Unit 1

Understanding Management and

Managerial Roles
 What Is An Organization?
An Organization Defined
A deliberate arrangement of people to accomplish
some specific purpose (that individuals
independently could not accomplish alone).
Systematic arrangement of people brought together
to accomplish some specific purpose
Collection of interacting and interdependent
individuals who work towards common goals
whose relationships are determined according to
certain structure.
Organization Example
Characteristics of Organizations
 Types of organization
Business organization whose motive is profit
making
Government organization formed to perform the
public welfare activities like ministers, department,
constitutional bodies, development board, army,
police etc.
Service organization which are non-profit oriented
institutions like governmental hospitals, public
schools and colleges, religious and non-
governmental organization
 Types of organization
Professional organization which is formed by a
group of people to protect their professional
right like Nepal bar association, university
teachers association, labour unions etc.
International organization are the organization
working in two or more countries like world
trade organization, world bank SAARC, European
union etc.
 Types of Organization
A hybrid organization is a body that operates in both
the public sector and the private sector simultaneously,
fulfilling public duties and developing commercial
market activities.
A voluntary association is an organization consisting of
volunteers. Such organizations may be able to operate
without legal formalities, depending on jurisdiction,
including informal clubs.
Organizations may also operate in secret and/or
illegally in the case of secret societies, criminal
organizations and resistance movements.
 Importance of organization
Mechanism for management in action:- organization is not only
a chart. It is a mechanism for management in action. So many
management actions such as direction, motivation, coordination
and control help in organizing function. It also helps to manage the
business firm with proper management actions
Facilitate in management and operation:- organization is
directly or indirectly related to well defined work, authorities,
responsibilities and account-abilities Managers and other
employees are benefited by appropriate functional activities. It
helps in smooth and effective management operation giving
effective functional activities.
 Importance of organization
Effective delegation:- all level of management must
make the decisions . Sufficient level of authority and
responsibility must be delegated to make the decisions.
When the delegation of authority and responsibility is
affected all level of employees can make the decisions
easy. Organization helps in effective delegation.
Growth and diversification:- organization clear division
of work, delegation of authority and responsibility, the
relationship among resources etc. these activities helps in
growth and diversification function. On the other hand,
sound organisation give the clear cut frame work to do
work too.
 Importance of organization
Optimum use of technological resources:-
organization use machines, equipment and tools.
With the help of organization many sophisticated
technologies and improved materials are used. Use of
latest technologies help in efficiency improvement.
Use of human resource:- human resource must be
properly utilized. Organisation helps in great
utilization of manpower by placing right people and
right place in the basis of their qualification,
experience, skill and knowledge etc. Developing
employees and motivating then are most important
tools to use the human resources.
 Importance of organization
Flexibility:- organisation may be changed according to
the needs of environment and changing circumstances.
The organisation structure must be flexible that helps to
adjust in external as well as internal environment.
Productivity increment: when the authorities and
responsibility are given to all employees they can make
decision in their working level, appropriate adjustment
of resources is most important management function
which help to increase the productivity.
 Management Defined

Management is the process of

achieving goals and objectives
effectively and efficiently through
and with the people.
"Management is a process of designing
and maintaining an environment in
which individuals work together in
groups to effectively and efficiently
accomplish selected aims".
 Management Defined Contd
Management is the process of achieving
organizational goals and objectives effectively
and efficiently by using management
functions i.e.
Planning
Organizing
Staffing
Controlling

Management is a set of activities directed at an

organization's resources with the aim of
achieving organizational goals in an efficient and
effective manner.
These definitions when expanded have
these implications:
Management is thus a continuous effort aimed at shaping an organization
and contributing to its overall growth.

The functions of managers include planning, organizing, staffing, leading

and controlling.

These functions are essential to any kind of organization.

It applies to managers at all hierarchical levels.

The aim of managers is to increase productivity, effectiveness and

efficiency.
 Elements of definition

Process - represents ongoing functions or primary activities engaged in by

managers

Efficiency - getting the most output from the least amount of inputs
Performing or functioning in the best possible manner with the least waste of
time and effort
doing things right
concerned with means
Achieving the objectives in time

Effectiveness - completing activities so that organizational goals are attained

Adequate to accomplish a purpose; producing the intended or expected result.
doing the right things
concerned with ends
Achieving the objectives on time
 Efficiency and Effectiveness

Means Ends
Efficiency Effectiveness

Goals

Goal Attainment
Resource Usage

Low High
Waste Attainment

FOM 1.9
 Why Study Management?
The Value of Studying Management
The universality of management
Good management is needed in all organizations.
The reality of work
Employees either manage or are managed.
Rewards and challenges of being a manager
Management offers challenging, exciting and creative opportunities
for meaningful and fulfilling work.
Successful managers receive significant monetary rewards for their
efforts.
Universal Need for Management
 Principles of Management
14 principles of management as given by Henry Fayol
(Administrative management theory) are:
Division of Work: an employee assigned to only one type of
work to increase output which leads to specialization. The work
division should be done based on efficiency of subordinates.
Authority and Responsibility: authority means right to give
order and power. Responsibility refers to the obligation to
perform the manner desired and directed by superior authorities
in any management process.
Discipline: the workers should be obedient and respectful of the
organization, and this is absolutely essential.
Unity of command: one employee should have only one boss
and receive orders for him/her using one plan
 Principles of Management
Subordination of Individual Interest to General Interest: it
means supremacy of organizational goals over interests of
individual or a group of individuals, including that of manager.
Remuneration of Personnel: the price rendered or remuneration
should be fair and satisfactory to the employees and employer
including the managers justifying the workload, job hazards,
efficiency and quality of performance.
Scalar chain (Hierarchy): the line of authority from top
management to lowest ranks represents the scalar chain.
Communications should follow this chain.
Order: It implies order of things and people. Placing all required
things and materials in prescribed place i.e. in right place. Working
place should be clean, tidy and safe for employees. Engagement of
right people in the right place.
 Principles of Management
Centralization: decisions are made from the top (managers).
Subordinates should be given enough authority to do their job
properly
Equity: It is the combination of kindness and justice.
Employees expect equity from the management. Employees
should be treated fairly and justly, kindly for devotion and
loyalty from employees in return.
Stability of Tenure of Personnel: For maximum productivity
through efficient workers, a stable work force with stable
tenure is needed.
Initiative: passion, energy and initiative from the employees
of all levels through freedom to think out a plan and execute
it. It motivates people and increases productivity.
 Principles of Management
Esprit de Corp: team or organizational spirit i.e.
cohesion among personnel is a great source of
strength in the organization. Managers should strive
to promote team spirit, unity and organizational
communication
Unity of direction Management principal based on the
concept that all team members involved in the same
activities must share the same objective. Team members
all work toward a common goal using the same plan to
reach the shared objective.
Function of Management
 Planning
Planning is setting goals and deciding how to
best achieve them in advance.
Planning is predetermining future and selecting
appropriate goals and actions to achieve them.
The process by which management set objectives,
assess the future, and develop course of action to
accomplish these objectives.
Planning is also to decide in advance about what
to do, how to do, when to do and who is to do.
 Planning

Establish an overall direction

for the organizations future
Identify and commit resources
to achieving goals
Decide which tasks must be
done to reach those goals
 There are uncontrollable, external factors that constantly
affect an organization both positively and negatively.
Depending on the circumstances, these external factors
may cause an organization to adjust its course of action in
accomplishing certain goals. This is referred to as
strategic planning.
During strategic planning, management analyzes internal
and external factors that do and may affect organization,
as well as the objectives and goals.
From there they determine the organizations strengths,
weaknesses, opportunities and threats.
In order for management to do this effectively, planning
has to be realistic and comprehensive.
 Organizing
The process of arranging people and physical
resources to carry out plans and accomplish the
organizational goals.
Also important for performing staffing, directing
and controlling functions
 Organizing involves:
Defining tasks required for achieving goals. What task to be
done?
Grouping the activities in logical pattern
Determining manpower requirement
Establishing authority and responsibility for each position.
Who reports to whom?
Assigning the activities to specific position and people
Coordinating their activities authority relations
Organizing efficiency and reducing the operation cost through
avoiding repetition and duplication of activities.
 Leading
Leading A continuous
process of setting objectives
and trying to achieve them
through the efforts of other
people.
 Leading
Leading consists of : Leadership, Motivation and
Communication
Leadership is the ability to influence a group toward
achievement of goals willingly and enthusiastically in a
given situation
Motivation is the acts of stimulating people to
contribute at some higher rate.
Communication consists of conveying information
from top to bottom, bottom to top and at horizontal and
lateral.
 Controlling
Controlling consists of actions and decisions, a manager
undertakes to ensure actual result.
Process by which a person, group, or organization consciously
monitors performance and takes corrective action
It ensures the right thing is done in the right manner and at
the right time.
The steps of controlling:
Establishing standards
Measuring actual performance
Finding and analyzing deviations
Corrective action
Someone who coordinates
and oversees the work of
other people so that
organizational goals can be
accomplished.
- A person who plans,
organizes, directs and controls
the allocation of human,
material, financial, and
information resources in
pursuit of the organizations
goals.
Managerial Levels
 Top Managers
Responsible for providing the overall direction of an
organization
Develop goals and strategies for entire organization
Spend most of their time planning and leading
Communicate with key stakeholdersstockholders, unions,
governmental agencies, etc., company policies
Use of multicultural and strategic action competencies to lead
firm is crucial
Top Managers: provide the overall direction of an organization
Chief Executive Officer, President, Vice President
 Levels of Management
Middle Managers:
Middle level management develops departmental goals,
executes the policies, plans and strategies determined by
top management ,
develop medium- term plans and supervises and coordinate
lower-level managers activities
Coordinate employee activities
Determine which goods or services to provide
Decide how to market goods or services to customers
Assistant Manager, Manager (Section Head)
 First-line Managers
Directly responsible for production of goods or services
Employees who report to first-line managers do the
organizations work
Spend little time with top managers in large organizations
Technical expertise is important
Rely on planning and administration, self-management,
teamwork, and communication competencies to get work done
have direct responsibility for producing goods or services
Foreman, supervisors, clerical supervisors
 Most

Least
Important

Important
Planning

Organizing

Top
Staffing

Managers
Directing
Controlling

Planning
Organizing
Staffing
Middle
Managers
Directing
Controlling

Planning
Organizing
Staffing
Managers
First-Line

Directing
Importance of management functions to managers in each level

Controlling
 Conceptual skill
Technical skill
Human/interpersonal skill
 Managerial skills Contd
Conceptual skills:
This refers to the ability to think and conceptualize
abstract situations. These abilities are required for
making complex decisions.
In short it is:
The mental capacity to develop plans, strategies and
vision
Human or interpersonal skills:
This includes the ability to understand other people
and interact effectively with them. The human skills
are also important in creation of an environment in
which people feel secure and free to express their
opinions.
In short it is:
The ability to work with other people in teams
 Managerial skills Contd

Technical skills:
These skills include the knowledge, abilities of
and proficiency in activities involving
methods, processes and procedures in the
relevant fields as accounting, engineering,
manufacturing etc.
Or in short:
The ability to use the knowledge or
techniques of a particular discipline to attain
ends
Management Level and Skills
 Roles of manager
Role: a set of expectation for ones behavior

In 1960, Henry Mintzberg conducted a study to understand about

the managerial roles. He identified 10 managerial roles that are
common to all managers. These 10 managerial roles are
grouped under: Interpersonal, decisional, and informational
roles.
Roles of Manager

Decisional Informational
Interpersonal
Entrepreneur
Figurehead Monitor
Disturbance handler
Leader Disseminator
Resource allocator
Liaison Spokesperson
Negotiator
 Roles of manager Contd
Inter-personal Role
Figurehead: Represents the company on social occasions.
Attending the flag hosting ceremony, receiving visitors or taking
visitors for dinner etc.
Leader: In the role of a leader, the manager motivates,
encourages, and builds enthusiasm among the employees.
Training subordinates to work under pressure, forms part of the
responsibilities of a manager.
Liaison: Consists of relating to others outside the group or
organization. Serves as a link between people, groups or
organization. The negotiation of prices with the suppliers
regarding raw materials is an example for the role of liaison.
 Roles of manager Contd
Decisional Role:
1. Entrepreneur: Act as an initiator and designer and
encourage changes and innovation, identify new ideas,
delegate idea and responsibility to others.
2. Disturbance handler: Take corrective action during disputes
or crises; resolves conflicts among subordinates; adapt to
environmental crisis.
3. Resource allocator: Decides distribution of resources
among various individuals and groups in the organization.
4. Negotiator: Negotiates with subordinates, groups or
organizations- both internal and external. Represents
department during negotiation of union contracts, sales,
purchases, budgets; represent departmental interests
 Roles of manager Contd
Informational role:
Monitor: Emerges as nerve center of internal and
external information about Information.
Disseminator: Transmits information received
from other employees to members of the
organization.
Spokesperson: Transmits information to the
people who are external to the organization, i.e.,
government, media etc. For instance, a manager
addresses a press conference announcing a new
product launch or other major deal.
 What Are
Managerial Competencies?

Competency a combination of
knowledge, skills, behaviors, and attitudes
that contribute to personal effectiveness

Managerial Competencies sets of knowledge,

skill, behaviors, and attitudes that a person needs to
be effective in a wide range of positions and various
types of organizations
 Why are Managerial Competencies
Important?
You need to use your strengths to do your best
You need to know your weaknesses
You need developmental experiences at work to become
successful leaders and address your weakness
You probably like to be challenged with new learning
opportunities
Organizations do not want to waste human resources
Globalization deregulation, restructuring, and new
competitors add to the complexity of running a business
A Model of Managerial Competencies
Communication
Competency
Planning and
Teamwork
Administration
Competency
Managerial Competency
Effectiveness
Global Strategic
Awareness Action
Competency Self-Management Competency
Competency
 How The Managers Job Is Changing
The Increasing Importance of Customers
Customers: the reason that organizations exist
Managing customer relationships is the responsibility
of all managers and employees.
Consistent high quality customer service is essential
for survival.
Innovation
Doing things differently, exploring new territory,
and taking risks
Managers should encourage employees to be aware of
and act on opportunities for innovation.
 Historical Background of Management
Ancient Management
Egypt (pyramids) and China (Great Wall)
The Qutub Minar, Taj Mahal
Venetians (floating warship assembly lines along the canal and
at each stop, materials were added to the ship)
Adam Smith
Published The Wealth of Nations in 1776, in which he argued
the benefits of division of labor (job specialization).
Industrial Revolution
Where it became more economical to manufacture in factories
than at home.
Managers were needed to manage the factories, and formal
theories to guide them.
Major Approaches to Management
 Classical Approach
Scientific Management
Fredrick Winslow Taylor
The father of scientific management
Published Principles of Scientific Management (1911)

Says Management is a science. There is one best

way and one best person to do the task. I love
efficiency and I love to study people at work.
Management should be an academic discipline.
(He had a point)
The systematic study of relationships between
people and tasks for the purpose of redesigning the
work process to increase efficiency.
 Classical Approach
Scientific Management
Taylor believed that if the amount of time and
effort that each worker expends to produce a
unit of output can be reduced by increasing
specialization and division of labor, the
production process will become more efficient.
 Taylors Scientific Management Principles
1. Develop a science for each element of an individuals work, which will
replace the old rule-of-thumb method.
Study the way workers perform their tasks, gather all informational
job knowledge that workers possess, and experiment with ways of
improving how tasks are performed
2. Scientifically select and then train, teach, and develop the worker.
3. Heartily cooperate with the workers so as to ensure that all work is done in
accordance with the principles of the science that has been developed.
Supervise employees to make sure they follow the prescribed
methods for performing their jobs
4. Divide work and responsibility almost equally between management and
workers. Management takes over all work for which it is better fitted than
the workers
Two managerial practice emerged out
of taylors scientific research
Piece rate incentive system
Time and motion study
 Frank & Lillian Gilbreth
Partners for Life
Frank Worked in the construction
trades and called his job design
motion study. Independent of, but
influenced by, Taylor.
Lillian our First Lady of
Management and First Lady of
Engineering for her accomplishments
with her husband as well as after
Franks death.
Our duty is to study the motions and
to reduce them as rapidly as possible
to standard sets of least in number,
least in fatigue, yet most effective
motions
Frank and Lillian Gilbreth
Frank Gilbreth (1868-1924)
Refused a place in MIT
to work as a laborer.
His first job was
apprentice brick layer.
He was able to lay 2700
bricks per day compared
to others who were
laying an average of
1000 per day.
Motions to lay a brick
Frank Gilbreth
reduced to 4 from 18.
Gilbreth Patent Scaffold
This invention
eliminated a lot of
stooping by keeping the
bricklayer at the same
distance from the top
of the growing wall.
The scaffolding was the
first in Gilbreths
attempts in reducing
motion and fatigue in
workers.
 Frank and lilliamn gilbreth
Frank developed a list of eighteen basic
movements to aid him in analyzing motion.
Each movement was called a therblig.
A workplace task is analyzed by recording each of
the therblig units for a process, with the results
used for optimization of manual labour by
eliminating unneeded movements.
By reducing the number of therbligs for any
task, one could increase the efficiency of the
worker.
18 Therbling
 To study the hand and body motion gilbreth
invented a device call microchronometer that
recorded a workers motion and the amount of
time spent doing each motion
Wasted motion missed by the naked eye could
be identified and eliminated
 LIMITATIONS OF SCIENTIFIC
MANAGEMENT
It revolves round problems at the operational level

The proponents were of the opinion that people were

motivated primarily by the desire for material gain

Scientific management theorists ignored the human

desire for job satisfaction
 General administrative theory
Focused on principles that could be used by
managers to coordinate the internal activities
of organizations and what constituted the good
management practice.
The study of how to create an organizational
structure that leads to high efficiency and
effectiveness
General Administrative Theory
Henri Fayol
Five functions of management i.e. planning, organizing,
commanding, coordinating and controlling
14 Principles of Management

Max Weber
Theory of bureaucracy is based on a rational set of guidelines
for structuring organizations
Developed a theory of authority based on an ideal type of
organization (bureaucracy)
Emphasized rationality, predictability, impersonality,
technical competence, and authoritarianism
 Fayols 14 Principles of Management

1. Division of work 8. Centralization

2. Authority 9. Scalar chain
3. Discipline 10. Order
4. Unity of command 11. Equity
5. Unity of direction 12. Stability of tenure of
6. Subordination of personnel
individual interests to 13. Initiative
the general interest
14. Esprit de corps
7. Remuneration
 Administrative Management,
Fayols Principles
Henri Fayol, developed a set of 14 principles:
1. Division of Labor: allows for job specialization.
Fayol noted firms can have too much specialization leading to
poor quality and worker involvement.
2. Authority and Responsibility: Fayol included both formal and
informal authority resulting from special expertise.
3. Unity of Command: Employees should have only one boss.
4. Line of Authority: a clear chain from top to bottom of the
firm.
5. Centralization: the degree to which authority rests at the very
top.
 Fayols Principles
6. Unity of Direction: One plan of action to guide the
organization.
7. Equity: Treat all employees fairly in justice and
respect.
8. Order: Each employee is put where they have the
most value.
9. Initiative: Encourage innovation.
10. Discipline: obedient, applied, respectful employees
needed.
 Fayols Principles
11. Remuneration of Personnel: The payment system
contributes to success.
12. Stability of Tenure: Long-term employment is important.
13. General interest over individual interest: The
organization takes precedence over the individual.
14. Esprit de corps: Share enthusiasm or devotion to the
organization.
Webers Bureaucracy
 limitations of administrative theory

Classical theorists ignored important aspects of

organizational behaviour.They stressed
productivity above other aspects of management

Webers concept of bureaucracy destroys

individual creativity and the flexibility to respond
to complex changes in the global environment
 Quantitative Approach to
Management(Management science)
Quantitative Approach
Evolved from mathematical and statistical methods
developed to solve WWII military logistics and
quality control problems
British and American military had developed
techniques using mathematics/statistics to plan for
attacks, convoy sizes, bombing raids, etc
 Quantitative techniques(Management Science)
Uses rigorous quantitative techniques to maximize resources
and making the right decision
Quantitative management: utilizes linear(use for effective
resource allocation decision) programming, modeling,
simulation systems.
Operations management: techniques to analyze all aspects of
the production system. Work scheduling, queuing theory
etc.
Total Quality Management (TQM): focuses on improved
quality.
Management Information Systems (MIS): provides
information about the organization.
 What Is total Quality Management?

Management philosophy devoted to continual improvement and

responding to the needs and expectation of the customer. It
includes:
Intense focus on the customer
Concern for continual improvement
Process-focused
Improvement in the quality of everything
Accurate measurement
Empowerment of employees
 Use of quantitative techniques
Queuing management in banks, travel,
ticketing, distribution
Helps the management in the area of panning
and controlling
For making budgeting, scheduling, quality
control and similar decision all needs
quantitative decision
 Behavioral Approach
People are the MOST important asset of
an organization or firm (True or False?)
Focus on people to determine the best
way to manage in all organizations.
People skills rather than technical skills.
Emphasis is given to the behavior of the
people
 Meaning of Organizational Behavior
Organizational Behavior (OB) is a field of study that
investigates the impact that individuals, groups,
and structure have on behavior within
organizations, for the purpose of applying such
knowledge toward improving an organizations
effectiveness.
OB is concerned with the study of what people do
in an organization and how their behavior affects
the organizations performance.
 Hawthorne Study:
Many findings of earlier writers, particularly of scientific
management, which focused attention on the mechanical and
physiological variables of organizational functioning were tested
in the field to increase the efficiency of the organizations.
The positive aspects of these variables could not evoke positive
response work behavior at work.
They discovered the real cause of the behavior was something
more than mere physiological variables.
Such findings generated a new phenomenon about human
behavior and focused attention on the human behaving in the
organizations.
As such, this new approach has been called human relations
approach of management.
The Hawthorne plant of General Electric Company, Chicago, was
manufacturing telephone system bell.
It employed about 30,000 employees at the time of experiments.

In respect of material benefits to workers, this was the most progressive company
with pension and sickness benefits and other recreational facilities, there was great
deal of dissatisfaction among the workers and productivity was not up to the mark.

After the utter failure of an investigation conducted by efficiency experts, in 1924,

the company asked for the assistance form the national academy of sciences to
investigate the problems of low productivity.
A team was constituted led by Elton Mayo (psychologist), Whitehead and
Roethlisberger(sociologists and company representative, William Dickson. The
researchers set out to study the relationship between productivity and physical working
conditions.

The four phases:

Experiments to determine the effects of changes in illumination on productivity,
illumination experiments (1924-27)

Experiments to determine the effects of changes in hours and other working

conditions on productivity, relay assembly test room experiments(1927-28)

Conducting plant-wide interviews to determine worker attitudes and sentiments,

mass interviewing programme(1928-30)

Determination and analysis of social organization at work, bank wiring

observation room experiments(1931-32)
 Illumination experiments:
This was undertaken to find out how varying levels of
illumination(amount of light at the workplace, a physical factor)
affected the productivity.
The hypothesis was that with higher illumination, productivity
would increase.
Result :
Higher worker productivity and satisfaction at all light
levels
Worker productivity was stopped with the light levels
reached moonlight intensity.
Conclusions:
Light intensity has no conclusive effect on output
Productivity has a psychological component
 Relay Assembly Room Test Room Experiments:

The experiment were designed to determine the effect of

changes in various job conditions on group
productivity as the illumination experiment could not
establish relationship between intensity of illumination
and production.
For this purpose, the researchers set up a relay assembly
test room.
 The major outcomes:
The incentive system was changed so that each girls
extra pay was based on the other five rather than the
output of larger group, say 100 workers or so. The
productivity increased as compared to before.(pay
incentives)

The rest period was increased to five minutes but the

frequency increased. The productivity slightly decreased
and the girls complained that frequent rest intervals
affected the rhythm of the work.(use of rest period)
 Major outcome of Relay Assembly Room Test Room Experiments:

The number of rest was reduced to two of ten minutes

each, but in the morning, coffee or soup was served
along with sandwich and in the evening, snack was
provided. The productivity increased.(company
sponsored meal)

Changes in working hours and workday were introduced

such as cutting an hour off the end of the day and
eliminating Saturday work. The girls were allowed leave
at 4:30pm instead of the usual 5:00pm and later at
4:00pm. The productivity increased. Absenteeism
decreased, morale increased and less supervision was
required.(length of work day and work week)
 Mass Interviewing Programme:

During the course of experiments, about 20,000

interviews were conducted between 1928 and
1930 to determine employees attitudes towards
company, supervision, insurance plans,
promotions, and wages.
 Result of Mass Interview Program
Merely giving an opportunity to talk and express grievances
would increase the morale.
Complaints were symptoms of deep-rooted disturbances.
Workers are governed by experience obtained from both
inside and outside the company.
The worker was satisfied/dissatisfied depending upon how he
regarded his social status in the company.
Social groups created big impact on work.
Production was restricted by workers regardless all financial
incentives offered as group pressure are on individual
workers.
 Bank Wiring Observation Room
Experiments:

There experiments were carried on between

November 1931 and may 1932 with a view to
analyze the functioning of small group and its
impact on individual behavior.
Limited changes to work conditions
Segregated work area
No Management Visits
Supervision would remain the same
Observer would record data only no
interaction with workers
The result was:
No appreciable change in the output
The reasons for this output:
Fear of unemployment: the basic reasoning of workers was that if there would be more
production per head, some if the workers would be put out of employment .
Fear of raising the standards: most workers were convinced that once they had reached the
standard rate of production, management would raise the standard of production reasoning that it
must be easy to attain.
Protection of slower workers: The workers were friendly on the job as well as off the job.
They appreciated the fact that they had family responsibility that required them to remain in the
job. Since slower workers were likely to be retrenched, the faster workers protected them by not
overproducing.
Satisfaction on the part of management: According to workers, management seemed to
accept the lower production rate as no one was being fired or even reprimanded for restricted
output.

The study suggested that informal relationships are an important factor in determining the
human behavior. During the course of experiments, workers were counseled for good human
relations in the company's plant. The counseling was in regard to supervision , employee
relations, personal adjustments and management of employee relations.
 Implications of the Hawthorne Experiments:
Social factors in output : An organisation is basically influenced
by social factors. Since, people are social beings, their social
characteristics determine the output and efficiency in the organisation.
Economic rewards and productivity do not necessarily go together.
Many non-economic rewards and sanctions affect the behavior of
workers and modify the impact of economic rewards.
Group Influence: Workers being social beings, they create groups
which may be different from their official group. In fact, groups are
formed to overcome the shortcomings of formal relationships. The
group determines the norm of behavior of members.
Conflicts: The informal relations of workers create groups and there
may be conflict between organization and groups so created. The
conflict may be because of the incompatible objectives between the
two.
Supervision: Supervisory climate is an important aspect in
determining efficiency and output. Friendly to the workers,
attentive, genuinely concerned supervision affects the productivity
favorably.
Communication: The experiments show that communication is
an important aspect of organisation. Through communication,
workers can be explained the rationality of a particular action,
participation of workers can be sought in decision-making
concerning the matter of their importance, problems faced by
them can be identified and attempts can be made to remove these.
Leadership: It is very important for directing group behavior,
and this is one of the most important aspects of managerial
functions. How ever, leadership cannot come only from formally-
appointed superior as held by earlier thinkers. There may be
informal leaders as shown by the bank writing experiments.
 Criticisms of Hawthorne Experiments:
The Hawthorne researchers did not give sufficient attention to the attitudes that people
bring with them to workplace. They did not recognize such forces as class consciousness, the
role of the unions, and other extra plant forces on attitudes of workers.

The Hawthorne plant was not a typical plant because it was a thoroughly unpleasant place
to work. Therefore, the results could not be valid for others.

The Hawthorne studies look upon the worker as a means to an end, and not an end himself
. They assume acceptance of managements goals and look on the worker as someone to be
manipulated by management.

Even with all its pitfalls Hawthorne experiments are still considered today for covering some
very important human factors.
 Contemporary approach
Look outside the organization in the external
environment
Previous theories emphasized in the internal
environment
System approach
Contingency approach
 System Approach
A system is a set of interrelated and interdependent parts
arranged in a manner that produces a unified whole.
The two basic types of system are closed and open.
Closed systems are not influenced by and do not interact with
their environment.
In contrast, open system are influenced by and do interact
with their environment.
Today, when we describe organization as a system, we mean
open system.
The Organization as an Open System
 Implications of the Systems Approach

Coordination of the organizations parts is essential for proper

functioning of the entire organization.
Decisions and actions taken in one area of the organization
will have an effect in other areas of the organization.
Organizations are not self-contained and, therefore, must adapt
to changes in their external environment.
 The Contingency Approach
Contingency Approach Defined
Also sometimes called the situational approach.
There is no one universally applicable set of
management principles (rules) by which to manage
organizations.
Organizations are individually different, face different
situations (contingency variables), and require different
ways of managing.
 Popular Contingency Variables
Organization size
As size increases, so do the problems of coordination.
Routineness of task technology
Routine technologies require organizational structures,
leadership styles, and control systems that differ from those
required by customized or non-routine technologies.
Environmental uncertainty
What works best in a stable and predictable environment may
be totally inappropriate in a rapidly changing and unpredictable
environment.
Individual differences
Individuals differ in terms of their desire for growth, autonomy,
tolerance of ambiguity, and expectations.
 Social Responsibility
and Managerial Ethics
 From Obligation to Responsiveness to Responsibility

Social Obligation
The obligation of a business is to meet its economic and
legal responsibilities and nothing more.
Social Responsiveness
When a firm engages in social actions in response to
some popular social need.
Social Responsibility
A businesss intention, beyond its legal and economic
obligations, to do the right things and act in ways that are
good for society.
 Green Management
A form of management in which managers consider the
impact of their organization on the natural environment.
 How Organizations Go Green
Legal (or Light Green) Approach
Firms simply do what is legally required by obeying laws,
rules, and regulations willingly and without legal challenge.
Market Approach
Firms respond to the preferences of their customers for
environmentally friendly products.
Stakeholder Approach
Firms work to meet the environmental demands of multiple
stakeholdersemployees, suppliers, and the community.
Activist Approach
Firms look for ways to respect and preserve environment and
be actively socially responsible.
 Green Approaches

Source: Based on R.E. Freeman. J. Pierce, and R. Dodd. Shades of

Green: Business Ethics and the Environment (New York: Oxford
University Press, 1995).
 Managerial Ethics
Ethics Defined
Principles, values, and beliefs that define what is right
and wrong behavior.
Factors That Determine Ethical and Unethical
Behavior
 Factors That Affect Employee Ethics
Moral Development
A measure of independence from outside influences
Levels of Individual Moral Development
Preconventional level
Conventional level
Principled level
Stage of moral development interacts with:
Individual characteristics
The organizations structural design
The organizations culture
The intensity of the ethical issue
 Stages of Moral Development

Source: Based on L. Kohlberg, Moral Stages and Moralization: The Cognitive-Development

Approach, in T. Lickona (ed.). Moral Development and Behavior: Theory, Research, and Social
Issues (New York: Holt, Rinehart & Winston, 1976), pp. 3435.
 Factors That Affect Employee Ethics
Moral Development
Research Conclusions:
People proceed through the stages of moral
development sequentially.
There is no guarantee of continued moral development.
Most adults are in Stage 4 (good corporate citizen).
 Factors That Affect Employee Ethics
Individual Characteristics
Values
Basic convictions about what is right or wrong.
Personality
Ego strength - A personality measure of the strength of
a persons convictions
Locus of Control
A personality attribute that measures the degree to which
people believe they control their own life.
Internal locus: the belief that you control your destiny.
External locus: the belief that what happens to you is due to
luck or chance.
 Factors That Affect Employee Ethics
Structural Variables
Organizational characteristics and mechanisms
that guide and influence individual ethics:
Performance appraisal systems
Reward allocation systems
Behaviors (ethical) of managers
 Factors That Affect Employee Ethics
Organizations Culture
Values-Based Management
An approach to managing in which managers establish and
uphold an organizations shared values.
The Purposes of Shared Values
Guiding managerial decisions
Shaping employee behavior
Influencing the direction of marketing efforts
Building team spirit
The Bottom Line on Shared Corporate Values
An organizations values are reflected in the decisions and
actions of its employees.
Intensity of the Ethical Issue
Determinants of Issue Intensity
 How Managers Can Improve Ethical Behavior
in An Organization
Hire individuals with high ethical standards.
Establish codes of ethics and decision rules.
Lead by example.
Set realistic job goals and include ethics in
performance appraisals.
Provide ethics training.
Conduct independent social audits.
Provide support for individuals facing ethical
dilemmas.
 Codes of Ethics
Cluster 1. Be a Dependable Organizational Citizen
1. Comply with safety, health, and security regulations.
2. Demonstrate courtesy, respect, honesty, and fairness.
3. Illegal drugs and alcohol at work are prohibited.
4. Manage personal finances well.
5. Exhibit good attendance and punctuality.
6. Follow directives of supervisors.
7. Do not use abusive language.
8. Dress in business attire.
9. Firearms at work are prohibited.
 Codes of Ethics
Cluster 2. Do Not Do Anything Unlawful or Improper That Will
Harm the Organization
Conduct business in compliance with all laws.
Payments for unlawful purposes are prohibited.
Bribes are prohibited.
Avoid outside activities that impair duties.
Maintain confidentiality of records.
Comply with all antitrust and trade regulations.
Comply with all accounting rules and controls.
Do not use company property for personal benefit.
Employees are personally accountable for company funds.
Do not propagate false or misleading information.
Make decisions without regard for personal gain.
 Codes of Ethics
Cluster 3. Be Good to Customers
1. Convey true claims in product
advertisements.
2. Perform assigned duties to the best of your
ability.
3. Provide products and services of the highest
quality.
 Effective Use of a Code of Ethics
Develop a code of ethics as a guide in handling ethical
dilemmas in decision making.
Communicate the code regularly to all employees.
Have all levels of management continually reaffirm the
importance of the ethics code and the organizations
commitment to the code.
Publicly reprimand and consistently discipline those who
break the code.
 The Value of Ethics Training

Can make a difference in ethical behaviors.

Increases employee awareness of ethical issues in business
decisions.
Clarifies and reinforces the organizations standards of
conduct.
Helps employees become more confident that they will have
the organizations support when taking unpopular but
ethically correct stances.
 Being an Ethical Leader

Be a good role model by being ethical and honest.

Tell the truth always.
Dont hide or manipulate information
Be willing to admit your failures.
Share your personal values by regularly communicating them
to employees.
Stress the organizations or teams important shared values.
Use the reward system to hold everyone accountable to the
values.