PRINCIPLES AND PRACTICES OF MANAGEMENT

BASIC CONCEPTS OF MANAGEMENT
INTRODUCTION What is the need to have Management in organisations ? ‡ Members of one organisation or another

‡

‡ ‡ 

A college  A Sports team  a business, etc. Basic element of any organisation-GOAL OR PURPOSE. Some programs or methods for achieving goals - a PLAN. Allocate and acquire the resources necessary to achieve goals. Need people responsible for helping in achieving the goals-

µMANAGERS¶

WHAT IS MANAGEMENT?
DEFINITION I For the purpose of study³ Management is the process of planning, organizing, leading, and controlling the resources of an organisation in the efficient and effective pursuit of specified organisational goals.´ - Burton & Thakur 

EFFICIENCY AND EFFECTIVENESS
EFFICIENCY- Ability to maximize the use of resources in achieving organisational objectives- ³doing things right´ Input- output concept. EFFECTIVENESS- Ability to determine appropriate objectives: ³doing the right things´ Involves choosing right goals.

PRODUCTIVITY
Surplus is created through productive operations. Definition: ³Productivity is the output-input ratio within a time period with due consideration for quality.´ Productivity = output inputs (within a time period and quality considered) 

DEFINITION II
³ Management is the process of designing and maintaining an environment in which individuals , working together in groups, efficiently accomplish selected aims.´ - Harold Koontz & Heinz Weihrich

Management As A Science   

Systematized body of knowledge covering general truths or the operation of general laws. Better work by using the organized knowledge about management. Organized knowledge underlying the practice.

MANAGEMENT AS AN ART 


Managing as practice. Learning from mistakes and polishing managing art.

³Science and art are not mutually exclusive; they are complementary.´

Success is measured not in terms of money alone.satisfaction. and training are required.MANAGEMENT AS A PROFESSION    Occupation for which specialized knowledge. . skills. Use of these skills for larger interests of the society not for self.

No formal education requirements for entry into management. 5. Management is moving closer to the state of professionalism.Certain Characteristics of Profession Missing in Management 1. 3. Thus. . No clear code of managerial ethics. 4. Managers do not have specific clients. 2. No system of accreditation or licensing for managers. No common body of knowledge required for understanding someone to be a manager.

Canakya Sutras .

Rajyatantram (Management)  a-labdha-labhah na alasasya ³Gaining that which not in possession is not for the lazy´ .

´ .Continued«  alasasya labdham api raksitum na sakyate ³The lazy cannot even protect that which is gained.

Continued«  na ca alasasya raksitam vivaradhate ³Neither does the lazy person¶s protected (gains) grow.´ .

´ .Continued«  na bhrtyan presayati ³ (The lazy) does not deploy employees (servants).

´ . together constitute the technology of enterprise (management). starting from gaining the nonpossessed.Continued«  a-labdha-labhadi catustayam rajya-trantram ³ These four.

Management Functions at Different Organisational Levels Management Levels 1. µFirst¶ or lowest level managers in the organisational hierarchy. First.Line Managers: Responsible for the work of operating employees only and do not supervise other managers. .

2. Report to more senior managers. Responsible for other managers and sometimes for some operating employees. Middle Managers: Managers in the midrange of the organisational levels. .

. Top Managers: Responsible for the overall management of the organisation.3. Establish operating policies. Guide the organization's interaction with its environment.

plan or logic.´  Actions are based on some method. Members of the organisation carry on activities consistent with the chosen objectives and procedures.  Plans are the guides by which ±    The organisation obtains and commits the resources.Management Functions 1. . Progress toward the objectives is monitored and measured to take corrective actions. PLANNING ³Process of establishing goals and a suitable course of action for achieving those goals.

 Bridge connecting the conceptual idea in creating and planning to the specific means for accomplishing ideas. .´  Different goals require different structures.2. ORGANIZING ³Process of engaging two or more people in working together in a structured way to achieve a specific goal or set of goals.

.  Interpersonal task of motivating the individual employee. work group or department as a complexity of individuals.  Motivate the work unit.  Management of organizational power.3. LEADING ³Process of directing and influencing the taskrelated activities of group members or an entire organisation.  Management of organizational communication processes. political forces and organizational culture.´  Management of human resources.

4. Measuring current performance. CONTROLLING ³Process of ensuring that actual activities conform to planned activities. Taking corrective actions if deviations are detected.´ Main Elements:     Establishing standards of performance. Comparing this performance to the established standards. .

influence and motivate employees to perform essential tasks. authority. CONTROLLING Managers make sure an organisation is moving towards organizational objectives. ORGANIZNG Managers arrange & allocate work. and resources to achieve organizational goals.PLANNING Managers use logic & methods to think through goals and actions. THE INTERACTIVE NATURE OF THE MANAGEMENT FUNCTIONS . LEADING Managers direct.

90 80 70 60 50 40 30 20 0 0 Planning Organizing Leading Controlling Middle managers Top managers First line Managers IMPORTANCE OF MANAGEMENT FUNCTIONS AT DIFFERENT LEVELS .

engineers.  .  Also called as µhard skills¶. Henry Fayol Identified three basic skills:TECHNICAL SKILL Ability to use procedures.Management Levels and Skills  1.  Pertain to knowledge and proficiency in processes. Surgeons. methods and techniques which are used in doing a work. procedures. techniques and knowledge of a specialized field. E. musicians.g.etc.

No manager can be effective without suitable human skills irrespective of being technically and conceptually competent. and motivate other people as individuals or in groups. Management is a process of getting things done with and through people. understand. .2. HUMAN SKILL Ability to work with.

. Anticipating how a change in any of its parts will affect the whole. CONCEPTUAL SKILL Ability to co-ordinate and integrate all of an organization's interests and activities. Involves seeing the organization as a whole.3.

Role is defined as the pattern of behaviour which is defined for different positions. Mintzberg identified three major categories of roles of a manager each of which has different defined roles. .MANAGERIAL ROLES    Henry Mintzberg discussed ten activities of managers in his book ³The Nature of Managerial Work´.

I.  . handing out merit certificates and other awards to outstanding employees. attending social functions involving employees. Figurehead: Perform activities which are of ceremonial and symbolic nature.  These include greeting the visitors. both the organizational members and outsiders.  INTERPERSONAL ROLES Concerned with interaction with other persons. Three types of interpersonal roles:i.

etc. .  These include‡ staffing ‡ maintaining a productive work force. Leader Role  Involves leading the subordinates and motivating them for willing contributions.ii.  Requires those leadership and motivational activities that are essential for the management of people.

 Manager serves as a connecting link between his organisation and outsiders or between his unit and other organisational units.iii. .to maintain a link between the organisation and its external environment. Liaison Role  Includes activities by which the executive develops and maintains a network of contacts outside the organization.  Major objective.

  INFORMATIONAL ROLES  Mainly involve management of information.  Factors may be within the organisation or outside it.II.both within and outside the organisation.giving and receiving information. both inside and outside the organisation. Include communication. Monitor Role (or Recipient Role): Involves constantly collecting information about those factors which affect a manager¶s activities. .  Manager uses interpersonal roles to seek information from many sources. Three types of informational roles: i.

formal or informal. Dissemination may be written or oral.  Disseminator Role Distributes the information to his subordinates who may otherwise not be in a position to collect it.  .ii.

actions. strategies.iii. the manager represents his organization or unit while interacting with outsiders. etc.  Information is related to corporate plans. policies. Spokesperson Role  As a spokesperson. . performances.  Transmitting information to those outside the organisation.

Entrepreneur Role: Process by which manager seeks and identifies opportunities to promote improvement and needed change.  Manager assumes certain risk which is involved in terms of the outcomes of an action.III.  DECISIONAL ROLES Involves choosing the most appropriate alternative out of the available ones. A manager performs four roles:  i. . manager is required to bring suitable changes.  Since these actions can be affected by dynamic and constantly changing factors.

natural disasters.ii. shortage of raw materials. employee complaints and grievances. Disturbance-Handler Role  Equips the manager to take corrective actions needed to resolve important.  Disturbances can be in the form of strike by employees. . etc. unexpected disturbances.

 Specific activities might include developing and monitoring budgets. etc. physical and financial. forecasting future resource problems. . predicting future resource needs.to various organisational units according to their needs.iii. Resource Allocator Role  Manager allocates resources ± human.

a manager might represent the corporation to negotiate a trade union contract. a joint venture.  Such interest groups are ± shareholders. Negotiator Role  Manager negotiates with various interest groups in the organisation. .iv. or a trade agreement.  For example. employees and outside agencies.

leading and controlling. organizing.Limitations of Mintzberg Approach     Sample of five executives used in his research is far too small. . Type of roles identified by Mintzberg are not applicable to all types of managers. Many of the activities Mintzberg found are evidences of planning. Managers have to do some work that is not purely managerial.

EVOLUTION OF MANAGEMENT THOUGHT .

Growing competition and complexity of managing large business organisation forced to develop systematic management concepts and principles.EVOLUTION OF MANAGEMENT THOUGHT Study of how managers achieve results is predominantly a 20th century phenomenon. . World War I compelled people to think of solution to the problem of how limited resources could be applied in better way. World War II added further problem.

Growing technological obsolescence. Freedom at national and international markets. Increasing buyers¶ sovereignty in the markets. Increase in capital investment.Increase in competition has come from factors as:     Technological innovations and their dissemination in business. .

Increased government regulations and controls to make business more socially-oriented. . Organized union activities to put pressures on management. High degree of division of labour and specialisation. Pressure of various conflicting interest groups to meet their demands from the organizations.Complexity of managing business has increased because :     Increasing size of business organisations.

Management Contributions by Earlier Civilisations CIVILIZATION Egyptians (4500 BC) Sumerians (3000) BC Babylonians (2000 BC) Hebrews Romans (AD 284) Roman Catholic Church (AD 200) Military organisation al structures CONTRIBUTION Planning. . Creation of chain of command by delegating authority to 100 provinces. cardinal and local priest. Written records in respect of control of herds. Simple hierarchy of authority with a ranking order of pope. organizing and coordination of natural and especially human resources in the building of the pyramids. Application of the span of management and creation of line organisation structure by Moses. families and labour. Centralisation of command and decentralisation of military operations. Code of Hammurabi stipulating guidelines and procedures in respect of trade. income. property. taxes and property. mobilisation.

THE SCIENTIFIC MANAGEMENT SCHOOL     Formulated by Frederick W. and for selecting. Generally acknowledged as ³the Father of Scientific Management´. . Concerned essentially with improving the operational efficiency at the shop-floor level. Published many papers and books and compiled all his contributions in his book ³Scientific Management´. Taylor & others between 1890 & 1930. training and motivating workers.that sought to determine scientifically the best methods for performing any task.

Replacing rule of thumb with science a) Application of organized knowledge.PRINCIPLES OF SCIENTIFIC MANAGEMENT 1. c) Should not be based on mere estimates (rule of thumb). . b) Emphasis on scientific method which denotes precision in determining any aspect of work.

2. Maximum Output Involves continuous increase in production and productivity instead of restricted production either by management or by workers. 3. . Harmony in Group Action a) Attempts should be made to obtain harmony in group action rather than discord. b) Mutual give and take situation and proper understanding should exist so that group as a whole contributes to the maximum.

c) Based on mutual confidence. Cooperation a) Involves achieving cooperation rather than chaotic individualism. b) Cooperation between management and workers can be developed through mutual understanding and a change in thinking. cooperation and goodwill. .4.

b) Training should be provided to workers to keep them fully fit according to the new methods of working. . Development of Workers a) All workers should be developed to the fullest extent possible for their own and for the company¶s highest prosperity.5.

Taylor¶s compensation system involving the payment of higher wages to more efficient workers which was interpreted by trade unions as a new method of exploiting workers by the industrialists. Work used to be performed under close and strict supervision based on authoritarian approach. workers had to follow strictly.OPPOSITION OF SCIENTIFIC MANAGEMENT Many followers took aggressive mechanical view of production and sidelined human aspect at the workplace. . Lack of scientific standardization of work and whatever standards used to be set by the management. Most crucial element under contention was Differential rate system.

Frank and his wife Lillian. . a psychologist. Frank Gilbreth gave up his contracting career in1912 to study scientific management after hearing Taylor speak at a professional meeting. studied work to eliminate wasteful hand-and-body motions.THE GILBRETHS     A construction contractor by trade. Focused on ways of promoting the individual worker¶s welfare. Ultimate aim of scientific management was to help workers reach their full potential as human beings.

etc.hold. . Wasted motions missed by the naked eye could be identified and eliminated.grasp.    First researchers to use motion pictures to study hand-and-body motions. Invented a device called microchronometer that recorded a worker¶s motions and amount of time spent doing each motion.) which they called therbligs. Devised a classification scheme to label 17 basic hand motions (search.

 Second motivation. . GANTT    Worked with Taylor on several projects and began to reconsider Taylor¶s incentive system when he went out on his own as a consulting industrial engineer.  This would spur supervisors to train their workers to do a better job.the supervisor would earn a bonus for each worker who reached the daily standard. Came up with new idea Every worker who finished a day¶s assigned work load would win a 50-cent bonus. plus an extra bonus if all the workers reached it.HENRY L. Abandon the differential rate system.

Beyond this. he originated a charting system production scheduling ± ³the Gantt Chart´ which is still in use today. managing and controlling complex organisations ±  CPM ( Critical Path Method. .   Every worker¶s progress was rated publicly and recorded on individual bar chartsBlack ± Days the worker made the standard. Formed the basis for two charting devices which were developed to assist in planning.  PERT (Program Evaluation & Review Technique developed by Navy).When he or she fell below it.originated by Du Pont). Red .

.  Design incentive systems based on output.How Do Today·s Managers Use Scientific Management? Principles of Scientific management which are used today : Analysing the basic work tasks that must be performed.  Hire the best qualified workers for a job.  Use time and motion study to eliminate wasted motions.

Contributions were first published in book form titled µAdministration Industrielle at Generale¶ in French language in 1916. to identify the principles and skills that underlie effective management.MODERN OPERATIONAL MANAGEMENT THEORY/ CLASSICAL ORGANISATION THEORY SCHOOL      Attempt pioneered by Henri Fayol. Its English version was published in 1949 in the United States of America. Contributions are termed as operational management or administrative management. . HENRI FAYOL Real father of modern operational management theory ± French industrialist Henri Fayol.

Gave emphasis on two things: The list of management principles is not exhaustive but suggestive and has discussed only those principles which he followed on most occasions. .FAYOL·S GENERAL PRINCIPLES OF MANAGEMENT   Gave fourteen principles of management.  Principles of management are not rigid but flexible.

Fayol·s Fourteen Principles of Management 1. along with which must go the balanced responsibility for its function. and to continuously improve his skills . Division of Work: Specialisation allows the individual to build up experience. Thereby he can be more productive. 2. . but this is twosided: employees will only obey orders if management play their part by providing good leadership. Authority and Responsibility: The right to issue commands. Discipline: Employee must obey. 3.

5. Individual interest must be subordinate to general interest when there is a conflict between the two.4. This is essential to ensure unity and coordination in the enterprise. Unity of Direction: People engaged in the same kind of activities must have the same objectives in a single plan. Unity of Command: Each worker should have only one boss with no other conflicting lines of command. . 6. Subordination of Individual Interest to General Interest: Common interest is above the individual interest.

7. Remuneration of Personnel: Payment is an important motivator although by analyzing a number of possibilities. 8. Centralisation: He refers the extent to which authority is centralised or decentralised. 9. Scalar Chain: A hierarchy is necessary for unity of direction. It refers to the number of levels in the hierarchy from the ultimate authority to the lowest level in the organisation.

10. Order: Principle relating to the arrangement of people and things. Material Order- Place for everything and everything should be in its place. Social order- There should be the right man in the right place. 11. Equity: It is the combination of justice and kindness. Equity in treatment and behavior is liked by everyone and it brings loyalty in the organisation.

12. Stability of Tenure: No employee should be removed within short time. There should be reasonable security of jobs. 13. Initiative: Within the limits of authority and discipline, managers should encourage their employees for taking initiative. It increases zeal and energy on the part of human beings. 14. Esprit de Corps: This is the principle of µunion is strength¶ and extension of unity of command for establishing team work. The manager should encourage esprit de corps among his employees.

Dissimilarity between contributions of Taylor and Fayol
Basis of Difference Perspective Focus Taylor Shop-floor level Fayol Higher management level Overall efficiency by observing certain principles. Managerial functions. Personal experiences translated into universal truths. Systematic theory of management

Efficiency through work simplification and standardisation Production and engineering Scientific observation & measurement Basis for accomplishment on production line.

Orientation Results

Overall Contribution

Administrative Theory
MAX WEBER (1864-1920)  A German sociologist who studied organizational activity.  Developed a theory of authority structures and relations in the early 1900s.  Any goal oriented organisation consisting of thousands of individuals would require carefully controlled regulation of its activities.

  

Developed a theory of bureaucratic management that stressed the need for a strictly defined hierarchy governed by clearly defined regulations and lines of authority. Bureaucracy- A form of organisation characterized by division of labor, a clearly defined hierarchy, detailed rules and regulations, and impersonal relationships. Believed that technical competence should be emphasized and that performance evaluations should be made entirely on the basis of merit.

Features of Weber·s Ideal Bureaucratic Structure
Recognized that this ³ideal bureaucracy´ did not exist in reality.  A basis for theorizing about work and how work could be done in large groups. 1. Administrative Class:  Responsible for maintaining co-ordinative activities of the members.  People are paid and are whole time employees.  Receive salary and other perquisites normally based on their positions.  Their tenure in the organisation is determined by the rules and regulations of the organisation.  Selected for the purpose of employment based on their competence. 

2. Authority Hierarchy: 
There is a hierarchy of positions in the organization.  Hierarchy is a system of ranking various positions in descending scale from top to bottom of the organization.  Each lower office is subject to control and supervision by a higher office.

3. Division of Labor: 
Work is divided on the basis of specialization to take the advantages of division of labor.  Tries to ensure that each office has a clearly defined area of competence within the organization.  No work should be left uncovered.

4.  Official positions are free from personal involvement.  Each official knows precisely the outcome of his behavior in a particular manner. .  Concept used in dealing with organizational relations as well as relations between the organisation and outsiders. 5. and predictability. continuity. Impersonal Relationships:  Relationships among individuals are governed through the system of official authority and rules. Official Rules:  Administrative process is continuous and governed by official rules.  Rules provide the benefits of stability. emotions and sentiments.

.  An official record is almost regarded as encyclopedia of various activities performed by the people in the organization. Official Records:  Maintenance of proper official records.6.  Decisions and activities of the organization are formally recorded and preserved for future reference.

iii. People may be judged on the basis of observance of rules not results. Rigid organisational hierarchy works against hierarchy. Following of rules may become the objective of the organisation and organisational objectives may become secondary. ii. Total impersonal approach cannot be adopted while dealing with people.Demerits of Weber·s Bureaucratic Model 1. Resources are used for a purpose other than for the organisational goals. 2. ii. . Invalidity of Bureaucratic Assumptions: i. iii. Goal Displacement: i. Rules often become source of inefficiency.

Professionals try to work according to their discipline for efficiency. Excessive specialisation may lead to trained incapacity in the organisation which refers to a phenomenon where a person does not see beyond his training and tries to correlate the matter with total situation on the basis of his training. iii. Unintended Consequences: i. ii. Conflicts between professionals and bureaucrats. Conflict between organisation and individuals. Bureaucrats try to emphasize rules and regulations. .3.

Innovation and new knowledge are stifled. iv. It does not consider the informal organisation and interpersonal difficulties. ii. iii. Behavioural scientists criticized the most. v.4. vi. It is incompatible with the development of a mature personality. emphasizing on human behaviour in the organisation. It promotes conformity. Inhuman Organisation: i. . The hierarchy interferes with communication.

iii. Ignores external conditions. . Closed System is :      Self contained. Self maintaining. Bureaucratic organisation can work well when environment is highly static and predictable. Static. ii. Does not allow for adapting to changes in the environment. Rigid. An open-system perspective is more suitable for the management of modern day organisations where more interaction between organisation and environment is required.5. Closed-System Perspective: i.

 Great deal of dissatisfaction among the workers and productivity was not up to the mark.  A team was constituted to investigate the real causes behind this phenomenon. was manufacturing telephone system bell.BEHAVIORAL APPROACH HAWTHORNE STUDIES  Hawthorne plant of Western Electric Company. Chicago. .000 employees at the time of experiments.  Employed about 30.  Most progressive company with pension and sickness benefits and other recreational facilities.

Control and experimental groups were set up. ii.  i. productivity continued to increase in both groups. As the light level was decreased in the experimental group. Findings: As the level of light was increased in the experimental group. A productivity decrease was observed in the experimental group only when the level of light was reduced to that of a moonlight. Experimental group being exposed to various lighting intensities. . Control group working under a constant intensity. output for both groups increased. iii. First set of experiment was to investigate the relationship between the level of lighting in the workplace and worker productivity.

Rest periods of varying length were introduced.  In 1927.The engineers couldn¶t explain what they had witnessed but concluded that illumination intensity was not directly related to group productivity and something else must¶ve contributed to the results. the Western Electric engineers asked Harvard professor Elton Mayo and some associates to join the study as consultants. The work day and work week were shortened. Researchers also allowed the groups to choose their own rest periods and to have a say in other suggested changes. New Set of Experiment :  A small group of workers was placed in a separate room and a number of variables were altered:     Wages were increased. .

both the groups have developed a group pride that motivated them to improve their work performance.have a positive influence on productivity. . Sympathetic supervision had further reinforced their motivation. This phenomenon was labeled as the Hawthorne Effect.the social environment of employees. Informal work groups.Findings:     Because of special attention. Employees would work harder if they believed management was concerned about their welfare and supervisors paid special attention to them.

It assumed acceptance of management¶s goals and look on the worker as someone to be manipulated by management. Insufficient attention was given to the attitudes that people bring with them to the workplace. Therefore.Criticisms of Hawthorne Experiments     The Hawthorne plant was not a typical plant because it was a thoroughly unpleasant place to work. There was bias and preconception on the part of the Harvard researchers. the results could not be valid for others. .

e. His analysis of management is truly a social systems approach. an influential 20th century management book. an organisation is essentially a cultural system composed of people who work in cooperation. He was author of Functions of the Executive.i. which presents a theory of organisation and the functions of executives in the organisation. .CHESTER IRVING BARNARD    Chester Barnard (1886-1961) was an American Executive and an early organisational theorists..

. Defined formal organisation as a system of consciously coordinated activities of two or more persons.  They are willing to contribute to the action. An organisation exists when the following three conditions are fulfilled: There are persons able to communicate with each other.Contributions of Barnard 1. ii.  They attempt to complete the common purpose. Concept of Organisation: i.

Executives should encourage the development of Informal organisation.2. Informal: Refers to those social interactions which do not have consciously coordinated joint purpose. . Formal and Informal Organisations: i. An organisation can be divided into two parts:Formal: Consciously coordinated interactions which have a deliberate and common purpose. ii. iii. A manager should take into account both types of organisations.

departmentation.3.that is. There are four elements of a formal organisation: A system of fictionalization so that people can specialise.  A system of effective and efficient incentives so as to induce people to contribute to group action.  A system of power which will lead group members to accept the decisions of the executives  A system of logical decision making. Elements of Organisation: i. .

 He believes that it is not inconsistent with the organisational purpose. Gave a new concept of authority which is termed as µacceptance theory of authority¶ or µbottom-up authority¶. .4. Authority: i.  He is mentally and physically able to comply with it.  He believes it to be compatible with his personal interest as a whole. A person will accept a communication as being authoritative only when four conditions are met simultaneously: He can understand the communication. ii.

. Formulation and definition of organisational purpose. Maintenance of organisational communication through a system of organisation. Motivation: i. ii. through formal interactions. 6. that is. ii. he suggested a number of non-financial techniques for motivating people. Functions of the Executive: i. iii. pleasant organisation. Apart from financial incentives. pride of workmanship. Securing of essential services from individuals so as to achieve organisational purpose. Some of them are: opportunity of power and distinction. participation and feeling of belonging-ness.5.

Executive Effectiveness: i. iii. . Equilibrium of the organisation depends on the individuals working in it. It requires high calibre. 8. other organisations. ii.7. and the society as a whole. ii. technological competence. Leadership is the most strategic factor in securing cooperation from the people. It requires a high level of responsible leadership. iii. Matching of individual efforts and organisational efforts to satisfy individuals. Demands and aspirations of individuals change and the organisation has to cope with the dynamic situation. Organisational Equilibrium: i. and technical and social skills.

 Presented a traditional view of motivation that holds that work is distasteful to employees.  Assumes that workers have little ambition. who must be motivated by force. want to avoid responsibility. .Douglas McGregor  Distinguished two alternative basic assumptions about people and their approach to work. and need to be closely controlled to work effectively. dislike work. THEORY X:  Presents an essentially negative view of people. money or praise.

. People are inherently motivated to work and do a good job.   THEORY Y: Offers a positive view of people. and consider work to be a natural activity. accept and actually seek out responsibility. Assumes that workers can exercise selfdirection.

the activity of every other segment. the systems approach to management views the organisation as a unified. external environment. . Mangers cannot function wholly within the confines of the traditional organisation chart.SYSTEMS APPROACH     Rather than dealing separately with the various segments of an organisation. in varying degrees. Approach give managers a way of looking at the organisation as a whole and as a part of the larger. Activity of any segment of an organisation affects. purposeful system composed of interrelated parts.

A system is not merely the totality of parts and subparts but their arrangement is more important. synergy means that departments that interact co-operatively are more productive than they would be if they operated in isolation. Parts and sub-parts of a system are mutually related to each other.The situation in which the whole is greater than its parts. 2+2=5 . Synergy:.Features of a System     A system is basically a combination of partssubsystems. In organisational terms.

. mediator. Open System: A system that interacts with its environment. outputs. Boundary classifies it into two parts:Closed System: A system that does not interact with its environment. System transforms inputs into outputs. Three aspects are involved in this transformation process:.    A system can be identified because it has a boundary that separates it from its environment. System works as a mediator.inputs.

 Feedback is the key to system controls. . It is the part of system control in which the results of actions are returned to the individual. allowing work procedures to be analyzed and corrected.

Lack of Universality: It cannot be applied to all organisation as it is suitable for large and complex organisation.g. 3. An organisation is a social system and therefore.Limitations of Systems Approach 1.  Its contribution to managing is limited. Abstract Approach: It is not of much use of a practicing manager. Managers have been doing their jobs seeing the problems as a network of interrelated element with interaction between environment inside and outside of their organisation. but not suitable for small organisation.. This approach does not offer anything new. 4. 2. is related with other organisation in the society.  E. . This approach fails to spell out the relationship among these.

CONTINGENCY APPROACH     Extension of systems approach. A manager¶s task is to identify which technique will. best contribute to the attainment of management goals. Also known as situational approach. It represents an important turn in modern management theory . in a particular situation. under particular circumstances. . because it portrays each set of organizational relationships in its unique circumstances. and at a particular time.

Features of Contingency Approach    Management action is contingent on certain action outside the system or subsystem as the case may be. Organisational action should be based on the behavior of action outside the system so that organisation should be integrated with the environment. no action can be universal. It varies from situation to situation. Because of the specific organisationenvironment relationship. .

. or one best way of doing a particular thing.   Management is entirely situational and there is nothing like universal principles of management. neither the organisation nor any of its subsystems are free to take absolute action. It suggests that since organisation interacts with it environment. The approach suggests suitable alternatives for those managerial actions which are generally contingent upon external and internal environment.

Complex: When put into practice. .  Determination of situation in which managerial action is to be taken involves analysis of a large number of variables with multi-dimensions. this approach becomes very complex. Inadequate Literature: It has not adequately spelled out various types of actions which can be taken under different situations. 2.  It is not sufficient to say that µmanagerial action depends on the situation.Limitations of Contingency Approach 1.

Reactive not Proactive: It does not suggest what managers can do in a given situation.  Managers are supposed to take actions based on the situation.3. 4. Difficult Empirical Testing: Methodology available for testing consists of too many factors which makes testing difficult.  It cannot be adopted to managerial actions. .

. or Determine how best to implement a proposed strategy. two consultants working at the McKinsey & Company consulting firm. the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful. Following are the uses:    Improve the performance of a company.Mckinsey 7-S Framework Developed in the early 1980s by Tom Peters and Robert Waterman. Align departments and processes during a merger or acquisition. Examine the likely effects of future changes within a company.

  .Seven Elements  Strategy: the plan devised to maintain and build competitive advantage over the competition. Systems: the daily activities and procedures that staff members engage in to get the job done. Structure: the way the organization is structured and who reports to whom.

Continued«  Shared Values: called "superordinate goals" when the model was first developed. Style: the style of leadership adopted. Staff: the employees and their general capabilities. Skills: the actual skills and competencies of the employees working for the company    . these are the core values of the company that are evidenced in the corporate culture and the general work ethic.

.

.Japanese Management System   Also known as Theory Z. describes the major postulates of Japanese management practices and how these practices can be adopted to the environment of United States and other countries. William G. Ouchi is among those who have studied Japanese business in the hope that it might provide solutions to some American problems.

2.Features of Theory Z  1. the chances of conflict are automatically reduced to the minimum. work groups.  When trust and openness exist. . and government. supervisors. Based on the Japanese management practices and motivational pattern. management. unions. and giving more emphasis to horizontal movement which reduces stagnation. Ouchi has suggested five broad features:Trust: Trust between employees. Strong Bond between Organisation and Employees: Encouraging life-time employment.  Slowing down of evaluation and promotion.

Employee Involvement: Involvement comes through meaningful participation. .3.  Idea is not to slow down decision-making process but to involve employees for their commitment and giving due recognition to them. resources and plans. No formal Structure: There should be a perfect team-work with cooperation along with sharing of information.  It places emphasis on rotational aspect of employee placement which provides opportunities to him to understand how his work affects others or is affected by others. 4.  There can be some decisions which are taken without consulting employees but they are informed later.

Coordination of Human Beings: Leader¶s role is to coordinate people and not technology to achieve productivity.  Leader must develop trust which requires a complete openness in the relationship.  This develops a common culture and no class feeling in the organisation.  Purpose is to achieve commitment of employees to the development of a less-selfish-more-cooperative approach to work.5. .

if there is a relative rise in the income or other nonmonetary benefits. .Limitations of Theory Z 1. 2. Provision of life-time employment to develop strong bond between the organisation and the employees seems to be difficult because of two reasons: Employer cannot retain an employee who is unproductive because of easy availability of substitutes. Common culture and no class feeling within an organisation is very difficult as people come from a wide variety of environments.  An employee will not hesitate to switch over.

. Proposition that shareholders will accept less profit or accept losses to avoid lay-off.  Degree of horizontal movement is limited to the extent to which skills needed for one job can be transferred to other jobs. Following operational problems may come while implementing Theory Z: Organisation without structure has been emphasised but how actually it works is yet unanswered. 4.3. does not seem feasible where most of the organisations believe in low level of social responsibility.

General preference to inexperienced fresh graduates from schools and colleges. Temporary Staffing University Recruiting Mid-Career Hiring   Preference for promotions from within. .Pertinent Features of Japanese Management System   Company wide union or House union. Life-time employment.

Continued«      Quality Control Circles (QCCs). Settlement of conflict through negotiations. Training Practices. Decision making and consultation practices. Compensation. .

CORPORATE SOCIAL RESPONSIBILITY .

´ .DEFINITION ³ Social responsibilities refer to the businessman¶s decisions and actions taken to reasons at least partially beyond the firm¶s direct economic or technical interest.

Responsibility towards consumers. Responsibility towards the government. Responsibility towards general public.Social Responsibility of Managers         Responsibility towards shareholders. . Responsibility towards suppliers. Responsibility towards creditors. Responsibility towards employees. Responsibility towards competitors.

Internal activities impact on the external environment. Social involvement may be in the interest of stakeholders. Profitably re-utilisation of wasteful items. Long-run self-interest of business. Avoidance of Government regulations. .Arguments For Social Involvement of Business       Business: A part of the society.

Lack of accountability of business to society. It would create excessive cost for business. Lack of social skills needed to deal with the problems of society.Arguments Against Social Involvement of Business      Contrary to basic function of Business. . Incomplete support for involvement in social actions.

PLANNING .

establishing an overall strategy for achieving those goals. schedules. Plans are the documents that outline how goals are going to be met including resource allocations. Planning is an activity consisting of a process. and other necessary actions to accomplish the goals. groups or entire organizations. . and developing a comprehensive set of plans to integrate and co-ordinate organizational work. Goals are desired outcomes for individuals.WHAT IS PLANNING?      A process that involves defining the organisation¶s goals. hence various sub-activities. Ongoing process that reflects and adapts to changes in the environment surrounding each organization.

. Planning reduces overlapping and wasteful activities by coordinating activities around established plans. Planning reduces uncertainty by forcing managers to look ahead. anticipate change.WHY DO MANAGERS PLAN?     Planning gives direction to managers by establishing coordinated effort. Planning establishes goals or standards that are used in controlling. consider the impact of change. and develop appropriate responses.

TYPES OF PLANS    A plan is a commitment of resources to a particular course of action believed necessary to achieve specific purpose. . Purpose or Mission:  Basic function or task of an organisation.  Basic objective of an organisation is accomplished by undertaking activities. going in clearly defined directions. achieving goals and accomplishing a mission. fail to do. Plans can be classified as:1. generally. A plan can be effective only if properly understood which managers.

2.  A department may also have its own objective. thinking and action.  They furnish a framework of guiding. Strategies:  General programs of action and deployment of resources to attain comprehensive objective.Objectives: Objectives or goals are the ends toward which activity is aimed. 3.  Represents not only the end point of planning but the end toward which other functions of management are aimed.  They do not attempt to outline exactly how the enterprise is to accomplish its objectives.  .

but within the limits. and contribute to. they are often merely implied from the actions of the managers. an objective. Policies:      General statements or understandings that guide thinking in decision making.g. .4. Hiring only university affiliated management graduates. They are the means of encouraging discretion and initiative. It defines an area within which a decision is to be made and ensure that the decision will be consistent with. E. Not all policies are ³statements´.

allowing no discretions.  Essence of a rule is that it reflects a managerial decision that a certain action must-or must not be taken.  Guides to action. Rules:  Specific required actions or non-actions. 5. 6.  Chronological sequences of required actions.  Often cut across department lines. .Procedures:  Plans that establish a required method of handling future activities.

  sequence to perform a particular task. Budgets: Statement of expected results expressed in numbers.7. It may beExpense Budget that deals with operations. Cash Budget that shows cash inflows and outflows. Programs:  Set of clear instructions in a clear and logical   8. Explain how to carry out a given course of action. Capital Expenditure budget that reflect capital outlays. Supported by budgets. .

STEPS IN PLANNING The sequences of various steps in planning are in such a way that they lead to the translation of an idea into action by reaching to the state of establishing of sequences of activities.  Each stage contributes to plan formulation in following ways: 1. .  It takes the advantages of opportunities and avoids threats.  It leads to formulation of plans by providing clue whether opportunities exist for taking up particular plans. Perception of Opportunities:   Not strictly a planning process.  A preliminary look at possible opportunities.

. Establishing Objectives:  Major organisational and unit objectives are set. Developing Premises:  Conditions under which planning activities will be undertaken.  The nature of planning premises differs at different levels of planning.2.  Establishing objectives for the entire enterprise and then for each subordinate work unit.  Planning premises are planning assumptions.the expected environmental and internal conditions.  Objectives specify the results expected and indicate the end points.  Forecasting plays a major role in planning premises. 3.

 There is no certainty about the outcome of any alternative. 5.  The most common problem is to reduce the number of alternatives so that most promising ones may be taken for detailed analysis.  It is affected by a large number of factors making the evaluation work quite complex.4. . Evaluation of Alternatives:  An attempt is made to evaluate how each alternative contributes to the organisational objectives in the light of its resources and constraints. Determining Alternative Courses:  This concept suggests that a particular objective can be achieved through various actions.

 Evaluation may show more than one alternative good. Choice of Alternative:  This is the point at which the plan is adopted. 7.  Derivative plans in no way reflect the main focus of the business. .  It is the real point of decision-making. various plans are derived so as to support the main plan.  Alternative course of action is to be undertaken in future which is not constant. but they are formulated out of the main plan. Formulation of Supporting Plan:  After formulating the basic plan.6.

8. usually of expenses and capital expenditures. Establishing Sequence of Activities:  Sequence of activities are determined so that plans are put into action. . with resultant profit or surplus. which tie into the overall budget.  Each department of a business can have its own budgets.  Budgets for various periods can be prepared to give plans more concrete meaning of implementation.  The overall budgets of an enterprise represent the sum total of income and expenses.

OBJECTIVES .

´ FEATURES:  Organisations or groups are created for certain objectives.  An organisation may have multiple objectives.  Objectives may be broad or specific. short-term or long-term.  Objectives are clearly defined and provide clear direction for managerial action.OBJECTIVES  Definition: ³ Intended end result that an organisation desires to achieve over varying periods of time.  Objectives have hierarchy. .

Process of assigning a part of a mission to a particular department and then further sub dividing the assignment among sections and individuals creates a hierarchy of objectives.HIERARCHY OF OBJECTIVES    Organisational objectives form a hierarchy ranging from the broad aim to specific individual objectives. Objective of each subunit contribute to the objectives of the larger unit of which it is a part. .

Hierarchy of Organizational Objectives 1. Individual objectives . Department and unit objectives 7. More specific overall objectives 5. Division Objectives 6. Overall objectives of the organization 4.economic purpose 2. Socio. Mission 3.

. Objectives should be rational and realistic rather than idealistic. Objectives must be set taking into account the various factors affecting their achievements. Objectives should be achievable but must provide challenge to those responsible for achievement. Objectives should be consistent with organisational mission.GUIDELINES FOR OBJECTIVE SETTING      Objectives must be clearly specified.

     Objectives should yield specific results when achieved. Objective should start with the word µto¶ and be followed by an action verb. Objectives should be desirable for those who are responsible for the achievement. Objectives should be periodically reviewed. Objectives should be consistent over the period of time. .

´ .´  ³Our objective is to offer best and cheapest product.´ EXAMPLE OF POOR OBJECTIVE SETTING  ³Our objective is to maximize our profit.EXAMPLE OF GOOD OBJECTIVE SETTING  ³We want to make our product number selling brand in its field in terms of units sold.´  ³We strive to become leader in product innovation in our field by investing five per cent of our sales revenue on research and development.

Definition: ³ A comprehensive managerial system that integrates many key managerial activities in a systematic manner.´ .MANAGEMENT BY OBJECTIVES   Approach was first proposed by Peter Drucker in his 1954 book µThe Practice of Management¶. consciously directed towards the effective and efficient achievement of organisational objectives.

which spell out the individual actions needed to fulfill the unit¶s functional strategy and annual objectives.FEATURES OF MBO     It is an approach and philosophy to management and not merely a technique. It is characterized by the participation of concerned in objective setting and performance reviews. Heart of MBO is the objectives. Refers to a formal set of procedures that begins with goal setting and continues through performance review. .

the individual enjoys wide discretion in choosing the means for achieving them.   Periodic review of performance is an important feature as it emphasises initiative and active role by the manager who is responsible for achieving objectives. . Once the objectives have been agreed upon. Effective MBO programs usually start with the top managers. who determines the organization's strategy and set preliminary goals.

Setting of Organisational Purpose and Objectives:  Questions which provide guidelines for the statement of purpose are:Why does the organisation exist? What business are we in? What should be our business?  Top managers has to determine what he or she perceives to be the purpose or mission and the more important goals of the enterprise for a given period ahead.  Goals are tentative and entire chain of verifiable objectives is worked out by the subordinates.  Companies strengths and weaknesses should be taken into account in the light of available opportunities and threats while setting the goals. .PROCESS OF MBO 1.

advertising expenditure. KRAs of marketing can be sales volume.  KRAs indicate the present state of an organisation¶s health and the top management perspective for the future.  E..  Organisation¶s objectives and planning premises together provide the basis for identification of KRAs. Identification of Key Result Areas (KRAs):  These are those aspects of a unit or organisation that must function effectively if the entire unit or organisation is to succeed. sales expense.2.g. individual sales-person¶s performance. .

3.  Each individual manager must know in advance what he is expected to achieve.  Subordinate states his own objectives as perceived by him. .  Final objectives are set by the mutual negotiation between superior and subordinate.  Process begins with superior¶s proposed recommendations for his subordinate¶s objectives. Setting Subordinates¶ Objectives:  Organisational objectives are achieved through individuals.

4.  There should be matching between objectives and resources. Matching Resources with Objectives:  Objectives should indicate the resource requirement.  It is taken to ensure that everything is going as planned and the organization is able to achieve its objectives. . Appraisal:  Tries to measure whether the subordinate is achieving his objective or not.  Helps in identifying the problems and the ways to overcome them.  On-going process so as to find out deficiency in the working and also to remove it promptly. 5.  Allocation and movement of resources should be done in consultation with the subordinate manager.  Proper application of resources ensures objective achievement.

. is used as an input for recycling objectives and other actions. Recycling:  Appraisal. being the last aspect of MBO.  What happens at each level may affect other levels also.  Outcome of appraisal at one level is recycled to see if the objectives have been set properly at the level concerned and also at the next higher level.6.

 Participation by managers in the management process. Better Managing:  Resources and activities are put in such a way that they result in better performance. .  Clarity of objectives.Benefits of MBO 1.  Realization that there is always scope for improvement.  MBO forces managers to think about planning for results.  Periodic feedback of performance.  Clarity of roles. rather than merely planning activities or work.

 Helps in defining the organisation properly in the environmental context as well as in the context of its various competitors. 3.  People become enthusiastic when they work for the objectives set by themselves. . Clarity in Organisational Action:  Tends to provide the key result areas (KRAs) where organizational efforts are needed.  While implementing MBO.2.  This is possible because of two closely related phenomena: participation in objective setting and rational performance appraisal. the deficiencies in the organization get discovered and appropriate remedial measures can be initiated. Personal Satisfaction:  Encourages people to commit themselves to their goals.

direct and control the change.  It aids in developing effective controls. plan. enabling the top management to initiate. .  Change process becomes easier because of application of MBO. Basis for Oraganisational Change:  It provides a framework and guidelines or planned change.4.

. how the performance is to be appraised and how organisation will benefit.  Managers have doubt MBO like what purpose it serves. Failure to Teach Philosophy of MBO:  Philosophy is built on concepts of self-control and self-direction. which are aimed at making managers professionals.Limitations of MBO 1.  It generates paper work because large number of forms are to be designed and put into practice. Time and Cost:  Requires large amount of time of the senior managers. 2.

 No guidelines are being given for managers regarding future assessment. etc. 4. Failure to Give Guidelines to Goal Setters:  Managers must know about their corporate goals and how their own activity fits in with these goals. Problems in Objective Setting:  MBO requires verifiable objectives against which performance can be measured.3. understanding of the policies affecting their areas of operations. sometimes. to quantify the objectives because of dynamic environment. .  It is difficult.

6. Managers may downgrade the important goals that are difficult to state in terms of end results. Emphasis on Short-run Goals:  In order to be precise.  Managers hesitate to change objectives during a period of time. there is a tendency to emphasize short term goals usually for a year or even less as it helps in performance appraisal. Danger of Inflexibility:  It is useless to follow old objectives in the context of revised corporate objectives.5. 7. . changed premises or modified policies.

POLICIES AND PLANNING PREMISES .STRATEGIES.

Cola: To put a Coke within µarm¶s reach¶ of every consumer in the world. Term µstrategy¶ has been derived from Greek word µstrategos¶ which means general. . Strategic Intent is focusing and applying organisational energies on a unifying and compelling goal.STRATEGY      Strategy is the broad program for defining and achieving an organisation¶s objectives. It may be defined as a comprehensive plan guiding resource allocation to achieve long-term organisation goals. the organisation¶s response to its environment over time. Coca.

. Essence of policy is discretion. Strategy concerns the direction in which human and material resources will be applied in order to increase the chance of achieving selected objectives.STRATEGY AND POLICY    Policies are general statements or understandings that guide managers¶ thinking.

SRATEGY AND TACTICS   Strategy determines what major plans are to be undertaken and allocates resources to them. . Tactics is means by which previously determined plans are executed.

Corporate ±Level Strategy Business-Level Strategy Business.Level Strategy Marketing Strategy Production Strategy R&D Strategy Finance Strategy Advertising Strategy LEVELS OF STRATEGY .

new business development.CORPORATE-LEVEL STRATEGY   Strategy formulated by top management to oversee the interests and operations of multiline corporations. divestitures. . etc.  Typical strategic decisions at corporate level relate t the allocation of resources for acquisitions. Major questions at this level are What kinds of businesses should the company be engaged in?  What are the goals and expectations for each business?  How should resources be allocated to reach these goals?  It sets long term direction for the total enterprise.

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BCG MATRIX(BOSTON CONSULTING GROUP) 1. QUESTION MARK  They are low-market-share businesses in high growth markets.  They are the source of difficult strategic decisions. .  They do not produce much profits but compete in rapidly growing markets.  Usually require cash investment so that they can become ³stars´.

they can turn out to be the firm¶s ³cash cows´ of the future.  They produce large profits through substantial penetration of expanding markets. and further resource investments in them are recommended.  Preferred strategy for stars is growth.  If properly handled. STARS  They are the high-market-share businesses in high growth markets.2. .

 ³Cows´ should be ³milked´ to generate cash that can be used to support investments in stars and question marks. and harvest. .  Preferred strategy is stability or modest growth.3.  Such businesses are in a position of making the products at low cost. CASH COWS  They are high-market-share businesses in lowgrowth markets.  They produce large profits and a strong cash flow.

and they show little potential for future improvement.  Preferred strategy is divest (retrenchment by divestiture).4.  They do not produce much profits. . DOGS  They are the low-market-share businesses in low growth markets.  These businesses are usually not profitable and generally should be disposed off.

Applicable in those organizations which have different businesses and each business is treated as Strategic Business Unit (SBU). SBU describes a single business firm or a component that operates with a major business line within a larger enterprise.BUSINESS-LEVEL STRATEGY    It is the strategy for single business unit or product line. .

   It could be termed as a sub strategy of corporate where for each line of business. facilities location. etc. a separate strategy is formulated. Selection of strategy at the business level involves answering the strategic question:³How are we going to compete for customers in this industry and market?´ Typical business strategy decisions include choices about product/service mix. new technologies. .

PORTER·S GENERIC STRATEGIES  According to Porter. Market Scope ± ask: ³ How broad or narrow is your market or target market? 2. . business-level strategic decisions are driven by two basic factors:1. Source of Competitive Advantage ± ask: ³ Will you compete for competitive advantage by lower price or product uniqueness?´  These factors combine to create the following three generic strategies that organisations can pursue.

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DIFFERENTIATION    Organisation¶s resources and attention are directed toward making its products appear different from those of the competition. shape. This offers a customer appeal to the buyers and also a competitive advantage to the firm over its competitors. . It aims at increasing the firm¶s share of the market by bringing about some changes in the basic features of its products like the colour. design or size of the product.1.

OVERALL COST. thereby increasing its sales volume.LEADERSHIP    Organisation¶s resources and attention are directed toward minimizing costs to operate more efficiently than the competition.etc. . advertising.) below the costs of the competing firms.2. R&D. It aims at increasing the firm¶s share of the market by minimizing the per unit cost of its products and reducing the selling price. Sales volume is increased in the present market by cutting down the company¶s overall costs (production.

. FOCUSED STRATEGY    Organisations concentrate on a special market segment with the objective of serving its needs better than anyone else. They seek competitive advantage in that market segment through product differentiation. or a specified area. or a specified product. Its focus may be on a specified group of customers.3.

FUNCTIONAL-LEVEL STRATEGY     It guides activities within one specific area of operations. . It guides the organisational resources to implement business strategy. The strategic question to be answered in selecting functional strategies is: ³How can we best utilize resources to implement our business strategy?´ Typical strategic decisions include the choice of management practices within each function that improves operating efficiency. customer service or innovativeness. product or service quality.

form a joint venture.Environmental Analysis by TOWS Matrix It aims at matching the organization's internal strengths and weaknesses (company profile) with its external threats and opportunities (environmental analysis).  Combination of these factors require distinct strategic choices. retrench or even liquidate. ..e.  It may require a complete restructuring of the firm. WT Strategy:   Company aims at minimising its internal weaknesses and the environmental threats.g. and thus give rise to four alternative strategies:1.

technology. managerial. ST Strategy:  Company maximises its strengths (technological. . e.  T take advantage of opportunities. WO Strategy:  Company minimises its weaknesses by developing its internal strengths and maximises the environmental opportunities. 3..etc.  Company can make use of its technological developments to face the threat of stiff competition with its competitor.2. a firm with certain weaknesses in some areas may either develop those areas within the enterprise or acquire needed competencies.g. persons with needed skills.) to be able to minimise the environmental threats.etc. functional.

.4. SO Strategy:  Company uses its strengths to take advantage of environmental opportunities.  Environmental threats are overpowered by opportunities. if any.  Weaknesses. are overcome and converted into strengths.  Most desirable strategy where the organisations use their strengths to exploit the opportunities offered by the environment and are also able to face the threats and convert them into opportunities.

Development of an organisation structure. Review. Reflection of overall objectives. Communication of planning premises. Need to spread the importance of strategies.Effective Implementation of Strategies         Communication of strategies. . Climate. Develop contingency strategies.

´ .PLANNING PREMISES ³Planning premises are the anticipated environment in which plans are expected to operate. They include assumptions or forecasts of the future and known conditions that will affect the operation of plans.

SELECTION OF PREMISES  Managers have to identify the most critical and high priority factors which should be later analysed intensively. 2. .Making Premising Effective 1.  Managers should be ready with alternative premises and align their plans accordingly. PREMISES FOR CONTINGENCY PLANNING  Planning premises are not constant but dynamic.

4. COMMUNICATION OF THE PREMISES  It should be communicated to those who are involved in planning process at different levels of the organisation. . VERIFICATION OF THE CONSISTENCY OF PREMISES  Managers should ensure that premises are consistent with the objective of the organisation.3.

MAKING .DECISION .

or in a practical sense. Plans get translated into action only when a decision has been made.DECISION . A decision represents a judgment. Decision-making is defined as selection of a course of action from among alternatives.MAKING     The word µdecision¶ has been derived from the Latin word µdecidere¶ which means a cutting away or a cutting off. .

Identification of the Problem:  Problem may be defined as any deviation from a set of expectations. .  Categorisation:.Managers collect facts and information which have led to the occurrence of the problem.  This is done in three stages: Scanning:.DECISION MAKING PROCESS 1.Areas of operation which can be responsible for the deviation are categorised.  Diagnosis:.Scanning of the current set up of an organisation to ascertain as to whether or not it is in accordance with the requirements of the internal and external environment.

the risk of technological changes and the domestic or international political climate.  Quality of labor relations. Evaluation of Alternatives:  Three ways of evaluating alternatives:i.  This resolution of managers forms the objective of decision-making. Quantitative and Qualitative Factors:  Fixed and operating costs. Generating Alternatives:  Alternative solutions refer to two or more ways of dealing with a particular problem. .2. Establishment of Objectives:  Aim is to solve the problems identified. 3. 4.

ii. iii.  Refers to comparing the future expected benefits with the potential costs of alternative solutions and selecting the one which gives the maximum benefit generated in terms of difference between the potential revenues and costs. Cost-Effectiveness Analysis:  Also known as Cost Benefit Analysis. the proposed alternative should be accepted. . Marginal Analysis:  Refers to comparing additional revenues associated with the acceptance of an alternative with its additional costs.  If the additional benefits are more than the additional costs associated with an alternative.

Selection of an Alternative:  Most suitable alternative is selected by adopting any of the following three approaches:i. iii.Each available alternative is put to practice and the one which is most suitable is selected.  Solving a problem by first comprehending it.  Problem is broken into its component parts and various quantitative and qualitative factors are studied.Post experience serves as a guide for future. Experience:.5. Experimentation:. . Research and Analysis:.Most effective technique when major decisions are involved. ii.  A model simulating the problem is developed.

Monitoring the Implementation:  Implementation process.  Other major area of concern is the acceptance of the alternative by those who are actually affected by it. . Implementation of the Alternative:  Planning for the application of the selected alternative is required.6. once initiated. 7. should be regularly monitored to know the degree of acceptance by the organisational members.

Managers take recourse to the pre-established criteria for taking decisions. . E..g. where the problem is more or less of routine and repetitive in nature.TYPES OF DECISIONS PROGRAMMED DECISIONS     Decisions related to structured situations. Ordering of fresh inventory when the existing level of inventory reaches the re-order point. schedules and procedures laid down by the management provide a guideline for taking these decisions. Various policies.

They are non-recurring or exceptional in nature and require brainstorming by managers. E. .NON-PROGRAMMED DECISIONS    Decisions are taken in unstructured situations which are reflective of novel.g.. Increase in advertising expenditure. ill-defined and complex problems.

 Future is predictable.SITUATIONS OF DECISION MAKING While making decisions. the managers face three types of situations or conditions:1.  Such decisions normally relate to very near future and are taken by lower-level or middle level managers. CERTAINTY  It exists when managers can obtain complete and reliable information about future. .

RISK  It occurs when information is available about future but it may be incomplete..  Impact of present decisions on future outcomes can be predicted with a fair degree of certainty.  Past experience and current economic scenario help in predicting the future.g. legal or political scenario in future. Change in the economic. UNCERTAINTY  It exists where almost no information is available about future . Potential of new entrants in the market. the exact degree not always known. 3..g.  Normally such situations do not occur and very few decisions are made under such conditions. .  E.  E.2.

Modern Approaches to Decision-Making Under Certainty
1. RISK ANALYSIS 
It is important to know the size and nature of the risk involved in choosing a course of action.  New techniques have been developed to give a more precise view of risk.  It is important to analyse the interaction of important variables, many of which have an element of uncertainty.

2. DECISION TREES 
Some decisions involve a series of steps, the second step depending on the outcome of the first, and so on.  It is a graphical method for identifying alternative actions, estimating probabilities, and indicating the resulted expected payoff.  Decision trees depict the decision points, chance events and probabilities involved in various courses that might be undertaken.  Graphical form visually helps the decision makers view his alternatives and outcomes.

3. PREFERENCE THEORY 
Also known as Utility Theory, explains the individual attitude toward risk, i.e., risk averters and gamblers.  Assumed that the decision makers follow the statistical probabilities, as applied to decision making.  Attitudes toward risk vary not only with the individual, but also with the level of the manager in an organisation and the source of the funds involved.

DECISION SUPPORT SYSTEM  They use computers to facilitate the decision-making process of semi-structured tasks.  Designed not to replace managerial judgement but to support it to make the decision process more effective. LIMITING FACTOR  Factors that stand in the way of accomplishing a desired objective.  Help in choosing the best alternative.  It is possible to narrow the search for alternative that are required in overcoming the limiting factors.  By recognizing and overcoming those factors that stand critically in the way of a goal, the best alternative course of action can be selected.

ORGANISING

ORGANISING   

Organising is the process of arranging people and other resources to work together to accomplish a goal. Once plans are created, the manager¶s task is to see to it that they are carried out. Organising begins the process of implementation by clarifying jobs and working relationships.

ORGANISATION STRUCTURE 

Organisation structure is the system of tasks, workflows, reporting relationships and communication channels that link together the work of diverse individuals and groups.

FORMAL ORGANISATION    

A formal organisation is a well-defined structure of authority and responsibility that defines delegation of authority and inter-relationships amongst various organisational members. It works on the basis of pre-defined set of policies, plans, procedures, schedules and programs. Some degree of formalisation is a must for any organisation to function effectively. Excessive reliance can lead to loss of initiative and innovative capacities of employees.

procedures.Features of Formal Organisation      It is a job-oriented concept which allocates jobs amongst people for the attainment of a common objective. Coordination among members and their control are well specified through processes. People enjoy the authority and power by virtue of their position in the organisational hierarchy. It is based on the principles of division of labor and efficiency in operations. . rules. etc. The structure of relationships is depicted through lines and boxes on the organisation chart.

. Chester Barnard. Such relationships may be more complex the the officially prescribed ones.INFORMAL ORGANISATION    It refers to the natural grouping of people on the basis of some similarity in an organisation. author of ³The Functions of the Executive´ described informal organisation as any joint personal activity without conscious joint purpose. even though contributing to joint results.

. A person may become member of several informal organisations at the same time. They can be very helpful in getting work accomplished.Features of Informal Organisation      It is a natural outcome at the work place. It enables informal learning that takes place while working and interacting together throughout the work day. They are created on the basis of some similarity among its members.

4. Informal Organisation Spontaneous reaction to formally structured organisations People and their relationships. Emphasis Positions Power It is attached to position and is institutional in nature. Well ± set goals.No.S. 3. 2. Nature 1. Social interaction. Purpose . Structure Formal Organisation Formally structured. It is attached to a person and given by group.

Informal Organisation Authority comes from personal knowledge & skill and given by group. 8.not affected by incomings and outgoings of organisational members. Flexibility Not flexible. Chain of Command Formal Organisation Chain is respected and the authority is delegated by the top management. . Stability Group norms.S. Stable. Highly flexible. 6. Guidelines Rules & for behavior procedures. 7.No. Change in members can lead to instability. Nature 5.

It is the number of subordinates directly reporting to the manager. care should be exercised to keep the span of control within manageable limits.SPAN OF MANAGEMENT    Also known as Span of Control.´ . Magic number for an effective span was never found but this span of control principle evolved: ³There is a limit to the number of people one manager can effectively supervise.

NARROW SPAN     When only few people are under a manager¶s immediate supervision. It results in creation of a large number of levels in an organisation. It gives rise to a Tall Structure. . then the span of control is said to be narrow. Manager is in a position to exercise tight control over their activities.

Narrow Span / Tall Structure .

3. 4. Control can also be tightened. There can be better communication between superiors and subordinates. 2. Managers can maintain a close supervision on their employees.Advantages of Narrow Span 1. It results into personalised relationship between managers and subordinates. .

Too many hierarchial levels are created which makes coordination complicated. 4. 2. Decision making becomes difficult. . Increasing gap between the top-level managers and workers can result in slow communication process. Supervisors are engaged in the routine jobs of supervising their subordinates and have less time to look after other important matters. 5. There is need for more number of managers to supervise the given number of workers resulting in an increase in the overhead expenditure. 3.Disadvantages of Narrow Span 1.

then the span of control is said to be wide. It is created with lesser number of hierarchial levels.WIDE SPAN    When many people are under a manager¶s immediate supervision. It gives rise to a Flat Structure. .

Wide Span / Flat Structure .

Clear policies can be made. 2. Decision-making process is made more effective as superiors delegate the authority to their subordinates and are relieved of dealing with the routine matters.Advantages of Wide Span 1. . It results in a better system of communication as the number of levels is less. 3. There is reduction in cost. 4.

It requires exceptional quality of managers to perform in this structure. It can give rise to a situation of decisive bottlenecks because of overloaded superiors. . There is the risk of superiors losing track of the activities being actually performed by the employees. 2.Disadvantages of Wide Span 1. 3.

. Nature of Work If all the employees are doing work of similar and repetitive nature. Level of Competence of Managers If the managers are competent in their jobs. the managers can supervise a large number of subordinates and thus have a wider span of control. they can afford to have a wider span of management.Factors Affecting Span of Management 1. 2.

. the superiors can afford to supervise a large number of subordinate. 4. Subordinate Training  If subordinates have a strong educational background and can manage their jobs without much assistance from their superiors.3. a wider span of control can be thought of. Clarity of Delegation of Authority  If the authority ± responsibility structure of an organisation is well-defined and understood by everyone clearly.

5.  If the authority to undertake them has been delegated.  If the subordinate understands what is expected of him.  If they are workable. Clarity of Plans and Policies  A manager can control more subordinates If the plans are well-defined. .

6. the span can be wide. Variation by Organisation Level  Top executives have to look after many important and specialised activities. and therefore. .  At lower levels. the span has to be narrow. since the supervisors are mainly concerned with routine jobs.

. System of Control Prevalence of effective techniques of control in an organisation shall enable a manager to supervise a larger number of subordinates. An ability to communicate plans and instructions clearly and concisely also tends to increase a manager¶s span. Effectiveness with which communication technique are used also influence the span of management.7.

8. A manager must find out whether subordinates are following plans. . Use of Objective Standards Good objective standards enable managers to avoid many time-consuming activities.

or branch of an organization over which a manager has authority for the performance of specified activities. .DEPARTMENTATION    Departmentation refers to division of work into smaller units and their re-grouping into bigger units on the basis of similarity of certain features. The word department designates a distinct area division. It is the basis of providing structure to an organizational unit.

. It is grouping of activities on the basis of similarities of functions.Functional Departmentation    ³It is the grouping of jobs and resources within the company in such a way that employees who perform the same or similar activities are in the same department.´ Departments are created along the various activities or functions of an organization.

Organization Chart showing Functional Departmentation Board of Directors GM Production Production Control Manufacturing GM Finance Capital Budgeting Current Assets Budgets GM Personnel Recruitment GM Marketing Advertisement Sales Promotion R&D Placement Training & Promotion Purchasing .

Training and Control.ADVANTAGES       Simple and logical basis of creating departments. Suitable for small organisations. . Supervision. Specialisation. Co-ordination.

Delayed decisions. Reduces coordination between functions. . Holding of accountability. Unsuitable for dynamic organisation. Responsibility for profits is at the top only.DISAVANTAGES       Neglected overall organisational goals.

Each department is headed by a product manager who is given necessary authority by the top manager to carry out the functional activities associated with the department.PRODUCT DEPARTMENTATION    It is the grouping of jobs and resources around the products or product lines that a company sells. Focus of attention is the product line and all functional activities associated with that product line. .

Organisation Chart showing Product Departmentation Board of Directors GM Production Manager Product A Production Finance Accounting R&D GM Finance GM Personnel Manager Product B Production Finance Accounting R&D GM Marketing Manager Product C Production Finance Accounting R&D .

East to exercise control. Faster decisions. skills and knowledge. Facilitates use of specialized capital. Places responsibility for profits at the division level. . Easy to coordinate.ADVANTAGES        Better performance. Flexibility.

Presents increased problem of top management control. . Expensive as it requires more persons with general manager abilities.DISADVANTAGES    Different departments focus excessive attention on the activities of their departments only without actually linking their performance with those of other departments.

People and materials are brought together in order to carry out a particular operation. Each stage of production is designated as a different process and departments are created on the basis of respective processes. .PROCESS DEPARTMENTATION     Also known as Equipment Departmentation. Particularly in manufacturing organisations.

Organisation chart showing Process Departmentation Board of Directors GM Production GM Finance GM Personnel GM Marketing Manager Crushing Manager Making Pulp Manager Purifying Pulp Manager Paper Rolls Manager Cutting .

Facilitates training for employees to efficiently carry out the processes. Achieves economic advantage due to specialisation in terms of time. .ADVANTAGES     Encourages and uses specialization. Uses specialized skills. money and managerial skills.

Repeated handling of the same job leads to boredom. . Responsibility for profits is at the top only.DISADVANTAGS    Output of one process department is the input for the other which creates coordination problems.

.CUSTOMER DEPARTMENTATION   It is defined as ³the organizing of jobs and resources in such a way that each department can carefully understand and respond to the different needs of specific customer groups.´ Clear identification of the customers and their needs is the basis of this type of departmentalization.

Organisation Chart Showing Customer Departmentation Board of Directors Managing Director Manager Car Loans Manager Housing Loans Manager Electronics Loans Manager Commercial Loans .

ADVANTAGES  



Companies stand an edge over their competitors and have better chance of survival and growth. Customer orientation. Gives customers feeling that they have an understanding supplier.

DISADVANTAGES   



Difficult to coordinate operations between competing customer demands. It is not an easy task to identify consumer groups. Change in consumer behavior. Requires managers and staff expert in customers¶ problems.

TERRITORY OR GEOGRAPHIC DEPARTMENTATION 

Territorial departmentation is followed in cases where An organisation creates departments close to its customers.  Organisation sets up its units or departments at places near the source of deposits.

Each geographical unit has resources assigned to it so that it can effectively cater to the needs of consumers of that area.

ADVANTAGES    

Places emphasis on local markets and needs of the customers. Takes advantage of economies of local operations. Better face-face communication with local interests. Improves coordination in a region.

DISADVANTAGES   

Since different departments are widely dispersed, coordination problems may arise. Method proves to be costly as each department sets up its auxiliary departments. Requires more persons with general manager abilities.

Departmentation by Time   

This is the traditional method of departmentation still in use. Generally used at lower levels of organisations where activities are grouped on the basis of time. Following are some of the situations where work has to be done round the clock:   

The machine cannot be stopped. The demand is high and machine has to work overtime. Services provided are essential in nature. The nature of the work entrusted to the organisation is such.

ADVANTAGES   

Optimum utilization of machines which can work on a continuous basis. Advantageous for those who prefer evening or night shifts. Service can be rendered extending to 24 hours a day.

DISADVANTAGES  

Coordination and supervision of employees who are working in different shifts. Payment of overtime rates can increase the cost of the product or service.

they report to one general matrix manager who consolidates and integrates their activities.) and product managers( individual product lines) report to a matrix manager. sales. It is the combination of functional and product patterns of departmentation in the same organization structure.g. etc. .MATRIX ORGANISATION STRUCTURE     Also known as Grid or Lattice Pattern. engineering. Functional managers (e. Instead of reporting to separate higher level managers. manufacturing.

FEATURES     Functional departments are a permanent fixture of the matrix organization. Members of a project team are assembled from the functional departments and are placed under the direction of a project manager. Functional and product managers need to work closely with each other to make a matrix design work well. Manager for each project is responsible and accountable for its success and he has authority over the other team members for the duration of the project. . they retain authority for the overall operation of their respective units.

A Typical Matrix Orgnisation Board of Directors R&D Engineering Manufacturing Administration Group Group Group Project Manager A Project Manager B Project Manager C .

Benefits of Matrix Structure     Permits the flexible sharing of employees across product lines. Change of projects promotes the intellectual growth and development of employees. . It is oriented towards end result. It helps in achieving coordination to meet the dual demands of efficiency and changing customer expectations.

a functional and a product boss. Members generally show greater loyalty to their parent departments than to the project organization in which they are working. Conflict exists between functional and project managers.Drawbacks of Matrix Structure     Maintenance of two management hierarchies (functional and product) is expensive. Employees may fall in confusion and ambiguity as they have two bosses. .

Mechanistic organization is one in which management breaks activities into separate.FORMS OF ORGANISATIONAL STRUCTURE      MECHANISTIC STRUCTURES Also known as Classical Organization Structure. relies extensively on standardized rules. It is usually pyramid shaped. . Most appropriate when an organization's environment is stable and predictable. highly specialized tasks. Generally give rise to a tall structure with narrow span of control. and centralizes decision making at the top.

ORGANIC STRUCTURE      It encourages managers and subordinates to work together in teams and to communicate openly with each other. responsibility and accountability flow to employees having the expertise required to solve problems as they arise. Authority. Well suited for changing environment. Decision-making tends to be decentralized. . Generally give rise to flat form with wider span of control.

AUTHORITY AND POWER .

Coercive Power: Power of A over B as B feels that A can deliver punishment if B fails to respond to A¶s influence attempt. which is the ability to influence or to cause a person to perform an act. Reward Power: Power of A over B as B feels that A can deliver reward to him. There are five types of Power:i. ii. .POWER   Authority is different from power.

³Legitimate power is same as Authority. Expert Power: It exists when B sees that A has some expertise in a given subject.´ . v. Referent Power: Power of A over B as B desires more and more to identify with or imitate A. Legitimate Power: It exists when B perceives that A has the legal right to determine B¶s behavior. iv.Continued« iii.

When delegating tasks to others.´ It is the right to make a decision and act. Accountability is the expectation that employees will accept credit or blame for their performance. Authority implies both responsibility and accountability. Responsibility is an employee¶s obligation to perform assigned tasks. managers should take care to match the responsibility they confer with authority and then insists on accountability for results. .AUTHORITY       Henri Fayol defines authority as ³ the right to give orders and power to exact obedience.

his qualities. . It cannot be depicted on the organisation chart. experience and expertise that enables him to influence the behavior of others.Difference Between Authority and Power AUTHORITY It is the formal right of an individual to issue orders and instructions to his subordinates. It is related to the person. It is related to the position that a person holds in a organizational hierarchy. It can be depicted on the organisation chart. POWER It is not a formal right but only the ability of a person to issue orders and instructions to his subordinates.

There is no such parity maintained between power and responsibility. . It is formal in nature as it is derived by virtue of the position. POWER It cannot be delegated as it is the personal abilities of a person. Power being attached to the person can be both formal and informal. Parity between authority and responsibility is maintained.Continued« AUTHORITY It can be delegated to people at lower levels.

LINE AND STAFF AUTHORITY .

Line authority flows down the organisation through the primary chain of command. according to the scalar principle³The clearer the line of authority from the ultimate management position in an enterprise to every subordinate position.LINE AUTHORITY   Line authority belongs to managers who have the right to direct and control the activities of employees who perform tasks essential to achieve organizational goals. the clearer will be the responsibility for decision making and more effective will be the organisation communication.´ .

recommendations. technical expertise and specialized services. a marketing department (line unit) might have to adhere to the mandates of human resources (staff unit) on how annual performance reviews are to be conducted. Information which a staff officer furnishes or the plans he recommends flow upward to his line superior who decides whether they are to be transformed into action. research. E. ..STAFF AUTHORITY    Staff authority belongs to those who support line functions through advice.g.

They help line managers to carry out the managerial functions. busy managing operations. whereas their superiors. cannot do so. .Benefits of Staff    Advice of well-qualified specialists in various areas of an organisation¶s operations can be utilized. gather data and analyze. These specialists get time to think.

Too much staff activity may complicate a line executive¶s job of leadership and control. loss of morale and even sabotage. It may give rise to problems when staff advisors forget that they are there to counsel not to order. . Managers may find problems in maintaining unity of command.Limitations of Staff      Lack of staff responsibility for the failure of their proposed plan. Staff people do not implement what they recommend which may result in friction.

. Each of the functional heads exercises direct authority (line authority) over the people of his department and also exercises authority over people of other departments.FUNCTIONAL AUTHORITY     Each departmental head exercises control over subordinates of his department. Staff specialists exercise some authority which is formalized on account of their expertise and competence. Each departmental head is assisted by various staff specialists.

g. the accounting manager.Continued«   E. Staff specialists. . also has the formal authority over the line managers of different departments. a finance manager holds direct authority over the people of finance department (line authority) and can also control the financial activities of other departments (functional authority)..

Features of Functional Authority     It may be exercised by line. public relations. . purchasing. more often by service and staff departments. It is delegated by the line superior. service or staff department heads. Restricting the area of authority is must to avoid role conflict and role ambiguity. etc. personnel. Line superiors may delegate the authority to the staff executive over the line organizations with respect to procedures in the fields of accounting.

Generally it exists in departments that have a common superior only in the office of the presidents. .SPLINTERED AUTHORITY   It exists when a problem cannot be solved or decision cannot be made without pooling the authority delegations of two or more managers.

DELEGATION OF AUTHORITY .

Authority and responsibility are delegated by the superiors to the subordinates but not the accountability of the work assigned.Delegation of Authority     Delegation is the process of giving authority to a person (or group) to make decisions and act in certain situations. . It is the downward pushing of authority to make decisions. Delegation of authority by managers does not mean that he/she is surrendering authority.

It helps train subordinates and builds morale. It speeds up decision-making. It leads to better decisions. It serves as compensation to those employees who face the prospect of limited advancement. It helps create a formal organization structure. .Advantages of Effective Delegation       It relieves the manager of his heavy workload.

 Difficulty in briefing.  Lack of incentives.  . On the subordinate¶s side ±  Lack of confidence.  Lack of confidence in subordinates.  Fear of making mistakes.  The µI Can Do it Better Myself´ Fallacy.  Lack of adequate information and resources.  Fear of being exposed.Barriers to Effective Delegation Fear of loss of power.

make the nature and scope of the task clear. . Train the subordinate properly. Give the subordinate some positive incentive for accepting responsibility. Make subordinate clearly understand the limits of his authority.Guidelines for Effective Delegation      Before delegating authority. Assign authority proportionate to the task.

Do not make the subordinate accountable to more than one superior.Continued«    Create a climate of mutual trust. . Overlapping of delegation and responsibility should be avoided.

CENTRALISATION & DECENTRALISATION .

CENTRALISATION OF AUTHORITY    Centralization is the concentration of authority at the top of an organization or department. Managers may delegate the work to people at lower levels but the necessary authority to carry out those tasks is vested with the top managers only. . Absolute centralization is not possible. except in a one-man enterprise.

 All activities related to one particular area are centralized in one department. Centralization of Performance:  All the operations of the company are carried out in a single geographical location.KINDS OF CENTRALISATION i. . Centralization of Departments:  This is the way a functional organization is structured. ii.

. Centralization as an Aspect of Management:  Certain decisions are always reserved at the top levels and others are delegated down the organizational levels.Continued« iii.

DECENTRALISATION OF AUTHORITY    Decentralization is disposal of a high degree of authority to lower levels of an organization or department. . It is essential but how much should the managers decentralize depends on various factors. Absolute decentralization of authority is not possible because the manager cannot delegate all his authority without surrendering his position as a manager.

. Superior is relieved from his responsibility for the work decentralized and the subordinate becomes liable for that.Difference between Delegation & Decentralization DELEGATION Delegation is a process which refers to the granting of authority and creation of responsibility as between one individual and another. Superior continues to be responsible for the work delegated to his subordinates. DECENTRALISATION It is the end result of delegation and dispersal of authority which exists as a result of the systematic delegation of authority throughout the organization.

The process to control is also delegated to lower level managers. Power to control the delegated tasks vests with the delegator. Lower levels managers carry Managers of each unit frame out the plans framed by their their own plans.Continued« DELEGATION Delegation is possible without decentralization. DECENTRALISATION Decentralization is not possible without delegation. superiors. .

Flexibility. It leads to a competitive climate within the organization. It permits quicker and better decision-making. . It ensures development of employees.ADVANTAGES OF DECENTRALISATION        Reduction in the burden of top management. It facilitates diversification of products. activities and markets. It reduces problem of communication and red tape.

It might prove to be expensive since each department handles its activities in its own way. Makes it more difficult to have a uniform policy. Can be limited by the availability of qualified managers. .DISADVANTAGES OF DECENTRALISATION      High degree of decentralization makes it difficult for top managers to coordinate the overall organizational activities. Difficulty for top managers to exercise control over different organizational activities.

.HOW MUCH DECENTRALISATION?      Size of the organization. Philosophy of top management. Cost and significance of decisions. History and age of the organization. Abilities of lower level managers.

Line-staff problem should be dealt with care for the effective working of the organization. Avoid organizational inflexibility so as to adapt to a changing environment and meet new contingencies. .GUIDELINES FOR EFFECTIVE ORGANISATION     Establishment of objectives and orderly planning of organization structure. Avoiding conflict by clear understanding of the assignment.

Value-driven corporate leaders are needed to create an effective climate.Continued«    All the members should understand the structure of their organization so that structure can work well (Grapevine). Organization culture should be appropriate so that managerial functions are carried out ina proper way. .

Horizontal & vertical coordi-nation of autho-rity & informa-tion relationships 7.Grouping of activities in light of resour-ces & situations 5.5.Identification & classifica-tion of required activities 4. Leading 9.6 (Other Functions) ORGANIZING PROCESS .Enterprise Objectives 2.Delegation of authority 6. Controlling Part 2 (Planning) Part 3 (Organizing) Parts 4. Supporting Objectives. Staffing 8. policies & plans 3.Feasibility Studies & Feedback 1.

STAFFING .

. selecting. and keeping filled. positions in the organisation structure. It is related to performing a set of activities which aim at inviting. placing and retaining individuals at the various jobs to achieve organisational goals.STAFFING   Staffing is defined as filling.

Development of potential managers. Facilitates leadership. Enables the organisation to face competition.IMPORTANCE OF STAFFING        Emphasis on human element. . Facilitates control. Motivation to work. Increase in overall efficiency.

.MANAGEMENT INVENTORY    Assess available human resource. It is done by Inventory Chart ± Organisation chart of a unit with managerial positions indicated and keyed as to the promotability of each incumbent. Finds out required number of competent managers.

Suresh 7 J. N.N. Sinha Promotable now Promotable in 1 yr Potential for further promotion Satisfactory but not promotable Dismiss 45 = age 6 = Yrs in position MANAGER INVENTORY CHART . Madhav 1 Manager Budget analysis 43 C.Y.General Manager Manager General Accounting 45 M.K. Singh 6 Manager Cost Accounting 52 2 Manager Contract Pricing 42 G.

ADVANTAGES OF INVENTORY CHART       Give overview of staffing situation. Identification of those who are not performing well and satisfactory. Shows when recruitment/replacement and training plans can be initiated. Prompt action may avoid such managers to look for better opportunity. Managers ready for promotion can be easily identified. Shows future internal supply of managers. .

 Strengthen weak departments.  Broaden manager¶s experience. Transfer of managers wherever required. . Managers can counsel subordinates about their career paths.Continued«   Preparation can be made for retirement cases.

Takes time and effort to keep the chart up-to-date.LIMITATIONS OF INVENTORY CHART      Does not show to what position manager may be promotable. Information not sufficient for a fair assessment. Upper level managers may be afraid to loose competent subordinates to other organisation units. . Not suitable to share this information with all employees.

External Environment Enterprise Plans Organization plans Number. kinds of managers required External sources Analysis of Present & future needs for manager Internal sources Recruitment Selection Placement Promotion Separation Appraisal Career strategy Leading and controlling Training and development Manager Inventory Internal environment Personnel policies Reward system SYSTEMS APPROACH TO STAFFING .

Reward System External factors: High technology demands well-trained. well educated and highly skilled managers. Organisational climate. It is carried out within the enterprise and linked to the external environment. Internal factors: Personnel Policies.SYSTEMS APPROACH TO HRM: STAFFING     Staffing requires open system approach. .

knowledge and skills are required? . Job design is to meet organisational and individual needs. clear understanding of the nature and purpose of the position is to be filled. What has to be done? How is it done? Is there any better way? What background.JOB DESIGN    Before selection.

Vertical job loading. Prompt and specific feedback. .FOCUS OF JOB DESIGN     Individual Job Enrichment: assigning an individual to carry out a group of similar tasks. Establish direct relationship with customer or client.

Costs associated with restructuring the jobs. Internal climate (not in autocratic top-down approach). Technology involved.Factors Affecting Job Design      Individual differences. Organisation structure (centralised / decentralised). .

SELECTION .

both inside and outside the organisation.SELECTION / RECRUITMENT   Recruitment is the process of searching. . for people to fill vacant positions. Selection involves deciding which of the recruits should be hired and for which positions.

 Physical conditions in which it is done.  Relation of the job to other jobs. .Job Analysis  It consists of:  Present methods and procedures of doing a job. Reveals ³What is Actually Required?´ Purpose is to show how at the moment constituent parts are being carried out.  Other conditions of employment.

Bulletin. Interviews Questionnaires responses.Continued«  Sources of information: Observation by workers. . Published manuals. etc.

.  Abilities and qualities that a should possess. Job Specification  Statement of the minimum acceptable human qualities necessary to perform a job satisfactorily.Job Description & Specification Job Description  Result of job analysis are set down.  Defines complete role.

Selection Process.Techniques & Instruments         Establishment of selection criteria Filling up of application form Screening interview Testing the candidates skills Formal interviews Verification of information is checked Physical examination Either selected or rejected .

Weaknesses of Interviews     Different interpretation by different interviewers Interviewers do not often ask the right questions Interviewer may be influenced by interviewee¶s general appearance Interviewer¶s make up their minds early in the interview .

result of tests. How to improve interviewing & overcome weaknesses Train interviewers Ask the right questions  Structured interview. references & recommendations .pre-determined set of questions which are specific  Semi-structured.mix of structured & loose questions asked  Unstructured ± open-ended vague question Conduct multiple interviews & compare evaluations Supplement by data from application form.

self-confidence. agility. scientific.Tests   Tests aim to obtain data about the applicants to have the best person for the job Type of tests Intelligence tests: mental capacity.out-door activities. reasoning Aptitude & Proficiency tests: skills & potential to acquire new skills Vocational tests: interests of the person. test memory. naturedominant. patience. introvert. mathematical. literary Personality tests: interpersonal competence. artistic. leadership ability & ambitions .

ASSESSMENT CENTERS      An approach to measure how a potential manager will act in typical managerial situation. . First corporate use in United States was in American Telephone and Telegraph Company in the 1950s. Technique used for selecting and promoting managers which may be used in combination with training. Used by the German and British military in World War II and the American Office of Strategic Services. Inappropriate for top-executives.

 ³In-basket´ exercises. .  Preparing a written report.  Oral presentation on a particular topic or theme.  Management games in small groups.Continued« Exercises in a typical assessment center:  Psychological tests.handle a variety of matters that they might face in a managerial job.

 Exercises used may not be the best criteria for evaluation.Advantages of Assessment Centers:  Encouraging and reliable. .  Training assessors is a problem.line managers / trained psychologists. Limitations of Assessment Centers:  Costly in terms of time.

tasks & people Formal orientation programs are conducted :  Company history  Businesses  Policies & Practices  Organization Structure  Benefits .ORIENTATION   Introduction of new employees to the enterprise. its functions.

PERFORMANCE APPRAISAL .

Performance Appraisal  Importance Basis of determining who is promotable to a higher position To determine whether development efforts are going in the right direction Appraisal is an integral part of a system of managing .

 Purpose/Aim Assess the employee¶s current level of performance Identify the strength & weakness of employees Provide feedback to the employee so that he can improve his performance To have a basis for rewarding the employees To motivate To identify gaps & assess training & development needs. punishments . Employee¶s potential To provide for database for succession strategies Take decisions related to rewards.

initiative Also includes work-related characteristics as job knowledge. assignments finished.Different Approaches to Appraising     TRAIT Appraisal: the oldest method of appraisal It is based on personal traits and behavioral patterns of an employee towards work It appraises the ability to get along with people. leadership. implementation of plans & instructions carried out . analytical competence. judgment.

 Weaknesses Managers cannot & won¶t evaluate Leaves some employees dissatisfied Many look at it as another work or paperwork .

. Whether any change in the goals was made or not. Supervisors determine how well managers set objectives and how well they have performed against them. Evaluator checks Whether goals were reasonably achievable. Reasons that may have helped or hindered in accomplishing goals.Appraisal by Objectives    Appraisals are done on the basis of the verifiable objectives set.

Progress or Periodic review: short & informal.Kinds of appraisals in ABO Comprehensive review: once a year or as required.    . Help pinpoint problems that hinder performance. To be supplemented by progress & periodic review. Continuous monitoring : immediate corrective actions to be taken to prevent a major problem. Review and change in objectives. open communication.

Managerial abilities are not appraised . Strengths : Improves managing Advantage of being operational Appraisals are done in cooperative and conducive manner  Weaknesses : .Persons may miss or meet the goals through no fault of their own .

The programs involve designing a series of questions related to each function of management.   . It uses the fundamentals of management as the standards to evaluate a manager.Appraisal of Manager as Manager  It focuses attention on what should be expected of a manager as a manager.

 Rating the checkpoints take time. .  Subjectivity involved. Weaknesses  Applies only to managerial aspects not to technical qualifications.Advantages  Supplement & a check on appraisal of managers effectiveness in setting & achieving goals.

Stress in Managing  Physical sources Workload Irregular work hours Loss of sleep Loud noises Bright & insufficient light .

Psychological sources Boring job  Inability to socialize  Lack of autonomy  Responsibility without authority  Unrealistic objectives  Role ambiguity  Dual-career marriages Effects -losing interest -inordinate food consumption -absenteeism -drug or alcohol abuse  .

3. 2. .Formulating Career Strategy 1. Development of long-term personal & professional goals. Analyzing the environment ± threats & opportunities. Preparation of a Personal Profile.identify the strengths & weaknesses. Attitude towards work & other things.

10. Consistency testing & strategic choices. Analysis of personal strengths & weaknesses.4. 5. Monitoring. 6. 9. Implementation of career plan. 8. Development of short-term career objectives and action plans. Develop strategic career alternatives. Development of contingency plans. . 7.

DIRECTING NATURE & ELEMENTS .

guiding. motivating & leading the human resources to achieve organisational objectives´ ³A managerial function that involves the responsibility of managers for communicating to others what their roles are in achieving the company plans´ . counseling.Definitions   ³Process of instructing.

Features       On-going process Not supported by rules Directing is situational Behavioral science Understanding of the group behavior Participative in nature .

Importance of Direction        Creation of sound working environment Development of managers Behavioral satisfaction Increase in productivity Achieves coordination Facilitates control Facilitates growth .

Components of Directing    Leadership Motivation Communication .

MANAGER AS A LEADER .

LEADING DEFINED
³Leadership is the lifting of man¶s visions to higher sights, the raising of man¶s performance to a higher standard, the building of man¶s personality beyond its normal limitations.´ Peter Drucker ³Leadership is the ability to persuade others to seek defined objectives enthusiastically.´ Keith Davis

BEHAVIORAL MODELS
Model by Edgar H. Schein: Developed four
conceptions about people:-

1. Rational-economic assumptions: People are primarily motivated by economic incentives. (Theory X) 2. Social assumptions: People are motivated by social needs. (Elton Mayo)

Continued«
3. Self-actualizing assumptions: Motives fall into five classes in a hierarchy (simple need of survival-highest need of selfactualization). People are self-motivated. 4. Complex assumptions: People are complex, variable and have many motives which combine into a complex motive pattern. (Schein¶s own view point)

     

Existence of followers. Involves a community of interest between the leader and his followers. Involves an unequal distribution of authority among leaders and group members. Develop a climate conducive to responding to and arousing motivations. Comprehend that human beings have different motivation forces at different times and in different situations. Leaders can influence followers in addition to being able to give legitimate directions.

CHARACTERISTICS OF LEADERSHIP

TRAIT APPROACH   

 

Attempts to identify the traits that leaders possess. ³Great Man´ Theory- Leaders are born, not made. Not a fruitful approach to explain leadership. Do not reveal which traits are leadership traits. Implies that training cannot make a man a leader if he is devoid of certain inborn qualities.

BEHAVIORAL APPROACH   

Tried to find answer to the question ³What determines leadership?´ Prominent belief ± ³ Leaders are not born but can be trained.´ Studied leadership behavior from three points of view:  

Motivation Authority Supervision

MOTIVATION 
    

Leadership behavior can be positive or negative. Positive behavior- leader¶s emphasis is on rewards to motivate the subordinates. Negative behavior- leader¶s emphasis is on penalties and punishments. Leader tries to frighten the subordinates into higher productivity. Time is lost in protecting themselves against management. Involves useless documentation, recording and filing of letters and papers.

LEADERSHIP STYLES BASED ON AUTHORITY
1. AUTOCRATIC LEADERSHIP
Leader commands and expects compliance. Demands strict obedience and relies on power. Formula used ± ³Do what I say or else«´ Determines policies and makes plans. Tells others what to do and how to do it. Can be paternalistic or benevolent also. Formula ± ³Do what I say because I am good to you.´

.MERITS    If appropriate. Chain of command and division of work are clearly and fully understood by all. detailed and achievable objectives. Paternalistic form works well with employees who thrive under clear. can increase efficiency in a crisis or an emergency situation.

Most people resent authoritarian rule. Receives little information and ideas from his people as inputs into his decision-making. .DEMERITS    One-way communication often becomes a false efficiency.

DEMOCRATIC LEADERSHIP     Also known as Participative or Personoriented leadership. . Leader¶s task is to encourage and reinforce constructive inter-relationships among members.2. Leader shows greater concern for his people than for high production. Entire group is involved in and accepts responsibility for goal setting and achievement.

talent. grow and rise in the organisation . Encourages people to develop. Benefit of receiving best information. suggestions. ideas. and operating experience of his people.MERITS    Built-in-personal motivation working for him.

Some leaders may use this style as a way of avoiding responsibility. .DEMERITS   Can take enormous amount of time and may lead to a complete loss of leader¶s control.

. FREE-REIN LEADERSHIP    Leader exercises absolutely no control. Can be a disaster if the leader does not know well the competence and integrity of his people and their ability to handle freedom. Provides only information.3. materials and facilities to his men to enable them to accomplish group objectives.

oriented :.SUPERVISION  Leadership style can be ±  Employee .  Production ± oriented :.Leader cares for the welfare of his subordinates.Leader cares more for production than for the welfare of subordinates. .

MANAGERIAL GRID   Developed by Robert Blake and Jane Mouton. Grid has two dimensions: Concern for People ( Vertical Axis)  Concern for Production ( Horizontal Axis) Dimensions are plotted on a 9-point scale on two separate axis. Author¶s main emphasis is on the styles in the 4 corners and at the middle of the grid. .

.

1. Impoverished Management (1.  It is ³speak no evil.1): Management shows least concern both for production as well as people. hear no evil. see no evil´ approach. .

9): Management shows maximum concern both for people as well as production.2.  Assumption is ³one plus one can add up to three´. Team Management (9. .  Able to mesh the production needs of the enterprise with the needs of individuals.

3.  Assumption is that contented people will produce the most. Country-Club Management (1.  It is the ³love conquers all´ approach. .9): Management shows maximum concern for people and least concern for production.

Task Management (9.  Autocratic in their style of leadership.1): Management shows maximum concern for production and least concern for people.  Also called authority-obedience approach.4. .

 Likely to have a benevolently autocratic attitude toward people.5.  Manager follows the middle position.³Get results but do not kill yourself´ .  Leaders do not set goals too high.5): Management shows a balanced concern for production and people. Dampened Pendulum or the Middle-ofRoad style (5.

. ease and difficulty with which the leader can influence the subordinate. Effectiveness of leadership styles depend on situational favorableness. i. FIEDLER¶S MODEL: Fred E.e.CONTINGENCY APPROACH 1. Situational favorableness can be defined as the degree to which a given situation enables a leader to exert influence over a group. . Fiedler and his associates and the university of Illinois suggested contingency theory of leadership.

Continued«  Situational Favourableness depends on three critical factors: i. ii. Extent to which group member accept. Leader Member Relations: Most important since position power and task structure may be largely under the control of an enterprise. Position . . iii. Task-structure: Extent to which tasks can be clearly spelled out and people held responsible for them.Power: Power arising from organisational hierarchy. follow and like their leader.

.  Scores on the Assumed Similarity between Opposites (ASO): Rating based on the degree to which leader see group members to be like themselves. Assumption.people will work best with those who are similar to them.Continued«  Used a testing technique to determine leadership styles: Scores on the Least Preferred Coworker (LPC): Rating for those with whom they would least like to work.

Continued« FINDINGS: i. Building an organisational environment in which leader can perform well is important to increase organisational and group effectiveness. . ii. Leader can be effective in one situation and ineffective in the other.

COMMUNICATION .

It is the transfer of information from a sender to a receiver with the information being understood by the receiver.COMMUNICATION    Communication is an exchange of facts. A proper understanding of information is one very important aspect of communication. opinions or emotions by two or more persons. . ideas.

Needed in Orientation programs. . Establish and disseminate goals. Develop plans for achievement of goals. Enable employees to perform their functions effectively.PURPOSES OF COMMUNICATION       Recruitment process to persuade potential employees. Organize human and other resources in the most effective and efficient ways.

Continued«    Select. Lead. Control performance. direct. motivate and create a climate in which people want to contribute. develop and appraise members of the organization. .

Information is transmitted over a channel ± oral or written.COMMUNICATION PROCESS      Communication starts in the mind of sender who has a thought or an idea. Sender develops a message to convey the idea (Encoding). Language skills are important at the encoding phase. message is then transmitted (Transmission). Once developed. .

a computer. . telephone. Communication is affected by ³noise´ which can be with any one ± sender. Sender and receiver should attach the same or at least similar meanings to the symbols that compose the message. or the receiver.Continued«     It may be transmitted through a memorandum. Once transmitted. message is received and the receiver attaches meaning to it (Decoding). telegram or television. transmission.

With feedback.Continued«      Final step is action taken by receiver which is known as Feedback. any distortion in meaning can be corrected by another communication. Without feedback. Communication is not complete unless it is understood. the sender cannot get the certainty of the message received. . Understanding is in the minds of both sender and receiver.

COMMUNICATION PROCESS MODEL .

.COMMUNICATION FLOW IN THE ORGANISATION  Communication flows in various directions:  Downward Communication: Flow from superiors to the subordinates. Diagonal flow among persons at different levels who have no direct reporting relationships.  Crosswise Communication :Includes horizontal flow of information among people on the same or similar levels.  Upward Communication: Flow from the subordinates to superiors.

Restricting communication.BARRIERS TO COMMUNICATION       Badly expressed message. Distrust of communicator.holding back a part of information due to some reasons. Poor retention. . Different backgrounds. Faulty organization ± Too long chain of command or too wide span of control.

Physical barriers ± environmental factors ± physical distance. Inattention ± selective listening ± block out information that conflicts with what we believe. Poor understanding ± semantic distortion. distracting noises. etc. .Continued«     In-group language ± terminology of occupational or social groups.

MOTIVATION .

control or explain the behavior of human beings´ . activates or moves & that directs behavior towards goals Motivation refers to the way in which urges.Definitions   Motive ± is an inner state that energises . strivings or needs direct. aspirations. desires. drives.

a needwant-satisfaction chain Complexity of motivation .Features   Motivation involves a chain reaction.

Various approaches & theories     Maslow¶s hierarchy of needs Motivation-Hygiene theory by Herzberg Mcclelland¶s theory Alderfer¶s ERG theory .

Satisfiers ±achievement. working conditions.Herzberg·s two-factor theory   Dissatisfiers ±needs like company policy & administration. job security. advancement and growth in job . challenging work. recognition. status. salary. personal life. supervision. interpersonal relations.

McClellands need theory of motivation  Three types of basic motivating needs Need for Power (n/PWR) Need for affiliation (n/AFE) Need for achievement (n/ACH) .

demanding & argumentative conversationalists They enjoy teaching and public speaking .Need for Power     People having a high need for power have a great concern for exercising influence & control People seek positions of leadership They are forceful. outspoken. hardheaded.

Need for Affiliation   People like to be loved and avoid being rejected by social group Concerned with maintaining pleasant social relationships. help people in trouble .

assume responsibility for getting a job done They like to run their own shows .Need for Achievement     People have a high desire for success & equally intense fear of failure They want challenges and set difficult goals for themselves Analyse & assess risk rationally.

ERG Theory by Alderfer   Extension of Maslow¶s & herzberg¶s theory Categorized the needs into 3 categories Existence needs Relatedness needs Growth needs .

Existence needs   Include all needs related to physiological & safety aspects of an individual. Clubbed the physiological needs & safety needs of Maslow into one category as these have similar impact on the behavior of the individuals .

Relatedness needs   Needs that induce people to make efforts to achieve full potential It covers Maslow¶s social needs & that part of esteem needs which is derived from the relationship with other people .

feeling of personal growth etc .Growth needs  These include Maslow¶s self actualization need as well as that part of the esteem need which is internal to the individual like feeling of being unique.

Progression of need satisfaction ± most concrete to abstract needs. Rise in the level of satisfaction of any lowerlevel need may result in decrease in its importance. Satisfaction-progression may become frustration-regression. .Features of ERG theory     Decreasing concreteness in the hierarchy of three need categories ± become abstract.

Motivational Techniques  Money As money Means of keeping organisation adequately staffed Motivator As a reward for good performance   Participation Quality of work life (QWL) .

Giving workers more freedom in performing their jobs Encouraging participation & interaction between workers Feeling of personal responsibility for their tasks Feedback on their job performance Involving workers in laying down the physical aspects of work environment .Job Enrichment       Attempts to make a job more varied by removing the dullness associated with performing repetitive operations.

(Applies mainly to jobs of low skill levels. Dissatisfied attitude among workers. Difficulty in enriching those jobs which require low levels of skill. Cost.Limitations of Job Enrichment     Technology.) .

. It should clearly convey the benefits of the employees. Workers should get feedback and recognition by managers . Workers should know what they are doing and why.Effective Job Enrichment      Better understanding of what employees want. Participative.

CONTROLLING .

Planning and controlling may be viewed as the blades of a pair of scissors. .CONTROLLING     It is the measurement and correction of performance in order to make sure that enterprise objectives and the plans devised to attain them are accomplished. It is a process through which managers assure that actual activities conform to planned activities. Control is not possible without objectives and plans as performance has to be compared against some established criteria.

ESTABLISHING STANDARDS  Entire operations cannot be observed.CONTROL PROCESS There are 3 basic steps :1. a list of key result areas for the purpose of control should be developed. .  Standards ± criteria of performance.  Managers should establish special standards which they desire to obtain in KRAs.  Standards should be in quantitative terms and flexible in order to adapt to changing conditions.

Reflect quality also ± hardness of bearings. ii. units of production per machine hour. machine hour cost. etc.Continued«  Following are the types of standards :i. Physical Standards: Non-monetary. . common at operating level. common at operating level. E. durability of a fabric. reflect quantity such as labor hours per unit of output. etc.g. Cost Standards: Monetary measurements. etc. direct and indirect cost per unit produced.

g.Continued« iii. Capital Standards: Arise from application of monetary measurements to physical items. etc. average sale per customer. iv. most difficult to set. success of a public relation program. v. E. Intangible Standards: Not expressed in either physical or monetary measurements. Revenue Standards: Monetary values to sales are attached. E. Competence of managers and employees. .g.

a program to improve the quality of sales force. vii. etc. Program Standards: E.Continued« vi.. can be quantitative and qualitative ± training sales people in accordance with a plan with specific characteristics. Goals as Standards: Define goals that can be used as performance standards. . a program for formally following the development of a new product.g.

.Strategic Plans as Control Point for Strategic Control: Systematic monitoring at strategic control points as well as modifying the organisation¶s strategy on the basis of this evaluation.Continued« viii.

MEASUREMENT OF PERFORMANCE    Performance is compared with predetermined standards. or by a study of various summaries of figures. Reveal variations which can be desirable like output above the standard/expenses below the standard.2. reports. charts and statements. undesirable ± variation in delivery schedule agreed upon with the customer. . Can be done by ± personal observation.

3. Standards should reflect the various positions in an organisation structure. . Control is seen as a part of the whole system of management. CORRECTION OF DEVIATIONS     Correct the deviations reflected. Correct causes for deviation should also be determined.

.  Examined what has happened in a particular period in the past.  Managers measures actual performance.g. inspection of goods and services.  E. .TYPES OF CONTROL METHODS 1. etc. accounting records. compare this measurement against standards and identify and analyse deviations. CONTROL AS A FEEDBACK SYSTEM  Post action control and measures results after the process.

E.2. Technique in use is network planning with the help of PERT. .g. Serve as warning posts to direct attention rather than to evaluate. FEEDFORWARD CONTROL     Designed to measure results during the process so that action can be taken before the job is done or the period is over. Cash flow and funds flow analysis.

Cover a time period ± usually a year. .BUDGETING AS A CONTROL TECHNIQUE     Budget is a statement of anticipated results during a designated time period expressed in financial and non-financial terms. A part of the step of establishing standards and involves use of cost standards. Begins when top management sets the strategies and goals for the organisation.

Reviewed by the superior of these managers. .Continued«   Usually lower level managers will then devise budgets for their sub-units within the guidelines. integrate lower-level budgets into their own budget and send it up the chain of command for review.

etc. period. research and development cost.  Sales forecasting is the basis. 2. product. . SALES BUDGET  Comprehensive sales program and plan for developing sales.  Includes advertising cost.  Lays down sales potential in terms of quantity. value. SELLING AND DISTRIBUTION COST BUDGET  Lays down the cost of selling and distribution of product during budget period. etc.TYPES OF BUDGETS 1.

 Purpose is to maintain an optimum balance between sales. . PRODUCTION BUDGET  Based on sales budget. production and inventory position of the firm.Continued« 3.  Lays down quantity of units to be produced during the budget period.

Continued« 4. production overhead budget. .  Sub divided into various sub-budgets ± Raw materials budget. PRODUCTION COST BUDGET  Based on production budget. labor budget.  Lays down the estimated cost of carrying out production plans.

etc. .  Plans concerning investment.Continued« 5.  Indicates the requirement of cash at various points of time. equipments. inventories. growth.  Shows the cash position arising from it. CAPITAL EXPENDITURE BUDGET  Outlines capital expenditure for plants. expansion. CASH BUDGET  Anticipated receipt and disbursements for the budget period. etc. 6.

etc.  Provides detailed particulars regarding production. MASTER BUDGET  Summary of all the functional budgets and shows how they affect the business as a whole. sales. cash. fixed assets.Continued« 7. .

ADVANTAGES OF BUDGETARY CONTROL    Different functional budgets clearly indicate the limits for expenses and also the results to be achieved in a given period. Make it possible to coordinate the work of entire organisation. Prepared with the consultation of managers at different levels. . provide the fruit of combined wisdom.

. Helps people learn from past experience. Deviations from the pre-determined standards are found out. Improves communication.Continued«     Promotes co-operation and team-spirit.

A good manager is discouraged from taking initiative and undertaking activities for which provision has not been made in the budget. µPerformance¶ in the budget-based organisation means the ability to maintain or increase one¶s budget. . People want to spend their current budget to the maximum so that their budget for next financial year is not reduced. do not respond to internal or external environmental changes.LIMITATIONS     Inflexible and rigid.

COORDINATION .

It is the orderly synchronisation or fitting together of the interdependent efforts of individuals. It is the process of linking the activities of the various departments of the organisation. . in order to attain a common goal.INTRODUCTION    Coordination is defined as ³the process of integrating the objectives and activities of the separate units (departments or functional areas) of an organisation in order to achieve organisational goals efficiently.

Ensures that the activities of each department are directed towards the common goal. .ELEMENTS OF COORDINATION    Integrates the individual efforts of units with each other so that all the units work as a group. departmental and the overall organisational goals. Strives to achieve a balance between the individual.

. Greater the interdependence. Helps in integrating activities which constantly change according to changes in the environment. Directs specialised activities. greater is the need for coordination between departments. either for resources or for information. towards a common goal. Managers attempt to coordinate the various activities to achieve high performance standards. which are carried out by different work groups.Advantages of Coordination      Helps in effectively carrying out non-routine jobs which need a constant flow of information.

Higher interdependence among various units lead to more difficulty in coordination. External uncertainties ± political or technological changes. etc. Internal uncertainties ± strikes. Different approach towards the same problem will lead to problem of coordinating their functioning. lockouts.Limitations of Coordination     Most difficult to coordinate the various activities where there is higher degree of specialisation. Uncertainty about future will make coordination difficult. .

. social values and ethics can hinder effective coordination. Existence of informal groups which are strongly bonded by the forces of culture.Continued«   Coordination becomes a problem if managers do not possess the requisite knowledge. skill and competence to do so.

Clear cut objective. Continuity. Effective leadership and supervision. Simplified organisation. Effective communication. Clear definition of Authority and Responsibility. . Early start.Requisites for Excellent Coordination         Direct contact.

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