1 0 0 Final

UTTARANCHAL UNIVERSITY
(Established vide Uttaranchal University Act, 2012, Uttarakhand Act No. 11 of 2013)
Premnagar-248007, Dehradun, Uttarakhand, INDIA
Program Name OMBA Program Code 501

Course Code OMBA-111 Credit 4
Year/Semester 1/1 L-T-P 4-0-0
Course Name Principles and Practices of Management
Objectives of the Course
● To understand how an organization functions, and in understanding the complexity and wide
variety of issues managers face in today’s business firms.
● To discuss the various concepts of planning, Decision making and controlling to help solving
managerial problems.
● To study and understand management concepts and styles in Global context.
● To familiarize the students with the contemporary issues in management.
UNIT-I: Evolution of management thought, systems and contingency approach for understanding
organizations, managerial processes, functions, skills and roles in an organization
UNIT-II: Social responsibility of business, Scope and challenges of CSR in Indian scenario,
Management practices from past to present, Different levels of management, Managerial skills,
Roles & Functions, Manager and Business environment.
UNIT-III: Planning- Objective of planning, planning process, Types of planning, Types of plans,
Corporate planning, Management by Objective, Decision-making- types, process & techniques,
making decision effective.
UNIT-IV: Organizing & staffing- Meaning of organization, types of organization, Organization
structure, Span of management, Line and staff relationship, Departmentation, Delegation-
Centralization and decentralization of authority, Meaning of staffing, Recruitment, selection &
placement, Training & development.
UNIT-V: Directing & Controlling- Principle of directing, Essence of coordination, Basic control
process, Different control techniques, Management by exception
Course Outcomes (CO)
CO1 Developing understanding of managerial practices and their perspectives.
CO2 Applying planning and managerial decision-making skills.
CO3 Comprehend and practice Indian Ethos and Value Systems.
CO4 Applying value-based management and ethical practices.
Books for References:
1. Koontz Harold & Weihrich Heinz – Essentials of management (Tata McGraw Hill, 5th Edition,
2008).
2. Dr. Premvir Kapoor, Principles and Practices of Management, Khanna Publishing House, Delhi.
3. Robbins & Coulter - Management (Prentice Hall of India, 9th Edition).
4. Robbins S.P. and Decenzo David A. - Fundamentals of Management: Essential. Concepts and
Applications Pearson Education, 6th Edition.
5.Weihrich Heinz and Koontz Harold- Management: A Global and Entrepreneurial Perspective.
6. James F.Stoner, et al, Management, Pearson Education Delhi, 2008.
7. Principles of Management, George R. Terry & S.G. Franklin, AITBS, Delhi.
8. L. M. Prasad- Principles and Practices of Management, Sultan Chand & Sons, 7 th Edition, 2007.
9. N. M. Khandelwal - Indian Ethos & Values for Management- Himalaya Publishing.
Principles and Practices of Management
UNIT – 2 SOCIAL RESPONSIBILITY
STRUCTURE
2.0 Objectives
2..1 Introduction
2..2 Social responsibility of business
2.3 Scope and challenges of CSR in Indian scenario
2.4 Management practices from past to present
2.5 Different Levels of management
2.6 Managerial skills
2.7 Roles and functions of manager
2 .8 Business environment
2.9Let Us Sum Up
2.10 Key Words
2.11Some Useful Books
2.12 Answer to check your progress
2.13 Terminal Questions
2.0 OBJECTIVES
Learners will be able to learn

o Scope of business
o Challenges of CSR
o Responsibilities of business
o Levels of management
o Business environment
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2.1 INTRODUCTION
A business can be established, but to successfully sustain a business, the

business needs resources like finance, for which it has to depend on
financial institutions. Acceptance of social norms, for which it has to
depend on society. Proper market conditions, for which it has to depend
on the market. The sale of products/services, for which it has to depend
on the customers. The labour, for which it has to depend on society.
Then there are natural resources and raw material, for which it has to
depend on Nature. Also, the legal support of the government, for which it
has to depend on the government. There are many factors and dimensions
that affect Business Environment. These factors are many different
components of a single concept called Business Environment.
These factors which business depends upon aren’t standstill, they are very
dynamic and ever-changing. For example, trends, the trend of fidget
spinners gave the biggest big push the silicone mold industry has ever
received.The changing needs of customers and new innovations in
the market are a part of the business environment. The challenge for
businesses in this technological era is not to enter the market but to
survive in the market. To survive in the market means to adapt to the
changes-as fast as possible. To adapt to the changes means to be aware of
the business environment.
All living creatures including human beings live within an environment.

Apart from the natural environment, environment of humans include
family, friends, peers and neighbors. It also includes man-made structures
such as buildings, furniture, roads and other physical infrastructure. The
individuals do not live in a vacuum. They continuously interact with their
environment to live their lives.
Just like human beings, business also does not function in an isolated
vacuum. Businesses function within the environment and have to negotiate
their way through it.
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The extent to which the business thrives depends on the manner in which
it interacts with its environment. A business, which continuously remains
passive to the relevant changes in the environment, gradually fade away
from the market. To be successful business one not only have to recognize
different elements of the environment but also respect, adapt to or have to
manage and influence them. The business must continuously monitor and
adapt to the environment if it is to survive and prosper. Disturbances in the
environment may spell extreme threats or open up new opportunities for
the firm. A successful business has to identify, appraise, and respond to
the various opportunities and threats in its environment.
As stated above, the success of every business depends on adapting itself

to the environment within which it functions. For example, when there is
a change in the government polices, the business has to make the necessary
changes to adapt it to the new policies. Similarly, a change in the
technology may make the existing product useless or of no importance, as
we have seen that the introduction of computer has replaced the
typewriters; the color television has made the black and white television
out of fashion. Again a change in the fashion or customers’ taste may shift
the demand in the market for a particular product, e.g., the demand for
jeans reduced the sale of other traditional wear. All these aspects are
external factors that are beyond the control of the business. So the business
units must have to adapt themselves to these changes in order to survive
and succeed in business. Hence, it is very necessary to have a clear
understanding of the concept of business environment and the nature of its
various components.
A business firm is an open system. It gets resources from the environment
and supplies its goods and services to the environment. There are different
levels of environmental forces. Some are close and internal forces whereas
others are external forces. External forces may be related to national level,
regional level or international level. These environmental forces provide
opportunities or threats to the business community. Every business
organization tries to grasp the available opportunities and face the threats
that emerge from the business environment.
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Business organizations cannot change the external environment but they

just react. They change their internal business components (internal
environment) to grasp the external opportunities and face the external
environmental threats. It is, therefore, very important to analyze business
environment to survive and to get success for a business in its industry. It
is, therefore, a vital role of managers to analyze business environment so
that they could pursue effective business strategy. A business firm gets
human resources, capital, technology, information, energy, and raw
materials from society. It follows government rules and regulations, social
norms and cultural values, regional treaty and global alignment, economic
rules and tax policies of the government. Thus, a business organization is
a dynamic entity because it operates in a dynamic business environment.
2.2 SOCIAL RESPONSIBILITY OF BUSINESS
An organization performs different activities to fulfill its profit-earning

motive and satisfy the needs of society. While fulfilling the expectations
of society, a business has some obligations towards society and has to
respect its norms and values. It means as society is permitting an
organization to run its business, set up factories, and perform other
activities to earn a profit, it also wants the business to not enter into
anything undesirable from their point of view or which is harmful to them.
Some of the socially desirable practices which are expected from the
companies are: supply of quality goods and services, providing goods at a
fair price, creating healthy and better working conditions, preventing
activities that can create pollution, or installing devices to control
pollution, ensuring that the customers’ complaints are taken care of, etc.
However, the socially undesirable practices which should be avoided by
the companies are the production and sale of bad quality goods and
services, polluting the environment, unfair trade practices, fraudulent
activities, etc.
What Is Social Responsibility?
Social responsibility mans that businesses in addition to
maximising shareholder value, must act in a manner benefiting society,
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not just the bottom line. Social responsibility has become increasingly
important to investors and consumers who seek investments that not
only are profitable but also contribute to the welfare of society and the
environment. While critics have traditionally argued that the basic
nature of business does not consider society as a stakeholder, younger
generations are embracing social responsibility and driving change.
Social responsibility means that individuals and companies must act in

the best interests of their environment and society as a whole. As it applies
to business, social responsibility is known as corporate social
responsibility (CSR) and is becoming a more prominent area of focus
within businesses due to shifting social norms.
The crux of this theory is to enact policies that promote an ethical balance
between the dual mandates of striving for profitability and benefiting
society as a whole. These policies can be either commission
(philanthropy: donations of money, time, or resources) or omission (e.g.,
“go green” initiatives such as reducing greenhouse gases or abiding by
U.S. Environmental Protection Agency regulations to limit pollution).
Many companies, such as those with “green” policies, have made social
responsibility an integral part of their business models, and they have
done so without compromising profitability.
Additionally, more investors and consumers are factoring in a

company’s commitment to socially responsible practices before making
an investment or purchase. As such, embracing social responsibility can
benefit the prime directive: maximisation of shareholder value.
There is a moral imperative as well. Actions—or the lack thereof—will

affect future generations. Put simply, social responsibility is just good
business practice, and a failure to do so can have a deleterious effect on
the balance sheet.
Social responsibility can also boost company morale, especially when a

company can engage employees with its social causes. An
organization’s obligation to make decisions and perform them for the
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benefit of society and its values is known as social responsibility. It is

assumed under social responsibilities that the businesses will respect the
values and aspirations of society and try their best to fulfill these
aspirations and accomplish their business goals.
In simple terms, it is the responsibility of an organization to be a
responsible member of society and work towards its betterment.
However, according to critics, social responsibility practices are exact
opposites of the major motive of a business’s existence. Social
responsibility in business is also known as Corporate Social
Responsibility (CSR). For example, a factory not disposing of its
chemicals and waste in the water bodies, improving working hours and
conditions of the employees, donating part of the firm’s profits to
educational services for poor children, etc. Social responsibilities
performed by the companies not only help society, but also help the
business gain a positive image and build its brand in the market. It
motivates the employees of the firm to work hard, as they feel good to be
a part of an organization that works well for society and respects its
values.
Fig 2.1 Social responsibility

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What Are the 4 Types of Social Responsibility?
The International Organization for Standardisation (ISO) emphasises
that a business’s ability to maintain a balance between pursuing
economic performance and adhering to societal and environmental
issues is a critical factor in operating efficiently and effectively.
The key ways that a company embraces social responsibility include

philanthropy, promoting volunteering, ethical labor practices, and
environmental changes.
For example, companies managing their environmental impact might

look to reduce their carbon footprint and limit waste. There’s also the
social responsibility of ethical practices for employees, which can mean
offering a fair wage, which arises when there are limited employee
protection laws.
1. Economic Responsibility
As we know, a business organization is an economic entity; therefore,
economic responsibility is its primary social responsibility. In simple
terms, economic responsibility means producing goods and services
according to the needs and wants of the customers and selling them the
same at a profit. It means that the organizations should understand whether
the customers are demanding quality or price and then provide them with
the same. Earning profit is a responsibility of the business as it ultimately
increases the incentives of the employees. Therefore, the economic growth
of an organization affects society as a whole.
2. Legal Responsibility
It is the duty and responsibility of an organization to legally abide by the
rules, laws, and regulations while performing business activities. As the
authorities enact these laws for the good of society, an organization
following these rules is a socially responsible firm. Besides, an
organization performing activities as per the laws gets no interference
from the government. Legal responsibilities include paying taxes on time
to the government, keeping its books of accounts and financial statements
clean and accurate, etc.
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3. Ethical Responsibility
It is the behaviour expected from the business organizations’ by society;
however, it is not codified in the law. Therefore, there is no legal obligation
on the companies to perform ethically responsible activities. Ethical
responsibility is beyond the laws and includes fair trade practices,
respecting the religious sentiments of people, maintaining and protecting
the environment, etc. It also means that a business should not get involved
in black marketing, adulteration, fraud, etc.
4. Discretionary Responsibility
It is a philanthropic responsibility and is completely voluntary. It includes
charitable services, providing education facilities to poor people, helping
the people affected by floods or other natural calamities, donating to
healthcare facilities for those who cannot afford them, etc. The
management of an organization is responsible for avoiding speculative
activities and safeguarding its capital investment by undertaking healthy
business ventures only that can provide them with good ROI(Returns on
Investment).
Examples of Socially Responsible Corporations

Social responsibility takes on different meanings within industries and
companies. For example:
• Starbucks Corp. (SBUX) committed to social responsibility from

the start, including sustainability and community welfare. It
purchases Fair Trade Certified ingredients to manufacture
products and actively supports sustainable farming in the regions
where ingredients are sourced.
• Ben & Jerry’s Homemade Holdings Inc. has integrated social
responsibility into the core of its operations. Like Starbucks, the
company purchases Fair Trade Certified ingredients.
• The Lego Group, manufacturer of Lego toys, has committed to
reducing its carbon impact. It was named a World Wildlife Fund
Climate Savers Partner in 2014.
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• Salesforce.com Inc. (CRM) developed what it calls the 1-1-1

model. The company dedicates 1% of its equity, 1% of its
product, and 1% of employees’ time back to the community.
• Big-box retailer Target Corp. (TGT), also well known for its
social responsibility programs, has donated money to
communities in which the stores operate, including education
grants.
Criticism of Corporate Social Responsibility

Not everyone believes that businesses should have a social conscience.
Economist Milton Friedman stated that “‘social responsibilities of
business’ are notable for their analytical looseness and lack of rigor.”
Friedman believed that only individuals can have a sense of social
responsibility. Businesses, by their very nature, cannot. Some experts
believe that social responsibility defies the very point of being in
business: profit above all else.
However, social responsibility has become more mainstream and is now

practiced among a wide range of companies. Younger generations, such
as millennials and Gems are embracing social responsibility and driving
change in the workplace and as consumers.
What are examples of social responsibility?

Social responsibility includes companies engaging in environmental
preservation efforts, ethical labor practices, philanthropy, and promoting
volunteering. For example, a company may change its manufacturing
process to reduce carbon emissions.
What are the main benefits of social responsibility?

Benefiting society and lessening the negative impacts on the
environment are among the main benefits of social responsibility.
Consumers are increasingly looking to buy goods and services from
socially responsible companies, which can have a positive impact on
their bottom line.
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Advantages of Social Responsibility

A company can boost its morale and enhance work culture when they
can engage their employees with some social causes. There are many
factors that can have a positive impact on the business while delivering
social responsibilities. Such few factors are
• Justification for existence and growth
• The long-term interest of the firm
• Avoidance of government regulation
• Maintenance of society
• Availability of resources with business
• Converting problems into opportunities
• A better environment for doing business
• Holding business responsible for social problems
How does social responsibility benefit companies?

In addition to potentially increasing the bottom line, companies that
implement social responsibility programs can also boost their brand
image. Social responsibility programs can also have a positive impact on
morale among employees.
Disadvantages of Social Responsibility

Like there are many advantages of social responsibility there are
similarly many disadvantages for business. Few factors are mentioned
below.
• Violation of profit maximisation objective
• Burden on consumers
• Lack of social skills
• Lack of broad public support
Opinions in Favour of Social Responsibilities:

Following Are the Opinions in Favour of Social Responsibilities:
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(1) Justification for Existence and Growth
• Good quality products help in expansion of the business.
• When the business organisation keeps on providing good quality

products, it’s actually a fulfilment of social responsibility.
(2) Long Term Interest of the Business
• Every business wants long term profits and gains.
• If increasing no. Of stakeholders are not giving their best, there

may be the withdrawal of cooperation of society.
• It can be noted that the public image of the business can be

improved by focusing on social goals.
(3) Avoidance of Government Regulations
• Good social behaviour is an ethical aspect of the business. They

are beyond the law.
• Business entities avoid government regulations as it their

freedom.
(4) Maintenance of Society
• The business should take social responsibilities.
• However, the law is not made for every situation.
• People who are against the organisation can come into conflict.
They can also harm the organisation.
• This situation can create criminal intent in society.
(5) Availability of Resources With Business
• Business entities have huge set-ups and good infrastructure.
• These organizations have access to different types of resources.
• These resources should be used for fulfilling social

responsibilities.
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(6) Holding Business Responsible for Social Problems
• Business activity should see if any type of activity is causing

harm to society.
• The business should themselves held responsible for causing

harm rather than waiting for any government or social team to
come and correct them.
Opinions Which Are Against the Idea of Fulfilment of Social

Responsibility:
Following Are the Opinions Against Social Responsibilities:
(1) Violation of Profit Maximisation Objective
• The sole motive of the business is profit maximisation.
• Supporting social responsibilities is violating the profit-making

objective of the business.
• It would be better if entities increase the profits through increased

efficiency.
(2) Burden on Consumers
• Social responsibilities like environment protection, pollution

control are very costly in nature.
• If entities opt for these social responsibilities, they always try to

shift their burden on ultimate consumers.
• It is not reasonable to charge the customers on the name of social

responsibilities.
(3) Lack of Social Skills
• Every entity does not have enough skills and knowledge to solve
each and every social problem.
• This can be the reason for a poor image in the society.
• So, these problems should be solved by some specialised parties.
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(4) Lack of Broad Public Support
• Generally, society does not accept the involvement of business

entities in social programs.
• That is why it gets difficult for the business to solve the problems
without the participation of the public.
Social Responsibilities for Different Interest Groups

(1) Responsibility Towards the Shareholders
• Shareholders are the owners of the company.
• The company should make all the efforts to maximise and protect
shareholder’s wealth.
• Sharing of useful information with the shareholders, utilisation of

funds etc.
(2) Responsibility Towards the Workers
• Workers are the key persons behind company success.
• Management of the enterprise must provide the proper working

conditions to the workers.
• Workers should get fair salaries and wages.
(3) Responsibility Towards the Consumers
• It is the consumer who buys the company’s product & services.
• So, it is the responsibility of the company to provide the right

quality, right quantity with the right price to the consumer.
• There should not be the unfair trade practices like adulteration,

poor quality, courtesy to the customers etc.
(4) Responsibility Towards the Government & Community
• Enterprises must follow the laws and regulations of the country/

state in which it is operating.
• The organisation should interact with society to know what they

require.
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• It should maintain proper infrastructure, proper disposal system

and should not cause harm to the society in any manner.
Need for Social Responsibility

Although an organization exists with the aim of maximising profits;
however, it should not be its sole motive and should commit to society. An
organization needs social responsibility because of the following reasons:
• Changing expectations of society:
Today’s world has changed a lot compared to the past years. Now, society
expects different things from a business besides the supply of goods and
services. As society provides companies with different resources like
labour, natural resources, etc., it expects something good in return for their
welfare.
• Reputation:
Companies spend a lot of money on brand building and a good image in

society. To do so, an organization can also perform socially responsible
practices that will it result in profitability, increased sales, sustainable
growth, a good image and attraction of talent.
• Avoidance of government interference:
Government has enacted various laws, putting moral and legal pressure on
the companies to perform socially responsible activities. If the company
fails or avoids these practices, the government will interfere in the
business. Therefore, to avoid such interference by the government,
companies need to perform their social responsibilities.
• Long-term self-interest:
Practicing socially responsible practices not only helps society, but also
proves to be beneficial for the companies in the long run. It means that if
a company has an image in the market as a brand or firm that serves society
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besides earning a profit, it will build the company’s image and will be
good for its self-interest.
• Contribution to social problems:
Businesses create some of the social problems, like pollution, inequality,

discrimination, unsafe workplace, etc. Therefore, it is those firms’ duty
and obligation to perform socially responsible activities to solve these
social problems and make society better and safe.
• Better environment for business:
Businesses use natural resources for their daily activities of the business
and usually degrade the environment in the process. Therefore, business
organizations need to avoid environmental degradation caused by them. It
not only benefits society, but also gives firms a chance to grow their
business in a healthy and safe environment.
• Growth of Consumer:
The consumer of the present world is more educated and aware of their
rights and powers as compared to the past. They know when a business is
engaged in unfair trade practices, giving them bad quality goods and
services, charging more price, etc., and what measures they can take for
the same. Therefore, organizations need to work with social responsibility
to retain existing customers and attract more.
• Optimum utilisation of resources:
One of the aims of businesses while producing and selling goods and
services to customers is optimum utilisation of resources. As we know that
with the increase in population, resources have become scarce, and we
need to save them for future generations. Therefore, business
organizations need to make optimum utilisation of resources and work
with social responsibility.
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2.3 SCOPE AND CHALLENGES OF CSR IN

INDIAN SCENARIO
CSR in the Indian Scenario Abstract Globally, there is growing concern

about the impact of business on environment and society. It is not enough
for businesses to get financial returns only; they need to get social returns
also. Financial performance alone is not the indicator of success for a
business today. Important indicator of sustainable development of
economy is measuring the performance of businesses in terms of what
impact their operations have had on environment, society and
government. Corporate social responsibility or CSR is a process to
ensure businesses are conducting sustainable business activities in a
manner that has a positive impact on consumers, employees,
communities, general public and the environment. An increasing number
of companies have started promoting their businesses by applying CSR
strategies because the customers, the public and the investors expect the
business people to do business in a sustainable and responsible manner.
Also the governments of various countries want the business units to
include CSR in their vision, mission and in their strategic plans. They
want corporations to implement CSR initiatives which would bring about
overall development of society and their businesses. Through these CSR
initiatives, government wants to bring about rural development too. So,
Corporate Social responsibility (CSR) is basically a concept which
corporates voluntarily adopt in order to achieve a better society and
cleaner environment. This article deals with what is CSR, its evolution in
India, the benefits of CSR, the current CSR practices of eminent Indian
companies and the deceptive claims companies make of being good
corporate citizens. Key Words: Corporate social responsibility,
Sustainable development, CSR practices, social returns.
➢ To study the CSR status in India.

➢ To understand the meaning and various models of CSR.
➢ To study the policies governing CSR in India.
➢ To study the issues
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➢ & challenges faced by CSR in India.
➢ To make suggestions for accelerating CSR initiatives.
➢ To conduct inter-disciplinary and collaborative research and
document case studies in thrust areas of CSR dealing with
contemporary issues and challenges.
Scope of Corporate Social Responsibility:

1. Environment:
This area involves the environmental aspects of production, covering

pollution control in the conduct of business operations, prevention or
repair of damage to the environment resulting from processing of natural
resources and the conservation of natural resources.
Corporate social objectives are to be found in the abatement of the
negative external social effects of industrial production, and adopting
more efficient technologies to minimise the use of irreplaceable
resources and the production of waste.
2. Energy:
This area covers conservation of energy in the conduct of business
operations and increasing the energy efficiency of the company’s
products.
3. Fair Business Practices:

This area concerns the relationship of the company to special interest
groups.
In particular it deals with:
i. Employment of minorities
ii. Advancement of minorities
iii. Employment of women
iv. Employment of other special interest groups
v. Support for minority businesses
vi. Socially responsible practices abroad.
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4. Human Resources:
This area concerns the impact of organisational activities on the people
who constitute the human resources of the organization.
These activities include:
i. Recruiting practices
ii. Training programs
iii. Experience building -job rotation
iv. Job enrichment
v. Wage and salary levels
vi. Fringe benefit plans
vii. Congruence of employee and organisational goals
viii. Mutual trust and confidence
ix. Job security, stability of workforce, layoff and recall practices
x. Transfer and promotion policies
xi. Occupational health
5. Community Development:
This area involves community activities, health-related activities,
education and the arts and other community activity disclosures.
6. Products:
This area concerns the qualitative aspects of the products, for example
their utility, life- durability, safety and serviceability, as well as their
effect on pollution. Moreover, it includes customer satisfaction,
truthfulness in advertising, completeness and clarity of labelling and
packaging. Many of these considerations are important already from a
marketing point of view. It is clear, however, that the social
responsibility aspect of the product contribution extends beyond what is
advantageous from a marketing angle.
Limitations of Social Reporting and Social Auditing:
Though the importance of social responsibility and reporting is being
recognised by many companies in India, yet its progress and performance
is hindered due to the following reasons:
(a) Not Mandatory – Disclosure of social responsibility information is
not mandatory for private sector units. In the case of public sector units
also ‘order for social overheads schedule’ does not at all fulfil the
requirements of social audit.
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(b) No Standard format – There are not well established concepts,

conventions, postulates and axioms to guide the social accountant in
drafting his accounts and reporting.
(c) Lack of clear cut definition of social reporting – Every enterprise
adopts different methods for measuring, reporting and evaluating social
responsibility as there is no clear cut definition and procedure for social
reporting.
(d) No cadre of social auditors – There is no separate cadre of social
auditors and it is not clear how and who will conduct such audit.
(e) Auditing social cost and benefit is an intricate function – It is
highly doubtful if only accountancy scholars would be able to perform
the stupendous task of identifying and documenting the many sided
social effects of business behaviour and auditing social costs and
benefits.
(f) Evaluation – The performance appraisal on social ground is not
expected by the business owners.
(g) Lack of objectivity – The collection of data, evaluation of accuracy
and objectivity are difficult.
Social Cost Benefit Analysis:
Social Cost Benefit Analysis (SCBA) is a systematic evaluation of an
organisation’s social performance as distinguished from its economic
performance. It is concerned with the possible influences on the social
quality of life instead of economic quality of life. It analyses all such
activities which have a social or macro impact. The development of an
economy not only depends on the quantum of investment but also on the
rational and prudent allocation of resources among various competing
projects.
The technique is most popular for making socially viable decisions of
selection or rejection of projects is based on an analysis of social costs
and social benefits of projects. In other words, social cost-benefit
analysis is an important technique of comparing economic alternatives. It
is used to determine- (a) which alternative or choice is socially viable
(or most suitable) and (b) which alternative is the optimal or the best
solution.
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The need for SCBA arises due to the reason that the criterion used to
measure commercial profitability that guides the capital budgeting in the
private sector may not be an appropriate criteria for public or social
investment decisions. Private investors are more interested in minimising
the private costs and therefore, take into account only those elements
which directly affect, their private gain i.e. private expenses and private
benefits.
Both the private benefits and private expenses are valued at prevailing
market prices. But the existence of externalities in benefits and expenses
introduces bias in market-price based investment decisions. The total
benefits expected from a project to the society are composed of the
private benefits (internal profit or returns) accruing to owner of the
project plus the external benefits (also known as externalities or
spillovers). Thus social benefits or returns equals to internal benefits to
the owner plus the external benefits to the society as whole.
SCBA is a systematic evaluation of an organisation’s social performance
as distinguished from its possible inferences on the social quality of life
instead of economic quality of life. It analyses all such activities which
have a social or macro impact. The development of an economy not only
depends on the quantum of investment but also on the rational and
prudent allocation of resources.
The technique is most popular for making socially viable decisions of
selection or rejection of projects based on an analysis of social cost and
social benefits of projects. As an aid to planning, evolution and decision
making, the cost-benefit analysis is a scientific quantitative appraisal of a
project to determine whether the total social benefits of the project justify
the total social cost. United Nations Industrial Development Organization
(UNIDO) and Organization of Economic Cooperation and Development
(OECD) have extensively conducted studies on SCBA.
CSR IN INDIA
In developing economies like India, CSR is seen as part of corporate

philanthropy in which corporations augment the social development to
support the initiatives of the government. However with time, the
scenario of CSR has changed from being philanthropic to being socially
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responsible to multi stake holders. The period of 1960s and 1970s saw
an emergence of CSR activities being inbuilt in corporate philanthropy.
(Mohan, 2001). India has been named among the top ten Asian countries
paying increasing importance towards corporate social responsibility
(CSR) disclosure norms. India was ranked fourth in the list, according to
social enterprise CSR Asia's Asian Sustainability Ranking (ASR),
released in October 2009. ̳Sustainability in Asia ESG reporting
uncovered‘ (September 2010) is based on four parameters viz. General,
Environment, Social and Governance. In its study based on 56
companies in India, it observed that India is ranked second in country
ranking in Asia and is ranked one ranking in general category. It is
observed that reporting is strongly followed by companies as well as
they seek international development standards. It could be attributed to
the Indian government compelling the public sector companies to
provide for community investment and other environmental, social and
governance liabilities.
A key finding of the survey conducted in June 2008, aimed at

understanding of the role of corporations in CSR, carried out by TNS
India ( a research organization) and the Times Foundation, revealed that
over 90 per cent of all major Indian organizations surveyed were
involved in CSR activities. Besides the public sector, it was the private
sector companies that played dominant role in CSR activities. A study
on the CSR activities of 300 corporate houses, conducted by an industry
body in June 2009, revealed that Corporate India has spread its CSR
activities across 20 states and Union territories, with Maharashtra
gaining the most from them. The study also revealed that about 36 per
cent of the CSR activities are concentrated in the state, followed by
about 12 per cent in Gujarat, 10 per cent in Delhi and 9 per cent in
Tamil Nadu. The companies have on an aggregate, identified 26
different themes for their CSR initiatives. Of these 26 schemes,
community welfare tops the list, followed by education, the
environment, health, as well as rural development.
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ISSUES OF CSR
Many companies think that corporate social responsibility is a peripheral

issue for their business and customer satisfaction more important for
them. They imagine that customer satisfaction is now only about price
and service, but they fail to point out on important changes that are
taking place worldwide that could blow the business out of the water.
The change is named as social responsibility which is an opportunity for
the business.
Some of the drivers pushing business towards CSR include:
1.The Shrinking Role of Government
In the past, governments have relied on legislation and regulation to

deliver social and environmental objectives in the business sector.
Shrinking government resources, coupled with a distrust of regulations,
has led to the exploration of voluntary and non-regulatory initiatives
instead.
2. Demands For Greater Disclosure
There is a growing demand for corporate disclosure from stakeholders,

including customers, suppliers, employees, communities, investors, and
activist organizations.
3. Increased Customer Interest
There is evidence that the ethical conduct of companies exerts a growing

influence on the purchasing decisions of customers. In a recent survey
by Environs International, more than one in five consumers reported
having either rewarded or punished companies based on their perceived
social performance.
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4. Growing Investor Pressure
Investors are changing the way they assess companies' performance, and
are making decisions based on criteria that include ethical concerns. The
Social Investment Forum reports that in the US in 1999, there was more
than $2 trillion worth of assets invested in portfolios that used screens
linked to the environment and social responsibility.
5. Competitive Labour Markets
Employees are increasingly looking beyond pay-checks and benefits,

and seeking out employers whose philosophies and operating practices
match their own principles. In order to hire and retain skilled employees,
companies are being forced to improve working conditions.
6. Supplier Relations
As stakeholders are becoming increasingly interested in business affairs,

many companies are taking steps to ensure that their partners conduct
themselves in a socially responsible manner. Some are introducing
codes of conduct for their suppliers, to ensure that other companies'
policies or practices do not tarnish their reputation. DrRatnam said the
concept of CSR had different meanings depending on the stakeholder
and that depending on the specific situation of the enterprises
expectations can also vary.
CHALLENGES OF CSR
1. Lack of Community Participation in CSR Activities:
There is a lack of interest of the local community in participating and

contributing to CSR activities of companies. This is largely attributable
to the fact that there exists little or no knowledge about.
CSR within the local communities as no serious efforts have been made
to spread awareness about CSR and in-still confidence in the local
communities about such initiatives. The-situation is further aggravated
by a lack of communication between the company and the community at
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the grassroots. Inadequate communication between the company and the

community limits the scope of conducting CSR activities. In addition,
due to inadequate knowledge of CSR among communities, coupled with
poor communication, problems escalate. There is a general deterrence to
participation by the community.
2. Need to Build Local Capacities:
There is a need for capacity building of the local nongovernmental

organizations as there is serious dearth of trained and efficient
organizations that can effectively contribute to the ongoing CSR
activities initiated by companies. This seriously compromises scaling up
of CSR initiatives and subsequently limits the scope of such activities.
Many NGOs and government agencies presume that companies involved
in CSR activities are only interested in funds. This de-motivates
companies to initiate and implement CSR activities.
3. Issues of Transparency:
Lack of transparency is one of the key issues brought forth by the survey.
There is an expression by the companies that there exists lack of
transparency on the part of the local implementing agencies as they do
not make adequate efforts to disclose information on their programs, audit
issues, impact assessment and utilisation of funds. This reported lack of
transparency negatively impacts the process of trust building between
companies and local communities, which is a key to the success of any
CSR initiative at the local level. Challenges may also be caused by the
commonly-held view that there may be a lack of transparency on the part
of local implementing agencies, and that they do not make adequate efforts
to disclose information on the progress of social programmes that have
been initiated.
In addition, companies and funding agencies are particular that audit
mechanisms, impact assessment, and the utilisation of their funds must
be well-recorded and shared among stakeholders.
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Such a perceived lack of transparency negatively impacts the process of

trust-building between companies and local communities.
4. Non-availability of Well Organised Non-governmental

Organizations:
It is also reported that there is non availability of well organised

nongovernmental organizations in remote and rural areas that can assess
and identify real needs of the community and work along with
companies to ensure successful implementation of CSR activities. This
also builds the case for investing in local communities by way of
building their capacities to undertake development projects at local
levels. One of the reasons for lack of transparency is inadequate local
capabilities. There is a need for building the capabilities of the local
NGOs as there is a serious dearth of trained and efficient organizations
that can effectively contribute to the ongoing CSR activities initiated by
companies. This also limits the ramp up, scope, and size of CSR
initiatives. Similarly, there are also challenges with respect to reaching
remote and rural areas, the inability to assess and identify the real needs
of the community and work with the corporate sector to ensure
successful implementation of CSR activities.
5. Visibility Factor:
The role of media in highlighting good cases of successful CSR

initiatives is welcomed as it spreads good stories and sensitises the local
population about various ongoing CSR initiatives of companies. This
apparent influence of gaining visibility and branding exercise often
leads many nongovernmental organizations to involve themselves in
event-based programs; in the process, they often miss out on meaningful
grassroots interventions.
6. Narrow Perception towards CSR Initiatives:
Non-governmental organizations and Government agencies usually

possess a narrow outlook towards the CSR initiatives of companies,
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often defining CSR initiatives more donor-driven than local in approach.

As a result, they find it hard to decide whether they should participate in
such activities at all in medium and long run.
7. Non-availability of Clear CSR Guidelines:
There are no clear cut statutory guidelines or policy directives to give

a definitive direction to CSR initiatives of companies. It is found that the
scale of CSR initiatives of companies should depend upon their business
size and profile. In other words, the bigger the company, the bigger is its
CSR program.
8. Lack of Consensus on Implementing CSR Issues:
There is a lack of consensus amongst local agencies regarding CSR

projects. This lack of consensus often results in duplication of activities
by corporate houses in areas of their intervention. This results in a
competitive spirit between local implementing agencies rather than
building collaborative approaches on issues. This factor limits company‘s
abilities to undertake impact assessment of their initiatives from time to
time. There is a lack of consensus amongst local communities, agencies,
government bodies, and companies while implementing CSR projects.
This lack of consensus often results in duplication of activities by
corporate houses in their areas of intervention. This results in a competitive
spirit between local implementing agencies rather than a collaborative
approach.
These challenges can be handled by companies by better planning and
coordination. Large companies and trusts are well-geared to draw
support and create success through such initiatives. A strategic analyst
must view CSR as a strategy to normalise the environmental factors of
business and solicit harmony through well-intended programmes.
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Check your progress - 1

1.What is social responsibility?
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2.Full form of CSR?
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3.State the objectives of CSR in Indian scenario?
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2.4 MANAGEMENT PRACTICES FROM PAST

TO PRESENT
The evolution of management and organization emerged around the final

decades of the nineteenth century. Hatch and Cunliffe (2006) proposed
that the prehistoric period of organization and
management theory was formed by two fundamental thoughts namely,
sociological and managerial.
These two schools of thought focused respectively on the
organizational formality and influence within a society as well as the
viable predicaments that managers deal with within those environments.
According to Perrow (1973), the distinctive interests embodied by
sociological and managerial thoughts created tension in organization
and management theory relative to both theory and practice.
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Sociological and managerial ideas represent the basis of scientific

management theory.
According to George (1968), the notable economist Adam Smith was one
of the first to pronounce a theory that elucidates effective production in
work practices that were systematically organized. Smith (1937)
compared the relational performances of two dissimilar manufacturing
methods and discovered that factory workers who specialized in
single/distinct task or limited tasks had greater performance
than those who performed multiple tasks for making a specific
product (for example, pins). He recognized that higher productivity and
efficiency resulted from job specialization. Job specialization
denotes or mandates the division of labour among workers in order to
improve work efficiency and improve organizational performance.
Division of labour outlines the allocation of responsibilities
and tasks in an organization (Hatch & Cunliffe, 2006). Smith concluded
that organizational managers should control and organize the
organization’s work process in order to capitalize on getting the most
out of the advantages of division of labour as well as job specialization.
The first management theory is widely known as Frederick Taylor’s
Scientific Management (Drury, 1915). During the late nineteenth
century and near the beginning of the twentieth century, Taylor
(1911a) posited that national loss in production was as a result of the
awkward, unproductive, and ill-directed movements of workers. He
constantly tried to replace the concept of management “by
rule of thumb” with real time observations resulting in “the one best”
practice. Taylor (1911b) also encouraged the systematic training of
employees in “the one best practice” instead of allowing these
workers individual discretion in their assignments. Additionally, he
believed that the workload could possibly be equally distributed among
the workers and management with management executing the
science and directive and the workers carrying out the labor; hence, each
group being responsible for the work that best suits the group.
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Frederick Taylor adhered to the idea that the length of time and effort
workers spend in producing a finished product or service could be
lessened by enhancing specialization and division of labour
which could result in a greater efficiency in the production process.
Taylor’s concepts of scientific management were concerned with an
organization’s functional type and different techniques needed
for motivating employee initiatives and for enhancing work methods
(Taylor, 1911a). He submitted five elements for the process of scientific
management: science, not a rule-of-thumb, harmony rather
Despite the inspirational stories we read about modern companies – such
as Zappos, Innocent Drinks and Google – most of us are using out-dated
management practices and failing to get the most out of our people.
Not convinced Consider this: 65 per cent of people are unhappy at work,
only 14 per cent understand their company’s strategy, and 75 per cent are
seeking jobs as we speak. Now, what do you think that does for your
bottom line
Management thinking and practice have evolved over the last century as
a result of increased understanding of human and organisational
behaviour, the economic climate and historical context, and the changes
in generations over time. But if we re really honest, much of what we
practice today is due to the consulting industry playing on executives’s
fears and aspirations by selling products and services that cause more
problems than solutions, and our own human weakness of always
looking for a quick fix” even to very complex issues
1910s-1940s: Management as science

Management as Science was developed in the early 20th century and
focused on increasing productivity and efficiency through
standardisation, division of labour, centralisation and hierarchy. A very
“top down” management with strict control over people and processes
dominated across industries.
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1950s-1960s: Functional organisations

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

In the 1970s, we changed our focus from measuring function to resource
allocation and tools such as Strategic Planning (GE), Growth Share
Matrix (BCG) and SWOT were used to formalise strategic planning
processes. 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 organisations in the 1980s.
Tools like Total Quality Management (TQM), Six Sigma and Lean were
used to measure processes and improve productivity. Employees were
more involved by collecting data but decisions were still made
u200bu200bat the top, and goals were used to manage people and
maintain control.
1990s: Process optimisation

Benchmarking and business process reengineering became popular in the
1990s and by the middle of the decade, 60 per cent of Fortune 500
companies claimed to have plans for, or have already initiated such
projects. TQM, Six Sigma and Lean remained popular and a more
holistic, organisation-wide approach and strategy implementation took
the stage with tools such as Strategy Maps and Balance Scorecards.
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2000s: Big Data
Largely driven by the consulting industry under the banner of Big Data,
organisations in the 2000s started to focus on using technology for
growth and value creation. Meanwhile, over-saturation of existing
market space drove to concepts such as Blue Ocean Strategy and Value
Innovation.
How we lead our people and how we solve problems and innovate, are
some of the most important aspects of Management to get right. In our
research, we have therefore looked specifically at two aspects of
Management throughout history, and how these will develop in the
future:
Management Approach: the style of top management, ranging from:

• Control (i.e. your boss tells you what to do and how to do it);
• Set Goals (i.e. your boss sets goals and expectations, but you
have more freedom with regards to how you achieve them); and
• Inspire (i.e. your boss gives you scope and freedom to innovate
on both the what and the how).
Approach to Innovation / Problem Solving: how leaders solve strategic
problems and develop new products and services.
This ranged from:
• Top Down (i.e. solutions are created and come from the top);
• Top Down with Bottom Up Data (i.e. the rest of the organisation
contributes information and experiences, but solutions are still
created at the top); and
• Participatory (i.e. solutions are created collaboratively, and
throughout the organisational levels).
After a century of trying to control people, processes and information, we
have come to a point in organisational history where we need to
recognise that what worked before just simply isn’t enough anymore.
Traditional Management is fine if you want compliance, but if you want
innovation and growth, you need to engage your people on a whole new
level.
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Over the next couple of weeks I will discuss the future of organisations,
and what it really takes to increase value creation, innovation and
employee engagement in today’s business environment.
Early Management Principles
Early management principles were born of necessity. The most

influential of these early principles were set forth by Henri Fayol a
French mining engineer. In 1888, Fayol became director of a mining
company. The company was in difficulty, but Fayol was able to turn it
around and make the company profitable again. When he retired, Fayol
wrote down what he’d done to save the company. He helped develop an
“administrative science” and developed principles that he thought all
organizations should follow if they were to run properly.
Fayol’s 14 Principles of Management
1. Specialization/Division of Labor
By specialising in a limited set of activities, workers become

more efficient and increase their output.
2. Authority/Responsibility
Managers must have the authority to issue commands, but with

that authority comes the responsibility to ensure that the work
gets done.
3. Discipline
Workers must obey orders if the business is to run smoothly. But

good discipline is the result of effective leadership: workers must
understand the rules and management should use penalties
judiciously if workers violate the rules.
4. Unity of Command
An employee should receive orders only from one boss to avoid

conflicting instructions.
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5. Unity of Direction
Each unit or group has only one boss and follows one plan so that
work is coordinated.
6. Subordination of Individual Interest
The interests of one person should never take precedence over

what is best for the company as a whole.
7. Remuneration
Workers must be fairly paid for their services.
8. Centralisation
Centralisation refers to decision making: specifically, whether

decisions are centralised (made by management) or decentralised
(made by employees). Fayol believed that whether a company
should centralise or decentralise its decision making depended on
the company’s situation and the quality of its workers.
9. Line of Authority
The line of authority moves from top management down to the

lowest ranks. This hierarchy is necessary for unity of command,
but communication can also occur laterally if the bosses are kept
aware of it. The line should not be overextended or have too
many levels.
10. Order
Orderliness refers both to the environment and materials as well

as to the policies and rules. People and materials should be in the
right place at the right time.
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11. Equity
Fairness (equity), dignity, and respect should pervade the

organization. Bosses must treat employees well, with a
“combination of kindliness and justice.”
12. Stability of Tenure
Organizations do best when tenure is high (i.e., turnover is low).

People need time to learn their jobs, and stability promotes
loyalty. High employee turnover is inefficient.
13. Initiative
Allowing everyone in the organization the right to create plans

and carry them out will make them more enthusiastic and will
encourage them to work harder.
14. Esprit de Corps
Harmony and team spirit across the organization builds morale

and unity.
Time and Motion
Frederick Winslow Taylor, a contemporary of Fayol’s, formalised the

principles of scientific management in his 1911 book, The Principles of
Scientific Management. Taylor described how productivity could be
greatly improved by applying the scientific method to management; for
this reason, the scientific approach is sometimes referred to as Taylorism.
Taylor is most famous for his “time studies,” in which he used a

stopwatch to time how long it took a worker to perform a task, such as
shoveling coal or moving heavy loads. Then he experimented with
different ways to do the tasks to save time. Sometimes the improvement
came from better tools. For example, Taylor devised the “science of
shoveling,” in which he conducted time studies to determine how much
weight a worker could lift with a shovel without tiring.
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He determined that 21 pounds was the optimal weight. But since the
employer expected each worker to bring his own shovel, and there were
different materials to be shove-led on the job, it was hard to ensure that
21-pound optimum. So, Taylor provided workers with the optimal shovel
for each density of materials, like coal, dirt, snow, and so on. With these
optimal shovels, workers became three or four times more productive,
and they were rewarded with pay increases.
Frank Gilbreth and Lillian Moeller Gilbreth, his wife (who outlived
Frank by 48 years!), were associates of Taylor and were likewise
interested in standardisation of work to improve productivity (Wikipedia,
2009). They went one better on Taylor’s time studies, devising “motion
studies” by photographing the individual movements of each worker
(they attached lights to workers’ hands and photographed their motions
at slow speeds). The Gilbreth’s then carefully analysed the motions and
removed unnecessary ones. These motion studies were preceded by
timing each task, so the studies were called “time and motion studies.”
Applying time and motion studies to bricklaying, for example, the

Gilbreth’s devised a way for workers to lay bricks that eliminated wasted
motion and raised their productivity from 1,000 bricks per day to 2,700
bricks per day. Frank Gilbreth applied the same technique to personal
tasks, like coming up with “the best way to get dressed in the morning.”
He suggested the best way to button the waistcoat, for example, was
from bottom up rather than top down. Why? Because then a man could
straighten his tie in the same motion, rather than having to raise his hands
back up from the bottom of the waistcoat.
Limitations of the Early Views
Fayol, Taylor, and the Gilbreth’s all addressed productivity improvement

and how to run an organization smoothly. But those views presumed that
managers were overseeing manual labor tasks. As work began to require
less manual labor and more knowledge work, the principles they had
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developed became less effective. Worse, the principles of Taylorism

tended to dehumanise workers. The writer Upton Sinclair who raised
awareness of deplorable working conditions in the meatpacking industry
in his 1906 book, The Jungle, was one of Taylor’s vocal critics. Sinclair
pointed out the relatively small increase in pay (61%) that workers
received compared with their increased productivity (362%). Frederick
Taylor answered Sinclair’s criticism, saying that workers should not get
the full benefit because it was management that devised and taught the
workers to produce more. But Taylor’s own words compare workers to
beasts of burden: The worker is “not an extraordinary man difficult to
find; he is merely a man more or less the type of an ox, heavy both
mentally and physically” (Sinclair, 1911; Taylor, 1911)
When work was manual, it made sense for a manager to observe workers
doing a task and to devise the most efficient motions and tools to do that
task. As we moved from a manufacturing society to a service-based one,
that kind of analysis had less relevance. Managers can’t see inside the
head of a software engineer to devise the fastest way to write code.
Effective software programming depends on knowledge work, not typing
speed.
Likewise, a services-based economy requires interactions between

employees and customers. Employees have to be able to improvise, and
they have to be motivated and happy if they are to serve the customer in
a friendly way. Therefore, new management theories were developed to
address the new world of management and overcome the shortcomings
of the early views.
Finally, early views of management were heavily oriented toward

efficiency, at the expense of attention to the manager-as-leader. That is, a
manager basically directs resources to complete predetermined goals or
projects. For example, a manager may engage in hiring, training, and
scheduling employees to accomplish work in the most efficient and cost-
effective manner possible. A manager is considered a failure if he or she
is not able to complete the project or goals with efficiency or when the
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cost becomes too high. However, a leader within a company develops
individuals to complete predetermined goals and projects. A leader
develops relationships with his or her employees by building
communication, by evoking images of success, and by eliciting loyalty.
Thus, later views of management evoke notions of leaders and leadership
in discussing the challenges and opportunities for modern managers.
Management Ideas of the 1990s
Peter Drucker was the first scholar to write about how to manage
knowledge workers, with his earliest work appearing in 1969. Drucker
addressed topics like management of professionals, the discipline of
entrepreneurship and innovation, and how people make decisions. In
1982, Tom Peters and Robert Waterman wrote In Search of Excellence,
which became an international best seller and ushered a business
revolution by changing the way managers viewed their relationships with
employees and customers. On the basis of the authors’ research focusing
on 43 of America’s most successful companies in six major industries,
the book introduced nine principles of management that are embodied in
excellent organizations:
1. Managing Ambiguity and Paradox
The ability of managers to hold two opposing ideas in mind at the

same time and still be able to function effectively.
2. A Bias for Action
A culture of impatience with lethargy and inertia that otherwise

leaves organizations unresponsive.
3. Close to the Customer
Staying close to the customer to understand and anticipate

customer needs and wants.
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4. Autonomy and Entrepreneurship
Actions that foster innovation and nurture customer and product

champions.
5. Productivity through People
Treating rank-and-file employees as a source of quality.
6. Hands-On, Value-Driven
A management philosophy that guides everyday practice and

shows management’s commitment.
7. Stick to the Knitting
Stay with what you do well and the businesses you know best.
8. Simple Form, Lean Staff
The best companies have very minimal, lean headquarters staff.
9. Simultaneous Loose-Tight Properties (Peters & Waterman,

1982)
Autonomy in shop-floor activities plus centralised values.
Following up, Peters wrote a Passion for Excellence, which placed

further emphasis on leadership, innovation, and valuing people. His
book Thriving on Chaos, published the day of the biggest stock market
crash of the time (“Black Monday,” October 19, 1987), addressed the
uncertainty of the times; and Liberation Management, published in 1992,
laid out 45 prescriptions for how to lead companies in a rapidly changing
world. The book called for empowering people by involving everyone in
decision making and eliminating bureaucratic rules and humiliating
conditions. Peters urged organisational leaders (i.e., managers) to
celebrate and recognise employees for their contributions. His advice to
leaders was to “master paradox” (i.e., develop a level of comfort with
complexity and ambiguity) and establish direction for the company by
developing an inspiring vision and leading by example.
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Beginning in the 1970s, Warren Bennis pioneered a new theory of
leadership that addressed the need for leaders to have vision and to
communicate that vision. More than just a manager, an effective leader
was defined as someone with the ability to influence and motivate others
not only to perform work tasks but also to support the organisation’s
values and meet the organisation’s goals. Different views of leadership
through the ages are shown next.
2.5 DIFFERENT LEVELS OF MANAGEMENT
Levels of Management
The term Levels of Management refers to the line of division that exists
between various managerial positions in an organization. As the size of
the company and workforce increases, the number of levels in
management increases along with it, and vice versa. The
different Levels of Management can determine the chain of command
within an organization, as well as the amount of authority and typically
decision-making influence accrued by all managerial positions.
Levels of Management can be generally classified into three principal

categories, all of which direct managers to perform different
functions. Management is the process of coordination and administration
of tasks that is required to achieve the goals of the organisation. It is also
referred to as the art of making things happen with the help of resources.
Management is required for an established life and is essential for

managing all types of organisations. A sound management system is the
fortitude of thriving companies. Managing life implies getting everything
done to accomplish the aspirations of life and maintaining an
establishment. This means getting things done with and by other people
to fulfils its objectives.
To put it in other words, the organisation and coordination of the pursuits

of an industry for the idea of accomplishing determined objectives
efficiently and thoroughly are marked as management.
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This authoritatively obligatory association connects individuals as

subordinates and superiors and gives rise to distinct degrees in an
establishment. There are 3 levels in the ranking order of an establishment
and they are:
1. Top-level management
2. Middle-level management
3. Lower-level management
We will explore the specific definition of these levels, as well as the roles
and responsibilities of the managers that fall into these categories.
Fig 2.2 Levels of Management

1. Administrative, Managerial, or Top Level of Management
This level of management consists of an organization’s board of directors
and the chief executive or managing director. It is the ultimate source of
power and authority, since it oversees the goals, policies, and procedures
of a company. Their main priority is on the strategic planning and
execution of the overall business success. It consists of board of directors,
chief executive or managing director. The top management is the ultimate
source of authority and it manages goals and policies for an enterprise. It
devotes more time on planning and coordinating functions. They comprise
of the senior-most executives of the company.
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They are normally regarded as the Chairman, the Chief Executive Officer
(CEO), the Chief Operating Officer (COO), President and Vice-president
(VP). Top management is a team consisting of managers from various
operational levels, managing marketing, finance, etc., For instance, Chief
Finance Officer (CFO), Vice President (marketing) whose primary task is
to combine various components and regulate the actions of different units
according to the overall objectives of the company.
These top-level managers are accountable for the progress and

continuation of the establishment. They investigate the trading
atmosphere and its connections for the survival of the company.
They form the overall organisational aims and approaches for their
accomplishment. They are held responsible for all the pursuits of the
company and for its influence on the society. The job of the top manager
is difficult and stressful, necessitating long hours and dedication to the
company.
The roles and responsibilities of the top level of management can be

summarised as follows:
• Laying down the objectives and broad policies of the business

enterprise.
• Issuing necessary instructions for the preparation of department-
specific budgets, schedules, procedures, etc.
• Preparing strategic plans and policies for the organization.
• Appointing the executives for middle-level management, i.e.
departmental managers.
• Establishing controls of all organisational departments.
• Since it consists of the Board of Directors, the top management
level is also responsible for communicating with the
outside world and is held accountable towards an organisation’s
shareholders for the performance of the enterprise.
• Providing overall guidance, direction, and encouraging harmony
and collaboration.
• Top management lays down the objectives and broad policies of
the enterprise.
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• It issues necessary instructions for preparation of department
budgets, procedures, schedules etc.

• It prepares strategic plans & policies for the enterprise.
• It appoints the executive for middle level i.e. departmental
managers.
• It controls & coordinates the activities of all the departments.
• It is also responsible for maintaining a contact with the outside
world.
• It provides guidance and direction.
• The top management is also responsible towards the shareholders
for the performance of the enterprise.
Functions of the Top Level Management
1. Determination of the objectives for the organization: The managers

at the top level management formulates the goals or objectives for an
organization along with the strategies to achieve those goals.
2. Framing of plans and policies: For the achievement of the pre-

determined goals or objectives of an organization, it is essential to
formulate proper strategies, plans and policies within the organization.
The top level managers are responsible for the formulation of these plans
and policies.
3. Coordination and control of the performance: Based on the overall

pre-determined objectives of the organization, the top level managers
coordinate and control different activities of different departments of the
organization.
4. Analysis of the business environment: Business environment of an

organization plays a crucial role in its success and survival. The
managers at the top level of management of an organization carefully
analyse the business environment and its implication and make necessary
decisions for better results.
5. Setting up an organisational framework: For the success and

survival of an organization, it is essential to form a proper framework or
structure within the company. The top level managers are responsible for
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the determination of the organisational framework for the proper and
successful execution of its plans and policies.
6. Assembling of the resources: Achievement of the organisational

goals requires different resources of materials, machines, men, money
and materials. It is the duty of the managers at the top level management
to arrange these resources.
2. Executive or Middle Level of Management

The branch and departmental managers form this middle management
level. These people are directly accountable to top management for the
functioning of their respective departments, devoting more time to
organisational and directional functions. For smaller organizations, there
is often only one layer of middle management, but larger enterprises can
see senior and junior levels within this middle section. The branch
managers and departmental managers constitute middle level. They are
responsible to the top management for the functioning of their department.
They devote more time to organizational and directional functions. In
small organization, there is only one layer of middle level of management
but in big enterprises, there may be senior and junior middle level
management. It is the connection between top and lower level managers.
They are lower to the top managers and above to the first line managers.
They are normally called as division heads, for instance, Production
Manager. Middle management is accountable for executing and regulating
systems and manoeuvrings generated by the top management.
At the same time, they are liable for all the actions of the first-line
managers. Their principal task is to bring out the plans formed by the top
managers.
The roles and responsibilities of the middle level of management can

be summarised as follows:
• Executing the plans of the organization in accordance with the

policies and directives laid out by the top management level.
• Forming plans for the sub-units of the organization that they
supervise.
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• Participating in the hiring and training processes of lower-level
management.
• Interpreting and explaining the policies from top-level
management to lower-level management.
• Sending reports and data to top management in a timely and
efficient manner.
• Evaluating the performance of junior managers.
• Inspiring lower level managers towards improving their
performance.
• They execute the plans of the organization in accordance with the
policies and directives of the top management.
• They make plans for the sub-units of the organization.
• They participate in employment & training of lower level
management.
• They interpret and explain policies from top level management to
lower level.
• They are responsible for coordinating the activities within the
division or department.
• It also sends important reports and other important data to top
level management.
• They evaluate performance of junior managers.
• They are also responsible for inspiring lower level managers
towards better performance.
Functions of the Middle Level Management
1. Interpretation of the policies framed by the Top Level
Management: As the middle level management acts as a subordinate to
the top level management, the managers at this level have to clearly
interpret the plans and policies framed by the managers at the top level
management to the managers at the lower or operational level
management.
2. Selection of suitable operative and supervisory personnel: To

perform any function properly, an organization needs the required
personnel. It is the duty of the Middle Level Managers to make sure that
the organization has sufficient personnel with them to perform the
functions and duties better. For the fulfilment of this duty, the middle
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level managers recruit and select suitable employees for different
departments based on the applicant’s skills, etc., and the firm’s
requirements.
3. Assigning of duties and responsibilities to the Lower Level

Management: The middle level managers acts as superior to the
operational level managers. These managers have to assign respective
duties and responsibilities to the lower level managers and coordinate
with them regarding the activities of different work units.
4. Motivating employees to get desired objectives: An organization can

effectively and efficiently achieve its desired goals only when its
employees are motivated enough to work towards the betterment of the
organization. Therefore, the managers at the middle level management
motivate the employees towards the achievement of the organisational
goals and improvement of their performance.
5. Cooperating with the entire organization: As middle level

management serves as a link between the top level management and the
lower level management, the managers at this level have to cooperate
with every other department for the smooth functioning of the
organization.
6. Supervisory, Operative, or Lower Level of Management

This level of management consists of supervisors, foremen, section
officers, superintendents, and all other executives whose work must do
largely with HR oversight and the direction of operative employees.
Simply put, managers at the lower level are primarily concerned with the
execution and coordination of day-to-day workflow that ensure
completion of projects and that deliverables are met. Lower level is also
known as supervisory/operative level of management. It consists of
supervisors, foreman, section officers, superintendent etc. According
to R.C. Davis, “Supervisory management refers to those executives whose
work has to be largely with personal oversight and direction of operative
employees”. In other words, they are concerned with direction and
controlling function of management Managers and supervisors make up
the lower level of the management in the hierarchy of the business.
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Supervisors immediately manage the efforts of the workforce. Their power
and ability are defined according to the maps drawn by the top
management.
Supervisory management performs a significant task in the system since

they coordinate with the genuine workforce and move in directions of the
middle management to the employees. Through their efforts the worth of
the output is reported, wastage of substances is reduced, and security
measures are affirmed.
The roles and responsibilities of the lower level of management can

be summarised as follows:
• Assigning jobs and tasks to various workers.

• Guiding and instructing workers in day-to-day activities.
• Overseeing both the quality and quantity of production.
• Maintaining good relations within lower levels of the
organization.
• Acting as mediators by communicating the problems,
suggestions, and recommendatory appeals, etc. of workers to the
higher level of management, and in turn elucidating higher-level
goals and objectives to workers.
• Helping to address and resolve the grievances of workers.
• Supervising and guiding their subordinates.
• Taking part in the hiring and training processes of their workers.
• Arranging the necessary materials, machines, tools, and
resources, etc. necessary for accomplishing organisational tasks.
• Preparing periodical reports regarding the performance of the
workers.
• Upholding discipline, decorum, and harmony within the
workplace.
• Improving the enterprise’s image as a whole, due to their direct
contact with the workers.
• Assigning of jobs and tasks to various workers.
• They guide and instruct workers for day to day activities.
• They are responsible for the quality as well as quantity of
production.
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• They are also entrusted with the responsibility of maintaining
good relation in the organization.
• They communicate workers problems, suggestions, and
recommendatory appeals etc to the higher level and higher level
goals and objectives to the workers.
• They help to solve the grievances of the workers.
• They supervise & guide the sub-ordinates.
• They are responsible for providing training to the workers.
• They arrange necessary materials, machines, tools etc for getting
the things done.
• They prepare periodical reports about the performance of the
workers.
• They ensure discipline in the enterprise.
• They motivate workers.
• They are the image builders of the enterprise because they are in
direct contact with the workers.
Functions of the Lower Level Management
1. Issuing of orders and instructions: The managers at the operational
level management issue orders to the workers and supervisors and
instructs them on their roles, responsibilities, and authority. Besides,
these managers also control the functioning of the workers.
2. Preparation of plan for activities: The lower level managers plan the
day-to-day activities of the organization. Besides, these managers also
assign work to the subordinates, guide them for the same, and take
corrective measures wherever and whenever necessary.
3. Assigning and assisting in work: The job or responsibility of the

lower level managers includes assigning work to the subordinates and
assisting them with the work. They do so by explaining the work
procedure to the employees and solving their problems for better
performance.
4. Representing workers’ grievances: As the managers at the lower

level management are in direct contact with the managers at the middle
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level management, they listen to the grievances of the workers and report
those issues to the middle level managers.
5. Ensuring a safe and proper work environment: The lower level

managers are responsible for providing the work force with a safe and
proper work environment. They also have to maintain proper discipline
and a good atmosphere within the organization, as it motivates the
employees to work towards the accomplishment of the organisational
goals.
6. Helping the middle level management: The managers at the

operational level management helps the middle level managers in
selecting, training, placing, and promoting the workers of an organization
as they can give a direct insight as to what is required for the
achievement of the organisational goals and about the performance of the
workers.
7. Encourage initiative of employees: The best way to motivate

employees and make them feel an important part of the organization is
by encouraging them to take initiative. The lower level managers do so
by welcoming their suggestions and ideas and by rewarding them for the
good ones.
Check your progress 2
1. State three levels of management ?
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2. Define management ?
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2.6 MANAGERIAL SKILLS
What are Management Skills?
Management skills can be defined as certain attributes or abilities that an

executive should possess in order to fulfil specific tasks in an
organization. They include the capacity to perform executive duties in
an organization while avoiding crisis situations and promptly solving
problems when they occur.
Management skills can be developed through learning and practical

experience as a manager. The skills help the manager to relate with their
fellow co-workers and know how to deal well with their subordinates,
which allows for the easy flow of activities in the organization.
Good management skills are vital for any organization to succeed and
achieve its goals and objectives. A manager who fosters good
management skills is able to propel the company’s mission and vision or
business goals forward with fewer hurdles and objections from internal
and external sources.
Management and leadership skills are often used interchangeably as they

both involve planning, decision-making, problem-solving,
communication, delegation, and time management. Good managers are
almost always good leaders as well.
In addition to leading, a critical role of a manager is to also ensure that

all parts of the organization are functioning cohesively. Without such
integration, several issues can arise and failure is bound to happen.
Management skills are crucial for various positions and at different levels
of a company, from top leadership to intermediate supervisors to first-
level managers.
Simply, managerial skills are the knowledge and ability of the

individuals in a managerial position to fulfil some specific management
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activities or tasks. This knowledge and ability can be learned and

practiced. However, they also can be acquired through practical
implementation of required activities and tasks. Therefore, you can
develop each skill through learning and practical experience as a
manager.
When we talk about managerial skills, we talk about the skills of a

manager to maintain high efficiency in the way how his or her employees
complete their everyday working tasks. Because of that, managers will
need skills that will help them to manage people and technology to
ensure an effective and efficient realisation of their working duties.
Types of Management Skills
According to American social and organisational psychologist Robert

Katz, the three basic types of management skills include:
1. Technical Skills
Technical skills involve skills that give the managers the ability and the
knowledge to use a variety of techniques to achieve their objectives. These
skills not only involve operating machines and software, production tools,
and pieces of equipment but also the skills needed to boost sales, design
different types of products and services, and market the services and the
products. As the name of these skills tells us, they give the
manager knowledge and ability to use different techniques to achieve what
they want to achieve. Technical skills are not related only for machines,
production tools or other equipment, but also they are skills that will be
required to increase sales, design different types of products and services,
market the products and services, etc.
Technical skills are most important for first-level managers. Whet it

comes to the top managers, these skills are not something with high
significance level. As we go through a hierarchy from the bottom to
higher levels, the technical skills lose their importance.
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2. Conceptual Skills
These involve the skills managers present in terms of the knowledge and
ability for abstract thinking and formulating ideas. The manager is able to
see an entire concept, analyse and diagnose a problem, and find creative
solutions. This helps the manager to effectively predict hurdles their
department or the business as a whole may face. Conceptual skills
present knowledge or ability of a manager for more abstract thinking. That
means he can easily see the whole through analysis and diagnosis of
different states. In such a way they can predict the future of the business
or department as a whole.
Conceptual skills are vital for top managers, less critical for mid-level
managers and not required for first-level managers. As we go from the
bottom of the managerial hierarchy to the top, the importance of these
skills will rise.
3. Human or Interpersonal Skills

The human or the interpersonal skills are the skills that present the
managers’ ability to interact, work or relate effectively with people. These
skills enable the managers to make use of human potential in the company
and motivate the employees for better results. Human or interpersonal
management skills present a manager’s knowledge and ability to work
with people. One of the most critical management tasks is to work with
people. Without people, there will not be a need for the existence of
management and managers.
These skills enable managers to become leaders and motivate employees

for better accomplishments. Additionally, they help them to make more
effective use of human potential in the company. Simply, they
are essential skills for all hierarchical levels in the company.
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Fig 2.3 management skills
Examples of Management Skills
There is a wide range of skills that management should possess to run an

organization effectively and efficiently. The following are six essential
management skills that any manager ought to possess for them to
perform their duties:
1. Planning
Planning is a vital aspect within an organization. It refers to one’s ability

to organise activities in line with set guidelines while still remaining
within the limits of the available resources such as time, money, and
labor. It is also the process of formulating a set of actions or one or more
strategies to pursue and achieve certain goals or objectives with the
available resources.
The planning process includes identifying and setting achievable goals,

developing necessary strategies, and outlining the tasks and schedules on
how to achieve the set goals. Without a good plan, little can be achieved.
2. Communication
Possessing great communication skills is crucial for a manager. It can

determine how well information is shared throughout a team, ensuring
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that the group acts as a unified workforce. How well a manager
communicates with the rest of his/her team also determines how well
outlined procedures can be followed, how well the tasks and activities
can be completed, and thus, how successful an organization will be.
Communication involves the flow of information within the organization,

whether formal or informal, verbal or written, vertical or horizontal, and
it facilitates the smooth functioning of the organization. Clearly
established communication channels in an organization allow the
manager to collaborate with the team, prevent conflicts, and resolve
issues as they arise. A manager with good communication skills can
relate well with the employees and, thus, be able to achieve the
company’s set goals and objectives easily.
3. Decision-making
Another vital management skill is decision-making. Managers make

numerous decisions, whether knowingly or not, and making decisions is
a key component in a manager’s success. Making proper and right
decisions results in the success of the organization, while poor or bad
decisions may lead to failure or poor performance.
For the organization to run effectively and smoothly, clear and right
decisions should be made. A manager must be accountable for every
decision that they make and also be willing to take responsibility for the
results of their decisions. A good manager needs to possess great
decision-making skills, as it often dictates his/her success in achieving
organisational objectives.
4. Delegation
Delegation is another key management skill. Delegation is the act of

passing on work-related tasks and/or authorities to other employees or
subordinates. It involves the process of allowing your tasks or those of
your employees to be reassigned or reallocated to other employees
depending on current workloads. A manager with good delegation skills
is able to effectively and efficiently reassign tasks and give authority to
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the right employees. When delegation is carried out effectively, it helps

facilitate efficient task completion.
Delegation helps the manager to avoid wastage of time, optimises

productivity, and ensures responsibility and accountability on the part of
employees. Every manager must have good delegation abilities to
achieve optimal results and accomplish the required productivity results.
5. Problem-solving
Problem-solving is another essential skill. A good manager must have the

ability to tackle and solve the frequent problems that can arise in a
typical workday. Problem-solving in management involves identifying a
certain problem or situation and then finding the best way to handle the
problem and get the best solution. It is the ability to sort things out even
when the prevailing conditions are not right. When it is clear that a
manager has great problem-solving skills, it differentiates him/her from
the rest of the team and gives subordinates confidence in his/her
managerial skills.
6. Motivating
The ability to motivate is another important skill in an organization.

Motivation helps bring forth a desired behaviour or response from the
employees or certain stakeholders. There are numerous motivation tactics
that managers can use, and choosing the right ones can depend on
characteristics such as company and team culture, team personalities, and
more. There are two primary types of motivation that a manager can use.
These are intrinsic and extrinsic motivation.
Best skills of a good manager

Here are 21 management skills that can help you be a more effective
leader:
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1. Communication and interpersonal skills
A manager's ability to relate and communicate effectively can unify and
motivate a team. Whether the communication is formal or informal,
written or verbal or team-oriented versus individual, communicate in ways
that make your team comfortable. Texts, emails, phone calls and
conversations in person are all important methods of communication.
Good managers know when to adapt their own communication style to the
situation or person. The more successful you are at strong communication,
the more likely your team is to complete tasks on time, achieve success
and reach the company's overall vision and goals.
2. Listening skills
Actively listening is just as important as other communication skills. A
good manager values, respects and appreciates their team's insights and
ideas by fully hearing what they share. Listening more also helps you
understand critical information better, and it can build connections and
trust for when problems may arise.
3. Relationship building skills
Managers should make connections with their team to establish credibility
and encourage camaraderie. The success of a manager depends on the
success of their team, and cultivating sincere relationships reveals more
about team members and how their skills and personality can best suit
work tasks and goals. Great managers are authentic, take a vested interest
in each team member and take time to establish good working
relationships.
4. Emotional intelligence
Emotional intelligence in a good manager includes exercising fairness,
empathy and sensitivity. Emotional intelligence can help you identify a
coworker who is feeling overwhelmed or burned out. A compassionate
leader gives support and may put provisions in place to help a struggling
employee, such as offering a work-from-home day, arranging a flexible
schedule or reminding them about services and policies that are there to
help.
Emotional intelligence in a leader also means having the self-awareness to
recognise their own emotions and reactions, be objective and show
restraint and understanding.
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5. Organization and project management

Organization is an essential part of project management, and both skills
require seeing both the big picture and the finer details at the same time.
The ability to outline a project, assign tasks, foresee obstacles and find
creative solutions, meet deadlines and show stakeholders a plan to succeed
are crucial to excellent management
6. Strategic thinking
Strategic thinking is the ability to plan for the future, generate ideas and
implement strategies for success. Good managers consider likely
scenarios, plan for potential complications and find ways to mitigate or
avoid risk.
7. Decision making
Managers often have to make many decisions throughout a workday or
workweek, some more critical than others. Successful choices help a team
and company run smoothly. Effective decision making requires thoughtful
consideration without overthinking or becoming sidetracked by minor
details.
8. Trustworthiness and respect
Managers can build trust and respect with their team by offering honest
advice and welcoming feedback. They seek the team's input and ideas and
appreciate all points of view, even those that differ. Respected managers
honour confidentiality among employees for sensitive topics and are
forthcoming and honest during difficult scenarios or when delivering
unpleasant news.
9. Teamwork
Managers are both a team leader and a team member. It's important to
know and appreciate what it takes to get the job done and keep the team in
mind when making decisions that affect it. Teamwork fosters loyalty,
higher morale, efficiency, creative thinking and comprehension. Good
managers support and encourage collaboration within their team and
across others in the department or company.
10. Team orientation
Managers should observe their team and get to know each individual in
order to utilise their strengths or find ways for them to grow and develop.
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An effective manager who knows their team well finds unique talents and
adjusts roles to capitalise on the particular capabilities of each person.
11. Problem solving
An excellent manager notices and resolves issues. From a problem with a
production order to a dispute between colleagues, there are many issues
that managers may need to address. Your ability to find the best way to
handle an issue can help you distinguish yourself as a manager and also
give confidence to your team. Great managers think ahead and expect
risks, then brainstorm solutions and determine the best option.
12. Conflict resolution
All workplaces experience conflict, and a skilled manager can recognise
conflict and deal with it swiftly. Unresolved issues can affect employee
performance or morale, so it is best to deescalate or resolve conflicts as
soon as possible.
Navigating challenging discussions like layoffs, negative performance
reviews or missed deadlines is also easier when you understand conflict
resolution.
13. Time management
Time management involves more than just being on time. Knowing what
to work on when, how to prioritise projects and setting realistic timeframes
to complete tasks are all part of good time management. A manager's role
is multi-faceted, and honing your time-management skills can make you a
leader better.
Managers who fully grasp time management establish routines around
certain tasks, such as spending the first half-hour of the business day
responding to emails, scheduling team member check-ins weekly or
approving budgets consistently on Wednesdays
14. Delegation
Delegation is the management skill of assigning tasks to others and giving
them the authority to accomplish those tasks. Knowing which person to
pass a task to and the tasks people already have is also part of successful
delegation, and it may involve re-assigning tasks to someone else. Good
delegation skills lead to more efficiency and productivity, and they can
also build accountability and responsibility within a team.
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15. Motivation
Motivation skills include being able to elicit a desired behaviour from a
team or specific employee. An outstanding manager can empower and
inspire their team by adopting the right motivators. Motivators can include
sales competitions, incentive and bonus programs, treating the team to
lunch once a month or simply thanking them for the work they do verbally
or in a quick email. A company's culture, overall team personality and
internal circumstances affect what the best motivators for employees
might be.
16. Recognition
Good managers offer recognition because praising the team helps group
morale, keeps employees engaged and makes them more likely to stay at
that workplace. Milestones are an opportune time to provide recognition,
though many employees also appreciate unexpected thanks for everyday
duties.
It's important to be consistent with recognition and know the value of
appreciating both the entire team and the individual contributors. Great
managers refine recognition to match what matters most to the employee.
A personal shout-out at a meeting might motivate one person, while a one-
on-one meeting with the manager might be good for someone else. An
award may motivate another team member, or sharing a customer
compliment may help another.
17. Confidence
Confidence is an important management trait that often comes with
experience and practice. An effective manager supports their decisions and
their team with confidence. Leadership development opportunities can
help you build confidence. Try reading books about leadership, taking
online training or coaching classes and attending work-related seminars
and conferences.
18. Vision
Having a clear vision and effectively presenting it to the team is important
as a leader. Good managers share their vision with team members, keep
the end goal in mind and outline what steps it will take to achieve a goal.
Revisiting goals, objectives and outcomes weekly, quarterly and annually
can help you make sure the vision is still on track.
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19. Functional skills
An effective manager knows the various software, operational tools and
equipment used within their team and company. These may include
computer programs, spreadsheets and organisational methods. Having the
ability to use the same tools or complete the same tasks your team is
responsible for builds credibility and allows you to help during an
emergency or unexpected situation.
20. Technological skills
Managers need to stay current with relevant new technology trends and
learn ways to use them for their team, projects or clients. Implementing an
app that drives employee engagement, a new platform that organises
project timelines and costs or a business-to-business program can help you
remain effective. Staying up-to-date on new tech offerings drives
innovation and could help you reach business goals sooner.
21. Adaptability
The business world constantly evolves, and a manager's willingness to
grow along with it keeps them relevant, competitive and innovative. A
good manager is often open to new ideas or ways of doing things and views
change as an opportunity rather than an obstacle.
2.7 ROLES AND FUNCTIONS OF MANAGER
Managers play a significant role in the running of an organisation. They

are the leaders of the team and are responsible for meeting the company's
objectives. To be a productive and efficient manager, you may want to
know the fundamental functions and accountabilities the position
implies. In this article, we explain what the function of a manager is, list
the four main roles of management and discuss how you can develop
your management skills.
What is the function of a manager?

The primary function of a manager is to ensure efficient operations within
an organisation, department or team. There are four commonly accepted
roles of a manager. These include planning, organising, leading and
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controlling. Understanding these functions can help you be a great

manager.
First, managers develop a plan and then organise the necessary resources
to carry out that plan. They can delegate duties to employees and lead them
until they achieve the objectives. After executing the plan, they can
evaluate the plan's effectiveness and see if there are any adjustments or
improvements to be made in the future. Here are the main functions in
detail:
1. Planning
Planning is the process of determining an organisation's goals and how to
achieve them. In this phase, managers brainstorm different alternatives and
then choose the best course of action. They help in making strategic
decisions that set a direction for the company. To plan effectively, the
management often conducts in-depth research on the company's current
affairs, considering its mission while evaluating if the available resources
are enough to execute the plans and achieve objectives. The basic step
required for any project, big or small, is the planning stage. The manager
needs to plan the schedule and give the blueprint of how the task is to be
done with all the necessary details, and also the manager should have a
backup plan that if this doesn’t work then what next. Example − There is
a new project, how to start, human resource required, resources required,
etc., everything should be planned. While planning, the managing director
can allocate resources as per the project needs. They also set achievable
deadlines for the completion of the tasks. In addition, managers may seek
approval from their superiors in budget matters and the execution of
specific tasks. Here are the several types of planning they may perform:
Strategic planning
Strategic planning is the foundation of a business and is under the
responsibility of top management. It entails creating and sharing a vision
for the future. It also involves creating goals for the entire company and
evaluating its strengths, weaknesses and threats. Strategic plans take a
minimum of three years to get implemented. These plans include values,
mission and vision.
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Tactical planning
Tactical planning takes a year or less to implement the plan and achieve
objectives. It's mainly the responsibility of middle management, which
involves coming up with tactics or ways to achieve the set goals. Tactical
planning is for specific departments such as finance, production or
marketing.
Operational planning
This is the process of using tactical planning to achieve strategic goals and
plans. It sets realistic timelines for executing a portion of the strategic plan.
As opposed to strategic planning, which shares a vision for the future,
operational planning lays out the steps of achieving the set goals. It
answers questions such as what, who, how much and when, regarding the
tasks.
Contingency planning
Contingency planning involves making plans for any unforeseen changes.
In senior management, it's essential to have a contingency plan to
anticipate changes. It may help in ensuring that nothing hinders you or
your team from achieving the set objectives.
2. Organising
As a manager, it's important that you have organisational skills to help you
plan and improve your workflow. Excellent organisational skills help you
reduce stress, meet deadlines and stay on top of your work. In this phase,
a manager organises people and resources to implement the set plans.
Organising involves delegating tasks, keeping in mind your team's
strengths and weaknesses. It may also mean reassigning tasks or adding
more team members to achieve a specific goal. Having organisational
skills ensures that goals get achieved without any challenges or internal
conflicts. Next comes the organizing part, where the manager needs to
synchronize and have to make sure everything is going according to the
plan. Everything should work as per the plan, and if not then the manager
needs to look into the issue and make it work as planned. Example − A
software tester is required, so organize the venue, date and time to
interview those eligible for the post.
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Here are some skills that may help you stay organised:
o Scheduling
o Time management
o Goal setting
o Record keeping
o Event coordination
o Deadline management
o Filling
o Project management
3. Leading
To achieve organisational goals, managers promote a teamwork
environment that fosters cooperation and loyalty. As a leader, it's
important that you feel confident and comfortable delegating tasks and
following through to see that they achieve the objectives. This involves
projecting a sense of leadership and direction when addressing employees
or setting goals. In simple words, staffing means grouping of people into
different teams and allotting different tasks to them. If the team members
have some disputes then the team member needs to report to the team
leader who will forward it to the manager and the issue will be taken care
of. Example − Assembling a new team for a new project Leadership skills
manifest in many ways, including recognising when employees need
praise or rewards to boost their morale. It also gets manifested in how you
handle conflicts between team members. To lead efficiently, be sure to
practice what you expect your team to do. Try to be a hands-on person,
such that they can learn from you. Also, as you lead, keep in mind that
everyone is different, and thus each may require a different approach if
you're to keep your team together. There are several approaches to leading:
Coaching: This method allows employees to pitch their ideas to the
manager. The manager is receptive to their ideas, which creates trust and
boosts confidence among employees.
Directing: The manager leads with little input from employees. It's quite
effective when dealing with new employees who need a lot of training and
direction.
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Supporting: This mainly focuses on building solid relationships within
the team, and the manager is receptive to employees' ideas and
contributions.
This leadership style is effective if employees have developed skills but
are inconsistent in their production or performance. It is a manager’s
responsibility to guide the employees in all situations in order to avoid
conflicts and delay in the task. Manager has to lead the employees so that
they can get a clear idea about what is to be done and how to do
it. Example − a team needs a team leader to look after each task that is
accomplished, in-process, or aborted.
Delegating: The manager delegates tasks to employees and avoids
interfering unless the employee needs help or guidance. This approach is
practical when dealing with professionals who can work effectively
without supervision or guidance, and this allows the manager to focus on
other crucial projects or tasks. It means bringing all the employees together
by forming an efficient relationship and making them feel comfortable to
share their views and issues freely. Example− Coordinating the schedule
for a project.
4. Controlling
In this phase, managers consistently monitor whether a team meets
organisational objectives. They may do this by controlling every stage
from planning to execution. As a manager, it's crucial that you monitor
employees' quality of work, performance and use of resources. You can
do so by conducting performance reviews and giving feedback on areas
that may need improvement. the manager is having everything under
control. Whether it is the budget, or resource allocation, everything should
be in order. Example − All members of a team cannot be granted leave on
the same day, as it affects work delivery.
Controlling involves taking the necessary action to ensure that the
company achieves its goals and objectives. If the project is going
differently from planned, the manager can make adjustments. Typically,
controlling pursues that everything works efficiently. Some of the
adjustments you can make include:
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Staffing adjustments
There are times when objectives may not get achieved because one
employee or more is underperforming. In these cases, it is the role of the
manager to understand why this is happening and to find a solution.
Sometimes, it may be because the employee is de-motivated or because
the assigned task is beyond their knowledge or skills.
As management, it's essential that you evaluate the issue and then decide
whether to reassign the employee to a different task or add another
employee to your team. Note that to add an extra employee, you may
require more funding. Also, if you decide to work with the current team,
you may need more time to accomplish the tasks given without adding an
extra employee.
Budget adjustments
Mangers must also ensure that resources get used effectively. If you notice
that you're going over the set budget, you can take a break and check what
is causing the excessive spending. Going over budget may be because one
department is overspending or the plan is working differently, forcing
team members to use a plan with high budget needs. Once you identify the
cause of going over budget, you may require curbing the overall spending.
Depending on the situation, you can also consider consulting with your
supervisor to see if it's possible to get extra funding. A task has to be
completed within the given time frame as well as it should be cost efficient.
The manager needs to be double sure that all the amount invested in the
project doesn’t exceed the budget given and in case of imbalance, the
budgeting manager has to report to the management. Example − If budget
allows to place three employees then five employees cannot be assigned
for the task.
How to develop your skills to excel in the function of a manager
Some of the above functions of a manager can extend from skills and
experience gained in formal education and entry-level positions. Here are
more ways to develop your management skills and become a better
manager:
1. Take time for reflection
Set time for reflection to help you evaluate your plan and progress. You
can schedule sessions after the completion of a project and invite your
team to participate. Encourage an open discussion, where everyone can
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give their views on what needs improving or fixing. That way, you can
develop an action plan to avoid facing the same setbacks in your next
project.
2. Work on your communication skills

Being in a management position may require you to tackle complex
situations. To be an effective manager, try to be transparent about the
situations and instil a shared vision of how the company can benefit from
their cooperation. For example, suppose the company is going through a
financial problem. In that case, you can inform your team and ensure that
the employees understand why various changes may need to get
implemented.
3. Find a mentor
To become an effective manager, you may need to find a mentor with
managerial experience and request them to guide you. Take time to watch
how they execute their duties and ask them questions when issues arise.
You can participate in a mentorship group or ask your senior manager to
be your mentor.
Various Challenges of a Manager
We have seen the different roles a manager as to play in order to maintain

the workflow balance in an organization. With all these responsibilities,
there are some tough challenges a manager has to deal with while trying
to balance everything. Following are some challenges a manager has to
deal with −
• Managing workforce diversity − Manager shouldn’t

create or encourage discrimination among employees.
Employees from different background, culture, and
ethnicity should be treated as equal and rewards should be
given only on the basis of work.
• Improving quality and productivity − It is the sole
responsibility of the manager to increase the productivity
without hampering the quality. It can be done in two ways
−
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o Totally quality management − That is
constant focus on customer satisfaction by
improving organisational process.
o Process of engineering − Focusing on the
manufacturing of the product, so that the
quality is not compromised.
• Responding to labor storage − If there is a labor shortage
then the manager should quickly respond to solve this
problem by arranging for the workforce required so that the
product delivery is not delayed.
• Eradication of labor shortage − The manager needs to
take quick action, if there is a labor shortage and should
assure with backup plans so that there is no labor shortage
in future.
• Improving customer service − Manager faces the
challenge to constantly improve customer service to survive
in an ever-competitive environment.
• Improving ethical behaviour- Managers should make sure
that the employees behave properly and maintain the
decorum of the company. These are few major challenges a
manager faces while trying to complete a project. To
maintain work-life balance and for the betterment of the
organization, the manager should try level best to resolve
these challenges.
2.8 BUSINESS ENVIRONMENT
Just like human beings, business also does not function in an isolated
vacuum. Businesses function within a whole gambit of relevant
environment and have to negotiate their way through it. The extent to
which the business thrives depends on the manner in which it interacts
with its environment. A business, which continually remains passive to the
relevant changes in the environment, is destined to gradually fade-away in
oblivion. To be successful business has not only to recognise different
elements of the environment but also respect, adapt to or have to manage
106
and influence them. The business must continuously monitor and adapt to
the environment if it is to survive and prosper.
The basic challenge before any company is its survival. For long term
survival, a company must have at least the following two capabilities:
(a) The ability to prosper and
(b) The ability to change
The elements of environment of business and commerce are elaborated in
this chapter. The present chapter also discusses the relationship between
organization and its environment; environmental analysis and scanning,
and organizations response to the environment.
A business depends on certain internal and external factors. These factors
are treated as given and business enterprise is expected to operate under a
particular set of environmental system. These factors are generally
uncontrollable and beyond the control of business enterprises. But
progress, success and survival largely depend upon their capacity and
ability to adapt successfully to environmental changes available in
surroundings of a business.
In its operational behaviour, an organization interacts with the various
forces in its environment. It may be in terms of receiving inputs,
returning outputs and using feedback to modify inputs and the
transformation process. Moreover, the organization does not operate in a
vacuum but must interact with its environment in order to function.
However, level of interaction may differ from organization to
organization and the impact can vary overtime.
Thus, business organizations deal with the environment by
undertaking following transactions:
(i) They Receive Inputs- The manufacturer receives raw
materials, a stock broker receives the latest financial
information and a local authority receives data on
housing needs.
(ii) They Transform Inputs- The Manufacturer produces
the goods from the raw materials the stock broker
interprets the information and the local authority
produces housing plans.
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(iii) They Produce Outputs- The manufacture sell products,
the stock broker advice and the local builds houses.
2. Meaning of Business Environment

The term business environment means
“The aggregate of all the forces, factors and institutions which are external
to and beyond the control of an individual business enterprise but which
exercise a significant influence on the functioning and growth of
individual enterprises.”
Initially only external forces were considered as the business environment.
But in modern scenario, business policies and actions are affected by
internal forces also. Thus, the integral elements of business environment
include both the internal as well as the external factors, as both have an
impact on business. It is set of those inputs to an organisation which are
under the control of other organisations or interest groups or are influenced
by interaction of several groups, such as economy” —Professor Paire and
Anderson
“Environment consists of all external and internal influence the complex
interaction of the market, production and finance, the three basic
components of our business world.” —Mr. J.A. King and Mr. C.J.
Duggan
“Business environment is an aggregate of all conditions, events and
influences that surround and affect it. It is broad and ever changing as its
separate elements interact. A single firm’s environment is narrow in
scope than the total environment of business. It is complicated and
continuously changing.” —Professor Keith Davis
“An organisation’s external environment consists of those things outside
an organisation such as customers, government units, suppliers, financial
firms and labour pools that are relevant to an organisation’s operations.”
—Professor Gerald Bell
“Every organisation exists in an environment that extends beyond its
formal boundaries. This external environment represents a set of
conditions, circumstances and influences that surround and affect the
functioning of an organization. Environment is made up of many
different individuals (for example—customers, members of other
organisation, local citizens, organisation of suppliers, civil groups, labour
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unions and government bodies—regulatory agencies, legislators, local
officials). It includes those people who are capable of influencing an
organisation and its management system, as well as those who might be

affected by the organisation’s actions.”
In a nutshell business environment is the sum total of all the external
factors beyond control of business that influence the business in a
number of ways. In other words, it consists of two layers of macro level
namely general and industry environments. The following picture makes
it amply clear. Thus, the business environment is divided into general
environment and industry environment.
‘General environment’ refers to the general and overall environment
within which firms operate. The experts like Charles W.L. Hill and
Gareth R. Jones call it is a ‘macro’ environment. Others like Mr. Ebbing
and others like to call it as the indirect action environment.
The macro- environment consists of the broader economic, social,
demographic, political, legal and technological framework within which
the industry and company are placed. It is called as ‘indirect action’
environment. The forces do not have any immediate direct effect on the
operations but they have influence.
On the other hand, “industry environment” or “direct action
environment” or “tasks environment” or “micro environment” or
“operating environment” is by Charles W.L. Hill and Gareth. R. Jones,
Ebbing, Paire and Anderson—Randall B. Dunham and Jon. L. Pierre-II,
Philip Kotler, and John A. Pearce II and Richard B. Robinson …,
respectively.
Concept of business environment
Managers must have a deep understanding and appreciation of the
environment in which they and their organisations function. The
environment of business is the ‘aggregate of conditions, events and
influences that surround and affect it’ (Davis).
Since the organisation is part of a broader social system, it has to work
within the framework provided by the society and its innumerable
constituents.
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For the sake of simplicity the environmental forces could be

classified into two categories:
1. Internal environment and
2. External environment.
1. Internal Environment:
The internal environment consists of conditions and forces within an
organisation that affect the organisation’s management. Aspects of the
internal environment include the organisation’s mission, corporate
culture, owners and the board of directors, employees, other units of the
organisation and unions.
2. External Environment:
The external environment consists of those factors that affect a firm from
outside its organisational boundaries. Of course, the boundary that
separates the organisation from its external environment is always not
clear and precise. For example, shareholders are part of the organisation,
but in another sense, they are part of its environment.
Importance of Business Environment:

Just like us, business operations do not survive in confinement. Every
enterprise is not an island to itself; it subsists, endures and develops
within the circumstances of the part and forces of its situation. While an
individual enterprise is able to do minute to change or manage these
forces, it has no choice to reacting or modifying according to them. Good
knowledge of the environment by business managers allows them not
only to recognise and assess but also to respond to the forces outside to
their enterprises. The significance of the business environment and its
perception by managers can be understood if we contemplate the below-
mentioned following points:
(A) It Helps in Identifying Opportunities and Making First Mover

Advantage
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• The environment provides numerous opportunities, and it is
necessary to identify the opportunities to improve the
performance of a business.
• Early identification gives an opportunity to an enterprise be the

first to identify opportunity instead of losing them to
competitors. Example: ‘Airtel’ identified the need for fast internet
and took first-mover advantage by providing 4G speed to its users
followed by Vodafone and Idea.
• Asian paints lost market share to Nerolac because it failed to

match its technology.
(B) It Helps the Firm Identify Threats and Early Warning Signals
• The business environment helps in understanding the threats

which are likely to happen in the future.
• Environmental awareness can help managers identify various

threats on time and serve as an early warning
signal. Example: Patanjali products have become a warning
signal to the rest of the FMCG
• The sector to develop similar products. Similarly, if an Indian

firm finds that a foreign multinational is entering the Indian
market with new substitutes; it needs to prepare accordingly.
• Chinese mobile phones have become a threat for Indian mobile

phone manufacturers.
(C) It Helps in Tapping Useful Resources
• Business and industry avail the resources (inputs) from the

environment and convert them into usable products (outputs) and
provide to society.
• The environment provides various inputs (resources) the like

finance, machines, raw materials, power and water, labour, etc.
• The business enterprise provides outputs such as goods and

services to the customers, payment of taxes to the government, to
investors and so on.
111
Example: With the demand for the latest technology, manufacturers will
tap the resources from the environment to manufacture LED TVs and
Smart TVs rather than collecting resources for colour or Black & White
TVs.
(D) It Helps in Coping With Rapid Changes
• The business environment is changing very rapidly, and the

industry is getting affected by changing market conditions.
• Turbulent market environment, less brand loyalty, divisions of

markets, changes in fashions, more demanding customers, and
global competition are some examples of changing the business
environment.
Example: Jack Ma started Alibaba as he could see the potential of

interest in E-Commerce.
(E) It Helps in Assisting in Planning and Policy Formulation
• The business environment brings both threats and opportunities to

a business.
• Awareness of business environment helps in deciding future

planning or decision making.
Example: Multiple entries of Chinese phones like VIVO, Gone, OPPO,

etc. have posed a threat to local players like Micromax, Karbonn, Lava
etc. to think afresh how to deal with the situation.
(F) It Helps in Improving Performance
• Environmental studies reveal that the success of any enterprise is

closely bound with the changes in the environment.
• The enterprises which monitor and adopt suitable business

practices not only improve their performance but become leaders
in the industry also.
Example: Apple has been successful in maintaining its market share due
to its proper understanding of the environment and making suitable
innovations in its products.
112
Features of Business Environment:
(A) The totality of External Forces
• Business environment includes everything which is outside the

organisation.
• If we add all these forces, they will form a business environment.
Example: When Pepsi and Coca-Cola got permission to set up their

business in India, it was an opportunity for them and threat for local
manufacturers like gold spot, camp-cola etc.
(B) Specific and General Forces
• Specific forces are those forces which directly affect the

operational activities of the business enterprise.
• Example: Suppliers, Customers, Investors, Competitors,

Financiers etc.
• General forces are those forces which indirectly affect the

functioning of business enterprises.
Example: Economic, Social, Political, Legal and Technological

conditions.
(C) Inter-relatedness
• Different forces of business environment are interrelated to each

other.
• One component of the business environment affects the

functioning of other components.
Example: The increased life expectancy of people and awareness of

health consciousness has increased the demand for many health products
like diet coke, olive oil, and so many health products.
(D) Dynamic Nature
The business environment is dynamic in nature and keeps on changing in

terms of :
(a) Technological improvement,
(b) Shifts in consumer preferences,

113
(c) The entry of new competition in the market.
Example: Many established companies in FMCG (Fast Moving

Consumer goods) sector are focusing on producing the goods with
natural ingredients with the entry of ‘Patanjali Products’.
(E) Uncertainty
• The changes in the business environment cannot be predicted

accurately because of future uncertainties.
• It is very difficult to predict the changes in the economic and

social environment.
Example: There has been a sharp decline in the prices of Android

smartphones due to the entry of many new companies.
(F) Complexity
• All forces of the Business environment are interrelated and

dynamic, which makes it difficult to understand.
• Complex nature of Business environment can be understood if we

study it in parts.
• Example: Increase in goods and service tax to 15 % would

increase the revenue of the government (economic), which would
help the government to improve social being of people (social)
and reduce the personal disposable income of rich people and
thereby controlling inflation.
(G) Relativity
• Business Environment differs from place to place, region to

region and country to country.
Example: In China, the electricity to the industry is provided at cheaper

rates as the consumption increases and hence, it leads to mass production
whereas, in India, it is otherwise, higher consumption of electricity leads
to costly electricity which results in lower production & higher cost of
production.
114
Why It is Important for Business Enterprises to Understand Their
Environment?
A) It Benefits in Tapping Useful Resources
• Business and industry avail the resources (inputs) from the

environment and convert them into usable products (output) and
provide to society.
• The environment provides various inputs (resources) like finance,

machines, raw materials, power and water, labour etc.
• The business enterprise provides outputs such as goods and

services to the customers, payment of taxes to the government,
interest/dividend to investors and so on.
Example: With the demand for the latest technology, manufacturers will
tap the resources from the environment to manufacture LED TVs and
Smart TVs rather than collecting resources for colour or black & white
TVs.
(B) It Helps in Coping With Rapid Changes
• The business environment is changing very rapidly and the

industry is getting affected by changing market conditions.
• Turbulent market environment, less brand loyalty, divisions of

markets, changes in fashion, more demanding customers, and
global competition are some examples of changing the business
environment.
Example: Jack Ma started Alibaba as he could see huge potential in E-

Commerce.

decades of the nineteenth
century. Hatch and Cunliffe (2006) proposed that the
prehistoric period of organization and
organizational formality and influence
115
within a society as well as the viable predicaments that managers deal

with within those environments.
sociological and managerial
thoughts created tension in organization and management theory relative
to both theory and practice.
management theory.
of the first to pronounce a
theory that elucidates effective production in work practices that were
systematically organized. Smith
(1937) compared the relational performances of two dissimilar
manufacturing methods and discovered
that factory workers who specialized in single/distinct task or limited
tasks had greater performance
product (for example, pins). He
recognized that higher productivity and efficiency resulted from job
specialization. Job specialization
improve work efficiency and
improve organizational performance. Division of labour outlines the
allocation of responsibilities
that organizational managers
should control and organize the organization’s work process in order to
capitalize on getting the most
Scientific Management (Drury,
1915). During the late nineteenth century and near the beginning of the
twentieth century, Taylor
116
awkward, unproductive, and
ill-directed movements of workers. He constantly tried to replace the
concept of management “by
practice. Taylor (1911b) also
encouraged the systematic training of employees in “the one best
practice” instead of allowing these
believed that the workload could
possibly be equally distributed among the workers and management with
management executing the
group being responsible
for the work that best suits the group.
workers spend in producing
a finished product or service could be lessened by enhancing
specialization and division of labour
Taylor’s concepts of scientific
management were concerned with an organization’s functional type and
different techniques needed
(Taylor, 1911a). He submitted
five elements for the process of scientific management: science, not a
rule-of-thumb, harmony rather
theory.
decades of the nineteenth
century. Hatch and Cunliffe (2006) proposed that the
prehistoric period of organization and
117
organizational formality and influence
within a society as well as the viable predicaments that managers deal
with within those environments.
sociological and managerial
thoughts created tension in organization and management theory relative
to both theory and practice.
management theory.
of the first to pronounce a
theory that elucidates effective production in work practices that were
systematically organized. Smith
(1937) compared the relational performances of two dissimilar
manufacturing methods and discovered
that factory workers who specialized in single/distinct task or limited
tasks had greater performance
product (for example, pins). He
recognized that higher productivity and efficiency resulted from job
specialization. Job specialization
improve work efficiency and
improve organizational performance. Division of labour outlines the
allocation of responsibilities
that organizational managers
should control and organize the organization’s work process in order to
capitalize on getting the most
Scientific Management (Drury,
118
1915). During the late nineteenth century and near the beginning of the
twentieth century, Taylor
awkward, unproductive, and
ill-directed movements of workers. He constantly tried to replace the
concept of management “by
practice. Taylor (1911b) also
encouraged the systematic training of employees in “the one best
practice” instead of allowing these
believed that the workload could
possibly be equally distributed among the workers and management with
management executing the
group being responsible
for the work that best suits the group.
workers spend in producing
a finished product or service could be lessened by enhancing
specialization and division of labour
Taylor’s concepts of scientific
management were concerned with an organization’s functional type and
different techniques needed
(Taylor, 1911a). He submitted
five elements for the process of scientific management: science, not a
rule-of-thumb, harmony rather
119
2.9 LETS SUM UP
Social responsibility benefits society and the environment while lessening

negative impacts on them. Companies engaging in social responsibility
can do so in a number of ways, including making changes that benefit the
environment, engaging in ethical labor practices, promoting volunteering,
and philanthropy. Consumers are more actively looking to do business
with socially responsible companies, which can also benefit bottom lines.
CSR dimensions are formed under the foundation of Human capital,
natural capital and the environment. It dimensions involve because of
related marketing, promotion, socially responsible business practice,
corporate philanthropy and corporate social marketing. The essence of
CSR lays on the investing part of the profit beyond business for the larger
good of the society. Companies can set a network of activities to be taken
up in a consortium to tackle major environmental issues. It would also
provide an opportunity to learn from each other. Everyone in the
organization needs to recognize their own role in promoting CSR.
Companies should provide wider professional development activities.
Training, conferences and seminars could be organized by companies to
disseminate and generate new knowledge and information in this sector.
A strong budgetary support would definitely help to grow this sector and
research related to respective industry would enhance their organization‘s
contribution further. Government regulations which are supporting in this
direction could attract more response from organizations. All this would
also lead to benchmark CSR activities. Companies need to involve their
stakeholders in order to build meaningful and long term partnerships
which would lead to creating a strong image and brand identity. It is also
suggested to review existing policies in order to develop more meaningful
visions for the companies and broaden their contributions to reach to local
communities. .The concept of corporate social responsibility is now
firmly rooted on the global business agenda. But in order to move from
theory to concrete action, many obstacles need to be overcome.
A key challenge facing business is the need for more reliable indicators
of progress in the field of CSR, along with the dissemination of CSR
strategies. Transparency and dialogue can help to make a business appear
120
more trustworthy, and push up the standards of other organizations at the
same time.
Early management theorists developed principles for managing
organizations that suited the times. A century ago, few workers were
highly educated; most work was manual, tasks were repetitive, and rates
of change were slow. Hierarchy brought unity and control, and principles
of management in which managers defined tasks and coordinated workers
to move in a unified direction made sense. As the economy moved from
manufacturing to services, the need for engaging workers’ minds and
hearts became more important. Drucker, Peters, and Waterman presented
ideas on how managers could achieve excellence in a continually changing
business environment, while Tennis encouraged managers to become
inspiring leaders who empowered people.
An organization can have many different managers, across a variety of
titles, authority levels, and levels of the management hierarchy that we
illustrated above. In order to properly assign roles and responsibilities to
all managerial positions, it is important to recognise the key differences
between low-level, middle-level, and top-level management.
The key takeaways from this distinction are as follows:
• Top-level managers are responsible for controlling and

overseeing the entire organization.
• Middle-level managers are responsible for executing
organisational plans which comply with the company’s
policies. They act as an intermediary between top-level and
low-level management.
• Low-level managers focus on the execution of tasks and
deliverables, serving as role models for the employees they
supervise.
All businesses are comprised of a vast array of different managerial

tasks. When these are coordinated properly, and there is a strong
hierarchal manager system in place, an organization can be extremely
efficient in creating value through the production of their products,
services and overall workflow.
121
Management skills are a collection of abilities that include things such as
business planning, decision-making, problem-solving, communication,
delegation, and time management. While different roles and
organizations require the use of various skill sets, management skills help
a professional stand out and excel no matter what their level. In top
management, these skills are essential to run an organization well and
achieve desired business objectives.
2.10 KEYWORDS
Management skills : Skills management is the practice of

understanding, developing and deploying people and their skills. Well-
implemented skills management should identify the skills that job roles
require, the skills of individual employees, and any gap between the two
Business environment : A business environment is all the components

that affect a business. These include both internal factors, like employees
and resources, and external factors, like customers and markets. Each of
these contributes to a company's working environment and can influence
how the business functions.
Manager : a man or woman who controls an organization or part of an

organization
2.11 REFERENCES
➢ RBI Notification.(2007) .CSR in Indian Banks, Corporate Social

Responsibility, Sustainable Development and Non- Financial
Reporting- Role of Banks,RBI/2007- 08/216:DBOD No
Dir.BC.58/13.27.00/2007- 08,Dec.20.
➢ S. K. Chaudhuri, S. K. Das and P. K. Sahoo, ―Practices of
corporate social responsibility (CSR) in banking sector in India:
an assessment,‖ research journal of economics, business, volume
4, pp.76, 2011P.
122
➢ Sunder, Beyond Business: From Merchant Charity to corporate
citizenship, New Delhi: Tata McGraw-Hill, 2000
➢ www.csrquest.net/defalt.aspx?articleID=12770&heading
➢ http://ec.europa.eu/enterprise/policies/sustainable-
business/corporate-social- responsibility
➢ B. Stolidness, ―Finance as a Driver of Corporate Social
Responsibility, ―Journal of Business Ethics, vol. 68, no. 1, pp.
19-33, sep 2006.
➢ J. M. Rose, ―Corporate Directors and Social Responsibility:
Ethics versus Shareholder value, Journal of Business Ethics, vol.
73, no. 3, pp. 319-331, jul 2007.
2.12 ANSWER TO CHECK YOUR PROGRESS
Refer -1 answer to check your progress -1 Q…1
Social responsibility is an ethical framework in which an individual is

obligated to work and cooperate with other individuals and organizations
for the benefit of the community that will inherit the world that individual
leaves behind

Corporate social responsibility (CSR) is a business model that helps a
company be socially accountable to itself, its stakeholders, and the public

• To provide a neutral and credible platform to all stakeholders
engaged in CSR best practices for capturing relevant issues to
foster sustainable growth.
• To provide research, training, practice, capacity building,
standard setting, advocacy, rating, monitoring, recognition and
related support in the field of CSR.
• To facilitate exchange of experiences and ideas between various
stakeholders for developing a framework for strengthening of
CSR indicatives.
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Refer -2 answer to check your progress -2 Q..1
Management levels are the divisions between degrees of authority and

responsibility in a company. The typical management levels are top-level
management, mid-level management and first-line management. These
levels determine the duties of various manager positions, including who
they report to and who reports to them
Refer -2 answer to check your progress -2 Q..2

Management (or managing) is the administration of an organization,
whether it is a business, a nonprofit organization, or a government body.
It is the art and science of managing resources of the business.
2.13 TERMINAL QUESTIONS
1. What are the ancient management practices?

2. What are examples of management practices?
3. Define managerial skills ?
4. Explain 3 levels of management?
5. What are roles and functions of a manager ?
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UNIT – 3 PLANNING
STRUCTURE
3.0 Objectives
3.1 Introduction
3.2 Objectives pf planning
3.3 Planning process
3.4 Types of planning
3..5 Types of plan
3.6 Corporate planning
3.7 Management by objective
3.8 Decision making process
3. 9Let Us Sum Up
3.10Key Words
3.11 Some Useful Books
3.12Answer to check your progress
3.13Terminal Questions
3.0 OBJECTIVES
Learners will be able to learn :

▪ Objectives
▪ Types
▪ Planning process
▪ Decision making process
3.1 INTRODUCTION
Regional disparities and imbalances in the economy have become so

acute in India that it needed special attention in our Five Year Plans.
Thus by regional development we mean economic development of all the
regions by exploiting various natural and human resources and by
increasing their per capita income and living standards.
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Since the Second Plan onwards, the Government realised the need for
balanced development. Thus the Second, Third, Fourth and Fifth Plans
laid emphasis on the redressal of economic imbalances for attaining a
balanced regional development.
The Sixth Plan again aimed at progressive reduction in regional

inequalities in the pace of development and in the diffusion of
technological benefits. The Seventh Plan and Eighth Plan also carried
this objective of balanced development in systematic manner. Besides
then long term objectives, our plans also laid importance on short term
objectives like control of inflation, industrialization, rehabilitation of
refugees, building up infrastructural facilities etc.
Planning is ascertaining prior to what to do and how to do. It is one of the

primary managerial duties. Before doing something, the manager must
form an opinion on how to work on a specific job. Hence, planning is
firmly correlated with discovery and creativity. But the manager would
first have to set goals. Planning is an essential step what managers at all
levels take. It requires making decisions since it includes selecting a
choice from alternative ways of performance. Planning is the first
primary function of management that all other functions. The planning
function involves the decision of what to do and how it is to be done? So
managers focus a lot of their attention on planning and the planning
process. Let us take a look at the eight important steps of the planning
process.
Planning is always done keeping the future in mind, however, the future is
always uncertain. So in the function of management certain assumptions
will have to be made. These assumptions are the premises. Such
assumptions are made in the form of forecasts, existing plans, past
policies, etc.
These planning premises are also of two types – internal and external.
External assumptions deal with factors such as political
environment, social environment, the advancement of technology,
126
competition, government policies, etc. Internal assumptions deal with
policies, availability of resources, quality of management, etc.
Another very important objective of Five Year Plans of our country was
the modernisation of various sectors and more specifically the
modernisation of agricultural and industrial sectors. The Fourth Plan laid
much emphasis on the modernisation of agricultural sector and undertook
a vigorous scheme for modernisation of agriculture in the name of Green
Revolution. The successive plans also continued their efforts in the same
direction but at a reduced rate.
The Sixth Plan categorically mentioned this objective of modernisation

for the first time. Here the objective of modernisation means those
structural and institutional changes in economic activities which can
transform a feudal and colonial economy into a progressive and modern
economy. Thus through modernisation economy may be diversified.
3.2 OBJECTIVES OF PLANNING
Economic planning is often regarded as technique of managing an

economy. When the structure of an economy becomes complex and
subject to rapid change and transformation (due to population growth,
discovery of resources, industrialisation, etc.) some sort of advance
thinking becomes necessary to resolve that complexity and to prepare the
economy for those changes. Such preparation is called planning.
Most often that not an economic plan is regarded as a programme of

action. It may also be taken to mean an instrument for regulating a free
private enterprise economy. The regulatory measures may vary from
country to country. They may leave either too much or too little a degree
of freedom to private enterprise.
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This may hamper the working out of the plan. Many plans leave their
programmes incomplete because they hesitate to exercise their regulatory
functions. They are little more than a list of public development projects.
Many other plans perform their regulatory functions with such

seriousness and severity that their programmes of action are completely
jeopardised. In such planned economies any sort of enterprise ceases to
exist. The correct plan is one in which a comprehensive and consistent
programme of action is sought to be implemented by carefully
harnessing enterprise for the success of the plan.
It should be noted that a plan is just a programme of action, it is not a

guarantee for action. In short, a good plan is one which makes adequate
provisions for and ensures that its targets are properly fulfilled. the six
major objectives of planning in India, i.e., (a) Economic Growth, (b)
Attaining Economic Equality and Social Justice, (c) Achieving Full
Employment, (d) Attaining Economic Self-Reliance,
(e)Modernisation of Various Sectors, and (f) Redressing Imbalances
in the Economy.
(a) Economic Growth:

Attainment of higher rate of economic growth received topmost priority
in almost all the Five Year Plans of the country. As the economy of the
country was suffering from acute poverty thus by attaining a higher rate
of economic growth eradication of poverty is possible and the standard of
living of our people can be improved.
The First Plan envisaged a target of 11 per cent increase in national

income against which 18 per cent growth in national income was
achieved. The Second, Third and Fourth Plan envisaged targets for
annual growth rate of 5 per cent. 5.6 per cent and 5.7 per cent
respectively against which the achievements were 4 per cent, 2.6 per cent
and 3.4 per cent respectively.
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Again the Fifth and Sixth Plan also proposed the annual growth rate of
4.37 per cent and 5.2 per cent against which the achievements were 5.0
per cent and 5.2 per cent respectively. The Seventh Plan also set the
target of 5 per cent in respect of annual growth rate of national income.
The Eighth Plan and the Ninth Plan set the target of 5.6 per cent and 7.0
per cent annual growth rate of national income against which the
achievements were 6.5 per cent and 5.4 per cent respectively. The Tenth
and Eleventh Plan set the target of 8.0 per cent and 9.0 per cent in its
annual average growth rate of GDP. Thus attaining higher rate of
economic growth is found as a common objective for all the Five Year
Plans of our country.
(b) Attaining Economic Equality and Social Justice:

Reduction of economic inequalities and eradication of poverty are the
second group of objective of almost all the Five Year Plans of our
country particularly since the Fourth Plan. Due to the faulty approach
followed in the initial part of our planning, economic inequality widened
and poverty became acute.
Under such a situation, the Fifth Plan adopted the slogan of ‘Garb Hatao’
for the first time. The Seventh Plan document shows that nearly 37.4 per
cent of the total population of our country was lying below the poverty
line and the plan aimed to reduce this percentage of 29.2 per cent by
1990.
Thus to achieve the target, various poverty alleviation programmes like

the National Rural Employment Programme (NREP), Composite Rural
Training and Technology Centre (CRTTC), Crash Scheme for Rural
Employment Programme (CSREP), Rural Landless Employment
Guarantee Programme (RLEGP) etc. were introduced. But the
performance of these programmes is not up to the satisfaction.
(c) Achieving Full Employment:

Five Year Plans of India gave importance on the subject to employment
generation since the Third Plan. The generation of more employment
opportunities was considered as an objective of both the Third and
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Fourth Plan of our country. But up to the Fourth Plan employment
generation never received its due priority.
The Fifth Plan in its employment policy laid special emphasis in

absorbing increments in labour force during this Fifth Plan Period. The
Sixth Plan accorded much importance on the reduction of incidence on
unemployment. It has been estimated that the employment will grow at
the rate of 4.17 per cent per annum as against the annual growth of
labour force at 2.54 per cent.
To achieve this target the major programmes which were introduced

during this Plan were Integrated Rural Development Programme (IRDP),
the National Rural Employment Programme (NREP), the Operation
Flood II Dairy Development Project, schemes in the villages and small
industries sector the national Scheme of Training Rural Youth for Self
Employment (TRYSEM) and various other components of the Minimum
Needs Programme.
One of the major objectives of the Seventh Plan was a faster growth of
employment opportunities. Thus the plan aimed that the employment
potential would grow at 4 per cent as against the 2.6 per cent growth in
the labour force. Again, the Eighth Plan envisages an annual employment
growth of 2.6 to 2.8 per cent over the next ten years 1992-2002.
(d) Attaining Economic Self-Reliance:

One of the very important objectives of Indian Planning is to attain
economic self-reliance. But this objective attained its importance only
since the Fourth Plan, when the plan aimed at elimination of the import
of food-grains under PL480. The Fifth Plan also laid much importance
on the attainment of self-reliance.
Thus this plan aimed at achieving self-sufficiency in the production of

food-grains, raw materials and other essential consumption goods. The
Fifth Plan also emphasised the need for import substitution and export
promotion for attaining economic self- reliance.
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The Sixth Plan also put importance on strengthening the impulses of
modernisation for the achievement of economic and technological self-
reliance. The Seventh Plan and Eighth Plan also followed the path for
achieving self-reliance.
Although India achieved self-sufficiency in respect of food-grains but it

has not yet achieved self- sufficiency in respect of edible oil. In the mean
time we have developed number of import substitute industries
particularly basic and capital goods industries but huge import of
petroleum oil along with some other items are creating a serious drain on
our foreign exchange reserves leading to a depletion of foreign exchange
reserves to such an extent in 1991-92 that the country has reached at the
near- bankruptcy level with a huge external debt obligation, Thus the
objective of self-reliance still remains unfulfilled.
(e) Modernisation of Various Sectors:

Another very important objective of Five Year Plans of our country was
the modernisation of various sectors and more specifically the
modernisation of agricultural and industrial sectors. The Fourth Plan laid
much emphasis on the modernisation of agricultural sector and undertook
a vigorous scheme for modernisation of agriculture in the name of Green
Revolution. The successive plans also continued their efforts in the same
direction but at a reduced rate.
The Sixth Plan categorically mentioned this objective of modernisation

for the first time. Here the objective of modernisation means those
structural and institutional changes in economic activities which can
transform a feudal and colonial economy into a progressive and modern
economy. Thus through modernisation economy may be diversified.
It requires setting up of various types of industries and advancement of

technology. In the mean time some sort of modernisation always gone
against employment generation thus the country is facing a conflict
between the objective of modernisation and the objective of removal of
unemployment and poverty.
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(f) Redressing Imbalances in the Economy
Regional disparities and imbalances in the economy have become so
acute in India that it needed special attention in our Five Year Plans.
Thus by regional development we mean economic development of all the
regions by exploiting various natural and human resources and by
increasing their per capita income and living standards.
Since the Second Plan onwards, the Government realised the need for
balanced development. Thus the Second, Third, Fourth and Fifth Plans
laid emphasis on the redressal of economic imbalances for attaining a
balanced regional development.
The Sixth Plan again aimed at progressive reduction in regional

inequalities in the pace of development and in the diffusion of
technological benefits. The Seventh Plan and Eighth Plan also carried
this objective of balanced development in systematic manner. Besides
then long term objectives, our plans also laid importance on short term
objectives like control of inflation, industrialization, rehabilitation of
refugees, building up infrastructural facilities etc.
3.3 PLANNING PROCESS
Meaning of Planning
Planning is ascertaining prior to what to do and how to do. It is one of the
primary managerial duties. Before doing something, the manager must
form an opinion on how to work on a specific job. Hence, planning is
firmly correlated with discovery and creativity. But the manager would
first have to set goals. Planning is an essential step what managers at all
levels take. It requires making decisions since it includes selecting a
choice from alternative ways of performance. Planning is the first
primary function of management that all other functions. The planning
function involves the decision of what to do and how it is to be done? So
managers focus a lot of their attention on planning and the planning
process. Let us take a look at the eight important steps of the planning
process.
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Planning Process
Fig 3.1 Planning Process
The planning function of management is one of the most crucial ones. It

involves setting the goals of the company and then managing
the resources to achieve such goals. As you can imagine it is a systematic
process involving eight well thought out steps. Let us take a look at the
planning process.
As planning is an activity, there are certain reasonable measures for

every manager to follow:
1. Setting Objectives
The most important step of the planning process. Here we establish the
objectives for the whole organization and also individual departments.
Organisational objectives provide a general direction, objectives of
departments will be more planned and detailed. Objectives can be long
term and short term as well. They indicate the end result the company
wishes to achieve. So objectives will percolate down from the managers
and will also guide and push the employees in the correct direction.
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• This is the primary step in the process of planning which specifies
the objective of an organisation, i.e. what an organisation wants

to achieve.
• The planning process begins with the setting of objectives.
• Objectives are end results which the management wants to

achieve by its operations.
• Objectives are specific and are measurable in terms of units.
• Objectives are set for the organisation as a whole for all

departments, and then departments set their own objectives within
the framework of organisational objectives.
Example:
A mobile phone company sets the objective to sell 2,00,000 units next
year, which is double the current sales.
(2) Developing Planning Premises
Planning is always done keeping the future in mind, however, the future is
always uncertain. So in the function of management certain assumptions
will have to be made. These assumptions are the premises. Such
assumptions are made in the form of forecasts, existing plans, past
policies, etc.
These planning premises are also of two types – internal and external.
External assumptions deal with factors such as political
environment, social environment, the advancement of technology,
competition, government policies, etc. Internal assumptions deal with
policies, availability of resources, quality of management, etc.
These assumptions being made should be uniform across the

organization. All managers should be aware of these premises and should
agree with them.
• Planning is essentially focused on the future, and there are certain

events which are expected to affect the policy formation.
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• Such events are external in nature and affect the planning
adversely if ignored.
• Their understanding and fair assessment are necessary for

effective planning.
• Such events are the assumptions on the basis of which plans are
drawn and are known as planning premises.
Example:
The mobile phone company has set the objective of 2,00,000 units sale
on the basis of forecast done on the premises of favourable Government
policies towards digitisation of transactions.
(3) Identifying Alternative Courses of Action
The planning process is to identify the alternatives available to the

managers. There is no one way to achieve the objectives of the firm, there
is a multitude of choices. All of these alternative courses should be
identified. There must be options available to the manager.
Maybe he chooses an innovative alternative hoping for more efficient

results. If he does not want to experiment he will stick to the more routine
course of action. The problem with this step is not finding the alternatives
but narrowing them down to a reasonable amount of choices so all of
them can be thoroughly evaluated.
• Once objectives are set, assumptions are made.
• Then the next step is to act upon them.
• There may be many ways to act and achieve objectives.
• All the alternative courses of action should be identified.
Example:
The mobile company has many alternatives like reducing price,

increasing advertising and promotion, after sale service etc.
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(4) Evaluating Alternative Course of Action
• In this step, the positive and negative aspects of each alternative

need to be evaluated in the light of objectives to be achieved.
• Every alternative is evaluated in terms of lower cost, lower risks,

and higher returns, within the planning premises and within the
availability of capital.
Example:
The mobile phone company will evaluate all the alternatives and check
its pros and cons.
(5) Selecting One Best Alternative
An important part of the planning process is to be aware of the business

opportunities in the firm’s external environment as well as within the
firm. Once such opportunities get recognised the managers can recognise
the actions that need to be taken to realise them. A realistic look must be
taken at the prospect of these new opportunities and SWOT
analysis should be done.
• The best plan, which is the most profitable plan and with
minimum negative effects, is adopted and implemented.
• In such cases, the manager’s experience and judgement play an

important role in selecting the best alternative.
Example:
Mobile phone company selects more T.V advertisements and online

marketing with great after sales service.
(6) Implementing the Plan
And finally, we come to the last step of the planning process,

implementation of the plan. This is when all the other functions of
management come into play and the plan is put into action to achieve the
objectives of the organization. The tools required for such implementation
involve the types of plans- procedures, policies, budgets, rules, standards
etc.
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• This is the step where other managerial functions come into the
picture.
• This step is concerned with “DOING WHAT IS REQUIRED”.
• In this step, managers communicate the plan to the employees

clearly to help convert the plans into action.
• This step involves allocating the resources, organising for labour

and purchase of machinery.
Example:
Mobile phone company hires salesmen on a large scale, creates T.V

advertisement, starts online marketing activities and sets up service
workshops.
(7) Follow Up Action
Once you have chosen the plan to be implemented, managers will have to
come up with one or more supporting plans. These secondary plans help
with the implementation of the main plan. For example plans to hire more
people, train personnel, expand the office etc are supporting plans for the
main plan of launching a new product. So all these secondary plans are in
fact part of the main plan.
• Monitoring the plan constantly and taking feedback at regular

intervals is called follow-up.
• Monitoring of plans is very important to ensure that the plans are

being implemented according to the schedule.
• Regular checks and comparisons of the results with set standards

are done to ensure that objectives are achieved.
Example:
A proper feedback mechanism was developed by the mobile phone

company throughout its branches so that the actual customer response,
revenue collection, employee response, etc. could be known.
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3.4 TYPES OF PLANNING
The process of planning may be classified into different categories on the

basis of nature of planning, duration of planning or the use of planning.
Type # 1. Formal and Informal Planning:
Planning is formal when it is reduced to writing. It would be
advantageous to prepare a formal plan for the success of the enterprise
when the number of action is large, as it will facilitate adequate control
and pinpoint the weaknesses, if any.
An informal plan is one which is not reduced to writing but is conceived
in the mind of the manager. Informal planning may be adopted if the
number of actions to be taken is less and the actions have to be taken in a
short period.
Type # 2. Short and Long-Range Planning:
The difference between short and long-range planning is based on the
period which is kept in view while formulating a plan. Generally, short-
term planning is one which covers a period from one to twelve months.
Long-range planning usually covers a period of usually more than five
years. In between, there may be medium-term plans. Short-term plans
must be formulated in a manner consistent with long-term plans.
Both the plans are complementary and not competitive to each other.
Short-term planning is considered as ‘tactical planning’ and long-term
planning is taken as ‘strategic planning’.
Long-term planning has an enduring effect on the business and is the
responsibility of the top management. It involves determination of the
long-range goals and the laying down of procedures, programmes and
policies to achieve those goals. It is concerned more with distant future.
It involves the work of increasing or reducing the resources of the
business also. Short-term plans are concerned with immediate futures. It
takes into account the available resources only and is mainly concerned
with the current operations of the business.
Type # 3. Single Use and Standing Planning:
A single use planning is one which sets a course of action for a particular
set of circumstances and is used up once the particular goal is achieved.
They may include programmes, budgets, projects and schedules.
138
This plan is prepared by lower-level management. These plans are also
called ‘specific planning’.
Standing planning is one which is designed to be used over and over
again. Standing plans are of a permanent nature and are meant for
repeated use. Objectives, policies, procedures, methods, rules and
strategies are included in standing plans. Its nature is mechanical. It helps
the higher executives to reduce their work load Standing planning is also
called ‘Routine planning’. These plans are prepared by top-level
management.
Examples of Plans or Planning:
i. Architectural planning
ii. Business plan
iii. Comprehensive planning
iv. Enterprise architecture planning
v. Event planning and production planning
vi.Family planning
vii. Financial planning
viii. Land use planning
ix. Marketing plan
x. Network resource planning
xi. Strategic planning
Type # 4. Corporate Planning and Long-Range Planning:
Corporate planning and long-range planning is the process of determining
the major objectives, policies and strategies that will govern the
acquisition, use and disposition of resources to achieve those objectives of
an organisation and is done at high /top level of the organisation.
It provides the answer to the basic questions like:
i. Where are we now?
ii. Where we want to go?
iii. Why do we want to go?
iv. How we will go? Etc.
Types of Planning – On Basis of Hierarchy, Time Horizon, Scope,
Challenges, Formalities and Utility
I. Hierarchy Based Classification:
1. Top Level Planning or Corporate Planning:
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This planning covers the entire organization. It is a comprehensive
process of determining the long term objective of the organization and
evolving inter-connected and interdependent plans to be carried out
inside the organization. This plan covers corporate growth, research and
development, divestment, unprofitable product/section modernisation,
expansion, diversification, merger and acquisition.
It has a long term perspective.
ii. It is developmental in nature and focuses on the growth of the
company.
iii. It covers the organization as a whole. It involves using all resources
of the organization.
iv. It is a continuous process. It keeps on identifying newer opportunities,
avoiding threats and reviewing the programmes in view of ever-changing
environments.
v. It integrates strategic plan with operational plans.
Process of Corporate Planning:
i. Defining the long term objectives of the company.
ii. Determining the time span of the enterprise.
iii. Scanning the environment both internal and external.
iv. Appraising resources position both in the current and future period,
and assessing the strength and weakness of the organization.
v. Devising alternative strategies.
vi. Transforming corporate planning into operational plans for different
functional domains.
vii. Reviewing the accomplishments and failures.
viii. Sustained revision of plans.
2. Middle Level Planning or Functional Planning:
This refers to plans made in various departments. It lays down the
objectives, policies and programmes for various domains like purchase,
production, marketing, human resources, finance and other functional
areas. The heads of various departments are involved in this planning.
The departmental plans are made within the framework of top-level
plans. The smooth accomplishment of various departmental plans
contributes to successful execution of corporate plans. Departmental
heads through their periodical review meetings, integrate the functional
plans into corporate plans.
140
3. Lower Level Planning:
This is also called sectional planning. It covers the activities associated
with a given functional domain. Unit planning is highly specific and very
much detailed as it encompasses the work details for the day to day
guidance of human resources employed in different departments.
It determines work, duties, specific instructions, work scheduling,
arranging tools, raw materials and other facilities. Effective
performances of unit level plans leads to accomplishment of
organisational goals.
II. Classification on the Basis Of Scope:
1. Strategic Planning:
Strategic planning envisages the possible changes that may take place in
the competitive environment and other environmental conditions and
making provisions for meeting them successfully.
Characteristics of Strategic Planning:
i. It is a long range one.
ii. It deals with the basic activities like product development, discovery
of new geographical area, new technology, invention and social
responsibility.
iii. It is purely a top level activity.
iv. It is an all-out effort made by the organization and strongly backed up
by the commitment of long term assets.
v. It is a continuous process.
Process of Strategic Planning:
It involves the following:
i. Formulation of goals.
ii. Environmental scanning.
iii. Resources assessment.
iv. Identification of threats and opportunities through SWOT analysis.
v. Putting in place alternative strategies.
vi. Review of alternative strategies.
vii. Absorption of the strategy.
Advantages:
i. It provides consistency and shows direction to the organisational
development.
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ii. It enables them to deal with environmental changes.
iii. It minimises the probability of mistakes and unpleasant surprises.
iv. It facilitates long term decision-making and shortens the lead time of
any project.
v. It eases downward communication.
Shortcomings:
i. It is expensive as it involves the use of time and energy of those
involved in it.
ii. It takes a longer time to structure this plan. Hence, small organizations
hardly engage in devising this type of planning.
iii. It is useless in addressing current crisis.
iv. It restricts its choice to most rational and less risky projects. It avoids
those projects which involve higher uncertainty. But such projects may
prove profitable in the long term.
2. Tactical Planning:
This type of planning is narrower in scope. However it is a detailed one.
The thrust of tactical planning is short term i.e., one to two years. These
plans are changed quite often in line with the change in the environment.
It focuses on the means of accomplishing the objectives of sub-goals and
action plans. Middle level managers are mostly engaged in this type of
planning. It is devised mostly in terms of internal environment.
This planning is coordinative in nature and it is concerned with
implementation of strategic plan by coordinating the diverse
activities of different departments. For example, if strategic planning
involves development of a new product by production department,
tactical planning involved includes design, testing, quality control and
installation of production facilities.
3. Operational Planning:
This type of plan limits itself to devising procedures and processes to
execute the plans in work stations in different departments. It is highly
detailed. Usually supervisors, foremen or superintendents are engaged in
evolving the operational plans. It is short tenured plan aimed at carrying
out routine tasks like production runs, work scheduling, arrangement of
tools and machinery, readying raw materials, machine maintenance, etc.
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In short, these plans are evolved at shop floor level implemented by
frontline workers or core workers like operators, machinists, assemblers,
clerks and sales persons.
III. Classification on the Basis of Time Horizon:
1. Long Range Planning:
This type of plan covers a time period of two to five years. At times, the
tenure of plan may go beyond five years. It takes the form of goal setting
for various functional domains, framing strategies, policies and
programmes. This type of plan can be more suited to industries which are
not mainly hit by ever changing environmental variables.
This is quite common in textiles, railways, defence, public utilities, etc. It
is the top level management which is usually engaged in evolving long
term plans. The goals of long term plan may be attaining market
leadership, technological leadership, globalization of operations, building
up employer brand and so on.
2. Medium Term Planning:
The duration of medium term planning ranges between one year and
three years. However, it may vary given the nature of business, risk and
uncertainties, market conditions, level of technology absorption, etc. It is
more detailed and specific one. The medium term plans are evolved by
departmental heads.
3. Short Range Planning:
The tenure of short term plan is up to one year. It is more specific,
detailed and instructional in nature. It is action centric plan. It is mainly
carried out by those at lower echelons of the management. For example,
sales quota, work scheduling, work assignment, choice of machine to
work, decision on shift working, repairs and maintenance, quality
inspection, waste control, material economy, etc.
IV. Classification on the Basis of Challenges:
The environment dynamics influence the planning in no small measure.
In such a case, planning is made to weather the storm emerging from
environmental forces. Accordingly, planning is divided into proactive
and reactive planning.
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1. Proactive Plans:
Proactive planning involves devising suitable course of action in
anticipation of likely changes in the relevant environment. Organizations
have to scan the environment very deeply and have decentralised control.
They should keep in readiness the resources required for meeting
anticipated eventualities.
The organizations using the proactive plans do not wait for the
environment to change. Managers challenge the environment. Only very
big entities with financial soundness and other resources support can
afford to go for proactive planning. In India, Reliance, TATA etc.,
engage in proactive planning.
2. Reactive Planning:
This type of planning reacts to the events unfolding in the environment.
This planning happens after the occurrence of events. In the
contemporary business world, organizations have to respond to the
changes swiftly so as not to lose the opportunity. In cellular telephone
market, Nokia lost to Samsung due to delayed or non-response to
changes unfolding in the cell phone market.
In India, Hindustan Automobile Ltd., lost its market share to Maruti
Udyog Ltd., due to very belated response to changes in consumer
behaviour in automobile market. Hence, reactive planning holds good
only in stable business environment. In other words, reactive planners
have to lose to proactive planners in changing business environment.
V. Classification on the Basis of Formalities:
1. Formal Planning:
This connotes a well-structured process, involving clearly identifiable
and sequentially arranged steps. Persons cast with the responsibility of
making formal plans are empowered by the organization. Some
organizations have a separate department dedicated to planning. Thus
planning is centralised
This department makes plans for the organization as a whole. But most
of the organizations nowadays adopt decentralised planning. The very
structure of the organization is changed to enable the employees across
the levels make plans at their respective levels. Formal planning is a
well-documented exercise. It serves as a reference material for future
planners in the organization.
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2. Informal Planning:
This connotes unstructured plans based on the memory of events and
evaluation of environment factors of the managers. This is mainly
adopted in small organizations where operations are small and simple.
VI. Classification Based on Utility:
Plans under this head are grouped as follows:
1. Single Use Plans:
Single use plans are called adhoc plans. It intends to achieve objectives
in a given situation. They are tailored to meet a specific situation. These
plans are formulated for addressing non-repetitive and unique problems.
Once the specific objective is achieved, this plan ceases to exist and new
plan is devised, e.g., budgets, programmes, projects, schedules and
methods.
a. Budgets:
This represents a single use plan containing expected results in
quantitative term. It is expressed in terms of time, money and material. It
is prepared for various functional areas like production, sales, finance,
human resources and materials.
It may be a fixed budget or variable budget. A fixed budget is one
prepared for a given level of production activity. It does not provide for
changes in cost for various levels of activity. A flexible budget is one
prepared for different levels of production activities.
Characteristics of Budget:
i. It is expressed in numerical terms.
ii. It is related to future period.
iii. It is prepared in advance and derived from the long term strategy of
the organization.
iv. It sets standards of performance against which actual performance is
matched for control purpose.
v. There are separate budgets for different functional departments. A
budget called master budget is prepared for the whole organization.
vi. It is both planning and control device.
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Objectives of Budget:
i. Determination of target of performance for each department or section
of the enterprise.
ii. Fixation of responsibilities for each executive so that one knows what
is expected of him and how he will be evaluated.
iii. Provision of measures for performance evaluation.
iv. Enabling better utilisation of available resources to maximise output
or profit subject to constraints.
v. Initiating corrective action to address deviations from the targeted
performance.
vi. Centralisation of control.
vii. Decentralisation of responsibility to each manager.
Advantages of Budget:
1. Charting future course – Budget enables business enterprises to chart a
future course of action.
2. Performance measurement device – It facilitates measurement of
performance and efficiency of functional departments.
3. Blueprint for goal attainment – It serves as a blueprint for attainment
of the objective.
4. Motivation to staff – Target fixation through budgeting exercise serves
as motivation to staff members to put in their best efforts to attain it.
5. Coordination device – Budget serves as a tool for coordination through
which the functions of various departments are coordinated. Each
department becomes aware of limitations faced by others. It results in
reduction of inter-departmental conflict. It enables the department to
cooperate with one another in realising objectives of one another.
6. Foundation for standard costing – It is a foundation on which standard
costing and other cost control techniques are put in place.
7. Feedback on plans – It provides a feedback for revision and alteration
of future plans.
8. Sense of commitment – Since staff of each department are engaged in
framing the budget of a department, there may prevail a sense of
commitment among the staff to actualise the target.
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Limitations:
1. Uncertainty factor – The effectiveness of a budget depends on the
accuracy of budget figures. Besides, uncertainty of future events may
tone down the potency of budgetary system.
2. Expensive – The prohibitive cost of installation of budgetary control
system does not allow small businesses to embrace it.
3. Interdepartmental conflict – Interdepartmental conflict, if any, may
diminish the value of budgetary control.
4. Lowering morale – Lesser budget allocation to any department than
the actual expectation may tone down the morale of the staff of the
department concerned.
5. Infusion of rigidity – When the budget is not revised according to the
major shift in the circumstances, it becomes irrelevant. Rigidity may
impair the efficacy of budgetary mechanics.
6. Time consuming – It is a time consuming and expensive process
requiring different kinds of data and specialised service.
7. Self-centric attitude – Managers may tend to forget their commitments
to the attainment of overall goals of the organization in their zeal to meet
the departmental target expressed through budget.
8. Restricting freedom – Budgetary controls restrict the freedom of
departmental manager in managing their domains.
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1. What are the steps involved in the planning process?
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2. What are the classification of plans
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3. What are the features of Planning?
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3.5 TYPES OF PLAN
For any organization to function distinctively, there must be a plan which

is to be devised before-hand. Planning is very important to a business. The
top managers must plan their goals both short and long terms with their
competent employees and their team of experts to analyze the pros and
cons of the plan, the investment required in the plan, the return expected
and so forth.
Introduction to Planning in Detail
For any organization to function distinctively, there must be a plan which
is to be devised before-hand. Planning is very important to a business. The
top managers must plan their goals both short and long terms with their
competent employees and their team of experts to analyse the pros and
cons of the plan, the investment required in the plan, the return expected
and so forth.
we will know about this managerial function of ‘Planning’ in detail. This

is one of the important topics in the study of Business, hence the students
must not exclude it.
Types of Plan
In an organization, various, different kinds of planning are included which
serves a variety of purposes. As Planning is the most important
fundamental, it is not to be compromised with a single plan applied
universally in the whole organization. With each department specific need,
workforce constituents, the different plans are devised. Predominantly, for
the goal of the business, planning is done by the top-level managers, while
short-term plans are done by the team leaders too in different departments.
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Good Companies give priority to the planning process, as adequate
management and competent leadership will follow only after effective
planning is done. Companies are required to keep a track on the planning
process, to be in sync with the predetermined process.
Operational plans
The specific results expected from departments, work groups, and

individuals are the operational goals. These goals are precise and
measurable. “Process 150 sales applications each week” or “Publish 20
books this quarter” are examples of operational goals.
An operational plan is one that a manager uses to accomplish his or her

job responsibilities. Supervisors, team leaders, and facilitators develop
operational plans to support tactical plans (see the next section).
Operational plans can be a single‐use plan or an ongoing plan.
• Single‐use plans apply to activities that do not recur or repeat. A

one‐time occurrence, such as a special sales program, is a single‐
use plan because it deals with the who, what, where, how, and
how much of an activity. A budget is also a single‐use plan
because it predicts sources and amounts of income and how much
they are used for a specific project.
• Continuing or ongoing plans are usually made once and retain
their value over a period of years while undergoing periodic
revisions and updates. The following are examples of ongoing
plans:
• A policy provides a broad guideline for managers to follow when
dealing with important areas of decision making. Policies are
general statements that explain how a manager should attempt to
handle routine management responsibilities. Typical human
resources policies, for example, address such matters as employee
hiring, terminations, performance appraisals, pay increases, and
discipline.
• A procedure is a set of step‐by‐step directions that explains how
activities or tasks are to be carried out. Most organizations have
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procedures for purchasing supplies and equipment, for example.
This procedure usually begins with a supervisor completing a
purchasing requisition. The requisition is then sent to the next
level of management for approval. The approved requisition is
forwarded to the purchasing department. Depending on the
amount of the request, the purchasing department may place an
order, or they may need to secure quotations and/or bids for
several vendors before placing the order. By defining the steps to
be taken and the order in which they are to be done, procedures
provide a standardised way of responding to a repetitive problem.
• A rule is an explicit statement that tells an employee what he or
she can and cannot do. Rules are “do” and “don't” statements put
into place to promote the safety of employees and the uniform
treatment and behaviour of employees.
• For example, rules about tardiness and absenteeism permit
supervisors to make discipline decisions rapidly and with a high
degree of fairness.
Tactical plans
A tactical plan is concerned with what the lower level units within each
division must do, how they must do it, and who is in charge at each level.
Tactics are the means needed to activate a strategy and make it work.
Tactical plans are concerned with shorter time frames and narrower
scopes than are strategic plans. These plans usually span one year or less
because they are considered short‐term goals. Long‐term goals, on the
other hand, can take several years or more to accomplish. Normally, it is
the middle manager's responsibility to take the broad strategic plan and
identify specific tactical actions.
A strategic plan is an outline of steps designed with the goals of the

entire organization as a whole in mind, rather than with the goals of
specific divisions or departments. Strategic planning begins with an
organization's mission.
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Strategic plans look ahead over the next two, three, five, or even more
years to move the organization from where it currently is to where it
wants to be. Requiring multilevel involvement, these plans demand
harmony among all levels of management within the organization. Top‐
level management develops the directional objectives for the entire
organization, while lower levels of management develop compatible
objectives and plans to achieve them. Top management's strategic plan
for the entire organization becomes the framework and sets dimensions
for the lower level planning.
Contingency plans
Intelligent and successful management depends upon a constant pursuit

of adaptation, flexibility, and mastery of changing conditions.
Strong management requires a “keeping all options open” approach at all

times — that's where contingency planning comes in.
Contingency planning involves identifying alternative courses of action

that can be implemented if and when the original plan proves inadequate
because of changing circumstances.
Keep in mind that events beyond a manager's control may cause even the
most carefully prepared alternative future scenarios to go awry.
Unexpected problems and events frequently occur. When they do,
managers may need to change their plans. Anticipating change during the
planning process is best in case things don't go as expected. Management
can then develop alternatives to the existing plan and ready them for use
when and if circumstances make these alternatives appropriate.
To Plan Better Companies, You Need to Take Care of The Following

Things
1. Devise a Plan – Important goals needed to achieve, strength of the
organization all are required to be forecasted before-hand.
Devising a proven plan helps to visualise the goals with much
before and thus take action in regard to that.
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2. Define Success – Managers need to foresee where their business
stands in the near future. They need to clearly define the milestones
that they want to take step on and the same is required to be
communicated to the employees.
3. Put in Action – After much planning, the final process that will
actually will help in achieving the goals is to put the plan in action.
With the required workforce, the company should start working in
the attempt to achieve their set target.
3.6 CORPORATE PLANNING
Planning is important to professionals and businesses because it provides

direction for daily actions. Corporate planning is more focused on
preparing courses of action for all the activities of a business.
Understanding corporate planning can help you successfully manage a
business or help you work more effectively. In this article, we explain what
corporate planning is, the types of corporate planning and the stages
involved in the creation of a corporate plan.
What is corporate planning?

Corporate planning is the process by which businesses create strategies for
meeting business goals and achieving objectives. It involves strategy
definition, strategy direction, decision-making and resource allocation.
Corporate planning ensures that business operations are orderly and that
the team works towards the same goals. It can also help you identify
potential challenges in meeting goals, so you can provide methods to
overcome them. Corporate planning is a continuous and dynamic process
that lasts throughout the life of the business.
Types of corporate planning
The different types of corporate planning include:
Strategic planning
Strategic planning overlaps with corporate planning in some areas,
though there are still key differences. Strategic planning requires a close
look at the company's missions, strengths and weaknesses. It defines the
present state, the desired future and how to get there.
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Corporate planning is much larger in scope than strategic planning. You
can use it to guide a more complex company with many businesses and
subsidiaries. The corporate plan has the same components as the strategic
plan, though it pertains only to the broader company and any shared
services used by the various units, such as marketing and human resources.
It also considers the individual steps of the business. These include how to
counteract challenges, train employees and achieve objectives.
Tactical planning
Tactical planning involves defining goals and determining how to
achieve them through actions and steps. It's the next step that a business
takes after formulating a strategic plan. With it, you can break down the
strategic plan into smaller goals and objectives. Generally, you can create
a tactical plan to address a short-term goal. Completing the tactical plan
may help you work to achieve medium or long-term goals.
Operational planning
An operational plan is a specific, detailed plan that outlines the details of
the business' daily operations for a specific period, usually more than one
year. It outlines the daily tasks and responsibilities of each employee and
manager and the mode of operation of the tasks. Operational planning
helps you allocate physical, financial and human resources, so you can
reach short-term objectives that support a business' larger growth.
Contingency planning
Contingency planning is the process by which organisations develop
strategies that help ensure they respond to an event that could impact their
operations. The purpose of a contingency plan is to ensure that a business
resumes normal activities after a disruptive event, such as a natural
disaster. Businesses also plan contingency plans around positive events,
like an unexpected influx of cash.
Benefits of corporate planning

There are many benefits of corporate planning, including:
Provides clear objectives for the organisation
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Corporate planning creates a sense of direction for professionals working
at an organisation. It lets you take every action with certainty since there's
a plan guiding every action. You can also understand easily when you're
working towards business objectives.
Helps formulate better strategies using a logical approach
A strategy is an approach you take towards achieving a business goal or
objective. For instance, if your objective is to make product a category
leader in sales revenue by the year 2023, the strategy might be to persuade
buyers that the product is the best in the market by investing in large
advertisement campaigns for the product. Corporate planning helps you
ease the process of formulating strategies since it follows a logical and
methodical approach. It also eases the decision-making process.
Increases communication between employees and employers
Corporate planning eases the group participation process for planning
decisions. This leads to a better understanding of the plans and the
strategies, which ensures that employees perform the tasks better. It also
ensures that you get feedback from your team. Understanding the areas
where they need help increases efficiency and improves overall workplace
culture.
Helps in the allocation of resources
Examples of organisational or corporate resources are time, equipment,
money, human, infrastructure knowledge and information. Infrastructure
knowledge may cover systems, procedures and functionality, while
information may refer to the current trends, internal and external data.
Corporate planning makes allocating these resources efficient, thus
reducing waste, decreasing costs and increasing profitability.
Helps communicate the brand's message
When you clearly define your mission and vision statements, you're also
defining the organisation's core values. This can clearly convey your brand
message effectively. A corporate plan helps communicate your brand's
message to creditors, shareholders, investors, customers and employees.
6 stages of corporate planning
The stages of corporate planning are as below:
1. Formulation of the company's vision and mission statements
A vision statement is a summary that highlights what the business may
look like in the future. An example of a vision statement is, To provide
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innovative mobility solutions to individuals throughout the nation and the
world.
A mission statement defines the purpose of a business within the industry
and the world. It contains the organisation's main industry or target
audience, key products or services and how it's different from its
competitors. An example of a mission statement is, At our company, we
are committed to helping low-income families find the resources they need
to get healthcare loans with no credits checks and low-interest payments
2. Setting corporate goals and objectives
While people use goals and objectives interchangeably, there are
noteworthy differences between them. A goal is a short-term statement
that defines the ambition of a business or a company over a specific period.
An objective is an actionable and measurable step that moves you closer
to your goal once it's complete.
A goal for an organisation can be general, but when you're setting goals
for a department, it's important to be detailed and specific. For instance,
while increasing profits could be a goal for the business, the individual
department may need more related goals to boost profits, such as We will
generate an additional $8,000 in revenue by September 15. Setting
corporate goals and objectives can help you understand your future. This
gives everyone a common purpose to work towards so that their daily
activities are more focused.
3. Consideration of organisational strengths and weaknesses
After you've set goals and objectives, you may want to consider the
organisation's strengths and weaknesses. The most common approach to
this is the strengths, weaknesses, opportunities and threats (SWOT)
analysis. To perform a SWOT analysis, list the corresponding
characteristics in each category. You can then capitalise on the strengths
and opportunities to counteract or neutralise the weaknesses and threats to
the organisation. This allows you to determine the potential challenges to
achieving business goals and the ways you can overcome them.
4. Integration between short-term and long-term plans
When making corporate plans, you can consider both the short-term and
long-term goals of the business. Short-term goals are those you hope to
achieve in a short period, usually six months to two years. Long-term goals
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have a longer duration, usually three to five years. Proper integration
between the both of them eases the completion of your plans.
5. Implementation of the plan
Once you clearly understand your goals, you can then proceed to the
implementation of the plan. At this stage, there's usually an action plan.
An action plan contains the responsibilities you intend to undertake and
the expected timeline for accomplishing each of them. It's important to
monitor the plans while you're implementing them to avoid challenges that
may arise. You can set up regular meetings to review progress on the
action plans and the key performance indicators (KPIs), notice deviations,
recognise successes and make corrections where necessary.
6. Evaluation of performance
Once you've implemented the plans, the next step is to evaluate how they
performed. The purpose of this is to align your overall expectations with
the actual contribution of your plans. This is important since it helps you
measure progress and impact.
3.7 MANAGEMENT BY OBJECTIVE
MBO stands for Management by Objectives and is a framework

designed to manage businesses based on their needs and goals. MBO goals
are tailored to meet the needs of today’s fast-growing businesses and fast-
paced work environments.
Management by objectives (MBO), also known as management by
planning (MBP), was first popularised by Peter Drucker in his 1954
book The Practice of Management. Management by objectives is the
process of defining specific objectives within an organization
that management-can convey to organization members, then deciding
how to achieve each objective in sequence. This process allows managers
to take work that needs to be done one step at a time to allow for a calm,
yet productive work environment. In this system of management,
individual goals are synchronised with the goals of the organization.
An important part of MBO is the measurement and comparison of
an employee's actual performance-with the standards set. Ideally, when
employees themselves have been involved with the goal-setting and
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choosing the course of action to be followed by them, they are more

likely to fulfil their responsibilities.
According to George S. [citation needed], the system of management by
objectives can be described as a process whereby the superior and
subordinate jointly identify common goals, define each individual's
major areas of responsibility in terms of the results expected of him or
her, and use these measures as guides for operating the unit and assessing
the contribution of each of its members. MBO refers to the process of
setting goals for the employees so that they know what they are supposed
to do at the workplace. Management by Objectives defines roles and
responsibilities for the employees and help them chalk out their future
course of action in the organization.
MBO defines top company goals and uses them to determine employees’
objectives. MBO processes identify an employee’s main objectives,
which are later graded with group input.
This helps all company contributors see their accomplishments in

connection to the company’s top priorities as they carry out their tasks. It
reinforces alignment between activity and outcome, which dramatically
increases productivity.
Though MBO aims to help define and manage a set of objectives, the
objectives themselves will be a little bit different for every company. It
allows companies to express their individuality and top priorities and,
most importantly, to execute on them.
The pros and cons of MBO
The management by objectives technique has several key strengths,

including:
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• Teamwork – As MBO drives each member of staff towards

business-focused objectives, it can lead to improved
communication and teamwork.
• Clarity – MBO sets out straightforward business goals and gives
each member of staff a clear set of tasks to help meet them.
• Empowerment – Equipped with clear objectives related to the
wider business strategy, staff at all levels of the organization feel
involved, empowered and indispensable.
• Efficiency – With staff goals geared towards business success,
managers know all staff are facing the same direction.
• Customisation – Managers tailor each set of objectives to
individual staff members — based on their specialisations, skills,
qualifications and career goals.
However, MBO can present several disadvantages too:
• High-pressure – With a measurable, business-aligned set of

goals, staff can feel under pressure.
• Impersonal – Though goals can be tailored to individual staff
skills, they might omit personal and career development
considerations.
• Lack of context – MBO approaches don’t account for factors
like motivation, resources and buy-in. It also doesn’t reflect
existing work culture, conditions or ethos.
• Over-focused – Focusing exclusively on business goals can
detract from other important elements of your operations.
MBO best practices

1. Goals
Goals are set for sole contributors, team leaders, department executives,
and the CEO. This way everyone has a sense of what they are supposed
to be contributing to the team, as well as how it fits into the big picture.
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2. Objectives.
Objectives are essential to ensuring all contributors spend their time at

work productively and are working towards a concerted outcome. They
also teach those at a company about how much they are truly capable of
accomplishing in a set amount of time.
If quarterly goals end up being too easy, they can be adjusted to be more
ambitious, or vice versa, during the review process. It is important to set
goals that are aspirational, so employees are met with a real challenge.
We recommend from one to three objectives, maximum. This forces

employees to discover what their essential priorities should be. As Peter
Drucker noted: “Do first things first, and second things not at all.”
Overall, the MBO process consists of five steps:
1. Set company objectives

2. Cascade objectives to employees
3. Monitor
4. Evaluate performance
5. Reward performance
3. Quantify.
Another rule is to quantify your objectives to provide a clear idea of

success, which will be important later in the review process. Rules like
this are helpful guidelines but do not necessarily need to be applied at all
times.
Top company goals are sometimes non-quantifiable. Company culture,

for instance, is a valuable asset and one that deserves to be a high
priority, though difficult to quantify.
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Management by Objective examples.
To help you get a handle on what MBOs look like, we’ve provided some
MBO examples for different business areas below, as well as some
geared towards specific industries. Here, we give you an idea of what the
actual MBOs might be for a:
• CEO
• Team leader
• Sole contributor
Company performance MBO examples.
Company performance can encompass factors ranging from recruitment

and cashflow to carbon emissions and online presence. A few specific
goals your business could use as MBO examples include:
Financial and sales performance.
• Achieve cash flow of $500,000 per month

• Decrease OPEX by 5%
• Expand sales abroad by 10%
• Increase Gross Margin by 10%
• Increase assets to debt ratio by 15%
Market share.
• Become a member of the Fortune 500

• Raise brand profile by 25%
• Become a market leader
Customer service.
• Increase customer satisfaction (CSAT) by 90%

• Increase customer retention rate to 92.5%
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Sales performance.
• Achieve payback period of 1.5 year for new products

• Increase win ratio by 10%
• Expand sales abroad by 10%
• Achieve the new bookings target of 50 per month
• Hit the win rate of 20%
• Achieve average deal size of $150 000
• Decrease sales cycle to three months
Operations.
• Promote or hire one new departmental executive

• Reduce carbon footprint by 5%
What is meant by management by objectives?
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Who invented management by objectives?
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3.8 DECISION MAKING TYPES
Decision Making Process

Decision making is considered one of the most important tasks of
management. The manager plays a crucial role in serving his/her decision,
as the growth and failure of an organization are dependent on timely
decisions taken. Each managerial decision like planning, organising,
staffing, and directing are all parts of decision making.
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A decision is a process that is consciously chosen from among a set of

desired options to achieve the result.
Types of Decision Making
The managers or non-managers have to make decisions at some point to
get their organisational goals done. These decisions are categorised
further. The types of decision making in an organization are as follows:
1. Programmed And Non-Programmed Decisions:
Programmed decisions are routine and repetitive in nature. These
decisions deal with common and frequently occurring problems in an
organization such as buying behaviour of consumers, sanctioning of
different types of leave to employees, purchasing decisions, salary
increment, etc.
Non-programmed decisions are not routine or common in nature. These
are related to exceptional situations in which guidelines or routine
management is not set. For example, problems arising from a decline in
market share, increasing competition in the business environment. The
majority of the decisions taken by managers do fall in this non programmed
category.
Programmed decisions are repetitive in nature. Such decisions deal with
simple, common, frequently occurring problems that have established
procedures. These decisions are taken based on the existing policy, rule
or procedure of the organization. For example: making purchase orders,
sanctioning of different types of leave, increments in salary, etc.
Managers in dealing with such issues of routine nature, follow the
established procedures.
Non-programmed decisions are not routine in nature. They are related

to exceptional situations for which there are no established procedure.
For example- Issues relating to declining market share, increasing
competition, etc. fall in this category. These problems have to be handled
in a different way. Many of the decisions that managers at top levels
make are non-programmed decisions.
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2. Operational and Strategic Decisions:
Operational decisions are just the normal functioning of the organization.
These decisions do not require much time and take a shorter time as
compared to other decisions taken. Ample of responsibilities are delegated
to subordinates. The main decision is to create harmony in an organization
and to see whether the management is proper or not.
Strategic decisions include all present issues and problems. The main idea
is to achieve better working conditions, better equipment, and efficient use
of existing equipment, etc. These all fall under this category. Usually,
strategic decisions are taken by top-level management.
Operational or tactical decisions relate to the present issues or problems.

The main purpose is to achieve high degree of efficiency. Better working
conditions, effective supervision, prudent use of existing resources, better
maintenance of the equipment, etc. fall in this category.
While, expanding the scale of operations, entering new markets,

changing the product mix, shifting the manufacturing facility, striking
alliances with other companies, etc. are strategic in nature.
Usually, routine decisions are taken by managers at the lower levels,

while strategic decisions are taken by top level managers. The focus in
the operational decisions is on the short-run or immediate present, while
it is on the long- rum in the case of strategic decisions.
3. Organisational and Personal Decisions:

If the decision is taken collectively keeping in mind the organisational
goal, it is known as the organization goal, and if the manager takes any
decision in the personal capacity (affecting his/her life). It is known as
personal decisions. These decisions may sometimes affect the functioning
of the organization as well. For example, if the employee has decided to
leave the organization, it may affect the organization. The authority of
taking personal decisions cannot be delegated and is dependent on the
individual itself. Decisions taken by managers in the ordinary course of
business in their capacity as managers are organizational decisions. For
example: decisions regarding introducing a new incentive system,
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transferring an employee, reallocation or redeployment of employees etc.
are taken by managers to achieve certain objectives.
On the other hand, managers do take some decisions which are purely
personal in nature. However, their impact may affect the organization also.
For example: the manager’s decision to quit the organization, though
personal in nature, may create some problems for the organization.
4. Major and Minor Decisions:

These are classified as the type of decision-making in management where
decision-related to purchase of new premises is a major decision. These
are taken by top management whereas the purchase of stationery is a minor
decision. Minor decisions can be taken by the superintendent.
Tactical or routine decisions are made repetitively following certain

established rules, procedures and policies. They neither require collection
of new data nor conferring with people. Thus, they can be taken without
much deliberation. They may be complicated but are always one-
dimensional. They do not require any special effort by the manager.
Such decisions are generally taken by the managers at the middle and
lower management level. Strategic or basic decisions, on the other hand,
are more important and so they are taken generally by the top
management and middle management. The higher the level of a manager,
the more strategic decisions he is required to take.
The strategic decisions relate to policy matters and so require a thorough

fact finding and analysis of the possible alternatives. Finding the correct
problem in such decisions assumes great importance. The managers are
more serious about such decisions as they influence decision-making at
the lower levels.
5. Individual and Group Decisions:

When the decision is taken by an individual, it is categorised as an
individual decision. Usually, routine decisions are taken by individuals
within the policy framework of the organization.
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Group decisions are taken by a group of individuals in the form of a

standing committee. Generally, important types of decisions in
management are shifted to this committee. The main aim of a group
decision is to involve the maximum number of individuals in the process
of decision making. Individual decisions are taken where the problem is
of routine nature, whereas important and strategic decisions which have a
bearing on many aspects of the organization are generally taken by a
group. Group decision making is preferred these days because it
contributes for better coordination among the people concerned with the
implementation the decision.
6. Tactical and Operational Decisions:

Decisions that are pertaining to various policy matters in the organization
are known as policy decisions. These are taken by top management and do
have a long-term impact on the organization. For example, decisions
regarding the location of the plant or volume of production. These are
tactical decisions
Operational decisions are all day-to-day decisions that need to be taken for
the proper functioning and operation of the organization. These can be
taken by middle or lower-level managers. For example, the Calculation of
bonuses given to each individual is an operational decision and is
performed by middle or lower-level managers.
These were the types of managerial decisions that are performed by top,
middle and lower-level management in the organization to get things done
in alignment and to achieve the organisational goal effectively and
efficiently.
A decision which relates to day-to-day operation of an organisation is
known as operative decision. This type of decision is taken by middle level
management people normally. The reason is that they are working at
supervisory level and have a good knowledge of the operations. The time
of payment of overtime wages is fixed by middle level management
people. It is an example of operative decision
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Process and techniques making decision effective

7 steps of the decision-making process
Identify the decision.
Gather relevant info.
Identify the alternatives.
Weigh the evidence.
Choose among the alternatives.
Take action.
Review your decision.
Two roads diverged in a wood, and I—I took the one less traveled by, and
that has made all the difference.” But unfortunately, not every decision is
as simple as “Let’s just take this path and see where it goes,” especially
when you’re making a decision related to your business.
Whether you manage a small team or are at the head of a large corporation,
your success and the success of your company depend on you making the
right decisions—and learning from the wrong decisions.
Use these decision-making process steps to help you make more profitable
decisions. You'll be able to better prevent hasty decision-making and make
more educated decisions.
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Fig 3.2 Identify the problem

Defining the business decision-making process
The business decision-making process is a step-by-step process allowing

professionals to solve problems by weighing evidence, examining
alternatives, and choosing a path from there. This defined process also
provides an opportunity, at the end, to review whether the decision was
the right one.
7 decision-making process steps
Though there are many slight variations of the decision-making

framework floating around on the Internet, in business textbooks, and in
leadership presentations, professionals most commonly use these seven
steps.
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1. Identify the decision
To make a decision, you must first identify the problem you need to
solve or the question you need to answer. Clearly define your decision. If
you misidentify the problem to solve, or if the problem you’ve chosen is
too broad, you’ll knock the decision train off the track before it even
leaves the station.
If you need to achieve a specific goal from your decision, make it

measurable and timely.
2. Gather relevant information
Once you have identified your decision, it’s 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.
Keep in mind, you can become bogged down by too much information
and that might only complicate the process.
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.
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 look at your organization’s own
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wins and losses. Identify potential pitfalls for each of your alternatives,
and weigh those against the possible rewards.
5. Choose among alternatives
Here is the part of the decision-making process where you actually make
the decision. Hopefully, you’ve identified and clarified what decision
needs to be made, gathered all relevant information, and developed and
considered the potential paths to take. You should be 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. plan-related to your decision, and then
assign tasks to your team.
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.
Tools for better decision-making
Depending on the decision, you might want to weigh evidence using

a decision tree. The example below shows a company trying to determine
whether to perform market testing before a product launch. The different
branches record the probability of success and estimated payout so the
company can see which option will bring in more revenue.
A decision matrix is another tool that can help you evaluate your options
and make better decisions.. You can also create a classic pros-and-cons
list, and clearly highlight whether your options meet necessary criteria or
whether they pose too high of a risk.
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Fig 3.3 Tools for better decision-making

DECISION-MAKING TECHNIQUES FOR MANAGERS
1. Take a Process-Oriented Approach
One of your primary responsibilities as a manager is to get things done
with and through others, which involves leveraging organisational
processes to accomplish goals and produce results. According to Harvard
Business School Professor Len Schlesinger, who’s featured in the online
course Management Essentials, decision-making is one of the processes
you can use to your advantage.
“The majority of people think about making decisions as an event,”

Schlesinger says. “It’s very rare to find a single point in time where a
‘decision of significance’ is made and things go forward from there.
What we’re really talking about is a process. The role of the manager in
overseeing that process is straightforward, yet, at the same time,
extraordinarily complex.”
When establishing your decision-making process, first frame the issue at

hand to ensure you ask the right questions and everyone agrees on what
needs to be decided. From there, build your team and manage group
dynamics to analyse the problem and craft a viable solution. By
following a structured, multi-step process, you can make informed
decisions and achieve the desired outcome.
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2. Involve Your Team in the Process
Decision-making doesn’t have to be done in a vacuum. To avoid relying
on managerial decisions alone, involve your team in the process to bring
multiple viewpoints into the conversation and stimulate creative
problem-solving.
Research in the journal Royal Society Open Science shows team

decision-making is highly effective because it pools individuals’
collective knowledge and experience, leading to more innovative
solutions and helping to surface and overcome hidden biases among
groups.
Considering others’ perspectives on how to approach and surmount a

specific challenge is an ideal alternative because it helps you become
more aware of your implicit biases and manage your team with
greater emotional intelligence.
3. Foster a Collaborative Mindset

Fostering the right mindset early in the decision-making process is
critical to ensuring your team works collaboratively—not contentiously.
When facing a decision, there are two key mindsets to consider:
• Advocacy: A mindset that regards decision-making as a

contest. In a group with an advocacy mindset, individuals try
to persuade others, defend their positions, and downplay their
weaknesses.
• Inquiry: A mindset that navigates decision-making with
collaborative problem-solving. An inquiry mindset centres on
individuals testing and evaluating assumptions by presenting
balanced arguments, considering alternatives, and being open
to constructive criticism.
“On the surface, advocacy and inquiry approaches look deceptively
similar,” HBS Professor David Gavin says in Management Essentials.
“Both involve individuals engaged in debates, drawing on data,
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developing alternatives, and deciding on future directions. But, despite
these similarities, inquiry and advocacy produce very different results.”
4. Create and Uphold Psychological Safety

For your team members to feel comfortable sharing their diverse
perspectives and working collaboratively, it’s crucial to create and
maintain a psychologically safe environment. According to research by
technology company Google, psychological safety is the most important
dynamic found among high-performing teams.
“Psychological safety is essential—first and foremost—for getting the

information and perspectives out,” HBS Professor Amy Edmondson says
in Management Essentials. “It’s helpful to be able to talk about what we
know and think in an effective and thoughtful way before coming to a
final conclusion.”
Reiterate the Goals and Purpose of the Decision

Throughout the decision-making process, it’s vital to avoid common
management pitfalls and lose sight of the goals and purpose of the
decision on the table.
The goals you’re working toward need to be clearly articulated at the

outset of the decision-making process—and constantly reiterated
throughout—to ensure they’re ultimately achieved.
“It’s easy, as you get into these conversations, to get so immersed in one
substantive part of the equation that you lose track of what the actual
purpose is,” Schlesinger says.
Revisiting purpose is especially important when making decisions related

to complex initiatives—such as organisational change—to ensure your
team feels motivated and aligned and understands how their
contributions tie into larger objectives.
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WHY ARE DECISION-MAKING SKILLS IMPORTANT?

Effective decision-making can immensely impact organisational
performance. By developing your decision-making skills, you can
exercise sound judgment and guide your team through the appropriate
frameworks and processes—resulting in more data-driven decisions.
You can also anticipate and navigate organisational challenges while

analysing the outcomes of previous efforts, which can have lasting
effects on your firm’s success.
3.9 LETS SUM UP
Every plan should be linked with some objectives. The planning done by
managers is aimed at achieving the organisational goals. The planning
helps people in concentrating their efforts on the most important jobs
rather than wasting time on the lesser important work. The purpose of
planning is also to minimise the cost of performance and eliminate
unproductive efforts. It also helps the management in adopting and
adjusting according to the changes that take place in the environment.
Planning also provides a basis for teamwork …
It helps us to identify our goals clearly. It makes us decide clearly and
concretely what we need to do to have the effect on society that we want.
It helps us make sure that we all understand our goal and what we need to
do to reach it by involving everyone in the planning process.
. It makes us all work in a goal-oriented way rather than in a loose or ad-
hoc way where we just respond to issues and crises with no clear plan or
Planning helps us see in advance those things that can help us achieve our
goal and those things that can prevent us from achieving our goal and work
out what to do about them.
Planning helps us to be accountable for what we do. Planning helps us
decide how best to use our resources (people, time, money, information,
173
equipment) so that they make the most significant contribution to
achieving our goal. Planning lays the basis for us to assess and evaluate
our achievements effectivelyAs planning is one of great importance to an
organisation, the entire process of planning should be carried out in a
systematic manner. Planning is an intellectual process which an executive
carries out before he does any job with the help of other people.
Every student has their own writing process. Writing process ways is the
student's way to have the best writing assignments and make who ever read
it understand their main idea. In this essay I am going to explain my own
writing process for various type. In chapter 4 by Keith Hjortshoj “How
Good Writing Gets Written” which talks about how should develops their
writing skills and gives them some tips that they should use in their writing
process. In “Decisions and Revisions: The Planning Strategies of a
Publishing Writer” Carol Berkenkotter. Berkenkotter did study and
experiment on Donald M. Murray to see how professional academic writer
writes and see his writing processes. In this essay I will talk about how's my
writing process is the same or different from other people processes.
Planning and proofreading is strategies I’m using during my writing
assignment
Planning can help you to formulate ideas and to ensure that the structure of
your final essay is logical and appropriate to the essay title. There is many
different way of planning that I use such as drawing pictures, making lists,
brainstorming, using graphic organizers. Planning is important because it
make the writing easier when I plan what I’m going to talk about. Also in
the article by Berkenkotter which she did study and experiment on Donald
M. Murray to see how peritoneal academics and she found that planning is
important process in Murray writing Strategy. “Some of the more
provocative findings of this study concern the sub-processes of planning and
revising that have not been observed in conventional protocols”. (165-166).
This shows us that on Berkenkotter experiment find that Murray use
planning and revising the most in his writing process
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3.10 KEYWORDS
1. Planning :
Planning is deciding in advance what to do, how to do it, when to do it,
and who should do it. This bridges the gap from where the organization is
to where it wants to be. The planning function involves establishing goals
and arranging them in logical order.
2 MBO:
MBO is an acronym for Management by Objectives. It can be defined as a
management system that measures employees' performance against a
series of set targets or goals to gauge their overall performance in their
role. These objectives are often tied into those set for the overall business
or department
3. Corporate planning :
Corporate planning is the process by which businesses create strategies for
meeting business goals and achieving objectives. It involves strategy
definition, strategy direction, decision-making and resource allocation.
4. Plan:
A plan is a document showing a detailed scheme, programme, and
strategy, worked out in advance for achieving an objective. It is a specific
action which aims to help the organisation or a country in achieving its
objectives
3.11 REFERENCES
➢ RBI Notification.(2007) .CSR in Indian Banks, Corporate Social

Responsibility, Sustainable Development and Non- Financial
Reporting- Role of Banks,RBI/2007- 08/216:DBOD No
Dir.BC.58/13.27.00/2007- 08,Dec.20.
➢ S. K. Chaudhuri, S. K. Das and P. K. Sahoo, ―Practices of
corporate social responsibility (CSR) in banking sector in India:
an assessment,‖ research journal of economics, business, volume
4, pp.76, 2011P.
175
➢ Sunder, Beyond Business: From Merchant Charity to corporate
citizenship, New Delhi: Tata McGraw-Hill, 2000
➢ www.csrquest.net/defalt.aspx?articleID=12770&heading
➢ http://ec.europa.eu/enterprise/policies/sustainable-
business/corporate-social- responsibility
➢ B. Stolidness, ―Finance as a Driver of Corporate Social
Responsibility, ―Journal of Business Ethics, vol. 68, no. 1, pp.
19-33, sep 2006.
➢ J. M. Rose, ―Corporate Directors and Social Responsibility:
Ethics versus Shareholder value, Journal of Business Ethics, vol.
73, no. 3, pp. 319-331, jul 2007.
3.12 CHECK YOUR PROGRESS ANSWER
1. Refer 1 for Answer to check your progress- 1Q. 1 ...

The steps involved in the planning process are as follows:
1. Developing of objectives
2. Developing tasks that are required to meet those objectives
3. Determining resources needed to implement those tasks
4. Creating a timeline
5. Determining tracking and assessment method
6. Finalising the plan
7. Distributing the plan to everyone involved in the process of
planning
Refer 1 for Answer to check your progress- 1Q.2 ...

Plans can be classified into three types:
1. Operational planning
2. Strategic planning
3. Tactical planning
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Refer 1 for answer to check you progress -1 Q…3
1. Planning is a primary function

2. Planning is goal-oriented
3. Planning is continuous
4. Planning is futuristic or future oriented
5. Planning focuses on achieving the objectives

Management by objectives (MBO) refers to the process of setting specific
objectives for your employees to work towards. This has become a key
part of performance management in recent decades.

Author Peter Drucker was the first person to use the term ‘management by
objective’. That was way back in 1954 in a book called The Practice of
Management.
3.13 TERMINAL QUESTION
1. What are the objectives of planning ?

2. Explain corporate planning ?
3. What is a plan ?
4. Explain MBO ?
5. Describe planning ?
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UNIT – 4 ORGANISING AND STAFFING
STRUCTURE
4,0 Objectives
4.1 Introduction
4..2 Meaning and its importance
4.3 Types pf organisation
4.4 Organisation structure
4.5 Span of management
4.6 Line and staff relationship
4.7 Departmentalisation
4.8 Centralization and decentralization
4.9 Staffing , recruitment and selection Training and development
4.10 Let Us Sum Up
4.11Key Words
4.12Some Useful Books
4.13Answer to check your progress
4.14Terminal Questions
4.0 OBJECTIVES

o Types of organisation
o Structure
o Span of management
o Departmentation
o Centralization
o Decentralization
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4.1 INTRODUCTION
An organisation is a group of people working together to achieve the

specified goal. A manager play a central role in grouping the people and
activities, establishing authority and responsibility and interacting with
people for the achievement of the organizational goal. He performs the
functions of planning, organizing, directing and controlling for smooth
functioning of the organisation. Moreover, continuous influence of
dynamic environment on the organisation requires new managerial
techniques to manage these changes. The detailed study of various aspects
of organisation and management may provide proper techniques for
managing them effectively. In this unit, you will learn the concept of
organisation and management. You will further learn the functions and
roles of managers. You will be acquainted with the types of organisation
and the features of the modern organisation.
Organization is the process of identifying and grouping work to be
performed, defining and delegating responsibility and authority and
establishing relationships for the purpose of enabling people to work
most effectively together in accomplishing objectives.” In the words of
Allen, organization is an instrument for achieving organisational goals.
The work of each and every person is defined and authority and
responsibility is fixed for accomplishing the same.
Wheeler, “Internal organization is the structural framework of duties and

responsibilities required of personnel in performing various functions
within the company………… It is essentially a blue print for action
resulting in a mechanism for carrying out function to achieve the goals
set up by company management”. In Wheeler’s view, organization is a
process of fixing duties and responsibilities of persons in an enterprise so
that business goals are achieved.
Koontz and O’Donnell, ‘The establishment of authority relationships

with provision for co-ordination between them, both vertically and
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horizontally in the enterprise structure.” These authors view organization

as a coordinating point among various persons in the business.
4.2 MEANING AND ITS IMPORTANCE
Organization is the process of identifying and grouping work to be

performed, defining and delegating responsibility and authority and
establishing relationships for the purpose of enabling people to work
most effectively together in accomplishing objectives.” In the words of
Allen, organization is an instrument for achieving organisational goals.
The work of each and every person is defined and authority and
responsibility is fixed for accomplishing the same.
Wheeler, “Internal organization is the structural framework of duties and

responsibilities required of personnel in performing various functions
within the company………… It is essentially a blue print for action
resulting in a mechanism for carrying out function to achieve the goals
set up by company management”. In Wheeler’s view, organization is a
process of fixing duties and responsibilities of persons in an enterprise so
that business goals are achieved.
Koontz and O’Donnell, ‘The establishment of authority relationships

with provision for co-ordination between them, both vertically and
horizontally in the enterprise structure.” These authors view organization
as a coordinating point among various persons in the business.
Organization is the process so combining the work which individuals or

groups have to perform with the facilities necessary for its execution, that
the duties so performed provide the best channels for the efficient,
systematic, positive and coordinated application of the available effort”.
Organization helps in efficient utilisation of resources by dividing the
duties of various persons.
Sprigged, “In its broadest sense organisation refers to the relationship

between the various factors present in a given endeavour. Factory
organisation concerns itself primarily with the internal relationships
180
within the factory such as responsibilities of personnel, arrangement and
grouping of machines and material control. From the standpoint of the
enterprise as a whole, organisation is the structural relationship between
the various factors in the enterprise”.
Sprigged has given a wide definition of the organization. He has

described it as the relationship among persons, factors in the enterprise.
All factors of production are coordinated in order to achieve
organisational objectives.
George Terry, “Organising is the establishing of effective authority

relationships among selected work, persons, and work places in order for
the group to work together efficiently”. According to Terry organisation
is the creation of relationship among persons and work so that it may be
carried on in a better and efficient way.
The arrangement by which tasks are assigned to men and women so that
their individual efforts contribute effectively to some more or less clearly
defined purpose for which they have been brought together”. According
to Northcott the purpose of organisation is to co-ordinate the activities of
various individuals working in the organisation for the attainment of
enterprise goals.
L.H. Haney, “Organisation is a harmonious adjustment of specialised

parts for accomplishment of some common purpose or purposes”.
Organisation is the adjustment of various activities for the attainment of
common goals.
An organization is an entity such as a company or an association that

consists of one or more people and has a specific purpose. The word is
derived from the Greek word organ, meaning instrument or instrument,
musical instrument and organ. An organization is a group of people who
work together, like a neighborhood association, a charity, a union, or a
corporation. Organization is also the act of forming or
establishing something (like an organization). Let’s go through the five
common types of organization and reasons why you might consider each
of them.
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• Organizations may be defined as a group of individuals large or

small they’re cooperating under the direction of executive
leadership in accomplishment of certain common object.” – Keith
Davis
• “Organization is a system of cooperative activities of two or more
persons.” – Chester Barnard
• “Organization is the form of every human association for the
attainment of a common purpose.” – Mooney and Reily
• “Organization is a harmonious adjustment of specialised parts for
the accomplishment of some common purpose or purposes.” –
Haney
• “In its broadest sense, organization refers to the relationship
between the various factors present in the given endeavour.
Factory organization concerns itself primarily with the internal
relationships within the factory such as responsibilities of
personnel arrangement and grouping of machines and material
control. From the standpoint of enterprise as a whole, organization
is the structural relationship between various factors in an
enterprise.”- Sprigged
• Step 1: Determination and classification of firm’s activities.
• Step 2: Grouping of the activities into workable departments.
• Step 3: Assignment of authority and responsibility on the

departmental executives for undertaking the delegated tasks.
• Step 4: Developing relationship amidst superior and subordinate,

within the unit or department.
• Step 5: Framing policies for proper coordination between the

superior and subordinate and creating specific lines of
supervision.
Organization is a goal oriented process, which aims at achieving them,

through proper planning and coordination between activities. It relies on
the principle of division of work and set up authority-responsibility
relationship among the members of the organization.
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Need / Importance of Organization
A renowned industrialist of U.S.A, Andrew Carnegie when sold his
company ‘United States Steel Corporation’, showed his confidence in
organization by saying “Take away our factories, take away our plants, our
avenues of transportation, our money, leave nothing but our organization
and we shall establish better factories.” Since ages and all walks of life,
organization has been playing a significant role. The importance of
organization are:
1. A tool for achieving objectives: Organization is an important tool

in the hands of management for accomplishing the objectives of an
enterprise.
2. It facilitates administration and management: A sound
organization increases efficiency, avoids duplication of work,
avoids delay in work, improves managerial skills and motivates
employees to perform their duties.
3. It ensures optimum use of human resource: Good organization
establishes individuals with interests, knowledge, skills, abilities
and viewpoints.
4. It enhances creativity: A well-conceived and comprehensive
organization is the source of creative thinking and initiation of new
ideas.
5. Prevents Corruption: Enterprises which lack sound organization
most of the times have problem of corruption. Sound organization
helps to prevent corruption by raising morale of the employees. As
a result of which employees are encouraged to work with higher
efficiency, commitment and honesty.
6. Fosters growth of enterprise: Good organization plays a key role
not only in growth but also in the expansion and diversification of
an enterprise.
7. Eliminates overlapping and duplication of efforts: In a
situation, where the distribution of work is not clearly identified
and the work is performed in a haphazard manner there will be
duplication and overlapping of efforts. As a good organization
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requires that the work be clearly assigned amongst employees,
such overlapping and duplication is to be eliminated.
8. Coordination: Various jobs and positions are linked together by
structural relationship of the organization. The organisational
process exercises its due and balanced emphasis on the
coordination of different activities.
Principles of Organization
For timely and systematic completion of work it is must for every
organization to adopt some techniques or principles. Thus these principles
would be the deciding factor for the success or failure of an organization.
1. Principle of Objective: All the enterprises whether large or small,

set certain central objectives. Every element of the organization
and organization as whole should be geared to the central
objectives identified by the enterprise.
2. Principle of Specialization: Precise division of work facilitates
specialization. According to this principle, division of work among
the employees should be based on their knowledge, skills, abilities,
capabilities and interests. This would lead to specialization which
would in turn lead to efficiency, quality and elimination of wastage
of resources.
3. The Scalar Principle: This principle is sometimes referred to as
the chain command. There must be clear lines of authority running
from the top to bottom of the organization and linking all the
individuals in the organization.
4. The Principle of Authority: Authority is an important ingredient
of the organization structure. It is the tool by which the manager
can create an environment where an individual can perform with
greater efficiency.
5. The Principle of Span of Control: This principle states that there
is a limit to the number of subordinates that report to one superior.
Supervision of too many people can lead to trouble and confusion.
Also the superior will not be able to spare time to supervise each
of his subordinate. It will also lead to increased complexity of the
organization structure. The span of control depends upon a number
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of considerations. It is easy to supervise a large number of
subordinates involved in routine jobs and working in the same
room, whereas it is difficult to supervise highly diverse and
specialised personnel scattered widely. The ability of the
employee, their willingness to assume responsibility and the
attitude of management towards delegating and decentralization
should also be analysed in detail while making a decision on span
of control.
6. The Principle of Unity of Command: This principle is basically
about avoiding dual reporting. It states that every individual
employee working in the organization should be kept in the
supervision of one boss only. This principle eliminates the
possibility of conflicts in instructions and fosters a feeling of
personal responsibility for work.
7. The Principle of Definition: Each individual in the organization
should be made aware about his / her responsibilities, duties,
authorities and relations with the other job positions in the
organization structure.
8. Principle of Unity of Direction: The basic motive for the
existence of organization is the attainment of certain objectives.
Major objectives should be split into functional activities and there
should be one objective and one plan for each group of people.
9. The Principle of parity of Authority and Responsibility: The
responsibility for execution of work must be accompanied by the
authority to control and direct the means of doing the work.
10. The Principle of Supremacy of Organisational Objectives: The
organisational goals and objectives should be given wide publicity
within the organization. The people contributing to it should be
made to understand that enterprise objectives are more valuable
and significant and one should give higher priority to
organisation’s objectives in comparison to personal motives.
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4.3 TYPES AND STRUCTURE
7 types of organisational structures (+ org charts for implementation

Types of organisational structures
1. Hierarchical org structure
2. Functional org structure
3. Horizontal or flat org structure
4. Divisional org structures (market-based, product-based,

geographic)
5. Matrix org structure
6. Team-based org structure
7. Network org structure
At some point, you have likely seen an organisational chart for your
company. And we can probably guess what it looked like.
The typical org chart looks like a pyramid, your C-level executives at the
top with lines stretching down to middle management and finally staff-
level employees.
But not every company functions best with a hierarchical organisational

structure. Many types of organisational charts exist because many types
of organisational structures exist.
Let’s go through the seven common types of org structures and reasons
why you might consider each of them.
1. Hierarchical org structure
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Fig 4.1 Hierarchical org structure
The pyramid-shaped organisational chart we referred to earlier is known

as a hierarchical org chart. It’s the most common type of organisational
structure—the chain of command goes from the top (e.g., the CEO or
manager) down (e.g., entry-level and low-level employees), and each
employee has a supervisor.
Pros
• Better defines levels of authority and responsibility
• Shows who each person reports to or who to talk to about specific
projects
• Motivates employees with clear career paths and chances for
promotion
• Gives each employee a specialty
• Creates camaraderie between employees within the same
department
187
Cons
• Can slow down innovation or important changes due to increased
bureaucracy
• Can cause employees to act in interest of the department instead
of the company as a whole

• Can make lower-level employees feel like they have less
ownership and can’t express their ideas for the company
2. Functional org structure
Fig 4.2 Functional org structure
Similar to a hierarchical organisational structure, a functional org

structure starts with positions with the highest levels of responsibility at
the top and goes down from there. Primarily, though, employees are
organised according to their specific skills and their corresponding
function in the company. Each separate department is managed
independently.
Pros
• Allows employees to focus on their role
• Encourages specialization
• Help teams and departments feel self-determined
• Is easily scalable in any sized company
Cons
• Can create silos within an organization
• Hampers interdepartmental communication
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• Obscures processes and strategies for different markets or
products in a company
3. Horizontal or flat org structure
Fig 4.3 Horizontal or flat org structure
A horizontal or flat organisational structure fits companies with few

levels between upper management and staff-level employees. Many start-
up businesses use a horizontal org structure before they grow large
enough to build out different departments, but some organizations
maintain this structure since it encourages less supervision and more
involvement from all employees.
Pros
• Gives employees more responsibility
• Fosters more open communication
• Improves coordination and speed of implementing new ideas
Cons
• Can create confusion since employees do not have a clear
supervisor to report to
• Can produce employees with more generalised skills and
knowledge
• Can be difficult to maintain once the company grows beyond
start-up status
4. Divisional org structure
In divisional organisational structures, a company’s divisions have

control over their own resources, essentially operating like their own
189
company within the larger organization. Each division can have its own
marketing team, sales team, IT team, etc. This structure works well for
large companies as it empowers the various divisions to make decisions
without everyone having to report to just a few executives.
Depending on your organization’s focus, there are a few variations to

consider.
Market-based divisional org structure
Divisions are separated by market, industry, or customer type. A large

consumer goods company, like Target or Walmart, might separate its
durable goods (clothing, electronics, furniture, etc.) from its food or
logistics divisions.
Fig 4.4 Market-based divisional org structure

Product-based divisional org structure
Divisions are separated by product line. For example, a tech company

might have a division dedicated to its cloud offerings, while the rest of
the divisions focus on the different software offerings—e.g., Adobe and
its creative suite of Illustrator, Photoshop, InDesign, etc.
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Geographic divisional org structure
Divisions are separated by region, territories, or districts, offering more

effective localisation and logistics. Companies might establish satellite
offices across the country or the globe in order to stay close to their
customers
Pros
• Helps large companies stay flexible
• Allows for a quicker response to industry changes or customer
needs
• Promotes independence, autonomy, and a customised approach
Cons
• Can easily lead to duplicate resources
• Can mean muddled or insufficient communication between the
headquarters and its divisions

• Can result in a company competing with itself
5. Matrix org structure
A matrix organisational chart looks like a grid, and it shows cross-

functional teams that form for special projects. For example, an engineer
may regularly belong to the engineering department (led by an
engineering director) but work on a temporary project (led by a project
manager). The matrix org chart accounts for both of these roles and
reporting relationships.
Pros
• Allows supervisors to easily choose individuals by the needs of a
project
• Gives a more dynamic view of the organization
• Encourages employees to use their skills in various capacities
aside from their original roles
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Cons
• Presents a conflict between department managers and project
managers
• Can change more frequently than other organisational chart types
6. Team-based org structure
Fig 4.5 Team-based org structure
It’ll come as no surprise that a team-based organisational structure

groups employees according to (what else?) teams—think Scrum
teams or tiger teams. A team organisational structure is meant to disrupt
the traditional hierarchy, focusing more on problem-solving, cooperation,
and giving employees more control.
Pros
• Increases productivity, performance, and transparency by
breaking down silo mentality
• Promotes a growth mindset
• Changes the traditional career models by getting people to move
laterally
• Values experience rather than seniority
• Requires minimal management
• Fits well with agile companies with Scrum or tiger teams
192
Cons
• Goes against many companies’ natural inclination of a purely
hierarchical structure
• Might make promotional paths less clear for employees
7. Network org structure
Fig 4.6 Network org structure

These days, few businesses have all their services under one roof, and
juggling the multitudes of vendors, subcontractors, freelancers, offsite
locations, and satellite offices can get confusing. A network organisational
structure makes sense of the spread of resources. It can also describe an
internal structure that focuses more on open communication and
relationships rather than hierarchy.
Pros
• Visualises the complex web of onsite and offsite relationships in
companies
• Allows companies to be more flexible and agile
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• Give more power to all employees to collaborate, take initiative,
and make decisions
• Helps employees and stakeholders understand workflows and
processes
Cons
• Can quickly become overly complex when dealing with lots of
offsite processes
• Can make it more difficult for employees to know who has final
say
Structure of organisation
What Is an Organisational Structure?
An organisational structure is a system that outlines how certain
activities are directed in order to achieve the goals of an organization.
These activities can include rules, roles, and responsibilities.
The organisational structure also determines how information flows

between levels within the company. For example, in a centralised
structure, decisions flow from the top down, while in a decentralised
structure, decision-making power is distributed among various levels of
the organization. Having an organisational structure in place allows
companies to remain efficient and focused.
Understanding an Organisational Structure

Businesses of all shapes and sizes use organisational structures heavily.
They define a specific hierarchy within an organization. A successful
organisational structure defines each employee's job and how it fits
within the overall system. Put simply, the organisational structure lays
out who does what so the company can meet its objectives.
This structuring provides a company with a visual representation of how

it is shaped and how it can best move forward in achieving its goals.
Organizational structures are normally illustrated in some sort of chart
or diagram like a pyramid, where the most powerful members of the
organization sit at the top, while those with the least amount of power
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are at the bottom. Not having a formal structure in place may prove
difficult for certain organizations. For instance, employees may have
difficulty knowing to whom they should report. That can lead to
uncertainty as to who is responsible for what in the organization.
Having a structure in place can help with efficiency and provide clarity
for everyone at every level. That also means each and every department
can be more productive, as they are likely to be more focused on energy
and time
1.Define organisation ?
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2. State types of organisation ?
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3. Define organisational structure ?
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4.4 SPAN OF MANAGEMENT
The Span of Management refers to the number of subordinates who can

be managed efficiently by a superior. Simply, the manager having the
group of subordinates who report him directly is called as the span of
management.
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The span of management refers to the ideal number of subordinates who

report to and are supervised by one manager.
Also known as the span of control (SOC), it determines how many

subordinates are able to provide maximum output without costing too
much under one manager/supervisor.
It also relates to the Unity of Command principle under Fayolism, which

discusses that there should be one manager who should be providing
guidance to subordinates.
Without determining an optimal number, a manager may be unable to

perform the controlling function. Likewise, coordinating, directing, etc.,
will also suffer. With that, the long-term plans suffer.
The Span of Management has two implications:
1. Influences the complexities of the individual manager’s job
2. Determine the shape or configuration of the Organization
The span of management is related to the horizontal levels of the

organization structure. There is a wide and a narrow span of
management. With the wider span, there will be less hierarchical levels,
and thus, the organisational structure would be flatter. Whereas, with the
narrow span, the hierarchical levels increases, hence the organisational
structure would be tall.
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Fig 4.7 Span of Management
Both these organisational structures have their advantages and the

disadvantages. But however the tall organisational structure imposes
more challenges:
• Since the span is narrow, which means less number of

subordinates under one superior, requires more managers to be
employed in the organization. Thus, it would be very expensive
in terms of the salaries to be paid to each senior.
• With more levels in the hierarchy, the communication suffers

drastically. It takes a lot of time to reach the appropriate points,
and hence the actions get delayed.
• Lack of coordination and control because the operating staff is far

away from the top management.
The major advantage of using this structure is that the cross

communication gets facilitated, i.e., operative staff communicating with
the top management. Also, the chance of promotion increases with the
availability of several job positions.
In the case of a flatter organisational structure, where the span is wide

leads to a more complex supervisory relationship between the manager
and the subordinate. It will be very difficult for a superior to manage a
large number of subordinates at a time and also may not listen to all
efficiently.
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However, the benefit of using the wider span of management is that the
number of managers gets reduced in the hierarchy, and thus, the expense
in terms of remuneration is saved. Also, the subordinates feel relaxed and
develop their independent spirits in a free work environment, where the
strict supervision is absent.
Types of Span of Management
There are two basic types when it comes to discussing the span of
management.
Wider Span of Management
It refers to situations when the organisational hierarchy consists of one

manager and many subordinates. The manager supervises many
subordinates who are themselves skilled to conduct duties without much
directing and controlling.
Narrow Span of Management
This is the opposite situation, when there is more than one manager in an
organisation to handle a few subordinates. One of the best advantages
here is that the subordinates get thoroughly supervised and the manager
can exercise their duties more efficiently.
Factors that Affect Span of Management
Look into the most important factors that will help you understand the
span of management in more detail.
Manager’s Capability & Competence
The more competent the manager is, more likely it is that they will be
able to supervise more subordinates than a less competent one. Skilled
managers are able to make better decisions that help not just the
organisation, but also the professional growth of the subordinates.
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Subordinate’s Capability & Competence
When the subordinates are not well-trained, it is ideal to have a narrow

span of management. The reason is because the manager would have to
spend more time to train them.
On the other hand, the subordinates are highly skilled, the manager will
not have to deal with intervening in every action taken by the
subordinate.
Nature & Complexity of Work
When the workload is repetitive, it does not matter how many of the
subordinates are under one manager. It is essential to have a narrow span
of management when the work is more complex and non-repetitive.
Complete Supervision
Supervision when required is crucial. A manager should have the time to

provide it to subordinates when they need it. A situation where the
manager does not have the bandwidth to provide supervision is not ideal
for the long term.
Organisational Planning
It is essential to determine the span of management when planning is

done on an organisational level. Planning should state how many
subordinates should report to one manager and have some amount of
contingency in case, the plan does not work out.
Levels of Management
The span of management is directly related to the levels of management.

When there are more levels, there is more hierarchy, which means it will
be a narrow span of management.
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4.5 LINE AND STAFF RELATIONSHIP
For running an organization properly both line and staff member’s

contribution is required and their relationship must be well defined in the
organisational structure.
Much confusion has arisen among both scholars and managers as to what
“line” and “staff’ mean.
As a result, there is probably no area of management that causes more

difficulties, more friction, arid more loss of time and effectiveness.
Yet the line-and-staff relationships of the members of an organization

must necessarily affect the operation of the enterprise.
One widely held view of line and staff is that line functions are those that
have a direct impact on the accomplishment of the objectives of the
enterprise.
On the other hand, Staff functions are those that help the line persons
work most effectively in accomplishing the objectives.
The people who adhere to this view almost invariably classify production
and sales (and sometimes finance) as line functions and accounting,
personnel, plant maintenance, and quality control as staff functions.
An organization structure which is composed of only line executives is

termed as a line organization.
Imaginary structure of such an organization may be as under:
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Fig 4.8 Imaginary structure of such an organization
An organization structure which is composed of both line executives and

staff executives is termed as line and staff organization.
An imaginary structure of such a type is shown below;
Fig 4.9 imaginary structure of such a type
The Nature of Line and Staff Relationships
A more precise and logically valid concept of line and staff is that they
are simply a matter of relationships.
Line authority gives a superior a line of authority over a subordinate. It

exists in all organizations as an uninterrupted scale or series of steps.
Hence, the scalar principle in the organization.

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The clearer the line of authority from the ultimate management position
in an enterprise to every subordinate position is, the clearer will be the
responsibility for decision-making and the more effective will be
organization communication.
In many large enterprises, the steps are long and complex; but even in the
smallest; the very fact of organization introduces the scalar principle.
It, therefore, becomes apparent from the scalar principle that line
authority is that relationship in which a superior exercise direct
supervision over a subordinate authority relationship being in direct line
or steps.
The nature of the staffing relationship is advisory. The function of people

in a pure staff capacity is to investigate, research, and give advice to line
managers.
Benefits of Staff
There are many advantages and benefits of the use of staff. A few of
them are:
o Handling complex managerial functions
The necessity of having the advice of qualified staff specialises in

various areas of an organization can scarcely be overemphasised,
especially as operations become more and more complex.
o Assisting in decision-making
Managers are now faced with the necessity of making decisions that
require expert knowledge in matters like environmental issues, strengths,
and weaknesses of the organization, so on and so forth.
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o Relieving an over-burdened top executive
Staff specialists devote their time to think, to gather data, and to analyse
them on behalf of their busy superiors. It is a rare top-level executive,
who has the time or will take the time, to do those things that a staff
specialist can do so well.
Limitations of Staff
The use of staff specialists can ensure many benefits to organizations but
the nature of staff authority and the difficulty of understanding it leads to
certain problems in practice.
o An escape clause for staff specialists
Staff specialists only propose a plan; others must decide to adopt the plan
and put it into operation. This creates an ideal situation for shifting blame
for mistakes.
The staff will claim that it was a good plan and that it failed because the
operating manager was inefficient and ineffective.
o Line authority being undermined
Operating (line) managers represent the mainline of the organization and

they also gain a degree of indispensability.
The staff specialists may, however, forget that their value lies in the
extent to which they strengthen line managers and also that they are to
counsel and not to order.
They need to remember that if they undermine line authority, they risk
becoming expendable. If there is an expendable person in an
organization, it is most likely to be a staff specialist.
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Check your progress
1. Define line ?
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2. Define staff ?
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4.6 DEPARTMENTATION
When companies grow, they need to implement new organizational

structures to ensure communication, maintain control and allow for
additional expansion. Departmentalization is a structure that helps an
organization continue expanding while still allowing company leadership
to monitor employees and uphold company-wide standards.
Understanding how businesses create departments can help you identify
how your workplace operates. In this article, we explore how
departmentalization works, review common department types and explain
how departmentalization benefits a workplace.
What is departmentalisation?
Departmentalisation is an organisational structure that separates people
into groups, or departments, based on a particular set of criteria. These
departments have their own leadership and work together to complete
tasks. With large or complicated projects, multiple departments may work
together.
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Here are the primary objectives of businesses that choose to implement
departmentalisation:
o Maintaining control
o Simplifying operational processes
o Grouping specialised activities together
o Increasing overall efficiency
o Ensuring responsibility and accountability
✓ What are the benefits of departmentalisation?
Organizations use departmentalisation for several reasons. First, it's a good

way to organise a large number of people. It can also simplify training,
increase the ease of evaluating performance and allow for quick growth or
expansion. Finally, departmentalisation effectively integrates work,
allowing people to communicate with and learn from their departments
easily.
Types of departmentalisation
Here are the common types of departmentalisation:
Function
Organizations that form departments by function separate employees
based on the type or subject of work they perform. This allows
professionals with similar areas of expertise to communicate and
collaborate with each other. Three common types of function departments
are production, marketing and finance.
Process
Process departmentalisation groups people by where in the production
process their work usually occurs. For example, a toy company may have
a department for ordering the raw materials, one for building toys and a
third department for transporting them. Process departmentalisation is
common among production companies.
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Product
Some companies with more than one product may sort their departments
by the item that teams work on. For example, an ice cream company may
have separate departments for their popsicles, ice cream sandwiches and
take-home ice cream cartons. Larger companies often have more products,
so they're more likely to use this type of departmentalisation.
Market
Market departmentalisation is when an organization forms its departments
based on what market it's targeting. Markets are large groups of customers
that may have unique needs. For example, a life insurance company may
have departments for insuring large companies, nonprofit organizations
and individuals.
Customer
If a company has a particular customer that gives them a lot of business,
they can create a department specifically for that customer. For example,
if a canned beans production company sells to five major grocery stores,
they may have a department for each store. This is a common type of
organisational structure for contracting and some production companies.
Location
Location departmentalisation creates groups based on a general
geographical area. This area can either be the location of the company or
of their clients. For example, a telemarketing company can make
departments depending on which state their telemarketers target.
Types of combined departmentalisation

Larger companies may use multiple forms of departmentalisation. Here
are a few common ways to combine departmentalisation:
Divisional
Divisional departmentalisation separates a company into several divisions.
These divisions then have several identical departments. For example, a
greeting card company may have divisions for its Northeast, Midwest and
206
Western customers. Then, each division has departments based on
function for production, marketing and finance.
Multiple
A multiple departmentalisation system organises a company into separate
divisions, but these divisions have different sub-departments. For
example, a technology company can create large divisions for production,
marketing, finance and transportation. The marketing division may then
create smaller departments by product, while the production department
uses the process departmentalisation type.
Matrix
A matrix, or project, departmentalisation structure combines aspects of
both the division and multiple models. There are large departments that
create smaller departments based on projects. These project departments
then form smaller, identical departments based on a project's need. For
example, a soda company creates a department for marketing, which
creates smaller departments for each of the company's main sodas. These
soda projects all have other identical departments that help them create
marketing campaigns.
How departmentalisation works

These are the basic steps that companies use when creating departments:
1. Choose a type of departmentalisation
A company that decides it wants to create departments must first decide
which type it wants to use. The type of departments it creates can depend
on multiple factors, such as the type of product it sells, its size or whether
it has multiple locations. When creating departments, it's important for
companies to consider their unique needs before deciding a
departmentalisation type.
2. Build the departments
Once a company chooses how it's going to form the departments, it can
begin placing team members in the appropriate department. It then selects
leadership for those departments, who may create sub-departments to
better organise their teams. Companies may also choose whether to use a
centralised structure, where information travels to a specific source like a
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CEO, or a decentralised structure, where multiple sources share duties and
information.
3. Design lines of communication
Although people work within their departments on most tasks, they can
talk to other departments during projects or when delivering their work to
someone else for the next step in a process. It's vital that companies create
clear policies for how departments talk to each other and deliver their work
to the needed area. They usually use a vertical system, where smaller
departments talk directly to larger departments that report to a central
source.
4. Review and restructure
As a company grows, its department structure may need to change.
Companies usually monitor their departments over time to determine how
productive they are and whether it should implement any changes.
Sometimes a company may go through a large restructuring and change
how it organises some of its departments.
4.7 CENTRALIZATION AND

DECENTRALIZATION
Concentration of authority at the top level of the administration system.

Decentralization means dispersal of authority among lower levels of the
systems. In centralisation the lower levels cant act on their own initiative.
They have to refer problems to the higher levels. Decentralization allows
field offices to act on their own initiative in specified matters.
Decentralization thus allows field offices to deliver public service from
local centres to client locality. It allows establishment of direct relationship
between client and administration and bring administration to doorstep.
Decentralization allows local planning, development using local
resources. It allows local participation in development activities with
intensive response and paves way for meaningful articulation of local
demands. Planning becomes more responsive, realistic. It increases local
capacity to govern local areas using local decision making.
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Decentralization will release local energies, enlist local support for
development activities. Thus local community can attain political,
administrative maturity.
Types:
1. Political: establish new levels of government like autonomous
states or local governments.
2. Territorial: Establishment of field offices by HQ and given limited
autonomy in their specified matters.
3. Functional: Vesting of decision making in specialised agencies by
the central agency. E.g: UGC, AICTE.
1. Doctrinal: Conceives decentralization as the end not means to
some goal through a process of 'romantic idealisation E.g:
Gandhian idea of "village self sufficiency".
2. Political: Creation of decentralised units with a set of operational
autonomy but this needs political support else remains a facade.
E.g: Panchayati raj.
3. Administrative: Establishment of decentralised units in field is
determined by factor of administrative efficiency i.e. better
decision making and problem solving. E.g: district and divisional
administration.
4. Dual role: Decentralization is used as a tool to resolve conflicts in
field administration between traditional and changing
organizations. E.g: Office of district collector is a status quo
oriented structure used for bring speedy socio economic change.
Decentralization may cause area function duality i.e. demands of area

based administration may conflict with claims of functional department.
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Advantages of centralisation Disadvantages of centralisation
Maximum control over

delay and red tape
organization
all work is done in same

manner and in accordance to overburden head office
same policies.
autocratic control over

avoids duplication of work
subordinates
not conducive for diversification,

active role in personal
development of second line of
leadership
executive
suitable for emergencies anti peoples participation
head office acts without

max utilisation of resources
information of local conditions.
Disadvantage of
Advantage of Decentralization
decentralization
Complicates
coordination, integration
Reduces delay, HQ is less burdened
of activities of multiple
units
communication is
policy making and execution are
difficult between various
separated
units.
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national policies are adopted to local
Administration is
conditions. Facilitates peoples
expensive
participation.
second line of executives is developed cant handle emergencies
encourages divisive
reduces communication overhead
forces
encourages competition and

increases corruption,
comparative standard among field
nepotism
offices
enables experimentation in decision

weakens national
making and implementation by field
perspective by breeding
units without committing whole
local-ism, parochialism
organization to untried course of action
Table4.1AdvantageofDecentralizationAndDisadvantageofdecentraliz
ation
Effective Decentralization
Only possible if decentralization of functions, finances and functionaries.
o Field offices should report to one central agency.
o Jurisdictional lines should be meticulously drawn.
o Common standard of procedure.
o Sufficient flexible physical and psychological structure to permit
it to adjust to local condition.
o System of ready appeals. Free channelization of suggestions from
fields to the centre.
o Adequate reporting, inspection methods should provide central
head with knowledge of field operations.
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Factors governing centralization or decentralization

Responsibility: As the central authority is held responsible for failures. It
doesn't delegate discretionary powers to field offices and prefers direct
control over them.
Administrative: Old organizations with stable procedures favor
decentralization whereas frequent changes favor centralization; Higher
pressure for speed, autonomy, competent staff favor decentralization.
Functions: Uniformity of functions favors centralization; If technical
nature of work and multi functional organization organization then
decentralization is favorable.
External: People participation, interest groups, grass root democracy,
demand for planning from below all encourage decentralization.
4.8 STAFFING , RECRUITMENT , SELECTION

AND PLACEMENT
STAFFING
Staffing involves filling the positions needed in the organization structure
by appointing competent and qualified persons for the job.
The staffing process encompasses man power planning, recruitment,

selection, and training
Fig 4.10 STAFFING

a) Manpower requirements:
Manpower Planning which is also called as Human Resource
Planning consists of putting right number of people, right kind of people
at the right place, right time, doing the right things for which they are
suited for the achievement of goals of the organization. The primary
function of man power planning is to analyse and evaluate the human
resources available in the organization, and to determine how to obtain the
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kinds of personnel needed to staff positions ranging from assembly line
workers to chief executives.
b) Recruitment:
Recruitment is the process of finding and attempting to attract job
candidates who are capable of effectively filling job vacancies.
Job descriptions and job specifications are important in the recruiting
process because they specify the nature of the job and the qualifications
required of job candidates.
c) Selection:
Selecting a suitable candidate can be the biggest challenge for any
organization. The success of an organization largely depends on its staff.
Selection of the right candidate builds the foundation of any organization's
success and helps in reducing turnovers.
d) Training and Development:
Training and Development is a planned effort to facilitate employee
learning of job-related behaviours in order to improve employee
performance. Experts sometimes distinguish between the terms “training”
and “development”; “training” denotes efforts to increase employee skills
on present jobs, while “development” refers to efforts oriented toward
improvements relevant to future jobs. In practice, though, the distinction
is often blurred (mainly because upgrading skills in present jobs usually
improves performance in future jobs).
RECRUITMENT PROCESS
Recruitment is the process of finding and attempting to attract job
candidates who are capable of effectively filling job vacancies. The
recruitment process consists of the following steps
✓ Identification of vacancy
✓ Preparation of job description and job specification
✓ Selection of sources
✓ Advertising the vacancy
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✓ Managing the response
Fig 4.11 Managing the response
a) Identification of vacancy:
The recruitment process begins with the human resource department
receiving requisitions for recruitment from any department of the
company. These contain:
o Posts to be filled
o Number of persons
o Duties to be performed
o Qualifications required
Preparation of job description and job specification:
A job description is a list of the general tasks, or functions, and
responsibilities of a position. It may often include to whom the position
reports, specifications such as the qualifications or skills needed by the
person in the job, or a salary range. A job specification describes the
knowledge, skills, education, experience, and abilities you believe are
essential to performing a particular job.
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c) Selection of sources:
Every organization has the option of choosing the candidates for its
recruitment processes from two kinds of sources: internal and external
sources. The sources within the organization itself (like transfer of
employees from one department to other, promotions) to fill a position are
known as the internal sources of recruitment. Recruitment candidates from
all the other sources (like outsourcing agencies etc.) are known as the
external sources of the recruitment.
d) Advertising the vacancy:
After choosing the appropriate sources, the vacancy is communicated to
the candidates by means of a suitable media such as television, radio,
newspaper, internet, direct mail etc.
e) Managing the response:
After receiving an adequate number of responses from job seekers, the
sieving process of the resumes begins. This is a very essential step of the
recruitment selection process, because selecting the correct resumes that
match the job profile, is very important. Naturally, it has to be done rather
competently by a person who understands all the responsibilities
associated with the designation in its entirety. Candidates with the given
skill set are then chosen and further called for interview. Also, the
applications of candidates that do not match the present nature of the
position but may be considered for future requirements are filed separately
and preserved.
The recruitment process is immediately followed by the selection process.
JOB ANALYSIS
Job Analysis is the process of describing and recording aspects of jobs
and specifying-the skills and other requirements necessary to perform the
job.
The outputs of job analysis are
o Job description
o Job specification
Job Description
A job description (JD) is a written statement of what the job holder does,
how it is done, under what conditions it is done and why it is done. It
describes what the job is all about, throwing light on job content,
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environment and conditions of employment. It is descriptive in nature and

defines the purpose and scope of a job. The main purpose of writing a job
description is to differentiate the job from other jobs and state its outer
limits.
Contents
A job description usually covers the following information:
o Job title: Tells about the job title, code number and the department
where it is done.
o Job summary: A brief write-up about what the job is all about.
o Job activities: A description of the tasks done, facilities used,
extent of supervisory help, etc.
o Working conditions: The physical environment of job in terms of
heat, light, noise and other hazards.
o Social environment: Size of work group and interpersonal
interactions required to do the job.
Job Specification
Job specification summaries the human characteristics needed for
satisfactory job completion. It tries to describe the key qualifications
someone needs to perform the job successfully. It spells out the important
attributes of a person in terms of education, experience, skills, knowledge
and abilities (SKAs) to perform a particular job. The job specification is a
logical outgrowth of a job description. For each job description, it is
desirable to have a job specification. This helps the organization to find
what kinds of persons are needed to take up specific jobs.
Contents
A job specification usually covers the following information:
✓ Education
✓ Experience
✓ Skill, Knowledge, Abilities
✓ Work Orientation Factors
✓ Age
SELECTION PROCESS
Selecting a suitable candidate can be the biggest challenge for any
organisation. The success of an organization largely depends on its staff.
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Selection of the right candidate builds the foundation of any organization's
success and helps in reducing turnovers.
Though there is no fool proof selection procedure that will ensure low
turnover and high profits, the following steps generally make up the
selection process-
Fig 4.12 SELECTION PROCESS

a) Initial Screening
This is generally the starting point of any employee selection process.
Initial Screening eliminates unqualified applicants and helps save time.
Applications received from various sources are scrutinised and irrelevant
ones are discarded.
b) Preliminary Interview
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
formalised 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
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how much the candidate knows about the company. Preliminary
interviews are also called screening interviews.
c) Filling Application Form
An candidate who passes the preliminary interview and is found to be
eligible for the job is asked to fill in a formal application form. Such a form
is designed in a way that it records the personal as well professional details
of the candidates such as age, qualifications, reason for leaving previous
job, experience, etc.
d) Personal Interview
Most employers believe that the personal interview is very important. It
helps them in obtaining more information about the prospective employee.
It also helps them in interacting with the candidate and judging his
communication abilities, his ease of handling pressure etc. In some
Companies, the selection process comprises only of the Interview.
e) References check
Most application forms include a section that requires prospective
candidates to put down names of a few references. References can be
classified into - former employer, former customers, business references,
reputable persons. Such references are contacted to get a feedback on the
person in question including his behaviour, skills, conduct etc.
f) Background Verification
A background check is a review of a person's commercial, criminal and
(occasionally) financial records. Employers often perform background
checks on employers or candidates for employment to confirm information
given in a job application, verify a person's identity, or ensure that the
individual does not have a history of criminal activity, etc., that could be
an issue upon employment.
g) Final Interview
Final interview is a process in which a potential employee is evaluated by
an employer for prospective employment in their organization. During this
process, the employer hopes to determine whether or not the applicant is
suitable for the job. Different types of tests are conducted to evaluate the
capabilities of an applicant, his behaviour, special qualities etc. Separate
tests are conducted for various types of jobs.
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h) Physical Examination
If all goes well, then at this stage, a physical examination is conducted to
make sure that the candidate has sound health and does not suffer from
any serious ailment.
i) Job Offer
A candidate who clears all the steps is finally considered right for a
particular job and is presented with the job offer. An applicant can be
dropped at any given stage if considered unfit for the job.
Placement :
Placement may be defined as the determination of the job to which a
selected candidate is to be assigned, and his assignment to the job.
o It includes the initial assignment of new entrants and the transfer
and promotion of the existing employees.
o It is matching of what the supervisor has the reason to think he
can do with the job demands; it is matching of what he imposes
(in strains, working conditions) and what he offers in the form of
payroll, with promotional possibilities.
SIGNIFICANCE OF PLACEMENT
✓ Reduced labour turnover rate
✓ Reduced absenteeism rate
✓ Increased safety of workers and lower accidents
✓ Increased morale of workers
✓ Better human relations in the organisations
CONSIDERATIONS IN PLACEMENT
✓ Job Requirements
✓ Suitable Qualifications
✓ Adequate Information to the job incumbent Commitment and
Loyalty
✓ Flexibility
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4.9 TRAINING AND DEVELOPMENT
Training and development refers to educational activities within a

company created to enhance the knowledge and skills of employees
while providing information and instruction on how to better perform
specific tasks.
Training is a short-term reactive process meant for operatives and

process while development is designed continuous pro-active process
meant for executives. In training employees' aim is to develop additional
skills and in development, it is to develop a total personality.
In training, the initiative is taken by the management with the objective

of meeting the present need o fan employee. In development, initiative is
taken by the individual with the objective to meet the future need of an
employee.
Training and development initiatives are educational activities within an

organization that are designed to improve the job performance of an
individual or group. These programs typically involve advancing a
worker’s knowledge and skill sets and instilling greater motivation to
enhance job performance.
Training programs can be created independently or with a learning

administration system, with the goal of employee long-term
development. Common training practices include orientations, classroom
lectures, case studies, role playing, simulations and computer-based
training, including e-learning.
Sometimes referred to as Human Resource Development (HRD), most

employee training and development efforts are driven by an
organization’s HRD function. These efforts are roughly divided into two
types of programs:
Employee Training and Development

A strategic tool for improving business outcomes by implementing
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internal educational programs that advance employee growth and
retention.
Management Training and Development

The practice of growing employees into managers and managers into
effective leaders by the ongoing enhancement of certain knowledge,
skills and abilities.
Why is training and development important?
Successful businesses understand that it’s more beneficial and cost-

effective to develop their existing employees instead of seeking out new
talent.
The top ten benefits of employee training and development programs

include:
1. Increased productivity: When employees stay current with new

procedures and technologies, they can increase their overall
output.
2. Reduced micromanagement: If workers feel empowered to
perform a task, they typically require less oversight and work
more independently.
3. Train future leaders: Organizations must have a solid pipeline
of well-trained and innovative potential leaders to grow and adapt
over time.
4. Increased job satisfaction and retention: Well-trained
employees gain confidence in their abilities, leading to greater job
satisfaction, a reduction in absenteeism and overall employee
retention.
5. Attract highly skilled employees: Top recruits are attracted to
firms with an identifiable career path based on consistent training
and development.
6. Increased consistency: Well-organised training ensures tasks are
performed uniformly, resulting in tight quality control that end
users can trust.
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7. Increased camaraderie: Training and development helps create
a sense of teamwork and collaboration.
8. Bolstered safety: Continuous training and development helps
ensure employees have the knowledge and skills to perform a
task safely.
9. Ability to cross-train: Providing consistent training creates a
knowledgeable team overall where employees can help train or
assist each other as needed.
10. Added innovation: Consistently trained employees can help
develop new strategies and products, contributing to the
company’s bottom line and continued success.
Benefits of Training
1. Training improves the quantity and quality of the workforce.

It increases the skills and knowledge base of the employees.
2. It improves upon the time and money required to reach the

company’s goals. For e.g. Trained salesmen achieve and
exceed their targets faster than inexperienced and untrained
salesmen.
3. Training helps to identify the highly skilled and talented

employees and the company can give them jobs of higher
responsibilities.
4. Trained employees are highly efficient in comparison to

untrained ones.
5. Reduces the need to constantly supervise and overlook the

employees.
6. Improves job satisfaction and thus boosts morale.
Benefits of Development
1. Exposes executives to the latest techniques and trends in their

professional fields.
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2. Ensures that the company has an adequate number of
managers with knowledge and skill at any given point.
3. Helps in the long-term growth and survival of the company.
4. Creates an effective team of managers who can handle the

company issues without fail.
5. Ensures that the employees utilise their managerial and

leadership skills in particular to the fullest.
4.10 LETS SUM UP
In this chapter, you learned that an organization is a “consciously

coordinated social unit composed of two or more people, that functions
on a relatively continuous basis to achieve a common goal or set of
goals” (Robbins 4). Organizations are dynamic and are created through
our communication. Organisational communication is the sending and
receiving of messages among interrelated individuals within a particular
environment or setting to achieve individual and common goals.
Organisational communication is highly contextual and culturally

dependent.
The study of organisational communication developed as a result of the

rapid changes brought on by the industrial revolution in the past 150
years. The more formal study of organisational communication took root
in the mid-1900s and has gained increasing attention over the past 60
years. We examined three predominant periods of organisational
communication during this time. The Era of Preparation (1900 to 1940)
is the era in which practitioners and scholars focused on public address,
business writing, managerial communication, and persuasion. The Era of
Identification and Consolidation (1940-1970) saw the beginnings of
business and industrial communication with certain group and
organisational relationships becoming important. During the Era of
Maturity and Innovation (1970 –present) organisational communication
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has worked to rationalise its existence through rigorous research methods
and scholarship.
Those in the field of organisational communication study a variety of

communication activity in organisational settings. Researchers focus on
communication channels, communication climates, network analysis and,
superior-subordinate communication. Since the 1980s, this specialization
has expanded to include the study of organisational culture, power and
conflict management, and organisational rhetoric. Other content areas of
focus include communication in groups and teams, leadership, conflict
and conflict management, communication networks, decision making
and problem solving, ethics, and communication technology.
Introductory organisational communication classrooms often focus on
skill development in socialisation, interviewing, individual and group
presentations, work relationships, performance evaluation, conflict
resolution, stress management, decision making, or external publics.
Since the start of the industrial revolution, perspectives regarding

organisational communication have continued to be developed and
refined. The initial organisational communication perspective, founded
on scientific principles, is the classical management perspective which
focused on specialization, standardisation, and predictability in
organizations. Following this perspective were the human relations and
human resources perspectives which further tried to incorporate human
satisfaction, needs, and participation as a means for creating effective
organizations and productive employees. The systems perspective
allowed researchers to understand organizations as a “whole greater then
the sum of their parts.” This perspective focuses on the interactions of the
people who form organizations, with the basic assumption that all people
in the organization impact organisational outcomes. Finally, the cultural
perspective understands organizations as unique cultures with their own
sets of artefacts, values, and basic assumptions. As part of the cultural
perspective we can examine the climate of an organization to reveal how
an organization impacts its members, and how members impact an
organization.
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The future of organisational communication is complex and rapidly
changing. As a result, there are many challenges to organizations. Two of
the most compelling challenges are ethics and the rapid changes
occurring in organisational life. As competition continues to increase,
and greater demands are placed on organizations and individuals, ethics
is becoming an essential focus of examination for organisational
communication and behaviour. Likewise, the rapid advances in
technology and globalization are creating increased challenges and
demands on organisational members.
An organisation is a group of people working together for the achievement

of specific goal. On the other hand, the management is the art of getting
things done through and with people in formally organized group. It is the
process of planning, organizing, leading and controlling the activities of
an organisation to increase its effectiveness. The philosophies and
principles of organisation and management are widely used for enhancing
the efficiency and productivity of the enterprise. The levels of
management are : top level, middle level and supervisory level. All levels
play crucial role in achieving the organizational goal.
The general principles of management propounded by Fayol provide
guidelines for smooth functioning of the organisation.
In an organisation, the managers perform various functions. The major
functions performed by the manager are : Planning, organizing, staffing,
directing, communicating, decision making and controlling. Managers
also perform various roles in the organisation. The major roles are :
Interpersonal roles, informational roles and decisional roles.
Organisation may be classified into formal and informal organisation,
primary and secondary organisation and principal objectives based
organisation. The rapid changes in the environment have led to the
emergence of modern organisation. The features of modern organisation
are : smaller size, smaller layer, higher technical skills, focus on customer
satisfaction and shareholder’s value, flexi time and flexi place, quality
orientation, more empowerment at middle level, business ethics gaining
ground, continuous learning orientation, cross cultural management,
growing outsourcing business; etc. These features require highly vigilant
225
and dynamic management styles for the smooth and efficient functioning
of the organization.
4.11 KEYWORDS
o Formal Organisation: Organisation, which has more rigid

structure and where processes are more or less
o defined to the maximum extent.
o Functions of Manager: Assigned tasks according to the authority
level as well according to the job description of the position of the
manager.
o Informal Organisation: Organisation characterized by more
flexible structure, and here processes are more spontaneous than
rigid.
o Levels of Management: Generally speaking there are three levels
of management- top, middle, and junior. Management: Process of
planning, organizing, leading, and controlling the work of
organisation members
o and of using all available organizational resources to reach stated
organizational goals.
o Organisation: A place where two or more people work together
in a structured way to achieve a specific goal or set of goals.
o Organizational Structure: A formal way to relate various persons
working in the organisation to facilitate various factors like flow
of communication, decision making, execution of decision,
controlling, and integration of all activities of the organisation.
o Principles of Management: Basic philosophy and guidelines
around which managerial functions are woven together for
effective management in an organisation.
o Roles of Manager: What a manager is expected to do as a person
of conscientiousness.
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4.12 SOME USEFUL BOOKS
1. Drucker, P., The Practice of Management, Harper, New York,

1954; Heinemann, London, 1955; revised eden, Butterworts-
Heinemann, 2007
2. ^ Thomson, Thomas M. "MANAGEMENT BY
OBJECTIVES" (PDF).
3. ^ Lafayette, William R.; Fleming, Richard J. (1977-08-01). "The
Historical Antecedents of Management by Objectives". Academy
of Management Proceedings. 1977 (1): 2–5. do:
AMBPP.1977.4976584. ISSN 0065-0668. Archived from the
original on 2017-03-09. Retrieved 2016-04-13.
4. ^ a b c "Management by objectives". The Economist. ISSN 0013-
0613. Retrieved 2016-04-27.
5. ^ Lambert, Bruce (1992-01-23). "George S. Odour Is Dead at 71;
Developed Theory of Management". The New York
Times. ISSN 0362-4331. Retrieved 2016-04-27.
6. ^Tim. Guide to Management Ideas and Gurus. New York:
Bloomberg Press, 2008. Print
7. ^ "Masterclass on Mission Statement from Gordon Moore, co-
founder, Intel Corporation > team blog". 14 September 2016.
8. ^ "Examples of Managerial Objectives". Small Business -
Chron.com.
4.13 ANSWERS TO CHECK YOUR PROGRESS
Refer -1 answer to check your progress -1Q…1

An organization is a group of people who work together, like a
neighborhood association, a charity, a union, or a corporation. You can use
the word organization to refer to group or business, or to the act of forming
or establishing something

Types of organisation structure
✓ Hierarchical org structure.
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✓ Functional org structure.
✓ Horizontal or flat org structure.
✓ Divisional org structures (market-based, product-based,
geographic)
✓ Matrix org structure.
✓ Team-based org structure.
✓ Network org structure.

An organizational structure defines how activities such as task allocation,
coordination, and supervision are directed toward the achievement of
organizational aims. Organizational structure affects organizational action
and provides the foundation on which standard operating procedures and
routines rest.

the part of a business organization that forms an integrated whole
concerned with the production of the goods or services that are the stock
in trade of the organization. often distinguished from staff.

A line-staff organizational structure attempts to render a large and
complex enterprise more flexible without sacrificing managerial authority.
1) Explain basic purpose of existence of various organizations in society.

2) Describe basic features of an organisation.
3) What are various responsibilities of various levels of management in an
organisation?
4) What are various principles of management? How are modern
organizations different from typical classical organizations, in terms of
practices of various principles of management?
5) Explain various functions and roles of managers. How are they useful
in enhancing the efficiency of the organisation ?
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UNIT – 5 DIRECTING AND ONTROLLING
STRUCTURE
5. 0 Objectives
5..1 Introduction
5.2 Directing And Controlling
5.3 Principle of directing
5.4 Essence of coordination
5.5 Basic control process
5.6 Different control techniques
5.7 Management by exception
5.7 Let Us Sum Up
5.8 Key Words
5.9 Some Useful Books
5.10 Answer to check your progress
5.11 Terminal Questions
5.0 OBJECTIVES

➢ Objectives of directing
➢ Principle of directing
➢ Basic control process
➢ Different control techniques
5.1 INTRODUCTION
Directing is the heart of management function. All other functions of

management such as planning, organising, and staffing have no importance
without directing. Leadership, motivation, supervision, communication are
various aspects of directing.
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Directing is a necessary function in management for guiding staff to
prepare for their assigned tasks so that they can complete them and help
achieve the goals as planned.
The direction process in management involves the manager guiding,

instructing, and looking over the performance of employees who are
tasked with achieving goals. Through such a process, the employees
don’t face bottlenecks while achieving goals.
See how management experts define directing in management.
“Direction is telling people what to do and seeing that they do it to the

best of their ability. It includes making assignments, corresponding
procedures, seeing that mistakes are corrected, providing on-the-job
instructions and of course, issuing orders.”
Directing is a management function that assists in guiding and leading

people to work in such a way that they perform efficiently and
effectively to achieve organizational goals. The managerial job of
directing is to initiate organized activity. Because direction is largely
concerned with many other functions of management, such as leadership,
motivation, and communication, it is one of the most important core
functions of management. It is a factor of every managerial activity. Let
us look in detail at the concept of directing.
The above case reveals how important it is to instill leadership qualities in

all managers. Business organizations have always given due importance
to its managers who are capable of leading others. A manager needs to use
various ways to lead, motivate and inspire the subordinates and to
communicate with them suitably. These ways, discussed in the present
chapter, are collectively called the directing function of management.
In the ordinary sense, directing means giving instructions and guiding

people in doing work. In our daily life, we come across many situations
like a hotel owner directing his employees to complete certain activities
for organizing a function, a teacher directing his student to complete an
assignment, a film director directing the artists about how they should act
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in the film etc. In all these situations, we can observe that directing is done
to achieve some predetermined objective.
In the context of management of an organisation, directing refers to the
process of instructing, guiding, counseling, motivating and leading people
in the organisation to achieve its objectives.
You can observe here that directing is not a mere issue of communication
but encompasses many elements like supervision, motivation and
leadership.
The importance of directing can be understood by the fact that every action
in the organisation is initiated through directing only. Directing guides
towards achievement of common objectives. Through directing, managers
not only tell the people in the organisation as to what they should do, when
they should do and how they should do but also see that their instructions
are implemented in proper perspective. Very often, this becomes an
important factor in the efficient and effective functioning of the
organisation.
5.2 DIRECTING AND CONTROLLING
Directing
Directing refers to a process or technique of instructing, guiding, inspiring,

counselling, overseeing and leading people towards the accomplishment of
organisational goals. It is a continuous managerial process that goes on
throughout the life of the organization. Main characteristics of Directing
are as follows:
1. Initiates Action
A directing function is performed by the managers along with planning,

staffing, organising and controlling in order to discharge their duties in the
organization. While other functions prepare a platform for action, directing
initiates action.
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2. Pervasive Function
Directing takes place at every level of the organization. Wherever there is

a superior-subordinate relationship, directing exists as every manager
provides guidance and inspiration to his subordinates.
3. Continuous Activity
It is a continuous function as it continues throughout the life of organization

irrespective of the changes in the managers or employees.
4. Descending Order of Hierarchy
Directing flows from a top level of management to the bottom level. Every
manager exercises this function on his immediate subordinate.
5. Human Factor
Since all employees are different and behave differently in different

situations, it becomes important for the managers to tackle the situations
appropriately. Thus, directing is a significant function that gets the work
done by the employees and increases the growth of the organization.
Directing
o Leadership
o Incentives
o Communication
o Elements of Directing
1. Initiates Action
Each and every action in an organization is initiated only through directing.

The managers direct the subordinates about what to do, how to do when to
do and also see to it that their instructions are properly followed.
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2. Ingrates Efforts
Directing integrates the efforts of all the employees and departments

through persuasive leadership and effective communication towards the
accomplishment of organisational goals.
3. Motivates Employees
A manager identifies the potential and abilities of its subordinates and

helps them to give their best. He also motivates them by offering them
financial and non-financial incentives to improve their performance.
4. Provides Stability
Stability is significant in the growth of any organization. Effective directing

develops co-operation and commitment among the employees and creates
a balance among various departments and groups.
5. Coping up with the Changes
Employees have a tendency to resist any kind of change in the organization.

But, adapting the environmental changes is necessary for the growth of the
organization. A manager through motivation, proper communication and
leadership can make the employees understand the nature and contents of
change and also the positive aftermaths of the change. This will help in a
smooth adaptation of the changes without any friction between the
management and employees.
6. Effective Utilisation of Resources
It involves defining the duties and responsibilities of every subordinate

clearly thereby avoiding wastages, duplication of efforts, etc. and utilising
the resources of men, machine, materials, and money in the maximum
possible way. It helps in reducing costs and increasing profits.
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Controlling
One of the most essential qualities required in a manager is that he should

command the respect of his team. This allows him to direct and control
their actions. In fact controlling is one of his more important functions. Let
us learn the importance and meaning of controlling function.
Meaning of Controlling
Controlling is one of the important functions of a manager. In order to seek

planned results from the subordinates, a manager needs to exercise
effective control over the activities of the subordinates. In other words, the
meaning of controlling function can be defined as ensuring that activities
in an organization are performed as per the plans. Controlling also ensures
that an organization’s resources are being used effectively & efficiently for
the achievement of predetermined goals.
• Controlling is a goal-oriented function.
• It is a primary function of every manager.
• Controlling the function of a manager is a pervasive function.
Fig 5.1 Controlling
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How Controlling Function Helps Managers
Managers at all levels of management Top, Middle & Lower – need to

perform controlling function to keep control over activities in their areas.
Therefore, controlling is very much important in an educational institution,
military, hospital, & a club as in any business organization.
Therefore, controlling function should not be misunderstood as the

last function of management. It is a function that brings back the
management cycle back to the planning function. Thus, the controlling
function act as a tool that helps in finding out that how actual performance
deviates from standards and also finds the cause of deviations & attempts
which are necessary to take corrective actions based upon the same.
This process helps in the formulation of future plans in light of the problems
that were identified &, thus, helps in better planning in the future
periods. So from the meaning of controlling we understand it not only
completes the management process but also improves planning in the next
cycle.
Importance of Controlling
After the meaning of control, let us see its importance. Control is an

indispensable function of management without which the controlling
function in an organization cannot be accomplished and the best of plans
which can be executed can go away. A good control system helps an
organization in the following ways:
1. Accomplishing Organisational Goals
The controlling function is an accomplishment of measures that further

makes progress towards the organisational goals & brings to light the
deviations, & indicates corrective action. Therefore it helps in guiding
the organisational goals which can be achieved by performing a controlling
function.
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2. Judging Accuracy of Standards
A good control system enables management to verify whether the standards

set are accurate & objective. The efficient control system also helps in
keeping careful and progress check on the changes which help in taking the
major place in the organization & in the environment and also helps to
review & revise the standards in light of such changes.
3. Making Efficient use of Resources
Another important function of controlling is that in this, each activity is

performed in such manner so an in accordance with predetermined
standards & norms so as to ensure that the resources are used in the most
effective & efficient manner for the further availability of resources.
4. Improving Employee Motivation
Another important function is that controlling help in accommodating a

good control system which ensures that each employee knows well in
advance what they expect & what are the standards of performance on the
basis of which they will be appraised. Therefore it helps in motivating and
increasing their potential so to make them & helps them to give better
performance.
5. Ensuring Order & Discipline
Controlling creates an atmosphere of order & discipline in the organization

which helps to minimise dishonest behaviour on the part of the employees.
It keeps a close check on the activities of employees and the company can
be able to track and find out the dishonest employees by using computer
monitoring as a part of their control system.
6. Facilitating Coordination in Action
The last important function of controlling is that each department &

employee is governed by such pre-determined standards and goals which
are well versed and coordinated with one another. This ensures that overall
organisational objectives are accomplished in an overall manner.
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5.3 PRINCIPLE OF DIRECTING
Principles of Directing
1. Maximum Individual Contribution
One of the main principles of directing is the contribution of

individuals. Management should adopt such directing policies that
motivate the employees to contribute their maximum potential for the
attainment of organisational goals.
2. Harmony of Objectives
Sometimes there is a conflict between the organisational objectives and

individual objectives. For example, the organization wants profits to
increase and to retain its major share, whereas, the employees may perceive
that they should get a major share as a bonus as they have worked really
hard for it.
Here, directing has an important role to play in establishing harmony and

coordination between the objectives of both the parties. Harmonizing the
individual’s objectives with the group objectives is the first principle of
directing. Persons join the concern for getting their physiological and
psychological needs satisfied. They are expected by the organization to
work in such a manner to achieve the organizational goals. Individuals also
work well only when they feel that their personal goals will be satisfied.
Thus, directing function must first of all resolve the conflict between the
individual’s goals and organizational goals
3. Unity of Command
This principle states that a subordinate should receive instructions from

only one superior at a time. If he receives instructions from more than one
superiors at the same time, it will create confusion, conflict, and disorder
in the organization and also he will not be able to prioritise his work.
Another important principle of direction is that the orders should be
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received by the subordinates from only one superior. In other words, there
should not be dual subordination. Dual subordination brings disorder,
confusion, chaos and undermines authority and leads to instability. The
subordinates should report to only one superior.
4. Appropriate Direction Technique
Among the principles of directing, this one states that appropriate direction
techniques should be used to supervise, lead, communicate and motivate
the employees based on their needs, capabilities, attitudes and other
situational variables. Direction techniques that are used by the managers
should be appropriate i.e., it should be suitable to superiors, subordinates
and the situation so as to ensure efficiency of direction.
5. Managerial Communication
According to this principle, it should be seen that the instructions are clearly
conveyed to the employees and it should be ensured that they have
understood the same meaning as was intended to be communicated.
6. Use of Informal Organization
Within every formal organization, there exists an informal group or

organization. The manager should identify those groups and use them to
communicate information. There should be a free flow of information
among the seniors and the subordinates as an effective exchange of
information are really important for the growth of an organization.
Managers should make use of informal groups so that the formal
groups can be strengthened.
7. Leadership
Managers should possess a good leadership quality to influence the

subordinates and make them work according to their wish. It is one of the
important principles of directing. Leadership is a process of influence
exercised on group members by the leader in the work environment. There
is no one universally acceptable leadership style. No single style is suitable
to all situations. The style varies with the situations. Therefore, a manager
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should exhibit appropriate leadership style i.e., the style that is suitable to
a given situation.
8. Follow Through
As per this principle, managers are required to monitor the extent to which
the policies, procedures, and instructions are followed by the subordinates.
If there is any problem in implementation, then the suitable modifications
can be made. Directing is a never ending process. It involves continuous
supervision, advice, counseling and assisting the subordinates in the
performance of their jobs. So it requires continuous feed back which is
essential to make necessary modifications in the activities of the
management.
1. Direction takes place at all levels of management. True or False?
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2. Define controlling ?
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5.4 ESSENCE OF COORDINATION
A manager needs to perform five managerial functions that are all

interdependent and overlapping. All these functions are not separate from
each other. Thus, when a manager links together all these functions, it is
known as coordination.
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Coordination is the force that connects all managerial functions and
ensures the smooth and efficient functioning of an organization. All the
activities of an organization such as purchase, production, sales, and
finance are connected through this link of coordination, which enables
and helps in the continuous working of an organization. It is considered
the soul of management, as it helps in achieving the goal through
harmony and discipline of both individuals and groups. Though
occasionally, coordination might not be referred to as a managerial
function, it is the essence of management.
Coordination: Essence of Management

1. Coordination is needed in all management functions: In planning,
coordination is needed between the plan of the enterprise and the plans of
the various departments. The enterprise should always have coordination
between the main objective and the resources available.
During organising, coordination is required between the authority and
responsibility of every individual. In staffing, coordination is gained by
assigning the employees, the right job by seeing their skills and
abilities. In directing, coordination is needed among orders, instructions
and suggestions, and between superiors and subordinates. Whereas
during controlling, coordination is achieved by confirming that the
results are close to the planned results.
2. Coordination is needed at all levels of management: The top-level

needs coordination so that all the activities are integrated. The middle
level needs coordination for integration efforts at different sections and
sub-sections, and the lower level needs coordination in various activities
of workers, and to ensure that plans are properly executed. So,
coordination is essential at all levels in order to achieve the goals on
time,
Therefore, Coordination is the essence of management, which works

carrying along all the other functions and activities affecting an
organization to achieve the required goal.
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Fig 5.2 Coordination

Features of Coordination
• Coordination assimilates group efforts: Coordination combines
diverse business activities into a purposeful group activity,

ensuring that all people work in one direction to achieve
organisational goals. It provides a common focus to
group effort so that the performance is as it was planned and
scheduled.
• Coordination assures unity of action: Coordination directs the
activities of different departments and employees towards

achievements of common goals and brings unity in individual
efforts. It performs as the binding force between
departments and assures that all action is aimed at achieving
the organisational goals. In an enterprise, the production
department needs to coordinate its work with the sales
department so that production takes place to the demand in the
market.
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• Coordination is a continuous process: Coordination is essential
in every stage of managerial functions. Stating right from the

stage of planning, it continues till controlling.
It is a continuous process that is required at all levels, in all the

departments till the organization continues its operation. In an
enterprise, which makes shoes, first they need to come up with
a good plan. Then they have to make sure that there is an
adequate workforce and continuously monitor whether
production is proceeding according to plans. The marketing
department also needs to prepare their promotional and
advertising campaigns so that they can increase their sales.
• Coordination is an all-pervasive function:Coordination is in
nature. It integrates the activities of all levels and departments

as they are dependent on each other to maintain balance in the
organization. To achieve organisational objectives
harmoniously, the purchase, production, and sales departmental
efforts have to be coordinated properly. For example, in a
textile company, the purchasing department is responsible for
procuring fabric. Then the production department performs
their task and finally, sales can take place. If the quality of
fabric purchased is of poor quality or is not according to the
specifications of the production department, further sales will
also decline, which will lead to loss. In the absence of
coordination, there is a lot of chaos, delays, and duplication in
the organization.
• Coordination is the responsibility of all managers: In an
organization, every manager needs to perform the function of

coordination . It is equally important at all the three levels of
management, i.e. top, middle and lower levels. Top-level
managers need to coordinate with their subordinates to make
sure that all the policies for the organization are carried out
properly. Middle-level management is the one that coordinates
with both the top level as well as the lower-level managers.
The operational level or the lower level management
242
coordinates the activities of its workers to ensure that work
proceeds according to plans.
• Coordination is a deliberate function: Coordination is never by
itself, rather it is a conscious effort on the part of every

manager. Even where members of a department willingly
cooperate and work, coordination gives direction to that willing
spirit. Compete ration is a voluntary effort of employees to
help one another. Effective coordination cannot be achieved
without the cooperation of group members. Cooperation in the
absence of coordination may lead to wasted effort, and
coordination without cooperation may lead to dissatisfaction
among employees.
Importance of Coordination
Coordination is important as it assimilates the efforts of
individuals, departments and specialists. The primary reason for
coordination is that departments and individuals in the
organization depend on each other for information and resources
to
perform their respective activities. Thus, managers need to
reconcile differences in approach, timing, effort, or interest. At
the same time, there is a need to harmonise individual goals and
organisational goals.
• Growth in size: When there is an increase in the size of the
organization, the number of employees also rises. Sometimes,

it becomes tough to assimilate the efforts and activities of the
worker. As we know, every individual is different in their way,
be it their habit of working, background, approaches to
situations, and relationships with others, etc. It becomes very
important to make sure that all individuals are working for a
common goal of the organization. Some employees have
individual goals also. Therefore, it becomes very important to
harmonise individual goals and work for organisational goals
through coordination to achieve organisational efficiency.
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• Functional differentiation: In an organization, activities and
functions are frequently divided into departments, divisions, or

sections. In an organization, there may be separate departments
of finance, production, marketing, or human resources. All
these departments have their objectives and working style. But
all these departments and sections depend on each other. All
the activities of all these departments should focus on attaining
the common goal of the organization. Coordination helps to
accumulate activities of this department, so that they can
proceed together in a single direction instead of working as
independent units.
• Specialization: Specialization is the result of the complexities of
modern technology and a variety of operations performed.

Thus, there is a need for the organization to recruit a plentiful
of specialists. The specialists qualify in a particular area and
work accordingly. They analyse and take decisions related to
their specialization for the advancement of the organization.
Different specialists working in the same organization might
sometimes result in conflicts among one another. Therefore,
coordination is required to harmonise the conflicts and
differences in way of thinking, interests, and beliefs of the
specialists.
5.5 BASIC CONTROL PROCESS
The proper performance of the management control function is critical to

the success of an organization. After plans are set in place, management
must execute a series of steps to ensure that the plans are carried out. The
steps in the basic control process can be followed for almost any
application, such as improving product quality, reducing waste, and
increasing sales. The basic control process includes the following steps:
244
1. Setting performance standards: Managers must translate
plans into performance standards. These performance
standards can be in the form of goals, such as revenue from
sales over a period of time. The standards should be
attainable, measurable, and clear.
2. Measuring actual performance: If performance is not
measured, it cannot be ascertained whether standards have
been met.
3. Comparing actual performance with standards or
goals: Accept or reject the product or outcome.
4. Analysing deviations: Managers must determine why
standards were not met. This step also involves determining
whether more control is necessary or if the standard should
be changed.
5. Taking corrective action: After the reasons for deviations
have been determined, managers can then develop
solutions for issues with meeting the standards and make
changes to processes or behaviours.
Consider a situation in which a fictional company, The XYZ Group, has

suffered a decrease in the profits from its high-end sunglasses due to
employee theft. Senior executives establish a plan to eliminate the
occurrence of employee theft. It has been determined that the items are
being stolen from the company warehouse. The executives establish a
goal of zero thefts ($0) within a three-month period . The company
currently loses an average of $1,000 per month due to employee theft.
To discourage the undesired behaviour, XYZ installed cameras in the

warehouse and placed locks on the cabinets where the most expensive
sunglasses are stored. Only the warehouse managers have keys to these
cabinets.
After three months, XYZ managers contact the bookkeeper to get the
sales and inventory figures for the past three-month period The
managers then compare the figures with the previous period, taking into
account orders for deliveries, returns, and defective merchandise ). It has
245
been determined that the company lost $200 the first month, $300 the
second month, and $200 the third month due to theft, which is an
improvement but short of the goal. Managers then come up with
suggestions for making adjustments to the control system
XYZ senior executives approve of the suggestion to institute a zero-

tolerance policy for employee theft. Now, if there is evidence that an
employee has stolen a pair of sunglasses, that employee’s job will be
terminated. The employee handbook is updated to include the change,
and XYZ executives hold a meeting with all warehouse employees to
communicate the policy change .
Timing of Controls
Controls can be categorised according to the time in which a process or

activity occurs. The controls related to time include feedback, proactive,
and concurrent controls. Feedback control concerns the past. Proactive
control anticipates future implications. Concurrent control concerns the
present.
Feedback
Feedback occurs after an activity or process is completed. It is reactive.

For example, feedback control would involve evaluating a team’s
progress by comparing the production standard to the actual production
output. If the standard or goal is met, production continues. If not,
adjustments can be made to the process or to the standard.
An example of feedback control is when a sales goal is set, the sales team
works to reach that goal for three months, and at the end of the three-
month period, managers review the results and determine whether the
sales goal was achieved. As part of the process, managers may also
implement changes if the goal is not achieved. Three months after the
changes are implemented, managers will review the new results to see
whether the goal was achieved.
The disadvantage of feedback control is that modifications can be made

only after a process has already been completed or an action has taken
246
place. A situation may have ended before managers are aware of any
issues. Therefore, feedback control is more suited for processes,
behaviours, or events that are repeated over time, rather than those that
are not repeated.
Proactive control
Proactive control, also known as preliminary, preventive, or feed-forward

control, involves anticipating trouble, rather than waiting for a poor
outcome and reacting afterward. It is about prevention or intervention.
An example of proactive control is when an engineer performs tests on
the braking system of a prototype vehicle before the vehicle design is
moved on to be mass produced.
Proactive control looks forward to problems that could reasonably occur

and devises methods to prevent the problems. It cannot control
unforeseen and unlikely incidents, such as “acts of God.”
Concurrent control
With concurrent control, monitoring takes place during the process or

activity. Concurrent control may be based on standards, rules, codes, and
policies.
One example of concurrent control is fleet tracking. Fleet tracking by

GPS allows managers to monitor company vehicles. Managers can
determine when vehicles reach their destinations and the speed in which
they move between destinations. Managers are able to plan more
efficient routes and alert drivers to change routes to avoid heavy traffic.
It also discourages employees from running personal errands during
work hours.
In another example, Keen Media tries to reduce employee inefficiency by

monitoring Internet activity. In accordance with company policy,
employees keep a digital record of their activities during the workday. IT
staff can also access employee computers to determine how much time is
247
being spent on the Internet to conduct personal business and “surf the
Web.”
Fig 5.3 Concurrent control
The control process consists of the following basic elements and steps:
1. Establishing goals and standards
The task of fixing goals and standards takes place while planning but it
plays a big role in controlling also. This is because the main aim of
controlling is to direct a business’s actions towards its goals. If the
members of an organization know their goals clearly, they will invest
their entire focus in achieving them.
It is very important for managers to communicate their organization’s

goals, standards and objectives as clearly as possible. There must never be
ambiguities amongst employees in this regard. If everybody works
towards common goals, it becomes easier for an organization to flourish.
The goals that managers have to set and work towards may be either
tangible/specific or intangible/abstract. Tangible goals are those which are
easy to quantify in numerical terms. For example, achievement of sales
worth Rs. 100 crores within one year is a tangible goal.
248
On the other hand, intangible goals are those which are not quantifiable
numerically. For example, a company may aim to win some prestigious
award for its corporate social responsibility activities.
2. Measuring actual performance against goals and standards
Once managers know what their goals are, they should next measure their
actual performance and compare. This step basically helps them in
knowing whether their plans are working as intended.
After implementing a plan, managers have to constantly monitor and

evaluate them. They must always be ready to take corrective measures if
things are not working properly. In order to do this, they should keep
comparing their actual performance with their ultimate goals.
Apart from taking corrective action, this step of process control also helps
managers in predicting future problems. This way they can take measures
immediately and save their business from losses.
In order to compare their actual performance, managers first have to

measure it. They can do so by measuring results in monetary terms,
seeking customer feedback, appointing financial experts, etc. This can
often become difficult if managers want to measure intangible standards
like industrial relations, market-reputation, etc.
3. Taking corrective action
In case there are discrepancies between actual performances and goals,

managers need to take corrective actions immediately. Timely corrective
actions can reduce losses as well as prevent them from arising in the
future again.
Sometimes, business organizations formulate default corrective actions in

the form of policies. This, however, can be difficult to do when it comes
to complicated problems.
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In such cases, managers need to first quantify the defect and prepare a
course of action to remedy it. Sometimes, they may have to take
extraordinary measures for unpredictable problems.
4. Following up on corrective action
Just taking corrective measures is not enough; managers must also take
them to their logical conclusion. Even this step requires thorough
evaluations and comparisons.
Managers should stick to the problem until they solve it. If they refer it to
a subordinate, they must stay around and see to it that he completes the
task. They may even mentor him personally so that he may be able to
solve such problems by himself later.
1.Define coordination ?
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2.What is essence of coordination ?
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5.6 DIFFERENT CONTROL TECHNIQUES
In management, Controlling is one of the most important functions in an

organization which is goal-oriented. Types of Control techniques in
management are Modern and Traditional control techniques.
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Feedforward, feedback and concurrent controls are also types of
management control techniques.
Controlling helps the managers in eliminating the gap between

organizations actual performance and goals. Controlling is the process in
which actual performance is compared with the company standards.
Comparing it gives the visibility that activities are performed according
to strategy or not. If it is not performed then necessary corrective action
should be taken.
Types of Control Techniques in Management
Management theorists and experts have devised several techniques over

the years. They often divide these techniques into two categories:
traditional and modern. Traditional types of techniques generally focus on
non-scientific methods. On the other hand, modern techniques find
their sources in scientific methods which can be more accurate.
Traditional Types of Control Techniques in Management
• Budgetary Control
• Standard Costing
• Financial Ratio Analysis
• Internal Audit
• Break-Even Analysis
• Statistical Control
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Fig 5.4 Traditional Types of Control Techniques
Despite the emergence of modern techniques, traditional practices are still

widely in use these days. Let us discuss them one by one.
Budgetary Control
Budgeting simply means showcasing plans and expected results using

numerical information. As a corollary to this, budgetary control means
controlling regular operations of an organization for executing budgets.
A budget basically helps in understanding and expressing expected results

of projects and tasks in numerical form. For example, the amounts of
sales, production output, machine hours, etc. can be seen in budgets.
There can be several types of budgets depending on the kind of data

they aim to project. For example, a sale budget explains selling and
distribution targets. Similarly, there can also be budgets for
purchase, production, capital expenditure, cash, etc.
The main aim of budgetary control is to regulate the activity of an

organization using budgeting. This process firstly requires managers to
determine what objectives they wish to achieve from a particular activity.
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After that, they have to lay down the exact course of action that they will
follow for weeks and months.
Next, they will translate these expected results into monetary and
numerical terms, i.e. under a budget. Finally, managers will compare
actual performances with their budgets and take corrective measures if
necessary. This is exactly how the process of budgetary control works.
Standard Costing
Standard costing is similar to budgeting in the way that it relies on

numerical figures. The difference between the two, however, is that
standard costing relies on standard and regular/recurring costs.
Under this technique, managers record their costs and expenses for every
activity and compare them with standard costs. This controlling technique
basically helps in realising which activity is profitable and which one is
not.
Financial Ratio Analysis
Every business organization has to depict its financial performances using

reports like balance sheets and profit & loss statements. Financial ratio
analysis basically compares these financial reports to show the financial
performance of a business in numerical terms.
Comparative studies of financial statements showcase standards like

changes in assets, liabilities, capital, profits, etc. Financial ratio analysis
also helps in understanding the liquidity and solvency status of a business.
Internal Audit
Another popular traditional type of control technique is internal auditing.

This process requires internal auditors to appraise themselves of the
operations of an organization.
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Generally, the scope of an internal audit is narrow and it relates to
financial and accounting activities. In modern times, however, managers
use it to regulate several other tasks.
For example, it can also cover policies, procedures, methods, and

management of an organization. Results of such audits can, consequently,
help managers take corrective action for controlling.
Break-Even Analysis
Break-even analysis shows the point at which a business neither earns

profits nor incurs losses. This can be in the form of sale output,
production volume, the price of products, etc.
Managers often use break-even analysis to determine the minimum level

of results they must achieve for an activity. Any number that goes below
the break-even point triggers corrective measures for control.
Statistical Control
The use of statistical tools is a great way to understand an organization’s

tasks effectively and efficiently. They help in showing averages,
percentages, and ratios using comprehensible graphs and charts.
Managers often use pie charts and graphs to depict their sales, production,
profits, productivity, etc. Such tools have always been popular traditional
control techniques.
5.7 MANAGEMENT BY EXCEPTION
Management by exception is the practice of examining the financial

and operational results of a business, and only bringing issues to the
attention of management if results represent substantial differences
from the budgeted or expected amount. For example, the company
controller may be required to notify management of those expenses
that are the greater of $10,000 or 20% higher than expected.
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The purpose of the management by exception concept is to only

bother management with the most important variances from the
planned direction or results of the business. Managers will
presumably spend more time attending to and correcting these larger
variances. The concept can be fine-tuned, so that smaller variances
are brought to the attention of lower-level managers, while a massive
variance is reported straight to senior management.
Management by exception (MBE) is a style of business management that
focuses on identifying and handling cases that deviate from the norm,
recommended as best practice by the project management method.
Management by exception has both a general business application and a
business intelligence application. General business exceptions are cases
that deviate from the normal behaviour in a business process and need to
be cared for in a unique manner, typically by human intervention. Their
cause might include: process deviation, infrastructure or connectivity
issues, external deviation, poor quality business rules, malformed data,
etc. Management by exception here is the practice of investigating,
resolving and handling such occurrences by using skilled staff and
software tools. Good management can contribute to efficiency of
business processes. Often in these cases the process will be called
exception management, as exceptional cases are not the sole focus of the
managerial policy, and exception management (as opposed to
management by exception) denotes a more moderate application of the
process.
Management by exception gives employees the responsibility to make
decisions and fulfil their work or projects by themselves.[1] It consists of
focus and analysis of statistically relevant anomalies in the data. If an
unusual situation or deviation in the recorded data appears, which could
cause difficulties for the business and can't be managed by the employee
at his level, the employee should pass the decision on to the next higher
level. For example, if all products are selling at their expected volumes
for the quarter, except one particular product which is underperforming
or over-performing at a statistically relevant margin, only the data for
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that product will be presented to the managers for further investigation
and discovery of the root cause. Management by exception can bring
forward business errors and oversights, ineffective strategies that need to
be improved, changes in competition and business opportunities.
Management by exception is intended to reduce the managerial load and
enable managers to spend their time more effectively in areas where it
will have the most impact. This management concept is widely attributed
to Frederick W. Taylor and was first discussed in his work, "Shop
management: A paper read before the American Society of Mechanical
Engineers. N.Y: American Society of Mechanical Engineers.
Exception management also has an IT application. When writing code, if
the programmer sees that there will be an exceptional case where a
predefined assumption of the application will be breached, the
programmer will need to deal with that exception programmatically from
the outset.
Advantages of Management by Exception
There are several valid reasons for using this technique. They are:
• It reduces the amount of financial and operational results that

management must review, which is a more efficient use of
their time.
• The report writer linked to the accounting system can be set to

automatically print reports at stated intervals that contain the
predetermined exception levels, which is a minimally-invasive
reporting approach.
• This method allows employees to follow their own approaches

to achieving the results mandated in the company's budget.
Management will only step in if exception conditions exist.
• The company's auditors will make inquiries about large

exceptions as part of their annual audit activities, so
management should investigate these issues in advance of the
audit.
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Disadvantages of Management by Exception
There are several issues with the management by exception concept,

which are:
• This concept is based on the existence of a budget against

which actual results are compared. If the budget was not well
formulated, there may be a large number of variances, many
of which are irrelevant, and which will waste the time of
anyone investigating them.
• The concept requires the use of financial analysts who prepare

variance summaries and present this information to
management. Thus, an extra layer of corporate overhead is
required to make the concept function properly. Also, an
incompetent analyst might not recognise a potentially serious
issue, and will not bring it to the attention of management.
• This concept is based on the command-and-control system,

where conditions are monitored and decisions made by a
central group of senior managers. You could instead have a
decentralised organisational structure, where local managers
can monitor conditions on a daily basis, and so do not need an
exception reporting system.
• The concept assumes that only managers can correct

variances. If a business were instead structured so that front
line employees could deal with most variances as soon as they
arise, there would be little need for management by exception.
5.8 LETS SUM UP
Direction is a management job that is primarily performed at higher levels

of management and has a ripple effect down to lower levels. It is the
function that initiates and begins action toward a set objective or goal. It
257
is a continuing process that exists as long as the business exists. It offers
significance to planning and organisation by pulling the entire organisation
together to work toward a common objective. Many management theorists
believe that there are four main management functions. Planning,
organizing, directing, and controlling are the four steps. In any business,
directing is a crucial function. Directing aids managers in ensuring high-
quality performance and achieving the company’s objectives.
Directing is a complex managerial function consisting of all the activities
that are designed to encourage subordinates to work effectively. It includes
supervision, motivation, communication and leading. The principles
which guide effective directing may be classified as principles related to
the purpose of directing and principles related to direction process.
Supervision: It is an element of direction. It can be understood as a process
as well as the functions performed by supervisor (a position at operative
level). Supervision is very important as it is closely linked to overseeing
the work, guiding and ensuring that targets are met by workers and
employees.
Motivation: Motivation is the process of stimulating people to action to
accomplish desired goals of organisation. It is an internal feeling of an
individual and leads to goal directed behavior. Motivation is mainly based
on needs of individuals. It helps individuals and groups in the organisation
for improved performance.
Managers offer incentives to employees both financial and non financial.
Financial incentives are monetary and may be in the form of salary, bonus,
profit sharing, pension, etc. Non financial incentives provide social and
psychological satisfaction. These include status, promotion, responsibility,
job enrichment, job recognition, job security, employee participation,
delegation, empowerment etc.
Leadership: Leadership is most important factor in the success of an
enterprise. It is the process of influencing people to strive willingly for
group objectives. The qualities of a good leader have been researched by
many experts. Some of the qualities of good leader include–courage, will
power, judgement, knowledge, integrity, physical energy, faith, moral
qualities, fairness, vitality, decisiveness, social skills etc. But all these
qualities cannot be possessed by one individual nor always help in their
success.
258
Communication: Communication refers to process of exchange of ideas

between or among persons and create understanding. Communication
process involves the elements of source, encoding, channel, receiver,
decoding and feedback. In organizations, both formal and informal
communications simultaneously takes place. Formal communications
refers to all official communications in the form of orders, memos,
appeals, notes, circulars, agenda, minutes, etc. Apart from formal
communications, informal or grapevine communications also exist.
Informal communications
5.9 KEYWORDS
1. Directing :
Directing is the guidance inspiration, the leadership of those men and
women constitute the real case responsibilities of management
2.Controlling :
Controlling is the process of taking steps to bring actual results and desired
results closer together.
3.Management by exception
Management by exception is a workplace practice that finance and
business industries often use. This practice allows employees to only
involve their managers on specific issues. For example, an employee who
monitors the company's budget may only need to contact their manager if
the account falls under a certain amount
4.Coordination:
coordination is essential at all levels in order to achieve the goals on time,
Therefore, Coordination is the essence of management, which works
carrying along all the other functions and activities affecting an
organization to achieve the required goal
259
5.10 SOME USEFUL BOOKS
1. "Management by exception". Cambridge Dictionaries Online.

Cambridge: Cambridge. 2014. Retrieved 16 October 2014.
2. ^ "Management by exception (MBE)". BusinessDictionary.
WebFinance. 2014. Retrieved 14 October 2014.
3. ^ "Making sense of your data - Telecommunications business
development". Verix.com. Archived from the original on 30
December 2013. Retrieved 29 December 2013.
4. ^ "Making sense of your data - Pharmaceutical sales".
Verix.com. Archived from the original on 30 December 2013.
Retrieved 29 December 2013.
5. ^ a b Bragg, S (23 May 2014). "What is management by
exception?". Accounting tools. Retrieved 17 October 2014.
6. ^ Northies, P.G. "Transactional Leadership
Factors". Leadership: Theory and Practice. SAGE. p. 195.
7. ^ "Shop management: A paper read before the American Society
of Mechanical Engineers. N.Y: American Society of Mechanical
Engineers". Journal of the Society of Mechanical
Engineers. 6 (9): App6. 1903. do:10.1299/.6.9_app6. ISSN 2433-
1546.
5.11 ANSWER TO CHECK YOUR PROGRESS
Refer-1 to check your progress -1 Q.1

The statement is true. Every manager of the organisation performs some
function of directing.
Refer-1 to check your progress -1 Q Q..2

Controlling is one of the important functions of a manager. In order to seek
planned results from the subordinates, a manager needs to exercise
effective control over the activities of the subordinates
260
Refer -2 answer to check your progress-2 Q..1
Coordination is the function of management which ensures that different
departments and groups work in sync. Therefore, there is unity of action
among the employees, groups, and departments. It also brings harmony in
carrying out the different tasks and activities to achieve the organization's
objectives efficiently.
Refer -2 answer to check your progress-2 Q..2

Coordination is needed at all the three levels of management. The work
at every level is performed by a group of people, that is why, it is
required at all the three levels :
(i) Top level : It requires coordination to integrate all the activities
performed by middle and lower level of management.
(ii) Middle level :This level requires coordination to balance the
activities performed by different individuals.
(iii) Lower level : This level requires coordination to bind the efforts of
all workers towards the achievement of goals.
1. What are semantic barriers of communication?

2. Explain the process of motivation with the help of a diagram.
3. State the different networks of grapevine communications.
4. Explain any three principles of Directing
5. What is informal communication?
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UTTARANCHAL UNIVERSITY

Program Name OMBA Program Code 501

UNIT – 2 SOCIAL RESPONSIBILITY

Learners will be able to learn

A business can be established, but to successfully sustain a business, the

All living creatures including human beings live within an environment.

As stated above, the success of every business depends on adapting itself

Business organizations cannot change the external environment but they

2.2 SOCIAL RESPONSIBILITY OF BUSINESS

An organization performs different activities to fulfill its profit-earning

Social responsibility means that individuals and companies must act in

Additionally, more investors and consumers are factoring in a

There is a moral imperative as well. Actions—or the lack thereof—will

Social responsibility can also boost company morale, especially when a

benefit of society and its values is known as social responsibility. It is

Fig 2.1 Social responsibility

The key ways that a company embraces social responsibility include

For example, companies managing their environmental impact might

Examples of Socially Responsible Corporations

• Starbucks Corp. (SBUX) committed to social responsibility from

• Salesforce.com Inc. (CRM) developed what it calls the 1-1-1

Criticism of Corporate Social Responsibility

However, social responsibility has become more mainstream and is now

What are examples of social responsibility?

What are the main benefits of social responsibility?

Advantages of Social Responsibility

• Justification for existence and growth

• The long-term interest of the firm

• Avoidance of government regulation

• Availability of resources with business

• Converting problems into opportunities

• A better environment for doing business

• Holding business responsible for social problems

How does social responsibility benefit companies?

Disadvantages of Social Responsibility

• Violation of profit maximisation objective

• Lack of social skills

• Lack of broad public support

Opinions in Favour of Social Responsibilities:

• Good quality products help in expansion of the business.

• When the business organisation keeps on providing good quality

(2) Long Term Interest of the Business

• Every business wants long term profits and gains.

• If increasing no. Of stakeholders are not giving their best, there

• It can be noted that the public image of the business can be

(3) Avoidance of Government Regulations

• Good social behaviour is an ethical aspect of the business. They

• Business entities avoid government regulations as it their

(4) Maintenance of Society

• The business should take social responsibilities.

• However, the law is not made for every situation.

• This situation can create criminal intent in society.

(5) Availability of Resources With Business

• Business entities have huge set-ups and good infrastructure.

• These organizations have access to different types of resources.

• These resources should be used for fulfilling social

(6) Holding Business Responsible for Social Problems

• Business activity should see if any type of activity is causing

• The business should themselves held responsible for causing

Opinions Which Are Against the Idea of Fulfilment of Social

(1) Violation of Profit Maximisation Objective

• The sole motive of the business is profit maximisation.