Business

Management

Bushra Shazli
 Business Management
Management has been described as a social process involving
responsibility for economical and effective planning & regulation of
operation of an enterprise in the fulfillment of given purposes.
It is a dynamic process consisting of various elements and
activities. These activities are different from operative functions like
marketing, finance, purchase etc. Rather these activities are common
to each and every manager irrespective of his level or status.

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 Business management is the act of organizing people to
accomplish the desired goals and objectives of a business. Business
management requires the utilization of the entity’s resources in the
most efficient manner possible.
Functions of Business Management
Different experts have classified functions of management.
According to George & Jerry, “There are four fundamental functions of
management i.e. planning, organizing, actuating and controlling”.

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 For theoretical purposes, it may be convenient to separate the
function of management but practically these functions are
overlapping in nature i.e. they are highly inseparable. Each function
blends into the other & each affects the performance of others.
1. Planning
It is the basic function of management. It deals with chalking out
a future course of action & deciding in advance the most appropriate
course of actions for achievement of pre-determined goals. According
to KOONTZ, “Planning is deciding in advance - what to do, when to do
& how to do. It bridges the gap from where we are & where we want to
be”. A plan is a future course of actions.

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Planning Process:
1. Setting up of the objectives:.
2. Developing premises:
3. Listing the various alternatives for achieving the objectives:
4. Evaluation of different alternatives:
5. Selecting an alternative:
6. Implement the plan:
7. Follow-up:.

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2. Organizing
It is the process of bringing together physical, financial and
human resources and developing productive relationship amongst
them for achievement of organizational goals.
According to Henry Fayol, “To organize a business is to provide it
with everything useful or its functioning i.e. raw material, tools, capital
and personnel’s”.
To organize a business involves determining & providing human
and non-human resources to the organizational structure.

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Organizing Process
Organizing as a process involves:
• Identification of activities.
• Classification of grouping of activities.
• Assignment of duties.
• Delegation of authority and creation of responsibility.
• Coordinating authority and responsibility relationships.

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3. Staffing
It is the function of manning the organization structure and
keeping it manned. Staffing has assumed greater importance in the
recent years due to advancement of technology, increase in size of
business, complexity of human behavior etc.
The main purpose of staffing is to put right man on right job i.e.
square pegs in square holes and round pegs in round holes.
According to Koontz & O'Donnell, “Managerial function of
staffing involves manning the organization structure through proper
and effective selection, appraisal & development of personnel to fill the
roles designed un the structure”. Staffing involves:
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4. Directing
It is that part of managerial function which actuates the
organizational methods to work efficiently for achievement of
organizational purposes.
It is considered life-spark of the enterprise which sets it in
motion the action of people because planning, organizing and staffing
are the mere preparations for doing the work.
Direction is that inert-personnel aspect of management which
deals directly with influencing, guiding, supervising, motivating sub-
ordinate for the achievement of organizational goals.
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Direction has following elements:
• Supervision
• Motivation
• Leadership
• Communication
Supervision- implies overseeing the work of subordinates by their
superiors. It is the act of watching & directing work & workers.
Motivation- means inspiring, stimulating or encouraging the sub-
ordinates with zeal to work. Positive, negative, monetary, non-
monetary incentives may be used for this purpose.
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• Leadership- may be defined as a process by which manager guides
and influences the work of subordinates in desired direction.
• Communications- is the process of passing information, experience,
opinion etc. from one person to another. It is a bridge of
understanding.
5. Controlling
It implies measurement of accomplishment against the standards
and correction of deviation if any to ensure achievement of
organizational goals.

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Controlling Process
Controlling has following steps:
• Establishment of standard performance.
• Measurement of actual performance.
• Comparison of actual performance with the standards and finding out
deviation if any.
• Corrective action.

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 Importance of Management
1. It helps in Achieving Group Goals - It arranges the factors of
production, assembles and organizes the resources, integrates the
resources in effective manner to achieve goals. It directs group
efforts towards achievement of pre-determined goals. By defining
objective of organization clearly there would be no wastage of time,
money and effort.
Management converts disorganized resources of men, machines,
money etc. into useful enterprise. These resources are coordinated,
directed and controlled in such a manner that enterprise work towards
attainment of goals.

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2. Optimum Utilization of Resources - Management utilizes all the
physical & human resources productively. This leads to efficacy in
management. Management provides maximum utilization of scarce
resources by selecting its best possible alternate use in industry from
out of various uses.
It makes use of experts, professional and these services leads to
use of their skills, knowledge, and proper utilization and avoids
wastage. If employees and machines are producing its maximum there
is no under employment of any resources.

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3. Reduces Costs - It gets maximum results through minimum input by
proper planning and by using minimum input & getting maximum
output. Management uses physical, human and financial resources in
such a manner which results in best combination. This helps in cost
reduction.
4. Establishes Sound Organization - No overlapping of efforts (smooth
and coordinated functions). To establish sound organizational structure
is one of the objective of management which is in tune with objective
of organization and for fulfillment of this, it establishes effective
authority & responsibility relationship i.e. who is accountable to whom,
who can give instructions to whom, who are superiors & who are
subordinates.
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5. Establishes Equilibrium - It enables the organization to survive in
changing environment. It keeps in touch with the changing
environment. With the change is external environment, the initial co-
ordination of organization must be changed. So it adapts organization
to changing demand of market / changing needs of societies. It is
responsible for growth and survival of organization.
6. Essentials for Prosperity of Society - Efficient management leads to
better economical production which helps in turn to increase the
welfare of people. Good management makes a difficult task easier by
avoiding wastage of scarce resource. It improves standard of living.

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 Principles of Management
A principle refers to a fundamental truth. It establishes cause and
effect relationship between two or more variables under given
situation. They serve as a guide to thought & actions.
Therefore, management principles are the statements of
fundamental truth based on logic which provides guidelines for
managerial decision making and actions.

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Henri Fayol’s Principles of Management
These principles are derived: -
• On the basis of observation and analysis i.e. practical experience of
managers.
• By conducting experimental studies.
There are 14 Principles of Management described by Henri Fayol.
1. Division of Work
In practice, employees are specialized in different areas and they have
different skills. Different levels of expertise can be distinguished within the
knowledge areas (from generalist to specialist). Personal and professional
developments support this.

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 According to Henri Fayol specialization promotes efficiency of the
workforce and increases productivity.
In addition, the specialization of the workforce increases their
accuracy and speed.
This management principle of the 14 principles of management
is applicable to both technical and managerial activities.

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2. Authority & Responsibility
Authority & responsibility are co-existing. If authority is given to a
person, he should also be made responsible. In a same way, if anyone is
made responsible for any job, he should also have concerned authority.
Authority refers to the right of superiors to get exactness from
their sub-ordinates whereas responsibility means obligation for the
performance of the job assigned.
Authority without responsibility leads to irresponsible behavior
whereas responsibility without authority makes the person ineffective.

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3. Discipline
This third principle of the 14 principles of management is about
obedience. It is often a part of the core values of a mission and vision in
the form of good conduct and respectful interactions.
This management principle is essential and is seen as the oil to make
the engine of an organization run smoothly.
4. Unity of Command
The management principle ‘Unity of command’ means that an
individual employee should receive orders from one manager and that the
employee is answerable to that manager.
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 If tasks and related responsibilities are given to the employee by
more than one manager, this may lead to confusion which may lead to
possible conflicts for employees.
By using this principle, the responsibility for mistakes can be
established more easily.
5. Unity of Direction
This management principle is all about focus and unity. All
employees deliver the same activities that can be linked to the same
objectives. All activities must be carried out by one group that forms a
team. These activities must be described in a plan of action.
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 The manager is ultimately responsible for this plan and he
monitors the progress of the defined and planned activities. Focus
areas are the efforts made by the employees and coordination.
6. Subordination of Individual Interest
There are always all kinds of interests in an organization. In order
to have an organization function well, Henri Fayol indicated that
personal interests are subordinate to the interests of the organization
(ethics).
The primary focus is on the organizational objectives and not on
those of the individual. This applies to all levels of the entire
organization, including the managers.
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7. Remuneration
Motivation and productivity are close to one another as far as
the smooth running of an organization is concerned. This management
principle argues that the remuneration should be sufficient to keep
employees motivated and productive.
There are two types of remuneration namely non-monetary (a
compliment, more responsibilities, credits) and monetary
(compensation, bonus or other financial compensation). Ultimately, it
is about rewarding the efforts that have been made.

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8. The Degree of Centralization
Management and authority for decision-making process must be
properly balanced in an organization. This depends on the volume and
size of an organization including its hierarchy.
Centralization implies the concentration of decision making
authority at the top management (executive board). Sharing of
authorities for the decision-making process with lower levels (middle
and lower management), is referred to as decentralization by Henri
Fayol. Henri Fayol indicated that an organization should strive for a
good balance in this.

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9. Scalar Chain
Hierarchy presents itself in any given organization. This varies
from senior management (executive board) to the lowest levels in the
organization.
Henri Fayol’s “hierarchy” management principle states that there
should be a clear line in the area of authority (from top to bottom and
all managers at all levels). This can be seen as a type of management
structure. Each employee can contact a manager or a superior in an
emergency situation without challenging the hierarchy. Especially,
when it concerns reports about calamities to the immediate
managers/superiors.

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 A Gang Plank is a temporary arrangement between two different
points to facilitate quick & easy communication. Gang Plank clarifies
that management principles are not rigid rather they are very flexible.
They can be moulded and modified as per the requirements of
situations.
10. Order
According to this principle of the 14 principles of management,
employees in an organization must have the right resources at their
disposal so that they can function properly in an organization. In
addition to social order (responsibility of the managers) the work
environment must be safe, clean and tidy.

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11. Equity
The management principle of equity often occurs in the core
values of an organization.
According to Henri Fayol, employees must be treated kindly and
equally. Employees must be in the right place in the organization to do
things right. Managers should supervise and monitor this process and
they should treat employees fairly and impartially.

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12. Stability of Tenure of Personnel
This management principle of the 14 principles of management
represents deployment and managing of personnel and this should be
in balance with the service that is provided from the organization.
Management strives to minimize employee turnover and to have
the right staff in the right place. Focus areas such as frequent change of
position and sufficient development must be managed well.

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13. Initiative
Henri Fayol argued that with this management principle
employees should be allowed to express new ideas. This encourages
interest and involvement and creates added value for the company.
Employee initiatives are a source of strength for the organization
according to Henri Fayol. This encourages the employees to be involved
and interested.

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14. Esprit de Corps
The management principle ‘esprit de corps’ stands for striving for
the involvement and unity of the employees. Managers are responsible
for the development of morale in the workplace; individually and in the
area of communication.
Esprit de corps contributes to the development of the culture
and creates an atmosphere of mutual trust and understanding.

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Scientific Management Theory
The Scientific Management Theory is well known for its
application of engineering science at the production floor or the
operating levels. The major contributor of this theory is Fredrick
Winslow Taylor, and that’s why the scientific management is often
called as “Taylorism”.
Its main objective is improving economic efficiency,
especially labor productivity.

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 The scientific management theory focused on improving the
efficiency of each individual in the organization. The major emphasis is
on increasing the production through the use of intensive technology,
and the human beings are just considered as adjuncts to machines in
the performance of routine tasks.
The scientific management theory basically encompasses the
work performed on the production floor as these tasks are quite
different from the other tasks performed within the organization. Such
as, these are repetitive in nature, and the individual workers
performing their daily activities are divided into a large number of
cyclical repetition of same or closely related activities.

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 Also, these activities do not require the individual worker to
exercise complex-problem solving activity. Therefore, more attention is
required to be imposed on the standardization of working methods and
hence the scientific management theory laid emphasis on this aspect.
The major principles of scientific management, given by Taylor,
can be summarized as follows:
• Separate planning from doing.
• The Functional foremanship of supervision e.g Eight supervisors
required to give directions and instructions in their respective fields.

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• Time, motion and fatigue studies shall be used to determine the fair
amount of work done by each individual worker.
• Improving the working conditions and standardizing the tools, period
of work and cost of production.
• Proper scientific selection and training of workmen should be done.
• The financial incentives should be given to the workers to boost their
productivity and motivate them to perform well.

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 Thus, the scientific management theory focused more on
mechanization and automation, i.e., technical aspects of efficiency
rather than the broader aspects of human behavior in the organization.
HAWTHORNE EXPERIMENTS
Elton Mayo’s team conducted a number of experiments involving
six female workers. These experiments are often referred to as the
Hawthorne experiments or Hawthorne studies as they took place at
The Hawthorne Works of the Western Electric Company in Chicago.

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Hawthorne Experiment Details
Over the course of five years, Mayo’s team altered the female
worker’s working conditions and monitored how the change in working
conditions affected the workers morale and productivity. The changes
in working conditions included changes in working hours, rest brakes,
lighting, humidity, and temperature. The changes were explained to the
workers prior to implementation.
Hawthorne Experiment Results
At the end of the five year period, the female worker’s working
conditions, reverted back to the conditions before the experiment
began.
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 Unexpectedly the workers morale and productivity rose to levels
higher than before and during the experiments. The combination of
results during and after the experiment (i.e., the increase in the
workers productivity when they were returned to their original working
conditions) led Mayo to conclude that workers were motivated by
psychological conditions more than physical working condition.
After analyzing the results from the Hawthorne experiments
Mayo concluded that workers were motivated by more than self
interest and the following had an impact too:

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• Psychological Contract
There is an unwritten understanding between the worker and
employer regarding what is expected from them; Mayo called this the
psychological contract.
• Interest in Workers
A worker’s motivation can be increased by showing an interest in
them. Mayo classified studying the workers (through the
experiments) as showing an interest in the workers.

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• Work is a Group Activity
Work is a group activity, team work can increase a worker’s
motivation as it allows people to form strong working relationships
and increases trust between the workers. Work groups are created
formally by the employer but also occur informally. Both informal and
formal groups should be used to increase productivity as informal
groups influence the worker’s habits and attitudes.
• Social Aspect of Work
Workers are motivated by the social aspect of work, as demonstrated
by the female workers socializing during and outside work and the
subsequent increase in motivation.

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• Recognize Workers
Workers are motivated by recognition, security and a sense of
belonging.
• Communication
The communication between workers and management influences
workers’ morale and productivity.
Workers are motivated through a good working relationship with
management.

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Conclusion
The traditional view of how to motivate employees is that you
offer monetary rewards (pay increases, bonuses etc.) for work
completion. However the Hawthorne experiments may suggest that
motivation is more complicated than that.
Advocates of the "Hawthorne Effect" will state that the
Hawthorne experiment results show that motivation can be improved
through improving working relationships and social interaction.

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 Organizational Structure
Organizational structure is a system used to define a
hierarchy within an organization. It identifies each job, its
function and where it reports to within the organization.
This structure is developed to establish how an
organization operates and assists an organization in obtaining
its goals to allow for future growth. The structure is illustrated
using an organizational chart.

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Importance of Organization Structure
Organization structure is important for the efficient management of an
enterprise because of the following factors:
• Organization structure allocates authority and responsibility. It specifies who is to
direct whom and who is to report to whom.
• Organization structure lay down the pattern of the communication and
coordination in the enterprises.
• Organization structure determines the location of centers of decision making in the
enterprises.
• A sound organization structure facilitates growth of the enterprises.
• A sound organization structure which is adoptable to change can make the best
possible use of the latest technology.

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Types of Organization Structure
The management of every business enterprises has involved its own
organization structure. The form of organization structure mainly
depends upon the nature of activities of business, personnel and
philosophy of management.
There are several types of organization structure, each reflecting a
particular pattern of authority relationship:
• Line Organization
• Functional Organization
• Line and staff Organization

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Others:
Project Organization
Matrix Organization
1. Line Organization
It is the basic framework for the whole organization. It
represents direct vertical relationship in the organization. This is the
simplest and oldest form of internal organization.
This organization is also known as scalar organization. The
authority flows from the top to lower level.

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Advantages of a Line Organization
• Simple to work
• Economical and effective. It also allows quick decisions and efficient
coordination.
• Conforms to the scalar principle of organization. Further, it promotes
the unity of command.
• There is excellent discipline in a line organization due to unified
control and undivided loyalties.
• It is a stable form of organization.

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Disadvantages of a Line Organization
• These organizations are based on the autocratic system
of management.
• The division of work is not based on any scientific plan but on the
whims of the manager.
• It might stop progress and prevent the unit to work effectively.
• Such organizations might also encourage nepotism or favoritism
based on relationship or friendship.

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2. Functional Organization
Functional authority occupies a mid-way position between line
and line staff authority. It is means of putting the specialists in the top
positions throughout the enterprises.
It confers upon the holders of a functional position a limited
power of the command over the people of various departments
concerning his function.

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Disadvantages
Functional organization suffers from the following drawbacks:
• The operation of the functional is too complicated to be easily understood by
the workers. Workers are accountable to a number of bosses. This creates
confusion in the organization.
• Functional organization develops specialists rather than generalists. This may
create problem in the succession of top executive position when the present
functional expert retire or leave the organization.
• There is generally lack of position among the functional executives and delay
in the decision making when a decision problem requires the involvement of
more than one specialist.

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3. Line and Staff Organization
Line and staff organization is a modification of line organization
and it is more complex than line organization.
According to this administrative organization, specialized and
supportive activities are attached to the line of command by appointing
staff supervisors and staff specialists who are attached to the line
authority.
The power of command always remains with the line executives and
staff supervisors guide, advice and council the line executives. Personal
Secretary to the Managing Director is a staff official.
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 MANAGING DIRECTOR

↓ ↓ ↓

Production Manager Marketing Manager Finance Manager

↓ ↓ ↓

Plant Supervisor Market Supervisor Chief Assisstant

↓ ↓ ↓

Foreman Salesman Accountant

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4. Project organization
Organization units who have to complete of a long duration are
termed as project organization. Each project is vitally important to the
organization.
Therefore, a team of specialists from different areas is created
for each project. The size of the projects team varies from the one
project to another. The activities of the project team are coordinated
by the project managers who have the authority to obtain advice and
assistance of experts both inside and outside the organization.

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6. Matrix Organization
Matrix organization is a hybrid structure combing two
complementary structure functional and project department.
Functional structure is a permanent feature of the matrix organization
and remains authority for overall operation of the functional units.
Projects departments are created whenever specific projects
required a high degree of technical skill and resources for a temporary
period. A functional department creates a vertical chain of the
command while the project team for the horizontal lines, thereby
forming matrix.

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 Formal and Informal Organizations
Formal Organisation:
When the managers are carrying on organizing process then as a result of
organizing process an organizational structure is created to achieve systematic
working and efficient utilization of resources. This type of structure is known as
formal organizational structure.
Formal organizational structure clearly spells out the job to be performed by
each individual, the authority, responsibility assigned to every individual, the
superior- subordinate relationship and the designation of every individual in
the organisation. This structure is created intentionally by the managers for
achievement of organizational goal.

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Features of Formal organisation:
(1) The formal organizational structure is created intentionally by the process of
organizing.
(2) The purpose of formal organisation structure is achievement of
organizational goal.
(3) In formal organizational structure each individual is assigned a specific job.
(4) In formal organisation every individual is assigned a fixed authority or
decision-making power.
(5) Formal organizational structure results in creation of superior-subordinate
relations.

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Advantages of Formal Organisation:
1. Systematic Working:
Formal organisation structure results in systematic and smooth
functioning of an organisation.
2. Achievement of Organizational Objectives:
Formal organizational structure is established to achieve organisational
objectives.
3. Co-ordination:
Formal organizational structure results in coordinating the activities of
various departments.
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4. Creation of Chain of Command:
Formal organizational structure clearly defines superior subordinate
relationship, i.e., who reports to whom.
5. . More Emphasis on Work:
Formal organizational structure lays more emphasis on work than
interpersonal relations.

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Disadvantages of Formal Organisation:
1. Delay in Action:
While following scalar chain and chain of command actions get delayed in
formal structure.
2. Ignores Social Needs of Employees:
Formal organizational structure does not give importance to psychological
and social need of employees which may lead to demotivation of employees.
3. Emphasis on Work Only:
Formal organizational structure gives importance to work only; it ignores
human relations, creativity, talents, etc.

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Informal Organisation:
In the formal organizational structure individuals are assigned
various job positions. While working at those job positions, the
individuals interact with each other and develop some social and
friendly groups in the organisation.
This network of social and friendly groups forms another
structure in the organisation which is called informal organizational
structure.
The informal organizational structure gets created automatically
and the main purpose of such structure is getting psychological
satisfaction.
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 Span of Control
A span of control is a concept that describes the number of
people that are managed by someone. It is a chain of command notion
where the number of subordinates are properly identified to
understand a manager’s reach.
This is a crucial information for managers since they need to
understand which are the resources available from a human resources
standpoint. A hierarchical organizational structure normally has well
defined boundaries that allow the manager to fully understand who are
part of his team.
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 Delegation of Authority
A manager alone cannot perform all the tasks assigned to him. In
order to meet the targets, the manager should delegate authority.
Delegation of Authority means division of authority and powers
downwards to the subordinate. Delegation is about entrusting
someone else to do parts of your job. Delegation of authority can be
defined as subdivision and sub-allocation of powers to the
subordinates in order to achieve effective results.

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 Elements of Delegation
• 1. Authority - in context of a business organization, authority can be
defined as the power and right of a person to use and allocate the
resources efficiently, to take decisions and to give orders so as to
achieve the organizational objectives. Authority must be well-
defined. All people who have the authority should know what is the
scope of their authority is and they shouldn’t misutilize it. Authority is
the right to give commands, orders and get the things done. The top
level management has greatest authority.

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 Authority always flows from top to bottom. It explains how a
superior gets work done from his subordinate by clearly explaining
what is expected of him and how he should go about it. Authority
should be accompanied with an equal amount of responsibility.
Delegating the authority to someone else doesn’t imply escaping from
accountability. Accountability still rest with the person having the
utmost authority.
2. Responsibility- is the duty of the person to complete the task
assigned to him. A person who is given the responsibility should ensure
that he accomplishes the tasks assigned to him. If the tasks for which
he was held responsible are not completed, then he should not give
explanations or excuses.
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Responsibility without adequate authority leads to discontent and
dissatisfaction among the person. Responsibility flows from bottom to
top. The middle level and lower level management holds more
responsibility. The person held responsible for a job is answerable for it.
If he performs the tasks assigned as expected, he is bound for praises.
While if he doesn’t accomplish tasks assigned as expected, then also he
is answerable for that.
3. Accountability - means giving explanations for any variance in the
actual performance from the expectations set. Accountability can not
be delegated.

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For achieving delegation, a manager has to work in a system and has to
perform following steps : -
• Assignment of tasks and duties
• Granting of authority
• Creating responsibility and accountability

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 Leadership Theories
• Great Man Theory
• Trait Theory
• Behavioural Theories
-Ohio state Studies and Michigan Studies
-Managerial Grid
• Contingency Theory :
- Fiedler’s Least Preferred Co-worker (LPC) Theory
-Cognitive Resource Theory
• Situational Theory :
-Hersey and Blanchard’s Situational Theory
-House’s Path Goal Theory
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-Leader Participation Model
 Great Man Theory

• Leaders are born, not made.

• This approach emphasized that a person is born with or
without the necessary traits of leaderships.
Early explanations of leadership studied the “traits” of
great leaders
▪ “Great man” theories (Gandhi, Lincoln, Napoleon)
▪ Belief that people were born with these traits and only the
great people possessed them
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 Great Man Theory
• Great Man approach actually emphasis “charismatic”
leadership. charisma being the Greek word for gift.
• No matter what group such a natural leader finds
himself in, he will always be recognized for what he
is.
• According to the great man theory of leadership,
leadership calls for certain qualities like commanding
personality, charm, courage ,intelligence,
persuasiveness and aggressiveness.

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 Trait Theory
• What characteristics or traits make a person a
leader?
• Great Man Theory: Individuals are born either
with or without the necessary traits for leadership
• Trait theories of leadership sought personality,
social, physical or intellectual traits that
differentiate leaders from non leaders
• Trait view has little analytical or predictive value
• Technical, conceptual and human skills (Katz
1974)

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 Trait Theories

Leadership Traits:
• Ambition and energy
• The desire to lead
• Honesty and
integrity
• Self-confidence
• Intelligence
• Job-relevant
knowledge
© 2003 Prentice Hall Inc. All rights reserved. Bushra Shazli 11–6
 Trait Theory
The trait theory is based on the great man theory, but it is more systematic in its analysis
of leaders. Like the great man theory, this theory assumes that the leader’s personal traits
are the key to leadership success.
Personality Traits

Abilities Personal Traits Motivators

⚫ Supervising Ability ⚫ Need for Occupational

⚫ Self-Assurance
⚫ Intelligence Achievement
⚫ Decisiveness
⚫ Initiative ⚫ Self-actualization
⚫ Masculinity/Famininity

⚫ Maturity ⚫ Power Over Others

⚫ Working Class Affinity ⚫ High Financial Reward

⚫ Job Security
Bushra Shazli
 Traits of Leaders
• Intelligence
• Physical Features
• Inner Motivation
• Maturity
• Vision & Foresight
• Acceptance of Responsibility
• Open-Minded and adaptability
• Self-confidence
• Human Relations Attitude
• Fairness and Objectivity

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 Trait Theories
Limitations:
• No universal traits that predict leadership in all
situations.
• Traits predict behavior better in “weak” than
“strong” situations.
• Unclear evidence of the cause and effect of
relationship of leadership and traits.
• Better predictor of the appearance of leadership
than distinguishing effective and ineffective
leaders.
Bushra Shazli
 Behavioural Theory
In contrast with trait theory, behavioural theory
attempts to describe leadership in terms of what leaders
do, while trait theory seeks to explain leadership on the
basis of what leaders are. Leadership according to this
approach is the result of effective role behaviour.
Leadership is shown by a person’s acts more than by
his traits. This is an appropriate new research strategy
adopted by Michigan Researchers in the sense that the
emphasis on the traits is replaced by the emphasis on
leader behaviour (which could be measured).
Bushra Shazli
 Behavioural Theory
Theories proposing that specific behaviors
differentiate leaders from non leaders.
• Pattern of actions used by different
individuals determines leadership potential
• Examples
– Autocratic, democratic and laissez-faire
– Michigan Studies: Employee centered versus
task centered

Bushra Shazli
 Behavioural Theory
– Theories that attempt to isolate behaviors that
differentiate effective leaders from ineffective
leaders
– Behavioral studies focus on identifying critical
behavioral determinants of leadership that, in
turn, could be used to train people to become
leaders

Bushra Shazli
 Behavioual Leadership Studies
• The Ohio State Studies sought to identify
independent dimensions of leader behavior
– Initiating structure
– Consideration
• The University of Michigan Studies sought to
identify the behavioral characteristics of leaders
related to performance effectiveness
– Employee oriented
– Production oriented
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Ohio State Studies

Bushra Shazli 11–15

 University of Michigan Studies

© 2003 Prentice Hall Inc. All rights reserved. Bushra Shazli 11–16
Managerial Grid ( Blake & Mouton)

Bushra Shazli
 Contingency Theories
& situational Theories of
Leadership
➢Contingency Theories
– Fiedler Model
▪ Cognitive Resource Theory
– Hersey and Blencherd’s Situational Theory
– Leader-member Exchange Theory
– Path-Goal Theory
– Leader Participation Model

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 Contingency Theories

➢While trait and behavior theories do help us

understand leadership, an important
component is missing: the environment in
which the leader exists.
➢Contingency Theory deals with this
additional aspect of leadership effectiveness
studies.

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 Fiedler Model
• The theory that effective groups depend upon a proper
match between a leader's style of interacting with
subordinates and the degree to which the situation gives
control and influence to the leader.
• There are basically three steps in the model

1) Identifying Leadership Style

2) Defining the Situation

3) Matching leaders and situations

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 1) Identifying Leadership Style
• Fiedler believes a key factor in leadership
success is the individual’s basic
leadership style
So he created the Least Prefer Co-worker
(LPC) Questionnaire
• LPC:-An instrument that tells to measure
whether a person is task or relationship
oriented
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➢ If the low LPC score then the person is task oriented

➢ If the high LPC score then the person is relationship

oriented

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 Least Preferred Coworker (LPC)
Scale
Pleasant 8 7 6 5 4 3 2 1 Unpleasant
Friendly 8 7 6 5 4 3 2 1 Unfriendly
Rejecting 8 7 6 5 4 3 2 1 Accepting
Tense 8 7 6 5 4 3 2 1 Relaxed
Cold 8 7 6 5 4 3 2 1 Warm
Supportive 8 7 6 5 4 3 2 1 Hostile
Boring 8 7 6 5 4 3 2 1 Interesting
Quarrelsome 8 7 6 5 4 3 2 1 Harmonious
Gloomy 8 7 6 5 4 3 2 1 Cheerful
Open 8 7 6 5 4 3 2 1 Closed
Backbiting 8 7 6 5 4 3 2 1 Loyal
Untrustworthy 8 7 6 5 4 3 2 1 Trustworthy
Considerate 8 7 6 5 4 3 2 1 Inconsiderate
Nasty 8 7 6 5 4 3 2 1 Nice
Agreeable 8 7 6 5 4 3 2 1 Disagreeable
Insincere 8 7 6 5 4 3 2 1 Sincere
Kind 8 7 6 5 4 3 2 1 Unkind
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 Scoring
• Your final score is the total of the numbers you
circled on the 18 scales
57 or less = Low LPC (task motivated)
58-63 = Middle LPC (socio-independent leaders,
self directed and not overly concerned with the
task or with how others view them)
64 or above = High LPC (motivated by
relationships)

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Bushra Shazli
 2) Defining the Situation
• Fiedler identified three contingency dimensions that
define the key situational factors
• 1. Leader-member relations:
The degree of confidence, trust, and respect,
members have in the leader
2. Task structure:
The degree to which the job assignments are
procedurized
3. Position Power:
The degree of influence a leader has over power
variables such as hiring, firing, promotion etc.
Bushra Shazli
 3) Matching leaders and Situations
• After knowing the leadership style through LPC and
defining all the situations, we will chose the leader
who will fit for the situation.
Two ways in which to improve leader effectiveness

1) Change the leader to fit the situation

2) Change the situation to fit the leader

Bushra Shazli
 Cognitive Resource Theory
• A theory of leadership that states that
stress unfavorably effects the situation,
and intelligence, and experience can
lessen the influence of stress on the
leader.

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➢ A refinement of Fielder’s original model:
– Focuses on stress as the enemy of rationality and
creator of unfavorable conditions
– A leader’s intelligence and experience influence his or
her reaction to that stress
➢ Stress Levels:
– Low Stress: Intellectual abilities are effective
– High Stress: Leader experiences are effective
➢ Research is supporting the theory

Bushra Shazli
 Hersey & Blanchard’s Situational
Leadership (SLT)
➢ A model that focuses on follower “readiness”
– Followers can accept or reject the leader
– Effectiveness depends on the followers’ response to the
leader’s actions
– “Readiness” is the extent to which people have the
ability and willingness to accomplish a specific task

➢ A paternal model:
– As the child matures, the adult releases more and more
control over the situation
– As the workers become more ready, the leader becomes
more laissez-faire
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• Hersey and Blencherd identify four specific
leader behaviors
• The most effective behavior depends on the
follower’s ability and motivation
3. If followers are unable and unwilling to do a task,
the leader needs to give specific and clear directions.
4. If followers are unable and willing,
The leader need to display a high task orientation.
5. If the followers are able and unwilling,
The leader needs to use a supportive and participative
style.
6. If followers are both able and willing,
The leader doesn't need to do much.
Bushra Shazli
Situational Leadership Theory
HT&HR
HR&LT

HT&LR

LT&LR

Mature Immature

Bushra Shazli
 House’s Path-Goal Theory
• The theory that a leader’s behavior is acceptable to
subordinates insofar as they view it as a source of either
➢The Theory:
immediate or future satisfaction.
– Leaders provide followers with information, support, and resou
to help them achieve their goals
– Leaders help clarify the “path” to the worker’s goals
– Leaders can display multiple leadership types

Bushra Shazli
Path-Goal Theory

Bushra Shazli 11–36

➢ Four types of leaders:

– Directive: focuses on the work to be done

– Supportive: focuses on the well-being of the worker

– Participative: consults with employees in decision-

making

– Achievement-Oriented: sets challenging goals

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The Path-Goal Theory

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Path-Goal Theory

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Bushra Shazli
 W.J.Reddin’s 3-D Management
Style Theory

Relationship Dimension

Task Dimension

Three DimensionsBushra
ofShazli
Leadership Style
Theories of Motivation

Bushra Shazli
Theories;
• 1- Maslow’s Need hierarchy theory
• 2-ERG Theory
• 3-McGregor’s theory X and theory Y
• 4- Herzberg’s two factor theory
• 5-William Ouchi’s theory Z
• 6-Vroom’s expectancy theory
• 7-McClelland’s acievement theory
• 8-Adam’s equity theory

Bushra Shazli
MASLOW’S NEED HIRARCY THEORY
Within every individual there is hierarchy of the needs which are
as follows:

Bushra Shazli
ERG Theory
Developed by Clayton Alderfer
It identifies three category of needs-

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 • Merits
▪ ERG theory assumes that
both ‘satisfaction-
progression process’ and
frustration-regression
process apply.

▪ Flexible

• Received better support

form scholars

• Presents more logical

version of the need
hierarchy
Bushra Shazli
HERZBERG’S TWO FACTOR THEORY
• Also known as “Motivation-hygiene theory”.

• Based on Research of job attitude of 200 engineers and accountant of

a company

• Two factor theory states that there are certain factors in the
workplace that causes job satisfaction while a separate set of factors
causes dissatisfaction.

Bushra Shazli
Bushra Shazli
Bushra Shazli
Merits-
• Clearly distinguishes between the factors that
motivate employees on the job and the factors that
maintain employees on the job.
•
• It recommends specific measures (motivators) to
improve motivation level.

• It helps in understanding the effect of job content on

motivation of employees.

Bushra Shazli
Demerits-
• It ignores the impact of situational variables on motivation

• Sometimes in real life situation, there is no direct cause and effect

relationship between satisfaction and performance

• Not all the measures of satisfaction have been explored and utilised.

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 THEORY X AND THEORY Y
• Given by Prof. Douglas McGregor.

➢Describe two distinct set of assumption about people at

work.

• He believed that these assumptions influence the

thinking and attitude of most managers about the
people at work.

• Theory X presents negative view of human nature

whereas Theory Y reflects positive view of human
behavior.
Bushra Shazli
THEORY X THEORY Y

Average human being dislike work and will Average human being does not inherently
avoid work, if possible dislike work.

Prefers to be directed Self-direction and self-control

Wishes to avoid responsibility Seeks Responsibility

Relative little ambition Commitment to objectives

Resists change Not lazy

Want security above all other factors Motivated by higher level needs

Need to be supervised at every level No need of supervision at every level.

Bushra Shazli
THEORY Z
• Given by Willim Ouchi.

• It belief that a high degree of mutual responsibilities , loyalty and

consideration between companies and their employees will result in
higher productivity.

Bushra Shazli
VROOM’S EXPECTANCY THEORY
• Expectancy theory states that every employee is motivated to work
when he believes to achieve the things which he wants from his work.

I WILL WORK HARD AS THAT WILL LEAD PERFOMANCE

TO PERFOMANCE APPRAISAL WILL
APPRAISAL LEAD TO
PROMOTION

Bushra Shazli
• This theory has three elements.

• Expectancy – is the belief that increased effort will lead to

increased performance . If I work hard my performance
will rise.

• Instrumentality- is the belief that if you perform well the

valued outcome will receive. If I do a good job, I will get
promotion.

• Valence-It is the importance that the individual places

upon the expected outcome.

Bushra Shazli
Classification of Motivation

• 1- Positive and negative motivation

• 2- Extrinsic and Intrinsic Motivation
• 3- Financial and non-financial motivation

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 Corporate Governance and Ethics
Corporate governance is the system of rules, practices, and
processes by which a firm is directed and controlled. Corporate
governance essentially involves balancing the interests of a company's
many stakeholders, such as shareholders, senior management
executives, customers, suppliers, financiers, the government, and the
community. Since corporate governance also provides the framework
for attaining a company's objectives, it encompasses practically every
sphere of management, from action plans and internal controls to
performance measurement and corporate disclosure.

Bushra Shazli
A company’s corporate governance is important to investors since it
shows a company's direction and business integrity. Good corporate
governance helps companies build trust with investors and the
community. As a result, corporate governance helps promote financial
viability by creating a long-term investment opportunity for market
participants.
Communicating a firm's corporate governance is a key component of
community and investor relations.

Bushra Shazli
 Business Ethics
• Business ethics is a kind of applied ethics. It is the
application of moral or ethical norms to business. The term ethics has
its origin from the Greek word “ethos”, which means character or
custom- the distinguishing character, sentiment, moral nature, or
guiding beliefs of a person, group, or institution.
• Ethics is a set of principles or standards of human
conduct that govern the behaviour of individuals or organization.
Ethics can be defined as the discipline dealing with moral duties and
obligation, and explanation what is good or not good for others and
for us.

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• Ethics is the study of moral decisions that are made by
us in the course of performance of our duties. Ethics is the study of
characteristics of morals and it also deals with the moral choices that
are made in relationship with others
• Business ethics comprises the principles and standards
that guide behaviour in the conduct of business. Businesses must
balance their desire to maximise profits against the needs of the
stakeholders. Maintaining this balance often requires tradeoffs. To
address these unique aspects of businesses, rules- articulated and
implicit are developed to guide the businesses to earn profits without
harming individuals or society as a whole.

Bushra Shazli