DMI - ST.

EUGENE UNIVERSITY
(DMISEU)

Institute for Virtual & Distance Learning (IVDL)

Course Material
For
MASTER OF BUSINESS ADMINISTRATION (MBA)

MODULE CODE : 552 MG 33/ 551 MG 33

MODULE NAME : Principles of Management

PROGRAMME : BACHELOR OF BUSINESS
ADMINISTRATION (BBA)

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 TABLE OF CONTENT

PAGE
UNIT CONTENT
NO
Management – Importance – Definition – Nature and
scope of Management process – Role and functions of a
I Manager – Levels of Management - functions and roles – 3-33
Management Art or Science – management as a
profession
Planning – Nature – Importance – Forms – Types – Steps
in planning – Objectives – Policies – Procedures – and
II 34-66
Methods – Nature and types policies – Decision making
– Process of decision making – Types of decision

Organising – Types of Organisation – Organisational

III structure – Span of Control – Committees – 67-117
Departmentalization –Informal Organisation.

Authority – Delegation – Decentralisation – Difference

between authority and power – Uses of authority Staffing
IV – Sources of recruitment – Selection process –Training – 118-151
Direction – Nature and Purpose of Directing –
Motivation.
Co-Ordination – Need for co-ordination – Types –
Techniques – Distinction between Co- Ordination and Co
V 152-196
Operations – Controlling – Meaning and importance of
Controls – Control Process.

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 UNIT I

Management: “Management is the process of getting activities

completed efficiently and effectively with and through other people.”

What is Management?
Simply speaking, management is what managers do. However, this
simple statement doesn’t tell us much.
We define management as the process of coordinating and integrating work
activities so that they are completed efficiently and effectively with and
through other people. Let’s look at some specific parts of this definition.
The process represents the ongoing functions of primary activities engaged
in by managers. These functions are typically labeled planning, organizing,
leading, and controlling. Let us remember it by POLCA.
Management is a basic integrating process of the organisational
activity that surrounds our daily life. The need for management arises out of
the scarcity of resources that go to satisfy human wants and out of the
diversity and complexity of human activities. The success of man’s quest for
better living depends heavily upon our understanding of how to develop and
apply the skills of management. Management is a universal process in all
organised living. Thus viewed, it is not confined to the factory, store or
office, families, clubs, churches, ball teams, schools and one’s personal
affairs all need skillful management. Primarily, however, management is an
operative force in all complex, purposive organisations such as business
enterprises, hospitals, schools or government units. Management is a
discursive subject and much has been written about it. The study of
organisations and their management has, therefore, to proceed on a broad
front. No single approach to organisation and management provides all the
answers. A study of different approaches to organizational design, their
structure and management that yield benefits is important for the manager.

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Identification of major trends in management and organisational behaviour
and the work of leading writers, provide a perspective on concepts and ideas.

Meaning of management: the word is a generic term subject to many

interpretations. A number of different ideas are attributed to the meaning of
management and to the work of a manager. In certain aspects, everyone
could be regarded as a manager to some extent. Everyone has some choice
whether or not to do something, and some control, however, light over the
planning and organisation of their work. However, we are concerned with
management as involving people looking beyond themselves and exercising
some formal authority over the activity and performance of other people.
The complexity of management is such that the word inevitably carries a
number of acceptable meanings, depending on the user’s purpose. The term
management, therefore, is applied in many different ways with its meaning
discernible only by considering its context.

There is no single universally accepted standard definition of

management. Moreover, management as a discipline is so new that many
o9f its related terms and concepts have not yet been standardised. However,
we can carefully state some conceptual definitions of management that
permit consistent and systematic thoughts about it. The fact that the word
management has multiple uses need not deter us from using the utmost care
in terminology. The loose usage of the word as a synonym for business
administration, for example, will be avoided in this paper. For our purpose
we can, therefore, regard management as taking place within a structured
organisational setting and with prescribed roles and directed towards the
attainment of aims and objectives achieved through the efforts of other
people and using systems and procedures. Peter Drucker, who is widely
regarded as the Guru of management gurus, has written about the

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significance of management as an essential, distinct and leading institution
which is a pivotal event in social history.
Rarely, if ever, has a new basic institution, a new leading group
emerged as fast as has management since the turn of the (twentieth) century.
Rarely also in human history has a new institution proven indispensable so
quickly and even less often has a new institution arrived with so little
opposition, so little disturbance and so little controversy. Drucker sees
management as denoting a function as well as people who discharge it, a
social position and authority, a discipline and field of study. He also states
that, management is tasks and every achievement of management is the
achievement of the manager. Every failure is a failure of a manager. Other
writers, however, take the view that management is not a separate discipline.
The problem is identifying a single discipline which encompasses the work
of a manager or agreeing with the disciplines that a manager needs to
effectively carry out this work. As a process management involves what a
manager does that is planning, organising, staffing, directing, co-ordinating
and controlling.

To co-ordinate involves material and human resources - men and

women, machinery, money and methods, all in order to achieve the desired
goals and common objectives such as production, services, profits,
satisfaction and others. As a noun management refers to all those persons
who manage like the board of directors, managing directors, chief
executives, general managers, production managers, functional managers and
supervisors, etc. As a discipline management is a body of knowledge and its
practice through the art of getting things done through others based on the
scientific principles of management. As a science, that is the art and service
of decision making and leadership. As a term management is used not to
mean an activity or the people that perform it, but as a body of knowledge, a

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 practice and a discipline. In this sense then management refers to the
principles and practices of management as a subject of study.

Definition of management: different authors, that is to say, people who

write about management have defined the term in many different ways. The
Functional concept classifies management as what managers do.
Simply stated, “Management is the art of getting things done through
others”. This is a very popular definition. It is very simple to understand.
Some of the important definitions of management on this basis of their
concepts are given here.

Louis Allen, “Management is what a manager does”.

F.W. Taylor, “Management is the art of knowing what do you want to do and
then seeing that it is done in the best and cheapest way”.

According to Drucker’ “management is a multipurpose organ that manages

a business and manages managers and manages worker and work”.

Koontz and O’Donnel, Management is the “creation and maintenance of an

internal environment in an enterprise where individuals, working in groups,
can perform efficiently and effectively toward the attainment of group goals.
It is the art of getting the work done through and with people in formally
organised groups.”

Koontz and Weihrich, “Management is the process of designing and

maintaining of an environment in which individuals working together in
groups, efficiently accomplish selected aims.”

Kimball and Kimball, “Management embraces all duties and functions that
pertain to initiation of an enterprise, its financing, the establishment of all
major policies, the provision of all necessary equipment, the outlining of the
general form of organisation under which the enterprise is to operate and the
selection of the principal officers. The group of officials in primary control of
an enterprise is referred to as the management”. 6
Importances of Management:

 Attainment of group goals

 Effective functioning of business
 Resource development
 Management control the organisation
 Sound organisation structure
 Integrates individual efforts
 Motivation
 Communication
 Coordination
 Decision- making
 Leadership quality
 Management is needed at all levels

• Attainment of group goals:

The achievement of objectives of business depends upon various factors. The
management theory gives direction of achievement of goals.
• Effective functioning of business:
Ability, understanding, communication, motivation, coordination and
supervision are some of the factors responsible for the effective functioning
of business. Management is vital tool to help for effective functioning of
business.
• Resource development:
The resources of any enterprises may be identified and developed by the
management. Generally the term resources are men, money, material and
machines.
• Management control the organisation:

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The management controls the activities of enterprises, Control process is
used to eliminate the unnecessary activities.
• Sound organisation structure:
Sound organisation structure clearly defines the authority and responsibility
of relationship. It helps to take corrective actions where ever and whenever
necessary.
• Integrates individual efforts:

Management takes necessary steps to integrate various efforts to attain the

objectives of an organisation.
• Motivation:
Motivation is vital tool to achieve organisation goal. Properly motivate the
workers increasing the speed of performance of a work Motivation is in the
form of monetary or non-monetary incentive.
• Communication:
Communication is important role for effective management Effective
communication leads to efficient management
• Coordination:
All the activities of enterprises are department- wise. Management
coordinates the activities of different departments to attain the objectives of
the organisation.
• Decision- making:
There are a number of decisions taken by the management every day, The
management gives guides the managers to take correct decisions.
• Leadership quality:

Leadership quality is developed in the persons who are working in the top
management.

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 • Management is needed at all levels:

The functions of management are common to all levels of organisations. The

management is very essential for top management, middle management and
lower management.
The Management Process:

Nature and characteristics of management, the salient features are as

follows:
 Management is universal and required in every form of group activity
whether it is a family, club, a government, an army or a business
enterprise. The approach or style of management may differ from one
organization to another, but in each case it involves marshaling of human
and physical resources towards the attainment of common objectives. The
fundamental principles of management are applicable in all areas of
organized effort. Managers at all levels perform the same basic functions
 Management is purposeful and exists for the achievement of specific
objectives. It is a means for the accomplishment of pre-determined goals.
All activities of management are goal-oriented. The success of
management is measured by the extent to which the desired objectives are
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 attained. Management has no justification to exist in the absence of
objectives. Management is creative and a process of achieving results. It
makes things happen.
 Management is an integrating force whose essence lies in the
coordination of individual efforts into a team. Management reconciles the
individual goals with organizational goals. As a unifying force,
management creates a whole that is more than the sum of individual parts.
It integrates human and other resources.
 Management is a social process done by people, through people and
for people. It is a social process because it is concerned with interpersonal
relation. Human factor is the most important element in management.
According to Appley, “Management is the development of people not the
direction of things. A good manger is a leader not a boss. It is the
pervasiveness of the human element which gives management its special
character as a social process.”
 Management is multidisciplinary and has to deal with human
behaviour under dynamic conditions. Therefore, it depends upon wide
knowledge derived from several disciplines like engineering, sociology,
psychology, economics, anthropology, etc. The vast body of knowledge in
management draws heavily upon other fields of study.
 Management is a continuous process, a dynamic and an on-going
process. The cycle of management continues to operate so long as there is
organized action for the achievement of group goals.
 Management is Intangible, an unseen or invisible force, it cannot be
seen, but its presence can be felt everywhere in the form of results.
However, the managers who perform the functions of management are
very much tangible and visible.
Management Vs Administration, there has been controversy on the use
of the two terms management and administration. Different authorities on
the subject have expressed conflicting opinions, but many experts make no
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distinction between management and administration while others consider
them as two separate functions.
A few authors treat administration as part of management, the three
viewpoints are explained thus:
Administration is different from management; according to this
view-point administration is of a higher level activity while management is
of a lower function. Here administration is a determinative function
concerned with the determination of objectives and policies while
management is an executive function involving the implementation of
policies and direction of efforts for the achievement of objectives. This
view is held mostly by American experts on management. Oliver Sheldon
was perhaps the first person to make a distinction between management
and administration. According to him, “Administration” is the function
in industry concerned with the determination of corporate policy, the co-
ordination of finance, production and distribution, the settlement of the
compass (structure), of the organization, and the ultimate control of the
executive.
Management, on the other hand, is the function in industry
concerned with the execution of policy within the limits set up by
administration, and the employment of the organization for the particular
objectives set before it. Administration defines the goal, management
strives towards it.” Other American experts such as Florence, Lansburg,
Haimann, Milward, McFarland, Spriegel, Schulze and Tead also are of the
same view that administration involves decision-making and policy
formulation while management is concerned with the execution of policies
and supervision of work. According to them, administration is superior to
management as the later has only peripheral role in the administration of
objectives and policies.

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 Administration is part of management. According to the
European school of thought management is a wider term including
administration and organization. This viewpoint has been propounded by
Brech. According to him, “Management” is the generic term for the total
process of executive control involving responsibility for effective planning
and guidance of operations of an enterprise. Administration is that part of
management which is concerned with the installation and carrying out of
the procedures by which the programme is laid down and communicated
and the process of activities is regulated and checked against plans”.
Kimball and Kimball, Richman and Copen also hold similar views.
According to them, “Administration” is only an implementing agency
while management is the determinative”. Thus, the European viewpoint is
exactly the opposite of the American opinion.
Administration and management as one, many writers like
Henry Fayol, William Newman, Chester Barnard, George Terry, Louis A.
Allen, Koontz and O’Donnel make no distinction between management
and administration. According to Newman, management or administration
is the guidance, leadership and control of the efforts of a group of
individuals towards some common goals. According to Fayol, all
undertakings require the same functions and all must observe the same
principles. There is one common science which can be applied equally
well to public and private affairs. Therefore, the distinction between
administration and management is superfluous or academic.
In actual practice the two terms are used interchangeably. The
term administration is more popular in government and other public
organizations while the word management is more commonly used in the
business world, where economic performance is of primary importance. In
general terms both terms are based upon the same set of principles and
functions. It may, therefore, be possible to make theoretical or conceptual
distinction between the two, but in practice such distinction is misleading.

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Managerial Roles:

The roles of a manager, a role is an organised set of observable behaviour

that is attributed to a specific position and can be studied in at least three
perspectives:

1. As a set of behaviour or roles that a manager has to play.

2. As a set of skills that a manager requires.

3. As a set of managerial functions.

As applied to the manager’s job, a role would be viewed at the

capacity in which a manager acts. For example, a manager may act as a
leader of subordinates, spokesman of the organisation, a source of
information, or as a decision-maker. Thus, a manager plays multiple roles
while performing his/her job.

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1. Inter- personal role:
• Figure head role:
 In this role a manager performs symbolic duties required by the status
of his office
 His activities include to greet the visitors, signing legal documents
attends the employee family functions
 E.g. Greeting visitors: signing legal documents
• Leader:
 Responsible for the motivation and activation of subordinates
 Responsible for staffing, training and associated duties
• Liaison:
 It describes a manager’s relationship with the outsiders and inside the
organisation
 A manager maintains smooth relation with other organisation and in
the organisation by use of mails, phone calls, meetings etc.

2. Informational roles:
 Monitor - Seeks and receives information concerning internal and
external events so as to gain an understanding of the organisation and its
environment. Reading periodicals and reports about internal and external
events so as to gain an understanding of the organisation and its
environment, changes in consumer’s attitudes, competitors, plans, etc.
 Disseminator – Transmits information to subordinates, peers and
superiors within the organisation. Calling staff meetings after business trip,
sending memo or reports and making phone calls
 Spokesperson – Speaking on behalf of the organisation and transmitting
information on the organisation’s plans, policies and actions to outsiders.
Giving statements in the Press, conversations with suppliers, making
speeches to local groups.

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3. Decision role:
 Entrepreneur – Initiating changes or improvements in the activities of
the organisation. Realigning subordinates’ jobs, launching new projects or
products.
 Disturbance handler – Taking charge and corrective action when an
organisation faces unexpected crisis. Resolving conflicts between
employees, reacting to an insolvent customer, adjusting to strike at suppliers.
 Resource allocator – Distributing organisation’s resources like money,
time, equipment and labour. Approving budget, scheduling time for projects,
awarding bonuses, etc.
 Negotiator – Representing the organisation in bargaining and
negotiations with outsiders and insiders. Bargaining with trade unions,
negotiating with an important supplier, entering into a lease agreement with
the local authority, etc.

Functions of Managers / Management:

The functions of managers provide a useful framework for organizing
management knowledge. The functions are as follows;
• Planning
• Organising
• Staffing
• Directing
• Motivating
• Controlling
• Co-ordinating and
• Communicating.
The following figure explains the functions of Manager.

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Planning: In simple it means looking ahead. It is preparing for the future.
Effective planning leads to efficient management. It involves selecting
missions and objectives and the actions to achieve them, formulating
policies, rules, procedures etc, it requires decision making that is, choosing
future course of action from among alternatives. There are various types of
plans, ranging from overall purposes and objectives to the most detailed
actions to be taken.

Organising:
It establishes harmonious relationship among all the workers of an
organisation by providing them with suitable authority and responsibility. It
involves the activities like the Identification and analysis of activities
required, assignment of duties to the individuals concerned, follow-up the
activities, for the attainment of objectives. It is the part of managing that
involves establishing an intentional structure of roles for people to fill in the

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organisation, assigned to people who can do those best by designing an
effective organisation structure.
Staffing:
It involves filling and keeping filled, the positions in the organisation
structure. Providing the right job for the right person. This is done by
identifying work-force requirement, inventorying the people available,
recruiting, selecting, placing, promoting, appraising, compensating, training,
etc.
Leading or Directing:
It is the influencing of people so that they will contribute to organisation and
group goals; it has to do predominantly with the interpersonal aspect of
managing.
Motivating:
Motivation is a managerial function to inspire and encourage people
to take required action. Motivation is the key to successful management of
any enterprise. Motivation can set into motion a person to carry out certain
activity.
Controlling:
It is the measuring and correcting of activities of subordinates to ensure that
events conform to plans. It is generally relate to the measurement of
achievement, like the budget for expense, inspection records, record of
labour- hours lost, etc.
Coordination:
It is the essence of manager ship for achieving harmony among individual
efforts towards the accomplishment of group goals. Each of the managerial
functions is an exercise contributing to coordination.
Communication:
It means transfer of information and under-standing from person to
person. Communication also leads to sharing of information, ideas and
knowledge. It enables group to think together and act together.

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Levels of Management:

Management Levels:

The three levels of managements that are commonly found in any

organisation are
 Top Level Management
 Middle Level Management
 Lower or First- line Management

1. Top Level Management:

It is the function of top management to watch, interpret, exploit of
where necessary, and counter external influences with appropriate
decisions and plans and to initiate the appropriate adjustment in the
functional authority and status structures of the organization. It is the top
management’s duty to protect the integrity of the organization, so that it
can survive for its own employee’s, the shareholder’s, supplier’s and
customer’s interests and for the general good of the social and economic
system within which it operates.
The top level management is made up of Board of directors; the
task is generally entrusted to the Directors, Managing Directors, General
Managers, Managers, Managing Agents, Deputy General Managers. They

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are called as Chief executives and they are responsible to carry out the
broad policies formulated. They are policy making body for overall
direction and success of all the activities of the company.
Functions of Top level Management:

• To formulate goals and policies of the company

• To formulate budgets
• To appoint top executives
• To provide overall direction and leadership of the company
• To decide the distribution of profits etc.
Intermediate management or upper middle management comprises
of departmental or divisional heads, e.g. works manager, marketing manager,
personnel manager, finance manger, etc. Each one of these mangers is
responsible for the efficient and coordinated functioning of own department
in accordance with the basic objectives and policies laid down by the top
management. Intermediate managers are concerned with priorities and
specific results. At upper middle management departmental operational plans
are established and targets of achievement are laid down. Departmental
heads exercise the usual functions of management in respect of their own
departments. They plan operations, issue instructions, assemble the required
resources, evaluate results of their respective departments, and control the
work of people in the departments.
2. Middle Level Management:
The middle management level generally consists of divisional and
departmental heads such as plant manager, production manager, marketing
manager, personal directors etc. their job is to interpret policies and
directions set by the top level management into specific plans and
guidelines for action. Their responsibility is to coordinate the working of
their departments so that the set objectives can be achieved. They are
concerned with short term goals and specific results. They spend more time

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on operational planning, information processing and day-to–day
monitoring of their divisional activities.
It is concern with the execution of the policies and plans evolved by the top
management. Therefore, the middle level management comprises of
departmental heads and other executives. They actually take part in the
execution of the plans and experience the difficulties involved in it. They
are like Heads of Departments, Superintendents, etc
Functions of Middle Level Management:
1. Interpretation of the policies of the company
2. Preparing the organisational set up in their department
3. Issuing orders to the subordinates and in their department
4. Motivating the personnel for higher productivity
5. Collecting reports and other information about the work taken over
6. Providing information and assisting the top management in revising
the plans to secure better performance.
3. Lower Level Management:
♠ This term is applied to subordinate departmental heads, foremen,
office superintendents, supervisors, etc. Being placed at the bottom of the
hierarchy of management they are directly in touch with rank and file of
workers. The workers look to them for guidance and direction and they have
the important job of interpreting the mind of the middle management to the
workers. They have a direct responsibility for maintaining high morale
among the workers.
Functions of Low level management:
1. To train and develop the efficiency of the workers
2. To assign jobs to workers
3. To give orders and instructions
4. To maintain discipline and good human relations among workers
5. To report feedback information about workers.
6.

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Management as an Art:
What is an art?
Art means application of skill in finding a desired result. Art is the way of
doing things skillfully.
Management as an Art involves the practical application of personal skills
and knowledge to achieve concrete results it is the practical way of doing
things. The function of the art is to effect change and to achieve desired
results. Art represents how of human behaviour or the know-how to do
work. Art is a personalised process and every artist has his own style. Art is
essentially creative and the success of an Artist is measured by the results he
achieves. Art is practice-based and perfection in it requires continuous
practice over a very long time. Thus, the main elements of an art are:
1. Personal skills.
2. Practical know-how.
3. Result-Orientation.
4. Creativity.
5. Constant Practice aimed at perfection.
Management is basically an art because of the following reasons:

1. Like any other artist, a manager applies his knowledge and skills to
co-ordinate the efforts of his people.
2. Management seeks to achieve concrete practical results, e.g. profits,
growth, social services, in a given situation.
3. Like any other art, management is creative and it brings out new
situations and converts resources into output.
4. Management is a personalised process. Every manager adopts his
own approach towards problems depending upon his perception and
environmental conditions.

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 5. Effective management leads to the realization of organisational and
other goals. The success of a manager is measured by the results he
achieves. It is very much like the saying that the proof of the
pudding lies in eating. Mastery in management requires a
sufficiently long period of experience in managing. The managerial
art can be refined through continuous practice.
Management as a Science:

What is a science?
1. Science may be defined as “representing knowledge gathered by
observation and experiment, critically tested, systematised and
brought under general principles.”
2. Management as a discipline fulfills the science criterion. The
application of these principles helps any practicing manager to
achieve the desired goals.
3. Management is a dynamic subject in that it has heavily from
economics, psychology, sociology, mathematics and engineering.
Management is multi disciplinary in nature.
4. Science classified in to two types. They are exact science and inexact
science. Exact science where the results are accurate. In the case of
Management it is an inexact science.

Management is inexact science because;

1. Every organisations human resources are different attitudes,
aspirations and perceptions. So standard results may not be obtained.
2. Readymade and standard solutions cannot be obtained.
3. Management is complex and unpredictable
4. Every organisation decisions are influenced by the environment. The
environment is so complexes and unexpected changes.

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Management is both - a science and an art:
1. Management may be said to be a unique combination of science and
art,
2. It requires knowledge of the science of management i.e., the theory or
principles of management which have been developed by thinkers
and practitioners of management after years of experimentation.
3. Knowledge of the science of management will enable the manager to
correctly identify the issues and problems facing him, and to
determine the source of action which will best meet the situation.
4. The management should now apply his knowledge in the given
situation. Needless to say that such application cannot be without
taking into consideration the limitations of the situation. This may
necessitate modification of the theory and principles learnt by him. It
is at this that art of management takes over. The manager can
successfully perform a job only if he is able to identify and diagnose
the problems correctly and apply his knowledge to solve them in a
manner which is the best under the given circumstances.
Management as a Profession:
Management as a profession, the development of management
theory, separation of ownership from management in large corporations and
growing complexities have led to the demand for giving management the
status of a distinct profession. An occupation must satisfy certain criteria in
order to claim the status of a profession. These criteria refer to the essential
attributes of a profession as given below.
 A well-defined and organised body of knowledge. There is an
organised body of specialised knowledge pertaining to a particular field.
Such a systematized body of theoretical knowledge contains principles,
theories and techniques. These principles establish cause and effect
relationships and are capable of universal application. They must be evolved
through scientific methods of observation, experiment and experience
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 Learning and experience. There must be satisfactory formalized
arrangements for impacting theoretical knowledge and practical training for
those desiring to enter the profession. A professional is a person who has
undergone certain vigorous training to acquire certain knowledge and skills.
The knowledge must be transferable through the medium of formal teaching,
training and practice. There must be competent application of knowledge to
problems
 Entry restricted by qualifications. Anybody who wants to enter the
profession must pass the prescribed examinations and obtain the degree or
diploma. Maximum educational qualifications and training are laid down to
ensure that a professional is proficient in the specialised body of knowledge.
Nobody can enter the profession without acquiring the prescribed
qualifications. For example, nobody can become a lawyer without being a
law graduate
 Recoganised national body. There must be an institute, association or a
similar well-accepted authority. Such a representative body is needed to
prescribe minimum qualification for entry, to impart education and training,
to conduct examinations, to award diplomas and degrees and to enforce
discipline among the professionals. It regulates and develops the
professional activities and enjoys legal powers as a statutory body.
 Ethical code of conduct. There must be a suitable code of conduct or
ethics. Such a code lays down the norms which members must observe
while dealing with their clients. It must be fairly homogeneous over all
members of the profession wherever they function. Every member of the
profession is expected to observe the ethical standards laid down for that
profession. The code requires self-control. Members who violate the code
can be derecognised and disqualified from the profession. Professionals
derive their social status from success in their work not from birth or
political power.
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 Dominance of service motive. A professional is expected to give
priority to service in preference to selfish gain. Financial gain is subsidiary.
A profession and its aim must be in tune with the objectives and changing
needs of society. A profession, however, provides full-time occupation and
means of livelihood with reasonable remuneration (fee) for its members.
Judged in these criteria management cannot at present be described as a full-
fledged profession though it satisfies many of the essentials of a profession.
There exists now a systematized and reasonably well-defined body of
knowledge in the form of theories and principles of management. This body
of knowledge is transferable and is being expanded through research and
practice. Formal education and training are becoming increasingly popular
among managers. Several national institutes have been established for
imparting specialised knowledge and skills in management. Specialised
courses in management are being sought after by would be managers.
Persons with formal education and training in management are given
preference for filing managerial positions in industry and business.

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 UNIT-2

Planning:
A plan is a forecast for accomplishment. It is a predetermined course
of action. It is today's projection for tomorrow's activity In other words; to
plan is to produce a scheme for future action, to bring about specified results
at a specified cost, in a specified period of time.
Planning is the most basic of all management function. Planning
refers to the determination of course of action to achieve a desired result.
Planning is the process of selecting the objectives and determining the course
of action required to achieve these objectives and determining the course of
action required to achieve these objectives. Lot of information has to be
gathered and processed before planning is formulated. Planning bridges the
gap from where we are and where we want to go. It makes the things
possible to occur which would not otherwise happen. Let us look at what the
following observations suggest about planning.
1. Planning is outlining a future course of action in order to achieve on
objective.
2. Planning is looking ahead
3. Planning is getting ready to do something tomorrow
4. Plan is a trap laid down to capture the future

Definitions of Planning:
According to Koontz and O’Donnell, “Planning is an intellectual process, the
conscious determination of course of action, the basing of decisions on
purpose, facts and considered estimates”.
According to Louis Allen, “Management planning involves the development
of forecasts, objectives, policies, programmes, procedures, schedules and
budgets.”

26
According to Heinz Weihrich and Harold Koontz, “Planning involves
selecting mission and objectives and the actions to achieve them; it requires
decision-making that is, choosing from alternative future courses of action.”
Nature of Planning:
The planning refers to the process of designing the future course of action for
an organisation to achieve specific goals. The nature of planning is discussed
below;
a) Planning – a primary function:
Planning is the primary function of management and it proceeds all
the function such as organising, directing, controlling etc. There is meaning
of other activities without setting the goals to be achieved a line of action to
be followed. In fact, all other functions of management largely depend upon
planning.
b) Planning – a dynamic process:
Planning is a continuous managerial function involving complex
processes such as perception, analysis, communication, decision and action.
It is a never-ending activity of a manager of an enterprise. Most of the plans
are modifying, revising according to the changes of circumstances.
Moreover, series of plans are to be followed successively one after the other.
Thus the planning process will continue and will never come to an end.
c) Planning – based on objectives and policies:
Planning process involves setting of objectives to be achieved and
determining the technique for achieving those objectives to be achieved and
determining the technique for achieving those objectives. The various
techniques such as policies, programmes, procedures are formulated.
Objective determines where we are to go, and planning makes a bridge over
where we are and where we want to go. Thus the planning and objectives are
related.
d) Planning – a selective process:

27
 For achieving a particular objective, there are number of alternatives
available. The planning manager has to select only one alternative which is
best suited to firm. Thus planning is one kind of selective process.
e) Pervasiveness of Planning:
Planning is generally considered as a function of top-level
management, but it is not true. Planning function should spread or make
available throughout the organisation. Every manager has a planning
function to perform. Only the scope of planning differs from person to
person depending upon the levels of management.
f) Planning – an intellectual process:
Planning is a mental activity. It is a process where a number of
activities are to be taken to decide the future course of action. Various levels
of managers has to consider various course of action, achieving the desired
goals, the detailed process of every course of action and then finally decide
which course of action may suit them best. Thus Planning is an intellectual
action.
g) Planning is directed towards efficiently:
In general, all management functions including Planning are directed to
increase the efficiency of the firm. Corollary of Planning is;
Planning is and intellectual activity that aims the best way of
doing things and Planning provides with goals and objectives.
Thus Planning is directed towards efficiency.
h) Planning – Focus with future activities:
Planning is primarily concerned with looking into future. It forecasts
the future situation in which the organisation has to function. Simply
planning decides in the present what is to be done in future.
i) Flexibility of Planning:
Planning is flexible as commitment which is based on future course
of action. These are always dynamic. Therefore, an adjustment is needed
between the various factors and planning.

28
 j) Planning is based on facts:
Planning is not guesswork or trial and error method. It is conscious
determination of projecting a course of action for the future. Planning is
based on facts, objectives and considered forecasts.
Importance of Planning:
The increasing peace of environmental changes has increased the need
for anticipating the developments and planning to meet them. A management
that does not identify the emerging situations, nor prepares to meet them,
will soon find the survival of the organisation threatened from all sides. Like
Alice in wonderland, management has ever to “run fast” to be even with the
turbulent changes. The following points highlight the importances of
planning:
a) Selection of “optimum” goals:
Planning involves rational thinking and decision-making concerning
a proposed course of action. It also implies selection of one course of action
and rejection of other possible course of action. The selected course of action
is naturally the one that promotes the overall organisational goals within the
framework of the resource availability and economic, social and political
factors.
b) Tackling increasing complexities:
An organisation is a heterogeneous group of human beings who differ
from one another in many respects. It is unlikely that they will work
effectively and harmoniously in the interest of the organisation, unless they
have a plan in the making of which they have had a share and, which they
regard as common property. Thus, Planning is essential to any goal-directed
activity.
c) Meeting environmental changes:

29
 Business environment changes more rapidly and sweepingly than can
be imagined. Change in social values, increase in competition, new product
discoveries, change in consumer tastes and preferences, have each the
potential to upset any organisation. Management should discern and exploit
the emerging situation by adjusting and adapting the inputs and
transformation process to suit the environment changes.
d) Safeguard against business failures:
Often, business failures are blamed on cut-throat competition,
unpredictability of consumer tastes and preferences, rapid technological
changes and abrupt economic and political development. However, in many
cases, failure of business is caused due to rash and unscientific decision-
making, which is a direct result of lack of proper planning.
e) Unity of action:
Planning enables the people within an organisation to work
effectively and harmoniously for the accomplishment of common goals. It
provides them a stake in their own future and thus induces them to do their
utmost to meet the challenge.
f) Effective coordination and control:
Planning makes it easy to exercise effective control and coordination.
The work to be done, the persons and the departments which have to do it,
time limit with in which it is to be completed and the costs to be incurred, are
all determined in advance. This facilitates proper and timely measurement of
actual performance and its comparison with the planned performance.

FORMS OF PLANNING:
Planning can be classified on different bases, which are discussed below:
1. Strategic and Functional Planning:
In strategic or corporate planning, the top management determines the
general objectives of the enterprise and the steps necessary to accomplish
them in the light of resources currently available and likely to be available in

30
the future. Functional planning, on the other hand, is planning that covers
functional areas like production, marketing, finance and purchasing.
2. Long-range and Short-range Planning:
Long-range planning sets long-term goals for the enterprise and then
proceeds to formulate specific plans for attaining these goals. It involves an
attempt to anticipate, analyze and make decisions about basic problems and
issues which have significance reaching well beyond the present operating
horizon of the enterprise. Short-range planning, on the other hand, is
concerned with the determination of short-term activities to accomplish long
term objectives. Short-range planning relates to a relatively short period and
has to be consistent with the long-range plans. Operational plans are
generally related to short periods.
3. Standing Planning:
Ad hoc planning committees may be constituted for certain specific matters,
as for instance, for project planning. But standing plans are designed to be
used over and over again. They include organizational structure, standard
procedures, standard methods, etc.
4. Administrative and Operational Planning:
Administrative planning is done by the middle level management, which
provides the foundation for operative plans. The lower level managers to put
the administrative plans into action, on the other hand, do operative planning.
5. Physical Planning:
It is concerned with the physical location and arrangement of building and
equipment. City planning and regional planning are the illustrations of
physical planning.
6. Formal and Informal Planning:
Various types of planning discussed above are of formal nature. The
management carries them on systematically. They specify in black and white
the specific goals and the steps to achieve them. They also facilitate the
installation of internal control systems. Informal planning, on the other hand,

31
is mere thinking by some individuals, which may become the basis of formal
planning in future.
Types of Planning:
A Plan, as defined earlier involves deciding future course of action to
achieve the desired goal. There are different types of plans are developed by
an organisation. All the plans are referred to a future course of action.
However, some variances with respect to the scope and operation are found
in the implementation. Some are single use plans where some are standing
plans or multipurpose plans.
Single use plans are meant for one time use and are of ad hoe nature.
Standing plans, on the other hand, are the recurring plans which are used
repeatedly in similar situations. These standing guides are use in think and
actions over long periods. The classification of various plans is depicted as
follows;

(a) Mission or purposes:

Mission may be defined as “a statement which defines the role that an
organisation plays in the society”. The terms mission or purposes are often
used interchangeably. The term ‘mission’ implies the basic character or
philosophy of an organisation and basic purpose for which it exits. Mission
distinguishes an organisation form other organisations. For e.g., the mission
of an educational institution is to provide good education to the society of

32
students, where as the mission of an army of nation is to serve or safeguard
the nation. Mission serves as a guide for defining the objectives and
strategies of the enterprise. It also suggests how an organisation is going to
conduct its business.
A good mission should provide answ4ers to two important questions,
1. What is our business?
2. What should it be?
These two questions force the management to define the customers and
their needs. The basic objectives of mission are accomplished by undertaking
activities going in clearly defined directions, achieving goals. Mission is the
foundation for deciding strategies, properties, work assignment, etc.
(b) Objectives:
The terms “objectives” or “goals” are often used interchangeable.
Objectives are the end results towards which the activities of firm are aimed
or directed. Objectives determine the end results of a organisation. Goals are
the foundation upon which the whole structure of plan built. Goals and
objectives may differ. Goals of one department may be different from other
department, but all are towards the attainment of common objectives.
Objectives should be derived from and be constant with the mission they are
meant to fulfill. Mission has to be translated into objective otherwise it
remains only a good intention. All effective management now days imply
management by objectives.
(c) Strategies:
Strategy of an organisation is the programmes of action and deployment of
resources to attain its objectives. It is also the process of the determination of
the long-term objectives of an organisation and the adoption of course of
action and allocation of resources necessary to achieve the goals. The aim of
a strategy is to gain an advantageous position by counteraction the actions of
competitors. Strategy is designed to achieve overall company goals in a
competitive external environment.

33
 The following factors should be considered while formulating strategies;
 Mission and objectives of an organisation.
 Values, aspirations and prejudices of top level management
 Opportunities and threads of the external environment
 Strength and weakness of the firm in various aspects such as funds,
organisation structure, human talent, technology etc.
(d) Policies:
Policies are general statement or understandings which provide guidance
in decision making to various managers. All policies are not statements as
some of the oral understanding in terms which govern the actions of
subordinates. Policies exist at all level in the organisation. Some may be
major company policy affecting the whole organisation where as others may
be minor or derivative policies affecting the functioning of departments
within the organisation.
Policies help in achieving the objectives as the provide ready-made
solution of problems. Policies may be very clear and explicit. Good policies
are flexible, easy to interpret and consistent with overall objectives of the
organisation. Policies are formulated by all functional areas of an
organisation. Policies are formulated by all functional areas of an
organisation such personal policies, production policies, financial policies,
marketing policies etc.
The following are the reasons for the need of policies;
 To ensure a uniform pattern of actions.
 To simplify and speed up the process of decision making
 To secure coordination of efforts
 To improve the performance of subordinates.

(e) Procedures:
A procedure is a chronological order of actions required to implement a
policy and to achieve an objectives. For e.g., a company’s policy may be to

34
sell the obsolete products at a discount. The procedure may explain how to
decide which product is obsolete and what percentage discount is to be
offered.
Procedures are guiding to action rather than thinking. Procedures are found
throughout the organisation. The various procedures are
 Procedures for placing orders for material and equipment
 Procedures for sanctioning different types of employee’s leave.
 Procedure for handling grievances at the shop floor level.

Policies and procedures are closely interrelated. For instance, if the policy of
an engineering college is to grant 45days vocation leave in a year to its
staffs, a procedure should be established so that grant of leave to staffs will
not disturb the work of the college. A procedure is established for repetitive
activity so that same steps are followed each time that activity is performed.
(f) Rules:
Rules are plans in which they suggest the required course of action. A rule
requires that a definite action has to be taken in a particular way with respect
to a situation. Some examples of rules are as follows;
 Starting time of organisation is 10 a.m.
 No smoking during office hours.
 Employee will be allowed to avail leave for not more than are day
in a month etc.
Rules are definite and do not change with the change in situation. Rules
should not be confused with polices and procedures. A policy provides
guideline for management actions by defining area of discretion, whereas
rule provides such discretion. Polices contain some operational freedom or
discretion while rules allow no discretion in their application. Rules, unlike
procedure, have no sequence of action or time limit for the action.

35
(g) Programmes:
A programme is a broad term which includes goals, policies, procedure,
rules, task assignment, steps to be taken, resources to be employed to carry
out a given course of action. Terry and Franklin define programme as
“comprehensive plan which includes future use of different resources in an
integrated pattern and establishes a sequence of required actions and time
schedule for each in order to achieve stated objectives.”
For instant, launching of satellite is a programme. Programmes are generally
supported by ‘time phasing’ and budgeting. It means that specific dates are
prescribed for the completion of various phases of programme and also
adequate budget and made for financing the programme.
A programme may be major or minor. A primary programme requires many
supporting programmes. For instance, in late 90’s all the banks in India have
computerised their all activities. This may be considered as a major
programme. On the other hand, mordernisation of small equipment in some
of the factory may be considered as a minor programme.
Programme may be prepared for repetitive and non-repetitive course of
action. Programme for repetitive action are referred as routine planning
while programmes for non-repetitive action are known as creative planning.
(h) Budgets:
A budget is a statement of expected results in numerical terms and
therefore it may be referred as a numerical programme, a budget is
quantitative expression of a plan. It may be generally expressed in terms of
financial plans other units may also be used such as in terms of man hour,
units of products, machine hours or any other numerically measurable term.
Budget is a part of the planning and budget is the fundamental statement of
planning. A budget forces a company to make the following factors in
advance: whether for short term or long term, a numerical compilation of
expected cash flow, expenses and revenues, labour and machine hour
utilization etc. Budgets are also useful device for control.

36
 There are various types’ budgets or Flexible budget:
i. Variable budgets or Flexible budget:
These budgets vary according to the organisation output.
ii. Programme budgets:
In this budget, the agency identifies goals, develops detailed programmes to
meet the goals, and estimates the cost of each programme.
iii. Zero based budget:
It is a combination of programme and variable budget.
(i) Schedules:
A schedule specifies time limits within which activities are to be
completed. Scheduling is the process of establishing a time sequence for the
work to be done. Schedules are essential for avoiding delays and for ensuring
continuity of operations. A schedule lays down a time table fixing starting
and finishing dates for different activities.
(j) Projects:
A project is a distinct cluster of functions and facilities for a definite
purpose and definite time period. It is designed and executed as a distinct
plan. It is integrated into a unity and is designed to achieve a stated objective.
A project is defined in terms of capital investment, specific objective, and
interdependence of tasks. For instance, installation of a computer may be
designated as a project. It is marked separate from the normal operations
because of special significance. Projects help to facilitate coordination and
control by identifying an integrated work package within a heterogeneous
mass of activities and resources.
Steps in the Planning process:
Planning is the endless process. The process is constantly modified to
suit changes in environmental conditions and changes in objectives and
opportunities for the firm. As organisations differ in terms of their size and
complexity, no single planning procedure is applicable to all organizations.

37
 However, all planning processes contain some basic steps, which are
represented as follows. An extended model of the planning process is shown
below;

(a) Analysing Opportunities:

The Manager should be aware of the opportunities in the external

environment, as well as those within the organisations. Identification of
awareness of the opportunity is the starting point of planning. First of all they
should identify the possible future opportunities and analyse them clearly
and completely.
From that we should know;
 Where we stand
 What is our strength and weakness
 What problem we wish to solve and why and
 What we expect to gain
Once the opportunities are perceived from availability, the other steps of
planning are undertaken.
(b) Establishing the objectives or goals:
The next step in planning is to establish objectives for the entire organisation
and for every work unit within the organisation. Objectives specify the
results expected from a particular course of action and define the areas that
should receive special attention. In addition, objectives specify what should
38
 be achieved by the network of strategies, policies, procedures, rules, budgets
and programmes. Organisational objectives provide direction to the major
plans. These plans help the various departments of an organisation prepare
their objectives in line with the organisational objectives. Thus, there exists a
hierarchy of objectives in an organisation.
Objectives must be stated clearly and must be established for all keys areas
where performance affects the well-being of the organisation. They should
be specified in measurable terms like costs, targets pr quality specifications.
(c) Determining planning premises:
Planning premises are the assumptions that should be made about the various
elements of the environment. It provides the basic frame work in which plans
operate. These premises may be internal or external.
The Internal premises includes organisational, polices, resources of various
types, sales forecasts and the ability of the organisation to withstand the
environmental pressure. External premises includes total factors in task
environment like political, social, technological, competitors, plans and
actions and government polices etc.
The plans are formulated on the basis of both internal and external premises.
The nature of planning premises differs at different levels of planning. At the
top level it is mostly externally focused whereas the bottom level is
internally focused.
(d) Identifying Alternatives:
Various alternative courses of action can be identified after establishing
organisational objectives and planning premises. A particular objective can
be achieved through various actions. For instance, if expansion is an
organisation’s objective, it can be achieved by expansion in the same field,
or diversification, or amalgamation, or by introducing a new product variant
in the market and so on. Thus, there are many ways of achieving the same
goal. A common problem at this stage is selecting the most promising
alternatives for further analysis. The planner must examine these alternatives

39
 and decide on the best ones through careful analysis. These alternatives lay
the foundation for the next step in planning.
(e) Evaluating Available Alternatives:
After identifying alternative courses of action and examining their
advantages and disadvantages, the next step is to evaluate the alternatives
keeping in mind the goals of the organisation and the available resources.
Each alternative may have some positive and negative aspects. For instance,
one alternative may be highly profitable but may require heavy investment
and may have a long gestation period; another one may be less profitable but
may also involve less risk. Since the future is uncertain, the planner can
never be sure of the outcome of any alternative. Thus, many variables and
limitations have to be considered when evaluating alternative courses of
action. The use of planning and decision-making techniques, such as
operations research, helps in the evaluation of alternatives.
(f) Selecting an alternatives:
After the evaluation of various alternatives, the most appropriate course of
action is selected. If more than one alternative may be chosen for execution.
When the situation changes and the selected plan do not provide to be the
best, the other alternative may be tried.
(g) Implementing the Plan:
This involves putting the plan into action. In order to implement the actions
stated in the plan, managers have to make a series of decisions. A manager
can implement the plans of a firm through the use of authority, persuasion or
policy. Authority is a legitimate form of power that comes with the position
and is not associated with a person. It is often sufficient to implement
relatively simple plans that do not cause a significant change in the status
quo. But a complex and comprehensive plan cannot be implemented through
authority alone. Persuasion is “the process of selling a plan to those who
must implement it, by communicating relevant information so that the
individuals understand all the implications.” Thus, persuasion requires

40
 convincing others, so that the plan is accepted on the basis of its merits rather
than on the authority of the manager. When long-term plans are developed,
manager generally formulates policies for implementing them. Policies are
usually written statements that provide guidelines for selecting particular
courses of action for achieving a firm’s objectives. Effective polices are
those that are flexible, comprehensive, coordinated, ethical and clear
(h) Reviewing the plan:
Once a plan has been implemented, it has to be reviewed. A review helps
managers to evaluate the plan and also identify deviations from the
established course of action. It thus helps managers take the necessary
corrective measures. At every stage of the review, the outcomes must be
compared with the expected results. This will help the organization develop
future plans. A periodic review of plans enables an organization to update
them in the light of changes in the business environment.
Objectives:
Objectives may be defined as the future results or a desired state of
affairs which the organisation seeks and strives to achieve. Objectives
provide the organisation with a purpose that keeps its attention and efforts
focused in a particular direction so that it is capable of steering a steady
course towards their accomplishment, taking corrective action when
necessary to avoid obstacles.
Objectives may be defined as the goals which an organisation tries to
achieve. Objectives are described as the end- points of planning. According
to Koontz and O'Donnell, "an objective is a term commonly used to indicate
the end point of a management programme." Objectives constitute the
purpose of the enterprise and without them no intelligent planning can take
place. Objectives are, therefore, the ends towards which the activities of the
enterprise are aimed. They are present not only the end-point of planning but
also the end towards which organizing, directing and controlling are aimed.
Objectives provide direction to various activities. They also serve as the

41
 benchmark of measuring the efficiency and effectiveness of the enterprise.
Objectives make every human activity purposeful. Planning has no meaning
if it is not related to certain objectives.
Features of Objectives:
 The objectives must be predetermined.
 A clearly defined objective provides the clear direction for managerial effort.
 Objectives must be realistic.
 Objectives must be measurable.
 Objectives must have social sanction.
 All objectives are interconnected and mutually supportive.
 Objectives may be short-range, medium-range and long-range.
 Objectives may be constructed into a hierarchy.
Categories of objectives:
 According to Charles Perrow, the board categories of objectives
which are likely to claim the attention of an organisation may be,
 Societal objectives: which are concerned with creation and
maintenance of cultural values through the production of goods and
services.
 Output objectives, concerned with the kind of output, viz, durable
goods, etc
 System objectives, concerned with growth, stability, profitability and
efficiency.
 Product objectives, concerned with quality, quantity, innovativeness
of the goods and services.
 Derived objectives, concerned with secondary areas, e.g. community
development.
Advantages of Objectives:

 Clear definition of objectives encourages unified planning.

 Objectives provide motivation to people in the organisation.

42
  When the work is goal-oriented, unproductive tasks can be avoided.
 Objectives provide standards which aid in the control of human efforts in
an organisation.
 Objectives serve to identify the organisation and to link it to the groups
upon which its existence depends.
 Objectives act as a sound basis for developing administrative controls.
 Objectives contribute to the management process: they influence the
purpose of the organisation, policies, personnel, leadership as well as
managerial control.
Policies:
Policy is a guide to thinking and action rather than a course of action. A
policy is a standing plan. It defines the area or limits within which decisions
can be made to achieve organizational objectives. Policies are flexible and
are broad plans providing scope for judgment and interpretation on the part
of subordinate managers. Policies are general statements of understanding
which guide or channel thinking in decision making of subordinates. Policies
are routes to the realization of objectives and prescribe the broad ways in
which objectives can be obtained. They decide the line of action along which
subordinate executives are expected to work in order to accomplish the goals
of the organization.
A policy is a continuing decision as it provides answers to problems of a
recurring nature or repetitive nature. For example, if management has
adopted the policy of seniority-based promotion, the departmental managers
need not seek guidance from top management again with respect to
promotional decisions.
Essentials of Policy Formulation:
The essentials of policy formation may be listed as below:
 A policy should be definite, positive and clear. It should be understood by
everyone in the organisation.
 A policy should be translatable into the practices.

43
 A policy should be flexible and at the same time have a high degree of
permanency.
 A policy should be formulated to cover all reasonable anticipatable
conditions.
 A policy should be founded upon facts and sound judgment.
 A policy should conform to economic principles, statutes and regulations.
 A policy should be a general statement of the established rule.

Nature of Policies:
 Characteristics of a Sound Policy (Principles of policy-making) a
policy can be called sound when it contains the following
characteristics:
 Based on objectives and should contribute towards the attainment of
objectives.
 Should be clear, unambiguous and explicit. It should not leave scope
for misinterpretation.
 As far as possible a policy should be expressed in writing as written
policies tend to be more clear and precise. They can be
communicated and understood better and their compliance can easily
be checked.
 Should be based on careful consideration of resources and
environment of the organisation.

 Should be reviewed and revised regularly to keep them up-to-date

and relevant, but must be reasonably stable and before revising them,
serious thought and consideration should be given.
 Should be in the form of general guidelines allowing scope for
decision-making at lower levels. Policies should be general and
flexible guides rather than detailed procedures.

44
  All policies should be communicated to the concerned persons so that
the policies and the objectives of their formulation are properly
understood by those who are supposed to implement them.
 A sound policy should make for consistency in the operations of the
organisation.
 Policies should conform to the norms of ethical behaviour which
prevail in society and to the ethical standards of business.

Types of policies:
These may be classified into the following categories:
(a) Organisational and functional policies – in terms of scope policies may
be classified as organisational policies and departmental policies.
Organisational policies are the overall policies of an organisation and are
formulated by top management. Departmental or functional policies are
meant for specific functions or departments of business, e.g. sales policy,
production policy, financial policy, personnel policy, etc. they are derived
from organisational policies to guide the efforts of people in particular
departments. Organisational or basic policies are used uniformly throughout
the organisation whereas departmental policies apply in particular
departments.
(b) Originated, appealed and imposed policies – on the basis of origin,
policies may be classified as originated, appealed and imposed.
i. Originated policies – are deliberately formulated by top management
on their own initiative in order to guide the actions of their subordinates.
They are generally put in writing and embodied in a policy manual
ii. Appealed policies – are formulated on the appeal or request of
subordinates. Subordinates make an appeal to deal with a particular case
which is not covered by earlier policies.

45
iii. Imposed policies – arise from the influence of outside forces like
government, trade unions, trade associations, etc. These forces either impose
a policy or create conditions for the adoption of a particular policy.
(c) General and specific policies – as the area of freedom, policies may be
classified as general and specific.
i. General policies – are stated in broad terms to give freedom to
units of the organisation
ii. Specific policies – are intensively defined to restrict freedom of
action.
(d) Written and implied policies.
i. Written policies - are explicit declarations in writing and are
always better guides. Than implied policies, but tend to be rigid and
inflexible..
ii. Implied policies – are those inferred from the behaviour or
conduct of organisational members particularly of top executives. Where no
written policy exists on a particular topic or the expressed policy is not
enforced, subordinates interpret the actions of their superiors and make
decisions accordingly. For instance, if promotions are made on the basis of
seniority, there is an implied promotional policy, even though nothing is
expressed in writing.
Procedures:
Procedures are a chronological sequence of steps to be undertaken to
enforce a policy and attain an objective. It lays down the specific manner in
which a particular activity is to be performed. It is a planned sequence of
operations for performing repetitive activities uniformly and consistently
according to George R. Terry, a procedure is a series of related tasks that
make up the chronological sequence and the established way of performing
the work to be accomplished. In business, procedures are generally
established for purchase of raw materials, processing of orders, selection of
employees, redress of grievances, holding and conduct of meetings, etc.

46
Procedures are generally laid down for repetitive work so that same steps are
taken each time the activity is performed.
Procedures are different from policies and methods:
Policy is a broad and general guide to decision-making while a procedure is
an operational guide to action. A policy provides scope for judgment while a
procedure leaves hardly any room for interpretation and judgment. A policy
delineates an area of operation while a procedure lays down the path through
that area. For instance, a company may have the policy of promoting
employees on the basis of merit and in order to implement this promotion
policy, the procedure may consist of definition of merit, records of
performance, tests and interviews to identify the most meritorious employee.
A policy helps in achieving an objective while a procedure shows the way to
implement the policy. Thus, a policy is wider in scope and more flexible in
nature than a procedure.
Method:
A method – outlines the specific way in which a particular step in the
procedure is to be performed. For example, it may be laid down that
promotion interview will be taken by committee of four executives. This
may be called the method of interviewing. A method is more limited in
scope, but more detailed because it specifies the mechanical way by which
an operation is to be performed. Methods help in increasing the usefulness
and effectiveness of a procedure. It lays down the manner of proceeding in
the performance of work. A procedure plays an important role in the daily
operations of an organisation:
I. Simplifies work by eliminating unnecessary steps
II. Avoids chaos or random activity by ensuring consistency in
operations.
III. Indicates a standard way of performing a work and, therefore, ensures
uniformity of action

47
 IV. Eliminates the need for further decision-making by laying down a
standard path to follow.
Provides a standard for appraisal of employees and can be used to judge
whether work is proceeding as planned and so a procedure serves as basis for
control. However, procedures become redundant unless these are regularly
revised and modified
Decision Making:
Decision making is the act of choosing one alternative from among a
set of alternatives. The decision-making process, however, is much more
than this. For example, the person making the decision must have somehow
recognized that a decision was necessary and identified the set of feasible
alternatives before selecting one. Hence, the decision-making process
includes recognizing and defining the nature of a decision situation,
identifying alternatives, choosing the “best” alternative, and putting it into
practice.
The word “best” implies effectiveness. Effective decision making
requires an understanding of the situation driving the decision. Most people
would consider an effective decision to be one that optimizes some set of
factors such as profits, sales, employee welfare, and market share. In some
situations, though, an effective decision may be one that minimizes loss,
expenses, or employee turnover. It may even mean selecting the best method
for going out of business or terminating a contract.
Characteristics of Decision Making:
Decision making implies that there are various alternatives and the
most desirable alternative is chosen to solve the problem or to arrive at
expected results.
 The decision-maker has freedom to choose an alternative.
 Decision-making may not be completely rational but may be judgmental and
emotional.
 Decision-making is goal-oriented.

48
 Decision-making is a mental or intellectual process because the final
decision is made by the decision-maker.
 A decision may be expressed in words or may be implied from behaviour.
 Choosing from among the alternative courses of operation implies
uncertainty about the final result of each possible course of operation.
 Decision making is rational. It is taken only after a thorough analysis and
reasoning and weighing the consequences of the various alternatives.

Types of Decisions:
(a) Programmed and Non-Programmed Decisions: Herbert Simon has
grouped organizational decisions into two categories based on the procedure
followed. They are:
(i) Programmed decisions: Programmed decisions are routine and repetitive
and are made within the framework of organizational policies and rules.
These policies and rules are established well in advance to solve recurring
problems in the organization. Programmed decisions have short-run impact.
They are, generally, taken at the lower level of management.
(ii) Non-Programmed Decisions: Non-programmed decisions are decisions
taken to meet non-repetitive problems. Non-programmed decisions are
relevant for solving unique/ unusual problems in which various alternatives
cannot be decided in advance. A common feature of non-programmed
decisions is that they are novel and non-recurring and therefore, readymade
solutions are not available. Since these decisions are of high importance and
have long-term consequences, they are made by top level management.
(b) Strategic and Tactical Decisions: Organizational decisions may also be
classified as strategic or tactical.

(i) Strategic Decisions: Basic decisions or strategic decisions are decisions

which are of crucial importance. Strategic decisions a major choice of
actions concerning allocation of resources and contribution to the

49
 achievement of organizational objectives. Decisions like plant location,
product diversification, entering into new markets, selection of channels of
distribution, capital expenditure etc are examples of basic or strategic
decisions.
(ii) Tactical Decisions: Routine decisions or tactical decisions are decisions
which are routine and repetitive. They are derived out of strategic decisions.
The various features of a tactical decision are as follows:
 l Tactical decision relates to day-to-day operation of the organization and
has to be taken very frequently.
 l Tactical decision is mostly a programmed one. Therefore, the decision
can be made within the context of these variables.
 l The outcome of tactical decision is of short-term nature and affects a
narrow part of the organization.
 l The authority for making tactical decisions can be delegated to lower
level managers because : first, the impact of tactical decision is narrow
and of short-term nature and Second, by delegating authority for such
decisions to lower-level managers, higher level managers are free to
devote more time on strategic decisions.

Unit III
INTRODUCTION:

50
 Organisation involves division of work among people whose efforts must be co-
ordinated to achieve specific objectives and to implement pre-determined strategies.
Organisation is the foundation upon which the whole structure of management is built. It
is the backbone of management. After the objectives of an enterprise are determined and
the plan is prepared, the next step in the management process is to organise the activities
of the enterprise to execute the plan and to attain the objectives of the enterprise. The term
Organising organisation is given a variety of interpretations. In any case, there are two
broad ways in which the term is used. In the first sense, organisation is understood as a
dynamic process and a managerial activity which is necessary for bringing people
together and tying them together in the pursuit of common objectives. When used in the
other sense, organisation refers to the structure of relationships among positions and jobs
which is built up for the realisation of common objectives. Without organising managers
cannot function as managers. Organisation is concerned with the building, developing and
maintaining of a structure of working relationships in order to accomplish the objectives
of the enterprise. Organisation means the determination and assignment of duties to
people, and also the establishment and the maintenance of authority relationships among
these grouped activities. It is the structural framework within which the various efforts are
coordinated and related to each other. Sound organisation contributes greatly to the
continuity and success of the enterprise. The distinguished industrialist of America,
Andrew Carnegie has shown his confidence in organisation by stating that: "Take away
our factories, take away our trade, our avenues of transportation, our money, leave
nothing but our organisation, and in four years we shall have re-established ourselves."
That shows the significance of managerial skills and organisation. However, good
organisation structure does not by itself produce good performance. But a poor
organisation structure makes good performance impossible, no matter how good the
individual may be.

Meaning of organising:

51
It is a very important managerial function. Organising is the process of identifying
and grouping activities required to attain the objectives, delegating authority,
creating responsibility and establishing relationships for the people to work
effectively.
Nature of Organising:
The organising natures are as follows;
 The identification and classification of required activities
 The grouping of activities necessary to attain the objectives
 The assignment of each grouping to a manager with the authority
(delegation) necessary to supervise it,
 The provision for coordination horizontally and vertically in the
organisation structure.
STEPS IN ORGANIZING:
Organizing involves the following interrelated steps;
(i) Determination of Objectives. Organization is always related to certain objectives.
Therefore, it is essential for the management to identify the objectives before
starting any activity. It will help the management in the choice of men and
materials with the help of which it can achieve its objectives. Objectives also serve
as the guidelines for the management and the workers. They bring about unity of
direction in the organization.

(ii) Identification and Grouping of Activities. If the members of the group are to
pool their efforts effectively, there must be proper division of the major activities.
Each job should be properly classified and grouped. This will enable the people to
know what is expected of them as members of the group and will help in avoiding
duplication of efforts. For instance, the total activities of an industrial organization
may be divided into major functions like production, purchasing, marketing,
financing, etc. and each such function is further subdivided into various jobs. The
jobs, then, can be classified and grouped to ensure the effective implementation of
the other steps.

52
(iii) Assignment of Duties. After classifying and grouping the activities into various
jobs, they should be allotted to the individuals so that there are round ' pegs in
round holes. Each individual should be given a specific job to do according to his
ability and made responsible for that. He should also be given the adequate
authority to do the job, assigned to him.
(iv) Developing Authority, Responsibility and Relationships. Since so many
individuals work in the same organization, it is the responsibility of management:
to lay down structure of relationships in the working of the enterprise by
facilitating delegation of responsibility and authority.

DEFINITION OF ORGANIZATION:
The term 'Organisation' connotes different things to different people. Many writers have
attempted to state the nature, characteristics and principles of organisation in their own
way. It can be used as a group of persons working together or as a structure of
relationships or as a process of management. Now, let us analyse some of the important
definition of organising or organisation, and understand the meaning of organisation.
According to Stephen P. Robbins and Mary Coulter, ‘organising’ is
“determining what tasks are to be done, who is to do them, how the tasks are to be
grouped, who reports to whom, and where decisions are to be made.”
According to Louis A Allen, "Organisation is the process of identifying and grouping the
work to be performed, defining and delegating responsibility and authority, and
establishing relationships for the purpose of enabling people to work most effectively
together in accomplishing objectives.
Mc Ferland has defined organisation as, "an identifiable group of people contributing their
efforts towards the attainment of goals".
In the words of Theo Haimann, "Organising is the process of defining and grouping the
activities of the enterprise and establishing the authority relationships among them. In
performing the organising function, the manager defines, departmentalises and assigns
activities so that they can be most effectively executed."

53
In the words of Mooney and Railey, "Organisation is the form of every human association
for the attainment of a common purpose.”
In the words of Koontz and O'Donnell, "Organisation involves the grouping of activities
necessary to accomplish goals and plans, the assignment of these activities to appropriate
departments and the provision of authority, delegation and co-ordination."
Barnard defined organization as an identifiable group of people contributing their
efforts towards tile attainment of goals. "An organization comes into existence when there
are a number of persons in communication and relationship to each other and are willing
to contribute towards a common endeavor". People form groups or organizations and pool
their efforts by defining and dividing various activities, responsibility and authority.
As such an organization has the following characteristics:
1. Communication
2. Cooperative efforts
3. Common objectives
4. Rules and regulations

TYPES OF ORGANIZATION:
According to Talcott Parson Scheme, organizations can be classified primarily into four
categories based on functions:
(a) Economic Organizations:
Economic organizations are primarily concerned with producing something of
value to the society. They are wedded to a philosophy of generating surplus/ profit.
Industrial, commercial and, trading concerns are included in this category.
(b) Political, organizations:
Political organizations survive on the basis of service to society. They help in
achieving the basic values cherished by the society. They, collect resources from the
society. Employ them judiciously, and help in maintaining peace and stability in the
society. All governmental agencies are included in this category.

(c) Integrative organizations:

54
 Integrative organization tried with social, control and maintenance. Police
departments and other protective organizations (courts etc.) are included in this category.
(d) Pattern maintenance organizations:
Pattern maintenance organizations, like, educational institutions, research
institutions, religious organizations, clubs etc. are primarily concerned with, long-term
interests bf society, culture, knowledge values, etc.,

According to Samuel Deep’s Classification Scheme:

1. For, profit organizations:
These organizations provide goods and services at a profit. Companies,
partnership firms, sole, proprietorship - firm are organised, along these lines and they
generate profit for survival and continuance, in the market.
2. Government organizations:
These organizations satisfy the public need, for, order and, provide a means for
people to exercise some measure of control over their environment.
3. Protective organizations:
They shield citizens from danger, Police, and military services etc.
4. Service organizations:
They act in the interest of, the general public without always receiving payments
in full for services rendered
5. Political organizations:
They seek to influence legislation by electing a member of their group to public
office (political parties, groups and associations).
6. Religious organizations:
They provide for the spiritual needs of members and try to enlist nonbelievers into
their fold (churches, sects, orders etc.).
7. Social organizations:
They satisfy the needs of persons to make friendships and to have contact, with,
others-who have contact with others who have compatible interests (clubs, teams,
fraternities).

55
ORGANIZATION STRUCTURE:
An organization structure shows the authority and responsibility relationships
between the various positions in the organization by showing who reports to whom. It is a
set of planned relationships between groups of related functions and between physical
factors and personnel required for the achievement of organizational goals.
Organization involves establishing an appropriate structure for the goal seeking
activities. The structure of an organization is generally shown on an organization chart or
a job- task pyramid. It shows the authority and responsibility relationships between
various positions in the organization. It is significant to note that the organization
structure is directly related to the attainment of the organization objectives. For instance,
if an undertaking is in production line, the, dominant element in its organization chart,
would be manufacturing and assembling. A good organization structure should not be
static but dynamic. It should be subject to change from time to time in the light o f the
changes in the business environment. While designing the organization structure, due
attention should be given to the principles of sound organization.
SIGNIFICANCE OF ORGANIZATION STRUCTURE:
Organization structure contributes in the following ways to the efficient functioning of
organizations:
1. Clear-cut Authority Relationships. Organization structure allocates authority and
responsibility. It specifies who is to direct whom and who is accountable for what results.
The structure helps an organization member to know what his role is and how it relates to
other roles.
2. Pattern of Communication. Organization structure provides the patterns of
communication and co-ordination. By grouping activities and people, structure facilitates
communication between people centered on their job activities. People who have joint
problems to solve often need to share information.

3. Location of Decision Centers. Organization structure determines the location of

decision-making in the organization. A departmental store, for instance, may follow a
structure that leaves pricing, sales promotion and other matters largely up to individual

56
departments to ensure that varied departmental conditions are considered. In contrast, an
oil refinery may concentrate on production, scheduling and maintenance decisions at top
levels to ensure that interdependencies along the flow of work are considered.
4. Proper Balancing. Organization structure creates the proper balance and emphasis of
activities. Those more critical to the enterprise's success might be placed higher in the
organization. Research in
a pharmaceutical company, for instance, might be singled out for reporting to the general
manager or the managing director of the company. Activities of comparable importance
might be given roughly equal levels in the structure to give them equal emphasis.
5. Stimulating Creativity. Sound organization structure stimulates creative thinking and
initiative among organizational members by providing well defined patterns of authority.
Everybody knows the area where he specializes and where his efforts will be appreciated.

6. Encouraging Growth. An organization structure provides the framework within which

an enterprise functions. If it is flexible, it will help in meeting challenges and creating
opportunities for growth. A sound organization structure facilitates growth of enterprise
by increasing its capacity to handle increased level of activity.
7. Making Use of Technological Improvements. A sound organization structure, which
is adaptable to changes, can make the best possible use of latest technology. It will modify
the existing pattern of authority-responsibility relationships in the wake of technological
improvements.
In short, existence of a good organization structure is essential for better
management. Properly designed organization can help improve teamwork and
productivity by providing a framework within which the; people can work together most
effectively. While building the organization structure, it is essential to relate the people to
design. The organization structure, which has technical excellence, may be quite useless
for practical purposes because it is not suited to the needs of the people. Thus, an
organization structure should be developed according to the needs of the people in the
organization.

57
Structure in an organization has three components (Robbins, 1989):

Complexity, referring to the degree to which activities within the organization are
differentiated. This differentiation has three dimensions:
- horizontal differentiation refers to the degree of differentiation between units based on
the orientation of members, the nature of tasks they perform and their education and
training,
- vertical differentiation is characterized by the number of hierarchical levels in the
organization, and
- spatial differentiation is the degree to which the location of the organization's offices,
facilities and personnel are geographically distributed;

 Formalization refers to the extent to which jobs within the organization are
specialized. The degree of formalization can vary widely between and within
organizations;
 Centralization refers to the degree to which decision making is concentrated at
one point in the organization.

Designing organizational structures:

Some important considerations in designing an effective organizational structure are:

 Clarity: The structure of the organization should be such that there is no confusion
about people's goals, tasks, style of functioning, reporting relationship and sources
of information.
 Understanding: The structure of an organization should provide people with a
clear picture of how their work fits into the organization.
 De-centralization: The design of an organization should compel discussions and
decisions at the lowest possible level.
 Stability and adaptability: While the organizational structure should be adaptable
to environmental changes, it should remain steady during unfavourable conditions.

58
SPAN OF MANAGEMENT OR SPAN OF CONTROL:
The term 'span of management' is also known as 'span of control,' 'span of
supervision' and 'span of authority'. It represents a numerical limit of subordinates to be
supervised and controlled by a manager. It is an important principle of sound
organization. This principle is based on the theory of relationships propounded by
V.A.Graicunas, a French management consultant. Graicunas analyzed superior-
subordinate relationship and developed a mathematical formula based on the geometric
increase in complexities of managing as the number of subordinates’ increases.
SPAN OF CONTROL:
According to the principle of the span of control, (also called span of
management/supervision) then is a limit to the number of subordinates, which a manager
can effectively supervise. It states that m single executive should have more people
looking towards him for guidance and leadership than he can reasonably be expected to
serve. Because of personal limitations arising from lack of complete and sufficient
knowledge, limited time, limited finance, and a manager has to delegate work, to as many
subordinators working in various departments as he can effectively manage. Thus, the
principle of span of management presupposes departmentation and delegation of
authority.
The ideal ratio was considered to be 15 to 25 subordinates for first level
supervision and 5 to 8 subordinates in executive spans.
Determination of Span of Management:
The span of management was studied extensively by V.A. Graicunas he identified
the relationship prevailing between the superior and the subordinates. The three
categories are
1. Direct single relation ship:-
It is one in which a supervisor has direct relationship with his subordinates
individually or the manager’s one- to- one relationship with each subordinate,

59
2. Direct group relationships:–
In direct group relationship, a supervisor has direct relationship with his
subordinates jointly or between groups of subordinates.

3. Cross relationship:
In cross relationship, a subordinate has relationship with another subordinate
mutually or among subordinates themselves.

60
The number of possible interactions of all types between manager and
subordinates can be determined by the following formula:

Where I is the Total number of interactions with and among subordinates, and N is
the number of subordinates.
WIDE SPAN OF SUPERVISION:
When the span of supervision is wider, the number of executives needed to
supervise the workers will be less. This will make the organization structure wide. Such a
structure would be less expensive because of less overhead costs of supervision. Since the
number of levels is less, there will be better communication between the worker and the
management and better coordination. However, the quality of performance is likely to
deteriorate because one executive cannot effectively supervise a large number of
subordinates. Supervision will not be able to devote sufficient time in directing each and
every subordinate.
For instance, if there are 256 persons in an organization and all are reporting to
one executive, there will be one level of management. If it is thought that only four
subordinates should directly report to the chief executive, then the number of management

61
levels will increase to two as four executives directly report to the top executive and each
executive controls 64 persons as shown in
Fig.1

This structure is flat as the span of control is very large at the lowest level and
there are only two layers of management. If it is thought that an executive can manage

62
only 4 subordinates effectively, the number of managerial levels will increase to four as
shown in Fig. 2. This will make the organization structure look like a tall pyramid.

NARROW SPAN OF SUPERVISION:

The narrow span of supervision will lead to a tall structure and to an increase in
the executive payroll as compared to the flat structure another drawback is that the
additional layers of supervisor will complicate communication from the chief executive
down to operative employees and back up the line. There will also be a problem of
effective coordination of the activities of different persons in the organization because of
more levels of executives. However, the narrow span of supervision has the benefit of
better personal contacts between the supervisors and the subordinates. It facilitates tight
control and Close supervision. Tall organization structure gives sufficient to an executive
for developing relations with the subordinates.
In recent years, there has been a controversy around the significance of the concept of
span of control. The transformation in the style of decision-making has had an inevitable
bearing on question relating to the number of people an executive can supervise.
Moreover, the use of delegation and decentralization is highly advocated these days. It is
realized that narrow span of control is an effective means of forcing the executives to
delegate. It is also argued that if an executive has enough number of subordinates to
supervise, there is a point beyond which intimate control becomes very difficult. But how
this point, should be determined is the main question.
FACTORS DETERMINING SPAN OF SUPERVISION:
The span of control varies from individual to individual, time to time and place to
place. The factors, which determine the span of control, are discussed below:
1. Ability of the Managers: Individuals differ in various qualities like leadership,
decision-making and communication. The span may be wider if the manager possesses
these skills in greater degree as compared to others.
2., Time available for Supervision: The span should be narrow at the higher levels
because top managers have less time available for supervision. They have to devote the
major portion of their time to planning, organizing, directing, and controlling. Each top

63
manager will delegate the task of supervision to his subordinates who have to devote
comparatively less time on the important functions of management.
3. Nature of Work: When the spans are narrowed, the levels in the organization increase.
This involves delegation of authority and responsibility. If the work is of a routine and
repetitive nature, it can easily be delegated to the subordinates.
4. Capacity of Subordinates: If the subordinates are skilled, efficient and
knowledgeable, they will require less supervision. In such a case, the superior may go in
for a wider span.
5. Degree of Decentralization: Under decentralization, the power to make decisions is
delegated to the lower levels. The span of management will be narrow in such cases so as
to exercise more and more control.
6. Effectiveness of Communication: An effective system of communication in the
organization favors large number of levels because there will be no difficulty in
transmission of information in spite of a large number of intervening layers.
7. Control Mechanism: The span of control also depends upon the control mechanism
being followed. Control may be followed either through personal supervision or through
reporting. The former favors narrow span and the latter favors a wide span.
To sum up, it can be said that an executive should be expected to supervise a
reasonable number of subordinates. What is reasonable depends on a variety of factors
like individual differences in executives, number and capacity of subordinates, the nature
of work, availability of time, ease of communication, internal checks and controls and
degree of delegation in the organization. If the span of control is narrow, there will be
more organizational levels, which in turn may impede communication. If the number of
levels is reduced and the span of control is widened, the supervisory load may become too
heavy. Sound management requires a proper balance between supervisory load and
organization levels.

64
 Committee:
Committees exist both in business and non-business organizations. It is difficult to
give a precise definition of the term “ Committee” because there are many different kinds
of committees and the concept of committee varies widely from one organization to
another. In many organizations, committees constitute an important part-of the
organization structure. Committees are usually relatively formal bodies with a definite
structure. They have their own organization. To them are entrusted definite responsibility
and authority. A committee may review budgets, formulate plans for new products or
make policy decisions. Or the committee may only have a power to make
recommendations and suggestions to a designated official.
According to Louis A. Allen, "A committee is a body of persons appointed or
elected to meet on an organised basis for the consideration of matters brought before it."
A committee is a group of persons performing a group task with the object of solving
certain problems. The area of operation of a committee is determined by its constitution.
A committee may formulate plans, make policy decisions or review the performance of
certain units. In some cases, it may only have the power to make, recommendations to a
designated official. Whatever may be the scope of their activities, committees have come
to be recognized as an important instrument in the modem business as well as non-
business organizations. They help in taking collective decisions, coordinating the affairs
of different departments and meeting communication requirements in the organization.

Generally, committees are constituted to achieve one or more of the following

objectives
 to have consultation with various persons to secure their view-points on different
aspects of business.
 to give participation to various groups of people.
 to secure cooperation of different departments.
 to coordinate the functioning of different departments and individuals by bringing
about unity of direction.

65
Advantages or Benefits of Committees:
A committee almost invariably is used to carry out responsibilities, which cannot
be undertaken by a single person. Committees have certain inherent advantages because
people in groups react differently from people as individual. The advantages or merits are
discussed below;
1. Pooled Knowledge and Experience: A committee is an effective method of bringing
the collective knowledge and experience of a number of persons to solve many intricate
problems that are beyond the reach of a single person. In a committee, such members may
be taken who are experts in their fields. This will help in concentrating knowledge and
judgment of experts for the solution of the intricate problems.
2. Enforces Participation: A committee tends to enforce participation by different people
in the organization. A major source of resistance to new policies and plans by those who
are asked to carry them out is lack of participation on their part at the planning stage. The
management can give representation to the employees in various committees. This will
motivate the employees for better performance as they feel that they have a say in the
affairs of the organization.
3. Facilitates Coordination: When it is necessary to integrate varying points of view,
which cannot conveniently be coordinated by individuals, the committee may be used to
bring about coordination. A committee consists of representatives of different departments
or persons who represent different points of view, who will sit around a table and discuss
their common problems. The direct contact among various individuals will bring about
proper understanding and coordination in the activities of various departments and
individuals.
4 Overcoming Resistances: The committee is an important means of cooling off
agitation and temper on the part of affected people. Establishment of committee is
recognized as a strategy for overcoming resistance, opposition or pressure from the
affected parties. For purposes of strategy, committees have a wider-application in
Government, educational, and other non-business institutions.

66
5 Checks against Misuse of Powers: It acts as a check and safeguard against the abuse
and misuse of powers. The Governments of all nations to circumscribe the executive
authority and to hold it in balance establish numerous boards and commissions. Company.
Plural executives in the form of committees are more common in non-business
organizations than in business organizations.
Limitations of Committees:
Some people consider committee as an organised means of passing the buck. A
committee is created when some top people-can't make up their minds and they want a
committee to do it for them. Though use of committees brings about certain advantages,
they have certain inherent drawbacks also which are discussed below:
1 Evasion of Decision-making Responsibilities: If a manager has an opportunity to carry
a problem to a committee, he may take it as a means of avoiding decision-making or to
escape the consequences of an unpopular decision. Thus, managers, who want to avoid
the laborious and difficult process of logical thinking that leads to 'a sound decision and to
escape responsibility, take resort to committee device.
2. Slow Decision-making: Committees take more time in procedural matters before any
decision is taken. In some cases, slowness seriously handicaps the administration of the
organization. The delay in decision-making often reduces the usefulness of the decisions.
The delay is caused by many factors like giving sufficient membership and lack of
preparation, before meeting. That is why committees are sometimes used by managements
to cool off agitation by their employees, which may create difficulties in the long-run.
3. Costly Device: Committees are an expensive device both in terms of cost and time.
Committee meetings take too much time, which absorbs the sum, total of the salary of its
members for that time. Sometimes, committee members deliberately tend to pass time in
order to show that they have taken pains in reaching the decision.
4. Lack of Definite Decision: When the committee findings represent a compromise of
different viewpoints, they may be found to be weak and indecisive. They may cloud the
real issues and get extraneous matters involved in decision -making. In case of committee
decisions, it is very difficult to fix responsibility on a particular person. So the committee
member's are apt to be irresponsible and indifferent.

67
5. Incompetent Membership: When a committee is formed, it is implied that the
individual members of the committee will exert pressure on the ideas, suggestions,
comments and judgments of other members, but this may happen in practice. The
chairman or any strong member of the committee may force the committee to come to a
foregone conclusion on the basis of his own thinking and the incompetent members may
keep silent. Thus, the decision may be overshadow by the force of strong personality.
6. Source of Misunderstanding: The committee meeting may prove to be a source of
misunderstanding instead of providing a forum for teamwork and settlement of problems.
The chairman of the meeting may not be effective in bringing about reconciliation of
ideas of different individuals. Moreover, committee actions are characterized by voting
and dissenting practices, which may leave behind a legacy of bitterness, discontent and
frustration.
Types of Committee:
According to the nature of their constitution and functions, committees can be classified
as follows:
(i) Line and Staff Committees: If a committee is vested with the authority and
responsibility to decide and whose decision is implemented invariably, it is known as a
line committee. For example, board of directors of a company is a line committee of the
representatives of its members, which is authorized to take and implement policy
decisions. On the other hand, if a committee is appointed merely to counsel and advice, it
is known as a staff committee. For instance, a committee composed of the heads of
various departments may meet at periodical intervals to counsel the chief executive.
(ii) Formal and Informal Committees: When a committee is constituted as a part of
the organization structure and has clear-cut jurisdiction. It is a formal committee. But an
informal committee is formed to advise on certain complicated matters on which the
management does not want to set up formal committee, which is a costly device, Informal
committees do not form part of the organization structure.
(iii) Standing and Ad hoc Committees: Formal committees, which are of permanent
character, are known as standing committees. Ad hoc committees are temporary bodies,

68
 which may be formal or informal. An ad hoc committee is appointed to deal with some
special problem and stops functioning after its job are over.
(iv) Executive Committee: It is a committee, which has power to administer the
affairs of the business.
(v) Coordinating Committee: Such a committee is generally constituted to
coordinate the functioning of different departments. It consists of the representatives of
different departments who meet periodically to discuss their common problems.
In addition, a business enterprise may have other committees like (a) Finance Committee,
(b) Planning Committee, (c) Production. Committee, (d) Workers' Welfare Committee,
and so on.
Departmentalization is the clustering of individuals into units and units into departments
and larger units in order to facilitate achieving organizational goals. It is a process of
horizontal clustering of different types of functions and activities on any one level of the
hierarchy. It is closely related to the classical bureaucratic principle of specialization
(Luthans, 1986). Departmentalization is conventionally based on purpose, product,
process, function, personal things and place (Gullick and Urwick, 1937).

Departmentalizati
on

Functional Product Customer Geography Process

1. Functional Departmentalization: is the basic form of departmentalization. It

refers to the grouping of activities or jobs involving common functions. In a
research organization the groupings could be research, production, agricultural
engineering, extension, rural marketing and administration.

69
 President

Vice President Vice President Vice President Vice President

Production Marketing Finance HR

Advantages:

• Development of expertise
• Clear career path within function
• Simplifies training
• Furnishes means of tight control at top.

Disadvantages:

• De- emphasizes overall objective.

• Narrow view point of key persons
• Reduction in co-ordination.
• Responsibility of profit at Top
• Slow adoption to changes.

2. Product Departmentalization: refers to the grouping of jobs and activities that

are associated with a specific product. As organizations increase in size and
diversify, functional departmentalization may not be very effective. The
organization has to be further divided into separate units to limit the span of
control of a manager to a manageable level (Luthans, 1986). In an agricultural
research institution, functional departments can be further differentiated by
products and purpose or type of research.

70
 President

General Manager General Manager General Manager

Pharmaceutical Customer Cosmetic products
Product Products

Advantages:

• More focus on products

• Easier to evaluate performance of product
• Product responsiveness to market changes
• Less burden on the top executive in making operating decisions

Disadvantages:

• Duplication of resources.
• Problems for customers purchasing across multiple product groups
• Conflicts between product group and corporate objectives
• Conflict between product groups

3. Departmentalization by Customers: is grouping of both activities and positions

to make them compatible with the special needs of some specific groups of users.

President

Vice President Vice President Vice President

Industrial Consumer Military

Advantages:

71
 • Focus on Customer needs.
• Gives customer a feeling that they have an understanding supplier..
• Develops expertness in customer area.

Disadvantages:

• May be difficult to coordinate operations between competing

customer demands.
• Requires managers & staff expert in customer problems.
• Customer groups may not be always defined

4. Departmentalization by Territory or Geography: involves grouping of

activities and positions at a given location to take advantage of local
participation in decision making. The territorial units are under the control of a
manager who is responsible for operations of the organization at that location.
In agricultural research institutions, regional research stations are set up to take
advantage of specific agro-ecological environments. Such departmentalization
usually offers economic advantage.

President

GM GM GM GM GM
North India South India East India West India Central India

Advantages:

• Responsibility at a lower level.

• Emphasis on local market & Problems.

72
 • Improves co-ordination in a region.
• Better face to face communications.
• Take advantages of local economies.

Disadvantages:

• More persons with manager ability.

• Increases problem at top level.
• Tends to make maintenance of central services difficult.

5. Departmentalization by Process or Equipment: refers to jobs and activities

which require a specific type of technology, machine or production process.
Other common bases for departmentalization can be time of duty, number of
employees, market, distribution channel or services.

Plant Superintendent

Spinning Dying Weaving Printing

Advantages:

• Use of heavy and costly machinery equipment in efficient manner.

• It follows principle of specialization

Disadvantages:

• Opportunity for overall development of managerial talent.

• Difficult to compare performance.

73
Formal Organization and Informal Organization:
The formal organisation refers to the structure of jobs and positions with clearly
defined functions and relationships as prescribed by the top management. This type of
organisation is built by the management to realise objectives of an enterprise and is bound
by rules, systems and procedures. Everybody is assigned a certain responsibility for the
performance of the given task and given the required amount of authority for carrying it
out. Informal organisation, which does not appear on the organisation chart, supplements
the formal organisation in achieving organisational goals effectively and efficiently. The
working of informal groups and leaders is not as simple as it may appear to be. Therefore,
it is obligatory for every manager to study thoroughly the working pattern of informal
relationships in the organisation and to use them for achieving organisational objectives.

Formal Organisation:
Chester I Bernard defines formal organisation as -"a system of consciously
coordinated activities or forces of two or more persons. It refers to the structure of well-
defined jobs, each bearing a definite measure of authority, responsibility and
accountability." The structure is consciously designed to enable the organizational
members to work together for accomplishing common objectives. The individual must
adjust to the formal organization. It tells him to do certain things in a specified manner, to
obey orders from designated individuals and to cooperate with others.
The essence of formal organisation is conscious common purpose and comes into
being when persons–
(i) Are able to communicate with each other
(ii) Are willing to act and
(iii) Share a purpose.
The formal organisation is built around four key pillars. They are:
o Division of labour
o Scalar and functional processes
o Structure and

74
 o Span of control
Thus, a formal organisation is one resulting from planning where the pattern of structure
has already been determined by the top management.
Characteristics of Formal Organization:
The basic characteristics of formal organization are as follows;
(i) Organization structure is laid down by the top management to achieve
organizational goals.
(ii) Organization structure is based on division of labor and specialization to achieve
efficiency in operations.
(iii) Organization structure concentrates on the jobs to be performed and not the
individuals who are to perform jobs.
(iv) The organization does not take into consideration the sentiments of organizational
members.
(v) The authority and responsibility relationships created by the organization structure
are to be honored by everyone. The position in the organization hierarchy
determines the relative status of the incumbent.
Advantages of formal organisation:
1. The formal organisation structure concentrates on the jobs to be performed. It,
therefore, makes everybody responsible for a given task.
2. A formal organisation is bound by rules, regulations and procedures. It thus ensures law
and order in the organisation.
3. The organisation structure enables the people of the organisation to work together for
accomplishing the common objectives of the enterprise
Disadvantages or criticisms of formal organisation:
1. The formal organisation does not take into consideration the sentiments of
organisational members.
2. The formal organisation does not consider the goals of the individuals. It is designed to
achieve the goals of the organisation only.
3. The formal organisation is bound by rigid rules, regulations and procedures. This
makes the achievement of goals difficult.

75
INFORMAL ORGANIZATION:
Informal organisation refers to the relationship between people in the organisation
based on personal attitudes, emotions, prejudices, likes, dislikes etc. an informal
organisation is an organisation which is not established by any formal authority, but arises
from the personal and social relations of the people. These relations are not developed
according to procedures and regulations laid down in the formal organisation structure;
generally large formal groups give rise to small informal or social groups. These groups
may be based on same taste, language, culture or some other factor. These groups are not
pre-planned, but they develop automatically within the organisation according to its
environment.
Characteristics features of informal organisation:
1. Informal organisation is not established by any formal authority. It is unplanned and
arises spontaneously.
2. Informal organisations reflect human relationships. It arises from the personal and
social relations amongst the people working in the organisation.
3. Formation of informal organisations is a natural process. It is not based on rules,
regulations and procedures.
4. The inter-relations amongst the people in an informal organisation cannot be shown in
an organisation chart.
5. In the case of informal organisation, the people cut across formal channels of
communications and communicate amongst themselves.
6. The membership of informal organisations is voluntary. It arises spontaneously and not
by deliberate or conscious efforts.
7. Membership of informal groups can be overlapping as a person may be member of a
number of informal groups.
8. Informal organisations are based on common taste, problem, language, religion, culture,
etc. it is influenced by the personal attitudes, emotions, whims, likes and dislikes etc. of
the people in the organisation.

76
Benefits of Informal organisation:
1. It blends with the formal organisation to make it more effective.
2. Many things which cannot be achieved through formal organisation can be achieved
through informal organisation.
3. The presence of informal organisation in an enterprise makes the managers plan and act
more carefully.
4. Informal organisation acts as a means by which the workers achieve a sense of security
and belonging. It provides social satisfaction to group members.
5. An informal organisation has a powerful influence on productivity and job satisfaction.
6. The informal leader lightens the burden of the formal manager and tries to fill in the
gaps in the manager's ability.
7. Informal organisation helps the group members to attain specific personal objectives.
8. Informal organisation is the best means of employee communication. It is very fast.
9. Informal organisation gives psychological satisfaction to the members. It acts as a
safety valve for the emotional problems and frustrations of the workers of the organisation
because they get a platform to express their feelings.
10. It serves as an agency for social control of human behaviour.
Significance of Informal Organization:
The importance of informal organization arises from the functions performed by
informal groups. The important functions of informal Organization are as under:
(i) It serves as a very useful channel of communication in the organization. The
informal communication is very fast.
(ii) It blends with the formal Organization to make it more effective. It gives support
to the formal Organization.
(iii) The informal leader lightens the burden of the formal manager and tries to fill in
the gaps in the manager's abilities.
(iv) Informal Organization gives psychological satisfaction to the members. They get a
platform to express their feelings.
(v) The presence of informal Organization encourages the manager to plan and act
carefully. Thus, informal organizations support and supplement the formal

77
 Organization. There are certain disadvantages also of informal organizations. They
put resistance to change and conform to old practices. The communication in
informal Organization is very fast; sometimes, it creates rumors, which may prove
dangerous to the enterprise.

DIFFERENCE BETWEEN FORMAL AND INFORMAL ORGANIZATION:

INFORMAL ORGANIZATION:
Informal organisation refers to the relationship between people in the organisation
based on personal attitudes, emotions, prejudices, likes, dislikes etc. an informal

78
organisation is an organisation which is not established by any formal authority, but arises
from the personal and social relations of the people. These relations are not developed
according to procedures and regulations laid down in the formal organisation structure;
generally large formal groups give rise to small informal or social groups. These groups
may be based on same taste, language, culture or some other factor. These groups are not
pre-planned, but they develop automatically within the organisation according to its
environment.
Characteristics features of informal organisation:
1. Informal organisation is not established by any formal authority. It is unplanned and
arises spontaneously.
2. Informal organisations reflect human relationships. It arises from the personal and
social relations amongst the people working in the organisation.
3. Formation of informal organisations is a natural process. It is not based on rules,
regulations and procedures.
4. The inter-relations amongst the people in an informal organisation cannot be shown in
an organisation chart.
5. In the case of informal organisation, the people cut across formal channels of
communications and communicate amongst themselves.
6. The membership of informal organisations is voluntary. It arises spontaneously and not
by deliberate or conscious efforts.
7. Membership of informal groups can be overlapping as a person may be member of a
number of informal groups.
8. Informal organisations are based on common taste, problem, language, religion, culture,
etc. it is influenced by the personal attitudes, emotions, whims, likes and dislikes etc. of
the people in the organisation.
Benefits of Informal organisation:
1. It blends with the formal organisation to make it more effective.
2. Many things which cannot be achieved through formal organisation can be achieved
through informal organisation.

79
3. The presence of informal organisation in an enterprise makes the managers plan and act
more carefully.
4. Informal organisation acts as a means by which the workers achieve a sense of security
and belonging. It provides social satisfaction to group members.
5. An informal organisation has a powerful influence on productivity and job satisfaction.
6. The informal leader lightens the burden of the formal manager and tries to fill in the
gaps in the manager's ability.
7. Informal organisation helps the group members to attain specific personal objectives.
8. Informal organisation is the best means of employee communication. It is very fast.
9. Informal organisation gives psychological satisfaction to the members. It acts as a
safety valve for the emotional problems and frustrations of the workers of the organisation
because they get a platform to express their feelings.
10. It serves as an agency for social control of human behaviour.
Significance of Informal Organization:
The importance of informal organization arises from the functions performed by
informal groups. The important functions of informal Organization are as under:
(vi) It serves as a very useful channel of communication in the organization. The
informal communication is very fast.
(vii) It blends with the formal Organization to make it more effective. It gives support
to the formal Organization.
(viii) The informal leader lightens the burden of the formal manager and tries to fill in
the gaps in the manager's abilities.
(ix) Informal Organization gives psychological satisfaction to the members. They get a
platform to express their feelings.
(x) The presence of informal Organization encourages the manager to plan and act
carefully. Thus, informal organizations support and supplement the formal
Organization. There are certain disadvantages also of informal organizations. They
put resistance to change and conform to old practices. The communication in
informal Organization is very fast; sometimes, it creates rumors, which may prove
dangerous to the enterprise.

80
 Unit IV

Definition of Authority

Authority is legal and formal right to a person, who can take decisions,
give orders and commands to others to perform a particular task. It is
conferred to high officials, to accomplish organisation’s objectives. It is
hierarchical in nature, it flows downward, i.e. delegated from superior to
the subordinate.

“In general, authority is exercised to get things done through others. It is

attached to the position, i.e. any person who gets the position
enjoys the authority attached to it, the higher the position, the
higher would be his authority. As the authority lies in the
designation, in the absence of authority, the position offered to the
person would be of no use. Moreover, it is restricted to the
organisation only”.

Types of Authority in Management

 Line Authority
 Staff Authority
 Functional Authority

1. Line Authority

The work of an employee is directed with the help of line authority. It

takes the form of employer-employee relationship that moves from top to
bottom. Certain decisions are made by the line manager without consulting
any other person. In some cases line managers are differentiated from the
staff managers by using the word “line”. The manager whose functions are

81
 linked directly with the achievement of organizational objectives is called
line manager in simpler terms.

2. Staff Authority

Staff authority is possessed by the staff managers. The objectives of

the organization determine the line & staff nature of the functions of any
manager. When the size of organization becomes larger & larger, the line
mangers feel that they cannot complete their jobs by the existing skills,
experience & knowledge which are not updated accordingly. Therefore
staff authority is generated for the staff whose main purpose is to assist,
support, advice & decrease the work burden of the line managers.

3. Functional Authority

Functional authority that is also known as functional control, and is

included in the area of line & staff aspects of HRM as it is the special
authority that is exercised by the personnel manager in coordinating the
personnel activities. The HR manager here performs his functions as right
arm of the supreme executive.

Delegation
Delegation is the assignment of any responsibility or authority to another
person to carry out specific activities. It is one of the core concepts of
management leadership. However, the person who delegated the work
remains accountable for the outcome of the delegated work. Delegation
empowers a subordinate to make decision…
Barriers to effective delegation
In spite of the above advantages, many managers are found
unwilling to delegate authority and many subordinates are found unwilling
to accept it. The reasons for this unwillingness on both sides are as undrer.

82
 1.Fear of loss power
 2.The I can do it better myself Fallacy
 3 lack of confidence in subordintes
 fear of being exposed
 difficulty in being
 inability to establish and exercise prober control

1. Fear of loss of power Some managers are little napoleons who

want to keep all authority to make decisions in their own hands.
They feel uncomfortable when they see their subordinates making
decisions which they themselves once made.
2. The I can do it better myself Fallacy some managers have an
inflated sense of their own worth. They therefore want to perform
themselves all jobs which come their way.
3. Lack of confidence in subordinates Some managers hesitate to
delegate authority to their subordinates because they doubt their
ability. Such managers continue to keep themselves involved in
jobs which they have delegated to their subordinates. For effective
delegation it is necessary that a subordinate should only initially
work under the guidance of his superior and then he should be freed
to work without the superior’s guidance.
4. Fear of being exposed some inefficient managers are always afraid
of their subordinates outshining them and proving more efficient.
They are therefore very cautious about delegating, lest their
inefficiency be exposed. Effective delegation is possible only when
a manager prepared to accept defeat from his reasons why our
indigenous system of medicine failed to flourish is that a vaidya
always kept some knowledge up his sleeve lest his disciples should
excel him.

83
 5. Difficulty in briefing Many times managers is reluctant to delegate
because they think that it is easier to do a task themselves than to
brief the subordinates.
6. Inability to establish and Exercise proper controls Since it is
only the authority which is delegated and not the responsibility, all
managers want to assure themselves about the proper use of
delegated authority by their subordinates. They are reluctant to
delegate authority if they are unable to keep a tab on whatever their
subordinates do.

PRINCIPLES OF DELEGATION:
The following principles are guides to successful delegation. Unless carefully
recognized in practice, delegation may be ineffective, organization may fail and the
managerial process may be seriously impeded:
1. Assignment of Duties in terms of Results:
Delegation by results expected implies that goals or objectives have being
set and plans made and are understood and accepted by the subordinates and ' that
jobs have been designed to fit in with them. The subordinates must understand
clearly what activities they must undertake and what results they must show. This
will enable them to know by what standards their performance will be judged and
will direct their efforts for the achievement of those results.
2. Functional Definitions:
According to Koontz and O'Donnell, the more a position or a department has clear
definitions of results expected, activities to be undertaken, organization authority
delegated, and authority and informational relationship with other positions
understood, the more adequately the individuals responsible can contribute toward
accomplishing enterprise objective." To do otherwise is to risk confusion as to
what is expected of whom. This principle although simple in concept, is often
difficult to apply. To define a job and delegate authority to do it requires, in most

84
 cases, patience, intelligence and clarity of objectives and plans. It is obviously
difficult to define a job if the superior does not know what results are desired.
3. Parity of Authority and Responsibility:
Authority and responsibility should bear logical relation to each other. So much
authority should be granted which is sufficient to fulfill the responsibility. This
parity is not mathematical, but rather coextensive, because both relate to the same
assignment. Authority can never be delegated equal to responsibility as both are
different things. Responsibility is the work assigned to a position and is related to
objectives, whereas authority is related to the rights given to perform the work
assigned. There is no common denominator for measuring equality between these.
However, authority should be delegated commensurate with responsibility. For
instance, if a manager tries to hold subordinates accountable for duties for which
they do not have the requisite, authority, it will be unfair. It is also not proper if the
subordinates are given -sufficient authority, but are not held accountable for its
proper use.
4. Clarification of Limits of Authority:
Limits of authority must be clarified to the subordinates so that they may not assume
excessive authority than desired. Clear limits of authority will allow subordinates
to exercise initiative, develop themselves through freedom of action and to know
their area of operation. This will also avoid misuse of authority.
5. Absoluteness of Accountability:
Accountability, being an obligation owed, cannot be delegated. No superior can
escape accountability for the activities of his subordinates, as it is the superior who
has delegated authority and assigned duties. The superior cannot pass on his
obligation to account for to his superior to the subordinates along with hit
authority. Likewise, the accountability of the subordinates to their superior for the
performance of assigned tasks is absolute.
6. Unity of Command:
This principle states that accountability is unitary. Each person should be accountable
only to one superior for delegated authority, as he cannot serve two masters well.

85
 If a person report, to two superiors for the same duty, confusion and friction will
result. He will find himself frequently receiving conflicting instructions. When this
is the case, his only hope is either to get his two bosses or to run the risk of
displeasing either or both. Therefore, as far as possible, dual subordination should
be avoided.
Advantages of Delegation of Authority:
i. It reduces the workload of superiors permitting them to concentrate on key areas.
ii. It provides an opportunity to subordinates to grow and develop.
iii. It helps in exercising effective control over the activities of subordinates.
iv. It provides satisfaction to subordinates in terms of recognition.
v. Accountability imposed on subordinate’s forces them to act in a more meaningful
and responsible manner.
vi. It results in prompt decision-making.
Disadvantages to Delegation of Authority:
i. Some managers believe in fallacy that is if we want it done right, do it yourself.
ii. Managers lacking required confidence and trust in subordinates might not be
interested in delegating the authority.
iii. Low self-confidence and more over confidence amongst the managers may create
a bottleneck in a process of delegation.
iv. Fear amongst managers that they will loose status and position.
v. Poor examples set by superiors who do not delegate may discourage that managers
to delegate further.
Decentralisation

Definition: Decentralisation can be understood as the orderly assignment

of authority, throughout the levels of management, in an organisation. ... It
is a philosophy, which refers to the selective diffusion of authority, which
advocates the belief that the workforce is capable, competent and
resourceful

86
 Decentralization Advantages
Noise is the first and foremost barrier to communication. It means “interference
that occurs in a signal and prevents you from hearing sounds properly.” In a factory, for
example, the continuous noise made by machines makes oral communication difficult.
In the same way some technical problem in a public address system or a static in a
telephone or television cable will distort the sound signal and affect communication.
Adverse weather conditions or some fault in the ultramodern telecommunication systems
may also spoil the effect.
Noise does not mean only this. It also encompasses many other factors that may
exist at the end of sender as well as that of the receiver. The sender may resort to
ambiguous or confusing signals. The receiver may mess up the message owing to
inattention or may spoil decoding because of wrong or unexpected interpretation.
The receiver’s prejudices may also come in the way of his understanding the
message in the right spirit. We must therefore keep in mind that communication is always
likely to be spoilt by ‘noise’ that stands for so many things.
2. Lack of Planning:
ADVERTISEMENTS:
Communication is not a casual affair. Unfortunately many people take it lightly.
The result is that the message to be sent across may not be carefully planned. There are
innumerable examples of people who would give an ill-planned, long-winding lecture
while a short presentation with tables or graphs would be sufficient. Such an event would
turn into one of miscommunication or mal-communication. In the same way some people
may not care to choose a suitable time and place that are so necessary for effective
communication.
3. Semantic Problems:
Semantics is the systematic study of meaning. That is why the problems arising
from expression or transmission of meaning in communication are called semantic
problems. Oral or written communication is based on words. And words, limited in
number, may be used in unlimited ways.

87
 The meaning is in the mind of the sender and also in that of the receiver. But it is
not always necessary for the meaning in the mind of the sender to be the same as in the
mind of receiver. Much, therefore, depends on how the sender encodes his message.
The sender has to take care that the receiver does not misconstrue his message, and
gets the intended meaning. Quite often it does not happen in this way. That leads to
semantic problems. It can be ensured only if we aim at clarity, simplicity and brevity so
that the receiver gets the intended meaning.
4. Cultural Barriers:
Cultural differences often come up as communication barriers. We have to be
especially careful in this regard as now we have to operate in international environment.
The same category of words, phrases, symbols, actions, colours mean different things to
people of different countries or different cultural backgrounds.
For example, in the United States people love to be called by their first names
while in Britain, and to a large extent also in India, people like to be addressed by their
last name. In the North American States a sign of ‘O’ made with the forefinger and thumb
stands for ‘OK’ while in the Southern States it is construed as obscenity.
5. Wrong Assumptions:
Quite often we act on assumptions, without caring to seek clarification for them.
We should make all possible efforts to maintain our goodwill and not act impulsively on
assumptions. If, for example, a customer writes to us that he would like to visit our office
or factory without telling us that he would like to be picked up and we assume that he will
manage to come on his own it may lead to loss of goodwill. So it is necessary to be
circumspect in such matters.
6. Socio-psychological Barriers:
The attitudes and opinions, place in society and status-consciousness arising from
one’s position in the hierarchical structure of the organisation, one’s relations with peers,
seniors, juniors and family background—all these deeply affect one’s ability to
communicate both as a sender and receiver.
Status consciousness is widely known to be a serious communication barrier in
organisations. It leads to psychological distancing which further leads to breakdown of

88
communication or miscommunication. Often it is seen that a man high up in an
organisation builds up a wall around himself. This restricts participation of the less
powerful in decision-making. In the same way one’s family background formulates one’s
attitude and communication skills.
7. Emotions:
ADVERTISEMENTS:
Emotions play a very important role in our life. Both encoding and decoding of
messages are influenced by our emotions. A message received when we are emotionally
worked up will have a different meaning for us than when we are calm and composed.
Anger is the worst emotion and enemy of communication.
8. Selective Perception:
Most of the factors cited above lead to selective perception. It means that the
receivers selectively see and hear depending upon their needs, background, motivations,
experience and other personal characteristics. While decoding the messages, most of the
receivers protect their own interests and expectations into process of communication
leading to a particular kind of feedback that may become a communication problem.
9. Filtering:
Filtering means that the sender of a message manipulates information in such a
way that it will be seen more favorably by the receiver. A manager, for example, likes to
tell his boss what he feels or what his boss wants to hear. In this process, he is filtering
information. The net result is that the man at the top never gets objective information.
In the same way, the people at the lower levels condense and synthesise
information so as to get maximum benefits for themselves. They hold back or ignore some
important part of information. The more vertical levels in the organisation, the more
chances are for filtering. This is a very frequently occurring communication problem.
10. Information Overload:
Unchecked inflow of information very often becomes another barrier to
communication. It may stifle the senior executive or bore and frustrate him. When people
are bogged down with too much information they are likely to make errors.

89
 They may also delay processing or responding to information/message at least for
some time. And delay may become a habit, causing serious communication problems.
People may also become selective in their response, and selectivity is not communication-
friendly. On the other hand it is a communication problem.
11. Poor Retention:
As a corollary to the problem mentioned above it is worth noting that people are
also likely to forget messages reaching them. There from arises the necessity to repeat the
message and use more than one medium to communicate the same message.
12. Poor Listening:
Poor listening may lead to serious communication problems. Too many people are
interested in talking, and mostly talking about themselves. They are so much involved,
with themselves that they do not have patience to listen. The result is that they are not
interested in the speaker whose words go waste.
Everybody knows about the importance of listening, but very few actually practice
patient, active and empathic listening. That is why so many communication problems crop
up. Poor listening accounts for incomplete information and also poor retention. One may
simply not get the desired result if this keeps on happening.
13. Goal Conflicts:
Very often clashes of the goals of various units and sub-units of an organisation
lead to communication breakdowns. Communication should serve as a conflict-reduction
exercise. But the goal conflicts act as communication reduction mechanisms.
Different units internalize their own goals, and that leads to the splitting or
bifurcation of interests in the organisation. When people start competing for the
fulfillment of their narrow interest’s communication suffers.
14. Offensive Style of Communication:
It is quite obvious that offensive style of communication leads to communication
breakdown. It is a rather sensitive point. If a manager sends a message in such a way that
the workers/ juniors become defensive their relations get strained and communication
suffers. Hence it is absolutely necessary for the management to adopt a persuasive style of
communication.

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 15. Insufficient Period for Adjustment:
It is a well-known fact that people respond to change in different ways. They take
their own time to adjust to any news or proposal for change. While the purpose of
communication is to effect change it should be kept in mind that the employees whose
duties, shifts, etc. are going to be changed should be given sufficient time. Only then the
communication will be effective.
16. Loss by Transmission:
Communication often suffers or gets diluted when messages pass on from person
to person in a series of transmissions. They get diluted on the way. Special care has to be
taken that the intended message reaches the person concerned.

Definition of Power

By the term power, we mean the personal capacity of an individual to

influence others to do or not to do an act. It is independent and informal in
nature derived from charisma and status. It is an acquired ability that
comes from knowledge and expertise. It is the right to control other’s
actions, decisions and performances.

Power is not hierarchical, i.e. it can flow in any direction like it can flow
from superior to subordinate (downward) or junior to senior (upward), or
between the persons working at the same level, but different departments
of the same organization (horizontal), or between the persons working
at different levels and departments of the same organization (diagonal). In
this way, it is not confined to any boundaries. Moreover, the element of
politics is usually attached to it.

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 Many of us think that these two terms are one and the same thing, but there
exists a fine line of difference between power and authority. While the
former is exercised in a personal capacity, the latter is used in a
professional capacity. So, on this topic, we are going to throw light on the
basic differences between the two, have a look.

Content: Power Vs Authority

1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart

BASIS FOR POWER AUTHORITY

COMPARISON

Meaning Power means the ability or The legal and formal right to give
potential of an individual to orders and commands, and take
influence others and control decisions is known as an
their actions. Authority.

What is it? It is a personal trait. It is a formal right, given to the

high officials.
Source Knowledge and expertise. Position & office

Hierarchy Power does not follow any Authority follows the hierarchy.
hierarchy.
Resides with Person Designation
Legitimate No Yes

Key Differences Between Power and Authority

The difference between power and authority can be drawn clearly on the
following grounds:
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 1. Power is defined as the ability or potential of an individual to
influence others and control their actions. Authority is the legal and
formal right to give orders and commands, and take decisions.

2. Power is a personal trait, i.e. an acquired ability, whereas authority

is a formal right, that vest in the hands of high officials or
management personnel.

3. The major source of power is knowledge and expertise. On the

other hand, position and office determine the authority of a person.

4. Power flows in any direction, i.e. it can be upward, downward,

crosswise or diagonal, lateral. As opposed to authority, that flows
only in one direction, i.e. downward (from superior to subordinate).

5. The power lies in person, in essence, a person acquires it, but

authority lies in the designation, i.e. whoever get the designation,
get the authority attached to it.

6. Authority is legitimate whereas the power is not.

Uses of authority

Mark would have gained far better results if he had used his authority for
the benefit of the team. Pondering my experience with Mark has led me to
consider five ways a solid leader uses authority the right way.

1. Reach. A team leader understands they don’t possess all the

answers. One person’s ideas are strengthened when mixed with
ideas from several others on a team. The collective insights from a
group of people usually result in a better solution. Authority should
be used to reach out to the best minds and bring them together to

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 find a solution. Authority that reaches out empowers a team
because people and their ideas are valued.
2. Recognize. A team leader puts authority to good use when people
are recognized for their contributions. Raising awareness of what
others are doing reminds every team member they are an important
part of bringing success. Achieving goals won’t come with heavy-
handed decision-making. Success comes from giving private and
public praise through a personal word of thanks. This use of
authority goes a long way to encouraging a passion for excellence.
3. Respirator. Every team leader will face a crisis moment when
those they lead are out of breath and losing energy. When the goal
seems to be fading, authority must be used to breathe life into the
team. Criticism and fault finding must be put aside. This is not the
time to place blame or point out failures. A leader should use
authority to revive a team’s spirit by inspiring them with a vision of
the future that renews hope.
4. Ricochet. The praise spotlight inevitably lands on the team leader
at some point. Like a symphony playing a beautiful melody,
everyone enjoys praise for a job well done. It is in those moments
that a leader most needs to acknowledge the contributions of the
team. The response of the leader should be, “Thank you for the
encouragement, but the credit really goes to an amazing team who
gave their best!” A solid leader allows the praise to ricochet so that
it encourages the heart of the team.
5. Reproduce. A reproducing leader uses authority as an opportunity
to help others gain insight and abilities. Recently a team member
shared some advice with me that he was given by a former boss.
Her advice went something like this, “Never let anyone working for
you know more than you know. Always keep them just one step
behind where you are so you will always be needed.” This abuse of

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 authority is based in fear and undermines and limits the success of a
team. An effective leader has no hesitancy or concerns that a team
member’s skill or knowledge may surpass their own. Instead, they
use authority proactively by helping and encouraging others to
advance in knowledge and skill.

I’m not proud of what we did to Mark, and I am sure it came as a surprise
to him. It was a Saturday morning at the Marriott. The Marriott pledge
included a free meal if room service was late with breakfast. We were
rarely late, and on that morning everything was running on schedule.

Difference between centralization and decentralisation To determine

whether an organization is centralized or decentralized greatly depends on
the location of decision-making authority and the degree of decision-
making power at lower levels. There is a never ending debate between
these two terms to prove which one is better. In this article, significant
differences between Centralization and Decentralization, in an organization
is explained.

Content: Centralization Vs Decentralization

1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart

BASIS FOR CENTRALIZATION DECENTRALIZATION

COMPARISON

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Meaning The retention of powers and The dissemination of authority,
authority with respect to planning responsibility and accountability to
and decisions, with the top the various management levels, is
management, is known as known as Decentralization.
Centralization.

Involves Systematic and consistent Systematic dispersal of authority.

reservation of authority.

Communication Vertical Open and Free

Flow

Decision Making Slow Comparatively faster

Advantage Proper coordination and Sharing of burden and responsibility

Leadership

Power of decision Lies with the top management. Multiple persons have the power of
making decision making.

Reasons Inadequate control over the Considerable control over the

organization organization

Best suited for Small sized organization Large sized organization

Responsibility:

The term responsibility is used in literature in two different ways. Some writers
have defined it as duty or task assigned to a subordinate by virtue of his position in the
organisation. “It refers to the mental and physical activities which must be performed to
carry out a task or duty. That means every person who performs any kind of mental or
physical efforts as an assigned task has responsibility. In more comprehensive (second)

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sense, responsibility may be defined as the obligation of an individual to perform the task
assigned to him by his superiors. It is “the obligation of an individual to carry out
assigned activities to the best of one’s ability”. Here we use and define responsibility as
the obligation of a subordinate to his superior. The main characteristics of responsibility
are as follows.
i. Responsibility can be assigned to human beings only. Non-living things such
as machines cannot be assigned responsibility.
ii. Responsibility arises from a superior-subordinate relationship and by virtue of
his superior position a manager has the authority to get the required work done
from his subordinates. Therefore, he assigns duties to subordinates who are
bound by the service contract to perform the assigned duties.
iii. Responsibility may be a continuing obligation or confined to the performance
of a single function. For example, a sales person has continuing obligation to
the sales manager. On the other hand, the responsibility of a management
consultant to a company comes to an end as soon as the consultancy
assignment is completed.

iv. Responsibility may be defined in terms of functions or targets or goals. For

example, the responsibility of a labour officer is in terms of a function. On the
contrary, the responsibility of a worker who is assigned the job of producing
50 units daily is in terms of targets. As far as possible responsibility should be
expressed in terms of targets. This will enable subordinates to know by what
standards their performance will be evaluated.
In order to enable the subordinate to perform his responsibilities well, the superior
must clearly tell the subordinate as to what is expected of him.

Line and staff relationship

1. 1. BY : Abhinav Harsh Paridhi Ravleen Yogesh Line and Staff
Relationship

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2. 2. Keep your eyes and ears open, as my forte is questioning I will
be asking a question in the end.
3. 3. Introduction Line and Staff are names given to different types of
functions in organizations. A "line function" is one that directly
advances an organization in its core work. This always production
and sales, and sometimes also marketing. A "staff function"
supports the organization with specialized advisory and support
functions. For example, human resources, accounting, public
relations and the legal department are generally considered to be
staff functions.
4. 4. Both terms originatedin theMilitary
5. 5. Origin andDefinition • A military-type organizational structure,
commonly employed in large, centralized corporations. • Line and
staff management has two separate hierarchies: (1) The Line
hierarchy in which the departments are revenue generators
(manufacturing, selling), and their managers are responsible for
achieving the organization's main objectives by executing the key
functions (such as policy making, target setting, decision making).
(2) The Staff hierarchy, in which the departments are revenue
consumers, and their managers are responsible for activities that
support line functions (such as accounting, maintenance, personnel
management). While both hierarchies have their own chains of
command, a line manager may have direct control over staff
employees but a staff manager may have no such power over the
line employees. In modern practice, however, the difference in the
two hierarchies is not so clear-cut and jobs often have elements of
the both types of functions.
6. 6. Structure
7. 7. Now comes thetime for my Question

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8. 8. Why the distinction Each has a different role and clarifying the
same avoids functional dilemmas. The relationship between the two
is interesting. Generally the Line is considered as the action guys –
the sleeves rolled-up types and Staff are viewed as the chair-bound
support folk.
9. 9. What IsLineOrganisation • Line structure consist of direct
vertical relationship which connects the position and task of each
level with those above and below it. • It represent the structure in
direct virtual relationship through which authority travels.
10. 10. Advantages • Clear cut relationship. • Unity of command. •
Prompt decision making. • Effective coordination. • Fixed
responsibility. • Discipline.
11. 11. Disadvantages • Difficulty in staffing. • Concentration of
authority. • Lack of specialization. • Instability. • Poor motivation. •
Ineffective communication. • Not useful for larger enterprises
12. 12. What is Staff Organisation Person of the organization who
provide advice and service to line. • Provide expert advice on
important matters. • Enables line people to work more efficiently. •
Cannot directly issue orders to subordinates in line departments.
13. 13. Advantages • Specialization. • Growth and Expansion. • Lesser
burden on line executives. • Better decisions. • Training of Line
executives. • Advancement of Research.
14. 14. Disadvantages • Different orientation. • Conflict Between line
and staff. • Lack of responsibility. • Lack of co-ordination. •
Excessive reliance on staff. • Costly Structure.
15. 15. WORK MANAGER ENGINEER SUPERINTENDENT
ROUTE CLERK TIME AND COST CLERK WORKERS
16. 16. LineAnd Staff Relations Basically, organizations are tightly
knit together by the cord of authority relationships, whatever the
way of structuring an organization. Such authority relationships act
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 as a cohesive force and integrate the whole organization. The types
and degree of authority vary with the decision-making levels.
Different authority relationships basically revolve around line and
staff relationships. “Line and staff relation refers to a pattern in
which staff specialists advise line managers to perform their
duties.”
17. 17. ROLE AND RESPONSIBILITY OF LINE AND STAFF
MANAGERS • The line managers are responsible for:  The
formulation of objectives, plans and policies.  Making decisions
for the implementation of plans and policies and attainment of
objectives.  Providing supervision and leadership, achieving
coordination and exercising control.
18. 18. The Staff managers have the responsibility to  Advice, help
and guide the line managers in the performance of the above
functions.  Provide specified administrative services.  Interpret
objective plans and policies.  Make the best tools available for the
implementation of plans and policies.  Help in the selection and
training of employees.  Measure organizational effectiveness.
19. 19. LINE AND STAFF CONFLICT • Line and staff relationship is
based on the assumption that both support each other and work
harmoniously to achieve organizational objectives. However, there
are frequent instances of conflict between line and staff in the
organization. This generates lots of friction and loss of time and
consequently loss of organizational effectiveness. Therefore, there
is a need for analyzing the sources of line and staff conflict and
then to take actions to overcome the problem of conflict. • • These
relations are often characterized more by conflict than cooperation.
Staff specialists complain that line managers are resistant to their

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 ideas and the line managers complain that staff managers are sky-
gazing specialists with no comprehension of practical situations.
20. 20. ARGUMENTS OF LINE OFFICERS AGAINST STAFF
OFFICERS  Staff officers have only theoretical knowledge. 
Much of advice given is impractical because they are not
responsible for the results.  They take into account only the
departments goal, not the organizations goal as a whole.  Staff
officers blame line officers when failures happen whereas are keen
on getting credit for success.
21. 21. ARGUMENTS OF STAFF OFFICERS AGAINST LINE
OFFICERS  Line officers completely neglect the advice given by
the officers.  Line officers hesitate to accept new ideas. They
simply reject the advice without considering its validity. Some
line officers are not ready to ask for any advice from the staff
officers.

Staffing in Management
According to Theo Haimann,
“Staffing pertains to recruitment, selection, development and
compensation of subordinates.”
"Staffing is the function by which managers build an organization through
the recruitment, selection, and development of individuals as capable
employees"

Staffing is that part of the process of management which is concerned

with acquiring, developing, employing, appraising, remunerating and
retaining people so that right type of people are available at right
positions and at right time in the organization. In the simplest terms,
staffing is ‘putting people to jobs’.
Importance of Staffing

 Filling the Organizational positions

 Developing competencies to challenges
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  Retaining personnel - professionalism
 Optimum utilization of the human resources

Staffing Process

1. Analyzing Manpower requirements: It is making an analysis of

work and estimating the manpower requirement to accomplish the
same.
2. Recruitment: It is identifying and attracting capable applicants for
employment. it ends with the submission of applications by the aspirants.
3. Selection: It is choosing the fit candidates from the applications
received in the process of recruitment.
4. Placement: This may be on probation and on successfully
completion of the same the candidate may be offered permanent
employment.
5. Training and Development: It is concerned with imparting and
developing specific skills for a particular purpose.
6. Performance Appraisal: Systematic evaluation of personnel by
superiors or others familiar with their performance so as to rank employees
to ascertain their eligibilty for promotions.

RECRUITMENT:
Recruitment is shortly defined as discovering of potential applicants for actual or
anticipated organizational vacancies. The human resources are the most important assets
of an organization. The success or failure of an organization is largely dependent on the
caliber of the people working therein. Without positive and creative contributions from
people, organizations cannot progress prosper. In order to achieve the goals or the
activities of an organization therefore, we need to recruit people with requisite skiffs,
qualifications, and experience. 'While doing so, we have to keep the present as well as the
requirements of the organization in mind. Recruitment is a 'linking - joining together those
with jobs to fill and those seeking jobs. It is a joining process in that, to bring together job
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seekers and employer with a view to encourage the former to apply for a job with the
latter. The basic purpose of recruiting is to develop a group of potentially qualified
people. To this end the organization must communicate the position in such a way that job
seekers respond. To be cost effective, the recruitment process should attract qualified
applicants and provide enough information for unqualified persons to self-select
themselves out.
Sources of Recruitment:
The sources of recruitment may be broadly into two categories: internal sources and
external sources.

Internal sources – consisting of the employees currently working in the organisation.

There are two sources of internal recruitment.
1. Promotions – most of the companies follow the practice of filling higher
jobs (positions) by promoting people working at lower levels. Such a practice helps to
improve the motivating and morale of employees. It encourages employees to put in
greater effort, to acquire additional qualifications. It also improves goodwill and labour
relations. On the other hand, promotion implies shifting an employee to a higher
position carrying higher status, responsibilities and pay.
2. Transfers - involve the shifting of an employee from one job to another
without any major change in the status and responsibilities of the employee or pay.
Internal sources of recruitment simplify the selection and placement problems. It
is economical as there is no need for orientation. It also reduces excessive recruiting and
placement costs. Selection among existing personnel tends to be more accurate as their
performance is known, but in a growing enterprise all positions cannot be filled with
internal recruitment. Moreover, too much use of internal sources may lead to inbreeding
as the new talent is not allowed to enter the organisation. There is little choice and
internal candidates may lack originality and fresh outlook. Every new enterprise,
therefore, has to recruit people from outside. Running concerns (enterprises) have also to
tap external sources for filling the positions whose specifications cannot be met by present
employees.

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 External Sources: External sources lie outside an organization. Here the organization can
have the services of;
i. Employees working in other organizations;
ii. job aspirants registered with employment exchanges;
iii. students from reputed educational" Institutions;
iv. candidates referred by unions, friends, relatives and existing employees;
v. candidates forwarded by search firms and contractors;
vi. candidates responding to the advertisements, issued by the organization; and
vii. Unstructured applications/walk-ins.

SELECTION:
Selection – once an adequate number of applicants is secured through different sources of
recruitment, the process of selection begins. The employer must develop appropriate
criteria and techniques for evaluating candidates. Selection is the process of carefully
screening the candidates who offer themselves for appointment so as to choose the most
suitable persons for the jobs that are to be filled. It is the process of matching the
qualifications of candidates with the requirements of jobs to be filled. Selection process
divides the candidates into two categories.
1. Those that will be offered employment.
2. Those that will not be offered employment
The process could be called ‘rejection’ because more candidates may be turned away
than hired. It is for this reason that selection is often described as a negative process in
contrast with the positive nature of recruitment.
THE PROCESS OF SELECTION:
Selection is usually a series of hurdles or steps. Each one must be successfully cleared
before applicant proceeds to the next. Figure outlines the important steps in the selection
process of typical organization. The time and emphasis placed on each step will, of
course, vary from organization to another and, indeed, from job to job within the same
organization. The sequence of steps may also vary from job to job and organization to
organization.

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1. Reception: A company is known by the people it employs- In order to attract people
with talents, skills and experience a company has to create a favorable impression on the
applicants right from the stage of reception. Whoever meets the applicant initially should
be tactful and able to extend help in a friendly and courteous way. Employment
possibilities must be presented honestly and clearly. If no jobs are available at that point
of time, the applicant may be asked to call back the personnel department after some time.
2. Screening Interview: A preliminary interview is generally planned by large
organizations to cut the costs of selection by allowing only eligible candidates to go
through the further stages in selection. A junior executive from the Personnel Department
may elicit responses from applicants on important items determining, the suitability of an
applicant for a job such as age, education experience, pay expectations, aptitude, location,
choice etc. This courtesy interview, as it often called, helps the department screen out
obvious misfits. If the department finds candidate suitable, a prescribed application form
is given to the applicants to fill and submit.

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3. Application Blank: Application blank or form is one of the most common methods
used to collect information on various aspects of the applicants' academic, social,
demographic, work-related background and references. It is a brief history sheet of an
employee's background, usually containing the following things:
Contents of Application Blanks
 Personal data (address, sex, identification marks)
 marital data (single or married, children, dependents)
 Physical data (height, weight, health condition)
 Educational data (levels of formal education, marks, and distinctions)
 Employment data (past experience, promotions, nature of duties, reasons for
leaving previous jobs; salary drawn, etc.)
 Extra-curricular activities data (sports/games, NSS, NCC, prizes won, leisure-time
activities)
 References (names of two or more people who certify the suitability of an
applicant of the advertised position)

4. Selection Testing: A test is a standardized, objective measure of a person's behavior,

performance or attitude. It is standardized because the way the-test is carried out, the
environment in the test is administered and the ways the individual scores are calculated -
are uniformly applied. It is objective in that it tries to measure individual differences in a
scientific way, giving very little -room for individual bias and interpretation.
Over the years, employment tests have not only gained importance but also a certain
amount of inevitability in employment decisions. Since they try to objectively determine
how well an applicant meets job requirements, most companies do not hesitate to invest
their time and money in selection testing in a big way. Some of the commonly used
employment tests are.
(a) Intelligence tests: These are mental ability tests. They measure the incumbent's
learning ability and also the ability to understand instructions and make judgments. The
basic objective of intelligence tests is to pick up employees who are alert and quick at
learning things so that they can be offered adequate training to improve their skills for the

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benefit of the organization. Intelligence tests measure not a single trait, but rather several
abilities such as memory, vocabulary, verbal fluency, numerical ability, perception,
spatial: visualization, etc. Stanford-Binet test, Binet-Simon test, The Wechsler Adult
Intelligence scale is examples of standard intelligence tests. Some of these tests are
increasingly used in competitive examinations while recruiting graduates and
postgraduates at entry management positions in banking, insurance and other financial
services Sectors.
(b) Aptitude tests: Aptitude tests measure an individual's potential to learn certain skills,
clerical, mechanical, mathematical, etc. These tests indicate whether or not an individual
has the ability to learn a given job quickly and efficiently. In order to recruit efficient
office staff, aptitude tests are necessary.
Clerical tests, for example, may measure the incumbent's ability to take notes, perceive
things correctly and quickly locate things ensure proper movement of files, etc. Aptitude
tests, unfortunately, do not measure on the job motivation. That is why the aptitude test is
administered in combination with other tests like, intelligence and personality tests.
(c) Personality tests: Of all the tests required for selection, personality tests have
generated lot of heat and controversy. The definition of personality, method of measuring
per factors and the relationship between personality factors and actual job criteria has
been the subject of much discussion. Researchers have also questioned whether applicants
answer all the items truthfully or whether they try to respond in a socially desirable
manner. Regardless of these objections, many people still consider personality as an
important component of job success.
(d) Achievement tests: These are designed to measure what the applicant can do on the
job currently, i.e., whether the tester actually knows what he or she claims to know. A
typing test shows typing proficiency, a short hand test measures the testis ability to take
dictation and transcribe, etc., Such proficiency tests are also known as work sampling
tests. Work sampling is selections test wherein the job applicant's ability to do a small
portion of the job is tested. These tests are of two types; Motor, involving physical
manipulation of things e.g., trade tests for carpenters, plumbers, electricians) or Verbal,

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involving problem situations that are primarily language-oriented-or people oriented (e.g.,
situational tests for supervisory jobs).
(e) Simulation tests: Simulation exercise is a test, which duplicates many of the activities
and problems an employee faces while at work. Such exercises are commonly used for
hiring managers at various levels in an organization. To assess the potential of a candidate
for managerial positions assessment centers are commonly used.
(f) Assessment center: An assessment center is an extended work sample. It uses
procedures that incorporate group and individual exercises. These exercises are designed
to simulate the type of work, which the candidate will be expected to do. Initially, a small
batch of applicants comes to the assessment center (a separate room). Their performance
in the situational exercises is observed and evaluated by a team of 6 to 8 trained assessors.
The assessor’s judgments on each exercise are compiled and combined to have a summary
rating for, each candidate being assessed.
(g) Graphology Tests: Graphology involves a trained evaluator to examine the lines,
loops, hooks, strokes, curves and flourishes in a person's handwriting to assess the
person's personality and emotional make-up. The recruiting company may, for example,
ask applicants to complete application forms and write about why they want a job. These
samples may be finally sent to a graphologist for analysis anti the results may be put to
use while selecting a person. The use of graphology, however, is dependent on the
training and expertise of the person doing the analysis. In actual practice, questions of
validity and just plain skepticism have limited its use.
(h) Polygraph (Lie-detector) tests. The polygraph records physical changes in the body
as the test subject answers a series of questions. It records fluctuations in respiration,
blood pressure and perspiration on a moving roll of graph paper. The polygraph operator
form a judgment as to whether the subject's response was truthful or deceptive by
examining the biological movements recorded on the paper. Polygraphs, despite strong
resistance by many applicants, are increasingly being used by companies, which have
problems with inventory and security of funds. Government agencies have begun to use
the polygraph, especially for filling security police, fire and health positions. Critics,
however, question the appropriateness of polygraphs in establishing the truth about an

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applicant's behavior. The fact is that polygraph records biological reaction in response to
stress and does not record lying or even the conditions necessarily accompanying lying. Is
it possible to prove that the responses recorded by the polygraph occur only because a lie
has been told? What about those situations in which a person lies without guilt (a
pathological liar) or lies believing the response to be true? The fact of the matter is that
polygraphs are neither reliable nor valid. Since they invade the privacy of those tested,
many applicants vehemently oppose the use of polygraph as a selection tool.
(i) Integrity tests: These are designed to measure employee's honesty to predict those
who more likely to steal from an employer or otherwise act in a manner unacceptable to
the organization.

5. Selection Interview: Interview is the oral examination of candidates for examination

of, employment. This is the most essential step in the selection Process. In this step the
interviewer matches the information obtained about the candidate through various means
to the job requirements and to apply on-line. Create an e-form which can be filled up on
line, and then, you do the calling-up.
Finally, ask HR to maintain a database on all applications. You may not have an opening
today. But, remember tomorrow may be another desperate day for you to look for people
with requisite skills, qualifications and experience.
6. Medical Examination: Certain jobs require certain physical qualities like clear vision,
perfect hearing unusual stamina, tolerance of hard working conditions, clear tone, etc.
Medical examination reveals whether or not a candidate processes these qualities Medical
examination can give the following information:
· Whether the applicant is medically suitable for the specify job or not
· Whether the applicant has health problems or psychological attitudes likely to interfere
with work efficiency or future attendance.
· Whether the applicant suffers from bad health, which should be corrected before he can
work satisfactorily (such as the need for spectacles).
· Whether the applicant's physical measurements are in accordance with job requirements
or not.

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7. Reference Checks: Once the interview and medical examination of the candidate is
over, the Personnel Department will engage in checking references. Candidates are
required to give the names of two or these references in their application forms. These
references may be from the individuals who are familiar with the candidate's academic
achievements or from the applicant's previous employer, who is well versed with the
applicant's job performance and sometimes from co-workers. In case the reference check
is from the previous employer, information in the following areas may be obtained. They
are: job tide, job description, period of employment, pay and allowances, gross
emoluments, benefits provided, rate of absence, willingness of the previous 'employer to
employ the candidate again, etc. Further, information regarding candidate's regularity at
work, character, progress, etc., can be obtained. Often a telephone call is much quicker.
The method of mail query provides detailed information about the candidate's
performance, character and behavior. However, a personal visit is superior to the mail and
telephone methods and, is used where it is highly essential to get detailed, first-hand
information, which can also be secured by observation. Reference checks are taken as a
matter of routine and treated casually or omitted entirely in many organizations. But a
good reference check, when used sincerely will fetch useful and reliable information to
the organization.
8. Hiring decision: The line manager concerned has to make the final decision now
whether to select or reject a candidate after soliciting the required information through
different discussed earlier. The line manager has to take adequate care in taking the final
decision because of economic, behavioral and social implications of the selection
decisions. A careless decision of rejecting a candidate would impair the morale of the
people and they are likely suspected the selection procedure and the very basis of
selection of a particular organization. A true understanding between line managers and
personnel managers should be established so as to facilitate good selection decisions.
After taking the final decision, the organization has to intimate this decision to the
successful well as unsuccessful candidates. The organization sends the appointment order
to the successful candidates either immediately or after sometime depending upon its time
schedule.

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Training:
Training is a process of learning a sequence of programmed behavior. It is application of
knowledge. It gives people an awareness of the rules and procedures to guide their
behavior. It attempts to improve their performance on the current job or prepare them for
an intended job.
Need for training - arises from more than one reason like:
i. An increased use of technology in production;
ii. Labor turnover arising from normal separations due to death or physical
incapacity, for accidents, disease, super-annuation voluntary retirement, promotion
within the organization and change of occupation or job;
iii. Need for additional hands to cope with an increased production of goods and
services;
iv. Employment of inexperienced, new or badli labor requires detailed instruction for
an effective performance of a job;
v. Old employees need training to enable them to keep abreast of the changing
methods, techniques and use of sophisticated tools and equipment;
vi. Need for enabling employees to do the work in a more effective way, to reduce
learning time, reduce supervision time, reduce waste and spoilage of raw material
and produce quality goods, and develop their potential.
vii. Need for reducing grievances and minimizing accident rates;
viii. Need for maintaining the validity of an organization as a whole and raising the
morale of its employees.
Steps In Training Programmes:
Training programmes are a costly affair, and a time consuming process. Therefore, they
need to be drafted very carefully. Usually in the organisation of training programmes, the
following steps are considered necessary:
a. Discovering or identifying the training needs.
b. Getting ready for the job.
c. Preparation of the learner.
d. Presentation of operations and knowledge.

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 e. Performance try-out.
f. Follow-up and Evaluation of the programme.
Training Methods / Techniques:
The forms and types of employee training methods are inter-related. It is difficult, if not
impossible; to say which of the methods or combination of methods is more useful than
the other. In fact, methods are multi- faceted in scope and dimension, and each is suitable
for a particular situation. The methods of training as follows;
 On-the-Job-Training (OJT)
 Job Instruction Training (JIT)
 Vestibule Training
 Training by experienced workmen
 Classroom or Off-the-Job-Training
 Lecture
 Conferences
 Group discussion
 Case studies
 Role playing
 Programme instruction
 T-group training
DIRECTING:
Meaning:
According to Dale, direction is telling people what to do and seeing that they do it to the
best of their ability. It is through directing that managers get the work done through
people. It consists of:
o Issuing orders and instructions by a superior to his subordinates (Communication).
o Guiding, advising and helping subordinates in the proper methods of work
(Leadership).
o Motivating them to achieve goals by providing incentives, good working
environment, etc. (Motivation).
o Supervising subordinates to ensure compliance with plans (Supervision).

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 o Thus, the scope of direction is very wide. It includes all those activities, which a
manager undertakes to, influence the actions of his subordinates and achieve goals.
(Koontz and O’Donnell).
Nature and Purpose:
Direction is a vital managerial function. Planning, organizing and staffing are preparatory
functions. It is through direction that managers get things done. Hence, it is also called
management in action. The importance of directing function in the process of
management may be discussed under following heads:

Initiates action: Direction lends meaning to other managerial functions such as planning,
organizing and staffing. It is through direction, managers seek to achieve goals. In most
systematic planning, sound organization and staffing do not ensure accomplishment of
along with these functions, managers must initiate action by:
 Issuing instructions,
 Providing guidance,
 Supervising work, and
 Motivating subordinates to realize goals.
Without direction, other functions of management remain ineffective. Direction makes
happen.
Achieves integration: Direction creates harmony and cooperation among the members of
a group. In an organization, different people at different Levels perform the total work.
Unless managers supervise the work in a proper way, things do not move in a desired
direction. Direction secures the whole-hearted cooperation of people at all levels through
good communication, people-oriented supervision and motivation. It tries to integrate the
efforts of individuals in a proper way.
Motivates people: Direction motivates employees to achieve superior performance. To
this end, attractive incentives, healthy work climate, guidance and counseling etc., are
provided to employees. Employees are made to realize that their performance alone
guarantees organization’s success. Unless they contribute in a real way, there is no future.

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This ultimately helps in getting superior performance from employees. Direction, thus,
makes common men do uncommon things.
Facilitates changes: Direction facilitates necessary changes in an organization. It helps
an organization to introduce changes smoothly. For example, employees often resist
introduction of computers and, robots in manufacturing operations, fearing loss of
employment. Managers can remove such doubts by emphasizing the fact that automation
and computerization will ultimately help the organization to achieve growth and, thereby,
provide attractive incentives to employees. Through persuasive leadership and proper
communication managers can secure the cooperation of employees. They can introduce
changes in a smooth way.

Attains balance and stability: Direction helps an organization to strike a harmonious

balance between individual needs and organizational demands. People are made to work
hard in an attempt to realize organizational goals and thereby earn their rewards. They are
compelled to use resources judiciously and achieve steady progress. In the Words of
Dimock, "The heart of Administration is the direction function which involves
determining the scope, giving orders and instructions and providing dynamic leader ship".
Direction converts plans into action. It is the nucleus around which the practice of
management is built. Without proper direction, people do not work to their full capacity,
and goals may remain as dreams. By putting everything on the right track continuously,
direction ensures stability to an organization.
Principles of directing:
Direction is a complex function as it deals with people whose behaviour is unpredictable.
Effective direction is an art which a manager can learn and perfect through practice.
However, managers can follow the following principles while directing their subordinates.
1. Harmony of objectives – individuals joins organisations to satisfy their
physiological and psychological needs. They are expected to work for the achievement of
organisational objectives. They will perform their tasks better if they feel that it will
satisfy their personal goals. Therefore, management should reconcile the personal goals
of employees with the organisational goals.

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 2. Maximum individual contribution – organisational objectives are achieved
at the optimum level when every individual in the organisation makes maximum
contribution towards them. Managers should, therefore, try to elicit maximum possible
contribution from each subordinate.
3. Unity of command – a subordinate should get orders and instructions from
one superior only. If he is made accountable to two bosses simultaneously, there will be
confusion, conflict, disorder and indiscipline in the organisation. Therefore, every
subordinate should be asked to report to only one manager.

4. Appropriate techniques – the managers should use correct direction

techniques to ensure efficiency of direction. The techniques used should be suitable to the
superior, the subordinate and the situation.
5. Direct supervision – direction becomes more effective when there is a direct
personal contact between a superior and his subordinate. Such direct contact improves the
morale and commitment of employees. Therefore, wherever possible direct supervision
should be used.
6. Strategic use of informal organisation – management should try to
understand and make use of the informal groups to strengthen formal or official
relationships. This will improve the effectiveness of direction.
7. Managerial communication – a good system of communication between a
superior and his subordinates helps to improve mutual understanding. Upward
communication enables a manager to understand the subordinates and gives an
opportunity to the subordinates to express their feelings.
8. Comprehension – communication of orders and instructions is not sufficient.
Managers should ensure that subordinates correctly understand what they are to do and
how and when they are to do. This will avoid unnecessary queries and explanations.
9. Effective leadership – managers should act as leaders so that they can
influence the activities of their subordinates without dissatisfying them. As leaders, they
should and counsel subordinates in their personal problems too. In this way, they can win
the confidence and trust of their subordinates.

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 10. Principle of follow through – directing is a continuous process. Therefore,
after issuing orders and instructions, a manager should find out whether the subordinates
are working properly and what problems they are facing. He should modify his orders, if
necessary, in the light of these findings.

MOTIVATION:
Meaning and Definition:
Motivation refers to goal-directed behaviour. It means what a person will choose
to do when several alternatives are available to him. It also refers to the strength of his
behaviour after he has exercised the choice, and the persistence with he will engage in
such behaviour.
Motivation is the process of channeling a person's inner drives so that he wants to
accomplish the goals of the organization. Motivation concern itself with the will to work.
It seeks to know the incentives for work and tries to find out the ways and means whereby
their realization can be helped and encouraged. Managers, by definition, are required to
work with and through people, so they must gain at least some understanding of the forces
that will motivate the people they are to manage. People are complex and they are
uniquely different. What motivates one person may not motivate another. Most successful
managers have learned to understand the concept of human motivation and are able to use
that understanding to achieve higher standards of subordinate work performance.

According to Koontz and O’Donnell, “Motivation is a general term applying to the

entire class of drives, desires, needs wishes and similar forces that induce an individual or
a group people to work”.

Scott defines, “Motivation means a process of stimulating people to action to accomplish

desired goals”.

In simple words, Motivation is the process of inducing people inner drives and
actions towards certain goals and committing his energies to achieve these goals.

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Nature of Motivation:
It is difficult to describe the nature of motivation. However, the following points
about it deserve to be noted;
a. A psychological concept:
Motivation deals with workers on the psychological plane. Even
workers with extraordinary abilities will not be able to perform as desired until
they are effectively motivated. Effective performance on the part of workers can
be said to be the result of their abilities backed by proper motivation. Thus,
Performance = Abilities x Opportunity x Motivation. While motivation has the
capacity to secure desired performance from workers, it can be effective only upon
an accurate analysis of worker’s needs for the satisfaction of which they may be
induced to work in the desired manner.
b. Motivation is total, not piecemeal:
A worker cannot be motivated in parts. For successful motivation,
he should be treated as an indivisible unit, taking into account all his urges and
aspirations. A motivational device with promises fulfillment of some needs of
workers and not others, will fall short of its objective of evoking total commitment
of workers.
c. Motivation is determined by human needs:
A worker will perform the desired activity only so long as he sees
his action as a means of continued fulfillment of his strongly –felt needs. Once a
particular needs is satisfied for good, he may lose interest in the activity that
provides him satisfaction of the said need. In such a case, he will have to be
provided awareness of satisfaction of his other needs so that he continues to be
inclined to pursue the said activity.
d. Motivation may be financial or non-financial:
Motivation may be provided in several ways depending upon the
needs, emotions and sentiments of workers. It may be classified as financial and
non-financial. Financial motivation seeks to satisfy physiological and security
needs and it is by way of wages, allowances, bonus, prizes and other perquisites.

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 On the other hand, non-financial motivation which seeks to satisfy social,
recognition and creative needs may be by way of appreciation for the work done,
higher status and greater responsibility, or increased participation in decision
making.
e. Motivation is a constant process:
Human needs are infinite. No sooner a person has satisfied one
need than he seeks to satisfy another. As very aptly put by McGregor, “Man is a
wanting animal- as soon as one of his needs is satisfied another appears in its
place. This process is unending…” Motivation cannot be a time-bound process.
Nor can it be a touch-and- go affair. To keep the workers continuously engaged in
the planned activities, they must be kept in a state of continued animated tension
by means of unfolding before them ever new avenues for the satisfaction of their
limitless needs. The Importance of Motivation:

Motivation is one of the most crucial factors that determine the efficiency and
effectiveness of an organisation. Motivation is an integral part of management process and
every manager must motivate his subordinates to create in them the will to work. The
importance of motivation is briefly discussed below;

 Proper utilization of human resources possible since it inspires employees to

make best possible use of different factors of production.
 Proper motivation improves the efficiency of operation.
 Motivation creates a willingness on the part of workers to do the work in a
better way.
 Higher motivation leads to job satisfaction. As a result of this labour
absenteeism and turnover are low.
 Motivation helps to solve the labour problems and maintains good labour
relations
 Motivation is the basis of co-operation to get the best results out of the efforts
of the men on the job. Efficiency and output are increased through co-
operation.
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  High motivation helps to reduce resistance to change.
 By providing proper motivation, all the members will try to be as efficient as
possible and to improve upon their skill and knowledge.
 Financial and non-financial incentives not only retain the existing employees
but also attract the competent employees from outside the enterprise.
 A proper motivation scheme promotes closer relationship between enterprise
and workers. Kinds and types of Motivation:

Motivation can be classified on several bases. They are;

a. On the basis of approach

o Positive motivation ; Negative motivation

b. On the basis of the types of incentives

o Financial motivation; Non-financial motivation

c. On the basis of the nature of reward

o Extrinsic motivation; Intrinsic motivation

(i) Positive motivation:

Positive motivation implies creation of an environment in which people can satisfy their
needs and aspirations. Under it rewards and incentives are offered to inspire employees.
All necessary facilities are provided to workers. They are offered prizes and awards for
best performance. Positive motivation removes the psychological barrier and develops a
sense of affiliation.

(ii) Negative motivation:

Negative motivation is based on force, and threats. The fear of punishment or unfavorable
consequences affects the behavioral changes. If the worker fails to complete the work,
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they may be threatened with demotion, dismissed, lay off, pay cut etc, involves creating a
sense of fear or unhelpful environment. Which the workers have to suffer in case their
performance does not come up to the desired level. This gives maximum benefits in the
short run.

(iii) Financial motivation:

Financial motivation implies use of monetary benefits to inspire employees. Financial

incentives include wages and salaries, bonus, fringe benefits, retirement benefits, etc.
money plays an important role in motivation. Money helps to satisfy physiological and
security needs of workers. Money is also useful in satisfying social needs to some extent
because money is often recognise as a symbol of power, prestige and status. But money is
not only motivator. It fails very often to satisfy higher level needs like ego and
selfactulisation. Employees do not always run after money. They also want status,
recognition autonomy and challenge. Once the physiological and security needs are
fulfilled money ceases to be motivator.

(iv) Non-financial motivation:

Non-financial motivation motivators are not associated with monetary rewards. These
include recognition of work done, greater involvement in decision-making, responsibility,
challenging job, etc. Praise, competition, knowledge of results, suggestion system, and
opportunity for growth are other important non-financial motivators. Values and attitudes
of an individual also determine his behaviour. For e.g. a status conscious executive may
be motivated by a carpeted floor, private parking site or personal secretary.

(v) Extrinsic motivation:

This motivation is induced by external factors, which are primarily financial in

nature. These incentives and rewards have been subjected of debate, whether they
really motivated the employees or simply move them to work or perform. These

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 motivations include higher pay, retirement benefits, rest periods, holidays, profit
sharing schemes, health and medical insurance, vacation etc.

(vi) Intrinsic motivation:

Intrinsic motivation is available at the time of performance of work. These motivations

provide a satisfaction during the performance of the work itself. Some of the intrinsic
motivations are praise, recognition, responsibility, esteem, power, status, participation etc.

Theories of Motivation:

1. Maslow’s Need Hierarchy theory:

According to Abraham Maslow, a U.S psychologist, man is a wanting animal. Abraham

H. Maslow developed his theory on the basis of human needs. He was of the opinion that
human behaviour is directed towards the satisfaction of needs. He has a variety of wants
or needs. He proposed that human needs can be arranged in a particular order from the
lowest to the highest. All motivated behaviour of man is directed towards the satisfaction
of his needs. The theory postulated that people are motivated by multiple needs, which
could be arranged in a hierarchy. Maslow offers a general theory of motivation called the
'need hierarchy theory'. Maslow classified all human needs into five categories as shown
in the figure,

1. Physiological needs:

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Physiological needs are the biological needs required to preserve human life. These needs
include needs for food, clothing and shelter. These needs must be met at least partly
before higher level needs emerge.

2. Safety needs:

Once physiological needs are satisfied, the safety or security needs emerge and become
dominant. These needs imply the need for self-preservation and economic independence.
These are the needs of being free from physical danger, threat and deprivation. People
want bodily safety, job security, provision for old age, insurance against risks, etc. these
needs are particularly significant where management policies are uncertain and arbitrary.
An organisation can satisfy these needs through pension plan, guarantee of job, insurance
plan, etc.

3. Social needs:

After the needs of the body and security are satisfied then a sense of belonging and
acceptance becomes predominant in motivating behaviour. These needs are for love,
friendship, exchange of feelings and grievances, recognition, conversation, belongingness,
companionship etc. social needs tend to be stronger for some people than for others and
stronger in certain situations.

4. Esteem needs:

These are concerned with awareness of self-importance and recognition from others.
Esteem needs consist of such things as self confidence, self- respect, independence,
power, prestige, achievement, praise and status.

5. Self actualization needs:

This implies “the desire to become more and more of what one is, to become everything
that one is capable of becoming”. It involves self fulfillment or achieving what one
considers to become everything what one considers to be his mission in life. It urges an
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individual to realize his full potential for continued self-development and for being
creative in the broadest sense of the word. E.g. A teacher thinks that he is capable of
giving best teaching to students. A doctor thinks that he is capable of saving the life of a
patient. What a man CAN he MUST be.

Unit V

Co-ordination:
Although Henri Fayol, James Mooney, Ordway Tead, Lyndall F. Urwick, Luther
Gullick and Louis A. Allen, all consider co-ordination as a separate function of
management, it seems more accurate to treat co-ordination as the essence of managing
because the achievement of harmony of individual efforts towards the accomplishment of
group goals is the very purpose of management. Like the conductor of an orchestra, the
task of a manager is to unify and harmonise the activities of subordinates for the
achievement of common purpose. Co-ordination permeates or transverses the entire
process of management.

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 It is a common silken thread running through all management functions.
Management functions are like flowers in the garland of co-ordination. Managers at all
levels must co-ordinate the efforts of their subordinates. They have to secure and
maintain unified action throughout an organisation just as a music director creates
harmony in music by integrating different voices of musicians. Manager co-ordinates by
securing and maintaining unified action throughout the organisation. Every function of
management must in itself have to be co-ordinated.

For example, planning is not effective unless departmental plans are properly
balanced and integrated. Organisation would be poor if there is a lack of harmony in
horizontal and vertical authority relationships. Staffing must be consistent with the needs
and resources of the enterprise. Direction is not sound unless orders and instructions are
consistent with the needs of the situation. Controlling creates harmony between plans and
performance. Thus, co-ordination is inherent in all managerial functions. Each of the
managerial functions is an exercise in co-ordination. A manager achieves co-ordination
through the management process and co-ordination is the outcome of managerial
functions. In fact, co-ordination makes planning more purposeful, organisation better-knit
and control more regulative, it is the key to the process of management. Co-ordination is
the result of the process of management.
Meaning and definition of co-ordination:

Co-ordination implies an orderly pattern or arrangement of group efforts to

ensure unity of action in pursuit of common objectives. It involves and orderly
synchronisation of the efforts of individual components of an enterprise to provide the
proper timing, amount, quality, place and sequence of efforts so that the stated objectives
may be achieved with minimum of friction. Co-ordination requires unification of diverse
and specialised activities. It is the task of blending the activities of individual and group
efforts in order to maximise contribution towards the accomplishment of common goals.
According to Henri Fayol, “To co-ordinate is to harmonise all the activities of a
concern so as to facilitate its working and its success. In a well-co-ordinated enterprise,

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each department or division works in harmony with others and is fully informed of its role
in the organisation. The working schedules of the various departments are constantly
attuned to circumstances.” The purpose of co-ordination is to secure harmony of action or
team-work and concurrence of purpose.
In the words of Haimann, “Co-ordination is the orderly synchronisation of efforts
of the subordinates to provide the proper amount, timing and quality of execution so that
their unified efforts lead to the stated objective, namely the common purpose of the
enterprise.” Mooney and Reiley have defined co-ordination as “the arrangement of group
effort, to provide unity of action in the pursuit of a common purpose.”

Nature of co-ordination:
The fore-going reveals the following features of co-ordination;

1. Co-ordination is not a distinct function, but the very essence of management.

It is inherent in the managerial job.
2. Co-ordination is the basic responsibility of management and it can be
achieved through managerial functions. No manager can evade or avoid this
responsibility.
3. Co-ordination does not arise spontaneously or by force. It is the result of
conscious and concerted action by management.
4. The heart of co-ordination is the unity of purpose which involves fixing the
time and manner of performing various activities.
5. Co-ordination is a continuous or on-going process. It is also a dynamic
process.
6. Co-ordination is required in group efforts not in individual effort. It involves
the orderly pattern of group efforts. There is no need for co-ordination when
an individual works in isolation without affecting anyone’s functioning.
7. Co-ordination is the responsibility of each and every manager.
8. Co-ordination has a common purpose of getting organisational objectives
accomplished.

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 According to Allen, “A manager in managing must co-ordinate the work for which
he is accountable by balancing, timing and integrating.” Thus, balancing, timing and
integrating are the three elements of co-ordination. Balancing is ensuring that enough of
one thing is available to support or counterbalance the other. It implies creating a balance
between the resources of different departments and individuals. Timing means adjusting
the time schedules of different activities so that they support and reinforce each other.
Integrating involves unification of the diverse interests under the common purpose.

Need and importance of co-ordination – co-ordination offers the following advantages.

1. Efficiency and effectiveness – co-ordination helps to improve the efficiency

of operations by avoiding the overlapping of efforts and duplication of work.
Integration of individual efforts leads to teamwork. Co-ordination makes a
productive enterprise out of diverse activities and produces the total result
which is greater than the sum of individual contributions. This is called
synergy. The quality of co-ordination determines the effectiveness of
organised efforts. Therefore, co-ordination is known as the first principle of
organisation.

2. Unity of direction – co-ordination helps to ensure unity of action in the face

of disruptive forces and by welding different work groups it facilitates the
stability and growth of an organisation. It provides unity of action and helps to
avoid conflicts between line and staff elements.
3. Human relations – co-ordination helps to improve team spirit and morale of
employees. In a well-co-ordinated organisation, organisational goals and
personal goals of people are reconciled and as a result employees derive a
sense of security and job satisfaction.
4. Quintessence of management – co-ordination is an all-inclusive concept and
the end result of management process. According to Mary Parker Follett, “The
first test of effective administration should be whether you have a business

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 with all its parts so co-ordinated, so moving together in their closely knit and
adjusting activities, so interlocking that they make a working unit that is not a
congenis of separate pieces, but a functional whole or integrated unit.” Thus,
co-ordination helps in the accomplishment of organisational goals.

Types of co-ordination:

The co-ordination may be divided on different bases, namely;

 Scope - on the basis of scope or coverage, co-ordination can be.

1. Internal – refers to co-ordination between the different units of an

organisation within and is achieved by integrating the goals and activities of
different departments of the enterprise.
2. External – refers to co-ordination between an organisation and its external
environment comprising government, community, customers, investors, suppliers,
competitors, research institutions, etc. It requires proper match between policies
and activities of the enterprise and the outside world.

 Flow - on the basis of flow, co-ordination can classified into:

1. Vertical – implies co-ordination between different levels of the

organisation and has to ensure that all the levels in the organisation act in harmony
and in accordance with the goals and policies of the organisation. Vertical co-
ordination is assured by top management through delegation of authority.

2. Horizontal or lateral – refers to co-ordination between different

departments and other units at the same level of the management hierarchy. For
instance, co-ordination between production department and marketing department
is horizontal or lateral co-ordination.
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Co-ordination may also be:

Procedural and substantive – which according to Herbert A. Simon, procedural

co-ordination implies the specification of the organisation in itself, i.e. the
generalised description of the behaviour and relationship of the members of the
organisation. On the other hand, substantive co-ordination is concerned with the
content of the organisation’s activities. For instance, in an automobile plant an
organisation chart is an aspect of procedural co-ordination, while blueprints for the
engine block of the car being manufactured are an aspect of substantive co-
ordination.
Techniques of co-ordination – the main techniques of effective co-ordination are
as follows.
1. Sound planning – unity of purpose is the first essential condition of co-
ordination. Therefore, the goals of the organisation and the goals of its units must
be clearly defined. Planning is the ideal stage for co-ordination. Clear-cut
objectives, harmonised policies and unified procedures and rules ensure
uniformity of action.

2. Simplified organisation – a simple and sound organisation is an important

means of co-ordination. The lines of authority and responsibility from top to the
bottom of the organisation structure should be clearly defined. Clear-cut authority
relationships help to reduce conflicts and to hold people responsible. Related
activities should be grouped together in one department or unit. Too much
specialisation should be avoided as it tends to make every unit an end in itself.
3. Effective communication – open and regular communication is the key to co-
ordination. Effective interchange of opinions and information helps in resolving
differences and in creating mutual understanding. Personal and face-to-face
contacts are the most effective means of communication and co-ordination.
Committees help to promote unity of purpose and uniformity of action among
different departments.

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4. Effective leadership and supervision – effective leadership ensures co-
ordination both at the planning and execution stage. A good leader can guide the
activities of his subordinates in the right direction and can inspire them to pull
together for the accomplishment of common objectives. Sound leadership can
persuade subordinates to have identity of interest and to adopt a common outlook.
Personal supervision is an important method of resolving differences of opinion.
5. Chain of command – authority is the supreme co-ordinating power in an
organisation. Exercise of authority through the chain of command or hierarchy is
the traditional means of co-ordination. Co-ordination between interdependent
units can be secured by putting them under one boss.
6. Indoctrination and incentives – indoctrinating organisational members with
the goals and mission of the organisation can transform a neutral body into a
committed body. Similarly incentives may be used to create mutuality of interest
and to reduce conflicts. For instance, profit-sharing is helpful in promoting team-
spirit and co-operation between employers and workers.
7. Liaison departments – where frequent contacts between different
organisational units are necessary, liaison officers may be employed. For instance,
a liaison department may ensure that the production department is meeting the
delivery dates and specifications promised by the sales department. Special co-
ordinators may be appointed in certain cases. For instance, a project co-ordinator
is appointed to co-ordinate the activities of various functionaries in a project which
is to be completed within a specified period of time.
8. General staff – in large organisations, a centralised pool of staff experts is
used for co-ordination. A common staff group serves as the clearing house of
information and specialised advice to all department of the enterprise. Such
general staff is very helpful in achieving inter-departmental or horizontal co-
ordination. Task forces and projects teams are also useful in co-ordination.
9.Voluntary co-ordination – when every organisational unit appreciates the
workings of related units and modifies its own functioning to suit them, there is
self-co-ordination. Self-co-ordination or voluntary co-ordination is possible in a

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climate of dedication and mutual co-operation. It results from mutual consultation
and team-spirit among the members of the organisation. However, it cannot be a
substitute for the co-coordinative efforts of managers.
Co-operation:

Co-ordination and co-operation – the two should not be confused because the two
terms denote quite different meanings. Co-operation refers to the collective efforts
of people who associate voluntarily to achieve specified objectives. It indicates
merely the willingness of individuals to help each other. It is the result of a
voluntary attitude of a group of people. Co-ordination is much more inclusive,
requiring more than the desire and willingness to co-operate of the participants. It
involves a deliberate and conscious effort to bring together the activities of the
various individuals in order to provide unity of action. It requires concurrence of
purpose, harmony of effort and concerted action. It is much more than mere
reconciliation of differences or avoidance of friction.
Co-operation provides the foundation for co-ordination by enlisting voluntary
efforts which facilitate co-ordination, but by itself it cannot guarantee co-
ordination. Co-ordination does not arise automatically from the voluntary efforts
of the manager. For instance, a group of six persons who attempt to move a heavy
object are willing and eager to co-operate with one another. They are fully aware
of their common purpose and are trying their best to move the object, but they
cannot be successful in their attempt unless one of them co-ordinates their efforts.
He must give proper directions to all members of the group to apply the right
amount of effort, at the right place and at the right time. Co-operation is a
necessary, but not a sufficient condition of co-ordination.
Difference between co-ordination and co-operation:
Difference between co-ordination and co-operation are given below.
1. Status – co-ordination is the essence of management and it is vital for the
success of all managerial functions. Co-operation, on the other hand, does not
enjoy the status of the essence of management. Co-operation is no doubt

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 essential for successful co-ordination, but it is more of a personal attitude
rather than organisational.
2. Nature of work – in the organisation, the nature of work is such that it needs
to be divided and then integrated. Co-ordination of all interdependent
activities is utmost necessary, but co-operation does not arise out of any
limitations of organisation structure. The individuals may learn to co-operate
with each other even though their activities may not be related.
3. Deliberate – co-ordination requires deliberate and intentional efforts of a
manager. On the other hand, co-operation is voluntary. In other words, co-
ordination is a contrived process, whereas co-operation is a natural process.
4. Scope – co-ordination is broader in scope than co-operation. It includes both
co-operation and deliberate efforts to maintain unity of action and purpose.
According to McFarland, “co-ordination is a far more inclusive term embracing the idea
of co-operation. Co-operation, that is mere willingness of individuals to help each other,
cannot serve as a satisfactory substitute for co-ordination. Co-operation is for most part
the result of voluntary attitudes on the part of people in an organisation. Co-ordination,
on the other hand, cannot be voluntarily produced by a number of co-operating persons.
Co-ordination is a state of affairs which an executive brings about through deliberate
action on his part.” Thus, co-ordination is much more than co-operation. Co-ordination is
the epitome of all managerial functions while co-operation is an attitude of an individual
or group. Need for co-ordination arises due to limitations of formal organisation
structure, but co-operation is necessary even in case of non-interdependent activities.
Thus, co-ordination is a broader concept than co-operation, but to be effective an
organisation requires both. Co-operation will be ineffective in the absence of co-
ordination just as co-ordination is not possible without co-operation.
Co-ordination Vs control: – these are two different, but related functions. Control is one
of the elements of the management process. Co-ordination is the essence of management
itself and is an all-inclusive function. Like other managerial functions, control is an
exercise in co-ordination. Co-ordination is a core theme and control is a facilitative
function to promote co-ordination.

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The main points of similarity and relationship between control and co-ordination are as
follows.

 Both of them are classical concepts developed at an early stage in the evolution
of management thought. These concepts have stood the test of time and are still
very much valued.

 Both are managerial activities aimed at achieving organisational goals most

efficiently. Their purpose is to ensure a steady state of the organisation in terms of
its continuity, consistency, discipline and precision.

 Both processes are based on authority.

 The processes of control and co-ordination are built into the organisational
structure and are relatively more centralised than the other processes.

 Both are rational concepts which serve as links between organisational ends
and means. They are used to maintain organisations as rational systems free from
conflicts, confusion and chaos.

 Both control and co-ordination are primarily internal organisational processes,

with little interface with the external environment. As a result management is
relatively free to design and administer control and co-ordination systems and
techniques.

 Both control and co-ordination have a limited time perspective. They are
essentially short range processes concerned with regulation and unification of
ongoing organisational activity.

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 Control and co-ordination are highly formalized processes. However, self-
control and self-co-ordination are useful to organisations.

 Both control and co-ordination are required in every organisation. Control is

needed to maintain order and consistency in the behaviour of people and events.
Co-ordination is required to unify the differentiated activities and to integrate the
diverse goals, interests and roles.

Co-ordination concept
Coordination has become necessary. There must be coordination among the
individuals or group of individuals either working in the same department or in
various departments of the firm to whom separate segmented jobs were assigned.

Coordination is an important function of management. It is very important

that without which other managerial functions cannot be performed effectively. It
is the continuous and never ending process in management because it is achieved
through the performance of functions. And, the functions are dynamic and change
over the period of the period of time and thus, coordination is also dynamic,
according to change in functions, the coordination also changes. Coordination is
always related to group efforts and not to individual effort. It is the orderly
arrangement of group efforts for achieving common goals. Similarly, it is a
process of making relation and cooperation through which some common goals
could be achieved.

A good coordination attacks the problems as they arise. It is accepted by all that
coordination is crucial to the effectiveness of the organization. In fact, it is
ongoing process whereby a manager determines and develops an orderly pattern of
group efforts among the subordinates and secures unity of action in the pursuit of
common goals. Some of the important elements/principles/elements for excellent
coordination are mentioned below:
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 1.Direct contact: Through direct contact, the activities of different individuals
within and between departments can be coordinated. By direct personal contact
among the responsible people concerned, coordination can be more easily
achieved. Views can be discussed by direct face-to-face or personal contact.
2.Early start: Coordination should start from the very beginning of planning and
policy making process. There should be mutual consultation among the officials
while preparing the plan. If it is done early, the task of adjustment will be very
easier either in preparation or in integration in the process of implementation of
the plan.
3.Continuity: Coordination is a continuous function, so, it should be viewed as a
continuous or never ending process, it must go on all the time, starting from the
stage planning. It cannot be left to chance, but management should make constant
efforts to achieve it.
4.Dynamism: Coordination should be modified in the light of changes incurred in
the internal and external environment. It envisages that coordination should not be
rigid but dynamic.
5.Simplified organization: The organizational structure of the enterprise should be
simplified to make the coordination effective. If structure is simplified, then,
closely related functions and operations may be put under the charge of one
executive and this would facilitate the taking of action necessary for coordination.
6.Clear cut objectives: The objectives should be clearly defined to make
coordination effective. The objectives, goals and mission should be laid down
clearly. The departmental managers should be told of the objectives of the firm
and they should understand the overall goals.
Control:
It is the process of ensuring that actual activities conform to planned
activities. Organisations use control procedures to ensure they are making
satisfactory progress towards their goals and using their resources efficiently.
While some companies may rely more heavily on control procedures than many

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other companies because of the market cyclicality and narrow profit margins, all
companies must use control procedures.
Meaning of control:
Management control is the process of ensuring that actual activities
conform to the planned activities. In fact, control is more pervasive than planning.
Control helps managers monitor the effectiveness of their planning, their
organising and their leading activities. An essential part of the control process is
taking corrective actions as needed. Controlling may also be defined as the
process of analyzing actual operations and seeing that actual performance is
guided towards expected performance. It involves comparing operating results
with plans and taking corrective actions when results deviate from plans.
It is a mechanism by which someone or something is guided to follow the
predetermined course. As a plan is put into operation, it becomes necessary to
check results to find out whether the work is proceeding along the right lines. In
case of any deviations, necessary corrective action is taken to ensure that in future
the work proceeds in the desired manner.

According to George R Terry - "Controlling is determining what is being accomplished

i.e., evaluating the performance and if necessary, applying corrective measures so that the
performance takes place according to plans."
According to Billy E Goetz - "Management control seeks to compel events to conform
plans".According to Koontz and O’Donnell, “The managerial function of controlling is
the measurement and correction of the performance of activities of subordinates in order
to make sure that the enterprise objectives and the plans devised to attain them are being
accomplished.”
Brech has defined control as “the continuing process of measuring the
actual results of the operations of an organisation in relation to results which were
planned for that organisation and of direction and action accordingly. In other
words managerial control implies measuring actual performance, comparing it

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with the standards set by plans and correcting deviations to ensure achievement of
objectives according to plans.

Nature of control:

The main characteristics of managerial control are as follows;

 Control is an essential function of management – the function is
performed by every manager at all levels of the organisation. Control is in
fact a follow-up action to the other functions of management. The other
managerial functions cannot be completed effectively without performing
the control function.
 Control is an on-going process – it involves continuous
measurement of results and review of standards. It does not stop
anywhere. “Just as the navigator continually takes reading to ascertain
whether he is relative to planned course, so should the business manager
continually take reading to assure himself that his enterprise or department
is on course.

 Control is forwards-working because the past cannot be

controlled – however, always the past performance is measured and in the
light of such measurement corrective action for a future period is
identified. No one can measure the outcome of an event which has not
taken place.
 Control involves measurement – is a process of measurement,
comparison and verification. It involves a check on the performance of
individuals and does not curtail the freedom of action. Control requires
feedback information on actual operations.
 The essence of control is action – the purpose of control is achieved
only when corrective action is taken to correct deviations and performance
is adjusted to predetermined standards. Control results in corrective action
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 which may lead to changes in other managerial functions. A good system
of control permits timely action so that there is a minimum waste of time
and money.
 Control is an integrated system – it is a set of interlocking
subsystems or a coordinated structure of activities.

SCOPE OF CONTROL:

The scope of control is very wide. A well designed plan of control (or control system)
covers almost all management activities. According to Holden, Fish and Smith, the main
areas of control are as follows:
1. Control over policies: The success of any business organisation to a large extent,
depends upon, how far its policies are implemented. Hence the need of control over
policies is self-evident. In many enterprises, policies are controlled through policy
manuals.
2. Control over organisation: Control over organisation is accomplished through the
development of organisation chart and organisation manual. Organisation manual
attempts at solving organisational problems and conflicts making long-range organisation
planning possible, enabling rationalisation of organisation structure, helping in proper
designing of organisation and department.
3. Control over personnel: The statement that ‘Management is getting the work done
through people’ underlines sufficiently the importance of control of personnel. All
employees working at different levels must perform their assigned duties well and direct
their efforts in controlling their behaviour. Personal Director or Personnel Manager
prepares control plan for having control over personnel.
4. Control over wages and salaries: Such type of control is done by having programme of
job evaluation and wage and salary analysis. This work is done either by personnel
department or industrial engineering department. Often a wage and salary committee is
constituted to help these departments in the task of controlling wages and salaries.

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5. Control over costs: Cost control is exercised by the cost accountant, by setting cost
standards for material, labour and overheads and making comparison of actual cost data
with standard cost. Cost control is supplemented by budgetary control systems.
6. Control over methods: Control over methods is accomplished by conducting periodic
analysis of activities of each department. The functions performed, methods adopted and
time devoted by every employee is studied with view to eliminate non-essential motions,
functions and methods.
7. Control over capital expenditures: It is exercised through a system of evaluation of
projects, ranking of projects in terms of their rank power and appropriate capital to
various projects. A capital budget is prepared for the whole firm. A capital budgeting
committee reviews the project proposes and approves the projects of advantages to the
firm. Capital budgeting, project analysis, break-even analysis, study of cost of capital, etc.
are some popular techniques of control over capital expenditure.
8. Control over research and development: Such activities are highly technical in nature
so no direct control is possible over them. By improving the ability and judgement of
research staff through training programmes and other devices, an indirect control is
exercised on them. Control is also exercised by having a research on the business.

9. Control over external relations: Public relations department is responsible for

controlling the external relations of the enterprise. It may prescribe certain measures for
other operating departments which are instrumental in improving external relations.
10. Overall control: It is effected through budgetary control. Master plan is prepared for
overall control and all the departments are made involved in this procedure. For effective
control through the master plan, active support of the top management is essential.
The control process:

The control process involves the following steps.

 Fixation of standards – first of all, the standard of desired
performance should be established. Standards serve as the criteria or
tests by which actual results are to be evaluated. Different standards of
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 performance are set up for various operations. Fixation of standards in
terms of quantity, quality, time and costs indicates how the
performance is going to be appraised. Standards should be accurate,
precise, objective, acceptable and workable. They should be flexible,
i.e., capable of being changed when the circumstances so require. As
far as possible, standards should be laid down in quantitative or
measurable terms. After setting the standards, the level of achievement
which will be regarded as satisfactory should be determined. The
desired level of performance should be reasonable and feasible. It
should be in terms of a range of maximum and minimum so as to
maintain some flexibility.
 Measurement of performance – after the fixation of standards, the
actual performance of the various individuals, groups and departments
is measured. This involves setting up the methods of collecting
accurate and up-to-date information on the progress of work, e.g.,
observation, inspection and reporting on a regular basis. As far as
possible, performance should be measured in quantitative terms.
Where such measurement is not possible, qualitative measures like
opinion surveys may be used. All measurements should be clear,
comparable and reliable.
Measurement of performance against standards should be on a future
basis so that deviations are anticipated and necessary corrective actions
are taken to prevent them, but this may not be possible in all cases. So
the next best course is to measure the actual performance.
 Comparing performance with standards – the actual results are
compared with standards to find out the extent of deviations, if any.
Such comparison is easy when both standards and actual performance
are expressed in quantitative terms. When the deviations are beyond
the permissible limits, an analysis is made to identify the causes of the
deviations. The causes may be controllable or uncontrollable. The
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 deviations and their causes are reported to the manager who can take
corrective actions all deviations need not be reported to top
management.
Only such deviations should be reported which are exceptional. The
control reports should contain figures that are truly comparable from
one period to another and from one section of business to another. The
reports should be presented in such a form that the manager can obtain
the bird’s eye view of the situation. They should not only show the
results, but also the reasons why the results are not satisfactory.
 Correction of deviations – the final step in the control process
involves taking corrective action so that deviations may not occur again
and the organisational objectives are achieved. After finding what has
gone wrong, where and why management can initiate remedial action.
Corrective action may involve review and revision of goals or
standards, change in the assignment of tasks, provision for additional
resources or new facilities, improvement in the selection and training of
workers or reform in the techniques of direction. Thus, control
function may require changes in all other managerial functions. This
shows the unity of the manager’s job and the integrated nature of
management process.

TYPES OF CONTROL:
Most control methods can be grouped into one of the two basic types:
 Future-oriented controls and
 Past-oriented controls.
Past-oriented Controls:
These are also known as post-action controls and measure results after the process. They
examine what has happened in a particular period in the past. These controls can be used
to plan future behaviour in the light of past errors or successes.
Future-oriented Controls
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These are also known as steering controls or feed-forward controls and are designed to
measure results during the process so that action can be taken before the job is done or the
period is over. They serve as warning-posts principally to direct attention rather than to
evaluate e.g.: Cash flow analysis, funds flow analysis, network planning etc.

Co-ordination:

Although Henri Fayol, James Mooney, Ordway Tead, Lyndall F. Urwick, Luther
Gullick and Louis A. Allen, all consider co-ordination as a separate function of
management, it seems more accurate to treat co-ordination as the essence of managing
because the achievement of harmony of individual efforts towards the accomplishment of
group goals is the very purpose of management. Like the conductor of an orchestra, the
task of a manager is to unify and harmonise the activities of subordinates for the
achievement of common purpose. Co-ordination permeates or transverses the entire
process of management.

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 It is a common silken thread running through all management functions.
Management functions are like flowers in the garland of co-ordination. Managers at all
levels must co-ordinate the efforts of their subordinates. They have to secure and
maintain unified action throughout an organisation just as a music director creates
harmony in music by integrating different voices of musicians. Manager co-ordinates by
securing and maintaining unified action throughout the organisation. Every function of
management must in itself have to be co-ordinated.

For example, planning is not effective unless departmental plans are properly
balanced and integrated. Organisation would be poor if there is a lack of harmony in
horizontal and vertical authority relationships. Staffing must be consistent with the needs
and resources of the enterprise. Direction is not sound unless orders and instructions are
consistent with the needs of the situation. Controlling creates harmony between plans and
performance. Thus, co-ordination is inherent in all managerial functions. Each of the
managerial functions is an exercise in co-ordination. A manager achieves co-ordination
through the management process and co-ordination is the outcome of managerial
functions. In fact, co-ordination makes planning more purposeful, organisation better-knit
and control more regulative, it is the key to the process of management. Co-ordination is
the result of the process of management.

Meaning and definition of co-ordination:

Co-ordination implies an orderly pattern or arrangement of group efforts to
ensure unity of action in pursuit of common objectives. It involves and orderly
synchronisation of the efforts of individual components of an enterprise to provide the
proper timing, amount, quality, place and sequence of efforts so that the stated objectives
may be achieved with minimum of friction. Co-ordination requires unification of diverse
and specialised activities. It is the task of blending the activities of individual and group
efforts in order to maximise contribution towards the accomplishment of common goals.
According to Henri Fayol, “To co-ordinate is to harmonise all the activities of a
concern so as to facilitate its working and its success. In a well-co-ordinated enterprise,

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each department or division works in harmony with others and is fully informed of its role
in the organisation. The working schedules of the various departments are constantly
attuned to circumstances.” The purpose of co-ordination is to secure harmony of action or
team-work and concurrence of purpose.
In the words of Haimann, “Co-ordination is the orderly synchronisation of efforts
of the subordinates to provide the proper amount, timing and quality of execution so that
their unified efforts lead to the stated objective, namely the common purpose of the
enterprise.” Mooney and Reiley have defined co-ordination as “the arrangement of group
effort, to provide unity of action in the pursuit of a common purpose.”
Nature of co-ordination:

The fore-going reveals the following features of co-ordination;

 Co-ordination is not a distinct function, but the very essence of management.

It is inherent in the managerial job.

 Co-ordination is the basic responsibility of management and it can be achieved

through managerial functions. No manager can evade or avoid this responsibility.

 Co-ordination does not arise spontaneously or by force. It is the result of

conscious and concerted action by management.

 The heart of co-ordination is the unity of purpose which involves fixing the
time and manner of performing various activities.

 Co-ordination is a continuous or on-going process. It is also a dynamic

process.

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  Co-ordination is required in group efforts not in individual effort. It involves
the orderly pattern of group efforts. There is no need for co-ordination when an
individual works in isolation without affecting anyone’s functioning.


 Co-ordination is the responsibility of each and every manager.

 Co-ordination has a common purpose of getting organisational objectives

accomplished.
According to Allen, “A manager in managing must co-ordinate the work for which
he is accountable by balancing, timing and integrating.” Thus, balancing, timing and
integrating are the three elements of co-ordination. Balancing is ensuring that enough of
one thing is available to support or counterbalance the other. It implies creating a balance
between the resources of different departments and individuals. Timing means adjusting
the time schedules of different activities so that they support and reinforce each other.
Integrating involves unification of the diverse interests under the common purpose.
Need and importance of co-ordination – co-ordination offers the following advantages.

5. Efficiency and effectiveness – co-ordination helps to improve the

efficiency of operations by avoiding the overlapping of efforts and
duplication of work. Integration of individual efforts leads to teamwork.
Co-ordination makes a productive enterprise out of diverse activities and
produces the total result which is greater than the sum of individual
contributions. This is called synergy. The quality of co-ordination
determines the effectiveness of organised efforts. Therefore, co-ordination
is known as the first principle of organisation.
6. Unity of direction – co-ordination helps to ensure unity of action in the face
of disruptive forces and by welding different work groups it facilitates the
stability and growth of an organisation. It provides unity of action and helps to
avoid conflicts between line and staff elements.
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 7. Human relations – co-ordination helps to improve team spirit and morale of
employees. In a well-co-ordinated organisation, organisational goals and
personal goals of people are reconciled and as a result employees derive a
sense of security and job satisfaction.

8. Quintessence of management – co-ordination is an all-inclusive concept and

the end result of management process. According to Mary Parker Follett, “The
first test of effective administration should be whether you have a business
with all its parts so co-ordinated, so moving together in their closely knit and
adjusting activities, so interlocking that they make a working unit that is not a
congenis of separate pieces, but a functional whole or integrated unit.” Thus,
co-ordination helps in the accomplishment of organisational goals.
Types of co-ordination:
The co-ordination may be divided on different bases, namely;
 Scope - on the basis of scope or coverage, co-ordination can be.
3. Internal – refers to co-ordination between the different units of an
organisation within and is achieved by integrating the goals and activities of
different departments of the enterprise.
4. External – refers to co-ordination between an organisation and its external
environment comprising government, community, customers, investors, suppliers,
competitors, research institutions, etc. It requires proper match between policies
and activities of the enterprise and the outside world.
 Flow - on the basis of flow, co-ordination can classified into:
3. Vertical – implies co-ordination between different levels of the
organisation and has to ensure that all the levels in the organisation act in harmony
and in accordance with the goals and policies of the organisation. Vertical co-
ordination is assured by top management through delegation of authority.
4. Horizontal or lateral – refers to co-ordination between different
departments and other units at the same level of the management hierarchy. For
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instance, co-ordination between production department and marketing department
is horizontal or lateral co-ordination.
Co-ordination may also be:
Procedural and substantive – which according to Herbert A. Simon, procedural
co-ordination implies the specification of the organisation in itself, i.e. the
generalised description of the behaviour and relationship of the members of the
organisation. On the other hand, substantive co-ordination is concerned with the
content of the organisation’s activities. For instance, in an automobile plant an
organisation chart is an aspect of procedural co-ordination, while blueprints for the
engine block of the car being manufactured are an aspect of substantive co-
ordination.
Techniques of co-ordination – the main techniques of effective co-ordination are
as follows.
1. Sound planning – unity of purpose is the first essential condition of co-
ordination. Therefore, the goals of the organisation and the goals of its units must
be clearly defined. Planning is the ideal stage for co-ordination. Clear-cut
objectives, harmonised policies and unified procedures and rules ensure
uniformity of action.
2. Simplified organisation – a simple and sound organisation is an important
means of co-ordination. The lines of authority and responsibility from top to the
bottom of the organisation structure should be clearly defined. Clear-cut authority
relationships help to reduce conflicts and to hold people responsible. Related
activities should be grouped together in one department or unit. Too much
specialisation should be avoided as it tends to make every unit an end in itself.
3. Effective communication – open and regular communication is the key to co-
ordination. Effective interchange of opinions and information helps in resolving
differences and in creating mutual understanding. Personal and face-to-face
contacts are the most effective means of communication and co-ordination.
Committees help to promote unity of purpose and uniformity of action among
different departments.

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4. Effective leadership and supervision – effective leadership ensures co-
ordination both at the planning and execution stage. A good leader can guide the
activities of his subordinates in the right direction and can inspire them to pull
together for the accomplishment of common objectives. Sound leadership can
persuade subordinates to have identity of interest and to adopt a common outlook.
Personal supervision is an important method of resolving differences of opinion.
5. Chain of command – authority is the supreme co-ordinating power in an
organisation. Exercise of authority through the chain of command or hierarchy is
the traditional means of co-ordination. Co-ordination between interdependent
units can be secured by putting them under one boss.
6. Indoctrination and incentives – indoctrinating organisational members with
the goals and mission of the organisation can transform a neutral body into a
committed body. Similarly incentives may be used to create mutuality of interest
and to reduce conflicts. For instance, profit-sharing is helpful in promoting team-
spirit and co-operation between employers and workers.
7. Liaison departments – where frequent contacts between different
organisational units are necessary, liaison officers may be employed. For instance,
a liaison department may ensure that the production department is meeting the
delivery dates and specifications promised by the sales department. Special co-
ordinators may be appointed in certain cases. For instance, a project co-ordinator
is appointed to co-ordinate the activities of various functionaries in a project which
is to be completed within a specified period of time.
8. General staff – in large organisations, a centralised pool of staff experts is
used for co-ordination. A common staff group serves as the clearing house of
information and specialised advice to all department of the enterprise. Such
general staff is very helpful in achieving inter-departmental or horizontal co-
ordination. Task forces and projects teams are also useful in co-ordination.
9.Voluntary co-ordination – when every organisational unit appreciates the
workings of related units and modifies its own functioning to suit them, there is
self-co-ordination. Self-co-ordination or voluntary co-ordination is possible in a

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 climate of dedication and mutual co-operation. It results from mutual consultation
and team-spirit among the members of the organisation. However, it cannot be a
substitute for the co-coordinative efforts of managers.
Co-operation:
Co-ordination and co-operation – the two should not be confused because the two
terms denote quite different meanings. Co-operation refers to the collective efforts
of people who associate voluntarily to achieve specified objectives. It indicates
merely the willingness of individuals to help each other. It is the result of a
voluntary attitude of a group of people. Co-ordination is much more inclusive,
requiring more than the desire and willingness to co-operate of the participants. It
involves a deliberate and conscious effort to bring together the activities of the
various individuals in order to provide unity of action. It requires concurrence of
purpose, harmony of effort and concerted action. It is much more than mere
reconciliation of differences or avoidance of friction.
Co-operation provides the foundation for co-ordination by enlisting voluntary
efforts which facilitate co-ordination, but by itself it cannot guarantee co-
ordination. Co-ordination does not arise automatically from the voluntary efforts
of the manager. For instance, a group of six persons who attempt to move a heavy
object are willing and eager to co-operate with one another. They are fully aware
of their common purpose and are trying their best to move the object, but they
cannot be successful in their attempt unless one of them co-ordinates their efforts.
He must give proper directions to all members of the group to apply the right
amount of effort, at the right place and at the right time. Co-operation is a
necessary, but not a sufficient condition of co-ordination.
Difference between co-ordination and co-operation:
Difference between co-ordination and co-operation are given below.
1. Status – co-ordination is the essence of management and it is vital for the
success of all managerial functions. Co-operation, on the other hand, does not
enjoy the status of the essence of management. Co-operation is no doubt

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 essential for successful co-ordination, but it is more of a personal attitude
rather than organisational.
2. Nature of work – in the organisation, the nature of work is such that it
needs to be divided and then integrated. Co-ordination of all interdependent
activities is utmost necessary, but co-operation does not arise out of any
limitations of organisation structure. The individuals may learn to co-operate
with each other even though their activities may not be related.
3. Deliberate – co-ordination requires deliberate and intentional efforts of a
manager. On the other hand, co-operation is voluntary. In other words, co-
ordination is a contrived process, whereas co-operation is a natural process.
4. Scope – co-ordination is broader in scope than co-operation. It includes
both co-operation and deliberate efforts to maintain unity of action and
purpose.
According to McFarland, “co-ordination is a far more inclusive term embracing
the idea of co-operation. Co-operation, that is mere willingness of individuals to
help each other, cannot serve as a satisfactory substitute for co-ordination. Co-
operation is for most part the result of voluntary attitudes on the part of people in
an organisation. Co-ordination, on the other hand, cannot be voluntarily produced
by a number of co-operating persons. Co-ordination is a state of affairs which an
executive brings about through deliberate action on his part.” Thus, co-ordination
is much more than co-operation. Co-ordination is the epitome of all managerial
functions while co-operation is an attitude of an individual or group. Need for co-
ordination arises due to limitations of formal organisation structure, but co-
operation is necessary even in case of non-interdependent activities. Thus, co-
ordination is a broader concept than co-operation, but to be effective an
organisation requires both. Co-operation will be ineffective in the absence of co-
ordination just as co-ordination is not possible without co-operation.
Co-ordination Vs control: – these are two different, but related functions.
Control is one of the elements of the management process. Co-ordination is the
essence of management itself and is an all-inclusive function. Like other

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 managerial functions, control is an exercise in co-ordination. Co-ordination is a
core theme and control is a facilitative function to promote co-ordination.
The main points of similarity and relationship between control and co-ordination
are as follows.
 Both of them are classical concepts developed at an early stage in the evolution
of management thought. These concepts have stood the test of time and are still
very much valued.

 Both are managerial activities aimed at achieving organisational goals most

efficiently. Their purpose is to ensure a steady state of the organisation in terms of
its continuity, consistency, discipline and precision.

 Both processes are based on authority.

 The processes of control and co-ordination are built into the organisational
structure and are relatively more centralised than the other processes.

 Both are rational concepts which serve as links between organisational ends
and means. They are used to maintain organisations as rational systems free from
conflicts, confusion and chaos.

 Both control and co-ordination are primarily internal organisational processes,

with little interface with the external environment. As a result management is
relatively free to design and administer control and co-ordination systems and
techniques.

 Both control and co-ordination have a limited time perspective. They are
essentially short range processes concerned with regulation and unification of
ongoing organisational activity.

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 Control and co-ordination are highly formalized processes. However, self-
control and self-co-ordination are useful to organisations.

 Both control and co-ordination are required in every organisation. Control is

needed to maintain order and consistency in the behaviour of people and events.
Co-ordination is required to unify the differentiated activities and to integrate the
diverse goals, interests and roles.
Co-ordination concept
Coordination has become necessary. There must be coordination among the
individuals or group of individuals either working in the same department or in
various departments of the firm to whom separate segmented jobs were assigned.
Coordination is an important function of management. It is very important
that without which other managerial functions cannot be performed effectively. It
is the continuous and never ending process in management because it is achieved
through the performance of functions. And, the functions are dynamic and change
over the period of the period of time and thus, coordination is also dynamic,
according to change in functions, the coordination also changes. Coordination is
always related to group efforts and not to individual effort. It is the orderly
arrangement of group efforts for achieving common goals. Similarly, it is a
process of making relation and cooperation through which some common goals
could be achieved.
A good coordination attacks the problems as they arise. It is accepted by all that
coordination is crucial to the effectiveness of the organization. In fact, it is
ongoing process whereby a manager determines and develops an orderly pattern of
group efforts among the subordinates and secures unity of action in the pursuit of
common goals. Some of the important elements/principles/elements for excellent
coordination are mentioned below:
1.Direct contact: Through direct contact, the activities of different individuals
within and between departments can be coordinated. By direct personal contact
among the responsible people concerned, coordination can be more easily
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achieved. Views can be discussed by direct face-to-face or personal contact.
2.Early start: Coordination should start from the very beginning of planning and
policy making process. There should be mutual consultation among the officials
while preparing the plan. If it is done early, the task of adjustment will be very
easier either in preparation or in integration in the process of implementation of
the plan.
3.Continuity: Coordination is a continuous function, so, it should be viewed as a
continuous or never ending process, it must go on all the time, starting from the
stage planning. It cannot be left to chance, but management should make constant
efforts to achieve it.
4.Dynamism: Coordination should be modified in the light of changes incurred in
the internal and external environment. It envisages that coordination should not be
rigid but dynamic.
5.Simplified organization: The organizational structure of the enterprise should be
simplified to make the coordination effective. If structure is simplified, then,
closely related functions and operations may be put under the charge of one
executive and this would facilitate the taking of action necessary for coordination.
6.Clear cut objectives: The objectives should be clearly defined to make
coordination effective. The objectives, goals and mission should be laid down
clearly. The departmental managers should be told of the objectives of the firm
and they should understand the overall goals.
Systems approach and coordination
We have suggested above that coordination implies the adjusting of the efforts of a
number of individuals and materials or machine, so that they come together in the
right quantity in the right quality in the right place ,in the right time.by
coordination
We balance a number of different parts of an orgnaisation harmonizing their
interaction, so that the total organization moves towards an agreed or defined
objective. this idea of looking at an organization as a single integrated machine is
known as the system approach . it is believed that the effectiveness of an

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 organization depends not so much on the quality of individual efforts as on the
logic organizations total design and the way in which each individuals contribution
has been geared to the organisations overall objective. In this approach,it is
imperative for the manager to provide for a system of built in coordination in his
organization and to subordinate all individual and department goals to the general
goals of the enterprise.
The distinctive feature of the system approach is its integrating nature it treats an
organization as a network of mutually dependent parts.
Coordination among various parts is achieved by seeking answers to the following
questions.
What are the strategic parts of the system?
For example the strategic parts of every enterprise are the individual, the formal
organization, the informal organization and the physical setting in which the job is
performed. Under the systems approach these parts are woven into a configuration
called the organization system.
What is the nature of mutual dependency of various parts?
In the absence of coordination the various parts of the system may function as
island kingdoms perceiving only vaguely any mutuality of interests with other
parts. Coordination works like an orchestra where each player knows not only his
own part in the total symphony but also the parts of other players.

What are the main processes in the system which link the parts together and
facilitate their adjustments to each other?
The process through which the various parts of a system are linked together are
the communication process, decision making, controlling, rewarding and
punishing. All these are of crucial importance largely because they are used to
define or to implement goals, keep different parts of the system operating as much
as possible in line with the overall objectives of an enterprise.

Control:

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 It is the process of ensuring that actual activities conform to planned
activities. Organisations use control procedures to ensure they are making
satisfactory progress towards their goals and using their resources efficiently.
While some companies may rely more heavily on control procedures than many
other companies because of the market cyclicality and narrow profit margins, all
companies must use control procedures.
Meaning of control:
Management control is the process of ensuring that actual activities
conform to the planned activities. In fact, control is more pervasive than planning.
Control helps managers monitor the effectiveness of their planning, their
organising and their leading activities. An essential part of the control process is
taking corrective actions as needed. Controlling may also be defined as the
process of analysing actual operations and seeing that actual performance is
guided towards expected performance. It involves comparing operating results
with plans and taking corrective actions when results deviate from plans.
It is a mechanism by which someone or something is guided to follow the
predetermined course. As a plan is put into operation, it becomes necessary to
check results to find out whether the work is proceeding along the right lines. In
case of any deviations, necessary corrective action is taken to ensure that in future
the work proceeds in the desired manner.

According to George R Terry - "Controlling is determining what is being accomplished

i.e., evaluating the performance and if necessary, applying corrective measures so that the
performance takes place according to plans."
According to Billy E Goetz - "Management control seeks to compel events to conform
plans".According to Koontz and O’Donnell, “The managerial function of controlling is
the measurement and correction of the performance of activities of subordinates in order
to make sure that the enterprise objectives and the plans devised to attain them are being
accomplished.”

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 Brech has defined control as “the continuing process of measuring the
actual results of the operations of an organisation in relation to results which were
planned for that organisation and of direction and action accordingly. In other
words managerial control implies measuring actual performance, comparing it
with the standards set by plans and correcting deviations to ensure achievement of
objectives according to plans.
Nature of control:

The main characteristics of managerial control are as follows;

 Control is an essential function of management – the function is
performed by every manager at all levels of the organisation. Control is in
fact a follow-up action to the other functions of management. The other
managerial functions cannot be completed effectively without performing
the control function.

 Control is an on-going process – it involves continuous

measurement of results and review of standards. It does not stop
anywhere. “Just as the navigator continually takes reading to ascertain
whether he is relative to planned course, so should the business manager
continually take reading to assure himself that his enterprise or department
is on course.

 Control is forwards-working because the past cannot be

controlled – however, always the past performance is measured and in the
light of such measurement corrective action for a future period is
identified. No one can measure the outcome of an event which has not
taken place.
 Control involves measurement – is a process of measurement,
comparison and verification. It involves a check on the performance of

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 individuals and does not curtail the freedom of action. Control requires
feedback information on actual operations.

 The essence of control is action – the purpose of control is achieved

only when corrective action is taken to correct deviations and performance
is adjusted to predetermined standards. Control results in corrective action
which may lead to changes in other managerial functions. A good system
of control permits timely action so that there is a minimum waste of time
and money.

 Control is an integrated system – it is a set of interlocking

subsystems or a coordinated structure of activities.

SCOPE OF CONTROL:
The scope of control is very wide. A well designed plan of control (or control system)
covers almost all management activities. According to Holden, Fish and Smith, the main
areas of control are as follows:
1. Control over policies: The success of any business organisation to a large extent,
depends upon, how far its policies are implemented. Hence the need of control over
policies is self-evident. In many enterprises, policies are controlled through policy
manuals.

2. Control over organisation: Control over organisation is accomplished through the

development of organisation chart and organisation manual. Organisation manual is
attempts to solving organisational problems and conflicts making long-range organisation
planning. it possible, enabling rationalization of organisation structure, helping in proper
designing of organisation and department.
3. Control over personnel: The statement that ‘Management is getting the work done
through people’ underlines sufficiently the importance of control of personnel. All
employees working at different levels must perform their assigned duties well and direct
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their efforts in controlling their behaviour. Personal Director or Personnel Manager
prepares control plan for having control over personnel.
4. Control over wages and salaries: Such type of control is done by having programme of
job evaluation and wage and salary analysis. This work is done either by personnel
department or industrial engineering department. Often a wage and salary committee is
constituted to help these departments in the task of controlling wages and salaries.
5. Control over costs: Cost control is exercised by the cost accountant, by setting cost
standards for material, labour and overheads and making comparison of actual cost data
with standard cost. Cost control is supplemented by budgetary control systems.
6. Control over methods: Control over methods is accomplished by conducting periodic
analysis of activities of each department. The functions performed, methods adopted and
time devoted by every employee is studied with view to eliminate non-essential motions,
functions and methods.
7. Control over capital expenditures: It is exercised through a system of evaluation of
projects, ranking of projects in terms of their rank power and appropriate capital to
various projects. A capital budget is prepared for the whole firm. A capital budgeting
committee reviews the project proposes and approves the projects of advantages to the
firm. Capital budgeting, project analysis, break-even analysis, study of cost of capital, etc.
are some popular techniques of control over capital expenditure.
8. Control over research and development: Such activities are highly technical in nature
so no direct control is possible over them. By improving the ability and judgment of
research staff through training programmes and other devices, an indirect control is
exercised on them. Control is also exercised by having a research on the business.
9. Control over external relations: Public relations department is responsible for
controlling the external relations of the enterprise. It may prescribe certain measures for
other operating departments which are instrumental in improving external relations.
10. Overall control: It is effected through budgetary control. Master plan is prepared for
overall control and all the departments are made involved in this procedure. For effective
control through the master plan, active support of the top management is essential.
The control process:

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The control process involves the following steps.
 Fixation of standards – first of all, the standard of desired
performance should be established. Standards serve as the criteria or
tests by which actual results are to be evaluated. Different standards of
performance are set up for various operations. Fixation of standards in
terms of quantity, quality, time and costs indicates how the
performance is going to be appraised. Standards should be accurate,
precise, objective, acceptable and workable. They should be flexible,
i.e., capable of being changed when the circumstances so require. As
far as possible, standards should be laid down in quantitative or
measurable terms. After setting the standards, the level of achievement
which will be regarded as satisfactory should be determined. The
desired level of performance should be reasonable and feasible. It
should be in terms of a range of maximum and minimum so as to
maintain some flexibility.
 Measurement of performance – after the fixation of standards, the
actual performance of the various individuals, groups and departments
is measured. This involves setting up the methods of collecting
accurate and up-to-date information on the progress of work, e.g.,
observation, inspection and reporting on a regular basis. As far as
possible, performance should be measured in quantitative terms.
Where such measurement is not possible, qualitative measures like
opinion surveys may be used. All measurements should be clear,
comparable and reliable.
Measurement of performance against standards should be on a future
basis so that deviations are anticipated and necessary corrective actions
are taken to prevent them, but this may not be possible in all cases. So
the next best course is to measure the actual performance.
 Comparing performance with standards – the actual results are
compared with standards to find out the extent of deviations, if any.
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 Such comparison is easy when both standards and actual performance
are expressed in quantitative terms. When the deviations are beyond
the permissible limits, an analysis is made to identify the causes of the
deviations. The causes may be controllable or uncontrollable. The
deviations and their causes are reported to the manager who can take
corrective actions all deviations need not be reported to top
management.
Only such deviations should be reported which are exceptional. The
control reports should contain figures that are truly comparable from
one period to another and from one section of business to another. The
reports should be presented in such a form that the manager can obtain
the bird’s eye view of the situation. They should not only show the
results, but also the reasons why the results are not satisfactory.
 Correction of deviations – the final step in the control process involves taking
corrective action so that deviations may not occur again and the organisational objectives
are achieved. After finding what has gone wrong, where and why management can
initiate remedial action. Corrective action may involve review and revision of goals or
standards, change in the assignment of tasks, provision for additional resources or new
facilities, improvement in the selection and training of workers or reform in the
techniques of direction. Thus, control function may require changes in all other
managerial functions. This shows the unity of the manager’s job and the integrated nature
of management process.
TYPES OF CONTROL:
Most control methods can be grouped into one of the two basic types:
 Future-oriented controls and
 Past-oriented controls.
Past-oriented Controls:
These are also known as post-action controls and measure results after the process. They
examine what has happened in a particular period in the past. These controls can be used
to plan future behaviour in the light of past errors or successes.
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Future-oriented Controls
These are also known as steering controls or feed-forward controls and are designed to
measure results during the process so that action can be taken before the job is done or the
period is over. They serve as warning-posts principally to direct attention rather than to
evaluate e.g.: Cash flow analysis, funds flow analysis, network planning etc.
Meaning of Control techniques
Control techniques provide managers with the type and amount of
information they need to measure and monitor performance. The
information from various controls must be tailored to a specific
management level, department, unit, or operation.
Types of Techniques of Controlling
1. Direct Supervision and Observation

'Direct Supervision and Observation' is the oldest technique of

controlling. The supervisor himself observes the employees and their
work. This brings him in direct contact with the workers. So, many
problems are solved during supervision. The supervisor gets first hand
information, and he has better understanding with the workers. This
technique is most suitable for a small-sized business

2. Financial Statements
All business organisations prepare Profit and Loss Account. It gives a
summary of the income and expenses for a specified period. They also
prepare Balance Sheet, which shows the financial position of the
organisation at the end of the specified period. Financial statements are
used to control the organisation. The figures of the current year can be
compared with the previous year's figures. They can also be compared
with the figures of other similar organisations
3. Budgetary Control

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 A budget is a planning and controlling device. Budgetary control is a
technique of managerial control through budgets. It is the essence of
financial control. Budgetary control is done for all aspects of a business
such as income, expenditure, production, capital and revenue.
Budgetary control is done by the budget committee.
4. Break Even Analysis
Break Even Analysis or Break Even Point is the point of no profit, no
loss. For e.g. When an organisation sells 50K cars it will break even. It
means that, any sale below this point will cause losses and any sale
above this point will earn profits. The Break-even analysis acts as a
control device. It helps to find out the company's performance. So the
company can take collective action to improve its performance in the
future. Break-even analysis is a simple control tool.
5. Return on Investment (ROI)
Investment consists of fixed assets and working capital used in
business. Profit on the investment is a reward for risk taking. If the ROI
is high then the financial performance of a business is good and vice-
versa
Investment consists of fixed assets and working capital used in
business. Profit on the investment is a reward for risk taking. If the ROI
is high then the financial performance of a business is good and vice-
versa
6.Management by Objectives (MBO)
MBO facilitates planning and control. It must fulfill following
requirements
 Objectives for individuals are jointly fixed by the superior
and the subordinate
 Periodic evaluation and regular feedback to evaluate
individual performance
 Achievement of objectives brings rewards to individuals

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 7. Management Audit
Management Audit is an evaluation of the management as a whole. It
critically examines the full management process, i.e. planning, organising,
directing, and controlling. It finds out the efficiency of the management.
To check the efficiency of the management, the company's plans,
objectives, policies, procedures, personnel relations and systems of control
are examined very carefully. Management auditing is conducted by a team
of experts. They collect data from past records, members of management,
clients and employees. The data is analysed and conclusions are drawn
about managerial performance and efficiency.
8. Management Information System (MIS)
In order to control the organisation properly the management needs
accurate information. They need information about the internal working of
the organisation and also about the external environment. Information is
collected continuously to identify problems and find out solutions. MIS
collects data, processes it and provides it to the managers. MIS may be
manual or computerised. With MIS, managers can delegate authority to
subordinates without losing control
9. PERT and CPM Techniques
Investment consists of fixed assets and working capital used in
business. Profit on the investment is a reward for risk taking. If the ROI
is high then the financial performance of a business is good and vice-
versa

CPM / PERT can be used to minimise the total time or the total cost required to perform
the total operations.

Importance is given to identifying the critical activities. Critical activities

are those which have to be completed on time otherwise the full project
will be delayed

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So, in these techniques, the job is divided into various activities / sub-
activities. From these activities, the critical activities are identified. More
importance is given to completion of these critical activities. So, by
controlling the time of the critical activities, the total time and cost of the
job are minimised.
10. Self-Control
Self-Control means self-directed control. A person is given freedom to set
his own targets, evaluate his own performance and take corrective
measures as and when required. Self-control is especially required for top
level managers because they do not like external control
The subordinates must be encouraged to use self-control because it is not
good for the superior to control each and everything. However, self-control
does not mean no control by the superiors. The superiors must control the
important activities of the subordinates
Effective Control Systems
Meaning of Effective control systems
The management of any organization must develop a control system
tailored to its organization's goals and resources. Effective control systems
share several common characteristics.
These characteristics are as follows:
 Integration with Planning
 Flexibility
 Acceptance by Members of the Organisation
 Focus on Critical Activities
 Timeliness
 Economic Feasibility
 Accuracy
 Ease of Understanding.

Characteristic # 1. Integration with Planning

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First, to be effective, control systems should be integrated with planning.
Fig. 17.10 shows one way in which this can be done
The planning system

Establish Develop action Update and Maintain goals

goalsand plans and modify goals and strategies
develop functional and strategies
strategies strategies

The control system

Establish Measure Compare Evaluate and

standards performance performance and take action
standards

The first step in planning is establishing goals and developing strategy.

This leads to the second step in planning (developing action plans and
functional strategies). The standards set for control purposes also play a
role in determining action plans and functional strategies
The action plans and functional strategy assume significance in
performance and measurement. Existing action plans, functional strategies,
measured performance and comparisons of performance with standards
then affect the updating and modification of future plans
Finally, decisions about whether to maintain or change goals and strategy
are affected by previous modifications and updates, by comparisons
between standards and performance, and by evaluations and actions taken
within the control system

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the start of the process, planning plays a major role in shaping the control
system. By the end of the process, however, the later stages of control exert
a primary influence of planning. And, as P.F. Drucker has pointed out a
careful integration of planning and control can improve the effectiveness of
both sets of activities
Characteristic # 2. Flexibility:
Another characteristic of an effective control system is flexibility. This
means that the control system itself must be flexible enough to
accommodate change.
Characteristic # 3. Acceptance by Members of the Organisation:
The effectiveness and efficiency of controls largely depend on the
acceptance by the members of the organisation
Doing the right thing and doing things right both require people; controls
are unlikely to work unless people want them. If controls are to be
accepted, it is important that people clearly understand the purpose of the
system and feel that they have an important stake in it, more so when new
systems are established
Characteristic # 4. Focus on Critical Activities:
The proper activities should be controlled. When people recognise that
certain specific areas will be monitored and compared to some standard,
their behaviour is likely to be channeled toward the standards set
Critical control areas (points) include all the areas of an organisation’s
operations that directly affect the success of its key operations such as
sales, revenue, expenses, inventory levels, personnel turnover, safety for
people and other assets, etc
Furthermore, each manager will have his (her) own critical areas to control.
The focus should be on those areas where failures cannot be tolerated and
the costs in time and money are excessive
It may also be noted that management has to frequently balance control
systems to assure that controlling one activity does not cause another to get

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out of control. For example, to meet production standard a supervisor may
overtax machinery and equipment
Likewise, a sales manager may cut prices drastically to reach the sales
quota for his own division; unless he is working under a profit standard
(constraint), reaching the sales standard, in itself, is not necessarily good.
Thus it is essential for managers to ensure that there is proper balance of
activities in the system
Characteristic # 5. Timeliness:
Another characteristic of an effective control system is that it provides
performance information in a timely way. Timeliness does not necessarily
mean maintaining a time schedule for exercising control. It simply means
exercise of control mechanisms (or technique) as and when required
For control to be effective it must report deviations in time to allow
management to take corrective action. Timely information, like accurate
information, must be provided to those in charge so as to make controls
effective. Giving managers excessive or irrelevant information is as serious
a problem as is inadequate information.
The purpose of MIS is to gather, assemble, and interpret data, processing it
into timely and accurate information that gets to those who need it. For
instance, budget printouts are helpful only when the appropriate manager
receives them in time
Characteristic # 6. Economic Feasibility
Control benefits should outweigh costs. In other words, control should be
cost-effective. Thus the costs of the control system have to be weighed
against the benefits it can return
Costs of control include the following factors
(1) Monitoring and processing systems — such as computers and cash
registers;
(2) Personnel to operate the system—such as inventory controllers,
inspectors and accountants—as well as supervisors and line

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 personnel and furnishing detailed information to them — such
as cost, scrap, production, and personnel reports

Characteristic # 7. Accuracy:
Information must be accurate if it is to be useful. This point is directly
related to our discussion of feed forward controls, used in diagnosing a
deviation. Since control systems are important indicators of progress and
are the basis for corrective reactions, care has to be taken to ensure that
control measurements are accurate.
Yet measurements are often imprecise, and errors are often made in
interpreting and reporting control results. Controls that offer inaccurate
assessments feed decision-makers the wrong input, which will cause them
to produce, incorrect responses (lack of action or inappropriate action and
the waste of resources that go with both).
Characteristic # 8. Ease of Understanding:
The control process should be simple so that it can be easily understood
and applied. Complexity often means lack of understanding. Controls often
become complex because various persons are responsible for creating,
implementing and interpreting them.
Overlapping authority is likely to cause confusion and unnecessary
duplication or multiplication of effort. Complexity can also result when
control users focus on the mechanics and techniques of control to the
complete neglect of the purposes of controls. This usually happens when
one control leads to another.
Moreover, refinements in reporting procedures often lead to additional
controls and more control procedures. The result is huge accumulation of
data, which may obscure the purposes behind the controls and to sidetrack
control efforts.

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