PRINCIPLES AND PRACTICES OF MANAGEMENT

UNIT 1 BASICS OF MANAGEMENT

Objectives

After going through this unit, you will be able to:

• Define the basic concepts of management and organization.

• State nature and scope and management.
• Explain various types of industries and business houses.

Structure

1.1 Introduction
1.2 Definitions of Management
1.3 Business Organization and Management
1.4 Nature of Business
1.5 Functions of Business Organization.
1.6 Business Industries
1.7 Factors affecting establishment of Business Organization
1.8 Objectives of Management
1.9 Principles of Management
1.10 Nature of Management
1.11 Levels of Management
1.12 Summary
1.13 Keywords

1.1 INTRODUCTION

An organization is a place where people come together, organize and co-ordinate activity to
achieve some specific goal. All organizations whether profit making or non-profit making need
to manage their business and direct the various efforts, towards a definite purpose. The
globalization process opens doors to multi-nationals which increases competitiveness in the
market. To manage the business for customer’s satisfaction is the challenge of this 21 st century.
This emerging economic environment forces for quick and effective changes in the business
organization. To visualize these changes, right people are needed to be appointed in the
organization. Right strategically decisions at right time will help to achieve success.

Management is a process where resources are put at its proper direction to achieve decided
goal. Management is a mechanism that constitutes basic functions for accomplishment of
objectives. Management is a science that is based on certain principles and functions.
Management is integrating function of organizing human resources, with physical resources for

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better performance and maximizing productivity with available economic resources.

Management is a group activity, where numbers of people come together and their efforts are
directed towards common objective.

Therefore management is a process where 4 basic factors i.e. men, machines, materials and
money, are involved. If these factors are managed strategically, the decided objectives could be
achieved successfully. Manager operates himself to get things done with the other people those
who are working along with him. Manager is a leader, who motivates people working with
formal as well as informal communications, interprets the instructions and supervises and co-
ordinates their work. Therefore men are treated as most important factor in the organization.
As the Herald Koontz and Cyril O’Donnell say, “Management is the art of getting things done
through and with people in formally organized groups.” Here Manager needs to control and co-
ordinate the activities in a formal way. For this managers use management principles, tools and
techniques which are derived by various management thinkers which are universally accepted.
Thus, Management has interdisciplinary approaching terms of economical, sociological,
mathematical, psychological aspects.

1.2 DEFINITION OF MANAGEMENT

Some Definitions of the term Management are given below –

Harold Koontz and Cyril O’Donnell-
“Management is the art of getting things done through and with people in formally organized
groups. It is the art of creating an environment in which people can perform as individuals and
yet co-operate towards the attainment of group goals. It is the art of removing blocks to such
performance, a way of optimizing efficiency in reaching goals.”

William Spriegel :-

“Management is that function of an enterprise which concerns itself with the direction and
control of the various activities to attain the business objectives.”

George R. Terry :-

“Management is a distinct process consisting of planning, organizing, actuating and controlling

performance to determine and accomplish the objectives by the use of people and resources.”

Dalton Macfarland :-

“Management is the process by which managers create, direct, control, maintain and operate
their organizations through coordinated, systematic and cooperative human efforts.”

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Thus, these definitions state that management is a collective activity of a group of people, to
reach a specific decided goal or objective. To manage the people is an art. Human mind is a
complex element. We need to handle it tactfully, to manage it and direct it for good efforts. So
management is the process of getting things done through and with the people. A good leader
will coordinate and control activities with cooperative human efforts. It is an art to remove gaps
between performances. Various management thinkers have provided tools and principles to
solve the problem that arise within the operation and execution level. A good manager will take
appropriate decision that would be necessary for the respective situation to carry on the work.
Proper and timely decision will prove to be beneficial.

Activity 1

Meet one manager or a person who is working as a Team Leader and discuss with him how
he manages people working with him? Which tools does he apply to solve their problems?

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

1.3 BUSINESS ORGANIZATION AND MANAGEMENT

Business is an organization where group of people undertake a particular activity to produce

goods and services, may be in the form of finished products or services to its customers.
Business organized may be profit making business or services providing i.e. non-profit making
organization. Profit making organizations could be identified as manufacturing companies, large
scale companies, small scale companies, shopping malls, retail stores etc. There are various
NGOs working in our community for the upliftment of poor and needy people, with the
government support or some large scale companies’ support. Any formal organization
established needs to manage its business for accomplishment of its goal. Business organization
activities include production and distribution of goods and services.
Now a day, government is encouraging students to undertake courses those are providing self-
employment. Numbers of vocational courses are started for this purpose. In the self-
employment, to start own business, a person should be well equipped with skills and knowledge
to conduct business, as well as should be able to manage people to execute the operations of
business effectively and efficiently. Therefore along with technical skills, management skills are
also needed to be acquired. Right from starting a business to its establishment, one has to co-
ordinate human resources with material resources.
Forms of Business Houses:-

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1. Sole proprietorship: A sole proprietorship is a profit-making business owned by one

person. The owner may operate on his or her own or may employ others. The owner of
the business has unlimited liability for the debts incurred by the business.

2. Partnership: A partnership is a for-profit business owned by two or more people. In most

forms of partnerships, each partner has unlimited liability for the debts incurred by the
business. The three typical classifications of partnerships are general partnerships,
limited partnerships, and limited liability partnerships.

3. Corporation: A corporation is a limited liability business that has a separate legal

personality from its members. Corporations can be either government-owned or
privately-owned. Corporations can organize either profit-making or not-profit making
institutions. A profit making corporation is owned by shareholders who elect a board of
directors to direct the corporation and hire its managerial staff. A profit making
corporation can be either privately held or publicly held.

4. Cooperative: Often referred to as a "co-op", a cooperative is a limited liability business

that can organize for-profit or not-for-profit. A cooperative differs from a for-profit
corporation, in the sense, it has members, as opposed to shareholders, who share
decision-making authority.

Activity 2

Divide following business houses as per their type of ownership –

Tata Motors, Big Bazar, Shaukat Panwala, Srushti co-operative society, Bhagwan and sons
Pvt. Ltd., National Kirana Bazar, Reliance Energy, SBI staff consumer cooperative store,
Adidas, Microsoft, Gyanba Vegetable store, Ranka Jewelers & Gems, Pantaloon, Shaadi
Mubarak from movie Band Baja Barat.

Sole proprietorship: __________________________________________________________

Partnership: ________________________________________________________________

Corporation: ________________________________________________________________

Cooperative: ________________________________________________________________

1.4 NATURE OF BUSINESS

1. Producing goods and services: - Production of goods like cars, scooters, machines, hardware
products, cloths etc. or service products like financial products, goods offered by banking or
insurance sectors, software products, would be basic activity of respective business
organizations.
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2. Distribution and exchange of finished products: - Distribution and exchange of goods

produced by manufacturing company for profit making activity.
3. Rendering services to needy people as a social responsibility: - In our country, though it is a
developing country, there are number of citizens who need support from the society for
their upliftment. Various government and private organizations are working for these
people. They provide services for the welfare of the community.

There are basically three components of a business :

1. Owner: - Owner is a person or a group of persons, who invests capital and takes risk in
profit or loss and dividend. He is liable for unlimited debts in the business. He is
responsible to prepare objectives, missions to carry over business. Strategically
decisions will be taken by the owner. In sole proprietorship a single person or along with
his family is treated as owner. Whereas corporate level stakeholders are also owners of
a company. They are decision-makers.
2. Employees: - Employee provides his/her services for a particular business and in return
he will receive adequate compensation in the form of salary, bonus, allowances,
recreational facilities, etc. Employees are treated as executors. Employee, may be in the
capacity of a manager, a supervisor, a worker etc., is responsible for execution and
implementation of strategies decided by owners.
3. Customers: - Customers are patrons of business enterprise. Customer satisfaction is the
sole and prime objective of any enterprise. Customer satisfaction lies with the quality
products at reasonable price with adequate and regular supply along with good timely
services.

1.5 FUNCTIONS OF BUSINESS ORGANIZATIONS

To achieve the objectives of the organization various functions need to be carried out. Those
could be grouped as Production, Marketing, Personnel, Finance etc. These functions are inter-
related and interdependent. In large organization this activity is generally decentralized
whereas in small organization it is a centralized activity. Effective planning, co-ordination,
control and execution will ensure smooth functioning of these departments.

1. Production Function: - This is a process where raw material and other resources are put
to use. After a process, final product i.e. output will be in the hands. This process is
called as production process. Type of product differ as per the type of industry, it may
be a manufactured goods or service products.
2. Marketing Function: - Sale of goods produced by production department is undertaken
by marketing department. Marketing department is responsible for deciding price of a
product. Advertisement, sales promotion through holding any contest or distributing
sample copies, market research and taking feedback from consumers for customer

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satisfaction; are prime activities of marketing department. Marketing person needs to

co-ordinate production department as per the feedback received for improvement in
the product designed.
3. Personnel Function :- Any organization, though it, is fully equipped with other resources
like material, technology, finance etc. without human beings involvement co-ordination
among them is not possible. It is a job of management to see whether human needs in
terms of work are satisfied. Proper necessary facilities in the working place for men and
women have to provide so as to create comfortable working environment.

Above mentioned functions are highly dependent on each other. Without production,
marketing of products is not possible, whereas marketing department keeps contact with
customers through after sales service public relation centers or through market research.
Suggestions received from the customers and laymen are forwarded to production
department for further improvement. Without human beings no organization could be run
efficiently though it is highly technically equipped.

Production
Department

Marketing
Department

Personnel

Fig 1.1

1.6 BUSINESS INDUSTRY

1.6.1 Basic concept

A business industry is a comprehensive collection of businesses of different scales, engaged

in varied commercial activities for earning a profit. Particular business industries may be
classified by the main activity that the businesses are involved in. The size of a business is
typically defined by the number of employees and the volume of annual sales.

There are two types of industry- Small scale and Large scale industry. A small business is one
that is independently owned and managed. In the US, a business is classified as “small” if it

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employs less than 50 people and “large” if the number of employees is more than 100. In
the European Union, the defining numbers stand at 100 and 250, respectively.

According to Indian economy, industry is also broadly separated into public sector and
private sector, of which major industrial section is generally categorized as private sector.
Industries can be classified on the basis of raw materials, size and ownership.
1.6.2 Types of Industries
A.) Primary Industries –
Primary industries are those which use natural resources as raw material. This involves
the extraction of resources directly from the earth or the universe.
A.1. Extraction Industry: - In this, it extracts out products from natural resources like
earth, sun, water etc. Finished goods of these industries are generally used by other
industries as raw material. Industries like agricultural industry, mining industry, fish
breeding, animal raring power and electricity generation are treated as primary
extraction industries.
A.2 Genetic industries: - In this business, industry is carried forward by one generation
to next generation. It could be animal breeding and animal husbandry, agriculture
industry, milk and milk product, food production and preservation etc.

B.) Secondary Industry –

B.1 Manufacturing Industry: - They carry our production process with raw material or
semi-finished goods to transform into finished products. Most of these industries
rely on raw material supplied by primary industry or other small scale industries.
Factory production is the outcome of any industry. Basically there are types of
manufacturing industry.
B.1.1 Analytical Industry – In this basic material is analyzed and separated from raw
material to process into finished products. Extracted crude oil from the earth
and process it for acquiring finished products like petrol, diesel, gas, kerosene,
separating iron from iron ores etc.
B.1.2 Synthetic Industry –When two or more materials are mixed together some
finished product is formed. Fertilizer producing, cosmetics, soap making,
cement creation etc. are some of the examples of synthetic industry.
B.1.3 Process Industry – Here raw material is processed by considering analytical or
synthetic methods. Sugar factories, Textile industry, Iron and Steel industry are
some these examples.
B.1.4 Assembly line Industry – Here raw material received from small scale industry
or primary industry is assembled in this, for example Automobile industry,
making watches, electronic goods like TV, Washing Machines etc.

B.2 Construction Industry – Construction of roads, dams, buildings, cannels etc. are
included under this type of industries. They need cement, steel and iron, sand,
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wood etc. as a raw material for construction. Even glass, marble, other decorative
stone industries are supportive to the construction industry.

C) Tertiary:-
Services providing industries are included in this section.
C.1 Financial Services –This sector provides services to other manufacturing industries
and to the society. Financial products in the form of insurance, deposits, mutual
funds, systematic investment plan, etc. are offered to industrial units, as well
patrons of the society. Here government and private institutions are established to
provide these services. Insurance Companies, Banking sector, Private Financial
Institutions comes under this sector.
C.2 Educational Services – Basically educational services are treated as noble services,
which are imparted for not profit motive. But educational institutes need to be
managed properly for qualitative education. Efficient and knowledgeable teachers
can only pass on knowledge to next generation.
C.3 Information services – This 21st century is called as Information era. There is vast
amount of information available in the society. This is most important and tedious
task to manage information in a systematic way, so it could be handled effectively.
Adequate, relevant and prompt information helps to carry out research. Print and
Non-Print medias, Publishing Houses, and now a days internet related institutions
are helping to manage these services.
C.4 Information and Technology Industry–This is also service rendering industry. This
helps, to acquire, process, store and manage data and information with the help of
technology like computer software, hardware, programming languages. This
processed data is delivered through communication technologies for free of cost
sometimes. Database along with hyperlink are providing vast of information across
the internet. Information technology along with communication technology is used
to develop these services.
D. Quaternary Industry – This is an intellectual services providing industry. Research and
development work is carried out under this. Research is carried out for the development
of human beings. Various research institutes like NCL (National Chemical Laboratory),
NEERI (National Environmental Engineering and Research Institute), IARI (Indian
Agricultural Research Institute) etc. are some of the research institutes established by the
government. Even research and development centers of pharmaceutical companies,
automobile industries work throughout on developing new products.

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Primary •Extraction industry

Industry •Genetic Industry

Secondary •Manufacturing Industry

Industry •Construction Industry

•Financial Services
•Educational Services
Tertiary
Industry •Information Services
•Information and
Technology Services

Quaternary
Industry

Fig 1.2

1.7 FACTORS AFFECTING ESTABLISHMENT OF BUSINESS ORGANIZATION

Following are the factors need to consider while establishing any business organization.
1. Nature of business: - First owner should decide about which business he can undertake.
A person will choose a nature of business as per his skills or knowledge acquired. The
business activity taken may be trading activity, manufacturing activity or service activity.
Trading activity may be sole proprietorship because it is conducted at small scale.
Manufacturing business, partnership firm or large scale companies need to establish by
offering shares and debentures.
2. Ease of Formation: - The difficulty level to bring a business into existence needs to be
analyzed first. Here problems like finding suitable partner or associate for business,
business promotion activity, funds rising, liability of business, legal formality, those
needs to be consider for establishing business.
3. Sources of Finance – This is an important function to establish any business. Nature of
business is always decided on the basis of capacity to raise adequate finance. For small
scale a proprietor or partners contribute in the capital, any profit or liability will be their
responsibility. But in Large scale companies shares and debentures are issued to a
society for capital contribution. Shareholders will be liable for dividend as per the profit
earned.
4. Expected Competition – Business is always related with competition which is there in
the market. The target consumers are always divided among various traders.
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Qualitative products and effective after sales service helps to survive in the competitive
world. Webster dictionary defines competition in business as "the effort of two or more
parties acting independently to secure the business of a third party by offering the most
favorable terms".
5. Government Regulations – To establish any firm one need to study and analyze
government rules and regulations. Some clauses of a law may differ as per the size of a
firm and the type of a ownership. A Company form of organization is subjected to a
more regulations by government than other type of firms.
6. Stability and continuity – An owner will first see for stability in the business. With
stability good returns on investment, and helps to achieve the objectives. With the
stability in the business assures its employees for long term commitment. Employees
will prove productive only when they will feel secure about their employment. Even the
society is interested in regular and timely supply of goods and services along with
satisfaction of customers.

Activity 3
Find out at least two business organizations of each type of industry working in our country.
Primary Secondary Tertiary Quaternary
Extraction Ind. Manufacturing Ind. Financial services related
Genetic Ind. Construction Ind. Educational services
Information Services
Information Technology services

1.8 OBJECTIVES OF MANAGEMENT

Goals or objective is a desired future condition that the organization seeks to achieve. Achieving
complex and difficult goals requires focus, long-term diligence and effort. Objective is a purpose
or the anticipated result that has intrinsic value. Objectives are organizational objectives, social
objectives or personal objectives. It can be described as –

1. Organizational Objectives –
a. Customer Satisfaction
b. Stability and growth of organization.
c. Improving goodwill of the organisation.

2. Social Objectives –
a. Supply qualitative products and services
b. Follow business ethics in business process.
c. Upliftment of underdeveloped people through social responsibilities.
d. To increase employment opportunities.
e. Conservation of environment and natural resources.
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3. Personal Objectives –

a. Fair returns for work performed.

b. Reasonable working conditions.
c. Continuity in employment

Activity 4

Frame the objective of your life within next 5 years. Write down steps how you will achieve
the decided objective?
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

1.9 PRINCIPLES OF MANAGEMENT

The basic principles of management are profound by Henry Fayol, a French industrialist and the
father of modern management. These principles are used for decision making when any
manager faces dilemmatic situation. These principles aim at smooth administration of any
industry.

1. Division of Work – this principle emphasis on work assignment. Work assigned to every
individual will be according to his specialization, skills and knowledge acquired by him.
This is applied to all industries irrespective of its scale of business.
2. Authority and Responsibility – Authority and responsibility are the two terms that go
hand in hand. Authority without responsibility will increase inefficiency among
individuals. To achieve the organizational objective is a basic responsibility of every
person working within. To handle this responsibility, authority limits are allotted as per
the position.
3. Discipline - It is an essential activity of any efficient organization. Discipline means to
instruct a person to follow a particular code of conduct or order. Discipline means an
activity, exercise or a regimen that develops or improves a skill through training.
Therefore if everyone observes this principle, it would affect productivity of employees.
4. Unity of Command –This principle deals with only one boss for each employee. There
should be one supervisor or manager for each employee. If a person’s receives two or
more instructions to follow, he would get confused. Thus may results in conflicts and
therefore may reduce his efficiency.
5. Unity of Directions – A one common plan should be followed for all to achieve the
objectives. Alternative plans, if implemented, may lead to confusions. Therefore there
should be one instruction at a time to employees.

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6. Centralization - Centralization and decentralization of activities is depending upon the

scale and nature of organization.
7. Subordination of individual interest to general interest – When a person joins any
enterprise he gets bound by its environment. For this, every individual’s interest would
depend on organizational goals. A manager is responsible to encourage everyone to
perform his duties towards implementation of plans.
8. Remuneration – Remuneration is the cost paid to every individual working for the
enterprise, for the services he is rendering towards an organization. Without fair wages
or salary nobody would prove production.
9. Scalar chain – This refers to the a hierarchy of authority and command that need to
maintain for smooth communication. Proper hierarchy provides proper direction to give
instructions from higher authority to lower level.
10. Order – This principle states that every individual working with organization should be
placed at its proper place and every place in the organization should be filled with
proper employee.
11. Equity – It deals with justice and humanistic approach to every employee. If this
principle is applied properly by the manager, any enterprise can enjoy success. If this
problem is handled properly,, relations between workers as well with management can
be maintained. For this, manager who possess emotional intelligence and experience,
can handle it successfully.
12. Stability of tenure of personnel – This principle deals with stability and continuity. If
employee knows that his services will be appreciated in the future with good returns,
then that person will prove to be productive. He will take more interest in his work and
perform better up to his maximum capacity. But if there is no assures of security he
loses his interest of work. This may result in searching other job opportunity. This
situation increase attrition in the organization.
13. Initiative – The principle of initiative refers to the ability and quality of manager to think
and execute a plan. A manager is responsible for encouraging others for better
performance. Leonardo Da Vinci said “Knowing is not enough; we must apply. Being
willing is not enough; we must do." As per this quote a good manager will apply his
knowledge and encourage others to apply and be innovative in their work.
14. Esprit de Corps – Here the sense of belongingness, unity and team spirit among
employees of the organization has to be encouraged to receive maximum output. All
successful organizations survive only when there is spirit of unity and team work. For
this, managers must create a culture and environment with the help of above
mentioned other principles, like equality, stability, specific industrial goals, putting right
person at a right place, etc.

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1.10 NATURE OF MANAGEMENT

A. Management as an art

Art is nothing but the application of principles. Art refers to creative skills and talents to
achieve the goal. As Harold Koontz and other management thinkers say “Management is the
art of getting things done through people.” The human psychology is complicated; need to
divert it for qualitative productivity, one needs to manage it properly. As Webster’s
Dictionary say “Art is skill in conducting human activity.” Henry Mintzberg is probably the
most well-known and prominent advocate of the school of thought, that management is an
art. He is an academic researcher, whose work capturing the actual daily tasks of real
managers was ground breaking research for its time. Mintzberg, through his observation of
actual managers in their daily work, determined that managers did not sit at their desks,
thinking, evaluating, and deciding all day long, working for long, uninterrupted time periods.
He also determined that mangers are engaged in very fragmented work, with constant
interruptions and rare opportunities to quietly consider managerial issues.

Peter Drucker, a well-known management scholar, is best known for developing ideas
related to total quality management. He terms management "a liberal art," claiming that it
is so because it deals with the fundamentals of knowledge, wisdom, and leadership, but
because it is also concerned with practice and application. Drucker argues that the
management attempts to create a paradigm for managers, in which facts are established,
and exceptions to these facts could be ignored just because of irregularities. He criticized
assumptions that make up the management paradigm, because these assumptions change
over time as the society and the business environment change. Thus, management is more
of an art, because scientific "facts" do not remain stable over the time.

Frederick W. Taylor's, a father of Scientific Management described management an art as -

1. Managers must study the way their workers perform their tasks and understand the
job knowledge (formal and informal) workers have, and then find ways to improve
how tasks are performed.
2. Managers must codify new methods of performing tasks into written work rules and
standard operating procedures.
3. Managers should hire workers who have skills and abilities needed for the tasks to be
completed, and should train them to perform the tasks according to the established
procedures.
4. Managers must establish a level of performance for the task that is acceptable and
fair and should link it to a pay system that rewards the workers who perform above
the acceptable level.

B. Management as a Science

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Webster’s College Dictionary defines science as "any skill or technique that reflects a precise
application of facts or a principle." Therefore science is a systematic body of knowledge
which could be applied derives facts and based on certain principles which are capable of
verification that is universally accepted. Science faculty is divided into two criteria’s –
1. Basic & Pure Science
2. Social Science.
Physics, Chemistry, Biology, Electronics, Mathematics, and Information Technology are
some of the branches of Pure Science. These subjects are based on accurate principles. If it
is applied the output will be the same universally everywhere. Where as in Social Science it
is based on certain principles but output may very according to situation, as it is mostly
related with human psychology. Management is a branch of Social Science faculty.
F. W. Taylor is known as father of scientific management. He emphasis, his studies in
“efficiency in work for better productivity”. For this he laid down certain fundamentals such
as accuracy in work, trained person at right place etc. He told decentralization of task is
more important.

Henry Fayol contributed to management studies with basic principles of management and
the “Functional Approach”. He divided all industrial activities into six groups. These
activities are important though the organization is small or large scale.

Peter Drucker introduced a concept MBO, Management by Objectives which is further

modified by Schleh as ‘Management by results.’

W. Edward Deming derived a statistical approach to management with the concept Kaizen.
It deals with standardization of operations and activities through Deming cycle, Shewhart
cycle, PDCA techniques to meet requirements and increase productivity.

TQM technique is a management approach for quality improvement. This approach came
from the teachings of such quality leaders as Philip B. Crosby, W. Edwards Deming, Armand
V. Feigenbaum, Kaoru Ishikawa and Joseph M. Juran. This is based on approach “the
customer is always right.”To satisfy this approach, Taguchi Technique has been built by
Japanese engineer Genichi Taguchi which is built on basic idea to remove the effects of
adverse conditions instead of removing causes.

In 1986 Motorola, USA, has developed business strategy ‘Six Sigma’ that seeks to improve
the quality of output by identifying and removing the causes of defects and minimizing
variability in manufacturing and business processes.

Motivational Theories i.e. Maslow’s Need Hierarchy Theory, Herzberg’s Two-Factor Theory
McGregor’s Theory X and Theory Y, Victor Vroom’s Expectancy theory are some techniques
pioneer in management faculty.

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All such techniques developed by management practitioner and thinkers supports that
management can be regarded as a science faculty. Management is a process of systematic
collection and processing of information for decision making. The processed data is then
analyzed and then managers by using their judgment, experience and techniques takes a
decision.

C. Management as a Profession

Webster’s Dictionary of English Language defines profession as, “that occupation requiring
specialized knowledge and academic training”. Therefore profession involves some branch
of advanced learning or skills. This knowledge is applied as a solution to many problems,
takes decisions and executes the plans to achieve decided goal. Thus knowledge of
management and a manager, as a working profile, is treated as a high class profession.

Characteristics of Profession

1. Systematic body of knowledge – When any occupation is based on the expert

knowledge is treated as profession. Expert knowledge possesses principles or
techniques, methods of knowledge. This knowledge can be applied to process, execute,
and carry the operation of any enterprise.
2. Universal Acceptance –In profession universally accepted theories, principles and
techniques are applied for practical working. Methods and principles evolved by
management thinkers are universally accepted and are used to base as solution to
dilemma.
3. Formal Education – A systematic body of knowledge when acquired through formal
education, it can be treated as a profession. Theoretical knowledge supported by short
term practical training of management is imparted from recognized institutes in India as
well throughout the world.
4. Specialization – Professionals may specialize in a particular field like engineers. As
engineers possess specialized knowledge in the field of electronics, information
technology, mechanics etc, as even managers can choose their specialization as per the
interest area like finance, marketing, personnel etc.
5. Code of conduct – Any good profession is always guided by a code of conduct. A
manager has to follow professional business ethics, while executing his responsibilities.
6. Independent Office – Many professionals work from their independent office. Some
management professionals work as a consultant and practice independently. Their
services are hired by other organizations.
7. Fees – Professionals charge fees in the form of consultancy fees or remuneration for the
services offered by them, as this management consultant charge fees as against
consultancy provided to their clients.

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8. Social Responsibility – Professionals are liable to the society. Their work is regarded as
vital to society.
9. Work Autonomy - Professionals are autonomous as they can make independent
judgments about their work. A professional enjoys freedom to exercise their
professional judgment. Even managers enjoys freedom in practicing their knowledge
and can make new experiments.
10. Status – Professionals enjoy high prestige and good rewards. Specialized technical
knowledge always gains status in the society. As Managers are treated as skilled workers
they receive prestige and status for their profession.

According to some management thinkers managers are treated as professionals and

management is a high class profession.

Activity 4

List out various occupations those are accepted as profession.

Select any professional person other than manager. Check how his/her work profile could
be treated as profession with the help of above characteristics.
___________________________________________________________________________
___________________________________________________________________________

1.11 LEVELS OF MANAGEMENT

According to the principles of division of work, job is divided among employees as per
individual’s caliber. Therefore there will be many managerial positions irrespective of the scale
of an organization. Positions in the organization are marked by authority, responsibility,
functions and roles etc. Job profile varies as per the position varies in the organization. Thus
managerial positions are classified as per the work profile and responsibilities allotted. A
demarcation is drawn to decide the level of these positions. Levels of management consist of
various managerial positions in the structure of an organization. It may differ from one
organization to another, size of organization or as per the span of control. The level of
management decides the role play, contribution and authority and responsibility of that
position. Therefore in the levels authority along with responsibility increases as the person
moves upward. Levels of management are broadly classified as-

1. Top Level Management

2. Middle level Management
3. Lower-Level Management

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•Owners
•Shareholders
Top Level •Directors

•Professionals
•SKilled and Intellectual Employees
Middle Level

•Operational level Employees

Lower Level •Semi-skilled or Unskilled Labours

Fig 1.3

1. Top Level Management –

Individuals those are involved in decision making process are regarded as Top Level
Managers. They are mainly responsible for drafting strategic decisions and framing
objectives and goals of an organization. Generally owners are incorporated in top level.
Owners along with their family members or in case of corporate companies’ representatives
of shareholders, CEO’s, directors and chief executives are also treated as decision makers.
These groups are responsible for entire management of the organization and responsible for
the activities carried out within the enterprise. They are answerable to the owners about
the current position. Activities carried out by top level Managers –
1. Frame Mission, Vision and Objective statements of an organization.
2. Plan out the strategies to achieve the objectives decided.
3. Prepare long term, short term, departmental planning to support the strategies.
4. Financial matters will be controlled by these managers.
5. Managers are involved in innovating new products and encourage others for the
same.
6. They are responsible for controlling and co-coordinating activities within various
departments.
7. They appoint right executives at right place.
8. They will keep a watch on organizational structure and can suggest modifications if
required.
9. They take decision for the alternate plans for any dilemma.
10. They calculate share of profit or dividend to distribute among owners of the
enterprise.
11. They are completely responsible for stability, growth and expansion of an
organization.
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12. They are leaders of an organization.

2. Middle Level Manager
Employees who are responsible for execution of policies are Middle Level Managers,
therefore they are also called as Executives. Project planning is mainly done by these
employees. They collect information, process it and forward it to top level executives for
final decision. Their suggestions and participation could be welcome by top managers.
Generally Departmental Managers, Deputy managers, Foreman, Administrative managers
etc. are middle level managers. They need to follow following functions as an executive –
1. To decide departmental goals to support organizational goals.
2. Work out plans and strategies to carry out those goals.
3. They are responsible for suggestions and recommendations to their managers for
constant improvement in the enterprise.
4. They guide and direct the work of their subordinates.
5. They are responsible to carry out functions like performance appraisal, arranging
training and development activity, for their subordinates.
6. They act as a spokesperson between top level managers and lower level managers
and bridge the gap in communication. Instructions received by top level are
communicated to the subordinates while any suggestions received by junior
managers are passed on to directors.
7. They motivate and encourage lower level managers for better performance.
8. Their responsibilities and authorities are limited as compared to director level
managers.
9. They will directly report to the top managers.
3. Lower Level Manager –
Lower level managers are also known as First line or Supervisory managers. They help
workers to carry out day to day functioning of workers. Though these managers does
not set goals, they have strong influence on the organization. If a manager performs
poorly, workers may lack to prove productive.
1. They are responsible to manage and carry out day to day activity i.e. basic
enterprises functioning.
2. To encourage and motivate flower workers and other employees.
3. Prepare plans to carry out the operation of enterprise.
4. To look into day to day problems of workers and helps to solve those as per their
capacity.
5. They are responsible for quality and quantity of production.
6. They are responsible to provide on the job training to workers.
7. They receive various grievances and they communicate those to top management.
8. Make an arrangement and provide all required resources for production.
9. Ensure discipline and safety of workers within the premises.
10. They supervise and guide workers.
11. They report day to day activity to higher level managers.
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1.12 SUMMARY
Management is an activity of organizing and coordinating people with resources, process
and technology. Management is often included as a factor of production along with
machines, materials, and money. While managing one, need they keep the end result in
mind i.e. decided the goal or objectives decided. To achieve the objectives, manager directs
controls and coordinates the activities. To process functions like production, marketing and
controlling financial aspect and personnel in the organization is main task of any
organization. According to management guru, Peter Drucker basic tasks of management are
marketing and innovation. These functions are divided among personnel available according
to their capacity and skill they acquire. Accordingly they serve for certain designation.
Though the nature and type of industry may vary, the basic managerial activities will be
same, though the organization is formal or informal. Principles and other management
theories support this discipline to adopt as a profession but still some experts say that to
manage is an art while according to other contributors it is science also.

1.13 KEYWORDS
1. NGO – Non-government-organization, those who work for the community or society on
no profit- no loss basis.
2. Strategically – something important in plan of action
3. Globalization – Growth to global or worldwide scale
4. Anticipate – To fee or realize beforehand
5. Conserve – To use carefully by avoiding waste

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UNIT 2 MANAGING ORGANIZATION

Objectives
After going through this unit, you will be able to:

• Describe different activities that are processed with control mechanism.

• Enumerate different managerial skills and roles that require managing the organization.
• Elaborate how it is necessary to manage business in changing environment.
• Explain responses to social gratitude.

Structure

2.1 Introduction

2.2 Management as a process

2.3 Management as an activity

2.4 Management as a discipline

2.5 Managerial skills

2.6 Managerial roles

2.7 Categories of Managerial roles

2.8 Social Responsibility

2.9 Managing Change

2.10 Factors affecting Change

2.11 Process to overcome the loopholes for change

2.12 Tools used to cope up with change process

2.13 Keywords

2.14 Summary

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2.1 INTRODUCTION

T. N. Suening and John M. Ivancevich described productivity as “The relationship between real
inputs and real outputs, a measure of how well resources are combined and utilized to produce
a result desired by management”. An organization is a formal system. According to them
productivity and efficiency works in inverse proportion. Improvement in efficiency does not
necessarily mean greater productivity. Organization of all activities must be concerned about
the productivity. In these circumstances, manager needs to perform, manage, and coordinate
all management functions at his best.

To manage any organization, proper division and decentralization of activities helps for smooth
coordination and control. To adopt a particular system is depend on size and complexity of an
organization. Increase in size leads to specialization of the management process. For this
specialized process and activities are categorized among different managers. For this, different
management levels are created like top level, middle level and front line managers. Top level
managers will built up team for overall set up of an organization and formulate organizational
mission statements. First line or an operational level manager, who actually operates the
execution of plans, will direct and get guidance from middle level managers. Middle level
manager controls and coordinates his subordinates for execution of plans. The amount of time
and effort given for planning and organizing the activities are usually equal at all levels of
management.

This horizontal specialization makes management process specialized. A functional manager,

who is responsible for short term planning, works under horizontal specialized organization
system. Managers are organizational members who are responsible for the work performance
of other organizational members. Managers have formal authority to use organizational
resources and to make decisions.

2.2 MANAGEMENT AS A PROCESS

Managing the process involves determining what work is needed to accomplish the goal,
assigning the tasks to individuals, and placing individuals in a decision-making framework. The
end result of the managing process is an organization. As George R. Terry said “Management is

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a distinct process consisting of planning, organizing, actuating and controlling, performed to

determine and accomplish stated objective by the use of human beings and other resources”.

Management is an integrating process. It is an activity to bring together human physical and

financial resources to achieve organizational goals. It helps to bring harmony between various
functions for smooth working. Management is a continuous process. It is concerned with
constantly identifying a problem and solving them by undertaking suitable plans and
alternatives. As Theo Haimann said “Management is the sum total of all processes including
planning, direction, control and organization”. It is the process of decision-making and control
over the actions of human beings for the express purpose. It is a process of directing men to
perform better. Process management is the application of knowledge, skills, tools, techniques
and systems to define, visualize, measure, control, report and improve processes with the goal
to meet customer requirements profitably. Management is treated as social activity also it is
completely depends upon the human factor. Management is concerned with developing human
relations with certain goals and objectives. It is a process of human interaction, make them
productive and useful.

2.3 MANAGEMENT AS AN ACTIVITY

Management is a process of organized activity. As Joseph Massie said, Management is the

process by which actions are directed by a cooperative group for achieving common goals. It is a
process of coordinating its resources like finance, people and raw material effectively for
production. Managing people, money, material and machinery is the base of organizing any
industry. It consists of achieving the business objective, putting the resources into operation and
periodical checking of their performance to ensure productivity.

Management is a purposeful activity. It is mainly concerned with setting up of objectives and

achieving those through its functions like planning, organizing, staffing, directing, controlling.
Management is a team activity. It is concerned with the efforts of a group. Lawrence Apply, a
management expert, said that management is concerned management of people and not the
things. It is a process of motivating people to work hard. Directing men to perform work,
authority to extract work from others is implied in the process of management. Any enterprise
can progress when management accepts social change and introduces innovative methodology.

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Management is a abstract concept. The quality of the organization and management could be
seen with increased productivity and knowledge and skills of the subordinates. A management

guru Peter Drucker defines management as “an economic organ of industrial society, this is an
activity to make the desired result”.

2.4 MANAGEMENT AS A DISCIPLINE

Managers organize the enterprise and they are responsible for success or failure. They need to
control, direct and coordinate the activities. Management is now recognized and universally
accepted as a discipline, a branch of knowledge. It has code of conduct, methods and techniques
to solve the problems. A person appointed as a manager completes his education by obtaining
degree in the subject management. Various management thinkers or gurus evaluated theories
and principles, their contributions are universally accepted. An innovation took place with new
concepts and methods specifically after World War II. Japan’s progress after world war has set
an example with new concepts like Kaizen, Six Sigma etc.

Activity 1–

Find out how textile organization is being managed. What are its activities, how does it
process, what are its inputs and outputs.

2.5 MANAGERIAL SKILLS

Skill is an inborn or developed ability by learning or practicing. According to Oxford Dictionary

the definition is “Skill is expertness, practiced ability, facility in an action”. Skill is an ability or
proficiency that a person possesses that permits him or her to perform a particular task. Basic
skills like reading, writing, logical and critical thinking are used for efficient learning strategies.
Skill helps to distinguish between essential and non-essential information and improves the
decision making skill to take necessary actions. Listening and communication skill removes the
misconduct and error in process. Managers of any level must possess and develops many critical
skills. Different skills have been suggested in performing managerial roles.

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Table 2.1

Type of skill Ability

Technical Skill Acquires subject related knowledge and information

Digital Skill Can operate digital know-how, communication systems etc.
Analytical skill Able to handle problems with technical and scientific methods
Conceptual skill Understanding organization as a whole
Decisional Skill Ability to take quick and effective decisions
Interpersonal Skill Treat organization as a family and try to keep everyone together
Communication skill Precise speaking, good listening, proper understanding
Political skill Negotiate for betterment of an organization

1. Technical skill –
When a person possesses / acquired information and knowledge that will would be
considered proficiency at workplace. Technical skill required at each level would be
different. First-level managers may engage in the actual operations of the organization; they
need to have an understanding of how production and service occur in the organization in
order to direct and evaluate line employees. Additionally, first-line managers need skill in
scheduling workers and preparing budgets. Middle managers use more technical skills
related to planning and organizing, and top managers need to have skill to understand the
complex financial workings of the organization.
2. Digital Skills –
At least conceptual understanding of computers, telecommunication systems, and technical
know-how has to be there. Now a day to use digital technology is the basic aspect of any
job. Digital technology helps to collect relevant information, prepare plans, financial
analysis, analyses resource requirements, analysis of data collected through research, for
production control, etc. Computer is especially helpful tool for decision making. Various
communication technologies, computer applications and software packages help to carry
out day to day transactions. Software enables managers to manipulate data and perform as
per the individual requirement. Some managers use technology for self-improvement and
there upon improving managerial performance.

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3. Analytical skills –
This is the ability to identify key factors and understand how they can be interrelating and
roles they play in a particular situation. Analytical skill involves using scientific approaches

or techniques to solve the problems. Managers will identify the base of problem and
develop plans of action to solve those. Analytical skill involves managers to think multiple
alternatives in a complexity. Analytical skill means that you are able to solve complex
problems using visualization and logical thinking. To develop the analytical thinking one has
to develop his observation capacity, able to judge through relevant criteria, should be able
to apply techniques and methods to judge properly. If a manager can frame a problem
statement properly it helps to handle critical situation. Analytical skill encourages creative
thinking. To think out of the box is a need today. Productivity increases with analytical and
creative thinking.
4. Conceptual Skill –
Conceptual skill is a manager's ability to see the organization as a whole, as a complete
entity. It involves understanding how organizational units work together and how the
organization fits into its competitive environment. Conceptual skill is crucial for top
managers, whose ability to visualize future can have major effects on the success of the
business. They stress on how each department of the organization gets interrelated with
organizational goals. The success of business depends upon leadership. Any organization can
achieve success with the visionary leadership. Successful company can visualize immediate
customers demand and market conditions. However, conceptual skill is still necessary for
middle and supervisory managers, who must use this skill to envision, for example, how
work units and teams are best organized.
5. Decision making skill –
Proper decision will affect the condition of the organization. Manager’s ability to make
decisions will reflect the quality of effectiveness in working. An individual’s decision making
skill is influenced by his/her analytical and conceptual skill. If one can make timely, well
considered decisions, then he/she can lead his/her team to well-deserved success. Poor
decisions will prove an individual’s leadership brutally short. Improper decisions will lead the
failure. For proper decision making an individual needs to direct him/her and others towards
objectives of the organization.
6. Interpersonal skill –
Managers accomplish work through and with the people. Their ability to interact with
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his/her subordinates, understand others, to communicate with subordinates as well

immediate or top management people is important. Interpersonal skill is important at every

level of management. Managers who have excellent technical skill, but poor interpersonal
skill are unlikely to succeed in their jobs. This skill is critical at all levels of management.
Their ability to encourage subordinates motivates them to work at their best and to make to
be innovative will prove their effectiveness. Here formal as well as informal interaction is
also necessary.
7. Communication skills –
Communication may be formal or informal, written or oral, is an important element for
effective managerial performance. Communications skills involve the ability to communicate
in ways that people understand and receive feedback that they understood, what is
communicated. Good manager need to possess excellent reading, writing, speaking and
listening capacity for good communication. Communication is necessary for team work as
well as working with diverse population. A person having analytical skills with good
communication skills can clutch change in the environment and could adapt it with positive
attitude.
8. Political Skills –
This is an ability to influence all those are associated with the person, immediate managers
or subordinates. Political skill exists in just about every organization—and the people most
successful at utilizing this skill often have the best reputations among their colleagues.
Political skill involves obtaining power and preventing other employees from taking away
one's power. Managers use power to achieve organizational objectives, and this skill can
often reach goals with less effort than others who lack political skill. . Managers at all levels
require political skill; managers must avoid others taking control that they should have in
their work positions.
Activity 2
Approach nearest Shopping Centre (may be small scale or large scale, but consist of staff
more than 5 persons). Meet the chief manager of it and discuss how he manages his skills to
organize the people working with him in different situations.

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Activity 3

In your day to day life, if you come across some problem, how different skills will help you to
handle that situation.

2.6 MANAGERIAL ROLES

Managers of all levels need to perform different managerial roles for smooth functioning of
work as per the plans and objectives. Managerial roles are sets of behavior that belong to the
manager’s job. Managers are typically responsible for:
• Establishing, prioritizing and making sure that objectives are met.
• Establishing a framework for communications, and patterns of work within their area of
responsibility.
• Communicating targets, goals and results to people that work for them.
• Motivating employees.
• Setting out the administrative arrangements for their area of responsibility.
• Creating, monitoring, and making sure that budgets are achieved.

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2.7 CATEGORIES OF MANAGERIAL ROLES

A researcher Henry Mintzberg has studied different managerial traits and he determined ten
different managerial roles. These are classified in three broad categories i.e. interpersonal roles,
informational roles and decisional roles.

INTERPERSONAL INFORMATIONAL
ROLES
ROLE
*Monitor Role
*figurehead Role
*Disseminator role
* Leader Role
*Spokesperson
*Liaison Role Rolle

DECISIONAL ROLES
*Entreprenuer Role
*Disturbance Handler Role
*Resource Allocator Role
*Negotiator Role

Fig 2.1
1. Interpersonal roles –
A manager needs to perform above roles due to formal authorities. These roles expect to
provide leadership, to be a figurehead, being a liaison within the company.
A. Figurehead Role -
When a manager is responsible for social, inspirational, legal and ceremonial obligations
he is said to perform as Figurehead role. Here manager performs his role as a symbol
of status and authority. The figurehead role is routine, with sometime informal
communication and interact people due to important title he holds. But its importance
should not be overlooked. A principal attending peon’s daughter’s marriage, Managing
director visiting his subordinate who has met with an accident, A section officer
welcome his new team, a chief chef take feedback from customer about a new dish

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that he has introduced; these are some examples of how a manager manages his

figurehead role. This informal relation is necessary for smooth functioning of formal
organization.
B. Leadership roles –
This role involves directing, coordinating, and controlling subordinates. This includes
activities like staffing, motivating, training etc. of his/her subordinates. He encourages
people working along with him for better results as well for inventions. He is
responsible for deciding targets for each person. He prepares the job profile for each
table and he evaluates employee’s performance accordingly. He controls / directs the
activities and keeps eye on whether activities are directed and executed according to
plan. A good leader brings success to an organization.
C. Liaison role -
Liaising interaction is a means of communication between different groups or units of
an organization. A manager performs a role as a liaising person to collect the
information with formal as well as informal contacts from inside or outside the
organization. He needs to keep a contact with all those who are related with, from
whom he is receiving work, other resources as inputs and forwarding output for next
process. Production manager has a talk with inventory officer for inventory records or
placing an order for next week at the same time discusses with marketing manager
about feedback from customers. Committee head, for conducting Academic Programs
of a management institute collects the information about guest to whom he/she can
invite as a speaker in the seminars. The liaison role enables a manager to develop a
network for obtaining external information which can be useful for completing current
and future work activities.
2. Informational roles –
Informational roles are those in which managers obtain and transmit information. These
roles have changed dramatically as technology has improved. Monitor, disseminator, and
spokesperson are the three informational roles that a manager performs.

Monitor Role –
Manager keeps a watch and constantly scans the global environment for change
situation. He identifies opportunities and threats in the changing environment. If a
manager proactively prepares for problems that may in future is able to be a successor

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in the competitive world. Network of contacts that has been established through the
interpersonal roles helps in this. Information gathered through informal meeting or
attending any party, business related newspapers or periodicals reading help manager
to collect external information.

A. Disseminator role –
Manager evaluates information collected through monitor role. Evaluated
information then disseminated to the concerned employee for further process. This
information may be disseminated to subordinates, peers, or superiors in the
organization. Any finance manager comes to know about new technology that
speeds up the production process, this concept he discusses with production
manager. A neurologist will discuss with orthopedic surgeon about a surgery of a
particular patient who is met with an accident after examining him through various
tests and blood checkups.
B. Spokesperson role –
This role serves in a Public Relation capacity by informing and lobbying others to
keep key stakeholders updated about the operations of the organization. He speaks
on behalf of the work unit to people inside or outside the organization. A manager
discusses about the scheme with in open meeting with shareholders. Guest Lecture
is arranged by a Management institute under Industry-Institute Relation where
marketing manager informs students about career development planning in
marketing.
When a manager discuss about company related legal issues with government
official, or a Bank Manager attending court hearing for which they have filled a suit
against their client for non-payment of loan.
3. Decisional roles –
After gathering information through interpersonal relationships it is time to take
decisions for the process. Decisional roles require managers to plan strategy and

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utilize resources. Decisional roles are of four types – i.e. entrepreneurial role,
disturbance handler role, resource allocator role and negotiator role.
A. Entrepreneurial Role –
Here manager assigns resources to develop innovative goods and services, or to
expand a business. Most of these roles are held by top-level managers, although
middle managers may be given some ability to make such decisions.
Entrepreneurial role is considered to be an initiator role. A businessman, who
establishes his business with new concept in the market like managing an event,
manufacturing a machine that would help food industry to produce food
products with speed, hygiene and low cost. Even managers encourage their
workers to come up with new ideas that could be implemented for better
productivity.
B. Disturbance handler role –
On the basis of information gathered about changing environment he is a
person who initiates respond that change. In this, manager handles crises
situation that may disturb the day to day functioning. Here decisional role plays
very important role as priority over other roles. Due to the flood in the region,
supplier may not be able to supply wood logs, which may affect production to
slow down within a few days, here a manager takes decision to contact other
supplier or close down one shift of production, two guest lecturers are invited
as guest speaker in the conference and one person got stuck up due to flight
has been cancelled due to bad weather.
C. Resource Allocator Role –
Manager is performed to be resource allocator role when he decides to whom
and quantity of resources to be distributed. Resources could be input material,
money, manpower, information or technology. Even regular time schedule
along with overtime schedule, will be decided by a manager. Proper distribution
and maximum utilization of resources, though there is scarcity of resources is
important. Human resource manager and Marketing manager decide in a
meeting how many sales managers are necessary to launch a new product. A
supervisor sees whether particular production could be finished in part time
schedule or need to take overtime shifts or in a regular shift.

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D. Negotiator Role -
Manager negotiates with other units and individuals for the departments’s
benefits. . The process of negotiation is possible only when an individual has the
authority to commit organizational resources. A librarian can ask for maximum
facility Library software package for daily transactions and other utilities instead
of integrated menu in overall Administration package. A Head clerk will demand
networking system within office.

Activity 4

Write down, as a family member which roles you are performing (besides just to be a good
daughter or a son) in different situations.

2.8 SOCIAL RESPONSIBILITY

Kathryn Anastos, described social responsibility as “Our responsibility as privileged human

beings is to pay back for the opportunities we've received”. Business as an economic agent of
the society, it must use its economic power to protect and promote social values, divert at part
of financial benefit for the public interest. Even they should ensure effective use of available
resources of our country. Fair transaction and transparency increase the goodwill of an
organization. Society allows and supports business existence, in return business is obliged to
repay by sharing the profit i.e. various large size business houses established own NGO like
organization to serve community with education, health program, clean environment etc.
There are basically four components of business customers, employees, legal and governmental
sectors and community. It is managers of an organization who are responsible to fulfill the
interest of all those who are related with above components.

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Owners

Competitors Customers

Business
Organisation

Supplier Employees

Society Government

Fig 2.2

A. Customers – Satisfaction of customer requirements is the broadest meaning of social

responsibility. Production by anticipation, pro-activeness and as per the market
expectations reflects the firm’s social nature.
1 Quality product with reasonable price and in sufficient quantity is the basic
responsibility towards customers.
2 Management is expected to provide prompt and adequate service as well ensures
cordial relations.
3 Keep open space for any suggestions and feedback, reply to feedback received from the
customer is expected.
B. Employees/ Workers –
Employees are the backbones of the any organization. Productivity of enterprise depends
upon ability and production of workers employed. Proper give and take process leads to the
higher productivity.
2 1 Appoint suitable persons for each job.
3 Provide training, education, conducting workshops to develop knowledge and skills.
4 Provide security and proper working environment within the organization.

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5 Fair wages and other fringe benefits.

6 Right to held Trade Union.
7 Accept any suggestions or innovations any.
8 Proper rewarding and promotional system.
9 Provide all required resources along with moral support for smooth functioning.
C. Competitors – Competitors are the businessman those are dealing in the same business.
Innovations, profit rise, increase in research and development activities would be the
outcome of healthy competition. Healthy competition is possible with the sense of social
obligations.
1. Reasonable prices and reasonable discounts should be offered in compare with
competitors.
2. Do not use competitor’s Strategies.
3. False or ambiguous advertisement should not be framed.
D. Suppliers - Any business organization needs to deal with number of suppliers from whom
they receive raw material or other resources. Large scale business depends upon small scale
businesses. Small scale produces small machine tools those are used as raw material for
large scale businesses.
1. Placing an order with appropriate duration.
2. Payment of dues in time.
3. Dealing with fair terms and conditions.
E. Legal Aspect of Social Responsibility – government through its legal functioning, rules and
regulations allows an industry to establish and survives for a longer period. Government
directs as well as controls the functioning of any organization.
1. It is necessary to follow all the rules and regulations laid down by the government.
2. Pay all taxes in time.
3. Maintain transparency in the transactions.
4. Discourage corruption or any malpractices within or outside of the organization.
F. Towards Society- When it is accepted that any business organization is a part of society, it
involves social obligation behavior. To create and maintain social values within the locality it
operates. With the increase in global warming, many corporate houses, built up their
ecofriendly premises.

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1. Support community with education to children and illiterate people, encourage and
support workers to provide education to their children.
2. Undertake health related training programs for that particular locality.
3. Some corporate houses adopted a village. They support for their complete growth.
4. Any business is accountable to society for ecological or environmental problems.
5. Prevent from air, water, noise or land pollution.

2.9 MANAGING CHANGE IN GLOBAL ENVIRONMENT

Due to Increase in the international competition forces organizations to relook at their

strategies and abilities for success. The international trade business takes place between two or
more countries for number of products, goods and services. When a country buys goods and
services from other country is said as importing products, when it sells produced in our country
to other nation is said as exporting products. Our country is importing products like electronic
products like digital phones, cameras, televisions etc.; steel, various automobiles, food grains
etc. And exporting goods such as clothing, information technology packages, iron ore, food
grains etc.

Change is a law of nature . Due to the law of change the ape man has been changed, developed
him to cope up with this era of information technology. Change is a significant feature of
modern environment. Business organization also needs to undergo change to improve quality,
performance and stand with others organization in the competition. Organizational change goes
through several phases. Everyone working with the organization, and internal and external
elements contribute to the phases of change. Change has become a significant feature of
modern environment.

Organizational change is described as “one which ultimately affects the pattern of work and/or
relationships within the organization.

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2.10 FACTORS AFFECTING CHANGE

Any organization which may be engineering, manufacturing, service provider, academic or social
organization, has faced dynamic and changing environment. The managers need to handle this
situation. Stephen Robbins explained six specific forces, which stimulate for change.

Every organization needs to adjust to a multicultural and multinational environment. Policies

and practices related to human resources need to change for attracting and at the time reducing
employee turnover by introducing Diverse Workforce. Therefore many companies spend large
amount on training, knowledge up gradation, keeping employees updated with computer skills
and developing other skills. Changing Technology which affects the job profile of employees and
workflow of an organization. Rapid changes in the Information Technology, computer and
communication technology resulted into engineering, electronic and other changes. Due to this,
many job profiles and span of control need to reshape. Therefore an individual doing narrow,
specialized and routine jobs is being replaced by a teamwork which needs to perform multi tasks
and actively participate in team decisions. During 1070’s various Economic Changes affected
business strategies. The interest rates have become more volatile and the economy of individual
country has become more interdependent. Global economy forces the change in the level of
Competition. Established enterprises also need to defend themselves against the traditional
competitors. Therefore even successful organizations may need to change in response to the
competition. Social trend also affects the organization. Change in the employees’ life style do
affects thinking and strategically changes within organization. Attitude for more and more
earning to cope up with life style has become essential. Politics at the world level, terrorist
attack, and foreign relations affected the globalization, competitive strategies in the
organization.

2.11 PROCESS TO OVERCOME THE LOOPHOLES FOR CHANGE

• Clarify the mission and vision for the change.

• Assess the situation.
• Establish roles and responsibilities of each person within the organization.
• Develop the required leadership.
• Determine the key strategies for change.

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• Develop implementation plans

• Develop support systems like communication flow, training and development,
evaluation systems.
• Implement plan and constantly supervise the progress.
• Analyze the causes for over or under progress.
• Celebrate the progress
• Proper documentation of changed process is also necessary.

Here managers need to ensure that all the employees will agree on the destination and the
journey in between. Training is given to the leaders to take up roles and responsibilities and to
prepare plans and strategies, support the change process. A leader will develop his team and
work out to upgrade their skills required to support the process. The performance is analyzed
with evaluation system. Once the assessment has been completed and the findings are
accepted, it is easy to agree on priorities for action. Here all necessary support mechanisms are
used to gather information for progress. Work out for any modification required and prepares
plan accordingly.

2.12 TOOLS USED TO COPE UP THE CHANGE PROCESS

• Communication- The first step in managing change is building awareness about the need for
change and creating a desire among employees. The flow of communication should be as
proper that right message is to be provided to right person at the right time. The change
management team or project leaders must design a communication plan that addresses the
needs of front-line employees, supervisors and executives. Every audience has particular
needs for information based on their role in the implementation of the change.
• Training – Every employee play a vital role in the change process. Knowledge and skills up
gradation accepts the changing environment quickly. Therefore every leader, supervisor as
well workers need a proper training to get acquainted with latest technologies.
• Motivation - Active and visible participation by senior business leaders throughout the
process is necessary. A change in agent's or project leader's role includes helping senior
executives do the right things to support the project. Leader’s active participation motivates
subordinates for better performance.

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• Data Collection – The information gathered interpret about the changing environment. It
makes possible to start the process for change. . Feedback from employees is a key element
of the change management process. Analysis and corrective action based on this feedback
provides a robust cycle for implementing change.
• Awarding and Celebration –Every success must be recognized and awarded. Individual
appreciations as well as group are necessary. Awards through monetary appreciation, in
kind, oral or through other benefits encourages employees.

2.13 KEYWORDS

1. Universally – Relating to, extending to or affecting the entire world or all within the world
2. Misconduct – Behaviour not conforming to prevailing standards or laws, dishonest or bad
management
3. Brutally – Extremely ruthless or cruel
4. Globalization – Growth to a global or worldwide scale
5. To be a Figurehead – a person nominally having a prominent position but with less authority

2.14 SUMMARY

Proper coordination among different activities makes the organization process simple. Various
activities of an organization are always directed towards its common goal. All the resources
man, machinery, material and money are put to use for process in the enterprise. To manage
any organization, human being is the most important resource that contributes at the maximum
percentage. Managers of any level who coordinate and control the activities posses different
skills and abilities. The success of any organization depends upon its intellectual capital.
Employees’ updated knowledge improves the organization performance. High ranking provides
status quo to the organization.
Manager needs to take quick decisions on the basis of information gathered as per the situation.
While performing his duties he needs to act upon various managerial roles such as initiator to
spokesperson. He gathers information as well disseminates it to proper person. Any manager
must be good communicator to carry out, coordinate and control the situation.

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An organization is a part of society. While managing an organization he needs to consider the

different aspects of it. Society helps and allows establishing business therefore it is our
responsibility to give something in return. Due to globalization and changing technologies it is
forced to change the strategies for managing organization. Sometimes external factors affect
the business strategies. It becomes difficult to survive, if he does not respond to the changing
environment. Instead of rigid, flexible strategies help to manage organization.

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UNIT 3 ORGANISATIONAL STRUCTURE AND DESIGN

Objectives

After going through this unit, you will be able to:

• Define the basic concept of organizational structure

• Explain different forms of structure.
• Analyze how a structure is suitable for business organizations.

Structure

3.1 Introduction
3.2 Organizational Chart
3.3 Elements of organizational structure
3.4 Line structure of Organization
3.5 Line and staff structure
3.6 Functional structure
3.7 Matrix structure
3.8 Departmentalization
3.9 Departmentalization for individual development
3.10 Centralized system
3.11 Keywords
3.12 Summary

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3.1 INTRODUCTION

To organize any enterprise is a team effort with decentralization of its activities. A group is
formed as a team work to achieve a goal or an objective. When a group is divided into
subgroups as per their specialization and an individual heads, directs and controls, that group
while ensuring smooth functioning. This division or departmentalization is an Organizational
Structure. Mullins, Mabey and others describes the organization structure as the pattern of
relationships between roles in an organization and its different parts. In organizational structure
allied jobs are grouped to gather for the most effective, efficient use of organizational resources.

Phil Alexander, president of Martello Holdings co., believes that “Organizational structure must
be simple, with as few management levels as possible”. The simple structure ensures
transparency in work and easy to handle. It is basically considered with relationship between
time, money, human and other resources. In this competitive world, organizational structure
helps to make SWOT analysis. Organizations’ strength, loopholes, opportunities and threats
could be better analyzed with simple organizational structure. In this competitive world, proper
planning to increase turnover by reducing overheads becomes essential.

Manpower is the most important resource of any organization. Organizational structure ensures
every person to understand his role. Pre-determined division with grouping of related jobs
ensures everyone to contribute in achieving success. Individual ensures freedom and good
interaction. Interaction with colleagues or other co-workers increases efficiency. Various
departments have to be coordinated for smooth functioning. For coordination common vision
and mission, objectives, authority relations, proper communication flow, appropriate resource
utilization, systems and procedures are required. In this globalization any organization needs to
accept changes for its longitivity. A good organizational structure can often experience
difference between a smooth operating organization and one in chaos. Hierarchical structure
with clear chain of command, communication flow, level of authority and responsibility
assigned, able to streamline their operations smoothly. Any organizational structure has to be
enough flexible to accommodate the new technologies or for reduction or modification any. The
rigid structure may be easy for any manager in normal times. Environmental external factors
force for change and flexible structures enable to accommodate this change.

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3.2 ORGANIZATIONAL CHART

Chart is a graphical presentation of data with different symbols. Charts could be diagram or in
the graph format. Charts make it easy to understand the large data and its relationship between
its various elements. Data presented with charts and graphs could be understood quickly,
probably at a glance. There are different types of charts like, bar chart, pie chart, line chart etc.
Organizational chart is a graphical presentation of relationships between relative designations or
positions of jobs within the organization. It is a diagram showing the grouping of different
elements of a similar field of knowledge. The relationship between managers and subordinates
could be observed at a glance. In large organizations sometimes organizational charts can be
large and complicated, therefore small charts for each individual department are created. These
charts cannot be updated frequently in large organizations with the large turnover. Therefore
quickly it becomes out dated. Also it shows only formal relationships but no social relations or
horizontal relations could be displayed.
Activity 1

Visit nearest departmental store or any shopping mall, discuss with the head, collect
information about hierarchy of that organization. Prepare an organizational chart for that
organization.

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3.3 ELEMENTS OF ORGANIZATIONAL STRUCTURE

Authority

Empow
Span of
erment
Control

Organisational
structure

Chain of
Delegation
command

Hierarchy

Fig 3.1

While preparing an organizational structure of any organization one needs to observe above
mentioned features to create simple and flexible structure. Authority has the right to make
decisions to process the work. Authority ensures team motivation, timely decisions, avoids
losses, respect for team leader as well members, and enforces to upgrade skills. The degree of
authority and responsibilities assigned to each individual possible within the organization helps
to take right decisions for smooth functioning. The Span of control refers to how many
subordinates will work under a manager. Through span of control, one can exercise control over
activities performed by subordinates, flow of communication, nature of work, information
overload. The number of subordinates to be guided and directed differs as per the type of
industry and its work load. Chain of command is the relationship between different levels of
authority. It is a command of hierarchy from top to bottom. In the chain every employee will
receive orders from only one person and will command only a defined group. If a manager of
one group wants to get work done, from an employee who is subordinate of another manager,
then he needs to communicate officially with that manager.

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Hierarchy shows the specific position of each employee with his duties and responsibilities in
the business. It is a system that ranks persons or positions one above another. It form subgroups
of all allied skills and abilities, defines job profile for each position, makes possible proper
division of labour. Delegation is the authority to carry out actions passed from superior to
subordinate. Delegation of authority means the division of authority where powers,
responsibility and accountability is downwards to the subordinates. Delegation of authority
involves assignment of duties, granting authority and creating responsibility and accounting for
subordinates. Empowerment gives responsibility to people at all levels of the business to make
decisions. It motivates employees with creativity, innovation. With this speed of decision making
increases.

3.4 LINE STRUCTURE OF ORGANIZATION

In the 20th century the basic structure of many large organizations was found on linear,
segmented, hierarchical design principle. Larger the organization, larger the structure and the
more the subdivisions. Organizational structure is something that ensures everyone who works
within the company knows what they should be doing and how they should be doing it. Getting
everything done and complete on time is what every business needs to ensure that it does
successfully.

Line structure is nothing but a hierarchical structure. By nature it is informal and involves few
departments, making the organization highly decentralized. Line structure is a clear chain of
command. Here decisions affect the operations of the company from the top to down. Line
structures mostly found in small organization. Typical example of Line structure is Military
Hierarchy.

3.4.1 Advantages of line structure –

1. Proper delegation –
With proper division of work, authority and responsibilities get properly explained. It
elaborates job profile and duties to be performed by each employee. The accountability
for each designation is also clarified.
2. Unity of command –

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In this every subordinate receives orders only from one superior and is accountable to
him only. Even every superior knows all the subordinates working under him.

3. Quick decisions –
Due to the small group who all related and work as a small team can take decisions
quickly. Every superior and subordinate knows each other and even flow of
communication is defined properly.
4. Simple and Easy –
The clear cut delegation, unity of command and clear hierarchy provides simple
structure of the organization. In these, complication does not arise as it is a simple
structure. Even the administrative cost is also low.

Chairman

Directors
General Managers

Managers

Lower Level Managers

Workers

Fig 3.2

3.4.2 Disadvantages of Line structure –

1. Obstacle for expansion –

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Every organization is a growing organization. It becomes necessary to accommodate

new activities with respect to expansions, as per the requirements. Line structure is
good for small team and which is no longer lasting.

2. Lack of expertise –
Managers in line organization are administrative officers only. They could have basic
knowledge in all branches of management, but cannot expertise to specialize in specific
departments.
3. Creates conflicts in relationships –
It was a tradition to obey orders given by superiors and should not disobey it while
performing any kind of duties. Even nobody is expert in a specific branch of
management. They may conflict between managers.

3.5 LINE AND STAFF STRUCTURE

In an organization some positions are primary to the company's mission, whereas others are
secondary in the form of support and indirect contribution. Line and structure combines the line
structure where information and approvals come from top to bottom, with staff departments
for support and specialization. Though line structure is highly suitable for the small organizations
is not effective for the large organizations.

C. Heyel defined as, “In terms of authority relationships, line connotes authority to take action
and make decisions, and the staff supplies facts and information that will enable, the
accountable the managers, to make the best possible decisions.”

Line departments are involved in making decisions regarding the operation of the organization,
while staff provides specialized support. Line-and-staff structures generally have a centralized
chain of command. The line-and-staff managers have direct authority over their subordinates,
but staff managers have no authority over line managers and their subordinates. This structure
is has many departments and is formal in nature.

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3.5.1 Advantages of Line and staff structure

1. Specialization –

Employee appointed will be expert in special branch of knowledge. This structure also
provides an opportunity to upgrade his skills with innovations. With the specialization,
the speed of work increases.

2. Centralization –

In this responsibility and accountability lies with centralized system. Here line officer is
responsible for job completion while staff manager will support him in his work while
carry partial responsibility to reach the ultimate goal.

3. Proper division of work –

In this, line managers need not have to look into administrative matter, so can
concentrate on production systems. Staff managers can handle plans and policies,
technical methods to be improved, other financial and administrative matters.

4. Discipline in work –

The responsibilities and accountability assigned to each staff forces to maintain

discipline in the organization to carry out production process smoothly and quickly.

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Chairman

Board of Directors

Production Director
Director Finance HR Director
engineer Marketing

Supervisor Zonal Manager Finance Manager HR Manager

Area Sales Asst. Finance

Foreman Asst. Manager HR
Manager Manager

Workers Sales executive Accountant Jr. Manager HR

Fig 3.3

3.5.2 Disadvantages

1. Flow of communication –

This system may give rise to misunderstandings or conflicts between technical and
administrative staff, managers to subordinates. Here a manager of one department
cannot directly contact with subordinate of other department. This may shorten
decision making speed.

2. Fixing responsibilities for faults –

With this complex structure, it becomes difficult to fix the responsibility for any
misconduct or fault if any. Here employees shift their faults to each other. The analysis
of actual problem may get neglect. This negligence may create loopholes in the system.

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3.6 FUNCTIONAL STRUCTURE

In this structure a group of people is divided as per their specialization, skills and knowledge to
complete a particular task. There they work in a team. Here people are classified according to
their professional life. Employees within the functional divisions of an organization tend to
perform a specialized set of tasks. Coordination and specialization of tasks are centralized in a
functional structure; this improves the efficiency of producing services and goods of the
organization. Functional organizations integrate their activities vertically so that products are
sold and distributed quickly and at low cost.

Functional organization has been introduced by F. W. Taylor’s functional approach of

management. Where he as recommended to appoint specialized personnel for important
positions. He introduced eight staff officers like Route clerk, Instruction clerk, time and cost clerk
etc. to take up the specialized jobs. Now a days this is the most commonly adopted form of
organization structure. Generally a business organization forms different functions as
production, marketing, finance, personnel etc.

3.6.1 Advantages of Functional structure –

1. Experts in knowledge –
Functional approach makes use of the benefit of specialization. It sets up different
departments and appoints experts in that particular field.
2. Increases efficiency –
Managers with specialized skills work more efficiently. As they are specialized in their
field, they prove to be productive at their best. This environment sometimes provides
them to get engage into research and development process.
3. Stress Management –
With this division of work, low work pressure, supervisors and executives are not
overburdened and therefore they can concentrate on their work. This increases
efficiency to manage the stress.
4. Reduce barriers in operation –
Clear cut departmentation shows proper flow of communication. This reduces barriers
in formal communications.

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5. Quick decisions –
In this structure responsibilities and authorities are defined as per their specialization.
The authority given helps managers to take quick decisions as per the situation.
6. Employee participation –
Each functional area works as a team. Each employee’s contribution as a team member
is important. This increases the team spirit, sense of belongingness, work satisfaction,
which increases the productivity of each worker.

3.6.2 Disadvantages

1. For large organizations-

The functional structure of the organization is suitable only for the large organizations
and not for the small organizations. Here, the number of employees to be appointed to
carry out different functions needs expert personnel.

2. Conflicts due to dual bosses –

In some of the organizations it is possible that an employee receives instructions from
two or more bosses. This situation confuses employee about to whose instructions
should obeyed and prepare the priority list of work process. This may give rise even to
conflicts between two managers.
3. Lack of co-ordination –
The loopholes in this structure give birth to conflicts between managers, superior-
subordinate relations and formal communication.
4. Overlapping of authority –
Horizontal positions sometimes are assigned with equal level authorities. This way,
different officers interact with each other’s activities. This creates conflicts, loss of time,
decrease productivity. Even it becomes difficult to fix the responsibility.
5. Cost burden-
Appointing experts leads to increase in the cost as they are highly charged. Even
numbers of new positions are accommodated in this structure from time to time as per
the requirements, this increases the salary budget. Fig 3.4 :

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CEO

Vice President Sr. Manager

Team Leader Team Leader

Team Leader
(Online (Graphic
(Print Adversising
Advertising) Designer)

Creative Mentor Creative Mentor

Creative Mentor

Production Production Production

Mentor Mentor Mentor

Sr. Designer Sr. Designer Sr. Designer

Jr. Designer Jr. Designer Jr. Designer

Upcoming industries working in designing production or information technology services

products etc. adopts functional type of organizational structure, as they operates in team work.

Activity

Find out an organizational structure and hierarchy followed by any construction company,
that is working on various projects.

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3.7 MATRIX STRUCTURE OF ORGANIZATION

A team of people from various sections of the business is created to form the matrix structure.
This structure is project based structure. Here team is created for a specific project. The project
would be, to create a new product or services or any up gradation or modification in established
production process This project will be headed by a team leader for that particular project or
assignment, may be for short period or long period. Here an employee needs to report two
bosses, one his immediate boss and other is project or a team leader with whom they are
working.
Matrix organization is based on five important elements such as, goal i.e. mission and vision of
the project, leader’s influence on that project, promoting a project for better performance,
costing and budget required for it, on success awarding and rewarding system. Here functional
and divisional chains of command are implemented simultaneously as each employee need to
reports to two bosses, which means that there are two chains of command. The activities of the
staff working on each project are effectively coordinated by all the levels of management. This is
done to ensure that the functions of a specific department are clearly defined to every member
working in that department. Project manager and functional manager together works for time
schedule, resources required and if any modification; required in the work process.
Duening and Ivancevich elaborated matrix organization as, “matrix structure achieves the
desired balance by superimposing, or overlaying, a horizontal structure of authority, influence,
and communication on the vertical structure”. This structure is developed in response to rapid
change in two or more environments, such as technology and market, which faces uncertainties
that generate high information processing. This structure is a recent origin. It is mostly used in
the manufacturing industries like electronics, heavy equipments, pharmaceuticals, banking,
constructions, insurance, hospitals etc. Most of the nationalized banks do follow above matrix
structure.

3.7.1 Advantages of matrix organization –

1. Better planning and control –
This structure focuses on talent and resources to be used on projects with proper
planning and policies. Specialists from several departments provide updated knowledge

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and skills. Employee can keep a control on the progress, which ensures completion of
that project in time.
2. Team work –
Here every employee is motivated to focus directly on the completion of that project.
This improves communication flow and reduces misinterpretations or errors. Staff
participation is possible in decision making process, which proves to be more productive
in future.
3. Resources utilization –
This structure facilitates specialized staff and high technology equipment. Each project
can share specialized resources with other units and these provide mutual cooperation.
4. Avoids Duplication-
Resources like personnel, technology, material etc. are shared as and when required by
the project. This avoids unnecessary duplication. With this, better balance between
time, cost and performance is maintained.

5. Encourages professionalism –
Matrix structure provides an environment where specialized personnel appointed can
test their competence and provide services at their best. This structure pushes decision
making capacity down to the chain of command.

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Branch
Manager

Manager

Branch Asst. Asst. Asst. Asst.

1 Manager Manager Manager Manager
(Deposit) (Remittance (Advances) (Cash)

Branch Clerk 1 Clerk 1 Clerk 1 Head

2 cashier

Branch Clerk 2 Clerk 2 Recovery Receipt

3 Clerk cashier

Fig 3.5 Payment

cashier

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3.7.2 Disadvantages –
1. Overlapping authority-
Due to horizontal structure, specialized officer’s authority may get overlap unless they
are properly defined. Managers may interact with each other’s activities and this would
rise to conflict between staff, this situation pushes from achieving the goal of an
organization.
2. High costing –
Expert professionals need to pay highly, even number of staff need to increase as the
business grow. Resources required for each department or projects increases the cost
burden. Project managers are directly responsible for completing the project within a
specific deadline and budget.
3. Loose control and increase in indiscipline –
Employees in the matrix structure work under two different bosses which disturbs the
principle of management i.e. unity of command, this situation gives rise for confusions
and conflicts within the organization. Employee gets confused to decide priorities that
disturb the discipline and control in the organization.

3.8 DEPARTMENTALIZATION

Departmentalization means grouping jobs according to their tasks. Menon and others said in
their article on product quality, that interdepartmental conflict and connectedness affects
product quality. Thus to reduce this conflict, it is important for managers to group appropriate
task. Business Dictionary explained this concept as “manner or practice in which related industry
tasks and their allocation to work groups is combined to form a specialized functional area that
is distinct from other functional area in an organization. This is an activity of Division of labor,
co-ordination of specific tasks for growth of total output and the rise of capitalism.” Duening
and Ivancevich pointed out one important factor i.e. physical location of departments must as
such that will be helpful for smooth co-ordination. Departmentalization is mainly carried out to
bring all activities under the control of a single manager and all necessary resources to make the
product. In large organizations this process is done using different methods.

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The process of departmentalization is suggested with four different categories –

1. Functional Departmentalization –
Here jobs are grouped according to the functions of the organization. Production,
marketing, finance, Human Resource, Research and development are different functions of
general business.
2. Geographical Departmentalization –
Here all activities in that particular geographical area are assigned to a particular manager.
Here departments are built on the geographical basis.
3. Product Departmentalization –
In large diversified companies, activities and personnel are grouped on the basis of
products. It allows concentrating authority, responsibility and accountability in a specific
product department. Here marketing, finance or HR personnel will work within each
department.
4. Customer Departmentalization –
Here customer-oriented businesses those deal directly with customers are categorized on
the basis of their products or services. Garment or cosmetics producing or selling industries
financial service providers or educational industries are mainly categorized under this.

3.9 DEPARTMENTALIZATION FOR INDIVIDUAL DEVELOPMENT

Specialized professionals are appointed to carry out functioning in large organizations. This
climate encourages development of professional managers and increases their decision-making
capacity. Performance Appraisal system is also more equipped in this system as performance
are compared on the basis of actual decision-making capacity and productivity of an individual.
This structure develops positive competitive climate, which forces employee to think out of the
box. With this, managers can experience more autonomy and contribute by participating in
organizational decisions to achieve the organizational objectives.

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Activity
General structure of a nationalized bank is given here; try to find out design of any IT
company or insurance company like LIC or education institute.

Activity
If possible discuss with a head of that institution, how this structure helps to deal in complex
projects..

3.10 CENTRALIZATION

An organizational structure is based on three basic components complexity, formalization and

centralization. Centralized system mainly deals with decision-making process. Centralization is
the process of tracking, assigning decision-making in the hands of top level management of an
organization. Here knowledge, information and ideas are concentrated at the top level and
decisions are flow down in the organization. Decision making process is the authority and
responsibility to be assigned.
In centralized system makes it easier to implement common policies and practices for the
business. This standardized procedure avoids the duplication of work by each department, that
results in cost savings. It affects in quick decision-making. Co-ordination and control over all

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system becomes easier in centralized system and senior manager can enjoy greater control in
the organization. Even it prevents monopoly of any one department in the organization,
therefore low rise of conflicts between the different departments. In centralized structure
decisions can be made to benefit the organisation as a whole. Sometimes an organisation needs
a strong leadership which can pull all functions in the same direction. Whereas a decision made
by a department manager may benefit their department, but disadvantage other departments.
This structure of an organisation could be implemented for small organisations; due to the
rigidity in functioning it experiences, difficulty in expansion and growth of business.

3.11 KEYWORDS
1. Longitivity - For longer duration
2. Delegation – To hand over task to one’s subordinates
3. Accountability – The state of being answerable to someone
4. Empowerment – Equip someone with power and upgrade the abilities
5. Overburdened – Give someone more work pressure than they can deal with
6. Matrix structure – Organisational structure with horizontal flow of skills and information.

3.12 SUMMARY
Division of labor, delegation, unity of command, horizontal as well vertical communication flow,
control and co-ordination, chain of command all to gather forms the structure of any
organization. A business firm may be small in nature or large scale organization will achieve
success with stream line operations and appropriate hierarchical structure. Well defined
structure reduces duplication of work, affects cost and time saving, less chances of overlapping,
conflicts and confusions between employees. Appropriate authorities and responsibilities are
assigned, provides platform to take quick decisions. Specialized professionals can achieve
greater command over particular field as they get chance to prove themselves with innovative
ideas, by experimenting and implementing those ideas and find out cause and effect
relationship.

Traditional organizational structures focus on the functions, or departments, within an

organization, closely following the organization's customs and bureaucratic procedures. These
structures have clearly defined lines of authority for all levels of management. Two traditional
structures are, line and line-and-staff. Functional structure, based on Taylor’s principles, is useful
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for most of the production level organizations, manufacturing business or service rendering
organizations. Recently developed industries like IT, designing, financial institutions, those are
customer-centric business houses prefer to follow matrix structure for hierarchy.

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UNIT 4 RESOURCE MANAGEMENT

Objectives

After going through this unit, you will be able to:

• Describe about basic concept of resources required in an industry.

• Identify different resources required.
• Demonstrate how resources are put to use to obtain better quality product in the
organization.

Structure

4.1 Introduction

4.2 Management of Resources

4.3 Information as a resource

4.4 Characteristics of information

4.5 Information in a business industry

4.6 Human being as a resource

4.7 Finance as a resource

4.8 Managing financial resources in the organization

4.9 Time as a resource

4.10 Managing time for productive business

4.11 Material as a resource

4.12 Inventory management

4.13 Keywords

4.14 Summary

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4.1 INTRODUCTION

Resources are materials and components that can be used and found within the environment.
Air, water, sunlight, mineral materials, marine resources are some of the natural resources,
those used for producing energy, food, shelter etc. While we find scarcity of some of these
resources and these may get depleted if not used properly. These natural resources are
obtained to satisfy human needs.

The natural resources are used as the raw material for the industry or a business. Resources is a
source which is processed to obtained best results i.e. product, that can be used to bring
comfort for the human beings. These resources satisfy the needs of a living organism. Allocation
of these resource is, the scheduling of activities and the sources required by those activities by
considering resource availability. For this strategic planning is necessary.

The business Directory.com defines resources as -

“An economic or productive factor required to accomplish an activity, or as means to undertake

an enterprise and achieve desired outcome. Three most basic resources are land, labor, and
capital; other resources include energy, entrepreneurship, information, expertise, management,
and time.”

Finance

Time
Material
Management

Production
Process

human
Intellectual Information
resource

Fig 4.1

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4.2 MANAGEMENT OF RESOURCES

These resources need to be managed effectively and efficiently for better use. Resource
management is a process of using a company’s resources in the most efficient way possible.
These resources may be tangible or intangible resources. Goods, machinery, finance or human
resource such as employees and workers are tangible resources. Information is intangible
resource, but total productivity affects the amount of information a company possess. Large
organizations usually have a defined corporate resource management process which keeps track
on exact allocation of resources. Resource management technique is used to smoothing the
stock of resources on hand, reducing both excess inventories and shortage. Presently demanded
resource and forecasting the demand into the future need to be considered for resource
configurations. The goal of resource management is to achieve 100% utilization to obtain
qualitative products. Resource development activity is included in resource management. The
basic principle of this is to invest in resources as stored capabilities and adequate distribution as
per the demand.

Table 4.1

People Directs and monitor’s the activities

Finance Use monetary resource to obtain profit and sales target

Material Maximum utilization for better production and minimum wastage

Information To cope up with the future changes.

Machinery Appropriate and updated equipment to get quality product

Time Ensures better quality and maximum productivity

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Activity 1

Find out resources that your parents need to manage a family every month. Sources from
where they obtain it. Quantity of resources they required. How those are utilized so that all
family members needs are satisfied.

4.3 INFORMATION AS A RESOURCE

Collected data is converted and put for the use is termed as information. Information is nothing
but a thing gathered from different sources. Information is an intangible virtual concept.
Information is, which is transmitted by the act or process of communication, it may be a
message, signal, stimulus etc. This process of act assumes a response at the receiving end and is
communicated through formal or informal way. Data may be facts or figures that are processed
for information. Information is a random collection of data that is used by someone to achieve
the decided objective. Information is a random collection of data that is used by someone to
achieve the decided objective. This era is called as an information era and information society.
Due to the technological and communication development we are experiencing change in the
society.
According to ALA, World Encyclopedia of Library and Information Service
“Information is a property of data resulting from or produced by a process that produced the
data.”

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4.4 CHARACTERISTICS OF INFORMATION

1. Information is a form of processed data.

2. Information communicated brings changes to the recipient.
3. Information reduces uncertainty.
4. Information increases reliability and accuracy.
5. Information is a basis for growth and expansion.
6. Information is a source of invention and research.

4.5 INFORMATION IN A BUSINESS INDUSTRY

Establishment, growth, expansion and development of any business industry is possible with the
amount of information it receives. Information about new technologies, skill acquired by
knowledge workers, increased competition does affect changes in the nature of business. Here a
manager of any levels monitors, acquires, processes and distributes that information to the
respective employee for process. In this competitive situation, he constantly keeps a watch on
general happenings surrounded him. He grabs necessary and relevant information that will
affect changes to his business. This collected information is passed to relevant authorities for
further discussion.

Information could be collected through N number of sources like during the conversation with
friends or relatives, while observing and listening to news channels, during the community
festivals etc. Information is passes orally through person to person i.e. during face to face
conversation or through various communication medias. Print medias like newspaper, books
published thesis or dissertation, patents, journals etc. all support for dissemination of
information. Continuous input flow of information is also essential from other resources.
Information is treated as a commodity that incorporates exchange of information among
people. Information needs to undergo process that it needs to go through various steps of
creation, processing, storage, distribution and use. Information is an intangible asset and it is
regarded as a basic resource for national development. Information not just embedded within a
social structure but creates that structure itself. Information is treated as one national resource
like mineral resources, electricity, oil, human resource, finance etc. for national development.

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IBM a computer designing organization believes, that information is like an inexhaustible and
renewable source of energy. Information could be expensive to be produced. Information is a
resource, if that put to use it adds values to the product. McGowan a senior scientist said that
information by processing data and with telecommunication systems will increase productivity
on the plant floor and in the office. Telecommunication facilities like internet has created global
village to pass on information within a few minutes.

Activity 2

Find out for any information that has changed your routine recently.

Does this number of corruptions does affect political environment in the country. Your
reaction on Anna Hazare’s fast unto death movement over Lokpal Bill.

4.6 HUMAN BEINGS AS A RESOURCE

People is greatest resource of any business organization, it is a key to success in business.

Therefore it is necessary to attract, develop and retain talented, ambitious people so that we
have the resources we need to help our clients and grow our business. Employees are crucial to
the success of the business and therefore fulfill their potential needs is also important. It is

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necessary to ensure that managers and other workers have the right training and knowledge.
The updated skills empower them to make decisions and respond quickly to clients’ needs and
business issues. Innovative climate also encourages for self-development.

In business, it is essential to attract the right people to take up challenges and varied carriers. It
is possible by providing strong financial compensations, stable and inspiring working place,
rewarding performance, training and welfare facilities. Senior people are responsible for overall
direction and performance of the group. Generally HR policies are designed on the basis of
International human rights & employment legislation, International Labour organization
standards etc. Employees appointed need to be retained in the organization for stability and
prosperity. Training facilities to the employees ensures that they deliver right skills to offer
quality services. Training is provided through specific job related skills, personal development
and for professional development. To encourage employees to cope up with this diverse
workforce, now a days many business houses adopts family friendly approach. They offer
flexible working arrangements like home working, job sharing, term-time working, flexi time or
part time hours. Some companies now a days offer sharing saving and ownership schemes to
their employees. Guaranteed service continuity for customers is possible when appropriate
human resource is channelized through efficient and a stable leadership.

The complete HR structure approaches people development that encourages and motivates
high performance. With this proper co-ordination and integration among employees is also
necessary. This is possible through ‘open door’ policy and formal or informal communication
channels. Here every employee gets an opportunity to communicate their views.

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Activity 3

Prepare a chart how every member in the family contributes at their best capacity, so that every
member can prove better performance in their respective field. Write down how your parents
and other family members have supported you when you are facing stressed situation,
particularly in the exam period.

4.7 FINANCE AS A RESOURCE

Any business owner need to keep a track on this resource, as it is a blood line area of any
business. A small mistake and minute wrong decision may prove to be costly and may lead to
heavy losses. Financial resources mean the money that is available for a person or organization
to spend. For better financial resources the business owners need to find the best local credit
agencies those can provide financial support through loans. Financial resources could be raised
through internal as well external sources. Internal sources like personal sources, share capital,
own savings, and external factors like banks, credits agencies, government agencies, debt
factoring, by outsourcings the activities, hiring purchases on credit, leasing the equipment or
machinery, retaining profit, venture capital etc. The type of finance chosen depends on the

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nature of the business. Large organizations are able to use a wider variety of finance sources
than are smaller ones. Savings are an obvious way of putting money into a business. Where as,
in large organizations or businesses mainly external sources are used.

Table 4.2

Personal source To start a business and to make a dream true.

Shareholders Finance to set up and expand a business
Bank Loans to business houses
Creditors To satisfy short term needs
Suppliers Purchases on credit basis or leasing machinery for short term

The Q-Finance dictionary defined financial resources as - “The money that is available for a
person or organization to spend “.

4.8 TO MANAGE FINANCIAL RESOURCE IN THE ORGANIZATION

Business organizations need to find the trusted mentor, who can assist with setting up financial
resources. All organizations need to accurately plan, monitor and control their finances if they
are to be successful. To do this properly, they need employees who have a clear knowledge and
understanding of accounting and finance, alongside a good general business background.
Generally financial consultants, MBA graduates or former enterprises provide support to
manage the financial resources. SCORE, FBSBIndia etc. are some of the sites that help to find the
financial mentor. To manage the financial resources always it is necessary to choose good and
trusted accounts maintainer. The person will handle all the tasks to keep track in financial
matters. Finance software like Tally supports to manage cash flow of any business. Various
other software helps to find out exactly the right solution with detailed questionnaire is
available. Correct heading for each cash inflow or outflow is sorted out from dozens of choices.
Now a days mobile payment system allow faster and easier acceptance of payments in support
of the system called GoPayment. Even we need to understand and measure capital and
operational cost. Operating cost does not require complex depreciation calculations and can
easily adjust from year to year. Planning and budgeting is the biggest resource to manage the
financial resources. In this it analyses the costs for delivering existing services, deleting or

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adding any new services. Figure out cost for each service along with new recruitments, present
payroll or other production cost. Financial resources affect the quality and quantity of services.

Activity 4

Ask your parents how they prepare budget to manage monthly resources required in your
house. Find out resources which need to make a provision for annual expenditure and how
those are managed?

4.9 TIME AS A RESOURCE

Time is a most precious resource. The importance of time management has never been greater
than today. Day and night together i.e. 24 hrs a day and every minute of a day is precious. We
need time to eat, sleep and work to carry out our daily chores. A human body has set up its body
clock according to nature’s time table. We need to spare time for our family members, parents,
friends to understand them. Time is extremely important in our life; it helps us to structure our
daily lives and activities, so that we can live more organized, productive lives. Time management
is a technique that makes your every minute productive. It is said that ‘Time is Money’, but time
is more precious than money. If we lose money we can regain it with hard work, but loss of time
could not be recovered, as time does not wait for anybody. One should not waste his time. The
time flies never returns. We cannot get back the time. Scientist carry out their methods at the
right time, which proves them to be successful in their inventions. The Newton saw an apple
falling down from a tree and then discovered a theory of gravity. Time reminds us to act and act
wisely. Americans now a days are highly time-oriented people, they are giving enormous
importance to work according to the clock. It is one of the American value system. Japan has

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recovered everything what has been destroyed in the second world war with the, as they could
analyze their future in time.

4.10 MANAGING TIME RESOURCE IN THE ORGANIZATION

Time management means techniques and systems for getting things done effectively and
efficiently. There are some time management skills that provide remedial measures to manage
the business. In the business it is said that 20 percent of their product comprises 89 percent of
their sales. Therefore it is necessary to save time in the long run by discovering exactly which
products or services are delivering the business. For this, various techniques like PERT/CPM
(Where work flow is controlled by best time management project with best alternative), Kaizen,
budgeting, delegating authorities and responsibilities are used for quality work. Time can be
saved by preparing a priority list and to do list everyday in the morning. Last minutes
interruptions can make the perfect person forget to do a particular task. A brief but
thoughtfully prepared list will remind you to complete that task. This list helps to set the
reasonable goals. It is a duty of every businessman and people working with him to satisfy
customer’s requirements. But sometimes they may ask such things that are impossible to
deliver. Producing or trying to provide those services would be a wastage of time. In this
situation delegating this matter to proper employee or handling over to other organization is
better. Delegating authorities and responsibilities to subordinates save time and can be utilized
for quality and productive work. Business deadlines make people to manage their activities and
tasks in time. Deadlines are to be discussed with employee which will reduces loss of time and
make arch for new developments. Proper flow of communication avoids the miscommunication
which affects delay in project completion. By spearing little time for oneself and by taking a
break for a few minutes, relaxes his brain. This relaxation and small break improves the
productivity. With this employees work faster and make very few mistakes. By examining set
objectives on a regular basis, people can focus on day to day activities. This constant evaluation
can save time to discover which methods work for you. Some of the business houses outsource
their basic business activities like manufacturing of small parts of machinery or printing a
broacher or hiring labour by a contractor etc. Therefore it is necessary for every businessman
and his employees to keep a track on everyday schedule. Keep in mind that time is valuable and
we must use it wisely to move forward, that improves our quality of our life.

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Activity 5

Prepare a daily time schedule to make it productive at the maximum. And even for your
examination.

4.11 MATERIAL AS A RESOURCE

Material is an important resource in any industry to satisfy customer’s requirements with the
finished products,, that need to be processed with raw material. Material used for production
differs upon the type of industry. Fabric is a core material for garments industry; iron and steel
is a core material for machinery manufacturing industry; aluminum is for aeronautic industry;
wood for furniture making; copper wires, fiber for electronic industry; chemicals for paint
making industry; while human intellectual capital would treated as core material for industries
like Information technology, film industry etc.

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Production &
Raw Material Output
operation process

Fig 4.2

Raw material means work in process goods. Completely finished goods are treated as business
assets that are ready or will be ready for sale. Raw Material is a material or substance, used in
the primary production or manufacturing of a good. Raw materials are often natural resources
such as oil, iron and wood. Before being used in the manufacturing process raw materials often
are altered in different processes. Raw materials are often referred to as commodities which
are bought and sold on commodities exchange around the world. Raw materials are so
important to the production process that the success of a country's economy can be determined
by the amount of natural resources the country has within its own borders. The shortage of
material could be imported and finished goods are exported out of the boarders.

4.12 INVENTORY MANAGEMENT

Material in the organization is managed with the technique of inventory control system. It is the
technique of maintaining size of the inventory at the desired level by keeping in mind the future
requirements from organization’s economic view. Inventory system is in when and how to
replenish the material to satisfy the demand need for production. Raw material is a part of
inventory; it monitors and determines the level of stock. Inventory includes raw material, work
in progress, component parts and finished goods. Production operation is the process in which
inputs are raw materials and output is finished goods. To store the raw material in the godown
or anywhere in the company one need to consider factors like, amount of capital available,
space available, loss for perishable products, cost of maintenance, possibility of change in
technology, trend etc., price fluctuations, weather effect etc.

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Material management deals with campus planning and designing for the movement of materials
within the organization. This covers the acquisition of spare parts, raw material etc. and its
quality control, purchasing, shipping, warehousing of the material. The material department is
charged with releasing materials to a supply base, ensuring that the materials are delivered on
time to the company using the correct carrier. In some companies procurement and managing a
supply of it, is responsibility of one department, where as in some of the companies a separate
purchasing department shoulders this responsibility. The major challenge that material
managers face is maintaining a consistent flow of materials for production, incorrect bills,
unreported scrap, shipping errors, production reporting errors etc. Material manager even
needs to keep a check on timely releases to the supply base.

Activity 6

Find out material that your mother needs to manage her kitchen every month.

4.13 KEYWORDS

1.Component - Element of a larger whole, especially part of machinery or vehicle.

2. Inventory – the quantity of goods and materials in hand.

4.14 SUMMARY

Every manager has to manage the resources that are necessary for getting output in the form of
finished product. Finished product does differ as per the type of industry. It could be aircraft,
packed food, attractive packaging material, plastic items, graphic designing, garments, books,
other reading materials, audio/video CD’s and stationary etc. To produce a particular product a
businessman need to organize for number of resources. Human brain is an important resource
that coordinates other resources like finance, material, machinery and other equipment’s, as
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per the information he receives and most important of all is time that is to be considered to
higher productivity.

In large organizations separate departments handle and control the flow of following resources.
Purchasing of raw material and machinery would be responsibility of purchasing or inventory
department. Inventory department handles all demands and supply. To manage the cash flow,
an expert advice is obtained. Now a days in some of the industries they are coming up with
information section or have set up libraries within the business houses, who gather information
related to that particular industry, to monitor technological or political or weather changes that
may affect in future.

With the help of information and communication technologies to manage these resources,
computerized systems like ERP or MRP helps to manage the resources. These systems consist of
various modules that coordinates the activities of different departments. Mainly it is used to
manage inventory department, human resource and payroll systems. Packages like Tally
monitors cash inflow and outflow of the organization.

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UNIT 5 ORGANIZATIONAL BEHAVIOR

Objectives
After going through this unit, you will be able to:

• Define the basic concept of Organizational Behavior.

• Explain how this concept developed and is useful to managing organizations.
• Enumerate different concepts and tools used to analyze individual behavior for the
organizational culture and its benefits.

Structure

5.1 Introduction
5.2 Definition of Organizational Behavior
5.3 Historical Review
5.4 The Hawthorne Studies
5.5 Personality
5.6 Attitude
5.7 Power and Political behavior within the organization
5.8 Organizational Culture
5.9 Team works and groups
5.10 Job Design
5.11 Interdisciplinary application to organizational behavior
5.12 Keywords
5.13 Summary

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5.1 INTRODUCTION

Industry of any type, organized and unorganized sector are always concerned with people,
human being. Therefore human behavior is considered as a key stone element, for working
efficiency. This factor is related to individuals, group of people, working together in teams. This
study is more challenging and interacts as per the situational factors. The study of organizational
behavior relates to the expected behavior of an individual, within the organization. No two
individuals are likely to behave in the same manner, in a particular work situation. It is the
predictability of a manager about the expected behavior of an individual.

Organizational behavior is involved with the study and application of the human side of
management and organization. Nirmal Singh has put up words of Sam Walton, the richest
businessman and founder of Wal-Mart stores, “People are the key to successful organization
and management”. The traditional resource based organization of the past is rapidly changing to
the emerging trend into knowledge based organization. He has identified, golden triangle that
will dominate this global economy, in this decade. Countries those comes as golden triangle are:

1. The trade regions of North America, i.e. United States, Canada and Mexico;
2. The Pacific Rim – Japan, South Korea, Hong Kong, Singapore, Taiwan;
3. The European Union – Western, Central and Eastern European countries.

Due to this paradigm shift organization need to face new aspects like downsizing, knowledge
and information explosion, global competition and quality management that makes necessary
to look for fundamental shift in management philosophy and practice. In this situation human
factor has received vital importance, as it is a contributor to the productivity hence study of
human behavior has become necessary.

In an organization manager need to handle a group of individual working with or under him.
Therefore he should be able to explain, predict, evaluate and modify human behavior, will
largely depend upon knowledge, skill and experience of the manager to handle large group of
people in diverse situations. Emotional intelligence, organizational culture, job design and the
work environment are the determining factors of human behavior. For today’s and tomorrow’s
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organizations and management there are new rules with different boundaries requiring new
and different behavior. Always there is considerable resistance to change and therefore it is
very difficult to move from the old management paradigm to the new.

5.2 ORGANIZATIONAL BEHAVIOR DEFINITION

Keith Davis defined this concept as -

“Organizational behavior is the study and application at knowledge about the how people - as
individuals and a groups - act within organization. It strives to identify ways in which people can
act more effectively."
Fred Luthans explained it as -

"Organizational behavior can be defined as the understanding; prediction and management of

the human behavior affect the performance of the organizations”.

In the words of Stephen Robbins -

"Organizational behavior is a field of study that, investigates the impact that individuals, groups
and structure have on behavior within organization for the purpose of applying such knowledge
toward improving an organization's effectiveness."

These definitions have three main elements:

First, organizational behavior is an investigative study of individuals and groups.

Second, the impact of organizational structure on human behavior

Third, the application of knowledge to achieve organizational effectiveness

5.3 HISTORICAL REVIEW OF ORGANIZATIONAL BEHAVIOR

Industrial revolution – Industrial revolution has brought materialism, discipline, job

displacement, impersonality, work interdependence and related Behavioral phenomena. Thus it
is a base of all potential improvement. This knowledge up gradation gave workers increased

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wages, shorter hours and more work satisfaction. This evolution starts in 1800, with Welsh
factory owner, Robert Owen, who is treated as Father of Personnel management and some
Behavioral aspects within the organization. He was the first to emphasis the human needs of
employees and therefore refused to employ young children.

Then in 1935, Andrew Ure published a book, “The Philosophy of Manufacturer”, in which he
stated that human factors are one of the factors of production, besides the mechanical and
commercial parts. Ure provided workers with hot tea, medical treatment and sickness payment.
Then the era of scientific management was started with F. W. Taylor converted general theory
and ideas into practical tools. He advocated the selection of right people for right jobs, train
them adequately, placing them for to be specialized with fair remuneration. This work was
criticized by other management thinkers and an employee due to it’s over-emphasized on task
accomplishment and monetary incentives than respect for human efforts.

A depression and recession period of 1930 has lower down the market and living standard of
people. During this factory owners could realize that only production could not be major
element of any business but marketing, finance, and of course human resource are important
functions of any organization. Even exploited workers could realize about their protection and
unions of workers were formed.

5.4 THE HAWTHORNE STUDIES

The Hawthorne Studies were conducted at the Hawthorne plant of western Electric Co. in
Chicago from 1927 to 1932. Pilot study was carried out from 1924 to 1927 on experimental
basis. This study was carried out by Elton Mayo, a professor of Harvard Business School. The
Mayo wanted to find out the effect of fatigue and monotony on job productivity and usage of
different variables like rest breaks, working hours, working conditions like humidity and
temperature. This would lead to human motivation that would help to revolutionize the theory
and practice of management. This study is regarded as mile stone for behavioral studies. Elton
Mayo is been coined as “father of human relations movement”.

Experiment - For study he chose six girls from assembly line and separated them from the rest
of the workers and put them under the eye of friendly supervisor. Mayo made frequent
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changes in their working conditions and discussed about changes with them. Actual
experiment carried out with different steps, as –

Normal condition i.e. routine work

• 2400 relays a week

put on piece work • Output increased

Two 5 minutes rest pauses • Output increased

Rest pauses increased by 10 minutes • Output increased

Six 5 minutes pauses • Output decreased

Two rest pauses with free hot meals • Output increased

Finish work 1/2 an hour before regular • Output increased

Finish work 1 hour before as regular • Output remained same

All the facilities taken away and backed

with normal condition
• Drastic change occured with 3000 relays per week per girl.

Table 5.1

1. Under normal conditions, with a 48-hour week, including Saturdays, and no breaks, the
girls produced 2,400 relays a week each.
2. They were then put on piece-work for 8 weeks. Output went up.
3. Two 5-minute rest pauses, morning and afternoon, were introduced for a period of 5
weeks. Output went up once more.
4. The rest pauses were lengthened to 10 minutes each. Output went up sharply.
5. Six 5-minute pauses were introduced, and the girls complained that their work rhythm
was broken by the frequent pauses. Output fell slightly.
6. The 2 rest pauses were re-instated, the first with a hot meal supplied by the Company
free of charge. Output went up.
7. The girls finished at 4.30 pm instead of 5.00 pm. Output went up.
8. The girls finished at 4.00 pm. Output remained the same.
9. Finally, all the improvements were taken away, and the girls went back to the same
conditions that they had at the beginning of the experiment: work on Saturday, 48-hour
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week, no rest pauses, no piece work and no free meal. These conditions lasted for a
period of 12 weeks. Output was the highest ever recorded with the girls averaging 3000
relays a week each.

The combination of results during and after the experiment led Mayo to conclude that workers
were motivated by psychological conditions more than physical working condition. He also
concluded that workers were motivated by more than self interest. Even this study is evident
that the informal associations to be found in almost every organization profound effect on an
individual’s motivation to work, Level of output and quality of performance.

Activity 1

Find out name of other management scientist, those have contributed in the development
of Organizational Behavior.

5.5 PERSONALITY

Personality refers to individual differences in characteristic patterns of thinking, feeling and

behaving. Personality arises from within the individual and remains fairly consistent through life
surrounding situation play an important role in determining how different aspects of your
personality are expressed. There are four fundamental characteristics of personality.

1. It is constant and people tend to behave in the same way when they encounter similar
situations.
2. Personality not only influences actions, but it also actually causes people to behave in
specific ways.
3. Personality is influenced by both psychological and biological factors.

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4. Personality is expressed not only in behaviors, but through emotions, thoughts, social
behavior, and close relationships.

Personality is a psychological construct, but research suggests that it is also influenced, by

biological processes and needs. Personality does not just influence how we move and respond
in our environment; it also causes us to act in certain ways. Personality is displayed in more
than just behavior. It can also be seen in our thoughts, feelings, close relationships and other
social interactions. Behavior is how you react to social and physical aspects of your environment
based on your personality. Where one person may never show emotions of anger, joy, grief, or
anxiety, another person's responses may be dramatically colored with facial expressions, voice
inflections, and hand gestures. Behavior is examined in two ways: internally controlled and
externally controlled. Internal theorists believe the individual characteristics of a person dictate
the behavioral pattern, while external advocates hold that the behavior is a result of the
situation at hand.

Fred Luthans has stated that personality will mean how people affect others and how they
understand and view themselves, as well as their pattern of inner and outer measurable traits
and their person-situation interaction behavior. He has defined two variable concepts of
personality –

a. Self-Variables
The self of a person is a unique product of many interacting parts and may be thought of
as the personality viewed by a person within. People's understanding regarding
themselves is called self-concept in personality theory. Self-esteem, multiple
intelligences, emotion, optimism and efficacy are important self-variables and have
application in organizational behavior.

b. Self-Esteem
Self-esteem includes people's self perceived competence and self-image. Is high self
esteem good for organization's performance. Kreitner and Kinicki concluded that
high self esteem can be good thing only when it is nurtured and channeled in
constructive and ethical ways. Otherwise, it can become antisocial and destructive.
So behavior managers have a role to play in getting the appropriate performance
from high self-esteem individuals.
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An elaboration of self esteem in organizational context has emerged. It is called organization-

based self esteem (OBSE). It is defined as the self-perceived value that individuals have of
themselves as organization members acting within an organization context.

Self esteem is a global trait, meaning it is present interactions of an individual in a similar way.

5.6 ATTITUDE

An attitude is a learned predisposition to respond in a consistently favorable or unfavorable

manner with respect to a given object. Attitudes influence with their actions and decisions.
Attitude do sometimes relate to behavior. Sense of ‘Why’ various factors exercise their influence.
‘Why’ is a certain kind of attitude or certain kind of situations promote attitude-behavior
consistency?

• Hogg & Vaughan defines, an attitude as "a relatively enduring organization of beliefs,
feelings, and behavioral tendencies towards socially significant objects, groups, events
or symbols”
• Eagly & Chaiken, psychologist, “a psychological tendency that is expressed by
evaluating a particular entity with some degree of favor or disfavor"

ABC model of attitudes describes three components of attitudes structure. These three
components are linked to each other. Sometimes it is also observed that cognitive and affective
components of behavior do not always match with behavior.

1. Affective component: - In this feelings or emotions are involved in the object. E.g. I do
not like dark coffee.
2. Behavioral: - This is a way the attitude we have influences how we act or behave. E.g. If
anyone offers me a dark coffee, generally I avoids to have it.
3. Cognitive: This shows person’s belief or knowledge about an object. E.g. Dark coffee is
dangerous for health.

Workplace attitudes have an effect on every person in the organization, from the employees
to the company owner. Attitudes help to develop the prevailing workplace environment that

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determines employee morale, productivity and team-building abilities. Understanding how

positive and negative attitudes affect the workplace is an important tool in creating a
harmonious workplace. There are some type of attitudes that generally practices at the
workplace.

5.7 POWER AND POLITICAL BEHAVIOR WITHIN THE ORGANIZATION

It is an ability to get something done the way a person wants it to be done. It includes the
ability to gather physical and human resource and put them to work to reach a goal. In an
organization power is used to get things done than just to dominate people and the employees
and colleagues working with. It is an unavoidable presence in an organization. Power and
authority are two different concepts while both are integrated with each other. Authority flows
from a person’s position in an organization, while power can build up at any level.

Power is essential for leadership and management. Powerful leaders delegate decision
authority, it regards people’s talent as a resource. It can change people’s working conditions
and receives resources and information to get work done. Leader with full of power accept the
challenges and risk, whenever necessary that in benefit of the organization. Power allotted to
leaders and managers develops creativity and innovation. It promotes the opportunities to
work into groups.

Types of power
A. Organizational Power –
All management level positions do posses organizational powers. These powers remain
to all those positions within the organization though a person leaves that post.
1. Legitimate power – These derives from position they are allotted and it provides
decision authority.
2. Reward power – this power allows appreciating employees with positive results and
person’s behavior and providing organizational reward systems and policies.
3. Information power – It allows holding, collecting, and controlling and distributing
information to a relevant person.
B. Personal power –

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Personal powers are affected by attributions processes. It flows from the attributes and
qualities of the person.
1. Referent power – Positive feelings about the leader.
2. Expert power – a person who is posses with technical knowledge and expertise does
hold power with the authority.

5.8 ORGANIZATIONAL CULTURE

Culture refers to the underlying values, beliefs and codes of practices that make a community
what it is. Success and failure of any organization depends upon culture it holds. Organizational
culture is unifying and refers to the processes that bind the organization together.
Organizational culture reinforces the underlying strengths of central goals and creates a sense of
common responsibility. Culture therefore gives an organization a sense of identity - 'who we
are', 'what we stand for', 'what we do'. Culture refers to the reality of the organization about
nature of work, how people deal with each other and what behaviors are expected.

The ability of organization to be culturally innovative is related to leadership and top

management must be responsible for building strong cultures. Leaders construct the social
reality of the organization; they shape values and vision of the organization. Culture helps to
resolve the dilemma of bureaucracy, formal procedures which are necessary for business
integrity. Organizational culture is been defined by Edgar Schein as –

“A pattern of shared basic assumptions that the group learned as it solved its
problems of external adaptation and internal integration that has worked well
enough to be considered valid and, therefore, to be taught to new members as the
correct way to perceive, think, and feel in relation to those problems”.

Strong culture based organization integrates values those are intensely held and widely
shared. It has great influence on the behavior of its employees –

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Philosophy of Foundar Directors

Top Management + Social Atmosphere

Organisational culture

Fig 5.1

Types of organizational culture

A number of organizational culture types have been identified by researchers are –

1. A Power culture – this is based on the dominance of one or a small number of

individuals within an organization. They make the key decisions for the organization.
This sort of power culture may exist in a small business or part of a larger business.
2. A role culture – this exists in large hierarchical organizations in which individuals
have jobs to perform which are closely specified. Individuals tend to work closely to
their job descriptions and tend to follow the rules rather than to operate in a
creative way.
3. Task cultures – it exist when teams are formed to complete particular tasks. A
distinct team culture develops, and because the team is empowered to make
decisions, task cultures can be creative.
4. A person culture – It is the most individualistic form of culture and exists when
individuals are fully allowed to express themselves and make decisions for them. A
person culture can only exist in a very loose form.

Cultural change is most likely to take when following conditions exist –

1. Dramatic crisis exist and created

2. Turnover into leadership
3. Young and small organization
4. Weak culture.

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5.9 TEAM WORKS AND GROUPS

We are all bound to be a part of a cooperative group to accomplish our daily tasks at the
workplace, and this is what we call ‘teamwork’. Teamwork is defined as an activity or a set of
inter-related activities undertaken by a number of people, in order to achieve a common
objective. organizational leaders have recognized the added value that comes from having
employees work in formal or informal teams. However, over the last two decades, even greater
emphasis has been placed on working together in a team. Team-building and team-work skills
are essential in the workplace and highly desirable skills to possess when seeking a new job or
promotion. Teams working at their potential generate more productivity and offer better
solutions than if all of them work independently.

Types of Groups

Group formation is of the social and emotional needs of any individual. He needs to receive
social affirmation, recognition, security and status in the community. Group could be
homogenous or heterogeneous, small or large groups. The type of group formed various as
the goal that they have to achieve. Meaningful interaction between two or more people
forms a group.

Mainly there are two types of groups –

1. Formal groups – These groups are created and maintained to fulfill specific needs
related to the overall organizational goals. Those are designed by top management and
concentrates more on the performance of the job. In this generally hierarchy is
maintained and individuals status is determined according the position. Co-ordination
of members are controlled through process and procedures. Formal groups could be
identified as -
a. Command group is composed of subordinates who report directly to a common
supervisor e.g. a production manager & his subordinates in his department.
b. A task group is usually formed to solve a problem. It is comprised of the employees
who work together to complete a particular task.

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2. Informal groups – These are created in the organization because of social and
psychological forces operating at the workplace. These groups are not designed and
planned just because of workplace requirements.

Importance of team work

Teamwork in a company has a great significance as this concept proved to increased

performance and production within the organization. The benefits of teamwork can make a
positive effect on the company that incorporates this type of teamwork approach.

1. Sharing Workload – When jobs are properly distributed among the employees, all
dealing with their own particular task, no member of the team can feel over-burdened
or extra pressurized in the overall project.
2. Unity among group - Continuous interaction among the team members and working in
a group, helps in building a mutual association or bond of friendship and unity among
the employees.
3. Speed up the work - It is a fact that when people or professionals work in teams with
mutual cooperation, the tasks get accomplished at a faster pace. Teamwork is one of
the best ways to ensure the timely completion of any work, with the maximum possible
efficiency.
4. Learning opportunity - The exposure to a team of diverse members and the knowledge
of the older team members help you to grasp the new concepts quickly. At the same
time, being working in a team enables the team-members to avoid mistakes and proves
to be a bonus for the overall image of the team.
5. Provides goodwill and brand - The goodwill created by mutual cooperation of
professionals in an organization, in fact, plays a highly instrumental role in bringing in
more business and public trust.

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Activity 2

Write down at least two situations where you and your group have worked for benefit of
others, and you have gained opportunity to learn something new, increase sense of unity
among you all etc.

5.10 JOB DESIGN

Job design means to decide the contents of a job. It fixes the duties and responsibilities of the
job, the methods of doing the job and the relationships between the job holder and his
superiors, subordinates and colleagues. Job design also gives information about the
qualifications required for doing the job and the financial or non-financial reward for doing the
job.

Job design has been defined by Business Dictionary as –

“Work arrangement aimed at reducing or overcoming job dissatisfaction and employee

alienation arising from repetitive and mechanistic tasks. Through job design, organizations
try to raise productivity levels by offering non-monetary rewrds such as greater satisfaction
from a sense of personal achievement in meeting the increased challenges and
responsibility of one’s work”.

Features of good job design are -

1. Allows for employee input. Employees should have the option to vary activities

according to personal needs, work habits, and the circumstances in the workplace.

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2. Gives employees a sense of accomplishment.

3. Includes training so employees know what tasks to do and how to do them properly.

4. Provides good work/rest schedules.

5. Allows for an adjustment period for physically demanding jobs.

6. Provides feedback to the employees about their performance.

7. Minimizes energy expenditure and force requirements.

8. Balances static and dynamic work.

Various techniques used in job designing are –

1. Job Enlargement: Job enlargement changes the jobs to include more and/or different
tasks. Job enlargement should add interest to the work but may or may not give
employees more responsibility.
2. Job Rotation: Job rotation moves employees from one task to another. It distributes the
group tasks among a number of employees.
3. Job Enrichment: Job enrichment allows employees to assume more responsibility,
accountability, and independence when learning new tasks or to allow for greater
participation and new opportunities.

Job
Enlarge
ment

Job Job Job

Simplifica Rotation
tion Design

Job
Enrich
ment

Fig 5.2

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4. Job Simplification – This is a statement where employee characteristics and

qualification required for the post are defined along with duties and tasks for
satisfactory performance. It includes evaluating the work processes, methods and
procedures for multiple workers performing the same task.

5.11 INTERDISCIPLINARY APPROACH TO ORGANIZATIONAL BEHAVIOR

We need to study organizational behavior to learn about ourselves and how to deal with others.
When we are working for an organization, we contribute to be a part of various organizational
departments. Organizations are increasingly expecting individuals to work in teams. Behavior
is concerned for the way people behave in an organizational context. Organizational Behavior is
a multidisciplinary activity. Along with psychology it also integrated with sociology and also look
to other scientific fields of study of insights. Organizations multiple levels of structure, has
become necessary to understand human behavior, because people work in teams, no human
being can act in isolation.

• Learning • Group dynamics

• Motivation •Work teams
• Emotions •Conflicts
•Organisational culture
• Job satisfaction
• Attitude
Psychology Sociology

Anthropolo Social
gy Psychology

•Organisational • Behavioural change

Environment • communication
•Cross-cultural • Group decision
aspect making

Fig 5.3

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1. Psychology :
This is a line of study of human behavior that tries to identify the characterizes of
individuals and provides an understanding why an individual behaves in a particular way.
This includes Behavioral patterns such as learning, motivation, personality, emotions,
perceptions, training, job satisfaction, decision making, work design and stress, attitudes
measurement. It is a science that seeks to measure, explain and change the behavior of
human.
2. Sociology :
This is study towards Behavioral pattern of co-workers and their social behavior along
with relationship with them to maintain social groups as per social order. This mainly
focuses on social systems. It appreciates the functioning of individuals within the
organization that could be treated as sociotechnical entity. Here group dynamics,
communication within work teams, power and conflicts, organizational change,
organizational culture etc. are considered for studies.
3. Social Psychology :
Social psychology is the study of human behavior in the context of social situations. This
essentially addresses the problem of understanding the typical behavior patterns to be
expected from an individual when he takes part in a group. This focuses on the
influence of people on one another, with Behavioral change, attitude change,
communication, group process, group decision making.
4. Anthropology :
Anthropology is the study of mankind and their activities. It mainly focuses on cultural
systems, beliefs, customs, ideas and values within a society and the comparison of with
aspects like values, attitudes and even cross-cultural analysis, organizational culture,
organizational environment.

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Activity 3

Try to analyze yourself, your personality pattern. Categories and write down about yourself
in line with points mentioned in behavioral aspects, at least in one or two pages.

5.12 KEYWORDS

1. Downsizing – Reduce personnel or other resources in number or size.

2. Resistance – a force that tends to oppose or retard motion.

3. Bureaucracy – An administrative system in which the need or inclination to follow rigid or

complex procedures impedes effective action.

5.13 SUMMARY

Organizational Behavior provides set of tools that allow understanding, analyzing and describing
employee behavior in the organization. It allows managers to improve, enhance or change work
behavior so that individual, group and the whole organization can achieve their goal. It is to
understand individual in organization, group and team processes. Organizational processes
changing social and cultural environment, globalization advance information technology and
employee relationships challenges do affects behavioral patterns. Global competition is
requiring employees to become more flexible.

Managers have to shift their philosophy from treating everyone alike to recognizing differences
and responding to those differences in ways that ensure employees retention and greater
productivity while not discriminating. Organizational Behavior creates positive work
environment.

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UNIT 6 PLANNING

Objectives

After studying this unit, you will be able to:

• Define the concept planning and process in planning.

• State the basic objectives and elements of planning process.
• Enumerate tools used in planning along with how they are useful to solve problem with
planning process.

Structure

6.1 Introduction
6.2 Definitions
6.3 Objectives of planning
6.4 Planning a management activity
6.5 Importance of planning
6.6 Levels of planning
6.7 Types of planning
6.8 Elements of planning
6.9 Planning Process
6.10 Tools used in planning
6.11 Keywords
6.12 Summary

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6.1 INTRODUCTION

Planning is one of the primary functions of management. Planning is an activity to achieve

organizational objectives. This is a process of determining results to be acquired in the future.
This is a forecasting activity for company’s growth. Most of the organizations operate in
uncertain environments. Planning is a tool to manage and face these unexpected situations for
the growth of an organization. A success management must cope up with and need to adapt the
changes and uncertainty. Planning is deciding in advance what to do and how to do. It is one of
the basic managerial functions. Before doing something, the manager must formulate an idea of
how to work on a particular task. Thus, planning is closely connected with creativity and
innovation. It involves setting objectives and developing appropriate courses of action to
achieve these objectives.
If management wishes to have any control over the change, they must plan their schedule. The
organization would follow some kind of course during a specific period of time. Sometimes
organization needs to respond to current pressure than making choices based on the
organization’s long term goals. Planning is the proposed actions decided prior to their
execution. This is a rational approach to the future. This includes choosing of a course of
actions from all available alternatives for accomplishing the desired results with the greatest
economy. Planning decides everything regarding the new enterprise in advance.

6.2 DEFINITION

Koontz and O’Donnel defined planning as -

"Planning bridges the gap from where we are to where we want to go. It makes it possible for
things to occur which would not otherwise happen."
James Lundy defined it as -
“Planning as determination of what is to be done, how and where it is to be done, who is to
do it and how results are to be evaluated.”
With this definition we can analyses that planning answers following questions

1. What needs to be accomplished?

2. When is the deadline?
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3. Where will this be done?

4. Who will be responsible for it?
5. How will it be done?
6. How much time, energy, and resources are required to accomplish this goal?

6.3 OBJECTIVES

Planning helps to find out

1. What kind of organizational structure it requires –

For established organization, it helps to bridge the gap between present structure and
objectives of an organization. Whereas for a person who want to start his business at first
phase, planning acts as a guideline and helps to accumulate necessary resources as per the
requirements.
2. What kind of people it requires –
Proper planning identifies human resource requirements for the project. Right person at the
right place at the right time leads to success. Experience, qualification, intellectual level and
ability to apply acquired knowledge are to be analyzed while hiring a person for a job.
3. Find out effective leadership –
To achieve the objectives, co-ordinate all available resources, maximum utilization of all
resources, to take organization on a right path, to take decisions at right time, a proper
leadership are necessary. A person with futuristic vision can sail a boat at right direction.
4. To analyze standards for control –
Planning helps to set standards and codes for the policy execution, also government rules
and regulations, time duration requires for various procedures can be considered while
preparing a platform for a policies.

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Activity 1

Study how Anna Hazare and his team members planned their activity of hunger strike and
the objective they wanted to achieve. Write down your opinion on the same.

6.4 PLANNING A MANAGERIAL ACTIVITY

Planning is a basic and initial activity among all other managerial function. Basically it takes
initiative to achieve the organizational objectives. Planning helps to establish an overall strategy
for achieving goals. It develops policies for organizational work activities. It encourages
managers to develop creative and competitive mind. It leads to technological and
environmental changes. Planning is an initial activity that helps to get survived in the future. It
helps managers to identify a problem, find out solution for it and guide to solve that problem.
Various statistical tools along with manual methods are used for this process. Systematic and
methodical study is expected by managers for planning. Managers need to keep an eye on the
external environment and always monitor the situation for any changes to get survived in this
global competition.

6.5 IMPORTANCE OF PLANNING

Planning is one of the important functions of management. Koontz, O’Donnell and Weihrich,
explained it as “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.”

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1. It provides direction –
A concise planning helps to head towards the goals and objectives of an enterprise. Short
term as well long term plans make picture clear about the job to be executed. Planning
provides direction to the activities of the organization and to the job behavior of managers
and others. It helps to analyze how best to make the organization move along the chosen
path, and when should it take what measures to achieve the goals of the organization.
2. It Reduces Uncertainties –
Internal and external environmental changes, monitored by a manager does makes the
manager to think about the future. Accordingly they need to prepare their policies to cope
with these changes. This reduces the instability and uncertainties so as to survive in the
future.
3. Can choose alternate plans –
We can choose best plan among alternatives prepared. If managers have an enhanced
awareness of the possible future effects of alternative courses of action, for making a
decision or for taking any action, they should be able to exercise judgment and proceed
cautiously to choose the most feasible and favorable course of action.
4. Managers can take the thoughtful decisions –
Manager collects all the details regarding technical, political and present situations in the
market. He can study and calculate all the details gathered and can take a proper decision,
that may prove beneficial in the future. It reduces the probability of major errors and
failures in managerial actions. It improves the capability of the organization to assume the
calculated risks. It increases the freedom and flexibility of managers within well-defined
limits.
5. Process of co-ordination –
Various functions and departments in the organization need to be coordinated for smooth
functioning in the organization. Planning manages to integrate all this activities to bind them
in one bundle.
6. Encourages creativity and innovation –
Planning is process that makes managers to think in anticipation. It encourages creative,
logical and abstract thinking. It encourages to prepare draft with, resources and technology
available presently, as well anticipating which technologies may be available in the future to
perform organizational activities.
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7. It is a base managerial function –

Planning is a prime managerial function which provides the base for the other managerial
functions. The functions of motivation, supervision, leadership and communication are
addressed for implementation of plans and achievement of organizational objectives.
8. Allocation of resources –
Planning makes easy, to locate resources required and quantity thereof. Planning is means
of judicious allocation of strategic and scarce resources of the organization in the best
possible manner for achieving strategic goals of the organization. Resources include funds,
highly competent executives, technological talent, exclusive dealer network along with raw
material, human resources.
9. Effective usage of resources –
Appropriate inventory management is possible with planned project. A possibility of
scarcity, excessive storage or inferior quality is reduced with this. Clean warehousing facility
could be provided along with cooling or warm technology required. There is better
utilization of the organization's existing assets, resources and capabilities. This reduces
wastage and leakages of funds, materials, human efforts and skills so as to bring about an
overall improvement.
10. Anticipate the crises –
Planning can stimulate the management to act, to take initiatives to face and handle various
crises situations in the future, to compete in this global world. By anticipating change, it can
direct and control the external and internal changing environment.
11. Manage time and energy –
Planning is a systematically processed activity. The best possible path is chosen from
different alternatives. While selecting the path, best use of time and human and other
efficiencies are considered. Best use efficiency gains productivity.
12. Encourages competitive spirit –
Planning encourages competitive spirit within enterprise as well among employees.
Competitive spirit encourages to think with innovation and creativity. Planning encourages
expansion of capacity, changes in the work method, changes in the quality of work, and
technological changes.
13. Social and economic development –

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Planning leads to a change in organizational as well employees’ work schedule. Financial

position is changed with new pattern of organizational system. Life style and purchasing
power is changed due to financial up gradation, this situation experiences social and
economic changes in the society.

6.6 LEVELS OF PLANNING

Levels of planning are based on the types of plans. Plans are prepared on the basis of
hierarchical basis. Types of plans differ as per the hierarchical levels.

Corporate plans

Divisional Plans

Departmental plans

Fig 6.1

1. Corporate or organizational level plans –

These are prepared as the overall strategic plans. Only top level managers are involved in
this. They decide about objectives, goals to be achieved along with mission and vision
statements.
2. Divisional Plans –
Here strategic level plans are further detailed down to the operational programs. Divisional
plan covers the entire units as a division as such. It covers activities of a particular division.
3. Departmental or Sectional plans –
These are functional level plans. Here minute details are prepared for actual execution.
These are prepared by lower- level managers. These plans support the day to day operations
to be carried out.

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6.7 TYPES OF PLANNING

There are different types of plans, which vary on the functional basis or as per the time period.
Pardeshi and Hasinuddin have identified five types of planning while Duening and Ivencevich
have classified plans into three types.

Table 6.1

Strategic planning Broad objectives and goals are prepared

Long Term plans Forecasting future events, today

Short term plans Activities carried out to accomplish long term plans
Formal plans Documentation is required.

Informal plans Outcome of informal discussions.

Administrative plans Is carried out by middle level managers.
Operational planning Planning is done for actual execution.
Adhoc planning Draft a plan for a particular project.

Standing plans These are prepared to use repeatedly

Functional planning Forms uniformity within a section
Tactical planning Bridge the gap between strategic and operational planning

1. Long term and short term planning –

Long term plans deal with decisions of tomorrow taken today by predicting future
situations. The end result goals are decided in long term plans for the enterprise. These
plans are those in which strategies are translated into detailed operational programs for
execution. These are attempted to anticipate, analyses and make decisions regarding basic
problems and issues. It includes issues which have importance in the future. It encourages
reaching well beyond the present operating horizon of an organization and competes with
the changing environment. According to Pardeshi and Hasinuddin “Long range planning is a
dynamic attempt to determine and forecast the course of most significant events that affect

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the major trends of the organizations future welfare.” More the long term we think more
stability we could experience for the organization in the future.
Short term plans are based on long term plans. Activities / functions are designed for the
short period to be completed are short term plans. These are considered with short range
activities. Number of short term activities together accomplishes long term goals. So they
are consistent with long term plans.
2. Formal and Informal Planning –
Formal plans are always written down, documented with specific aim in mind with long
term focus. Formal plans are systematically processed, written down with formal
discussions by considering various rules and regulations, to maintain standards and codes.
These facilitate systematic internal control systems.
Informal planning is generally outcome of informal discussions. Managers across the lunch
table or while attaining any function discuss a particular issue to carry out a particular
activity may be on a trial basis. Once a pilot project is succeeded it can be recommended for
long term implementation.
3. Administrative and operational planning –
Administrative planning is done by middle-level managers who actually shape the objectives
framed by top-level management. Administrative plans actually makes clear picture for
optimize resources of men, money, materials and facilities within the strategic objectives. It
deals with tactical plans. Tactical plans deals more with efficiency then with long-term
effectiveness. Therefore more it deals with short term plans.
Operational planning is carried out at lower-level managers. These are plans which are
actually executed by these managers. They define the detail manners and programs as to
how current operations are to be carried out . It controls and regulates daily routine of the
concerned function. Operational Plannings are part of short term plans. These are
prepared at operational level.
4. Adhoc and standing planning –
Adhoc planning is generally carried out for project planning. These are scheduled for very
short period. For this, committees may be formed to discuss on a certain issues.
Standing plan can be issued again and again repeatedly. These are organizational
structures, systems, standards, rules and regulations etc. Standing plannings are effective

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for smooth running of business, delegation of authority, coordination and control and
facilitate training etc.
5. Functional planning –
Plans drafted for functional areas like production, finance, purchasing, marketing etc. are
termed as functional planning. Functional plans need to be clearly defined as well they
should be uniform for that particular section. The functional goals are always based on the
enterprise goals as a whole. Here functional planning integrates functions of each
department with functional goals and organizational goals.
6. Strategic and Tactical Planning –
Typically strategic planning are where organizations goals, missions and objectives are
framed. These are effective over a long period of time. They focus on broad and enduring
issues. Author coined this type as “ Planning for the future”.
Tactical planning is framed as a part of strategic as well as operational planning. It is more
specific than strategic planning. It deals more with efficiency than with long term
effectiveness.

Activity 2
Visit any nearest departmental shop like Big Bazar, and how they drafts a plan for launching
any special scheme first time and hierarchical structure they follow for its implementation.

6.8 ELEMENTS OF PLANNING

• Objectives: Objectives are defined as end results which the management seeks to achieve
through specified activities. They serve as a guide for overall business planning.

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• Strategy: Strategy is a comprehensive plan for accomplishing organizational objectives.

This comprehensive plan will include three dimensions, (a) determining long term
objectives, (b) adopting a particular course of action, and (c) allocating resources necessary
to achieve the objective.
• Policy: It tells about effectiveness of the organization, required to carry out various
operations within the enterprise. They are the guides to managerial action and decisions in
the implementation of strategy.
• Procedure: Procedures are routine steps on how to carry out activities. Efficiency and
flexibility is considered in this. Procedures are specified steps to be followed in particular
circumstances.
• Method: Methods provide the prescribed ways or manner in which a task has to be
performed considering the objective. It deals with a task comprising one step of a procedure
and specifies how this step is to be performed.
• Rule: Rules are specific statements that inform what is to be done. They do not allow any
flexibility or discretion. It forms uniform procedures within the organization. Ensures
standardization and quality in various activities.
• Program: Programs are detailed statements about a project which outlines the objectives,
policies, procedures, rules, tasks, human and physical resources required and the budget to
implement any course of action.
• Budget: It is a plan which quantifies future facts and figures. It is a fundamental planning
instrument in many organizations.
• Resources: Planning helps to identify resources like financial, physical, time and human
resources required for production.

Activity 3

Plan out your studies for the examination and various resources it required, list out friends
with whom you can share knowledge for up gradation.

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6.9 PLANNING PROCESS

Effective business planning has to begin with an honest and realistic appraisal of the current
position of the business. The basic planning process typically includes similar nature of activities
to be carried out in the same sequence. Complexity and duplication within the systems depend
upon the planning process. Every planning process goes through a series of stages.

1. Identification of the problem: Manager monitors the environment changes around him.
From which he identifies the problems that may occur in the future and may prove harmful
for organizational stability.
2. Establishing premising – Premises are judgments about future plans in terms of the
situation in which they will operate. It proceeds on the basis of facts, assumptions,
background and objectives. Premising is concerned with internal as well as external
environment. Premises identify primarily possible growth in the market, availability of
resources, competition and strategic considerations etc. We can enrich and enlarge
premising by undertaking collection of information and research activity. Here objective
studies are undertaken to find opportunities or threats and can establish pointers for
premising.
3. Define business mission and objectives: Objectives are the end results that company want
to achieve. Mission statements are drafted as the problems are identified. This is a first step
to be accomplished by the network of policies, procedures and rules along with budgetary
system. The mission statement is concerned with the scope of the business and what
distinguishes it from similar other businesses.
4. State principles and ideologies for its implementation: It is to establish rules and
regulations and draft an agreement for maximum utilization of resources. For this some of
the external environment like political and environmental changes cannot be controlled but
need to be monitored to make changes in our strategies.

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5. Prepare alternative courses: Next step in the process is to prepare alternative plans. The
best possible plan is to be chosen for maximum utilization of time and resources of the
organization.
6. Proper documentation – Once the objectives and goals are decided, they need to draw
further down into detail program. Documenting a program includes synchronizing its
activities along with time and other resources systematically to achieve the overall program
and its activities.
7. Budget – It means converting plans into monetary terms. Plans are documents that explains
target to be achieved and budget expresses it in monetary terms. Budget work as a control
mechanism as well evaluates documents.
8. Check the performance – A pilot project is implemented on trial and error basis, studies to
bridge any loopholes in between, that need to be rectified. Corrections can be reintroduced
with revised plans.

Problem
Feedback identifica
tion

Budget Premising

Documen Objectives
and
taion missions

Principles
Alternative
and
courses
ideologies

Fig 6.2

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6.10 TOOLS FOR PLANNING

1. Research Methods –
In research planning process is carried out with systematic methods. Coding methods,
statistical tools, different types of research are used for study purpose. It is based on
definite principles and rules. Hypothesis, pilot projects etc. are some of the methods used
for research. Hypothesis is a principle instrument that suggests new experiments and
observations. It explains certain elements to guide in the investigation. Hypotheses is an
instrument that guide for the end results to be achieved.
2. MIS (Management Information System) –
Information and data does highly influence decision making process, that is necessary for
planning. MIS is the function to collect and transmit all relevant data for a project as well as
information on managerial applications. This collecting information and transmitting it on
the right path is the basic functioning of MIS. Information is necessary for entire
organization i.e. from inventory to finance, budget, production, marketing. For this
information centers are established in many organizations. Even it can be collected through
bills, list of items, budget and other documents. MIS also helps to collect summary of
statistical data, monitoring and calculating daily clerical data, online data and
predetermined transactions transmitted directly from operations or processes.
Traditional activity of collecting and transmitting all relevant data has now been taken over
by computers. Function of collecting, analyzing and supplying of data has now become a
part of the EDP (Electronic Data Processing) or ADP (Automated Data Processing)
departments. Even advanced MIS, supports in automatic generation of statistical reports,
providing on-line response to individual queries and there it fastens the decision-making
process.
3. PERT/CPM (Program Evaluation Review Technique/ Critical Path Method) – PERT is a more
precise method of scheduling a task. It shows sequence by detailed activity and time by
hours, days and week. It is a graphical representation of interrelationships of activities
within a particular project. PERT enables managers to determine which task may get
delayed, that may affect the project. IT is a detailed planning and control methodology for
defining and controlling the efforts necessary to accomplish project objectives on schedule.
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PERT/CPM is a statistical technique which is used for quantifying knowledge about the
uncertainties that we may face in completing its activities. This is a system where
management receives danger signals that require remedial measures. Also it shows the area
of effort in which time, resources, or technical performance need to be updated.
PERT system is developed jointly by the United States Navy and Lockheed Aircraft
Corporation and CPM was developed by DuPont Company. PERT helps to know the major
schedule dates of final products or results of each activity. This is system which can be used
to establish coordination and definite job activities even at the lowest level. It stimulates
proposed changes in the project and effect of it on entire activity. PERT is a planning tool
that helps management as –
• This is a medium that integrates various activities though they are geographically
separated.
• With this each portion of each activity could be defined properly with relative
importance to each activity.
• It calculates required time to complete the each task.
• It identifies task that may get delayed and may affect the project.
• It is a technique to measure future performance today.

PERT/CPM is a precise method of planning. PERT can be carried out by using manual calculation
method or with computerized PERT program. In computerized method, input and output
formats have to be learned first, because those are designed for a particular company. PERT
manual calculations are more easy and are often advantageous for small networks that contain
units of 150 or less. PERT consist of events and activities Here all required events are connected
by arrows that indicate the preceding and succeeding events. An event is a decision or a task. In
a diagram events are always represented by circle or a box and activities with arrows.

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C 4 days4daysE

A D 1Week
1 2 3
2 Weeks

1 Week
B2 Weeks F

Fig 6.3

PERT/CPM is a precise method of planning. PERT can be carried out by using manual calculation
method or with computerized PERT programme. In computerized method, input and output
formats has to be learned first, because those are designed for a particular company. PERT
manual calculations are more easy and are often advantageous for small networks that contain
units of 150 or less. PERT consist of events and activities Here all required events are connected
by arrows that indicates the preceding and succeeding events. An event is a decision or a task.
In a diagram events are always represented by circle or a box and activities with arrows.

6.11 KEYWORDS
1. Forecasting – to estimate or calculate in advance.

2. Judicial allocation – Proper distribution for all the resources.

3. Premises – A preposition/ statement upon which an argument is based and conclusion is

drawn.

4. Synchronization – Arrange or represent events so that they co-occur.

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6.12 SUMMARY

Planning is one of the important management function. It is a predetermined course of action

by predicting, analyzing, and controlling the situation, to face the future changes. It is a process
of forecasting the future environment. It decides about maximum utilization of resources like
finance, manpower, raw material to achieve its targets. Planning coordinates the activities to

complete production process. It encourages staff members to think creatively and innovatively.
Duplication of work could be avoided with the planning process.

Though planning process is carried out at three different levels, the right and strategies at each
level is varied at each level but everybody works for the same result. At each level the way out
planning is different, but they are interconnected.

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UNIT 7 STAFFING

Objectives
After studying this unit, you will be able to:

• Define basic concept of staffing as one of the management function.

• State why and how manpower planning is important within the organization.
• Draw a systematic and well defined staffing process leading to a better future.

Structure

7.1 Introduction
7.2 Definition
7.3 Importance of staffing
7.4 Main components of human resources
7.5 Staffing process
7.6 Manpower Planning
7.7 Selection
7.8 Placement and Orientation
7.9 Training and Development
7.10 Performance Appraisal
7.11 Promotion
7.12 Corrective Actions
7.13 Keyword
7.14 Summary

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7.1 INTRODUCTION

Human resource is considered to be very important asset of an organization. Human resource

of any organization facilitates the accomplishment of its goals and objectives. They serve the
needs of an organization. The manager who understands the human resource requirements
and its implications can attract, retain and motivate people to be more productive. Staffing is
the process of management that is concerned to acquiring, developing, employing, appraising,
rewarding and retaining people. It supports right type of people at right positions at the right
time. Staffing means putting suitable people into his/her appropriate work. The right staff can
carry an organization throughout the company’s life period to ensure its success in the future.
Employees / staff are much more important asset than any other equipment or machinery of
that organization. Without human beings machinery would find absolute and would be of no
use in future. In staffing all managers are human resource managers although they are
performing some other activities, even it may be small or large organization.
Staffing is one of the management functions of managing and developing human resource. It is
a function related to the hiring and maintaining a committed and competent staff. Effective
HRM is a crucial to the success of all organization. Staffing is a matching process; it must match
the needs of the organization with employee needs. Staffing means filling work positions and
maintaining such positions those are needed, over the time. Such positions are fully manned by
the competent people. This is an activity of inviting people, making their choices and fixing
them up with work responsibility and then maintaining that role throughout the company’s life.
It is a function to find the requisite human resources to build the organization structure. The
best plans and the most efficient organization may fail if the person who carries them may not
be suitable to the task. Therefore staffing is very important function for successful
management.

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7.2 DEFINITION

A given by McFarland –

“Staffing is the function by which managers build an organization through the recruitment,
selection and development of individuals as capable employees”.

Business Dictionary.com defines –

“The selection and training of individuals for specific job functions, and charging them with the
associated responsibilities”

Staffing is the process by which an organization creates a pool of applicants and makes a choice
from that pool to provide the right person at the right place at the right time to increase the
organizational effectiveness. It is a continuous process as the organization receives success and
look forward for the expansion.

7.3 IMPORTANCE OF STAFFING

1. Filling the organizational positions.

2. Train to monitor and analyses changing environment.
3. Developing competencies to challenges.
4. Retaining personal professionalism.
5. Optimum utilization of the human resources.
6. Helps in getting right people for the right job at the right time.
7. Finds out employee’s positions requirements within a company.
8. Ensures the improved organizational productivity.
9. Proper selection provides with quality workers.
10. Training and development programs improve performance that leads to job satisfaction.
11. Awarding and rewarding system worked out with performance appraisal system in staffing
help to maintain harmony in the organization.

7.4 MAIN COMPONENTS OF HUMAN RESOURCE

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Staffing is a process of organizing, retaining and developing human resources in any

organization. Staffing means understanding and matching needs of individuals with
organizational needs, so that human resources could be employed with full potential.

1. Acquisition Phase – This step includes recruiting, selection and properly placing of selected
personal to obtain maximum productivity. Talented, self-motivated employees are always
more demanded.
2. Retention – skilled and talented employees are always prove to be more productive for the
organization. For long-term organizational stability these employees are beneficial. So to
train and develop such employees is more important. Frequent attrition result to
incomplete / half done projects and therefore delay in project completion. Also it increases
production and administration cost. When an employee leaves an organization, we need to
place new personal at his place to complete the work. It means carrying out recruitment
process again and again, training process need to be arranged again for the appropriate
personal. This process increase the administration cost. This process takes a long time,
which results in delay in project completion.
3. Termination – Due to job cutbacks, employees adverse performance or if employee breaks
rules, results in frequent terminations. This is an unpleasant job that managers need to
carry out sometimes. This process is generally specified by an HRM Staff.

7.5 STAFFING PROCESS

Staffing process is a process of analyzing manpower requirements within the organization.

Staffing process decides the kind of staff and number of staff to be managed to form the
successful organizational structure. This is done through various methods like job analysis,
workload analysis etc. Staffing process starts with functions like job analysis and ends with
awarding employees after screening with appraising their performance.

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1. Needs Analysis - To start up a business or for any business expansions, top level managers
need to look for the manpower requirements within the organization. Here skills, abilities
and desired experience required will be found out. Manpower planning is done at this level.
2. Matching – On the basis of the job specification, the manager advertises and looks for the
assignment. Post could be advertised through various medias like print, internet, or through
mouth publicity within the organization. Candidates’ profiles are analyses to match with the
job profiles for selecting suitable candidates for the interview.
3. Interview and Selection Process – Selected suitable candidates would be asked to attend
interview sessions and appear for the tests, to judge their skills and ability to take up the
assignment.
4. Training and Development process –Candidates’ acquired skills and skills required to
perform a task, need to be matched with. Training is one of the important functions of
staffing which identifies the areas for the up gradations to cope with external changing
environment.
5. Appraisal System – In a broad sense performance evaluation is a developmental process.
This process find outs the lacunas and provides the chances for improvement. Various
appraisal systems are used for the process, like PCMM, 360 degree appraisal system, etc.

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7.6 MANPOWER PLANNING

Fig 7.1

Planning is an activity that is needed for each and every stage in management functioning: as
this staffing / recruiting people is a planned activity. It identifies requirements of different
positions, at different levels, and different abilities required to carry out respective positions.
When a project is decided, an organization needs to analyses its manpower requirements first.
At the time of planning process manager needs to monitor the external environmental
conditions. It may be technical changes, legal matters, political changes or change in life style.
Therefore it is necessary to plan in advance the manpower needs over a period of time and
follow the plan so to ensure smooth functioning. Planning is possible only when facts and data
related to number and type of positions and the time duration that is required, need to be
analyzed. This data could be obtained through organizational structure, external changes etc.
Responsibilities, authorities and job profile for each position and relation among different
positions, are also to be identified in the manpower planning process.

1. Manpower planning is done on the basis of organizational plans for all positions in an
organization i.e. from top management positions to staff positions.

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2. The size of the organization complexity of organizational structure, projected plan and
post duration will help to analyses number of positions required in the organization.
3. Manpower planning also considers different levels of the organizational structure.
4. Job content for the each post would be decided in the planning stage itself.
5. Along with technical abilities, physical and mental abilities are also defined here.
6. This planning process also defines the process of promotion and abilities required for it.
7. The processes of recruitment, selection, promotion, are better identified with manpower
process.
8. Additional facilities like welfare pay and perks are also briefly explained in manpower.
9. Appraisals process along with its regular schedule, which would lead to promotional,
rewarding or for any corrective actions.
10. Steps to be taken for corrective actions are also defined in manpower.

Activity 1

Mr. XYZ wants to open a restaurant in the city area, find out various posts that he needs to
follow for the recruitment process. Prepare a plan how he will have to carry out the
selection and recruitment process.

7.7 SELECTION

Once the positions and the abilities required for that post are decided, the process of selection
starts. It includes recruitment, placement, promotional activity etc. As G J Narayana says,
“Selection means filling a particular post calling for specific job requirements whereas
placement involves finding or creating a suitable position suiting industrial talent, ability and
limitations.” Selection process depends on organizational needs and legal matters. The
selection process starts with screening process and ends with orientation to newly appointed

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person. Staffing process starts with selection process with the help of manpower planning
phase. Application screening is carried out at first phase of selection for unqualified applicant.
Ultimately a best suited person, who will help to achieve the objective set of an organization,
will be selected.

Selection starts with the recruitment process. Generally we use term recruitment for the
process of employment. But in the management function, this term has a very limited scope. It
just refers to the initial stage of staffing function. It is just a process of inviting and attracting
suitable candidate for the various posts.

7.7.1 For the recruitment process applications are invited from various sources i.e. internal as
well as external sources.

Government
Employment
Exchanges

Educational
Institutes

Media
Advertisements

External Sources
Private
Employement
Agencies

At Factory Gate on
daily basis hiring
Recruitment

Referrals

Employees within
Internal Sources
the organisation

Fig 7.2

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1. Internal sources – A suitable person from the existing staff members can be selected on
the promotional basis. The periodic appraisal report provides data and facts for the
comparisons.
2. External Sources – some of the positions, those are identified in the manpower planning
need to be published for selection process. For this one needs to consider social,
economic, political, educational conditions for all those related posts. Candidates are
selected from passing out students; receive applications through advertisements or
through employment agencies.

7.7.2 Steps to be taken for selection technique –

A. Interview -

Interviews are conducted to analyses the qualities and abilities of candidate. Interview
is a technique where candidate is evaluated by an employer. Evaluation process is
carried out for hiring decision. The job interview is considered one of the most useful
tools for evaluating candidates. Interview help to pick up right person for the job.
Interviews are generally conducted to observe –

Table 7.1

Situation Background information. Provide a context as

Where and when
Task Capacity to take up challenges and expectations.
What is needed to be done and Why?
Action Specifies Action. – How and which tools would be used
for it?
Results It explains accomplishments, recognitions, savings and
quality.

1. Mental Ability – Capacity to learn and process information.

2. Personality –Candidate’s emotional stability, self-motivation and decision-making
capacity.
3. Values – Positive aspect to achieve the decided goals.

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Interview is to be conducted in such an atmosphere that will encourage free

communication. Interview demonstrates the candidate’s basic knowledge of
subject. Job requirements, enterprise culture are also better explained and
discussed during interview sessions. For the senior post, there could be more than
one interview sessions and conducted by more than two interviewers.

B. Tests –

During the interview sessions personal traits could be assessed within a few minutes,
but to know the depth of technical knowledge, that he/she possesses could be analyzed
through various tests to be conducted. Therefore well-designed tests are conducted to
extract intelligence, proficiency, vocational fitness and personality of the candidate.
Here different types of tests could be conducted, like technical test or psychological
tests, etc.

1. Aptitude Test –This includes aptitudes like arithmetic test, verbal ability, logical
reasoning test, number puzzles or even Sudoku. The aptitude test has been
compiled to assist the manager / team leader in the recruitment of good ability
candidate. These tests are used in conjunction with other interview techniques.
Generally these tests comprises of 25 questions. These questions are designed to
test a broad knowledge of the candidate.
2. Psychometric Test –Basic objective of Psychometric test is to measure aspects of
applicant’s mental ability or personality. These tests are designed to provide
employer with a reliable method of selecting the most suitable job applicants or
employer for promotion. These tests represent just one of the methods used by
employer in the selection process. These tests aim to measure attributes like
intelligence, aptitude and personality. It provides an employer with an insight into
how well an employee can work with other people, how well he handles stress and
whether he will be able to cope with the intellectual demands of the job. The
principle behind personality questionnaires is to judge feelings, thoughts and
behavior. It plays significant role in providing answer regarding your enthusiasm
and motivation. Now a most of the employers across most of the sectors like IT,
engineering, energy, banking, consultancy, accountancy, FMCG sectors, civil
services, etc. conduct psychometric tests.

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3. Numerical Tests – This includes questions based on basic arithmetic like addition,
subtraction, multiplication and division; number sequence and simple mathematics
like percentage, fractions etc. This categorize as speed test and used to determine
candidate’s basic numerical ability. Most of the competitive examinations conduct
numerical test to judge candidates’ speed and the level of abstract thinking.
C. References –
Tests and interviews can provide a brief explanation about candidate’s emotional
balance. A candidate is selected for the assigned within a company has to be judged
for his social behavior. In detail this data could be collected from a person who
knows a selected candidate well. This information could be obtained from head of
the institute from where a person is done his/her education or a previous employer
or a person whose contact numbers are given as a referee. Certain jobs like cashier,
security guards where loyalty, perfection and sincerity is important. This referee
can guide about this certain behavior.
D. Medical Examination –
Certain posts need physical requirements like pilots and his crew members should
work with perfection for a longer time, their eye sight has to be perfect; whereas
complete physical and mental fitness is required in case of security guards; chefs
working in the production section need to stand for longer time in the kitchen.
Therefore physical fitness is prime criteria for the candidate selected for the post.

7.8 PLACEMENT AND ORIENTATION

When a selected candidate decides to join an organization, his consent is given in writing to the
respective authorities. This joining report represents percentage of recruitment and selection in
the organization. Placement shows the number of candidates joining the organization.

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Orientation Program

Welcoming new employees and introduce them

with organisation's culture.

Facilities

Introducing employees with facilities like

welfare, transport, gym, canteen etc.

Awareness

Make them aware about code of conduct, rules

and regulations of the organisation.

Training

To upgrade employees know to take up

company's assignment to be more productive.

Fig 7.3

Orientation is a process of introducing new employee with organization’s culture and makes him
acquainted with it. Here he gets introduced with his colleagues also. General environment,
working conditions and various rules and regulations are better explained in the orientation
sessions. Nature of job and job requirements along with duties and authorities are explained at
this point. Employee’s anxiety can be reduced and work expectations are explained properly by
a good orientation.

7.9 TRAINING AND DEVELOPMENT

Training upgrades skills, attitudes, knowledge and behavior. In large companies separate
department is developed with qualified trainers to teach the employees. Training is the formal
and systematic modification of behavior through learning which occurs as a result of education,
instruction, development and planned experience. Training permits employees to perform their
present job to standards. It improves human performance on the job, the employee is presently
doing. Training is given to those people who have been identified as being promotable or

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considered for new job and to increase their potential. Training is an application what one has
learned as a theory during course time. It provides narrow perspective with a specific task.

7.9.1 Importance of Training

1. Training increases productivity and quality.

2. It promotes versatility, adaptability to new methods.
3. It reduces number of errors and accidents.
4. It reduces labour turnover.
5. It increases job satisfaction and efficiency
6. It results into less absenteeism.

7.9.2 Types of training

There are different types of training methods.

1. On the job training – In this method employees learn or get training about new
technology or how to handle equipment’s while performing their duties assigned to
them. It’s a hand on training method.
2. Off the job training – This method involves training by some expert away from the job
place. Here employees are free from their immediate work pressure. In this method
training is imparted through conducting some lecture series, seminars, group
discussions, etc. There is another new method of off the job training which is called
vestibule training. Here, in a workshop same working condition / atmosphere is created
to make employees or new candidates acquainted with actual job conditions. It
facilitates large number of employees get trained in a shorter period.

Mark Twain says “Training can turn bad morals to good, it can destroy bad principles and
create good ones, it can lift men to angelship.” If an organization wants to produce
professional career minded employees an investment has to be made. Employer must
provide training as one of the needed tools for employees to get the job done. It is
management most important function to train people for their assignment.

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7.9.3 Training provides with –

1. A human capital is regarded as one of the major drivers of productivity, economic

growth and competitive advantage.
2. Training recognizes the importance of human capital.
3. Skilled, adaptable, motivated and resilient workforces increase the productivity.
4. A responsive strategy to meet employee needs for skilled workers.
5. Learned employees can retain customers and increase business and market share
through proper behavior and good public relation.
6. It identifies resistance to change and prepare employees to think positively.
7. Training activity affects change in behavior as well attitude.
8. It provides creativity as during the training session candidate may introduce some new
idea that could be transformed into applications.
9. Training makes the processes more efficient and effective.
10. It responds to organization restructuring.

Investment in training and education gives high returns. Generally Japanese companies
spend 6% of their budget on training. Japanese automobile companies spend 300 hrs. to
train new employees as compared to only 40 hrs. US companies.

7.9.4 Training benefits for industry employees.

1. Does job more efficiently by learning new methods.

2. It provides professional approach to work, engages in best practice routines.
3. Provides personal satisfaction.

Once the training activity is completed employee is ready to take up his/her assignment.

7.10 PERFORMANCE APPRAISAL

A performance appraisal is a review and discussion of an employee's performance of assigned

duties and responsibilities. The appraisal is based on results obtained by the employee in his/her

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job. It provides a way to identify areas for performance enhancement and to promote
professional growth. Performance evaluation should be a continuing process throughout the
year, with a formal performance evaluation interview conducted annually. The intent is to
communicate expectations, provide constructive feedback, document accomplishments,
compare current performance against expectations and jointly formulate performance
development plans.

Periodic reviews help supervisors gain a better understanding of each employee's abilities. The
goal of the review process is to recognize achievement, to evaluate job progress, and then to
design training for the further up gradation of skills and knowledge. The success of the process
depends on the supervisor's willingness to complete a constructive and objective appraisal, the
employee's willingness to respond to constructive suggestions and to work with the supervisor
to reach future goals. Performance appraisal is a process of evaluating an employee
performance of a job in terms of its requirements.

7.10.1 Performance Appraisal aims at –

1. Personal development
2. Work Satisfaction
3. Involvement in the organization
4. Increasing harmony and enhancement
5. Maintaining organizational control
6. Providing feedback about concrete and tangible particulars.

Generally in most of the organizations Performance Evaluation process is carried out as

follows -

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Taking
Corrective Setting
Actions performance
standards

Discussing Communicating
Results Standards

comparing Measuring
Standards Standards

Fig 7.4

7.10.2 Performance Appraisal Methods

A careful review will stimulate employee’s interest and improve job performance. During
the performance evaluation process, the most recent job description on file with Human
Resources is reviewed. Employees are reviewed for a salary increase, generally annually.
Different companies apply different methods to review performance.

a. MBO-

It can be defined as a process whereby the employees and the superiors come together
to identify common goals, the employees set their goals to be achieved, the standards
to be taken as the criteria for measurement of their performance and contribution and
deciding the course of action to be followed. The principle behind Management by
Objectives (MBO) is to create empowered employees who have clarity of the roles and
responsibilities expected from them, understand their objectives to be achieved and
thus help in the achievement of organizational as well as personal goals. MBO is a
system developed by a Management Thinker Perter Drucker.

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b. 3600 Appraisal System-

This method gives a chance to the employee to look at his/her strengths and
weaknesses, his achievements, and judge his/her own performance. Superior’s appraisal
forms the traditional part of the 360 degree performance appraisal where the
employees’ responsibilities and actual performance is rated by the superior. Here
anyone can respond for an employee, it can be his/her peers, managers , subordinates,
team members, customers, suppliers/ vendors . That means it can be anyone who
comes into contact with the employee and can provide valuable information
or feedback regarding the "on-the-job" performance of that particular employee.

c. Straight Ranking Method -

This is one of the oldest and simplest techniques of performance appraisal. In this
method, the appraiser ranks the employees from the best to the poorest on the basis of
their overall performance. It is quite useful for a comparative evaluation.

d. Critical Incident Method -

This format of performance appraisal is a method which is involved identifying and

describing specific incidents where employees did something really well or that needs
improving during their performance period.

e. Essay Evaluation Method -

In this style of performance appraisal, managers/ supervisors are required to figure out
the strong and weak points of staff’s behaviors. Essay evaluation method is a non-
quantitative technique. It is often mixed with the method the graphic rating scale.

f. Trait Rating System -

Here person’s qualitites like knowledge of work, aptitude, attitude towards co-workers,
job performance, etc. are related like satisfactory or unsatisfactory or below job
requirements, normal or above.

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Regular and continuous evaluation of the quality, quantity and style of the person along
with the assessment factors, influence the personality and behaviour of an individual. It
is a method of rewarding those who are working efficiently and honestly in the
organisation at a sametime eliminating all those who are inefficient and unfit to carry
their responsibilities. Since 1956 Government of India has been following a system of
grading for evaluation, for which basic criteria applied are- Outstanding, Very Good,
Good, Fair and Poor. This rating sytem is followed by Annual confidential Report.

Traditional Appraisal Modern Appraisal

Method Methods

• Essay Appraisal Method • MBO

• Critical Incidents Method • 360 degree appraisal
• Graphic Rating scales • Asessment Centres
• Paired Compatision • Human Resource
• Field Review Accounting
• Straight Ranking Method • Behaviourally Anchroed
Rating method

Activity 2

Visit nearest company or any educational institute. Collect the documents and study the
process in that organization to evaluate employee’s performance in brief.

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7.11 PROMOTION

Promotion serves as a incentive for better work performance, enhance morale and create a
sense of individual achievement and recognition. Consistancy with prior practice would be the
criteria. Promotional activity makes changes in duties and functions, that may change into
complexity and responsibility also. It expands duties, authorities and responsibilities. A person
who would ensure maximum opportunity and consistant with the commitment to institutional
needs and institutional excellence, affirmative action, equal opportunity can recommanded for
promotion.

During the job evaluation process organisation M/s. ABC recognises the post of Marketing Head.
Mr. X and Mr. Y are working as a zonal manager of marketing for two different zones. A target
of Rs. 1 lakh in the first year and Rs. 1.5 lakhs in the second year was assigned to them. Mr. X
could achieve Rs. 96 thousad in the first and Rs. 1.2 lakhs in the second year. But management
received some adverse feedback about his behaviour and attitude from his teammembers
during evalution. While Mr. Y could achived Rs. 90 thousand and Rs. 1.15 lakhs in the second.
During evalution his team members, customers, suppliers provided good feedback about him.
Therefore management appointed Mr. Y as a Marketing Head though he achieved low targets as
compared to Mr. X.

Promotional activity is noting but one of the placement and selection activity where internal
source of selection is considered for staffing. It referes to the advancement of an employee to a
higher level or position. The main purpose of promotion is to make fuller use of the abilities of a
person and also increase his job satisfaction.

7.12 CORRECTIVE ACTIONS

Corrective action is a process of reacting to an existing problem, customer complaint or
employee/ workers unsatisfied result. Corrective action is an essential element of quality
system to have a significant financial impact on a company. Before starting with any corrective
action management need to list the specific information documentation or data avilable that

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identifies the problem. This is very improtant during investigation. Corrective actions could be
tranfers, demotion or termination also.

e.g. A Regional Manager of Scale V grade of a Nashik District of a Nationalised Bank has found
to be involved in fradulant activity. Documents identified also support a case. A corrective action
has been taken against him and he is demoted to scale I officer with a rural branch and without
any authorities.

Activity 3

Visit a Branch Manager of any Bank nearest to your house. Ask him about -

1. Performance Apprisal System that is followed to evaluate the employees performance.

2. Promotional system that is carried out in the bank.
3. Corrective actions applied in certain situations.

7.13 KEYWORDS

1. Attrition – One’s gradual or natural reduction in membership due to retirement, resignation

or death

2. Lacunas – An empty space or a gap.

3. Versatility - Having varied uses

4. Resistance – A force that tends to oppose.

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7.14 SUMMARY

Staffing means filling up the organisational positions for developing competencies to take up
challenges. It is a process of optimum utilisation of human resources. It is an activity that is
concerned with acquiring developing, employing, appraising and retaining people. In simplest
term it is a process of putting proper people to ther appropriate job. It is a planning to bridge a
gap between jobs to be done and qualified and eligible person to carry that job. It plans out to
fullfil the need of employees within the organisation. This need is communicated through
various ways like advertising in medias, mouth publicity within the existing employees. Even
students from various educational institutes can be considered for placement. They are eligible
for training and interanceship within the organisaion. Training is imparted toproduce career

minded profession those could take up challenges to achieve the organisational goals.
Promotion, transfers and demotion are actions taken to reward employees as against their
performance. Evaluation is a system which shows the percentage of devotion and commitment
by each employee to achieve set standards for him/her.

Thus staffing is a complete process of human resource department as human capital is

considered to be most vital asset of a company. It is a process of taking care and look after its
staff for progress at individual as well as organisational level.

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UNIT 8 LEADING

Objectives
After studying this unit, you would be able to:
• State concept of leading and relationship between leader and subordinate.
• Enumerate qualities those are required to be a leader.
• Elaborate different leadership styles and theories applied in different situations.

Structure
8.1 Introduction
8.2 Definition
8.3 Principles of Leadership
8.4 Process of Leadership
8.5 Functions of Leadership
8.6 Management with Leadership
8.7 Leadership Style – Autocratic
8.8 Democratic Leadership style
8.9 Delegative Leadership Style
8.10 Leadership Theory – Trait Theory
8.11 Behavioral Theory
8.12 Contingency Theory
8.13 Keywords
8.14 Summary

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8.1 INTRODUCTION

A person works for empowerment of his team members or motivates them to manage their
work with some innovative way, a person is said to be leading his team. Leading is one of the
important functions as all the managers which directs and motivates it’s subordinates and
influence a group towards the achievement of the goals. Leading person will inspire workers
into higher levels of teamwork. Therefore leadership is an important skill. It helps to upgrade
individual, groups as well as organizational performance. Leadership is an art that depends
upon possession of certain qualities. These qualities may be born or created with knowledge
and experience. Leadership depends upon the ability to influence the thoughts and directs
people to complete their activities successfully. Leading is an activity to accept the challenges
and prepare colleagues to take up those challenges and work in a systematically planned way to
finish those challenges.

8.2 DEFINITION

Duening and Ivancevich stated that it not easy to define leadership precisely. Still they have
defined leadership as –
“The ability to influence through communication the activities of others, individually or as a
group, toward the accomplishment of worthwhile, meaningful and challenging goals” This
definition indicates that there cannot be a leader unless there are people.
Chester I Bernard defines “Leadership is the quality of the individual whereby, he guides people
on their activities in organized effort.”

Keith Davis said “Leadership is the ability to persuade others to seek defined objectives
enthusiastically. It is the human factor which binds a group together and motivates it towards
its goals.”

Harold Koontz and Cyril O’Donnell “Leadership is influencing people to follow you and to work
willingly for the advancement of common goal.”

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Leader is a individual person who influence others working with him, guides them work in
proper direction, coordinates group members to work as a team, he is aware about external as
well as internal environments, prepared with a SWOT analysis, encourages them to be creative,
motivates them towards achievement of the common goal.

8.3 PRINCIPLES OF LEADERSHIP

US Army stated leadership is based on eleven principles. Principles are indicates to be, to know,
and to follow consideration. These principles guide and provide basis as a tools in certain
situations. It helps to take appropriate decisions in critical situations.

1. Know yourself and seek self-improvement –

A person need to know and understands his attributes. He would be aware about his
strengths, weaknesses, etc. A good leader will seek for self-improvement with self-study,
observations, monitoring situations, interactions, communication. This continuous up
gradation, strengthens attributes.
2. Be technically proficient –
A person who is technically sound must possess full knowledge. He must be aware about
task he needs to complete properly.
3. Seek responsibility and take responsibility for actions –
When a person is heading a particular team, a specific task is assigned to him. He needs to
take whole responsibility of the activities to be completed for that task. Attitude of self-
improvements benefits to take up new challenges and sense of completing those. As a
good monitor, he would observe about when ever things are going wrong, analysis the
situation, take corrective actions, and communicate properly.
4. Make sound and timely decisions –
Appropriate decisions leads to better future. Appropriate decisions is a tool for planning,
and to solve problems. To finish the task within a time duration allocated, he needs to
analysis the situation, and take fast and appropriate decisions.
5. Set the example –
A leader is always role model for his employees. His colleagues and co-workers are his
followers. Good attitude, characteristic makes him a good personality.

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6. Know your people and look out for their well-being –

A person interacts with his follower as a leader. A leader looks after his colleagues as a
subject. He should know all the employees working with him. Their job satisfaction, sound
mind, relations among the group, helps to achieve the decided goal without any errors. This
could be possible when leader thinks about everyone’s well-being.
7. Keep your workers informed –
Interaction and communication is key factor of sound and healthy group environment.
Regular happenings progress or lacking behind the schedule, need to be communicated to
all the team members. This makes them to be a participant in decision making activities and
get them aware about the current situation.
8. Develop a sense of responsibility –
Good interactions among colleagues, senior employees, make them aware about current
situations. This can develop the sense of responsibility. Even the smallest task is important.
If that small activity is not finished in time, to finish other activities gets delayed. Even a
sweeping and cleaning a hall for a function before 2 hours is important so that other
arrangement for the function could be done in time. So a responsibility assigned to a
sweeper is also important.
9. Ensure that, task are understood, supervised and accomplished –
Qualitative work is important. Every employee, worker needs to be aware about task given
to him and time duration allotted to finish the task. Job profile along with duties and
responsibility given to each employee; have to be communicated in a proper way.
10. Develop a sense they are working as a team –
People work to gather to finish a task. They are working in a group, means their activities
interact with each other. Along with this, they should know that they are a part of an
organization. Therefore coordination among different groups has to be there.
11. Use the full capabilities of your organization –
Maximum utilization of all organizational resources is key factor of team coordination. It
develops team spirit, and it employs each department, and organization to its fullest
capabilities.

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8.4 PROCESS OF LEADERSHIP

Kouzes & Posner have identified the process to be a great leader. These are some common
traits that successful leaders would follow –
1. First they need to find out process and activities that need to be improved, prepare a
priority list.
2. Share your vision in words that can be understood by your followers.
3. Give them the tools and methods to solve the problem.
4. When the process gets tough, get your hands dirty. A boss tells others what to do, a leader
shows that it can be done.
5. Share the glory with your followers' hearts, while keeping the pains within your own.

8.5 FUNCTIONS OF LEADERS

To develop a group as a team is most important for a person who is heading that group. A
person is called a leader when he/she looks forward into future developments. For this he/she
needs to carry certain activities, as –
1. Development of Team Work –
A group of people working together form and develop a sense of team work. A sense of
togetherness makes a team. Leader identifies followers’ competence, potential and need.
He tries to create healthy working environment.
2. Representing a team –
Leader heads the team, he is one of the representatives of his team. He co-ordinates
between his team members and management. He communicates with both the level. He
forwards plans, activities to be carried out with his team members whereas communicates
any problem or grievances of his subordinates to the senior management.
3. Managing Time –
To finish the task in given time duration, time management is one of the important function
that every leader needs to supervise. PERT/CPM analysis helps in finishing task in time. To
take a right decision at a right time is a basic criteria of time management.

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4. Guiding team members –

A technically sound leader can guide and advice his team members in a proper way. His
knowledge and skills can be put to the fullest use. He constantly monitors the external
situation for any technical changes that could be applied for his job, may up grade his job
work for qualitative and quantitative application.

8.6 MANAGEMENT WITH LEADERSHIP

A person in the management could be integrated with leadership. Leadership is an additional

quality with management function. Michael Dell of Dell computers said that he is a better
leader than a good manager. Leadership and management must go hand in hand. They are not
the same thing. They are necessarily linked, and complemented. Any effort to separate the two
is likely to cause more problems than it solves.
Warren Bennis in his book “On the becoming a Leader” have listed above points.
Table 8.1

Manager Leader
He innovates.
He is an administrator
He is original
He repeats the same
He develops
He maintains
He focuses people
He focuses on systems and structures
He inspires and trust
He relies on control
He has a long range view
He has a short range view
He ask what and why
He asks how and when
His eye on the horizon
His eye on the bottom line
He originates
He imitates

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He challenges it
He accepts the status quo
He is his own person
He is the classic good soldier
He does the right things
He does things right

Per Daft, another thinker stated the main difference between leadership and management lies
in the fact that in the classical managerial context “managers are thinkers and workers are
doers,” while in a leadership context both leaders and workers/followers think, do, lead,
“expand their minds and abilities to assume responsibility” for their decisions and actions. He
has extended this view with five different angles –

1. About direction - Managers plan and budget whereas leaders create vision and strategy.
2. About Alignment – Managers direct, control and create boundaries, whereas leaders
allows others to grow and change him/her.
3. About Relationship – Manager’s relationships with people is based on position powers
and acts like a boss, whereas leader’s influence is based on personal power and serves
as a facilitator, councilor, philosopher or even as a servant.
4. About Personal Qualities – Managers focus on emotional distance, expert mind, talking,
conformity and insight into organization, whereas leaders deal with emotional
connectedness, open mind, listening, nonconformity and insight into self.
5. About Outcomes –Here manager maintains stability and creates culture of efficiency,
whereas leader creates culture of integrity and bring changes.

Abraham Zaleznick of Harward Business School has stated that managers focus on movement to
movement organizational performance whereas leaders focus on long term goals. Managers
are primarily concerned with process and leaders are concerned with substance. But most of
the managers are leaders whereas most of the leaders may not be good managers. We can say
some famous personalities like Shantanurao Kirloskar, Sunil Mittal, Narayan Murthy are some
good examples of leaders as well as managers. They could maintain good communication with
their employees and developed their business that could compete with the global environment
and competition. Duening and Ivancevich have stated that Managers climb the corporate
ladder; leaders make sure the ladder is leaning against the right wall.
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8.7 LEADERSHIP STYLE

Different people require different styles of leadership. For example, a new hire requires more
supervision than an experienced employee. A person who lacks motivation requires a different
approach than one with a high degree of motivation.

Autocratic Style of Leadership-

A manager or a leader gives an order his subordinates “complete this task within 3 days
with this technique only”. When a leader communicates with his subordinates or
colleagues with such kind of order, it is said to be authoritative or Autocratic style of
leadership. Decision-making activity is absolutely centralized and lies in the leaders hand
only. There is no room for subordinates to think, decide and behave. They are just
followers. They just do as they have been told to do it. Subordinates cannot participate in
decision making either suggest any alternative to for what have been decided. Leader gives
orders and assigns task without taking anybody into confidence. In this style employees
morale, productivity, innovation, creativity limits at certain level. Autocratic leaders
typically make choices based on their own ideas and judgments and rarely accept advice
from followers. Autocratic leadership involves absolute, authoritarian control over a group.
Generally, subordinates dislike such kind of leader’s style as they lose any freedom.

Subordin
ate no. 1

subordin Subordin
ate no. 4 Leader ate no. 2

Subordin
ate no. 3

Fig 8.1

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This style may be appropriate in case of unskilled and uneducated workers. Like a person
called Mistry gives an order about cutting, polishing etc. to carpenters to make furniture.
Here carpenter measures length and do carpentry work instead of thinking how to make
that furniture. Interior Designer designs the furniture and gives technical instructions with
minute details regarding how to transform that design into furniture. Even this style is
desirable when company endorses fears and punishment as a disciplinary technique.

Characteristics of Autocratic Leadership

1. Little or no input from group members.
2. Leaders make the decisions.
3. Group leaders dictate all the work methods and processes.
4. Group members are rarely trusted with decisions or important tasks.

Benefits of Autocratic Leadership

1. When decisions need to be made quickly and effectively.
2. During stress situations like military conflicts.
3. In case of students, or other unskilled workers.

Disadvantages
1. Group members dislike this kind of leadership as they are unable to contribute.
2. Lose of creatively hurts the productivity of employees.
3. Such situation increases frustration, low morale and conflict among subordinates.
4. Subordinates refuses to take any initiative and any responsibility.

8.8 PARTICIPATIVE OR DEMOCRATIC STYLE OF LEADERSHIP

These are people orientated leaders “Who can do this work by applying this technique or is
there any other solution to it”, can be the words of democratic type of leader.This leadership
encourages discussions and free-flow of ideas. This involves other people in the process,
possibly including subordinates, peers, superiors and other stakeholders. Team members can
put fourth their ideas on the best way of alternative. Leader studies those options, chooses one
of them to be proceed. Leader works to develop the team members to make them more
efficient and stronger at their jobs. They work as a cheerleader, motivating and encouraging the

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team for better productivity. They try to make their co-workers comfortable in their roles. This
develops the sense of team work and increases community feeling. Participative leader
delegates the responsibility to take up the challenges. They communicate their requirements
and ask for any opinions. They modify their plans if found suitable. These leaders are
themselves confident and show confidence on their followers.

Subordina
te no. 1

Subordina
Participative Subordina
te no. 3 Leadership te no. 2

Subordin
ate no. 4

Fig 8.2

Now a days pattern of job work has been changed from just to clerical to knowledge work.
Therefore more knowledge competent workers are required than unskilled one. Here people
require thinking and solving problems. According to management principles, division of work,
delegation, thinking process can be forwarded to subordinates. More than one suggestion can
apply as an input for PERT/CPM process.

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Characteristics of Participative Leadership

1. Involves co-workers in the decision making process.

2. Leader delegates work along with thinking process.

3. Encourages subordinates to be innovative.

4. Leader is self-motivated and motivates others.

5. Can manage time appropriately.

6. Works as a guide, consultant, philosopher, or as a friend whenever necessary.

7. He knows each and every one working with him.

8. He can choose the best talent among the people.

Benefits of Participative Leadership

1. Knowledge workers can prove their creativity.

2. Several people together make better decisions than one person alone.

3. People work together with competitive and collaborative spirit.

4. People are more committed when are involved in decision making.

5. Provides opportunity to utilize talents which satisfies need for self-fulfillment and job
satisfaction.

Disadvantages

1. When 2 or more people are involved in decision making takes time.

2. Some people like the feeling of being in control.

3. Less educated people cannot work unless they are instructed by the others.

8.9 DELEGATIVE LEADERSHIP

When a leader say that “You people do this work, think how to finish this.” This is also known as
Free Reign or Laissez-Faire type of Leadership. This type of leadership is said to be delegating
work with authority and responsibility to its followers. It allows them to take decisions. But
leader is also equally responsible for the decisions. This leadership is used when employees are
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able to analyses the situation and what and how they can do it. It not possible for a leader to
complete, each and every job, works alone. Delegation is done when there are competent
people working with him. Priority list for delegation is prepared for the certain task to be
completed. Here leader merely acts as a coordinator for all the resources. Researchers have
found that this is generally the leadership style that leads to the lowest productivity among
group members. This is a style not to be used when things go wrong, but rather when one trust
and have full confidence in the people.
Characteristics of Delegative Leadership
1. Leaders provide very little guidance.
2. Complete freedom is given to make decisions.

3. Leaders provide the tools and resources whenever needed

4. Group members are expected to solve problems.

1st Employee

2nd Employee

Production Manager
Laissez Faire
leadership

Inventory
Manager

Sales Manager

Fig 8.3

Benefits of Delegative Leadership

1. Applied for highly skilled, motivated and capable of working them at their own.
2. Leaders can devote their time for other priorities.
3. Employees can apply their full potential.

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Disadvantages
1. Not proper when employees are semi-skilled or less experienced.
2. Though employees are highly knowledgeable, but lack in decision making capacity.
3. Sometimes projects may lose their original track.
4. May increase the time gap, which may lead to delay in the project.

Activity 1

Prepare a dairy for a month. Write down an event where you have shown your leadership
quality, may be positive or negative environment. Try to find out which leadership style you
have used.

8.10 LEADERSHIP THEORIES

Leadership is an activity to influence the followers for success. Every manager cannot be a
leader, as every leader may not be effective manager. A leader’s ability to influence others may
be based on a variety of factors other than his formal authority. To study these influencing
factors, some thinkers have studied characteristics of leaders.
Some of those theories tend to focus upon the characteristics and behaviors of successful
leaders, while theories consider the role of followers and the contextual nature of leadership.

Trait Theory
It is said that, effective leaders are born, not made. This statement is based on the
previously known theory of Great Man theory of Leadership. While it was said that in born
behavior develops a great man i.e. a leader. To be a leader one must have some inborn
abilities to influence others. It was believed that through this approach, leadership traits
could be identified and that people with such traits could then be recruited, selected, and

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placed into leadership positions. After few years it became clear that no consistent traits
could be identified, although some traits were found in a considerable number of studies.
Stogdill in 1974 , have identified traits and skills of leadership –

Table 8.2

Traits Skills

Adaptable to situations Clever (intelligent)

Alert to social environment Conceptually skilled

Ambitious and achievement-orientated Creative

Assertive Diplomatic and tactful

Cooperative Fluent in speaking

Decisive Knowledgeable about group task

Dependable Organised

Dominant Persuasive

Energetic (high activity level) Socially skilled

Persistent

Self-confident

Tolerant of stress

Willing to assume responsibility

This research examined the physical, mental, and social characteristics of individuals. They
have studied for significant associations between individual traits and measures of
leadership effectiveness. Physical traits such as height, mental traits such as intelligence,
and social traits such as personality attributes were all subjects of empirical research. The
initial conclusion from studies of leader traits was that there were no universal traits that
consistently separated effective leaders from other individuals.

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8.11 THE BEHAVIORAL THEORY

During 1950’s and 1960’s different behaviours have been studies for leadership styles. Here
researchers studied how leaders behave towards their followers. It is stated that, a leader
behavior is the best predictor of his leadership influences and as a result, is the best
determinant of his or her leadership success. Behavioral studies are based on the scientific
approach. It has been recognized after studying autocratic and democratic styles of leadership.

Different three experiments have been conducted to study behavioural theories

8.11.1 Ohio State University

In this study different individuals right from students, from private companies, military
personnel etc. have been surveyed to identify common leadership behaviours. University
developed a list of 150 statements out of 1800 statements that received as a responses. This
questionnaire is now well-known as the LBDQ or the Leaders Behavior Description
Questionnaire. After compiling and analyzing the results the study concluded, there are two
types of behavior, i.e. people-orientated behavior and task oriented behavior.
1. People–oriented behavior – People oriented behavior focuses on encouraging,
observing, listening and mentoring. They motivate their followers with human relation
approach. They focus to satisfy various needs of their followers. These leaders are also
task oriented people, but they achieve it by different means.
2. Task oriented behavior – Task oriented people focuses on organizational structure and
the operating procedures. While motivating employees they like to keep control over
them. They are more concerned with initiating, organizing and clarifying information
gathering.

8.11.2 University of Michigan

Dr. Likert a famous organizational psychologist of University of Michigan has studied the
leadership theory. Even he identified three characteristics of leadership. The concept of
Participative Manager has been coined by Likert while he concluded the study by stating
that task and relationship oriented behaviours are not of major significance, which have
identified by Ohio State University.

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8.11.3 Blake and Mouton’s Leadership Grid

Leadership/Managerial grid is a simple tool for leaders to assess their own style of working;
what they do and how do they act and behave with their subordinates. In this, leaders are
more effective when they can establish balance between task and people. This grid consist
of two axes i.e. X axis, which is concerned for people and Y axis for production. It shows
how leadership style can help to achieve objectives in certain situations.

Fig 8.4

This grid shows various ratio and proportions to the degree of relations between task and
people. In the grid 9,1 leader is more concern about task and results while less concern
about people. For them people are means to achieve the results. Leader of country club
grid are more concern about people, while fail to focus on task. When a leader withdraw
himself from a particular project he may behave like impoverished management where he is
neither concern about task nor people. Next two i.e. middle of the road management and
Team management can achieve success as they show highly balanced behavior. They are
concerned about task as well as people.

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Managerial grid model consider following key behaviours:

1. Initiative – Being at the forefront of action

2. Inquiry – Seeking and testing information before hand

3. Advocacy – Communicate your opinion and ideas

4. Decision – Making and identifying possible options and acting as on

5. Conflict – Resolving disagreements and reaching a solution

6. Critique – Using experience for further effect

7. Resilience – Understanding how problems influence the ability to move forward

8.12 CONTINGENCY THEORY

Contingency theory is similar to situational theory in that there is an assumption of no simple

one right way. The main difference is that situational theory tends to focus more on the
behaviors that the leader should adopt. Contingency theory takes a broader view that includes
contingent factors about leader capability and other variables within the situation.

8.12.1 Fiedler’s Contingency Theory

Different situations lead for the different leadership styles. Fielder and his team member
studied a relationship of employees and organization that is to be effective under different
conditions. Managerial situation is contingent on the factors that impact on the situation. It
is sated that the direct leadership style is applied where in the repetitive environments,
whereas in complex and flexible situation participative style is applied. According to him the
situational factors influence the leader’s effectiveness. For this he have identified three
different situations –
1. Leader-member relations –
It is about leader and his followers or subordinates relationship. Confidence, loyalty,
devotion, faith on leader and from other side good communication with subordinates

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does reflect the relationship.The leader-member relations, task structure, and position
power dictate a leader's situational control
2. Task structure –
This is related to the job profile of a subordinated and well he could do it. Whether how
he is highly structured or unstructured or needs some help. In a favorable relationship
the manager has a high task structure and is able to reward and or punish employees
without any problems. In an unfavorable relationship the task is usually unstructured
and the leader possesses limited authority.
3. Position power –
Each manager is delegated with authority and responsibility. Positioning power
measures the amount of power or authority the manager perceives, the organization
has given him or her for the purpose of directing, rewarding, and punishing
subordinates. The degree of authority also reflects the relationship.

The task-motivated style leader experiences pride and satisfaction in the task
accomplishment for the organization, while the relationship-motivated style seeks to build
interpersonal relations and extend extra help for the team development in the organization

8.12.2 Hersey and Blanchard Maturity Model

This contingency theory tells about the maturity model of an employee. The theory states
that instead of using just one style, successful leaders should change their leadership styles
based on the maturity of the people they're leading and the details of the task.

According to both of them four leadership styles are there.

1. Telling(L1) – Leader describes what and how to do the job

2. Selling (L2)–Leader communicates an information and his suggestions with
followers, but subordinates discuss among themselves and decides.
3. Participating (L3) – Leader work with the team and participate in the decision-
making process while focuses on the relationship.
4. Delegating (L4) – Here leader delegates most of his responsibilities with his
subordinates but supervise the situation and do not participate in the decision-
making process.

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Here we can see leadership styles 1 and 2 are more focused on getting task done while
leaders of 3rd and 4th are more concern about welfare of people along with completing their
task. Hersey and Blanchard also stated that above mentioned leadership style is depend on
team members’ level of maturity. For this he has identified four different levels of Maturity.
People those fall into M1 does lack the knowledge, skill or confidence to work on their own
and they need to be pushed to finish the task. People might be willing to work but they do
not possess skill to do it successfully are group into M2. Followers who come under M3 are
ready and willing to work on the task, but lack the confidence. People who are able to
handle work independently, committed to the task, with high confidence and strong skills
are treated under M4 group.
Hence, relationship between leadership style and maturity levels is stated as –
• For M1 i.e. low level of maturity need to deal with L1 i.e. Telling style of leadership.
• For M2 i.e. medium maturity and limited skills with L2 i.e. Selling style.
• For M3 i.e. medium maturity and higher skills, but lack in confidence with L3 i.e.
participative style.
• For M4 i.e. high maturity can deal with L4 i.e. Delegate leadership style of maturity.

8.12.3 Path-Goal Theory

This theory is studied work motivation of subordinates or followers. This theory assumes
that there is one right way of achieving a goal and that the leader can see it but the follower
cannot. The theory states that by clarifying the path to achieving good performance and
removing pitfalls and enhancing personal satisfaction for the job. House and Mitchell have
identified this approach in 1974.
This theory is based on the following approaches –
• Clarify the path to subordinates so that they can achieve organizational goal.
• Increase rewards for the followers.
• Remove the hurdles those may be obstruct success.

This theory is depends on the situation, follower’s capability and motivation, as well as
complexity of the job and other environment. For this it identifies four types of leadership
styles –

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1. Directive Leadership – This type of leaders gives an instructions about task how it is
done, time duration for it, what is ultimately expected from them. Even he set
standards for task activities.
2. Supportive Leadership – This type of leaders do have a friendly approach. They
treat their subordinates at equal and respect their status. They support for the well-
being of their subordinates. They try to create comfortable work environment.
3. Participative Leadership – They involve their subordinates in decision making
activity, consult subordinates about their opinions. They make their subordinates to
think and be creative.
4. Achievement –oriented Leadership – This is a task oriented leadership where leader
challenges his subordinates to perform at their best level. They show confidence in
their subordinate’s task accepting ability.

8.12.4 Vroom-Yetton Expectancy Theory

This expectancy theory focuses on the degree of subordinate’s participation during different
situations. The amount of participation does reflects the style of leadership and decision
making process. During the study vroom realized that an employee’s performance is based
on individuals factors such as personality, skills, knowledge, experience and abilities. Thus
theory suggests that individuals may have different goals, they can be motivated with
favorable performance that will result in a desirable reward. The reward will satisfy an
important need and the desire to satisfy the need is strong enough to make the effort. They
have stated that factors like valence, expectancy and instrumentality interacts with each
other that acts in ways that brings pleasure.

This theory is based on the some beliefs that –

1. Valence – Emotional orientation will respect the outcomes, and intrinsic desire of
the want i.e. rewards, promotion, benefits etc. value for employees.
2. Expectancy - Employees have different expectations and levels of confidence about
what they can do. Management must discover what resources, training, or
supervision employees need.

3. Instrumentality - Management must ensure that promises of rewards are fulfilled

and that employees are aware of that.

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Activity 2

Read two biographies of any eminent personalities, as a leader. Write down characteristics
those are depicted in the books. Find out which leadership style do they possess.

8.13 KEYWORDS

1. Empowerment – To equip or supply with an ability

2. Enthusiastically – Source or cause of great excitement
3. Autocratic – Person with unlimited power and authority
4. Sustainability – to keep and maintain in existence

8.14 SUMMARY
“A leader is an agent of change and progress is about change”, as quoted by Narayan Murthy. He
also said that leadership is about raising the aspirations of followers and enthusing people with a
desire to reach for the stars. Responding and initiating change in today’s environment to maintain
organizational competitive advantage. In this global environment we need to focus on delivering
customer satisfaction and change management strategy to achieve the long-term goals. It is a good
leader who can enhance this change and brings and organization up to the level of taking challenges.
Different leadership styles and theories are applied by a leader as per the situation to bring the
changes. Leader of a well known organization can predict future and work on it for sustainability. A
leader must be able to recognize and measure the depth of risk. A great leader lives with integrity;
they are harmonious in words and in actions, honest, trustworthy, and authentic.

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UNIT 9 DIRECTION

Objectives
After going through this unit, you will be able to:
• State the basic concept of Direction in management and how it is useful for better
functionality.
• The need of supervision and communication throughout the organization.
• The importance of motivation and relation between leadership and direction.

Structure

9.1 Introduction
9.2 Definitions
9.3 Importance of direction
9.4 Characteristics of Direction
9.5 Supervision
9.6 Motivation
9.7 Features of motivation
9.8 Motivational factors
9.9 Motivational theories
9.10 Communication
9.11 Elements of communication
9.12 Leadership
9.13 Keywords
9.14 Summary

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9.1 INTRODUCTION

Management has to undertake activities like guiding people, inspiring and leading them. Even
they need to supervise their activities. Direction is one of the management functions that tells
how to conduct these activities. Directing means giving instructions, guiding, counseling,
motivating and leading the staff in an organization in doing work to achieve organizational
goals. Directing is like the activity of teaching in a classroom. In order to teach, a teacher has to
guide his students, maintain discipline, inspire them and lead them to fulfill the desired goal. It
helps the managers in ensuring quality performance of jobs by the employees and achievement
of organizational goals.
A school principle co-ordinates everything; She need to guide her teachers about how to handle
children, the way of teaching, preparing students for various competition, to carry out academic
as well cultural activities to be conducted within the school. Even it is necessary to upgrade
teachers to make them acquainted with the latest technologies that could be used as a teaching
aid. Head of each department is a manager. She instructs motives and guides her junior
teachers about day to day teaching work. Every manager or a leader councils, motivates his/her
subordinates to complete the task. He/she is the person who tells the exact path on which
his/her team members walk. Directing means telling people what is to be done and explaining
how to do it. It inspires subordinates to contribute towards the quality achievement. Direction
is more performance oriented. It is a continuous function that moves from top level
management to bottom level management. Direction ensures efficiency; it is an activity to
initiative the task and brings changes. When a manager is involved in making assignments,
assisting workers to carry out those assignments and inform workers about how well they can
perform is said to be directing and motivating his/her employees to complete the task.

9.2 DEFINITIONS

According to Newman and Warren, “Directing Deals with the steps a manager takes to get
subordinates and others to carry out plans.”

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According to Koontz and O’Donnell, “direction is a complex function that includes all those
activities which are designed to encourage subordinates to work effectively and efficiently in
both the short and long run.”

Directing consist of issuing orders and instructions by a superior, to his subordinates. This is a
process of motivating subordinates and providing leadership with an understanding of their
hopes, beliefs and behavior patterns. It helps to balance employees’ interest and organizational
interest.

9.3 IMPORTANCE OF DIRECTING

1. Direction initiates actions –

Organization is the sum-total of human and non-human resources. These resources should
be handled in a certain way to get the desired results. Through direction, management
conveys and motivates individuals in the organization to function in the desired way to get
organizational objectives. Without direction, other managerial activities like planning,
organizing and staffing become ineffective.
2. Direction integrates employees efforts-
For achieving organizational objectives, individuals need not only to be efficient, but
effective also. Their actions are interrelated in such a way that each individual's efforts
need to be integrated so that organization achieves its objectives in the most efficient
manner and this is possible through direction only.
3. Direction attempts to get maximum out of an individuals-
Every individual has some potential and capacity. Through direction, manager can
increase employees’ efficiency and encourage them to contribute at their maximum
capacity.
4. Direction facilitates changes in the organization-
Organization exists in the society and any change in the society changes organizational
process to keep organization ready to face environmental changes. Moreover, there are
changes in organization structure and in individuals. To incorporate and implement these
changes, management should motivate individuals affected by these changes, which is an
essential part of direction.

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5. Direction provides stability and balance in the organization –

Effective leadership, communication and motivation, provide stability in the organization
and maintain balances in the different part of the organization. Thus, organization exists for
a long period and its parts work in a harmonious way.

9.4 CHARACTERISTICS OF DIRECTION

1. It is a continuous function – Every manager need to keep on directing his subordinates as

well as his peers throughout the company’s life.
2. Direction is required at all levels of management. Every manager guides whenever
necessary.
3. Direction helps to convert their plans into performance.
4. Direction is a function of delegation. Superior directs and delegates the work to the
subordinates to complete the task.
5. It is an executive function as it is carried out by all the managers and executives at all levels.
6. Direction ensures co-operation among team members.
7. As direction ensures achievement of goals, it helps to reduce cost of production and
increase the performance.
Direction is essential to keep the elements like Supervision, Motivation, Leadership and
Communication effective.

9.5 SUPERVISION

Supervision is monitoring the environment. Supervision is one the technique of directing

subordinates for better results. Supervision is the activity carried out to monitor the
productivity and progress of employees. For example, chief executive will supervise the various
heads like head of marketing department, finance department, human resource department,
whereas each department head will supervise their subordinates. Marketing representatives
need to report and will be supervised by marketing manager.

Characteristics of supervisors

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1. Good supervisor should have ability to support and develop the super capacity to
identify and manage risk.
2. He should able to set standards for job to be carried out.
3. He must be able to recognize and help to resolve problems including time management,
workload, employees’ relations.
4. He should have ability to identify and discuss any misconceptions between subordinates
and try for low intensity intervention.
5. He should have ability to build subordinates morale and productivity.
6. He should have ability to use latest technologies for production as well for gathering
information.

9.5.1 Features of supervisory skills

For effective and efficient work, five management and supervisory skills can be followed –
1. Set standards –
Emphasize the importance of doing the job right way and with high standards. It is
necessary to ensure task is carried safely and according to the standards.
2. Increases the efficiency –
Supervisor will define and organize each task for best and maximum use of time and
other resources. By monitoring he would identify inefficiencies, and delegate or rotate
the task to improve effectiveness. He will prepare a plan for day to day monitoring.
3. Planning and organizing –
Supervisor need to plan and organize his task allotted to determine status and impact of
work division. For this, certain steps need to be carried out carefully and systematically.
He will set goals, priorities and deadlines, along with minute detail plans. Preparing a
schedule optimum use of the resources, and organize those resources by coordinating
with concern people. Even a SWOT analysis would help to bridge the gap between.
4. Supervising for effective performance –
Best performance is always appreciated. Therefore subordinates need to be prepared
to take up challenges and put up their efficiency at their best level. He is responsible to
place proper person at the proper job. Supervisor will clearly communicate his
expectations of performance and other rules and regulations of his department. He will
promote team work spirit for better performance.

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5. Monitoring -
Supervisor constantly need to monitor progress his task allotted. For this he will
constantly monitor processes are as per the schedule, records, equipments and other
resources are supplied in time. He takes reports from his subordinates progress and
quality of a product. He needs to supervise for quality control with various techniques
like PERT/CPM or Gantt chart. Even he will communicate any punishment for poor
performance or misconduct if any.

9.6 MOTIVATION IN MANAGEMENT

Motivation is a state of mind. It is a desire that helps to fulfill the wish. It is a process to achieve
what we have decided to have. It is a process of directing and carrying out physical and
psychological activities. Motivation is a process that starts with a physiological or psychological
need that activates a behavior or a drive that is aimed at a goal. It is a act or process of
stimulating to action, providing an incentive or motive, especially for an act. It sustains and
channelizes the intrinsic behavior of people. It is a psychological character that contributes to
the individual degree of commitment. Motivation is an individual behavior that depends on the
motivation. It can be used to increase the employees’ performance and commitment to
organization. The behavior of a person is a direct cause of how the person is motivated. In
management this can bed to increase an individual performance and commitment.

Managers are continuously challenged to motivate a workforce. They motivate employees

toward achieving organizational as well as personal goals. Top level management decides the
organizational goals whereas individual goals are to gain rewards and have a job satisfaction. As
Fred Luthans said that motivation is the process that arouses, energies, directs and sustains
behavior and performance. This stimulation makes workers more satisfied with and committed
to their jobs. People are the most important asset of an organization. The task of every
manager leader is basically people-oriented. The management of people at work is an integral
part of the management process. An well-managed organization usually sees an average worker
as the root source of quality and productivity gains.

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9.7 FEATURES OF MOTIVATION

• It is a continuous process
• Motivation can be positive or negative.
• To motivate people is an art.
• Motivation is goal oriented.
• Desire of job satisfaction motivates the individual.
• It is basically complex in nature.

9.8 MOTIVATIONAL FACTORS

Motivational factors can be basically divided into two categories, monetary and non-monetary-

1. Monetary Factors
a. Salaries – This is the most important motivational factor. Cost of living, company’s
ability to pay, requirement of a post are some of the factors those are considered while
fixing up the salary.
b. Incentives – this an additional payment done by company in the form of transport,
medical facilities, canteen and other food facility, etc.
c. Bonus – This is a reward that every individual receives as against the better
performance.
2. Non-Monetary factors –
a. Job title – Higher the designation, higher the status. Higher status motivates the
employee to perform better.
b. Job security – Guaranty of job security provides work satisfaction that motivates worker
to involve more.
c. Appreciation and Recognition – Work appreciation by superiors satisfy the employee
that his performance has been recognized. This sense of recognition motivates to
perform more better way.

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d. Delegation of authority – Able and committed employees received certain authorities

from their superior.
e. Working environment – Healthy working atmosphere with safety and hygienic tools
provided, feels comfortable for an employee to work better.
f. Good communication – there has to be a proper communication flow with superiors as
well as subordinates and co-workers.
g. Participation in management - Workers suggest and put forth any alternative or any
idea to complete work when this is considered by management, employee can feel
sense of belongingness.
h. Taking up challenges - Instead of routine work challenging task are welcome by
employees.

9.9 MOTIVATIONAL THEORIES

Various motivational studies have found a correlation between employee engagement and
organizational output. Most of the theories are based on the concept of need. It may be
physiological or psychological needs.

9.9.1 Maslow’s Need Hierarchy Theory

Most of the employees are motive by the desire to satisfy their needs. A clinical
psychologist, Abraham Maslow has developed a theory on motivation that is coned as Need
Hierarchy theory. This theory physiological need is a basic need of any human being that
each and every individual desires to fulfill, whereas in the self actualization phase human
being feels to be a complete human being and instead of fulfilling self requirements he
works for others. This theory is based on mainly two assumptions –
1. Each person’s needs depend on what he already has.
2. The Needs can be arranged in a hierarchy of importance.

For this he has identified five basic needs of which hierarchy is specified –

1. Physiological need – Food, shelter and clothing are the basic needs that any human
being wants to satisfy with. As Maslow stated a person who is lacking food, safety,

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love and esteem would probably hunger for food more strongly than for anything
else”. Once this need is satisfied, they no longer remain as factor for motivator.
2. Security Needs – Physical safety, protection from unemployment, stability and
considerable law and protection provides the need of satisfaction.

Self
Actualisation

Esteem Needs

Social Needs

Security Needs

Physicological Need

3. Social needs – Every human being is a social animal. He/ she always want to belong
to a group. He likes to be supported by others and worked in a team.
4. Esteem Needs – Recognition and respect for job done is a basic requirement of
human being. He likes to be appreciated by superiors or colleagues.
5. Self-Actualization Need – This is measured by extent of success and taking up
challenges at work. This refers to the personal growth. This enables individuals to
realize fully potentialities of their talents and capabilities.

9.9.2 Herzberg Two Factor Theory

Frederick Herzberg has invented this theory in 1959. He has collected information by
interviewed almost two hundred engineers and accountants. His study is based on attitude
of people towards their work. He classified factors into two categories i.e. factors those
influence in less for satisfaction, those are hygiene factors and those which highly influence
the attitude are motivating factors.

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Though hygiene or maintenance factors provide little level of motivation their presence is
necessary as those are basic needs. But their absence does not cause much harm. They
create positive job environment whereas prevent job dissatisfaction. They are not a
intrinsic part of a job but are related to the job conditions. If an employer is unable to
provide all those factors, that leads to dissatisfaction, but if those are present does not lead
to high satisfaction level. These factors are –

1. Company policy and administration

2. Technical supervision
3. Interpersonal relations with supervisor and subordinates
4. Interpersonal relations with peers
5. Salary
6. Job security
7. Personal life
8. Work conditions
9. Status

Motivating factors provide high level of satisfaction, while their absence does not lead to
high dissatisfaction. These factors make people happy as they fulfill need of psychological
growth. Thise create positive effect and are longer lasting on once life. There are some of
the motivating factors as –

1. Achievement
2. Recognition
3. Advancement
4. Opportunity of personal growth
5. Responsibility
6. Challenge in the work

According to Herzberg, these two sets are dependent on each other. The hygiene factors
when satisfied, does not lead to motivate individual for better performance. But motivating
factors provides individual growth and development. A hygiene factor ensures individual
willingness to work while motivating factors increase once ability and efficiency to work.

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9.9.3 Douglas McGregor’s Theory X and Theory Y

Douglas McGregor in his book ‘The Human side of Enterprise’ published in 1960 stated two
theories of motivation; theory X and theory Y. These theories are assumes that
managements role is based on the production factors along with human capital for the
economic benefit of the firm. Both the stories show different attitudes of employees
towards workforce.
a. Theory X
This theory assumes – employees are inherently lazy and will avoid work if they can.
Due to this assumption workers need to be supervised closely and control systems has
to be appropriate. According to this theory management, assumes employees are
inherently lazy and will avoid work if they can. It assumes that employees have no
ambition, want no responsibilities and would rather follow than lead. They are self-
centered and therefore do not care about organizational goals. They particularly resist
the change and are not much intelligent. Theory X relies on money and benefits to
satisfy employees’ lower needs. Once these needs are satisfied the source of
motivation is lost. According to this, people work to satisfy their lower needs and try to
fulfill their higher needs in their leisure time.

But McGregor also pointed out that a command and control is not only effective as
these are based on lower needs. But in today’s world these basic needs are satisfied, so
they are no longer motivators. Therefore he proposed an alternative theory Y.

b. Theory Y
Theory assumes – Work can be as natural as a rest or play
According to this assumption people are not by nature passive and resist to
organizational needs. Instead they will be self-directed to meet organizational
objectives. They are committed to their objectives for higher rewards like self-
fulfillment. Most people can handle responsibility because creativity and ingenuity
are common in the people. For this organization or management can apply
technologies like decentralization and delegations techniques to reduce number of
levels of management and make people more creative. With the job enlargement,
scope for opportunities and innovation broadens. This assumption focuses on
employee’s participation in decision making process. This environment would
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provide high levels of motivation, as employees work to satisfy for better

performance. Thus, Theory Y has at its core the assumption that the physical and
mental effort involved in work is natural and that individuals actively seek to engage
in work. It also assumes that close supervision and the threat of punishment are not
the only means or even the best means for inducing employees to exert productive
effort. Instead, if given the opportunity, employees will display self-motivation to
put forth the effort necessary to achieve the organization's goals.

Activity 1

Have you directed your friend to take up a proper decision when he/she is in dilemma,
about his/her better future?

9.10 COMMUNICATION

Communication is the way we interact with fellow humans, the way we get our message across.
The process of communication involves exchanging facts, ideas, and opinions, emotions
between two or more people. We communicate with our eyes, faces and bodies as well as our
words and voices. Communication is the ability to use and express information. Communication
is a two way process of reaching mutual understanding, in which participants exchange
information and create and share meaning.

Communication is a vital aspect of management for directing and guiding people. Regardless of
the size of your organization whether it's a large corporation, a small company, or even a home-
based business you need good communication skills if you want to succeed. In a business
manager’s work with their colleagues, all the managerial functions could be fulfilled only with

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the help of communication process. The effectiveness of management is largely depends upon
the effectiveness of communication.

Medium Structure Direction

used Based based

Formal Downward
Oral communiction communication

Informal Upward
Written communication Communication

Horizontal
Communication

9.11 ELEMENTS OF COMMUNICATION

1. Communicator – Sender is the one who initiates the communication process. Before one
writes or passes on the message is conceptualized first and then encoded. An effective
communication depends on the communication skill, knowledge level, and desire to
affect the receiver.
2. Receiver – Receiver is to whom the message is communicated. At the other end of the
communication, is the recipient of the message and must possess the same orientation
as the communicator. For the effective communication, receiver is the most important
factor of the communication.
3. Channel – This is a carrier through which message has been send from communicator to
receiver. Message can be passed orally or written, through print medias like newspaper,
periodicals, circulars, orders, letters, etc. or non-print medias like Internet, e-mails, SMS,
TV sets, Radio, meetings, etc. channels.
4. Encoding – It is the formulation of messages in the communicators mind. Here
communicator not only translates his purpose into message but also decides on the
medium to communicate. Various symbols like words, gestures, signaling or speaking
are used to translate concept in to message. Even it can be photographs, paintings,
films, dances, or performing arts.

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5. Decoding – This is the interpretation of message by the receiver. Receiver converts

message received by communicator as per his own understanding.
6. Feedback – It is the response or acknowledgement of receiver to the
communicator’s message. Even a minute express from the receiver like raising an
eyebrow or shoulder, smiling, shaking head can be the signs of feedback system. In face
to face communication sender receives feedback immediately, whereas in other medias
they need to ask people for the feedback and wait till it receives.

9.11.1 Types of communication –

All living things communicate with each other with some or other way. Birds and animals
communicate with different signs and symbols, human being communicate with the help of
sings, symbols and even words. Communication can take place with various types –
1. Written Communication – Messages written passed on through a medium of paper is
written communication. Paper messages can be orders issued, letter written, annual
reports, suggestions or grievances, reports and forms, bulletin boards, handbooks,
books, periodicals, theses, newspapers, etc.. This is the most suitable and convenient
form of formal communication. It is helpful for future reference and therefore reduces
disputes if any occurs. Once the messages are written it avoids the duplication. One
can decide his/her policies and procedures once they are in the written form. One may
think it is a time consuming and expensive process, but it can be put up as evidence and
keep you alert about your aims and goals.
2. Verbal communication – In this, face to face conversation takes place. It can be
lectures, telephonic conversations, social or business meetings, conferences, interviews,
videos, audio cassettes, television broadcastings, etc. Verbal communication is more
effective for the speedy decision-making process. It saves time as well as money.
Immediate feedback is received in this, that leads to modify your decisions or line of
thing process. It is always useful in emergency. It may prove unproductive when if
necessary decisions are not present in writing and has no permanency to it.
3. Formal and informal communication – Formal communication takes place between
formal relationships. Teacher-student, Superior-subordinate, employees within the
organization, social leaders and their followers, seminars and conferences etc. Generally

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it is in the form of written communication. Though communicator conveys his message

verbally, finally it records down for future reference.
An informal communication has no boundaries for the conversation. It takes place
during informal meetings. Sometimes it can provide valuable information for the
organization. For e.g. Discussion held between team members during the Christmas
party may come up with some innovative alternative to bridge the time gap in the
production schedule.

In an organization communication flows in various directions –

1. Downward Direction -
Top level management has issued a circular informing about new project to be
launched to its middle level managers, workers as well other stakeholders. This
form of communication is called downward communication. The most basic form of
downward communication is giving subordinates orders and instructions to get
work done. This kind of direction of communication is used generally in
authoritative leadership style. Handbooks, policy statements, electronic news
displays, memorandum, procedures, are some of the forms of downward
communication. Even verbal communication takes place during the meetings,
conferences, etc.
For example, A Branch Manager issues an order to his Assistant Manager to gather
information about a firm ABC and prepare a report to decide whether they can
grant a loan. This issuing an order to a subordinate is a form of downward
communication.

2. Upward communication –
Upward communication travels from subordinates to superiors. Here
communication originates at low level and then communicated to higher level
through proper channels. Upward communication takes place through grievance
procedures, participative decisions, suggestions boxes, group meetings. Feedback
system is most important factor of upward communication system. Positive and
negative conversing are, forms of upward informal communications. Proper
channels developed for communication can avoid this situation. Even research has

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shown that workers do not put their opinions, just because their suggestions may
get neglected or gets forward on bosses credit. But proper feedback system
facilitates with modifications if any and has a quality product.
3. Horizontal communication –
When the communication takes place between employees of similar level or from
different departments who have no direct relationship of reporting, or of diagonal
levels is called horizontal communication. When the managers of the same level
share ideas, suggestions and solutions to bring organization at better level, this type
of communication takes place. For this employee should need to know as many
people working in the organization. This type of communication establishes team
spirit within the organization. Horizontal communication is less formal and
structured than both downward communication and upward communication.
Informal discussions, Management gossips, telephone calls, teleconferencing,
videoconferencing, routine meetings, etc. are some of the forms of horizontal
communication.
For example, when a head of accounts section discusses with the head of the
advertising section, production manager, HR manager about budget is called as
horizontal communication. This discussion may hold across the telephone or during
the meeting.

Activity 2

State the type of communication is to be followed in certain situations

1. Students attending a seminar.

2. HR manager directing HR Asst. Manager about calculations of overtime duties done by
shop floor workers.
3. Shop floor worker providing information to the foreman about problems in machinery.
4. A group of friends discussing about picnic plans.
5. Marketing Director and Inventory Director are discussing about expected demand for
the product from the market within near future.

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9.12 LEADERSHIP

Leader is a person who directs his subordinates to perform at their best level to meet the set
standards. Good leader will find appropriate path and along with his subordinates he would
walk on the same path, ultimately to reach the end. During the journey constantly he needs to
guide, supervise, control and suggest his co-workers, subordinates and even superiors. If
followers are knowledgeable, dedicated, loyal with the leader, he can prove his performance.
He can take up challenging task and opportunities. A good leader will constantly monitor
external environment and update oneself with latest technologies. With this he can equip
himself to stand before global competition.

9.12.1 Basically there are three elements of leadership

1. Followers –
Followers can be an individual or a group of people working under a leader. A leader
needs to handle different types of people, where he would apply different leadership
styles. For example, there will be more supervision and guidance required for a fresher
or a trainee, whereas he will take suggestions from experienced follower. Leader
subordinate relations depend upon good understandings of human nature such as
needs, emotions, and motivations. Therefore he should know his subordinates with
formal and informal relations.
2. Communication –
Relationship with subordinates depends upon the way of communication he follows.
Passing on every message received from top level management, for its execution is
necessary. The way of passing on message makes the difference the way of its
execution. For example, organization wants to implement a software package to speed
up the work. For this it is necessary to conduct a training program. If a leader explains
basic facts of that software during the meeting, even followers will attend the training
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session sincerely, whereas if he just pass on the message verbally, they would attend
program just because it has been told. What and how you communicate either builds or
harms the relationship between you and your employees.

3. Situation
All situations are different. What you do in one situation will not always work in
another. You must use your judgment to decide the best course of action and the
leadership style needed for each situation. For example, a leader may need to punish an
employee for his any misbehavior or misconduct. but if an organization is starting with
a new project where this employee can perform better as he is experienced in that
particular activity. His expertise will be beneficial for the company, a leader need to
handle him with different style.

9.12.2 Leadership styles

To supervise and guide the followers, leader need to apply different leadership styles to
handle different situations. Some of the great thinkers like Likert, Blake and Mouton,
Vroom, Adair, Fiedler have identified different styles of leadership. Some of these are
coined as authoritative, consultative, participative, task-oriented, people-oriented
leadership. Out of these most recognized three styles are –
a. Autocratic – This type of leader takes his own decisions and announces those for
implementation. Here he does not consider any suggestions. He issues orders about
what is expected and how it is to be carried out. This type of leadership style is
appropriate to deal with illiterate or semi-skilled workers. Even when subordinates are
capable but unable to think for a particular task, leader takes initiative and issues an
order.
b. Participative – Here leader involve in decision making activity along with his
subordinates. Subordinates can suggest their ideas and consider those as an
alternative. He makes a choice for the best option that would perform better in the
future. This style develops subordinates ability to think and be creative. Manager
when needs to prepare his plans with minute details, communicates with subordinates
as well superiors. This helps him to identify his strengths, weaknesses and any
loopholes if any.
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c. Democratic/ Laisser-faire style – Leaders with this characteristics lay down problems
before his subordinates and makes them involve in discussions. There he acts as a
chairperson instead of decision-maker. Knowledge workers are self-motivated and take
initiative to perform. Such type of subordinates could be handled with laisser-faire style,
where leader only communicates about new projects. Subordinates prepare plans along
with resources required, whereas leader just observes their activities. But he takes
responsibility for the results.

9.13 KEYWORDS

1. Integrate – To be a part of large unitInstrinsic behavior – Inherent behavior

2. Grievances – A complaint or protestation against injustice.
3. Memorandum – Short note written as reminder
______________________________________________________________________________

9.14 SUMMARY
______________________________________________________________

Direction is a very important function of management. Direction is a function performed by top

level management in order to achieve organizational goals. This helps to ensure quality
performance of jobs by the employees and achievement of organizational goals. It involves
supervision, communication and provide leadership the subordinates and motive them to
contribute to their best capacity. It helps the subordinates to complete the given task properly and
as per schedule. Even this helps to maintain discipline and rewarding those who do well. Different
people perform different activities in the organization. All the activities are inter related . In order
to co-ordinate the activities carried out in different parts and to ensure that they are performed
well, directing is important. This involves leadership that essentially helps in creating appropriate
work environment and build up team spirit. Specific instructions, monitoring and accountability are
the three elements of direction. These three elements, specific instruction on what is to be done,
monitoring them periodically and making employees accountable for the results of the process are
the effects of this function direction. Subordinates who do not receive proper instructions and
direction reviews of their work, they cannot perform at their best. Therefore proper and timely
direction and guidance is highly important.

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UNIT 10 CONTROLLING

Objectives
After going through this unit, you will be able to:
• Define the management function of Controlling.
• State its importance and how it is used.
• Enumerate different types of control that can be exercised for smooth functioning of all
the departments.

Structure
10.1 Introduction
10.2 Definition
10.3 Purpose of controlling function
10.4 Importance of controlling
10.5 Planning and controlling
10.6 Features of controlling
10.7 Control process
10.8 Advantages of controlling process
10.9 Types of control
10.10 Marketing control
10.11 Financial control
10.12 Human Resource Control
10.13 Budgetary control
10.14 Inventory control
10.15 Information control
10.16 Keywords
10.17 Summary

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10.1 INTRODUCTION

Controlling function has the task of checking the achievement of the targets set and
approaching the goal. The basis of controlling process is the information comparison with
enterprise plan. The manager is responsible for the success of the company, while controlling is
responsible for transparency of that success. The control function of management can be a vital
element of organization. According to many thinkers control is possible only through feedback
and adjustment processes. According to Ivancevich and Duening, the control function consists
of actions and decisions, managers undertake to ensure that actual results are consistent with
desired results. The basis of controlling process is the information comparison with enterprise
plan.
If all personnel working with an organization are loyal, devoted and transparent work, and act
which is the best for the organization, control would not be needed. But sometimes employees
are unable or unwilling to perform that is best from the organization’s interest. Therefore
control mechanism needed to be applied to reach to the set targets. Control mechanism is
implemented to ensure against undesirable behavior and to encourage appropriate actions.
Most of the people do not understand what is expected from them and how best they could
perform for it. Many times even knowledge workers may lack requisite ability, training, or
information need to perform a particular task. Control has been accepted as a basic managerial
function to ensure speed of activity and quality of the activity. According to Pardeshi and
Hasinuddin control can be exercised with a planning mechanism. It is a basis of control, and
action is the essence of control. Delegation is the key to control and information is the guide to
control.

10.2 DEFINITIONS

George R. Terry and Franklin defined it as -

“Controlling is determining what is being accomplished that is, evaluating performance and,
if necessary, applying corrective measures so that performance takes place according to
plans.”

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Herald Koontz and O’Donnell say it as –

“Controlling is the measuring and correcting of activities of subordinates to ensure that

events conform to plans”.

Reeves and Woodward defines -

"Control refers to the task of ensuring that activities are producing the desired results.
Control in this case is limited to monitoring the outcome of activities, reviewing feedback
information about this outcome, and if necessary, taking corrective actions".

Controlling is the process through which managers assure that actual activities conform to the
planned activities. It is employed to make things happen in accordance with the plans,
programmes and rules prepared. Control mechanisms are outcome of feedback received
through performance evaluation system, carried out among employees. Control mechanism is
always applied for employees as well as for total organization.

10.3 THE SIX MAJOR PURPOSES OF CONTROL FUNCTION

1. Control makes plans more effective –

Control is the other side of planning process. With this, managers can measure progress,
receive feedback and provide data to top level management to be on the right path to
achieve the decided target.
2. Control observes the consistency in the organizational activities –
Activities are carried out within the organization as per the plan, policies and procedures
that have been decided. Policies and standards are integrated with each other. By
measuring the standards, performance also gets revised.
3. Control makes organization more effective –
Organization needs controls in all its areas, if they want to achieve and accomplish their
objectives.

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4. Control provides feedback –

Control measures progress along with its evaluation. The evaluation of organizational
activities as well as at individual level benefits with the progress.
5. Control makes organization more efficient –
By reshaping plans and policies for better control production, activities can be speed up and
even it measures for better quality.
6. Control is a decision making aid –
Control mechanism makes the organizational activities more effective and efficient. This
helps managers for better decisions. It makes managers aware of problems and gives them
information that is necessary for decision making process.

Activity 1
Now you are turned up into matured citizens. Can you analyse yourself to be a good citizen
by controlling some activities those can be avoided and save time and resources?

10.4 IMPORTANCE OF CONTROLLING

1. Modifier –
Control system acts as a modifier, to correct the organizational systems. It is a tool which
observes whether plans are being observed and suitable progress is obtaining to achieve the
objectives.

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2. Planed element –
Policies set by the managers become the basis and reason for control. Control monitors
whether the individuals adhere to the frameworks of organizational policies. This allows
management to verify the quality of various plans and policies.
3. Authority –
It provides an authority to form superior-subordinate relationship throughout the
organization’s life. Also it provides authority to superiors to conduct their task and walks
the decided path along with their subordinates.
4. Better Performance –
With the help of control as a factor, rules and standards, sets the individual works properly
and exhibits better performance to reach the targets set for him.

10.5 PLANNING AND CONTROL

Controlling involves where the organization would like to be and how to get there, which
involves bridging the gap between performance and goals decided and strategy determined. It
involves three main activities:

a) Situation analysis - where are we now?

b) Objectives - where do we want to be?
c) Strategy and tactics - how can we best reach our goals?

The control and planning task depends on the level of involvement in a country. Exporting and
licensing give minimum country involvement but joint ventures involve more in-country activity
and give a greater degree of integration and control. Wholly owned subsidiaries give the
organization almost total control. Because of the "external uncontrollable" international
planning is rather more difficult than domestic planning. (Unable to understand the sentence)

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10.6 FEATURES OF CONTROLLING

1. Control is a continuous process that follows definite pattern and time-table, with a specific
time period.
2. Future activities can be controlled with proper planning, and past performance can be
measured for taking corrective actions for the future period.
3. Manager of any level is liable for any gaps in between and should be involved to carry
control function. He is responsible to work with quality control, inventory control,
production control and administration control.
4. Control is a corrective action, also it is a review of performances. Therefore it involves
constant changes, flexible planning strategies.
5. Corrective actions deal with feedback information received and those are based on the
performance reviews obtained. This evaluation systems are compared with set standards
and then the corrective action is decided. Control is a process of action.
6. Controlling and planning are two sides of same coin. Both the functions are depends on
each other.

10.7 CONTROL PROCESS

Controlling is a tool for development. It requires up to date and appropriate information about
the system, procedures, persons, technologies and external environment to make the necessary
changes and decides as per the objectives. For this it needs to undergo four basic steps –

1. Establish standards to measure performance –

Within an organization’s overall strategic plan, managers define goals for organizational
departments in specific, operational terms. Along with this objectives include policies and
procedures, and standards of performance to compare with organizational activities. For
e.g. A particular sales target is set for a region and it has been communicated to regional
sales managers with the policies they have to follow.

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2. Measure actual performance –

Most of the organizations prepare formal reports of performance evaluation that managers
review regularly. These reports are to be compared with the set standards. For e.g. a
constant review is taken to obtain information about the progress of regional sales
manager.
3. Compare performance with the standards –
After collecting information, actual performance is measured with the standards. Manager
receives the reports and observes the environment and identifies whether actual
performance meets, exceeds or falls short of standards. Reports are compared by placing
the performance standards for the reporting period. Here he compares the difference
between each actual performance and the standards set. For e.g. reports received by
regional sales manager are compared with the set targets decided in the first step.

4. Take corrective actions –

By comparing performance with the set standards, manager obtains data about current
situation. Here if necessary he makes changes and modify his strategies and policies. Even
he guides how to apply rectified plans. In the productivity and quality-centered
environment, workers and managers are often empowered to evaluate their own work.

10.8 ADVANTAGES OF CONTROLLING PROCESS

• Gives rise to systematic thinking.

• Helps to coordinate activities.
• Helps to prepare for exigencies.
• Continuity in the activities.
• Integrates functions and activities.
• Helps in continuous review of operations.

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10.9 TYPES OF CONTROL

Control is a management function that is closely related to the planning function. It is the
function that helps to utilize its resources at the maximum and have maximum productivity with
minimum cost. Control ensures the organizational efficiency and effectiveness. With the
efficient systems, organization can achieve its objectives.
Control technique provides the different types of information that managers need to compare
with actual performance situation and the targets set for a particular task. Information could be
gathered from management levels, departments, or different production levels. However, to
obtain even minute information each unit of an organization, like HR section, finance,
marketing, etc., uses its own specific control techniques.

Activity 2
Departmental stores need to apply various forms of controlling tools and appliances for
safety and security. Study which tools they use, purposes of controlling applications, how
those made a difference in improving productivity?

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Information Financial
and Control
compputer
control

Production Budgetary
Control control

Human
Resource Marketing
Control Control

Inventory
Control

Fig 10.1

10.10 MARKETING CONTROLS

Marketing controls evaluate the customer satisfaction with products and its prices, services it
offers. Through Market research data is gathered to assess customer needs. Here customer
feedback is considered to be most suitable form of data collection. Market research shows the
customer’s expectations and helps to anticipate customer needs. Market testing is a small-scale
product used to assess customers’ acceptance with survey method. It focuses a group and
collects data to identify general requirements and looks at what actually influences on demand
situation. Managers need to look for the marketing ratios as profitability, market share and
sales quotas. It is measured with marketing statistics that will help to evaluate with sales
targets. Even constant evaluation of market to take up challenge in the global market is
necessary.

Even a marketing guru, Philip Kotler, has identified four aspects with which control over
marketing function is possible. Each this makes use of specific technique and tools for control.

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A. Annual plan control –

This is a process to calculate current results and to observe whether profit goals are
achieved. Annual plan control is the activity that is to be conducted by top and middle
level management. Annual plan control signifies continuous ongoing performance
verification against the annual plan and taking the necessary corrective actions. During
the Annual plan monthly and quarterly goals are set down. Then actual performance is
monitored in the background of planned goals. If any exceptional and serious causes
are found those showing gaps between goals and performance, the corrective action is
taken.
Here marketing personnel evaluate marketing performance with five basic tools,
a. Sales analysis - It is a study of sales performance and to trace and understand sales
pattern that is to be compared with target set.
b. Market share analysis – It is the study of sales performance as compared to
competitors’ share in the market and to analyses companies status in the market.
c. Market Expense Analysis - This is a study of observing that business spending are as
per the set limits. It can be presented with sales ratio and component expense
ratios.
d. Financial analysis – Profitable strategies are always applied in the marketing
function through ratio analysis method. Ratio analysis is determined with gross
profit ratio and inventory turnover ratio.

B. Profitability control –
Profitability control means to observe whether company is making profit or lacking
behind somewhere. It is study of profit generated and contribution made by different
products, regions, and customers. It is to determine the actual profit, market segments
and trade channels. This analysis provides vital information to the management for
expansion or contraction or suspension of the business. Profitability control is
determined with gross margin and net profit. To calculate gross margin cost of goods is
subtracted from sales. (Sales – Cost of goods = Gross margin). Then expenses of direct
attributes to product, territories, trade channels, sales order are to be deducted from
gross margin to obtain net profit.
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C. Efficiency control –
There is close relationship between profitability and efficiency. Efficiency control of
marketing is the activity of increasing efficiency of marketing activities like selling,
advertising, sales-promotion, and distribution. It is to observe and calculate to increase
spending expenses and its impact on marketing expenditures. For this efficiency control
is determine with four basic steps –
1. Sales efficiency – Here sales manager calculates sales efficiency for each sale
personal he is dealing with. There he will consider calls per day a sales person
attended, required time and revenue per call , percentage of orders received per
100 calls. Number of new customers added or deleted during a particular period.
2. Advertising Efficiency – this is calculated with how the advertisements are
reached to per thousand customers. The customer opinions on advertisement
Medias, effectiveness, attractiveness. Even the number of responses and
enquiries received as against advertisement are taken into consideration.
3. Sales promotion efficiency – It is based on the buyers interest and the quality of
the product. In order to improve sales promotion manager keeps record of costs
and sales impact of each sales promotion activity. Sales promotion activities could
be distributing free samples, coupons, meetings with celebrity etc., and the
enquiries received through this impact.
4. Distribution Channels – Cost and time spend on distribution channels are
calculated. To improve the sales efficiency quality and services provided through
distribution channels is considered to be the vital aspect of marketing control.

D. Strategic Control -

It is a study to observe best opportunities in the market. Here top level managers will
continuously monitor the market situation from various different angles like new
technologies, global competitors, new or improved product introducing . Strategic
control is observed with objectives, policies and strategies, and schedule of activities of
each task to achieve its goals. Strategic control in marketing is possible with marketing
effectiveness rating review and market auditing. The major aspects of measuring
marketing effectiveness are marketing orientation, customer’s philosophy, and
integrated marketing organization. It is generally rated between poor to superior.
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Marketing audit focuses on planning process by considering internal and external

conditions that may influence marketing planning. Even it gets reviewed from time to
time.

10.11 FINANCIAL CONTROLS

Financial control is the policy and procedures established by an organization for managing,
documenting, reporting its financial transactions. Financial controls are the means by which an
organization’s financial resources are directed, monitored and measured. It plays an important
role in ensuring the accuracy of reporting, eliminating fraud and protecting the organizational
resources, both physical and intangible. These internal control procedures reduce process
variation, leading to more predictable outcome. For this, some staffing policies have to be
implemented like knowledge workers in the accounting and finance are to be placed to ensure
relevant accounting standards are reviewed and implemented throughout the organization for
accuracy. Financial staff should have direct reporting authority to the top level management,
because they are accountable for all the financial matters. Top level management reviews and
evaluates financial performance and ensures the financial staff has appropriate knowledge and
skill. Financial control is a form of feedback control system.

Financial staff is expected to keep up to date documents like Accounts Receivables, Accounts
Payables payrolls, Inventory etc.

1. Accounts Receivables – A/R ensures all funds intended for the organization are received
and promptly deposited and invented with secured institutions. They should have
periodic reviews about their customers of credit worthiness.
2. Accounts Payables – A/P ensures funds are distributed properly with appropriate
authorization of management, for valid business purposes and disbursements has to be
properly recorded. Policies and procedures for accounts payable and purchasing
process has to exist. The appropriate individual will monitor vendor records for its
addition, modification or deletion as per the requirements. Before making payments to
the vendor one has to check for invoice, P O s for adjustment to A/P balances are
restricted to appropriate personnel.

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Control over financial factor is obtained by auditing procedure. Auditing is generally done by
persons called auditors. Auditors will examine and evaluate the financial statements and records
of the firm and will give their opinion in the form of report.

Audits are classified into two types: 1. External/ Statutory Auditing, 2. Internal Audit
1. External/Statutory audit - Every company at the end of the financial year will make
financial statements. According to statutory financial audit these financial statements
are to be certified by the independent auditor who is a Chartered Accountant as per the
Chartered Accounts Act, 1949, and the auditor has to give his opinion. External or
statutory audit is further classified into (a) Statutory Financial Audit (b) Statutory Cost
Audit (c) Audit by Controller and Auditor General. Even Office of controller and auditor
general of India has made it compulsory to carry out audit for all Government
companies according to Companies Act.
2. Internal Audit – It is CA appointed by the respective firm, analyses all financial
documents of a company. Internal audit is an independent appraisal activity within an
organization for the review of operations as a service to the organization. Internal
auditor ensures that the accounting data and records are maintained according to the
principles of accounting and the management is complying with the laid policies and
procedures.

10.12 HUMAN RESOURCE CONTROL

Human resource planning deals with recognizing and fulfilling the human resource needs of an
organization and meeting its strategic goals by attracting, developing and retaining employees
and by managing them effectively. The nature of HR planning is primarily depending upon the
organizational size and the hierarchical structure. To make the HR plan successful, it is to be
supported by the top management, HR department, and the line managers. HR control
department keeps the record to facilitate the entry, maintenance, retrieval and archiving of
employee information in a corporate or small business. It includes employee information, salary
and appraisals methods, attendance register, training and development programs, grievances
and disciplines, loans and credit issues, accident register, leave analysis, etc. It helps managers
to regulate the quality of newly hired personnel and monitor current employees’ performance

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and take efforts for their development. HR department can control their employees with
specific efforts.
1. Managers will direct their performance towards goals by making sure that goals are clearly
set and understood by the workers.
2. Workers participation in decision making process and listening to their suggestions and any
grievances motivates employees to work more effectively.
3. Training and development activity upgrades the knowledge that increases the number of
knowledge workers within the organization. Delegation of work would be possible with
more knowledge workers that lead to improved productivity.
4. Common control types are performance evaluation activity, disciplinary programs,
observation and apply any corrective action if any.

10.13 BUDGETARY CONTROL

Budget is a statement showing company’s financial resources, which are set aside for carrying
out specific activities in a given period of time generally a next year. It is technique where actual
financial results could be compared with budget. And if any differences found, one can exercise
control action or revise the original budget. The basic principle behind preparing budget is to
balance of estimated revenue and expenditure in order to achieve set goals. Budget forces
management to think and look ahead to prepare itself for the future with proper planning and
controlling process. It anticipates and gives support to head towards proper direction. It is a
yardstick against which performance can be measured. It helps to improve allocation of scarce
resources and also it saves management’s time and energy in duplicating its job, resources and
human beings.

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Table 10.1

Type of a budget Particulars

Master Budget Budgets of various functional areas are combined together
and overall statement for an organization is prepared
Operating Budget This defines and identifies expenses, revenues and profit of
an organization as relation to master budget
Cash Budget The degree of Cash inflow and outflow is prepared during the
specified period.

There are different types of budgets-

1. Master budget – It is an overall financial plan for the forthcoming generally financial or a
calendar year. It summaries various functional budgets like production, sales, purchases,
human resource, etc. Generally it includes details relating to production, sales, stocks,
debtors, cash position, fixed assets etc. In this income and expenditure appropriate to the
responsibility of the function areas are considered.
2. Operating budget – This budget deals with costs for the services produced. It presents the
financial plan for each responsibility centre during the budget period with its revenues and
expenses. The most common type of operating budgets are expense budget, revenue
budget, profit budget. Expense budget; it calculates expected expenses during the budget
period with three different aspects i.e. fixed, variable and discretionary expenses. For e.g. it
can be legal fees, R&D expenses, transport expenses etc. Revenue Budget; which identifies
the revenues required by the organization for e.g. future sales. Profit Budget; It shows
expenses and revenues on one statement to find out gross and net profit.
3. Cash Budget - It provides control over cash flow. It presents the cash inflow and outflow
during the specified budgeted period. It helps management to keep reasonable cash
balances to fulfill its needs and avoids idle cash and possible cash shortages.

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Activity 3

Each family needs to prepare its accounts in rough at least every month for their income
and expenditure. Can you help your parents in preparing household budget for at least next
6 months?

10.14 INVENTORY CONTROL

Inventory control is a most important tool for management to handle inventory of an

organization. Maximum utilization with minimum resources is the basic aim of any organization.
Properly managed and controlled stock, adds to the income and unnecessary wastages reduces
expenses. There are some important techniques of stock control.

1. Min-Max System – Here stock is divided into two segments. Top most line and bottom most
line is decided. Here if a stock reaches below the bottom most line it is filled up with fresh
stock while taking care of not exceeding top most line.
2. Two bin system – Here two bins are used. One is regular and another as supportive
whenever necessary. When a stock from regular bin is over it is borrowed from the
reserved stock bin.
3. Economic ordering quantity – It determines the optimum quantity of that company should
hold, in its given cost of production, demand rate and other variables.
4. ABC Analysis - Under this system item of inventory are divided under three main categories
i.e. A, B, C. Here classification of ABC analysis is done on the basis of cost and valuation of
those items. This categorization is based on the Pareto’s principles where situation and
majority of activities are governed by very few attributes.
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1. Stock of high value and small in number is categorized as A

2. Stock of moderate value and moderate in number as B
3. Stock of less value and high in number categorized as C.

ABC VED
EOQ
Analysis Cost and value Analysis To obtain
of a stock is maximum stock
considered required
categorises by
considering
Based on the production
Patero's process Cost effective
principle

Can fulfill
inventory
demandimmedi
ately

Fig 10.2

5. VED Analysis – According to this analysis stock is categorised according to their necessity
during the production. This is a production based analysis.
1. Vital stock – The stock which are highly necessary for the production process.
2. Essential stock – These are comparatively less vital but work without them cannot be
managed for few days.
3. Desirable stock – These are stock which is needed but their absence even for some days
will not lead to stoppage of production.

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Activity 4
Your mother or grandmother is a controller of her functional area i.e. kitchen. Observe and
then write down a report after one month on how she manages and controls her kitchen
items and uses those at its maximum capacity.

10.15 INFORMATION CONTROLS

Generation and archival of information is vital and continuous activity of any business house. Of
which most of the information is confidential and sensitive for the organization, which they do
not want to publish it for the organization’s benefit. This information could be used by number
of different sources like competitors, lawyers, insurance industries, retailers, reporters,
intellectual agencies, etc. To keep a track of all the information, proper information system has
to be developed for collecting, processing and achieving. Now a days with the help of
Information Technology it has become possible to manage information easily.

Information system is an organized combination of people, hardware, software communication

systems and the data resources, that collect, transform and disseminate information in an
organization. Information system helps to manage information overload, employee mistrust
and even system could be built up to keep the information secured. Two types of information
systems i.e. Operating Support Systems and Management Support systems are used to control
the information flow within the organization. In most of the information houses Operating
Support Systems are used to process data generated by business operations. It is basically used
to process the office automation system. Whereas Management Support system provide

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information and support needs for effective decision making by managers. There are different
types of Management support systems used as tools to control the information–

1. MIS – With this routine information is processed for routine decisions. It increases the
operational efficiency. It uses transaction data as a main input.
2. DSS – It is a interactive support for non-routine decisions or problems occurred. Decision
makers use DSS systems in the information overload situation. A properly-designed DSS is
an interactive software-based system intended to help decision makers compile useful
information from raw data, documents, personal knowledge, and/or business models to
identify and solve problems and make decisions.
3. Executive information system – With this system one can provide critical information
needed by the executives. The basic purpose of this system is to analyses company’s data
and to provide sales performance or market research statistics for decision makers, like
financial managers, marketing managers etc., who are not necessarily well acquainted with
computers.
4. ERP – It is an integrated programmed system that can manage a company’s entire set of
business operations. It often co-ordinates planning, inventory control, production and
ordering.

10.16 KEYWORDS

1. Accomplishment – complete something successfully

2. Subsidiaries – Serving to assist or supplement

3. Exigency – Apprising needs or urgent requirements

4. Intangible – Incapable of being realized or defined

5. Auditing – Checking financial records and accounts for its accuracy

6. Anticipates - To feel or realize a situation beforehand

7. Acquainted – to make something familiar

8. Concurrent – Operating or acting in connection with another

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10.17 SUMMARY

The managerial function controlling always maximize the use of scarce resources to achieve the
purposeful behavior of employees in an organization. Control process managers can analyses
whether resources are been utilized properly, efficiently and at the maximum use. In planning
stage, it is decided that how the resources would be utilized but where as in the controlling
stage it is observed that whether the resources are being utilized in the same way as planned or
not. Thus, control completes the whole sequence of management process. The controlling
function will make an individual work properly and perform better to reach the targets set.

This controlling function is exercised among all the departments and sections within the
organization like marketing, finance, human resource, information, etc. Controlling mechanism
is used for smooth and efficient functioning of these departments. Mainly three different forms
of controlling function are used as primary control, concurrent control and feedback control.
Preliminary control focuses on human, material and financial controls. It identifies various

standards and by exercising various tests and screening devices, the set standards are checked
with actual performance. Concurrent control ensures the consistency in work with quality of
product. For production and operation activity this control is mainly used. Feedback control
reviews the standards and actual performance. This measuring and calculation functions
identify gaps in between. This loopholes may cause delay, duplication or inferior quality
production. To measure the performance and bridge the gap various controlling tools like
quality control, MIS, TQM, strategic management, change management are used, which will be
discussed in the next chapter.

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UNIT 11 CO-ORDINATION IN MANAGEMENT

Objectives
After going through this unit, you will be able to:
• State the basic concept of coordination, delegation as one of the management function.
• Elaborate the importance of coordination within the organization.
• Analyze how delegation and division of work supports the coordinating function of
various activities for better output.

Structure
11.1 Introduction
11.2 Definition
11.3 Characteristics of co-ordination
11.4 Importance of coordination
11.5 Symptoms of poor coordination
11.6 Tools for coordinating the activities
11.7 Co-operation for coordination
11.8 Delegation of work
11.9 Principles of Delegation
11.10 Division of Labor
11.11 Advantages and Disadvantages of Division of Labor
11.12 Keywords
11.13 Summary

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11.1 INTRODUCTION

Co-ordination is a fundamental and primary activity of any organization. Co-ordination is the

process of synchronizing activities of various processes with persons within the organization. It
is undertaken at every level of management. It deals with the task of blending efforts in order
to ensure successful attainment of an objective. It is accomplished by means of planning,
organizing and controlling. It is a part of all phases of administration and that is not a separate
and distinct activity. Balancing, timing and integrating are the three elements of co-ordination.
Balancing is ensuring that enough of one thing is available to support or counterbalance the
other. It implies creating a balance between the resources of different departments and
individuals. Timing means adjusting the time schedules of different activities so that they
support and reinforce each other. Integrating involves unification of the diverse interests under
the common purpose. In every organization, work is to be divided according to its nature and
requirements. But it has to be integrated to obtain qualitative output. The interdependent
activities are to be working out simultaneously. Here co-ordination forms appropriate system
for the integration between two or more departments. Co-ordination is based on positive and
constructive efforts; therefore resistance to accept the system is less. Co-ordination helps to
maintain unity and action throughout the organization’s life.

11.2 DEFINITIONS

According to Henri Fayol,

“To co-ordinate is to harmonies all the activities of a concern so as to facilitate its working
and its success. In a well-coordinated enterprise, each department or division works in
harmony with others and is fully informed of its role in the organization. The working
schedules of the various departments are constantly attuned to circumstances.”
According to George R. Terry,
“Co-ordination is the orderly synchronization of efforts to provide the proper measure,
timing and directing of execution of resulting in harmonious unified action to stated
objectives”.

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In the words of Haimann,

“Co-ordination is the orderly synchronization of efforts of the subordinates to provide the
proper amount, timing and quality of execution so that their unified efforts lead to the
stated objective, namely the common purpose of the enterprise.”

11.3 CHARACTERISTICS OF CO-ORDINATION

1. Co-ordination is very essential function of management. It is inherent in the managerial job.

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

11.4 IMPORTANCE OF CO-ORDINATION

• Efficiency :
Coordination helps to improve the efficiency of people and operations. Also it helps in
avoiding overlapping efforts and duplication of work. Integration and balancing of individual
efforts provide a smooth and harmonious team work. Coordination is a creative force which
makes possible a total result which is greater than the sum of individual achievements. This
is the synergetic effect coordination. Coordination enables an organization for the optimum
use of its resources.

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• Unity of direction:
Co-ordination helps to ensure unity of action in the face of disruptive forces and by welding
different work groups it facilitates the stability and growth of an organization. It provides
unity of action and helps to avoid conflicts between line and staff elements.

• Human relations:
Co-ordination helps to improve team spirit and morale of employees. In a well-coordinated
organization, organizational goals and personal goals of people are reconciled. This helps to
increase a sense of security and job satisfaction.
• Essential function of management
Coordination is an inclusive concepts or the end result of the management process.
Management is nothing more than coordination of all activities, efforts and forces that
affect the organization from within and without. Coordination serves as a key to all
managerial functions.
• Avoids conflicts –
Subordination of individual interest to general interest is common phenomena in the
organizations. There is need for coordination to avoid conflicts or overlapping in the work of
employees or units or as organization.

11.5 SYMPTOMS OF POOR CO-ORDINATION

Coordination is the process of synchronizing activities of various persons and process in the
organization in order to achieve organizational goals. This is a very essential function of a
management. Absence of this function may lead to –

1. Delay – Without this problem may create about delay in the work process that may lead to
unnecessary waiting period for completing.
2. Duplication – Poor coordination increases the duplication of work. It would be a waste of
efforts. For e.g. If two P. Hd. students are working on the same topic within the same
university only their guides are different. Findings and conclusions are also same. Then it
would be duplication of efforts and wasting of time and other resources if this information is
not gathered, listed and distributed through proper channels.

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3. Confusion – Poor cooperation increases the misunderstandings and increases the in-
commensurate data.
4. Lost data – Gaps between the coordination leads to poor utilisation of resources and missed
opportunities.
5. Inflexibility – The set before need to be modified as and when necessary for quality
production. The lack of proper methods of coordination, problems occurring if are not
communicated properly, it would not be possible to make the changes in work flow.

11.6 TOOLS FOR COORDINATION

Various departments need to be coordinated for smooth functionality. There are basically three
coordinating tools, Mutual adjustment, standardization and supervision.

Coordination

Mutual Direct
Standardisation
Adjustment supervision

Work progress Output Workers skills

Fig 11.1

1. Mutual Adjustment –
Basically this system is carries out for small companies. This is an informal way of
communication. Mutual adjustment is the same mechanism used by furniture movers to
maneuver through a house, or paddlers to take a canoe downriver, or jazz musicians playing
a live engagement.
2. Direct Supervision –

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A leader takes the responsibility of issuing instructions and monitoring subordinates

activities. He monitors to keep the task on the track. If the organization is large enough,
one person cannot handle all the team members, therefore multiple leaders or managers
are used. These managers are coordinated by their immediate bosses or board of directors
or top level management.
3. Standardization –
In any organization different task are carried out but they need to be integrated for final
output. Standardization with proper planning of those efforts will prove to be beneficial.
Standardization is pre planned activity for coordination. It can be achieved with following
three ways –
a. Work progress – It is used for actual manufacturing or production process. After
assembling number of parts final output is obtained. For e.g. a toy making factory,
here machinery in the factory has been standardized for coloring the toys. In the
food processing plant, the process is standardized for uniformity in the product.
b. Outputs – Standardization of output means specifications issued about the product
or work output must meet. For e.g. Stereo equipment designers have a lot of
freedoms in designing their products, but the interface portions of the product (the
connections to other stereo devices like CD's, speakers, tape-recorders, etc.) must
be the same as everyone else's, or else it would be hard to put together a complete
system.
c. Worker skills –The knowledge workers can put up their efforts at their best level.
For this it is necessary to give them freedom with rules and policies to be specified.
Even the maturity of manager/leader and his/her subordinates leads to his/her
relationship.

11.7 COOPERATION FOR COORDINATION

Cooperation means working together with understanding. It is a collective efforts of persons

working in an enterprise voluntarily for the achievement of a particular purpose. Here person
willing help each other. Whereas coordination is a planned activity ensures effectiveness of pre-
arranged goals or objectives. Co-operation is emotional in nature because it depends on the
willingness of people working together, which establishes informal relationship also, whereas

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various sections and people are expected to work in coordination irrespective of their job. This
may develop more formal and even informal relationship. Actually cooperation is not one of the
management functions but it is necessary for the success of co-ordination. Cooperation is a
more of a personal attitude rather than organizational formalities. Cooperation does not arise
out of any limitations of organizational structure. Every individual learns to be co-operative with
one another even though their activities are not related. In the organization same nature of
work is grouped together while divides as per their requirements. These various departments
need to be integrated as they are interdependent on each other. Here existence of co-operation
may prove to be effective condition or requisite for co-ordination. But it does not mean that co-
ordination originates automatically from the voluntary efforts of the group of members. It has to
be achieved through conscious & deliberate efforts of managers. Cooperation is a part of
coordination. Coordination is a broader in scope. It includes both cooperation and deliberate
effort to maintain unity of action and objectives.

Activity 1
Constructing a building is a form of coordination of different activities and human resources.
Try to find out how these activities are coordinated and by whom each job is performed.

11.8 DELEGATION OF WORK

It is not possible for any individual to perform all the duties alone. He need some support to
complete the given task. Person/ manager will distribute his/her duty along with authority and
responsibility to his/her subordinates. This process of transferring duties is termed as delegation

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of authority and responsibility. Delegation of authority is one vital organizational process.

Delegation means assigning of certain responsibilities along with the necessary authority by a
superior to his subordinate managers. Delegation does not mean surrender of authority by the
higher level manager. It only means transfer of certain responsibilities to subordinates and
giving them the necessary authority, which is necessary to discharge the responsibility properly.
Delegation is a common function everywhere; even school principal hands over some of the
administrative work to the supervisor.

• Definition:
1. 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.”

2. F. C. Moore defined delegation as -

“Delegation means assigning work to others and giving them authority to do so”.

11.9 PRINCIPLES OF DELEGATION

Delegation is one of the most important functions of a leadership. Proper delegation saves time
and resources as well saved efforts could be diverted for another task. Delegation process helps
to built up the subordinate’s knowledge and other skills. Following are some elements that
direct the process of delegation.

1. Person for a delegation – It is important to have trust and confidence on the subordinate’s
abilities to which a leader is delegating the work. The subordinates skills and maturity of
understanding the nature of job and duration for completing the given target is important.
2. Attitude of commitment – Loyalty and commitment towards the leader and given task is
important. Subordinates attitude towards the job can makes him fully committed and
devoted for the given task.

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3. Describe the task - It is necessary to explain and describe the task fully. Subordinate can
concentrate on the work when he is completely aware about outline, policies, technical
knowhow and other related aspects. While delegating superior is supposed to discuss all
these matters with subordinates.
4. Co-ordinal relationship – Mutual understanding and coordinal relation between a person
who is delegating and a subordinate to whom the responsibility is to be delegated affects
the process. Poor relationship makes it difficult while good relation supports all the
activities of delegation.
5. Feedback mechanism – A person delegating has to build a regular feedback mechanism into
the delegation of the role. This can assure to avoid miss-communications if any. Also it
avoids to a person from taking any undue advantage of powers allotted to precede the task.
This can also act as a powerful rein force for the person undertaking task i.e. to know their
progress is right on track and be appreciated.
6. Avoid undue interference – Delegation process is done as leader alone cannot carry out all
activities and complete the target in a given time. But if he wastes his time in interfering the
allotted work and disturb subordinates from time to time would not be of any use. Even
superior would not be able to concentrate on other activities.
7. Leader cannot be the perfectionist – There could be some activities which subordinate
could do better than superior. Leader may lack some skills or knowledge and their therefore
would find difficult to carry those activities.
8. Convert mistakes into opportunities – Mistakes can act as a great learning tool. Feedback
received from the subordinate can helps to make the changes in the original plans. New
policies and plans could be developed for better productivity.
9. Reward Success – Acknowledging successful work is another function of delegation.
Appreciating and rewarding the success encourages self-motivation, innovation,
upgrading skills and better productivity.

11.10 DIVISION OF WORK

Division of labour means workers are more alien to one another and yet more dependent upon
one another. It is a process of separation of work, into number of tasks. The task may be
performed by an individual or a group of persons. It is applied for the mass production system

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and its principles can be used as a basic for assembly line. It breaks down work into simple,
repetitive tasks. The reduction in production time results in lower down production costs and a
less expensive output.

The term Division of Labour was first used by a Scottish economist Adam Smith, to describe the
separation of manufacturing process into distinct and simple operations which are then
delegated to specific hands and machines to perform. For this he studied two groups of people.
One group, that carried out qualitative and quantitative work with the principle division of
labour, and other work done by non-divided labour. The first group proved their superiority in
the job than second group.

• Definition of Division of Labour

Macmillan Dictionary has specified it as “The way that the work that needs to be done is
divided so that different people are responsible for different parts of it.”
Effect of Division of Labour
He identified three reasons for increase in productivity with Division of labour.
• Workers become expert and effective in their work. Workers specialised in a single task
have a lot of time and occasion to practice their allotted operation. This leads to increase
speed and accuracy that affects the quality of work done.
• In this time is saved by eliminating the constant need to move from one operation to next.

• Division of work in general manufacturing and simple task results in automation; this may
speed up individual task. This effect is caused because once the tasks needed for
manufacture are broken down into simplest possible elements it becomes easy to find
methods and invent machinery that will save time and increase quality and accuracy of
work.

11.11 ADVANTAGES AND DISADVANTAGES OF DIVIDING VARIOUS JOBS

1. Advantages of Division of Labor

• Specialized workers can speed up the work.
• Minimum production cost leads to increased production level
• Workers can put up their maximum productivity.

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• Specialization ensures improved skills.

• Specialized workers are paid at higher scale.

2. Disadvantages of Division of Labor

1. Increases the cost due to constant training and development activity .

2. Boredom may create among workers.
3. Quality of work may suffer due to boredom.
4. Unskilled workers those are unfit for automation may be replaced with machinery.

Activity 2

You must have watched a movie ‘Lagan’. Write down different situations where principles of
management like co-ordination, delegation and division of work could be pointed out.

11.12 KEYWORDS

1. Attuned to circumstances – Familiar or get adjusted to the situation.

2. Incommensurate data – Inadequate data

3. Maneuver – Strategic or tactical movement

4. Canoe – Light, open, spender boat that has pointed ends and propelled by paddles.

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11.13 SUMMARY

Co-ordination is an orderly pattern of group efforts to ensure unity of direction and action in
pursuit of common objectives. It involves synchronization of the efforts of individuals as well as
group of an enterprise to provide proper timing, amount, and quality of place and sequence of
efforts to achieve stated objectives with the minimum losses. Although many management
thinkers like Fayol, James, Ordway Tead, Urwick, Allen etc, have stated co-ordination as a
separate management function. Other managerial functions like planning, controlling, directing,
leading, are itself exercise basic function, Co-ordination is inherent in all management functions.

Co-ordination is followed along with two more principles of management as division of labour
and delegation. Division of labour increases the productivity with three important elements as
workers, timing and integration. The Division of labour is a system whereby workers
concentrate on performing a few and specialised task those are integrated for collective
operation. By delegation the work load among subordinates along with co-ordination and
integration their task, a leader can focus on more problem areas.

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UNIT 12 DECISION MAKING

Objectives

After studying this unit, you will be able to:

• State the concept of Decision Making and its importance to achieve the target.
• Describe the process and factors related to decision making those are required to be an
effective manager.
• Enumerate different types of models and tools applied in different situations to the best
among different alternatives.

Structure
12.1 Introduction
12.2 Definitions
12.3 Characteristics of Decision Making
12.4 Simple and Complex decision
12.5 Factors affecting decision making process
12.6 Decision Making process
12.7 Types of business decisions
12.8 Decision Making Models
12.9 Tools and techniques used for Decision Making
12.10 Keywords
12.11 Summary

12.1 INTRODUCTION

Every individual takes number of decisions every day, at whichever level of an organization he is
working for. It is an act of choosing between different alternatives. It is a purposeful selection
from a set of alternatives in light of a given objective. Decision making is not a separate function
of management but it is integrated with other functions like planning, controlling and
coordinating. These functions could be completed, once the decision is taken. These functions
help to execute the decision making. Decision making process requires knowledge, experience,

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identification of options, proper judgment, creative thinking, and risk taking capacity and
effective implementation. Problem solving and decision making are two important skills of
management. Problem solving involves decisions making process. Problem could be anything
like, choosing the right media for advertisement, the amount of budgetto be allotted for the
library book purchasing, material used for preparing model of a building, whether to take up this
job or look for another, not to decide anything for this situation etc. Duening and Ivancevich
said that decision making often reflects the manager’s effort to make sense of the complicated
environment, to attain some control over the uncontrollable and to achieve some sense of order
(Unable to understand this statement). Decision making process helps to reduce uncertainties
rather than eliminating it. But every decision also includes some risk.

M. T. Copeland stated decision-making is a process of administration and authority is

responsible for making decisions and for ascertaining that the decisions are carried out. In
business, whether the enterprise be large or small, changes in the condition occur. Irrespective
of level of an organization decision making process is carried out by every person involved in the
task. Top level managers make several critical strategies which may have long term effect
therefore they need to take decisions of all the types like tactical, operational as well strategic
decisions, whereas decision making process would be followed for routine problems to be
solved by lower level managers.

12.2 DEFINITIONS -

T N Dueing and J M Ivancevich defined it as –

“A conscious choice among alternatives followed by action to implement the decision”

A Business Dictionary defined it as –

“The though process of selecting a logical choice from the available options”.

Lyndon B. Johnson said –

“Doing what’s right isn’t hard but knowing what right is”.
For effective decision making, a person must be able to forecast the outcome of each option
based on positive and negatives perspectives, before determining the option that is best for the
future situation.

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12.3 CHARACTERISTICS OF DECISION MAKING

1. Making a choice – Decision making is a process of choosing the best alternative among
various options available for the better future.
2. Process of forecasting – It is a process of collecting information about ongoing
developments and possible changes in the future. To walk the path that would help to
reach the success in the future.
3. Human Activity – This process is possible to be applied with great intellectual ability. The
involvement of human being at the great extent is necessary in this process.
4. Related to the situation - Decision making process is always related to the situation. A
manager takes one decision in a particular set of circumstances and different decisions in for
another situation.
5. Rational process – Decision making process is a done with thoughtful deliberation and
reasoning.
6. Some Purpose – This is carried out with some definite purpose. There is some or other
reason before putting up an idea.
7. Followed by an Action – Every decision taken by an individual may be for personal use or for
official purpose is to be expected for its execution.

12.4 SIMPLE AND COMPLEX DECISION

Everyone, layman to manager, teenager to older, doctors, executives, shareholders, authors etc.
need to take decisions. Some of them may be complex or simple. Some decisions may be
simple and straight forward to take. Today I will reach my office by bus or would prefer to ride
own vehicle, today’s menu for a dinner.

But others may be little complex deciding exact treatment for a patient to cure the diseases,
whether to appoint person X or person D. This will typically involves issues like –

1. Uncertainty – When part of information is unknown.

2. Complexity – When it is considered with interrelated factors.
3. High risk consequences - When the impact of decision is important.
4. Alternatives – When there are more than two alternatives.

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5. Interpersonal issues – a group of persons is involved and may get affected with decision
taken.

12.5 FACTORS AFFECTING DECISION MAKING PROCESS

The decision making process involves number of factors that can affect the process. It could be
categories into three major groups. i.e. perception, organizational issues, environmental issues.

1. Perception:
This is an individual’s personal aspect that affects the decision making capacity. An
individual’s perception can influence how they make decisions and solve problems. For
e.g. when a manager wants to collect information about the problem occurred, the
perception will help him to find the source and exact amount of information to be
collected. The perception can be influenced by following three aspects –
a. The perceiver – Personal perception includes experience, personal values, personal
expectations, interest for the subject. He is heavily influenced by their personal
characters.
b. The Object – It could be person, machinery, activity, event, services or final product,
etc. It has an impact on the way it is been perceived.
c. The situation – Time, location and other situational factors can influence the
perception of an individual. For e. g. a marketing manager may exclude some areas
for advertisement on the basis of information gathered. But actual situation may be
different.

2. Organizational issues :
Organizational hierarchy, policies and procedures does affect the decision making
process.
a. Policies and procedures – Organizational policies and procedures have developed as
a guide for managers. Also it helps to solve the problems. For e.g. in the banking
sector, policies have been decided for corrective actions for certain issues like
taking a bribe while allotting loan to the customer.
b. Organizational Hierarchy – This is a management structure of an organization.
Different management levels carry different degrees of authority. The degree of

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authority directly affects the decision-making process. For e.g. Finance manager
along with his teams and in consultation of top management authorities can decide
about investment or amount of budget is to be provided for the welfare facilities.
But he cannot decide the facilities to be given against welfare to the workers.
c. Organizational politics – Any organization is made up of an individual, having
different beliefs, values and interest. Individual and group politics refer to
individual’s career planning, different interests and ideas, type of rewards.
Individual or a group try to influence each other with various other aspects for
competitions. For e.g. Two managers required one more helping hand to reach the
target. But the organization can afford to appoint only one person. In this case they
will try to convince their superior about their requirement.

3. External environmental issues :

Organization always affects by external environments. Manager need to monitor
environment for the changes in the technology or any political or any legal issues.
Flexible plans and policies will provide a space to get adjusted with new environment.
This may include –
a. Nature of market – Different aspects of a particular market like standard of
living, changing fashion and change in technology does affect current
production process.
b. Government Legislation – There could be change in the Government policies
due to the free marketing strategy or increase or decrease in the tax, provide
subsidy for farmers, some changes in the banking or financial systems, etc.
c. The economy – Economical condition of a particular market also affects the
policies. If a factory producing tractors that can be used only by farmers and the
cost of which is not affordable by everyone, only few farmers will prefer to buy
those. So the rest of the production will stand idle .
d. Customer’s feedback - Customer will respond positively for qualitative and
reasonable products. Customer feedback is necessary to observe that policies
are followed as per the standards set. Through customer relation one can
obtain feedback.

Activity 1

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Think you are in a dilemma where your instinct is forcing you take up a management course
while you at good at singing or designing. How you will decide about the best carrier option
for your future.

12.6 DECISION MAKING PROCESS

Manager plans and/or organizes staffs, leads, and controls their team by executing decisions.
The effectiveness and quality of those decisions determine how successful a manager will be.
Managers are constantly called upon to make decisions in order to solve problems. Decision
making and problem solving are ongoing processes of evaluating situations or problems,
considering alternatives, making choices, and following them up with the necessary actions.
Decision-making process is dependent upon the right information being available to the right
people at the right times. The decision-making process involves the following steps:

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Define the
problem

Establish
control and Identify
evaluation alternatives
system

Implement Analyses the

the decision alternatives

Choose the
best
alternative

Fig 12.1

1. Define the problem -

The process is to define what you want to achieve and decide how to approach the process.
The decision making process begins when a manager identifies the real problem. The
accurate definition of the problem affects all the steps that follow in decision making
process. A manager can help determine the problem in a situation is by identifying the
problem separately. The symptoms within the organization, identify the problems like low
profits or declined sales may be a cause of poor market research. Even lack of
communication between superior and subordinates may lead to employee’s low morale.

2. Identify alternatives –
This is a first step to make the right decision. After identifying the problem a manager
chooses different alternatives to solve the problem. A successful problem solving requires
going through a pilot project before having permanent solution. There are several
techniques to find out alternative solutions for the problem-solving :
a. Brainstorming – It is a group dynamic thinking process, where an individual with a
group works can provide number of ideas. It focuses and concentrates on the

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problem at hand. It keeps the problem specific and avoids the general topics. It
encourages all thoughts on the related subject.
b. Nominal Group Techniques - This includes the use of a highly structured meeting
with complete agenda and restricts conversations at interpersonal levels during the
discussion. This technique ensures equal input from a member in decision-making
process. This helps to avoid group dominance, conflicts, unstructured forums, etc.
c. Delphi Technique – In this team leader receives everyone’s opinion through
questionnaire. Here team members or employees do not discuss the matter in face
to face conversation.

3. Analyses the alternatives –

This is the stage to consider and compare the pros and cons of each option developed. This
step decides the relative merits of each idea. Managers identify advantages and
disadvantages of each alternative. They would make cost-benefit analysis for each
alternative. It would rank each alternative relative to its ability to meet maximum factors
and then multiplies by a probability factor to provide a final value for each alternative. Each
alternative would be analyzes on the basis of factors like feasibility, effectiveness and
consequences.
a. Feasibility – The positive aspects of each alternatives.
b. Effectiveness – How well does it resolve the problem situation?
c. Consequences – What will be its costs to the organization?

4. Choose the best alternative –

After analyzing various options it is a time to decide best option for the better future. This is
the stage to determine what resources would be required and which should carry the most
weightage. This is an art as well as science that require your intuition the experience,
knowledge and skills. Sometimes the best alternative may not be feasible. At such time
manager will think for the best possible and other effective alternative, which has highest
probability of success.

5. Implement the decision –

Once the decision is taken, manager is responsible to take actions for its implementation.
Everyone involved in the decision should be made aware about the respective roles and

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activities there upon. Here everybody gets involved in the process, to know their objectives
and techniques to be followed, programmes and policies to be evolved for successful
implementation.

6. Establish control and evaluation system –

Implemented action needs to be monitored for adequate productivity. Evaluation system
should be developed to provide feedback on how well the decision is being implemented
what are its results and the necessary adjustments are to be done. Manager needs to gather
information to determine its effectiveness, to see whether the original problem is been
resolved. If not, it is needed to analyze the situation again.
When a manager’s plan hasn’t resolve the problem, he needs to figure out what went wrong
with the following questions –
a. Was the alternative selected, wrong? Another alternative may be a better one than
chosen earlier.
b. To see whether alternative has been chosen is correct, but there is problem with its
implementations. Here manager needs to focus on its implementation steps and
the plans prepared.
c. Even manager should give enough time for its implementation. He should give
more time for process reevaluation at a later date.

12.7 TYPES OF BUSINESS DECISIONS

Decision-making increasingly happens at all levels of a business. The Board of Directors may
make the grand strategic decisions about investment and direction of future growth, and
managers may make the more tactical decisions about how their own department may
contribute most effectively to the overall business objectives. But quite ordinary employees are
increasingly expected to make decisions about the conduct of their own tasks, responses to
customers and improvements to business practice. This needs careful recruitment and selection,
good training, and enlightened management.

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Table 12.1

Types of Decisions Description

Programmed Policies framed to follow the routine

Decisions
Non-programmed Considered with one time implementation
Decisions
Strategic Decisions Usually complex in Nature and long-term oriented

Tactical Decision Helps to fulfill mission statement.

Operational For day to day activities to implement above decisions

Decisions

1. Programmed Decisions –
These are standard decisions which always follow the same routine. They are written
down in the series of fixed steps that everyone has to follow. In this definite procedures
have been developed for determining that the decision should be made with what
actions should be taken. For e.g. HR department of each organization decides policies
and rules regarding ethics and behavior during company hours, for its employees that
each and every employee has to follow.
2. Non – programmed Decisions –
These are non-routine decisions. The decision taken for previous activities will not be
repeated for another activity. It is not based on preexisting structure. They involve
with creativity, intuitions, tolerance for ambiguity. These often have significant
implications for the future of the organization and must be made only after careful
analysis. Generally it includes issues of strategy, resource collection, long term returns
on investments. For e.g. Decision taken to launch a new product, purchase of new
machinery, budget allocation to built up a library within the organization, etc.

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3. Strategic Decisions –
They affect on long term period. They deal with the big picture of the business. They
are typically external to the business and are usually future oriented. Strategic decisions
describe the questions “what “. It includes decisions about –
a. What business are you in?
b. What is your vision for the business?
c. What is your business identity?
d. What do you stand for?
Organizations describe their overall strategy in a statement of intent and term for
describing what strategic decision-making is. They are typically made by the top
managers. Typically they are complex in nature and output may be uncertain.
Managers always depend upon past experiences when making decisions. For e.g.
increase in the production level, that may include increase in the resources, human
beings, finance, change adverting strategy etc.
4. Tactical Decisions –
These are medium term decisions. Tactical decisions are domain of ‘mission’ statement.
They focus on intermediate term issues. They are made by middle managers. It
describes about how to implement strategy. Decision made at this level is to direct the
company closer to reach the strategic goal. It involves the establishment of key
initiative to the overall strategy. This layer of decision making may be overlooked yet it
is the glue that creates a strong connection between long-term vision and day to day
activities. For e.g. decide which advertising media to be chosen for promotion of new
product.
5. Operational Decisions –
These are short term or administrative decisions. These are probably answers ‘How’. It
is about how to implement strategic and tactical decisions. These determine day to day
routine activities. Generally middle level and lower level managers are responsible to
take these decisions. For e.g. How we will provide services to the customers?, who
should be appointed for giving services?

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Activity 2
Write down two or three situations where your parents had to take major decisions at their
work place for the organizations better future.

12.8 DECISION MAKING MODELS

Problems with high stakes, involving human perceptions and judgments, and whose resolutions
have long-term repercussions, call for a rational approach to their solution. Decision making is a
crucial process of any business. There are different aids to take decision that help to information
clearer and better analyzed and to have objective precision to decision-making process.

Table 12.2

Normative Determine style and level of involvement by

Model analyzing a situation
Matrix Model Collects information and prioritize the
important situation for planning
OODA Loop Problems are evaluated and handled as a
cycle of observation
Administrative Based on rational concept for satisfying.
Model

A. Normative Decision Model –

This technique has been developed by Vroom, Yetton & Jago. It enables a leader to examine
a situation and to determine which style or level of involvement to engage. This model is
developed after discussing with experts about how to make a decision, which steps they

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have followed before finalizing their decision after the deciding to choose the alternative.
This model identifies five styles along a continuum ranging from autocratic to consultative to
group-based. By asking oneself a series of questions about the nature of the problem stated
below, decision and consequences, the leader can decide just how much involvement others
should have in the decision.
Different questions have been developed in this model as stated above -

1. Quality Requirement (QR): How important is the technical quality of the decision?
2. Commitment Requirement (CR): How important is subordinate commitment to the
decision?
3. Leader's Information (LI): Do you (the leader) have sufficient information to make a
high quality decision on your own?
4. Problem Structure (ST): Is the problem well structured (e.g., defined, clear,
organized, lend itself to solution, time limited, etc.)?
5. Commitment Probability (CP): If you were to make the decision by yourself, is it
reasonably certain that your subordinates would be committed to the decision?
6. Goal Congruence (GC): Do subordinates share the organizational goals to be
attained in solving the problem?
7. Subordinate conflict (CO): Is conflict among subordinates over preferred solutions
likely?
8. Subordinate information (SI): Do subordinates have sufficient information to make
a high quality decision?

B. Matrix decision making model

The structure of the model developed by Charles H. Kepner and Benjamin B. Tregoe, is
based on gathering information and prioritizing and evaluating it. This is a rational model
that is well respected in business management circles. The idea behind it is not to find a
perfect solution but the best possible choice, based on actually achieving the outcome with
minimal negative consequences. It is a way to make unbiased decisions that limit conscious
and unconscious biases that draw attention away from the outcome.
There are four basic steps used in the model –
1. Situation Appraisal – It is used to clarify the situation, outline concerns and choose
a direction.

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2. Problem analysis – Here the problem is defined along with its root cause.
3. Decision analysis – In this various alternatives are identified and a risk analysis is
done for each alternative.
4. Potential problem analysis – The best alternative is scrutinizes against the potential
problems and negative consequences and actions are proposed to minimize the risk.
This step by step approach, allows for critical thinking by considering various factors those
are vital for decision making process.
C. OODA loop -
The OODA Loop model was developed by Col. John Boyd during the Korean War. This
concept is developed to observe, orient, develop and act. This model is based on rational
behavior in which problems are viewed as a cycle of observation. Four concepts describe as

Observe : to keep a
watch on different
changes

Orient : Compare
Action : with existing
Implementing the situation and
decision make the
changes

Decide : Choose
among best
alternatives

Fig 12.2

1. Observe – It is to monitor the situation and other external environment and collect
the necessary information.
2. Orientation – It is to transform data into information. New information helps to
change old images and creates new images as appropriate to the situation. Correct

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information is that which is retrieved and use with the proper context. Orientation
emphasizes the context in which events occur, so that one can facilitate the
decisions and actions. Orientation helps to turn information into knowledge.
3. Decision – It is the course of action selected among various alternatives for final
implementation.
4. Action – To follow various steps and procedures and implement it to achieve what is
to be decided.

D. Administrative Model
The decision makers are usually expected to consult the concerned parties and then make a
decision in the interest of the whole organization. Administrative decision makers could be
government officials, judges, governors, department heads, business owners etc. The
administrative decision making is widely used and can be highly efficient which is depend
upon the wisdom and humanity. There are two concepts which are instrumental in shaping
the administrative model
1. Bonded Rationality – Here people have limits or boundaries how rational they can
be.
2. Satisfying – It means that decision making chooses the first solution alternative that
satisfies minimal decision criteria. In this managers actually make decisions in
difficult situations characterized by non-programmed decision, uncertainty and
ambiguity.

Managers are often unaware of problems or opportunities that exist in the organization.
Rational procedures are not always used and when they are confined to a simplistic view of
the problem that does not capture the complexity of the real organization. Managers
searches for alternative which are limited, because of human, environment, information and
etc. Most of the managers settle for satisfying rather than a maximizing solution.

Features of Administrative model

1. Decision goals are often vague, conflicting and lack consensus among managers.
2. Rational procedures are not always used.
3. Manager’s searches for alternatives are limited.
4. Managers settle for a satisfying rather than a maximum solution

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5. Based on past experience.

12.9 TOOLS AND TECHNIQUES USED FOR DECISION MAKING

A. Delphi method
It is a method for structuring a group communication process, so that the process is
effective in allowing group individuals, to deal with a complex problem. This method has
been developed by US Military Forces in 1950’s. It is used in circumstances where accurate
information does not exist or is impossible to obtain economically. Delphi studies are
complex procedures and require some resources depending on the breadth of the study
planned. These studies are processes include the preparation, survey into two or more
rounds, some analyses and application when the survey is finished.
Characteristics of Delphi method –
1. Content of Delphi studies are always issues about incomplete knowledge exists,
otherwise there are more efficient methods for decision making.
2. It is a judgment process which ensures aspects.
3. For the participation experts are to be involved on the basis of their knowledge and
experience are able to assess in a competent way.
4. It tries to make use of self-fulfilling and self-destroying predictions for shaping or
even creating the future.

It is an organized method for collecting views and information pertaining to a specific area.
This method allows dialogue between geographically separated experts while serving an
effective means for learning. This method gathers a group of experts to forecast events and
assess complex issues. It is a process of exploring, assessing and evaluating various
alternatives to take a final decision.
Delphi method is applicable in certain situations like –
a. Where there is no clear-cut information and solution of a given policy.
b. When time and cost constraints make frequent face to face meetings are difficult to
arrange.
c. Heterogeneity of the participants must be preserved and anonymity assured.

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Process of Delphi Method –

1. Participants are chosen and initial data is gathered. Here each participant presents
his/her views on the policy.
2. A list of possible alternatives is complied and distributed to participants. Ideas are
produced and a smaller no of possible policy recommendations are complied.
3. An amended list of alternatives are prepared and distributed.
4. The collective policy is established.

B. Grid Analysis
Grid analysis is a useful technique in making the decisions. It is also known as Decision
matrix technique. It is powerful where you have a number of good alternatives by taking
into account number of different factors. It helps to decide between several options, where
you need to take many different factors into account. In this, rows on the table are laid
down for options and set the columns for different factors that we need to consider.
Certain steps are followed to carry out this method –
1. In the first stage all the options are listed as the row and all the factors are
considered as headings on the columns.
2. In the next stage show relative importance for each factor within the range between
0 to 5, where 0 is assigned for poor performance and 5 for important one.
3. The next stage, record each option between 0 to 5 as per its importance and
relevance.
4. Here you need to multiply scores recorded for factors and for options.
5. Next step is to add up all scores for different options. The highest score option is the
best suitable for the enterprise.
C. Pareto analysis
This is another statistical tool and technique of decision making. This concept is developed
by a management guru Juran who observed that in 1906, Italian economist Vilfredo Pareto
has stated that 20% of Italian population owned 80% of Italy’s wealth. The principle
basically speaks about quality problems i.e. most of the quality problems result from a small
number of causes. Within the process 20% of the defects, cause 80% of the problems. A

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small number of causes are responsible for large % of the effect. Therefore true progress
results from a consistent focus on the 20% most critical object.
Seven steps to use Pareto Analysis:

1. Form a table listing the causes, and their frequency as a percentage.

2. Arrange the rows in the decreasing order of importance of the causes, i.e. the most
important cause first.
3. Add a cumulative percentage column to the table.
4. Plot causes on x-axis and cumulative percentage on y-axis.
5. Join the above points to form a curve.
6. Plot (on the same graph) a bar graph with causes on x-axis and percent frequency
on y-axis.
7. Draw a line at 80% on y-axis parallel to x-axis. Then drop the line at the point of
intersection with the curve on x-axis. This point on the x-axis separates the
important causes on the left and less important causes on the right.

12.10 KEYWORDS

1. Consequences – Logical conclusion or inference

2. Legislation – A processed law or group of laws

3. Ambiguity – Something of doubtful meaning

4. Continuum – A continuous extent, series or whole, with no discernible division into parts

5. Goal congruence – The quality or state of agreeing or corresponding with harmony

6. Heterogeneity – consisting of dissimilar elements or parts

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12.11 SUMMARY
Decision making is an essential managerial as well as leadership skill. Decisions are at the heart
of leader success, and at times there are critical moments when they can be difficult, perplexing,
and nerve-racking. One has to learn how to make timely, well-considered decisions, to lead a
team to well deserved success. If a leader makes wrong decision he will be brutally short.
Serious business decisions that ultimately shape, guide, and direct our future are extremely
important to business managers. These decisions involve norms, standards, and the comparison
and choice of goals. The outcome of some of the decisions depends on the external
environment as the situation may be in the competitive market. Therefore while analyzing the
decision one could see that ‘good’ decision does not necessarily bring good outcomes. Biggest
example of it is a former USA president John F. Kennedy, said “How could I have been so
stupid?” after the Cuban Missile Crisis known as failure in Bay of Pigs invasion.

Each and every business day the manager puts many questions to the test. The questions must
first be identified as problems or opportunities, verified; scaled into statistical models for which

an answer will abound, and then controlled by updating the solutions because of the dynamic
nature of business decisions.

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UNIT 13 EVOLUTIONS OF MANAGEMENT THOUGHTS

Objectives
After going through this unit, you will be able to:
• State how management science developed throughout the industrial development
mainly after the II World war.
• Enumerate life stories and contribution by different management scientist.
• Define basic management theories.

Structure
13.1 Introduction
13.2 Management thoughts of Henry Fayol
13.3 Management thoughts of Fredrick W. Taylor
13.4 Comparing contributions of Fayol and raylor
13.5 Management thoughts of Joseph M. Juran
13.6 Management thoughts of Abraham H. Maslow
13.7 Management thoughts of William E. Deming
13.8 Management thoughts of Chester I. Bernald
13.9 Management thoughts of Peter F. Drucker
13.10 Keywords
13.11 Summary

13.1 INTRODUCTION

The continued development of commerce and wealth human beings, try to transform their life,
where managing life with humanity and professional development was considered as prior
aspect. While appreciating the past success of ‘management’ we also recognize that today’s
accelerating pace of change is putting pressure on our organizations to be at the forefront of
management thinking. But our present day management thinking has evolved from a whole

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range of influences over an extraordinary long period of time. In the comprehensive book ‘The
Evolution of Management Thought’ Daniel A Wren writes:

“Within the practices of the past there are lessons of history for tomorrow in a continuous
stream. We occupy but one point in this stream. The purpose .. is to present…the past as a
prologue to the future."

So with the aim of accelerating the development of our management practice for the future, let
us examine that stream of evolving management thought of the past.

13.2 HENRI FAYOL (1841- 1925)

A French management theorist was born in Istanbul in 1941. His contribution to management
concepts is always remarkable for the industrialization. He has coined five primary functions of
management those are -

1. Planning,
2. Organizing,
3. Commanding,
4. Coordinating,
5. Controlling.

These five points pervaded management thinking in the future. “Command and control”
became the slogan for the authoritative style of management fashionable through the 1950s
and 1960s, though Fayol’s method was more nuanced than this. His “commanding”, for instance,
included energizing employees, while “controlling” included adapting the overall plan to
changing circumstances.

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Fayol thought that management principles could be developed and then taught. Fayol
suggested that it is important to have unity of command: a concept suggests that there should
be only one supervisor for each person in an organization. Like Socrates, Fayol suggested that
management is a universal human activity that applies equally well to the family as it does to
the corporation. Fayol's career began as a mining engineer. He then moved into research
geology and in 1888 joined, Comambault as Director. Comambault was in difficulty but Fayol
turned the operation round. On retirement he published his work - a comprehensive theory of
administration - described and classified, administrative management roles and processes then
became recognized and referenced by others in the growing discourse about management. He is
frequently seen as a key, early contributor to a classical or administrative management school of
thought. Fayol was graduated from the mining academy of St. Etienne (cole des Mines de Saint-
tienne) in 1860. The nineteen-year old engineer started at the mining company Compagnie de
Commentry-Four Chambeau-Decazeville, ultimately acting as its managing director from 1888 to
1918.
Fayol has been described as the father of modern operational management theory. Although his
ideas have become a universal part of the modern management concepts, some writers
continue to associate him with Frederick Winslow Taylor. Taylor's scientific management deals
with the efficient organization of production in the context of a competitive enterprise that has
to control its production costs. That was only one of the many areas that Fayol addressed.
Perhaps the connection with Taylor is more one of time, than of perspective.
Based largely on his own management experience, Fayol developed his concept of
administration. The 14 principles of management were discussed in detail in his book published
in 1917, Administration industrielle et rale. It was first published in English, as General and
Industrial Management in 1949 and is widely considered a foundational work in classical
management theory.

13.2.1 Principles of Classical Management Theory

1. Specialization of labour - Specializing encourages continuous improvement in skills and
the development of improvements in methods.
2. Authority - The right to give orders and the power to exact obedience.
3. Discipline - No slacking, bending of rules. The workers should be obedient and respectful
to the organization.

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4. Unity of command - Each employee has one and only one boss.
5. Unity of direction - A single mind generates a single plan and all play their part in that plan.
6. Subordination of Individual Interests - When at work, only work things should be pursued
or thought about.
7. Remuneration - Employees receive fair payment for services, not what the company can
get away with.
8. Centralization - Consolidation of management functions. Decisions are made from the top.
9. Chain of Superiors (line of authority) - Formal chain of command running from top to
bottom of the organization, like military
10. Order - All materials and personnel have a prescribed place, and they must remain there.
11. Equity - Equality of treatment (but not necessarily identical treatment)
12. Personnel Tenure - Limited turnover of personnel. Lifetime employment for good
workers
13. Initiative - Thinking out a plan and do what it takes to make it happen.
14. Esprit de corps - Harmony, cohesion among personnel. It's a great source of strength in
the organization. Fayol stated that for promoting esprit de corps, the principle of unity of
command should be observed and the dangers of divide and rule and the abuse of
written communication should be avoided.
He looked for general management principles that could be applied to a wide range of
organizations like business houses, financial or government institutions. He was a great
believer in the value of specialization and the unity of command, that each employee should
be answerable to only one person or authority. The above 14 principles of management
were initially discussed in detail in his book published in 1917, “Administration industrielle
et gïale”. It was first published in English as General and Industrial Management in 1949 and
is widely considered a foundational work in classical management theory. In 1987 Irwin Gray
edited and published a revised version of Fayol’s classic that was intended to free the reader
from the difficulties of sifting through language and thought that are limited to the time and
place of composition.

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13.3 FREDERICK WINSLOW TAYLOR (1856 – 1915)

F.W. Taylor, a mechanical engineer, was born on 20th March 1856 in Philadelphia. Taylor was a
chief engineer at Philadelphia’s Midvale Steel Company, when he introduced time-and-motion
studies in 1881, which helped companies, find efficiencies in worker movement and drive out
time wasting on the assembly lines. Henry Ford, in particular, put Taylor’s theories to work.
Taylor passed away at Philadelphia, Mar 21, 1915.

Taylor worked as an apprentice at a hydraulic works plant in Philadelphia, in his initial days and
then as an unskilled laborer at the Midvale Steel Company where he quickly rose through the
ranks to become chief engineer. He earned an engineering degree while holding down these
jobs, a rare event for those days. But it was his introduction of new scientifically-based practices
that revolutionized the way he and eventually the whole world of management looked at work.
While he was working at Midvale, Tayor closely watched how work was done. It was a time of
industrial expansion in America. But owners and higher authorities had a little understanding
about how to manage and motivate their workers. That was the time to assume that incentives
and punishments are only two elements to increase the productivity. But Taylor realized that
productivity could be increased by measuring both work and people. At the age of 35, Tayor
became an engineering consultant and went to work at the Bethlehem Steel Company. Here he
was able to introduce a time-and-motion system with cost accounting methods and daily output
quotas that would show how his ideas worked. As a result, within a short space of time,
production doubled and costs fell dramatically. But Taylor also made many enemies.

He described the main reasons that workers were not performing their work at the optimum.
He described those as -
1. The belief that increased output would lead to fewer workers.
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2. Inefficiencies within the management control system such as poorly designed incentive
schemes and hourly pay rates not linked to productivity.
3. Poor design of the performance of the work by rule-of-thumb.

Frederick Winslow Taylor is known as the "father of scientific management." Many of his
theories are too autocratic for today's workplace, but during the early years of the twentieth
century, Taylor helped make factories more efficient and productive. His books were known
around the world, and he became a symbol of America's industrial power.
Perhaps the key idea of scientific management and the one which has drawn the most criticism
was, the concept of task allocation. Task allocation is the concept that breaking task into smaller
and smaller tasks, allows the determination of the optimum solution to the task. The fear of
redundancies within the workforce was a valid argument during the previous style of
management. Taylor not only countered this argument by using economic arguments of
increased demand due to decreased pricing and put forward the idea of sharing the gains with
the workforce. Taylor saw the weaknesses of piece work in the workers reactions to gradual
decreases in the piece rate as the worker produced more pieces, by working harder and/or
smarter.

13.3.1 The main elements of the Scientific Management are –

1. Time studies, Functional or specialized supervision, Standardization of tools and
implements Standardization of work methods,
2. Separate Planning function,
3. Management by exception principle,
4. The use of slide-rules and similar time-saving devices,
5. Instruction cards for workmen Task allocation,
6. Large bonus for successful performance,
7. The use of the 'differential rate' Mnemonic systems for classifying products and
implements,
8. A routing system,
9. A modern costing system etc.

Taylor also called these elements as details of the mechanisms of management.

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13.3.2 He saw them as extensions of the four principles of management

1. The development of a true science.

2. The scientific selection of the workmen.
3. The scientific education and development of the workmen.
4. Intimate and friendly cooperation between the management and the workmen.

13.3.3 Time and Motion study

Time and motion study is based on systematic observation, analysis and measurement of
the separate steps in the performance of a specific job for the purpose of establishing a
standard time for each performance, improving procedures and increased productivity. This
theory is combination of the Time Study work of Frederick Winslow Taylor with the Motion
Study work of Frank and Lillian Gilbreth. It is a major part of scientific management that can
be coined as Taylorism.
After its first introduction, time study developed in the direction of establishing standard
times, while motion study devolved into a technique for improving work methods. The two
techniques became integrated and refined into a widely accepted method applicable to the
improvement and upgrading of work systems. Time and motion studies are conducted to
document and improve inefficient methods, eliminate or reduce avoidable delays in the
workplace, and develop time standards. It is studied with two aspects as –

1. Time study – time required by a qualified and well trained person working at a normal
working environment to complete a specific task.
2. Motion study- It is a careful analysis of body motions employed in doing a job in order to
find the most efficient method in terms of time and effort.

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Activity 1

Read a book “Cheaper by the Dozen”, list out different activities those have described about
save in time and energy.

13.3.3.a Steps in conducting a time and motion study:

1. Conduct a Method Study
2. Standardize the Processes and Procedures
3. Conduct a Time Study
4. Establish Standard Time
5. Monitor and Evaluate Changes in Conditions

Study
existing
methods

Monitor Process
the standar-
changes disation

Time Study
Standar- current
disation time

Fig 13.1

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13.3.3.b Advantages of Conducting a Time and Motion Study

1. Eliminate or reduce ineffective movements

2. Facilitate and speed effective movements
3. Eliminate unnecessary work
4. Determine schedules and planning work
5. Determine standard cost and aid budget making
6. Estimate the cost of a product
7. Determine machine effectiveness
8. Determine time standards for establishing wage incentive
9. Determine time standards for estimating labor

Taylor was a strong advocate of worker development. It follows that the most important
object of both the workman and the establishment should be the training and development
of each individual in the establishment, so that he can do the highest class of work for which
his natural abilities could be showcased. Taylor's ideas on management and workers speak
of justice for both parties. Taylor used to say "It (the public) will no longer tolerate the type
of employer who has his eyes only on dividends alone, who refuses to do his share of the
work and who merely cracks the whip over the heads of his workmen and attempts to drive
them harder work for low pay. No more will it tolerate tyranny on the part of labour which
demands one increase after another in pay and shorter hours while at the same time it
becomes less instead of more efficient." Taylor's system was widely adopted in the United
States and the world. Although the Taylor system originated in the factory production
departments, the concept of separating planning from execution was universal in nature
and, hence, had potential application to other areas: production, support services, offices,
operations service industries, etc.

A book "The Principles of Management", published in 1911. In this book, he has laid down
the core values of scientific management including the rule of reason, the need for
management-workers’ co-operation, clear tasks and goals, the careful selection and training
of people, and the importance of review. Extraordinarily, all of these principles are still

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cornerstones of the way, people manage today, whether they adhere to the principles of
scientific management or not.

13.4 CONTRIBUTION OF HENRY FAYOL AND F. W. TAYLOR

These both thinkers have contributed to the development of science of management. In this
Fayol has been described as, the father of modern operational management theory. Although
his ideas have become a universal part of the modern management concepts, some writers
continue to associate him with Frederick Winslow Taylor. Taylor's scientific management deals
with the efficient organization of production in the context of a competitive enterprise that has
to control its production costs. That was only one, of the many areas that Fayol addressed.
Perhaps the connection with Taylor is more one of time, than of perspective. According to
Claude George (1968), a primary difference between Fayol and Taylor was that, Taylor viewed
management processes from the bottom up, while Fayol viewed it from the top down. George's
comment may have originated from Fayol himself. In the classic General and Industrial
Management, Fayol wrote that "Taylor's approach differs from the one we have outlined in that
he examines the firm from the "bottom up." He starts with the most elemental units of activity -
- the workers' actions -- then studies the effects of their actions on productivity, devises new
methods for making them more efficient, and applies what he learns at lower levels to the
hierarchy. Fayol suggested that "Taylor has staff analysts and advisors working with individuals
at lower levels of the organization to identify the ways to improve efficiency. According to Fayol,
the approach results in a "negation of the principle of unity of command”.

Some other management scientist viewed it as, “The work of Taylor & Fayol was, of course,
especially complementary. They both realized that problem of personnel & its management at
all levels is the key to individual success. Both applied scientific method to this problem that
Taylor worked primarily from operative level, from bottom to upward, while Fayol concentrated
on managing director and work downwards, was merely a reflection of their very different
careers”.

Fayol and Taylor do have some similar thoughts on certain issues but have different perspective
on certain aspects –
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Table 13.1

Henry Fayol’s aspect Frederick Winslow Taylor’s aspect

Hierarchical Fayol analysed management from top Taylor looked at management from
aspect management towards downward. supervisory view point and tried to
improve efficiency at operational
level.
Main Developed a universal theory of To improve labour productivity and to
approach of management and stressed upon need eliminate all type of waste through
a theory for teaching the theory of management. standardization of work and tools.
Philosophy A general theory of administration. Scientific management
of theory

Application It mainly considered function of This theory is based on facts by

of theory managers and principles of management and his principles are
management wheel are applied even mainly applicable on shop floor.
today smooth co-ordination in
industries.
Focus He studies focused on top management Individual worker and machine
and their actions. relationships in manufacturing plants
is reviewed in this theory.
Theory Derived 5 functions and 14 principles of Time and motion study
management.

Key Theory is viewed with - It is viewed with –

Concepts 1. Planning a. the best way to complete
2. Organizing, production task
3. Commanding, b. Selection and training of
4. Coordinating, workers
5. Controlling c. Co-operation between worker
and management.
Broader He viewed management as a profession Its piece – rate system which equated
contribution that can be trained and developed and worker rewards and improve worker’s
emphasized on policy aspect at top performance and it instilled
level management. cooperation between management
and workers.

Both the thinkers emphasized on mutual co-operation between employment and employees.
But Fayol’s theory is more widely applicable than that of Taylor, although Taylor’s philosophy

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has undergone a big change under influence of modern development, but Fayol’s principles of
management have stood the test of time and are still being accepted as the core of
management theory.

Activity 2

You must have practiced an activity where in you could saved maximum time and energy
and utilized it for another activity and could gain maximum utilization of resources like time
and other resources, list out those.

13.5 JOSEPH M. JURAN (1904 -2008)

Joseph M. Juran made many contributions to the field of quality management in his lifetime. He
was born in 1904, in Romania; and later moved to Minneapolis, America with his family. In
school days, he could achieve high excellence over mathematics and chess. After obtaining a
degree in electrical engineering he joined with Bell Labs into their Inspection Statistical
Department, for applying and disseminating statistical quality control innovations. After few
years he moved on Western Electrical in New York. Then he served as a professor in New York
University in the Department of Industrial engineering for courses in quality control. Juran
began his own independent practice, from which he made a comfortable living until his
retirement in the late 1990s. He passed away in 2008 at the age of 103 in New York.

A great management thinker has contributed in management science with two main theories
both are based on quality control – a. Pareto Principle b. Quality Trilogy.

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I. Pareto principle -
In the late 1940’s Juran came across various observations with mathematical formulas made
by, an Italian economist, that twenty percent people owe eighty percent of the wealth.
Here he derived an attributes of 80/20 rule, which are now known as Pareto’s Principles.
In this Juran identified 20 percent of the defects causing 80 percent of the problems. Project
Managers know that 20 percent of the work consumes 80 percent of your time and
resources. You can apply the 80/20 Rule to almost anything, from the science of
management to the physical world. The value of the Pareto Principle for a manager is that it
reminds you to focus on the 20 percent that matters. Of the things you do during your day,
only 20 percent really matter. Those 20 percent produce 80 percent of your results. Identify
and focus on those things. When the fire drills of the day begin to sap your time, remind
yourself of the 20 percent you need to focus on. If something in the schedule has to slip, if
something isn't going to get done, make sure it's not part of that 20 percent.

II. Quality Trilogy –

Juran's Trilogy is possibly the most simple, complete, and pure representation of managing
for quality ever devised. The trilogy exemplifies the essence of Quality. It completely meets
its objective in the most efficient and effective manner possible. It includes –
A. Quality Planning – This is the process for designing products, services, and processes to
meet new breakthrough goals. It is based on –
1. Identify the customers.
2. Determine the needs of those customers.
3. Translate those needs into our language.
4. Develop a product that can respond to those needs.
5. Optimize the product features so as to meet our needs and customer needs.
B. Quality Improvement – This is a process for meeting goals during operations. This phase
tells to develop a process which is able to produce the product.

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C. Quality control - This level creates breakthrough at exceptional level of performance.

For this it requires to-
1. Prove that the process can produce the product under operating conditions with
minimal inspection.
2. Transfer the process to operations.

The Union of Japanese Scientists and Engineers invited Dr. Juran to Japan, to teach them the
principles of quality management, as they rebuilt their economy. In 1979, Juran founded The
Juran Institute to better facilitate broader exposure of his ideas. The Juran Institute is today one
of the leading quality management consultancies in the world, and it produces books,
workbooks, videos and other materials to support the wide use of Dr. Juran's methods. The
institute and the consulting practice continue to thrive today. Dr. Juran worked to promote
quality management into his 90's.

13.6 ABRAHAM HAROLD MASLOW (APRIL 1, 1908 - JUNE 8, 1970)

Abraham H. Maslow was a American psychologist who is known for his theory that he proposed
“hierarchy of human needs”. Abraham Maslow was born and raised in Brooklyn. His parents
were uneducated Jewish immigrants from Russia. Abraham Maslow was smart but shy, and
described his childhood as lonely and rather unhappy, because, as he said, "I was the little
Jewish boy in the non-Jewish neighborhood. It was a little like being the first Negro enrolled in
the all-white school. I was isolated and unhappy. I grew up in libraries and among books,
without friends".

Maslow graduated in psychology from University of Wisconsin, where he met his main mentor,
Professor Harry Harlow. From 1937 to 1951, Maslow was on the faculty of Brooklyn College. In
New York he found two more mentors, anthropologist Ruth Benedict and Freudian psychologist

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Max Wertheimer, whom he admired both professionally and personally. He described them as
"wonderful human beings" as well, Maslow began taking notes about them and their behavior.
He wrote extensively on this subject, but especially on the concepts of a hierarchy of needs, Met
needs, self-actualizing persons, and peak experiences.

13.7 WILLIAM EDWARDS DEMING (OCTOBER 14, 1900 - DECEMBER 20,

1993)
Deming was born in Sioux City, Iowa. He received a B.S. in electrical engineering from the
University of Wyoming at Laramie (1921), an M.S. from the University of Colorado (1925), and a
Ph.D. from Yale University (1928). Both graduate degrees were in mathematics and physics.
While studying at Yale he did his internship at Bell Labs and then worked at US Department of
Agriculture and Census. Here he could gain a chance to teach statistical process control methods
to Japanese business leaders, and witness economic growth that had predicted by his mentor
Walter Shewhart at Bell Labs. After returning he joined as a professor at New York University
and started consulting business houses. Deming continued consulting for industry throughout
the world until his death at the age of 93.

Deming edited a series of lectures delivered by Shewhart at USDA, Statistical Method from the
viewpoint of Quality Control, into a book published in 1939. Deming developed the sampling
techniques that were used for the first time during the 1940 in U.S. Census. During World War II,
Deming was member of the five-man Emergency Technical Committee, where they have
compiled American War Standards those are published in 1942.

13.7.1 Japanese Union of Scientists and Engineers (JUSE), in Japan.

JUSE members had studied Shewhart's techniques, and as part of Japan's reconstruction
efforts, they sought an expert to teach statistical control. During June - August 1950, Deming

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trained hundreds of engineers, managers, and scholars in Statistical Process Control (SPC)
and concepts of quality. He also conducted at least one session for top management.
Deming's message to Japan's chief executives: improving quality will reduce expenses while
increasing productivity and market share. A number of Japanese manufacturers applied his
techniques widely and experienced theretofore unheard of levels of quality and productivity.
The improved quality combined with the lowered cost created new international demand
for Japanese products.

Activity 3
Collect information on Walter Shewhart, who encouraged and inspired Dr. Deming to study
further on Statistical methods and how it helped to improve quality.

Deming returned to US and worked on his book "Out of the crisis" in 1982. In this book,
Deming set out 14 points which, if applied to US manufacturing industry, would save the US
from industrial doom at the hands of the Japanese –

1. "Create constancy of purpose towards improvement", i.e. long-term planning than

short-term.
2. "Adopt the new philosophy".
3. "Cease dependence on inspection".
4. "Move towards a single supplier for any one item."
5. "Improve constantly and forever". Constantly strive to reduce variation.
6. "Institute training on the job".
7. "Institute leadership".

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8. "Drive out fear".

9. "Break 7`8 barriers between departments".
10. "Eliminate slogans".
11. "Eliminate management by objectives".
12. "Remove barriers to pride of workmanship".
13. "Institute education and self-improvement".
14. "The transformation is everyone's job".

In his career, Deming received dozens of academic awards, along with honorary, Ph.D. from
Oregon State University. In 1987 he was awarded the National Medal of Technology: "For
his forceful promotion of statistical methodology, for his contributions to sampling theory,
and for his advocacy to corporations and nations of a general management philosophy that
has resulted in improved product quality." In 1988, he received the Distinguished Career in
Science award from the National Academy of Sciences. Just before his death i.e. in 1993, Dr.
Deming published his final book, “The New Economics for Industry, Government, Education”,
which included the System of Profound Knowledge and the 14 Points for Management.

13.8 CHESTER IRVING BARNARD (1886 - 1961)

Chester Barnard, telecommunications executive, public administrator was a great management
science thinker of 20th century. He was born in November 1886 in Massachusetts. In his youth,
Bernard worked on a farm, and then studied economics with earning money by selling pianos
and operating a dance band. Gober wrote about his childhood that “his personality reflected
the contradictions of a poor boy, which had grown up in a working class household where
endless hours of arguments centered not on the perpetual lack of money but on books and
philosophy”.

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Barnard joined the American Telephone and Telegraph Company (now AT&T) in 1909. In 1927,
he became president of the New Jersey Bell Telephone Company. During the Great Depression,
he directed the New Jersey state relief system. He was elected a Fellow of the American
Academy of Arts and Sciences in 1939. He was President of the United Service Organizations
(USO), between 1942 and 1945. Upon retiring from business, he served as president of the
Rockefeller Foundation,1948–52, and as chairman of the National Science Foundation 1952-54.
End 1950s he was among the first members of the Society for General Systems Research.

Bernard believed that no organization would come up with long lasting future, without human
kind activities. Therefore he has suggested two basic criteria’s i.e. effectiveness and efficiency.
Effectiveness to accomplish explicit goals, while efficiency is degree to which, that organization
is able to satisfy the motives of an individual. Bernard has mainly come up with two theories i.e.
theory of authority and theory of incentives.

13.8.1 Both these theories are concerned with communication system, based on seven rules:

1. The Channels of communication should be definite

2. Everyone should know of the channels of communication
3. Everyone should have access to the formal channels of communication
4. Lines of communication should be, as short and as direct, as possible
5. Competence of persons serving as communication centers should be adequate
6. The line of communication should not be interrupted when organization is functioning
7. Every communication should be authenticated

Activity 4

Find out how many management thinkers have worked with Bell Labs and the department
they have worked with.

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13.9 PETER F. DRUCKER (1909 - 2005)

Peter F. Drucker, father of Modern Management, born on November 19, 1909, in Vienna,
Drucker was educated in Austria and England and earned a doctorate from Frankfurt University
in 1931. He became a financial reporter for Frankfurter General Anzeiger in Frankfurt, Germany,
in 1929, which allowed him to immerse himself in the study of international law, history and
finance. Drucker moved to London in 1933 to escape Hitler's Germany and took a job as a
securities analyst for an insurance firm. From 1950 to 1971, Drucker was a professor of
management at the Graduate Business School of New York University. He died on in November
2005 in Claremont, California. He was instrumental in the development of one of the country's
first executive MBA programs for working professionals at Claremont Graduate University (then
known as Claremont Graduate School).

Drucker's work had a major influence on modern organizations and their management over the
past 60 years. Valued for keen insight and the ability to convey his ideas in popular language,
Drucker often set the agenda in management thinking. Central to his philosophy is the view
that people are an organization's most valuable resource, and that a manager's job is to prepare
and make free people to perform.

13.9.1 Drucker has pointed out five tasks for managers –

1. Set Objectives – Managers determine what the objective should be, the goals for each
objective and what has to be done to achieve those objectives.
2. Organize – Analyze the activities, that need to be accomplished, classify the work and
divide it into manageable jobs. Arrange an organizational structure to carry out work
and select people to manage those units.

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3. Motivate and communicate – Form a team of responsible employees and train them for
various jobs.
4. Measurement – Establish yardsticks to measure performance.
5. Development – Improvements to increase productivity.

Drucker's ideas have been disseminated in his 39 books, which have been translated into
more than 30 languages. His works range from 1939's "The End of the Economic Man" to
"Managing in the Next Society" and "A Functioning Society," both published in 2002 and
"The Daily Drucker," released in 2004. His last book co-authored with Joseph A. Maciariello,
"The Effective Executive in Action" was published by Harper Collins in January of 2006.

Activity 5
List down title of books authored by all the management gurus mentioned here.

13.10 KEYWORDS
1. Perspective – Subjective evaluation of relative significance.
2. Obedience – Dutifully complying with the commands, orders or instructions of one in
authority
3. Optimum – A condition, degree or compromise that produces the best possible result
4. Anthropologist – The scientific study of the origin, the behavior, social and cultural
development of human.

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13.11 SUMMARY

This is the information and electronic age. Information and knowledge is going to be readily
available to us all. E-commerce is going to revolutionize the way we work, and leads the
organization. The World Wide Web reflects how the brain works and appears to be in tune with.
Margaret Wheatly, management thinker of new age, talk about a concept of self organizing
systems. We are also witnessing significant developments in our understanding of how the brain
works and how we learn. Writers such as Edward de Bono are challenging the analytical and
confrontational styles of Aristotle and Plato in their search for the truth. He talks about lateral
thinking and developing solutions by building on people’s ‘half baked’ ideas (parallel thinking).

We are now starting to talk about democracy within organizations. Ricardo Semler of Semco in
his book ‘Maverick’ explains how he was able to transform a traditional hierarchical organization
into one in which the employees appoint their respective leaders.

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UNIT 14 RECENT TRENDS IN MANAGEMENT

Objectives
After going through this unit, you will be able to:
• The concepts recently developed in the field of management and can be
implemented in the organization for better performance.
• Usage and importance of Balanced Scorecard, Six sigma and TQM for improvement.
• How these tools support for quality improvement.

Structure
14.1 Introduction of Balancescore Card
14.2 Importance of Balancescore Card
14.3 Balance Scorecard perspective
14.4 Seven elements of scorecard program
14.5 Advantages of Balance Scorecard
14.6 Six Sigma
14.7 Steps to implement six sigma
14.8 Six sigma Strategy
14.9 Six sigma tools
14.10 TQM
14.11 Principle of TQM
14.12 Elements of TQM
14.13 Implementing TQM
14.14 Keywords
14.15 Summary

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14.1 INTRODUCTION OF BALANCE SCORE CARD

Balance scorecard is a management system used for strategic planning and measuring
performance. A performance metric is used in strategic management to identify and
improve various internal functions and their resulting external outcomes. The balanced
scorecard attempts to measure and provide feedback to organizations in order to assist in
implementing strategies and objectives. In this data collection is crucial for providing
quantitative results, which are interpreted by managers and executives and used to make
better long-term decisions. Dr. Robert Kaplan and David P. Norton have coined this concept.
Initially they had carried out research and studied for performance measurement framework,
which later added to strategic non-financial performance measure to traditional financial
metrics for managers. It shows balanced view of organizational performance. Dr. Kaplan and
Norton had put this approach towards management first through series of articles and books.
The balanced scorecard has evolved from its early use as a simple performance
measurement framework to a full strategic planning and management systems. The new
balanced scorecard transforms an organization’s strategic plan from an attractive but
passive document into the marching orders for the organization on daily basis. It provides a
framework that not only provides performance measurements, but helps planners identify
what should be done and measured. It enables executives to truly execute their strategies.

Balance scorecard is not only measurement system but it is a management system also. It
recognizes some of the weaknesses and vagueness of previous management approaches.
This activity provides a clear prescription as to what organization should measure in order to
balance the financial aspect. Dr. Kaplan and Norton had stated it, in their book “The Balance
Scorecard, as“ the Balance Scorecard translates an organization’s mission and strategy into a
comprehensive set of performance measures that provides the framework for a strategic
measurement and management systems”. It provides feedback around both the internal
business process and external outcomes in order to continuously improve strategic
performance and results. The balance scorecard transforms strategic planning from an
academic exercise into the nerve center of an enterprise.

14.2 IMPORTANCE OF BALANCE SCORECARD

1. Change – formulate and communicate new strategy for more competitive environment.

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2. Growth – Increase revenue, not just cut costs and enhance productivity.
3. Implement – Every employee implements the new growth strategy in their day to day
operations.

Dr. Kaplan in his studies has observed that less than 10% of strategies effectively formulated
are effectively executed. Even in this information age environment, any type of organization
requires new capabilities for competitive success.

Dr. Kaplan provided a framework to translate a strategy into operational terms, in the article
‘using the Balanced Scorecard as a strategic management system’, that is published in
Harvard Business Review in 1996.

14.3 BALANCE SCORECARD PERSPECTIVES

Dr. Kaplan and Norton have measured organizational performance with above mentioned
four balanced perspectives, described as – these perspectives are mainly based on
objectives and measures which focus to communicate and help to implement the strategy.

1. Financial perspective – Kaplan and Norton emphasized on need of traditional financial

data. But this data has to be linked with corporate strategies. Timely and accurate data
will always be a priority and managers will do whatever necessary to provide it. In fact,
often there is more than enough handling and processing of financial data. With the
implementation of a corporate database, it is hoped that more of the processing be
centralized and automated. In this, more focus is needed to be provided for unbalanced
situation with regard to other perspectives. Here it is necessary to include additional
financial-related data, such as risk assessment, cost-benefit data, etc.
2. Customer perspective – This covers the customer objectives such as customer
satisfaction, market share as well as product and service attributes. It tries to analyze
strategy where we can measure new customers by retaining existing ones with customer
satisfaction. Without customers no business could run. Here leading indicators are if
customers are not satisfied, they will eventually find other suppliers that will meet their
needs. Poor performance is an indicator of future decline, even though the current
financial picture may be good. Customers would be analyzed in the terms of kinds of
customers and processes that we are providing a product or services to a group of
customers.

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3. Internal business process perspectives – In this, derived data allows the manager to
know how well his/her business is running and whether its products and services,
conform to customer requirements. This data has to be carefully designed by those who
know these processes most intimately, and not just by outside consultants. This covers
internal operational goals and outlines the key processes necessary to deliver the
customer objectives.
4. Learning and growth perspective – In this information era for future success, it is
necessary to consider human capital, organizational capital that includes skills, training,
organizational culture, leadership, systems and databases. In a knowledge workers
organization, people the only repository of knowledge, are the main resource of the
organization. In this environment of rapidly technological changes, it is becoming
necessary for knowledge workers to be in a continuous learning mode. Therefore
Kaplan and Norton emphasized more on learning than just a training, including mentors
or tutors within the organization and could be communicated easily for various
problems. In any organization learning and growth are constituted with each other.

Balance Scorecard management system is used to -

1. Implement a framework to align and focus the organization from top to bottom
on its strategy.
2. Identify the related key change initiatives, required to realize the strategy and
mobilize the organization.
3. Create feedback processes at all levels to evaluate progress against strategy,
monitor and manage issues and priorities, and measure performance and
contribution to the business.

14.4 SEVEN ELEMENTS OF SUCCESSFUL BALANCE SCORECARD

PROGRAMMES
1. A process to mobilize the organization and lead ongoing changes.
2. Describe the strategy.
3. Linking scorecard to create an organizational alignment.
4. Continuous communication to empower the workforce.

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5. Aligning personal goals, incentives and competencies with the strategy.

6. Aligning resources, budgets and initiates with strategy.
7. Feedback process that encourages learning and experience sharing.

14.5 ADVANTAGES OF BALANCE SCORECARD

1. For better planning-

It provides a powerful framework for building and communicating strategy. Here it
develops the business model in a strategy map. This forces managers, to think about
cause and effect relationships. Also it ensures harmony among interrelated strategic
objectives. Identified performance outputs enable to create a complete picture of the
strategy.
2. Improved communication and execution –
Strategies framed on a single piece of paper allow, to easily communicate strategy
internally and externally. This facilitates understanding of the strategy and helps engage
staff, stakeholders in the delivery and review of strategy. It is possible to execute a
strategy that could be understood by everyone.
3. Management of Information –
This approach forces organizations, to design performance indicators for their various
strategic objectives. This ensures that companies are measuring what actually matters.
Research shows that companies that follow scorecard system report higher quality
management information and gain increasing benefits from the way this information is
used to guide management and decision making.

4. Improves performance –
Balance Scorecard and its structured approach produces better performance reports
than organizations without such a structured systems. Companies should create
meaningful management reports and dashboards, to communicate performance both
internally and externally to increase transparency within the organization.
5. Improved internal environment –
Proper execution of plans as per the scorecard prepared ensures, that all business and
support units are working towards the same goals. Further preparing cards for those
units will help to achieve and link strategy to operations. This helps to align
organizational processes such as budgeting, risk management and analytics with the
strategic priorities.
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14.6 SIX SIGMA

14.6.1 Introduction
Six Sigma is a highly disciplined process that helps us to focus on developing and
delivering perfect products and services. Sigma is a statistical term that measures how
far a process deviates from perfection. The basic idea behind Six Sigma is that if you can
measure how many defects you have in a process, you can systematically figure out how
to eliminate these and get as close to zero defects as possible. It is a process of change
everything that we do and every product that we design. Pyzdek T and Keller P stated in
their book ‘the six Sigma Handbook’, incorporating elements from the work of many
quality pioneers Six Sigma aims for virtually error-free business performance. This is an
application of the scientific method to the design and operation of management systems
and business processes, which enable employees to deliver the greatest value to
customers and owners. Six Sigma at many organizations, simply means a measure of
quality that strives for near perfection. Six Sigma is a disciplined, data-driven approach
and methodology for eliminating defects (driving toward six standard deviations
between the mean and the nearest specification limit) in any process – from
manufacturing to transactional and from product to service.

14.6.2 Historical Review

Six sigma was originally developed as a set of practices designed to improve
manufacturing processes and eliminate defects, but its application was subsequently
extended to many other types of business process even. In Six Sigma, a defect is defined
as anything that could lead to customer dissatisfaction and does not meet business set
specifications. This methodology was first formulated by Bill smith at Motorola in 1986.
Six sigma was heavily inspired by six preceding decades of quality improvement
methodology such as Quality control, TQM, that has been introduced by pioneers like
Shewhart, Deming, Juran, Ishikawa, Taguchi and others.

14.7 STEPS TO IMPLEMENT SIX SIGMA

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Six Sigma is a scientific method that needs to be applied with certain steps as those are
described by Pyzdek T. and Keller P.
1. Observe some important aspect of the marketplace of your business.
2. Develop a tentative explanation or hypothesis, consist with your observations.
3. Based on your hypothesis, make predictions.
4. Test your predictions by conducting experiments or making further careful observations.
Record your observations. Modify your hypothesis based on the new facts. If variation
exists, use statistical tools to help you separate signal from noise.
5. Repeat step 3 and 4 until there are no discrepancies between the hypothesis and the
results from experiments or observations.

14.8 SIX SIGMA STRATEGY

It is a statistical presentation that describes quantitatively how a process is performing.

According to six sigma strategy, error should be eliminated up to 3.4 defects per million
opportunities. It defines defect as anything outside of customer specifications. It is
something related to nonconformance or not meeting the required specification. This
means we need to be almost faultless in execution and implementation.
The basic objective of the Six Sigma methodology is the implementation of a measurement-
based strategy for improvement and reducing variation through the application of six sigma
improvement projects. This could be achieved with two major sub-methodologies –
1. DMAIC – It is an improvement system for existing processes falling below
specification and looking for incremental improvement.
a. D -Define the goals of the improvement activity.
b. M- Measure the existing system.
c. A – Analyze the system, to identify ways to eliminate the gap between the current
performance, of the system or process and the desire goal.
d. I – Improve the system.
e. C – Control the new system.
2. DMADV- This is a system when product or process is not in existence at your
company and needs to be developed. This can be a next process to DMAIC, mainly
when a level of customer satisfaction is not met after going with DMAIC process.
a. D – Define the goals for improvement.
b. M – Measure the existing system.
c. A - Analyze the system to eliminate the gap between performances.
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d. D – Design the process to meet the customer needs.

e. V – Verify the design performance

14.9 SIX SIGMA TOOLS

There are various tools available to assist and implement six sigma process in the
establishment for improvement or for new set up.
1. SIPOC – This means Suppliers, Input, Process, Output and customer. This is a high level
process map. It is typically used during define phase of a process improvement project,
that helps to understand the purpose and the scope of a process. It gives us initial
insight to the vital inputs of a process that have significant impact on critical outputs.
2. Benchmarking - Benchmarking is one of the first key steps in any Six Sigma DMAIC or
DFSS project. Benchmarking is a standard by which something can be measured or
judged. In business benchmarking means comparison with other business, so that it can
develop an objective assessment of our business. It is done to identify areas for
breakthrough improvements and establish higher targets and new priorities.
Benchmarking is just not a comparison but it helps to analyses the outcome and adds
the values derived for improvement.
3. Brainstorming – This is a process to handle a challenging situation like product designing,
sales management, market research etc., from a group of people by nurturing free-
thinking. This is required for generating inputs for the above techniques is complex as
compared to the free flow ideation. Brainstorming sessions generally focus on
generating a number of ideas, with involvement of every participant in the process and
encourage to think out of the box. Reasonable time limit is decided to take up the
challenge.
4. Affinity Diagram – Affinity diagram is a process between brainstorming and
implementation of those ideas into reality. This is typically used to analyed and
prioritized the ideas designed during brainstorming session before implementation.
Even smaller set of ideas are easy to sift through and evaluate without applying any
formal technique. This is a effective technique to handle a large number of ideas. For
this, it is suggested to write down ideas and plans on the post-it cheats and place them
on the flat surface with appropriate grouping that could be visible to everyone, for its
effective implementation.

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5. Fishbone Diagram – It is also called as cause and effect diagram or Ishikawa diagram.
This concept is devised by Prof. Kaoru Ishikawa, a quality management guru in the
1960’s. He has published this technique in his book “Introduction to Quality Control”.
After creating a diagram it looks like a skeleton of fish, therefore the term Fishbone is
assigned to this concept. This diagram identifies many possible causes for an effect or
problem. This is also one of the methods used in brainstorming session. It is used to
discover the root causes for a problem. It uncovers bottlenecks in the processes and
identifying where and why process isn’t working or has been slow down in the process.
6. Pareto chart – Pareto chart is based on 80/20 principle, formulated by Dr. Juran on basis
of analyses made by Italian Economist Vilfredo Pareto. A Pareto chart is used to
graphically summarize and display the relative importance of the differences between
groups of data. Learn when it’s appropriate to use a Pareto chart, histogram and bar
chart, and what the differences are.
7. Sampling – Sampling is a technique used to measure values. It draws inferences about
one or more characteristics of a large group of item and represents a group of that item.
Sampling selection is mostly based on probability or judgment or non-probability
method. Sampling method is necessary when the population is large that makes
unaffordable to carry out the survey with entire population which leads to high priced in
terms of time and resources.
Activity : Analyse any Indian company, taken initiative to implement Six sigma and
experienced improvement with it.

14.10 TOTAL QUALITY MANAGEMENT

14.10.1 Introduction
Total Quality Management (TQM) is an approach that organizations use to improve their
internal processes and increase customer satisfaction. When it is properly implemented,
this style of management can lead to decreased costs related to corrective or
preventative maintenance, better overall performance, and an increased number of
happy and loyal customers. This can be achieved by integrating all quality-related
functions and processes throughout the company. TQM looks at the overall quality
measures used by a company including managing quality design and development,
quality control and maintenance, quality improvement, and quality assurance. TQM

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takes into account all quality measures taken at all levels and involving all company
employees. In this all members of an organization participate in improving processes,
products, services and the culture in which they work.

14.10.2 Evolution of Concept TQM

Though now a day’s many companies are adopting QMS software’s as controlling
procedures, this concept has evolved from the quality assurance methods that were first
developed around the time of the First World War. The war effort led to large scale
manufacturing efforts that often produced poor quality. To help correct this, quality
inspectors were introduced on the production line to ensure that the level of failures
due to quality was minimized.
After the First World War, quality inspection became more commonplace in
manufacturing environments and this led to the introduction of Statistical Quality
Control (SQC), a theory developed by Dr. W. Edwards Deming. This quality method
provided a statistical method of quality based on sampling. Where it was not possible to
inspect every item, a sample was tested for quality. The theory of SQC was based on the
notion that a variation in the production process leads to variation in the end product. If
the variation in the process could be removed this would lead to a higher level of quality
in the end product.
After World War Two, the industrial manufacturers in Japan produced poor quality items.
In a response to this, the Japanese Union of Scientists and Engineers invited Dr. Deming
to train engineers in quality processes. By the 1950’s quality control was an integral part
of Japanese manufacturing and was adopted by all levels of workers within an
organization.
By the 1970’s the notion of total quality was being discussed. This was seen as company-
wide quality control that involves all employees from top management to the workers,
in quality control. In the next decade more non-Japanese companies were introducing
quality management procedures that based on the results seen in Japan. The new wave
of quality control became known as Total Quality Management, which was used to
describe the many quality-focused strategies and techniques that became the center of
focus for the quality movement.

14.11 SEVEN IMPORTANT PRINCIPLES FOR TQM

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1. Quality can and must be managed - Many companies have allowed in a repetitive cycle of
chaos and customer complaints. They believe that their operations are simply too large to
effectively manage the level of quality. The first step in the TQM process, then, is to
realize there is a problem and that it can be controlled.

2. Processes, not people, are the problem - If your process is causing problems, it won’t
matter how many times you hire new employees or how many training sessions you put
them through. Correct the process and then train your people on these new procedures.

3. Don’t treat symptoms, look for the cure - If you just patch over the underlying problems
in the process, you will never be able to fully reach your potential. If, for example, your
shipping department is falling behind, you may find that it is because of holdups in
manufacturing. Go for the source to correct the problem.

4. Every employee is responsible for quality - Everyone in the company, from the workers
on the line to the upper management, must realize that they have an important part to
play in ensuring high levels of quality in their products and services. Everyone has a
customer to delight, and they must all step up and take responsibility for them.

5. Quality must be measurable - A quality management system is only effective when you
can quantify the results. You need to see how the process is implemented and if it is
having the desired effect.(meaning of above sentence is not understood) This will help
you set your goals for the future and ensure that every department is working toward the
same result.

6. Quality improvements must be continuous - Total Quality Management is not something

that can be done once and then forgotten. It’s not a management “phase” that will end
after a problem has been corrected. Real improvements must occur frequently and
continually in order to increase customer satisfaction and loyalty.

7. Quality is a long-term investment - Quality management is not a quick fix. You can
purchase QMS software that will help you get things started, but you should understand
that real results won’t occur immediately. TQM is a long-term investment, and it is
designed to help you find long-term success.

14.12 ELEMENTS OF TQM

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TQM can be defined as the management of initiatives and procedures that are aimed at
achieving the delivery of quality products and services. TQM is processed with different
elements as-
1. Executive Management – Top management should act as the main driver for TQM
and create an environment that ensures its success.
2. Training – Employees should receive regular training on the methods and concepts
of quality.
3. Customer Focus – Improvements in quality should improve customer satisfaction.
4. Decision Making – Quality decisions should be made based on measurements.
5. Methodology and Tools – Use of appropriate methodology and tools, ensures that
non-performances are identified, measured and responded to consistently.
6. Continuous Improvement – Companies should continuously work towards improving
manufacturing and quality procedures.
7. Company Culture – The culture of the company should aim at developing employees’
ability to work together to improve quality.
8. Employee Involvement – Employees should be encouraged to be pro-active in
identifying and addressing quality related problems.

14.13 IMPLEMENTING TQM

To implement the TQM within the organization, following 12 steps are to be followed –
1. Obtain CEO Commitment- It is necessary that the CEO and upper management
believe in TQM and supporting its implementation.
2. Educate Upper-Level Management - Teach the CEO and upper management, the
required management involvements and decisions must be taken during the
implementation of the TQM.

3. Create a Steering Committee - Once the upper management completes the training,
a steering committee to be created in order to sponsor and guide the process of
implementing TQM.

4. Outline the Vision statement, Mission Statement and Guiding Principles

5. Prepare a Flow Diagram of Company Processes - The Company should draw and
document their flow diagram when implementing the TQM

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6. Focus on the Owner/Customer (External) through Surveys - It is very important that

the company focus on the customer concerns and feedbacks. To get these concerns
the company must go through set of surveys in order to learn and understand the
customer view about the company products or services.

7. Consider the Employee as an Internal Owner/Customer - The Company to

understand that the employees are considered as internal customers, and satisfying
the internal customer would reflect either positively or negatively on the quality of
the products or services and thus the company performance.

8. Provide a Quality Training Program - To a successful TQM implementation, the

company should provide training to all level of employees within that company.

9. Establish quality improvement teams - Quality teams’ responsibility is to investigate

on the areas of improvement, such as training, employee participation and personal
development.

10. Implement Process Improvements - Developing a system for selecting processes to

be improved then you could move to other areas, such as customer satisfaction,
employee involvement, cooperative attitude, and improving the communication
among the company levels.(meaning os the sentence is not understood)

11. Use the Tools of TQM - Flowchart, Cause and Effect diagram, Control Chart,
Histogram, check Sheet and Pareto diagram are considered the tools of TQM.

12. Know the Benefits of TQM - It is very well known that eliminating all the factors that
are preventing a company from high performing is considered a benefit.Activity

Write down information in short about Deming Award and Malcom Balridge Award, list
down at least 5 Indian companies those are recipient of these awards.

14.14 KEYWORDS
1. Hypothesis – Tentative explanation for an observation, phenomenon or scientific problem
that can be tested by further investigation.
2. Benchmarking – Standard by which something can be measured or judged.
3. Brainstorming – Method of shared problem solving by thinking intensely about it, in
which member of a group spontaneously contribute ideas.

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4. Implementation – To put into practical effect.

14.15 SUMMARY

After industrialization, twenty first century is known as information knowledge era. Human
resource is considered as a core and important asset along with machinery and tools. In
these current trends it include hiring employees from contractors directly rather outsourcing
employees of particular division. After World War II, with the financial crises, it makes to

see for more transparency within the organization and at each and every corner of the
organization. Therefore some mechanism and tools are developed to have a control and
streamline each minute activity within the operations. Six Sigma, TQM and Balance
Scorecard are some of the tools developed by management scientist to have financial as well
as operational control. This supports to frame standardized process for business operations,
financial matters, processes for customer satisfaction and for quality of a product.

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