PRINCIPLES OF MANAGEMENT

(CZ22B / CPC4B)

FREDERICK WINSLOW
HENRI FAYOL PETER DRUCKER
TAYLOR Scientific Management Theory Father of Modern Management
Father of Scientific Management

GEORGE ELTON MAYO DOUGLAS MCGREGOR' ABRAHAM MASLOW

(The Hawthorne Experiments (Theory of Motivation - Theory (Founder of Humanistic
Thinker) X and Theory y) Psychology )

Prepared by
M. JEGANRAJ
Assistant Professor
Department of B.Com CA
JAH Agarsen college
Madhavaram

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 SYLLABUS
PRINCIPLES OF MANAGEMENT
(CPC4B)

Unit I: Introduction
Definition – Importance – Nature and Scope of Management – Process of Management - Role
and functions of Managers - Levels of Management Scientific Management Contributions to
Management by different Schools of thought.

Unit II : Planning
Nature – Importance -Types of Planning - Steps in planning - Objectives of Planning – Policies -
Decision making Process-Types of Decisions. HRM- Meaning, -Nature and scope of HRM

Unit III : Organization

Meaning and Types of organizations - Principles – Formal and Informal organization -
Organisation Structure – Span of Control – Departmentalisation – Basis - Meaning and
Importance of Departmentalisation. Policies - Meaning and Types – Procedures - Forecasting.

Unit IV: Authority and Responsibility

Authority – Definition – Sources – Limitations – Difference between Authority and
Responsibility – Delegation of Authority – Meaning – Principles and importance –
Centralisation Vs Decentralisation- Leadership & Communication.

Unit V : Direction Co-ordination & Control

Direction – Nature - Purpose. Co-ordination – Need – Types and Techniques – Requisites for
Excellent Co-ordination. Controlling – Meaning – Importance – Control Process.

Suggested Readings
1. Gupta, C.B. Management Theory & Practice, Sulthan Chand & Sons, New Delhi.
2. Prasad,L.M. Principles & Practice of Management, Sultan Chand & Sons, New Delhi.
3. Tripathi,P.C.&Reddy,P.N. Principles of Managements, Tata Mc Graw Hill, New Delhi.
4. Weihrich and Koontz, Management-A Global Perspective.
5. Premavathy N, Principles of Management, Sri Vishnu Publications, Chennai.
6. Jayasankar, J. Business Management, Margham Publication, Chennai.
7. Sundar,K. Principles of Management, Vijay Nicole Imprints Pvt. Ltd. ,Chennai

E-Resources
1. www.wisdomjobs.com
2. www.aima.in
3. www.clep.collegeboard.org

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 UNIT I: INTRODUCTION TO MANAGEMENT

What is Management?
 The word manage comes from the Italian word “Maneggiare” - means
‘To Handle’ (Handle the problem with the help of some tools)
 Management is the process of planning, organizing, leading and controlling the efforts
of organization members and using all other organizational resources to achieve stated
organizational goals

Definitions of Management

1. Mary Parker
"Management is the art of getting things done through people."
Follet

2. Harold "Management is the art of getting things done through and with people
Koontz in formally organized groups."

"To manage is to forecast and to plan, to organize, to command, to co-

3. Henri Fayol
ordinate and to control."

4. Peter "Management is a multi-purpose organ that manages business and

Drucker manages managers and manages workers and work."

 Management brings together all Six Ms i.e. Men, Money, Machines, Materials, Methods
and Markets.
 They use these resources for achieving the objectives of the organization such as high
sales, maximum profits, business expansion, etc

Objectives of Management
1. To increasing organizational effectiveness.
2. To achieve optimum utilization of various resources.
3. To have co-ordination between various department in the organization.
4. To have co-ordination between various agencies, and company.
5. To control the material quality.
6. To reduces the execution time for various activities of the organization.
7. To control the quality of workmanship.
8. To manage and control economy execution.

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 Importance of Management / Significance of Management

Importance of Management
1. Encourages Planning

2. Encourages Innovation

3. Facilitates Growth And Expansion

4. Improves Life of Workers

5. Improves Corporate Image

6. Motivates Employees

7. Optimum Use of Resources

8. Reduces Wastage

9. Increases Efficiency

10. Improves Relations

11. Reduces Absenteeism And Labour Turnover

12. Encourages Team Work

1. Encourages Planning
 Management encourages initiative. Initiative means to do the right thing at the right time
without being told or influenced by the superior.

2. Encourages Innovation
 Management also encourages innovation in the organization. Innovation brings new
ideas, new technology, new methods, new products, new services, etc

3. Facilitates Growth And Expansion

 Management makes optimum utilization of available resources. It reduces wastage and
increase efficiency.

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4. Improves Life of Workers
 Management shares some of its profits with the workers. It provides the workers with
good working environment and conditions.
5. Improves Corporate Image
 If the management is good, then the organization will produce good quality goods and
services.

6. Motivates Employees
 Management motivates employees by providing financial and non-financial incentives.

7. Optimum Use of Resources

 Management brings together the available resources. It makes optimum (best) use of
these resources. This brings best results to the organization.

8. Reduces Wastage
 Management reduces the wastage of human, material and financial resources. Wastage is
reduced by proper production planning and control.

9. Increases Efficiency
 Efficiency is the relationship between returns and cost. Management uses many
techniques to increase returns and to reduce costs.

10. Improves Relations

 Management improves relations between individuals, groups, departments and
between levels of management.

11. Reduces Absenteeism And Labour Turnover

 Absenteeism means the employee is absent without permission.
 Labour Turnover means the employee leaves the organization.

12. Encourages Team Work

 Management encourages employees to work as a team. It develops a team spirit in the
organization.

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 The Nature of Management
1. Management is a Continuous Process
 Management is a never ending process. It
will remain the part of organization till the
organization itself exists.
2. Universal in Nature
 Management is universal in nature i.e. it
exists everywhere in universe wherever
there is a human activity.
The Nature of Management 3. Multidisciplinary
 Management is basically multidisciplinary.
Management draws knowledge and
Management is a concepts of various other streams like
Continuous Process sociology, psychology, economics, statistics
etc.
4. Management is a Group Activity
Universal in Nature  Management is a vital part of group
activity. As no individual can satisfy all his
needs himself, he unites with his co-
workers and work together as an organized
Multidisciplinary
group to achieve what he cannot achieve
individually.
5. Management is Goal Oriented
Management is a
 Management is a goal oriented activity. It
Group Activity works to achieve some predetermined
objectives or goals which may be economic
Management is Goal or social.
Oriented 6. Management is Dynamic
 Management is dynamic in nature i.e.
techniques to manage business changes
Management is Dynamic itself over a period of time.
7. System of Authority
 Authority is power to get the work done by
others and compel them to work
System of Authority systematically.
8. Management is an Art
 Management is considered as art as both
Management is an Art requires skills, knowledge, experience and
creativity for achievement of desired
results.
9. Management is Science
Management is Science  Science tells about the causes and effects
of applications and is based on some
specific principles and procedures.

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 Process of Management

Process
 A systematic method of doing things
 A systematic method of handling activities

A. Planning
 Planning is the selection of goals
 Planning is the process of establishing goals and suitable course of action for achieving
organizational goals
 The determination of short-to-long-range plans to achieve the objectives of organization
B. Organizing
 It is the process of arranging and allocating work, authority, and resources among
members to achieve goals
 Process of engaging two or more people in working together in a structure way to
achieve a specific goals
 The development of sound organization structure according to predetermined plans
C. Leading
 It involves directing, influencing and motivating employees to perform
 The process of directing and influencing the task-related activities of group members of
an organization
D. Controlling
 The process of ensuring that actual activities conform to planned activities
 It is the process that measures current performance and guides it towards some
predetermined objectives

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 Role and functions of Managers

Figurehead
Interpersonal
Leader
Contact
Liason
Monitor
Mintzberg Information
Managerial Disseminator
Processing
Roles Spokesman
Entrepreneur
Disturbance Handler
Decision-making
Resource Allocator
Negotiator

A) Interpersonal contact
It refers to the contact between the manager and the people in his environment
1. Figurehead A manager is expected to carry out formal and/or representative duties
The manager motivates and develops staff and encourages a positive
2. Leader
work environment
A manager serves as an agent and a linking pin between the high and
3. Liason
low levels

B) Information processing
The managerial role involves the processing of information which means that they send,
pass on and analyze information
The manager collects all internal and external information that is related
1. Monitor
to the organization
The manager passes on truthful information to his subordinates and to
2. Disseminator
other people within the organization
The manager represents the company and he communicates to the
3. Spokesman
outside world about the organization

C) Decision-making
Managers are responsible for decision-making and they can do this in different ways at
different levels
1. Entrepreneur The manager plan and start changes and strategies
2. Disturbance The manager will always immediately respond to unexpected events
Handler and operational breakdowns
3. Resource
The manager controls and permits the use of organizational resources
Allocator
The manager participates in negotiations with other organizations and
4. Negotiator
individuals and he represents the interests of the organization

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 Levels of Management / Types of Managers

Top Level Management Functions of the Top Management

 It is the policy making body 1. Determination of Objectives
 Top managers are responsible for the overall 2. Formulation of Policies
management of the organization 3. Long Range Planning and Strategy
 Top managers are responsible for the overall 4. Organizing for Action
direction and success of all the activities of 5. Developing of Major Resources
the company 6. Selecting Key Personnel
7. Co-ordination and Controlling
Middle Level Management Functions of the Middle Management
 The middle level management deals with the 1. Interprets the policies of the company
finishing of the policies and plans developed 2. Prepare organizational set up in their
by the top management department
 The middle level management direct the 3. Issue orders to the subordinates
activities of lower-level managers 4. motivate the personnel for higher productivity
 Their important role is direct activities that 5. Collecting reports and other information about
implement their organizations' polices the work
6. Providing information and helping the top
management
Lower Level (First-Line) Managers (First Level
Functions of the Lower Management
Management)
 lower level management have direct contact 1. Executing the work
with the workers 2. Maintaining the standard, quality and
 They carry out the functions as per schedule workmanship of the product
 They are the essential link between the 3. Eliminating wastage of material, time, etc.,
worker and the management 4. Maintaining strict discipline amongst the
 They direct non-management employees workers
 They do not supervise other managers 5. Giving orders and other information to the
workers

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 The Principles of Scientific Management
Introduction
 The theory of scientific management published by Frederick Winslow Taylor (F.W. Taylor)
in 1911
 He is called the ‘Father of Scientific Management’.
 The term "scientific management" refers to organizing the activity for everyone's benefit
including increased wages for laborers
 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.
 The scientific management is often called as “Taylorism”
 According to Taylor, “scientific management means knowing exactly what you want men
to do and seeing that they do it in the best and cheapest way.”

Principles of Scientific Management

Development of Science for each part of men’s job

(replacement of rule of thumb)

Scientific Selection, Training & Development of Workers

Co-operation between Management & workers or Harmony

not discord
Principles of
Scientific
Management
Division of Responsibility

Mental Revolution

Maximum Prosperity for Employer & Employees

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1. Development of Science for each part of men’s job (replacement of rule of thumb)
 Work assigned to any employee should be observed, analyzed with respect to each and
every part and time involved in it.

2. Scientific Selection, Training & Development of Workers

 There should be scientifically designed procedure for the selection of workers.
 Physical, mental & other requirement should be specified for each and every job.
 Workers should be selected & trained to make them fit for the job.

3. Co-operation between Management & workers or Harmony not discord

 It is only through co-operation that the goals of the enterprise can be achieved
efficiently.
 There should be no disagreement between managers & workers.

4. Division of Responsibility
 There must be different roles between managers and workers.
 The management should do planning the work and the workers should do the finishing
of task.
 Planning is to be separated from execution.

5. Mental Revolution
 The workers and managers should have a complete change of mutual relation and work
effort.
 Management should create suitable working condition and solve all problems
scientifically.
 Similarly workers should attend their jobs with utmost attention, devotion and
carefulness. They should not waste the resources of enterprise.
 Handsome remuneration should be provided to workers to boost up their moral.

6. Maximum Prosperity for Employer & Employees

 There must be maximum prosperity for employer and employees.
 There is an opportunity for each worker to attain his highest efficiency.
 Maximum output & optimum utilization of resources will bring higher profits for the
employer & better wages for the workers.
 There should be maximum output in place of restricted output.
 Both managers & workers should be paid handsomely.

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 Administrative Management of Henri Fayol

1. Division of Labor
 It refers specialization of jobs.
 All Work must be divided and subdivided and allotted to various persons according to
their knowledge in a particular area.
 Subdivision of work makes it simpler and results in efficiency.
 It also helps the individual in acquiring speed, accuracy in his performance.

2. Party of Authority & Responsibility

 Authority & responsibility are co-existing.
 If authority is given to a person, he should also be made responsible.
o Authority: The right of superiors to get accuracy from their sub-ordinates
o Responsibility: Duty for the performance of the job assigned.

3. Discipline
 It is about obedience.
 Discipline refers clear and fair agreements and judicious application of penalties
 Employees must obey, but this is two-sided: employees will only obey orders if
management play their part by providing good leadership

4. Unity of Command
 Sub-ordinate should receive orders & instructions from only one boss
 Each worker should have only one boss with no other conflicting lines of command

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5. Unity of Direction
 It means one head, one plan for a group of activities having similar objectives.
 Efforts of all the members of the organization should be directed towards common goal.

Differences between Unity of Command and Unity of Direction

Basis Unity of command Unity of direction

It implies that a sub-ordinate should It means one head, one plan for a
Meaning receive orders & instructions from group of activities having similar
only one boss. objectives.
It is related to the functioning of
It is related to the functioning of
Nature departments, or organization as a
personnel’s.
whole.
It is necessary for fixing responsibility It is necessary for sound
Necessity
of each subordinate. organization.
It avoids duplication of efforts and
Advantage It avoids conflicts, confusion & chaos.
wastage of resources.
It leads to better superior sub- It leads to smooth running of the
Result
ordinate relationship. enterprise.

6. Subordination of Individual Interest

 Every worker of the organization has 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.

7. Remuneration
 Remuneration should be sufficient to keep employees motivated and productive.
 Wages should be determined on the basis of cost of living, work assigned, financial
position of the business, wage rate prevailing etc
 There are two types of remuneration
o Non-monetary Remuneration - a compliment, more responsibilities, credits
o Monetary Remuneration - compensation, bonus or other financial
compensation

8. The Degree of Centralization

 The focus 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

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9. Scalar Chain (Line of Authority)
 The formal lines of authority from highest to lowest ranks are known as scalar chain.
 According to Fayol, “Organizations should have a chain of authority and communication
that runs from top to bottom and should be followed by managers and the
subordinates.”

Fayol’s Scalar Chain

 There is one head ‘A’ who has two lines of authority under her/ him.
 One line consists of B-CD-E-F.
 Another line of authority under ‘A’ is L-M-N-O-P. If ‘E’ has to communicate with ‘O’ who
is at the same level of authority then she/he has to cross the route E-D-C-B-A-L-M-N-O.
 This is due to the principle of scalar chain being followed in this situation.

Gang Plank
 According to Fayol, this chain should not be violated in the normal course of formal
communication. if there is an emergency then ‘E’ can directly contact ‘O’ through ‘Gang
Plank’ as shown in the diagram.
 This is a shorter route and has been provided so that communication is not delayed.

10. Order
 According to Fayol, “People and materials must be in suitable places at appropriate time
for maximum efficiency.”
 The principle of order states that ‘A place for everything (everyone) and everything
(everyone) in its (her/his) place’. Essentially it means orderliness.

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11. Equity
 ”According to Fayol, this principle gives importance to kindliness and justice in the
behavior of managers towards workers.
 This will make sure loyalty and devotion.
 Fayol does not rule out use of force sometimes.

12. Stability of Personnel

 “Employee turnover should be minimized to maintain organizational efficiency”
 Personnel should be selected and appointed after due and rigorous procedure.
 But once selected they should be kept at their post/ position for a minimum fixed
tenure.

13. Initiative
 Workers should be encouraged to develop and carry out their plans for improvements
 According to Fayol, Initiative means taking the first step with self-motivation.

14. Espirit De Corps

 Management should promote a team spirit of unity and harmony among employees
 According to Fayol, management should promote teamwork especially in large
organizations otherwise objectives would be difficult to realize.

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 Name of Principle Explanation

1. Division of Work Specialization in workers Job design

2. Authority & Responsibility Managers are empowered

3. Discipline Formalized Controls

4. Unity of Command Subordinates report to only one boss

5. Unity of Direction Functions have only one plan and one boss

Subordination of individual interest

6. Employees are committed to the organization
to common good

7. Remuneration of personnel Reasonable Pay reward system

8. Centralization Trickle down decision making

Hierarchical, formalized communication

9. Scalar Chain
channel

Internal information system for control

10. Order
purposes

11. Equity Commitment obtained through kindness

Train employees and encourage them to

12. Stability of tenure of personnel
remain

13. Initiative Managers conceive and implement new ideas

Maintaining high morale among employees is

14. Espirit de corps
imperative

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 Contributions to Management by Different Schools of Thought

Classical Management Theory

Rational Economic View

Scientific Management of
Early standpoint
F.W. Taylor

Administrative Theorists
Personified by Henri Fayol

Bureaucratic Organisation By
Max Weber

Contributions to Neo Classical Theory

Management by — Human Relations Hawthorne Studies
Different Approach
Schools of
Thought

Behavioural Science
Organisational Humanism
Approach

Management
Science/Operational
Research

Modern
Management

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 1) EARLY PRESPECTIVES
 The first known management ideas were recorded in 3000-4000 B.C.
 One Pyramid built by Egyptian ruler Cheops required work to be done by 100,000 men for
over twenty years in 2900 B.C.
2) CLASSICAL MANAGEMENT THEORY
This was the era of the industrial revolution and factory system of production. Large scale
production would not have been possible without adherence to the principles governing
organizing production based on division of labour and specialization, relationship between man
and the machine, managing people and so on
A. Rational Economic View
 It assumed that people are motivated by economic gains primarily
B. Scientific Management of F.W. Taylor
 Emphasized one best way of production etc
C. Administrative Theorists Personified by Henri Fayol
 Looked at the best way to combine jobs and people into an efficient organization
D. Bureaucratic Organization Theorists Led By Max Weber
 It looked at ways to eliminate managerial inconsistencies due to abuse of power which
contributed to ineffectiveness.
3) NEO CLASSICAL THEORY — HUMAN RELATIONS APPROACH
 This school of thought developed between 1920s to 1950s felt that employees simply do
not respond rationally to rules, chains of authority and economic incentives alone but
are also guided by social needs, drives and attitudes.
 Hawthorne Studies at GEC etc., were conducted then.
 This idea focuses on development of techniques and technology.
 This attention was to serve as a maker to the development of behavioral sciences.
4) BEHAVIOURAL SCIENCE APPROACH
Organizational Humanism
 Organizational behaviorists like Chris Argyris; Douglas McGregor, Abraham Maslow and
Fredrick Herzberg used the knowledge of psychology, sociology and anthropology to
develop this approach.
 The basic idea of organizational humanism is that individuals need to use all of their
capacities and creative skills at work as well as at home.
MANAGEMENT SCIENCE/OPERATIONAL RESEARCH
 It emphasizes research on operations and use of quantitative techniques to aid managers to
take decisions.
5) MODERN MANAGEMENT
 It sees modern organizations as complex systems and bring about possibility approach
and use of modern techniques to solve organizational and human problems.

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Unit II - Planning

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 Unit – II
PLANNING

What is planning?
 Planning is the first function performed by a manager.
 Planning means looking ahead or deciding in advance what is to be done
 It involves the selection of objectives, Functions of Management policies, procedures
and programmes from among alternatives.
 A plan is a predetermined course of action to achieve a specified goal
 It is a blueprint for action.

Definitions of Planning
1. According to Louis A Allen - "Management planning involves the development of
forecasts, objectives, policies, programmes, procedures, schedules and budgets".
2. According to Theo Haimann - "Planning is deciding in advance what is to be done. When
a manager plans, he projects a course of action, for the future, attempting to achieve a
consistent, co-ordinated structure of operations aimed at the desired results".
3. According to Koontz O'Donnel - "Planning is an intellectual process, the conscious
determination of courses of action, the basing of decisions on purpose, acts and
considered estimates".

Nature of Planning

Planning Is Goal-Oriented

Primacy of Planning

Frequency of Planning

Efficiency, Economy and Accuracy

Nature of
Planning
Co-ordination

Limiting Factors

Flexibility

Planning is an intellectual process

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1. Planning Is Goal-Oriented
 Planning has no meaning without being related to goals.

2. Primacy of Planning
 Planning is the first of the managerial functions. It leads all other management
functions.

3. Frequency of Planning
 Planning is found at all levels of management.
 Top management, Middle management and Lower management all levels of
management needs operational planning.

4. Efficiency, Economy and Accuracy

 All planning must focuses the efficiency, economy and accuracy at all levels with
accurate forecasts.

5. Co-ordination
 Planning co-ordinates the what, who, how, where and why of planning.

6. Limiting Factors
 A planner must know the limiting factors (money, manpower etc) and prepare plans in
the light of these critical factors.

7. Flexibility
 The process of planning should be flexible to changing environmental conditions.

8. Planning is an intellectual process

 The quality of planning will differ according to the quality of the mind of the manager.

Characteristics of Planning

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1. Managerial function: Planning is a first and foremost managerial function provides the base
for other functions of the management, i.e. organizing, staffing, directing and controlling, as
they are performed within the periphery of the plans made.
2. Goal oriented: It focuses on defining the goals of the organization, identifying alternative
courses of action and deciding the appropriate action plan, which is to be undertaken for
reaching the goals.
3. Pervasive: It is pervasive in the sense that it is present in all the segments and is required at
all the levels of the organization. Although the scope of planning varies at different levels
and departments.
4. Continuous Process: Plans are made for a specific term, say for a month, quarter, and year
and so on. Once that period is over, new plans are drawn, considering the organization’s
present and future requirements and conditions. Therefore, it is an ongoing process, as the
plans are framed, executed and followed by another plan.
5. Intellectual Process: It is a mental exercise at it involves the application of mind, to think,
forecast, imagine intelligently and innovate etc.
6. Futuristic: In the process of planning we take a sneak peek of the future. It encompasses
looking into the future, to analyze and predict it so that the organization can face future
challenges effectively.
7. Decision making: Decisions are made regarding the choice of alternative courses of action
that can be undertaken to reach the goal. The alternative chosen should be best among all,
with the least number of the negative and highest number of positive outcomes.

Planning is concerned with setting objectives, targets, and formulating plans to accomplish
them. The activity helps managers analyze the present condition to identify the ways of
attaining the desired position in future. It is both, the need of the organization and the
responsibility of managers.

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 Importance of Planning

To Manage By Objectives

To Offset Uncertainty and Change

To Secure Economy in Operation

Importance of
Planning
To Help In Co-Ordination

To Make Control Effective

To Increase Organizational Effectiveness

1. To Manage By Objectives
 Planning makes the objectives more concrete by focusing attention on them.

2. To Offset Uncertainty and Change

 Planning calculate the future and makes the needed provisions for it.

3. To Secure Economy in Operation

 Planning involve the selection of most profitable course of action that would lead to the
best result at the minimum costs.

4. To Help In Co-Ordination
 Without planning it is not possible to co-ordinate the different activities of an
organization.

5. To Make Control Effective

 In the absence of plans, a management will have no values for controlling other's
performance.

6. To Increase Organizational Effectiveness

 Planning enables the manager to measure the organizational effectiveness in the way of
confirmed objectives and take further actions in this direction.

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 Types of Planning

Types of Planning

Nature of Duration of Levels of

Use
Planning Planning Management

Formal Short Term Strategic Standing

Planning Planning Planning Plans

Informal Long Term Intermediate Single-use

Planning Planning Planning Plans

Operational
Planning

Contingency
Planning

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 A. Nature of Planning
1. Formal Planning
 It is written and focuses specifically on the long term goals of the organization
 All formal planning should be followed or implemented.
Advantages of Formal Planning
1. Proper Cooperation among employees
2. Unity of Action
3. Economy
4. Proper coordination and control
5. Choosing the right objectives
6. Future plan

2. Informal Planning
 It is not in writing
 It is in the imagination of the manager.
 Informal planning will be useful when the number of actions is less and actions have to
be taken in short period

B. Duration of Planning
1. Short term Planning
 The planning which covers less than two years
 It is considered as calculated planning
 It takes into account the available resources only
 It is concerned with the current operations of the business

Advantages of Short term Planning Disadvantages of Short term Planning

1. It can be easily adjustable.
2. Changes can be made and incorporated.
3. Easy to measure.
4. Only little resources required.
1. Very short period-left over things will be
more.
2. Difficult to mobiles the resources.
3. Communication cycle will not be
completed.

2. Long-Term Planning
 Discusses a period of more than five years, mostly between five and fifteen years
 It deals with broader technological and competitive aspects of the organization
 Long-term planning is considered as strategic planning

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 Advantages of Long-Term Planning
1. Sufficient time to plan and implement.
2. Effective control.
3. Adjustment and changes may be made
gradually.
4. Periodic evaluation is possible.
5. Thrust areas can be identified easily.
6. Weakness can be spotted and rectified
then and there.
Disadvantages of Long-Term Planning
1. Prediction is difficult.
2. Full of uncertainties.
3. Objectives and Targets may not be
achieved in full.
4. More resources required.

C. Levels of Management
1. Strategic Planning
 It is the process of determining overall objectives of the organization and the policies
and strategies to be applied to achieve those objective
 It is conducted by the top management
 It covers a time period of up to 10 years
 It is the total assessment of the organization’s capabilities, its strengths and its
weaknesses

2. Intermediate Planning
 Covers time frames of about 6 months to 2 years
 Planned by middle management
 This finalizes the resources available and the most effective and efficient mix of human,
financial and material factors

3. Operational Planning
 Covering a time span from one week to one year
 Deals only with current activities and keeps the business running
 These are the responsibility of the lower management

D. Use
1. Standing Plan
 It is designed to be used over and over again
 It helps executives to reduce their workload
 Standing plan is also called routine plan

2. Single Use Plan

 Sets a course of action for a particular set of situation and is used up once the particular
goal is achieved
 It is also called specific planning.
 Single use plan is short range.

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 Planning Process

1. Perception of Opportunities (The market, Competition, what customer wants, Strength and
weakness): Although preceding actual planning and therefore not strictly a part of the planning
process, awareness of an opportunity is the real starting point for planning. It includes a
preliminary look at possible future opportunities and the ability to see them clearly and
completely, knowledge of where we stand in the light of our strengths and weaknesses, an
understanding of why we wish to solve uncertainties, and a vision of what we expect to gain.
Setting realistic objectives depends on this awareness. Planning requires realistic diagnosis of
the opportunity situation. Defining the present situation includes measuring success and
examining internal capabilities and external threats

2. Establish Goals and Objectives (Where we want to be and what we want to accomplish and
when): The second step in planning is to establish goals and identify objectives that contribute
to the attainment of goals. (Goals are broader than objectives, whereas objectives function as
smaller goals that support the bigger goals.)

3. Considering the Planning Premises (Analyze the Environment to Forecast Aids and Barriers
to Goals and Objectives): As an extension of defining the present situation, the manager or
other planner attempts to predict which internal and external factors will foster or hinder
attainment of the desired ends. These are forecast data of a factual nature, applicable basic
policies, and existing company plans.

4. Develop Action Plans to Reach Goals and Objectives: Goals and objectives are only wishful
thinking until action plans are drawn. An action plan consists of the specific steps necessary to
achieve a goal or objective.

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5. Develop Budgets: Planning usually results in action plans that require money to implement.
Among the expenses would be larger advertising and promotion budgets geared to seniors and
women.

6. Implement the Plans: If the plans developed in the previous five steps are to benefit the
firm, they must be put to use. A frequent criticism of planners is that they develop elaborate
plans and then abandon them in favor of conducting business as usual.

7. Control the Plans: Planning does not end with implementation, because plans may not
always proceed as conceived. The control process measures progress toward goal attainment
and indicates corrective action if too much deviation is detected. The deviation from expected
performance can be negative or positive. Progress against all of the goals and objectives
mentioned above must be measured. One goal was to hold on to much of the existing customer
base.

Instruments of Planning
1. Mission or Purpose
2. Objectives or Goals
3. Strategies
4. Policies
5. Procedures
6. Rules
7. Programs
8. Budgets

1. Mission or Purpose: The mission, or purpose (the terms are often used interchangeably),
identifies the basic purpose or function or tasks of an enterprise or agency or any part of it.
Every kind of organized operation has, or at least should have if it is to be meaningful, a mission
or purpose.

2. Objectives or Goals: Objectives, or goals (the terms are used interchangeably),are the ends
toward which activity is aimed. They represent not only the end point of planning but also the
end toward which organizing, staffing, leading, and controlling are aimed.

3. Strategies: For years, the military used the word strategies to mean grand plans made in light
of what it was believed an adversary might or might not do. While the term still usually has a
competitive implication, managers increasingly use it to reflect broad areas of an enterprise's
operation. Here the term, strategy is defined as the determination of the basic long-term

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4. Policies: Policies also are plans in that they are general statements or understandings that
guide or channel thinking in decision making. Not all policies are "statements"; they are often
merely implied from the actions of managers.

5. Procedures: Procedures are plans that establish a required method of handling future
activities. They are chronological sequences of required actions. They are guides to action,
rather than to thinking, and they detail the exact manner in which certain activities must be
accomplished.

6. Rules: Rules spell out specific required actions or non-actions, allowing no discretion. They
are usually the simplest type of plan. "No smoking" is a rule that allows no deviation from a
stated course of action. The essence of rule is that it reflects a managerial decision that a
certain action must- or must not-be taken.

7. Programs: Programs are a complex of goals, policies, procedures, rules, task assignments,
steps to be taken, resources to be employed, and other elements necessary to carry out a given
course of action; they are ordinarily supported by budgets.

8. Budgets: A budget is a statement of expected results expressed in numerical terms. It may be

called a "quantified" plan. In fact, the financial operating budget is often called a profit plan.

Advantages of Planning / Benefits of Planning

1. Reduces unnecessary pressures of immediacy
2. Reduces mistakes and oversights
3. Ensures a more productive use of resources
4. Makes control easier
5. Increases effectiveness of a manager
6. Improves focus and flexibility.
7. Improves action orientation.
8. Improves coordination.
9. Improves time management.
10. Improves control.
11. Knowing what to expect reduces stress
12. Allows you to have the required materials
13. Provides a sense of accomplishment & well-being
14. Leaders receive accurate and complete information, and do a better job as a result.
15. Helps the organization progress in a manner considered most suitable
16. Employees know what is expected.
17. Employees stay within the time limits.
18. Managers give enthusiasm and confidence to other leaders.

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29
 Management By Objectives (MBO)
 MBO was first popularized by Peter Drucker in 1954 in his book 'The practice of
Management’.
 MBO (Management by objectives) as a comprehensive managerial system that
integrates many key managerial activities in a systematic manner and is consciously
directed toward the effective and efficient achievement of organizational and individual
objectives

MBO Definition
 “MBO is a process whereby the superior and the mangers of an organization jointly identify its
common goals, define each individual’s major area of responsibility in terms of results expected
of him, and use these measures as guides for operating the unit and assessing the contribution
of each of its members.”

Features of MBO
 MBO is concerned with goal setting and planning for individual managers and their units.
 The essence of MBO is a process of joint goal setting between a supervisor and a subordinate.
 Managers work with their subordinates to establish the performance goals that are consistent
with their higher organizational objectives.
 MBO focuses attention on appropriate goals and plans.
 MBO facilitates control through the periodic development and subsequent evaluation of
individual goals and plans.

Benefits of Management By Objectives

1. Better managing of organizational resources and activities
2. Clarity in organizational action& objectives
3. MBO provides greatest opportunity for personal satisfaction (for managers)
4. MBO provides a basis for organizational change and provide a framework and also it
provide guideline for planned change ,enabling the top management to initiate, plan , direct
and control the direction , speed and change
5. MBO helps the manager to understand their role in the total organization involvement
6. Commitment and hard work by managers as they are involved in setting the objectives.
(Participating in the management
7. MBO helps in evaluating the performance systematically
8. MBO motivates the workers &make the job meaningful
9. management takes the decision very quickly as the workers know the purpose of taking
decisions
10. Improvement of managing through results-oriented planning
11. Clarification of organizational roles and structures as well as delegation of authority
according to the results expected of the people occupying the roles
12. Encouragement of commitment to personal and organizational goals
13. Development of effective controls that measure results and lead to corrective actions

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30
Limitations of MBO
1. Time consuming process: requires large amount of time of the senior managers and cost
high due to paper work and other resources which are scarce
2. Fail to teach philosophy: managers fail to teach MBO philosophy of managing an
organization
3. Variable objective: Setting of variable objectives difficult at least in time areas.
4. Much emphasis for short term objectives at the cost of long term objectives.
5. Danger on inflexibility
6. Difficulty of setting goals

Types of Decision Making

The managers or non-managers have to make decisions at some point to get their
organizational goals done. These decisions are categorized further. The types of decision
making in an organization are as follows:

1. Programmed And Non-Programmed Decisions:

Programmed decisions are routine and repetitive in nature. These decisions deal with common
and frequently occurring problems in an organization such as buying behavior of consumers,
sanctioning of different types of leave to employees, purchasing decisions, salary increment,
etc.

Non-programmed decisions are not routine or common in nature. These are related to
exceptional situations in which guidelines or routine management is not set. For example,
problems arising from a decline in market share, increasing competition in the business
environment. The majority of the decisions taken by managers do fall in this non programmed
category.

2. Operational and Strategic Decisions:

Operational decisions are just the normal functioning of the organization. These decisions do
not require much time and take a shorter time as compared to other decisions taken. Ample of
responsibilities are delegated to subordinates. The main decision is to create harmony in an
organization and to see whether the management is proper or not.

Strategic decisions include all present issues and problems. The main idea is to achieve better
working conditions, better equipment, and efficient use of existing equipment, etc. These all fall
under this category. Usually, strategic decisions are taken by top-level management.

3. Organizational and Personal Decisions:

If the decision is taken collectively keeping in mind the organizational goal, it is known as the
organization goal, and if the manager takes any decision in the personal capacity (affecting
his/her life). It is known as personal decisions. These decisions may sometimes affect the
functioning of the organization as well. For example, if the employee has decided to leave the

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31
organization, it may affect the organization. The authority of taking personal decisions cannot
be delegated and is dependent on the individual itself.

4. Major and Minor Decisions:

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

5. Individual and Group Decisions:

When the decision is taken by an individual, it is categorized as an individual decision. Usually,
routine decisions are taken by individuals within the policy framework of the organization.

Group decisions are taken by a group of individuals in the form of a standing committee.
Generally, important types of decisions in management are shifted to this committee. The main
aim of a group decision is to involve the maximum number of individuals in the process of
decision making.

6. Tactical and Operational Decisions:

Decisions that are pertaining to various policy matters in the organization are known as policy
decisions. These are taken by top management and do have a long-term impact on the
organization. For example, decisions regarding the location of the plant or volume of
production. These are tactical decisions

Operational decisions are all day-to-day decisions that need to be taken for the proper
functioning and operation of the organization. These can be taken by middle or lower-level
managers. For example, the Calculation of bonuses given to each individual is an operational
decision and is performed by middle or lower-level managers.

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 Human Resource Management (HRM)
Human resource management (HRM) is the practice of recruiting, hiring, deploying and
managing an organization's employees.
HRM is often referred to simply as human resources (HR). A company or organization's HR
department is usually responsible for creating, putting into effect and overseeing policies
governing workers and the relationship of the organization with its employees.

Definition of Human Resource Management (HRM)

 Human resource management is organizing, coordinating, and managing employees
within an organization to carry out an organization’s mission, vision, and goals. This
includes recruiting, hiring, training, compensating, retaining, and motivating employees.

Nature of HRM
1. HRM involves management functions like planning, organizing, directing and controlling.
2. It involves procurement, development, maintenance and management of human resource.
3. It helps to achieve individual, organizational and social objectives.
4. HRM is a mighty disciplinary subject. It includes the study of management psychology
communication, economics and sociology.
5. It involves team spirit and team work.

The scope of HRM

1. Human Resources Planning: – Human resource planning is a process by which the company
to identify the number of jobs vacant, whether the company has excess staff or shortage of
staff and to deal with this excess or shortage.

2. Job Analysis Design: – Another important area of HRM is job analysis. Job analysis gives a
detailed explanation about each and every job in the company. Based on this job analysis
the company prepares advertisements.

3. Recruitment and Selection: – Based on information collected from job analysis the
company prepares advertisements and publishes them in the newspapers. A number of
applications are received after the advertisement is published, interviews are conducted
and the right employee is selected thus recruitment and selection are yet another
important areas of HRM.

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33
4. Orientation and Induction: – Once the employees have been selected an induction or
orientation program is conducted. The employees are informed about the background of
the company. They are told about the organizational culture and values and work ethics and
introduce to the other employees.

5. Training and Development: – Every employee goes under training program which helps him
to put up a better performance on the job. Training program is also conducted for existing
staff that have a lot of experience. This is called refresher training. Training and
development is one area where the company spends a huge amount.

6. Performance Appraisal: – Once the employee has put in around 1 year of service,
performance appraisal is conducted i.e. the HR department checks the performance of the
employee. Based on these appraisal future promotions, incentives, increments in salary are
decided.

7. Compensation Planning and Remuneration: – There are various rules regarding

compensation and other benefits. It is the job of the HR department to look into
remuneration and compensation planning.

8. Motivation, Welfare, Health and Safety: – Motivation becomes important to sustain the
number of employees in the company. It is the job of the HR department to look into the
different methods of motivation. Apart from this certain health and safety regulations have
to be followed for the benefits of the employees.

9. Industrial Relations: – Another important area of HRM is maintaining co-ordinal relations

with the union members. This will help the organization to prevent strikes lockouts and
ensure smooth working in the company.

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34
 Unit – III
ORGANIZATION

35
 Organization
Meaning of an Organization
 An organization is an entity such as a company or an association that consists of one
or more people and has a specific purpose.
 The word is derived from the Greek word organ, meaning instrument or instrument,
musical instrument and organ.
 An organization is a group of people who work together, like a neighbourhood
association, a charity, a union, or a corporation.
 Organization is also the act of forming or establishing something (like an
organization).

What are the types of organization?

There are 5 types of organizations such as
1. Line Structure Organization
2. Line and Staff Organization
3. Functional Structure Organization
4. Matrix Structure Organization
5. Project Structure Organization.

Line Structure Organization

Meaning of Line Structure Organization
 Line structure organization is the simplest and oldest form of organization structure.
 It is called as a scalar type of military or divisional or organization.
 Under this system, authority flows directly and vertically downward from the top of
the managerial hierarchy to different levels of managers and subordinates, and down
to the operative level of workers.
 It is also known as the chain of command or scalar principle.

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Advantages of Line Structure Organization: –
1. Simple to understand and simple to operate;
2. Communication is fast and easy;
3. Feedback can be acted upon faster;
4. Responsibility is fixed and unified at each level and authority and accountability are
clear-cut, hence each individual knows to whom he is responsible and who is or in
truth responsible to him;
5. Since it is especially useful when the company is small in size, it provides for greater
control and discipline in the organization.
6. It is a stable form of organization.

Disadvantages of Line Structure Organization: –

1. It is a rigid and inflexible form of organization;
2. Line authority has a tendency to become dictatorial;
3. It overloads the executive with suppressive activities so that long-range planning and
policy making are often neglected;
4. A line organization can suffer from a lack of specialization. This is because each
department manager is concerned only with the activities of his own department.
5. Different departments may be more interested in their interests rather than overall
organizational interests and welfare;
6. It might stop progress and prevent the unit to work effectively.
7. It does not provide any means by which a good worker can be rewarded and a bad
one can be punished.

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 Line and Staff Organization
Meaning of Line and Staff Organization
 Line and staff organization, in management, approach authorities (For example: –
managers) establish goals and instructions that are then met by employees and other
workers.
 A line and staff organizational structure attempts to present a large and complex
enterprise in a more flexible way without sacrificing managerial authority.
 Staff groups support those who are engaged in the central productive activity of the
enterprise.
 They back up their work.
 Staff groups help the organization in analyzing, researching, counselling, monitoring,
and in evaluating activities.

Advantages of Line and Staff Organization

1. Line officers can mainly focus on the task as planning and checking is done by the
employees. Specialization provides expert advice and proficiency in management.
2. Since the organization includes line and staff functions, decisions can be made easily.
3. Staff officers provide complete factual data to line officers covering activity within and
without their units. This will help to create more coordination.
4. It provides ample opportunities for the advancement of workers.
5. Staff services provide a training ground for various positions.
6. This arrangement is flexible for newcomers in that employees can be forced to make
early adjustments to the line arrangement.

38
 7. Staff experts are ideologically oriented to look forward and have time to undertake
program and strategic planning and analyze the potential impacts of future potential
events.

Disadvantages of Line and Staff Organization

1. Confusion and conflict may arise between the line and the staff. Because the allocation
of authority and responsibility is not clear and the lower level members may be
confused with various line orders and staff advice.
2. The staff usually advises the lines, but the line makes decisions and tasks. So
employees often feel powerless.
3. Too much reliance on staff officers may not be beneficial to the business as line
officers may have to lose a lot about their decisions and duplication.
4. Since staff specialists demand high pay, it is expensive.
5. Employees are unable to carry out its plan or recommendations due to lack of
authority. So they sometimes become ineffective, this will make them careless and
indifferent to their jobs.
6. As the line is performed, with advice provided by employees, if things go right, the
employee takes credit and if things go wrong, the line gets the blame for it.

Functional Structure Organization

Meaning of Functional Structure Organization
 Functional Structure Organization is one of the most common structures of
organization.
 They are grouped based on their specific skills and knowledge.
 Under this structure, the employees are divided into groups by the organization
according to a particular or group of tasks.
 Where functional structures operate well in stable environments, where business
strategies have little inclination for change or mobility, the level of bureaucracy makes
it difficult for organizations to react quickly to market changes.

39
Advantages of Functional Structure Organization
1. The executive or the team leader has the knowledge and experience of that particular
field. For example, the person heading the IT department will have the education and
skill necessary to shoulder this responsibility and successfully run his team.
2. Because the employee has expertise in that particular field, the work is more efficient
and precise. There are fewer mistakes. This also helps with the motivation of the
employees of the company.
3. Since all team members come from similar backgrounds it allows them to share ideas
and come up with solutions. There is a sharing of knowledge, which is always
beneficial.
4. The employees also having a clear idea of the hierarchy of the firm. They need not
report or answer to several managers.
5. Also, the employees feel secure in their work. They see that their work and efforts is
not going unnoticed. This sense of security helps them perform better.

Disadvantages of Functional Structure Organization

1. The work can be quite one dimensional. After a while, the employees may start feeling
monotony or boredom. The lack of new challenges can make them unenthusiastic for
the job at hand.
2. In this structure, the manager must take care of the appraisal system. If the correct
approach is not taken then conflicts may arise between the employees
regarding promotions or appraisals.

40
 3. Also, this form of organization requires a high degree of specialization which is difficult
to establish
4. If there is a necessary change of personnel it can disrupt the whole system and its
balance. Also, it is quite a rigid structure, not leaving a lot of scope for adaptation.
5. In Functional Organizational Structure, the employees never gain any knowledge or
skills outside their own department. This can cause difficulties in inter-
departmental communication.

Matrix Structure Organization

Meaning of Matrix Structure Organization
 A matrix organizational structure is a structure of organization in which
some individuals report to more than one supervisor or leader, which is described as
solid line or dotted line reporting.
 More broadly, it can also describe the management of cross-functional, cross-business
groups and other work models that do not maintain rigid business units or silos
grouped by function and geography.
 For example, an employee may have a primary manager they report to as well as one
or more project managers they work under.

Advantages of Matrix Organization

1. Since there is both vertical and horizontal communication, it increases coordination and
this leads to greater and more effective control over operations.
2. As the matrix organization is handling many projects, the available resources will be fully
utilized.
3. It focuses organizational resources on specified projects, thus enabling better planning
and control.
4. It is highly flexible in following rules, procedures etc. Experience here is the best guide for
setting rules and procedures.

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5. As any department has to put its efforts towards the completion of any one project,
employees are effectively motivated.

Disadvantages of Matrix Organization

1. Since, there is more than one supervisor for each worker, this causes confusion and
conflict and reduces effective control.
2. There is continuous communication both vertically and horizontally, which increases
paper work and costs.
3. It is difficult to achieve downward balance on projects technical and administrative
aspects.

Project Structure Organization

Meaning of Project Structure Organization
 A project structure organizational structure is used to determine the hierarchy and
authority of people involved in a specific project.
 This organizational structure is temporarily created for specific projects for a particular
period, for the project to achieve the goal of developing a new product, specialize in
various functional departments such as production, engineering, quality control,
marketing research etc. and will be ready to work together.
 These specialists return to their duties as soon as the project is completed.
 In fact, the project organization is established with the aim of overcoming the major
weakness of functional organization, such as absence of unity of command, delay in
decision making and lack of coordination.

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When to use the project structure organization?
1. It is a one-time task and is fixed in the context of a single, specific goal.
2. It is big in scope it is unfamiliar or lacks precedent.
3. It is complex and calls for a high degree of freedom.
4. Successful completion of the project has a high stake.
5. The result is very important for the organization.

Advantages of Project Structure Organization

1. It is a notable depiction of the relationship between environment, strategy and
structure.
2. The team can focus properly.
3. The clustering of activities on the basis of each project initiates new authorization
patterns.
4. As experts from different organizations are ready to work together under the project
organization, it helps in coordination.
5. This makes for personal control and determination of personal responsibility.

Disadvantages of Project Structure Organization

1. The uncertainty can be attributed to the diverse background of the professional who
is deputed in the project.
2. The project manager finds it difficult to control in the traditional way in order to
motivate and control employees, in the absence of a norm of lines and norms
responsible for communication.
3. Project completion may be delayed.
4. Effective project management can also be hindered by top management who may not
be fully aware of the problems in the project center.

Formal and Informal organization

What is Formal Organization?
 A formal organization is the structure of the organization that is officially formed by
the management to achieve the defined goals.
 In other words, a formal organization refers to an organization that is formed under
official rules and regulations to achieve defined objectives.
 A formal organization is a structure of well-defined jobs with a prescribed system of
communication, coordination, and delegation of authority.
 This structure is deliberately designed to enable people to work together for the
achievement of common objectives.
o Examples of formal organizations are Schools, Business Firms, Hospitals,
Government Organizations, and other organizations that are officially formed.

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 Characteristics of Formal Organization
1. Deliberate Formation
 A formal organization is intentionally created by management, demonstrating its
purposeful nature. It is not an ad hoc arrangement but a consciously structured entity
designed to fulfill specific objectives.
2. Specialization of Work
 Within a formal organization, tasks are divided into specialized roles. This division
allows individuals to concentrate on their area of expertise, leading to increased
efficiency and proficiency in completing their assigned responsibilities.
3. Written Rules and Regulations
 Formal organizations establish explicit procedural guidelines and protocols in the form
of written rules and regulations. These documents serve as a reference point for
decision-making, ensuring consistency, fairness, and uniformity in the organization’s
operations.
4. Clear Authority and Responsibility
 Every individual within formal organizations has a defined level of authority and
corresponding responsibilities. This clarity empowers employees, enables effective
decision-making, and ensures that tasks are performed with accountability.
5. Official Line of Communication
 A formal organization establishes a structured system of communication, outlining
the official channels through which information flows. This system minimizes
miscommunication, enables efficient coordination, and facilitates the dissemination
of relevant information to the appropriate individuals.
6. Task Orientation
 A distinguishing feature of a formal organization is its focus on the job or task to be
accomplished, rather than placing excessive emphasis on individual personalities. This
approach promotes efficiency, as efforts are directed toward achieving organizational
goals rather than getting entangled in personal dynamics.
7. Goal and Objective-driven
 Formal organizations are goal-oriented, with a clear focus on achieving specific
objectives. By aligning individual efforts with organizational targets, formal
organizations foster a sense of purpose and direction, facilitating collective progress.

Advantages
1. The formal organization clearly outlines the relationships among employees. Hence,
it becomes easier to rack responsibilities.
2. An established chain of commands maintains the unity of command.
3. As the duties of each member is clearly defined, there is no ambiguity or confusion in
individual roles whatsoever. Further, there is no duplication of efforts which
eliminates any wastage.

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 4. In a formal organization, there is a clear definition of rules and procedures. This means
that behaviors and relationships among the members are predictable. Consequently,
there is stability and no chaos existing in the enterprise.
5. Finally, it leads to the achievement of organizational goals and objectives. This is
because there exist systematic and well thought out work cultures and relationships.

Disadvantages
1. Decision making is slow in a formal organization. It is important to realize that any
organizational need has to flow through the respective chain of commands before
being addressed.
2. Formal organization is very rigid in nature. This means that there prevails perfect
discipline coupled with no deviations from the procedures. Hence, this can lead to low
recognition of talent.
3. Lastly, the formal organization does not take into account the social nature of humans
as it talks about only structure and work. Interestingly, we cannot eliminate this
integral part of our nature. Hence, it does not entirely display the functioning of the
organization.

Informal Organization
What is an Informal Organization?
 An informal organization refers to a group of people having the same interests and
likes that are grouped in an organization. They are grouped to protect the rights of
each other in the organization.
 The informal organization is also known as unofficial relation or informal group.
Meaning that this type of group is not formed by the management formally.
 It is just the opposite of a formal organization. It is developed within the framework
of the formal organization due to social interactions and personal relations.

Features of Informal Organization

1. The major features of the informal group are as follows:
2. It is created on the basis of friendship and some common interests.
3. It is not stable and built spontaneously over time.
4. It reflects human and social relationships among people.
5. It is based on common ideology, language, religion, culture, or tradition.
6. It has no prescribed position, responsibilities, and authority.
7. Membership in the informal group is voluntary.
8. It has no written rules and regulations.
9. The authority and responsibility are based on personal acceptance.
10. The informal group has its own leaders, goals, and standard.

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Advantages
1. In this type of organization, communication does not need to follow the defined chain.
Instead, it can flow through various routes. This implies that communication in an
informal organization is much faster relative to formal organization.
2. Again, humans are social animals. The needs to socialize exists deep within our
existence. The informal organization ensures that there is socialization within the
enterprise. Consequently, members experience the sense of belongingness and job
satisfaction.
3. Informal organization, getting true feedbacks and reactions is not easy. Hence, in
informal organization, various limitations of formal organization is covered up.

Disadvantages
1. The informal organization is random and can result in the spread of rumours. Again,
we cannot manage and control informal organization. Consequently, this may result
in chaos within the enterprise.
2. It is important to realize that it is not possible to effect changes and grow without the
support of the informal organization. This can work in both ways, for growth or decline
of the enterprise.
3. To point out again, informal organization conforms to group standards and
behaviours. If such behaviours are against the organizational interests, they can
eventually lead to disruption of the organization.

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 Difference between Formal and Informal Organization

Basis of
Formal Organization Informal Organization
Difference
Formal organization refers to
Informal organization refers to the
an organization that is
organization that is formed without
Meaning established to achieve defined
having predefined rules and
objectives through official
regulations to interact with people.
regulations.
It is created for the
Objectives achievement It has no predetermined objectives.
of predetermined objectives.
It has no specific hierarchy. It’s
It has an official hierarchy of
the structure is completely based
Hierarchy relations between various
on
levels of management.
human emotions and sentiments.
Under this, informal relations are
Under this, formal
Planning unplanned, and they are created
relationships are well planned.
automatically.

It is usually unstable and does not

Stable It is usually stable.
last so long.

Communication is made There is no fixed and established

Communication
through proper channels. channel for communication.

If follows the official chain It does not have any fixed chain
Chain of
of command and is generally of command. It is sentimentally
Command
unchanged. based on members.

It reflects technological
Disclosure It reflects human aspects.
aspects.

Under this, personal relationships

Authority and There is a well-defined
are automatically developed when
Responsibility authority and responsibility.
people work together.
Usually formal organization
Size and size is larger and has a larger It is usually small in size and limited
Scope scope that informal to a location or place.
organization.

47
 Span of Control
What is the Span of Control?
 The term ‘span of management’ is also known as ‘span of control’, ‘span of
supervision’ and ‘span of authority’.
 The term “Span of Control” is popularly used in business management and human
resource management.
 Span of Control can be defined as the total number of direct subordinates that a
manager can control or manage.
 The span of control in management suggests estimating the optimum number of
subordinates managed by a single supervisor.
 It is a primary factor that determines the shape of the organization.

Types of Span of Control

Generally, two types of span can be seen in organizations that are:
1. Wide Span of Control
2. Narrow Span of Control

Wide Span of Control

 When one manager supervises many subordinates, it shows a wide span of control.
 It is also called Operative Span as it is generally applicable at the lower or operating
managerial level.
 It involves less operating cost and is highly adaptive to the changes.
 The supervisors have excellent coordination and communication horizontally &
vertically because of the fewer levels.

48
 Narrow Span of Control

 A narrow span contains fewer subordinates at a single level.

 When one manager manages a few subordinates, it shows a narrow span of control.
 It is also called the Executive span because it is applicable at the top or middle
managerial level.
 Organizations prefers narrow span when the nature of work is complex and requires
more assistance from the superior.

Importance of Span of Control

1. Discipline
 By specifying the span of control at every management level, stakeholders can create
discipline within the organizations.
2. Motivation
 Motivation is a crucial factor that keeps the team going. One can motivate its
workforce through the span of control by providing guidance and feedback at regular
intervals.
3. Timely Decision Making
 Many small or big business decisions have to be taken at every hierarchy. The
determination of the span of management helps in timely decision-making.
4. Effective Control
 Control is an essential principle of management. Managers use the span of control to
achieve effective control over the business.
5. Communication
 Business communication is how individuals interact within the business. To attain
effective communication, organizations use the span of control.

49
 Factors Affecting Span of Management

1. Adequate Supervision The managers’ span should be determined to achieve adequate

supervision. The employees who need more guidance can be placed under a narrow span.
2. Nature and Complexity A narrow span is suitable when the nature of work is complex and
needs more focused supervision. In contrast, a wide span is suitable for repetitive work
that is less complex.
3. Organizational Planning The span of management is one of the critical factors of
corporate planning. It clarifies the reporting relationships among superiors and
subordinates in the organization.
4. Degree of Centralization The degree of centralization and decentralization impacts the
span of management. As centralized organizations have a narrow span of management
and vice versa.
5. Geographic Proximity The scattered organization results in a narrow span as supervision
is required at every location. Whereas the organization situated at a single premise can
use a wide span of management.
6. Stability The organizations running for a long term generally have a wide span, as their
goals are clearly defined, and the nature of work is known to all.
7. Effective Communication A specified span of control can result
in effective communication in the organization. It reduces confusion, and communication
takes place through a proper channel.

50
8. Qualification of Manager The span of control largely depends on the capability of the
manager or superior. If the superior is more qualified, he can handle more numbers
subordinated under him. Whereas, if he is less capable, he can only supervise a few
subordinates under him.
9. Delegation of Authority Appropriate delegation of authority may be achieved by defining
the number of subordinates at each management level.
10. Management Levels The greater the number of management levels, the narrower the
span of management. The lesser the number of management levels, the wider the span
of control.

Departmentalization
Meaning of Departmentalization
 Departmentalization is the process of grouping of work activities into departments,
divisions, and other homogenous units.
 Departmentation means division of work into smaller units and their re-grouping
into bigger units (departments) on the basis of similarity of features.
 Departmentalization is the efficient and effective grouping of jobs into meaningful
work units

Definitions of Departmentation
1. Pearce and Robinson, “Departmentalisation is the grouping of jobs, processes and
resources into logical units to perform some organisational task.”
2. Louis A. Allen, “Divisionalisation is a means of dividing the large and monolithic
functional organisation into smaller, flexible administrative units”.
3. 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.”

Concept Departmentation

51
 Bases (or) Methods (or) Types of Departmentalization

Functional Departmentalization

Process Departmentalization

Product Departmentalization

Geographic Departmentalization
Bases (or) Methods
(or) Types of
Departmentalization
Customer Departmentalization

Combined Departmentalization

Time Departmentalization

Number Departmentalization

1. Functional Departmentalization
 In functional departmentalization, departments are segregated i.e. separated from
each other based on functions or tasks they perform.
 Examples of functional departmentalization include; production department, finance
department, marketing department, human resource (HR) department, etc.

2. Process departmentalization
 In process departmentalization, departments are separated based on their role in a
production process.
 Best example of process departmentalization can be seen in a textile mill where we
may have a spinning department, weaving department, dyeing department, printing
department, etc.

3. Product departmentalization
 In process departmentalization, departments are separated based on a type of
product produced by the company. Here, every individual department is responsible
for producing and selling the type of product assigned to them.

52
4. Geographic Departmentalization
 In geographic departmentalization, separate departments are made based on the
company's (i.e. institution's) operations to be carried out either over a vast area or
within some restricted area through branches or offices established at different zones
or places in that area.

5. Customer Departmentalization
 In customer departmentalization, departments are separated from each other based
on the types or groups of customers to be handled or dealt with.
 For example, customers can be classified under types such as, international or foreign
customers, inland or domestic customers, bulk purchasing or wholesale customers,
retail customers, etc.

6. Combined Departmentalization
 In combined departmentalization, a company or an organization uses a mixture or
combination or union of two or more different bases of departmentalization.
7. Time Departmentalization
 In time departmentalization, departments are separated based on the division of their
working time or job shifts.
 For an example, departments can be made based on night shift, morning or regular shift,
evening shift, etc.

8. Number Departmentalization
 In number departmentalization, separate departments are made after analysing and judging
the maximum limit up to which number of persons can be managed or educated or supervised
or taken care of. This method of departmentalization is generally used in schools and colleges
for making division of classes.
 For example, students having numbers from 1 to 50 are made to sit in A division of their class
and so on. Military forces also use this method.

53
 Importance of Departmentation
Importance of Departmentation
Organisation Structure
Flexibility
Specialisation
Sharing of Resources
Co-Ordination
Control
Efficiency
Scope for Growth and Diversification
Responsibility
Development of Managers

1. Organisation Structure: 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.
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.
3. Specialisation: Division of work into departments leads to specialisation as people of one
department perform activities related to that department only.
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.
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
6. Control: Departmentation facilitates control by departmental manager over the activities
of his department only.
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.
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.
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.

54
1. Specialization: In departmentalization, each department performs a different function. This results
in specialization. Specialization leads to speed, accuracy, efficiency and improvement in quality and
quantity of work.

2. Growth and Expansion: There are many different departments in the organization. Therefore, the
organization can easily grow and expand. Without departmentalization, the organisation cannot grow
and expand. It will remain small and static.

3. Fixing Responsibility: Departmentalization helps to fix the responsibility of a specific job on a

particular department. If there is a mistake in the accounts, then the accounts department will be held
responsible

4. Better Customer Service: Departmentalization results in a better customer service. The customers
get quick and efficient service.

5. Performance Appraisal: In departmentalization, a specific job is given to a particular person or

department. Therefore, it is very easy to do the performance appraisals. That is, the performance of
a person or department can be easily measured.

6. Management Development: Training given to managers is called management development.

Departmentalization facilitates management development. This is because the junior or trainee
managers can be sent to different departments to get an On-the-Job-training.

7. Optimum Utilization of Resources: Departmentalization facilitates optimum utilization of

resources. The men, money, materials, machines, methods and markets are put to maximum use.

8. Facilitates Better Control: In departmentalization, the organization is divided into small

manageable departments. These departments can be easily supervised and controlled.

55
 Policies
What is a policy?
 A policy in Management is a general statement which is formulated by an organization
for the guidance of its personnel
 Policy is a set of rules or guidelines for the organization and employees to follow in
order to achieve a specific goal

Types of Policies

Types of Policies

2. Supportive 4. Composite
1. Major Policies 3. Minor Policies
Policies Policies

1. Major Policies
 These are those policies which give a unified direction to the overall concern and imply
the commitment of the resources.
 These policies give shape to the concern in the accomplishment of its purpose. They
should also be supportive to the organizational objectives.

2. Supportive Policies
 These policies are meant to be formulated to support the major policies.
 A concern may have the development of a new product as a major policy; the research
to find out the unfulfilled needs of consumers may be a supportive policy.

3. Minor Policies
 The policies which do not influence the main objectives of the enterprise may be called
minor policies.
 These policies may relate to some routine matters of some less importance. These
policies do give directions but are not of much significance.

4. Composite Policies
 Some concerns have a number of policies or group of policies.
 To achieve one objective a number of policies may be used, these are composite
policies.

56
 Characteristics of a Sound Policy
1. It should be comprehensive in scope and flexible for its implementation.
2. It should ensure good understanding and harmony among different departments.
3. It should be based on facts and sound judgments.
4. It should be uniform for its application.
5. It must reflect its intended objectives,
6. It should be clear, definite and positive,
7. It should be properly communicated and clearly understood.
8. It must be in writing so as to avoid misinterpretation.
9. It must be reasonable, permanent and stable.
10. It should be periodically reviewed to check up its effectiveness.
11. It should incorporate all possible contingencies,
12. It should never be conceived in haste.

Procedure
What is Procedure?
 Procedure, refers to a complete set of instructions that recommend a certain way of
performing a process, or part of a process, in relation to time.
 It states a chronological sequence for undertaking activities, so as to achieve the objectives.

Standard Operating Procedure (SOPs)

 The procedures are meant for insiders (members of the organization including
employees, directors, managers and workers) to be pursued.
 They are also popularly known as the term Standard Operating Procedure (SOPs).

Characteristics of Procedure

57
1. Acts as a guide to action.
2. Defined keeping in view the company’s objectives, policies and resources.
3. Related to the time sequence for the work to be performed.
4. Meant for handling repetitive and regular events effectively.
5. Relevant for controlling and coordination of activities.
6. Procedure suggests particular beginning and endpoints which are required to be
pursued in an exact manner to efficiently and satisfactorily carry out a task.

Importance of Procedure
1. It defines the manner in which work is to be carried out and eliminate all the irrelevant
or repetitive steps.
2. It ensures a high level of uniformity in tasks, and consistency in the decisions which
helps in avoiding chaos.
3. To undertake any task in an effective manner, the procedure suggests the ideal ways
and methods.
4. It facilitates in eliminating or reducing errors or accidents.
5. It assists in the successful completion of the work assigned in a timely manner.
6. Procedures specify the base for evaluating the performance of the workers or
employees. In this way, it ensures executive control over the performance of
employees.
7. It saves time, efforts and money because it states the standard ways for doing things.

58
 Unit IV:
Authority and Responsibility

59
Authority
 It is the power to give orders and get it obeyed
 It is the power to take decisions.

Definitions of Authority
 According to Henri Fayol, "Authority is the right to give orders and the power to
exact obedience."
 According to Mooney and Reily, "Authority is the principle at the root of
Organisation and so important that it is impossible to conceive of an Organisation at
all unless some person or persons are in a position to require action of others."

Sources of Authority
1. Legal Authority: The authority is based upon the rank of the person in the organisation
and such authority may be given by law or by social norms, rules and regulations
protected by law
2. Traditional Authority: This authority is based upon the belief in traditions and the
legality of the status of people exercising authority through those traditions.
3. Acceptance Theory of Authority: The acceptance theory of authority states that a
manager's authority over his/her subordinates depends on the willingness of the
subordinates to accept his/her right to give orders and comply with them
4. Charismatic Authority: Charismatic authority is power legitimized by a leader’s
exceptional personal qualities, which inspire loyalty and obedience from followers.
5. Competency Theory of Authority: This is also known as “technical authority” and is
implicit in person’s special knowledge or skill. For example, when doctor advises you to
rest, you accept his “order” because you respect his knowledge and his skills as a doctor.

Responsibility
 It means state of being accountable or answerable for any obligation, trust, debt or
something
 It means obligation to complete a job assigned on time and in best way.

Authority and responsibility are closely related and this principle states that these two must
go hand in hand. It means that proper authority should be delegated to meet the
responsibilities.

60
 Difference between Authority and Responsibility
BASIS FOR
AUTHORITY RESPONSIBILITY
COMPARISON

Authority refers to the power or Responsibility denotes duty or

right, attached to a particular
job or designation, to give
Meaning
orders, enforce rules, and make
decisions and exact
compliance.
obligation to undertake or
accomplish a task successfully,
assigned by the senior or
established by one's own
commitment or circumstances.

What is it? Legal right to issue orders. Corollary of authority.

Formal position in an
Results from Superior-subordinate relationship
organization

Task of
Delegation of authority Assumption of responsibility
manager

Requires Ability to give orders. Ability to follow orders.

Flow Downward Upward

To make decisions and To execute duties, assigned by

Objective
implement it. superior.

Ends, as soon as the task is

Duration Continues for long period.
accomplished.

Delegation of Authority

Meaning of Delegation of Authority

 Delegation means assigning of certain responsibilities along with the necessary
authority by a superior to his subordinate managers.
 Delegation does not mean surrender of authority by the higher level manager.
 It only means transfer of certain responsibilities to subordinates and giving them the
necessary authority, which is necessary to discharge the responsibility properly.

Elements of Delegation of Authority

1. Assignment of duties to subordinates,
2. Granting of authority to enable the subordinates to perform the duties assigned, and
3. Creation of obligation on the part of subordinate to perform duties in an orderly
manner.

61
Definitions of Delegation of Authority
1. According to F.C. Moore, "Delegation means assigning work to the others and giving
them authority to do so."
2. According to O. S. Miner, "Delegation takes place when one person gives another
the right to perform work on his behalf and in his name and the second person
accepts a corresponding duty or obligation to do that is required of him."

Objectives of Delegation of Authority

1. To reduce the excessive burden on the superiors i.e., executives and managers
functioning at different levels.
2. To provide opportunities of growth and self development to junior executives.
3. To create a team of experienced and matured managers for the Organization.
4. It acts as a technique of management and human resource development.
5. To improve individual as well as overall efficiency of the Organization.

Process of Delegation of Authority

Delegation process involves four distinct stages. The process of delegation moves through
these stages.

(A) Assignment of duties to subordinates: Before delegating, the delegator has to decide
precisely the duties which are to be delegated to the subordinate or a group of
subordinates. The authority is delegated accordingly and the subordinate is told what is
expected from him.
(B) Transfer of authority to perform the duty: In the second stage of delegation process,
the authority is granted by the delegator to his subordinate (delegate). Authority must be
delegated strictly to perform the assigned duty.
(C) Acceptance of the assignment: In this third stage of delegation process, the
subordinate/delegate has to accept or reject the task assigned to him in the first stage along
with the authority given in the second stage.
(D) Creation of Obligation / Accountability / Responsibility: The fourth stage in the,
delegation of authority is the creation of obligation on the part of the subordinate to
perform duties assigned to him in a satisfactory manner by using the authority given. When
subordinate accepts a task and the authority is given, an obligation is created.

62
 Advantages / Importance of Delegation of Authority
1. Relieves Manager for More Challenging Jobs: Delegation makes it possible for the
managers to distribute their workload to others.
2. Leads to Motivation of Subordinates: Subordinates are encouraged to give their best at
work when they have authority with responsibility.
3. Facilitates Efficiency and Quick Actions: Delegation saves time enabling tile subordinates
to deal with the problems promptly.
4. Improves Employee Morale: Delegation raises the morale of subordinates as they are
given duties and supporting authority. They feel that they are responsible employees. The
attitude and outlook of subordinates towards work assigned becomes more constructive.
5. Develops Team Spirit: Due to delegation, effective communication develops between the
superiors and subordinates. The subordinates are answerable to superiors and the
superiors are responsible for the performance of subordinates. This brings better relations
and team spirit among the superiors and subordinates
6. Maintains Cordial Relationships: The superiors trust subordinates and give them
necessary authority. The subordinates accept their accountability and this develops
cordial superior-subordinate relationships.
7. Facilitates Management Development: Delegation acts as a training ground for
management development. It gives opportunity to subordinates to learn, to grow and to
develop new qualities and skills. It builds up a reservoir of executives, which can be used
as and when required. Delegation creates managers and not mere messengers.

Obstacles / Barriers to Effective Delegation of Authority

 Unwillingness of the manager to delegate authority: Some superiors/managers
tend to think that they can do the job better when they themselves handle the job
 Fear of competition: Fear of subordinate's excellence may come in the way of
delegation.
 Lack of confidence in subordinates: A manager may hesitate to delegate authority, if
he feels that his subordinate is not competent to deal with the problem and take
decisions
 Lack of ability to direct: Sometimes, a manager may experience difficulty in directing
the efforts of his subordinates because of his inability to identify and communicate
the essential features of his long-range plans and programmes.
 Absence of controls that warn of coming troubles: An Organization might not have
developed the controlling techniques to know in advance the serious problems lying
ahead.
 Conservative and cautious temperament of the manager: If a manager has a
conservative and over-cautious approach
 Desire to dominate subordinates: Managers (Superiors) normally, have a desire to
dominate the subordinates functioning under their control

63
 Principles of Effective Delegation of Authority

1. Knowledge of Objectives: Before delegating authority, the subordinates should be made

to understand their duties and responsibilities.
2. Parity of Authority and Responsibility: This principle of delegation suggests that when
authority is delegated, it should be commensurate with the responsibility of the
subordinate.
3. Unity of Command: This principle of delegation suggests that everyone should have only
one boss. A subordinate should get orders and instructions from one superior and should
be made accountable to one superior only.
4. The Scalar Principle: The scalar principle of delegation maintains that there should be
clear and direct lines of authority in the Organisation, running from the top to the bottom.
5. Clarity of Delegation: The principle of clarity of delegation suggests that while delegating
authority to subordinates, they should be made to understand the limits of authority so
that they know the area of their operation and the extent of freedom of action available
to them.
6. Absoluteness of Responsibility: This principle of delegation suggests that it is only the
authority which is delegated and not the responsibility. The responsibility is absolute and
remains with the superior.
7. Use of Exception Principle: This principle of delegation indicates that when authority is
delegated, it is expected that the subordinate will exercise his own judgment and take
decisions within the purview of his authority.
8. Completeness of Delegation: This principle of delegation suggests that there should be
completeness in the process of delegation. The process of delegation should be taken to
its logical end. Otherwise, there will be confusion of authority and accountability.
9. Effective Communication Support System: This principle suggests that there should be
continuous flow of information between the superior and the subordinates with a view to
furnishing relevant information to subordinate for decision-making.
10. Reward for Effective Delegation: This principle suggests that effective delegation and
successful assumption of authority should be rewarded.

Centralization and Decentralization

Centralization
 Centralization is said to be a process where the concentration of decision making is
in a few hands.
 All the important decision and actions at the lower level, all subjects and actions at
the lower level are subject to the approval of top management.
 According to Allen, “Centralization” is the systematic and consistent reservation of
authority at central points in the organization.

64
Decentralization
 Decentralization is a systematic delegation of authority at all levels of
management and in all of the organization.
 In a decentralization concern, authority in retained by the top management for
taking major decisions and framing policies concerning the whole concern.
 Rest of the authority may be delegated to the middle level and lower level of
management.

The degree of centralization and decentralization will depend upon the amount of
authority delegated to the lowest level.
According to Allen, “Decentralization refers to the systematic effort to delegate to the
lowest level of authority except that which can be controlled and exercised at central points.

Decentralization Centralization
Definition
Decision-making capabilities delegated across Decision-making capability rests with
multiple levels the top management
Flow of Information
Open and free Vertical
Ideal for
Decentralization is ideal for large-sized Centralization is ideal for small-sized
organizations organizations
Decision-making speed
Significantly faster Comparatively slow
People Involved
In decentralization, a higher number of In centralization, only a few
people from each level are involved in the handpicked people are involved in the
decision-making process decision-making process
Employee Motivation
Highly motivated employee Demotivated employee
Conflict in Decision
Most likely to occur Least likely to occur
Burden
The burden gets shared among many levels Only one group is carrying the burden
Stability
Relatively stable as decisions are made
Prone to instability due to multiple
by a central authority sharing a
conflicting decisions
common ideology

65
 Leadership

What Is Leadership?
 Leadership is setting and achieving goals, undertaking the competition, and solving
problems quickly.
 Leadership is the ability of an individual or a group of people to influence and guide
followers or members of an organization, society or team
 Leadership is the art of motivating a group of people to act toward achieving a
common objective

Definitions of Leadership.
 According to Koontz and O'Donnell, "Leadership is the ability of a manager to
induce subordinates (followers) to work with confidence and zeal."
 According to George Terry, "Leadership is the activity of influencing people to strive
for mutual objectives."
 According to Peter Drucker, "Leadership is the shifting of owns vision to higher
sights, the raising of man's performance to higher standards, the building of man's
personality beyond its normal limitations."

Who is a leader?
 A person who rules or guides or inspires others
 A leader is "a person who influences a group of people towards the achievement of a
goal".

Characteristics of Leadership
Involves Guiding And Motivating

Needs Subordinates And Common Interests

Promotes Interest In The Work

Needs Support From All

Influences Subordinates Through Personal
Characteristics Qualities
Of Leadership
Dynamic And Continuous Process

Leadership Is Situational

Assumes Obligation

Needs Interaction With Followers

Achievement Of Objectives

66
1. Involves guiding and motivating: Leadership is a managerial process of guiding and
motivating the subordinates for achieving organizational goals/objectives. For
motivating, communicating is necessary. Leadership is described as an art of
influencing and inspiring subordinates to perform their duties efficiently.
2. Needs subordinates and common interests: It pre-supposes the existence of
subordinates. There must be common interest for the leader and his followers due
to which they cooperate and participate for achieving common objectives.
3. Promotes interest in the work: The purpose of leadership is to influence, motivate
and encourage subordinates to take active interest in the work assigned and give the
best results.
4. Needs support from all: The leader must recognize the presence of all employees
irrespective of their position. The leader cannot become successful unless he obtains
support from all.
5. Influences subordinates through personal qualities: A leader understands the
problems of his subordinates and influences them by his personal qualities.
6. Dynamic and continuous process: Leadership is a dynamic and continuous process.
It is a regular activity of guiding and motivating subordinates for improving their
performance and contribution towards organizational objectives.
7. Leadership is situational: An ideal leadership is always situational. A leader has to
study the prevailing situation and provide appropriate leadership to his
subordinates.
8. Assumes obligation: A leader always inspires followers. In the event of failure, he
does not shift the responsibility to his subordinates but accepts his personal
weaknesses in performance. A leader leads by setting good example.
9. Needs interaction with followers: The objective of the leader and his subordinates
should be the same. If the leader attempts for one purpose and his subordinates for
some other purpose, it is no leadership. Their interest must be identical.
10. Achievement of objectives: The success of a leader largely depends on his ability to
achieve organizational objectives. When a leader fails to attain the objectives, he is
of no utility to the management.

67
 Qualities of a Good Leader / Traits of a Successful Leader

Patience
1. Patience and Tolerance
Tolerance

2. Good Personality

Coaching
3. Coaching and Guidance
Guidance

4. Self-confidence
Qualities of a Good Leader / Traits of a

5. Human Skills
Successful Leader

6. Initiative

7. Intelligence

8. Innovative

9. Communication Skills

10. Proper Judgement

11. Administrative Skiils

12. Discipline

1. Patience and Tolerance

 Patience: Patience is the capacity to face difficult situations, hardships or
inconvenience without making a single complaint. It is the ability to wait calmly for
something to happen without complaining or giving up or getting angry.
 Tolerance: Tolerance means to have a fair, objective and permissive attitude
towards those, whose thinking, opinions, and practices differ from one's own.

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2. Good Personality
 A good personality is a combination of physical, mental and social qualities. Good
personality helps a leader to influence his followers.
3. Coaching and Guidance
 Coaching: A good leader must be a coach for his followers. As a coach, he must teach
his followers, what to do, how to do and when to do it.
 Guidance: A good leader must also give guidance to his followers. As a guide, he
must first fix the objectives. Then he must show his followers how to achieve the
objectives. A good leader shows the way by leading, directing and advicing his
followers.
4. Self-confidence
 A good leader must have self-confidence. This quality is necessary for facing
challenging situations and for solving problems easily and effectively.
5. Human Skills
 A good leader must have essential social and human skills. That is, he must
understand people.
6. Initiative
 A good leader must always take an initiative. This means he should do the right thing
at the right time without being told by others.
7. Intelligence
 A good leader must be smart and intelligent. That is, he should have a good
educational background and sound technical knowledge.
8. Innovative
 A good leader must have an art of innovation. That is, he must have a good
imagination and visualization skills.
9. Communication Skills
 A good leader must be an effective and excellent communicator. This means he must
be a good speaker and writer.
10. Proper Judgement
 A good leader must make proper judgements. He must have a skill to judge different
situations.
11. Administrative Skills
 A good leader must have an administrative ability. This means, he must be able to
get the work done through his followers.
12. Discipline
 A good leader must be a disciplined person. This means he must have respect for the
rule and regulations of the organization. This is because his followers will follow his
example.

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 Different Leadership Styles or Types of Leaders

Autocratic Style

Consultative Style

Participative Style

Different Leadership Styles

or Types of Leaders
Laissez-Faire Style

Bureaucratic Leader

Neurocratic Leader

Paternalistic Style

Sociocratic Style

Situational Style

Type 1. Autocratic Style

 Autocratic type of leader is called an Autocrat.
 He does not consult his subordinates (followers).
 He takes all the decisions by himself.
 He also takes full responsibility for his decisions.
 The subordinates must obey him without asking any questions.

Type 2. Consultative Style

 Consultative type of leader has an open mind.
 He encourages his subordinates to give their suggestions and comments.
 If these suggestions and comments are good, then he will accept them. So this
leader consults his subordinates before taking a decision.
 However, the final decision is taken by the leader. Therefore, he takes full
responsibility for his decision.

Type 3. Participative Style

 Participative type of leader encourages his subordinates to take part in decision
making.
 The final decision is not taken by the leader himself.
 It is taken by the group (team), i.e. by the leader and his subordinates.

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  The leader gives his subordinates full scope for using their talents.
 He is loyal to them. Therefore, they are loyal to him.
 They obey his orders willingly.
 They have a genuine (real) respect for him.
Type 4. Laissez-Faire Style
 Laissez-Faire style of leader is passive.
 He only acts as a contact man.
 He provides information and resources to his subordinates.
 He believes that the subordinates will work best if they are left alone.
 Therefore, he gives them complete freedom to take their own decisions.
 He allows them to plan and organize their own work.
 He allows them to set their own goals and to solve problems on their own.
Type 5. Bureaucratic Leader
 Bureaucratic leader follows all the rules and formalities of the organization.
 He does not believe in new ideas.
 He wants his subordinates to follow all his orders.
 This leadership style result in red tapism and unwanted paper work.
Type 6. Neurocratic Leader
 Neurocratic leader is highly a task oriented one.
 He wants to get the work done at any cost.
 He gets very upset if there is any failure.
 He is very emotional, sensitive and eccentric.
 He does not consult his subordinates in decision making.
 He takes his own decisions.
Type 7. Paternalistic Style
 Paternalistic style of a leader creates a family atmosphere in the organisation.
 He acts just like a parent of his subordinates.
 He advises, guides and helps his subordinates with their personal problems.
 This style of leadership will be successful in a small organisation having a very few
employees and only one leader.
Type 8. Sociocratic Style
 The sociocratic leader tries to run the organisation just like a Social Club.
 He gives less importance to production and more importance to friendship.
 That is, he tries to keep his subordinates very happy. So, he creates a warm and good
social environment.
Type 9. Situational Style
 Situational type of leader uses different styles in different situations.
 That is, he changes his style according to the situation.
 Sometimes he will be autocratic, or consultative, or participative, etc.
 Now-a-days, most managers use this style of leadership.

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 COMMUNICATION
 Communication is an important requirement of every business.
 A businessman participates in the process of communication in many ways.

Meaning of Communication
 “Communication is the process by which information is transmitted between
individuals and/or organization so that an understanding response results”. - By
Peter Little
 “Communication is an exchange of facts, ideas, opinions or emotions by two or more
persons”. - By W.H. New man and C.F. summer Jr
 “Administrative communication is a process which involves the transmission and
accurate replication of ideas ensured by feedback for the purpose of eliciting actions,
which will accomplish organizational goals.”

Importance of Communication in Management

1. Basis of Decision-Making and Planning: Communication is essential for decision-making
and planning. It enables the management to secure information without which it may
not be possible to take any decision.
2. Smooth and Efficient Working of an Organization: In the words of George R. Terry, “It
serves as the lubricant, fostering for the smooth operations of management process.”
3. Facilitates
4. Co-Ordination: Management is the art of getting things done through others and this
objective of management cannot be achieved unless there is unity of purpose and
harmony of effort.
5. Increases Managerial Efficiency: Effective communication increases managerial
efficiency. It is rightly said that nothing happens in management until communication
takes place.
6. Promotes Co-operation and Industrial Peace: Effective communication creates mutual
understanding and trust among the members of the organization.
7. Helps in Establishing Effective Leadership: Communication is the basis of effective
leadership. There cannot be any leadership action without the effective communication
between the leader and the led.
8. Motivation and Morale: Communication is the means by which the behavior of the
subordinates is modified and change is effected in their actions.
9. Increases Managerial Capacity: Effective communication increases managerial capacity
too.
10. Effective Control: The plans have to be communicated to the subordinates, the actual
performance has to be measured and communicated to the top management
11. Job Satisfaction: Effective communication creates job satisfaction among employees as
it increases mutual trust and confidence between management and the employees.

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 Unit V:
Direction Co-ordination & Control

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Meaning of Co-Ordination
 The process of organizing people or groups so that they work together properly and well
 Coordination is the orderly arrangement of individual and group efforts to provide unity
of action in the pursuit of a common goal.
 coordination involves synchronization of different activities and efforts of the various units of an
organization so that the planned objectives may be achieved with minimum conflict.

Definition of Co-Ordination
 “According to Brech, Coordination is balancing and keeping together the team by
ensuring suitable allocation of tasks to the various members and seeing that the tasks are
performed with the harmony among the members themselves.”
 Coordination is "the process of integrating the objectives and activities of the separate
units, departemtns or functional areas) of an organisation in order to achieve
organisational goals efficiently."
 Coordination is "integration of the activities of individuals and units into a concerted
effort that works towards a common aim." — Pearce and Robinson

Features of Coordination

1. Group Effort: Coordination integrates the efforts of individuals and departments to make
them work as a group. The group works for maximizing the group goals as well as
organizational goals.
2. Unity of Action: Every individual and department has his own perspective or way of achieving
the organizational goals. Coordination ensures unity of action amongst individual and
departmental activities.
3. Common Goal: Each individual and department has a goal, which it strives to maximize.
Maximization of departmental goals at the cost of organizational goals can be harmful for the
organization.
4. Continuous Process: Coordination is not a onetime attempt by managers to integrate and
harmonies individual goals. It is a continuous process that keeps going as long as the
organization survives.
5. Managerial Responsibility: Co-ordination is the responsibility of every manager at every level
for every operative function (production, finance, personnel and sales.) All managers
continuously coordinate the efforts of people working in their respective departments.
6. Essence of Management: Coordination is not a separate function of management. It is
required for every managerial function. Managers coordinate the human and non-human
resources while carrying out all the managerial functions of planning, organizing, staffing
directing and controlling. Coordination is, thus, called the 'essence of management."

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7. Process of Synthesis Of Efforts: Coordination integrates and synthesizes the efforts of people
of all departments at all levels towards achievement of common organizational goals. It also
synthesizes the organizational resources (physical, human and financial) to collectively
contribute to organizational goals.
8. Necessary Obligation: Coordination is not something that managers may or may not strive
for. All managers (also non-managers) must direct their efforts towards a common goal
considering this as their obligation.
9. Deliberate Effort: Coordination is not a spontaneous effort of managers. Managers make
deliberate efforts to coordinate their inter-departmental activities

Elements of Coordination
1. Group Effort: Coordination integrates individual effort of each unit so that the unit works
as a group. It ensures that individuals work as group for promoting their individual and
organizational goals.
2. Unity of Action: Coordination ensures that activities of each individual, group and
department are headed towards the common goals. They must be carried out within the
framework of policies, procedures etc.
3. Common Purpose: Coordination strives to maintain balance amongst individual,
departmental and organizational goals. It ensures that resources and tasks are assigned
to individuals and departments in a manner that working of one department promotes
the working of other departments. All individuals, groups and departments should have
a common purpose, that is, achieve organizational goals.

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 Importance/Need for Coordination
1. Non-Routine Jobs: Jobs which are non-routine in nature need constant flow of information,
both vertical and horizontal. Unless there is proper coordination amongst these jobs, they
cannot be performed efficiently. Coordination, thus, helps in effectively carrying out non-
routine jobs.

2. Dynamic Activities: Coordination helps in integrating activities which constantly change

according to changes in the environment.

3. Standards of Performance: When standards of performance against which actual

performance is to be measured are too high, managers need to coordinate various business
activities to ensure that high performance standards are achieved.

4. Interdependence of Activities: When different units of organization are dependent on each

other for resources or information, there is greater need for coordination amongst them.
Greater the interdependence, greater is the need for coordination.

5. Specialization: Specialization leads to concentration on very narrow areas of job activity.

Individuals tend to overlook overall perspective of the job. This requires coordination to
direct the activities towards a common goal.

6. Growing Organization: In growing organizations, number of people and divisions become so

large that it becomes difficult for top managers to coordinate the activities performed by all
of them. Various techniques of coordination (rules, procedures, plans, goals, resource etc.)
help managers in unifying diverse and multiple organizational/departmental activities
towards the common goal.

7. Promoting Group Effort: In the absence of coordination, each individual and department will
carry out their objectives in a manner that they perceive as the best. People maximize their
individual goals. This may, however, not be the best for the organizational whole.

8. Unity of Action: Organizations have diverse work force, thoughts, resources, goals, activity
and skills. Coordination helps to unify these diverse set of actions towards a single goal and
thus, maximize their use.

9. Synergy: Coordination facilitates the sum total of output of group to increase by more than
the sum total of their individual output. It integrates work of different units and produces
synergistic effects by increasing the overall organizational output.

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 Limitations in Achieving Coordination
1. Increased Specialization: Though specialization helps to increase organizational
productivity, it also creates the problem of coordination.
2. High Interdependence amongst Various Units: Higher the degree of dependence of one
unit on the other, greater the need for coordination and more difficult it is to ensure
coordination.
3. Different Approach towards The Same Problem: If different departments look at the
same problem in different ways, there will be problem of coordinating their activities.
4. Uncertainty about Future: Howsoever skilled and competent may the managers be in
coordinating the activities of different units, changes in environmental factors can make
coordination difficult.
5. Informal Groups: Informal groups which are strongly bonded by forces of culture, social
values and ethics can affect the ability of highly skilled managers to coordinate
organizational activities.

Types of Coordination
1. Internal and External Coordination
2. Vertical and Horizontal Coordination
3. Horizontal coordination

1. Internal and External Coordination

 Internal Coordination: Coordination between the activities of departments of people
working within the organization is known as internal coordination.
 External Coordination: Coordination between activities of the organization with units
outside the organization (Government, customers, suppliers, competitors etc.) is known
as external coordination

2. Vertical and Horizontal Coordination

 Both these types of coordination are the forms of external coordination.
 Vertical coordination is achieved amongst activities of people working at different levels.
 It coordinates the activities of top managers with those people of middle and lower level
managers.
 It is "the linking of activities at the top of the organization with those at the middle and
lower levels in order to achieve organizational goals."

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  Vertical coordination can be achieved through span of management, centralization,
decentralization and delegation.
3. Horizontal Coordination
 It is coordination amongst the activities of people of different departments working at
the same level. It is "the linking of activities across departments at similar levels.
 It links the activities of four primary departments — production, finance, personnel and
sales

Techniques of Coordination
1. Scalar Chain: Scalar chain clearly identifies every person's position in the organization
structure. It also identifies the authority and responsibility attached to each position in the scalar
chain. When one knows clearly his position, the position of his boss and subordinates, it facilitates
coordination.

2. Rules and Procedures: In organizations where simple and routine activities are performed
rules and procedures provide established standards of performance. Organizational members
perform according to rules without going to top managers every time they face a problem. Rules
and procedures, thus, provide an effective way of achieving coordination.

3. Plans and Goals: Well defined plans and goals help to achieve coordination by ensuring that
efforts of all individuals and departments are directed towards organizational goals.

4. Information System: People of different departments at all levels need information for making
various decisions. Effective information systems, like computers and networking facilitate free
flow of information and, thus, facilitate coordination throughout the organization.

5. Lateral Relationships: Lateral relations refer to relations between peer groups of different
departments. People of different departments constantly interact with each other through
formal and informal communication systems. These relations refer to "coordination of efforts
through communicating and problem solving with peers in other departments or units, rather
than referring most issues up the hierarchy for resolution." An effective system of
communication, thus, facilitates coordination by developing strong relationship amongst people
of different departments.

6. Stack Resources: It means keeping a backup of resources. If an organization expects demand

for its product to be 10,000 units every month, it should produce 11,000 units to meet sudden,
unexpected increase in demand. In case it does not do so, it will have to wait to produce to meet
the increased demand. Competitors can take advantage of this and divert the firm's customer

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increase their clientele. Maintaining stack resources, thus, facilitates coordination amongst
different departments and units.

7. Cooperation: Cooperation is a way of achieving coordination. Cooperation refers to voluntary

actions of members to work collectively as a group. If all the members cooperate with each other,
it will result in coordination amongst their activities.

8. Independent Units: If organization is structured in a manner that different units carry out all
functional activities (production, finance, marketing and personnel) with respect to their units
independently, the need for coordination gets reduced. Though this will be financially costly, it
will reduce top manager's burden to coordinate the activities of these units.

9. Committees: "Committees are usually formal organized groups with a designated membership
and chairperson which regularly conduct scheduled meetings." Committees are formed to solve
specific organizational problems like leave committee. This looks into cases of absenteeism and
transfer of workers and achieves coordination by keeping the organizational work force satisfied
at their jobs.

10. Managerial Integrators: Managerial integrators are specially appointed managers who
continuously coordinate the products, project or brand managers who coordinate the activities
of work groups carrying out different projects or producing different products.

Differences between Coordination and Cooperation

Cooperation Coordination
It is deliberate attempt of
Attempt It is voluntary attempt of members
managers.
Scope It is narrow in scope It is wider in scope
Relationship amongst members is Relationship amongst members is
Relationship
formal informal
It is an important technique of It is not a technique to achieve
Nature
coordination. cooperation
It is a collective effort of group
It is an attempted effort of
members that arises out of their need
Concept managers to unify the actions of all
to work together to attain a common
the organizational members.
goal

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 CONTROLLING
Meaning of Controlling
 Controlling as a function of management refers to the evaluation of actual performance of work
against planned or standard performance and taking the corrective action, if necessary.
 Controlling is the process of comparing the actual performance with the standards set by
the company to ensure that all the activities are happening according to the plan and if
any deviations are found, then corrective action needs to be taken

Definitions of Controlling
 According to Henri Fayol, “Control consists in verifying whether everything occurs in
conformity with the plan adopted, the instructions issued and principles established.”
 According to Brech, “Control is checking current performance against predetermined
standards contained in the plans, with a view to ensure adequate progress and
satisfactory performance, and also recording the experience gained from the working of
these plans as guide to possible future needs.

Characteristics of Control
1. Planning is the basis of control: Control is said to be checking performance as per what has
been planned. So planning precedes controlling and sets the standards and targets of
performance.

2. Control is a continuous process: It is an ongoing and dynamic function of management. It

involves a continuous review of performance and is not a one-time exercise. The period of control
normally depends upon the nature of work, the amount of work and the policies of management.

3. Control is all pervasive: Control is exercised at all levels of management, and is done in every
functional area and at each unit or department. Thus, control is all pervasive.

4. Action is the essence of control: Control is an action-oriented process. The very purpose of
control is defeated if corrective action is not taken for improvement of performance or the
revision of plans.

5. Control is forward looking: Control is futuristic in nature. It measures current performance

and provides guidelines for the corrective action. This ensures future performance as per plans.
Thus, it is forward looking.

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 Importance of Control / Why Control is needed?
1. Helps in achieving the targets
2. Helps in taking corrective action on time
3. Helps in monitoring and improving employees performance
4. Helps in achieving better coordination
5. Helps in better planning
6. Helps in minimizing errors
7. Facilitates decision making
8. Simplifies supervision

Process of Control

1. Setting Performance Standards

 The first step of the process of controlling is to establish standards of performance against
which the actual performance of the organization is measured. An organization should
clearly define its standards to the employees and must establish attainable,
understandable, and realistic standards to be achieved. Standards can be set in
quantitative terms as well as qualitative terms.

2. Measurement of Actual Performance

 Once the organization has established the standards, the second step of the process of
controlling is to measure the actual performance in a reliable and objective manner. The
actual performance of an organization can be measured through different techniques
such as sample checking, personal observation, etc., and should be measured in the same
units in which the standards are fixed to make the comparison easy.

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3. Comparison of Actual Performance with Standards
 The third step of the process of controlling is to compare the actual performance of the
organization with the established standards (in the first step). By comparing the actual
performance with the standards, an organization can determine the deviation between
them. When the standards are expressed in quantitative terms, it becomes easy for the
organization to make comparisons as there is no subjective evaluation required.

4. Analyzing Deviations
 The actual performance and set standards of an organization rarely match with each
other. Usually, there is always some variation between the expected and actual
performance. Therefore, the fourth step of the process of controlling is to analyses the
deviations.
A) Critical Point Control
 Critical Point Control states that the control system of an organization should focus more
on the Key Result Areas (KRAs), which are critical to its overall performance. It is not easy
and economical for an organization to keep a check on every activity with the same
attention level.
B) Management by Exception
 Management by Exception is based on “If you try to control everything, you may end up
controlling nothing”, and states that the manager of an organization should focus on the
significant deviations which go beyond the set deviation limit. For this, the managers
should establish a range of deviations for the performances and any deviation that goes
beyond the set range must be given attention.

5. Taking Corrective Action

 The last and final step of the process of controlling is to take corrective action. If the
deviations are within the acceptable limits set by the managers, then there is no need to
take corrective action. However, if the deviations go beyond the set acceptable limit in
the key areas, then proper and immediate managerial actions are required. An
organization can easily rectify the defects in the actual performance through the
corrective steps.

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