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a. Top management lays down the objectives and broad policies of the enterprise.
b. It issues necessary instructions for preparation of department budgets,
procedures, schedules etc.
c. It prepares strategic plans & policies for the enterprise.
d. It appoints the executive for middle level i.e. departmental managers.
e. It controls & coordinates the activities of all the departments.
f. It is also responsible for maintaining a contact with the outside world.
g. It provides guidance and direction.
h. The top management is also responsible towards the shareholders for the
performance of the enterprise.

2. Middle Level Management

The branch managers and departmental managers constitute middle level. They are
responsible to the top management for the functioning of their department. They devote
more time to organizational and directional functions. In small organization, there is only
one layer of middle level of management but in big enterprises, there may be senior and
junior middle level management. Their role can be emphasized as –
a. They execute the plans of the organization in accordance with the policies and
directives of the top management.
b. They make plans for the sub-units of the organization.
c. They participate in employment & training of lower level management.
d. They interpret and explain policies from top level management to lower level.
e. They are responsible for coordinating the activities within the division or
department.
f. It also sends important reports and other important data to top level
management.
g. They evaluate performance of junior managers.
h. They are also responsible for inspiring lower level managers towards better
performance.

3. Lower Level Management

Lower level is also known as supervisory / operative level of management. It consists of
supervisors, foreman, section officers, superintendent etc. According to R.C. Davis,
“Supervisory management refers to those executives whose work has to be largely with

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personal oversight and direction of operative employees”. In other words, they are
concerned with direction and controlling function of management. Their activities include
a. Assigning of jobs and tasks to various workers.
b. They guide and instruct workers for day to day activities.
c. They are responsible for the quality as well as quantity of production.
d. They are also entrusted with the responsibility of maintaining good relation in the
organization.
e. They communicate workers problems, suggestions, and recommendatory
appeals etc to the higher level and higher level goals and objectives to the
workers.
f. They help to solve the grievances of the workers.
g. They supervise & guide the sub-ordinates.
h. They are responsible for providing training to the workers.
i. They arrange necessary materials, machines, tools etc for getting the things
done.
j. They prepare periodical reports about the performance of the workers.
k. They ensure discipline in the enterprise.
l. They motivate workers.
m. They are the image builders of the enterprise because they are in direct contact
with the workers.

FUNCTIONS OF MANAGEMENT

Management has been described as a social process involving responsibility for economical
and effective planning & regulation of operation of an enterprise in the fulfillment of given
purposes. It is a dynamic process consisting of various elements and activities. These activities
are different from operative functions like marketing, finance, purchase etc. Rather these
activities are common to each and every manger irrespective of his level or status.
Different experts have classified functions of management. According to George & Jerry, “There
are four fundamental functions of management i.e. planning, organizing, actuating and
controlling”. According to Henry Fayol, “To manage is to forecast and plan, to organize, to
command, & to control”. Whereas Luther Gullick has given a keyword ‘POSDCORB’ where P

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stands for Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for
reporting & B for Budgeting. But the most widely accepted are functions of management given
by KOONTZ and O’DONNEL i.e. Planning, Organizing, Staffing, Directing and Controlling.
For theoretical purposes, it may be convenient to separate the function of management but
practically these functions are overlapping in nature i.e. they are highly inseparable. Each
function blends into the other & each affects the performance of others.

1. Planning
It is the basic function of management. It deals with chalking out a future course of
action & deciding in advance the most appropriate course of actions for achievement of
pre-determined goals. According to KOONTZ, “Planning is deciding in advance – what to
do, when to do & how to do. It bridges the gap from where we are & where we want to

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be”. A plan is a future course of actions. It is an exercise in problem solving & decision
making. Planning is determination of courses of action to achieve desired goals. Thus,
planning is a systematic thinking about ways & means for accomplishment of pre-
determined goals. Planning is necessary to ensure proper utilization of human & non-
human resources. It is all pervasive, it is an intellectual activity and it also helps in
avoiding confusion, uncertainties, risks, wastages etc.

2. Organizing
It is the process of bringing together physical, financial and human resources and
developing productive relationship amongst them for achievement of organizational
goals. According to Henry Fayol, “To organize a business is to provide it with everything
useful or its functioning i.e. raw material, tools, capital and personnel’s”. To organize a
business involves determining & providing human and non-human resources to the
organizational structure. Organizing as a process involves:
• Identification of activities.
• Classification of grouping of activities.
• Assignment of duties.
• Delegation of authority and creation of responsibility.
• Coordinating authority and responsibility relationships.

3. Staffing
It is the function of manning the organization structure and keeping it manned. Staffing
has assumed greater importance in the recent years due to advancement of technology,
increase in size of business, complexity of human behavior etc. The main purpose o
staffing is to put right man on right job i.e. square pegs in square holes and round pegs
in round holes. According to Kootz & O’Donell, “Managerial function of staffing involves
manning the organization structure through proper and effective selection, appraisal &
development of personnel to fill the roles designed un the structure”. Staffing involves:
• Manpower Planning (estimating man power in terms of searching, choose the
person and giving the right place).
• Recruitment, selection & placement.
• Training & development.
• Remuneration.
• Performance appraisal.

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• Promotions & transfer.

4. Directing
It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. It is considered life-spark of the
enterprise which sets it in motion the action of people because planning, organizing and
staffing are the mere preparations for doing the work. Direction is that inert-personnel
aspect of management which deals directly with influencing, guiding, supervising,
motivating sub-ordinate for the achievement of organizational goals. Direction has
following elements:
• Supervision
• Motivation
• Leadership
• Communication
(i) Supervision- implies overseeing the work of subordinates by their superiors. It is the
act of watching & directing work & workers.

(ii) Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal
to work. Positive, negative, monetary, non-monetary incentives may be used for this
purpose.
(iii) Leadership- may be defined as a process by which manager guides and influences
the work of subordinates in desired direction.
(iv) Communications- is the process of passing information, experience, opinion etc
from one person to another. It is a bridge of understanding.

5. Controlling
It implies measurement of accomplishment against the standards and correction of
deviation if any to ensure achievement of organizational goals. The purpose of
controlling is to ensure that everything occurs in conformities with the standards. An
efficient system of control helps to predict deviations before they actually occur.
According to Theo Haimann, “Controlling is the process of checking whether or not
proper progress is being made towards the objectives and goals and acting if necessary,
to correct any deviation”. According to Koontz & O’Donell “Controlling is the
measurement & correction of performance activities of subordinates in order to make

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sure that the enterprise objectives and plans desired to obtain them as being
accomplished”. Therefore controlling has following steps:
(i) Establishment of standard performance.
(ii) Measurement of actual performance.
(iii) Comparison of actual performance with the standards and finding out deviation if
any.
(iv) Corrective action.

ROLES OF MANAGER
Henry Mintzberg identified ten different roles, separated into three categories. The categories he
defined are as follows

a) Interpersonal Roles
The ones that, like the name suggests, involve people and other ceremonial duties. It can be
further classified as follows
• Leader – Responsible for staffing, training, and associated duties.
• Figurehead – The symbolic head of the organization.
• Liaison – Maintains the communication between all contacts and informers that compose
the organizational network.

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b) Informational Roles
Related to collecting, receiving, and disseminating information.
• Monitor – Personally seek and receive information, to be able to understand the
organization.
• Disseminator – Transmits all import information received from outsiders to the members
of the organization.
• Spokesperson – On the contrary to the above role, here the manager transmits the
organization’s plans, policies and actions to outsiders.
c) Decisional Roles
Roles that revolve around making choices.
• Entrepreneur – Seeks opportunities. Basically they search for change, respond to it, and
exploit it.
• Negotiator – Represents the organization at major negotiations.
• Resource Allocator – Makes or approves all significant decisions related to the allocation
of resources.
• Disturbance Handler – Responsible for corrective action when the organization faces
disturbances.

EVOLUTION OF MANAGEMENT THOUGHT

The practice of management is as old as human civilization. The ancient civilizations of

Egypt (the great pyramids), Greece (leadership and war tactics of Alexander the great) and
Rome displayed the marvelous results of good management practices.
The origin of management as a discipline was developed in the late 19th century. Over
time, management thinkers have sought ways to organize and classify the voluminous
information about management that has been collected and disseminated. These attempts at
classification have resulted in the identification of management approaches. The approaches of
management are theoretical frameworks for the study of management. Each of the approaches
of management are based on somewhat different assumptions about human beings and the
organizations for which they work.
The different approaches of management are
a) Classical approach,

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b) Behavioral approach,
c) Quantitative approach,
d) Systems approach,
e) Contingency approach.
The formal study of management is largely a twentieth-century phenomenon, and to some
degree the relatively large number of management approaches reflects a lack of consensus
among management scholars about basic questions of theory and practice.

a) THE CLASSICAL APPROACH:

The classical approach is the oldest formal approach of management thought. Its roots pre-date
the twentieth century. The classical approach of thought generally concerns ways to manage
work and organizations more efficiently. Three areas of study that can be grouped under the
classical approach are scientific management, administrative management, and bureaucratic
management.
(i) Scientific Management.
Frederick Winslow Taylor is known as the father of scientific management. Scientific
management (also called Taylorism or the Taylor system) is a theory of management that
analyzes and synthesizes workflows, with the objective of improving labor productivity. In other
words, Traditional rules of thumb are replaced by precise procedures developed after careful
study of an individual at work.
(ii) Administrative Management.
Administrative management focuses on the management process and principles of
management. In contrast to scientific management, which deals largely with jobs and work at
the individual level of analysis, administrative management provides a more general theory of
management. Henri Fayol is the major contributor to this approach of management thought.
(iii) Bureaucratic Management.
Bureaucratic management focuses on the ideal form of organization. Max Weber was
the major contributor to bureaucratic management. Based on observation, Weber concluded
that many early organizations were inefficiently managed, with decisions based on personal
relationships and loyalty. He proposed that a form of organization, called a bureaucracy,
characterized by division of labor, hierarchy, formalized rules, impersonality, and the selection
and promotion of employees based on ability, would lead to more efficient management. Weber
also contended that managers' authority in an organization should be based not on tradition or
charisma but on the position held by managers in the organizational hierarchy.

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b) THE BEHAVIORAL APPROACH:

The behavioral approach of management thought developed, in part, because of
perceived weaknesses in the assumptions of the classical approach. The classical approach
emphasized efficiency, process, and principles. Some felt that this emphasis disregarded
important aspects of organizational life, particularly as it related to human behavior. Thus, the
behavioral approach focused on trying to understand the factors that affect human behavior at
work.
(i) Human Relations.
The Hawthorne Experiments began in 1924 and continued through the early 1930s. A
variety of researchers participated in the studies, including Elton Mayo. One of the major
conclusions of the Hawthorne studies was that workers' attitudes are associated with
productivity. Another was that the workplace is a social system and informal group influence
could exert a powerful effect on individual behavior. A third was that the style of supervision is
an important factor in increasing workers' job satisfaction.
(ii) Behavioral Science.
Behavioral science and the study of organizational behavior emerged in the 1950s and
1960s. The behavioral science approach was a natural progression of the human relations
movement. It focused on applying conceptual and analytical tools to the problem of
understanding and predicting behavior in the workplace.
The behavioral science approach has contributed to the study of management through
its focus on personality, attitudes, values, motivation, group behavior, leadership,
communication, and conflict, among other issues.

c) THE QUANTITATIVE APPROACH:

The quantitative approach focuses on improving decision making via the application of
quantitative techniques. Its roots can be traced back to scientific management.
(i) Management Science (Operations Research)
Management science (also called operations research) uses mathematical and statistical
approaches to solve management problems. It developed during World War II as strategists
tried to apply scientific knowledge and methods to the complex problems of war. Industry began
to apply management science after the war. The advent of the computer made many
management science tools and concepts more practical for industry

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(ii) Production And Operations Management.

This approach focuses on the operation and control of the production process that
transforms resources into finished goods and services. It has its roots in scientific management
but became an identifiable area of management study after World War II. It uses many of the
tools of management science.
Operations management emphasizes productivity and quality of both manufacturing and
service organizations. W. Edwards Deming exerted a tremendous influence in shaping modern
ideas about improving productivity and quality. Major areas of study within operations
management include capacity planning, facilities location, facilities layout, materials requirement
planning, scheduling, purchasing and inventory control, quality control, computer integrated
manufacturing, just-in-time inventory systems, and flexible manufacturing systems.

d) SYSTEMS APPROACH:
The simplified block diagram of the systems approach is given below.

The systems approach focuses on understanding the organization as an open system

that transforms inputs into outputs. The systems approach began to have a strong impact on
management thought in the 1960s as a way of thinking about managing techniques that would
allow managers to relate different specialties and parts of the company to one another, as well
as to external environmental factors. The systems approach focuses on the organization as a
whole, its interaction with the environment, and its need to achieve equilibrium

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e) CONTINGENCY APPROACH:
The contingency approach focuses on applying management principles and processes
as dictated by the unique characteristics of each situation. It emphasizes that there is no one
best way to manage and that it depends on various situational factors, such as the external
environment, technology, organizational characteristics, characteristics of the manager, and
characteristics of the subordinates. Contingency theorists often implicitly or explicitly criticize the
classical approach for its emphasis on the universality of management principles; however,
most classical writers recognized the need to consider aspects of the situation when applying
management principles.

MANAGEMENT
Beginning Dates Emphasis
APPROACHS

CLASSICAL APPROACH

Traditional rules of thumb are replaced by precise

Scientific
1880s procedures developed after careful study of an
Management
individual at work.
Gives idea about the primary functions of
Administrative
1940s management and The 14 Principles of
Management
Administration

Bureaucratic Replaces traditional leadership and charismatic

1920s
Management leadership with legal leadership

BEHAVIORAL APPROACH

Human
1930s workers' attitudes are associated with productivity
Relations

Behavioral Gives idea to understand human behavior in the

1950s
Science organization.

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QUANTITATIVE APPROACH

Management
Science Uses mathematical and statistical approaches to
1940s
(Operation solve management problems.
research)
Production This approach focuses on the operation and
and Operations 1940s control of the production process that transforms
Management resources into finished goods and services

RECENT DEVELOPEMENTS

Considers the organization as a system that

SYSTEMS
1950s transforms inputs into outputs while in constant
APPROACH
interaction with its' environment.
Applies management principles and processes as
CONTINGENCY
1960s dictated by the unique characteristics of each
APPROACH
situation.

CONTRIBUTION OF FAYOL AND TAYLOR

F.W. Taylor and Henry Fayol are generally regarded as the founders of scientific
management and administrative management and both provided the bases for science and art
of management.

Taylor's Scientific Management

Frederick Winslow Taylor well-known as the founder of scientific management was the first to
recognize and emphasis the need for adopting a scientific approach to the task of managing an
enterprise. He tried to diagnose the causes of low efficiency in industry and came to the
conclusion that much of waste and inefficiency is due to the lack of order and system in the
methods of management. He found that the management was usually ignorant of the amount of
work that could be done by a worker in a day as also the best method of doing the job. As a
result, it remained largely at the mercy of the workers who deliberately shirked work. He

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therefore, suggested that those responsible for management should adopt a scientific approach
in their work, and make use of "scientific method" for achieving higher efficiency. The scientific
method consists essentially of
(a) Observation
(b) Measurement
(c) Experimentation and
(d) Inference.
He advocated a thorough planning of the job by the management and emphasized the necessity
of perfect understanding and co-operation between the management and the workers both for
the enlargement of profits and the use of scientific investigation and knowledge in industrial
work. He summed up his approach in these words:
• Science, not rule of thumb
• Harmony, not discord
• Co-operation, not individualism
• Maximum output, in place of restricted output
• The development of each man to his greatest efficiency and prosperity.

Elements of Scientific Management: The techniques which Taylor regarded as its essential
elements or features may be classified as under:
1. Scientific Task and Rate-setting, work improvement, etc.
2. Planning the Task.
3. Vocational Selection and Training
4. Standardization (of working conditions, material equipment etc.)
5. Specialization
6. Mental Revolution.
1. Scientific Task and Rate-Setting (work study): Work study may be defined as the
systematic, objective and critical examination of all the factors governing the operational
efficiency of any specified activity in order to effect improvement.
Work study includes.
(a) Methods Study: The management should try to ensure that the plant is laid out in the best
manner and is equipped with the best tools and machinery. The possibilities of eliminating or
combining certain operations may be studied.
(b) Motion Study: It is a study of the movement, of an operator (or even of a
machine) in performing an operation with the purpose of eliminating useless motions.

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(c) Time Study (work measurement): The basic purpose of time study is to determine the
proper time for performing the operation. Such study may be conducted after the motion study.
Both time study and motion study help in determining the best method of doing a job and the
standard time allowed for it.
(d) Fatigue Study: If, a standard task is set without providing for measures to eliminate fatigue,
it may either be beyond the workers or the workers may over strain themselves to attain it. It is
necessary, therefore, to regulate the working hours and provide for rest pauses at scientifically
determined intervals.
(e) Rate-setting: Taylor recommended the differential piece wage system, under which workers
performing the standard task within prescribed time are paid a much higher rate per unit than
inefficient workers who are not able to come up to the standard set.

2. Planning the Task: Having set the task which an average worker must strive to perform to
get wages at the higher piece-rate, necessary steps have to be taken to plan the production
thoroughly so that there is no bottlenecks and the work goes on systematically.

3. Selection and Training: Scientific Management requires a radical change in the methods
and procedures of selecting workers. It is therefore necessary to entrust the task of selection to
a central personnel department. The procedure of selection will also have to be systematised.
Proper attention has also to be devoted to the training of the workers in the correct methods of
work.
4. Standardization: Standardization may be introduced in respect of the following.
(a) Tools and equipment: By standardization is meant the process of bringing about uniformity.
The management must select and store standard tools and implements which will be nearly the
best or the best of their kind.
(b) Speed: There is usually an optimum speed for every machine. If it is exceeded, it is likely to
result in damage to machinery.
(c) Conditions of Work: To attain standard performance, the maintenance of standard
conditions of ventilation, heating, cooling, humidity, floor space, safety etc., is very essential.
(d) Materials: The efficiency of a worker depends on the quality of materials and the method of
handling materials.
5. Specialization: Scientific management will not be complete without the introduction of
specialization. Under this plan, the two functions of 'planning' and 'doing' are separated in the
organization of the plant. The `functional foremen' are specialists who join their heads to give

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thought to the planning of the performance of operations in the workshop. Taylor suggested
eight functional foremen under his scheme of functional foremanship.
(a) The Route Clerk: To lay down the sequence of operations and instruct the workers
concerned about it.
(b) The Instruction Card Clerk: To prepare detailed instructions regarding different aspects of
work.
(c) The Time and Cost Clerk: To send all information relating to their pay to the workers and to
secure proper returns of work from them.
(d) The Shop Disciplinarian: To deal with cases of breach of discipline and absenteeism.
(e) The Gang Boss: To assemble and set up tools and machines and to teach the workers to
make all their personal motions in the quickest and best way.
(f) The Speed Boss: To ensure that machines are run at their best speeds and proper tools are
used by the workers.
(g) The Repair Boss: To ensure that each worker keeps his machine in good order and
maintains cleanliness around him and his machines.
(h) The Inspector: To show to the worker how to do the work.

6. Mental Revolution: At present, industry is divided into two groups – management and
labour. The major problem between these two groups is the division of surplus. The
management wants the maximum possible share of the surplus as profit; the workers want, as
large share in the form of wages. Taylor has in mind the enormous gain that arises from higher
productivity. Such gains can be shared both by the management and workers in the form of
increased profits and increased wages.

Henry Fayol's 14 Principles of Management:

The principles of management are given below:
1. Division of work: Division of work or specialization alone can give maximum productivity and
efficiency. Both technical and managerial activities can be performed in the best manner only
through division of labour and specialization.
2. Authority and Responsibility: The right to give order is called authority. The obligation to
accomplish is called responsibility. Authority and Responsibility are the two sides of the
management coin. They exist together. They are complementary and mutually interdependent.

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3. Discipline: The objectives, rules and regulations, the policies and procedures must be
honoured by each member of an organization. There must be clear and fair agreement on the
rules and objectives, on the policies and procedures. There must be penalties (punishment) for
non-obedience or indiscipline. No organization can work smoothly without discipline - preferably
voluntary discipline.
4. Unity of Command: In order to avoid any possible confusion and conflict, each member of
an organization must received orders and instructions only from one superior (boss).
5. Unity of Direction: All members of an organization must work together to accomplish
common objectives.
6. Emphasis on Subordination of Personal Interest to General or Common Interest: This is
also called principle of co-operation. Each shall work for all and all for each. General or common
interest must be supreme in any joint enterprise.
7. Remuneration: Fair pay with non-financial rewards can act as the best incentive or motivator
for good performance. Exploitation of employees in any manner must be eliminated. Sound
scheme of remuneration includes adequate financial and nonfinancial incentives.
8. Centralization: There must be a good balance between centralization and decentralization of
authority and power. Extreme centralization and decentralization must be avoided.
9. Scalar Chain: The unity of command brings about a chain or hierarchy of command linking
all members of the organization from the top to the bottom. Scalar denotes steps.
10. Order: Fayol suggested that there is a place for everything. Order or system alone can
create a sound organization and efficient management.
11. Equity: An organization consists of a group of people involved in joint effort. Hence, equity
(i.e., justice) must be there. Without equity, we cannot have sustained and adequate joint
collaboration.
12. Stability of Tenure: A person needs time to adjust himself with the new work and
demonstrate efficiency in due course. Hence, employees and managers must have job security.
Security of income and employment is a pre-requisite of sound organization and management.
13. Esprit of Co-operation: Esprit de corps is the foundation of a sound organization. Union is
strength. But unity demands co-operation. Pride, loyalty and sense of belonging are responsible
for good performance.
14. Initiative: Creative thinking and capacity to take initiative can give us sound managerial
planning and execution of predetermined plans.

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UNIT II
PLANNING

DEFINITION
According to Koontz O'Donnel - "Planning is an intellectual process, the conscious
determination of courses of action, the basing of decisions on purpose, acts and considered
estimates".

NATURE AND PURPOSE OF PLANNING

Nature of Planning
1. Planning is goal-oriented: Every plan must contribute in some positive way towards the
accomplishment of group objectives. Planning has no meaning without being related to goals.
2. Primacy of Planning: Planning is the first of the managerial functions. It precedes all other
management functions.
3. Pervasiveness of Planning: Planning is found at all levels of management. Top
management looks after strategic planning. Middle management is in charge of administrative
planning. Lower management has to concentrate on operational planning.
4. Efficiency, Economy and Accuracy: Efficiency of plan is measured by its contribution to the
objectives as economically as possible. Planning also focuses on accurate forecasts.
5. Co-ordination: Planning co-ordinates the what, who, how, where and why of planning.
Without co-ordination of all activities, we cannot have united efforts.
6. Limiting Factors: A planner must recognize the limiting factors (money, manpower etc) and
formulate plans in the light of these critical factors.
7. Flexibility: The process of planning should be adaptable to changing environmental
conditions.
8. Planning is an intellectual process: The quality of planning will vary according to the
quality of the mind of the manager.

Purpose of Planning

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– It involves conversion of detailed and specific plans into detailed and specific
action plans.
– It is the blue print for current action and it supports the strategic plans.

On the basis of time period

• Long term planning
– Time frame beyond five years.
– It specifies what the organization wants to become in long run.
– It involves great deal of uncertainty.
• Intermediate term planning
– Time frame between two and five years.
– It is designed to implement long term plans.
• Short term planning
– Time frame of one year or less.
– It provide basis for day to day operations.

PLANNING PROCESS
The various steps involved in planning are given below

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a) Perception of Opportunities:
Although preceding actual planning and therefore not strictly a part of the planning
process, awareness of an opportunity is the real starting point for planning. It includes a
preliminary look at possible future opportunities and the ability to see them clearly and
completely, knowledge of where we stand in the light of our strengths and weaknesses, an
understanding of why we wish to solve uncertainties, and a vision of what we expect to gain.
Setting realistic objectives depends on this awareness. Planning requires realistic diagnosis of
the opportunity situation.

b) Establishing Objectives:
The first step in planning itself is to establish objectives for the entire enterprise and then
for each subordinate unit. Objectives specifying the results expected indicate the end points of
what is to be done, where the primary emphasis is to be placed, and what is to be accomplished
by the network of strategies, policies, procedures, rules, budgets and programs.
Enterprise objectives should give direction to the nature of all major plans which, by
reflecting these objectives, define the objectives of major departments. Major department
objectives, in turn, control the objectives of subordinate departments, and so on down the line.
The objectives of lesser departments will be better framed, however, if subdivision managers
understand the overall enterprise objectives and the implied derivative goals and if they are
given an opportunity to contribute their ideas to them and to the setting of their own goals.

c) Considering the Planning Premises:

Another logical step in planning is to establish, obtain agreement to utilize and disseminate
critical planning premises. These are forecast data of a factual nature, applicable basic policies,
and existing company plans. Premises, then, are planning assumptions – in other words, the
expected environment of plans in operation. This step leads to one of the major principles of
planning.
The more individuals charged with planning understand and agree to utilize consistent planning
premises, the more coordinated enterprise planning will be.
Planning premises include far more than the usual basic forecasts of population, prices, costs,
production, markets, and similar matters.
Because the future environment of plans is so complex, it would not be profitable or realistic to
make assumptions about every detail of the future environment of a plan.

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Since agreement to utilize a given set of premises is important to coordinate planning, it

becomes a major responsibility of managers, starting with those at the top, to make sure that
subordinate managers understand the premises upon which they are expected to plan. It is not
unusual for chief executives in well- managed companies to force top managers with differing
views, through group deliberation, to arrive at a set of major premises that all can accept.

d) Identification of alternatives:
Once the organizational objectives have been clearly stated and the planning premises
have been developed, the manager should list as many available alternatives as possible for
reaching those objectives.
The focus of this step is to search for and examine alternative courses of action, especially
those not immediately apparent. There is seldom a plan for which reasonable alternatives do
not exist, and quite often an alternative that is not obvious proves to be the best.
The more common problem is not finding alternatives, but reducing the number of alternatives
so that the most promising may be analyzed. Even with mathematical techniques and the
computer, there is a limit to the number of alternatives that may be examined. It is therefore
usually necessary for the planner to reduce by preliminary examination the number of
alternatives to those promising the most fruitful possibilities or by mathematically eliminating,
through the process of approximation, the least promising ones.

e) Evaluation of alternatives
Having sought out alternative courses and examined their strong and weak points, the
following step is to evaluate them by weighing the various factors in the light of premises and
goals. One course may appear to be the most profitable but require a large cash outlay and a
slow payback; another may be less profitable but involve less risk; still another may better suit
the company in long–range objectives.
If the only objective were to examine profits in a certain business immediately, if the future were
not uncertain, if cash position and capital availability were not worrisome, and if most factors
could be reduced to definite data, this evaluation should be relatively easy. But typical planning
is replete with uncertainties, problems of capital shortages, and intangible factors, and so
evaluation is usually very difficult, even with relatively simple problems. A company may wish to
enter a new product line primarily for purposes of prestige; the forecast of expected results may
show a clear financial loss, but the question is still open as to whether the loss is worth the gain.

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f) Choice of alternative plans

An evaluation of alternatives must include an evaluation of the premises on which the
alternatives are based. A manager usually finds that some premises are unreasonable and can
therefore be excluded from further consideration. This elimination process helps the manager
determine which alternative would best accomplish organizational objectives.

g) Formulating of Supporting Plans

After decisions are made and plans are set, the final step to give them meaning is to numberize
them by converting them to budgets. The overall budgets of an enterprise represent the sum
total of income and expenses with resultant profit or surplus and budgets of major balance–
sheet items such as cash and capital expenditures. Each department or program of a business
or other enterprise can have its own budgets, usually of expenses and capital expenditures,
which tie into the overall budget.
If this process is done well, budgets become a means of adding together the various plans and
also important standards against which planning progress can be measured.

h) Establishing sequence of activities

Once plans that furnish the organization with both long-range and short-range direction have
been developed, they must be implemented. Obviously, the organization can not directly benefit
from planning process until this step is performed.

TYPES OF PLANS / COMPONENTS OF PLANNING

In the process of planning, several plans are prepared which are known as components of
planning.

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Plans can be broadly classified as

a) Strategic plans
b) Tactical plans
c) Operational plans

Operational plans lead to the achievement of tactical plans, which in turn lead to the attainment
of strategic plans. In addition to these three types of plans, managers should also develop a
contingency plan in case their original plans fail.

a) Strategic plans:
A strategic plan is an outline of steps designed with the goals of the entire organization as a
whole in mind, rather than with the goals of specific divisions or departments. It is further
classified as

i) Mission:
. The mission is a statement that reflects the basic purpose and focus of the organization which
normally remain unchanged. The mission of the company is the answer of the question : why
does the organization exists?

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Properly crafted mission statements serve as filters to separate what is important from what is
not, clearly state which markets will be served and how, and communicate a sense of intended
direction to the entire organization.
Mission of Ford: “we are a global, diverse family with a proud inheritance, providing exceptional
products and services”.

ii) Objectives or goals:

Both goal and objective can be defined as statements that reflect the end towards which the
organization is aiming to achieve. However, there are significant differences between the two. A
goal is an abstract and general umbrella statement, under which specific objectives can be
clustered. Objectives are statements that describe—in precise, measurable, and obtainable
terms which reflect the desired organization’s outcomes.

iii) Strategies:
Strategy is the determination of the basic long term objectives of an organization and the
adoption of action and collection of action and allocation of resources necessary to achieve
these goals.
Strategic planning begins with an organization's mission. Strategic plans look ahead over the
next two, three, five, or even more years to move the organization from where it currently is to
where it wants to be. Requiring multilevel involvement, these plans demand harmony among all
levels of management within the organization. Top-level management develops the directional
objectives for the entire organization, while lower levels of management develop compatible
objectives and plans to achieve them. Top management's strategic plan for the entire
organization becomes the framework and sets dimensions for the lower level planning.

b) Tactical plans:
A tactical plan is concerned with what the lower level units within each division must do,
how they must do it, and who is in charge at each level. Tactics are the means needed to
activate a strategy and make it work.
Tactical plans are concerned with shorter time frames and narrower scopes than are strategic
plans. These plans usually span one year or less because they are considered short-term goals.
Long-term goals, on the other hand, can take several years or more to accomplish. Normally, it

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is the middle manager's responsibility to take the broad strategic plan and identify specific
tactical actions.

c) Operational plans
The specific results expected from departments, work groups, and individuals are the
operational goals. These goals are precise and measurable. “Process 150 sales applications
each week” or “Publish 20 books this quarter” are examples of operational goals.
An operational plan is one that a manager uses to accomplish his or her job responsibilities.
Supervisors, team leaders, and facilitators develop operational plans to support tactical plans
(see the next section). Operational plans can be a single-use plan or a standing plan.
i) Single-use plans apply to activities that do not recur or repeat. A one-time
occurrence, such as a special sales program, is a single-use plan because it deals with
the who, what, where, how, and how much of an activity.
 Programme: Programme consists of an ordered list of events to be followed to
execute a project.
 Budget: A budget predicts sources and amounts of income and how much they are
used for a specific project.
ii) Standing plans are usually made once and retain their value over a period of years
while undergoing periodic revisions and updates. The following are examples of ongoing
plans:
 Policy: A policy provides a broad guideline for managers to follow when dealing with
important areas of decision making. Policies are general statements that explain how
a manager should attempt to handle routine management responsibilities. Typical
human resources policies, for example, address such matters as employee hiring,
terminations, performance appraisals, pay increases, and discipline.
 Procedure: A procedure is a set of step-by-step directions that explains how
activities or tasks are to be carried out. Most organizations have procedures for
purchasing supplies and equipment, for example. This procedure usually begins with
a supervisor completing a purchasing requisition. The requisition is then sent to the
next level of management for approval. The approved requisition is forwarded to the
purchasing department. Depending on the amount of the request, the purchasing
department may place an order, or they may need to secure quotations and/or bids
for several vendors before placing the order. By defining the steps to be taken and

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the order in which they are to be done, procedures provide a standardized way of
responding to a repetitive problem.
 Rule: A rule is an explicit statement that tells an employee what he or she can and
cannot do. Rules are “do” and “don't” statements put into place to promote the safety
of employees and the uniform treatment and behavior of employees. For example,
rules about tardiness and absenteeism permit supervisors to make discipline
decisions rapidly and with a high degree of fairness.

d) Contingency plans
Intelligent and successful management depends upon a constant pursuit of adaptation,
flexibility, and mastery of changing conditions. Strong management requires a “keeping all
options open” approach at all times — that's where contingency planning comes in.
Contingency planning involves identifying alternative courses of action that can be implemented
if and when the original plan proves inadequate because of changing circumstances.
Keep in mind that events beyond a manager's control may cause even the most carefully
prepared alternative future scenarios to go awry. Unexpected problems and events frequently
occur. When they do, managers may need to change their plans. Anticipating change during the
planning process is best in case things don't go as expected. Management can then develop
alternatives to the existing plan and ready them for use when and if circumstances make these
alternatives appropriate.

OBJECTIVES
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 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.

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• The objectives should be set in realistic terms i.e., the objectives to be set should be
reasonable and capable of attainment.
• Objectives must be consistent with one and other.
• Objectives must be set in clear-cut terms.
• For the successful accomplishment of the objectives, there should be effective
communication.

MANAGEMENT BY OBJECTIVES (MBO)

MBO was first popularized by Peter Drucker in 1954 in his book 'The practice of
Management’. It is a process of agreeing within an organization so that management and
employees buy into the objectives and understand what they are. It has a precise and written
description objectives ahead, timelines for their motoring and achievement.
The employees and manager agree to what the employee will attempt to achieve in a period
ahead and the employee will accept and buy into the objectives.
Definition
“MBO is a process whereby the superior and the mangers of an organization jointly identify its
common goals, define each individual’s major area of responsibility in terms of results expected
of him, and use these measures as guides for operating the unit and assessing the contribution
of each of its members.”
Features of MBO
1. MBO is concerned with goal setting and planning for individual managers and their units.
2. The essence of MBO is a process of joint goal setting between a supervisor and a
subordinate.
3. Managers work with their subordinates to establish the performance goals that are
consistent with their higher organizational objectives.
4. MBO focuses attention on appropriate goals and plans.
5. MBO facilitates control through the periodic development and subsequent evaluation of
individual goals and plans.

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Steps in MBO:

The typical MBO process consists of:

1) Establishing a clear and precisely defined statement of objectives for the employee
2) Developing an action plan indicating how these objectives are to be achieved
3) Reviewing the performance of the employees
4) Appraising performance based on objective achievement

1) Setting objectives:
For Management by Objectives (MBO) to be effective, individual managers must understand the
specific objectives of their job and how those objectives fit in with the overall company
objectives set by the board of directors.
The managers of the various units or sub-units, or sections of an organization should know not
only the objectives of their unit but should also actively participate in setting these objectives
and make responsibility for them.
Management by Objective (MBO) systems, objectives are written down for each level of the
organization, and individuals are given specific aims and targets.

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• Clarity of goals
• Subordinates have a higher commitment to objectives they set themselves than those
imposed on them by another person.
• Managers can ensure that objectives of the subordinates are linked to the organization's
objectives.

Limitations
There are several limitations to the assumptive base underlying the impact of managing by
objectives, including:
• It over-emphasizes the setting of goals over the working of a plan as a driver of outcomes.
• It underemphasizes the importance of the environment or context in which the goals are set.
That context includes everything from the availability and quality of resources, to relative
buy-in by leadership and stake-holders.
• Companies evaluated their employees by comparing them with the "ideal" employee. Trait
appraisal only looks at what employees should be, not at what they should do.
When this approach is not properly set, agreed and managed by organizations, self-centered
employees might be prone to distort results, falsely representing achievement of targets that
were set in a short-term, narrow fashion. In this case, managing by objectives would be
counterproductive.

STRATEGIES
The term 'Strategy' has been adapted from war and is being increasingly used in
business to reflect broad overall objectives and policies of an enterprise. Literally speaking, the
term 'Strategy' stands for the war-art of the military general, compelling the enemy to fight as
per out chosen terms and conditions.
According to Koontz and O' Donnell, "Strategies must often denote a general programme of
action and deployment of emphasis and resources to attain comprehensive objectives".
Strategies are plans made in the light of the plans of the competitors because a modern
business institution operates in a competitive environment. They are a useful framework for
guiding enterprise thinking and action. A perfect strategy can be built only on perfect knowledge
of the plans of others in the industry. This may be done by the management of a firm putting
itself in the place of a rival firm and trying to estimate their plans.

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firm entered the market with a lower-quality product that better met the overall needs of the
customers.

POLICIES
Policies are general statements or understandings that guide managers’ thinking in
decision making. They usually do not require action but are intended to guide managers in their
commitment to the decision they ultimately make.

The first step in the process of policy formulation, as shown in the diagram below, is to
capture the values or principles that will guide the rest of the process and form the basis on
which to produce a statement of issues. The statement of issues involves identifying the
opportunities and constraints affecting the local housing market, and is to be produced by

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• They save time and effort by pre-deciding problems and

• They permit delegation of authority to mangers at the lower levels.

DECISION MAKING
The word decision has been derived from the Latin word "decidere" which means
"cutting off". Thus, decision involves cutting off of alternatives between those that are desirable
and those that are not desirable.
In the words of George R. Terry, "Decision-making is the selection based on some criteria from
two or more possible alternatives".

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 judgemental and emotional.
• Decision-making is goal-oriented.
• 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.

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UNIT III
ORGANIZING

DEFINITION
According to Koontz and O'Donnell, "Organization 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."
Organization involves division of work among people whose efforts must be co-ordinated to
achieve specific objectives and to implement pre-determined strategies.

NATURE OR CHARACTERISTICS OF ORGANIZING

From the study of the various definitions given by different management experts we get
the following information about the characteristics or nature of organization,
(1) Division of Work: Division of work is the basis of an organization. In other words, there can
be no organization without division of work. Under division of work the entire work of business is
divided into many departments .The work of every department is further sub-divided into sub-
works. In this way each individual has to do the saran work repeatedly which gradually makes
that person an expert.
(2) Coordination: Under organizing different persons are assigned different works but the aim
of all these persons happens to be the some - the attainment of the objectives of the enterprise.
Organization ensures that the work of all the persons depends on each other’s work even
though it happens to be different. The work of one person starts from where the work of another
person ends. The non-completion of the work of one person affects the work of everybody.
Therefore, everybody completes his work in time and does not hinder the work of others. It is
thus, clear that it is in the nature of an organization to establish coordination among different
works, departments and posts in the enterprise.
(3) Plurality of Persons: Organization is a group of many persons who assemble to fulfill a
common purpose. A single individual cannot create an organization.
(4) Common Objectives: There are various parts of an organization with different functions to
perform but all move in the direction of achieving a general objective.
(5) Well-defined Authority and Responsibility: Under organization a chain is established
between different posts right from the top to the bottom. It is clearly specified as to what will be

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the authority and responsibility of every post. In other words, every individual working in the
organization is given some authority for the efficient work performance and it is also decided
simultaneously as to what will be the responsibility of that individual in case of unsatisfactory
work performance.
(6) Organization is a Structure of Relationship: Relationship between persons working on
different posts in the organization is decided. In other words, it is decided as to who will be the
superior and who will be the subordinate. Leaving the top level post and the lowest level post
everybody is somebody's superior and somebody's subordinate. The person working on the top
level post has no superior and the person working on the lowest level post has no subordinate.
(7) Organization is a Machine of Management: Organization is considered to be a machine of
management because the efficiency of all the functions depends on an effective organization. In
the absence of organization no function can be performed in a planned manner. It is appropriate
to call organization a machine of management from another point of view. It is that machine in
which no part can afford tube ill-fitting or non-functional. In other words, if the division of work is
not done properly or posts are not created correctly the whole system of management
collapses.
(8) Organization is a Universal Process: Organization is needed both in business and non-
business organizations. Not only this, organization will be needed where two or mom than two
people work jointly. Therefore, organization has the quality of universality. (9) Organization is a
Dynamic Process: Organization is related to people and the knowledge and experience of the
people undergo a change. The impact of this change affects the various functions of the
organizations. Thus, organization is not a process that can be decided for all times to come but
it undergoes changes according to the needs. The example in this case can be the creation or
abolition of a new post according to the need.

IMPORTANCE OR ADVANTAGES OF ORGANIZING

Organization is an instrument that defines relations among different people which helps
them to understand as in who happens to be their superior and who is their subordinate. This
information helps in fixing responsibility and developing coordination. In such circumstances the
objectives of the organization can be easily achieved. That is why, it is said that Organization Is
a mechanism of management. In addition to that it helps in the other functions of management
like planning, staffing, leading, controlling, etc. The importance of organization or its merits
becomes clear from the following facts,

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(1) Increase In Managerial Efficiency: A good and balanced organization helps the managers
to increase their efficiency. Managers, through the medium of organization, make a proper
distribution of the whole work among different people according to their ability.
(2) Proper Utilization of Resources: Through the medium of organization optimum utilization
of all the available human and material resources of an enterprise becomes possible. Work is
allotted to every individual according to his ability and capacity and conditions ant created to
enable him to utilize his ability to the maximum extent. For example, if an employee possesses
the knowledge of modem machinery but the modem machinery is not available in the
organization, in that case, efforts are made to make available the modem machinery.
(3) Sound Communication Possible: Communication is essential for taking the right decision
at the right time. However, the establishment of a good communication system is possible only
through an organization. In an organization the time of communication is decided so that all the
useful information reaches the officers concerned which. in turn, helps the decision-making.
(4) Facilitates Coordination: In order to attain successfully the objectives of the organization,
coordination among various activities in the organization is essential. Organization is the only
medium which makes coordination possible. Under organization the division of work is made in
such a manner as to make all the activities complementary to each other increasing their inter-
dependence. Inter-dependence gives rise to the establishment of relations which, in turn,
increases coordination.
(5) Increase in Specialization: Under organization the whole work is divided into different
parts. Competent persons are appointed to handle all the sub-works and by handling a
particular work repeatedly they become specialists. This enables them to have maximum work
performance in the minimum time while the organization gets the benefit of specialization.
(6) Helpful in Expansion: A good organization helps the enterprise in facing competition. When
an enterprise starts making available good quality product at cheap rates, it increases the
demand for its products. In order to meet the increasing demand for its products an organization
has to expand its business. On the other hand, a good organization has an element of flexibility
which far from impeding the expansion work encourages it.

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is crucial in organizational structure, design and efficiency. It is also an important aid to

information processing and coordination.
b) Departmentalization:
Departmentalization is a process of horizontal clustering of different types of functions
and activities on any one level of the hierarchy. Departmentalization is conventionally based on
purpose, product, process, function, personal things and place.
c) Span of Control:
This refers to the number of specialized activities or individuals supervised by one
person. Deciding the span of control is important for coordinating different types of activities
effectively.
d) De-centralization and Centralization:
De-centralization refers to decision making at lower levels in the hierarchy of authority. In
contrast, decision making in a centralized type of organizational structure is at higher levels. The
degree of centralization and de-centralization depends on the number of levels of hierarchy,
degree of coordination, specialization and span of control.
Every organizational structure contains both centralization and de-centralization, but to varying
degrees. The extent of this can be determined by identifying how much of the decision making
is concentrated at the top and how much is delegated to lower levels. Modern organizational
structures show a strong tendency towards de-centralization.

FORMAL AND INFORMAL ORGANIZATION

The formal organization refers to the structure of jobs and positions with clearly defined
functions and relationships as prescribed by the top management. This type of organization is
built by the management to realize 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 organization, which
does not appear on the organization chart, supplements the formal organization in achieving
organizational 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 organization and to use them for
achieving organizational objectives.

FORMAL ORGANIZATION

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Chester I Bernard defines formal organization 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 essence of formal
organization 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 organization is built around four key pillars. They are:
• Division of labor
• Scalar and functional processes
• Structure and
• Span of control
Thus, a formal organization is one resulting from planning where the pattern of structure has
already been determined by the top management.

Characteristic Features of formal organization

• Formal organization structure is laid down by the top management to achieve organizational
goals.
• Formal organization prescribes the relationships amongst the people working in the
organization.
• The organization structures is consciously designed to enable the people of the organization
to work together for accomplishing the common objectives of the enterprise
• Organization structure concentrates on the jobs to be performed and not the individuals who
are to perform jobs.
• In a formal organization, individuals are fitted into jobs and positions and work as per the
managerial decisions. Thus, the formal relations in the organization arise from the pattern of
responsibilities that are created by the management.
• A formal organization is bound by rules, regulations and procedures.
• In a formal organization, the position, authority, responsibility and accountability of each
level are clearly defined.
• Organization structure is based on division of labor and specialization to achieve efficiency
in operations.

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• A formal organization is deliberately impersonal. The organization does not take into
consideration the sentiments of organizational members.
• The authority and responsibility relationships created by the organization structure are to be
honored by everyone.
• In a formal organization, coordination proceeds according to the prescribed pattern.

Advantages of formal organization

• The formal organization structure concentrates on the jobs to be performed. It, therefore,
makes everybody responsible for a given task.
• A formal organization is bound by rules, regulations and procedures. It thus ensures law and
order in the organization.
• The organization structure enables the people of the organization to work together for
accomplishing the common objectives of the enterprise

Disadvantages or criticisms of formal organization

• The formal organization does not take into consideration the sentiments of organizational
members.
• The formal organization does not consider the goals of the individuals. It is designed to
achieve the goals of the organization only.
• The formal organization is bound by rigid rules, regulations and procedures. This makes the
achievement of goals difficult.

INFORMAL ORGANIZATION
Informal organization refers to the relationship between people in the organization based
on personal attitudes, emotions, prejudices, likes, dislikes etc. an informal organization is an
organization 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 organization 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 organization according to its environment.

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Characteristics features of informal organization

• Informal organization is not established by any formal authority. It is unplanned and arises
spontaneously.
• Informal organizations reflect human relationships. It arises from the personal and social
relations amongst the people working in the organization.
• Formation of informal organizations is a natural process. It is not based on rules, regulations
and procedures.
• The inter-relations amongst the people in an informal organization cannot be shown in an
organization chart.
• In the case of informal organization, the people cut across formal channels of
communications and communicate amongst themselves.
• The membership of informal organizations is voluntary. It arises spontaneously and not by
deliberate or conscious efforts.
• Membership of informal groups can be overlapping as a person may be member of a
number of informal groups.
• Informal organizations 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 organization.

Benefits of Informal organization

• It blends with the formal organization to make it more effective.
• Many things which cannot be achieved through formal organization can be achieved through
informal organization.
• The presence of informal organization in an enterprise makes the managers plan and act
more carefully.
• Informal organization acts as a means by which the workers achieve a sense of security and
belonging. It provides social satisfaction to group members.
• An informal organization has a powerful influence on productivity and job satisfaction.
• The informal leader lightens the burden of the formal manager and tries to fill in the gaps in
the manager's ability.
• Informal organization helps the group members to attain specific personal objectives.
• Informal organization is the best means of employee communication. It is very fast.

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• Informal organization gives psychological satisfaction to the members. It acts as a safety

valve for the emotional problems and frustrations of the workers of the organization because
they get a platform to express their feelings.
• It serves as an agency for social control of human behavior.

DIFFERENCES BETWEEN FORMAL AND INFORMAL ORGANIZATION

Formal Organization Informal Organization
1. Formal organization is established with the explicit 1. Informal organization springs on its
aim of achieving well-defined goals. own. Its goals are ill defined and
intangible.
2. Formal organization is bound together by 2. Informal organization is characterized
authority relationships among members. A by a generalized sort of power
hierarchical structure is created, constituting top relationships. Power in informal
management, middle management and supervisory organization has bases other than
management. rational legal right.
3. Formal organization recognizes certain tasks 3. Informal organization does not have
which are to be carried out to achieve its goals. any well-defined tasks.
4. The roles and relationships of people in formal 4. In informal organization the
organization are impersonally defined relationships among people are
interpersonal.
5. In formal organization, much emphasis is placed 5. Informal organization is characterized
on efficiency, discipline, conformity, consistency and by relative freedom, spontaneity, by
control. relative freedom, spontaneity,
homeliness and warmth.
6. In formal organization, the social and 6. In informal organization the
psychological needs and interests of members of the sociopsychological needs, interests and
organization get little attention. aspirations of members get priority.
7. The communication system in formal organization 7. In informal organization, the
follows certain pre-determined patterns and paths. communication pattern is haphazard,
intricate and natural.
8. Formal organization is relatively slow to respond 8. Informal organization is dynamic and
and adapt to changing situations and realities. very vigilant. It is sensitive to its
surroundings.

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• Danger of superiors loss of control

• Requirement of highly trained managerial personnel
• Block in decision making

CENTRALIZATION AND DECENTRALIZATION

CENTRALIZATION:
It is the process of transferring and assigning decision-making authority to higher levels
of an organizational hierarchy. The span of control of top managers is relatively broad, and
there are relatively many tiers in the organization.

Characteristics
• Philosophy / emphasis on: top-down control, leadership, vision, strategy.
• Decision-making: strong, authoritarian, visionary, charismatic.
• Organizational change: shaped by top, vision of leader.
• Execution: decisive, fast, coordinated. Able to respond quickly to major issues and changes.
• Uniformity. Low risk of dissent or conflicts between parts of the organization.

Advantages of Centralization
• Provide Power and prestige for manager
• Promote uniformity of policies, practices and decisions
• Minimal extensive controlling procedures and practices
• Minimize duplication of function

Disadvantages of Centralization
• Neglected functions for mid. Level, and less motivated beside personnel.
• Nursing supervisor functions as a link officer between nursing director and first-line
management.

DECENTRALIZATION:
It is the process of transferring and assigning decision-making authority to lower levels of
an organizational hierarchy. The span of control of top managers is relatively small, and there
are relatively few tears in the organization, because there is more autonomy in the lower ranks.

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Characteristics
• Philosophy / emphasis on: bottom-up, political, cultural and learning dynamics.
• Decision-making: democratic, participative, detailed.
• Organizational change: emerging from interactions, organizational dynamics.
• Execution: evolutionary, emergent. Flexible to adapt to minor issues and changes.
• Participation, accountability. Low risk of not-invented-here behavior.

Three Forms of decentralization

• De-concentration. The weakest form of decentralization. Decision making authority is
redistributed to lower or regional levels of the same central organization.
• Delegation. A more extensive form of decentralization. Through delegation the
responsibility for decision-making are transferred to semi-autonomous organizations not
wholly controlled by the central organization, but ultimately accountable to it.
• Devolution. A third type of decentralization is devolution. The authority for decision-
making is transferred completely to autonomous organizational units.

Advantages of Decentralization
• Raise morale and promote interpersonal relationships
• Relieve from the daily administration
• Bring decision-making close to action
• Develop Second-line managers
• Promote employee’s enthusiasm and coordination
• Facilitate actions by lower-level managers

Disadvantages of Decentralization
• Top-level administration may feel it would decrease their status
• Managers may not permit full and maximum utilization of highly qualified personnel
• Increased costs. It requires more managers and large staff
• It may lead to overlapping and duplication of effort

Centralization and Decentralization are two opposite ways to transfer decision-making power
and to change the organizational structure of organizations accordingly.

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There must be a good balance between centralization and decentralization of authority and
power. Extreme centralization and decentralization must be avoided.

DELEGATION OF AUTHORITY
A manager alone cannot perform all the tasks assigned to him. In order to meet the
targets, the manager should delegate authority. Delegation of Authority means division of
authority and powers downwards to the subordinate. Delegation is about entrusting someone
else to do parts of your job. Delegation of authority can be defined as subdivision and sub-
allocation of powers to the subordinates in order to achieve effective results.
Elements of Delegation
1. Authority - in context of a business organization, authority can be defined as the power and
right of a person to use and allocate the resources efficiently, to take decisions and to give
orders so as to achieve the organizational objectives. Authority must be well- defined. All
people who have the authority should know what is the scope of their authority is and they
shouldn’t misutilize it. Authority is the right to give commands, orders and get the things
done. The top level management has greatest authority. Authority always flows from top to
bottom. It explains how a superior gets work done from his subordinate by clearly explaining
what is expected of him and how he should go about it. Authority should be accompanied
with an equal amount of responsibility. Delegating the authority to someone else doesn’t
imply escaping from accountability. Accountability still rest with the person having the utmost
authority.
2. Responsibility - is the duty of the person to complete the task assigned to him. A person
who is given the responsibility should ensure that he accomplishes the tasks assigned to
him. If the tasks for which he was held responsible are not completed, then he should not
give explanations or excuses. Responsibility without adequate authority leads to discontent
and dissatisfaction among the person. Responsibility flows from bottom to top. The middle
level and lower level management holds more responsibility. The person held responsible
for a job is answerable for it. If he performs the tasks assigned as expected, he is bound for
praises. While if he doesn’t accomplish tasks assigned as expected, then also he is
answerable for that.
3. Accountability - means giving explanations for any variance in the actual performance from
the expectations set. Accountability cannot be delegated. For example, if ’A’ is given a task
with sufficient authority, and ’A’ delegates this task to B and asks him to ensure that task is
done well, responsibility rest with ’B’, but accountability still rest with ’A’. The top level

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SELECTION PROCESS
Selecting a suitable candidate can be the biggest challenge for any organisation. The
success of an organization largely depends on its staff. Selection of the right candidate builds
the foundation of any organization's success and helps in reducing turnovers.
Though there is no fool proof selection procedure that will ensure low turnover and high profits,
the following steps generally make up the selection process-

a) Initial Screening
This is generally the starting point of any employee selection process. Initial Screening
eliminates unqualified applicants and helps save time. Applications received from various
sources are scrutinized and irrelevant ones are discarded.

b) Preliminary Interview

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LEADERSHIP
Definition
Leadership is defined as influence, the art or process of influencing people so that they
will strive willingly and enthusiastically toward the achievement of group goals.
- Leaders act to help a group attain objectives through the maximum application of its
capabilities.
- Leaders must instill values – whether it be concern for quality, honesty and
calculated risk taking or for employees and customers.

Importance of Leadership
1. Aid to authority
2. Motive power to group efforts
3. Basis for co operation
4. Integration of Formal and Informal Organization.

LEADERSHIP STYLES
The leadership style we will discuss here are:
a) Autocratic style
b) Democratic Style
c) Laissez Faire Style

a) Autocratic style
Manager retains as much power and decision-making authority as possible. The manager does
not consult employees, nor are they allowed to give any input. Employees are expected to obey
orders without receiving any explanations. The motivation environment is produced by creating
a structured set of rewards and punishments.

Autocratic leadership is a classical leadership style with the following characteristics:

• Manager seeks to make as many decisions as possible
• Manager seeks to have the most authority and control in decision making
• Manager seeks to retain responsibility rather than utilize complete delegation

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h)Transformational Leadership:
Assumptions
• People will follow a person who inspires them.
• A person with vision and passion can achieve great things.
• The way to get things done is by injecting enthusiasm and energy.

Description
Working for a Transformational Leader can be a wonderful and uplifting experience. They put
passion and energy into everything. They care about you and want you to succeed.
Transformational Leaders are often charismatic, but are not as narcissistic as pure Charismatic
Leaders, who succeed through a belief in themselves rather than a belief in others.
One of the traps of Transformational Leadership is that passion and confidence can easily be
mistaken for truth and reality.
Transformational Leaders, by definition, seek to transform. When the organization does not
need transforming and people are happy as they are, then such a leader will be frustrated. Like
wartime leaders, however, given the right situation they come into their own and can be
personally responsible for saving entire companies.

COMMUNICATION
Communication is the exchange of messages between people for the purpose of
achieving common meanings. Unless common meanings are shared, managers find it
extremely difficult to influence others. Whenever group of people interact, communication takes
place. Communication is the exchange of information using a shared set of symbols. It is the
process that links group members and enables them to coordinate their activities. Therefore,
when managers foster effective communication, they strengthen the
connections between employees and build cooperation. Communication also functions to build
and reinforce interdependence between various parts of the organization. As a linking
mechanism among the different organizational subsystems, communication is a central feature
of the structure of groups and organizations. It helps to coordinate tasks and activities within
and between organizations.

DEFINITION

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According to Koontz and O'Donnell, "Communication, is an intercourse by words, letters

symbols or messages, and is a way that the organization members shares meaning and
understanding with another".

THE COMMUNICATION PROCESS

Communication is important in building and sustaining human relationships at work.
Communication can be thought of as a process or flow. Before communication can take place, a
purpose, expressed as a message to be conveyed is needed. It passes between the sender and
the receiver. The result is transference of meaning from one person to another.
The figure below depicts the communication process. This model is made up of seven parts:
(1) Source, (2) Encoding, (3) Message, (4) Channel, (5) Decoding, (6) Receiver, and (7)
Feedback.

a) Source:
The source initiates a message. This is the origin of the communication and can be an
individual, group or inanimate object. The effectiveness of a communication depends to a
considerable degree on the characteristics of the source. The person who initiates the
communication process is known as sender, source or communicator. In an organization, the
sender will be a person who has a need or desire to send a message to others. The sender has
some information which he wants to communicate to some other person to achieve some
purpose. By initiating the message, the sender attempts to achieve understanding and change
in the behaviour of the receiver.

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(ii) Encoding and decoding be done with symbols that are familiar to the sender and the
receiver of the message.
(iii) For the planning of the communication, other people should be consulted and encouraged
to participate.
(iv) It is important to consider the needs of the receivers of the information. Whenever
appropriate, one should communicate something that is of value to them, in the short run as
well as in the more distant future.
(v) In communication, tone of voice, the choice of language and the congruency between what
is said and how it is said influence the reactions of the receiver of the message.
(vi) Communication is complete only when the message is understood by the receiver. And one
never knows whether communication is understood unless the sender gets a feedback.
(vii) The function of communication is more than transmitting the information. It also deals with
emotions that are very important in interpersonal relationships between superiors,
subordinates and colleagues in an organization.
(viii) Effective communicating is the responsibility not only of the sender but also of the
receiver of the information.

BARRIERS TO EFFECTIVE COMMUNICATION

Barriers to communication are factors that block or significantly distort successful
communication. Effective managerial communication skills helps overcome some, but not all,
barriers to communication in organizations. The more prominent barriers to effective
communication which every manager should be aware of is given below:

a) Filtering:
Filtering refers to a sender manipulating information so it will be seen more favourably by
the receiver. The major determinant of filtering is the number of levels in an organization's
structure. The more vertical levels in the organization's hierarchy, the more opportunities for
filtering. Sometimes the information is filtered by the sender himself. If the sender is hiding some
meaning and disclosing in such a fashion as appealing to the receiver, then he is "filtering" the
message deliberately. A manager in the process of altering communication in his favour is
attempting to filter the information.

b) Selective Perception:

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Selective perception means seeing what one wants to see. The receiver, in the
communication process, generally resorts to selective perception i.e., he selectively perceives
the message based on the organizational requirements, the needs and characteristics,
background of the employees etc. Perceptual distortion is one of the distressing barriers to the
effective communication. People interpret what they see and call it a reality. In our regular
activities, we tend to see those things that please us and to reject or ignore unpleasant things.
Selective perception allows us to keep out dissonance (the existence of conflicting elements in
our perceptual set) at a tolerable level. If we encounter something that does not fit out current
image of reality, we structure the situation to minimize our dissonance. Thus, we manage to
overlook many stimuli from the environment that do not fit into out current perception of the
world. This process has significant implications for managerial activities. For example, the
employment interviewer who expects a female job applicant to put her family ahead of her
career is likely to see that in female applicants, regardless of whether the applicants feel that
way or not.

c) Emotions:
How the receiver feels at the time of receipt of information influences effectively how he
interprets the information. For example, if the receiver feels that the communicator is in a jovial
mood, he interprets that the information being sent by the communicator to be good and
interesting. Extreme emotions and jubilation or depression are quite likely to hinder the
effectiveness of communication. A person's ability to encode a message can become impaired
when the person is feeling strong emotions. For example, when you are angry, it is harder to
consider the other person's viewpoint and to choose words carefully. The angrier you are, the
harder this task becomes. Extreme emotions – such as jubilation or depression - are most likely
to hinder effective communication. In such instances, we are most prone to disregard our
rational and objective thinking processes and substitute emotional judgments.

d) Language:
Communicated message must be understandable to the receiver. Words mean different
things to different people. Language reflects not only the personality of the individual but also
the culture of society in which the individual is living. In organizations, people from different
regions, different backgrounds, and speak different languages. People will have different
academic backgrounds, different intellectual facilities, and hence the jargon they use varies.
Often, communication gap arises because the language the sender is using may be

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incomprehensible, vague and indigestible. Language is a central element in communication. It

may pose a barrier if its use obscures meaning and distorts intent. Words mean different things
to different people. Age, education and cultural background are three of the more obvious
variables that influence the language a person uses and the definitions he or she gives to
words. Therefore, use simple, direct, declarative language.
Speak in brief sentences and use terms or words you have heard from you audience. As much
as possible, speak in the language of the listener. Do not use jargon or technical language
except with those who clearly understand it.

e) Stereotyping:
Stereotyping is the application of selective perception. When we have preconceived
ideas about other people and refuse to discriminate between individual behaviours, we are
applying selective perception to our relationship with other people. Stereotyping is a barrier to
communications because those who stereotype others use selective perception in their
communication and tend to hear only those things that confirm their stereotyped images.
Consequently, stereotypes become more deeply ingrained as we find more "evidence" to
confirm our original opinion. Stereotyping has a convenience function in our interpersonal
relations. Since people are all different, ideally we should react and interact with each person
differently. To do this, however, requires considerable psychological effort. It is much easier to
categorize (stereotype) people so that we can interact with them as members of a particular
category. Since the number of categories is small, we end up treating many people the same
even though they are quite different. Our communications, then, may be directed at an
individual as a member of a category at the sacrifice of the more effective communication on a
personal level.

f) Status Difference:
The organizational hierarchy pose another barrier to communication within organization,
especially when the communication is between employee and manager. This is so because the
employee is dependent on the manager as the primary link to the organization and hence more
likely to distort upward communication than either horizontal or downward communication.
Effective supervisory skills make the supervisor more approachable and help reduce the risk of
problems related to status differences. In addition, when employees feel secure, they are more
likely to be straightforward in upward communication.

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CHANNELS OF COMMUNICATION
a) Formal Communication
Formal communication follows the route formally laid down in the organization structure.
There are three directions in which communications flow: downward, upward and laterally
(horizontal).

i) Downward Communication
Downward communication involves a message travelling to one or more receivers at the lower
level in the hierarchy. The message frequently involves directions or performance feedback.
The downward flow of communication generally corresponds to the formal organizational
communications system, which is usually synonymous with the chain of command or line of
authority. This system has received a great deal of attention from both managers and behavioral
scientists since it is crucial to organizational functioning.

ii) Upward Communication

In upward communication, the message is directed toward a higher level in the hierarchy. It is
often takes the form of progress reports or information about successes and failures of the
individuals or work groups reporting to the receiver of the message. Sometimes employees also
send suggestions or complaints upward through the organization's hierarchy.
The upward flow of communication involves two distinct manager-subordinate activities in
addition to feedback:
• The participation by employees in formal organizational decisions.
• Employee appeal is a result against formal organization decisions. The employee appeal is
a result of the industrial democracy concept that provides for two-way communication in
areas of disagreement.

iii) Horizontal Communication

When takes place among members of the same work group, among members of work groups at
the same level, among managers at the same level or among any horizontally equivalent
personnel, we describe it as lateral communications. In lateral communication, the sender and
receiver(s) are at the same level in the hierarchy. Formal communications that travel laterally
involve employees engaged in carrying out the same or related tasks.

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UNIT V
CONTROLLING
DEFINITION
Control is the process through which managers assure that actual activities conform to
planned activities.
In the words of Koontz and O'Donnell - "Managerial control implies measurement of
accomplishment against the standard and the correction of deviations to assure attainment of
objectives according to plans."

Nature & Purpose of Control

• Control is an essential function of management
• Control is an ongoing process
• Control is forward – working because pas cannot be controlled
• Control involves measurement
• The essence of control is action
• Control is an integrated system

CONTROL PROCESS
The basic control process involves mainly these steps as shown in Figure

a) The Establishment of Standards:

Because plans are the yardsticks against which controls must be revised, it follows logically that
the first step in the control process would be to accomplish plans. Plans can be considered as
the criterion or the standards against which we compare the actual performance in order to
figure out the deviations.

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Examples for the standards

• Profitability standards: In general, these standards indicate how much the company
would like to make as profit over a given time period- that is, its return on investment.
• Market position standards: These standards indicate the share of total sales in a
particular market that the company would like to have relative to its competitors.
• Productivity standards: How much that various segments of the organization should
produce is the focus of these standards.
• Product leadership standards: These indicate what must be done to attain such a
position.
• Employee attitude standards: These standards indicate what types of attitudes the
company managers should strive to indicate in the company’s employees.
• Social responsibility standards: Such as making contribution to the society.
• Standards reflecting the relative balance between short and long range goals.

b) Measurement of Performance:

The measurement of performance against standards should be on a forward looking basis so

that deviations may be detected in advance by appropriate actions. The degree of difficulty in
measuring various types of organizational performance, of course, is determined primarily by
the activity being measured. For example, it is far more difficult to measure the performance of
highway maintenance worker than to measure the performance of a student enrolled in a
college level management course.

c) Comparing Measured Performance to Stated Standards:

When managers have taken a measure of organizational performance, their next step in
controlling is to compare this measure against some standard. A standard is the level of activity
established to serve as a model for evaluating organizational performance. The performance
evaluated can be for the organization as a whole or for some individuals working within the
organization. In essence, standards are the yardsticks that determine whether organizational
performance is adequate or inadequate.

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d) Taking Corrective Actions:

After actual performance has been measured compared with established performance
standards, the next step in the controlling process is to take corrective action, if
necessary. Corrective action is managerial activity aimed at bringing organizational performance
up to the level of performance standards. In other words, corrective action focuses on correcting
organizational mistakes that hinder organizational performance. Before taking any corrective
action, however, managers should make sure that the standards they are using were properly
established and that their measurements of organizational performance are valid and reliable.
At first glance, it seems a fairly simple proposition that managers should take corrective action
to eliminate problems - the factors within an organization that are barriers to organizational goal
attainment. In practice, however, it is often difficult to pinpoint the problem causing some
undesirable organizational effect.

BARRIERS FOR CONTROLLING

There are many barriers, among the most important of them:
• Control activities can create an undesirable overemphasis on short-term production as
opposed to long- term production.
• Control activities can increase employees' frustration with their jobs and thereby reduce
morale. This reaction tends to occur primarily where management exerts too much
control.
• Control activities can encourage the falsification of reports.
• Control activities can cause the perspectives of organization members to be too narrow
for the good of the organization.
• Control activities can be perceived as the goals of the control process rather than the
means by which corrective action is taken.

REQUIREMENTS FOR EFFECTIVE CONTROL

The requirements for effective control are
a) Control should be tailored to plans and positions
This means that, all control techniques and systems should reflect the plans they are designed
to follow. This is because every plan and every kind and phase of an operation has its unique
characteristics.
b) Control must be tailored to individual managers and their responsibilities

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is little consensus about the fundamental causes of the problem and what to do about them.
The blame has been assigned to various factors. Some people place it on the greater proportion
of less skilled workers with respect to the total labor force, but others disagree. There are those
who see cutback in research and the emphasis on immediate results as the main culprit.
Another reason given for the productivity dilemma is the growing affluence of people, which
makes them less ambitious. Still others cite the breakdown in family structure, the workers’
attitudes, and government policies and regulations. Another problem is that the measurement
of skills work is relatively easy, but it becomes more difficult for knowledge work. The difference
between the two kinds is the relative use of knowledge and skills.

COST CONTROL
Cost control is the measure taken by management to assure that the cost objectives set
down in the planning stage are attained and to assure that all segments of the organization
function in a manner consistent with its policies.

Steps involved in designing process of cost control system:

• Establishing norms: To exercise cost control it is essential to establish norms, targets or
parameters which may serve as yardsticks to achieve the ultimate objective. These
standards, norms or targets may be set on the basis of research, study or past actual.
• Appraisal: The actual results are compared with the set norms to ascertain the degree of
utilization of men, machines and materials. The deviations are analyzed so as to arrive at
the causes which are controllable and uncontrollable.
• Corrective measures: The variances are reviewed and remedial measures or revision of
targets, norms, standards etc., as required are taken.

Advantages of cost control

• Better utilization of resources
• To prepare for meeting a future competitive position.
• Reasonable price for the customers
• Firm standing in domestic and export markets.
• Improved methods of production and use of latest manufacturing techniques which have
the effect of rising productivity and minimizing cost.

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• By a continuous search for improvement creates proper climate for the increase
efficiency.
• Improves the image of company for long-term benefits.
• Improve the rate of return on investment.

PURCHASE CONTROL
Purchase control is an element of material control. Material procurement is known as the
purchase function. The functional responsibility of purchasing is that of the purchase manager
or the purchaser. Purchasing is an important function of materials management because in
purchase of materials, a substantial portion of the company's finance is committed which affects
cash flow position of the company. Success of a business is to a large extent influenced by the
efficiency of its purchase organization. The advantages derived from a good and adequate
system of the purchase control are as follows:

a) Continuous availability of materials: It ensures the continuous flow of materials. so

production work may not be held up for want of materials. A manufacturer can complete
schedule of production in time.
b) Purchasing of right quantity: Purchase of right quantity of materials avoids locking up of
working capital. It minimizes risk of surplus and obsolete stores. It means there should not be
possibility of overstocking and understocking.
c) Purchasing of right quality: Purchase of materials of proper quality and specification avoids
waste of materials and loss in production. Effective purchase control prevents wastes and
losses of materials right from the purchase till their consumptions. It enables the management to
reduce cost of production.
d) Economy in purchasing: The purchasing of materials is a highly specialized function. By
purchasing materials at reasonable prices, the efficient purchaser is able to make a valuable
contribution to the success of a business.
e) Works as information centre: It serves as a function centre on the materials knowledge
relating to prices, sources of supply, specifications, mode of delivery, etc. By providing
continuous information to the management it is possible to prepare planning for production.
f) Development of business relationship: Purchasing of materials from the best market and
from reliable suppliers develops business relationships. The result is that there may be smooth
supply of materials in time and so it avoid disputes and financial losses.

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g) Finding of alternative source of supply: If a particular supplier fails to supply the materials
in time, it is possible to develop alternate sources of supply. the effect of this is that the
production work is not disturbed.
h) Fixing responsibilities: Effective purchase control fix the responsibilities of operating units
and individuals connected with the purchase, storage and handling of materials.

In short, the basic objective of the effective purchase control is to ensure continuity of supply of
requisite quantity of material, to avoid held up of production and loss in production and at the
same time reduces the ultimate cost of the finished products.

MAINTENANCE CONTROL
Maintenance department has to excercise effective cost control, to carry out the
maintenance functions in a pre-specified budget, which is possible only through the following
measures:

First line supervisors must be apprised of the cost information of the various materials so that
the objective of the management can be met without extra expenditure on maintenance
functions

A monthly review of the budget provisions and expenditures actually incurred in respect of each
center/shop will provide guidlines to the departmental head to exercise better cost control.
The total expenditure to be incurred can be uniformly spread over the year for better budgetary
control. however, the same may not be true in all cases particularly where overhauling of
equipment has to be carried out due to unforseen breakdowns. some budgetary provisions must
be set aside, to meet out unforeseen exigencies.

The controllable elements of cost such as manpower cost and material cost can be discussed
with the concerned personnel, which may help in reducing the total cost of maintenance.
Emphasis should be given to reduce the overhead expenditures, as other expenditures cannot
be compromised.

It is observed through studies that the manpower cost is normally fixed, but the same way
increase due to overtime cost. however, the material cost, which is the prime factor in
maintenance cost, can be reduced by timely inspections designed, to detect failures. If the

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inspection is carried out as per schedule, the total failure of parts may be avoided, which
otherwise would increase the maintenance cost. the proper handling of the equipment by the
operators also reduces the frequency of repair and material requirements. Operators, who
check their equipment regularly and use it within the operating limits, can help avoid many
unwanted repairs. In the same way a good record of equipment failures/ maintenance would
indicate the nature of failures, which can then be corrected even permanently.

QUALITY CONTROL
Quality control refers to the technical process that gathers, examines, analyze & report
the progress of the project & conformance with the performance requirements

The steps involved in quality control process are

1) Determine what parameter is to be controlled.
2) Establish its criticality and whether you need to control before, during or after results are
produced.
3) Establish a specification for the parameter to be controlled which provides limits of
acceptability and units of measure.
4) Produce plans for control which specify the means by which the characteristics will be
achieved and variation detected and removed.
5) Organize resources to implement the plans for quality control.
6) Install a sensor at an appropriate point in the process to sense variance from
specification.
7) Collect and transmit data to a place for analysis.
8) Verify the results and diagnose the cause of variance.
9) Propose remedies and decide on the action needed to restore the status quo.
10) Take the agreed action and check that the variance has been corrected.

Advantages and disadvantages

 Advantages include better products and services ultimately establishing a good
reputation for a company and higher revenue from having more satisfied customers.
 Disadvantages include needing more man power/operations to maintain quality control
and adding more time to the initial process.

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