UNIT-3:FUNCTIONS OF

MANAGEMENT:PART-1
PLANNING;
MEANING OF PLANNING/CONCEPT OF
PLANNING
Planning is a process which involves anticipation of future course of events
and deciding the best course of action. It is a process of thinking before
doing. To plan is to produce a scheme for future action; to bring about
specified results, at specified cost, in a specified period of time.

It is deliberate attempt to influence, exploit, bring about, and control the

nature,direction, extent, speed and effects of change. It may even attempt
deliberately to create change, remembering always that change (like decision)
in any one sector will in the same way affect other sectors.
Planning is a deliberate and conscious effort done to formulate the design and
orderly sequence actions through which it is expected to reach the objectives.
Planning is a systematic attempt to decide a particular course of action for the
future, it leads to determination of objectives of the groupactivity and the
steps necessary to achieve them. Thus, it can be said that planning is the
selecting and relating of facts and the making and using ofassumptions
regarding the future in the visualization and formulation of proposed
activities believed necessary to achieve desired results.

Definition of planning:
“Planning is the process of deciding in advance what is to be done, who is to
do it, how it is to be done and when it is to be done”.
 According to Koontz, O’Donnell and Weihrich, “Planning is an
intellectually demanding process; it requires the conscious determination of
courses of action and the basing of decisions on purpose, knowledge and
considered estimates”.

Planning is thus deciding in advance the future state of business of an

enterprise, and the means of attaining it. Its elements are :

1. What will be done – what are the objectives of business in the short and in
the long run?
2. What resources will be required – This involves estimation of the
available and potential resources, estimation of resources required for the
achievement of objectives, and filling the gap between the two, if any.
3. How it will be done – This involves two things : (i) determination of tasks,
activities, projects, programmes, etc., required for the
attainment of objectives, and (ii) formulation of strategies, policies,
procedures, methods, standard and budgets for the above purpose.
4. Who will do it – It involves assignment of responsibilities to various
managers relating to contributions they are expected to make for the
attainment of enterprise objectives. This is preceded by the breaking down of
the total enterprise objectives into segmental objectives, resulting into
divisional, departmental, sectional and individual objectives.
5. When it will be done – It involves determination of the timing and
sequence, if any, for the performance of various activities and
execution of various projects and their parts.

Nature of planning:
ü 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.

ü Primacy of Planning: Planning is the first of the managerial functions. It

precedes all other management functions.
ü Pervasiveness of Planning: Planning is found at all levels of management.
Top management looks after strategic planning.

ü Middle management is in charge of administrative planning. Lower

management has to concentrate on operational planning.

ü 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.

ü 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.

ü Limiting Factors: A planner must recognize the limiting factors (money,

manpower etc) and formulate plans in the light of these critical factors.

ü Flexibility: The process of planning should be adaptable to changing

environmental conditions.

ü Planning is an intellectual process: The quality of planning will vary

according to the quality of the mind of the manager.

Purpose of planning:
ü To manage by objectives: All the activities of an organization are
designed to achieve certain specified objectives. However, planning makes
the objectives more concrete by focusingattention on them.

ü To offset uncertainty and change: Future is always full of uncertainties

and changes.Planning foresees the future and makes the necessary provisions
for it.
 ü To secure economy in operation: Planning involves, the selection of most
profitable courseof action that would lead to the best result at the minimum
costs.

ü To help in co-ordination: Co-ordination is, indeed, the essence of

management, the planning is the base of it. Without planning it is not possible
to co-ordinate the different activitiesof an organization.

ü To make control effective: The controlling function of management

relates to the comparison of the planned performance with the actual
performance. In the absence of plans, a management will have no standards
for controlling other’s performance.

ü To increase organizational effectiveness: Mere efficiency in the

organization is not important; it should also lead to productivity and
effectiveness. Planning enables the manager to measure the organizational
effectiveness in the context of the stated objectives and take further actions in
this direction.

Needs and importance of planning:

1. Planning is essential in modern business : The growing
complexity of the modern business with rapid technological
changes, dynamic changes in the consumer preferences and
growing tough competition necessities orderly operations, not
only in the current environment but also in the future
environment. Since planning takes a future outlook, it takes
into account the possible future developments.
2. Planning affects performance : A number of empirical
studies provide evidence of organizational success being a
function of formal planning, the success being measured by
such factors as return on investment, sales volume, growth in
earnings per share and so on. An investigation of firms in
various industrial products as machinery, steel, oil, chemicals
and drugs revealed that companies that engaged in formal
 planning consistently performed better than those with no
formal planning.
3. Planning puts focus on objectives : The effectiveness of
formal planning is primarily based upon clarity of objectives.
Objectives provide a direction and all planning decisions are
directed towards achievement of these objectives. Plans
continuously reinforce the importance of these objectives by
focusing on them. This ensures maximum utility of
managerial time and efforts.
4. Planning anticipates problems and uncertainties : A
significant aspect of any formal planning process in collection
of relevant information for the purpose of forecasting the
future as accurately as possible. This would minimize the
chances of haphazard decisions. Since the future needs of the
organization are anticipated in advance, the proper acquisition
and allocation of resources can be planned, thus minimizing
wastage and ensuring optimal utility of these resources.
5. Planning is necessary to facilitate control : Controlling
involves the continual analysis and measurement of actual
operations against the established standards. These standards
are set in the light of objectives to by achieved. Periodic
reviews of operations can determine whether the plans are
being implemented correctly. Well developed plans can aid
the process of control in two ways.
First, the planning process establishes a system of advance
warning of possible deviations from the expected
performance. Second contribution of planning to the control
process is that it provides quantitative data which would make
it easier to compare the actual performance in quantitative
terms, not only with the expectations of the organization but
also with the industry statistics or market forecasts.
6. Planning helps in the process of decision making : Since
planning specifies the actions and steps to be taken in order to
accomplish organizational objectives, it serves as a basis for
decision-making about future activities. It also helps
managers to make routine decisions about current activities
since the objectives, plans, policies, schedules and so on are
clearly laid down.

Types of planning:
Planning is of basically four types:

1.operational planning:

This type of planning typically describes the day-to-day running of the

company. Operational plans are often described as single use plans or
ongoing plans. Single use plans are created for events and activities with a
single occurrence (such as a single marketing campaign). Ongoing plans
include policies for approaching problems, rules for specific regulations and
procedures for a step-by-step process for accomplishing particular
objectives.

Strategic Planning
“Strategic plans are all about why things need to happen,” Story said. “It’s
big picture, long-term thinking. It starts at the highest level with defining a
mission and casting a vision.”

Strategic planning includes a high-level overview of the entire business. It’s

the foundational basis of the organization and will dictate long-term
decisions. The scope of strategic planning can be anywhere from the next two
years to the next 10 years. Important components of a strategic plan are
vision, mission and values.

Tactical Planning
“Tactical plans are about what is going to happen,” Story said. “Basically at
the tactical level, there are many focused, specific, and short-term plans,
where the actual work is being done, that support the high-level strategic
plans.”

Tactical planning supports strategic planning. It includes tactics that the

organization plans to use to achieve what’s outlined in the strategic plan.
Often, the scope is less than one year and breaks down the strategic plan into
actionable chunks. Tactical planning is different from operational planning in
that tactical plans ask specific questions about what needs to happen to
accomplish a strategic goal; operational plans ask how the organization will
generally do something to accomplish the company’s mission.

Contingency Planning
Contingency plans are made when something unexpected happens or when
something needs to be changed. Business experts sometimes refer to these
plans as a special type of planning.

Contingency planning can be helpful in circumstances that call for a change.

Although managers should anticipate changes when engaged in any of the
primary types of planning, contingency planning is essential in moments
when changes can’t be foreseen. As the business world becomes more
complicated, contingency planning becomes more important to engage in and
understand.

Process of planning:
1. RECOGNISING NEED FOR ACTION: An important part of the
planning process is to be aware of the business opportunities in the firm’s
external environment as well as within the firm. Once such opportunities get
recognized the managers can recognize the actions that need to be taken to
realize them. A realistic look must be taken at the prospect of these new
opportunities and SWOT analysis should be done.
Say for example the government plans on promoting cottage industries in
semi-urban areas. A firm can look to explore this opportunity.
2] Setting Objectives
This is the second and perhaps the most important step of the planning
process. Here we establish the objectives for the whole organization and also
individual departments. Organizational objectives provide a general direction,
objectives of departments will be more planned and detailed.

Objectives can be long term and short term as well. They indicate the end
result the company wishes to achieve. So objectives will percolate down from
the managers and will also guide and push the employees in the correct
direction.

3] Developing Premises
Planning is always done keeping the future in mind, however, the future is
always uncertain. So in the function of management certain assumptions
will have to be made. These assumptions are the premises. Such assumptions
are made in the form of forecasts, existing plans, past policies, etc.

These planning premises are also of two types – internal and external.
External assumptions deal with factors such as political environment, social
environment, the advancement of technology, competition, government
policies, etc. Internal assumptions deal with policies, availability of
resources, quality of management, etc.

These assumptions being made should be uniform across the organization.

All managers should be aware of these premises and should agree with them

4] Identifying Alternatives
The fourth step of the planning process is to identify the alternatives available
to the managers. There is no one way to achieve the objectives of the firm,
there is a multitude of choices. All of these alternative courses should be
identified. There must be options available to the manager.

Maybe he chooses an innovative alternative hoping for more efficient results.

If he does not want to experiment he will stick to the more routine course of
action. The problem with this step is not finding the alternatives but
narrowing them down to a reasonable amount of choices so all of them can
be thoroughly evaluated.

5] Examining Alternate Course of Action

The next step of the planning process is to evaluate and closely examine each
of the alternative plans. Every option will go through an examination where
all there pros and cons will be weighed. The alternative plans need to be
evaluated in light of the organizational objectives.

For example, if it is a financial plan. Then it that case its risk-

return evaluation will be done. Detailed calculation and analysis are done to
ensure that the plan is capable of achieving the objectives in the best and
most efficient manner possible.

6] Selecting the Alternative

Finally, we reach the decision making stage of the planning process. Now
the best and most feasible plan will be chosen to be implemented. The ideal
plan is the most profitable one with the least amount of negative
consequences and is also adaptable to dynamic situations.

The choice is obviously based on scientific analysis and mathematical

equations. But a managers intuition and experience should also play a big
part in this decision. Sometimes a few different aspects of different plans are
combined to come up with the one ideal plan.
7] Formulating Supporting Plan
Once you have chosen the plan to be implemented, managers will have to
come up with one or more supporting plans. These secondary plans help with
the implementation of the main plan. For example plans to hire more people,
train personnel, expand the office etc are supporting plans for the main plan
of launching a new product. So all these secondary plans are in fact part of
the main plan.

8] Implementation of the Plan

And finally, we come to the last step of the planning process, implementation
of the plan. This is when all the other functions of management come into
play and the plan is put into action to achieve the objectives of the
organization. The tools required for such implementation involve the types of
plans- procedures, policies, budgets, rules, standards etc.

Barriers to effective planning:

Resistance to Change

The difficulties of the planning process are not always the result of accident
or incompetence. Most people who are going to be affected by change don’t
like the idea and resist it. Resistance to planning for change within
organizations can take the form of malingering, undermining of morale or
straightforward opposition. Contingency plans to accommodate resistance
should be included in any comprehensive planning process.

Insufficient or Poorly Allocated Resources

If plans become excessively ambitious, they can sometimes be stymied by a

simple lack of resources on the part of a company or organization. This is
particularly true if planning involves physical plant renovation or expansion.
Grand plans are much less expensive to create on paper than in bricks and
mortar, and planners can easily lose track of the eventual cost of their plans.

Lack of Situation Analysis

Without an honest analysis of the current situation bereft of emotions,

planning cannot be effective. If you don’t know where you are, you cannot
plot a map or plan to take you where you want to go. All effective plans start
with an honest review of the project or company’s specific situation, its
competition and a market analysis of its customer demographics. A
forecasting analysis can also help make a reasonable plan that can be carried
out.

Experience-based Thinking

The human mind tends to base its thoughts, activities and expectations on
what has happened in the past. Often, this is a valuable trait, but in a planning
process it can become a liability. If planning requires the development of new
ways of doing things, an inability to overcome the past on the part of the
planners can become a liability that obstructs innovative thought. Albert
Einstein said that people cannot solve their problems with the same thinking
that created them.

Inertia Barriers to the Planning Process

Inertia is most frequently a problem for large and long-established

organizations. Inertia can be created by a combination of archaic
infrastructure, calcified modes of thinking, oversize bureaucracy and fear of
change. Forward thinking elements within an organization that want to
engage in creative planning may have to spend a lot of time and energy
overcoming the inertia of things that have gone before.

Communication Barriers to Effective Planning

 When communication within or between groups breaks down or doesn’t
exist, planning becomes ineffective. Business plans need to clearly outline
the current situation and goals and objectives along with prioritized strategies
and tactics in a way that everyone involved can understand. Without clear
communication, planning leads to replication of effort and people working at
cross purposes when they should be working together.

Poor communication may be caused by undeveloped skills, rivalries,

misunderstanding of the planning process or excessive complexity within the
planning group structure.

Levels of planning:
In management theory it is usual to consider that there are three basic level
of planning, though in practice there may be more than three levels of
management and to an extent there will be some overlapping of planning
operations. The three level of planning are as under :

1. Top Level Planning: Also known as overall or strategic planning,

top level planning is done by the top management, i.e. board of
directors or governing body. It encompasses the long-range
objectives and policies of organization and is concerned with
corporate results rather than sectional objective. Top level planning is entirely
long-range and is inextricably linked with long-term objectives. It might be
called the ‘what’ of planning.
2. Second Level Planning: Also known as tactical planning, it is done by
middle level managers or department heads. It is concerned with ‘how’ of
planning. It deals with deployment of resources to the best advantage. It is
concerned mainly, but not exclusively, with long-range planning, but its
nature is such that the time spans are usually shorter than those of strategic
planning. This is because its attentions are usually devoted to the step by step
attainment of the
organization’s main objectives. It is, in fact, oriented to functions
and departments rather than to the organization as a whole.
3. Third Level Planning: Also known as operational or activity
planning, it is the concern of department managers and supervisors. It is
confined to putting into effect the tactical or departmental plans.
It is usually for short-term and may be revised quite often to be in
tune with the tactical planning.

Advantage of planning:
Specific objective and action statements has numerous advantages for
the organization which are as follows :

1. Focuses Attention on Objectives: Since all planning is directed

towards achieving enterprise objectives, the very act of planning
focuses attention on these objectives. Laying down the objectives is the first
step in planning. If the objectives are clearly laid down, theexecution of plans
will also be directed towards these objectives.
2. Reduces Uncertainty: Planning helps in reducing uncertainties of
future because it involves anticipation of future events. Effective
planning is the result of deliberate thinking based on facts and
figures. It involves forecasting also. Planning gives an opportunity to a
business manager to foresee various uncertainties which may be caused by
changes in technology, taste and fashion of thepeople,
etc. Sufficient provision is made in the plans to offset these
uncertainties.
3. Facilitates Control: Planning helps the managers in performing
their function of control. Planning and control are inseparable in the sense
that unplanned action cannot be controlled because control involves keeping
activities on the predetermined course by rectifying deviations from plans.
Planning helps control by furnishing standards of control. It lays down
objectives and standards of performance which are essential for the
performance of control function.
4. Encourages Innovation and Creativity: Planning is basically the
deciding function of management. It helps innovative and creative
thinking among the managers because many new ideas come to the mind of a
manager when he is planning. It creates a forward looking attitude among the
managers.
5. Improves Motivation: A good planning system ensures
participation of all managers which improves their motivation. It
improves the motivation of workers also because they know clearly what is
expected of them. Moreover, planning serves as a good training device for
future managers.
6. Improves Competitive Strength: Effective planning gives a
competitive edge to the enterprise over other enterprises that do not have
planning or have ineffective planning. This is because planning may involve
expansion of capacity, changes in work methods, changes in quality,
anticipation tastes and fashion of people and technological changes, etc.
7. Achieves Better Coordination: Planning secures unity of direction towards
the organizational objectives. All the activities are directed towards the
common goals. There is an integrated effort throughoutthe enterprise. It will
also help in avoiding duplication of efforts. Thus, there will be better
coordination in the organization.

8. Ensures Economical Operation: Planning involves a lot of mental

exercise which is directed towards achieving efficient operation in the
enterprise. It substitutes joint directed effort for uncoordinated piecemeal
activity, even flow of work for uneven flow, and deliberate decisions for snap
judgment costs. This helps in better utilization of resources and thus
minimizing costs.

Limitations of planning:
1. Lack of reliable data: There may be lack of reliable facts and
figures over which plans may be based. Planning loses its value if
reliable information is not available or if the planner fails to utilize the
reliable information. In order to make planning successful, the planner must
determine the reliability of facts and figures and must base his plans on
reliable information only.
2. Lack of initiative: Planning is a forward looking process. If a
manager has a tendency to follow rather than lead, he will not be
able to make good plans. Therefore, the planner must take the
required initiative. He should be an active planner and should take adequate
 follow up measure to see that plans are understood and implemented
properly.
3. Costly process: Planning is time consuming and expensive process.
This may delay action in certain cases. But it is also true that if
sufficient time is not given to the planning process, the plans so
produced may prove to be unrealistic. Similarly, planning involves
costs of gathering and analyzing information and evaluation of
various alternatives. If the management is not willing to spend on
planning, the results may not be good.
4. Rigidity in organizational working: Internal inflexibility in the
organization may compel the planners to make rigid plans. This may deter the
managers from taking initiative and doing innovative thinking. So the
planners must have sufficient discretion and flexibility in the enterprise. They
should not always be required to follow the procedures rigidly.
5. Non-acceptability of change : Resistance to change is another
factor which puts limits on planning. It is a commonly experienced
phenomenon in the business world. Sometimes, planners themselves do not
like change and on other occasions they do not think it desirable to bring
change as it makes the planning process
ineffective.
6. External limitations : The effectiveness of planning is sometimes
limited because of external factors which are beyond the control of the
planners. External strategies are very difficult to predict. Suddenbreak-out of
war, government control, natural havocs and many other factors are beyond
the control of management. This makes the execution of plans very difficult.
7. Psychological barriers : Psychological factors also limit the scope
of planning. Some people consider present more important than
future because present is certain. Such persons are psychologically
opposed to planning. But it should not be forgotten that dynamic
mangers always look ahead. Long-range wellbeing of the enterprise cannot
be achieved unless proper planning is done for future.

FORECASTING:
What is forecasting?
Forecasting is the process of making predictions of the future based on past
and present data and most commonly by analysis of trends. A commonplace
example might be estimation of some variable of interest at some specified
future date. Prediction is a similar, but more general term. Forecasting is the
basis of premising. Forecasting uses many statistical techniques. Therefore, it
is also called as Statistical Analysis.

Needs for forecasting:

1. Promotion of new business:

Forecasting is of utmost importance in setting up a new business. It is not an

easy task to start a new business as it is full of uncertainties and risks. With
the help of forecasting the promoter can find out whether he can succeed in
the new business; whether he can face the existing competition; what is the
possibility of creating demand for the proposed product etc.

After discovering the business opportunity, he will see the possibilities of

assembling men, money, materials etc. The success of a business unit
depends upon as to how sound is the forecasting? Proper forecasting will help
to minimize the role of luck or chance in determining business success or
failure. A successful promoter is also the prophet of economic conditions.

2. Estimation of financial requirements:

The importance of forecasting can’t be ignored in estimating the financial

requirements of a concern. Efficient utilization of capital is a delicate issue
before the management. No business can survive without adequate capital.
But adequacy of either fixed or working capital depends entirely on sound
financial forecasting.

Financial estimates can be calculated in the light of probable sales and cost
thereof. How much capital is needed for expansion, development etc., will
depend upon accurate forecasting?
3. Smooth and continuous working of a concern:

‘Forecasting of earnings’ ensures smooth and continuous working of an

enterprise, particularly to newly established ones. By forecasting, these
concerns can estimate their expected profits or losses. The object of a forecast
is to reduce in black and white the details of working of a concern.

4. Correctness of management decisions:

The correctness of management decisions to a great extent depends upon

accurate forecasting. As Meivin, T. Copeland says, “Administration is
essentially a decision making process and authority has responsibility for
making decisions and for ascertaining that the decisions made are carried out.

In business, whether the enterprise is large or small, changes in conditions

occur; shifts in personnel take place, unforeseen contingencies arise.
Moreover, just to get the wheels started and to keep them turning, decisions
must be made.”

This shows that the decision making process continues throughout the life of
the concern. Forecasting plays an important role in various fields of the
concern. As in the case of production planning, management has to decide
what to produce and with what resources. Thus forecasting is considered as
the indispensable component of business, because it helps management to
take correct decisions.

5. Success in business:

The accurate forecasting of sales helps to procure necessary raw materials on

the basis of which many business activities are undertaken. The accurate
sales forecasting becomes the basis for several other budgets. In the absence
of accurate sales forecasting, it is difficult to decide as to how much
production should be done.
Thus, to a great extent, the budgets of other departments depend upon the
compilations based on the sales forecasts and the accuracy of these budgets
also depends upon correctness of sales forecasting. Thus, the success of a
business unit depends on the accurate forecasting by the various departments.

6. Plan Formulation:

The importance of correct forecasting is apparent from the Key role it plays
in planning. It should not go unaccounted that forecasting is an essential
element in planning since planning premises include some forecasts. There
are forecast data of a factual nature having enormous implication on sound
premises.

Undoubtedly, forecasting is a prelude to planning and indeed it is the

foundation on which planning takes place. Infact, planning under all
circumstances and in all occasions involve a good deal of forecasting, i.e.
appraising the future in the light of existing conditions and environment.
Forecasting and planning are closely related. Adequate planning, no matter
whether it is overall or sectoral, short-term or long term, largely depends on
forecasting.

7. Co-Operation and co-ordination:

Forecasting is not one man’s job. It needs proper co-ordination of all

departmental heads in a company. Thus, by bringing participation of all
concerned in the process of forecasting, team spirit and coordination is
automatically encouraged.

According to Henry Fayol, “The act of forecasting is of great benefit to all

who take part in the process, and is the best means of ensuring adaptability to
changing circumstances. The collaboration of all concerned leads to a united
front, an understanding of the reasons for decisions and a broadened
outlook.”
8. Complete Control:

Forecasting provides the information which helps in the achievement of

effective control. The managers become aware of their weaknesses during
forecasting and through implementing better effective control they can
overcome these weaknesses.

Techniques of forecasting:
1. Historical Analogy Method:

Under this method, forecast in regard to a particular situation is based on

some analogous conditions elsewhere in the past. The economic situation of a
country can be predicted by making comparison with the advanced countries
at a particular stage through which the country is presently passing.

Similarly, it has been observed that if anything is invented in some part of the
world, this is adopted in other countries after a gap of a certain time. Thus,
based on analogy, a general forecast can be made about the nature of events
in the economic system of the country. It is often suggested that social
analogies have helped in indicating the trends of changes in the norms of
business behaviour in terms of life.

Likewise, changes in the norms of business behaviour in terms of attitude of

the workers against inequality, find similarities in various countries at various
stages of the history of industrial growth. Thus, this method gives a broad
indication about the future events of general nature.

2. Survey Method:

Surveys can be conducted to gather information on the intentions of the

concerned people. For example, information may be collected through
surveys about the probable expenditure of consumers on various items. Both
quantitative and qualitative information may be collected by this method.

On the basis of such surveys, demand for various products can be projected.
Survey method is suitable for forecasting demand—both of existing and new
products. To limit the cost and time, the survey may be restricted to a sample
from the prospective consumers.

3. Opinion Poll:

Opinion poll is conducted to assess the opinion of the experienced persons

and experts in the particular field whose views carry a lot of weight. For
example, opinion polls are very popular to predict the outcome of elections in
many countries including India. Similarly, an opinion poll of the sales
representatives, wholesalers or marketing experts may be helpful in
formulating demand projections.

If opinion polls give widely divergent views, the experts may be called for
discussion and explanation of why they are holding a particular view. They
may be asked to comment on the views of the others, to revise their views in
the context of the opposite views, and consensus may emerge. Then, it
becomes the estimate of future events.

4. Business Barometers:

A barometer is used to measure the atmospheric pressure. In the same way,

index numbers are used to measure the state of an economy between two or
more periods. These index numbers are the device to study the trends,
seasonal fluctuations, cyclical movements, and irregular fluctuations.

These index numbers, when used in combination with one another, provide
indications as to the direction in which the economy is proceeding. Thus,
with the business activity index numbers, it becomes easy to forecast the
future course of action.
However, it should be kept in mind that business barometers have their own
limitations and they are not sure road to success. All types of business do not
follow the general trend but different index numbers have to be prepared for
different activities, etc.

5. Time Series Analysis:

Time series analysis involves decomposition of historical series into its

various components, viz. trend, seasonal variances, cyclical variations, and
random variances. When the various components of a time series are
separated, the variation of a particular situation, the subject under study, can
be known over the period of time and projection can be made about the
future.

A trend can be known over the period of time which may be true for the
future also. However, time series analysis should be used as a basis for
forecasting when data are available for a long period of time and tendencies
disclosed by the trend and seasonal factors are fairly clear and stable.

6. Regression Analysis:

Regression analysis is meant to disclose the relative movements of two or

more inter-related series. It is used to estimate the changes in one variable as
a result of specified changes in other variable or variables. In economic and
business situations, a number of factors affect a business activity
simultaneously.

Regression analysis helps in isolating the effects of such factors to a great

extent. For example, if we know that there is a positive relationship between
advertising expenditure and volume of sales or between sales and profit, it is
possible to have estimate of the sales on the basis of advertising, or of the
profit on the basis of projected sales, provided other things remain the same.

7. Input-Output Analysis:
According to this method, a forecast of output is based on given input if
relationship between input and output is known. Similarly, input requirement
can be forecast on the basis of final output with a given input-output
relationship. The basis of this technique is that the various sectors of
economy are interrelated and such inter-relationships are well-established.

For example, coal requirement of the country can be predicted on the basis of
its usage rate in various sectors like industry, transport, household, etc. and
how the various sectors behave in future. This technique yields sector-wise
forecasts and is extensively used in forecasting business events as the data
required for its application are easily obtained.

DECISION MAKING:
THE CONCEPT OF DECISION MAKING:

Decision-making is a mental process. It is a process of selecting one best

alternative for doing a work. Thus, it is a particular course of action chosen
by a decision maker as the most effective alternative for achieving his goals.

According to D.E. McFarland, “A decision is an act of choice where in

an executive forms a conclusion about what must be done in a
given situation. A decision represents a course of behaviour chosen from a
number of possible alternatives”.

In the words of Haynes and Massie, “A decision is a course of action which

is consciously chosen for achieving a desired result”.

Hence decision-making is a typical form planning. It involves choosing

the best alternative among various alternatives, in order to realize certain
objectives. A decision represents a judgement, a final word, and resolution of
conflicts or a commitment to act in certain manner in the given set of
circumstances. It is really a mental exercise which decides what to do.
 CHARACTERISTICS OF DECISION MAKING
The essential characteristics of decision making are given below:

1. It is a process of choosing a course of action from among the alternative

courses of action.
2. It is a human process involving to a great extent the application of
intellectual abilities.
3. It is the end process preceded by deliberation and reasoning.
4. It is always related to the environment. A manager may take one
decision in a particular set of circumstances and another in a different set of
circumstances.
5. It involves a time dimension and a time lag.
6. It always has a purpose. Keeping this in view, there may just be a
decision not to decide.

Types of decision making:

1. Routine and Basic Decision Making

Routine decision making means such decisions, which are taken in respect
of the day to day activities of the organization and which require less thinking
and advise. These are of a repetitive nature.

Basic decision making means such decisions which are essential for the
existence of the organization and for which complete study, analysis, power,
and critical thinking are essential.

2. Personal and Organisational Decision Making

The decisions which are taken by any person in his personal capacity, and not
as a member of the organization are known as a personal decision, for
example, decisions for leave, dress, resigning the organization and accepting
or rejecting promotions, etc.
The organizational or institutional decisions are which are taken by the
executives or officers in their formal capacity and which may be delegated to
other persons.Such decisions directly affect organizational behaviour.

3. Individual and Group Decision Making

When the size of the business unit is small and the decisions to be taken do
not require high, specific and technical knowledge, then the decisions for
various problems are normally taken by the managers himself.

Such decisions are known as individual decision-making technique.

Group decision making techniques mean such decisions which are not
taken by a single individual, but by a group.

This is known as participating decisions are known as individual decision

making.

4. Policy and Operating Decision Making

Policy decisions are those which relate to the basic policies of the
organization and these are taken by the top management or board of directors.
Such decisions are also known as management decisions or basic decisions.

Operating decision making is in respect of decisions relating to the general

affairs of the institution or enterprise and is of mechanical nature.

Such decisions making is also known as executive or current decision

making because they are helpful in the execution of policy decisions.

Policy decisions are those which relate to the basic policies of the
organization and these are taken by the top management or board of directors.
Such decisions are also known as management decisions or basic decisions.
5. Programmed and Non-Programmed Decision
Making
Programmed decision making is of repetitive and routine nature and which is
taken through some well decided and well-organized system, so that when
the problem arises, it may be solved by using that method.

Non Programmed decision making is not a routine or repetitive

nature. These are unique and new and they have a long-lasting effect on the
organization.

This decision making is based on traditional methods, and not on the

predecided procedure.

6. Planned and Unplanned Decision Making

Decisions for which Advance preparation is done, an are based on the
collection of facts, analysis and scientific methods are known as planned
decision making.

Unplanned decision making technique means Such decisions for which no

plan is made, But are necessary, according to the circumstances, problems
and opportunities prevailed.

7. Tactical and Strategic Decision Making

Tactical decision making is of routine nature, related to the normal day to
day activities and is of relatively lesser significance.

For these decisions, the options are limited and do not require much analysis
and evolution.
Strategic decision making technique is those decisions, which are very
difficult to be taken. This effect the future of the business and are related to
the whole Organisation.

In other words, these are the decisions, which are taken presently, but their
primary effect is observed after sometime.

8. Organizational, Departmental and

Interdepartmental Decisions Making
Organizational decision making means such decisions which are taken by the
higher authorities of the Institution and affect the whole organization or
enterprise. Such decision making is also known as enterprise decision
making.

Departmental decision making is for those decisions which affect the

operation of the whole department of an enterprise and its employees.

Such decisions are taken by department managers, chairman, or the

management. Interdepartmental decision making is for those decisions which
are taken by the higher authorities/chairpersons/representatives of two or
more departments of the organizations, after mutual deliberations. Such
decisions are taken by department managers, chairman, or the management.

Process of rational decision making:

1. Verify and define your problem.

To prove that you actually have a problem, you need evidence for it. Most
marketers think data is the silver bullet that can diagnose any issue in our
strategy, but you actually need to extract insights from your data to prove
anything. If you don’t, you’re just looking at a bunch of numbers packed into
a spreadsheet.

To pinpoint your specific problem, collect as much data from your area of
need and analyze it to find any alarming patterns or trends.

Example:

“After analyzing our blog traffic report, we now know why our traffic has
plateaued for the past year — our organic traffic increases slightly month
over month but our email and social traffic decrease.”

2. Research and brainstorm possible solutions for

your problem.
Expanding your pool of potential solutions boosts your chances of solving
your problem. To find as many potential solutions as possible, you should
gather plenty of information about your problem from your own knowledge
and the internet. You can also brainstorm with others to uncover more
possible solutions.

3. Set standards of success and failure for your

potential solutions.
Setting a threshold to measure your solutions’ success and failure lets you
determine which ones can actually solve your problem. Your standard of
success shouldn’t be too high, though. You’d never be able to find a solution.
But if your standards are realistic, quantifiable, and focused, you’ll be able to
find one.

4. Flesh out the potential results of each solution.

Next, you should determine each of your solutions’ consequences. To do so,
create a strength and weaknesses table for each alternative and compare them
to each other. You should also prioritize your solutions in a list from best
chance to solve the problem to worst chance.

5. Choose the best solution and test it.

Based on the evaluation of your potential solutions, choose the best one and
test it. You can start monitoring your preliminary results during this stage
too.

6. Track and analyze the results of your test.

Track and analyze your results to see if your solution actually solved your
problem.

7. If the test solves your problem, implement the solution. If not, test a new
one.

If your potential solution passed your test and solved your problem, then it’s
the most rational decision you can make. You should implement it to
completely solve your current problem or any other related problems in the
future. If the solution didn’t solve your problem, then test another potential
solution that you came up with.

Techniques of decision making:

The following are some of the important decision making techniques:
(A) Qualitative Techniques
(B) Quantitative Techniques
(A) Qualitative Decision Making Techniques
There is a great importance of generating a reasonable number of
alternatives, so that one can decide upon the better quality items and
make better decision.
Generating a reasonable number of alternatives is very useful for
solving any complex problem. There are following means of
generating the alternatives :
(a) Brainstorming
(b) Synectics, and
(c) Nominal Grouping

(a) Brainstorming
This technique was developed by Alex F. Osborn, and is one of the
oldest and best known techniques for stimulating the creative
thinking. This is carried out in a group where members are presented
with a problem and are asked to develop as many as potential
solutions as possible. The member of the group may be experts, may
be from other organizations but the members should be around six to
eight. The duration of the session may be around 30 minutes to 55
minutes. The premise of brainstorming is that when people interact
in a free and exhibited atmosphere, they will generate creative ideas.
The idea generated by one person acts as a stimulus for generating
idea by others. This generation of ideas is a contagious and creates
an atmosphere of free discussion and spontaneous thinking. The
major objective of this exercise is to produce as many deals as
possible, so that there is greater likelihood of identifying a best
solution.
The important rules of brainstorming are as given below :
(i) Criticism is prohibited.
(ii) Freewheeling is always welcome.
(iii) Quantity is desirable.
(iv) Combination and improvements are sought.
One session of brainstorming exercise generates around 50 to 150 ideas.
Brainstorming is very useful in research, advertising, management, armed
forces, governmental and non-governmental agencies.
Limitations of Brainstorming
The limitations of brainstorming are given below :
(i) It is not very effective when a problem is very complex and vague
(ii) It is time consuming
(iii) It is very costly
(iv) It produces superficial solutions.

(b) Synectics
This technique was developed by William J.J. Gordon. It is recently
formalized tool of creative thinking. The word Synectics is a Greek
word,meaning the fitting together of diverse elements. The basic purpose of
synectics is to stimulate novel and even bizarre alternatives through the
joining together of distinct and apparently irrelevant ideas.
The selection of members to synectics group is based on their background
and training. The experienced leader states the problem for the group to
consider, group reacts to the problem stated on the basis of their
understanding and convictions. When the nature of the problem is
thoroughly reviewed and analyzed, group proceeds to offer potential
solutions. The leader has to structure the problem and he/she can use
various methods to involve the preconscious mind, like role-playing, use of
analogies, paradoxes, metaphors and other thought provoking exercises.
This helps in generation of alternatives. The technical expert assists the
group in evaluating the feasibility of ideas. It also suffers from some
limitations of brainstorming. This is more useful and appropriate for
solving complex and technical problems.

(c) Nominal Grouping : This was developed by Andre Dellbecq and

Andrew Van de Ven. Nominal group is very effective in situations where
high degree of innovation and idea generation is required. It is highly
structured and follows following stages :
Stage-I : Around seven to ten participants with different background and
training are selected, familiarized with a selected problem like what
alternatives are available for achieving a set of objective.
Stage-2: Each member is asked to prepare a list of ideas in response to the
identified problem, individually for achieving a set of objective.
Stage -3: After ten minutes, the member shares ideas, one at a time, in a
round-robin manner. The group facilitator records the ideas on a blackboard
or flip chart for all to see.

Stage-4: Each group member then openly discusses and evaluates each
recorded ideas. At this point, it may be rewarded, combined, added or
deleted.
Stage-5: Each member votes ranking the ideas privately. Following a brief
discussion of the vote, a final secret ballot is conducted. The group’s
preference is the arithmetical outcome of the individual voter, these are
followed by concluding meeting.

Quantitative Techniques
There are several techniques that a manager can employ while making
decisions. For example, quantitative techniques enable managers to take
decisions objectively and efficiently.

1. Linear programming
This technique basically helps in maximizing an objective under limited
resources. The objective can be either optimization of a utility or
minimization of a disutility. In other words, it helps in utilizing a resource or
constraint to its maximum potential.

Managers generally use this technique only under conditions involving

certainty. Hence, it might not be very useful when circumstances are
uncertain or unpredictable.

2. Probability decision theory

This technique lies in the premise that we can only predict the probability of
an outcome. In other words, we cannot always accurately predict the exact
outcome of any course of action.

Managers use this approach to first determine the probabilities of an outcome

using available information. They can even rely on their subjective judgment
for this purpose. Next, they use this data of probabilities to make their
decisions. They often use ‘decision trees’ or pay-off matrices for this
purpose.

3. Game theory
Sometimes, managers use certain quantitative techniques only while taking
decisions pertaining to their business rivals. The game theory approach is one
such technique.

This technique basically simulates rivalries or conflicts between businesses as

a game. The aim of managers under this technique is to find ways of gaining
at the expense of their rivals. In order to do this, they can use 2-person, 3-
person or n-person games.

4. Queuing theory
Every business often suffers waiting for periods or queues pertaining to
personnel, equipment, resources or services.

For example, sometimes a manufacturing company might gather a stock of

unsold goods due to irregular demands. This theory basically aims to solve
such problems.

The aim of this theory is to minimize such waiting periods and also reduce
investments on such expenses.
For example, departmental stores often have to find a balance between unsold
stock and purchasing fresh goods. Managers in such examples can employ
the queuing theory to minimize their expenses.

5. Simulation
As the name suggests, the simulation technique observes various outcomes
under hypothetical or artificial settings. Managers try to understand how their
decisions will work out under diverse circumstances.

Accordingly, they finalize on the decision that is likely to be the most

beneficial to them. Understanding outcomes under such simulated
environments instead of natural settings reduces risks drastically.

6. Network techniques
Complex activities often require concentrated efforts by personnel in order to
avoid wastage of time, energy and money. This technique aims to solve this
by creating strong network structures for work.

There are two very important quantitative techniques under this approach.
These include the Critical Path Method and the Programme Evaluation &
Review Technique. These techniques are effective because they segregate
work efficiently under networks. They even drastically reduce time and
money.

ORGANISING:
Definition-
According to Theo Haimann,
“Organizing is the process of defining and grouping the activities of the
enterprise and establishing the authority relationships among them.”
According to Louis Allen,
“Organizing is the process of identifying and grouping the work to be
performed, defining and delegating responsibility and authority and
establishing relationships for the purpose of enabling people to work most
effectively together in accomplishing objectives.”

Organizing process
The stages or steps in the process of organization are explained below:-

1. Fixing the objectives of the organization

At the top level, administrative management first fixes the common

objectives of organization. At the middle level, executive management fix the
departmental objectives. Lastly, at the lower level, supervisory management
fix the day-to-day objectives. All the objectives of the organisation must be
specific and realistic.

2. Finding activities must for achieving objectives

After fixing the objectives, the top-level management prepares a list of

different activities (or works) which are required to be carried out for
achieving these objectives. This list is prepared at random without following
any sequence or order. This is a very important step because it helps to avoid
duplication, overlapping and wastage of efforts.

3. Grouping the similar activities

All similar or related activities having a common purpose are grouped

together to make departments. For e.g. all activities or works which are
directly or indirectly connected with purchasing are grouped together to make
the Purchase Department. So various departments such as Purchase,
Production, Marketing, Finance, etc. are made. The grouping of similar
activities leads to division of labour and specialisation.

4. Defining responsibilities of each employee

The responsibilities (duties) of each employee are clearly defined. This will
result in the selection of a right person for the right post / job. He / she will
know exactly what to do and what not to do. Therefore, it will result in
efficiency.

5. Delegating authority to employees

Each employee is delegated (surrender or given) authority. Without authority,

the employees cannot carry out their responsibilities. Authority is the right to
give orders and the power to get obedience. The authority given to an
employee should be equal to the responsibility given to him.

6. Defining authority relationship

When two or more persons work together for a common goal, it becomes
necessary to clearly define the authority relationship between them. Each
person should know who is his superior, from who he should take orders, and
to whom he will be answerable. Similarly, each superior should know what
authority he has over his subordinates.

7. Providing employees all required resources

After defining the authority relationships, the employees are provided with all
the material and financial resources, which are required for achieving the
objectives of the organisation. So in this step, the employees actually start
working for a common goal.
 8. Coordinating efforts of all to achieve goals

This is the last stage or step in the process of organisation. Here, the efforts of
all the individuals, groups, departments, etc. are brought together and co-
coordinated towards the common objectives of the organisation.

types of organisation
there exist two types of organisation:

 Formal Organisation
 Informal Organisation

formal organisation

What is Formal Organization

The formal organization is basically goal-oriented entity that exist to

accurate the efforts of individuals and it refers to the structure of jobs and
positions with clearly defined functions, responsibilities and authorities.

Definition of Formal Organization

According to Chester Banard “an organization is formal when the activities

are coordinated towards a common objective”. He found that the essence of
formal organization is conscious common purpose and that formal
organization comes into being when persons:

1. Are able to communicate with each other

2. Are willing to act, and
3. Share a purpose

In this way, all business organizations are formal organizations they have a
system of well defined jobs bearing a definite measure of authority,
 responsibility and accountability. All this is designed to enable the people
working within the enterprise to work more effectively for achieving
objectives.

Advantages

 The formal organisation clearly outlines the relationships among employees.

Hence, it becomes easier to rack responsibilities.
 An established chain of commands maintains the unity of command.
 As the duties of each member is clearly defined, there is no ambiguity or
confusion in individual roles whatsoever. Further, there is no duplication of
efforts which eliminates any wastage.
 In a formal organisation, there is a clear definition of rules and procedures.
This means that behaviours and relationships among the members are
predictable. Consequently, there is stability and no chaos existing in the
enterprise.
 Finally, it leads to the achievement of organisational goals and objectives.
This is because there exist systematic and well thought out work cultures and
relationships.

Disadvantages

 Decision making is slow in a formal organisation. It is important to realise

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

informal organisation
 informal Organisation exists within the formal organisation. An informal
organisation is a network of personal and social relationships. People
working in a formal organisation meet and interact regularly. They work,
travel, and eat together. Therefore, they become good friends and
companions. There are many groups of friends in a formal organisation.
These groups are called informal organisation.

An informal organisation does not have its own rules and regulation. It has no
system of co-ordination and authority. It doesn’t have any superior-
subordinate relationship nor any specific and well-defined objectives. Here in
informal organisation, communication is done through the grapevine.

Advantages

 In this type of organisation, communication does not need to follow the

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

Disadvantages

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

difference between formal and informal organisation:

 bcastudyguide.com
delegation of authority
Definitions of Delegation of Authority ↓

1. According to F.C. Moore, “Delegation means assigning work to the others

and giving them authority to do so.”
2. According to O. S. Miner, “Delegation takes place when one person gives
another the right to perform work on his behalf and in his name and the
second person accepts a corresponding duty or obligation to do that is
required of him.”
3. According to Louis Allen, “Delegation is the dynamics of management, it is
the process a manager follows in dividing the work assigned to him so that he
performs that part which only he, because of his unique organizational
placement, can perform effectively, and so that he can get others to help him
with what remains.”

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 can not be delegated.
For example, if ’A’ is given a task with sufficient authority, and ’A’ delegates
this task to B and asks him to ensure that task is done well, responsibility rest
with ’B’, but accountability still rest with ’A’. The top level management is
most accountable. Being accountable means being innovative as the person
will think beyond his scope of job. Accountability, in short, means being
answerable for the end result. Accountability can’t be escaped. It arises from
responsibility.

process of delegation

Delegation of authority is the base of superior-subordinate relationship, it

involves following steps:-

1. Assignment of Duties – The delegator first tries to define the task and duties
to the subordinate. He also has to define the result expected from the
subordinates. Clarity of duty as well as result expected has to be the first step
in delegation.
2. Granting of authority – Subdivision of authority takes place when a
superior divides and shares his authority with the subordinate. It is for this
reason, every subordinate should be given enough independence to carry the
task given to him by his superiors. The managers at all levels delegate
authority and power which is attached to their job positions. The subdivision
of powers is very important to get effective results.
3. Creating Responsibility and Accountability – The delegation process does
not end once powers are granted to the subordinates. They at the same time
have to be obligatory towards the duties assigned to them. Responsibility is
said to be the factor or obligation of an individual to carry out his duties in
 best of his ability as per the directions of superior. Responsibility is very
important. Therefore, it is that which gives effectiveness to authority. At the
same time, responsibility is absolute and cannot be shifted. Accountability,
on the others hand, is the obligation of the individual to carry out his duties as
per the standards of performance. Therefore, it is said that authority is
delegated, responsibility is created and accountability is imposed.
Accountability arises out of responsibility and responsibility arises out of
authority. Therefore, it becomes important that with every authority position
an equal and opposite responsibility should be attached.

needs of delegation

The Importance of Delegation is

because it leads to;
1. Efficiency: Efficiency arises when duty is transferred to people with skills
that match the role. Let the team members carry out routine activities for
themselves while you plan and strategize for the next step. This will ensure
you have adequate time for planning, less stress and improved efficiency
2. Development: Team leaders have skills and abilities that can be passed down
to other team members. The best way to do this is to teach them the new
skills and then delegate duties to them for them to utilize the already learnt
skills. The importance of delegation is in team development as well; as you
can outsource team development to experienced members of your team
thereby increasing their mentoring skills as well as decision making.
3. Empowerment: To empower is to allow others become experts at what they
do even if they surpass your ability. This encourages personal development
of team members leading to the overall team success.
4. Leadership: A good leader does not do, he plans and coaches. After
coaching, team members will take roles assigned to them and accomplish
with or without supervision. When tasks are completed, new tasks can be
taken with maximum confidence.

decentralisation
Definitions of Decentralisation

According to Henry Fayol, “Everything that goes to increase the importance

of the subordinate’s role is decentralisation, everything that goes to reduce it
is centralisation.”

According to Louis Allen, “decentralisation refers to the systematic effort to

delegate to the lowest levels all authority except that which can only be
exercised at central point.”

This definition makes it clear that even in decentralisation, delegation to the

lowest levels is not complete as the basic functions in the management
process are centralized.

difference between delegation and decentralisation

bcastudyguide.com

STAFFING
Staffing is the process of hiring eligible candidates in
the organization or company for specific positions. In management, the
meaning of staffing is an operation of recruiting the employees by evaluating
their skills, knowledge and then offering them specific job roles accordingly.
It is a truth that human resource is one of the greatest for every organization
because in any organization all other resources like- money, material,
 machine etc. can be utilized effectively and efficiently by the positive efforts
of human resource.

Definition: Staffing can be defined as one of the most important functions of

management. It involves the process of filling the vacant position of the right
personnel at the right job, at right time. Hence, everything will occur in the
right manner.

Functions of Staffing
1. The first and foremost function of staffing is to obtain qualified personnel for
different jobs position in the organization.
2. In staffing, the right person is recruited for the right jobs, therefore it leads to
maximum productivity and higher performance.
3. It helps in promoting the optimum utilization of human resource through
various aspects.
4. Job satisfaction and morale of the workers increases through the recruitment
of the right person.
5. Staffing helps to ensure better utilization of human resources.
6. It ensures the continuity and growth of the organization, through
development managers.

Importance of Staffing
Efficient Performance of Other Functions

For the efficient performance of other functions of management, staffing is

its key. Since, if an organization does not have the competent personnel, then
it cannot perform the functions of management like planning, organizing and
control functions properly.

Effective Use of Technology and Other Resources

What is staffing and technology’s connection? Well, it is the human factor
that is instrumental in the effective utilization of the latest technology,
capital, material, etc. the management can ensure the right kinds of personnel
by performing the staffing function.

Optimum Utilization of Human Resources

The wage bill of big concerns is quite high. Also, a huge amount is spent on
recruitment, selection, training, and development of employees. To get the
optimum output, the staffing function should be performed in an efficient
manner.

Development of Human Capital

Another function of staffing is concerned with human capital requirements.

Since the management is required to determine in advance the manpower
requirements. Therefore, it has also to train and develop the existing
personnel for career advancement. This will meet the requirements of the
company in the future.

The Motivation of Human Resources

In an organization, the behaviour of individuals is influenced by various

factors which are involved such as education level, needs, socio-cultural
factors, etc. Therefore, the human aspects of the organization have become
very important and so that the workers can also be motivated by financial and
non-financial incentives in order to perform their functions properly in
achieving the objectives.

Building Higher Morale

The right type of climate should be created for the workers to contribute to
the achievement of the organizational objectives. Therefore, by performing
the staffing function effectively and efficiently, the management is able to
describe the significance and importance which it attaches to the personnel
working in the enterprise.

DIRECTING
Directing definition

Directing refers to a process or technique of instructing, guiding, inspiring,

counselling, overseeing and leading people towards the accomplishment of
organizational goals. It is a continuous managerial process that goes on
throughout the life of the organization.

nature of directing

1. Initiates Action

A directing function is performed by the managers along with planning,

staffing, organizing and controlling in order to discharge their duties in the
organization. While other functions prepare a platform for action, directing
initiates action.

2. Pervasive Function

Directing takes place at every level of the organization. Wherever there is a

superior-subordinate relationship, directing exists as every manager provides
guidance and inspiration to his subordinates.

4. Continuous Activity

It is a continuous function as it continues throughout the life of organization

irrespective of the changes in the managers or employees.
5. Descending Order of Hierarchy

Directing flows from a top level of management to the bottom level. Every
manager exercises this function on his immediate subordinate.

6. Human Factor

Since all employees are different and behave differently in different

situations, it becomes important for the managers to tackle the situations
appropriately. Thus, directing is a significant function that gets the work done
by the employees and increases the growth of the organization.

Importance of Directing
1. Initiates Action

Each and every action in an organization is initiated only through directing.

The managers direct the subordinates about what to do, how to do when to do
and also see to it that their instructions are properly followed.

2. Ingrates Efforts

Directing integrates the efforts of all the employees and departments through
persuasive leadership and effective communication towards the
accomplishment of organizational goals.

3. Motivates Employees

A manager identifies the potential and abilities of its subordinates and helps
them to give their best. He also motivates them by offering them financial
and non-financial incentives to improve their performance.

4. Provides Stability
Stability is significant in the growth of any organization. Effective directing
develops co-operation and commitment among the employees and creates a
balance among various departments and groups.

5. Coping up with the Changes

Employees have a tendency to resist any kind of change in the organization.
But, adapting the environmental changes is necessary for the growth of the
organization. A manager through motivation, proper communication and
leadership can make the employees understand the nature and contents of
change and also the positive aftermaths of the change. This will help in a
smooth adaptation of the changes without any friction between the
management and employees.

6. Effective Utilization of Resources

It involves defining the duties and responsibilities of every subordinate

clearly thereby avoiding wastages, duplication of efforts, etc. and utilizing the
resources of men, machine, materials, and money in the maximum possible
way. It helps in reducing costs and increasing profits.

Principles of Directing

1. Maximum Individual Contribution

One of the main principles of directing is the contribution of

individuals. Management should adopt such directing policies that motivate
the employees to contribute their maximum potential for the attainment of
organizational goals.

2. Harmony of Objectives
Sometimes there is a conflict between the organizational objectives and
individual objectives. For example, the organization wants profits to increase
and to retain its major share, whereas, the employees may perceive that they
should get a major share as a bonus as they have worked really hard for it.

Here, directing has an important role to play in establishing harmony and

coordination between the objectives of both the parties.

3. Unity of Command

This principle states that a subordinate should receive instructions from only
one superior at a time. If he receives instructions from more than one superior
at the same time, it will create confusion, conflict, and disorder in the
organization and also he will not be able to prioritize his work.

4. Appropriate Direction Technique

Among the principles of directing, this one states that appropriate direction
techniques should be used to supervise, lead, communicate and motivate the
employees based on their needs, capabilities, attitudes and other situational
variables.

5. Managerial Communication

According to this principle, it should be seen that the instructions are clearly
conveyed to the employees and it should be ensured that they have
understood the same meaning as was intended to be communicated.

6. Use of Informal Organization

Within every formal organization, there exists an informal group or

organization. The manager should identify those groups and use them to
communicate information. There should be a free flow of information among
 the seniors and the subordinates as an effective exchange of information are
really important for the growth of an organization.

7. Leadership

Managers should possess a good leadership quality to influence the

subordinates and make them work according to their wish. It is one of the
important principles of directing.

8. Follow Through

As per this principle, managers are required to monitor the extent to which
the policies, procedures, and instructions are followed by the subordinates. If
there is any problem in implementation, then the suitable modifications can
be made.