INTRODUCTION

 Planning means looking ahead and chalking out future courses of action to

be followed. It is a preparatory step. It is a systematic activity which
determines when, how and who is going to perform a specific job. Planning is
a detailed programme regarding future courses of action. It is rightly said
“Well plan is half done”. Therefore planning takes into consideration
available & prospective human and physical resources of the organization so
as to get effective co-ordination, contribution & perfect adjustment. It is the
basic management function which includes formulation of one or more
detailed plans to achieve optimum balance of needs or demands with the
available resources.
 According to Urwick, “Planning is a mental predisposition to do things in
orderly way, to think before acting and to act in the light of facts rather than
guesses”. Planning is deciding best alternative among others to perform
different managerial functions in order to achieve predetermined goals.
DEFINITION
 According to Koontz & O’Donell, “Planning is deciding in advance what to do, how
to do and who is to do it. Planning bridges the gap between where we are to, where
we want to go. It makes possible things to occur which would not otherwise occur”.

 Planning is deciding in advance what to do, how to do, when to do and who is to do
it. Planning bridges a gap between from where we are to where we want to go”
Harold . Koontz and O’Donnel.

 Planning is the selecting and relating of facts and the making and using of
assumption regarding the future in the visualization and formulation of proposed
activities believed necessary to achieve desired results” George R
Terry
 

 
Procedure of Planning
 1.Analyze Opportunities: Generally, this is not a step of planning. It is
known as pre-step of planning. It is essential to make a successful plan. The
management has to analyze strengths; weakness, opportunities and threats
(SWOT) of changing environment of the business. Here, strengths and
weaknesses are internal environment of the enterprise like availability of
materials, machines, manpower, organizational structural technology etc.
 In the similar manner, opportunities and threats are external environment
and affected by many factors like government rules, economic condition,
competitors strategy customers taste, social and cultural believes etc. it is essential to
make detail study about the above factors and should be pointed clearly.
  
 2.Setting objectives: This is the first and real starting point of planning. The
objectives must be specific, clear and practical. They should be time bound and
expressed in numerical terms. They should not be idealistic or over ambitious. A minor
mistake in setting objectives might affect in implementation of plan. Thus, management
has to define objectives in clear manner by considering organizational resources and
opportunities. After clarification of specific objective, it should be broken down into
different departments, branches, sections and individuals.
. Determination of premises: After setting objectives, another
step of planning is to determine premises. Premises are the
assumptions about the future in which the planning is implemented. They
provide environment and boundaries for the implementation of plan in
practical operation. The future environment will be established through
forecasting. They provide present trend and future possibilities. These
premises may be tangible and intangible and external.
 (a) Tangible and intangible: Tangible premises involve capital
investment, unit of production, units sold, cost per unit, time available etc.
Similarly, intangible premises involve employees moral, goodwill, motivation,
managerial attitude, etc.
 (b) Internal and external: Internal premises involve money,
materials, Machines and managements. In the similar manner, external
factors involve competitors strategy, technological change, government
policy, social and cultural beliefs etc.
 4. Determination of alternatives: The next step, after establishment of
objective and premises of the planning is to discover the various alternative courses of
action for the achievement of organizational objectives. For this purpose, it is essential
to identify all the possible hidden alternatives. The information about alternative
courses of action may be obtained from primary and secondary sources. There must be
search for the best alternative. The management must develop alternatives through the
support of experienced and intellectual experts in management sectors. The
determination of alternative courses of action is the basis of development, and
therefore, they must be up-to-date and reliable for the organization.
  
 5 Evaluation of alternatives: This is another step after
determination of alternative courses of action to evaluate them from their expected cost
and benefits. This is the logical step to evaluate each alternative from its plus and minus
points. Each alternative is studied and evaluated in terms of some common factors such
as risk, responsibility, planning premises, resources, technology etc. Thus, management
must implement a broad basis of requirement; it may borrow techniques of analysis
from many disciplines such as mathematic, sociology, economics, psychology etc. In
conclusion, evaluation techniques must be scientific and practical so that one of the best
courses can be selected.
6 Selecting a course of action: Next step of the planning after
evaluation of alternative courses of action is to select a best course of action. At
that time of selection of one course of action, management has to consider past
experience, present situation and future contingencies of such decision. In practical
sense, this is the first step in the real point of decision. Thus, it is essential to
consider about the various premises and environments of an organization and their
impact on future course of action. Besides, it is needed to forecast about the
comparative costs and benefits factors. The evaluation of these factors will provide
guidelines and suggestions in practical implementation of plan.
 
 7 Formulation of derivative plans: This is the next logical step
after the selection of a course of action. After the selection of course of action, it is
essential to formulate action plans for each step of work and to all departments of
the organization. These action plans involve formulation of policies, rules, schedule
and budget to complete defined objectives. Thus, formulation of derivative plans is
an essential step in planning process. It is difficult to implement main plan without
formulation of derivative plan without formulation plan. For example,
management has decided introduce a new product in the line, for this purpose it
has to prepare plans for product design, plan and equipment, staffs, production
process, market strategy, budget etc. This is helpful to implement in practical field.
 8.Implantation of plans: This is one of the significant steps of
planning. Without this step, other this procedure of plan will remain
as paper work. This step brings all the procedure of plan into action.
For implementation plan, management has to take some steps such as
to communicate with subordinates who initiate to plan into action;
provide necessary instruction and guidance; make arrangement of all
resources like materials, machines, money, equipments etc; make
timely supervision and control over subordinates.
 
 9.Reviewing the planning process: The planning procedure is
continuous function up to the attainment of defined objectives. For
this purpose, evaluation of achievement of work, according to the
time, is necessary to know about actual performance. The manager
can take corrective action in proper time only after evaluation of
actual performance. The right decision at the right time is necessary
to achieve objectives according to the plan. It is also essential to
adjust with changing environment of the business.
NATURE OF PLANNING
 1. Planning is an intellectual process :- Planning as an intellectual process,
the conscious determination of course of action. Thus, it is an intellectual
stimulation. It possesses an element of day-dreaming. In the initial stage it
may involve what might be called vision. It involves foreseeing future
developement, making forecasts or predictions and then taking decisions.
Thus, it becomes an important mental exercise.
2. Planning contributes to the objective :- A plan starts with the setting of
objectives and in order to realize it develops policies, procedures, and
strategies, etc. Obviously, without setting the goals to be reached and lines of
action to be followed, there is a continuous and never-ending activity of a
manager to keep the enterprise going.
3. Planning is a selecting process :- Planning is a selective process. It
involves the study and a careful analysis of various alternatives and then
selecting the best one. It not only pertains to defining a problem which
immediately confronts the manager, but often it mentally searches the
possibilities for problems that might appear in the future.
 4. Planning forms the premises for the decision of the future :- Plans become
premises, for the decisions of the future. Detailed planning may include several
plans, which are mutually exclusive. It provides series or sets of decision that can
be made under various possible circumstances. Thus, planning aids in making
specific decisions, since it includes all of the important alternatives, which
5. Planning pervades all managerial activities :- Planning is a pervasive activity
convering the entire enterprise with all its segments and its every level of
management. It is not the exclusive responsibility of top management but it
extends to middle and lower management as well. It is a primary function of the
management and its level and extent, etc. Will depend upon the level of
management.
6. Planning is directed towards efficiency :- The main purpose of planning is to
increase the efficiency of the enterprise. It is an attempt on the part of a manager
to anticipate the future in order to achieve better performance. It has become an
important function due to uncertain and ever changing environmental of business.
7. Planning is a continuous and flexible process :- Because of uncertainties of
the future the planner must be ever alert and should form his plans in such a way
as to adopt them to changing circumstances without inconvenience and undue
costs.
 Planning is all pervasive -Planning is an function which exists in all levels of
managerial hierarchy. Starting from the the CEO to down to the last line worker. But the
content and quality of planning differ in different levels. Planning of top level executives
considerably affect the function of organization. Middle and lower level managerial
planning will not affect much of the function of the organization. Some examples of
planning are: Production planning, Material requirement planning, financial planning,
project planning etc.

 Planning is the primary function of management -Planning is the first and foremost
activity of Managerial function. Management starts with planning. Planing gives base for
other functions like organizing, staffing, directing controlling etc. It is equally important
like all other managerial functions.
 Planning is goal oriented –

 Planning leads to efficiency and economy- Planning leads to accomplishment of

objectives at the minimum possible cost.
 It avoids wastage of resources and ensures adequate and optimum utilization of
resources.
 A plan is worthless or useless if it does not value the cost incurred on it.
 Therefore planning must lead to saving of time, effort and money.
 Planning leads to proper utilization of men, money, materials, methods and machines.
 Internal Limitations
 There are several limitations of planning. Some of them are inherit in the process of
planning like rigidity and other arise due to shortcoming of the techniques of planning and
in the planners themselves.
 Rigidity
 Planning has tendency to make administration inflexible.
 Planning implies prior determination of policies, procedures and programmes and a
strict adherence to them in all circumstances.
 There is no scope for individual freedom.
 The development of employees is highly doubted because of which management might
have faced lot of difficulties in future.
 Planning therefore introduces inelasticity and discourages individual initiative and
experimentation.
 Misdirected Planning
 Planning may be used to serve individual interests rather than the interest of the
enterprise.
 Attempts can be made to influence setting of objectives, formulation of plans and
programmes to suit ones own requirement rather than that of whole organization.
 Machinery of planning can never be freed of bias. Every planner has his own likes,
dislikes, preferences, attitudes and interests which is reflected in planning.
 Time consuming
 Planning is a time consuming process because it involves collection of information,
it’s analysis and interpretation thereof. This entire process takes a lot of time
specially where there are a number of alternatives available.
 Therefore planning is not suitable during emergency or crisis when quick decisions
are required.
 Probability in planning
 Planning is based on forecasts which are mere estimates about future.
 These estimates may prove to be inexact due to the uncertainty of future.
 Any change in the anticipated situation may render plans ineffective.
 Plans do not always reflect real situations inspite of the sophisticated techniques of
forecasting because future is unpredictable.
 Thus, excessive reliance on plans may prove to be fatal.
 False sense of security
 Elaborate planning may create a false sense of security to the effect that everything
is taken for granted.
 Managers assume that as long as they work as per plans, it is satisfactory.
 Therefore they fail to take up timely actions and an opportunity is lost.
 Employees are more concerned about fulfillment of plan performance rather than
any kind of change.
 Expensive
 Collection, analysis and evaluation of different information, facts and
alternatives involves a lot of expense in terms of time, effort and money
 According to Koontz and O’Donell, ’ Expenses on planning should never
exceed the estimated benefits from planning
External Limitations of Planning
 Political Climate- Change of government from Congress to some other
political party, etc.
 Labour Union- Strikes, lockouts, agitations.
 Technological changes- Modern techniques and equipments,
computerization.
 Policies of competitors- Eg. Policies of Coca Cola and Pepsi.
 Natural Calamities- Earthquakes and floods.
 Changes in demand and prices- Change in fashion, change in tastes, change in
income level, demand falls, price falls, etc.
Types of planning
• According to time period
• Long term planning: For the long term goals. It covers a time period of 5 yr or more.
• Medium term planning: Such planning covers a time horizon between 2 to 5 yrs.
• Short term planning: The time horizon of short term planning usually extended up to
one year.

• According to the levels of formulation planning may be classified into 3 categories:

• Corporate planning: Planning for the total enterprise. It lay down the basic goals,
strategies and policies for the enterprise as a whole.
• Divisional Planning: It specifies the goals, policies and procedures for a particular
division of the enterprise.
• Functional Planning: This is the lowest level of the planning. These plans are used to
implement the divisional plans. The concern is for short- range actions and adherence
to planned schedules and budget.
 According to the Focus
 Strategic planning: SP refers to comprehensive and integrated planning. It
is based on long term forecasts and is usually done at higher levels of
management. it encompasses all the functional areas of business.
 This plan is prepared by the top level management by taking the long
term objectives of the organization into consideration. It clearly defines
the objectives of the organization and strategies to achive the defined
objective. Here goal focuses on the result that an organization wants to
achieve. It is the end point of planning. In the similar manner, strategies
involve the clear explanation about how to achieve the defined objectives.
They consist of programs, policies and schedules to utilize properly the
available resources of the service, market, competition, social
responsibility, introduction of technology, public image etc. As strategies
are for the long term future course of action, they are based on analysis of
future opportunities and threats. Hence, there is a high degree of
uncertainty in strategic plans. A minor negative impact of an
environment may inverse impact on organizational performance. Thus
the top level management has to modify strategic plan on the basis of
time, situation and requirement
 Operational Planning: OP or tactical planning involves the conversion of
strategic plans into detailed and specific action plans. An operational plan is
the blue print for current action and it supports the strategic plans.
 Operational or Unit Plan: This plan is prepared by the lower level
management. It is consistent with tactical plant. In simple sense, it is the
action plan of each and every activity of the department. It prepares the
schedule of each and every department. It prepares schedule of each unit of
work and implement tactical plan in practical field. It is concentrated in the
best use of available resources. For this purpose, operating level of
management prepares plan and schedule of each stage of work of a unit or
department. For instance, it prepares regular production schedule of a
production department so that priority should be given to regular production
process. In the similar manner, short term operational plan are also prepared
for other units like marketing, finance, personal etc. In conclusion, this plan
concentrates in best utilization of resources under the control of concerned
unit.

 Tactical - Tactical plan is prepared by the middle level
management It is consistent with corporate plan. In
simple words, it is the sub-division of corporate plan to
implement in practical field. Here, divisional managers
identify the priorities of the works. They focus to allocate
work and resources on the basis of programs. It is
prepared to allocate divisional activities like production,
finance, marketing, personal and others. It focuses to get
the things done complete. Basically divisional plan is
based on divisional strength and threats. This plays a
mediator role between corporate and operational plans.
Advantages (Benefits/Importance) of
Planning
Goal Focus
Minimize Uncertainty
Improve efficiency
Facilitates to Control
Innovation and Creativity
Better Coordination
Ensures Commitment
Aid to Business Success
Brings Systematization
TYPES OF PLANS
 Plans are classified into two ways:
 A) Multi-Use plans or repeated use plans or standing plans.- are used again
and again. these are used for indefinite time. They facilitate decision-making
and save time and effort.
 B) Single Use plans- Deals with unique and non- repetitive situation.
  Multi-Use plans or repeated use plans or Standing.
 Objectives
 Policies
 Strategies
 Procedures
 Rules
 Single Use plans
 Programmes
 Budgets
 Schedules
 Projects
 Methods
Multi-Use plans or repeated use plans or Standing.
 Objectives: Every org’ exists to achieve some purposes which are
called its objectives. Objectives are the aim or purpose for which an
organization is set up and operates .The planning process begins with
the setting up of the objectives. according to ALLEN “ objectives are
goals established to guide the efforts of the company and each of its
components”.
 Goals
 Targets
 Standards
 Quota
 Deadlines
 Policies: A policy is a general statement that guides decision making.
Policies define the boundaries within which decisions can be made
and they direct decision towards the accomplishment of the
objectives. Polices are generally formulated by the top management
and provides scope for executive judgment.
 Type of policies:
 A)Originated policy-Guide decision making at lower level.
 B) Appealed policy-Formulated on the appeal/request of the
subordinates.
 C) Imposed policy- Compelled to adopt a policy due to the outside
forces like trade unions, trade associations, govt etc.
 Strategies: Strategy is the course of action through which an
organization relates itself with environment so as to achieve its
objectives. It is the right combination of factors both external and
internal. It relates the organisation with its environment.
 Strategy is forward looking.
 It has orientation towards the future.
Procedure: A procedure describes what action is to be
taken in a specific situation. It spells out a series of steps
agganged in some predetermined order.
Procedures are designed to execute policies and achieve
objectives.
A procedure is narrower in scope and less flexible than a
policy.
Rule: Rules are specific statement of what should or should
not be done in a specific situation. Rules indicates limits of
acceptable behavior to the members of an organisation.
Rules permit comparison of behaviour of people and
group.
Rules are helpful in maintaining discipline.
A rule may or may not be the part of the procedure.
Single Use plans
 Methods: Methods are formalized and standardized way of
accomplishing repetitive and routine jobs. Methods provide detailed and
specific guidance for day-to-day action.
 Methods are helpful in standardization, simplification and systematized
work.
 A method prescribe the manner of performing a task. Therefore, it is
helpful in the use of a procedure with minimum expenditure of time,
money and efforts.
 A method is more limited in scope than a procedure. It is one step of the
procedure.
 Budget: A budget is the plan for the allocation of resources. It expresses
the objectives and resources in a quantitative term.
 A budget is a plan which states expected results of a given future period in
a numerical term.
 A budget may reflect capital outlay, cash flows, production, sales targets.
 Budget serve as standards of performance.
 Project: A project is a complex scheme for the investment of
resources which can be analyzed and evaluated as an independent
unit.
 Project is non- recurring plan.
 It has a specific mission or objective.
 It involves time bound plan with a long time
 It involves considerable investment of resources and its significant for
the future of the organisation.
 Project is helpful in precise allocation of duties, effective control, easy
implementation of the plans and fixation of responsibility.
 Programme: A programme is a comprehensive plan designed to
implement the policies and accomplishing the objectives.
 It is the combination of goals, policies, task assignment, resource
flows etc.
 It spell out clearly the steps to be taken, resource to be used, and the
time period with in which the task is to be completed .
Schedule: A schedule is the time table of the work. It
specifies the date when a task is to be begin and the time
needed to complete each task.
The starting and completion dates for each part of the
programme are specified in the time schedule.
It is necessary in all the org’ to provide for an even flow of
operations and ensure completion of each task at the right
time.
Main elements involved in planning schedule:
Identify activities or tasks
 determine their sequence
Specify starting and finishing dates for each activity as
well as for the sequence as a whole.
Scheduling is the process of establishing a time sequence
for the work to be done.
OBJECTIVES
Objectives : Every org’ exists to achieve some purposes which
are called its objectives. Objectives are the aim or purpose for
which an organisation is set up and operates .
 Mission or purpose: Mission and Purpose are often used
interchangeably. A mission statement helps the org’ to link its
activities to the needs of the society and legitimate its existence.
 ”mission/purpose of an organisation is a general enduring statement
of the org’ the extent of which embodies the decision maker’s
philosophy; it implies the image which the org’ seeks to project”
 Example: Hindustan lever’s commitment to national priorities:
employment generation, development of backward areas, agriculture
linkages, exports etc
 Thus, mission of the company says what it can do for the country
(society in general)
Meaning of Objectives
Objectives are more precise as compared to the
mission and used to specify the end results which an
organisation wants to achieve.
According to terry and franklin” a managerial
objective is the intended goal that prescribe definite
scope and suggests directions to the planning efforts
of a manager”.
Features of Objectives
 Each org’ or groups has objectives. In fact org and groups are created for
the certain objectives. members in the org’ try to achieve those
objectives.
 Objectives can be broad or they may be specifically mentioned. They
may be set either for the long term or for the short term.
 Objectives may be clearly defined or these may not be clear and have to
be interpreted by the behavior of organisational members, particularly
those at top level.
 Objectives have hierarchy.
 Objectives have social sanctions, that is they are created within the
social norms. various restrictions on org’ objectives are put by the social
norms, rules or customs.
 An organization may have multiple objectives.
 Organisational objectives can be changed old objectives can be replaced
by the new ones.
Hierarchy of objectives
Social- economic purpose
Visionary long term concepts of organization
Organizational mission
Organizational objectives
Objectives in key results areas
Departmental objectives
Sectional objectives
Individual level objectives
OBJECTIVE SETTING
All organizations have a formal, explicitly recognized,
legally specified organs for setting the initial objectives.
Generally the top management of the organization
determines the overall objectives which the members of
the org’ unite to achieve.
In some of the org’ the objectives may be set by the votes
of the shareholders, in other by the votes of the members,
by small no. of trustees or by few individuals who own and
run the organization.
In large enterprises such bodies as board of director,
governing boards, executive committee may set the
objectives.
Guidelines for objective
settings
 Objectives must be clearly specified
 Objective must be set taking into account the various factors affecting
their achievements .
 Objectives must be consistent with organizational mission.
 Objectives should be rational and realistic rather than idealistic.
 Objectives should be achievable but must provide challenge to those
responsible for achievement.
 Objectives should be yield specific results when achieved.
 Objectives should be desirable for those who are responsible for the
achievement.
 Objectives should be consistent over the period of time.
 Objectives should be periodically reviewed.
Area Of objective setting
Marketing standards
Innovation
Productivity
Physical and financial resources
Profitability
Manager performance and development
Work performance and attitude
Public responsibility
MBO (Management by
objectives)
 MBO is a process whereby the superiors and the subordinate
managers of an enterprise jointly identify its common goals, define
each individual’s major areas of responsibility in terms of the results
expected of him, and use these measures as guide for operating the
unit and assessing the contribution of each of its members.
 MBO is a comprehensive managerial system that integrates many key
managerial activities in a systematic manner, consciously directed
towards the effective and efficient achievement of organizational
objectives.
 MBO is a result-centered, non-specialist, operational managerial
process for the effective utilization of the material, physical and
human resource of the organization. By integrating the individual
with the organization and the organization with the environment.
Characteristics of MBO
 Mutual goal oriented. Fundamentals to the MBO process in the mutual
setting of objectives b/w each position holder ad their superiors, and the
use of these objectives as standards for evaluating the employees
performance. There is active participation of lower level people.
 Compatibility: MBO is a process of setting compatible objectives at all
level of the organisation.The process starts with the setting of overall
organizational objectives at the top. objectives for each position are
designed to complement each other vertically in the hierarchy and
horizontally and laterally across the organisational span .
 Measurable objectives: MBO involves the setting of specific
measurable objectives for the future time period. The idea is to assign
each employee a specific target which is time bound.
 Systematic: MBO is a formal process that begins with the goals setting
and continue through performance review. managers and subordinates
act together not only to set common goals but to review the performance
in the light of these goals.
 Continuity: Under MBO performance appraisal are conducted jointly
on a continuous basis with provision for regular periodic review.
MBO is an dynamic approach that’s attempt to integrate the
individual with the organization.
 KRA: The emphasis of the MBO is on performance improvement in
the areas which are of a critical importance to the organization as a
whole. by identifying key result areas(KRA), MBO ensures that due
attention is given to the priority areas which have significant impact
on performance and the growth of the organisation.
Objectives of MBO
To measure and judge the performance.
To relate individual performance with org. performance.
To clarify both the job is to be done and expectations of
accomplishment.
To foster the increasing competences and growth of the subordinates.
To enhance the communication b/w superior and supervisors.
To serve as the basis for judgments about salary and promotions .
Motivation
To serve as a device for organisational control and integration.


Steps in MBO
Diagnosis: Preliminary activities directed toward an
understanding of important employee needs, jobs, technology
and external influences.
1) understanding the organisation
2) obtaining commitment.
3) define jobs
4) training people
Goal setting: Goal setting is a multilevel process in MBO.
1) Organisational goals and strategies
2) unit and individual goals
3) review by superiors.
4) Joint agreement.


Action planning: Goals reflects the ends of managerial
performance. action plans provides means for their
attainment.
Steps in action planning: a) specify the major task and
activities for the attainment of the objectives.
B) construct a schedule for performing the activates in a
proper sequence.
C) Clarify the roles and relation by delegating the
authority for each activity.
D) estimate time requirement.
E) determine the source required.
F) Clarify the deadlines and modify the action plans
Interim Review: After regular time interval the
subordinates and superiors get together to review the
progress towards the attainment of goals.
1) Environmental changes
2) Revise goals and action plans.
Final Review: At the end of the goals setting period
superiors and subordinates formally meet and review the
results. Emphasis is placed on analysis, discussion and
feedback to the next MBO cycle.
1) Discussion
2) analysis
3) motivation
4) rewards
5) Control
Advantage of MBO
Improved planning
Team work
Effective self control
Objective appraisals
Motivation and morale.
Basis for orgnisational changes
Clarity in orgnisational actions.
Time and cost
Limitations ofphilosohy
Failure to teach MBO MBO
Problem in objective settings
Emphasis on short term goals
Inflexibility
Frustration
Undermining leadership
Participation problem.
Increased paperwork.

Prerequisites for installing MBO
programme
Purpose of MBO
Top management support
Training for MBO
Participation
Feedback for self direction and self control
Adequate time and resources
Decentralization
politics
 STRATEGY / Strategies
Strategy is the pattern of objectives, purpose or goal and
major policies and plans for achieving these goals, stated
in such a way so as to define what business the company is
in or is to be and the kind of company it is to be.
Strategy is the course of action through which an org’
relates itself with environment so as to achieve its
objectives.
Strategy is the determination of the basic long term goals
and objectives of an enterprise and the adoption of the
course of action and the allocation of resources necessary
for carrying out these goals.
Levels of strategies
1) corporate level strategy-
2) business level strategy
3) functional level strategy

1) Corporate level-
 It occupies the highest level of strategic decision making.
It covers actions dealing with the objectives of the firm,
Acquisition and allocation of resources
Coordination of strategies of various SBUs for optimal
performance.
Strategy decisions tends to be value oriented, conceptual
and less concrete than decision in business and functional
level.
Business level strategy-
It is applicable in those orgnaisation which have
different businesses and each business is treated as
strategic business unit.
The fundamental concept of SBUs is to identify
independent products/ market segments served by an
organisation.
The corporate strategy set the long term objectives of
the firm and the broad constraints and policies with
in which a SBU operates.
C.S is not the sumtotal of B.S of the corporation but
it deals with different subject matters.
Functional Strategies –
 It relates to a single functional operations and
activates involved therein.
F.S deals with relatively restricted plan providing
objectives for specific functions, allocation of
resources among different function/ operations with
in that functional area and coordination b/w them for
the optimal contribution to the achievement of the
SBUs and corporate – level strategies .
Example: marketing strategies: sales, distribution,
promotion
Polices
Policies are general statement or understanding which
guide or channel thinking in decision making (-kotler)
Policies define the boundaries within which decisions can
be made and they direct decision towards the
accomplishment of the objectives.
Polices are generally formulated by the top management
and provides scope for executive judgment.
Type of policies:
A)Originated policy-Guide decision making at lower level.
B) Appealed policy-Formulated on the appeal/request of
the subordinates.
C) Imposed policy- Compelled to adopt a policy due to the
outside forces like trade unions, trade associations, govt
etc.
Process of Policy Formulation
Definition of policy area :The area in which policy is
needed should be specified. proper planning horizon is
decided.
 Identification of policy alternatives : in order to identify
the alternative policies that may be adopted for achieving
objectives, analysis of environment is necessary. Analysis of
E.environment reveals O and T. Analysis of I.environment
reveals S and W and values of the org’.
Evaluation of alternatives: alternative is evaluated in
terms of its contribution to the objectives. costs benefits and
resource requirement of each alternative are considered.
Choice of policy: After evaluation most appropriate
alternative is selected. This is the point of policy making as
it results in long-term commitment.
Testing of policy : The tentative policy may be tested
to judge its impact on the organization. Ideas and
suggestions received during the test may be used to
modify and improve policies.
Communication of policies: the final policy is
communicated and explained to those responsible for
its application.it is necessary to educated people in the
proper application of policy.
Policy application: The chosen policy is put into
practice by covering it into operational plans.
Policy review and appraisal: A periodic review of
policy is necessary to ensure that it is useful under
changing conditions.
Programme
A programme is a precise plan which lays down the
different operations to be carried out to achieve a given
work.
A programme involves planning for future events and
establishing sequence of required actions.
A programme is a comprehensive plan designed to
implement the policies and accomplishing the objectives.
It is the combination of goals, policies, task assignment,
resource flows etc.
It spell out clearly the steps to be taken, resource to be
used, and the time period with in which the task is to be
completed .
Features of programme
Prog. Prescribe the fixed time table for each step.
Prog. Indicates the various steps in form of small
plans.
Prog. Is designed for achieving the objects of business
enterprise.
It is simple use plan once the objectives or goals of the
prog. Is achieved it will not be used again.
It is action based and result oriented
It helps in motivating employees
There is great risk of failure of the prog. Due to the
change in the environment.
Prog. Process model
DECISION MAKING
The word decision is derived form the Latin word
“Decis” which means cutting away or cutting off to
come to a conclusion. Thus decision making means
choosing one alternatives from available different
alternatives
Decision making is both managerial and
organizational process
“Decision making is selection based on some criteria
from two or more possible alternatives “– G.R. Terry
“Decision making is a blend of thinking deciding and
acting.”
Type of Decisions
1 Programmed Decisions: P.D are routine repetitive
having set of procedure deal with low risk and can be easily
delegated. Policies ,rules and regulating are established
well in advance to solve recurring nature of problems
example: problem related to employee promotion, transfer
and termination are solved through pre-decided policies
and procedure.
2 NON-Programmed Decisions: NPD are new unique
challenging highly risky and difficult decisions. These type
of decision leads to difficult situation for which there is no
easy solution. Exmple. Is a new unit is to be settled or
started or any of the old unit is to be closed or change in
product line or design
3Strategic Decision:These are basic long term, vital
and very imp. Managerial Decisions, it is based on actions
and probable actions of the competitors. These are non
repetitive in nature and are taken after careful analysis
and evaluation of many alternatives.
Features:
S.D are very crucial for the whole organisation
These are based on basic objectives and policies of the org.
S.D directly contribute to the achievement of
organisational objectives
These are generally non programmed decisions which is
made under the conditions of partial ignorance.
4 Tactical Decision: T.D relates to day to day
operations of the organisation and has to be taken very
frequently.
T.D are derived out of the strategic decisions eg.
Purchase of raw materials assigning duties to employees
etc.
Features:
These decisions are taken as programmed one and one
of repetitive in nature.
The out come of tactical decisions is shot-term in nature
and affect only some part of the organization.
As T.D have to taken at middle or lower level.
5 Organisational Decisions: When an individual takes as
an executive or in official capacity it is known as organisational
decisions. Most of the time decision taken by the executive are
of organisational nature.such decisions affect the functioning
of the organisation directly.
6 Personal Decisions: These decisions are those decisions
which are taken by the individuals in his personal capacity and
are concerned with particular individual.these decisions affect
only one’s personal life.but some times these decisions also
affect the working of the organisation.
Other classification of Decisions:
1) Major decisions
2) Minor decisions
3) Individual decisions
4) Group Decisions
5) Referred Decisions
Steps in Decision Making
1) Problem Identification: A manger should identify and
define the real problem. A problem well defined is half solved.
Problem generally arise becouse of disparity between “what is
and what should be”.There may be multiple causes for an
orgnaisational problem and the manager has to clearly identify
those causes.
2) Disgnosing and analysing the problem: to diagnose the
problems quickly and correctly all relevant facts and
information must be collected and analysed.It implies knowing
the real cause and understanding the problem. The problem
should be well understood in terms of its element. Its
magnitude, its urgency and its relations with other problems.

3)Developing alternatives: A wide range of alternatives
increase the freedom of decision makers. A problem can be
solved by many ways but one of them is the best. All
possible ways should be thought and analyzed. A good
decision maker should not try to solve the problem only on
very first alternatives. A good decision maker should
discover only those alternatives which are strategic or
critical to the problem.
 4) Analysis and evaluation of alternatives: After the
identification of the various alternatives the next step is to
analyze each alternatives which seems important in its pros
and cons in relation to each other. The alternatives should
be evaluated in relation to time and money involved. Only
those alternatives which have good prospects should be
screened out.
5) Selection of the best alternatives: Experience is the
best teacher and history repeats itself. After all the various
alternatives are being evaluated the decision maker is to
select the best alternative.
In selection of the best alternatives generally these three
approaches are followed:
A) Experience: generally past experience acts as the
guide. The difficulties and problems encountered earlier
can be well judged and collective measures can be taken in
advance.
B) Experimentation: under this approach each
alternative is put in practice, results are observed and the
alternatives which shows the best results may be chosen.
C) Research and Analysis: this approach considered to be
the most effective technique when a major decision is
involved , it involves a search of relationship among the
most critical variable , constraints and premises that bear
upon the goal sought.
6) Implementation of decisions:once the best
alternative is chosen or selected it is put into action .
Decision making is not complete unless the decision maker
comes to knew its result.It is desirable that the language of
the decision should be simple andy easy to understand.
7) Follow Up: The implementation of the decision should
be constantly monitored. It is not enough to take a
decision , it should also be seen whether it is properly
implemented or not.
Techniques for decision making
Decision Making Aids

For one shot or non

For Routine or
programmed
Programmed Decision
1-intiuition
2- experience
1-Habits 3- considered
2-standard opinion
procedure and 4- facts
methods 5- quantitative
3- policies
4- organizational
structure
Experience- experience is the best teacher and should be
used for making rapid and quick decision. It provide guide
for decision making. An experience d person takes less time
in decision making.
Facts- These are considered to be the best basis of decision
making. A decision based on facts has its roots and such
decision would be sound and proper. The information facts
and figures has become a major tool in managerial decision
making e.g. facts collected in test marketing may provide
the basis for decision making.
Intuition: Decision making by intuition is based upon the
inner feeling of the person the takes the decision as per his
attitudes, nature, perception, mind set, and conscious. He
thinks about the prallem and an answer is found in his
mind. Decision are quick but some time may be wrong.
Considered options: When many brains sets together
better decisions or ideas can be taken e.g. a marketing
manager before deciding whether to market a new
product or not, will like to see marketing statistic as well
as considered opinion before finally making a choice.
Quantitative Decision making Technique :
Operations Research: under this technique like decision
making the manager takes the decision with the help of
statistical mathematical technique which is highly
scientific approach.
Linear programming: It is one of the latest scientific
technique for managerial decision making. It is a
mathematical technique for the purpose of allocating the
limited resource in an optimum manner.
Queuing theory: It is also known as waiting line theory.
The theory is applied to any situation which needs balancing
of increasing cost. This theory uses mathematical
techniques to balance the cost waiting line verses cost of
preventing waiting lines by the increased services.
Replacement theory: Replacement theory gives emphasis
that new technique and improved machinery help in
increasing profitability. In manufacturing and service
industries machinery, equipment plant etc. becomes
obsolete in a certain period and ask for replacement
decision. Decision are required for their replacement. In
case replacement is not being done at proper time , the cost
of the production nay go up and efficiency may go down.
that is why management have to take the decision in
advance. And such decisions are being taken on the basis of
replacement theory.
Game Theory: game theory is used when the problem is
concerned basically with action of the competitors. this
theory assumes that the opponents will carefully consider
what the decision maker may do before he selects his own
strategy.
Network analysis: In fact network analysis is used for
planning and controlling the project activities. According to
network analysis a project is divided into small operations
arranged in logical sequence. Example of NA=
PERT(programme evaluation and review technique) CPM=
Critical Path Method)
Delphi method: It is group decision technique. This
technique is used for long term forecasting planning. It is
used to determine programme alternatives to expose
presumption of information leading to different judgment.
Decision Tree:It is a visual device and graphic
method for illustrating all the chance that available
while taking a decision. It is a graphical method.
ORGANISING
Organizing is the process of defining and grouping
activities and establishing authority relationships
among them to attain organizational objectives.
"Organization is the process of identifying and
grouping of the works to be performed, defining
and delegating responsibility and authority and
establishing relationships for the purpose of
enabling people to work most efficiently" - Louis
A. Allen
Nature of organizing
Common purpose: an organization is goal oriented and
purposeful. Every org. exists to accomplish some common
goals.
Division of nature: The total work of an org is divided into
functions and sub-functions. This is necessary to avoid waste
of time energy and resource which arise when people have to
constantly change from one work to another.
Authority structure: there is an arrangement of positions
into a graded series. The authority of every position is defined.
People: an org is basically a group of persons. Therefore
activity groupings and authority provision must take into
account the limitations and customs of people.
Communication: every org has its own channel of
communication. Such channels are necessary for mutual
understanding and cooperation among the members of an
organisation.
Coordination: co-operative effort is a basic feature of
organisation.
Resources: an org make use of various resources, technology,
and skills its activities and processes cannot take place
without resources.
Man- made: an org is man made. It is composed of people
who have their own interactions and relationships. But it has
an identify of its own.it has its own form and functions.
Environment: An org function is an environment comprising
economic, social, political and legal factors. Therefore the
structure must be designed to work efficiency in a changing
environment.
Importance of Organizing
 Specialization - Organizational structure is a network of relationships in
which the work is divided into units and departments. This division of
work is helping in bringing specialization in various activities of concern.
 Well defined jobs - Organizational structure helps in putting right men
on right job which can be done by selecting people for various
departments according to their qualifications, skill and experience. This
is helping in defining the jobs properly which clarifies the role of every
person.
 Clarifies authority - Organizational structure helps in clarifying the role
positions to every manager (status quo). This can be done by clarifying
the powers to every manager and the way he has to exercise those powers
should be clarified so that misuse of powers do not take place. Well
defined jobs and responsibilities attached helps in bringing efficiency
into managers working. This helps in increasing productivity.
 Co-ordination - Organization is a means of creating co- ordination among
different departments of the enterprise. It creates clear cut relationships
among positions and ensure mutual co- operation among individuals.
Harmony of work is brought by higher level managers exercising their
authority over interconnected activities of lower level manager.
 Authority responsibility relationships can be fruitful only when there is a
formal relationship between the two. For smooth running of an
organization, the co- ordination between authority- responsibility is very
important. There should be co- ordination between different relationships.
Clarity should be made for having an ultimate responsibility attached to
every authority. There is a saying, “Authority without responsibility leads
to ineffective behavior and responsibility without authority makes person
ineffective.” Therefore, co- ordination of authority- responsibility is very
important.
 Effective administration - The organization structure is helpful in
defining the jobs positions. The roles to be performed by different
managers are clarified. Specialization is achieved through division of work.
This all leads to efficient and effective administration.
 Growth and diversification - A company’s growth is totally dependant
on how efficiently and smoothly a concern works. Efficiency can be
brought about by clarifying the role positions to the managers, co-
ordination between authority and responsibility and concentrating on
specialization. In addition to this, a company can diversify if its
potential grow. This is possible only when the organization structure is
well- defined. This is possible through a set of formal structure.
 Sense of security - Organizational structure clarifies the job positions.
The roles assigned to every manager is clear. Co- ordination is possible.
Therefore, clarity of powers helps automatically in increasing mental
satisfaction and thereby a sense of security in a concern. This is very
important for job- satisfaction.
 Scope for new changes - Where the roles and activities to be
performed are clear and every person gets independence in his working,
this provides enough space to a manager to develop his talents and
flourish his knowledge. A manager gets ready for taking independent
decisions which can be a road or path to adoption of new techniques of
production. This scope for bringing new changes into the running of an
enterprise is possible only through a set of organizational structure.
Principles of Organizing
 Principle of Specialization
 According to the principle, the whole work of a concern should be
divided amongst the subordinates on the basis of qualifications,
abilities and skills. It is through division of work specialization can be
achieved which results in effective organization.
 Principle of Functional Definition.
 According to this principle, all the functions in a concern should be
completely and clearly defined to the managers and subordinates.
This can be done by clearly defining the duties, responsibilities,
authority and relationships of people towards each other.
Clarifications in authority- responsibility relationships helps in
achieving co- ordination and thereby organization can take place
effectively. For example, the primary functions of production,
marketing and finance and the authority responsibility relationships
in these departments should be clearly defined to every person
attached to that department. Clarification in the authority-
responsibility relationship helps in efficient organization.
 Principles of Span of Control/Supervision
 According to this principle, span of control is a span of supervision which
depicts the number of employees that can be handled and controlled
effectively by a single manager. According to this principle, a manager
should be able to handle what number of employees under him should be
decided. This decision can be taken by choosing either froma wide or
narrow span. There are two types of span of control:-
 Wide span of control- It is one in which a manager can supervise and
control effectively a large group of persons at one time. The features of
this span are:-
 Less overhead cost of supervision
 Prompt response from the employees
 Better communication
 Better supervision
 Better co-ordination
 Suitable for repetitive jobs
 According to this span, one manager can effectively and efficiently handle
a large number of subordinates at one time.
 Narrow span of control- According to this span, the work and
authority is divided amongst many subordinates and a manager
doesn't supervises and control a very big group of people under him.
The manager according to a narrow span supervises a selected
number of employees at one time. The features are:-
 Work which requires tight control and supervision, for example,
handicrafts, ivory work, etc. which requires craftsmanship, there
narrow span is more helpful.
 Co-ordination is difficult to be achieved.
 Communication gaps can come.
 Messages can be distorted.
 Specialization work can be achieved.
 Factors influencing Span of Control
 Managerial abilities- In the concerns where managers are capable,
qualified and experienced, wide span of control is always helpful.
 Competence of subordinates- Where the subordinates are capable
and competent and their understanding levels are proper, the
subordinates tend to very frequently visit the superiors for solving
their problems. In such cases, the manager can handle large number
of employees. Hence wide span is suitable.
 Nature of work- If the work is of repetitive nature, wide span of
supervision is more helpful. On the other hand, if work requires
mental skill or craftsmanship, tight control and supervision is
required in which narrow span is more helpful.
 Delegation of authority- When the work is delegated to lower levels
in an efficient and proper way, confusions are less and congeniality of
the environment can be maintained. In such cases, wide span of
control is suitable and the supervisors can manage and control large
number of sub- ordinates at one time.
 Degree of decentralization- Decentralization is done in order to
achieve specialization in which authority is shared by many people
and managers at different levels. In such cases, a tall structure is
helpful. There are certain concerns where decentralization is done in
very effective way which results in direct and personal communication
between superiors and sub- ordinates and there the superiors can
manage large number of subordinates very easily. In such cases, wide
span again helps.
 Principle of Scalar Chain
 Scalar chain is a chain of command or authority which flows from top
to bottom. With a chain of authority available, wastages of resources
are minimized, communication is affected, overlapping of work is
avoided and easy organization takes place. A scalar chain of command
facilitates work flow in an organization which helps in achievement of
effective results. As the authority flows from top to bottom, it clarifies
the authority positions to managers at all level and that facilitates
effective organization.
Principle of Unity of Command
 It implies one subordinate-one superior relationship. Every subordinate is
answerable and accountable to one boss at one time. This helps in
avoiding communication gaps and feedback and response is prompt.
Unity of command also helps in effective combination of resources, that
is, physical, financial resources which helps in easy co- ordination and,
therefore, effective organization.
 Authority Flows from Top to Bottom 

 Managing Director

 Marketing Manager

 Sales/ Media Manager

 Salesmen
Organization Structure
Line organization structure is also known as scalar,
military, or vertical organization and perhaps is the oldest form.
This concept holds that in any org’ or hierarchy derived from
the scalar process, there must be a single head who commands
it.
According to this type of organization, the authority flows
from top to bottom in a concern. The line of command is
carried out from top to bottom. This is the reason for
calling this organization as scalar organization which
means scalar chain of command is a part and parcel of this
type of administrative organization. In this type of
organization, the line of command flows on an even basis
without any gaps in communication and co- ordination
taking place.
 Features of Line Organization
It is the most simplest form of organization.
Line of authority flows from top to bottom.
Specialized and supportive services do not take place
in these organization.
Unified control by the line officers can be maintained
since they can independently take decisions in their
areas and spheres.
This kind of organization always helps in bringing
efficiency in communication and bringing stability to
a concern.
Line org can be designed in two ways:
Pure line org: Under this form similar activities
are performed at a particular level. Each group of
activities is self-contained unit and is able to
perform the assigned activities without the
assistance of others.
Departmental line org: Under this all the
activities are divided into different departments
on the basis of similarity of activities. Each
department is placed under one departmental
head. all persons in the department are subject to
control by department head.
Merits of Line Organization
 Simplest- It is the most simple and oldest method of administration.
 Unity of Command- In these organizations, superior-subordinate
relationship is maintained and scalar chain of command flows from top
to bottom.
 Better discipline- The control is unified and concentrates on one
person and therefore, he can independently make decisions of his own.
Unified control ensures better discipline.
 Fixed responsibility- In this type of organization, every line executive
has got fixed authority, power and fixed responsibility attached to every
authority.
 Flexibility- There is a co-ordination between the top most authority
and bottom line authority. Since the authority relationships are clear,
line officials are independent and can flexibly take the decision. This
flexibility gives satisfaction of line executives.
 Prompt decision- Due to the factors of fixed responsibility and unity
of command, the officials can take prompt decision.
Demerits of Line Organization
 Over reliance- The line executive’s decisions are implemented to the
bottom. This results in over-relying on the line officials.
 Lack of specialization- A line organization flows in a scalar chain from
top to bottom and there is no scope for specialized functions. For example,
expert advices whatever decisions are taken by line managers are
implemented in the same way.
 Inadequate communication- The policies and strategies which are
framed by the top authority are carried out in the same way. This leaves no
scope for communication from the other end. The complaints and
suggestions of lower authority are not communicated back to the top
authority. So there is one way communication.
 Lack of Co-ordination- Whatever decisions are taken by the line officials,
in certain situations wrong decisions, are carried down and implemented
in the same way. Therefore, the degree of effective co- ordination is less.
 Authority leadership- The line officials have tendency to misuse their
authority positions. This leads to autocratic leadership and monopoly in
the concern.
Line and Staff Organization
Line and staff organization is a modification of line
organization and it is more complex than line
organization. According to this administrative
organization, specialized and supportive activities are
attached to the line of command by appointing staff
supervisors and staff specialists who are attached to
the line authority. The power of command always
remains with the line executives and staff supervisors
guide, advice and council the line executives. Personal
Secretary to the Managing Director is a staff official.
Features of Line and Staff Organization
 There are two types of staff :
 Staff Assistants- P.A. to Managing Director, Secretary to Marketing
Manager.
 Staff Supervisor- Operation Control Manager, Quality Controller
 Line and Staff Organization is a compromise of line organization. It is more
complex than line concern.
 Division of work and specialization takes place in line and staff organization.
 The whole organization is divided into different functional areas to which staff
specialists are attached.
 Efficiency can be achieved through the features of specialization.
 There are two lines of authority which flow at one time in a concern :
 Line Authority
 Staff Authority
 Power of command remains with the line executive and staff serves only as
counselors.
Merits
 Relief toof Line and Staff Organization
line of executives- In a line and staff organization, the advice
and counseling which is provided to the line executives divides the work
between the two. The line executive can concentrate on the execution of
plans and they get relieved of dividing their attention to many areas.
 Expert advice- The line and staff organization facilitates expert advice
to the line executive at the time of need. The planning and investigation
which is related to different matters can be done by the staff specialist
and line officers can concentrate on execution of plans.
 Benefit of Specialization- Line and staff through division of whole
concern into two types of authority divides the enterprise into parts and
functional areas. This way every officer or official can concentrate in its
own area.
 Better co-ordination- Line and staff organization through
specialization is able to provide better decision making and
concentration remains in few hands. This feature helps in bringing co-
ordination in work as every official is concentrating in their own area.
 Benefits of Research and Development- Through the advice of
specialized staff, the line executives, the line executives get time to
execute plans by taking productive decisions which are helpful for a
concern. This gives a wide scope to the line executive to bring
innovations and go for research work in those areas. This is possible due
to the presence of staff specialists.
 Training- Due to the presence of staff specialists and their expert advice
serves as ground for training to line officials. Line executives can give due
concentration to their decision making. This in itself is a training ground
for them.
 Balanced decisions- The factor of specialization which is achieved by
line staff helps in bringing co- ordination. This relationship automatically
ends up the line official to take better and balanced decision.
 Unity of action- Unity of action is a result of unified control. Control
and its effectivity take place when co- ordination is present in the
concern. In the line and staff authority all the officials have got
independence to make decisions. This serves as effective control in the
whole enterprise.
Demerits of Line and Staff Organization
 Lack of understanding- In a line and staff organization, there are
two authority flowing at one time. This results in the confusion
between the two. As a result, the workers are not able to understand
as to who is their commanding authority. Hence the problem of
understanding can be a hurdle in effective running.
 Lack of sound advice- The line official get used to the expertise
advice of the staff. At times the staff specialist also provide wrong
decisions which the line executive have to consider. This can affect
the efficient running of the enterprise.
 Line and staff conflicts- Line and staff are two authorities which are
flowing at the same time. The factors of designations, status influence
sentiments which are related to their relation, can pose a distress on
the minds of the employees. This leads to minimizing of co-
ordination which hampers a concern’s working.
 Costly- In line and staff concern, the concerns have to maintain the
high remuneration of staff specialist. This proves to be costly for a
concern with limited finance.
 Assumption of authority- The power of concern is with the line
official but the staff dislikes it as they are the one more in mental
work.
 Staff steals the show- In a line and staff concern, the higher returns
are considered to be a product of staff advice and counseling. The line
officials feel dissatisfied and a feeling of distress enters a concern. The
satisfaction of line officials is very important for effective results.
Functional Organization
 Functional organization has been divided to put the specialists in
the top position throughout the enterprise. This is an organization in
which we can define as a system in which functional department are
created to deal with the problems of business at various levels.
Functional authority remains confined to functional guidance to
different departments. This helps in maintaining quality and
uniformity of performance of different functions throughout the
enterprise.
 The concept of Functional organization was suggested by F.W. Taylor
who recommended the appointment of specialists at important
positions. For example, the functional head and Marketing Director
directs the subordinates throughout the organization in his particular
area. This means that subordinates receives orders from several
specialists, managers working above them.
Features of Functional Organization
The entire organizational activities are divided into
specific functions such as operations, finance,
marketing and personal relations.
Complex form of administrative organization compared
to the other two.
Three authorities exist- Line, staff and function.
Each functional area is put under the charge of
functional specialists and he has got the authority to
give all decisions regarding the function whenever the
function is performed throughout the enterprise.
Principle of unity of command does not apply to such
organization as it is present in line organization.
Merits of Functional Organization
 Specialization- Better division of labour takes place which results in
specialization of function and it’s consequent benefit.
 Effective Control- Management control is simplified as the mental
functions are separated from manual functions. Checks and balances
keep the authority within certain limits. Specialists may be asked to
judge the performance of various sections.
 Efficiency- Greater efficiency is achieved because of every function
performing a limited number of functions.
 Economy- Specialization compiled with standardization facilitates
maximum production and economical costs.
 Expansion- Expert knowledge of functional manager facilitates better
control and supervision.
Demerits of Functional Organization
Confusion- The functional system is quite complicated to
put into operation, especially when it is carried out at low
levels. Therefore, co- ordination becomes difficult.
Lack of Co- ordination- Disciplinary control becomes
weak as a worker is commanded not by one person but a
large number of people. Thus, there is no unity of
command.
Difficulty in fixing responsibility- Because of multiple
authority, it is difficult to fix responsibility.
Conflicts- There may be conflicts among the supervisory
staff of equal ranks. They may not agree on certain issues.
Costly- Maintenance of specialist’s staff of the highest
order is expensive for a concern.
DIVISIONAL ORGANISATIONAL STRUCTURE
Divisional structure is also know as Profit
decentralization. In this form, the org is divided into
different fairly autonomous units.
A divisional structure groups its divisions according to the
specific demands of products, markets or customers.
Unlike the functional organizational structure, where the
different organizational functions of the company conduct
activities satisfying all customers, markets and products,
the divisional structure focuses on a higher degree of
specialization within a specific division, so that each
division is given the resources, and autonomy, to swiftly
react to changes in their specific business environment.
 Divisional structure divides, the employees based on the
product/customer segment/geographical location. For example, each
division is responsible for certain product and has its own resources
such as finance, marketing, warehouse, maintenance..etc.
Accordingly, this structures is a decentralized structure and thus
allows for flexibility and quick response to environmental changes. It
also enhances innovation and differentiation strategies. 
Advantages
Divisional structure emphasis on the end results, that is on
product or customer through which revenue is generated in
the organisation.
There is higher level of managerial motivation because
managers works in the environment of autonomy.
Organisational size can be increased without any problem
as new division can be opened without disturbing the
existing system.
This structures allows for flexibility and quick response to
environmental changes.
It also enhances innovation and differentioan strategies.
Dis-Advantages
Divisional structure is that each division can operate as a
separate, self-sufficient unit without having to rely heavily on
the parent company or top management of the organization.
This structure results in duplication of resources .
it does not support the exchange of knowledge between
people working in the same profession because part of them
are working in one division and the others are working in
other divisions.
Control system is a major problem of divisionalisation.
MATRIX
 A Matrix structure organization contains teams of people created
from various sections of the business. These teams will be created for
the purposes of a specific project and will be led by a project manager.
Often the team will only exist for the duration of the project and
matrix structures are usually deployed to develop new products and
services.
 In a matrix organizational structure, people have to report to two
bosses, one being the head of the department in which they are
working, and the other being the leader or coordinator of the project
 on which they are working. 
 A matrix structure of organization helps the organization run
smoothly according to the projects that have to be completed by the
employees at a given point of time. It starts from the general manager
of the company at the top, and then goes down to the heads of the
production, research and development and marketing departments,
besides all the heads of the other departments in the organization. 
 An example would be a company that produces two products,
"product a" and "product b". Using the matrix structure, this company
would organize functions within the company as follows: "product a"
sales department, "product a" customer service department, "product
a" accounting, "product b" sales department, "product b" customer
service department, "product b" accounting department. Matrix
structure is amongst the purest of organizational structures, a simple
lattice emulating order and regularity demonstrated in nature.
Weak/Functional Matrix: A project manager with only
limited authority is assigned to oversee the cross-
functional aspects of the project. The functional managers
maintain control over their resources and project areas.
Balanced/Functional Matrix: A project manager is
assigned to oversee the project. Power is shared equally
between the project manager and the functional
managers. It brings the best aspects of functional and
projectized organizations. However, this is the most
difficult system to maintain as the sharing power is
delicate proposition.
Strong/Project Matrix: A project manager is primarily
responsible for the project. Functional managers provide
technical expertise and assign resources as needed.
Advantages 
Individuals can be chosen according to the needs of
the project.
The use of a project team which is dynamic and able
to view problems in a different way as specialists have
been brought together in a new environment.
Project managers are directly responsible for
completing the project within a specific deadline and
budget.
It is Quit flexible structure as compared to traditional
hierarchical structure.
It improves motivation because people can focus
more directly on completion of one project.
Disadvantages
A conflict of loyalty between line managers and project
managers over the allocation of resources.
Projects can be difficult to monitor if teams have a lot of
independence.
Costs can be increased if more managers (ie project
managers) are created through the use of project teams.
There is always power struggle in matrix structure.
The essence of matrix structure is dual command, and to
survive such form, there needs to be balance of power.
If matrix structure is not followed properly there is delay
in decision making.
Team Structure
One of the newest organizational structures developed in
the 20th century is team. In small businesses, the team
structure can define the entire organization. Teams can be
both horizontal and vertical. While an organization is
constituted as a set of people who synergize individual
competencies to achieve newer dimensions, the quality of
organizational structure revolves around the competencies
of teams in totality.
In order to meet the challenges of dynamic business
environment, more and more organizations are replacing
old hierarchies with team of different types in the form of
work teams or project teams.
Ex: In information technology companies, most of the work
is done by teams which are constituted on project to project
basis.
Type of Teams
In an organization there may be different types of teams.
Typology of teams may be based on their constitution,
purpose, power entrusted, duration etc.
Lead team: A lead team is consist of managers and their
subordinates. This is the most usual form of team which
works in every part of an organization. Its objective is to
plan and execute the business activates in its specified area
of responsibility.
 Cross functional team: It is constituted by drawing
personal from different functional area particularly from
the function which have high interdependence..the basic
objective is to solve problem and take decisions areas which
cannot be done by a particular functional department.
 Problem solving: It is also known as corrective action team, is
constituted to solve specific problem which an organisation may be
facing.
 The problem solving team applies the problem-solving methodologies
and techniques to get deep into the problem, draws different
alternative solutions to the problem, evaluate likely outcomes of each
alternative and finally suggest a particular solution and its
implementation.
 Self managed team: It is also known as empowered or self directed
team . They are empowered to share various management and
leadership functions.
 They plan, control and improve their own work processes.
 They set their own goals and inspect their own work.
 They create their own schedules.
 They prepare their own budgets and coordinate their work with other
departments.
Effective Team: An effective team is one which
contribute to the achievement of organisational
objectives by performing the task assigned to it and
providing satisfaction to its members.
Advantages
The team-based organizational model allows different
departments to communicate freely. Having a representative
from each department participate in the team decision-making
process, allows the departments to work together for a common
goal.
The amount of time it takes to make a decision is much faster
with a team-based approach.
Employees feel like they have a voice so they are more
motivated to accomplish their tasks.
The need for a multi-level management tier is replaced by
workers, therefore the company's administrative costs are
lowered
Disadvantages
The team-based organizational model presents
certain disadvantages. Each representative from their
departments can be partial to their needs, resulting in
more conflict among the team.
Time is often an issue because there is no manager
overseeing the meetings. It can take longer before the
team makes a collaborative decision.
This can prolong resolving the issue at hand.
Network Structure
New network organizations contract out any business
function, that can be done better or more cheaply. In
essence, managers in network structures spend most
of their time coordinating and controlling external
relations, usually by electronic means.
Delegation of Authority
Delegation is how a manager successfully assigns work to an
employee to be accomplished. Delegation is a three-step
process including assigning responsibility, giving authority,
and creating accountability. These steps can vary between
organizations, but the process must be done smoothly and
concretely.
A manager alone cannot perform all the tasks assigned to
him. In order to meet the targets, the manager should
delegate authority. Delegation of Authority means division
of authority and powers downwards to the subordinate.
Delegation is about entrusting someone else to do parts of
your job. Delegation of authority can be defined as
subdivision and sub-allocation of powers to the
subordinates in order to achieve effective results.
Elements of Delegation
 Authority - in context of a business organization, authority can be
defined as the power and right of a person to use and allocate the
resources efficiently, to take decisions and to give orders so as to achieve
the organizational objectives.
 Authority must be well- defined. All people who have the authority
should know what is the scope of their authority is and they shouldn’t
mis-utilize it.
 Authority is the right to give commands, orders and get the things done.
 The top level management has greatest authority. Authority always flows
from top to bottom. It explains how a superior gets work done from his
subordinate by clearly explaining what is expected of him and how he
should go about it.
 Authority should be accompanied with an equal amount of
responsibility.
 Delegating the authority to someone else doesn’t imply escaping from
accountability. Accountability still rest with the person having the
utmost authority.
Responsibility - is the duty of the person to complete the
task assigned to him. A person who is given the
responsibility should ensure that he accomplishes the
tasks assigned to him. If the tasks for which he was held
responsible are not completed, then he should not give
explanations or excuses.
Responsibility without adequate authority leads to
discontent and dissatisfaction among the person.
Responsibility flows from bottom to top. The middle level
and lower level management holds more responsibility.
The person held responsible for a job is answerable for it.
If he performs the tasks assigned as expected, he is bound
for praises. While if he doesn’t accomplish tasks assigned
as expected, then also he is answerable for that.
Accountability - means giving explanations for any
variance in the actual performance from the
expectations set. Accountability can not be delegated.
For example, if ’A’ is given a task with sufficient
authority, and ’A’ delegates this task to B and asks
him to ensure that task is done well, responsibility
rest with ’B’, but accountability still rest with ’A’. The
top level management is most accountable. Being
accountable means being innovative as the person
will think beyond his scope of job.
Accountability, in short, means being answerable for
the end result. Accountability can’t be escaped. It
arises from responsibility.
Delegation of authority is the base of superior-
subordinate relationship, it involves following steps:-
 Determination of result expected: First of all a manager has to
define the results he wants to obtain from his subordinates for
achievement of organizational objective.
 Assignment of Duties - The delegator then tries to define the task
and duties to the subordinate. He also has to define the result
expected from the subordinates. Clarity of duty as well as result
expected has to be the main step in delegation.
 Granting of authority - Subdivision of authority takes place when a
superior divides and shares his authority with the subordinate. It is for
this reason, every subordinate should be given enough independence
to carry the task given to him by his superiors. The managers at all
levels delegate authority and power which is attached to their job
positions. The subdivision of powers is very important to get effective
results.
 Creating Responsibility and Accountability - The delegation
process does not end once powers are granted to the subordinates.
They at the same time have to be obligatory towards the duties
assigned to them.
 Responsibility is said to be the factor or obligation of an individual to
carry out his duties in best of his ability as per the directions of
superior. Responsibility is very important. Therefore, it is that which
gives effectiveness to authority. At the same time, responsibility is
absolute and cannot be shifted.
 Accountability, on the others hand, is the obligation of the individual
to carry out his duties as per the standards of performance. Therefore,
it is said that authority is delegated, responsibility is created and
accountability is imposed.
 Accountability arises out of responsibility and responsibility arises
out of authority. Therefore, it becomes important that with every
authority position an equal and opposite responsibility should be
attached.
 IMPORTANCE OF DELEGATION

 Delegation of authority is a process in which the authority and powers are

divided and shared amongst the subordinates. When the work of a
manager gets beyond his capacity, there should be some system of
sharing the work. This is how delegation of authority becomes an
important tool in organization function. Through delegation, a manager,
in fact, is multiplying himself by dividing/multiplying his work with the
subordinates. The importance of delegation can be justified by -
 Through delegation, a manager is able to divide the work and allocate it
to the subordinates. This helps in reducing his work load so that he can
work on important areas such as - planning, business analysis etc.
 With the reduction of load on superior, he can concentrate his energy on
important and critical issues of concern. This way he is able to bring
effectiveness in his work as well in the work unit. This effectivity helps a
manager to prove his ability and skills in the best manner.
 Delegation of authority is the ground on which the superior-subordinate
relationship stands. An organization functions as the authority flows from top
level to bottom. This in fact shows that through delegation, the superior-
subordinate relationship become meaningful. The flow of authority is from
top to bottom which is a way of achieving results.
 Delegation of authority in a way gives enough room and space to the
subordinates to flourish their abilities and skill. Through delegating powers,
the subordinates get a feeling of importance. They get motivated to work and
this motivation provides appropriate results to a concern. Job satisfaction is an
important criterion to bring stability and soundness in the relationship
between superior and subordinates. Delegation also helps in breaking the
monotony of the subordinates so that they can be more creative and efficient.
Delegation of authority is not only helpful to the subordinates but it also
helps the managers to develop their talents and skills. Since the manager get
enough time through delegation to concentrate on important issues, their
decision-making gets strong and in a way they can flourish the talents which
are required in a manager. Through granting powers and getting the work
done, helps the manager to attain communication skills, supervision and
guidance, effective motivation and the leadership traits are flourished.
Therefore it is only through delegation, a manager can be tested on his traits.
Delegation of authority is help to both superior and
subordinates. This, in a way, gives stability to a
concern’s working. With effective results, a concern
can think of creating more departments and divisions
flow working. This will require creation of more
managers which can be fulfilled by shifting the
experienced, skilled managers to these positions. This
helps in both virtual as well as horizontal growth
which is very important for a concern’s stability.
Decentralization
Decentralization implies to the systematic delegation
of authority in an organization wide context.
Decentralization refers to the systematic efforts to
delegate to the lowest levels all authority except that
which can only be exercised at central points.
It is the distribution of authority through out
organization.
Delegation and Decentralization
Delegation and decentralization should not be confused
because of the tendency of using two terms
interchangeably. Though these terms are closely related
decentralization is much more comprehensive than
delegation. Thus both the terms should be used
differently.
The major difference between delegation and
decentralization may be identified in two ways:
1) Decentralization is used to mean several types of
dispersal other than of authority also.
2) Even in the context of authority , the terms denote
different degrees of authority bat various levels and
consequent managerial process.
Factors Determining Degree of
Decentralization:
Size of the Organization: Decentralization depends on the size
of the organization. The larger the size of an organization the
more urgent is the need for decentralization. In large
organization more decisions are to be made at different places .
History of the organization: Decentralization of authority
depends on the way the organization has been built up over the
period of time.
 Management philosophy: The management philosophy of the
top manager has considerable influence on the extent to which
authority is decentralized.
Availability of manager: Availability of managers directly
affects the degree of decentralization because exercise of
authority requires competences on the part of those who exercise
authority. If better quality of manager are available there is
more chance of decentralization of authority.
Control technique: development and use of control
technique affect the degree of decentralization by
ensuring whether the performance at various levels
and points of the organization is in line with
planning.
Rate of change in organization: If the business of
the organization if of fast developing nature and it is
facing problems of expansion, there is more chance
that authority will be decentralized.
Environment influence.
Delegation
Basis and Decentralization
Delegation Decentralization

Managers delegate some of their Right to take decisions is shared by top

Meaning function and authority to their management and other level of
subordinates. management.

Scope of delegation is limited as

Scope superior delegates the powers to the Scope is wide as the decision making i
subordinates on individual bases.

Responsibility remains of the managers Responsibility is also delegated to

Responsibility
and cannot be delegated subordinates.

Freedom is not given to the Freedom to work can be maintained by

Freedom of Work subordinates as they have to work as subordinates as they are free to take
per the instructions of their superiors. decision and to implement it.

It is an important decision of an
Nature It is a routine function
enterprise.

Decentralization becomes more

Delegation is important in all concerns
important in large concerns and it
Need on purpose whether big or small. No enterprises
depends upon the decision made by
can work without delegation.
the enterprise, it is not compulsory.
Basis Delegation Decentralization

It is a systematic act which takes

The authority is granted by one
Grant of Authority place at all levels and at all functions
individual to another.
in a concern.

Authority with responsibility is

Grant of Responsibility Responsibility cannot be delegated
delegated to subordinates.

Degree of delegation varies from Decentralization is total by nature. It

Degree concern to concern and department spreads throughout the organization
to department. i.e. at all levels and all functions

It is an outcome which explains

Delegation is a process which
relationship between top
Process explains superior subordinates
management and all other
relationship
departments.

Delegation is essential of all kinds of Decentralization is a decisions

Essentiality
concerns function by nature.

Delegation is essential for creating Decentralization is an optional policy

Significance
the organization at the discretion of top management.

It is considered as a general policy of

Delegated authority can be taken
Withdrawal top management and is applicable to
back.
all departments.

Very little freedom to the

Freedom of Action Considerable freedom
subordinates
MOTIVATION
The term motivation has been derived form the word
motive. motive is anything that initiates or sustains
activity.
It is an inner state that energizes, activates pr moves and
that directs or channels behavior towards goals.
Motivation is the process of steering a person’s inner
drives and actions towards certain goals and committing
his energies to achieve these goals
Motivation may be define as the work a manager performs
in order to induce subordinates act in the desired manner
by satisfying their needs and desires. Thus motivation is
concerned with how behavior gets started, is energized
sustained and directed
Characteristics
Motivation is personal and internal feeling
Motivation is a continuous process.
Motivation is complex
Motivation is system oriented.
Motivation can be either positive or negative.
 Motivation create goal directed behavior
Motivation is different from job satisfaction.
TECHNIQUE OF MOTIVATION
Leading
as a function of management
 Leading involves influencing others toward the attainment of
organizational objectives. Effective leading requires the manager to
motivate subordinates, communicate effectively, and effectively use
power. If managers are effective leaders, their subordinates will be
enthusiastic about exerting effort toward the attainment of
organizational objectives.
 Leadership is the activity of influencing people to strive willingly for
group objectives.
 Koontz and O'Donnell “influencing people to follow the achievement
of a common goal. It is the ability to exert interpersonal influence by
means of communication towards the achievement of organizational
goals”
Leadership traits
The increasing rate of change in the business environment is a
major factor in this emphasis on leadership. Whereas in the
past, managers were expected to maintain the status quo in
order to move ahead, new forces in the marketplace have made
it necessary to expand this narrow focus. The new leaders of
tomorrow are visionary. They are both learners and teachers.
Not only do they foresee paradigm changes in society, but they
also have a strong sense of ethics and work to build integrity in
their organizations.
Raymond Cattell, a pioneer in the field of personality
assessment, developed the Leadership Potential equation in
1954. This equation, which was based on a study of military
leaders, is used today to determine the traits which characterize
an effective leader. The traits of an effective leader include the
following:
Emotional stability. Good leaders must be able to tolerate
frustration and stress. Overall, they must be well-adjusted and
have the psychological maturity to deal with anything they are
required to face.
Dominance. Leaders are often times competitive and decisive and
usually enjoy overcoming obstacles. Overall, they are assertive in
their thinking style as well as their attitude in dealing with others.
Enthusiasm. Leaders are usually seen as active, expressive, and
energetic. They are often very optimistic and open to change.
Overall, they are generally quick and alert and tend to be
uninhibited.
Conscientiousness. Leaders are often dominated by a sense of
duty and tend to be very exacting in character. They usually have a
very high standard of excellence and an inward desire to do one's
best. They also have a need for order and tend to be very self-
disciplined.
 Social boldness. Leaders tend to be spontaneous risk-takers. They
are usually socially aggressive and generally thick-skinned. Overall,
they are responsive to others and tend to be high in emotional
stamina.
 Tough-mindedness. Good leaders are practical, logical, and to-
the-point. They tend to be low in sentimental attachments and
comfortable with criticism. They are usually insensitive to hardship
and overall, are very poised.
 Self-assurance. Self-confidence and resiliency are common traits
among leaders. They tend to be free of guilt and have little or no
need for approval. They are generally secure and free from guilt and
are usually unaffected by prior mistakes or failures.
 Compulsiveness. Leaders were found to be controlled and very
precise in their social interactions. Overall, they were very
protective of their integrity and reputation and consequently
tended to be socially aware and careful, abundant in foresight, and
very careful when making decisions or determining specific actions.
 Beyond these basic traits, leaders of today must also possess traits which
will help them motivate others and lead them in new directions.
Leaders of the future must be able to envision the future and convince
others that their vision is worth following. To do this, they must have
the following personality traits:
 High energy. Long hours and some travel are usually a prerequisite for
leadership positions, especially as your company grows. Remaining alert
and staying focused are two of the greatest obstacles you will have to
face as a leader.
 Intuitiveness. Rapid changes in the world today combined with
information overload result in an inability to "know" everything. In
other words, reasoning and logic will not get you through all situations.
In fact, more and more leaders are learning to the value of using their
intuition and trusting their own instincts when making decisions.
 Maturity. To be a good leader, personal power and recognition must be
secondary to the development of your employees. In other words,
maturity is based on recognizing that more can be accomplished by
empowering others than can be by ruling others.
Team orientation. Business leaders today put a strong
emphasis on team work. Instead of promoting an adult/child
relationship with their employees, leaders create an adult/adult
relationship which fosters team cohesiveness.
Empathy. Being able to put yourself in the other person's shoes
is a key trait of leaders. Without empathy, you can't build trust.
And without trust, you will never be able to get the best effort
from your employees.
Charisma. People usually perceive leaders as larger than life.
Charisma plays a large part in this perception. Leaders who
have charisma are able to arouse strong emotions in their
employees by defining a vision which unites and captivates
them. Using this vision, leaders motivate employees to reach
toward a future goal by tying the goal to substantial personal
rewards and values.
Leadership styles
Leadership style refers to a leader's behavior. It is the
result of the philosophy, personality, and experience
of the leader.
Leadership styles can be classified into three broad
categories --- a) Autocratic
 b) Consultative
c) Free Rein.
Autocratic or authoritarian style
 Under the autocratic leadership style, all decision-making powers are
centralized in the leader.
 Leaders do not entertain any suggestions or initiatives from
subordinates. The autocratic management has been successful as it
provides strong motivation to the manager. It permits quick decision-
making, as only one person decides for the whole group and keeps
each decision to him/herself until he/she feels it needs to be shared
with the rest of the group.
 Autocratic leaders loves power and never delegate their authority.
 ADV:
 1) A.leader style permits quick decision making
 2) it provides strong motivation and satisfaction to the leader who
dictate terms
 3) the style may yield positive results when great speed is required
DIS.ADV:
It leads to frustration, low morale for the
subordinates
Full potential of subordinates and creativity are not
utilized.
Conflicts among subordinates.
Subordinates tend to shirk responsibility and
initiatives.
Participative or democratic style
A consultative leader takes decision in consultation
and participation with the subordinates.
The democratic leadership style favors decision-
making by the group. Such a leader gives instructions
after consulting the group.
They can win the cooperation of their group and can
motivate them effectively and positively. The
decisions of the democratic leader are not unilateral
as with the autocrat because they arise from
consultation with the group members and
participation by them.
 Adv:
 Consultative leadership style improve the job satisfaction and morale of
subordinates
 It cultivates the decision making ability of subordinates.
 It develops positive attitude and reduce resistance to change.
 Labour absenteeism and labour turnover are reduced.

 DIS ADV
 Democratic style is time consuming and may result in delays in decision making
 It may not yield positive results when subordinates prefer minimum interaction
with the leader,
 Over period of time subordinates may develop the habit of expecting to be
consulted.
 Consultative leadership is considered to be more effective than autocratic style
through there is no empirical proof for this.
Laissez-faire or free rein style
 A free-rein leader does not lead, but leaves the group entirely to itself.
Such a leader allows maximum freedom to subordinates; they are
given a free hand in deciding their own policies and methods
 Different situations call for different leadership styles. In an
emergency when there is little time to converge on an agreement and
where a designated authority has significantly more experience or
expertise than the rest of the team, an autocratic leadership style may
be most effective; however, in a highly motivated and aligned team
with a homogeneous level of expertise, a more democratic or laissez-
faire style may be more effective.
 The style adopted should be the one that most effectively achieves the
objectives of the group while balancing the interests of its individual
members.
ADV:
Positive effect on job satisfaction and morale of
subordinates
Maximum possible scope for development of subordinates.
Full utilization of the potential of subordinates.
DIS ADV:
 Subordinates do not get the guidance and support of the
leader.
It ignores the leader contribution just as autocratic style
ignores the contribution of subordinate.
Free rein style may be appropriate when the subordinates
are well trained, highly knowledgeable self motivated and
ready to assume responsibility
Likert’s Management
 Rensis Likert System
and his associates studied the patterns and styles of
managers for three decades at the University of Michigan, USA, and
identified a four-fold model of management systems. The model was
developed on the basis of a questionnaire administered to managers in
over 200 organizations and research into the performance characteristics
of different types of organizations. The four systems of management
system or the four leadership styles identified by Likert are:
 System 1 - Exploitative Authoritative: The manager under this system
make all work related decisions and order their subordinates to carry out
the decisions. The managers also defines standards and performance
methods.
  Responsibility lies in the hands of the people at the upper echelons of
the hierarchy. The superior has no trust and confidence in subordinates.
The decisions are imposed on subordinates and they do not feel free at all
to discuss things about the job with their superior. The teamwork or
communication is very little and the motivation is based on threats.
 System 2 - Benevolent Authoritative: system 2 managers are also
autocratic but they are not exploitative. They adopt a paternalistic
approach towards the subordinates.
 The responsibility lies at the managerial levels but not at the lower
levels of the organizational hierarchy. The superior has condescending
confidence and trust in subordinates (master-servant relationship).
Here again, the subordinates do not feel free to discuss things about
the job with their superior. The teamwork or communication is very
little and motivation is based on a system of rewards.
 Carrot and stick approach to motivation is adopted under this system
 System 3 - Consultative: manager under this system set goals and
issue orders after discussing them with the subordinates.
Responsibility is spread widely through the organizational hierarchy.
The superior has substantial but not complete confidence in
subordinates. Some amount of discussion about job related things
takes place between the superior and subordinates. There is a fair
amount of teamwork, and communication takes place vertically and
horizontally. The motivation is based on rewards and involvement in
the job.
System 4:Democratic under this system goals are
set and work related decisions are taken by the
subordinates. supervisions and control are group
oriented. Responsibility for achieving the
organizational goals is widespread throughout the
organizational hierarchy. There is a high level of
confidence that the superior has in his subordinates.
There is a high level of teamwork, communication,
and participation.
 The nature of these four management systems has been described by
Likert through a profile of organizational characteristics. In this profile,
the four management systems have been compared with one another
on the basis of certain organizational variables which are: Leadership
processes
 Motivational forces
 Communication process
 Interaction-influence process
 Decision-making process
 Goal-setting or ordering
 Control processes
 On the basis of this profile, Likert administered a questionnaire to
several employees belonging to different organizations and from
different managerial positions (both line and staff). His studies
confirmed that the departments or units employing management
practices within Systems 1 and 2 were the lease productive, and the
departments or units employing management practices within Systems
3 and 4 were the most productive.
Conclusion:According to Rensis Likert, the nearer
the behavioral characteristics of an organization
approach System 4 (Participative), the more likely this
will lead to long-term improvement in staff turnover
and high productivity, low scrap, low costs, and high
earnings. if an organization wants to achieve
optimum effectiveness, then the ideal system.
Likert suggested that system 4 is the ideal system
towards which organizations should work. he
advocated system 4 as the best way to develop and
utilise human resources.
Blake and Mouton’s Managerial Grid
 The treatment of task orientation and people orientation as two
independent dimensions was a major step in leadership studies. Many
of the leadership studies conducted in the 1950s at the University of
Michigan and the Ohio State University focused on these two
dimensions.
 Building on the work of the researchers at these Universities, Robert
Blake and Jane Mouton (1960s) proposed a graphic portrayal of
leadership styles through a managerial grid (sometimes
called leadership grid). The grid depicted two dimensions of leader
behavior, concern for people(accommodating people’s needs and
giving them priority) on y-axis and concern for production (keeping
tight schedules) on x-axis, with each dimension ranging from low (1)
to high (9), thus creating 81 different positions in which the leader’s
style may fall
 The five resulting leadership styles are as follows:
 Impoverished Management (1, 1): Managers with this approach are
low on both the dimensions and exercise minimum effort to get the
work done from subordinates. The leader has low concern for
employee satisfaction and work deadlines and as a result disharmony
and disorganization prevail within the organization. The leaders are
termed ineffective wherein their action is merely aimed at preserving
job and seniority.
 Task management (9, 1): Also called dictatorial or perish style. Here
leaders are more concerned about production and have less concern
for people. The style is based on theory X of McGregor. The
employees’ needs are not taken care of and they are simply a means to
an end. The leader believes that efficiency can result only through
proper organization of work systems and through elimination of
people wherever possible. Such a style can definitely increase the
output of organization in short run but due to the strict policies and
procedures, high labour turnover is inevitable.
 Middle-of-the-Road (5, 5): This is basically a compromising style
wherein the leader tries to maintain a balance between goals of
company and the needs of people. The leader does not push the
boundaries of achievement resulting in average performance for
organization. Here neither employee nor production needs are fully
met.
 Country Club (1, 9): This is a collegial style characterized by low task
and high people orientation where the leader gives thoughtful
attention to the needs of people thus providing them with a friendly
and comfortable environment. The leader feels that such a treatment
with employees will lead to self-motivation and will find people
working hard on their own. However, a low focus on tasks can hamper
production and lead to questionable results.
 Team Management (9, 9): Characterized by high people and task
focus, the style is based on the theory Y of McGregor and has been
termed as most effective style according to Blake and Mouton. The
leader feels that empowerment, commitment, trust, and respect are
the key elements in creating a team atmosphere which will
automatically result in high employee satisfaction and production.
 Advantages of Blake and Mouton’s Managerial Grid
 The Managerial or Leadership Grid is used to help managers analyze
their own leadership styles through a technique known as grid
training. This is done by administering a questionnaire that helps
managers identify how they stand with respect to their concern for
production and people. The training is aimed at basically helping
leaders reach to the ideal state of 9, 9.
 Limitations of Blake and Mouton’s Managerial Grid
 The model ignores the importance of internal and external limits,
matter and scenario. Also, there are some more aspects of leadership
that can be covered but are not.
Controlling Function of Management
 Controlling consists of verifying whether everything occurs in
conformities with the plans adopted, instructions issued and
principles established. Controlling ensures that there is effective and
efficient utilization of organizational resources so as to achieve the
planned goals. Controlling measures the deviation of actual
performance from the standard performance, discovers the causes of
such deviations and helps in taking corrective actions
 According to Brech, “Controlling is a systematic exercise which is
called as a process of checking actual performance against the
standards or plans with a view to ensure adequate progress and also
recording such experience as is gained as a contribution to possible
future needs.”
 According to Donnell, “Just as a navigator continually takes reading to
ensure whether he is relative to a planned action, so should a business
manager continually take reading to assure himself that his enterprise
is on right course.”
Controlling has got two basic purposes
It facilitates co-ordination
It helps in planning
 Controlling is an end function- A function which comes once the
performances are made in conformities with plans.
 Controlling is a pervasive function- which means it is performed by
managers at all levels and in all type of concerns.
 Controlling is forward looking- because effective control is not
possible without past being controlled. Controlling always look to
future so that follow-up can be made whenever required.
 Controlling is a dynamic process- since controlling requires taking
reviewal methods, changes have to be made wherever possible.
 Controlling is related with planning- Planning and Controlling are
two inseperable functions of management. Without planning,
controlling is a meaningless exercise and without controlling,
planning is useless. Planning presupposes controlling and controlling
succeeds planning.
Process of Controlling
 Establishment of standards- Standards are the plans or the targets
which have to be achieved in the course of business function. They
can also be called as the criterions for judging the performance.
Standards generally are classified into two-Measurable or tangible -
Those standards which can be measured and expressed are called as
measurable standards. They can be in form of cost, output,
expenditure, time, profit, etc.
 Non-measurable or intangible- There are standards which cannot be
measured monetarily. For example- performance of a manager,
deviation of workers, their attitudes towards a concern. These are
called as intangible standards.
 Controlling becomes easy through establishment of these standards
because controlling is exercised on the basis of these standards.
 Measurement of performance- The second major step in
controlling is to measure the performance. Finding out deviations
becomes easy through measuring the actual performance.
Performance levels are sometimes easy to measure and sometimes
difficult. Measurement of tangible standards is easy as it can be
expressed in units, cost, money terms, etc. Quantitative measurement
becomes difficult when performance of manager has to be measured.
Performance of a manager cannot be measured in quantities. It can be
measured only by-Attitude of the workers,
 Their morale to work,
 The development in the attitudes regarding the physical environment,
and
 Their communication with the superiors.
 It is also sometimes done through various reports like weekly,
monthly, quarterly, yearly reports.
 Comparison of actual and standard performance- Comparison of actual
performance with the planned targets is very important. Deviation can be defined
as the gap between actual performance and the planned targets. The manager has
to find out two things here- extent of deviation and cause of deviation. Extent of
deviation means that the manager has to find out whether the deviation is positive
or negative or whether the actual performance is in conformity with the planned
performance. The managers have to exercise control by exception. He has to find
out those deviations which are critical and important for business. Minor
deviations have to be ignored. Major deviations like replacement of machinery,
appointment of workers, quality of raw material, rate of profits, etc. should be
looked upon consciously. Therefore it is said, “ If a manager controls everything,
he ends up controlling nothing.” For example, if stationery charges increase by a
minor 5 to 10%, it can be called as a minor deviation. On the other hand, if
monthly production decreases continuously, it is called as major deviation.
 Once the deviation is identified, a manager has to think about various cause which
has led to deviation. The causes can be-
 Erroneous planning,
 Co-ordination loosens,
 Implementation of plans is defective, and
 Supervision and communication is ineffective, etc.
Taking remedial actions- Once the causes and
extent of deviations are known, the manager has to
detect those errors and take remedial measures for it.
There are two alternatives here-Taking corrective
measures for deviations which have occurred; and
After taking the corrective measures, if the actual
performance is not in conformity with plans, the
manager can revise the targets. It is here the
controlling process comes to an end. Follow up is an
important step because it is only through taking
corrective measures, a manager can exercise
controlling.
 Planning and controlling are two separate fuctions of management, yet
they are closely related. The scope of activities if both are overlapping to
each other. Without the basis of planning, controlling activities becomes
baseless and without controlling, planning becomes a meaningless
exercise. In absense of controlling, no purpose can be served by. Therefore,
planning and controlling reinforce each other. According to Billy Goetz, "
Relationship between the two can be summarized in the following points
 Planning preceeds controlling and controlling succeeds planning.
 Planning and controlling are inseperable functions of management.
 Activities are put on rails by planning and they are kept at right place
through controlling.
 The process of planning and controlling works on Systems Approach
which is as follows :Planning    →    Results    →    Corrective Action
Planning and controlling are integral parts of an organization as both are
important for smooth running of an enterprise.
 Planning and controlling reinforce each other. Each drives the other
function of management.
In the present dynamic environment which affects
the organization, the strong relationship between the
two is very critical and important. In the present day
environment, it is quite likely that planning fails due
to some unforeseen events. There controlling comes
to the rescue. Once controlling is done effectively, it
give us stimulus to make better plans. Therefore,
planning and controlling are inseperate functions of a
business enterprise.
TYPE OF CONTROL
Feedforward control focuses on the regulation of inputs (human,
material, and financial resources that flow into the organization) to
ensure that they meet the standards necessary for the transformation
process.
 Feedforward controls are desirable because they allow management to
prevent problems rather than having to cure them later. Unfortunately,
these control require timely and accurate information that is often
difficult to develop. Feedforward control also is sometimes called
preliminary control, precontrol, preventive control, or steering
control.
 However, some authors use term "steering control" as separate types of
control. This types of controls are designed to detect deviation some
standard or goal to allow correction to be made before a particular
sequence of actions is completed.
Concurrent control takes place while an activity is in
progress. It involves the regulation of ongoing activities that are
part of transformation process to ensure that they conform to
organizational standards. Concurrent control is designed to
ensure that employee work activities produce the correct
results.
Since concurrent control involves regulating ongoing tasks, it
requires a through understanding of the specific tasks involved
and their relationship to the desired and product.
Concurrent control sometimes is called screening or yes-no
control, because it often involves checkpoints at which
determinations are made about whether to continue progress,
take corrective action, or stop work altogether on products or
services.
 FEEDBACK CONTROL This type of control focuses on the outputs of
the organization after transformation is complete. Sometimes
called postaction or output control, fulfils a number of important
functions. For one thing, it often is used when feedforward and
concurrent controls are not feasible or are to costly.
 Sometimes, feedback is the only viable type of control available.
Moreover, feedback has two advantages over feedforward and
concurrent control. First, feedback provides managers with meaningful
information on how effective its planning effort was. If feedback
indicates little variance between standard and actual performance, this
is evidence that planning was generally on target.
 If the deviation is great, a manager can use this information when
formulating new plans to make them more effective. Second, feedback
control can enhance employees motivation.
 The major drawback of this type of control is that, the time the manager
has the information and if there is significant problem the damage is
already done. But for many activities, feedback control fulfils a number
important functions.