unfavorable situation in the organization‘s environment that is potentially damaging to
its strategy. The threat may be a barrier, a constraint, or anything external that might
cause problems, damage, or injury.
3. Problem Tree- is a pictorial representation of a problem, its causes, and its

consequences. This analysis tool helps the project team get a quick glance of how a
range of complex issues contribute toward a problem and how this problem branches out
into a set of consequences. Both causes and consequences are fitted into the diagram
on a hierarchical preference basis.
STEPS TO PERFORM THE PROBLEM TREE ANALYSIS

3.1 Begin with a brainstorming session to identify the major problems affecting the
project. For each problem you will have to carry out a separate problem tree
analysis.
3.2 Divide your board or the paper you are using to record the analysis into three
vertical sections and write the problem in the middle section. The left side can be
reserved for the causes and the right side for the consequences.
3.3 Discuss with the team the possible causes that can be held responsible for the
problem situation. From this, list and identify the ones which have a direct
relationship with the problem. These direct causes can be listed on the extreme
right-hand side of the section reserved for the causes. The causes which lead to
these direct causes can be listed to the left of this list. Relational arrows can also be
used to demonstrate the cause and effect relationship among the causes

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3.4 When you are done with the causes, move on to the consequences. When listing
the consequences, list the direct ones on the extreme left of the consequences
section. The consequences that result from these causes can be listed to right of
this list.
3.5 Finally, when a comprehensive list of causes and consequences have been
developed and the related causes and consequences have been linked
respectively, you are ready to display the information pictorially.
4. Logical Framework- or log frame is a document that gives an overview of

the objectives, activities and resources of a project. It also provides information about
external elements that may influence the project, called assumptions. Finally, it tells you
how the project will be monitored, through the use of /content/indicators. All this
information is presented in a table with four columns and four rows – although variations
on this basic scheme do exist. It has two types the vertical and horizontal logic.
5. Forcefield Analysis- was created by Kurt Lewin in the 1940s. Lewin originally used it in
his work as a social psychologist. Today, however, it is also used in business, for making
and communicating go/no-go decisions. The idea behind Force Field Analysis is that
situations are maintained by an equilibrium between forces that drive change and others
that resist change, as shown in figure 1, below. For change to happen, the driving forces
must be strengthened, or the resisting forces weakened.
CONCEPT OF DECISION MAKING

DECISION MAKING
According to the Oxford Advanced Learner‘s Dictionary, the term decision making means
the process of deciding about something important, especially in a group of people or in an
organization.
Trewartha & Newport defines decision making process as follows: ―Decision-making

involves the selection of a course of action from among two or more possible alternatives in
order to arrive at a solution for a given problem‖.
Further, decision making process can be regarded as check and balance system that
keeps the organization growing both in vertical and linear directions.
It means that decision making process seeks a goal. The goals are pre-set business
objectives, company missions and its vision.
To achieve these goals, company may face lot of obstacles in administrative, operational,
marketing wings and operational domains. Some types of decision making are routine and
basic decision making, personal and organizational decision making, individual and
group decision making, programmed and non-programmed decision making and
tactical and strategic decision making.
DECISION-MAKING is an integral part of modern management. Essentially, rational, or sound

decision making is taken as primary function of management. Every manager takes hundreds
and hundreds of decisions subconsciously or consciously making it as the key component in
the role of a manager. Decisions play important roles as they determine both organizational
and managerial activities.
1. Decision-Making is Goal-Oriented: Each decision of management major or minor must

make, at least, some contribution towards the attainment of organizational objectives.

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2. Decision-Making is Pervasive: There are three dimensions of the pervasiveness of

decision-making.
2.1 All managers in the management hierarchy take decisions, within the limits of their
authority, pertaining to their areas of functioning.
2.2 Decision-making is done in all functional areas of management e.g. production,
marketing, finance, personnel, research, and development etc.
2.3 Decision-making is inherent in all functions of management i.e. planning, organizing,
staffing, directing, and controlling.
3. Decision-Making is an Intellectual Exercise: Decision-making calls for creativity and
imagination on the part of managers; in that decision-making forces managers to think in
terms of developing best objectives and best alternatives for attaining those objectives.
4. Decision-Making Involves a Problem of Choice: Decision-making is fundamentally a

choosing problem i.e. a problem of choosing the best alternative, from out of a few
alternatives, in a rational and scientific manner.
5. Decision-Making is a Continuous Process: Decision-making process commences

since the inception of business and continues throughout the organizational life. All
managers take decisions for organizational purposes; so long as the enterprise is in
existence.
6. Decision-Making is the Basis of Action: All actions of people operating the enterprise
are based on the decisions taken by management vis-a-vis organizational issues.
7. Decision-Making Implies a Commitment of Organizational Resources: Commitment

of organizational resources time, efforts, energies, physical resources etc. is implied both
during the process of taking decisions and more particularly, at time of implementation of
decisions.
8. Decision-Making is Situational: Decision-making much depends on the situation facing

the management; at the time when a decision-making problem crops up.
PROCESS OF DECISION MAKING
1. Identify the decision- To decide, you must first identify the problem you need to solve or
the question you need to answer. If you misidentify the problem to solve, or if the problem you
have chosen is too broad, you will knock the decision train off the track before it even leaves
the station.
2. Gather relevant information- Once you have identified your decision, it is time to gather
the information relevant to that choice. Do an internal assessment, seeing where your
organization has succeeded and failed in areas related to your decision. Also, seek
information from external sources, including studies, market research, and, in some cases,
evaluation from paid consultants.
3. Identify the alternatives-With relevant information now at your fingertips, identify possible
solutions to your problem. There is usually more than one option to consider when trying to
meet a goal—for example, if your company is trying to gain more engagement on social
media, your alternatives could include paid social advertisements, a change in your organic
social media strategy, or a combination of the two.

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4. Weigh the evidence- Once you have identified multiple alternatives, weigh the evidence
for or against said alternatives. See what companies have done in the past to succeed in
these areas and take a good hard look at your own organization‘s wins and losses.
5. Choose among alternatives- Here is the part of the decision-making process where you,
you know, make the decision. Hopefully, you have identified and clarified what decision needs
to be made, gathered all relevant information, and developed and considered the potential
paths to take. You are perfectly prepared to choose.
6. Take action- Once you‘ve made your decision, act on it! Develop a plan to make your
decision tangible and achievable. Develop a project plan related to your decision, and then set
the team loose on their tasks once the plan is in place.
7. Review your decision- After a predetermined amount of time, which you defined in step
one of the decision-making process, take an honest look back at your decision. Did you solve
the problem? Did you answer the question? Did you meet your goals? If so, take note of what
worked for future reference. If not, learn from your mistakes as you begin the decision-making
process again.
1. What is the nature of planning and why it is important in the success of any
business and organization?
2. Describe the different types of plans and explain how it can be used to
accomplished results in any organization?
3. What are the different planning techniques and tools and how can a manager
make effective planning?
4. Formulate an effective plan for a specific business endeavor during this

pandemic crisis of the Covid-19.
B. CASE PROBLEM
In 1997 Michael O‘Dell, the chief scientist at WorldCom, which owned the largest
network of ―Internet backbone‖ fiber optic cable in the world, stated that data traffic
over the Internet was doubling every hundred days. This implied a growth rate of
over 1,000 percent a year. O‘Dell went on to say that there was not enough fiber
optic capacity to go around, and that ―demand will far outstrip supply for the
foreseeable future.‖
Electrified by this potential opportunity, a number of companies rushed into the

business. These firms included Level 3 Communications, 360 Networks, Global
Crossing, Qwest Communications, WorldCom, Williams Communications Group,
Genuity Inc., and XO Communications. In all cases the strategic plans were
remarkably similar: Raise lots of capital, build massive fiber optic networks that
straddled the nation (or even the globe), cut prices, and get ready for the rush of

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business. Managers at these companies believed that surging demand would soon
catch up with capacity, resulting in a profit bonanza for those that had the foresight to
build out their networks. It was a gold rush, and the first into the field would stake the
best claims.
However, there were dissenting voices. As early as October 1998 an Inter net
researcher at AT&T Labs named Andrew Odlyzko published a paper that debunked
the assumption that demand for Internet traffic was growing at 1,000 percent a year.
Odlyzko‘s careful analysis concluded that growth was much slower—only 100
percent a year! Although still large, that growth rate was not nearly large enough to
fill the massive flood of fiber optic capacity that was entering the market. Moreover,
Odlyzko noted that new technologies were increasing the amount of data that could
be sent down existing fibers, reducing the need for new fiber. But with investment
money flooding into the market, few paid any attention to him. WorldCom was still
using the 1,000 percent figure as late as September 2000.
As it turned out, Odlyzko was right. Capacity rapidly outstripped demand, and by
late 2002 less than 3 percent of the fiber that had been laid in the ground was
actually being used! While prices slumped, the surge in volume that managers had
bet on did not materialize. Unable to service the debt they had taken on to build out
their networks, company after company tumbled into bankruptcy— including
WorldCom, 360 Networks, XO Communications, and Global Crossing. Level 3 and
Qwest survived, but their stock prices had fallen by 90 percent, and both companies
were saddled with massive debts.
C. CASE DISCUSSION QUESTIONS

1. Why did the strategic plans adopted by companies like Level 3, Global Crossing,
and 360 Networks fail?
2. The managers who ran these companies were smart, successful individuals, as
were many of the investors who put money into these businesses. How could so
many smart people have been so wrong?
3. What specific decision-making biases do you think were at work in this industry
during the late 1990s and early 2000s?
4. What could the managers running these companies have done differently that
might have led to a different outcome?

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LESSON 5:
Concept of Organizing Function
Overview:
Organizing involves assigning tasks, grouping tasks into departments, delegating
authority, and allocating resources across the organization. During the organizing process,
managers coordinate employees, resources, policies, and procedures to facilitate the goals
identified in the plan.
• Discuss the nature of organizations

• Distinguish the various types of organization structures
• Apply organization theories in solving business cases
• Identify the different elements of delegation
• Differentiate formal from informal organization
Course Materials:
The next function of management follows planning and it is about organizing. It‘s
about using the plan to bring together the physical, financial and other available resources
and use them to achieve the organizational goal. If your task were to increase sales, you
would look at the plan and determine how to divide the resources you have in order to put
your plan in place.
The marketing campaign would be handed out the Becky and you would provide them
with the financial resources available and needed to give birth to the campaign. You would
also need to ensure the team has access to the customer files in order to utilize vital
information. You‘d then direct Danny and his team to calculate the possible reductions you
can make, help them have the resources to determine which products are best to discount
and so on.
NATURE OF ORGANIZING
Organizing involves assigning tasks, grouping tasks into departments, delegating authority,
and allocating resources across the organization. During the organizing process, managers
coordinate employees, resources, policies, and procedures to facilitate the goals identified in
the plan.
a. Identification of Activities -Important component of also organizing the activities of

enterprises depend on its nature and size
b. Grouping of Activities -Involves creating departments and section for specific work such
as production, marketing, finance, human resources etc.
c. Accumulation of Resources -Availability of needed resources facilitate for uniform and
smooth performance of the enterprises
d. Defining Hierarchy of Positions -It is formed in the basic degree of responsibility and
accountability and clarifies roles of everyone from top to the subordinate level

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e. Assignment of Jobs -Each work is assigned to different individuals based on their skills,
and ability and experience
f. Establishing Authority and Responsibility Relationship -For the systemic functioning of
managerial function, it is essential to establish authority and responsibility relationship of
all the employees from top level to subordinate level
g. Evaluation of Performance -It is helpful to meet determined objectives within time
defined
ORGANIZING LEVELS AND SPAN OF MANAGEMENT
Organizational levels exist because there is a limit to the number of persons a manager
can supervise effectively, even though this limit varies depending on situations. The term
―span of control‖ or ―span of management‖ is defines ―the number of subordinates who are
working under one manager.‖
DIFFERENT TYPES OF ORGANIZATIONAL STRUCTURE
1. FUNCTIONAL STRUCTURE- is one of the most common organizational structures.

Under this structure, the organization groups employees according to a specialized or
similar set of roles or task.
2. DIVISIONAL STRUCTURE- is a type of organizational structure that groups each

organizational function into a division. Each division contains all the necessary resources
and functions within it to support that product line or geography (for example, its own
finance, IT, and marketing departments).
3. MATRIX MANAGEMENT- is an organizational structure in which some individuals report

to more than one supervisor or leader, relationships described as solid line or dotted line
reporting.
ORGANIZATION THEORIES AND APPLICATION
1. Classical Theories- It focuses on the structure of the Organization. Proponents; Max

Weber, Frederick Taylor & Henry Fayol.
2. Neo-Classical- Employees is treated as human beings and their needs were emphasize.
3. Systems Approach- System Theorist believe that all organization components are
interrelated, Hence Changes in one component may affect all the other components.
Proponent: Ludwig von Bertalaffy also known as the Father of System Theory.
4. Contingency Models- is an organizational theory that claims that there is no best way to
organize a corporation, to lead a company, or to make decisions. Instead, the optimal course
of action is contingent (dependent) upon the internal and external situation. A contingent
leader effectively applies their own style of leadership to the right situation.
Fred Fiedler's contingency model focused on a contingency model of leadership in

organizations. This model contains the relationship between leadership style and the
favorable-ness of the situation. Fielder developed a metric to measure a leader's style called
the Least Preferred Co-worker. The test consists of 16-22 items they are to rate on a scale of
one to eight as they think of a co-worker, they had the most difficulty working with. A high

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score indicates the test taker is relational in style and a low score indicates the test taker is
more task orientated in style.
Situational favorable-ness was described by Fiedler in terms of three empirically derived

dimensions:
a) Leader-member relationship – high if the leader is generally accepted and respected by
followers
b) Degree of task structure – high if the task is very structured
c) Leader's position power – high if a great deal of authority and power are formally
attributed to the leader's position
Its FORMAL STRUCTURE is primarily concerned with the relationship between authority
and subordinate. Typical organization chart illustrates the formal structure at work in a
company or part of a company. The hierarchical organization begins at the top with the most
senior leader and then cascades down to the subordinate managers and then subordinate
employees below those managers, and there are job titles, financial obligations and clear
lines of authority for each box on the organization chart.
Its INFORMAL STRUCTURE is typically developed around social or project groups.

Because they are based on camaraderie there is often a more immediate response from
individuals. This saves people time and effort, thus making it easier to work with in informal
structures.
THREE (3) ELEMENTS OF DELEGATION
1. Responsibility is the obligation of a subordinate to properly perform the assigned duty.

When a superior assign a job to his subordinate it becomes the responsibility of the
subordinate to complete that job. This means that the word responsibility comes into play
only after the job has been assigned. Thus, to assign job can be called to assign
responsibility. Responsibility Features:
-Responsibility can be assigned to some other person.
-The essence of responsibility is to be dutiful.
-It gets originated because of superior-subordinate relationship.
2. Authority - means the power to take decisions. Decision can be related to the use of
resources, and to do or not to do something. Authority Feature:
-Authority can be assigned (delegated) to some other person.
-It is related to the post (with the change of post, even authorities change).
-It makes implementation of decisions possible.
-Authority is the key to a managerial job because a post without authority cannot be
a managerial post.
3. Accountability -means the answerability of the subordinate to his superior for his work
performance. In other words, when a superior assigns job / work or the responsibility to his
subordinates, simultaneously he gives authority to them which makes workers
(subordinates) accountable to their superior for the work- performance. Accountability
Features:
-Accountability cannot be delegated to some other person.
-It is only towards the delegators.
-Its base is senior-subordinate relationship.

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-It originates because of delegation of authority.
ART OF DELEGATION
What to delegate and to whom
Divide work into meaningful tasks and then allocate them to specialists or people who will
benefit from the experience.
Allocate the work
This is the hardest and most important stage of delegation and generally involves several
issues:
a) The subordinate must understand why the work needs to be done.

b) Where the applicable the manager should set specific performance standards for output,
time, cost, and quality, and involve the subordinate in the process. Furthermore, sub
goals and monitoring and reporting procedures should be agreed upon.
c) The manager should delegate responsibility; the subordinate must be allowed to make
decisions to achieve agreed results.
d) The subordinate must be given authority or control over certain resources and people.
e) While the manager can delegate tasks and assign responsibility and authority for them.
accomplishment, he will always be held accountable for the tasks his subordinates
perform.
MONITORING PERFORMANCE
A manager should constantly monitor progress against standards and sub-goals.

Recognition must be given for task accomplishment and preventative or corrective action
instituted when targets are not being achieved. It's the monitoring of performance which keeps
you in control and aware of the results of the work you delegate. Tasks are delegated as part
of a developmental program the manager should ensure that the subordinate receives proper
training and guidance!
BENEFITS OF SUCCESSFUL DELEGATION
a) Providing subordinates with the opportunity for growth and development

b) Motivating subordinates by giving them the opportunity to make decisions.
c) Allowing the manager more time for relevant managerial activities such as
planning and controlling.
d) Facilitation communication and understanding between a manager and his
subordinates.
e) Reducing the time taken to make decisions.
f) Allowing the decision making to take place close to the point of action where the
detail is known.
Obstacles to successful delegation
a) There are several possible reasons which hold managers back from delegating.
The reasons are.
b) The fear that subordinates will do a better job and get the recognition.
c) Fear that the subordinate won't be able to do the job properly.
d) The fear of losing control over activities and tasks for which he is accountable.

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e) A feeling that it is important for him to be seen doing the work rather than purely
managing.
f) Preference for doing the work itself as opposed to managing people.
FORMAL AND INFORMAL ORGANIZATION
ORGANIZATION- is a collection of people who work together to attain specified objectives.

There are two types of organization structure, that can be formal organization and informal
organization.
Formal Organization
An organization is said to be formal when the two or more than two persons come together to
accomplish a common objective, and they follow a formal relationship, rules, and policies are
established for compliance, and there exists a system of authority. It should be noted that
official association has certain like rationality, impersonality, and uniqueness.
FEATURES:
a) Power hierarchy
b) Specificity in distribution of labor duties
c) A large amount of working documentation
d) Collectivism
e) Top-down communication
f) Specified procedures for replacing inefficient wage earners
g) Duration of functioning
h) Independence from the participation of specific persons
THREE (3) TYPES OF FORMAL ORGANIZATION
5. Coercive systems are characterized by forced membership and exercising control by

force. Their bright instances include prison, psychiatric clinics, boarding schools, military
units. The joining of new participants is authorized by a higher power in the person of the
chief or director. Such institutions are inherent puissance ladder, strict discipline, and
compliance with stated rules. Everyday life is quite monotonous; some workers of team
wear overalls, which emphasize the leveling of individuality.
6. Utilitarian structures involve those that bring benefits. Persons will rejoin them because
they see some prospect of a mutually beneficial exchange. This could be an internship in a
company, successful passage of which promises a high salary in the future. Or an
excellent graduation from a school/university, because of which the student not only
receives first-class knowledge and habits but also, offers cooperation from the best
employers.
7. Normative associations are immanent in maintaining order through education and
having an ordinary set of norms. Generally, fellowship in them is free, although, some
participants could add to them out of a sense of solidarity, duty or even fear. Such
structures include church, brotherhoods, and political parties. The latter is understood as
the formal organization that directs a political life of a society. Participating in them,
persons feel belonging to general good and purpose.

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INFORMAL ORGANIZATION
A network of interpersonal relationship that arise when people associate with each other. It is
the interlocking social structure that governs how people work together in practice. It features
Independent channel of communication without specified direction of flow of information are
developed by group members. Unofficial communication channel. Which flows in vertical and
Horizontal direction.
Its advantages are it creates sense of "Belongingness‘‘ and develops some cohesiveness
among each other. While its disadvantages are it spreads rumors and it pressures members
to conform to the group‘s expectations.
COMPARISON CHART
BASIS FOR FORMAL ORGANIZATION INFORMAL

COMPARISON ORGANIZATION
An organization type in An organization formed

which the job of each within the formal
member is clearly defined organization as a network
whose authority of interpersonal
responsibility and relationship, when people
Meaning accountability are fixed is interact with each other is
formal organization. known as informal
communication.
Creation Deliberately by top Spontaneously by

management. members.
To fulfill, the ultimate To satisfy their social and

objective of the psychological needs.
Purpose organization.
Nature Stable, it continues for a Not stable

long time.
Communication Official communication Grapevine
Control mechanism Rules and Regulations Norms, values, and beliefs
Focus on Work performance Interpersonal relationship
Authority Members are bound by All members are equal.

hierarchical structure.
Size Large Small

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A. ESSAY . ANSWER THE FOLLOWING QUESTIONS
1. What is organizing and explain the nature of organizations in the present business
environment?
2. What are the different types of organization structures and what is the significance of
these structures for effective business management?
3. What are the different elements of delegation and how it can use for the success of
the organization?
4. What is the difference between formal and informal organization?
B. CASE PROBLEM
A handful of major players compete head-to-head around the world in the chemical industry.
These companies are Dow Chemical and DuPont of the United States, Great Britain‗s ICI, and the
German trio of B ASF, Hoechst AG, and Bayer. The barriers to the free flow of chemical products
between nations largely disappeared in the 1970s. This, along with the commodity nature of most bulk
chemicals and a severe recession in the early 1980s, ushered in a prolonged period of intense price
competition. In such an environment, the company that wins the competitive race is the one with the
lowest costs. Dow Chemical was long among the cost leaders.
For years Dow‗s managers insisted that part of the credit belonged to its ―matrix‖ organization.
Dow‗s organizational matrix had three interacting elements: functions (such as R&D, manufacturing,
and marketing), businesses (like ethylene, plastics, and pharmaceuticals), and geography (for
example, Spain, Germany, and Brazil). Managers‗ job titles incorporated all three elements (plastics
marketing manager for Spain), and most managers reported to at least two bosses. The plastics
marketing manager in Spain might report to both the head of the worldwide plastics business and the
head of the Spanish operations. The intent of the matrix was to make Dow operations responsive to
both local market needs and corporate objectives. Thus, the plastics business might be charged with
minimizing Dow‗s global plastics production costs, while the Spanish operation might determine how
best to sell plastics in the Spanish market.
When Dow introduced this structure, the results were less than promising: Multiple reporting
channels led to confusion and conflict. The many bosses created an unwieldy bureaucracy. The
overlapping responsibilities resulted in turf battles and a lack of accountability. Area managers
disagreed with managers overseeing business sectors about which plants should be built where. In
short, the structure didn‗t work. Instead of abandoning the structure, however, Dow decided to see if it
could be made more flexible.
Dow‗s decision to keep its matrix structure was prompted by its move into the pharmaceuticals
industry. The company realized that the pharmaceuticals business is very different from the bulk
chemicals business. In bulk chemicals, the big returns come from achieving economies of scale in
production. This dictate establishing large plants in key locations from which regional or global markets
can be served. But in pharmaceuticals, regulatory and marketing requirements for drugs vary so much
from country to country that local needs are far more important than reducing manufacturing costs
through scale economies. A high degree of local responsiveness is essential. Dow realized its
pharmaceutical business would never thrive if it were managed by the same priorities as its
mainstream chemical operations.

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Accordingly, instead of abandoning its matrix, Dow decided to make it more flexible to better
accommodate the different businesses, each with its own priorities, within a single management
system. A small team of senior executives at headquarters helped set the priorities for each type of
business. After priorities were identified for each business sector, one of the three elements of the
matrix— function, business, or geographic area—was given primary authority in decision making.
Which element took the lead varied according to the type of decision and the market or location in
which the company was competing. Such flexibility required that all employees understand what was
occurring in the rest of the matrix. Although this may seem confusing, for years Dow claimed this
flexible system worked well and credited much of its success to the quality of the decisions it
facilitated.
By the mid-1990s, however, Dow had refocused its business on the chemicals industry, divesting itself
of its pharmaceutical activities where the company‗s performance had been unsatisfactory. Reflecting
the change in corporate strategy, in 1995 Dow decided to abandon its matrix structure in favor of a
more streamlined structure based on global product divisions. The matrix structure was just too
complex and costly to manage in the intense competitive environment of the time, particularly given
the company‗s renewed focus on its commodity chemicals where competitive advantage often went to
the low-cost producer. As Dow‗s then-CEO put it in a 1999 interview, ―We were an organization that
was matrixed and depended on teamwork, but there was no one in charge. When things went well, we
didn‗t know whom to reward; and when things went poorly, we didn‗t know whom to blame. So, we
created a global divisional structure and cut out layers of management. There used to be eleven layers
of management between me and the lowest-level employees; now there are five.
CASE DISCUSSION QUESTIONS:
1. Why did Dow Chemical first adopt a matrix structure? What benefits did it hope to
derive from this structure?
2. What problems emerged with this structure? How did Dow try to deal with them? In
retrospect, do you think those solutions were effective?
3. Why did Dow change its structure again in the mid-1990s? What was Dow trying to
achieve this time? Do you think the current structure makes sense given the industry in
which Dow operates and the strategy of the firm? Why?

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LESSON 6:
Concept of Staffing Function
Overview:
The staffing function is an increasingly important function of management, although it is
sometimes left out when the core functions are discussed. It can be seen closely related to
organizing, with both focused on ensuring the resources are directed to the right processes
and tasks. For staffing, the focus is on people and their labor in relation to the organizational
objectives.
The function aims to ensure the organization always has the right people in the right
positions and the organizational structure isn‘t hindered by lack or excess of personnel. You
would essentially be looking at the tasks ahead of you and determining who should do what
and if you have the right manpower to achieve the objectives you want.
• Discuss the nature of staffing

• Explain the steps in the recruitment and selection process
• Recognize the different ways or methods of training
• Discuss employee remuneration
Course Materials:
According to Mc Farland: Staffing is the function by which managers build on
organization through the recruitment, selection and development of individual as capable
employee.
According to Heinz Weihrich, Mark Cannice and Harold Koontz: The managerial
function of staffing is defined as filling and keeping filled, positions in the organization
structure.
The reason staffing is included as a separate function and why it‘s a crucial part of
management is due to the changing nature of the workforce and the organization. Today‘s
companies are much more complex in terms of where and when they operate – companies
aren‘t confined between national boundaries anymore. Technology has also had a huge
impact on company structures, requiring new positions and destroying others.
STAFFING FUNCTION
According to Mc Farland: Staffing is the function by which managers build on
organization through the recruitment, selection and development of individual as capable
employee.
According to Heinz Weihrich, Mark Cannice and Harold Koontz: The managerial
function of staffing is defined as filling and keeping filled, positions in the organization
structure.

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NATURE OF STAFFING
1. Management function: Staffing is a management function that appoints people at

different positions to run the organization. While organizing creates departments and
positions, staffing ensures that people with desired skills and abilities occupy these
positions to contribute to organizational goals.
2. Pervasive function: People are the most important asset that convert inputs into outputs.
People are appointed at all levels (top, middle, low) in all functional areas (production,
finance, marketing, personnel). Staffing ensures that right persons are appointed at the
right job so that organization can efficiently achieve its objectives.
3. Part of human resource management: Staffing is an important part of human resource
management. Human resource management ensures that competent people perform
organizational activities. It deals with the set of organizational activities that attract,
develop and maintain an effective workforce. The requirements of human resource
management are filled through staffing as staffing appoints people at the desired jobs.
4. Deals with active resource: Staffing deals with the most important resource (people) that
converts inactive resources (raw materials) into productive outputs. It deals with the live
resource (people) without whom resources would remain as resources only. They will not
be converted into outputs.
5. Attached with personnel department: Functions of staffing; recruitment, selection,
training, and appraisal of subordinates of all departments (production, marketing etc.) are
performed by managers at all levels as all departments need people to function. In
performing these functions, managers seek assistance of the personnel department.
Personnel department is a service department that assists line managers in performing the
staffing function.
6. Continuous function: Staffing is a continuous managerial function. People keep leaving
and joining the organizations. Departments and organizations grow and, therefore, need
for people keep arising. Hiring, training and compensating people (staffing) are, therefore,
continuously performed by managers.
STAFFING PROCESS AND STEPS INVOLVED IN STAFFING
1. Manpower Planning: can be regarded as the quantitative and qualitative measurement

of labor force required in an enterprise. Therefore, in an overall sense, the planning
process involves the synergy in creating and evaluating the manpower inventory and as
well as in developing the required talents among the employees selected for promotion
advancement.
2. Recruitment is a process of searching for prospective employees and stimulating them
to apply for jobs in the organization. It stands for finding the source from where potential
employees will be selected.
3. Selection is a process of eliminating those who appear unpromising. The purpose of
this selection process is to determine whether a candidate is suitable for employment in
the organization or not.
Therefore, the main aim of the process of selection is selecting the right candidates
to fill various positions in the organization. A well-planned selection procedure is of
utmost importance.
4. Placement means putting the person on the job for which he is selected. It includes
introducing the employee to his job.

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5. Training: After selection of an employee, the important part of the programmed is to

provide training to the new employee. With the various technological changes, the need
for training employees is being increased to keep the employees in touch with the
various new developments.
6. Development A sound staffing policy provides for the introduction of a system of
planned promotion in every organization. If employees are not at all having suitable
opportunities for their development and promotion, they get frustrated which affect their
work.
7. Promotions implies the up gradation of an employee to a higher post involving
increasing rank, prestige, and responsibilities. Generally, the promotion is linked to
increment in wages and incentives, but it is not essential that it always relates to that
part of an organization.
8. Transfer means the movement of an employee from one job to another without
increment in pay, status, or responsibilities. Therefore, this process of staffing needs to
evaluate on a timely basis.
9. Appraisal: Appraisal of employees as to how efficiently the subordinate is performing a
job and to know his aptitudes and other qualities necessary for performing the job
assigned to him.
10. Determination of Remuneration This is the last process which is very crucial as it
involves in determining remuneration which is one of the most difficult functions of the
personnel department because there are no definite or exact means to determine correct
wages.
PROCESS OF RECRUITMENT
Recruitment is a process of finding and attracting the potential resources for filling up the vacant
positions in an organization.
Recruitment process is the first step in creating a powerful resource base. The process undergoes
a systematic procedure starting from sourcing the resources to arranging and conducting interviews
and finally selecting the right candidates.

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1. RECRUITMENT PLANNING- is the first step of the recruitment process, where the vacant
positions are analyzed and described. It includes job specifications and its nature, experience,
qualifications, and skills required for the job, etc. A structured recruitment plan is mandatory to
attract potential candidates from a pool of candidates. The potential candidates should be qualified,
experienced with a capability to take the responsibilities required to achieve the objectives of the
organization.
STEPS OF RECRUITMENT PLANNING
IDENTIFYING VACANCY -The first and foremost process of recruitment plan is identifying the
vacancy. This process begins with receiving the requisition for recruitments from different
department of the organization to the HR Department, which contains –
1. Number of posts to be filled
2. Number of positions
3. Duties and responsibilities to be performed
4. Qualification and experience required
When a vacancy is identified, it the responsibility of the sourcing manager to ascertain whether
the position is required or not, permanent, or temporary, full-time, or part-time, etc. These
parameters should be evaluated before commencing recruitment. Proper identifying, planning,
and evaluating leads to hiring of the right resource for the team and the organization.
JOB ANALYSIS is a process of identifying, analyzing, and determining the duties,
responsibilities, skills, abilities, and work environment of a specific job. These factors help in
identifying what a job demands and what an employee must possess in performing a job
productively. It also helps in understanding what tasks are important and how to perform them.
Its purpose is to establish and document the job relatedness of employment procedures such
as selection, training, compensation, and performance appraisal.
The following steps are important in analyzing a job –
1. Recording and collecting job information
2. Accuracy in checking the job information
3. Generating job description based on the information
4. Determining the skills, knowledge, and skills, which are required for the job
The immediate products of job analysis are job descriptions and job specifications.
JOB DESCRIPTION is an important document, which is descriptive in nature and contains the
final statement of the job analysis. This description is very important for a successful recruitment
process. It provides information about the scope of job roles, responsibilities, and the positioning
of the job in the organization. And this data gives the employer and the organization a clear idea
of what an employee must do to meet the requirement of his job responsibilities.
Job description is generated for fulfilling the following processes –
1. Classification and ranking of jobs
2. Placing and orientation of new resources
3. Promotions and transfers
4. Describing the career path
5. Future development of work standards
6. A job description provides information on the following elements −
7. Job Title / Job Identification / Organization Position
8. Job Location
9. Summary of Job
10. Job Duties
11. Machines, Materials and Equipment
12. Process of Supervision
13. Working Conditions
14. Health Hazards

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JOB SPECIFICATION focuses on the specifications of the candidate, whom the HR team is going to
hire. The first step in job specification is preparing the list of all jobs in the organization and its
locations. The second step is to generate the information of each job.
This information about each job in an organization is as follows −
1. Physical specifications
2. Mental specifications
3. Physical features
4. Emotional specifications
5. Behavioral specifications
A job specification document provides information on the following elements −

1. Qualification
2. Experiences
3. Training and development
4. Skills requirement
5. Work responsibilities
6. Emotional characteristics
7. Planning of career
JOB EVALUATION is a comparative process of analyzing, assessing, and determining the relative
value/worth of a job in relation to the other jobs in an organization. The main objective of job
evaluation is to analyze and determine which job commands how much pay. There are several
methods such as job grading, job classifications, job ranking, etc., which are involved in job
evaluation. Job evaluation forms the basis for salary and wage negotiations.
2. STRATEGY DEVELOPMENT- Once it is known how many and what type of recruits are required,
serious consideration needs to be given to (a) make or ‗buy‘ employees; (b) technological
sophistication of recruitment and selection devices; (c) geographic distribution of labor markets
comprising job seekers; (d) sources of recruitment; and (e) sequencing the activities in the
recruitment process.
2.1 Make „or „Buy‟: Firms must decide whether to hire less skilled employees and invest on
training and education programs, or they can hire skilled labor and professionals. Essentially,
this is the ‗make‘ (hire less skilled workers) or ‗buy‘ (hire skilled workers and professionals)
decision. Organizations which hire skilled labor and professionals shall have to pay more for
these employees. ‗Buying‘ employees has the advantage in the sense that the skilled labor
and professionals can begin the work immediately and little training may be needed. But the
high remuneration that the skilled workers and professionals demand may outweigh the
benefits.
2.2 Technological Sophistication: The second decision in strategy development relates to the
methods used in recruitment and selection. This decision is mainly influenced by the
available technology. The advent of computers has made it possible for employers to scan
national and international applicant qualifications. Although impersonal, computers have
given employers and job seekers a wider scope of options in the initial screening stage.
Technological advancement has made it possible for job seekers to gain better access. They
have begun sending videotapes about themselves to several companies without wasting time
and without spending money on travel.
To reduce costs, firms investigate labor markets most likely to offer the required job seekers.
Generally, companies investigate the national market for managerial and professional employees,
regional or local markets for technical employees, and local markets for clerical and blue-collar
employees. In the final analysis, organizations recruit where experience and circumstances
dictate likely success. Recognizing this, many adopt an incremental strategy in which initial efforts
are concentrated in regional or local labor markets and expanded only if these efforts fail to
achieve the desired results.
How to look refers to the methods of SOURCES OF RECRUITMENT. There are several sources
and they may be broadly organized into (a) Internal, and (b) External.

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-INTERNAL recruitment seeks applications for positions from those who are currently employed.
Internal sources include present employees, employee referrals, former employees, and former
applicants.
-EXTERNAL sources far outnumber the internal methods. Specifically, sources external to a firm
are professional or trade associations, advertisements, employment exchanges,
college/university/institute placement services, walk-ins and write-ins, consultants, contractors,
displaced persons, radio and television, acquisitions and mergers, and competitors.
3. SEARCHING - is the process of recruitment where the resources are sourced depending upon the
requirement of the job. After the recruitment strategy is done, the searching of candidates will be
initialized. This process consists of two steps –
a)Source activation − Once the line manager verifies and permits the existence of the vacancy,
the search for candidates starts.
b) Selling − Here, the organization selects the media through which the communication of
vacancies reaches the prospective candidates.
Searching involves attracting the job seekers to the vacancies. The sources are broadly divided
into two categories: Internal Sources and External Sources.
Internal sources of recruitment refer to hiring employees within the organization through
1. Promotions
2. Transfers
3. Former Employees
4. Internal Advertisements (Job Posting)
5. Employee Referrals
6. Previous Applicants
External sources of recruitment refer to hiring employees outside the organization through
1. Direct Recruitment
2. Employment Exchanges
3. Employment Agencies
4. Advertisements
5. Professional Associations
6. Campus Recruitment
7. Word of Mouth
4. SCREENING - starts after completion of the process of sourcing the candidates. Screening is the
process of filtering the applications of the candidates for further selection process. It is an integral
part of recruitment process that helps in removing unqualified or irrelevant candidates, which were
received through sourcing. The screening process of recruitment consists of three steps –
4.1 Reviewing Resumes and Cover Letters – Reviewing is the first step of screening
candidates. In this process, the resumes of the candidates are reviewed and checked for the
candidates‘ education, work experience, and overall background matching the requirement
of the job.
While reviewing the resumes, an HR executive must keep the following points in mind, to
ensure better screening of the potential candidates −
1. Reason for change of job
2. Longevity with each organization
3. Long gaps in employment
4. Job-hopping
5. Lack of career progression
4.2 Conducting Telephonic or Video Interviews – Conducting telephonic or video interviews is
the second step of screening candidates. In this process, after the resumes are screened,
the candidates are contacted through phone or video by the hiring manager. This screening

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process has two outcomes − It helps in verifying the candidates, whether they are active and
available. It also helps in giving a quick insight about the candidate‘s attitude, ability to
answer interview questions, and communication skills.
4.3 Identifying the Top Candidates – Identifying the top candidates is the final step of
screening the resumes/candidates. In this process, the cream/top layer of resumes are
shortlisted, which makes it easy for the hiring manager to take a decision.
This process has the following three outcomes
1. Shortlisting 5 to 10 resumes for review by the hiring managers
2. Providing insights and recommendations to the hiring manager
3. Helps the hiring managers to take a decision in hiring the right candidate
5. Evaluation and Control- are the last stage in the process of recruitment. In this process, the
effectiveness and the validity of the process and methods are assessed. Recruitment is a costly
process; hence it is important that the performance of the recruitment process is thoroughly
evaluated.
The costs incurred in the recruitment process are to be evaluated and controlled effectively. These
include the following −
1. Salaries to the Recruiters
2. Advertisements cost and other costs incurred in recruitment methods, i.e., agency fees.
3. Administrative expenses and Recruitment overheads
4. Overtime and Outstanding costs, while the vacancies remain unfilled
5. Cost incurred in recruiting suitable candidates for the final selection process
6. Time spent by the Management and the Professionals in preparing job description, job
specifications, and conducting interviews.
TYPES OF RECRUITMENT
1. INTERNAL RECRUITMENT - is a recruitment which takes place within the concern or organization.
Internal sources of recruitment are readily available to an organization. Internal sources are
primarily three - Transfers, promotions, and Re-employment of ex-employees. Internal recruitment
may lead to increase in employee‘s productivity as their motivation level increases. It also saves
time, money, and efforts. But a drawback of internal recruitment is that it refrains the organization
from new blood. Also, not all the manpower requirements can be met through internal recruitment.
Hiring from outside must be done.
a) TRANSFERS- Transfer refers to the process of interchanging from one job to another without
any change in the rank and responsibilities. It can also be the shifting of employees from one
department to another department or one location to another location, depending upon the
requirement of the position.
b) PROMOTIONS (through Internal Job Postings)- Promotion refers to upgrading the cadre of
the employees by evaluating their performance in the organization. It is the process of shifting
an employee from a lower position to a higher position with more responsibilities,
remuneration, facilities, and status. Many organizations fill the higher vacant positions with
the process of promotions, internally.
c) RE-EMPLOYMENT OF EX-EMPLOYEES - Re-employment of ex-employees is one of the
internal sources of recruitment in which employees can be invited and appointed to fill
vacancies in the concern. There are situations when ex-employees provide unsolicited
applications also.
2. EXTERNAL RECRUITMENT - External sources of recruitment must be solicited from outside the
organization. External sources are external to a concern. But it involves lot of time and money. The
external sources of recruitment include – Employment at factory gate, advertisements, employment
exchanges, employment agencies, educational institutes, labor contractors, recommendations etc.
a. EMPLOYMENT AT FACTORY LEVEL - This a source of external recruitment in which the

applications for vacancies are presented on bulletin boards outside the Factory or at the
Gate. This kind of recruitment is applicable generally where factory workers are to be
appointed. There are people who keep on soliciting jobs from one place to another. These

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applicants are called as unsolicited applicants. These types of workers apply on their own for
their job. For this kind of recruitment workers tend to shift from one factory to another and
therefore they are called as ―badly‖ workers.
b. ADVERTISEMENT - It is an external source which has got an important place in recruitment

procedure. The biggest advantage of advertisement is that it covers a wide area of market
and scattered applicants can get information from advertisements. Medium used is
Newspapers and Television.
c. EMPLOYMENT EXCHANGES - There are certain Employment exchanges which are run by
government. Most of the government undertakings and concerns employ people through
such exchanges. Now-a-days recruitment in government agencies has become compulsory
through employment exchange.
d. EMPLOYMENT AGENCIES - There are certain professional organizations which look

towards recruitment and employment of people, i.e. these private agencies run by private
individuals supply required manpower to needy concerns.
e. EDUCATIONAL INSTITUTIONS - There are certain professional Institutions which serves as

an external source for recruiting fresh graduates from these institutes. This kind of
recruitment done through such educational institutions, is called as Campus Recruitment.
They have special recruitment cells which helps in providing jobs to fresh candidates.
f. Recommendations - There are certain people who have experience in an area. They enjoy
goodwill and a stand in the company. There are certain vacancies which are filled by
recommendations of such people. The biggest drawback of this source is that the company
must rely totally on such people which can later prove to be inefficient.
g. Labor Contractors - These are the specialist people who supply manpower to the Factory or
Manufacturing plants. Through these contractors, workers are appointed on contract basis,
i.e. for a time. Under conditions when these contractors leave the organization, such people
who are appointed must also leave the concern.
SELECTION PROCESS
Employee Selection is the process of putting right men on right job. It is a procedure of matching
organizational requirements with the skills and qualifications of people. Effective selection can be done
only when there is effective matching. By selecting best candidate for the required job, the organization
will get quality performance of employees. Moreover, organization will face less of absenteeism and
employee turnover problems. By selecting right candidate for the required job, organization will also
save time and money. Proper screening of candidates takes place during selection procedure. All the
potential candidates who apply for the given job are tested.
But selection must be differentiated from recruitment, though these are two phases of employment
process. Recruitment is a positive process as it motivates more of candidates to apply for the job. It
creates a pool of applicants. It is just sourcing of data. While selection is a negative process as the
inappropriate candidates are rejected here. Recruitment precedes selection in staffing process.
Selection involves choosing the best candidate with best abilities, skills, and knowledge for the required
job.

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The Employee selection Process takes place in following order:
1. Preliminary Interviews- It is used to eliminate those candidates who do not meet the minimum
eligibility criteria laid down by the organization. The skills, academic and family background,
competencies and interests of the candidate are examined during preliminary interview. Preliminary
interviews are less formalized and planned than the final interviews. The candidates are given a
brief up about the company and the job profile; and it is also examined how much the candidate
knows about the company. Preliminary interviews are also called screening interviews.
2. Application blanks- The candidates who clear the preliminary interview are required to fill
application blank. It contains data record of the candidates such as details about age, qualifications,
reason for leaving previous job, experience, etc.
3. Written Tests- Various written tests conducted during selection procedure are aptitude test,
intelligence test, reasoning test, personality test, etc. These tests are used to objectively assess the
potential candidate. They should not be biased.
4. Employment Interviews- It is a one to one interaction between the interviewer and the potential
candidate. It is used to find whether the candidate is best suited for the required job or not. But such
interviews consume time and money both. Moreover, the competencies of the candidate cannot be
judged. Such interviews may be biased at times. Such interviews should be conducted properly. No
distractions should be there in room. There should be an honest communication between candidate
and interviewer.
5. Medical examination- Medical tests are conducted to ensure physical fitness of the potential
employee. It will decrease chances of employee absenteeism.
6. Appointment Letter- A reference check is made about the candidate selected and then finally he
is appointed by giving a formal appointment letter.
7. Receiving Applications -Potential employees apply for a job by sending applications to the
organization. The application gives the interviewers information about the candidates like their bio-data,
work experience, hobbies and interests.
8. Screening Applications -Once the applications are received, they are screened by a special
screening committee who choose candidates from the applications to call for an interview. Applicants
may be selected on special criteria like qualifications, work experience etc.
9. Employment Tests -Before an organization decides a suitable job for any individual, they must gauge
their talents and skills. This is done through various employment tests like intelligence tests, aptitude
tests, proficiency tests, personality tests etc.
10. Employment Interview -The next step in the selection process is the employee interview.
Employment interviews are done to identify a candidate‘s skill set and ability to work in an organization
in detail. Purpose of an employment interview is to find out the suitability of the candidate and to give
him an idea about the work profile and what is expected of the potential employee. An employment
interview is critical for the selection of the right people for the right jobs.
11. Checking References -The person who gives the reference of a potential employee is also a very
important source of information. The referee can provide info about the person‘s capabilities, experience
in the previous companies and leadership and managerial skills. The information provided by the
referee is meant to kept confidential with the HR department.
IMPORTANCE OF THE SELECTION PROCESS
1. Proper selection and placement of employees lead to growth and development of the company.
The company can, similarly, only be as good as the capabilities of its employees.
2. The hiring of talented and skilled employees results in the swift achievement of company goals.
3. Industrial accidents will drastically reduce in numbers when the right technical staff is employed
for the right jobs.
4. When people get jobs, they are good at, it creates a sense of satisfaction with them and thus
their work efficiency and quality improve.
5. People who are satisfied with their jobs often tend to have high morale and motivation to
perform better.

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INDUCTION TRAINING AND EMPLOYEE REMUNERATION

Induction training is a training provided to new employees by the employer in order to assist in
adjustment to their new job tasks and to help them become familiar with their new work environment
and the people working around them. This type of training will also outline the basic overview of the
business and its services as well as the new employee's role in the environment. When done
effectively, it increases employee retention and overall performance and happiness at work, benefiting
both the organization and the employee. Induction training has many benefits for organizations and its
employees. For the organization, an effective induction training system has the following advantages:
For the Company
a) Saves a lot of time and company money: Induction training provides all the information
needed to help a new hire to start performing his duties. The better and more effective the
training, the faster a new employee can start delivering results quickly.
b) Reduces employee turnover: When a new employee starts in a company, he has a
thousand questions about his new role and the company itself that need to be answered.
The fastest he can get an answer for those questions, the more prepared and confident he
will feel about his new position and what he can accomplish inside the organization.
c) Ensures operational efficiency: An effective training helps employees understand the
company culture, its values, its place in the world, and where they, as employees, fit in the
puzzle. Also, keeping all new hires and employees on the same page ensures quality and
consistency across all the company‘s products and services.
For the Employee
a) Makes the new employee feel respected and valued: good induction training is like a
warm welcome: it helps employees feel valued, respected and a part of something bigger
than themselves. It motivates them to give their best.
b) Provides the necessary information: A comprehensive induction training helps the
employee get the necessary information to do his job and clarifies the companies‘
expectations of him. Learning the company culture, rules and policies makes it easier to
adapt to the work environment.
c) Helps establishing good communication: By learning how the company operates, its
structure and the people he has to answer to, the new employee knows exactly where and
who to look for when he needs information or has questions.
The disadvantages don‘t really come with the fact of conducting induction training itself, since
training employees is always something positive, except when the training is poorly designed and does
not meet the needs of the employees and may get them started off on the wrong note.
The worst consequence of that, which would be similar of not providing any training at all, is high
(and costly) employee turnover. And even if the employee stays in the company, he will be ill equipped
to perform his job well, could be embarrassed to ask questions and might lose trust in the company.
EMPLOYEE RENUMERATION refers to the reward or compensation given to the employees for their
work performances. Remuneration provides basic attraction to an employee to perform job efficiently
and effectively. Remuneration leads to employee motivation. Salaries constitutes an important source
of income for employees and determine their standard of living. Salaries effect the employee‘s
productivity and work performance. Thus, the amount and method of remuneration are very important
for both management and employees.
IMPORTANCE OF TRAINING
Training is not just important to any company, it is vital. Although there are many categories of
training such as management training and or sales training, employees with Project Management skills
are an important asset to any organization. Training presents a prime opportunity to expand the

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knowledge base of all employees, but many employers in the current climate find development
opportunities expensive.
Employees attending training sessions also miss out on work time which may delay the completion
of projects. However, despite these potential drawbacks, training and development provides both the
individual and organizations with benefits that make the cost and time a worthwhile investment. The
return on investment from training and development of employees is really a no brainer.
WAYS/ METHOD OF TRAINING
Training method refers to a way or technique for improving knowledge and skills of an employee for
doing assigned jobs perfectively. The organization must consider the nature of the job, size of the
organization & workers, types of workers and cost for selecting a training method. There are different
types of the training method.
1. On the Job Training (Internal Training) These methods are generally applied in the workplace
while employees are working. This form helps particularly to develop the occupational skills
necessary to manage an organization, to fully understand the organization‘s products and services
and how they are developed and carried out.
a) Apprenticeship programs - These programs put the trainee under the guidance of a master
worker. People seeking to enter the skilled trades to become, for example, plumbers,
electricians etc.
b) Planned progression - It is a technique that gives employees a clear idea of their path of
development. They know where they stand and where they are going.
c) Job rotation - It involves periodically moving people from one job to another. The purpose of
job rotation is to broaden the knowledge of managers or potential managers. It also increases
their experiences.
d) Coaching - To be effective, which is the responsibility of every line manager, must be done
in a climate of confidence and trust between the superior and the trainees. Effective coaching
will develop the strengths and potentials of subordinates and help them overcome their
weakness.
2. Off the Job Training Off-the-job training is sometimes necessary to get people away from the work
environment to a place where the frustrations and buzz of work are eliminated.
Training is generally given in the form of lectures, discussions, case studies, and demonstrations.
This enables the trainee to study theoretical information or be exposed to new and innovative ideas.
a) Lectures - The lecture is one of the oldest forms of training, second to demonstrate. Lecture may
be printed or oral. It is the best used to create an understanding of a topic or to influence attitudes
through education or training about a topic.
b) Discussion method - The discussion method uses a lecture to provide trainees with information
that is supported, reinforced, and expanded on through interactions both among the trainees and
between the trainer and trainees.
c) Demonstrations - A demonstration is a visual display of how to do something or how something
works. To be effective, a demonstration should, at a minimum, be accompanied by a lecture and
preferably by a discussion.
d) Seminars and conferences - Conference programs may be used in internal or external training.
During conference programs, managers or potential managers are exposed to the ideas of
speakers who are experts in their fields. A careful selection of topics and speakers will increase
the effectiveness of this training device.
EMPLOYEE RENUMERATION
REMUNERATION is a general term used to describe any amount of income that is given to
employees in exchange of the services they render for the organization. It covers all forms of
compensation packages an employee in an organization receives for a service but not on a regular
basis. It includes salary, sales commissions, bonus, wages, fees, pensions, leave encashment, gratuity,

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overtime, and retirement allowance. It also often encompasses non-monetary incentives as well as
allowances and benefits such as flextime, time off, tuition assistance, mentoring programs, free or
discounted parking or anything that is designed to address a specific need and is provided in a non-
cash form.
Remuneration and salary are often mistaken to be similar but for those who are doing a job in an
organization, it is significant to know the differences between the two. While both terms imply money
and other incentives received by the employees for their work performances, there are subtle
differences between them:
a) Remuneration is a broader term that encompasses salary.

b) Salary is more commonly used to refer to the payment of the employees‘ rendered services.
c) Salary is a fixed amount of money given to an employee on a timely basis (weekly, monthly, etc.)
while remuneration can change and vary depending on the employee‘s performance and output.
Remuneration is mostly used to refer to the pay of the employees in higher echelons of management,
whereas, the term salary is often used to describe the amount of money employees from lower levels of
organization receive.
METHODS OF EMPLOYEE REMUNERATION
TIME RATE METHOD – under this system, remuneration is directly linked with the time spent an
employee devotes on the job. The remuneration is fixed and a pre-decided amount hourly, daily,
weekly, or monthly irrespective of their performances. This method leads to minimum wastage of
resources and quality output. This can be very beneficial to starting employees as they can learn and
improve their work without any reduction in their salaries. It encourages employees to work together
and efficiently to get equal salaries. However, this method can lead to tight supervision, lower employee
morale, indefinite employee cost and can demotivate other employees into working effectively since
there is no distinction made between efficient and inefficient employees.
PIECE RATE METHOD – in this system the remuneration depends and is based on the pieces or units
produced by an employee. This method emphasizes the quantity of the output rather than the quality.
This requires less supervision hence the per unit cost of production is low. This method boosts the
employee morale as the salaries are directly related with their work efforts. There is also a greater
work-efficiency in this method. However, it can lead to deterioration in work quality, lesser unity within
the employees, wastage of resources and high cost production.
MOTIVATION
Remuneration leads to employee motivation. It is one of the key tools to appraise employee‘s work
performances which prompts one to work with zeal and enthusiasm. Salaries constitute an important
source of income for employees and determine their standard of living, thus, salaries affect the
employees‘ productivity and work performance.
Remuneration is directly or indirectly one of the principal parts of motivation in the society. An
unambiguous and well-marked system motivates the employees, which further results to increase
productivity (Chi and Han 2008). Yermack (2004) has stated in his study that all the business
organizations act like a profit maximization institution, so they put their efforts to improve the
performance of its employees by prompting them. This motivation ultimately helps the organizations to
increase productivity level.
Work motivation is interrelated with job satisfaction. Money often is looked upon as a means of
fulfilling the most basic needs of man. These needs are made available through the purchasing power
provided by monetary income: remuneration and salary of individual (Stajkovic and Luthans 2003).
According to different motivation theories, such as Maslow‘s Hierarchy of Needs, Two
Factor Theory given by Herzberg‘s, McGregor‘s Theory X and Theory Y, Achievement Theory,
Taylor‘s Motivational Theory, etc. money is one of the main sources to persuade the behavior of an

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individual towards his organization and work productivity (Wheeler 2008). Thus, it is necessary for the
corporate executives or managers to be aware with the economic and social background of employees
to offer good remunerations as per their talent and skills and motivate them to work. The general
meaning of remuneration is the basic salary or pay of an employee, but in the broader sense,
remuneration comprises salary, fringe benefits, compensation, bonus, commissions, employee stock
option, etc. (Guedri and Hollandts 2008).
In this highly changing and competitive environment, remuneration is one of the main tools for the
manager to improve the productivity of the employees, to attract competent personnel, to retain present
employees, to reduce the rate of absents and employee turnover, to manage job sequences, to
strengthen union management relationships, to improve public image of the company, etc. (Perry,
Mesch and Paarlberg 2006).
FOUNDATION OF BEHAVIOR
The rational actor model was developed in the 20th century by John von Neumann, Leonard
Savage, and many others, and its applicability was shown to depend substantively only on choice
consistency over sets of probability distributions (Kreps 1988). The rational actor model is the most
powerful and fruitful analytical tool of the behavioral sciences. Economic theory and biological theory
thus have a natural affinity: the choice consistency on which the rational actor model of economic
theory depends is rendered plausible by biological evolutionary theory, and the optimization techniques
pioneered by economic theorists are routinely applied and extended by biologists in modeling the
behavior of a vast array of organisms. Unfortunately, the technical definition of the term ―rational‖ in
choice theory is so far from any of the standard, non-technical, meanings of the term that propose to
call it the Beliefs, Preferences, and Constraints (BPC) model, a name more informative of the model‘s
operation. The most common assumption is that "rational" means self-interested, which is how
economists use the term in an analyzing market transaction. However, there is nothing in the BPC
model that precludes agents from valuing the welfare of others, caring about fairness and justice, or
adhering to norms of honesty and trustworthiness.
a) GOALS OF ORGANIZATIONAL BEHAVIOR- focuses on how humans behave in organizations,

including how they interact with each other, as well as how they work within the organizations'
structures to get their work done. Organizational Behavior is the ―study of human behavior and the
organization, and the organization itself. The goals of Organizational Behavior are to explain, predict,
and influence behavior. Managers need to be able to explain why employees engage in some
behaviors rather than others, predict how employees will respond to various actions and decisions,
and influence how employees behave.
b) ATTITUDES- Individuals bring several differences to work. They have a variety of personalities,
values, and attitudes. When they enter organizations, their stable or transient characteristics affect
how they behave and perform. Moreover, companies hire people with the expectation that they have
certain knowledge, skills, abilities, personalities, and values. Learn about the principles of
management through the planning, organizing, leading, controlling (P-O-L-C) framework. Employees',
personalities, attitudes, and work behaviors affect how managers approach each P-O-L-C dimension.
Here are just a few examples:
1. When conducting environmental scanning during process, a manager's perceptions color the
information that is absorbed and processed.
2. Employee preferences for job design and enrichment (aspects of organizing) may be a function of
individuals' personalities and values.
3. Leading effectively requires an understanding of employees' personalities, values, and attitudes.
4. Absenteeism can challenge a managers' ability to control costs and performance (both at the
group and individual levels).
c) PERSONALITY- encompasses a person's relatively stable, feelings, thoughts, and behavioral

patterns. Each of us has a unique personality that differentiates us from other people and
understanding someone's personality gives us clues about how that person is likely to act and

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feel in a variety of situations. To manage effectively, it is helpful to understand the personalities of

different employees. Having this knowledge is also useful for placing into jobs and organizations.
THE BIG FIVE (5) PERSONALITY TRAIT
1. Openness - is the degree to which a person is curious, original, intellectual, creative, and
open to new ideas. People high in openness seem to thrive in situations that require flexibility
and learning new things. They are highly motivated to learn new skills, and they do well in
training settings.
2. Conscientiousness - refers to the degree to which a person is organized, systematic,
punctual, achievement-oriented, and dependable. Conscientiousness is the one personality
trait uniformly predicts how high a person's performance will be across a variety of
occupations and jobs. In fact, conscientiousness is the trait most desired by recruiters, and
highly conscientious applicants tend to succeed in interviews.
3. Extraversion - is the degree to which a person is outgoing, talkative, sociable, and enjoys
socializing. One of the established findings is that they tend to be more effective in jobs
involving sales. They tend to be effective as managers and they demonstrate inspirational
leadership behaviors.
4. Agreeableness - is the degree to which a person is affable, tolerant, sensitive, trusting, kind,
and warm. In other words, people who are high in agreeableness are likeable people who get
along with others. Not surprisingly, agreeable people help others at work consistently; this
helping behavior does not depend on their good mood.
5. Neuroticism - refers to the degree to which a person is anxious, irritable, temperamental,
and moody. It is perhaps the only Big Five dimensions where scoring high is undesirable.
Neurotic people tend to have emotional adjustment problems and habitually experience
stress and depression. People very high in Neuroticism experience several problems at work.
d) PERCEPTION- is simply defined how a person sees the world around them and how they
interpret that information. It is a subconscious thing that mind does and is contingent on your
ability to pay attention to your surroundings and your existing knowledge. In organizational
behavior and business, perception often helps shape a person's personality and how they act in
certain situations.
e) EMOTIONAL QUOTIENT- Also known as Emotional intelligence is defined as the ability to

understand and manage your own emotions, as well as recognize and influence the emotions of
those around you. Over the years, emotional intelligence has evolved into a must-have skill. It is
the strongest predictor of performance.
FOUR (4) COMPONENTS OF EMOTIONAL INTELLIGENCE
1. SELF-AWARENESS - It is the core of everything. It describes your ability to not only understand
your strengths and weaknesses, but to recognize your emotions and the effect they have on you
and your team's performance.
2. SELF-MANAGEMENT - Self management refers to the ability to manage your emotions,
particularly in stressful situations, and maintain a positive outlook despite setbacks. Leaders who
lack self-management tend to react and have a harder time keeping their impulses on check.
3. SOCIAL AWARENESS - While it is not important to understand and manage your own emotions,
you also need to know how to read a room. Social awareness describes your ability to recognize
others' emotions and the dynamics in play within your organization.
4. RELATIONSHIP MANAGEMENT - Relationship management refers to your ability to influence,
coach, and mentor others, and resolve conflict effectively.

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1. What is the nature of staffing and why it is important in an organization?
2. What are the different steps in the recruitment and selection process?
3. What are the different ways or methods of training?
4. What is employee remuneration and discuss its importance in an organization?
B. CASE PROBLEM:
As with most fast-food restaurant chains, McDonald‘s needs more people to fill jobs in its
empire. Yet McDonald‘s executives are finding recruiting is a tough sell. The industry is
taking a beating from an increasingly health-conscious society and the popular film
Supersize Me. Equally troublesome is a further decline in the already dreary image of
employment in a fast-food restaurant. It doesn‘t help that McJob, a slang term closely
connected to McDonald‘s, was recently added to both Merriam-Webster‘s Collegiate
Dictionary and the Oxford English Dictionary as a legitimate concept meaning a low-
paying, low prestige, dead-end, mindless service job in which the employee‘s work is
highly regulated.
McDonald‘s has tried to shore up its employment image in recent years by improving
wages and adding some employee benefits. A few years ago it created the ―I‘m loving it‖
campaign, which took aim at a positive image of the golden arches for employees as
well as customers. The campaign had some affect, but McDonald‘s executives realized
that a focused effort was needed to battle the McJob image.
Now McDonald‘s is fighting back with a ―My First‖ campaign to show the public- and
prospective job applicants-that working at McDonald‘s is a way to start their careers and
develop valuable life skills. The campaign‘s centerpiece is a television commercial
showing successful people from around the world whose first job was at the fast-food
restaurant.‖Working at McDonald‘s really helped lay the foundation for my career,‖ says
ten-time Olympic track and field medalist and for mer mcDonald‘s crew member Carl
Lewis, who is featured in the TV ad. ―It was the place where I learned the true meaning
of excelling in a fast-paced environment and what it means to operate as part of a team.‖
Richard Floersch, McDonald‘s executive vice president of human resources, claims that
the company‘s top management has deep talent, but the campaign should help to retain
current staff and hire new people further down the hierarchy. ―It is a very strong
message about how when you start at McDonald‘s, the opportunities are limitless,‖ says
Floersch. Even the McDonald‘s application form vividly communicates this message by
showing a group of culturally diverse smiling employees and the caption ―At McDonald‘s
You Can Go Anywhere!‖
McDonald‘s has also distributed media kits in several countries with factoids debunking
the McJobs myth. The American documentation points out that McDonald‘s CEO Jim

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Skinner began his career working the restaurant‘s front lines, as did 40 percent of the
top 50 members of the worldwide management team, 70 percent of all restaurant
managers, and 40 percent of all owner/operators. ―People do come in with ―a job‖
mentality but after three months or so, they become evangelists because of the
leadership and community spirit that exists in stores,‖ says David Fairhurst, the vice
president for people at McDonald‘s in the United Kingdom. ―For many, it‘s not just a job,
but a career.‖
McDonald‘s also hopes the new campaign will raise employee pride and loyalty, which
would motivate tohe 1.6 million staff members to recruit friends and acquaintances
through word of mouth. ―If each employee tells just five people something cool about
working at McDonald‘s, the net effect is huge,‖ explains McDonald‘s global chief
marketing officer. So far the campaign is having the desired effect. The company‘s
measure of employee pride has increased by 14 percent, loyalty scores are up by 6
percent, and 90-day employee turnover for hourly staff has dropped by 5 percent.
But McDonald‘s isn‘t betting entirely on its new campaign to attract enough new
employees. For many years it has been an innovator in recruiting retirees and people
with disabilities. The most recent innovation at McDonald‘s UK, called the Family
Contract, allows wives, husbands, grandparents, and children over the age of 16 to
swap shifts without notifying management. The arrangement extends to cohabiting
partners and same-sex partners. The Family Contract is potentially a recruiting tool
because family members can now share the same job and take responsibility for
scheduling which family member takes each shift.
Even with these campaigns and human resourcechanges, some senior McDonald‘s
executives acknowledge that the entry-level positions are not a ―lifestyle‖ job. ―Most of
the workers we have are students- it‘s a complementary job,‖ says Denis Hennequin, the
Paris-based executive vice president for McDonald‘s Europe‖
1. Discuss McDonald‘s current situation from a human resource planning

perspective.
2. Is McDonald‘s taking the best approach to improve its employer brand? Why
or why not? If you were in charge of developing the McDonald‘s employer
brand, what would you do differently?
3. Would the different recruiting tactics help McDonald‘s attract more

applicants? Why or why not‖ If so, what tactics might be effective?

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LESSON 7:
Concept of Directing/Leading Function
Overview:
The fourth function is known as directing, sometimes also referred to as the influencing
or the leading function of management. Directing is about the actuation of the methods to
work efficiently to achieve the set organizational objectives. The function goes beyond
organizing the employees to their specific roles and involves ensuring they are able to
perform the tasks through a variety of means. Directing in essence is looking after
productivity and ensuring productivity is going up instead of decreasing.
The function delves deeper inside human interaction, making the manager motivate,
communicate and inspire his or her personnel. At this stage, you are meeting and connecting
with your employees to find out how the tasks are going. You would talk to them about the
new marketing program, get their feedback on the project and spend time inspiring them with
new ideas. The directing function is all about the day-to-day interaction between the
management and the staff.
• Discuss the nature of directing or leading

• Differentiate leading to managing
• Identify the different theories of motivation
• Differentiate styles of leadership
• Appreciate the role of communication in directing people within the organization
Course Materials:
The function of directing has strong links to things such as leadership. A good manager will
be able to inspire the workforce to work towards the goals not because they have to do it,
but because they are driven to achieve these objectives. The manager‘s role is not just
about ensuring the workplace has the right resources and employees know what they are
doing; it‘s also important to create an environment of friendship. The manager wants to be
someone who can encourage and motivate the personnel and not fear them into
submission. With proper directing, you are able to set in motion the processes you‘ve
prepared with the above three functions.
CONCEPT OF LEADERSHIP
Good leaders are made, not born. If you have the desire and willpower, you can become
an effective leader. Good leaders develop through a never-ending process of self-study,
education, training, and experience (Jago, 1982).

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LEADERSHIP THEORIES
1. Bass‟ Theory of Leadership- states that there are three basic ways to explain how
people become leaders. These theories are:
a) Some personality traits may lead people naturally into leadership roles. This is
the Trait Theory.
b) A crisis or important event may cause a person to rise that occasion, which
brings out extraordinary leadership qualities in an ordinary person. This is the
Great Events Theory.
c) People can choose to become leaders. People can learn leadership skills. This is
the Transformational or Process Leadership Theory. It is the most widely
accepted theory today and the premise on which this leadership guide is based.
ISSUES OF LEADERSHIP
1. Failure to communicate
2. Lack of Accountability
3. Fear of firing
4. Lack of Alignment
5. Lack of Clear Vision
6. Poor execution
7. A company culture by default
LEADERSHIP STYLE
1. Democratic Leadership (Commonly Effective) Democratic leadership is exactly what it

sounds like- the leader makes decisions based on the input of each member.
2. Autocratic Leadership (Rarely Effective) Autocratic leadership is the inverse of
democratic leadership. In this leadership style, the leader makes decisions without
taking input from anyone who reports to them.
3. Laissez-Faire Leadership (Sometimes Effective) The French term ―laissez faire‖
literally translates to ―let them do‖, and leaders who embrace it afford nearly all authority
to their employees.
4. Strategic Leadership (Commonly Effective) Strategic leaders sit at the intersection
between a company‘s main operations and its growth opportunities. He or she accepts
the burden of executive interests while ensuring that current working conditions remain
stable for everyone else.
5. Transformational Leadership (Sometimes Effective) Transformational leadership is
always ―transforming‖ and improving upon the company‘s conventions.
6. Transactional Leadership (Sometimes Effective) Transactional leaders are common
today. These managers reward their employees for precisely the work they do.
7. Coach-Style Leadership (Commonly Effective) Similarly, to a sports team‘s coach, this
leader focuses on identifying and nurturing the individual strengths of each member on
his or her team.
8. Bureaucratic Leadership (Rarely Effective) Bureaucratic leaders go by the books. This
style of leadership might listen and consider the input of employees- unlike autocratic
leadership- but the leader tends to reject an employee‘s input if it conflicts with company
policy or past practices.

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MOTIVATION
A crucial role of management is to motivate and develop their workforce to
ensure that they are as productive and creative as possible. Professor Herzberg defined
motivation as: ―The will to work due to enjoyment of the work itself.‖ Motivation is what
influences individuals to behave in a certain way and combined with individual skill and
ability results in performance.
Motivation helps people:
1. achieve their goals

2. gain a positive perspective on their private and working lives
3. create the power to change
4. manage their own development
5. build positive self-esteem
CLASSIFICATION OF MOTIVATION
1. INTRINSIC – INTRINSIC motivation comes from within the person themselves.

Employees may be intrinsically motivated if:
a) the job is challenging, stimulating, and interesting
b) they can see the result of their efforts
c) they can control the way they work
d) they see that their work helps others
2. EXTRINSIC – Extrinsic motivation comes from outside of the person. Good performance
is rewarded with benefits and/or recognition. Pay and bonuses are obvious examples of
rewards and may compensate for any lack of satisfaction from the work itself.
Employees are usually motivated by a combination of both intrinsic and extrinsic
motivation.
MOTIVATIONAL THEORIES
BASIC TYPES OF MOTIVATIONAL THEORIES
1. CONTENT THEORIES – The content theories find the answer to what motivates an
individual and is concerned with individual needs and wants. Deals with “what” motivates
people.
A. MASLOWS HIERARCHY OF NEEDS – Proposed by Abraham Maslow, his
hypothesis was that unsatisfied needs act as motivators. He argued that humans are
influenced by a series of needs, some biological and others less tangible. It must be
remembered that for Maslow it is possible to satisfy needs both in the workplace and
outside. This means that employers must have a holistic approach to motivation
recognizing that motivation may come from a satisfactory work/life balance.
B. HERZBERG MOTIVATION HYGIENE THEORY -Proposed by Frederick Herzberg,
THIS celebrated theory was developed in his book Work and Nature of Man [1966].
His hypothesis is that removing factors causing dissatisfaction in the workplace does
not automatically cause satisfaction. He believes that employers need to seek out
factors which positively increase satisfaction.
His work developed out of research he conducted in the 1950s with two hundred
engineers and accountants. He asked the two groups the simple question: "Can you

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recollect occasions when you felt really happy in your work and what made you
happy on these occasions?" Through this study, Herzberg concluded that there are
two job conditions independent of each other that affect the behavior differently.
The first set of job conditions has been referred to as maintenance or hygiene
factor, wherein the same job conditions provide the same level of dissatisfaction, in
case the conditions are absent, however, their presence does not motivate in a
strong way.
The second set of job conditions is referred to as motivational factors, which
primarily operate to build strong motivation and high job satisfaction, but their
absence does not result in strong dissatisfaction.
C. MCCLENAD‟S NEEDS THEORY - Proposed by psychologist David McClelland,

who believed that the specific needs of the individual are acquired over a period and
gets molded with one‘s experience of the life. McClelland‘s Needs Theory is
sometimes referred to as Three Need theory or Learned Needs Theory.
McClelland‘s Needs Theory posits that the person‘s level of effectiveness and
motivation is greatly influenced by these three basic needs.
McClelland has identified three basic motivating needs: Need for Power, Need for
Affiliation and Need for Achievement and, along with his associates performed a
considerable research work on these basic needs.
1. Need for Power (n-pow) - Power is the ability to induce or influence the
behavior of others. The people with high power needs seek high-level positions
in the organization, to exercise influence and control over others.
2. Need for Affiliation (n-affil) - People with high need for affiliation derives
pleasure from being loved by all and tend to avoid the pain of being rejected.
People with these needs like to maintain the pleasant social relationships, enjoy
the sense of intimacy, and like to help and console others at the time of trouble.
3. Need for Achievement (n-ach) - McClelland found that some people have an
intense desire to achieve. High achievers take the moderate risks, i.e. a
calculated risk while performing the activities in the management context. This is
opposite to the belief that high achievers take high risk.
D. ALDERFER‟SERG THEORY- An American psychologist Clayton Paul Alderfer had
proposed this theory and believed that each need carries some value and hence can
be classified as lower-order needs and higher-order needs. He also found some level
of overlapping in the physiological, security and social needs along with an invisible
line of demarcation between the social, esteem and self-actualization needs.
Alderfer‟s ERG Theory is the extension of Maslow‘s Needs Hierarchy, wherein the
Maslow‘s five needs are categorized into three categories: Existence Needs,
Relatedness Needs, and Growth Needs.
1. Existence Needs - The existence needs comprise of all those needs that relate
to the physiological and safety aspects of human beings and are a prerequisite
for the survival.
2. Relatedness Needs - The relatedness needs refer to the social needs that an
individual seeks to establish relationships with those for whom he cares.
3. Growth Needs - The growth needs cover Maslow‘s self-actualization needs as
well as a part of esteem needs which are internal to the individual, such as a
feeling of being unique and personnel growth. Growth needs are those needs
that influence an individual to explore his maximum potential in the existing
environment.

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2. PROCESS THEORIES – Address more the issues relating to “how” the process works
and sustains itself over time, such as factors that determine the degree of effort, the
continuation of effort or the modification of effort.
A. VROOM‟S EXPECTANCY THEORY- Proposed by Victor. H. Vroom, who believed

that people are motivated to perform activities to achieve some goal to the extent
they expect that certain actions on their part would help them to achieve the goal.
This theory assumes that an individual‘s behavior results from the choices made by
him with respect to the alternative course of action, which is related to the
psychological events occurring simultaneously with the behavior. This theory is built
around the concept of valence, instrumentality, and expectancy and, therefore, is
often called as VIE THEORY.
-VALENCE - It refers to the value that an individual place on a particular outcome
or strength of an individual‘s preference for the expected rewards of the outcome.
-INSTRUMENTALITY - Another major input into the valence is the instrumentality
of first level outcome in obtaining the second level outcome, i.e. a degree to which
the first level leads to the second level outcome.
-EXPECTANCY - Expectancy, another factor that determines the motivation,
refers to the probability that a particular action will lead to the desired outcome.
B. ADAM‟S EQUITY THEORY- Proposed by John Stacey Adams, posits that people
maintain a fair relationship between the performance and rewards in comparison to
others. In other words, an employee gets de-motivated by the job and his employer
in case his inputs are more than the outputs. There are three types of exchange
relationships that arise when individual input/outcomes are compared with that of the
other persons.
1. OVERPAID INEQUITY - When an individual perceives that his outcomes are

more as compared to his inputs, in relation to others.
2. UNDERPAID EQUITY - When an individual perceives that his outcomes are less
as compared to his inputs, in relation to others.
3. EQUITY - An individual perceives that his outcomes in relation to his inputs are
equal to those of others.
C. REINFORCEMENT THEORY- Proposed by B.F. Skinner and his associates, this

theory posits that behavior is the function of its consequences, which means an
individual develops a behavior after performing certain actions. The reinforcement
theory of motivation is based on the “Law of Effect” concept, i.e. an individual is
likely to repeat those actions having the positive consequences and will avoid those
behaviors that result in negative or unpleasant outcomes.
The reinforcement theory of motivation mainly focuses on what happens when an
individual takes some action. It is observed that people tend to repeat those activities
which gives them pleasure and avoid the activities with negative consequences.

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ISSUES IN MOTIVATION
FOUR (4) MOST IMPORTANT ISSUES IN MOTIVATION
1. CROSS- CULTURAL CHALLENGES

a) Today‘s global business environment
b) Maslow‘s hierarchy of needs theory do not work for other cultures
c) Herzberg‘s motivator (intrinsic) factor may be universal
2. MOTIVATING PARTICULAR GROUPS OF WORKERS

a) Motivating diverse workforce
1. It requires managers in terms of flexibility. Lifestyle is an important factor.
2. Compressed workweek – a workweek where employees work longer hours per
day but fewer days per week
3. Flexible work hours (flextime) – is a scheduling system in which employees are
required to work on several hours a week, but are free, within limits, to vary the
hours of work.
4. Job sharing – is a practice of having two or more people split a full-time job.
5. Telecommunicating – is a job approach where employees work at home and are
linked to the workplace by computer and modern technologies.
b) Motivating professionals
1. Job challenge
2. Organizational support of their work
3. Work itself
4. Motivating contingent/temporary workers
5. Contingent workers do not have the security or stability that permanent
employees do
6. Motivating low skilled, minimum wages employees
7. Using recognition programs and sincere appreciation
3. DESIGNING APPROPRIATE REWARDS PROGRAMMES

a) Open book management
1. Open financial statement in front of employees in front of employees to motivate
them to make better decisions
2. Goal is to get employees to think like an owner by seeing the result their decisions
have on financial results.
b) Employee recognition program
c) Pay for performance
4. MOTIVATING IN CHALLENGING ECONOMIC CIRCUMSTANCES

a) Layoffs
b) Tight budgets
c) Minimal or no pay raises
d) No bonuses
e) Long working hour

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1. What is the nature of directing or leading and why it is important in an organization?
2. What is the difference between leading and managing? Explain
3. What are the different theories of motivation?
4. What are the different styles of leadership and how it can affect the organization?
5. What do you think will happen if communication in directing people within the
organization is not properly utilized?
B. CASE PROBLEM
On the day that A.G. Lafley took the helm at consumer products giant Procter &
Gamble in 2000, the stock dropped by $4. The financial markets were unimpressed with
Lafley‘s rise to the CEO spot. Lafley, who started out at P&G in 1977 as a brand
assistant for Joy dishwashing liquid, did not seem to have the stuff of which CEO
legends are made. Quiet, understated, and unassuming, with a shock of white hair, wire-
rimmed glasses, and the demeanor of Mr. Rodgers, he looks more like a thoughtful
college professor than the stereotype of a visionary and dynamic CEO. In a profile, a
Fortune reporter described Lafley as ―a listener, not a storyteller. He‘s likable, not awe-
inspiring. He‘s the type of guy who gets excited in the mop aisle of a grocery store. . ..
He has rallied his troops not with big speeches and dazzling promises, but by hearing
them out, one at a time. It‘s a little dull perhaps.‖
Dull or not, Lafley had his work cut out for him. His predecessor, Durk Jager, had
lasted just 17 months after failing to improve P&G‘s lackluster performance. For a
decade P&G had struggled to introduce new brands, considered by many to be the
lifeblood of a large consumer products company. Worse still, half of P&G‘s 15 top brands
were losing market share, and employee morale was at an all-time low.
Lafley realized that he had to move fast: ―I had to move quickly to get people focused. I
didn‘t want everyone sitting around worrying that the stock price had dropped in half.‖
One of Lafley‘s first acts was to issue a manifesto of ―10 things I believe in.‖ At the top of
the list was ―lead change,‖ followed by ―the consumer is boss.‖ Lafley also signaled that
it was time for P&G to look outside its own organization for new product ideas—
something the company had long resisted.
As Lafley saw it, P&G did not need a radical makeover; it just needed to focus on
selling more of its basic brands, such as Tide and Pampers. He chose P&G‘s 10 best-
selling brands, each of which generated more than $1 billion in sales, and he told his
managers to focus on selling more. These brands would get the bulk of P&G‘s
resources. It was a message everyone could understand. Selling more Tide was easier
than inventing the next great brand. For years P&G had been struggling to invent new
brands, but it had not introduced a new blockbuster since 1983 when it had a huge hit
with Always (feminine protection pads). Now, Lafley told his managers, the number one
task w as to sell more of what they had.

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Lafley went further, pushing his managers to add value to P&G‘s established brands by
listening closely to what consumers wanted. This approach worked. For example, by
watching consumers use its diapers, P&G learned that mothers were frustrated by how
long it took to toilet train their children; so P&G developed a new line of its best-selling
Pampers brand—Feel n Lear n Advanced Trainers, which stay wet for two minutes to
alert toddlers to try tinkling in the toilet. He also told managers to focus on telling
customers what the brand could do for them rather than the attributes of the product; so,
the mission for Pampers changed from ―making the driest diapers‖ to ―helping moms
with babies‘ development.‖ The result: Pampers gained market share against longtime
rival Kimberly-Clark.
At the same time Lafley moved to cut costs. Within months he had eliminated some
9,600 jobs, closing down several new product development projects that were
consuming resources and pulling new products from the market that had not generated
significant sales. He also sold off products he did not see as strategic fits, including Jif
and Crisco brands. It was a classic case of triage: Focus on what is selling, pour
resources into those brands, and cut the rest.
Commenting on Lafley‘s cost cutting, one of P&G‘ s board members noted, ―He knows
how to lay down the rules when he needs to. Quiet people tend to be the toughest.‖
Indeed, in a culture traditionally characterized by collegiality, Lafley has not been shy
about pushing his managers to improve their performance. Each quarter at a meeting
with top managers, Lafley reveals everyone‘s financial results. He notes, ―It motivates
people who are performance oriented. F or the people that it doesn‘t‘ motivate, we are
probably not the right place for them.‖
Another goal of Lafley‘s was to break down the barriers within P&G, getting employees
from different divisions to exchange ideas. He emphasized that R&D and marketing
people from different divisions should talk to each other, which they had not traditionally
done. To give the idea teeth, he rewarded business units that shared their ideas with
others. To drive home the importance of removing barriers between units, Lafley
embarked on a highly visible symbolic redesign of the fabled 11th-floor executive suites
at P&G‘s head office. The oak-paneled walls were torn down; the 19th-century paintings
that once decorated offices were donated to a local art museum; and the CEO and other
top executives were assigned to cubicles on half the floor. The other half was
transformed into a center for employee learning.
Lafley also articulated the need to ―reach outside for ideas.‖ His goal is to get half of
P&G‘s new products from external sources—up from 20 percent when he took over.
P&G has started entering alliances with other companies to develop new products,
including competitor Clorox, with which it codeveloped Glad Press and Seal—a product
that overtook S.C. Johnson‘s Saran Wrap to become the top-selling food wrap in the
United States.
The results of Lafley‘s leadership have been impressive. P&G‘s core brands have
been gaining impetus. In 2005, 19 out of P&G‘s top-selling 20 brands gained market
share. Costs have fallen, and sales and prof it‘s have advanced strongly. In 2000 P&G
earned $5.53 billion on sales of $40 billion. In 2005 it earned $10.4 billion on sales of
$57 billion. The stock price doubled over the same period.

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1. How would you characterize the leadership style of A.G. Lafley—people-oriented or

task-oriented?
2. What leadership competencies does A.G. Lafley have? What competencies often
associated with strong leaders does he seem to lack?
3. How did Lafley go about shifting the strategy and culture of P&G? Would you
characterize Lafley as a transformational leader or a transactional leader?
4. What does the story of A.G. Lafley tell you about the attributes and style of effective
leaders?

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LESSON 8:
Concept of Controlling Function
Overview:
The final function of management is controlling. The function ensures the other four
functions are followed correctly and the flow of work is moving the organization towards the
objectives it has set itself. As Theo Haimann has put it, controlling is ―the process of checking
whether or not proper progress is being made towards the objectives and goals and acting if
necessary, to correct any deviation‖.
Controlling requires you to examine the objectives in a measurable manner. You

essentially need to set standards, which guarantee you know exactly what you want to
achieve and what counts as success or failure. But controlling is also a function that due to
the set of standards will ensure you have the ability to correct behaviors when they deviate
from the standards. In essence, controlling is about quality monitoring. You are looking at the
processes and ensuring they achieve the right things for the organization.
• Discuss the nature of controlling

• Describe the link between planning and controlling
• Differentiate controlling methods and techniques
Course Materials:
Controlling is the managerial functions of planning, staffing, organizing, implementing,
and directing. It is one of the key factors for performing basic functions for future actions as it
identifies and reduces the chance of committing errors by providing preventive measures.
According to Robbins and Coulter (2009), ―Control is the process of monitoring activities
to ensure that they are accomplished as planned and correcting any significant deviations.
Furthermore, it also assures that the performance of one‘s business is still on the managerial
standards. Proper control helps the organization to have a smooth workplace since the
subordinates will be kept monitored and thus brings discipline among them.
CONCEPT OF CONTROLLING
Controlling is the managerial functions of planning, staffing, organizing, implementing,

and directing. It is one of the key factors for performing basic functions for future actions as it
identifies and reduces the chance of committing errors by providing preventive measures.
According to Robbins and Coulter (2009), ―Control is the process of monitoring activities
to ensure that they are accomplished as planned and correcting any significant deviations.
Furthermore, it also assures that the performance of one‘s business is still on the managerial
standards. Proper control helps the organization to have a smooth workplace since the
subordinates will be kept monitored and thus brings discipline among them.

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Controlling can be defined as that function of management which helps to seek planned
results from the subordinates, managers and at all levels of an organization. The controlling
function helps in measuring the progress towards the organizational goals and brings any
deviations and indicates corrective action. It is an important and indispensable part of
management. Proper control makes smoothness in the working of an organization as it
corrects bended things. It also ensures that the goals of an organization are met, and its
resources are effectively utilized. Besides, control is the primary function of every manager--
pervasive function.
IMPORTANCE OF CONTROLLING
Good control system means the organization is capable of:
1. Accomplishing Organizational Goals - Since controlling function identifies corrective

action and deviation, this serves as a guide to progress towards the main goal of an
organization itself.
2. Judging Accuracy of Standards- Standard is a set of rules and regulations being given
by the organization for authoritative purpose. A good control system could be equated to
verify the accuracy and objectivity because it also helps in the review and revision of
standards. Hence, it takes the major place in the organization and in its workplace.
3. Improving Employee Motivation- This ensures that each employee knows well in
advance what they expect, and their expected performance based on the standards that
they should appraise to.
4. Ensuring Order and Discipline- Pervasive function of a manager creates an environment
of order and discipline to the part of the employees and therefore run-down dishonest
behaviour. To minimize it, computer monitoring is used a part of control system to track
down and find out dishonesty and fraud.
5. Making Efficient Use of Resources -Each activity is performed by following the
predetermines standards, norms, rules, and regulations. This will further ensure that the
resources are used efficiently and effectively for the availability of the resources on the
next operation.
RELATIONSHIP BETWEEN PLANNING AND CONTROLLING
The relationship between planning and control can be explained as follows:
1. Planning Originates Controlling -When it comes to planning the objectives are aligned
to pursue these goals and indeed control is a must. So, planning originates Controlling.
2. Controlling Sustains Planning
ADVERTISEMENTS: Controlling manage the course of planning since it would be useless

if there is no power of directing something. Controlling guides, the spots where planning
is needed.
3. Controlling Provides Information for Planning -In controlling the actual performance is
likely to meet standards and records the deviations, if any. The collected information that
was gathered through exercising the control can be used for planning.
4. Planning and Controlling are Interrelated: Planning is one of the important functions of
management other than organizing, staffing etc. are arranged for implementing plans.

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While control records the actual performance and correlate it with the standard set.
Proper corrective measures are taken to develop performance in future. Planning comes
first and control must be the last one. Both are dependent upon each other.
5. Planning and Control are Forward Looking: are concerned with the future activities of
the business that it goes overboard to what is usual. Planning is always for the future
and control guides the path that the planning must take. No one can control the past; it is
the future that can be controlled by planning. Their combined efforts will result to a
maximum output with minimum cost. Both systematic planning and organized controls
are essential to achieve the organizational goals.
MANAGEMENT CONTROL SYSTEM
MANAGEMENT CONTROL SYSTEM is a control system that is designed to bring the

different activities as one in organization to fulfill overall objectives. It simply describes the
design, connection and operation of different planning and control frameworks within
management. But there are two control systems within the concept. MCS essentially has an
informal and a formal control system.
The term management control system consists of three words, namely:

1. Management – It is defined as a process consisting of activities, planning, organizing,
staffing, and controlling to achieve the specific goals. Management includes guidance
and monitoring of the resources as well. Instead of doing it yourself, you are essentially
managing how other people perform a specific role and use resources. The description
of management in the context of Management Control System is important because of
how organizations can be viewed.
2. Control – It is one of the functions of management. It refers to the process of

examination and corrective action. When controlling, you are basically monitoring
whether you are receiving an expected result of a process or if the outcome differs
from the expectation.
Control in relation to management:
1. Setting a goal and establishing desired objectives. – ―I want to create 1,000

pairs of shoes in a month.‖
2. Measuring the achievements of goals and objectives. – ―I‘ve made 999 pairs
of shoes in a month.‖
3. Comparing the achieved goals and objectives with the original goals and
objectives. – ―I wanted 1,000 and I got 999. I wanted to do it in a month, and I‘ve
spent a month.‖
3. System – The Business Dictionary gives two definitions to systems, they are both
good to understand in the context of MCS.
Systems are:
“a set of detailed methods, procedures and routines created to carry out a
specific activity, perform a duty, or solve a problem” or you could view them as:
“an organized, purposeful structure that consists of interrelated and
interdependent elements”

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Every system comes with input, output, and feedback mechanism. The system
can maintain itself even when the surroundings are changing, and it has a
specific set of boundaries within which is operates.
Formal Control Informal Control

System System
The controls are laid These are unwritten,

down by the people-initiated
management in mechanisms that
writing to influence the
influence the behavior of
behavior of individuals or
employees in groups in
achieving business units.
organization‘s
goals.
Formal Control Informal Control

System System
An example of a An example of
formal system informal control
would be the system would be
rules and the good behavior
guidelines used expected from
by the human managers and
resource subordinates,
department in such as loyalty
terms of functions towards the
such as hiring organization and
and developing respect of the
staff. organizational
culture.
CONTROL POINTS – those are tools for business process management. They get all
necessary information on the process which can be used for the following analysis and
necessary improvements. A control point is work that is aimed at checking of the compliance
of the results of certain work in a business process with formulated requirements to its results.
The method of organization of control points in a business process helps to provide the
compliance of the results of a business process to appropriate requirements.
Control is one of the functions of management. In this context, it refers to the process of
analysis and corrective action. If there is a deviation, you take a corrective action to ensure

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the expected results occur. If you consider the process in the forms of steps, control in
relation to management would look like this:
a) Setting a goal and establishing desired objectives

b) Measuring the achievements of goals and objectives
c) Comparing the achieved goals and objectives with the original goals and
objectives.
d) Analyzing variances and reporting on them. Determining the underlying causes for the
variations.
e) Taking corrective action to eliminate the variations.
f) Following up and repeating the process.
FINANCIAL CONTROLS Are the strategies, approaches, and means by which an

organization traces and controls the distribution of its monetary assets. It is Essential part of
any company‘s finances. Must have a set of rules and regulations about the financial
management systems followed in an organization. All organizations have financial controls
to ensure effective financial management.
The following are illustrative examples of Financial Control.
a. Accounting Standards
b. Financial Statement
c. Operating Metrics
d. Policies
e. Segregation of Duties
f. Reconciliation
g. Responsibilities
h. Approvals
i. Disbursements Policies
j. Audit Trail
k. Information Security
OBJECTIVES OF FINANCIAL CONTROLS
1. PREPARATION OF BUDGET -Helps the organization prepare budgets for a specific

department. A financial plan will give a basis to compare actual performance with
standard performance.
2. MAINTENANCE OF ADEQUATE CAPITAL -Way to maintain adequate capital. A

proper application of financial control will help determine the adequacy of the
organization‘s capital.
3. MAXIMIZATION OF PROFIT -Obtain funds from cheaper sources and to apply the said
funds efficiently to lead to profit maximization.
4. ECONOMIC USE OF RESOURCES -Aims to monitor financial activities to prevent

leakage of funds, cash inflows and outflows are observed.
5. SURVIVAL OF BUSINESS -A good, continuous financial control system will make an

organization productive. They help the management prepare the budget for a
department. Budgets provide a basis to compare actual performance with standard
performance.

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IMPORTANCE OF FINANCIAL CONTROLS
1. Cash flow maintenance

2. Resource management
3. Operational efficiency
4. Profitability
5. Fraud prevention
BEHAVIORAL CONTROL – it is centering on referring to the facts that they need to do,
controlling their actions inside the environment where they are involve to do such things, this
kind of control will be specific in every aspect and one great example is for jobs means that
controlling the employees actions reminding that they need to follow the rules and
regulations of that organization that will count and be seen to their job performance, on how
they act as a great employee showing what is behavioral control and how it can affect their
jobs.
The effectiveness of the behavioral control can be known about the standards and
performance evaluation as the job are more complex inside of that environment, evaluate
behavioral control refers to the employees whether controlling employees on how workers
does their work on how well their organization is performing taking actions about the
behavioral of all who are participating on that kind of environment emphasize the act of
controlling a tracks whether the performance meets the expectations of their environment
and make different test or make a lots of actions if they need changes to improve everything.
This refers to facts that show whether there is a right to direct or control how the worker
does the work. A worker is an employee when the business has the right to direct and
control the worker. The business does not have to direct or control the way the work is done
– if the employer has the right to direct and control the work. The behavioral control factors
fall into the categories of:
1. Type of instructions given — generally subject to the business‘s instructions about

when, where, and how to work.
2. Degree of instruction — the more detailed the instructions, the more control the
business exercises over the worker.
3. Evaluation systems — the measurement done if the goals are met.
4. Training — if the business provides the worker with training on how to do the job, this
indicates that the business wants the job done in a particular way.
OPERATIONAL CONTROL – it involves control over intermediate-term operations and

processes but not business strategies. Operational control systems ensure that activities are
consistent with established plans. Mid-level management uses operational controls for
intermediate-term decisions, typically over one to two years. When performance does not
meet standards, managers enforce corrective actions, which may include training, discipline,
motivation, or termination.
Unlike strategic control, operational control focuses more on internal sources of information
and affects smaller units or aspects of the organization, such as production levels or the
choice of equipment. Errors in operational control might mean failing to complete projects on
time. For example, if salespeople are not trained on time, sales revenue may fall.

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Operation Control or task control is the process of assuring that specific tasks are carried our
effectively and efficiently. The focus of operational control is on individual task or
operations.
It is concerned with scheduling and controlling individual jobs through a shop rather than
with measuring the performance of the shop. It is also concerned with activities that can be
programmed. For instance, if the demand for an item, the cost of storing it, its production cost
and production-time, and the loss involved in not filling an order are known, then:
a. The optimum inventory levels

b. The optimum procurement
c. Automated plants
d. Production scheduling
e. Inventory Control
f. Order processing
g. Payroll accounting
h. Cheque handling
i.
A. ESSAY. Answer the following questions.
1. What is the nature of controlling and how do managers exercise control?
2. What is the relationship between planning and controlling?
3. What is the difference between controlling methods and techniques?
B. CASE PROBLEMS
Lincoln Electric is one of the leading companies in the global market for arc
welding equipment. This is a cost-competitive business in which consumers are price
sensitive. Lincoln‘s success has been based on extremely high levels of employee
productivity. The company attributes its productivity to a strong organizational culture
and an incentive scheme based on piecework. Lincoln‘s organizational culture dates
back to James Lincoln, who in 1907 joined the company his brother had established
a few years earlier. Lincoln had a strong respect for the ability of the individual and
believed that, correctly motivated, ordinary people could achieve extraordinary
performance. He emphasized that the company should be a meritocracy where
people were rewarded for their individual effort. Strongly egalitarian, Lincoln removed
barriers to communication between workers and managers, practicing an open-door
policy. He made sure that all who worked for the company were treated equally; for
example, everyone ate in the same cafeteria, there were no reserved parking places
for managers, and so on. Lincoln also believed that any productivity gains should be
shared with consumers in the form of lower prices, with employees in the form of
higher pay, and with shareholders in the form of higher dividends.
The organizational culture that grew out of James Lincoln‘s beliefs was reinforced
by the company‘s incentive system. Production workers receive no base salary but
are paid according to the number of pieces they produce. The piecework rates at the
company enable an employee working at a normal pace to earn an income
equivalent to the average wage for manufacturing workers in the area where a

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factory is based. Workers are responsible for the quality of their output and must
repair an y defects spotted by quality inspectors before the pieces are included in the
piecework calculation. Since 1934 production workers have been awarded
semiannual bonuses based on merit ratings. These ratings are based on objective
criteria (such as an employee‘s level and quality of output) and subjective criteria
(such as an employee‘s attitudes toward cooperation and his or her dependability).
These systems give Lincoln‘s employees an incentive to work hard and to generate
innovations that boost productivity—doing so influences their level of pay. Lincoln‘s
factory workers have been able to earn a base pay that often exceeds the average
manufacturing wage in the area by more than 50 percent, and they also receive
bonuses that in good years can double their base pay. Despite high employee
compensation, the workers are so productive that Lincoln has a lower cost structure
than its competitors.
1. What kind of control systems does Lincoln Electric rely on to generate high
employee productivity?
2. Can you think of any possible unintended consequences of an incentive pay

system based on piece work? How does Lincoln guard against these unintended
consequences?
3. Do Lincoln‘s control systems match the strategy of the enterprise? How?

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GRADING SYSTEM
Class Standing 70%
(Portfolio, projects, case analysis, summative tests)
Midterm / Final Examinations 30%
_______________
100%
Midterm Grade + Final Grade = FINAL GRADE
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https://online.hbs.edu/blog/post/emotional-intelligence-in-leadership
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https://www.managementstudyguide.com/employee-remuneration.html
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advantages-and-disadvantages/item12578
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Stajkovic, A., Luthans, F. (2003). Behavioral Management and Task Performance in

Organizations: Conceptual Background, Meta-Analysis, and Test of Alternative Models.
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MIDTERM EXAM
PRINCIPLES OF MANAGEMENT AND ORGANIZATION
NAME: SCORE:____________________
I. MULTIPLE CHOICE. Read the following items carefully. Encircle the letter of the
correct answer.
1. Who defined organizing as to organize a business is to provide it with everything useful

or its functioning like raw materials, tools and personnel’s.
a. Henri Fayol c. Harold Koontz
b. Theo Haimann d. Abraham Maslow
2. It is the principle of specialization, which is very well expressed by economists as being a

necessary factor for efficiency in the utilization of labor.
a. Division of Work c. Authority and Responsibility
b. Discipline d. Unity of Direction
3. This principle of management declares that discipline requires good superiors at all
levels, clear and fair agreements and judicious application of penalties.
a. Division of Work c. Authority and Responsibility
b. Discipline d. Unity of Direction
4. This management theory attempts to find a rational way to design an organization. This
theory generally calls for a formalized administrative structure, a clear division of labor
and delegation of power and authority to administrators relevant to their areas of
responsibilities.
a. Scientific Management Theory c. Bureaucracy Theory
b. Administrative Management Theory d. Behavioral Management Theory
5. This management theory gave rise to more human interests in the workplace that might
motivate teamwork through fostering a collaborative atmosphere.
a. Scientific Management Theory c. Bureaucracy Theory
b. Administrative Management Theory d. Behavioral Management Theory
6. This is one of the external environmental factors that determine the extent to which
government and government policy may impact on an organization or a specific industry.
a. Strengths c. Opportunities
b. Political Factor d. Legal Factor
7. This is one of the internal environmental factors that refers to the favorable factors that
could give an organization a competitive advantage.

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a. Strengths c. Opportunities
b. Political Factor d. Legal Factor
8. This is the existence of significant agglomeration externalities as the most important

efficiency rationale for local based incentives.
a. Economic Development c. Local Development
b. Local Welfare d. Economic Welfare
9. This is one of the external environment factors that helps the management of the
organization to further understand their customer’s needs and wants.
a. Political Factor c. Social Factor
b. Economic Factor d. Technological Factor
10. This is one of the external environment factors that consider the rate of technological
innovation and development that could affect a market or industry.
a. Political Factor c. Social Factor
b. Economic Factor d. Technological Factor
11. This is a kind of organized foresight as well as corrective hindsight and it involves
predicting the future as well as attempting to control the events.
a. Planning c. Organizing
b. Staffing d. Controlling
12. It is the function that involves the determination of activities that need to be done in order
to reach the company goals, assigning these activities to the proper personnel and
delegating the necessary authority to carry out these activities in a coordinated and
cohesive manner.
13. It is the function defined as the systematic exercise which is called as a process of
checking actual performance against the standards or plans with a view to ensure
adequate progress.
14. It is the function of hiring and retaining a suitable workforce for the enterprise both at
managerial as well as non-managerial levels.
15. It is the function of guiding, inspiring, overseeing and instructing people towards
accomplishment of organizational goals.

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b. Staffing d. Directing
16. It involves the selection of a course of action from among two or more possible
alternatives in order to arrive at a solution for a given problem.
a. Planning c. Decision-making
b. Brainstorming d. Goal Setting
17. It is a terrific technique for idea generation, coming up with alternatives and possibilities,
discovering fatal flaws, and developing creative approaches. The better you are at
selecting participants, setting the stage, and encouraging discussion, the better your
outcomes are likely to be.
18. It is the process of identifying something that you want to accomplish and establishing
measurable goals and time frames.
19. It is the type of planning that includes tactics that the organization plans to use to achieve
what is outlined in the strategic plan.
a. Tactical Planning c. Strategic Planning
b. Contingency Planning d. Operational Planning
20. It is the type of planning that can be helpful in circumstances that call for a change.
a. Tactical Planning c. Strategic Planning
b. Contingency Planning d. Operational Planning
II. MATCHING TYPE. Read the following items carefully. Choose the correct answer from
the choices in the box and write the letter on the space provided
A. Porter-Lawler Model H. PESTEL analysis O. Organizing
B. Management I. Staffing P. Henri Fayol
C. Operational Planning J. Scalar Chain Q. Controlling
D. SWOT Analysis K. Planning R. Classical Management Theory
E. Environmental Forces L. Economic Development S. External Business Environment
F. Directing/Leading M. Strategic Planning T. Tactical Planning
G. Goal Setting N. Contingency Planning

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___1. This is an art of knowing what it is to be done and seeing that it is done in the best possible
manner.
___2. He is claimed to be the real father of modern management who developed the 14
Principles of Management that could be used in all management situations, irrespective of the
organizational framework.
___3. One of the 14 Principles of Management which is a line of authority, a chain of superiors
from the highest to the lowest ranks. And, because it is an error of a subordinate to depart
needlessly from the lines of authority, the chain should be short-circuited.
___4. It is the oldest management theory that focuses on operations and the creation of standards
to increase production output.
___5. It is a theory of motivation that assumes that rewards cause satisfaction and that
sometimes performance produces reward.
___6. It refers to the forces/factors outside the organization which may affect, either positively or
negatively, the performance of the organization.
___7. It is defined as external and internal factors which affect the future success of the organization
business or company and these forces requires a regular monitoring to cope up with these factors to help
in decision making.
___8. It is a framework used to evaluate an organization’s competitive position and to develop

strategic planning developed by Jerome McCarthy.
___9. It is a framework or tool used to analyze and monitor the external environmental factors
that may have a profound impact on an organization’s performance.
___10. It describes a change in a country’s economy involving qualitative and quantitative

improvements that also consider the social, political, cultural, and spiritual aspects of the
country’s growth.
___11. It is a rational and systematic way of making decisions today that will affect the future of
the company.
___12. It requires a formal structure of authority and the direction and flow of such authority through
which work subdivisions are defined, arranged and coordinated so that each part relates to the other part
in a united and coherent manner to attain the prescribed objectives.
___13. It is the function of hiring and retaining a suitable workforce for the enterprise both at
managerial as well as non-managerial levels. It involves the process of recruiting, training,
developing, compensating and evaluating employees and maintaining this workforce with proper
incentives and motivations.

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___14. It is the process in which the managers instruct, guide and oversee the performance of the
workers to achieve predetermined goals.
___15. It is a systematic exercise which is called as a process of checking actual performance against the
standards or plans with a view to ensure adequate progress and also recording such experience as is
gained as a contribution to possible future needs.
___16. It is a type of planning typically describes the day-to-day running of the company and it
is described as single use plans or ongoing plans that includes policies for approaching problems,
rules for specific regulations and procedures for a step-by-step process for accomplishing
objectives.
___17. It is a type of planning that includes a high-level overview of the entire business and it is
the foundational basis of the organization and will dictate long-term decisions.
___18. It is a type of planning that includes tactics that the organization plans to use to achieve
what is outlined in the strategic plan.
___19. It is a type of plan that are made when something unexpected happens or when something
needs to be changed.
___20. It is the process of identifying something that you want to accomplish and establishing
measurable goals and time frames.
III. ESSAY. Answer the following questions. (5 points each)
1. Why do you think you need to study the nature and concept of organization and
management? What is the importance of studying organization and management?
2. What is the importance of the planning concepts in the business success?

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FINAL EXAM
PRINCIPLES OF MANAGEMENT AND ORGANIZATION
NAME: SCORE:____________________
I. MATCHING TYPE. Read the following items carefully. Choose the correct answer from
the choices in the box and write the letter on the space provided
A. Recruitment H. Content Theories O. Reinforcement Theory
B. Organization I. Process Theories P. Job Analysis
C. Selecting J. System Q. Controlling
D. Motivation K. Controlling R. Classical Management Theory
E. Valence L. Formal Organization S. Employee Remuneration
F. Behavioral control M. Organizing T. Management Control System
G. Divisional Structure N. Control points
___1. It is the function of management that involves assigning tasks, grouping tasks into
departments, delegating authority and allocating resources across the organization.
___2. It is the type of organizational structure that groups each organizational function into a
division. Each division contains all the necessary resources and functions within it to support that
product line or geography.
___3. It is an organizational theory that claims that there is no best way to organize a
corporation, to lead a company, or to make decisions.
___4. It is a collection of people who work together to attain specified objectives.
___5. It is a type of organization structure when the two or more than two persons come
together to accomplish a common objective, and they follow a formal relationship, rules, and
policies are established for compliance, and there exists a system of authority.
___6. It is a management function that appoints people at different positions to run the
organization and ensures that people with desired skills and abilities occupy these positions to
contribute to organizational goals.

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___7. It is the process of searching for prospective employees and stimulating them to apply for jobs in
the organization. It stands for finding the source from where potential employees will be selected.
___8. It is the process of eliminating those who appear unpromising, the purpose of this process
is to determine whether a candidate is suitable for employment in the organization or not.
___9. It is the process of identifying, analyzing, and determining the duties, responsibilities,
skills, abilities and work environment of a specific job.
___10. It refers to the reward or compensation given to the employees for their work
performances.
___11. This is what influences individuals to behave in a certain way and combined with
individual skill and ability results in performance.
___12. It is the motivational theory that finds the answer to what motivates an individual and is
concerned with individual needs and wants.
___13. It is the motivational theory that address more the issues relating to “how” the process
works and sustains itself over time, such as factors that determine the degree the effort, the
continuation of effort or the modification of effort.
___14. A theory of motivation that mainly focuses on what happens when an individual takes
some action. It is observed that people tend to repeat those activities which gives them pleasure
and avoid the activities with negative consequences.
___15. It refers to the value that an individual place on a particular outcome or strength of an individual’s
preference for the expected rewards of the outcome.
___16. It is defined as the function of management which helps to seek planned results from the
subordinates, managers and at all levels of an organization and it all helps in measuring the
progress towards the organizational goals and brings any deviations and indicates corrective
action.
___17. It is a control system that is designed to bring the different activities as one in
organization to fulfill overall objectives. It simply describes the design, connection and operation
of different planning and control frameworks within management.
___18. It is a work that is aimed at checking of the compliance of the results of certain work in a
business process with formulated requirements to its results.
___19. It is a set of detailed methods, procedures and routines created to carry out a specific
activity, perform a duty or solve a problem .

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___20. It is a type of control factor that fall into categories of type of instructions given, degree
of instruction, evaluating systems and training.
II. MULTIPLE CHOICE. Read the following items carefully. Encircle the letter of the
correct answer.
21. It is one of the most common organizational structures in which this structure, the
organization group employees according to a specialized or similar set of roles or task.
a. Functional Structure c. Divisional Structure
b. Matrix Management d. Classical Theories
22. It is a type of organizational structure that groups each organizational function into a
division which contains all the necessary resources and functions within it to support that
product line.
23. It is an organizational structure in which some individuals report to more than one
supervisor or leader, relationships described as solid line or dotted line reporting.
24. It is an organizational model that claims that there is no best way to organize a
corporation, to lead a company, or to make decisions and this is a model of leadership
that contains the relationship between leadership style and the favorable-ness of the
situation.
a. Contingency Models c. Neo- Classical Theories
b. Classical Theories d. Systems Approach
25. It is a type of formal organization that are characterized by forced membership and
exercising control by force.
a. Coercive Systems c. Normative Associations
b. Utilitarian Structures d. Systems Approach
26. It is a staffing process that means the movement of an employee from one job to another
without increment in pay, status or responsibilities and this process needs to evaluate on a
timely basis.
a. Training c. Transfer
b. Placement d. Recruitment

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27. It is a staffing process done after selection of an employee that provides employees with
training and keep the employees in touch with the various new development in the
organization.
28. It is a staffing process that means putting the person on the job for which he is selected
and it includes introducing the employee to his job.
29. It is a staffing process of searching for prospective employees and stimulating them to
apply for jobs in the organization and it stands for finding the source from where
potential employees will be selected.
30. It is a comparative process of analyzing, assessing, and determining the relative

value/worth of a job in relation to the other jobs in an organization and the main objective
is to analyze and determine which job commands how much pay.
a. Job Analysis c. Job Specification
b. Job Description d. Job Evaluation
31. It is leadership style in which the leader makes decisions based on the input of each
member.
a. Laissez-Faire Leadership c. Strategic Leadership
b. Bureaucratic Leadership d. Democratic Leadership
32. It is leadership style in which it means “let them do” and leaders who embrace it afford
nearly all authority to their employees.
33. It is a leadership style in which leaders go by the books and this style of leadership might
listen and consider the input of employees but the leader tends to reject an employee’s
input if it conflicts with company policy or past practices.
34. It is a leadership style in which leaders sit at the intersection between a company’s main
operations and its growth opportunities. He or she accepts the burden of executive
interests while ensuring that current working conditions remain stable for everyone else.

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35. It is the basis of the reinforcement theory of motivation in which an individual is likely to
repeat those actions having the positive consequences and will avoid those behaviors that
result in negative or unpleasant outcomes.
a. Law of Effect c. Adam’s Equity
b. Reinforcement Theory d. Vroom’s Expectancy
36. It involves the control over intermediate-term operations and processes but not business
strategies. This control system ensure that activities are consistent with established plans.
a. Financial Control c. Operational Control
b. Control Points d. Behavioral Control
37. It is a centering or referring to the facts that they need to do, controlling their actions
inside the environment where they are involve to do such things, this kind of control will
be specific in every aspect.
38. Are the strategies, approaches and means by which an organization traces and controls
the distribution of its monetary assets.
39. This are tools for business process management and get all necessary information on the
process which can be used for the analysis and necessary improvements in the
organization.
40. It is a control system that is designed to bring the different activities as one in
organization to fulfill overall objectives. It simply describes the design, connection and
operation of different planning and control frameworks within management.
a. Management Control System c. Control System
b. Management d. Management Control System
III. ESSAY. Answer the following questions. (5 points each)
3. Why does employee relations important in any business and organizations?

4. Explain the management of change and diversity in the workplace?


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Principles of Management and Organization-Instructional

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Republic of the Philippines

INSTRUCTIONAL MATERIALS FOR

PUP A. Mabini Campus, Anonas Street, Sta. Mesa, Manila 1016

THE COUNTRY’S 1Downloaded

Principles of Management and Organization

NATURE AND CONCEPT OF MANAGEMENT 5 - 21

THE FIRM AND ITS ENVIRONMENT 22 - 31

PRINCIPLES OF MANAGEMENT FUNCTION 32 – 35

CONCEPT OF PLANNING FUNCTION 36 – 45

CONCEPT OF ORGANIZING FUNCTION 46 - 53

CONCEPT OF STAFFING FUNCTION 54 – 69

CONCEPT OF DIRECTING/LEADING FUNCTION 70 – 78

CONTROLLING FUNCTION OF MANAGEMENT 79 - 86

Principles of Management and Organization

At the end of the semester, the student will be able to:

 Explain the fundamental concepts, principles and processes of business

 Understand and apply these functional areas of management in business and

 To use analytical thinking and problem-solving skills to address specific problems

 Integrate management principles into Management practices

Principles of Management and Organization

Management is a process of designing and maintaining an environment in which

Management is to forecast, to plan, to organize, to command, to coordinate, and

• Discuss the meaning and concepts of management

DEFINITIONS AND FUNCTION OF MANAGEMENT

Management is a distinct process consisting of activities, planning, organizing,

Management is a process of designing and maintaining an environment in which

Principles of Management and Organization

Three key characteristics define the process of management

Principles of Management and Organization

1. It helps in Achieving Group Goals- Management converts disorganized resources

Planning – According to KOONTZ, ―Planning is deciding in advance - what to

EVOLUTION OF MANAGEMENT THEORIES

Principles of Management and Organization

1910s-1940s: Management as Science

1950s-1960s: Functional Organizations

1970s: Strategic Planning

1980s: Competitive Advantage

1990s: Process Optimization

2000s: Big Data

Principles of Management and Organization

The Famous Theories on the Functions of Management

Henri Fayol is claimed to be the real father of modern management. He was a

Henri Fayol‟s 14 Principles of Management

2. Authority and Responsibility: In this principle, Fayol conceives authority as a

Principles of Management and Organization

6. Subordination of Individual Interest to General Interest: In any group, the interest

7. Remuneration of Personnel: Fayol perceives that remuneration and methods of

Principles of Management and Organization

The Question The Function The Result

WHERE DID MANAGEMENT THEORIES ORIGINATE?

HOW ARE MANAGEMENT THEORIES CLASSIFIED?

Principles of Management and Organization

Classical Management Theory is the oldest management theory. Classical Management

a. Scientific Management Theory is a very early management theory focused on

b. Administrative Management Theory- Administrative Management Theory was

c. Bureaucracy Theory- Bureaucracy Theory promotes reason to guide management

Behavioral Management Theory Increasingly complex industries and organizations gave

a. Human Relations Theory- Human Relations Theory considers the organization as a

Principles of Management and Organization

b. Behavioral Science Theory- Behavioral Science Theory combines elements of