Principles of Management (103) M.B.A.

INFINITY
MANAGEMENT & ENGINEERING COLLEGE, SAGAR

Principles of Management
(Paper No.: 103)
Department of Management Studies
Prepared By: Dr Mohd. Ashfaq Siddiqui

INFINITY MANAGEMENT & ENGINEERING COLLEGE, SAGAR
SYLLABUS
Principles of Management (Paper No.: 103)
UNIT-I (15-Lecture)
Management: Definition & Concepts, Management and Administration, functions of
Management, (Management process), Evolution of Management thought, the classical theories.
Taylor Vs. Fayol in management evolution, neo-classical theory, Hawthorne experiments,
decision-making process.
UNIT-I (12-Lecture)
Planning function, types of plans, MBO, Strategies, policies, proceedings, methods & rules,
project management, planning & evaluation, feasibility report, planning process major steps in
managerial planning, planning under systems approach.
UNIT-I (10-Lecture)
Organizing : Major approaches to Organization theory : Classical approach, the newoclassical
approach, Systems & Contingency approach, principles of organization, the organization
process, Span of control for Supervision. Departmentation, Delegation & Decentralisation.
UNIT-I (17-Lecture)
Directing, Supervision, Communication & Co-ordination, principles of Communication, barriers
of communication, Controlling, nature & purpose, control mechanism, planning & control
techniques, Budgetary control.
Reference Book:
1. Harold Koontz, Cyril O'Donnel & Weilrich : Management (International Students Edition,
Koga
Kusha, Tokyo, 1980).
2. Harold Koontz & Cyril O'Donnel : Management : A Contingency and System Analysis.
3. Peter F. Drucker : The Practice of Management.
4. Newman Summer Warren : The Process of Management, Concepts, Behaviour & Practice
(Prentice
Hall of India, 1981).
5. R.D. Agrawal : Organisation & Management (Tata McGraw Hill, New Delhi).
6. Robbins & Cotler : Management (Pecrson Edition).

LESSION PLAN
Principles of Management (Paper No.: 103)
3 Semester Lecture Classes: 54
Lecture-1:
Introduction of management
Lecture-2:
Meaning and Definitions and Objective of Management
Lecture-3:
Characteristics, Feature, Nature and Concept of Management:-
Lecture-4:
Significance or Importance of Management and Scope of Management
Lecture-5:
Difference between Management & Administration
Lecture-6:
The Process and Function of Management:-
.
Lecture-7:
Evolution of Management Thought: Classical Theory or approach to management
thought
Lecture-8:
Neo-Classical Theory and Modern Management Theory
Lecture-9:
Difference between Classical Theory Vs Neo-Classical Theory
Lecture-10:
Difference between System Approach Vs Contingency Approach
Lecture-11:
Scientific Management :Frederick Winslow Taylor (1856-1915)
Lecture-12:
Fayol's 14 principles of management
Lecture-13:
Taylor Vs. Fayol in Management Evolution
Lecture-14:

Elton Mayo’s Hawthorne experiment and it’s contributions to management
Lecture-15:.
The Decision Making Process
Lecture-16:
Planning in Management, Planning Definition
Lecture-17:
Importance of Planning , Features of planning
Lecture-18:
Steps in Planning process
Lecture-19:
Types of Plans and Elements of Planning
Lecture-20:
MBO(Management by objectives)
Lecture-21:
Unique features and advantages of the MBO process & Limitations of MBO
Lecture-22:
Strategy:- Meaning, Definitions and Strategies at different levels
Lecture-23:
Policy: Meaning, Definitions, Advantages and Limitations of Policies
Lecture-24:
Difference between Policies & Objectives
Difference between Policies & Strategies
Lecture-25:
Procedures: Definition, Importance of Procedure and Difference between Policy and
Procedure
Lecture-26:
Methods: Definition, Difference between Methods Vs Procedures
Lecture-27:
Rule, Difference between Rule & Policy
Lecture-28:
Meaning and Definition of Organising

Lecture-29:
Functions of Organisation, Principles of Organisation, Importance/ Advantages of
Organisation
Lecture-30:
The process of organisation
Lecture-31:
Organizational theories: Classical organization theories
Lecture-32:
Neoclassical theory and Modern organization theories
Lecture-33:
Span of management/ span of control
Lecture-34:
Departmentation: Meaning, Definition and Importance of Departmentation
Lecture-35:
Basis of Departmentation: Functional departmentation, and Divisional departmentation.
Lecture-36:
Delegation & Decentralisation: Definition of Delegation and Decentralization
Lecture-37:
Key Differences Between Delegation and Decentralization
Lecture-38:
Directing : What is Directing? Who is Directed? Need of Direction
Lecture-39:
Characteristics & Feature of Direction, Process of Direction
Lecture-40:
Supervision: Meaning, Definitions and significance of supervision
Lecture-41:
Distinction between Direction and Supervision.
Lecture-42:
Functions and Types of Supervision
Lecture-43:
Qualities of Supervisor, How Supervision can be more effective?, Requisites of effective
Supervision

Lecture-44:
Co-ordination: Definition, Objective, Characteristics of Coordination
Lecture-45:
Need and importance of co-ordination, Techniques of effective coordination and
Principle of Coordination
Lecture-46:
Meaning and Nature of Communication, Principles of Communication:
Lecture-47:
Barriers to Effective Communication
Lecture-48:
Controlling Definition, Characteristics & Features of Control
Lecture-49:
Advantages and Limitation of Control, Types of Control
Lecture-50:
Controlling Process, Principle or Requirements of Control
Lecture-51:
Concept of Technique of control, Different techniques of control
Lecture-52:
Budgetary Control: Meaning, Objectives, Types of Budgetary Controlling Techniques
Lecture-53:
Benefits of Budgetary Control, Essentials of a Good Budgetary Control System
Lecture-54:
Steps of Budgetary Control, Preparation for Budgetary Control

Unit-1
Introduction of management:-Management is the art of getting or
achieving the goal with the best possible means. Management is a process consisting of
Functions such as planning organizations , recruitments , directions , Control , Co-
ordination etc. in other words management works to achieve predetermined goals.
“Management is a process, whose object is to provide better goods & Service to the
Society.”
Whatever the size of business, whether small or big . all require management . the
importance of management has become universal the relations of management is with 5
ms which are Called as 5 ms of industry , ie. Men, Material, Machines, Money &
Method. All 5 ms are related to management. So they are called as the main elements of
managements.
This concept of management can be Understand well with the help of the Following
Diagram.
Input (5 Managerial End Result

M’S) Functions
Men, planning management

Material, organizations , works to
Machines, recruitments , achieve
Money directions , predetermined
& Method Control , goals.
Co-ordination
etc

Meaning and Definitions: - Meaning the word “Management has a wider Applicability
in the present day world. In a wider sense “Management, Organizations, Recruitment,
Directions and Control, Co-ordination etc in other words. Management works to achieve
predetermined goods. Management has been defined as science and art both Management
works as a brain and life saving device in any enterprise. Managements are a group which
directs and controls according to planning.
Management is Universal in nature as every organization requires making of decision, procurement of

resources, co-ordination of activities, leading of people and evaluation of performance directed towards its
objectives.
Modern organization is open systems which have continuous interface with the external environment. They
get various inputs such as men, money, machines, materials and information form the environment and supply
their various output to the environment. The economic, political and technological changes in India and around
the globe in the recent year have created several new challenges for the modern organization and their
management. To achieve success in managing, a manager must have a thorough knowledge of management
concept, principles and techniques.
Management Definition
1. According to Mary Porker Follett:- “ Management is the art of getting things done through people”
2. According to Ross Moore:- “Management means decision making.”
3. According to J. Clough:- “ Management is the art and science of decision making and leadership.”
4. According to Apple Dawton:- “Management is the development of people and not the direction of
things.”
5. According to Henry Fayol:- “To manage is to forecast to plan, to organise, to command, to coordinate
and to control.
6. According to P. Drucker:- “Management is Multipurpose organ that manages worker and work”
7. According to Koontz:- Management is the art of getting things done through and with people in
formally organized group.”
8. According to Michael H. Mescon:- “ Management is the process of Planning, Organising, Leading and
Controlling the efforts of Organisational member and of using all other organizational resources to
achieve the stated organizational goals.”
9. According to J. Sundy:- Management is principally a task of planning, coordinating, motivating and
controlling the efforts of others towards specific objectives.”
10. According to Louis Alkan Peterson:- “Management is the field of knowledge and technique.”
11. “Management is the life blood of organization.”
Objective of Management:-
1. Efficient use of resources.

2. Satisfaction of customers.
3. Adequate return on capital.
4. Satisfied workforce.
5. Good working conditions.
6. Good relations with suppliers
7. Contribution to national Goals.

Concept of Management: - it is divided in to two parts.

(1) General (2) New
(1) General – It has 7 parts.

(a) System of Authority (b) Economic Resources
(c) Class and status (d) Discipline
(e) Career (f) Process
(g) Skill and Art
(2) New – It has 8 part

a. Scientific Management (F.W. Taylor Concept)
b. People orientated Concept
c. Decision Making Concept
d. Leadership Concept
e. System Concept
f. Contingency Management Concept
g. Electric concept
h. Cooperation social system concept
Characteristics, Feature, Nature of Management:-

1. Management is the process of function.
2. Management is a social process
3. Management is related with human organization
4. Management is a human process
5. Management is the integrated (mixture) process
6. Management is a Group effort
7. Management is a system hierarchy (level)
8. Management is the integrating force
9. Management is the purposeful activity
10. Management is the intangible force
11. Management is the universal process
12. Management is an art as well as science
13. Management is non-replaceable skill
14. Management is the continuous process
15. Management is the creative function
16. Management is regulated and control
17. Management is multi disciplinarily
18. Management is a Practice
19. Special role of human element
20. Management is global activity
21. Management is a dynamic (full of energy) process

Significance or Importance of Management
1. Management needs the challenges of change

2. Effective, efficient and profitable utilization of seven aims / 7 M’S
(Seven M’S – Man. Material, Machine, Money, Management, Methods, Market)
3. Development of Resources.
4. Management directs the organisation.
5. Management integrates various interest
6. Management Provide Stability
7. Management Provide Co-ordination and establish team spirit
8. Management tackle business problem
9. Management is a tools of personality development
10. Management plays an important role in Indian economic development
Scope of Management :-
1. Subject matter of Management

(a) Financial Management
(b) Personal Management (Human Resource Management
(c) Material or Purchase Management
(d) Marketing Management
(e) Machine or Maintenance Management
(i) Office Management
(ii) Development Management
(iii) Production Management
2. Functional area of Management

3. Management is an interdisciplinary
4. Principle of Management are of Universal application.
5. Essential of Management
(a) Scientific methodology
(b) Human relationship
(c) Quantitative technique
6. Modern Management is an agent of change.
Management and Administration:

Practically, there is no difference between management & administration. Every manager is concerned with
both - administrative management function and operative management function as shown in the figure.
However, the managers who are higher up in the hierarchy denote more time on administrative function & the
lower level denote more time on directing and controlling worker’s performance i.e. management.

Difference between Administration and Management:
Basis Administration Management

Nature of work It is concerned about the determination It puts into action the policies and plans
of objectives and major policies of an laid down by the administration.
organization.
Type of function It is a determinative function. It is an executive function.
Scope It takes major decisions of an enterprise It takes decisions within the framework
as a whole. set by the administration.
Level of authority It is a top-level activity. It is a middle level activity.
Nature of status :It consists of owners who invest capital It is a group of managerial personnel
in and receive profits from an enterprise. who use their specialized knowledge to
fulfill the objectives of an enterprise.
Nature of usage It is popular with government, military, It is used in business enterprises.
educational, and religious organizations.
Decision making Its decisions are influenced by public Its decisions are influenced by the
opinion, government policies, social, and values, opinions, and beliefs of the
religious factors. managers.
Main functions Planning and organizing functions are Motivating and controlling functions are
involved in it. involved in it.
Abilities It needs administrative rather than It requires technical activities
technical abilities.
Management handles the employers. Administration handles the buisness
aspects such as finance.
The Process of management:-

Function of Management: - it is divided into two parts.
1. Managerial function.
2. Operative function.
1. Managerial Function.
1. Planning – Planning is the first and forecast function of management. it is deciding in

advance what is to be done . A plan is a projected course of action. Planning involves
problem Solving and decision making. The function of planning also incorporates
forecasting as its only through anticipation of future that a manager can decide upon the
future course of action.
2. Organizing- it is the second important Function of management .without organization
no management Survive .organizing involves bringing together the manpower and
material recourses for the achievement of the objectives load down by the enterprise.
3. Staffing – The third important function of management is Staffing because without
adequate staff there can be no organization and without organization , there can be no
management , Staffing Function is a difficult managerial Function because it is
concerned with the Selection of persons who are properly Qualified and Experienced
for the job.
4. Directing -- Direction is the art & process to getting things done. Directing is concerned
with alliterating the members of the organization to work efficiently and effectively for
the attainment of the organizational goals.
5. Controlling - Fundamentally, control is any process that guides aetinity towards some
predetermined goal the purpose of control is to ensure that activities proceed as per
plans .
6. Motivation – it is a complex Force inspiring a person to work to use his Capacities
willingly For achieving certain objectives the role of intimation is to develop and
intensity a desire in every members of the Organization to work effectively in his
position .
7.
8. Co- ordination – due to the effect of modern contract view and the will to work Freely,
Co-ordination has become an important task of management. it is also called as virtual

understanding , ca-o ordination aims at an orderly arrangement of group effort for the
achievement of desired ends .
9. Communication - although Communication is the Secondary Function of management ,
its importance can not be Undermined . that is why some management experts have put
in the primary Function of management communication is an exchange of Facts,
ideas , opinion or emotions by two or persons.
10. innovation - termed as managements modern Function its basically a creative activity.
. it consists in doing such things , are generally not done in the ordinary course of
business. It may involves various activities like introductions of a new products , new
method of production, opening a new marbit , conquest of a new source of supply ,
creations of monopoly positions etc.
11. Decision Making – Decision making is an important Function of management
Everyday hundred of decision are made in an enterprise , so decision making also a part
of management activity. According to Peter Drucker whatever a manager does , he
does after making decision .
12. Representation – Representation may also mean dealing with consumers , workers ,
Suppliers and the government on behalf of the enterprise . the top level management
represents the owners of the entries for different setting and contract. The decision of
the top level management are taken as the decision made by the Owners/Administration.
2. Operative Function – Production, Purchasing, Finance, Personnel or Human

Resources, Marketing.
Evolution of Management Thought:-

With the development of management thinking over a
long period of time, various approaches for managerial analysis have been developed. These approaches are
based on certain concepts and theories. Management scholars have developed various patterns of thinking,
though each school tries to explain the nature of management, each of them employee different theories and
thinking.
Excessive contradictions in various school of management have forced the people to
accept no one single approach. We can classify various schools of thought into three broad categories.
1. Classical Theory or approach to management thought: - The classical theory represents the
traditionally accepted view about organization. In a way, it signifies the beginning of the systematic
study of management. It is often called traditional theory. It can be traced historically to the 19th
century prototype industrial and military organization. Several writers contributed to the classical
thought in the early year of the 20th century they include Taylor, Fayol, Weber, Luther, Urwick,
Mooney and many others. All these writer concentrated on finding sound principle of organization.
That is way classical theory is also known as ‘Structural theory of organization’. The classical theory
or school of management has four elements namely, Custom school, scientific school, Bureaucratic
Management School and Process or Administrative School.

(a) Management by custom school: - this school studies management by analysing past
managerial experiences. As such it is also named as “experience” approach. The major
advocates of this school are Davis, Urwick, Dale, Sloan etc.
Basic features or characteristics
1. it follows customs and traditions in managing.
2. it believes that though experiences and give general insights can be obtained.
3. it identifies that management can be learnt by experience.
4. it studies managerial experiences and gives a feeling of managerial stability and
success.
5. it identifies success of failure of mangers through analytical skills.
6. it accepts that the object of studying managers experiences is to draw guidelines
for training managers.
7. it treats management as study of managers in practice.
8. it elicits that management situations are of repetitive type, hence it is easy to find
solutions for similar situations.
(b) Bureaucratic Management School:-In present day sense, the term “bureaucracy” means
delays and unnecessary complicated rules, regulations and procedures. The third major
approach in the classical school of management thought was provided by Max Weber. He
developed a bureaucratic model made up of hierarchy of authority of inter-personal
relationships, a system of work procedures and a rational method of structuring organizations.
Basic features or characteristics
1. The organizational task are divided on the basis of specialization.
2. A clear hierarchy of authority runs throughout the organization.
3. There is an impersonal attitude towards the sub-ordinates by the superiors.
4. Ability not personal loyalty is the condition for employment.
5. Officials and superiors are autonomous within their sphere of competence.
6. there are written rules at every stage and action is taken on the basis of written documents
7. Promotion of employees on purely merit and competence basis.
8. Strict adherence to qualifications of individuals holding responsible positions.
9. The idea of management is more “by the position” rather than “by the person.”
10. Adequate protection to individuals against arbitrary dismissals.
(c) Scientific Management:- The scientific management school was propounded by F.W.Taylor
and his associates. This school uses the scientific method to perform manual tasks. Taylor
applied scientific principles to the problem of management.
Basic Features of Characteristics
1. Scientific selection, placement and training of workers.
2. Standardization of materials, processes, tools etc.
3. analysis of job and determination of standards of work
4. separation of planning and implementation of work
5. standardization of tasks and wage rates
6. Cost control through elimination of wastage.
7. Creating a favourable work environment.
8. Scientific study of work, motions, fatigue, speed etc.
9. scientific allocation of tasks
10. Special stress on specialization and division of labour.
(d) Process of Management:- This school was created by Henry Fayol. This school considers
management as a process of getting things done through others. Process school of thought
provides conceptual framework for it. Henry Fayol’s ideas were fully accepted by his
associates. The contribution of all management thinkers is also known as “administrative”, or
“functional” and “process” school of management.

Basic Features or characteristics of Administrative or Process school of management

thought
1. it adopt function view point. It analyses a manger’s function.
2. it says :Management is what management does”
3. it focuses on the administrative level rather than on the shop level of the organization.
4. it regards management as a ‘universal process’ to be found in every organization.
5. it identifies management as a distinct discipline.
6. it believes that management like law and medicine, can be practiced.
7. it distinguishes ‘managerial work’ from other ‘technical work’
8. it regards management as a skill which can be learned.
9. it provides basic functions of management, such as planning, organizing, coordinating, controlling
etc. for the first time and explains that these are basic administrative functions.
10. it paves the way for the evolution of modern approach to the problem of higher management by
way of functional analysis.
2. Neo-Classical Theory:- As the management thinkers felt that all four phases of classical school of
thought are not devoid of deficiencies, they stressed upon the importance of interpersonal and group
behaviour of treating people as human beings. The bureaucratic school lead strict rules and lack of
inter-personal relationship; the scientific management theory stressed its attention on the activities of
the workers; and the administrative theory focused on the activities of the managers. That is the failure
of classical theory was that it failed to recognize the significance of ‘man’ and ‘machines.’ There is
lack of “human interaction.” Therefore neo-classical theory was developed by renowned personalities
like Elton Mayo, McGregor, Dalton, Maslow, Davis etc. their thought stressed upon this importance
of interpersonal and group behavior and of treating peoples human beings. Their opinion was “since
management involves getting things done through other people, the study of management must
revolve around human behaviour. Therefore, the neo-classical school of management thought laid
emphasis on the “human side” of enterprise. This school had its origin in a series of experiments
primarily initiated by Elton Mayo. This school stressed upon two branches which are as under:
(a) Human Relationship
(b) Behavioral Science
(a) Human Relationship:- This approach stress the utility of human relations. Its is also called
“People oriented” school. It lays emphasis on relationship, Motivation and communication.
This approach believes that if managers show greater concern for their employees, the
employee satisfaction would increase. This would lead to increase in productivity.
Basic Features of human behavior school

1. The neo-classical theory shifted its attention from plant and other facilities to the
worker.
2. This school views individuals as socio-psychological being.
3. This school clearly distinguishes between ‘man’ and ‘machine.’ It emphasizes
upon a fact that the ‘will to work’ is more important than the ‘skill to work.’
4. It recognizes that employees would be happy and productive only if they would
belong to a cohesive work group and the organization is treated as a “collectivity
of people.”
5. It emphasis’s that “work is a group activity and work group is especially
important.”
(c) social system school / behavioral science – This school is closely related to the human
behavior approach. If focuses on the study of human relationship as a “social system”. Since
all managers operate in a social system, management can be looked upon as a system upon as
a system of cultural inter-relationship.
Basic Features of social system school / behavioral science

1. It treats organization as a “social entity”.

2. It advocates a system’s approach to human relationship.
3. It emphasizes upon the sociological perspective of human behavior.
4. Exponents of this school believe that personal attitudes and group behavior are also
influenced by technical environment in which people work.
5. It synthesises the classical and the neo-classical school as it recognizes the formal
as well as informal organizations.
3. Modern Management Theory: - The exponents of modern school thought see management as a
system of mathematical process, concepts and models. They believe that managerial problems can be
solved effectively through the application of quantitative technique. The management scientists in
terms of mathematical relationships and symbols. This school leads exactness to management process
and substitutes facts and figures for guesswork and quantitative base for judgment.
There integrating trends have developed throwing light on the ever
changing nature of management. We consider these aspects of modern management separately:
(a) Quantitative or Mathematical School

(b) System approach
(c) Contingency approach or Situational approach
(a) Quantitative or Mathematical School of management thought: - mathematical or quantitative basis

considers management as a system of models or processes. Thought quantitative techniques were in use since
long, their significance has increased beyond doubt only recently. Again, business it turning more dynamic
and expanding than ever before and this warrants a change in the quality of information needed and its
handling for quick and effective use. The major contributors to this discipline are Herbert A. Simon,, J.V.
Newmann, Osborn etc.
Basic Features of Quantitative or Mathematical approach
1. Management is seen as a mathematical process ingrained with concepts and models.
2. It looks at management as a logical process that can be expressed in mathematical relationships.
3. Its aims is to identify and unify scientific knowledge pertaining to management and its focus in on
rational decision making.
4. While model building, it aims at goal oriented analysis.
5. It helps developing orderly thinking in management and substitutes facts for experience.
6. It relies on a formal mathematical model.
7. Management science techniques are used in such activities as capital budgeting, cash flow
management, production scheduling, inventory management etc.
(b) The System Approach:- An organization functions like an organism. In an organization,

people, tasks, processes and management are inter-related and interdependent. The systems
theory school of management attempts to view the organization as a unified, purposeful and
organic system of inter related parts. Rather than dealing separately with the various parts of
an organization, the systems approach pays attention to the organization ‘as a whole’ and ‘as
a part of the large system’. In doing so, it believes that every part of an organization affects
the activity of the other part. It looks at the organization as a ‘dynamic organic whole’. The
thinkers viewed organization as an organic and open system which is composed of elements
should be orderly with appropriate communication system to facilitate interaction of these
inter-related parts leading to achieve a common goal.
Basic Features of the Systems Approach:

1. System theorists see organizations as complex network of inter-related part. An organization is a set of
inter-related elements that function as unit for a specific purpose.

2. It is a multi-disciplinary system in the sense that management is the outcome of contributions of

various disciplines such as sociology, economics, psychology, mathematical and so on.
3. System theorists believe that management can be viewed as transformation model. Managers receive
various inputs, transform these inputs in some ways and produce goods and services.
4. System theorists see organizations subject to environmental changes. As environment is subject to
change, there will be change in the organization. It is for the organization to adjust and adapt to the
changing needs of the environment. They feel that only adaptive units will survive and rest will fail.
5. As against the prescriptive approach of classical thinkers, modern theorists describe clearly the
various concepts as to organization, management and so on, so that individuals are free to select the
objectives and the methods to improve group behavioral effectiveness.
6. The system theorists believe that a manager can achieve goals in various ways and by varying
methods. They consider that there is “no single best way”.
7. The system theorists consider management in totality. That is, management problems are seen in an
organization by taking organization in its entirety and not in a part. This means that there should be
integration of variant forces affecting the management.
8. System approach provides a frame-work for visualizing both internal and external forces as an
integrated whole. That is why, this approach is thought as more realistic that the other approach.
(d) Contingency approach or Situational approach

The contingency approach has emerged form the real-life experience of mangers. The short coming of the
system approach gave way for a new approach called “Contingency approach” which is also known as
“Situational approach”. This view suggests that the effectiveness of managerial function and practices will
very according to the particular circumstances of the situation. This approach assumes that there is “no one
best way” of doing things under all conditions. The proper management technique in a given situation
depends upon the nature and conditions of that situation. This requires a “situational awareness” to be
developed on the part of managers. The major contributors to this theory are burns and stalker, james
Thompson, lorsch etc.
Basic Features of the Contingency approach or Situational approach
1. Different situations require the application of different management techniques.

2. Contingency implies possibility of happening of an event which may or may not happen
depending on the internal and external forces.
3. Contingency approach implies that there is no “best” way to manage. There are no
universal solution techniques because every problem situation is unique in itself.
Managers have to devise methods and to learn when and how to apply each of them
4. The Contingency approach emphasizes upon the need for analyzing the situation thread-
bare.
5. There should be congruence between the organization and the environment within the
organization functioning. The managerial policies, strategies and practices must be
matching to the ever changing external environmental factors in order to produce best
results.
6. Contingency approach emphasizes that managers should be prepared with many
alternative plans of actions in order to produce best results.
7. Contingency approach suggests that the managers should develop “situational sensitivity”
and “practical selectivity”.
8. Contingency approach is useful in various areas such a leadership, motivation, group
dynamics, strategic planning etc.

Difference between:
Classical School Neo-classical school
1. The classical school looked at organization as 1. The neo-classical school accepted

an impersonal entity. It failed to consider it as a organization as a part of community and a
social unit. social entity.
2. Classical school thought that both individual 2. The neo-classical theorists believed that
and group behavior is the outcome of rules and man is independent and human behavior is the
regulations of the organization. outcome of attitudes, feelings, sentiments,
beliefs and so on.
3.It meant that people were meant for rules and
regulations 3. It considered people working in
organization as social beings. Thus human
side was greatly stressed upon.
4. Classical theory focused its attention on work
and over- emphasized on order and rationality. 4. The neo-classical theorists focused on non-
economic needs with due respects to workers
5. The classical managerial technique and as “human beings”.
practices were authoritative. The rules and
regulations were stringent to get the work done. 5. The neo-classical techniques and practices
were participative and flexible giving due
6.It had a negative approach and there was consideration to human values and dignity.
forcible compulsion on workers to work under
the guidelines which were provided to them. 6. It had a positive approach and work was
done out of encouragement and motivation.
7. Under this theory the outcome was that the
workers produced just what was expected of
them – nothing more, nothing less. This kept 7. Under this theory the outcome was that the
employees agitated, frustrated and dis-satisfied. workers worked through motivation and
participation. This kept employees free from
fear, frustration, and dis-satisfaction.

Difference between:
System Approach Contingency Approach
1. It provides a theoretical model for under 1. It provides practical model for understanding
standing organization. organization.
2. It considers all organizational 2. It concentrates only on structural change.

Variables.
3. Systems approach is neutral on the 3. Contingency approach rejects the idea of ‘one
question of universal application of best way’ of doing the things. It has adaptive,
principles. flexible approach to problem and the solution to
a problem may vary form situation to situation.
4. It treats each organization and each situation

4. It treats all organization alike. It insists on as unique in its own sense. It emphasizes a match
the fact that they are not only between the problem situation and the particular
Complex, dynamic systems but are also sub- situation.
system of larger systems.
5. Contingency approach is not a unified theory
5. It is incorporates broader view of as it does not incorporate all aspect of system
organizational variables. System theorists see theory.
organization as a set of interrelated elements
the function as a unit for a specific purpose.
6. Systems thinking help the manger to

recognize the inter-relatedness of all 6. Contingency approach highlights the
managerial functions and actions. multivariate nature of organization and suggests
that organization interacts with its environment
and that management is entirely situational.
7. The systems approach is thought as more

realistic in approach as under the systems 7. The contingency approach is fundamentally
approach conceptual level of management reactive by its nature. That is, it merely suggests
analysis is much higher and deeper than any what a manager is to do in a given situation.
other approach.

SCIENTIFIC MANAGEMENT :
Frederick Winslow Taylor (1856-1915) is the father of scientific management. He
exerted great influence on the development of management thought through his
experiments and writings. During a career spanning 26 years, he arranged a series of
experiments in three companies: Midvale Steel, Simonds Rolling Machine and Bethlehem
Steel.
• Time and motion study: Since Taylor had been an operator himself; he knew how piecework
workers used to hold back production to one-third its level. The workers feared that their
employers would cut their piece rate as soon as there was a rise in production. The real trouble,
Taylor thought, was that no one knew how much work was reasonable for a man to do.
Therefore, he established the time and motion study, where Management Process and
Organisational Behaviour every job motion was supposed to be timed by using a stopwatch and
shorter and fewer motions. Thus, the best way of keeping an account of work performance was
found. This had replaced the old rule-of-thumb-knowledge of the worker.
• Differential payment: Taylor had founded the differential piecework system and the related
incentives with production. Under this plan, a worker received a low piece rate if he produced
the standard number of pieces and a high rate if he surpassed the standard. Taylor also
comprehended that the attraction of a new high piece rate would encourage the workers to
increase production.
• Drastic reorganisation of supervision: Taylor developed two new concepts: (i) Division of
planning and doing and (ii) Functional foremanship. In those days, it was customary for each
worker to plan his own work. The worker himself used to select his tools and decide the
sequence of performance of operations. The foreman essentially told the worker what jobs were
to be performed, not how they were to be performed. Taylor suggested that the work should be
designed by a foreman and not by the worker. He stated that there were distinctive functions
involved in doing any kind of job and that each of the foremen should give orders to the worker
in his specialised field.
• Scientific recruitment and training: Taylor also gave importance to the scientific selection
and development of the worker. He said that the management should develop and train every
worker in order to bring out his best output and to enable him to perform a superior, more
interesting and profitable class of work than he has done in the past.
• Intimate and friendly cooperation between the management and workers: Taylor said that,
“a complete mental revolution” on the part of management and labour was necessary to make the
organisation successful. Rather than argue over profits, they should both try to increase
production. Consequently, profits will also increase manifold, which will leave no room for
further disagreements. Taylor realised that both, the management and labour, had a common
interest in maximising production.Gantt identified the significance of the human element in
productivity and suggested the concept of motivation. He introduced two new features in
Taylor’s incentive scheme, which was found to have minimal motivational impact. First, every
worker who finished a day’s assigned workload was to win a 50-cent bonus for that day. Second,

the foreman was to get a bonus for each worker who achieved the daily standard, plus an extra
bonus if all the workers reached it.
Fayol's 14 principles of management are as under:

Authority Giving orders
Discipline Respect
Centralisation Always some central authority
Scalar chain Top to bottom line of authority
Order Right person in the right place
Unity of command One person being one superior over others
Unity of direction One head giving one plan for a group
Paramount general interest Interests of organisation over any one person
Division of work Reduced span of effort
Esprit de corps Teamwork encouraged
Initiative Encouraged but within organisational limits
Stability of tenure Appropriate settling in time for all
Remuneration Fair both to the organiation and the employee
• Division of work: Division of work in the management process produces increased and
improved performance with the same effect. Various functions of management like planning
organising, directing and controlling cannot be performed efficiently by a single proprietor or by
a group of directors. They must be entrusted to the specialists in the related fields.
• Authority and responsibility: A manager may exercise formal authority and personal power.
Formal authority is derived from his official position, while personal power is the result of
intelligence, experience, moral worth, ability to lead, past service etc. Responsibility is closely
related to authority and it arises wherever authority is implemented. Both responsibility and
authority are equally important.

• Discipline: Discipline is necessary for the smooth functioning of a business. By discipline, we

mean the obedience to authority, adherence to the rules of service and norms of performance,
reverence for agreements, sincere efforts for completing the delegated responsibility, deference
for superiors etc. The best measures of maintaining discipline are (a) good supervisors at all
levels, (b) transparent, unambiguous and unbiased agreement between the employer and (c)
judicious application of penalties. In fact, discipline is what leaders make it.
• Unity of command: Every employee should receive orders from only one superior. There
should be a clear-cut chain of command. Management Process and Organisational Behaviour
• Unity of direction: This means that there must be complete congruency between individual
and organisational goals on the one hand and between departmental and organisational goals on
the other.
• Subordination of individual interest to general interest: In a firm, an individual is

concerned with making the most of his own satisfaction through more money, recognition status
etc.
• Remuneration: The remuneration paid to the employees of the firm should be fair. It should
be based on general business conditions, cost of living, productivity and efficiency of the
concerned employees and the capacity of the firm to pay. Just and adequate remuneration
increases employee effectiveness and confidence and maintains good relations between them and
the management. If the compensation is not sufficient, it will lead to dissatisfaction and
employee relinquishment.
• Centralisation: If subordinates are given a greater role and importance in the management and
organisation of the firm, it is known as decentralisation but if they are given a smaller role and
importance, it is known as centralisation. The management must decide the degree of
centralisation or decentralisation of authority based on the nature of the circumstances, size of
the undertaking, the category of activities and the characteristic of the organisational structure.
The objective or purpose should be the optimum utilisation of all faculties of the personnel.
• Scalar chain: As per this principle, the orders or communications should pass through proper
channels of authority along the scalar chain.
• Order: To put things in an order takes effort. On the other hand, disorder does not require any
effort. It evolves by itself. The management must bring about order, harmony and regulation in
work through appropriate organisation. The management should observe the principle of 'right
place for everything and for every man'. To view this principle, there is a need for the selection
of competent personnel, right assignment of duties to employees and good organisation.
• Equity: Equity results from a mixture of kindness and justice. Employees expect the
management to be equally just with everybody. It requires managers to be free from all
prejudices, personal likes or dislikes. Equity provides healthy industrial relations between
management and labour, which is necessary for the successful functioning of the enterprise.

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

improved quality and quantity of work, it is necessary that they be assured of the security of their
job by the management. If they have a fear of insecurity of their job, their morale will be low and
they cannot deliver sufficient quality and quantity of work. Further, they will not have any sense
of attachment to the firm and they will always be on the lookout for a job elsewhere.
• Initiative: Initiative is to think and implement a plan. The zeal and energy of employees is
augmented by initiative. Innovation, which is the hallmark of technological progress, is possible
only where the employees are encouraged to take initiative. According to Fayol, “initiative is one
of the keenest satisfactions for an intelligent man to experience” and hence, he advises managers
to give their employees ample scope to take the initiative. Employees should have a positive
attitude and make suggestions freely.
• Esprit de Corps: This means team strength. Only when all the personnel unite as a team, is
there scope for realising the objectives of the concern. Harmony and solidarity among the staff is
a great source of strength for the undertaking. To achieve this, Fayol suggested two things. One,
the motto of divide and rule should be avoided and two, verbal communication should be used
for removing misunderstandings. Differences further deteriorate through written communication.
Taylor Vs. Fayol in management evolution

Study of Fayol and Taylor:
Both the persons have contributed to development of science of management. The contribution of these two
pioneers in the field of science of management has been reviewed as “The work of Taylor & Fayol was, of
course, especially complementary. They both realized that problem of personnel & its management at all levels
is the key to individual success. Both applied scientific method to this problem that Taylor worked primarily
from operative level, from bottom to upward, while Fayol concentrated on managing director and work
downwards, was merely a reflection of their very different careers”. They both differ from each other in
following aspects: -
1. Taylor looked at management from supervisory viewpoint & tried to improve efficiency at operating
level. He moved upwards while formulating theory. On the other hand, Fayol analyzed management from level
of top management downward. Thus, Fayol could afford a broader vision than Taylor.
2. Taylor called his philosophy “Scientific Management” while Fayol described his approach as “A
general theory of administration”.
3. Main aim of Taylor - to improve labor productivity & to eliminate all type of waste through
standardization of work & tools. Fayol attempted to develop a universal theory of management and stressed
upon need for teaching the theory of management.
4. Taylor focused his attention on fact by management and his principles are applicable on shop floor.
But Fayol concentrated on function of managers and on general principles of management wheel could be
equally applied in all.
Similarity - Both emphasized mutual co-operation between employment and employees.

Spheres of Human Activity

Fayol’s theory is more widely applicable than that of Taylor, although Taylor’s philosophy has undergone a
big change Under influence of modern development, but Fayol’s principles of management have stood the test
of time and are still being accepted as the core of management theory.
Psychologists View Point

According to Psychologists, Taylor's study had following drawbacks: -
1. Ignores human factors - Considers them as machines. Ignores human requirements, want and
aspirations.
2. Separation of Planning and Doing.
3. Dissatisfaction - Comparing performance with others.
4. No best way - Scientific management does not give one best way for solving problems.
Difference between Taylor Vs Fayol:

Basis Taylor Fayol
Human aspect Taylor disregards human elements and there is Fayol pays due regards on human element.
more stress on improving men, materials and E.g. Principle of initiative, Espirit De’ Corps
methods and Equity recognizes a need for human
relations
Status Father of scientific management Father of management principles
Efficiency & Stressed on efficiency Stressed on general administration

administration
Approach It has micro-approach because it is restricted to It has macro-approach and discuses general
factory only principles of management which are
applicable in every field of management.
Scope of principles These principles are restricted to production These are applicable in all kinds of
activities organization regarding their management
affairs
Achievement Scientific management Administrative management

Elton Mayo’s Hawthorne experiment and it’s contributions

to management
Hawthorne Experiment:
In 1927, a group of researchers led by Elton Mayo and Fritz Roethlisberger of the Harvard
Business School were invited to join in the studies at the Hawthorne Works of Western Electric
Company, Chicago. The experiment lasted up to 1932. The Hawthorne Experiments brought out
that the productivity of the employees is not the function of only physical conditions of work and
money wages paid to them. Productivity of employees depends heavily upon the satisfaction of
the employees in their work situation. Mayo’s idea was that logical factors were far less
important than emotional factors in determining productivity efficiency. Furthermore, of all the
human factors influencing employee behaviour, the most powerful were those emanating from
the worker’s participation in social groups. Thus, Mayo concluded that work arrangements in
addition to meeting the objective requirements of production must at the same time satisfy the
employee’s subjective requirement of social satisfaction at his work place. The Hawthorne
experiment consists of four parts. These parts are briefly described below:-
1. Illumination Experiment.
2. Relay Assembly Test Room Experiment.
3. Interviewing Programme.
4. Bank Wiring Test Room Experiment.
1. Illumination Experiment:
This experiment was conducted to establish relationship between output and illumination. When
the intensity of light was increased, the output also increased. The output showed an upward
trend even when the illumination was gradually brought down to the normal level. Therefore, it
was concluded that there is no consistent relationship between output of workers and
illumination in the factory. There must be some other factor which affected productivity.
2. Relay Assembly Test Room Experiment:

This phase aimed at knowing not only the impact of illumination on production but also other
factors like length of the working day, rest hours, and other physical conditions. In this
experiment, a small homogeneous work-group of six girls was constituted. These girls were
friendly to each other and were asked to work in a very informal atmosphere under the
supervision of a researcher. Productivity and morale increased considerably during the period of
the experiment. Productivity went on increasing and stabilized at a high level even when all the
improvements were taken away and the pre-test conditions were reintroduced. The researchers

concluded that socio-psychological factors such as feeling of being important, recognition,

attention, participation, cohesive work-group, and non-directive supervision held the key for
higher productivity.
3. Mass Interview Programme:

The objective of this programme was to make a systematic study of the employees’ attitudes
which would reveal the meaning which their “working situation” has for them. The researchers
interviewed a large number of workers with regard to their opinions on work, working conditions
and supervision. Initially, a direct approach was used whereby interviews asked questions
considered important by managers and researchers. The researchers observed that the replies of
the workmen were guarded. Therefore, this approach was replaced by an indirect technique,
where the interviewer simply listened to what the workmen had to say. The findings confirmed
the importance of social factors at work in the total work environment.
4. Bank Wiring Test Room Experiment:

This experiment was conducted by Roethlisberger and Dickson with a view to develop a new
method of observation and obtaining more exact information about social groups within a
company and also finding out the causes which restrict output. The experiment was conducted to
study a group of workers under conditions which were as close as possible to normal. This group
comprised of 14 workers. After the experiment, the production records of this group were
compared with their earlier production records. It was observed that the group evolved its own
production norms for each individual worker, which was made lower than those set by the
management. Because of this, workers would produce only that much, thereby defeating the
incentive system. Those workers who tried to produce more than the group norms were isolated,
harassed or punished by the group. The findings of the study are:-
 Each individual was restricting output.

 The group had its own “unofficial” standards of performance.
 Individual output remained fairly constant over a period of time.
 Informal groups play an important role in the working of an organization.
Contributions of the Hawthorne Experiment:

Elton Mayo and his associates conducted their studies in the Hawthorne plant of the western
electrical company, U.S.A., between 1927 and 1930. According to them, behavioural science
methods have many areas of application in management. The important features of the
Hawthorne Experiment are:-

1. A business organization is basically a social system. It is not just a techno-economic

system.
2. The employer can be motivated by psychological and social wants because his behaviour
is also influenced by feelings, emotions and attitudes. Thus economic incentives are not the
only method to motivate people.
3. Management must learn to develop co-operative attitudes and not rely merely on
command.
4. Participation becomes an important instrument in human relations movement. In order to

achieve participation, effective two-way communication network is essential.
5. Productivity is linked with employee satisfaction in any business organization. Therefore

management must take greater interest in employee satisfaction.
6. Group psychology plays an important role in any business organization. We must

therefore rely more on informal group effort.
7. The neo-classical theory emphasizes that man is a living machine and he is far more
important than the inanimate machine. Hence, the key to higher productivity lies in
employee morale. High morale results in higher output.
The Decision‐Making Process

Quite literally, organizations operate by people making decisions. A manager plans, organizes, staffs, leads,
and controls her team by executing decisions. The effectiveness and quality of those decisions determine how
successful a manager will be.
Managers are constantly called upon to make decisions in order to solve problems. Decision making and
problem solving are ongoing processes of evaluating situations or problems, considering alternatives, making
choices, and following them up with the necessary actions. Sometimes the decision-making process is
extremely short, and mental reflection is essentially instantaneous. In other situations, the process can drag on
for weeks or even months. The entire decision-making process is dependent upon the right information being
available to the right people at the right times.
The decision-making process involves the following steps:

1. Define the problem.
2. Identify limiting factors.
3. Develop potential alternatives.
4. Analyze the alternatives.
5. Select the best alternative.
6. Implement the decision.
7. Establish a control and evaluation system.
Define the problem
The decision-making process begins when a manager identifies the real problem. The accurate definition of the
problem affects all the steps that follow; if the problem is inaccurately defined, every step in the decision-
making process will be based on an incorrect starting point. One way that a manager can help determine the
true problem in a situation is by identifying the problem separately from its symptoms.
The most obviously troubling situations found in an organization can usually be identified as symptoms of
underlying problems. (See Table 1 for some examples of symptoms.) These symptoms all indicate that
something is wrong with an organization, but they don't identify root causes. A successful manager doesn't just
attack symptoms; he works to uncover the factors that cause these symptoms.
TABLE 1 Symptoms and Their Real Causes

Symptoms Underlying Problem
Low profits and/or declining Poor market research

sales
High costs Poor design process; poorly trained employees
Low morale Lack of communication between management and

subordinates
High employee turnover Rate of pay too low; job design not suitable
High rate of absenteeism Employees believe that they are not valued

Identify limiting factors

All managers want to make the best decisions. To do so, managers need to have the ideal resources —
information, time, personnel, equipment, and supplies — and identify any limiting factors. Realistically,
managers operate in an environment that normally doesn't provide ideal resources. For example, they may lack
the proper budget or may not have the most accurate information or any extra time. So, they must choose
to satisfice — to make the best decision possible with the information, resources, and time available.
Develop potential alternatives
Time pressures frequently cause a manager to move forward after considering only the first or most obvious
answers. However, successful problem solving requires thorough examination of the challenge, and a quick
answer may not result in a permanent solution. Thus, a manager should think through and investigate several
alternative solutions to a single problem before making a quick decision.
One of the best known methods for developing alternatives is throughbrainstorming, where a group works
together to generate ideas and alternative solutions. The assumption behind brainstorming is that the group
dynamic stimulates thinking — one person's ideas, no matter how outrageous, can generate ideas from the
others in the group. Ideally, this spawning of ideas is contagious, and before long, lots of suggestions and ideas
flow. Brainstorming usually requires 30 minutes to an hour. The following specific rules should be followed
during brainstorming sessions:
 Concentrate on the problem at hand. This rule keeps the discussion very specific and avoids the
group's tendency to address the events leading up to the current problem.
 Entertain all ideas. In fact, the more ideas that come up, the better. In other words, there are no bad
ideas. Encouragement of the group to freely offer all thoughts on the subject is important. Participants
should be encouraged to present ideas no matter how ridiculous they seem, because such ideas may
spark a creative thought on the part of someone else.
 Refrain from allowing members to evaluate others' ideas on the spot.All judgments should be
deferred until all thoughts are presented, and the group concurs on the best ideas.
Although brainstorming is the most common technique to develop alternative solutions, managers can use
several other ways to help develop solutions. Here are some examples:
 Nominal group technique. This method involves the use of a highly structured meeting, complete
with an agenda, and restricts discussion or interpersonal communication during the decision-making
process. This technique is useful because it ensures that every group member has equal input in the
decision-making process. It also avoids some of the pitfalls, such as pressure to conform, group
dominance, hostility, and conflict, that can plague a more interactive, spontaneous, unstructured forum
such as brainstorming.
 Delphi technique. With this technique, participants never meet, but a group leader uses written
questionnaires to conduct the decision making.

No matter what technique is used, group decision making has clear advantages and disadvantages when
compared with individual decision making. The following are among the advantages:
 Groups provide a broader perspective.
 Employees are more likely to be satisfied and to support the final decision.
 Opportunities for discussion help to answer questions and reduce uncertainties for the decision
makers.
These points are among the disadvantages:
 This method can be more time-consuming than one individual making the decision on his own.
 The decision reached could be a compromise rather than the optimal solution.
 Individuals become guilty of groupthink — the tendency of members of a group to conform to the
prevailing opinions of the group.
 Groups may have difficulty performing tasks because the group, rather than a single individual, makes
the decision, resulting in confusion when it comes time to implement and evaluate the decision.
The results of dozens of individual-versus-group performance studies indicate that groups not only tend to
make better decisions than a person acting alone, but also that groups tend to inspire star performers to even
higher levels of productivity.
So, are two (or more) heads better than one? The answer depends on several factors, such as the nature of the
task, the abilities of the group members, and the form of interaction. Because a manager often has a choice
between making a decision independently or including others in the decision making, she needs to understand
the advantages and disadvantages of group decision making.
Analyze the alternatives
The purpose of this step is to decide the relative merits of each idea. Managers must identify the advantages
and disadvantages of each alternative solution before making a final decision.
Evaluating the alternatives can be done in numerous ways. Here are a few possibilities:
 Determine the pros and cons of each alternative.
 Perform a cost-benefit analysis for each alternative.
 Weight each factor important in the decision, ranking each alternative relative to its ability to meet
each factor, and then multiply by a probability factor to provide a final value for each alternative.

Regardless of the method used, a manager needs to evaluate each alternative in terms of its
 Feasibility — Can it be done?

 Effectiveness — How well does it resolve the problem situation?
 Consequences — What will be its costs (financial and nonfinancial) to the organization?
Select the best alternative
After a manager has analyzed all the alternatives, she must decide on the best one. The best alternative is the
one that produces the most advantages and the fewest serious disadvantages. Sometimes, the selection process
can be fairly straightforward, such as the alternative with the most pros and fewest cons. Other times, the
optimal solution is a combination of several alternatives.
Sometimes, though, the best alternative may not be obvious. That's when a manager must decide which
alternative is the most feasible and effective, coupled with which carries the lowest costs to the organization.
(See the preceding section.) Probability estimates, where analysis of each alternative's chances of success takes
place, often come into play at this point in the decision-making process. In those cases, a manager simply
selects the alternative with the highest probability of success.
Implement the decision
Managers are paid to make decisions, but they are also paid to get results from these decisions. Positive results
must follow decisions. Everyone involved with the decision must know his or her role in ensuring a successful
outcome. To make certain that employees understand their roles, managers must thoughtfully devise programs,
procedures, rules, or policies to help aid them in the problem-solving process.
Establish a control and evaluation system
Ongoing actions need to be monitored. An evaluation system should provide feedback on how well the
decision is being implemented, what the results are, and what adjustments are necessary to get the results that
were intended when the solution was chosen.
In order for a manager to evaluate his decision, he needs to gather information to determine its effectiveness.
Was the original problem resolved? If not, is he closer to the desired situation than he was at the beginning of
the decision-making process?
If a manager's plan hasn't resolved the problem, he needs to figure out what went wrong. A manager may
accomplish this by asking the following questions:
 Was the wrong alternative selected? If so, one of the other alternatives generated in the decision-
making process may be a wiser choice.

 Was the correct alternative selected, but implemented improperly? If so, a manager should focus
attention solely on the implementation step to ensure that the chosen alternative is implemented
successfully.
 Was the original problem identified incorrectly? If so, the decision-making process needs to begin
again, starting with a revised identification step.
 Has the implemented alternative been given enough time to be successful? If not, a manager
should give the process more time and re-evaluate at a later date.
Unit II
Planning in Management
Planning is deciding in advance what to do and how to do.It is one of the basic managerial
functions. Before doing something, the manager must formulate an idea of how to work on a
particular task. Thus, planning is closely connected with creativity and innovation. It involves
setting objectives and developing appropriate courses of action to achieve these objectives.
Planning Definition
"Planning bridges the gap from where we are to where we want to go. It makes it possible for
things to occur which would not otherwise happen" – Koontz and O'Donnel.
Importance of Planning
1. Planning increases the organization's ability to adapt to future eventualities: The future is
generally uncertain and things are likely to change with the passage of time. The uncertainty is
augmented with an increase in the time dimension. With such a rise in uncertainty there is
generally a corresponding increase in the alternative courses of action from which a selection
must be made. The planningactivity provides a systematic approach to the consideration of such
future uncertainties and eventualities and the planning of activities in terms of what is likely to
happen.
2. Planning helps crystallize objectives: The first step in planning is to fix objectives which
will give direction to the activities to be performed. This step focuses attention on the iesults
desired. A proper definition and integration of overall and departmental objectives would result
in more co-ordinated inter-departmental activities and a greater chance of attaining the overall
objectives.
3. Planning ensures a relatedness among decisions: A crystallization of objectives as

mentioned above would lead to a relatedness among the decisions which would otherwise have
been random. Decisions of the managers are related to each other and ultimately towards the
goals or objectives of the enterprise. Creativity and innovation of individuals is thus harnessed
towards a more effective management of the company.
4. Planning helps the company to remain more competitive in its industry: Planning may
suggest the addition of a new line of products, changes in the methods of operation, a better
identification of customer needs and segmentation and timely expansion of plant capacity all of
which render the company better fitted to meet the inroads of competition.
5. Adequate planning reduces unnecessary pressures of immediacy: If activities are not

properly planned in anticipation of what is likely to happen, pressures will be exerted to achieve
certain results immediately or a in a hurry. Thus adequate planning supplies orderliness and
avoids unnecessary pressures.
6. Planning reduces mistakes and oversights: Although mistakes cannot be entirely

obviated, they can certainly be reduced through proper planning.
7. Planning ensures a more productive use of the organization's resources: By avoiding

wasted effort in terms of men, money and machinery, adequate planning results in greater
productivity through a better utilization of the resources available to the organization.
8. Planning makes control easier: The crystallization of objectives and goals simplify and
highlight the controls required.
9. Planning enables the identification of future problems and makes it possible to provide
for such contingencies.
10. Planning can help the organization secure a better position or standing:Adequate planning
would stimulate improvements in terms of the opportunities available.
11. Planning enables the organization to progress in the manner considered most suitable by
its management: Management, for example, may be interested in stability and moderate profits
rather than huge profits and risk of instability. In terms of its objectives, the plan would ensure
the actions are taken to achieve such objectives.
12. Planning increases the effectiveness of a manager: As his goals are made clearer,
adequate planning would help the manager in deciding upon the most appropriate act.
Features of planning
• Planning focuses on achieving objectives
• Planning is a primary function of management
• Planning is pervasive
• Planning is continuous
• Planning is futuristic
• Planning involves decision making
• Planning is a mental exercise
Steps in Planning process

As 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. It involves the following steps :
1. Determination of the objectives :

The first step in planning is to identify certain objectives. The objectives set must clearly indicate
what is to be achieved, where action should take place, who should perform it and when it is to
be accomplished. The objectives should be established for the entire organisation and for each
and every department. Planning has no utility if it is not related to certain objectives.
2. Collection and forecasting of Information :

Sufficient information must be collected in order to make plans and sub plans. necessary
information includes the critical assessment of current status of the organisation together with a
forward look at the environment that is anticipated. The collection and forecasting of the
information must be done in terms of external and internal environment. The considerations of
the external environments must the competitions now and in the future. The assessment of
internal environment may consist of the strong and weak point of the organisation. This is an
important step of planning process.
3. Development of planning premises :

The next step is the establishment of planning premises. Planning premises are the assumptions
and predictions about the future. The assumptions are the basis of planning. Forecasting is
important in premising. It helps in making realistic assumptions about sales, costs, prices,
products etc in future. This requires a collection of data on present trends and future possibilities.
4. Discovering alternative courses of action :

Usually, there are several alternatives for any plan. The manager should try to find out all the
possible alternatives.At the time of developing alternatives he should screen out most viable
alternatives. So he has to analyse in detail a limited number of alternatives.
5. Selection of best alternative :

The various alternatives identified are evaluated and compared in terms of their expected costs
and benefits. Many quantitative techniques are available to evaluate alternatives. after evaluating
the various alternatives the best alternative should be selected for implementation.
6. Formulation of derivative plans :

The next step is to develop detailed sub plans for its implementation. Derivative plans are
required to support the overall plans. The derivative plans are developed in the frame work of
overall plans.These are drawn up with respect to different areas of activity.
7. Communicating the plan :

It is very important to get the co operation of the subordinates at every stage of its
implementation. For this purpose the plans should be communicated and explained to them so
that they can get the clear picture of what to be done. An organisation is not benefited from
planning process until they are put into action.
8. Follow up measures :
To ensure the plans are proceeding along the right lines, the actual performance is compared with
the planned performance. In this way, any short coming can be noted and suitable remedial
action can be taken.

Types of Plans
Plans commit individuals, departments, organizations, and the resources of each to specific
actions for the future. Effectively designed organizational goals fit into a hierarchy so that the
achievement of goals at low levels permits the attainment of high-level goals. This process is
called a means-ends chain because low-level goals lead to accomplishment of high-level goals.
Three major types of plans can help managers achieve their organization's goals: strategic,
tactical, and operational. Operational plans lead to the achievement of tactical plans, which in
turn lead to the attainment of strategic plans. In addition to these three types of plans, managers
should also develop a contingency plan in case their original plans fail.
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 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 standardized 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 behavior 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.
Strategic plans
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.
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.
MBO(Management by objectives)
Management by objectives (MBO) is a process of defining objectives within an organization so
that management and employees agree to the objectives and understand what they need to do in
the organization.
The term "management by objectives" was first popularized by Peter Drucker in his 1954 book
'The Practice of Management'.

The essence of MBO is participative goal setting, choosing course of actions and decision
making. An important part of the MBO is the measurement and the comparison of the
employee’s actual performance with the standards set. Ideally, when employees themselves have
been involved with the goal setting and choosing the course of action to be followed by them,
they are more likely to fulfill their responsibilities.
According to George S. Odiorne, the system of management by objectives can be described as a

process whereby the superior and subordinate managers of an organization jointly identify its
common goals, define each individual's major areas of responsibility in terms of the results
expected of him, and use these measures as guides for operating the unit and assessing the
contribution of each of its members.
Features and advantages

Unique features and advantages of the MBO process
The principle behind Management by Objectives (MBO) is for employees to have a clear
understanding of the roles and responsibilities expected of them. They can then understand how
their activities relate to the achievement of the organization's goal. MBO also places importance
on fulfilling the personal goals of each employee.
Some of the important features and advantages of MBO are:

1. Motivation – Involving employees in the whole process of goal setting and increasing
employee empowerment. This increases employee job satisfaction and commitment.
2. Better communication and Coordination – Frequent reviews and interactions between

superiors and subordinates helps to maintain harmonious relationships within the organization
and also to solve many problems.
3. Clarity of goals
4. Subordinates tend to have a higher commitment to objectives they set for themselves than
those imposed on them by another person.
5. Managers can ensure that objectives of the subordinates are linked to the organization's
objectives.
Domains and levels

Objectives can be set in all domains of activities (production, marketing, services, sales, R&D,
human resources, finance, information systems etc.).
Some objectives are collective, for a whole department or the whole company, others can be
individualized.
Limitations
There are several limitations to the assumptive base underlying the impact of managing by
objectives, including:
1. It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes.

2. It underemphasizes the importance of the environment or context in which the goals are set.
That context includes everything from the availability and quality of resources, to relative buy-in
by leadership and stake-holders. As an example of the influence of management buy-in as a
contextual influencer, in a 1991 comprehensive review of thirty years of research on the impact
of Management by Objectives, Robert Rodgers and John Hunter concluded that companies
whose CEOs demonstrated high commitment to MBO showed, on average, a 56% gain in
productivity. Companies with CEOs who showed low commitment only saw a 6% gain in
productivity.
3. Companies evaluated their employees by comparing them with the "ideal" employee. Trait
appraisal only looks at what employees should be, not at what they should do.
When this approach is not properly set, agreed and managed by organizations, self-centered
employees might be prone to distort results, falsely representing achievement of targets that were
set in a short-term, narrow fashion. In this case, managing by objectives would be
counterproductive.
The use of MBO must be carefully aligned with the culture of the organization. While MBO is
not as fashionable as it was before, it still has its place in management today. The key difference
is that rather than 'set' objectives from a cascade process, objectives are discussed and agreed
upon. Employees are often involved in this process, which can be advantageous.
A saying around MBO – "What gets measured gets done", ‘Why measure performance?
Different purposes require different measures’ – is perhaps the most famous aphorism of
performance measurement; therefore, to avoid potential problems SMART and SMARTER
objectives need to be agreed upon in the true sense rather than set.
Strategy
Meaning of Strategy:-
 Art or Science of war military tactics
 The term strategy was firstly used in military. It is a skillful war for making war proper.
 The purpose of competitive strategy is to encounter the forces of competitors so that

competitions are faced properly.
Definitions of Strategy
 Strategies are plan for bringing the organisation from given position to a deserve position
in future.
 Strategy is a process of deciding on the objectives of the organisation.
Strategies at different levels

 Corporate level Strategy _ Strategy Decision relate to Organization _ wide Policies as in
the case of multidivisional Companies having wide range Operations. Major Policies
decision involving acquisition diversification and structural re-designing

 Business level Strategy _ it is the Strategy to achieve the specific Objective of the
Strategic Business Unit So as to help achieve the overall Corporate objectives. Its Scope
is limited Compared to corporate strategy . It determines how to complete business &
Position itself among Competitors.
 Functional level Strategy - the success of business level Strategy will depend on
Functional areas like Marketing , Finance Production , personal research and
development etc. it is odvious that Functional level Strategic are guided by business
level Strategy.
Policy
A policy is typically described as a principle or rule to guide decisions and achieve rational
outcome(s). The term is not normally used to denote what is actually done, this is normally
referred to as either procedure[1] or protocol. Policies are generally adopted by the Board of or
senior governance body within an organization whereas procedures or protocols would be
developed and adopted by senior executive officers. Policies can assist in both subjective and
objective decision making. Policies to assist in subjective decision making would usually assist
senior management with decisions that must consider the relative merits of a number of factors
before making decisions and as a result are often hard to objectively test e.g. work-life balance
policy. In contrast policies to assist in objective decision making are usually operational in nature
and can be objectively tested e.g. password policy.[citation needed]
A Policy can be considered as a "Statement of Intent" or a "Commitment". For that reason at

least, the decision-makers can be held accountable for their "Policy".[citation needed]
The term may apply to government, private sector organizations and groups, and individuals.
Presidential executive orders, corporate privacy policies, and parliamentary rules of order are all
examples of policy. Policy differs from rules or law. While law can compel or prohibit behaviors
(e.g. a law requiring the payment of taxes on income), policy merely guides actions toward those
that are most likely to achieve a desired outcome.[citation needed]
Policy or policy study may also refer to the process of making important organizational
decisions, including the identification of different alternatives such as programs or spending
priorities, and choosing among them on the basis of the impact they will have. Policies can be
understood as political, management, financial, and administrative mechanisms arranged to reach
explicit goals
Introduction of Policy :
The term Policy is derived From Latin word “Politis “ which means Polished . A clear cut
Information is give to take a decision. The decision maker may be Self regulated with the help of
policy . In other words norms are Provided by the Policy .
Meaning of policy :
Policy are of guideline or general limits within which the members of an enterprise act. They are
general statements or understanding which guide thinking and action. They are valuable because
they allow lower levels of management to handle problems without going to top management for
decision each time. Some example of policies of various levels:-

Examples:-
1. No employee will accept any gift from supplier except for token gifts of purely nominal or
advertising value.
2. Each employee will proceed on one weeks vocation each year.
3. No employee will accept any outside assignment.
Advantages of Policies
 Policies help managers at various levels to act with confidence without the need for consulting
the superiors every time.
 Policies facilitate better administrative control.
 By setting up policies, the management insures that decisions made will be consistent and in tune
with the objective.
 Policies secure coordination and integration of efforts in accomplishing the organisation
objectives'.
 Policies save time and effort by pre - deciding problems in repetitive situation.
Limitations of Policies
 Policies are repeatedly used plans and they bring about rigidity in operation.
 Policies may not cover all problems
 Policies are no substitute for human judgment.
 Policies my not be ever lasting. They might need revision quite frequently.
Difference between Policies & Objectives

1. Policies are guidelines which facilitate 1. Objective are the ends towards which
the achievement of predetermined all activities of the enterprise are
objectives. directed.
2. Policies determine how the work is to 2. Objectives determine what is to be
be done. done.
3. Policies prescribe the mode and the
manner in which objectives can be 3. Objective are the endpoints of
achieved. planning.
4. Policies are formulated at the top level,
middle level and lower level
managemen 4. Objectives are determined by the
owners or top management of the
business.
Difference between Policies & Strategies

1. A Policy is guide to thinking and action 1. A Strategies provides the direction in
of those who make decisions. which the physical, technological and
2. A Policy is made to guide taking human resources of the organisation
actions under situations which arise shall be deployed.
repeatedly. 2. A Strategy is made by top management
3. It is a type of standing plan to be used whenever there is a need to given sharp
time and again. focus to an objective.

4. The situations to be faced by a policy 3. It is single use plan. After its

are comparatively known. implementation, it is not used again.
5. It need not originate because of 4. A strategies is drawn up to deal with
competition in the market. unknown environment in the future.
5. It is made to fight competition in the
market. The existing moves and
expected moves always considered.
Procedures
 A Procedure is a systematic way of handling regular events.
 ‘Policies are general instructions – procedures are specific applications.’
‘Ernest C Miller’
 ‘A series of related tasks that make up the chronological sequence & the established way
of performing the work to be accomplished.’
‘George R Terry’
Importance of Procedure
1. Procedure relieves the manager from directing the subordinates. A subordinate can be
well – directed by procedure. Procedure specifies the steps to be taken, time and order of
performance of a work.
2. Procedure Facilitates the management to exercise control function. Management by

Exception principle is followed here.
3. Procedure gives a readymade solution to solve repetitive problems. It saves time &
energy of the management executives.
4. Procedure can be used as a parameter to judge whether a work is done perfectly or not.
Procedure serves as a basis for control.
5. Procedure helps the employees to improve their efficiency adhering to the standard.
6. Procedure facilitates orientation of new employees & training of existing & new
employees.
7. Procedure can be used to boost the morale of the employees.
8. Procedure ensures consistency and uniformity of action.
9. Procedure speeds up not only clerical work but also any type of work and increases the
speed of flow of information.
10. A well designed procedure facilitates proper delegation of authority & fixation of
responsibility.

11. Procedure facilitates the co – ordination of function of the top management people.
Difference between Policy and Procedure

Policy Procedure
1. It guides the thinking & decision – 1. It guides the action process.
making process.
2. It is derived from the objectives of an 2. It is derived from the policies of an
organisation. organisation.
3. It discloses the attitude of management 3. It discloses the ways to be used for handling
towards certain specific issues. events systematically.
4. It is formulated by top management
people. 4. It is framed by middle level & lower level
5. It gives more discretion. management people.
6. It is not based on procedure. 5. It gives less discretion.
7. It lays down broad area. 6. It is based on policy.
8. It acts as a bridge between purpose & 7. It lays down little area.
performance. 8. It acts as a bridge between activities &
9. It is a part of strategy. results.
9. It is a tool of tactics.
Methods
A method is a standing plan which is more specific & detailed than a procedure. Method
specify the way in which the specified work is to be performed. A method is the manual
or mechanical means by which each work or operation is performed. Methods are used as
uniform norms to guide & control operation & performance.
Advantages of Method:
* Methods are part of enterprise structure just like the nails, nuts & bolts of a
product.
* One best way of doing a job prevents subjective handling of the matters.
* It helps in the smooth functioning of the departments.
* Communication line is cleared.
Methods Vs Procedures
1) Method is concerned with a particular step but procedure is concerned with series of
steps.
2) Methods are specific but procedure is not specific.
3) Methods are standardized but procedure is not standardized.
4) Method involves one department but procedure involves many departments.
5) Methods lay down the best way of doing a specific step of a procedure.

Rule
 A rule is prescribed guide for conduct or action.
 A rule specifies what is to be done & what may not be done.
 Rules are helpful in maintaining discipline.
 Features of a Rule :
> It is a simplest type of a plan.

> Rules are very rigid.
> A fine is imposed if the rule is not followed.
> There is no scope of any decision – making.
Difference between Rule & Policy

 Rule is a specific statement telling  Policy is a general statement of a
employees what should not be done. management decision.
 Rule is a guide of behaviour.  Policy is a guide to decision -
 Rule constitutes the most specific making.
type of standing plan.  Policy is a less specific types of
 Rule is rigid, no expectations or standing plans.
deviations.  Policy is flexible and has some
 Rule does not give any scope of exceptions.
discretion & its implementations.  Policy gives some discretion to the
executives concerned with its
implementation.
Unit III
Organising:
MEANING AND PROCESS OF ORGANISING
Organising refers to the way in which the work of a group of people is arranged and distributed
among group members. The function of organising includes the determination of the activities to
be performed; creation of departments, sections and positions to perform those activities; and
establishing relationships among the various parts of an organisation. The purpose is to create a
framework for the performance of the activities of an organization in a systematic manner. It is
important to note that the term organisation should not be used in the same sense as
organising.Organising is a function of management, while organisation refersto a group of
persons who have come together to achieve some common objectives.
The process of organising refers to identifying and grouping of activities to be performed,

defining and delegating authority, casting responsibility and establishing relationships to enable

people to work together effectively in accomplishing objectives.
Definition:
 Haney, ‘ Organisation is a harmonious adjustment of specialised parts for the
accomplishment of some common purpose or purposes.’
 Mc Farland, ‘ An identified group of people contributing their efforts towards the

attainment of goals is called an organisation.’
 Chester Bernard, ‘ A system of co-operative activities of two or more persons is called

organisation.’
 Louis Al Allen, ‘Organisation is that process of identifying & grouping the work to be
performed, defining & delegating responsibility & authority & establishing relationships
for the purpose of enabling people to work most effectively together in accomplishing
objectives.’
 Koontz O’Donnel, ‘Organising involves the establishment of an international structure of

roles through determination & enumeration of the activities required to achieve the goals
of an enterprise & each part of it; the grouping of these activities, the assignment of such
groups of activities to the manager, the delegation of authority to carry them out and
provision for co-ordination of authority & informational relationship, horizontally &
vertically, in the organisation structure.’
Functions of Organisation:
 Determination of activities.
 Grouping of activities.
 Allotment of duties to specified persons.
 Delegation of authority.
 Defining relationship.
 Co-ordination of various activities.
Principles of Organisation:
 Principle of Definition.
 Principle of Objective.
 Principle of Specialisation or Division of work.
 Principle of Co-ordination.

 Principle of Authority.
 Principle of Responsibility.
 Principle of Explanation.
 Principle of Efficiency.
 Principle of Uniformity.
 Principle of Correspondence.
 Principle of Unity of Command.
 Principle of Balance.
 Principle of Equilibrium Balance.
 Principles of Continuity.
 Principle of Span of Control.
 Principle of Leadership Facilitation.
 Principle of Exception.
 Principle of Flexibility.
 The Scalar Principle.
 Principle of Simplicity & Homogeneity.
 Principle of Unity of Direction.
 Principle of Joint Decisions.
Importance/ Advantages of Organisation...

o Facilitate Administration…
o Increases the efficiency of management…
o Facilitates growth & diversification…
o Ensures optimum utilisation of material resources & Human Efforts…
o Adoption of new technology…
o Places proportionate importance to the various activities of the enterprise…

o Encourages creativity & initiative…
o Facilitates co-ordination…
o Facilitates training & development of managerial personnel…
o Prevents the growth of secret, influence & corruption…
Steps in the process of organising

The process of organising consists of the following steps:
1. Determining the activities to be performed to achieve the objectives of the organisation.
2. Identification of major functions to which these activities relate.
3. Grouping and sub-dividing the activities within each function on the basis of similarity or
relatedness.
4. Establishing relationship among individuals and groups.
1. Determing the activities to be performed to achieve the objectives of the organisation:

Business organizations undertake economic activities with a view to earning profit. They may
perform manufacturing, trading or service activity. In a manufacturing organisation, production
and sales are the two major activities. In a trading organisation, purchases and sales are the two
main activities. Service organisations provide services such as transportation to their customers.
In carrying out these major activities, business units have to perform a number of other activities
such as producing, financing, marketing, accounting, recruiting employees, etc. Since the
objectives of different organisations are different, it is therefore, necessary to determine the
activities of each organisation separately.
2. Identification of major functions to which these activities relate: The next step is to
identify the major functions to which these activities relate. In a manufacturing organisation,
production, selling, finance and personnel are the major functions. If the amount of work to be
done in connection with each of these functions is large, separate departments may be created for
each of these functions. Managerial positions will have to be created to supervise the activities of
these departments. At this stage, a list of activities relating to each function must be prepared.
3. Grouping and sub-dividing the work within each function: In this step, it is decided how
best the activities can be grouped on the basis of similarity or relatedness. The activities of a
production department, for example, can be divided into a number of workshops where
production will actually take place. Besides, separate sections may be created for such
production related activities as quality control and repairs. The activities of other departments
can similarly be sub-divided. This division and subdivision of activities goes on till individual
positions have been created for performing all types of work in an organisation. The reasons of
dividing and sub-dividing functions and activities are as follows—
(i) The total work may be so large that it cannot be done by a single individual or by a few
persons.

(ii) If the work is divided into smaller units, it becomes easy to assign work to individuals who
have the necessary skill and knowledge to perform the work efficiently.
4. Establishing relationship among individuals and groups: Managers divide activities to

increase efficiency and to ensurethat work is properly done. The activities which are performed
by persons holding different positions must be related. The responsibility, authority and
accountability of each person must be well defined. This is necessary to avoid conflict and
confusion and to ensure that work is performed as planned. Establishing relationships among
individuals and groups is, therefore, an important aspect of the organising process. It would be
useful at this stage to explain the meaning of responsibility, authority, and accountability.
(i) Responsibility: Responsibility is the obligation of a subordinate to perform the assigned
duties. When a subordinate accepts duties, he has to perform those duties in the manner desired
by the superior. Duties are assigned to subordinates when a manager has to share the work with
them.
(ii) Authority: When a person is given certain duties to perform, he must be given necessary
authority also. Otherwise, he will not be able to do the work. A typist, for example, cannot do the
typing job if he is not given the right to use facilities such as a place to sit in, a table, a chair, a
typewriter, typing and carbon papers. etc. Authority includes the right to take decision, right to
issue orders and the right to take action if orders are not carried out. An engineer responsible for
the construction of a bridge has the authority to command his subordinates, procure the needed
material, seek assistance of architects and other experts in the completion of the project. No
person should be given any authority unless certain duties have been assigned to him. Authority
should always follow responsibility.
(iii) Accountability: After assigning duties and grantingauthority, one more relationship
becomes necessary. This is the relationship of accountability. Accountability means
answerability. That is, each person has to report to his superior how the work has been done and
how authority has been used. Accountability is always upward. Each subordinate is accountable
to his superior who in turn is accountable to his own superior. In this way, every person becomes
accountable to top management. Accountability ensures that the work is done as planned and
authority is properly used. An important principle of accountability is the principle of single
accountability. A person should be accountable to one superior only. If a person is accountable to
two or more persons, he may avoid the work or he may be in difficulty to decide whom to obey
first.
A manager performs organizing function with the help of following steps:-
1. Identification of activities - All the activities which have to be performed in a concern
have to be identified first. For example, preparation of accounts, making sales, record keeping,
quality control, inventory control, etc. All these activities have to be grouped and classified into
units.
2. Departmentally organizing the activities - In this step, the manager tries to combine
and group similar and related activities into units or departments. This organization of dividing
the whole concern into independent units and departments is called departmentation.
3. Classifying the authority - Once the departments are made, the manager likes to classify
the powers and its extent to the managers. This activity of giving a rank in order to the
managerial positions is called hierarchy. The top management is into formulation of policies, the
middle level management into departmental supervision and lower level management into
supervision of foremen. The clarification of authority help in bringing efficiency in the running

of a concern. This helps in achieving efficiency in the running of a concern. This helps in
avoiding wastage of time, money, effort, in avoidance of duplication or overlapping of efforts
and this helps in bringing smoothness in a concern’s working.
4. Co-ordination between authority and responsibility - Relationships are established
among various groups to enable smooth interaction toward the achievment of the organizational
goal. Each individual is made aware of his authority and he/she knows whom they have to take
orders from and to whom they are accountable and to whom they have to report. A clear
organizational structure is drawn and all the employees are made aware of it.
Organizational theories
Classical organization theories: Classical organization theories (Taylor, 1947; Weber, 1947;
Fayol, 1949) deal with the formal organization and concepts to increase management efficiency.
Taylor presented scientific management concepts, Weber gave the bureaucratic approach, and
Fayol developed the administrative theory of the organization. They all contributed significantly
to the development of classical organization theory.
Taylor's scientific management approach
The scientific management approach developed by Taylor is based on the concept of planning of
work to achieve efficiency, standardization, specialization and simplification. Acknowledging
that the approach to increased productivity was through mutual trust between management and
workers, Taylor suggested that, to increase this level of trust,
 the advantages of productivity improvement should go to workers,

 physical stress and anxiety should be eliminated as much as possible,
 capabilities of workers should be developed through training, and
 the traditional 'boss' concept should be eliminated.
Taylor developed the following four principles of scientific management for improving
productivity:
 Science, not rule-of-thumb Old rules-of-thumb should be supplanted by a scientific

approach to each element of a person's work.
 Scientific selection of the worker Organizational members should be selected based on
some analysis, and then trained, taught and developed.
 Management and labour cooperation rather than conflict Management should
collaborate with all organizational members so that all work can be done in conformity
with the scientific principles developed.
 Scientific training of the worker Workers should be trained by experts, using scientific
methods.

Weber's bureaucratic approach
Considering the organization as a segment of broader society, Weber (1947) based the concept of
the formal organization on the following principles:
 Structure In the organization, positions should be arranged in a hierarchy, each with a

particular, established amount of responsibility and authority.
 Specialization Tasks should be distinguished on a functional basis, and then separated
according to specialization, each having a separate chain of command.
 Predictability and stability The organization should operate according to a system of
procedures consisting of formal rules and regulations.
 Rationality Recruitment and selection of personnel should be impartial.
 Democracy Responsibility and authority should be recognized by designations and not by
persons.
Weber's theory is infirm on account of dysfunctions (Hicks and Gullett, 1975) such as rigidity,
impersonality, displacement of objectives, limitation of categorization, self-perpetuation and
empire building, cost of controls, and anxiety to improve status.
Administrative theory
The elements of administrative theory (Fayol, 1949) relate to accomplishment of tasks, and
include principles of management, the concept of line and staff, committees and functions of
management.
1. Division of work or specialization This increases productivity in both technical and

managerial work.
2. Authority and responsibility These are imperative for an organizational member to
accomplish the organizational objectives.
3. Discipline Members of the organization should honour the objectives of the organization.
They should also comply with the rules and regulations of the organization.
4. Unity of command This means taking orders from and being responsible to only one
superior.
5. Unity of direction Members of the organization should jointly work toward the same
goals.
6. Subordination of individual interest to general interest The interest of the organization
should not become subservient to individual interests or the interest of a group of
employees.
7. Remuneration of personnel This can be based on diverse factors such as time, job, piece
rates, bonuses, profit-sharing or non-financial rewards.
8. Centralization Management should use an appropriate blend of both centralization and
de-centralization of authority and decision making.
9. Scalar chain If two members who are on the same level of hierarchy have to work
together to accomplish a project, they need not follow the hierarchy level, but can interact
with each other on a 'gang plank' if acceptable to the higher officials.

10. Order The organization has a place for everything and everyone who ought to be so
engaged.
11. Equity Fairness, justice and equity should prevail in the organization.
12. Stability of tenure of personnel Job security improves performance. An employee
requires some time to get used to new work and do it well.
13. Initiative This should be encouraged and stimulated.
14. Esprit de corps Pride, allegiance and a sense of belonging are essential for good
performance. Union is strength.
The concept of line and staff The concept of line and staff is relevant in organizations which are
large and require specialization of skill to achieve organizational goals. Line personnel are those
who work directly to achieve organizational goals. Staff personnel include those whose basic
function is to support and help line personnel.
Committees Committees are part of the organization. Members from the same or different
hierarchical levels from different departments can form committees around a common goal.
They can be given different functions, such as managerial, decision making, recommending or
policy formulation. Committees can take diverse forms, such as boards, commissions, task
groups or ad hoc committees. Committees can be further divided according to their functions. In
agricultural research organizations, committees are formed for research, staff evaluation or even
allocation of land for experiments.
Functions of management Fayol (1949) considered management as a set of planning,

organizing, training, commanding and coordinating functions. Gulick and Urwick (1937) also
considered organization in terms of management functions such as planning, organizing, staffing,
directing, coordinating, reporting and budgeting.
Neoclassical theory:- Neoclassical theorists recognized the importance of individual or group

behaviour and emphasized human relations. Based on the Hawthorne experiments, the
neoclassical approach emphasized social or human relationships among the operators,
researchers and supervisors (Roethlisberger and Dickson, 1943). It was argued that these
considerations were more consequential in determining productivity than mere changes in
working conditions. Productivity increases were achieved as a result of high morale, which was
influenced by the amount of individual, personal and intimate attention workers received.
Principles of the neoclassical approach
The classical approach stressed the formal organization. It was mechanistic and ignored major
aspects of human nature. In contrast, the neoclassical approach introduced an informal
organization structure and emphasized the following principles:
The individual An individual is not a mechanical tool but a distinct social being, with aspirations
beyond mere fulfilment of a few economic and security works. Individuals differ from each other
in pursuing these desires. Thus, an individual should be recognized as interacting with social and
economic factors.

The work group The neoclassical approach highlighted the social facets of work groups or
informal organizations that operate within a formal organization. The concept of 'group' and its
synergistic benefits were considered important.
Participative management Participative management or decision making permits workers to

participate in the decision making process. This was a new form of management to ensure
increases in productivity.
Modern theories:- Modern theories tend to be based on the concept that the organization is a
system which has to adapt to changes in its environment. In modern theory, an organization is
defined as a designed and structured process in which individuals interact for objectives (Hicks
and Gullet, 1975). The contemporary approach to the organization is multidisciplinary, as many
scientists from different fields have contributed to its development, emphasizing the dynamic
nature of communication and importance of integration of individual and organizational
interests. These were subsequently re-emphasized by Bernard (1938) who gave the first modern
and comprehensive view of management. Subsequently, conclusions on systems control gave
insight into application of cybernetics. The operation research approach was suggested in 1940.
It utilized the contributions of several disciplines in problem solving. Von Bertalanffy (1951)
made a significant contribution by suggesting a component of general systems theory which is
accepted as a basic premise of modern theory.
Some of the notable characteristics of the modern approaches to the organization are:
 a systems viewpoint,
 a dynamic process of interaction,
 multilevelled and multidimensional,
 multimotivated,
 probabilistic,
 multidisciplinary,
 descriptive,
 multivariable, and
 adaptive.
Modern understandings of the organization can be broadly classified into:
 the systems approach,

 socio-technical theory, and
 a contingency or situational approach.
The systems approach
The systems approach views organization as a system composed of interconnected - and thus
mutually dependent - sub-systems. These sub-systems can have their own sub-sub-systems. A
system can be perceived as composed of some components, functions and processes (Albrecht,
1983). Thus, the organization consists of the following three basic elements (Bakke, 1959):

(i) Components There are five basic, interdependent parts of the organizing system, namely:
 the individual,
 the formal and informal organization,
 patterns of behaviour emerging from role demands of the organization,
 role comprehension of the individual, and
 the physical environment in which individuals work.
(ii) Linking processes The different components of an organization are required to operate in an
organized and correlated manner. The interaction between them is contingent upon the linking
processes, which consist of communication, balance and decision making.
Communication is a means for eliciting action, exerting control and effecting coordination to
link decision centres in the system in a composite form.
Balance is the equilibrium between different parts of the system so that they keep a
harmoniously structured relationship with one another.
Decision analysis is also considered to be a linking process in the systems approach.

Decisions may be to produce or participate in the system. Decision to produce depends upon the
attitude of the individual and the demands of the organization. Decision to participate refers to
the individual's decisions to engross themselves in the organization process. That depends on
what they get and what they are expected to do in participative decision making.
(iii) Goals of organization The goals of an organization may be growth, stability and interaction.
Interaction implies how best the members of an organization can interact with one another to
their mutual advantage.
Socio-technical approach
It is not just job enlargement and enrichment which is important, but also transforming
technology into a meaningful tool in the hands of the users. The socio-technical systems
approach is based on the premise that every organization consists of the people, the technical
system and the environment (Pasmore, 1988). People (the social system) use tools, techniques
and knowledge (the technical system) to produce goods or services valued by consumers or users
(who are part of the organization's external environment). Therefore, an equilibrium among the
social system, the technical system and the environment is necessary to make the organization
more effective.
The contingency or situational approach
The situational approach (Selznick, 1949; Burns and Stalker, 1961; Woodward, 1965; Lawrence
and Lorsch, 1967) is based on the belief that there cannot be universal guidelines which are
suitable for all situations. Organizational systems are inter-related with the environment. The
contingency approach (Hellriegel and Slocum, 1973) suggests that different environments
require different organizational relationships for optimum effectiveness, taking into
consideration various social, legal, political, technical and economic factors.

What Is Span of Control?
Span of control is simply the number of staff that report to a manager. Some companies also
have an ideal span of control, which is the number of reports they feel a manager can effectively
manage. In this case, if a manager has fewer reports than the ideal, they may feel he or she is not
being effectively used, while if he or she is handling more they may feel that the manager is
over-stretched and the reports will not receive enough direction.
Span of management means the number of people managed efficiently by a single officer in an
organization. This is also called span of management, span of authority, span of supervision,
span of authority, span of responsibility or levels of organization. This principle is based on the
principle of relationship.
Span of control refers to the maximum numbers effectively supervised by a single

individual. The number of members may be increased or decreased according to the nature of
work done by the subordinate or the ability of the supervision. In the administration area, under
one executive, nearly four of five subordinates may work. The span of control enables the
smooth functioning of the organization.
The term ‘span’ literally means the space the between two supports of a structure, e.g. the
space between two pillars of a bridge. The space between two pillars should be neither too large
nor to small. If it is too large, the bridge may collapse and if is too small, it will enhance its cost.
When this word is applied to management, it refers to the number of subordinates a manager or a
supervisor can supervise, manage or control effectively and effectively.
Therefore, span of supervision refer to the optimum number of subordinates that a

manager or supervisor can manage or control effectively.
Accordingly to Mr.Spriegal “ Span of control means the number of people reporting

directly to an authority. The principle of span of control impulse that no single executive should
have more people looking to him for guidance and leadership than he can reasonably be exacted
to serve.’’
An organization is characterized by the presence of a number of levels and departments.

But more the levels are created more will be the administrative cost due to additional staff
required and more will be the difficulty to be encountered in communication and controlling.
This is basically the problem of deciding the number of subordinates to report directly to
each manager. According to this principle there is a limit of the number of subordinates that each
managers can effectively supervise.

Basically there are two types of span of management –
1. Narrow span of management – It leads to many level in heresy system in organization

situation. Narrow span also effect employees moral adversely.
When the work and authority is divided amongst many subordinates and a manager
supervises and controls a small group of people, then narrow span of control exists. It adds more
layers or levels of management and so leads to tall organization. Main features of narrow span of
control are as specialization work can be achieved; work which is complex and requires tight
control and supervision, there narrow span of control is helpful; messages can be distorted; co-
ordination is difficult to achieve; communication gaps can come; more overhead cost of
supervision and no quick response to environmental changes.
2. Wide span of management – Wide spans of management leads to flat organization in
which manager have a developing skill and experience of knowledge.
Wide span of control means a manager can supervise and control effectively a large
number of persons at a time. It is because shorter span of control leads to rise in number of steps
or levels in vertical chain of command which leads to tall organization. Wide span of control has
features as it leads to maximized communication; better supervision; better co-ordination;
suitable for routine and easy jobs; prompt response from employees; less overhead cost of
supervision and greater ability to respond to environmental changes.
A wide span of control results in an organization that has relatively few levels or steps of
management which can be termed as flat or horizontal organization. Wide span of control is
suitable when people are competent, prefer low supervision and tasks are similar and
standardized. Simon pleads for wider span of control. It is because shorter span of control leads
to rise in number of steps or levels in vertical chain of command which leads to tall organization.
This makes vertical communication difficult and indirect. Wider span of control leads to
maximized communication.
Factors affecting span of control:
1. Ability of subordinates: when the subordinates are enough competent to complete the
allotted work easily, the manager will not be required to give more attention to them and more
subordinates can be supervised. But, when if subordinates are less competent, the manager will
be required to devote more time for supervision and span of control will be narrow.
2. Degree of delegation: A manager who delegates more authority of taking decisions to his
subordinates can supervise a greater number of subordinates and enlarge the span of control. But,
if a manager keeps more authority of taking decisions with him can supervise a small number of
subordinates.
3. Capability of the supervisor: The qualities and qualifications of the supervisor affect the
span of control to a great extent. If the supervisor is competent enough, he can easily supervise a

large number of employees and span of control can be wider. In case when supervisor is new,
less competent and has less administrative ability, the span of control will be narrow.
4. Age of the organization: The span of control is wider in old organizations than in newer
organizations because in old organizations things get stabilized.
5. Nature of work: As the work is more routine, the span of control can be wide. The similarity
and simplicity of functions can be tackled easily while if work is of complex nature, the
supervisor‟s span of control will be narrow. So, nature of work determines the span of control.
6. Geographical Dispersion: If branches of a business are widely dispersed, then the manager
will find it difficult to supervise each of them, as such the span on control will be smaller. A
manager can supervise easily the work of a large number of subordinates, if they are located in
one compact place.
7. Techniques of supervision: Supervision Techniques such as delegation, planning,

programming, the use of staff specialists, etc., help extend a manager‟s span of control. Span of
control can be extended where the direction of operations is done more by goals and objectives
rather than by ever-present supervisor. Also, an administrator can broaden his span of control by
the use of staff specialists who can provide another set of legs, eyes and ears for the executive.
8. Communication system: A well organized and sensitive proper communication system in an

organization will make possible a larger span of control than a power and ill-organized system of
communication.
9. Use of standing plans: It reduces the work load of managers, as a result span of control
increases considerably.
10. Use of communication technology: In modern times, because of the use of automation in
administration, of control has widened. Further, the application of mechanization to such
activities as accounting and computation work had increased the span of control.
11. Level of management: The higher the superior is in the organizational hierarchy, the
narrower the span of control. Based on empirical studies, Newman suggested that executives in
higher echelons should have a span of three to seven operating subordinates, whereas the
optimum range for first-line supervisors of routine activities is usually from fifteen to twenty
employees.
Departmentation:
Meaning of Departmentation:
Departmentation is the foundation of organisation structure, that is, organisation structure

depends upon departmentation. Departmentation means division of work into smaller units and
their re-grouping into bigger units (departments) on the basis of similarity of features.

As the organisation grows in size, the work is divided into units and sub-units. Departments are
created and activities of similar nature are grouped in one unit. Each department is headed by a
person known as departmental manager.
Departmentation, thus, helps in expanding an organisation and also promotes efficiency by

dividing the work on the basis of specialisation of activities and appointing people in various
departments on the basis of their specialised knowledge.
Departmentation as is defined follows:
Louis A. Allen: “Divisionalisation is a means of dividing the large and monolithic functional
organisation into smaller, flexible administrative units”.
Pearce and Robinson:“Departmentalisation is the grouping of jobs, processes and resources

into logical units to perform some organisational task.”
Terry and Franklin:“Departmentalisation is the clustering of individuals into units and of units
into departments and larger units in order to facilitate achieving organisational goals.”
Importance of Departmentation:
The following points highlight the importance of departmentation:
1. Organisation structure:
Division of work into units and sub-units creates departments. Supervisors and managers are
appointed to manage these departments. People are placed in different departments according to
their specialised skills. The departmental heads ensure efficient functioning of their departments
within the broad principles of organisation (scalar chain, unity of command, unity of direction
etc.).
Thus, organisation structure is facilitated through departmentation. If there are no departments, it

will be difficult to keep track of who is doing what and who is accountable to whom.
Departmentation creates departments, assigns tasks to people, fixes their responsibility and
accountability to their departmental heads, creates a span of management so that work can be

easily supervised. This network of authority- responsibility relationships is the basis of designing
a sound organisation structure.
2. Flexibility:
In large organisations, one person cannot look after all the managerial functions (planning,
organising etc.) for all the departments. He cannot adapt the organisation to its internal and
external environment. Such an organisation would become an inflexible organisation. Creating
departments and departmental heads makes an organisation flexible and adaptive to environment.
Environmental changes can be incorporated which strengthen the organisation’s competitiveness
in the market.
3. Specialisation:
Division of work into departments leads to specialisation as people of one department perform
activities related to that department only. They focus on a narrow set of activities and repeatedly
performing the same task increases their ability to perform more speedily and efficiently.
Specialisation promotes efficiency, lowers the cost of production and makes the products
competitive.
4. Sharing of resources:
If there are no departments, organisational resources; physical, financial and human, will be
commonly shared by different work units. Departmentation helps in sharing resources according
to departmental needs. Priorities are set and resources are allocated according to the need,
importance and urgency regarding their use by different departments.
5. Co-ordination:
“The organisation is a system of integrated parts, and to give undue emphasis to any functional
part at the expense of the entire organisation creates organisational islands, thus, resulting in
inefficiency and significant behavioural problems”. Creating departments focuses on
departmental activities and facilitates co-ordination.
6. Control:
Managers cannot control organisational activities if they have to be collectively supervised.

Departmentation facilitates control by departmental manager over the activities of his department

only. Activities are divided into smaller segments, standards of performance can be framed,
factors affecting performance can be identified and control can be more objective in nature.
7. Efficiency:
Flow of work from one level to another and for every department, i.e., vertical and horizontal
flow of work in the organisation increases organisational efficiency.
8. Scope for growth and diversification:
In the absence of departmentation, managers can supervise a limited number of activities,

depending upon their skills and abilities. Departmentation enables them to expand their area of
operation into new product lines and geographical divisions. Departmentation provides scope for
organisational growth (along the same product lines) and expansion (adding new product lines).
9. Responsibility:
Since similar activities are grouped in one department headed by departmental managers, it
becomes easy for top managers to fix responsibility of respective managers for achieving the
desired results. If planned performance is not achieved, the department responsible becomes
answerable. When responsibility is clear, authority can also be delegated to managers. Clear
identification of responsibility and authority increases efficiency of the departmental activities.
10. Development of managers:
Departmentation enables departmental heads to be creative in making decisions with respect to

their departmental activities. Training needs can also be identified because manager’s task is
clear and specific. There are opportunities to improve performance in their area of specialisation.
This develops their potential to be promoted to higher managerial positions in the organisation. It
also facilitates recruitment and selection of top managers from within the organisation rather
than depending on outside sources.
Basis of Departmentation:
The form of organisation structure depends upon the basis of departmentation. Creating
departments and sub-dividing the work of departments into smaller units creates organisation

structure. With growing size of organisations, departments are created for activities of similar
nature.
There are two broad forms of departmentation:
a. Functional departmentation, and
b. Divisional departmentation.
a. Functional Departmentation:
Functional organisation creates departments along activities or functions of the undertaking

(functions do not refer to managerial functions of planning, organising , staffing, directing and
controlling). It is grouping of activities on the basis of similarities of functions.
The nature of activities performed by different organisations is different. For example, activities
carried by a manufacturing organisation are production, finance, personnel and sales. For a
trader, the major activities are buying and selling, a bank performs borrowing and lending
functions. Functional departmentation is, “the grouping of jobs and resources within the
company in such a way that employees who perform the same or similar activities are in the
same department”.
It is the simplest, logical and most widely accepted form of creating departments. It is suitable
for organisations where limited number of products are produced. The major functional
departments further have derivative departments. Production department, for example, has sub-
departments to manage purchase, production planning and control, manufacturing etc. Finance
department creates departments to look into capital budgeting (fixed assets) and current assets,
cash management and budgets.
Personnel department has sub-departments to take care of appointments, training, placement and
promotion of employees. These sub-departments can be further sub-divided if needed.
Advertising department (sub-department of marketing department), for example, can further
have sub-departments like advertising in Newspapers, Radio, TV etc.
b. Divisional Departmentation:
Divisional structures are created on the basis of smaller divisions where each division has its
own functional activities (production, finance, personnel and marketing).

Major divisions that determine the organisation structure are as follows:
1. Product Departmentation:
This form of departmentation is suitable for companies that produce multiple products. Product
departmentation is grouping of jobs and resources around the products or product lines that a
company sells. With increase in operations of a company, it adds more products to its line of
products which require various functional activities (production, marketing etc.). Product
departmentation is suitable for product diversification where marketing characteristics of each
product are different from others.
An organisation selling stationery, for example, also starts selling cosmetics and
pharmaceuticals. While marketing strategies for cosmetics need to be intensive, it is not so in
case of stationery or pharmaceuticals. Similarly, funds required for each product line are
different.
The focus is on the product line and all functional activities associated with the product line.
Departments are created on the basis of products and product manager has the authority to carry
out functional activities for his department. Each product manager is in charge of his product line
though general managers of various functional areas provide them the necessary support. It helps
in coordinating the activities of different products.
2. Process or Equipment Departmentation:
In manufacturing organisations where the product passes through different stages of production,
each stage is designated as a process and department is created for each process. It is called
process departmentation.
Manufacturing paper, for example, requires processes like crushing the bamboo, making pulp,
purifying the pulp, making paper rolls, and cutting it into rims. For each process, departments are
created and headed by people skilled and competent to carry that process.
Since finished product goes through different processes, each process is assigned to a different
department. This form of departmentation is suitable for medium and large-sized organisations
where goods are produced through a series of operations.
3. Customer Departmentation:

When organisations sell to customers with different needs, departments are created on the basis
of customers. Customer departmentation is “the organising of jobs and resources in such a way
that each department can carefully understand and respond to different needs of specific
customer groups”.
A lending institution, for example, gives loan to meet different customer requirements like
housing loan, car loan, commercial loan etc. An educational institution which provides academic
and non-academic subjects (vocational subjects), full-time or part-time courses, morning or
evening shifts is a typical case of customer departmentation. Clear identification of customers
and their needs is the basis of customer departmentation. This method of departmentation can be
followed only in marketing division.
4. Territory or Geographic Departmentation:
In territorial departmentation, organisation creates departments:
(i) Close to its customers because they are geographically dispersed over different areas, or
(ii) Near the sources of deposits.
Each geographic unit has resources to cater to the needs of consumers of that area. The
production, purchase, personnel and marketing activities are looked after by departmental
managers but finance is vested at the headquarters. General Manager of every department looks
after functional activities of his geographical area but overall functional managers provide
supporting services to the managers of different areas.
Thus, customers of different regions with different tastes and preferences for the same product
are looked after by geographical departments set up in their territories. The product or customer
differentiation, both can be the basis of geographic or territorial departmentation. This basis is
suitable for large-sized organisations which have activities dispersed over different geographical
areas.
5. Departmentation by Time:
This method of departmentation is used in situations where work is done round the clock
because:
1. The machine cannot be stopped before finishing the work.

2. The demand is high and the machine has to work overtime.
3. The nature of work entrusted to the organisations is such.
4. The services are essential in nature (health and fire services).
5. Workers work in shifts; morning, afternoon and night, so that work can progress continuously.
These points are illustrated below:
1. The machine cannot be stopped in manufacturing steel and workers, therefore, have to work in
shifts.
2. During boom conditions, the demand increases and, therefore, extra load has to be borne by
machines. This is possible through shift duties.
3. Airlines, where flights arrive and depart, work throughout the day.
4. Essential services like hospitals and fire stations deal with emergencies and, thus, people work
in shifts.
Departments are created for each shift though the objectives and nature of work carried in all the
departments is the same.
This method of departmentation results in optimum utilisation of machines as they work

continuously which otherwise may remain idle. It is also good for workers who cannot work
during day time. They can be gainfully employed during evening or night shifts.
There are problems of co-ordination and supervision of employees who work in shifts.
Employees have to explain to the workers joining the next shift about the stage of completion at
which they are leaving the work which may not always be possible.
It is also a costly form of departmentation as each shift has separate functional departments.
6. Departmentation by Size:
This method is followed in army where number of workers in the unit is important. The
company’s performance is judged by the number of people working with it, and therefore, it

adopts departmentation by size. Departments are created on the basis of number of people who
form the department. Soldiers in army are grouped in numbers to form departments.
7. Departmentation by Task Force:
When organisation has a number of projects, it forms task forces which consist of people from
different units having different skills to complete those projects. These groups are formed
temporarily till completion of the project. They are similar to project organisations.
Delegation & Decentralisation:
In an organization, it is not possible for one to solely perform all the tasks and take all the
decisions. Due to this, delegation and decentralisation of authority came into
existence. Delegation means the passing of authority by one person who is at a superior position
to someone else who is subordinate to him. It is the downward assignment of authority, whereby
the manager allocates work among subordinates.
On the other hand, Decentralization refers to the dispersal of powers by the top level
management to the other level management. It is the systematic transfer of powers and
responsibility, throughout the corporate ladder. It elucidates how the power to take decisions is
distributed in the organizational hierarchy.
These two terms are often used interchangeably, but they are not alike. So, here we have
compiled a detailed difference between delegation and decentralization of authority.
Comparison Chart
BASIS FOR
DELEGATION DECENTRALIZATION
COMPARISON
Meaning Delegation means Decentralization is the final outcome

handing over an authority achieved, when the delegation of
from one person of high authority is performed systematically
level to the person of low and repeatedly to the lowest level.
level.
What it is? Technique of Philosophy of management.

management

BASIS FOR
DELEGATION DECENTRALIZATION
COMPARISON
Accountability Superiors are accountable Department heads are accountable for

for the acts done by the acts of the concerned department.
subordinates.
Requirement Yes, for all organization No, it is an optional philosophy which

delegation of authority is may or may not be adopted by the
very necessary. organization.
Liberty of Work Subordinates do not have A substantial amount of freedom is

full liberty. there.
Control The ultimate control is The overall control vests with top
the hands of superior. management and delegates authority
for day to day control to departmental
heads.
Relationship Creates superior- A step towards creation of semi-

subordinate relationship. autonomous units.
Definition of Delegation
The assignment of authority or decision-making power or duty of a person who is at a higher

level to an individual who is below his level is known as Delegation. It is a requirement of the all
the organisation, for its growth and development.
A delegation of authority refers that the senior is handing over the decision-making powers to his
junior. Although, the senior cannot pass on an authority which he does not possess. With the help
of delegation, the workload can be divided to different individuals as well as the responsibility is
also shared among them. The person who delegates the authority is known as Delegator while
the person who is delegated the authority is known as Delegatee.
There are three major elements of Delegation:
 Authority: The rights and powers which are delegated.

 Responsibility: The duties and tasks which are to be performed are delegated.
 Accountability: Reporting on the discharge of responsibility or use of authority is
accountability which cannot be delegated.

Definition of Decentralization
The transfer of authorities, functions, rights, duties, powers and accountability of the top level
management to the middle or low-level management is known as Decentralization. It is nothing
but the delegation of authority, in the entire organisation or it can be said that decentralization is
an improvement over delegation. When there is decentralization, the considerable authority,
responsibility and accountability are vested to the lower levels of the organisational hierarchy.
Many organisations take decisions regarding the diffusion of authority from a higher level to
other levels of management like departments, divisions, units, centres, etc. This dissemination of
authority is known as delegation, but when it is exercised in the whole entity, on a large scale, it
is decentralization. So here it must be noted that the extent to which the right, duties and powers
are disseminated is important.
This is the greatest advantage of decentralization that the top management gets unburden, and
timely decisions can now be taken on different matters. Moreover, it will lead to better
supervision and motivation of the employees.
Key Differences between Delegation and Decentralization
The following are the major differences between delegation and decentralization:
1. When an authority or responsibility is entrusted to the subordinate by a superior is known

as Delegation. Decentralization refers to the final result which is attained when the
authority is delegated to the lowest level, in an organised and consistent manner.
2. Delegation is the technique of management. On the contrary, decentralisation is the
philosophy of management.
3. In delegation, only authority and responsibility are transferred but not the accountability.
However, in decentralization, all the three are transferred.
4. In delegation, there is less liberty of work to the subordinates whereas, in the
decentralization, a substantial amount of liberty can be seen.
5. Delegation of authority creates superior-subordinate relationship in the organization.
conversely, decentralisation is a step towards creation of semi autonomous units.
6. A delegation of authority is a must for every organisation, as no person can alone do each
and every task. Conversely, Decentralization is discretionary, in the sense that top
management may or may not disperse authority.
Conclusion
Delegation and Decentralization both have its merits and demerits. They are not similar terms,
but the decentralization is the result of the delegation of authority. So there is no competition
between them as they both complete each other.
They are helpful to the success and progress of the organisation, but there is a precondition for
the delegation that there should be a desire of the manager to give freedom of work to the
persons whom work is assigned. Let them choose the methods and solutions for their problems,

in order to guide them and let them learn from their mistakes. In this way, they will get the
training and development.
Another prerequisite is that the juniors should communicate with the seniors freely. However,
this is a demerit of decentralization, which due to no control of top level management over the
middle or low-level management, the absence of coordination and leadership is felt.
Unit-IV
Directing…
What is Directing?
“Directing concerns the total manner in which a manager influences the actions of his
subordinates. It is the final action of a manager in getting others to act after all preparations have
been completed.”
J.L. Massie
“Directing is the guidance, the inspiration, the leadership of those men and women that constitute
the real core of the responsibilities of management”
Urwick and Brech
Who is Directed?
 Direction is concerned primarily with the people who put the plans into action. It is the
duty of manager at each level to achieve cooperation of the subordinates for the
achievement of organizational objective. It should not be thought that only the managers
at the lower level, who deal directly with the operative employees, Perform the direction
function. Direction is also done by the top level managers.
Need of Direction..
 It is here that the need of direction arises to deal effectively and efficiently with the
human factor for the accomplishment of goals of the enterprise.
 Direction is needed because people working in the enterprise have to be told what they
should do and have also to be guided and induced to accomplish this .
Characteristics & Feature of Direction

1. Managerial Function:- Direction is an important function of management.
2. Continuous Activities:- Direction is a continuous activity.
3. Pervasive Function:- Like other functions of management, direction is also performed

by the managers at all levels.
4. Communication:- Giving of instructions and order is an indispensable part of direction.

(Linear and Circular)

5. Chain of Command:- Direction initiates at the top level and follows to bottom through
the hierarchy.
6. Creative Function:- Direction is a creative function of management which converts

plans into action.
Process of Direction
1. Setting and defining the Objectives:- The first step in direction. After spelling out the
objectives the manager interprets them and communicates them for performance.
2. Organizing the efforts:- The manager organizes the effort, analyses the activities,
decisions and relations so that he is able to define and interpret them and then he provide
proper guidance, better supervision and effective direction in the light of his own
definitions and interpretations.
3. Measuring the work:- He interprets the performance so that the working force may
come to know where they have erred, how they erred and where they stand so far as their
work and efficiency is concerned.
4. Developing the people:- The manager develops the people those who are one working
with them.
“Supervision”
 Meaning:-
The term “supervision” is comprised of two words, “super” and “vision”. “super” means from
above and “vision” means to see the work of others.
In other words, supervisions means overseeing the subordinates at work to ensure that the work
is being performed as required.
Definitions
 “Supervision refers to the direct and immediate guidance and control of subordinates in
performance of their tasks.” - Viteles
 It means observing the subordinates at work to see that they are working according to
plans and policies of the organisation and keeping the time schedule, and to help them in
solving their work problem.
 According to the Toft Hartley Act, 1947 (USA), ‘Supervisors are those having authority
to exercise independent judgement in hiring, discharging, disciplining, rewarding and
taking other actions of a similar nature with respect to employees’.

Supervision – Significance
Supervision is primarily concerned with overseeing or watching the performance of workers
under his control. He plays an important role in the management set up. He is the person who is
directly connected with the workers and acts as a vital link between the management and
workers.
The significance of supervision can be explained as follows:
1. Issue of Orders and Instructions: The workers require guidance of supervisor at every step.
He clears their doubts and tells them the proper method of doing a job. A sub-ordinate can give
better performance when he knows the work he is supposed to do.
2. Planning and Organizing the Work: A superior acts as a planner and a guide for his sub-
ordinates. A schedule of work is prepared so as to ensure an even and steady flow of work. The
supervisor lays down production targets for the workers and determines the methods and
procedures for doing the work.
3. It is Important at All Levels: Supervision means overseeing and watching sub-ordinates. The
time devoted by top management to supervision is only 20% whereas supervisor (or foreman or
overseer or superintendent or section officer) devotes about 80% of his time to supervision. Top
management supervises managers whereas supervisor supervises workers. The supervision at the
front line or firing line is most important since actual work is done at that level.
4. Vital Link between Workers and Management: A supervisor is a representative of the
management and a very important figure from workers point of view. He communicates the
policies of the management to workers (downward communication) and also provides feed back
to the management as to what is happening at the lowest level (upward communication).
5. Motivating Subordinates: A supervisor is a leader at the lowest rung of management ladder.
He serves as a friend, philosopher and guide to workers. He inspires team work and secures
maximum co-operation from the employees. It is he who can help in getting optimum utilization
of manpower.
6. Feedback to Workers: A supervisor compares the actual performance of workers against the
standards laid down and identifies weaknesses of workers and suggests corrective measures to
overcome them. In this way, workers can improve their performance in future.
7. Proper Assignment of Work: A supervisor makes systematic arrangement of activities and
resources for his group. He assigns work to each worker and delegate’s authority to workers.
Workers feel frustrated when the work being done by them is not properly arranged. Some
workers may sit idle whereas others may be overburdened if work is not properly assigned.
Distinction between Direction and Supervision.

1. Direction is a wider term including supervision. Supervision is one of the elements of
direction. Other elements of direction being motivation, leadership and communication.
2. The function of direction is usually carried by higher level managers where as

supervision is more important at the operating level of management.
3. Face to face contact between supervision and subordinates takes place in supervision,
whereas direction may take place without face to face contact.

Functions of Supervision
1. Selection of workers.
2. Induction of new workers.
3. Planning the work.
4. Issuing orders.
5. Training of the workers.
6. Enforcing discipline among workers.
7. Enforcing discipline among workers.
8. Motivates workers.
9. Complaints and grievances of workers.
10. Ensuring proper safety of workers.
11. Provision of proper working condition to workers.
12. Maintaining records.
Types of Supervision:
1. Autocratic,
2. Laissez-faire,
3. Democratic and
4. Bureaucratic Supervision!
Types of supervision are generally classified according to the behaviour of supervisors towards
his subordinates. These are also called as techniques of supervision.
1. Autocratic or Authoritarian Supervision: According to this technique, all rights are

centred in the supervisor, and his/her orders are strongly obeyed. He/she fully controls
his/her subordinates. While the workers tend to be unfaithful and undisciplined, this
technique is used. In such circumstances, all acts of workers are controlled by the
supervisor. Generally, nowadays, this technique is not used as it is based on time-worn
Theory X of motivation.
2. Laissez- fair or free-rein Supervision: This is just opposite of the autocratic technique.
Herein, the supervisor gives complete freedom to workers to work and after seeing their
abilities develops them. It can be said as a ‘laissez-faire’ policy also.
This should be carefully understood that the supervisor should not depend on a single
technique. As circumstances permit, techniques should be changed or adjusted. There
cannot be one best technique of supervision for all.
In the words of R. Likert, ‘There is no one best way to supervise. Supervisory practices
that are effective in some situations yield to unsatisfactory results in others’.
3. Democratic Supervision: This technique is based on the democratic principles of

supervision and leadership. Under this technique, the advice of the workers should be
taken on all important matters. The objective of the technique is to give chance to
workers to suggest solutions to various problems related to company, and if these
suggestions are appropriate and useful, then they should be taken into consideration.
Thus, workers are instigated to give suggestions and advice. It makes workers feel their
importance in their organisation. Their original thinking process is awakened and they
work with more enthusiasm and interest and feel that the supervisor is helpful in their
development and progress. This is an employee-centred supervisory style, giving
importance to the needs and motives of the employees. It has a positive impact on their
behaviour and efforts.
4. Bureaucratic Supervision: Under this type certain working rules and regulations are
laid down by the supervisor and all the subordinates are required to follow these rules and
regulations very strictly. A serious note of the violation of these rules and regulations is
taken by the supervisor.
This brings about stability and uniformity in the organisation. But in actual practice it has
been observed that there are delays and inefficiency in work due to bureaucratic
supervision.
Qualities of Supervisor
1. Knowledge of the Organization.
2. Technical knowledge.
3. Ability to communicate.
4. Ability to listen.
5. Sharp memory.
6. Ability to secure co-operation.
7. Orderly thinking.
8. Ability to judge subordinates.

9. Emotional stability.
10. Miscellaneous qualities.
How Supervision can be more effective?

 Competency of the Supervisor.
 Management by Exception.
 Proper system of Communication.
 Employee centered Supervision.
 Provision for proper working conditions.
Requisites of effective Supervision…

 Knowledge of work.
 Knowledge of Rules & Regulations.
 Skills in Leading.
 Skills in Instructing
 Skill in dealing with current Problems.
 Human Orientations.
Co-ordination
“Co-ordination is the orderly arrangement of group effort, to provide unity of action in the
pursuit of common purpose.” Alan C. Reiley and James D. Mooney
“Coordination deals with the task of blending (combination) efforts in order to ensure successful
attainment of an objective. It is accomplished by means of planning, organizing, actuating and an
objective.” According Terry
Objective of Coordination
1. Reconciliation (understanding) of Goals.
2. Total Accomplishment.
3. Economy and Efficiency.
4. Good personnel Relations.
5. Retention of Managerial and other personnel.

Characteristics of Co-ordination
1. Not a distinct function of management.
2. Managerial Responsibility.
3. Conscious and deliberate effort on the part of managers.
4. Relevant for group effort and not individual efforts.
5. Continuous and dynamic process.
6. Brings about unity of action.
7. A system concept.
Need and importance of co-ordination

1. Unity in diversity:- effective co-ordination is the essence of good management. Through it
the management can avoid potential sources of conflict among the members of the organization.
2. Team work or unity of direction:- co-ordination is directed toward channelising the co-
operative energies and skills of work groups along organisationally determined lines.
3. Functional differentiation:- Functions of an organisation are frequently divided into
departments, divisions, selections and the like. Coordination is necessary to have a link between
these various function and assure their designed contribution to the total result.
4. Specialisation:- In modern industrial word, there is a high degree of specialisation. They are
the best judge of the scope, nature and kind of work they perform, they know very little of other
work job. Hence, some mechanism is required to co-ordinate the efforts os specialist in an
organisation.
5. Reconciliation of Goals:- In practice, every department or individual is so much committed
to its own goals that it ignores the commitments of other departments or individuals and also the
organsationl goal. It department or individual efforts are not co-ordination towards the
achievement of organization goal is will create a confusion. Therefore, integration of department
or individual goal with the organisation goals is necessary.
6. Congruence (comparison) of flows:- An organisation is a dynamic system of flow of
information, activities, authority and outputs.
Techniques of effective coordination

1. Clearly defined goals.
2. Clear lines of authority and responsibility.
3. Precise (specific) and comprehensive programs and policies.
4. Cooperation.
5. Effective communication.
6. Effective leadership and supervision.

Principle of Coordination
1. Principle of Direct Contact:- This helps in exchanging the opinions and ideas in a better
way and clarifying the misunderstandings more easily.
2. Principle of Early Start:- Coordination can be achieved easily during the early stages of
planning and policy-making.
3. Principle of Reciprocal Relationship:- This stages that all the factors in a situation like men,
materials and environment are reciprocally related.
4. Principle of Continuity:- Coordination should be a continuous process starting with planning
and running through the other managerial process.
Meaning and Nature of Communication:

The exchange of information or passing of information, ideas or thought from one person to the
other or from one end to the other is communication. According to McFarland communication is,
“a process of meaningful interaction among human beings. More specifically, it is the process by
which meanings are perceived and understandings are reached among human beings.” Newman
and summer defined communication as “an exchange of facts, ideas, opinions or emotions by
two or more persons.”
Principles of Communication:
Lack of effective communication renders an organisation handicapped. So to have effective
communication certain principles are to be followed.
They are as follows:
1. Clarity:
The principle of clarity means the communicator should use such a language which is easy to
understand. The message must be understood by the receiver. The words used should be simple
and unambiguous. The language should not create any confusion or misunderstanding. Language
is the medium of communication; hence it should be clear and understandable.
2. Adequacy and Consistency:
The communicator must carefully take into account that the information to be communicated
should be complete and adequate in all respect. Inadequate and incomplete message creates
confusion and delays the action to be taken. The adequate information must be consistent with
the organizational objectives, plans, policies and procedures. The message which is inconsistent
may play havoc and distort the corporate interests.
3. Integration:
The principle of integration portrays that through communication the efforts of human resources
of the organisation should be integrated towards achievement of corporate objectives. The very
aim of communication is to achieve the set target. The communication should aim at
coordinating the activities of the people at work to attain the corporate goals.
4. Economy:
The unnecessary use of communication system will add to cost. The system of communication
must be used efficiently, timely i.e. at the appropriate time and when it is necessary. The
economy in use of communication system can be achieved in this way.
5. Feedback:

The purpose of communication will be defeated if feedback is not taken from the receiver. The
confirmation of the receipt of the message in its right perspective from its receiver fulfills the
object of communication. The feedback is essential only in case of written communication and
messages sent through messengers. In case of oral type of communication the feedback is
immediately known.
6. Need for Communication Network:
The route through which the communication passes from sender or communicator to its receiver
or communicate refers to communication network. For effective communication this network is
essential. The managerial effectiveness will also depend upon the availability of adequate
network.
7. Attention:
The message communicated must draw the attention of the receiver staff and ensure action from
him in the right perspective. The efficient, sincere and prompt manager succeeds in drawing the
attention of his subordinates to what he is conveying.
BARRIERS TO EFFECTIVE COMMUNICATION

1. PHYSICAL AND PHYSIOLOGICAL BARRIERS
These include distance, background noise, poor or malfunctioning equipment, bad hearing, poor
eyesight, speech impediments.
2. EMOTIONAL AND CULTURAL NOISE

Emotions (anger, fear, sadness) and attitudes (having to be right all the time, believing oneself to
be superior or inferior to others) affect objectivity, as do the stereotypical assumptions that
people make about each other based on cultural background.
3. LANGUAGE
Speaking different languages, having strong accents, using slang or jargon can frustrate
communication and negotiation efforts.
4. NOTHING OR LITTLE IN COMMON

Examples, stories and anecdotes can help get a point across, except when the audience cannot
relate to any of these because they don’t share a common experience with the speaker.
5. LACK OF EYE CONTACT

Not making eye contact is a sure way of raising doubt in listeners and losing their attention and
making them feel suspicious of you, not to mention invisible.
6. INFORMATION OVERLOAD AND LACK OF FOCUS

Too much information can confuse your audience and even make them wonder if you’re
overwhelming them with details to avoid telling them something else they would rather know.
7. NOT BEING PREPARED, LACK OF CREDIBILITY

If you’re not prepared, if you lack the facts, if you rely on your Power Point presentation too
much, your listeners will notice and feel let down, even disrespected–and they won’t believe
you.

8. TALKING TOO MUCH

When you talk, you’re not listening, and you need to listen to the people you’re attempting to
persuade.
9. TRYING TOO HARD, SEEMING DESPERATE

When you try too hard to persuade someone, you may seem desperate, and desperation smells
like manipulation and turns people off before you can utter your next desperate word.
10. LACK OF ENTHUSIASM

If you don’t believe in your position, product, service, or whatever you’re trying to sell, they
won’t believe in it either.
Controlling…
“The managerial function of controlling is the measurement and correction of the performance in
order to make sure that enterprise objectives and the plans devised to attain them are
accomplished.”
Koontz and Weihrich
“Control is the process of checking actual performance against the agreed standards or plans with
a view to ensuring adequate progress and satisfactory performance”
E.F.L. Breach
Characteristics & Features of Control…
1. Pervasive Function:- Like other functions of management, Controlling is also performed
by the managers at all levels.
2. Review of past events:- Control lead to appraisal of past activities. Thus, it is looking
back. The deviation in the past are revealed by the control process.
3. Forward looking:- A manager can take corrective action only in regard to future
operations.
4. Action oriented:- The purpose of control is achieved only when corrective action is
taken on the basis of feedback information.
5. 5. Continuous process:- control is also a continuous activity.
6. 6. Dynamic process:- it is a dynamic process. It is flexible and not rigid.
7. 7. Control does not curtail (restrict) the rights of individuals:- its purpose is to
achieve and maintain acceptable productivity form all the resources of an enterprise.
Advantages of Control…
1. Supervision:- If control devices are properly planned and implemented, supervision
become much easy.

2. Identification of Efficient and inefficient (ineffective) workers:- Those workers who

succeed to secure the target are identified as efficient workers. The inefficient workers
who fail to attain the target need some kind of training or corrective measures.
3. Co -ordination:- Control process indicate where co-ordination is needed and how it can
be secured.
4. Insurance against failures:- Through controlling process the business operations are
constantly monitored to ensure that things are proceeding according to plan.
5. Knowledge of success of plan:- For success of an enterprise, it is essential that progress

of various plans and projects is constantly received.
6. Formulation of future plans:- Control indicate the failure area where an action is
needed. The required corrective measures can be considered while formulating future
plans for the organization.
Limitation of Control…
1. Difficulty in determining individuals responsibility:- Sometimes, a job is done by a
group where it is difficult to ascertain the responsibility of any individual.
2. Expensive process:- The modern control techniques are quite expensive. Small
organisation cannot afford such expensive device.
3. No control over external environment:- Control system covers only the internal
factors. The enterprise donse not command any control over external environmental
factors such as govt.’s trade, taxation and credit policy etc.
4. Difficulty in setting standards:- Setting of standards at strategic points is an essential

component of control. But setting standards is not something very easy. In case some
wrong or unrealistic standards are set, performance can’t be measured against them.
5. Limitation on individuals freedom:- Controls put restraints on the operational freedom

of the individuals. Too much controls kill the enthusiasm of the people.
6. Misuse of controlling authority:- Sometimes organization sufferer, because of

controlling authority makes ill use of its authority.
Types of Control…
Control can be divide in two pars:-
 Strategic control:- This process is necessary become strategy formulation is based on
certain assumption, since there is a time led between strategy formulation & its
implementation. Some or these assumption may not good either fully or partially.

 Operational Control:- It is concern with action or performance & its aim evaluating the
performance of the organization. As a whole or its different component. That is units
division & departments.
Controlling Process..
1. Establishment of standards:-
(i) To establish standard performance against which actual results can be evaluated.
(ii) Standard should be stated in definite measurable term, such as quantity, quality, men
hour, speed, unit or services etc.
(iii) Standard of performance are clear, fixed & specific in the light of objectives laid
down by top management.
2. Measurement of performance:-
(i) measure actual performance of individual workers, group of workers, departments &
the whole enterprise.
(ii) Actual performance should be expressed in the some terms as the planned standard.
3. Comparison of actual with established standard:-
(i) Finding deviation & their extent.
(ii) Identifying the cause of such deviation.
(iii) Minor deviation can be solved by managerial level, but in case in case of major
deviation mush be reported to top management.
4. Taking corrective action:-
(i) Corrective action should be based on factor cussing deviation or deficiencies b/w
established standard & actual performance.
(ii) It involves changes in working methods, materials, machines, policies & procedures.
(iii) It may also require improvement in the motivation, supervision & modification of
business plans.
Principle or Requirements of Control…

 Emphasis on Objective.
 Efficiency of control technique.
 Responsibility for control.
 Direct control
 Suitability
 Flexibility.
 Self control
 Control by Exception

 Strategic point control
 Corrective action
 Forward looking control
 Human factor
 Economical
 Objective standers
Concept of Technique of control:- Manager use several techniques of control. The choice of
control technique dependent on various factors including size of enterprise, functions of the
enterprise, resources of the enterprise and nature of work-force of the enterprise.
Different techniques of control:-

(i) Production control.
(ii) Budgetary control
(iii) Cost control
(iv) Quality control
(v) Inventory control
(vi) Management Accounting
(vii) Break even Analysis
(viii) Managerial Statistics.
Budgetary Control:
Meaning: Budgetary Control is a means of control in which the actual results are compared with the
budgeted results so that appropriate action may be taken about any deviations between the two.
What is Budgetary Control?

Budgetary control is a system of controlling cost which includes preparation of Budgets
coordinating the departments and establishing responsibilities comparing performance with
budgeted and acting upon results to achieve the maximum profitable.
The process of budgetary control includes:
 Preparation of various budgets.
 Continuous comparison of actual performance with budgetary performance.
 Revision of budgets in the light of changed circumstances.
A system of budgetary control should not become rigid.

There should be enough scope of flexible individual initiative and drive. Budgetary control is an
important device for making the organization an important tool for controlling costs and
achieving the overall objectives.
Budgetary control serves 4 control purposes:

1. They help the manager’s co-ordinate resources;
2. They help define the standards needed in all control systems;
3. They provide clear and unambiguous guidelines about the organization’s resources and
expectations, and
4. They facilitate performance evaluations of managers and units.
Objectives of Budgetary Control

An effective budgeting system plays a crucial role in the success of a business organization.
The budgeting system has the following objectives, which are of paramount importance in the
overall efficiency and effectiveness of the business organization.
These objectives are discussed below.
1. Planning
Planning is necessary for regularly doing any work. A well- prepared plan helps the organization
to use the scarce resources efficiently and thus achieving the predetermined targets becomes
easy.
A budget is always prepared for the future period and it lays down targets regarding various
aspects like purchase, production, sales, manpower planning, etc. This automatically facilitates
planning.
2. Coordination
For achieving the predetermined objectives, apart from planning, coordinated efforts are
required. Budgeting facilitates coordination in the sense that budgets cannot be developed in
isolation.
For example, while developing the production budget, the production manager will have to
consult the sales manager for a sales forecast and purchase manager for the availability of the
raw material.
The production budget cannot be developed in isolation.
Similarly, the purchase and sales budget, as well as other functional budgets like cash, capital
expenditure, manpower planning, etc, cannot be developed without considering other functions.
Hence the coordination is automatically facilitated.
3. Control
Planning is looking ahead while controlling is looking back.

The preparation of budgets involves detailed planning about various activities like purchase,
sales, production, and other functions like marketing, sales promotion, manpower planning. But
planning alone is not sufficient.
There should be a proper system of control which will ensure that the work is progressing as per
the plan.
Budgets provide the basis for such controlling in the sense that the actual performance can be
compared with the budgeted performance.
Any deviation between the two can be found out and analyzed to ascertain the reasons behind the
deviation so that necessary corrective action can be taken to rectify the same. Thus budgeting
helps immensely in controlling function.
Types of Budgetary Controlling Techniques
Budgetary control is a system for monitoring an organization’s process in monetary terms. Types
of budgetary controlling techniques are;
1. Financial Budgets.
2. Operating Budget.
3. Non-Monetary Budgets.
1. Financial Budgets
Such budgets detail where the organization expects to get its cash for the coming period and how
it plans to spend it. Usual sources of cash include sales revenue, the sales of assets, the issuance
of stock, and loans.
On the other hand, the common uses of cash are to purchase new assets, pay expenses, repay
debts, or pay dividends to shareholders.
Financial budgets may be of the following types:

(i) Cash budget
This is simply a forecast of cash receipts and disbursements against which actual cash
“experience” is measured
It provides an important control in an enterprise since it breaks down incoming and outgoing
cash into monthly, weekly, or even daily periods so that the organization can make sure it can
meet its current obligations.
The cash budget also shows the availability of excess cash, thereby making it possible to plan for
profit-making investment of surpluses.
(ii) Capital expenditure budget
This type of financial budget concentrates on major assets such as a new plant, land or
machinery. Organizations often acquire such assets by borrowing significant amounts through,
say, long-term bonds or securities.
All organizations, large or small, business or non-business, pay close attention to such a budget
because of the large investment usually associated with capital expenditure.
(iii) The balance sheet budget
It forecasts what the organization’s balance sheet will look like if all other budgets are met.
Hence it serves the purpose of overall control to ensure that other budgets mesh properly and
yield results that are in the best interests of the organization.
2. Operating Budgets

This type of budget is an expression of the organization’s planned operations for a particular
period.
They are usually of the following types:

(i) The sales or revenue budget
It focuses on the income the organization expects to receive from normal operations. It is
important since it helps the manager understand what the future financial position of the
organization will be.
(ii) The expense budget
It outlines the anticipated expenses of the organization in a specified period. It also points out
upcoming expenses so that the manager can better prepare for them.
(iii) The project budget
It focuses on anticipated differences between sales or revenues and expenses i.e. profit. If the
anticipated profit figure is too small, steps may be needed to increase the sales budget or cut the
expense budget.
Non-monetary budgets
Budgets of this type are expressed in non-financial sales or revenues and expenses, i.e. profit. If
the anticipated profit figure is too small steps may be needed to increase the sales budget or cut
the expense budget.
Fixed and variable budgets

Regardless of their purpose, most budgets must account for the three following kinds of costs:
1. Fixed costs
They are the expenses that the organization incurs whether it is in operation or not. Salaries of
managers may be an example of such a cost.
2. Variable costs
Such costs vary according to the scope of operations.

The best example may be the raw materials used in production. If $5 worth of material is used
per unit. 10 units would cost $50, 20 units would cost $100 and so on.
3. Semi-variable costs
They also vary, but in a less direct fashion. Costs for advertising, repairs, and maintenance, etc.
may fall under this category.
All these categories of cost must be accurately accounted for in developing a budget. Fixed costs
are usually the easiest to deal with. Variable costs can also be forecast, although with less
precision from projected operations.
Semi-variable costs are the most difficult to predict because they are likely to vary, but not in
direct relation to operations. For these costs, the manager must often rely on experience and
judgment.
Types of Budgets
Budgets can be classified as per the following basis.
1. Based on Area of Operation.

1. Functional Budgets.
2. Master Budget.
2. Based on Capacity Utilization.
1. Fixed Budget.
2. Flexible Budgets.
3. Based on Time.
1. Short Term.
2. Medium Term.
3. Long Term.
4. Based on Conditions
1. Basic Budget.
2. Current Budget.
Benefits of Budgetary Control

Budgeting plays an important role in planning and controlling. It helps in directing the scarce
resources to the most productive use and thus ensures overall efficiency in the organization.
The benefits derived by an organization from an effective system of budgeting can be

summarized as given below.
1. Budgeting facilitates the planning of various activities and ensures that the working of the
organization is systematic and smooth.
2. Budgeting is a coordinated exercise and hence combines the ideas of different levels of
management in the preparation of the same.
3. Any budget cannot be prepared in isolation and therefore coordination among various
departments is facilitated automatically.
4. Budgeting helps planning and controlling income and expenditure to achieve higher
profitability and also acts as a guide for various management decisions.
5. Budgeting is an effective means for planning and thus ensures sufficient availability of
working capital and other resources.

6. It is extremely necessary to evaluate the actual performance with predetermined

parameters. Budgeting ensures that there are well-defined parameters and thus the
performance is evaluated against these parameters.
7. As the resources are directed to the most productive use, budgeting helps in reducing the
wastages and losses.
Essentials of a Good Budgetary Control System

A good budgetary control system depends upon the following conditions:
1. Support from top management
The effective implementation of the budgetary control system depends upon the attitude and
perception of management towards it.
If the top executive takes the budgeting as a mere routine job and does not take any interest in its
implementation, it will be a futile exercise.
2. Quantification of organizational goal
The goal of the organization should be clearly expressed and quantified. There should not be any
misconception and confusion in the minds of employees regarding goals to be attained.
3. Creation of responsibility center
The entire organization should be divided into sections and subsection with clear assignment of
duties and responsibilities for each of them.
4. The split of organizations’ goals
The goals of each department or responsibility center should be spelled out towards the
attainment of the overall goals of the organization. The functional goals should be compatible
with the organizational goal.
5. Realistic
The target to be set in the budget should be fairly attainable.

If it is set at a level beyond the capacity of employees, they will lose their interest in its
implementation, on the other hand, if it is set at a very low level, it will be meaningless as the
job, in any case, will be done.
6. Participation
All the key employees should be made involved in the preparation of the budget. Participation
brings in commitment. Commitment enhances the efficiency and productivity of employees.
7. Good accounting system
The accounting system should be designed in such a way that c the actual performance of various
responsibility centers can be readily available for comparison with the target.
8. Coverage
To reap the benefit of a budgetary control system it should cover all the areas organization. It
should not be partially applied.

9. Creation of environment conducive to budgetary control
A proper environment should be developed in the organization for the successful implementation
of budgetary control. The employees should be educated about the utility of the system.
They should be convinced that it is not a tool of pressurization upon them to work more but a
way to the prosperity of the organization which will ultimately benefit them.
So seminar, lecture, executive development program, etc. should be held for this purpose.
10. Coordination
Co-ordination is an important requirement” of budgetary control. It brings in common thinking,

mutual trust, and confidence amongst various departments.
11. Flexibility
A budget should be amenable to change if the changing situation so warrants.

12. Reporting system
The success of budgetary control depends upon a good reporting system. The actual performance
vis-a-vis the target should be continuously reported to the management to enable them to take
corrective action in the areas which are not performing well.
Steps of Budgetary Control

Budgetary control has the following stages.
1. Developing Budgets
The first stage in budgetary control is developing various budgets. It will be necessary to identify
the budget centers in the organization and budgets will have to develop for each one of them.
Thus budgets are developed for functions like purchase, sale, production, manpower planning as
well as for cash, capital expenditure, machine hours, labor hours and so on.
Utmost care should be taken while developing the budgets. The factors affecting the planning
should be studied carefully and budgets should be developed after a thorough study of the same.
2. Recording Actual Performance
There should be a proper system of recording the actual performance achieved. This will
facilitate the comparison between the budget and the actual. An efficient accounting and cost
accounting system will help to record the actual performance effectively.
3. Comparison of Budgeted and Actual Performance
One of the most important aspects of budgetary control is the comparison between the budgeted
and the actual performance.
The objective of such a comparison is to find out the deviation between the two and provide the
base for taking corrective action.
4. Corrective Action
Taking appropriate corrective action based on the comparison between the budgeted and actual
results is the essence of budgeting.
A budget is always prepared for the future and hence there may be a variation between the
budgeted results and actual results.

There is a need for investigation of the same and take appropriate action so that the deviations
will not repeat in the future. Responsibilities can be fixed on proper persons so that they can be
held responsible for any such deviations.
Preparation for Budgetary Control

Budgetary control is extremely useful for planning and control as described above. However,
forgetting these benefits, sufficient preparation should be made.
For complete success, a solid foundation should be laid down and given this the following
aspects are of crucial importance.
1. Budget Committee
For the successful implementation of the budgetary control system, there is a need for a budget
committee. In small or medium-sized organizations, the budget-related work may be carried out
by the Chief Accountant himself.
Due to the size of the organization, there may not be too many problems in the implementation
of the budgetary control system.
However, in large size organization, there is a need for a budget committee consisting of the
chief executive, budget officer and heads of main departments in the organization.
The main functions of the budget committee are to get the budgets prepared and then scrutinize
the same, to lay down broad policies regarding the preparation of budgets, to approve the
budgets, to suggest for revision, to monitor the implementation and to recommend the action to
be taken in a given situation.
2. Budget Centers
The establishment of budget centers is another important pre-requisite of a sound budgetary

control system. A budget center is a group of activities or a section of the organization for which
budget can be developed.
For example, manpower planning budget, research and development cost budget, production and
production cost budget, labor hour budget and so on.
Budget centers should be defined clearly so that preparation becomes easy.
3. Budget Period
A budget is always prepared before a defined period. This means that the period for which a
budget is prepared is decided in advance.
Thus a budget may be prepared for three years, one year, six months, one month or even for one
week. The point is that the period for which the budget is prepared should be certain and decided
in advance.
Generally, it can be said that functional budgets like sales, purchase, production, etc. are
prepared for one year and then broken down monthly. Budgets like capital expenditure are
generally prepared for a period from 1 year to 3 years.
Thus depending upon the type of budget, the period of the same is decided and it must be
decided well in advance.
4. Preparation of an Organization Chart
There should be an organization chart that shows clearly defined authorities and responsibilities
of various executives. The organization chart will define clearly the functions to be performed by
each executive relating to the budget preparation and his relationship with other executives.

The organization chart may have to be adjusted to ensure that each budget center is controlled by
an appropriate member of the staff.
5. Budget Manual
A budget manual is defined by ICMA as ‘a document which sets out the responsibilities of the
person engaged in, the routine of and the forms and records required for budgetary control’.
The budget manual thus is a schedule, document or booklet, which contains different forms to be
used, procedures to be followed, budgeting organization details, and set of instructions to be
followed in the budgeting system.
It also lists out details of the responsibilities of different persons and the managers involved in
the process.
6. Principal Budget Factor or Key Factor
A key factor or a principal budget factor [also called constraint] is that factor the extent of whose
influence must first be assessed to prepare the functional budgets.
Normally sales are the key factor or principal budget factor but other factors like production,
purchase, and skilled labor may also be the key factors.
For example, a company has the production capacity to produce 30,000 tones per annum but if
the sales forecast tells that the market can absorb only 20,000 units, there is no point in
producing 30,000 units.
Thus the sale is the key factor in this case.
On the other hand, if the company can produce 30,000 units and the market can absorb the entire
production which means that sales are not the key factor but if the raw material is available in
limited quantity so that only 25,000 units can be produced, the raw material will become the key
factor.
The key factor puts restrictions on the other functions and hence it must be considered carefully
in advance. So continuous assessment of the business situation becomes necessary.
In all conditions, the key factor is the starting point in the process of preparation of budgets.
7. Establishment of Adequate Accounting Records
The accounting system must be able to record and analyze the transactions involved.
A chart of accounts or accounts code should be maintained which may correspond with the
budget centers for the establishment of budgets and finally control through budgets.

Multi Choice Question

1. Management is a creative and ________ process.
(A) Continuous
(B) Technical
(C) Democratic
(D) None of the above
ANSWER: (A)
2. Management exists at the ___ level of the organization.

(A) Lower
(B) Middle
(C) Top
(D) All of the above
ANSWER: (D)
3. Limitation(s) of control is (are)

(A) external factors
(B) fixing of responsibility
(C) variation and its causes
ANSWER: (D)
4. Management is said to be the combination of

(A) arts, science and profession
(B) arts, science and engineering
(C) arts, commerce and science
(D) arts, commerce and engineering
ANSWER: (A)
5. ___ is supposed to be immutable, unchanging and eternal.

(A) Policy
(B) Vision
(C) Mission
ANSWER: (A)
6. Costliness of the ________ is the overriding factor determining the extent of decentralization.
(A) Decision
(B) Staffing
(C) Both (A) and (B)
ANSWER: (A)
7. The heart of administration is the ___ function.

(A) Directing
(B) Organizing

(C) Controlling
(D) Cooperating
ANSWER: (A)
8. Fedrick Winslow Taylor’s Mechanism of Scientific Management includes

(A) Scientific task setting
(B) planning the task
(C) standardization of tools and equipment
ANSWER: (D)
9. Direction is a ________ function performed by all the managers at all levels of the
organization.
(A) Managerial
(B) Organizational
ANSWER: (A)
10.___ is a tool for corporate governance.

(A) Training
(B) Recruitment
(C) Communication
(D) Consulting
ANSWER: (C)
11.Horizontal co-ordination takes place ___ .

(A) upwards
(B) downwards
(C) sideways
(D) any of the above
ANSWER: (C)
12. The internal environment factor(s) that influence management is (are)

(A) Labor
(B) Machines
(C) Place
ANSWER: (D)
13. What articulates the long-term goals of an enterprise?

(A) Policies
(B) Vision statement
ANSWER: (B)

14. Which of the following statements is true with reference to principles of management?
(a) The principles of management have evolved.
(b) The principles of management are yet to be evolved.
(c) The principles of management are in the continuous process of evolution.
(d) None of the above.
ANSWER: (c)
15. Which of the following statements is/are true with reference to principles of management?
(a) The principles are guidelines to action.
(b) The principles denote a cause and effect relationship.
(c) Principles help the manager to take decisions while performing various management
functions.
(d) All of the above.
ANSWER: (d)
16. ‘Rule of thumb’ refers to

(a) Use of personal judgement in handling management issues
(b) Adopting a hit-and-trial approach to resolve management problems
(c) Both of the above
(d) None of the above
ANSWER: (c)
17. Principles of management are not:-

(a) absolute
(b) Behavioral
(c) universal
(d) Flexible
ANSWER: (a)
18. Principles of management are significant because of:-

(a) Initiative
(b) Increase in efficiency
(c) Optimum utilization of resources
(d) Adaptation to changing technology
ANSWER: (b)
19. Which of the following is not a principle by Henry Fayol?

(a) Division of work
(b) Harmony not discord
(c) Discipline
(d) Unity of command
ANSWER: (b)
20. Controlling function finds out how far __________ deviates from standards.
(a) Actual performance

(b) Improvement
(c) Corrective actions
(d) Cost
ANSWER: (a)
21. “Planning is theoretical whereas controlling is practical”

(a) True
(b) False
(c) Cannot say
ANSWER: (a)
22. Which of the following is not a limitation of controlling?

(a) Little control on external factors
(b) Costly affair
(c) Ensuring order & discipline
(d) Difficulty in setting quantitative standards
ANSWER: (c)
23. Which of the following is not a characteristic of directing?

(a) Directing initiate action
(b) It is a continuous process
(c) Flows from top to bottom
(d) Ensuring order & discipline
ANSWER: (d)
24. Name the process which co-ordinates human efforts, assembles resources and integrates both
into a unified whole to be utilised for achieving specified objectives,
(a) Management
(b) Planning
(c) Organising
(d) Directing
ANSWER: (c)
25. Which of the following is the elements of directing?

(a) Supervision
(b) Motivation
(c) Leadership
(d) All of the above
ANSWER: (d)

Video Reference:
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https://youtu.be/tjy0B-Q9WMU
https://youtu.be/4_kvJyAW06o
https://youtu.be/dclbuEdKXW0

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INFINITY

MANAGEMENT & ENGINEERING COLLEGE, SAGAR

Department of Management Studies

Prepared By: Dr Mohd. Ashfaq Siddiqui

Department of Management Studies

Department of Management Studies

Elton Mayo’s Hawthorne experiment and it’s contributions to management

Department of Management Studies

Department of Management Studies

Department of Management Studies

Input (5 Managerial End Result

Men, planning management

Department of Management Studies

Management is Universal in nature as every organization requires making of decision, procurement of

1. Efficient use of resources.

Department of Management Studies

Concept of Management: - it is divided in to two parts.

(1) General – It has 7 parts.

(2) New – It has 8 part

Characteristics, Feature, Nature of Management:-

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Significance or Importance of Management

1. Management needs the challenges of change

1. Subject matter of Management

2. Functional area of Management

6. Modern Management is an agent of change.

Management and Administration:

Department of Management Studies

Difference between Administration and Management:

Basis Administration Management

The Process of management:-

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Function of Management: - it is divided into two parts.

1. Planning – Planning is the first and forecast function of management. it is deciding in

Department of Management Studies

2. Operative Function – Production, Purchasing, Finance, Personnel or Human

Evolution of Management Thought:-

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Department of Management Studies

Basic Features or characteristics of Administrative or Process school of management

Basic Features of human behavior school

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1. It treats organization as a “social entity”.

(a) Quantitative or Mathematical School

(a) Quantitative or Mathematical School of management thought: - mathematical or quantitative basis

(b) The System Approach:- An organization functions like an organism. In an organization,

Basic Features of the Systems Approach:

Department of Management Studies

2. It is a multi-disciplinary system in the sense that management is the outcome of contributions of

(d) Contingency approach or Situational approach

Basic Features of the Contingency approach or Situational approach

1. Different situations require the application of different management techniques.

Department of Management Studies

Classical School Neo-classical school

1. The classical school looked at organization as 1. The neo-classical school accepted

Department of Management Studies

2. It considers all organizational 2. It concentrates only on structural change.

4. It treats each organization and each situation

6. Systems thinking help the manger to

7. The systems approach is thought as more

Department of Management Studies

Department of Management Studies

Fayol's 14 principles of management are as under: