Principles of Management

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P RINCIPLES

O

M ANAGEMENT

DR. (MRS.) PRATIBHA M. SIRIYA

M.Com., M. Phil, L.L.B., B.A. (Addl.), Ph.D.Associate Professor, Vice Principal,

Dr. Ambedkar College, Nagpur.

SAI JYOTI PUBLICATION



CONTENTS

1. Management and Its Process 1

2. Management of Change and Conflict 63

3. Planning 81

4. Decision Making 103

5. Recruitment and Selection 112

6. Organising 135

7. Departmentation and Delegation 173

8. Direction 209

9. Communication 217

10. Co-ordination 231

11. Motivation 240

12. Leadership 261

13. Morale 278

14. Control 292

15. Business Ethics 30516. Management Information System (MIS) 309



© AUTHOR

No part of this book shall be reproduced, stored in retrieval system, or translated in any form or by any means, electronic, mechanical, photocopying and/or otherwise without the prior written

permission of the publishers.

FIRST EDITION : 2011

ISBN: 978-81-920041-6-7

Published By:

Sai Jyoti Publication

C-9 Shrinath Sainagar, Near Onkar Nagar, Ring Road, Manewada, NAGPUR.

Ph. No.: 9764673503, 9923693506.email id:[email protected]

Type Set ter:Om Sai Graphics

Plot No. 29 Behind T.B. Ward, Indira Nagar, Nagpur 440003.



PREFACE

In present scenario management education and training has assumed the prime place in theeducational servi ces. Intensified competi tion among domesti c, private and public sector companiesand multinational companies, amangement task became challenging. Business world had realized that

professionalism in business operations will prove more beneficial in achieving the economic objectivesof the business. Management is as old as human civilisation. As a distinct academic field the management

is considered a product of 20th century. In fact management is a developing and dynamic discipline.

In the modern era, due to rapid, diverse, complex and unstructured changes, the ma nagement theory has also undergone through radical changes. In the changed situations existing techniques and approaches

of management which constitute a larger part of a management theory have become less effective and

inadequative. Therefore, the application of management t heory is become situational. To become more sensible and responsible to the changing environment the manager has to assume new roles as

per demand of the situation. New dimensions have been added to the management theory and itsapplication and emphasis ha s been shift ed to new thurst areas such as management of strategic

alliances, improvement in productivity. World wide demand of qualit y management, of change andconflict, growi ng emphasis on ethics, strategic management and employment process in organisat ion

etc. Management is not challenging task, requires t echnical, human, conceptual, deci sion-makingskills. “Managers are not born but are made.” this statement is absolutely true in private as well as

public sector.

Principles of Management is a paper to Commerce and Management students. The text of thi book has been designed and arranged essentially to provide clear understanding of the subject intoday’s context to the students of commerce and management. The subject matter of this book has

been coll ected from various authentic literature. Attempts have been made to familarise with the latest developments taking place in the theory as well as practice of management.

W hile designing the text of this book, the syllabus of various uni versities and management

institutes have been into consideration.

I am greatly thankful to S.N. Pathan. I am greatly thankful to Dr. S.N.Pathan, Vice-Chancellor,

RTM Nagpur University, Ex-Director, Higher Education, Maharashtra State, for constant support andencouragement for writing this book. I am thankful to His excellency, Shri. R.S. Gavai, Governor o

Kerala, for his unstinted support extended to me for this venture. Its my great pleasure to express myheartful gratitude to my beloved husband Shri Mahendra H. Siriya a Judge at Mumbai. My talented son

Shekhar M. Siriya an engineer, Asst. Executive, My in-laws Shri Harnamsingh and Smt. Nirmala Siriya

who have shouldered my burdens for the successful completion of this book.I also extend my thanks to Shri Abhay Harsulkar who helped me to computerize this book in

a lucid manner. I take this opportuni ty to express my sincere thanks to Sai Jyoti Publications, who have

readily agreed to publish the book and finish the task within a short span of time.

Dr. (Mrs.) Pratibha Siriya

Author.



1 MANAGEMENT AND ITS PROCESS

INTRODUCTION TO MANAGEMENTAfter industrial revolution tremendous acceleration and growth took place in business and

industrial world. Eventually drastic changes became inevitable in the field of Promoting, Organising,

Managing and Administrating business as well as industrial establishments. Although, India, too, after

independence, has made a remarkable progress in development of business, commerce and industry,

its pace is slower as compared with developed countries. Natural resources are abundant in India. But

they could not be explored to the extent, they should have been. If one goes to the root cause of this,

one can find that it is non-else than lack of integrating and co-ordinating their explosion with proper

utilisation aimed at optimum profitability.

The agency which undertakes this job is “Management” and personnel or group of persons

are known as Managers. A manager is supposed to bring about effective co-ordination between human

and non-human resources with a view to achieve broad objectives of business organisations at a

minimum cost. Thus, management becomes a force that brings together various resoruces and co-

ordinates them. As such management can be termed to be t he level which actually accomplishesorganisational goals and objectives. Naturally, it becomes essential to have trained personnel withmaximum and up-to-date knowledge of the process i.e. management.

It is continuous, l ively, fast developing science known as Perspective management. Anyorganisation either commercial, industrial, educational, religious or charitable, when comes into existence

with a group of people joining hands for the attainment of certain objectives, needs ‘someone’ to

channalise its activities towards achieving the goals. This ‘some-one’ functionary is “ Management”.

Management manages the men tactfully getting the things done, achieving the objectives and goals,gaining the profits for its organisation. Management is a ‘live asset’ of any organisation. It is activative,

catalytic, creative, innovative and a dynamic force too, which seeks to secure the best results by using

available resources. Management provides new ideas, inventions and vision to the work group andintegrates its efforts in such a manner as to account for best possible results. The success, survival,

smooth functioning, stability of the business orgainsation depends upon the management. Management

is the life blood of an organisation. Management is the primary force within an organisation which co-

ordinates the acti vities of a sub-system related to environment. Management is primarily a humanactivity. The role of management in business organisations is to cater to the present and future needs

of the community, to create and generate wealth. Generation of wealth is of paramount importance in

the sense that without it the enterprise will neither be able to achieve its economic nor social aims. An

organisation without good management is a house built on sand. People are individually known asmanagers and collectively as management. Management is a body of people who perform the managerial

functions of planning, orgainising, directing, coordinating, motivating and controlling. The management

of any organisation tries to satisfy the interest of three unidentical groups of people i.e. customers,

sha reholders and employees. The success of any organi sation is determined by ability of its topmanagement to fulfil the interest of these three groups without undermining its own.

Management is a thinking organ of the enterprise. All the policy decisions are taken by it.



Management keeps itself in touch with the external environment and takes steps to ensuring the ability

of the enterprise, to meet the demands of changing environment. Thus, management of any organisation

plays a role of decision making machinery.

According to Dalton Mc. Farland , “Mana gement is the basic intergrating process of the

organisational activity that surrounds our daily life. The need for management arises out of the scarcity

of resources that satisfy human wants out of the diversity and complexity of human activities.”

Following are the concised definitions of “Management” made by eminent personalities-

1) Management is the process by which manager creates, directs, maintains and operates

purposive organisation through systematic, co-ordinated and co-operative human effort.

Dalton Mc. Farland.

2) ‘‘Management is a disti nct process consi sting of planning, organizing, staffing and

controlling, performed to determine and accomplish stated objectives by use of human beings and other resources.’’ G.R. Terry.

3) “Management may be broadly defined as the art of applying the economic principles that

underline the control of men and materials in the enterprise under consideration.” - Kimball

4) “Management is the art of getting things done through and with people in formally organised

groups.” -Koontz5) “Management is simply the process of decision making and control over the action of

human being for the express purpose of attaining predetermined goals”. - S. Vance6) “Management is the function of getting things done through people and directing the

effect of individuals towards a common objectives”. - Theo Haimann7) “Management is the co-ordi nation of all resources through the process of planning,

organising, directing and controlling in order to attain stated objectives.”

- Dr. Henry L. Sisk

8) “Management is a multipurpose organ that manages worker and work.” - P. Drucker9) “Management is principally a task of planning, co-ordinating, motivating and controlling

the efforts of others towards specific obj ectives.” -J. Lundy

10) “Management is knowing exactly what you want the men to do, and then seeing thatthey do it in the best and cheapest way.” - F. W. Taylor

11) ‘‘Management is social process entailing responsibility of the effective and economical planning and regulation of the operations of an enterprise in fulfilment of a given purpose

or task with responsibility involving.

a) Judgement and decision in derermining plans, and the development of procedures to

assist control of performance and progress against plans, and

b) The guidance, integration, motivation and supervision of the personnel compri sing

the enterprise and carrying out its operations.’’

-Breach12) “Management is defined as the process by which a co-operative group directs act ion

- Joseph Massie towards common goals.”

13) “Management is the art and Science of preparing organising and directing human efforts



to control the forces and utilise the material of nature for the benefit of men.”

- American Society of Mechanical Engineers.

14) “Management is the process of planning, organising, leading and controlling the efforts

of organisational members and of using all other organisational resources to achieve the

stated organisational goals.” - Michael H. Mescon

15) “Management may be defined as the art of securing maximum prosperity and happiness

for both employer and employee and give the public t he best possible service, with

minimum effort.” - John F. Mee16) “Management is the Art of getting things done through people.”

- Mary Parker Follett

17) “Management means decision-making.”

- Ross Moore

18) “Management is the Art and Science of decision-making and leadership.”

- J. Clough

19) “Management is the development of people and not the direction of things.”

- Applex L.20) “To manage is to forecast, to plan, t o organise, to command, to co-ordinate and to

control.”

- Henry Fayol

After carefully studying the above definitions one can very clearly conclude that management-

1) Is concerned with getting things done through and with people.

2) Is directing the efforts of people to achieve the goals of the organisation.

3) Is integration of all kinds resources like men, material, machine, money to achieve the predetermined goals of organisation.

4) Is development of people as an essential aspect of management.

5) Is an art of creating favourable performance environment enabling the working force attain

stated objectives.

Gett ing the thinge donethrough andwith people

Creating Integration o favourable Management5 Ms. environment

Directing people’sefforts for achieve-

ment of organisational goal

Developing the people

Figure



Thus, management, in terms of personnel manning the group, is a body of personnel having

organised knowledge in the field, which is an outcome of perpetual principles taken together skilfully,

As such management is a science underlining the art.

NATURE OF MA NA GEMENT1) Interdisciplinary discipline : The concept of management is universal and very old.

Therefore, different views have been expressed about its nature by different authourities. Emergence

of giant corporations in large number has necessitated the growth of management as a discipline. For

this, it has drawn knowl edge, tools and techni ques from a number of discipli nes. That i s why

management perspective is an int erdisciplinary activity. Thus, a special independent managementdiscipline is merged with combination of so many other disciplines.

2. Social proc ess :Management is a continuous process of getting things done through

people. Management is a social process of motivating people to work together to accomplish commongoals. It indicates the social nature of management.

3. Management as an inborn quality : In the prescientific management period i.e. prior to

1880 there has been a leading concept that management is an inborn quality. At that time people

thought that it was not necessary to study any of management concepts as they believed that, managers

are born and not made. In their opinion some people are so efficient and talented since their birth thatthey lead and get success in the field of business. But as we see today, this concept is totally reversed

by the new development. In modern era managers are not born but are made by equipping people with

specialized knowledge in the field of management.

4. Management as a science :In order to ascertain the status of management as a science, it is necessary to know the meaning of the word ‘Science’ and then apply that to management.

A science is a systematised body of knowledge. It is based upon information that has been

empirically verified through the scientific methods. The scientific method involves identification o

conditions or facts through observation and verification of principles through experimetation. Whencertain facts and principles are interpreted into broader conclusions, they constitute the theory of a

particular science or body of knowledge. Verified principles of a science are useful for a practitioner as

they help to predict the outcome of certain actions.

Science is an organised body of knowledge based on proper fi ndings and exact perpetual principles. It establishes relationship between cause and effect and its findings are safely applicable in

all the situations. There are a number of branches of natural sciences like physics, biology, chemistry,

astronomy etc. There are social sciences like sociology, political science, economics etc. Management

mainly relates to t he social science. It is a behavioural science of inexact nature. The process omanagement is very much related with behaviour of people at work and their behaviour cannot be

predicted in exact manner. Management deals with human beings, so it is a social science and is not an

exact science like natural sciences.

Management is a developing science. It has now evolved certai n basic theories based on

behavioural science. The form of process of management which has universal application in each branch of human activity. Thus management can be known as a science though not natural science. It

is quite obvious that principles of management are not fundamental truths and their application maynot yield the desired results always because human behaviour is ever changing and most unpredictable.

It cannot be governed by the laws of mechanics as a human being is not an inanimate machine. Hence,

management dealing with complex human beings is bound to be an inexact science. Even the theoretical



base of knowledge is essential for developing sound practice. In fact, theory must be supplemented by

prctical knowledge continuously. Science and art are complementary and each supplements the other.

5. Management as an art : Art is the best way of doing things. Art is the bringing about a

desired result through the application of skills. Art is concerned with the exercise of the know- how

for the effective accomplishment of desired results. It is concerned with the application of knowledge

and skills. Every manager has to apply certain knowledge and skills while dealing with the people toachieve the desired results. Like any art, management is also creative. It develops new situations, new

designs and new systems needed for further improvement.

Management is one of the most creative art as it requires a vast knowledge and certaininnovating, initiating, implementing and integrating skills in relation to goals, resources, techniques and

results. Moulding the behaviour of people at work towards achievements of certain goals in a changing

environment is an art. As an art management calls for a corpus of abilities in continuous practice of

management theories and principles.

Ma nagement is an art because i t requires vision. knowledge and communication. Artistic

skills are developed, likewise managerial skills can be developed. Management is an art in the sensethat management principles are developed not for the sake of knowledge only but for application inspecific situations also.

6. Management is both a science and an art : Management is a science and an art.Theoretical knowledge must be supplemented and perfected by practical knowledge. Both theory and

practice are equally important for management. According to koontz and O’Donnell, “ Managing as practice is an art ; the organinsed knowledge underlying it, may be referred to as a science. Art needs

the existence of science and science requires skillful application of knowledge.” They are two sides o

the same coin and to obtain the best of both, theoritical knowledge must be supplemented and perfected

by practical knowledge. Both theory and practice are equally important and there is nothing to choose between them. Hence science and art are not exclusive but are complementary. It is , for practical

purposes, accepted now that management is a science as well as an art.

7. Manegement as a profession : Since the emergence of separation of mana gement

from ownership, the management is being taken as a profession also. The term professional management

has acquired an important position in the corporate sector. *A professional manager is one who specialiseshimself in the work of planning, organising, leading and controlling the efforts of others and does so

through systematic use of classified knowledge, a common vocabulary and pri nciples and whosubscribes to the standards of practice and code of ethics establ ished by recognised body. Hence

management is assuming a professional character during the last four decades. It should be noted that all professions are occupations in the sense that they provide means of livelihood. But all occupationsare not professions because some of them do not possess the basic characteristics of a profession. An

occupation can be a profession if it has in it the followings basics :-

I) Requirement of specific knowledge.

II) Competent application of specific knowledge.

III) Social responsibility

IV) Community sanction V ) Self control According to Dalton Mc. Farland ‘the bench marks of a professional

include :-



a) the existence of a body of specialised knowledge or techniques.

b) formalised methods of acquiring training and experience

c) establishment of a representative organisation with professionalisation as its goal.

d) formation of ethical codes for the guidance of conduct.

e) charging of fees based on services but with due regard for the priority of service over the desire for monetary reward.

a ) Body of Knowledge

Management has now developed a special ised body of management theory and philosophy.

Management literature is growing in almost all countries. In modern era we have a systematic

body of knowledge that can be used for development of professional managers. Management is

also taught in many educational institutions and in universities. More the more ‘Management isemerged as a separate discipline like science arts etc. It is a fact that management as a discipline

contains a well defined body of knowledge and a number of sophisticated tools and techniques

meant to translate the theory into practice.

b ) Formal Education

Many institutes of management have come into being in India and other countries which offer courses in management. In the modern era competent application of management knowledge

and skill has becomes almost indispensable. Therefore it is essential that the managers acquire

certain management skills through formal education and training. The people having formal

education in management can definitely give better performance. Therefore giant organisations

give preference to graduates and post graduates who have acquired specialisation in some area

of management like personnel, marketing, financial, production etc.

c) Repre sentative OrganisationA representative body or association is that which enforces standards and controls the entry to

the field through licensing and so on. For the regulation of the activity of the members of a

profession, existence of such a representative body is a must.Frankly speaking we do not have

such a body or an association in the field of management in our country. This body may lay

down the code of conduct for the members and the level of education and tra ining for thosewho want to enter this particlar professi on. We have very few organisations like “IndianManagement Association.”, “The all India Management Development Association” which try to

impose code of conduct to their member but do not have means for enforci ng it. These

organisations do not have any authourity to set or prescribe minimum qualification for taking up

manageri al posts, unlike the recognised professional groups such as the Medical Council o

India, The Bar Council of India etc.

d ) Ethical StandardsIt is essential to have professional ethics. Unfortunately whole world lacks in this. Simplereason for this is, that there are very few organisations representing professional managers.

Existing such organisation do not have proper co-ordination. Eventually this profession, though

of outmost importance for gearing up and developing industrial and business economy aimed at

national goal of economic developement , is being neglected. What is needed today is that there

should be strong associations having affiliation to the international association, thus fixing global standards. If this need is catered to some universal standards can be formul ated to regul ate



education, training, entry in the profession and so on.

e ) Community sanction and monetary rewardsManagement professionals are expected to have commitment to services rather than financial

reward. Management professionals have a high status in the eyes of community as a whole

including the men who are directlty involved in achievement of goals. As these can be satisfied

if they a re properly rewarded i n terms of money. Their achievements are ultimat ely the achievement of the organisation to which they render their services. Naturally they deserve high

monetary rewards. That is why management consultants or professionals charge high fees,which

they feel to be commensurate to the services rendered by them. Community sanctions and

monetary rewards go hand in hand which is a precondition for terming an occupation to be

profession.

8. Management is an universal processApplication of principles and techniques of management is not restricted only to business but

they have universal application also. They are applied to social, religious, charitable and non

profit organisations also. In absence of management, none of the orgnisations can walk a singlestep. Wit hout management, organi sational goal s and obje cti ves would not be achieved. Management is the life blood of the organisation.

THE MANAGEMENT PROCESSEvery business enterprise has certain pre-determined objectives. No business enterprise can

achieve its objectives until and unless all the members of the unit make an intergrated and planned

effort under the directi ons of a centra l co-ordinating a gency, which i s techni cally known as

MANAGEMENT and the methodology of gett ing things done is known as management process.The process in general is defined as a series of actions or operations conducted to an end. The logic of the management and the sequence in which they are performed is designated as Management process.

Generally this includes the main functions of a manager viz.

i ) decision making, and

ii ) implementaton of decisions.

Naturally these two are the functi ons which are included in management process. These functions are performed by : Planning, organising, staffing, motivating and controlling.

Planning Organising Actuating Controlling

Business goals

Figure: The Management Process

Management process, aimed at achievement of organisational goal includes these five functions. These functions are to be performed in the sequence they are mentioned. Thus we can say that

managers have to walk along the route of management process to reach organisational goals. The

desired result, objective or goal is attained by performing certain fundamental management functions.



They can be grouped under five basic heads mentioned earlier .

1)Planning : Planning means thinking in advance the future course of action. Planning isintellectual in nature. It is a mental exercise. It is a vision of future and preparing for it. Planning, as

decision making, is selecting among many choices. Planning forecasts future problems and involves

selection of courses of action to handle them. Foreseeing the probl ems is one of the essentials of

planning. Their severity is anticipated so that preparatory provisions can be made to handle them.Planning, as decision, answers to the following basic questions-

i) What should be done ?

ii) How should it be done ?iii) Who will be responsible for doing it ?

iv) Where it should done ?

v ) Why is it to be done ?

vi) When should it be done ?

Planning involves taking decisions of action in advance. Planning emphasizes the fact that if

one knows where he is going, he is more likely to get there. Good managers endeavour to draft a planwhich will make things happen in the desired way. This is also stressed by the saying. “Good managersmake things happen. Things do not just happen to them.”

Best planning is concerned with fixing the objectives, determining the strategies policy and prescribing the procedures as guidelines to future action. It is the most important step in the process

of getting results. It enables the management to be a step ahead of each activity, retain initiative tomake use of any opportunity and anticipate problems which may actually arise. Thus planning assumes

first step in management process.

The process of planning involves the steps shown in the figure. It means that the plans must

be in detail but flexible so that bear the capability of being re-adjusted in case there is a change in

working condition or in objectives of the organisation.

2)Organising : Once plan is prepared and methodology to achieve goal is decided, the jobsare required to be allotted and allocated to a group or groups. Naturally groups are formed. The whole

process of forming groups and allocating jobs is organisation.

Thus, after planning the next important step is organising. In order to accomplish the work it

is necessary to distribute or allocate the necessary component activities among the members of the

group. Generally the component time and cost , wi ll be realised. After assignment of a component

activity it is a must to delegate authority, so that the allotted activity can be accomplished. From thisauthority delegation arises various organisational relationships. This task of allocation, authority delegating

and establishing relat ionship by the manager is known as organising. Thus organising is basically

concerned with grouping the activities required to attain the planned objectives, defining responsibilities

of the people in the organisation, delegating appropriate authority to them to discharge their respectiveresponsibilities and establishing structural as well as, working relationship to enable coordination of

the individual efforts towards accomplishment of objectives of the enterprise. The process of organising

involves the steps given in the fig. It is a fundamental function of management authority and the key to

the managerial job. Delegation of authority is the key to organisation. We cannot speak of manager unless he has authority and we cannot speak of creating an organisation unless authority is delegated.

The organisation structure is, of course, not an end in itself but a tool for accomplishing enterprise

objectives.Efficient organisation will contribute to the success of the enterprise and for this reason,



application of organisational principles is very important.

3)Staffing :Staffing is concerned with ensuring that the right type of personnel isavailable toundertake and execute the varied activities required to attain the planned objectives of the organisation.Staffing involves filling the positions needed in the organisation structure by appointing competent and

qualified persons for the jobs. It, therefore includes activities such as anticipating manpower needs.

adopti on of an appropriate selection procedure, providing ma npower appraisals and development.This needs manpower planning and manpower management. Much of the work relating to human

resource planning and management is delegated to personnel manager. However, top management isultimately responsible for all activities to staffing.

4)Motivating :Motivating means inspiring the personnel with zeal to work and co-operate

for the accomplishment of common objectives.

Motivation is the process of creating organisational conditions which will impel employees tostrike to attain objectives and development. Motivation is the complex of forces starting and keeping a

person at work in an organisation. We may define motivation as “a willingness to expend energy to

achieve a goal or reward. It is a force that activates dormant energies and sets in motion the action of the people. It is the function that kindles a burning passion for action among the human beings of an

organisation.

Motivation is a powerful tool in the hands of a manager for getting things done. Effective

motivation improves the performance of the employees. Employees can be motivated by giving themreward, proper appreciation of work, fair treatment which helps in increasing their enthusiasm and

performance too. There are four types of motivation techniques i.e.

a) positive or incentive motivation

b) negative or fear motivation

c )financial motivation

d)non-financial motivation.

If a manager wants to get work done by his employees, he may either hold out a promise o

a reward for them for doing work in a better or improved way, or he may constrain them, by installing

fear in them or by using force, to do the desired work. In other wards, he may utilise a positive or negative or financial or non financial type of motivation. All these types of motivation are widely used

by management.

5) Controlling :Controlling means observing whether everything is going on according to

plan or not. Controlling is nothing but conciliation of the plan with the actual work. ensuring that theobjectives in terms of the plan are fullfilled.

Controlling includes an eva luation to determine whether the planned objectives have been

achieved or not. Controlling shows where improvements are required. Adequate control can thus lead

to innovation, improvements or modifi cat ions in previously determined objectives. Control is a

fundamental management functi on that ensures work accomplishment according to plans. It is

concerned with measuring and evaluating performance so as to secure the best result of managerialefforts. It is an essential feature of scientific successful management.

Controlling is nothing but conciliation of the plan with the actual work and locating the lapses, if any, so as to bring the methodology of work on correct track. For this the manager has to be very

alert and find out the reasons for such lapses or deviations. He is also responsible for implementing



corrective measures. All these things are ultimately aimed at achievement of business goals.

Management can be looked upon as a process by which mangers formulate, direct and operateorganisations with coordinat ive human effort t o attain predetermined objectives. Management is a

process concerned with planning executing and controlling the activities of an enterprise. Managerial

behaviour must be goal directed which results in a succession of activities and events by which the

organisation’s work proceeds. Management is concerned with evolving workable plans which arethen put into action result ing in certain consequences which have to be observed, evaluated and

constantly compared with the objectives prescribed in the plan. This cyclical process can be describedas the management process.

Thus this process starts from a point i.e. planning and till it reaches the point i.e. goal somecertain distance is covered. But this wheel does not stop. It further moves to cover further distance in

forms of another activity.

A ladder, to be climbed to reach the goal is management process.

ROLE, SCOPE AND IMPORTANCE OF MANAGEMENT

Modern era is of knowledge explosion and Technology improvisation. This is, naturally, adopted

by business., industry and all other organisations including Government. Added to this is Globalisation

and thereby cut throat competition. This has to be managed efficiently. “ Survival of the Fittest ” has become a symbol of efficiency. If new technologies are not adopted by industries, competitive goods,

consumer demand globally spread over, automation, computerisation and specialisation have become

very important. One can not eliminate the behavioural psychology of human element involved through

out this process. Marketing of the consumer goods has also become very complex. Therefore it will

not be exaggeration if we say that complexity at all levels of business, industry and any other field has become their characteristic. Naturally, one, who is at the helm of the situation and who is responsible

to look after efficient and profitable conduct of all operation in business, industry or elsewhere, must

be efficient and profitable conduct of all operations in business, industry or elsewhere, must be efficient

and ntelligent enough to pave a smooth way through this specialised but complex and ticklish situation.Person or group of persons responsible for this is “ Manager ” and all his activities towards fulfilment

of predetermined goals taken together is “ Management.” In this discussion lies the importance, role

and scope of “Management.” A Government and /or any organisation without good and efficientma nagement is a struct ure buil d on holl ow founda tion. In short , mana gement is an essentialaccompaniment of all social organisations and it is to be found everywhere as a distinct, separate and

dominant activity.

Importance of management in developing, underdeveloping and underdeveloped countries is more.

Only the experienced, capable and efficient managers would be able to shoulder the responsibilities of

future. Increased productivity and output is the goal of countries like ours having mixed economy.

Developing country like India and others have a dream of higher porductivity. Management organises

the factors of production for better performance, greater productivity and increased supply of goodsas well as services. Indirectly it gives a helping hand to the development of society and better welfare

of the public. It is by efficient management that limited resources can be utilised more effectively to

meet the demands of growing population. During the last three decades countries like US and Canadadoubled their industrial output and increased their agricultural production by 50%,through application

of better technology and introduction of new managerial methods. There are a number of instances in

the history of industrial development in which managers with outstanding abilities had revolutionised

the conditions of business firms and made them prosperous.



GOALS

CONTR OLLING

Identify

MOTIVATING potential

problemsProvide STAFFINGSelecteffec tive mode of leader shipORGANISING Anticipate controlMotive Ma npower Auditdiscipline d

nee ds PLANN ING Divide work measure & behaviour Develop job into evaluate inCommunicateCr ystallise descr iption component terms oMANAGER Provied objective and manactivities planningclimate for Collect and specifications Design job Spotsubordinates synthesise Decide structure significantdevelopment

informa tion appropriateDefine res- deviationCompair source of ponsibilties Ascertain

alternatives recruitmentEstablish causesin terms o Arrange structural Takeobjectives se lectionrelationship remedialfeasibility & procedure to secure action.consequences Decide co-ordinationSelect opti- manpower mum course developm ent of action activitiesEstablish Determine policies suitable procedures trainingand programmes methods. & Techinques.

Figure: Management process

The higher the degree of managerial skill, the faster will be the economic growth. Management

is the one and perhaps the only resource of production which generates life and momentum in theenterprises as a whole and makes its impact by improving the competitive position and the scale in

operation. It helps to manufacture better production at reasonable cost and enables to bring greater

returns to shareholders and the society.

The role of management has been pin-pointed by Franklin Moore in the following words.

“ We look to the managers of our business companies to make most of the changes which areto improve our wel l-being, we expect management to preserve and add to the nation’s supply of

capital,industrial know-how and productive capacity. We expect management to increase the nation’s

supply of goods and services, year by year and to maintain widespread employment, good wages so

that all of us will have jobs and more and more leisure, more conveniences and less drudgery.”And how is management to produce more goods ? By getting rid of all kinds of waste, by

becoming ever more efficient, by making products with fewer manoeuure by bringing out new products

and by getting products distributed to customers at reasonable price. Harbison and Myers have analysed



this role from three aspects :-

1) an economic resource

2. a system of authority and

3. a class or an elite.

Management is itself an economic resource or a factor of production and as such it is similar

to capital, labour or natural resources. Managerial skill like capital must be acquired and effectivelyemployed or invested in productive capacity. Capital-intensive industrial development is inconceivable

without talented manpower. In many instances management is even more critical factor in industrialisationthan capital and almost more essential to development than either labour or natural resource. Management

is a “system of authority ” It is ineffective as a resource unless it can operate effectively as a “system

of authority” in industrial society. Within the managerial hierarchy itself there are lines of command

and patterns of authority at all levels of decision-making. In a very real sense, management is a rule

making and rule-enforcing body. The exercise of authority by it is indispensable to industrial development.

Management is a class or an elite. In any industrial society the members of management are a small innumber but are usually aggressive minority. In varying degrees indifferent countries they enjoy a

measure of prestige, privilege and power as an elite. This particular perspective has also been prominentlyemphasized by James Burnham in the managerial revolution (1941). According to him, capitalist,

society is undergoing rapid transformation. The actual managers are not the capitalist, Within the newsocial structures a different social groups or class the managers will be the dominent or ruling class.

Co-ordination of human effort for better production is another important contribution of management.It does this by adopting practices and procedures through which the rewards of labour can be increased

without reducing the returns of risk-taking enterprise. Management is not just building factories, dams

or highways, employing skilled workmen, training supervisors or using mechanical devices. It is also playing with the aspirations, feelings and reactions of people and getting more work from them through

willing effort. There cannot be any impressive improvement of industry or agriculture without the

motivation or greater productivity or workers engaged in it.

Drucker has gone a step ahead. He regards management not merely as a basic institution, a

dealing group but as link with the survival of Western Civilization. “Management ”, he wrote, “is not

only grounded in the nature of the industrial system and in the heads of the modern business enterpriseto which an industrial system must entrust its productive resources both human and material .

Management also expresses basic beliefs of modern western society. It expresses the belief thateconomic changes can be made the most powerful engine for human betterment and social justice.

Management reflects the basic spirit of the modern age. It is in fact indispensable.” (Managementorganisation and practice - by Harper and Row)

ROLE OF MANAGEMENT IN MAKING MEN

Urwick and Breach has rightly observed, “No ideology, no political theory can win a greater

output wi th less effort from a given complex of human and material resources, but only soundmanagement. And it is on such greater output that a higher standard of life, more leisure, more amenities

for all must necessarily be founded. In fact the structure of a welfare state can be said to be safe and

sound provided it is based on a well organised management. Management contributes a lot towards the

making of a state and its citizens. It is the art of developing men, and this fact clearly reflects upon itssignificance.”

The task of the manager is not an easy one. As he directs the enterprise, he endeavours to



allocate human and physical resources wisel y to underst and and solve a host of problem and to

recognise and act upon his opportunities. In fact he faces organisational difficulties. He is expected to

make decision and to behave with responsibility.

He is concerned with the needs of individuals coordinating and maint aining subordinates.

colleagues and superiors. There responsibi lities demand careful observation objective analysis and

sound Judgment- traits of the true professional.

There are ten basic roles of managers. The work of managers is very challenging. Manager’s

working at various levels is extremely complex and openended at the same time. It is more artistic thanscientific. Although the activities of managers at different levels vary, they have important elements in

common. The crux of Mintzberg’s work is the identification of ten managerial roles. Fig. No. 4 helpsus to see managerial work across levels and to integrates some of the vast amount of fragmented

information on the subject.

Mi ntzberg felt that the ten of managers fall into three groups namely, interpersonal role,

process information role and decision making role. All these ten roles are described briefly as under :

(a) As figure head : It describes the manager as a symbol required by the status of his

office, to carry a variety of social, legal and ceremonial duties.

(b) As leader : It describes the manager relationship with his own subordinates, his need tohire, train and motivate them. As a leader the manager must bring their needs in accordance

with those of his organisation.

(c) As liaison officer : It focusses on the managers dealings with people outside his own organisation.

2. Process information role :

(a) As monitor : It refers to the manager continuously seeking and receiving information

about the organisation in order to understand his milieu thoroughly. Much of the information

is privileged. He alone receives it because of the contacts he develops in his liaison roleand because of his status in leaders role.

(b) As disseminator : In this role, the manager shares some of the privileged information

with his subordinates.

(c) As spokesman : In this role, the manager informs outsiders about the progress of hisorganisation.

3. Decision- Making Role :

(a) As enterpreneur : In this role, the manager takes the responsibility for bringing aboutchange in his organisation. He looks the problems and opportunities and initiates projects

to deal with them.

(b) As disturbance handler : In this role, the manager has to take charge when his organisation

faces a major disturbance or crisis like the loss of key executive, a strike, destruction o

a facility etc.

(c) As resource allocator : In this role, the manager decides as to who will get what in the

organisation. He schedules his own time according to his priorit ies. He designs his





organisation, decides who will do what, a nd allocates authority to take all important

decisions.

(d) As negotiator : In this role, the managers take charge whenever organisation their enter

into crucial negotiations with other parties. His presence is required because he has the

information and authority to make the real time decisions as difficult negotiations require.

Mintzberg emphasised on the inseparability of these ten roles and advocated for viewing

them as forming a ‘Gastalt ’ an integrated whole. For example, status, as manifested inthe interpersonal roles, brings information to the manager and it is this information (together

with the status) that enables him to perform the decision making role effectively. Further he observed that different managers emphasis different roles.

SCOPE OF MANAGEMENT

George has viewed managers job in a broader context, “Determining the collective objectives

of an undertaking and generating an environment for their achievements is the t otal function of a

manager.”

This environment consists of two parts. First is the physica l part which includes all the

physical aspects of which it is compared i.e. light, noise, ventilation, the tools and materials thatemployees work with and the sequence of work performance. The second part is conceptual in natrue

and refers to the mental facet of the environment which affects an employee’s attitude towards hiswork and his work place. An effective mental environment makes the employee particapate willingly in

the endeavours of the organisation. “A manager’s prime task, therefore, is the creation of a healthy,

physica l and ment al work climate which wi ll i nduce other to willingly contribute their efforts to

achieve the objectives of the undertaking. Without this, proper physical concept ual environment or work climate, the participants efforts be ineffective or even lacking.”

Management has a wide scope in every field. It is very difficult to precisely define the scope

of management. Yet the following may be considered to evaluate the scope of Management :

1) Subject matter of management

2) Functional area of management 1) Subject matter of Management :In modern days, every activity of any organisation is

basically looked after and manged by management. Whole of the management process is a chain of activities. Thus from starting with planning it has to go a long way to achieving objectives. All these

activities assume the status of subject matter of management. In nutshell planning, organising, directing,

co-ordinating, motivating, staffing, leading, communicating and controlling areas becomes the subject

matter of management. There is no area which remains untouched by the management. It can, therefore,

be said that management has a very wide scope in any organisation.

2) Functional area of Management : All the act ivities added with others become total

management. But different skills and knowledge are required to manage them. Secondly it becomes ahard task, for one person to handle all these properly. Need for specialisation is emerged out of this.

Now-a-days a qualified manager tries to acquire specialised knowledge of one or two of the areas o

management. Such specialised areas are:(a) Finance

(b) Human resource



(c) Materials

(d) Marketing

(e) Machines

a) Financial management : Money occupies prime import ance in successful running

organisation. Only applying or pouring money in organinsation does not ensure success. Therefore,

now-a-days, money is being taken as a part of finance. Finance includes cash and fund flow, applicationof different management tools to transcript the financial accounts in the form of management accounting

which provides data of decision making. Cost of product ion occupies major port ion in outflow o

funds. As such a financial manager must know the cost as well as financial accounting. As far as

external fianance is concerned, managing the creditors and investors along with government statutes

is also a major area where the management has a wide scope.

b) Personnel or Human Resource Management : Next “M” is men. It is not only a human

but a resource also. Managing this human resource is much ticklish and thus intelligent, as it is a live

resource and not a dead resource. A dead resource will not complain for any untowa rd handling,

immediately. No doubt it will tell upon the profitabi li ty of the undertaking in long run. W hereasmismanagement of human resource immediately affects the organisation. Fortunately development of

this human resource has gained a fast momentum. It has resulted in efficiency and , in turn, profitabilityof any undertaking. This includes various fuctions right from recruitment to retirement of employees.

A Japanese management scientist has rightly said that they take care of their employees from womb totomb. Thus this area of management has a very wide scope and management skills are essential for

this.

(c) Materi al / Purchase management : Raw material is the most important fa ctor of

production and thereby important element of production cost. Unless it is controlled, this cost willinflate and finally tells upon the profit of any organisation. There are ways and means to control it. But,

again, it is a specialised job. Right from procurement of material to its utilization, that too, efficiently

and conservatively is the area of material management. It involves procurement of right material atright time and at right cost, stocking of material, its preservation, its issue to production department

and fi nall y its proper accounting. Al l these require management skills. Thus purchase / material

management fall under the preview of scope of management.

d) Marketing management : Marketi ng of the goods produced i s equally important, intoday’s competitive world. Unless your product is made known to its consumers, it is very difficult tomarket it. Marketing does not simply mean selling. On the other hand selling is a part of marketing. It

involves, market research, creating demand, good packaging, effective a dvert ising, regular and

continuous supply, transportation, selling, warehousing, allowing credit and finally post sales servicewhich is most important as far as mechanical and electronic goods are concerned. Functions and area

of marketing are very vast. It also requires specialisation in management. Thus marketing has assumed

a very specialised and expertised branch of management. Naturally scope of management is very vastin marketing.

e) Machine / maintenance management : Just as bad workman creates a mess in production,

bad and ill- maintained machines deteriorate quality of production. As the saying goes “one can befool ed once and not all the time.” Inferior qua lity of goods cannot be continuously marketed.

Standardisation of production has become the need of the time. This standardisation can be maintained

onlyof all five Ms. are of good quality. Todays consumer is more quality conscious, and purchases



quality goods. This good quality, can be maintained by utilisation of modern machines and their quality

maintenance. Managers have a wide scope in this also.

All the above are main areas where management has wide scope. Following areas are also

covered by management :

(1) Office management : This includes the selection of office location, adopting appropriate

office layout, staffing function, smooth flow of work, office forms design, control, office appliances

and machines, giving best services from office to different parties or people.

(2) Development management : This is an area where in allround development of managers

and managerial skills is developed by way of experimentation and research. Thus training, orientation

refreshers, conferences and seminars are arranged.

(3) Manage ment as an interdisciplinary approach : For correct appl ica tion of the

management principles, study of commerce, economics, sociology, psychology and mathemati cs is

very essential. For better discipline in the whole orgainsation,management must adopt an inter-disciplinary

approach which is very essential due to complexity of business organisation.

4. Principles of management are of universal application :The principles of managementhave universal aplicati on. Business organisation, indust ry, trade, commerce, educational, religious,

charitable, political and social institutions etc. can be run successfully and efficiently by applying modern principle and techniques of management everywhere.

(5) Essentials of management are :Following three are essentials of management :

i) Scientific methodology

ii) Human relationship

iii) Quantitative techniques

Scientific methodology must be adopted while applying management principles. Management

must concentrate on human relation and follow quantitative technique for productivity as well.

6) Modern management is an agent of change : The technique of management can be

improved by proper research and development. Due to fast changes within and outside the business

organisations, improved and appropriate techniques of management must be developed through research.

SIGNIFICANCE AND IMPORTANCE OF MANAGEMENT

After going through the forgoing paragraphs one can easily understand as to how important andsignificant ‘management’ is in modern era. Proper outcome of all the management are as and their functions can lead the organisation to the everest of all round success. Following points will elaborate

the importance.

1) Management meets the challenges of change : In the era of globalisation, liberalisation,computerisation, privatisation mult inati onals,fast and growing changes are taking place. In recent

years the challenge of change has become intense and critical. This challenge of changes can be met by professional and efficient management only. Complexities of modern business can be overcome

only by scientific management.

2) Effective, efficient and profitable utilisation of the seven M’s :In this era two M’s

( Methods, Markets, ) are added to traditional M’s i.e. men, materials,money, machines and management.Among all these seven, management stands at the top. It determines and controls all other factors of

business, and manages them for achieving the predetermined objectives and goals of the organisation.



3) Development of resources : Good management always tries for development of other

resources.It produces good business by creating a vital, dynamic and life giving force in the organisation.

4) Management direc ts the organisation : Role of management as a director is very

important. For instance, mind directs and controls the body to fulfil its desires, like wise management

directs and controls all the organs of organisation to achieve the desired goals.

5) Management integrates various interests : Business organisation activities are carriedout by working groups, involving a number of individuals. There are various interest groups and they

put pressure over other groups for maximum share in the total output.Management balances these

pressures and integrates various interests. Interest of the business organisation and that of the individuals

is integrated by the management in such a way, that interests of both the parties are achieved. As a

result both the parties are satisfied and work together happily in the organisation.

6) Management provides stability : S moot h and cont inuous running of busi ne ss

organisation depends upon the efficiency of management. Degree of stability of any organisation is positively correlated with the degree of efficiency shown and adopted by the management. It is necessary

to change and modify the resource in accordance with the changing environment of the society. If the

business enterprieses do not change according to the changing environment, their stability may be in

danger.

7) Management provides innovation : Innovation is a must for business and i ndustry.Otherwise it becomes rigid and outdated. Innovation requires new ideas, improved or new suggestions,

new dimension, new vision, excellent imagination etc. All this is provided by management, which

makes the business and industry modern, live and dynamic.8) Management provides co-ordination establishes teamspirit : In an organisation,

different activities are performed by different departments. A large number of activities are going oncont inuously and / or simultaneously in a business enterprise. The management onl y, has to co-

ordinate all these activities and establish team-spirit among the working groups. Coordination in activities,

maintaining and establishing team spirit, is a great task to be done by management alone.

9) Management tackles business problems : Management is the only instrument with

the enterprise to tackle all sorts of problems of business enterprises. Management possesses the skill

for tackl ing the variety of problems. It very well knows how to face the crit ical problems of theorganisati on like compet ition of technology, problem of marketing, probl em of human resources,

physical resources, financial resources and so on. It provides a tool for the best way of doing a task.

10) Management is a tool of personality development : Management at tempts t o

improve the personality of personnel. Management is not only for the things but the development of

men also. Management is always searching new ways and means for developing the personality of the

employees. It tries to develop alround personal ity of employees through education training. It also

at tempts how to raise t heir efficiency and productivit y. Management contribution in personalitydevelopment of employees is indispensable.

11) Importance of management in India’s developing economy :Our country is a

developing country. Role of management in such situations and circumstances is very important.Totaleconomics of a nation depends upon how the managers are giving their honest and loyal contribution

for it. We have a small number of managers. Added to this is scarcity of professional managers as well as experienced managers. There is a great demand for professional managers, business executives to

successfully run business enterprises. History of business reveals the fact that t he complexity and

sophistication of a business need professional management. There is a direct co-relation between the



sophistication of business / industry and the kind of managment needed. For fast development of

economy after industrial revolution, we are required to establi sh industries like machines, t ools

equipments, electronics, engineering petrochemicals, chemicals, iron and steel, pharmaceuticals, cement,fertilisers, computers,etc. and to manage these industries we need the managers with the abilit y to

manage them successfully. These ma nagers must have the knowledge of technical and scientific

know-how, professional and administrative competence and dynamic personality. It is universallyadmitted that scientific training can build good managers. The managerials skills have to be acquired

by training and education and the scientific managerial approach calls for initiative, entrepreneurship,

goal setting drive and dynamism. Professional managers must have necessary training and ability tospot t he problem areas and bring in together al l the diffused talent s of t he various technical and

professional experts such as engineers, scientists, economists psychologists, sociologists etc. to tackle

the problem spots with confidence. If business administ ration and management is founded upon ascience, if its practice is a profession, then in the near future we must expect its exponents to be men

of high ability and perfect knowledge. Men who have graduated in their profession and are qualified

thereby be entrusted with the responsibilities which its practice imposes. Thorough knowledge of the

principles, and practice of business administration is needed for developing more good managers.

Thus in short management is an essential accompaniment of all social organisations and it is to be

found everywhere as a distinct, separate and dominant activity. Management is the custodian of theeconomic welfare of the community.

CHARACTERISTICS OF MANAGEMENT

Following are the unique features of management.

1) Management is an Activity : Management is an activity which is concerned with theefficient use of human and non human resources of production. It is the driving force that inspires an

undertaking,to knit it into an entity and creat the conditions and relationship which bring about full use

of its power and resources.

2) Management is a purposeful activity : Management deals with the achievement of some

clearly defined objectives. The purpose of manufacturing enterprise is to profi tably manufacture products for satisfying the consumers. For this purpose, management organises plans, directs and

controls and enterprise. There may be cert ain other goals also. Managerial success is commonlyconsidered by the extent to which these objectives are achieved.

3) Management is a social process : All business organisations are social organisations asthey are constituted of men. The management has to control , organise and motivate them. It can

improve their lives and create a favourable climate for their development. Because of these social

organisations, which produce variety of products, the standard of living of society is concerned.

4) Management is a science : Now-a-days the science of management is universally accepted

as a wide and distinct discipline. It has assumed professional charact er. That is why managerial

effectiveness requires the use of certain knowledge, skill and practice. There are certain fundamental

concepts, theories, tools and techniques which constitute the subject matter of this social science.

They are communicable hence being taught to would-be managers in the schools of management.

There are definite principles of management. It is a science because by the application of these principles predetermined objectives can be achieved.

Management is also a social scince. It is supposed to be the Behavioural science of in exact

nature. Its principles and theories are situation bound despite the fact that a large number of theories



and principles of management that have been established their applicability may not necessarily lead to

the same result. The process of management is very much related with the behaviour of people at

work and their behaviour cannot be predicted in exact manner. So the limitations of social sciences arethere wi th sci ence of ma nagement. But with the int roducti on of quanti ta ti ve tools in the field of

decision-making, management is growing as science. It has an organised body of knowledge having

its own nature. It can be communicated to new-comers also through formal training. To conclude wecan say that management is a social science having its own approach and dynamics in different work

situations.

5) Management is an Art : Management is an art of getting things done through people.Managers must possess this art. Artistically, managers get the things done through people. Art is the

best way of doing things. Art i s concernd wit h the exercise of the know-how for the effectiveaccomplishment of desired results. As a matter of fact the process of managing is a fine art, as it is

concernd with the application of the principles, keeping in view the real life sit uations. The same

process is followed in a repetitive manner and the practice is moulded according to the experiences

after applying the set body of knowledge. Design and redesign of systems continue until the managers

find a proper solution and desire results. So the art management is also creative. It develops newsituations new designs and new systems needed for further improvement. But there is not, one best

way of managing. Every manager has his individual approach and technique in solving problems. Oneof the scholars has very aptly said that ‘business’ is the oldest of the arts and youngest of the sciences.

6) Management is associated with effort of a group : Management is the management of

people and not the direction of things. Business activities are group activities. Management is a directive activity aiming at the effectiveness of collective human effort. A good management inspires them andincreases their willingness to work.

7) Management is getting the things done : A manager does not do any operating work

himself. He gets the work done by, with and through the people. He has to direct them and develop

their talent by adopting technical, human and psycology skills.

8) Management is an intangible force : Management is not an abstract thing. It is a social

which cannot be seen with the eyes but it is evidence by the quality and level of the organisation.

9) Management is to achieve the predetermined objectives of the organisation : Whatever objectives are determined by the business organisation they are achieved by the management only.Every managerial activity has certain objectives, which should be expressible in spoken words or in

writing or implied. These objectives, if determined by administration without the positive help of the

management, cannot be achieved at all.

10) Management is an integrating process : Management is an integrating process in thesense, it integrates the men, machine and material to carry out the operations of the enterprise. This

intergration process is result oriented.

11) Management aims at maximisation of profits : Management is meant for optimum

utilisation of human and non human resources which ultimately results in maximisation of profits to

the organisation. It is the expectation of the owners from management, to bring desired results for the

organisation. Rational utilisation of available resources to maximise the profit is the economic functionof management.

12) Management is a must for group activity : When the activities are carried out by an

individual, himself it is not that difficult to manage them. But whenever the activities are carried on by



a group of individuals, management is a must for carrying on the activities. Without management,

group activities may not be started at a right time and finished at the right time, Management plans,

organises, co-ordinates, directs and controls the group efforts, for achieving the enterprise goals.Management is always concerned with the group efforts and not indiviudual efforts.

13) Management is separated from ownership : It is one of the important features of the

oint stock company, that management is separated from ownership. This only means that owners andmanagers are not the same persons. Owners are not managers and managers are not owners. In

modern times there i s a separation of management from ownership. Todays big corporations are

owned by a vast number of shareholders scattered through out the world, while their management isin the hands of qualified and competent managers who normally do not possess ownership interest in

the enterprise.

14) Management is an universal activity : Managing involves getting things done through

and with the people. Management means getting things done skilfully from others. Managers performthe same functions regardless of their place in the organisation structure or the type of enterprise in

which they are engaged. The techniques and tools of management are universally applicable.

15) Management is a profession : In modern days management is a profession like other recongnised professions. Even management is based on certain princi ples and theories, and their

application in practice is becoming a must.16) Management has a separate identity : Management is an art and science of getting

things done through and with people. Yet their identity as thinkers is quite different from the identity o

the doers. Administrators and managers are doers or executors. As an executors they are having a

separate identity.

17) Dynamic principle of management : Management changes according to the changes

arising within and out of organisation. Management is an adjustable element. It, not only, adopts itsel

according to social changes, but also introduces innovation in techniques of getting things done.

18) Management-need of organisation : Managements achieves the predetermined objectivesof the orgainsation with the help of organisation. Organisation works as a tool for management for

desired results.

19) Management is needed at different levels of organisation : According to the size and nature of business enterprise, either three or five levels of management are required. If the businessenterprise is small only three or two levels of management are required e.g. Top level, Middle level and

Lower level of management. If the business enterprise is large enough then top level,upper top level,middle level. upper middle level and lower level of management may be required. It simply means that,

management is essential at different levels of organisation.

20) Management is also characterised by the quality of leadership : Every manager

must possess the quality of leadership. A person who does not have quality of leadership cannot

become a manager. According to R.C. Davi s management is the funct ion of executive leadershipeverywhere.

21) Management is a system of authority : Management having special skills activates it

for achieving the objectives of the organisation , making the organisation profitable, keeping the

organisation going , its smooth running , making the organisation successful, getting the suitable typeof people to execute the operations is the significant aspect of management. Perfection in this skill can

be achieved only after practice, called as experience. There is a great demand for skilled and experienced



managers.

Thus we see that management is so complex that our mind cannot catch all its specialities at the same moment. In nut shell, it is such a social and technical process that comprises a series o

actions that leads to the accomplishment of objectives. It is such a function of an enterprise which

concerns itself with the direction and control of the various activities to attain the business objectives.

It is the dynamic life giving element in every business. without its leadershi p the resources of the production remain mere resources and are never converted into production.

22) Management makes things happen : Managers focus their attention and efforts in

bringing about successful action. They know where to start, what to do to keep things moving andhow t o follow through. Successful managers have an urge for accompl ishment. Ma nagement is

acceptable because things are accomplished through them.

23) Management is an outstanding means for exerting real impact upon human life :

A manager can do much to improve the work environment, to stimulate people to do better things and

to make favourable actions take place. Frustrations. and disappointment need not be accepted at face

value and passively viewed as inevitable. A manager can achieve progress, can bring hope and can helpthe group members to achieve better things in life.

All the characteristics as mentioned above, certainly, help us in understanding the real meaningof the term ‘Management.

FU NC TIONS OF MANAGEMENT

Study of the functions of management is an important point in the theory of management.

Management is the art of getting things done through and with people. Overall job of a manager is tocreate within the organisation, an atmosphere which facilitates the accomplishment of its objectives.

For this purpose he has to perform a series of functions.

Management is what management does”- points out the functional approach to management and emphasises the importance of distinctive managerial functions which together give us an unified

concept of the process of mana gement. Functions of manageme nt are al so called el ements omanagement. Many management thinkers have discussed the functions of management but it is a

strange thing that each thinker, author accepts the pervasiveness of the managerial functions, but thereis hardly any unanimity in them. Everyone has his own list of functions and tries to defend his

classification. If we go through the management l iterature,we shall come across a large number oclassification of management functions. The chief reason for this is that different scholars discussed

the functions of management by studying different organisations and from different angles.

For example R.C.Davis enumerates only four functions organising, executing and controlling.

L. A. Appley too describes three functions planning, executing and controlling.

Breach says that they are four - planning, motivating, coordinating and controlling. Fayol has

described five functions as planning, organising, commanding, coordinating and controlling. But this

defference of opinion does not come in our way. According to Koontz and O’Donnell -” The mostuseful method of classifying managerial functions is to group them around the activities of planning,

organising, staffing, directing and controlling. This classifcation of managerial functions is a helpfuland realistic tool for analysis and understanding.

i) Planning,



ii) Organising

iii) D irecting

iv) Staffing

v) Coordinating

vi) R eporting and

vii) BudgetingG.R. Terry described managerial functions under four heads namely planning, organi sing,

actuating, and controlling.

According to L. Hall there are five main functions of management. They are

i) Forecasting

ii ) Planning

iii) Controlling

iv) Motivation and

v) Co-ordination

Massie has stated the fol lowi ng management funcitons - Planni ng, organising, staffing,

communication and direct ion.

According to Niles functions of management are organisation,co-ordination, administrationand leadership.

In classifying the functions of management one must remember clearly, the important operations

such as marketing, manufacturing, accounting, engineering and purchasing. It differs from one enterpriseto another but the functions of manager are common to all. We can broadly classify the functions omanagement under the following two broad categories.

1) Managerial functions

2) Operative functions

Functions of Management

Managerial Functions Operative Functions1. Planning 1. Production2. Organisation 2. Purchasing3. Staffing 3. Marketing4. Directing 4. Finance5. Co-ordinating 5. Personnel6. Motivating7. Communicating8. Decision making 9. Controlling

We propose to discuss here the managerial functions which are listed under 1 above for they

are common to all the operative functions viz. production, purchasing, marketing, financial, personnel.

1) Planning :Planning is an indispensable as well as first and foremost function of management. Almost all

managers, whether they are at the top, middle or bottom of the organisation have to plan. In the words



of M.E. Hurle “Planning is deciding in advance what is to be done. It involves the selection of objectives,

policies, procedures and programmes for attaining enterprise goals.”

Planning determines the objectives to be achieved and the course of action to be followed to

achieve them. It is a menta l process requiring the use of intellectual faculties, foresight and sound

udgement. It is selecting and relation of facts. Making and using of assumptions regarding the future

in the visualisation and formation of proposed activities are believed to be necessary to achieve thedesired results. It involves deciding in advance what? when ? where ? how ? and who ? is to do it andhow the results are to be evaluated. Thus planning is the systematic thinking about the ways and the

means for the accomplishment of predetermined objectives. Planning virtually pervades the enti re

gamut of managerial activity. This function is performed by the managers at all levels. The managers

at the top level of the organisation devote more time on planning as compared to the managers at the

lower levels. The lower level managers have to follow the policies, programmes and procedures laid

down by the top management. The process of planning includes:-

i) determination of objectives

ii) forecasting

iii) search of alternative courses of action

iv ) their evaluation

v) drawing policies and programmes

vi ) budgeting

Planning is a prerequisite of doing anything. It is today’s projection for tomorrows activity. Planning makes things happen that would not otherwise have happened. Systematic planning is necessary

for any business activity, otherwise it will be done in a haphazard manner. Proper planning is a must toensure proper utilisation of human and non-human resources to achieve the desired goals. Once the

plan is formulated the manager has to indicate the objectives of the plan and steps to be taken by his

subordinates. By communicating them, he makes the objectives effective. In practice, planning functionis all pervading. It is involved in organising, leading, motivating and controlling. Budget is a part of

planning as well as an instrument of control. Planning involves developing objectives, strategies policies,

procedures, programmes etc. As it involves making choices, decision making is the heart of planning.

2 ) Organising :Managing a business is not just planning. It includes putting life into the plan by bringing

together the executive personnel, workers, capital, machinery, materials, physical facilities and other

things or services to execute the plans. The process of organising is very essential for accomplishingthe objectives of the enterprise set by administration and planned by ma nagement. It involves the

establishment of an organisation structure through determination and grouping the activities, assignment

of activities to the specific departments and individuals,defining role and establishing relationships,

delegation of authority to carry out the responsibility and provision of coordination of men and work.

Devel opment of sound organisation requires certain principles. Delegation of authority creates anorganisation. It determines authority-responsibility relationship. These relationships must be properly

co-ordinated to secure unity of organisation. Organisation provides a framwork of management of or

a mechanism of purposive, integrated and co-operative action by many people, in a joint effort toimplement any plan. Planning decides what management wants to do, while organising provides aneffective machinery for achieving the plan or objectives. In brief, organisation is the process of dividing

work into convenient tasks or duties by grouping such duties in the form of posts, by delegati ng



authority to each so that work is carried out as planned .

Under organising we have mechanical as well as human aspect. Mechanical aspect provides an organisation structure or chart, describing the authority- responsibility- relationship side by sidewith formal organisation structure. We have also an informal or social organisation having an informal

group leader, unwritten conventions and code of conduct and manager has to int egrate both these

organisations in order to execute the plans and policies.3) Staffing :

Staffing an executive functi on which involves recruitement, selection training, placement,

compensating, promotion or demotion and finally the retirement of the employees. Thus staffing is a process of manning the organisation and keeping it manned.The sole aim of staffing is to take right

man for the right job. It needs manpower planning, job analysis and such other staff functions. It is thequality of hired personnel which governs the future of the business enterprise.

The staffing function has assumed greater importance these days because of rapid advancement

of technology, size of organisations and complicated behaviour of human beings. According to HaroldKoontz and Cyril O’Donnell the managerial function of staffing involves manning the organisational

structure through proper and effective selection, appraisal, development of personnel to fill the roles

designed into the structure. Every manager is continuously engaged in performing the staffing function.He is actively associated with the recruitment, selection, training, and appraisal of his subordinates.Finally the first line managers or supervisors perform the staffing function when they participate in

selecting, training and appraising their subordinates. Staffing is also a pervasive function of managementfor all activities relating to staffing.

4) DirectingDirection is also an important function of management. As the process of management is

concerned with getting work done through and with people, it requires continuous encouragement to

the people to work effectively. As such management guides and leads them continuously. It impartsinstructions to them, communicates to them orders, rules and decisions, motivates, provides leadership,and guidance, supervises their work and behaviour and inspires them towards improved performance.

All these functions are in the orbit of direction, thought it is very simple to define direction than to

practice it. It requires foresight and experience.

George Terry has used the word ‘actuating’ for ‘directing’. Once subordinates are employed, the superior has a continuous responsibility of guiding and leading them for better work performance

and motivating them to work with zeal, confidence and enthusiasm. Some management experts prefer leading in place of directing, particularly under democratic managerial set up. The function of leading

has been termed as motivating, directing, guiding, teaching, stimulating and organisation. The manager must know how to direct others i.e. how to issue orders and instructions without arousing resentment

or offencives. He must be able to secure willing obedience from his subordinates without destroying

their initiative and creativity. Directing or leading is the art of influencing people so that they work with

interest and enthusiasm in order to achieve group goals.

5) Co-ordinating :

In modern days organisations have grown in size and in character. There is a lot of complexities in business world. A large number of people work therein. Therefore co-ordination has become verynecessary. In the words of Koontz and O’Donnel “The best co-ordination occurs when individuals see



how their jobs contribute to the dominant goa ls of the enterprise. This impli es knowledge and

understanding of enterprise objectives.”

Some authors consider co-ordination as a separate function of management while many ot hers

call it “essence of management”. The process of co-ordination involves synchronising individual actions

with the goals of the enterprise. Co-ordination is an integral part of direction. It is concerned with

harmonious and unified action directed towards a common objective. It involves inter-relating various parts of the work or organinsation. Co- ordination is an orderl y arrangement of group efforts to provide unity of action. It ensures that all groups and persons work efficiently, economically and in

harmony. Co-ordination is a must in large scale business enterprises because of its complex and

elaborate organisation structure multiple levels of management due to limited span of control, division

of labour specialisation of work, inter-dependency of work or activities channels of communication.

Direct, face to face, person to person communication is most effective for coordination. Coordination

can be accomplished automatically if we have sound organisation structure. Co-ordination is an orderly

arrangement of group efforts to provide unity of action.

6 . Motivating :Motivation means inspiring the subordinates with a zeal to do work for the accomplishment

of organisational objectives. A successful manager makes appropriate use of motivation to actuate thesubordinates to work harmoniously towards the achievement of organisational goals. Motivation is a

psychological technique of executing the plans and policies through the efforts of others. Desire and

willingness on the part of the worker to perform a given task depends upon his attitudes, satisfaction,

morale as well as the systems of communication incentive, fair treatment and human approach built-

up by management. Through motivation, the manager inspires the subourdinates to do what exactly hewants them to do. This managerial function is fully reflected when we define management as the art

of getting things done willingly t hrough and with other people. Management is interested i n two

primary elements (1) Material or non-human resources and (2) Human resources. Motivation relates

exclusively to human resources.

Motivation and leadership are the master keys to successful management. They are also

responsible to ensure productivi ty of human resources. Motivation can set int o motion a person to

carry out certain activity. Human relation in industry has special emphasis to this managerial function.Effective communication and participation enhance the power of motivation. Democratic leadership

heavily relies on motivation of employees. Different people are motivated by different types of rewards.

To some, non-financial incentives like job. security, job enlargement, freedom to do work, recognition, achievement, respect, status etc.

7 ) C ommunicating :It is process of passing information and understanding from one person to another. A manager,to

be successuful, must develop an effective system of communication so that he may issue instructions,

receive the reactions of the subordinates and guide and motivate them. A flow of information from thetop level to the bottom level and from the bottom level to the top level as well as horizontally on the

same level of organisation is communication. Communication also leads to sharing of information,

ideas and knowledge. Existance of the organisation is based on good syatem of communication network.

When communication breaks down, an organisation may collaps at any time. According to Barnardthe first function of a manager is to develop and maintain a good system of communication. Organisationaldecisions are based on the effective communication of relevant information-facts feelings, ideas,



massages etc. Understanding, thoroughly the process of communication, can enable a manager to

improve a lot the performance of the enterprise. In interpersonal communication between two or

more persons we have transmission of information as well as flow of understanding based on two -way- traffic of communication. Personal communication is the best form of communication. Managerial

leadership depends upon upward communication to the leader in the form of feedback so that he can

understand the feelings, emotions, motives and problems of subordinates and his power will havesupport and acceptance from below. Communication system serves two fold purposes.

(i) It can integrate and co-ordinate all managerial functions as well as all enterprise operations and areas.

(ii) It links the organisation with its environment and enables the enterprise to adopt with all

variable forces of the environment. The business enterprises are aware of customer needs,

competition, marketing opportunities, threats and risks only through effective system of

communication. Communication helps in securing largest possible participation or consultation

in decision making, planning and general administration. It provides democratic character to

managerial process and strengthen the morale of the people.

8) Decision making :

It is most important function of management. Every manager has to take a number of decisions. Scientific decision-making is a well tried process of arriving at the best possible choice for a solution

within a reasonable period of time. According to R. S. Davar, “Decision making can be defined as the

selection based on some criteria of one behaviour alternative from two or more possible alternatives.To decide means “to cut off ” or in practical content, to come to, a conclusion.”

A decision is an act of choice wherein an executive forms a conclusion about what must and

must not be done, in a given situation. A decision is something that takes place prior to the actual

performance of the action that has been decided upon. It is a conclusion that the manager has receivedas to what he or others should do at some later time. It is a solution after examining several alternatives. Decision making involves two or more alternatives because,if there is only one alternative, there is no

decision to be made. Decision-making i.e. selection of a suitable course of action is at the heart of planning. It is an important function of management. Management without decision is like a man

without backbone. Nothing can be performed without taking decisions. Every aspect of management functions such as planning organising, motivating and controllig is determined by decisions, the result

of which is the performance of the organisation in accordance with predetermined set of goals.

Decision-making is, therefore, vital to all management activities. It helps set definite objectives, prepare

plans of action, determine organisational structure, motivate personnel and introduce innovations etc.

9) Controlling :It involves the process of visualising whether the activities have been or are being performed

in the same way as contained in the plans because any deviation will result in inefficiency in the

organisation. Control is the process of measuring actual results or present performance and comparing

those results with plans or some standard of performance, finding out the reason for deviations oactual from desired and taking corrective action when necessary. The corrective action may lead to a

change in the method of implementation of the plan or change in the plan itself or even a change in theobjectives.

Koontz and O’Donnell have defined controlling as the mea surement and correction of the

performance of activities of subordinates in order to make sure that enterprise objectives and the plans



devised to attain them are being accomplished. According to Haimann, a control is the process of

checking to determine whether or not proper progress is being made towards the objectives and goals

and acting. if necessary, to correct any deviation.

Controlling is seeing that actual performance is guided towards expected performance. It is

related to all other management functi ons. All ot her management functions cannot be completed

effectively without performance of the control function. Thus controllig generally invloves the followingsteps.

1) Determination or setting up of standards.

2) Measurment of actual performance

3) Compairing actual performance with the standards

4) Correction of deviations to ensure attainment of objectives.

Control is very much related to planning. Planning must be followed by control if it is to be

successful. But in a running concern, planning and control go togehter because planning seeks to set

consistent, integrated and articulated goals while control seeks to compel events to confirm to plans.

The controlling function brings to light in the deviations, if any, and assists the management in making

the necessary changes in the plan or policies.

10 ) InnovationThe famous modern thinker of the science of management Peter Drucker says that management

is a creative rather than an adaptive task. The management must try to create new product s, new practices, new ideas and new structure looking to the needs of the future. Furthermore the function o

innovation involves preparing people and organisation to face new challenges. Otherwise the organisation

will become stale and static. Innovation function relates to research and development, which is essentialin this age of competition. All big business concerns have started Research and Development Departments

to keep pace with modern technique and up-to-date demand. Innovation becomes the part of business

enterprises. If manager does not perform this function at a ri ght time, his business concern ma y

become out dated or rigid.

LEVELS OF MANAGEMENT

1 ) Managerial Hierarchy and Number of Le vels :Managerial Hierarchy means classification of managerial positions into a number of levels in

the organisation. There is no Tailor-made formul a t o determine the number of management levels

required in an organisation for efficient management. The number of levels of management dependsupon the size of the business concern. The number of levels of management increases when the size

of the business and work force increases. As well as span of control is one of the important factor for determining the number of levels of management. There is a limit to the number of sub-ordinates, a

person can supervise and guide. Levels of management are increased to achieve effective supervision.

It does not mean that an unlimited number of management levels be created. If there are so many

levels of management, instead of effective supervision more problems may crop up. The problems

may be of effective communication, coordination, control etc. These may ultimately harm the discipline

of the business organisation. Classification and understanding of levels of management is very importantas they substantially determine authority relationships and give social status to their occupants. Thetime and effort spent on different functions will depend on the level on which the manager is placed in

the managerial hierarchy. Though every manager has to perform all the managerial functions, the



stress placed on individual functions varies at different managerial levels. The term manager includes

all managers right from the Managing Director up to the first line supervisor on the shop floor. Managing

Director who occupies the position of top most level of management normally spends most of his timeon planning and organising and less time on staffing, directing and supervision. On the other hand the

foreman representing supervisory level of management will devote less time on planning and organising

and more time on directing and controlling.



LEVEL OF MANAGEMENT

B oard of Directors

Managing Directors Õ Top

Manage ment General Manager

Departmental Manager

Deputy Manager

Õ MiddleAssistant Manager Management

Foremen

Low er LevelÕSupervisor First Line Manageme nt

Workers (Core Groupe)

Figure.

It is necessary to give prime regard to the span of control less or minimum number of levels. I

managers exceed their feasible span of control less or minimum number of levels of management will

be required but it will increase administrative and social distance.

In a large scale business organisation there are generally five levels of management, namely :-

1) Upper top level 2) Top level 3) Upper middle level

4) Middle level 5) Lower levelIn many cases a job title indicates the management level to which an executive belongs. But in

every case job title does not indicate management level. Some job title may be misleading. For examplea Vice-President may have limited authority and minor impact on the overall operations of the firm. In

a small organisation, designation of a manager may look attractive though all important decisions are

taken by its owner, who also performs managerial functi ons. The number of managerial levels and

also managers at a particular managerial level vary from firm to firm. For example in a small sole

traders shop there is only one level of management represented by owner manager who takes all thedecisions affecting the operation of the business. But in big corporations, multinationals, top management

may include a large number of people who take strategic decisions affecting the entire firm.

1) Upper top level and top level of management :Top level of management of a company

consists of the Board of Directors, the Chief Executive, the General manager, Secretary and others

concerned with the policy making. General operations are distinct from some functional specialization.They are the ultimate level of authority in the operation of the enterprise. this level of management

establishes objectives, frames policies and defines the goals of the enterprise. It is accountable to the



owners of the concern for the overall management of the company. Top management sees that the

policies are put into effect and judge the results. Board of Directors is the trustee of the organisation.

Its includes

a) Deciding long-range poli cies, plans, objectives, goals, programmes, budgets, strategies

et c.

b) Designing structure of organisation c) Reviwing financial and operational results of the company.d) Issue of general directives for their implementa tion (implimentation of policies, plans,

programmes etc.)

e) Overall review of performance and progress.

It also appoints top manageri al personnel and ratifies the appointment of managers at lower

levels. Executive functions of top management are performed by the Chief Executive or the Managing

Director. He is responsible for the day-to-day management of the company under the overall guidanceof the Board of Directors. He is responsible for executing the policies and programmes laid down by

he Board of Directors and also acts as a link between the board and other personnel in the organisation.

He provides effective leadership to the organisation and acts as a co-ordinating link between various

departments. The role of top level management is very important. Success as well as smooth running

of an organisation depends upon the way, t he top level management adopts. Interest, hard work,honesty, willingness to work for long hours, their dedication devotion of the people at top level ultimately

convert the business organisation into profits. All this help in creating good image of the organisation

in the market.

2) U pper-Middle leve l of manageme nt : It consists of the head of the personneladministration department, production or works manager, sales manager or ot hers responsible for

research, finance, accounting and so on. It means upper middle management includes heads of various

functional department s or divisi ons. Thus upper middle management consist s of the executives

responsible for leading functions within the enterprise such a personnel admi nistration, production,sales, research etc. In certain companies these people are on the board of directors and are therefore

part of top management. Main functions of this level are described by Hempel as under :-

(a) Establishment of an organisation.(b) Selection of best suited executives of staff or of employees.

(c) Appointment of sufficient workmen to carry out the plans.

(d) Installation of proper departments.

(e) Designing of operating policies and operating routines.

(f) Actual assignment of specific duties to each departments and to each individual.

(g) Obtaining the necessary funds as well as control of costs, and the financial status of the

company.

(h) Solution of all problems of actual sales activities and distribution, finance production, labour relations, wages etc.

A vital role is played by the upper middle management. This level of management is very essential

in large organisations.3) Middle management :Middle management stands between upper middle management

and lower management in five levels of management. It stands between top management and lower



management in case there are only three levels of management. Middle management may be further

bifurcated into two parts as mentioned above, upper middle management and lower middle management.

Upper middle management includes heads of various functions departments or divisions. The lower middle management is primarilly concerned with achieving specific goals of the departments to which

they are attached. Lower middle management includes branch managers, superintendents and heads

of various sections.Middle ma nagement consist s of the deputy hea ds of t he va rious sections of Pe rsonnel

Administration and Management ; Mary C. Niles has described the functions of middle management in

the following words : “Middle management acts with and under top management to accomplish the

following broad objectives of administration.

(a) To run the details of the organisation, leaving the top officers as free as possible for their

other responsibilities.

(b) To co-operate in ensuring smooth functioning of the organisation.

(c) To understand the ineterlocking of departments in major policies.

(d) To achieve the co-ordination between the different parts of the

organisation.

(e) To build up a contented and efficient staff where reward is given according to capacity and merit and not according to change or length of service.

(f) To develop leader for the future by broad training and experience.

(g) To build up a team spirit in all the person working to provide a product or service wanted

by others.

All the above functions can be generalised in the follwing four important functions of middlemanagement.

i) To execute various functions in accordance with the policies, directions and guidance of

the top management.

ii) To work in making a smooth functioning organisation.

iii) To achieve co-ordination between different parts of the organisation.

iv) To promote team spirit in the organisation.4) Lower level of Management :There are people in any organisation who are entrusted

with the job of supervising the functioning of operative staff. Such people form lower level management.Foremen are the officials manning this level of management. Foreman have direct supervision over the

working force in office, factory, sales or other areas of activity of the concern. Lower or supervisory

management is directly concerned with the supervision and control of the performance of operative or

rank and file employees. Supervisory personnel perform those jobs which typically involve immediateand continuing contact with operative workers. Lower level managers are more concerned with directon and control functions of management. They devote more time on supervision of various jobs than onot her ma nagement functions.

In general, the following are the important functions of lower i.e. supervisory management:

a) To supervise and guide the subordinates.

b) To plan and organise the activities of the group.c) To arrange for necessary materials, machines, tools etc. for workers and to provide them

necessary working environment.



d) To provide training to the workers.

e) To solve problems of workers.

f) To communicate workers, problems to the higher level of management.g) To maintain discipline among workers.

h) To maintain good human relation in the organisation.

A dministration, Management and Organisation are distinct functionsWhilst there is general agreement in the meaning of the word ‘business’ there is considerable

confusion in the use of the words admininstration, management and organisation. These words are

use by different people as if they are all synonymous. We shall study how these three terms are usedin different senses by different authors.

According to one school of though - administration is a top level function which centres round

the determination of major policies and objectives of a business enterprise, while ‘Management’ is alower level function which relates to the implementation of the policies and directing operations to

attain the objectives laid down by administration.

In support of the concept the following authorities may be quoted.

1) According to W. R. Spriegel “Administration is that phase of a business enterprise that

concerns itself with the overall determination of institutional objectives and the policiesnecessary to be followed in achieving those objectives. Administration predetermines the

specific goal and lays down the broad areas within which those goals are to be attained. Administration is a determination function, management on the other hand, is an executive

function which is primarily concerned with carrying out the broad policies laid down bythe administration.

2) Mr. J. N. Schulze in a paper read at the Taylor society and published in the Bulletin of that

societ y for August 1919, has di fferentiated between administ ration, management and

organisation in the following words.

Administration is the force which lays down the object. Function of an organisation and its

management are to strive for implementing broad policies under which they are to operate.

Management is t he force which lea ds, gui des and di rects an orga nisat ion in t he

accomplishment of the predetermined object. An organisation is the combination of thenecessary human beings, materials, tools, equipment, working space and apprentieas brought

together in systematic and effective correlation, to accomplish some desired object’’.

3) According to F. J. Wright “Administration is the implementation of policy, the coordination

of all the factors of production in accordance with the general direction laid down by thoseresponsible for the formulation of the policy. In his opinion, ‘Management comprises those

functions which are involved in the carrying out of the decisions of the administration. And

as such management is subordinate to administration. The former executes and implementsthe decisions of the later.

4) According to Ordway Tead “the distinction between administration and management is as follows, - Administration is the process and agency which is responsible for the determination

of the aims for which an organisation and its management are to operate and which gives general oversight to the continuing effectiveness of the total operat ion in reaching the

objectives sought”.



He goes on to say that “Management is the process and agency which directs and guides

the operations in an organisation in realisation of established aims”.

5) Oliver Sheldon was perhaps the first scholar to made a distinction between managementand administration. He has beautifully summarised the difference between the three terms

in the following words.

Administration is the function in industry concerned in the determination of the corporate

policy, the co-ordination of finance, producti on and distribution, the settl ement of the

compass of the organisation and the ultimate control of the executive. “

“Management proper is the function in industry concerned in t he execution of policy,

within the limits set up by the administration and the employment of the organisation for

the particular objects set before.”

“Organisation is the process of so combining the work which individuals or groups have to

perform with the facilities necessary for its execution ; systematic, positive and co-ordinatedapplication of the available effort.”

“Organisation is the formation is an effective machine, Management is an effective direction.

Administration determines the organisation, management uses it. Administration defines

the goals. Management strives towards it. Organisation is the macnine of management inits achievement of the ends determined by administration.”

6) Similarly G.F. Milward has distinguished the three words as below, Administration is primarily

the process and the agency used to establish the object or purpose which an undertaking

and its staff are to achieve, Secondly administration has to plan and to stabilise the broad

lines or principles on which will go on the action. These broad lines are in their turn usually

called policies. Management is the process and the agency through which the execution o policy so planned and supervised. Organisation is the process of dividing work into convenient

tasks or duties or grouping such duties in the form of posts of delegating authority to each

post and of appointing qualified staff to be responsible that t he work is ca rried out as

planned.

After studying the above views and opinions, the distinction between administration and

management stands as follows :

Basis oDistinction Administration Management

1.Managerial It is a top level Management. It is a middle or lower level of level. Personnel of the top level of management.

like the ownership or the Personnel below the top level Board of Directors are like General Manager or incharge of it. Managing Director are

incharge of it. 2. Illustrations Personnel are designated as Personnel are designated as

Administrators : Managers, General Manager Collector, Commissioner of the company Vice-chancellor Managing Director of a com-Registrar, Minister, pany Director of Personnel chief Justice etc. Administration Deptt. etc.



3. Main Functions Planning & organising are Motivating & controlling the main functions. are the main functions.

4. Policy Administration is concerned Management is concerned Determination with policy making. It deter- with the implimentation of the

mines the goals or the target policy. It has no direct conto be achieved. cern with goal or target

fixation.

5. Implimentation Administration is not direct- Implemintation of policiesof policies. ly concerned with the framed by administration is

implimentation of policies. the main task of management.

6. Determinative Its functions are legislative Its functions are executive &vs. Executive. & largely determinative. largely governing.

7. Direction of It is not actively concerned It is mainly concerned withhuman efforts. with the direction of human the direction of human

efforts in the execution of efforts in the execution of thethe plan or policy. plan and policy.

8. Administrative It needs administrative Management requires vs rather than technical technical ability more thanTechnicality. ability. administrative ability.

9. Coordination Administration coordinates It uses organisation for theand control. finance, production and achievement of the targets

distribution.It frames the fixed by administration.organisation structure andexercises control over theenterprise.

10. Men -boss Administration is the master Management is the employee

Relation of industry which provides of administration, it gets sal-the various agents of produ- ary or a part of the profit in ction and in lieu of this lieu of its services.service earns profit.

11. Expansion of Its functions expand at the Its function contract at thefunctions. upper level and decrease in upper level and expand at the

importance at the lower lower levels.levels.

12. Govt. vs. The term administration is Management is mostly usedPrivate sector used mostly in Government in the business or industrial

or public sector. sector.



TOP LEVEL M ANAGEM ENT

(Determinative LOWER LEVEL OFfunction M ANAGEM ENT

( Doing executory Thinking function )functions ) 1. Board of Directors1. Supervisory 2. Chief Executives.management.3. General Manager.2. Sectional officers 4. Managing Director

ADMINISTRATION 3. Foremen etc.

From the above figure it becomes clear that Administration is the top of level of management. The principal task of administration is to determine the specific goals and lay down the broad areas withinwhich goals are to be achieved. It determines plans, policies, frames programmes, prepared budgets,

broad objectives. Therefore administration is called determinative function within an enterprise and isthe primary responsibility of top management. Administration frames the polocies and makes thenecessary adjustments. W hatever decisions are taken, by no means are final, as requirements of adynamic society must be met by constant adjustments.

Policies provide an objective and management provides the action to get things done. Management is the executive functions that concerns itself with the carrying out of the administrative policies laiddown by administration. Management directs the active operations within the enterprise and combinesthe work of the employees with the available capital, equipment and materials to produce an acceptable

product. Managment also markets the product or service according to the broad policies established by administration. According to Breach “Management is a social process entailing responsibility for the effective and economical planning and regulation of the operations of an enterprise in fulfilment o a given purpose or task. Administration is the part of management which is conceren with the installationand carrying out of the procedures by which the programme is laid down and communicated and the

progress of activities is regulated and checked against plans. Thus Beach conceived administration asa part of management .

Kimball and kimball also subscribed to this view According to them administration is a part o

management. “Administration is concernd with the actual work of executing or carrying out theobjectives. It embraces such functions as issuing orders concerning the work to be done. seeing thatthe personnel are fit for work and trained to operate efficiently and carrying on, in general, the every day routine necessary to ensure that men, materials and equipment are functioning properly towardsthe desired end.

Thus upper and top level of management may be termed as “Administrative level of management.making administration as part of management. In modern era bi g companies and corporations arecoming up. Their shareholders simply provide money and the total activity of these is managed byBoard of directors. This is a part of management. Thus administration is a part of management.

OrganinsationAn organisati on is a set of people working together to achieve certain common objectives.

Organisation is the framework or medium of exercise managerial functions. Management is an effectiveexecution. Administration devises the organisation and management uses the organisation. Administration

defines goals and management tries its best to achieve those goals. Organisation is the machine to beused by management to discharge managerial functions to accomplish the set goals.

Organisation is the process of so combining the work which individuals or groups have to perform



with the faculties necessary of its execution that the duties, so formed, provides the best channels for the efficient, systematic, positive and co-ordinated application of the available effort.

Some people consider organisation as synonymous to management. But this is a wrong notionas organisation is simply a funciton of management like planning. directing and controlling.It is throughorganising that the management brings together various resources required for the achievement o

enterprise goals. Organisation involves the establishement of an international structure of roles throughdetermination and enumaration of the activities required to achieve the goals of the enterprise. Groupingof these activities and assignment of such groups of activities to the managers, delegation of authorityto carry out and provision for coordination of authority relationship horizontally and vertically is theorganisation structure.

Thus the terms mangement and organisation may be differentiated as under

Management Organisation

1. Management is an executive function Organisation is an organic function owhich is prima ri ly concerned wit h putting together different parts of angetting the things done with others. enterprise into working order.

2. Pl anning or ga ni s ati on, s t affi ng, Organisation is one of the important

motivation, direction, co-ordination and functions of management.control are all functions of management.

3. Management functions are executed by Organisati on i s the framework o bringing into being an organisation. management.

4. It is like entire body of a human being. It is li ke the nervous system of ahuman body.

5. There are different levels in management There is no such level in organisation.viz, top m iddl e, l ower level omanagement etc.

Organis ati on is the m achine of 6. Management uses the organisati onmanagement in its achievement of thedetermined by administration.ends determined by administration.

Administration and Management are synonymous :Some experts say that there is no distinction between administration and management. The

third opinion which has gained wide a cceptance is that there is no distinction between the terms

management and administration. The term management is used for higher executive functions likedetermination of policies, planning, organising, directing, and controlling in the business circles, while

the term administration is ued for the same set of functions in the govrnment circles. So there is nodiference in these terms and they are often used interchangeably.

Thus, there is another school of thought according to which a dministration and management

are synonymous, these are interchangeable terms. In the words of Mr. Henry Fayol, “ All undertakingsrequire planning, organising, command, co-ordination and control and in order to function properly, all must observe the same general principle. We are no longer confronted with several administrative

science, but with one which can be applied equally well to public and private affairs. William Newman,too, seems not to distinguish between these terms. He defines administration as “the guidance, leadershipand control of the efforts of a group of individuals towards some common goal.” I perform a actual



practice some people may perform all the functions of administration as also management. For instanceGeneral Manager / Managing Director of a big company is found to take active part both in administration

and in management. As well as many lower executives are asked to determine policies and to executethem. In fact, executives at all levels perform both the functions, through in varying degrees. Middleexecutives have to be associated with policy-making and in the determination of the broad objectives

though on a limited scale, whereas top executives, besides initating policy decisions have often toguide a nd direct managerial functions at middle and lower l evels. Thus there i s no exact line of demarcation betwen the functions of thinking and doing or determinative and executive. According to

The Haimann also “No two separate sets of personnel are required, however to discharge administrativeand managerial functions. Every Manager performs both the functions like administrative and managerial.All Managers working at any level perform the same functions.

For solving the problem of terminology some expressed their views in this matter.

The British management expert E.F.L. Brech, has made an attempt in solving the problem oterminology. From his point of view ‘ Management is a comprehensive genetic function embracing theentire process of planning, policy making co-ordination of activities, maintaining morale and disciplineas well as controlling the operations so as to attain the best possible results. He has divided the

management function into two categories ;-

1) Administrative management2) Operative management

Administrative management is directly concerned with policy making, preparing the plans,det ermini ng the object ives, fixing the standards as wel l as eval uating the performance against

predetermined standards or targets. On the other hand, operative management is concerned with theactual execution of the plans, policies, by effective and efficient utilisation of men, materials. machinesmoney and equipments, as well as running the day-to-day affairs of the business concern in a very smooth way with a minimum cost. This view has been advocated among others by E.F. Breach, one

of the eminent management expert. According to him administration is that funciton of an industrywhich is concerned with the installation and carrying out of the processes by which the programme islaid down and the progress of activities is regulated and checked against plans.

To conclude, it may be observed that top or upper level management may be designated as

administrat ive management and the lower level management as operative management. Bot h theadministraive and the managerial function must balanced properly, if the business is to grow properly

and be able to meet changing conditions. The science of Business Administration and Management hasgradually evolved with growth of Trade, Commerce and industry. Today business administration and

management is emerging as the directing force of industry and is gradually becoming a profession.Administration and management are two sides of the same coin. Both are essential for effective and

profitable running of an organisation.

DEVELOPMENT OF MANAGEMENT A NDMANAGEMENT THOUGHT

Introduction :

The origin of Management is as old as mankind. The co-ordination of human and material

resources has been a concern of man ever since he started living in groups. History reveals that strongmen organised the masses into groups according to their intelligence, physical, mental capabilities. Inthis sense management took the form of leadership which was essential to co-ordinate the efforts of the group members in order to arrange the necessaries of life. Management as a systematic field o



study is a product of the early 20th century. The 20th century is marked in history as the era of scientific ma nagement. The growth of modern management techniques began with t he indust rial

revolution in England during the 18th and 19th centuries. A series of invensions were made by thescientist like Hargreaves, Arkwright, Crompton Kay and Cart Wright etc. They led to production onlarge scale and introduction of division of labour. The factory system of production started facing the

problem of achieving good human relations. To meet the challenges of management several managementthinkers such as Fredrick Taylor, Henry Fayol, Elton Mayo, Peter Drucker, Abraham Maslow, Frank and Lillian Gilbreth, Henry Gantt, Harrington Emerson, Mary Parker Foliet, Frank Bunker Gilbreth etc.

contributed to the development of management through during the 18th and 19th century. They triedto achieve better utilisation of human resources and effective, efficient management of factories. The

present position is therefore, best appreciated and understood in the light of its evolut ion over theyears.Much of the development in this field has taken place during the last 100 years. A number o

management thinkers have written books to convey their ideas about management of an organisation.There was no uniformity in their views. Because of the divergent directions of management thought,,

Harold Koontz called it, as the “Management Theory Jungle”. From the brief historical survey severalthings become clear, that the management is ancient art and was initially of interest to political thinkers.

The industrial revolution was oriented with the factory and mechanical production. The problem omanagement and administration was emerged. Therefore it is observed that the prior to the begining of

he 20th centurey the essential elements were present for the emergence of syst ematic managementthought.

The time period in which different concepts management have developed may be divided into

five parts :

1) Pre-scientific Management Era-Before 1880

2) Scientific Management Era-1880-1930

3) Human Relations Era-1930-1950

4) Social Sciences Era- 1950-onward

5) Management Science Era- 1950 - onward

The above mentioned periods are only suggestive, they are not exact. It shows only the dominance

of a management thought on particular time period.

Various Schools of Management Thought : In different time periods as mentioned earlier different schools of thought emerged. Because of divergent directions of management thought Prof. Harold Koontz rightly called it “The Management Theory Jungle”. The schools of management thoughtcan be classified as under :

The following are the various approaches of the management

1) Scientific Management

2) Functional or administration Management

3) Human relations approach Management

4) Behaviour science approach to Management

5) Quantitative approach to Management

6) Systems approach to Management

7) Contingency approach to Management

To sum up, it is evident that introduction of the factory system and the emergence of large



industrial organisation in society only are not the adequate reasons for the development of managementthought. The development of management theory on a systematic basis began in the highly industrialised20th century and contribution were made by theoreticians and practitioner in England, Europe, USAand other countries. In England and Europe this development was in response to top management and

scholars.

The management theory Jungle has identified six major schools of management.1) The Management Process School

2) The Empirical School

3) The Human Behaviour School

4) The Social System School

5) The Decision Theory School

6) The Mathematical School

They are described as below.:-

1) The Management Proce ss School : This school is devel oped during the scientific

management era. “F.W. Taylor” is regarded as the father of scientific management. Frederick Tayl or and Henry Fayol were the founders of the Management process school. They

perceived the management theory as a process of getting things done through and with people in a business organisation. The management process was considered to be universal

irrespective of the type of enterprise.

2) Empirical school : Earnest Dale was the founder of this school. It was started around1952. This school is based on the premise that management problems could be solved in a

better way depending on the experiences of the managers. Dale emphasised on experiencesrather than general principles of management as believed by F.W. Taylor and Henry Fayol,founders of the management process school. The empirical school belived in experienceand research. But too much reliance on experiences of managers is also not useful in

changing circumstances.

3) The Human Behaviour school : Elton Mayo was the founder of this school. This schoolwas started during 1930. According to Mayo the study of management mut be interpersonal

relationship oriented. It must concentrate on “people” as a part of management. Themanageres in different organinsation recognise that worker’s performance is related to

psychological, sociological and physical factors.

4) The social system school : Chester Barnard is the father of the social system school. It is closely related to human relation school. This school is developed during social sciences

era. It consists of all the management researchers and thinkers who look upon managementas a social system.

5) The Decision theory school : The Decision theory school was developed during themanagement science era. The decision theory emphasised on rational approach to decision

i.e. it is a selection of a possible alternative course of action or of an idea.

6) The Mathematical school : It is observed that the mathematics is a tool and it is equally

useful of managers as well as like scientists and engineers. But it is not a substitute for

management. This school emphasizes that the organisation or decision making is a logical process and it can be expressed in terms if mathematical symbols and relationships.



DEVELOPMENT STAGES OF MANA GEMEN T THOUGHT IN A PERSPECTIVE TIME

Application of management knowledge is as old as human civi lisat ion but developments omanagement thought and theory is relatively of recent origin. It was only from the begining of the 20th century that serious efforts were made to develope this field as a separate discipline. In the past few

decades, ma nagement knowledge ha s undergone radical changes.There have been substantialcontributions to management theory by scholars from different fields including psychology, sociology,

anthropology, mathematics, economics and political science. Development of management thought ina time perspective can be divided into four stages namely :-

1) The scientific management stage.

2) The organisational stage.

3) The management process stage.

4) The general management theory stage.

1) The scientific management stage : It is based on the assumption that the objectives of an

organisation may vary from one to another but the management of all organisation requires similar management processes. It has its roots in the basic concept of division of labour and specialisation and

consists mainly of scientific management developed by F.W. Taylor administrative theory of management

by Henry Fayol and Bureaucratic organisation by Max Weber. F.W.Taylor and others, the pioneers of management thought, began to be concerned with a desire to make intelligent use of human effort andto produce maximum output with minimum effort. It can be done by separating wastages and in

efficiency from human work at the operative level. This stage concerned with setting work sandards, pre-planning of the work, using control devices intelligent use of human effort, increasing the operational

efficiency of workers by solving their work related problems, minimising in efficiency and wastage,improving their relation with management and developing a best way of doing things. During the1920’s the conceptual approach was modified to include management reaserch and cooperation betweenmanagers and workers. Functional and like type of organisation structures began to develop with the

need for speci alisation of the management function and the work functions. Taylor suggested thatincentives should be directly linked with producti vity. The woker producing more should be given

higher wages. For this purpose he devised differential piece rate plan which implies different rates of

wages for different levels of efficiency of workers. This provides motivation to the workers. F.W.Taylor and Henry Fayol have given greatest contributions in the scientific management stage.

2) The organisational stage : The organisational stage during the 1930’s was more concentrated on the organisation structure for carrying out managerial function as well as assignments. Administration

is a representation of the owner’s point of view, seperated form the management, who are not theowners of the business organisation. Administration was separated from management. Administration

was mainly concerned with policy formulation, organisation structure, preparing the overall plans,

taking the important overall decisions of the business organisation. They were mainly concerned withdetermination or thinking functions. Management , on the other hand, was mainly concerned wi th

with execution of poli cies, plans, decisions et c. taken by the administation. Management was themechanism for carrying out the work assignments throughout the structure. They were responsiblefor proper work performance withi n the organisation struct ure. Both the concepts were later on

modified by some authourities into administrative management and operative management. The former was related with general overall management of the enterprise and the later was concerned with the

operative functions.



3) The management process stage : During the 1940’s stress was placed on the process omanaging. This stage emphasised on planning and organising. The concept of management process

was highly developed during the period of 1940’s , moreover more st ress was given on setting theclear cut, precise, specific objectives or goals, formulation of policies organising and staffing to put

plans into operation, directing and motivating people at work, to carry out activites in the light of the

pre-plans and standards. The management process consists of planning organising, directing, staffingand moti vating. functions. These managerial functions were made more effective by stress on thecrystalizing of objectives towards which all the activities were directed.

4) The general Management theory stage : The process of managi ng was affected by

technol ogy, communication, transport, information technology, devel opment and others ha s greatimpact on it. A strong system of engineering flavour has evolved in recent years because of these

technological advances and also due to contributions made by Operation Research from the defenceforces, particularly based on the experience in world war II. As a result of this the managementconcept could be synthesized into a conceptual framwork for a general management theory. Variousschools of management thought began to evolve the general management theory.

DEVELOPMENT OF MANAGEMENT THOUGHTCLASSICAL AND NEO-CLASSICAL SYSTEMS

Management knowledge is as old as human civilisation. But mangement is one of the important branch of social sciences is of a recent origin. Development of management thought and theory is of

a recent origin. In the earlier days there was a jungle of management knowledge and people used it in their own way. It is only after the industrial revolution in the 19th century attempts were made to study

management knowledge systematically.The tremandous changes due to indusrial revolution in industrial business world forced managemnt thinkers, scholars and executives to adopt a systematic approachto management. It was only from the beginning of the 20th century that serious efforts were made to develop management field as a separate discipline.

It was only from the beginning of the 20th century that serious efforts were made to develop the

management as a separte discipline. The scholars from different fields and the scholars from phychology,sociology, anthropology, mathematics, economics and political science have geen given substantial

contributions to management theory and management is categorised as an inter-disciplinary approach.

In the past few decades management knowledge has undergone radical changes. In the 20th century a study of development in management helps to undrstand the basic nature and history of modern management.

Prior to industrial revolution the management was in crude form an after the indutrial revolution

in England in middle of the 18th century only its development started in its true sense. The developmentof management thought can be broadly calssified into threee stages as under :

I) Classical or Traditional Management ApproachII) Behavioural / Neo-classical /Human Relation ApproachIII) Modern Approach to Management

I) Classical or Traditional Management Approach

The origin of Management can be traced back to the days when man started living in groups.

The classical or traditional approach to management is one of the oldest and most popular process.This approach based on the assumption that the objective of an organisation may very from one to

another but the management of all the oraganisation is same, in other words, “Management is a



universal process irresepective of the nature. objective and type of the organisation. It has its roots inthe basic concepts of division of labour and specialisation. It has in the second half of the 18th century

a serious thought was given to the mangement of the industry and business. The contributions given by F.W.Taylor. Henri Fayol, James Watt, Boulten, Robert Owen and Charles Babbage. Max webber found significant in those days.

A systematic approach to the study of management started only during the second half of the19th century. History reveals the existence of mangement in the Egyptian, China, Greeks, Roman, and

in Indian ancient literature such as Vedas Upanisahds, Ramayana and Mahabharata in some or the other form. In the earlier days Kautilyas literature consists of very valuable thoughts on the management o

economic, political and social institutions in anciant India.

Several management scholars, thinkers have propounded their ideas about how the organisationsshould be managed efficiently.

Scientific Management :Fredrick Winslow Taylor is regarded as the, “ father of ModernManagement Science ” has given a concrete shape to the theory of scientific management. Though thecontribution have been made by various scholars and practitioners Taylors cont ribution provide

significant. He has started his carrer as a mechanic in the Midvale Steel Works in Philadelphia (USA)in 1878 and rose to the position of Chief Engineer in 1884 in Bethleham Steel Company, USA and is

known as, “father of Scientific Management ” He was the most infulential of management pioneersknown as a classist in management theory, he dealt primarilly with formal organisations. Taylors most

widely recongised contrubution was his application of scientific methods to the solution of factory problems. He aims at increasing the operational efficiency of workers by solving their work related

problems, reducing wastage, increasing efficiency, improving labour management relations, developing best way of doing things. He stressed in scientific way of doing things in physical work situation at the

shop floor level and he has expressed the basic philosophy of scientific management in the following

terms. :Science not Rule of Thumb :According to Taylor, a manager has to adopt scientific attitude

while solving organisational problems and making decisions. The rule of Thumb or hit or miss approach

should be replaced . In other words develop a science for each el ement of a man’s work whichreplaces the old “rule of Thumb method.

Harmony / Co-ordination not Discord :Taylor said all departments and workers are a part of an organisation. There must be complete harmony of coordination in their functioning, avoid any

kind of conflicts clash or disagreement, If it arises try to keep it to a minimum.

Co-operation not Individualism :Taylor emphasis on the importance of competition instead

of individualism. For the attainment of the organi sational objectives co-operative group efforts aremost important It is possible not only by a dynamic and effective. leadership of a manager but it

equally requires the whole hearted co-operation and commitment of all the employees.

Maximum, not re stricted Productivity :The policy / decision of restricted productivi ty

should be treated as outdated one. Taylor belived in maximum productivity which is economical, per

unit cost of production will be minimum.

Development of Employees :According to F. W. Taylor for the well being and prosperity of

individual workers and the organisations. it is necessary to give scientific training to the workforce

and develop their potential abilities which ultimately improve their thinking.Taylor has developed guide lines to the practice of management which was based on his own

experience at the shop floor mentioned as under.



Scientific Study and Planning of Work :(Time and Motion study) Taylor has suggested that every work should be scientifically studied and should be planned before its assignment to the concerning

work. it is necessary to determine, the da ys fair work means, Standard work for each worker. Thework study should be done on its various aspects such as time, speed, fatigue, work and motion studyall this will give clear-cut and precise idea to the worker what is to be done? and How it can be done?

Scientific Selection Training and Placement of the Workers :Taylor realised that selection of workers should be made on the scientific methods by tallying job requirements with abilities and

skills of the workers. They should be placed on the basis of capability and aptitude. Moreover scientifictraining should be imparted to workers for developing their existing level of knowledge and potential.All These ultimately converted into building a team of efficient workers.

Standardisation of Tools and Equipment :A worker needs not only machines but tools and

equipments also. Taylor suggested there should be standardisation of tools, equipments and raw materials

used by workers and physical working conditions provided to them. If they are substandard maydirectly affect level of efficiency of workers.

Division of Work :Taylor advocated the two aspects of planning , one is “thinking” and other is “doing”, should be separated, planning of the work that is, “thinking responsibility” should beentrusted to the manager and “doing responsibility” should be entrusted to workers. He stressed anequal division of work management and the workmen. In this way benefit of division of labour and

specialisation may be secured.

Functional Foremanship : Taylor has introduced and pract ised the concept of functionalforemanship. It means instead of having one foreman as an incharge for production department all

activities should be grouped into two groups namely planning forum and workshop. Each forum

should have four supervisors to command over the activities of workers.. Each worker will get ordersand instructions from eight supervisors dealing with various aspects of his j ob such as route clerk instruction card clerk , time and cost clerk , shop disciplinari an, gang boss speed boss. Inspector/ inspection boss, Repai res boss/ Maintenance boss etc. The foremen should be expert in entrusted aspects of the job.

Mental Revolution : According to Taylor, mental revolution has the power of bringing drasticchanges among the workers attitude and behavioural patter towards their work, fellow workers,duties and employers. There should be complete mental revolution on the part of workers as well as

management. Similar kind of changes in outlook should be take place amoung managers towards theworkers and solve problems and difficulties while performing on the job. In order to get desired

results of scientific management, similar kind of change in the mental attitude of workers and managersis must, he has suggested workers participation in management, sharing of surplus as bonus.

Wage Incentives (Differential Piece Rate) : Taylor suggested that incentives should be directly

li nked with productivity he stressed on differential piece rate system of wages. This system oremuneration gives justice to more skillful and efficient workers. Higher wages are paid to workerswho perform the job in standard time. The workers producing more, should be given higher wages.This differential piece rate plan, implies different rates of wages for different levels of efficiency oworker s.

Criticism : F.W. Taylors, contribution for developing the approach of scientific management was very significant and was accepted all the world but it was criticised on the following grounds.

1) Taylor used the word, ‘Scientific before Management’ was objected simply because scientificmanagement is nothing but a scientific approach to management and not more than that.

2. It was strongly criticised that the principles of scientific management as advocated by Taylor is



mostly applicable to producing the mana gers, the other aspects of management like finance,marketing, accounting, and personnel were ingnored by him.

3. His contribution was also criticised for his unrealistic assuption that workers veing ‘economicman’ are having only economic needs may be most important and influence their working behaviour

but their other needs such as social and psychological etc. effecting their working behaviour can

not be ruled out completely.4. The scientific management techniques have considered the workers only as a factor of production

and not more than. have dehumanised the workers.

5. The concept of functional foremanship he advocated to bring specialisation in the organisation but in actual practice is not feasible because as it violates the principle of unity of command.

6. He advocated close supervision and control of workers to get maximum contribution and higher producti vity from them, this practice has limited use,self control, and supportive supervision

have proved more affective.

7. According to Trade Unionist the scientific management i s a means of exploiting the workers

because their wages are not increased in direct proportion to production increases.

Thus the F.W. Taylor’s cont ribution reveals the philosophy of scientific management and its

principles have considerable influence on modern management theory and practice. Most of the modernmanagement approaches is based on Taylor’s philosophy of scientific management. Despite this criticismthe techniques advocated by Taylor were further refined by his followers like Gatt, Frank, Lillian and

Emerson.

AD MINISTRATIVE THEORY MANA GEMENT

Administrative theory of mangement is based on the contribution of Henry Fayol, Max, Webber,Sheldon, Mooey, Allen and Urwick etc. But its major part is related to Henry Fayol’s work. He was

born in 1841 and was a French mining engineer in 1860 and became Managing Director of the samecompany in1880. He believed that manager’s job could be divided into five functions namely planning

organising, command, co-ordination and control and these functions have to be performed by everymanager, Fayol, wrote a Paper title General and Industrial Management published in 1916 It is in four

parts. Its first part deals with classification of business activities into six parts that is Technical,

Commercial, Financial, Security, Accounting and Managerial.

Its second part deals with the basic functions of management that is planning and forecasting,organising, commanding,co-ordinating and controlling.

Contribution of Henry Fayol : Henry Fayol was a mining engineer basically, but finally herose to the position of chief executive. Though he belong to the same period that of Taylor he completed

his studies in France. He stated that the principle of administration remain the same every where andthus he advocated “teaching of management science ” which could become universal phenomenon.

He, through his experience, divided entire activities of an organisation in six categories :-

1) Technical ( Production and adaptation )

2) Commercial ( Buying and Selling )

3) Financial ( Capital and its use )

4) Security ( Protection of property and person )5) Accounting ( Financial as well as cost )

6) Managerial ( Planning, organisation, control, co-ordination etc.)



Today even after 75 years of his death we find that these areas a re of utmost importance.Therefore specialisation in any of the above areas becomes essential for today’s professional managers.

Mr. Fayol, in his days onl y, stated that management is a process compri sing of planning,

organisation, command, coordination and control. Today’s management science added some more steps to this process. This process, according to him, is based on following 14 principles.

1) Division of work - This lays importance to specialisation.

2) Authority and Responsibility - These should go hand in hand.

3) Discipline - This is obedience, application, energy and respect. Managers should see that discipline is maintained and punish the breakers.

4) Unity of command - Orders should be given by one authority of respective activity.

5) Uni ty of direction - Functi ons of the personnel should be direct ed properly. Specific

procedure for every activity, by personnel, should be laid down.

6) Scalar chain - This is related to hierarchy of authority for the purose of communication. If quick communication is required at times, the principle of ‘Gang plank’ i.e. Direct contact may be

resorted to. But the chain should not be disturbed.

7) General interest -should be supreme and individual interest should be subordinate.

8) Remuneration - It should be fair and satisfactory, commensurate to the services rendered.

9) Centralisation - Fayol did not favour either complete centralisation or decentralisation. He

advocated a balance in these.

10) Order - Everything should remain in the place provided for it and should not break the order

as to where it should be.

11) Equity - It is a combination of justice and kindness. This ensures devotion and loyalty fromthe workers.

12) Stability - Reasonable security of job makes the worker accustomed to the job.

13) Initiative - The workers be allowed to propose their plan and line of action in performingob but this should be within the limits of authority. At times, if the proposals given by them are nice,

they may be allowed to execute.

14) Spirit-de - corps - This is a term-spirit synonym.

Contribution of Peter F. Drucker :Peter Drucker was a Professor of Management in the New York University. He was a “Management

consultant”. He researched upon various facts of management and wrote a number of research papers

and authored some management books. His contribution in managementscience is of prime significance. The following are the books authorised by him.

1. The practice of Management.

2. The end of Economic Man.

3. The Future of Industrial Man.

4. The concept of Corporation.

5. The New society.

6. Economic Tasks and Risk-taking decisions.

7. The Landmarks of Tomorrow and Managing for results.



Peter Drucker emphasised on the following ideas:

1. He opined that bureaucratic management is unable to boost up production, therefore it is not a boon but curse to Management.

2. He strongly believed that Management must have professional base.

3. He opined that management must be creative and innovative which can easily adopt to

change.

4. He believed that management is a distinct type of discipline.

5. According to Peter Drucker, management should define the clear cut task and objectives

for each member and the group.

6. He said information generation and dissemination should be done continuously, so thatemployees will be well informed and can give better output and results.

7. Drucker advocated that for enhanced morale and motivation of the employees adopt the

devices like self control and decentralised decision making process ultimately resulted into higher productivity and efficiency.

8. He advoc ated appklilcati on of management by objective (MBO) and participat uivemanagement. So that t here wi ll be least domi nance of the supervisorsd over t heir subordinates.

9. He believed that proper planning, setting of standards, the performance appraisal and highmorale and motivation are the important pillars of management.

10. According to Drucker departmentation should be done on the basis of products instead of on tasts or functions.

He was rationalist and possessed sophisticated ideas and views about management of businiessenterprises.

“Managing a business can not be a bureaucratic, an administrative or even a policy making job, it

must be a creative rather than adaptive task. Hence introducing innovation is an important task of amanager .” This is the gist of what a professor, managment consultant, a great management thinker

and legendary personality. Mr. Peter F. Drucker thinks about management. The term “Innovation used by him includes development of new ideas, combining them with old and existing, adaptation of ideasfrom other fields and to encourage other for innovation.

Drucker viewed management not as a science but as a ‘Practice.’ He viewed and considered it as a discipline having its own tools, techniques and approaches. In his opinion ‘Knowledge is the

foundation of modern organisation.’ All major tasks and activities are required to be undertaken and performed by organisations because of the fact that today’s society is a society of institutions.

He did not believe in total centralisation. He thought that decentralisation of functions in different

groups helps the management in devoting more to its functions. Secondly by such decentralisationresponsibilities are given to employees who actually perform the jobs. It further helps creating standardsand yardsticks to, measures the effectiveness in jobs. Drucker emphasises upon the competence in

Managers as they have to perform three tasks-

1) Setting specific goals and missions.2. Making the work productive and the worker achieving.3. Managing social impacts and social responsibilities.



MANAGEMENT BY OBJECTIVES (MBO)

Drucker’s major contribution to management is “MBO.” A method of implementing compatibleobjectives of all organisational levels is management by objectives ( MBO ) Today the expression MBOhas become very popular in view of its advantages. It is also described as ‘Result Management’ or

‘management by result.’ The thrust of MBO is on what must be accompli shed rather than how to

accomplish. It is aimed at increasing the effectiveness of managers by placing the responsibility oneach manager for achieving results for his part of the organisations activities. Thus objectives are set by ea ch manager either wit h pa rt icipat ion or consult ation or through t he top down approach.

Fundamental principal of MBO is mutual setting of objectives between each subourdinate and hissuperior. It allows the subordinates to make creative decisions on his own. The supervisor from

whom subordinate can seek assistance, is available for advice, counselling and direction. These objectivesare then used as standards for evaluating the performance of subordinates. Ideally, the process should

begin at the top of the organisational hierarchy. Following are the essentials of MBO.

1) The individuals and departmental objectives must be so devised that they get merged in

overall organisational objectives with a view to be achieved.

2) Objectives must be clearly defined and communicated.

3) Objectives must be reasonably attainable because of too high goals, objectives may not be

attained and may lead to frustration.4) Factors uncontrollable by an idividual must be considered while fixing the objectives for

the individual. Otherwise such factors may affect the achievement.

5) Objectives should be reviewed periodically for the necessary changes.

MBO has several advantages

1) Objectives provide a basis for planning and for development of other types of plans.

2) They result in a better appreciation of what the organisation tries to attempt to achieve and

give direction to the people working in the organisation.

3) As the objectives are predetermined and communicated all efforts are direct ed to their achievement. Naturally co-ordination gets established.

4) They assume the status of standards to control human effort throughout the organisation.

5) Predetermination of objectives and their communication along with directions serve as

motivation to workers to direct their energy for achievement.

6) Objectives give direction and force to management to look beyoud while establishing either short-term or long term objectives. They provide i ncentive to the managers to foreseeeventualities and plan to meet them. This, in turn, helps the organisation to march ahead on

the path of success.

7) It provides greater employee involvement and commitment . One works at ones best to

achieve self set goals.

8) Under MBO objectives are more realistic because they are set by those who have to carry

them out.

9) It provides greater scope for self control.

However, use of MBO is criticised for its time consuming nature and emphasis on short-termrather than long-term objectives. Mis-application of the technique may result in unnecessary increasein costs by way of introducing a useless administrative system. For MBO to be successful the underlying



philosophy must be fully appreciated, the common goals must be crystallised and a goal structureshould be established for the overall organisation as well as for each contributing unit. Conflicts

between personel and organisational goals should be eliminated. A systematic effort on the right lineshas to be made. If not, the technique should not be blamed for failure of management.

Nature of objectives

Determination of objective is an integral part of the planning process. Plans relate to future (immediate future) or during a specific period of future span. Thus objectives are also determined as(1) Intermediate or short-term and (2) long-term or “indistant future.”

Managerial objective is defined by Terry as - “ the intended goal which prescribed definite scope

and suggests direction to efforts of a manager.” It enable the physical and mental work to be directedtowards some goal or purpose thus stimulates action in the desired direction.

Objectives may thus be categoriesed as (A) Genera l or overall objectives and (B) Specificobjectives.

(A) General or Overall objectives

Overall objectives of the business are determined by top management such as the chairman, the board of directors, and the chief executive.These objectives are based on the following :

1) Nature of the business : Motive and method are two factors which can describe anyorganisation. In business organisa tion ‘Profit’ is a motive and ‘Sale Purchase’, ‘munufacture andsale’, ‘General service and sale’ are the methods to earn profit. A top executive must understand these

two, more specially the second i.e. method because it is “method” that describes the nature of anenterprise. This nature is further based on customer behaviour and need as well as paying capacity.

According to “Peter Drucker” what is our business can best be answered by looking at it from outsidei.e. from the view point of market and customer. Thus the top management which decides the method

i..e. nature must have a broad vision so that future opportunities are not missed.

2) Economic contribution : As seen in previous chapters business has to shoulder social

responsibilities. This entails supply of quality goods and services at moderate prices and suitable to theneeds of the society i.e. customers. If is done it serves as a contribution to the economic satisfactionof the customers i.e. the human constitutes basic foundation. Unless the business provides opportunities

for satisfaction of relevant human needs it cannot survive for long time.3) The survival objectives : Peter Drucker stresess that the survival of a business primarily

depends upon its ability t o cover the costs of staying in business such as costs of replacement.

obsolescence, uncertainty and market risks. The questions of survival depends on the financial strenghtof the company. The general business conditions as well as management ski ll . The economic and

political environment have a changing tendency. The organisation must continue its profitable existencedespite such changes. This survival. naturally, is the outcome of social satisfaction.

4) The growth objective : “Business should be a going concern” is the universal principle.

This “Going nature” provides opportunities for growth. Such a growth is essential for any business iit wants to stand in the competitive world. Without growing, the concern may not be able to stand to

the customers demands of product and / or services as t hey are constantly increasing. Growt h o business enables large scale production which, in turn, can be offered to customers at lower price.

Growth also, creates promotional opportunities for the employees. This increase their morale andenhances integrity.



Thus “Growth” assumes status of important objective which should, at times, be achieved atthe cost of immediate profits. This growth is, many times, affected by technological factors as well as

political considerations and geographical area.

But, in nut shell “Growth” is one of the most important objectives.

5) Profit objectives : It is human tendency and psychology to expect returns for his / her

investments. These returns are possible only if a surplus over all expenditure is earned. This surplus isa ‘profit.’ Thus objective of profit gathers prime importance. There is a differences in ‘earning profit’and ‘profi teering.’ Earning profi t is essential and thus it is a noble motto. But profiteering meanssqeezing t he consumers, taking a dvantage of their helplessness which, ma ny times, is artificiall y

created.

Unless profit is earned and ploughed in t he business, t he business can not grow. But then

“Growth” is important objective which can not be ignored. Naturally profit becomes important objectiveof any business concern. Most important thing regarding profit is that it should be moderate andreasonable. At no time it should be excessive.

There are charitable institutions who do not have profit motto. Their expenses are met fromdonations, grants, fees etc. As such when we talk about profit objective, we assume and all should

assume that it is “moderate and reasonable profit.” The same time one should not forget that profit andrate of dividend is an indicator of efficiency and profitability of an organisation.

6) Increasing productivity objective : Quantum of profit directly depends upon the turnover of business. The more the turnover the more is the profi t. This turnover is directl y affect ed by

production, which depends upon the productivity of the organisation. As we know that profit is a

surplus over expenditure and cost occupy major portion of expenditure, all other expenses can besubjected to conservation but cost can not be. Lowering the cost is essential but it is equally importantto see that reduction in cost is not by sacrificing the quality. Thus the only way available is increasingthe productivity. If the productivity is increased cost controls become easy to be implemented. As

such “Growth,” “profit” and “productivity” are inter- dependant and therefore, important.

7) Social obligations objectives : Every business organisation ha s to fulfil their soci al obligations. These obligations extend to smooth and adequate supply of products at reasonable price.

A reasonable, assured and regular return on investment by shareholders in the form of dividend isanother such obligation. Regular payment of Govt. taxes, repayment of loans and advances is obligatory

to any concern. Paying adequate and satisfactory wages and salaries to the employees of the organisationis also an important obligation. To fulfil all these social obligations an organisations has to earn sufficient

profits. Social obligation objective, thus, cannot be ignored.

B ) Specific objectivesIn addition to the above overall objectives more specific objectives must be evolved in each area

such as marketing, production and so on. For example, some of the specific objectives can be framed

by answering the following questions.

1) What is the nature of the goods or services to be produced by the company?

2) What is the extent of diversification into different groups of products that are desired to be

manufactured by the organisation ?

3) What is the extent of geographical area of market to be covered i.e. will it be local, national or inter-national ?



4) What is the type of the company’s customers i.e. whether public or industry or Governmentor a combination ?

These types of questions will have to be answered to arrive at more specific objectives. For

example in the area of marketing apart from the overall marketing objectives regarding (1) The naturesof the business (2) The extent of diversifications or (3) The minimum return desired on investment,

speci fic objectives should be envolved in the areas of product, pricing, distribution and promotion.These specific objectives then must be integrated into the overall company objectives.

Multiplicity of objectivesThus there is a large variety of business objectives. Drucker sets eight areas in which objectives

of performance and results have to be set namely :

1) Market standing2) Innovation

3) Productivity

4) Physical and financial resources

5) Profitability

6) Manager performance and developement

7) Worker performance and attitude and

8) Public responsibility

Drucker points out, real protest against the inclusion of the last three intangibles. The proper

selection and blending of appropriate objectives can alone set the business-ship on the right course o

continued profitable growth and increased contribution to society.

Charactertics of MBOThe broad features of MBO are as follows :

1) Management by objectives is a highly objective technique. It is not goal oriented in theordinary sense. The goals have to be set down in measurable or quantitative terms. AsDrucker puts it, objectives must be operational. They must be capable of being converted

into specific targets and specific assignment, and capable of becoming the basis, as well as the motivation, for work and achievement.

2) MBO represents a comprehensive and overall motto. It is not a piece-meal tool of personnel management or measuring performance, but an overall management policy, attitude and

technique.

3) MBO emphasises participative approach to management. The goals are determined bymanagers in consultation with their subordinates. MBO is not merely a meeting of minds,

but joint authourship of goals and their joint implementation.

4) MBO is performance-oriented. That is why, its other name is Management by Results.

According to Fred Luthans, this approach concentrates on ends rather than means and is diagnostic rather than punitive in character. The person or unit is evaluated according to

the results obtained.

5) MBO is not a soft approach. It is exacting and demanding. “Proper use of MBO requires

the administrator to clearly and identify poor performance as well as good performance

and take affirmative steps to improve performance.



MBO PROCESS Basic steps in MBO are discussed below -

1) Setting of objectives : The process of MBO revolves around the setting up of organisationalgoals and the goals of various divisions and sub divisions. The goals of individuals are derived from thedivisional or departmental goals. Major activities of every enterprise are divided on some basis o

departmentation. The managemnt must determine the objectives of every division. At this stage, thetop management should discuss the objectives with the divisional managers so that a statement o

agreed objectives may be evolved. Each department sets its long-range and short-range objectiveswith the approval of top management. This process of setting objectives is repeated at lower levels of management also. Objectives are set inveriable units at each level so that performance of every division,department and individual may be reviewed after the end of a particular period. Once this process isover each supervisor and his subordinates meet together to discuss and formulate the objectives to beachieved, how and why.

2) Developing action plan : As soon as the objectives and targets are set and apporved,

next step is to prepare aciton plan for their accomplishment. Both of them have, once again, to meet for the purpose.The meeting will lead them to key result analysis as goals are represented in terms of

results. The key result analysis should contain the following informantion.(a) Overall objectives for the subordinates.

(b) The key results that are to be achieved to fulfil individual’s objectives.

(c) Task priorities, long-term and short -term both, adherence to which is a must.

(d) The scope and extent of assistance that is expected from the superior and related departmental

managers as well as the assistance that is expected to be provided to other departments.

(e) Nature of informantion and reports expected to be received to carry out selfevaluation.

(f) The standards for performance evaluation.

3) Establishing check points : MBO ensures periodic meetings between, the superior andthe subordinate to review the progress towards the accompli shment of targets of the subordinat es.

The superior must establish check points or standards of performance for evaluating the progress othe subordinates. The standards should be defined quantitatively as far as possible and the subourdinates

must understand them clearly.4) Review of performance : While informal performance appraisal of a subordinate is done

by his immediate superior almost everyday, formal appraisal at periodic intervals is usually done once or twice a year. The design format of the Performance review Form will depend on the nature of the

enterprise. The performance of every individual is evaluated in terms of the standards and /or resultsclearly agreed to by the superior and the subodinates. Whenever MBO has been introduced, it has led

to greater satisfaction, more agreement , greater comfort and less tension and hostility between the superiours and the subordinates, Under MBO the superior valuates not the individual concerned, but

his performance. Moreover the performance review is aimed at assisting the subordinate to improvehis performance in the future. It also helps in setting fresh goals for the next period.

MER ITS OF MBO

MBO calls for regulating the entire process of managing in terms of meaningful specific andvariable at different levels of management. MBO is a comprehensive management planning and control

technique. It affects the ent ire organisational st ructure, culture and style. MBO moulds planning,

organising, directing and controlling in a number of ways. It stimulates meaningful action for better performance and higher accomplishment. The merits of MBO are discussd below.:-



1) Better planning : MBO involves setting of goals and targets through active participation of both superiors and subordinates. Such mutual goal setting improves goal clarity and results in realistic

plans to which the people become committed. MBO makes objectives clear and specific and planningis directed towards these objectives.

2) Better organisation : When the goals for each individual are reset under MBO there is a

considerable change in the job descriptions at various positions. This may call for a revision of theexisting organisation structure. The organisation charts and manuals should be suitably amended to

depict the changes brought by the introduction of management by objectives. The job descriptions of various jobs must define their objectives, responsibility and authority and the relationship with others,

positions in the organisation.

3) Self - control : MBO serves as a tool of organisation control. There is a greater sense o

identifacation by the management team wi th the objectives of the enterprise wherein controls arecalled as tools of “self control” rather than device to be used against them.

4) Higher productivity : There is a considerable improvement in productivity as managementteam concentrates on the important task of reducing costs and harnessing opportunities rather thanwasting energies on less important matter.

5) Better appraisal of performance : MBO provides an objective measuring instrument for

the evaluation of actual performance. The process of defining the expected results establishes accuratecriteria for appraisal of performance. Appraisal is result oriented. an individual himself can evaluate theresults of his own performance. Clear understanding of responsibilities or criteria of evaluation intensifiesaccountability. Performance appraisal can be done honestly by MBO.

6) Executive development : MBO emphasises long-term and comprehensive view point o

the executives. It calls for finding new methods to deal with emerging situations. Thus MBO is a toolof self development of the executives, that is the individual acquiring the knowledge and skills in the

ob as a by-pr oduct of his meeting performance requirements. Opportunities for learni ng a ndexperimenting naturally help executive development.

DEMERITS OR LIMITATIONS OF MBO1) Resistance to adopt MBO technique : Successful use MBO requires continuous education

and training of supervisors and others in its implication. The idea of MBO appears to be simple, But itrequires changes in traditional thinking and practices towards specialised functional classification,organisat ion structure, goal setti ng, t rait- oriented apprai sal etc. Above maj or a reas requiresuccessful.implementation of MBO and real hard work as well as patience on the part of managers.

Naturally it is resisted.

2) Poor planning : One of the major weakensses often seen in MBO is poor planning of the

programme prior to its implementation. Implimentors must be well-trained. They must know how toinvolve all levels of management and obtain their support.

3) Lack of traini ng : The superi ors, generally, l ack in training, which is required for implementing the programme. Actually the superiors have to sit together with their subordinates to

dictate the goals and targets and the time to achieve the same. to decide whether the goals are realisticor not . Proper training is, thus essentially required for both superiors and their subordinates.

4) Limited application : MBO technique is not appropriate for all levels and for everyone. Itshould be adopted only when both managers and subordinates agree and feel comfortable with itsapplication and are willing to participate in it. Managerial and professional employees generally demand

for its application.



5) Inflexibility ( Rigidity ) : MBO technique may tend to introduce rigidity in the organisation.Goals are basically set after every six months or a year. The superiors may not like to modify them in

between because of fear of resistance from the subordinates. There may arise a need of revise the goalat lower levels to achieve the long-range objectives of the enterprise. The manager must handle sucha situation properly.

6) Expensive process : MBO is, costly and time consuming process. MBO requires a greatdeal of rigorous analysis for which senior executives do not have sufficient time and patience. As wellas the setting and evaluation of objectives is done over such a short period that it man not be able to

provide for adequate interaction among all people in the organisation.

BUREAUCRATIC ORGANISATIONMax Webber a German social scientist had developed a bureaucratic model of organisation.

According to him it is a more efficient form of organisation simply because it aims at high degree o precision, efficiency, objectivity and rationality. This model is popular in government and mi litary

organisations. Division of labour, hierarchy of authority, rigidity in compliance with procedures and

frame work if rulers i mpersonality, technical competence are the important characteristics of thismodel.

Max Webber advocat ed that this model is the most rational ly efficient form of organisation

aimed at high degree of precision perfection and objectivity but it reduces subjective judgment, emotion,fear tactics and favouritism, simply because employees have impersonal and very formal relationship

and they have to observe a set of rules and procedures for doing the job. Moreover heirarchy of authority helps in maintaining discipline and controlling the activities of the employees. Division o

labour leads to specialisation and rationality makes decision making process more effective. The negativeaspect of this model is it is very slow, individuals needs are not considered, delay in decision making.

encourage red-tapism, goal displacement,lack of initiative and positive motivation all these may result in inefficient functioning of the organisation.

Administrative theory of management stressed on such principles and concept of management which are related to the structure of organisation. Most of t he principle are derived from military

organisation. This theory like scientific management also ignores human aspect in the management or organisation. In fact organisation is not merelly hierarchy of authority but it is more than that. Thismodel is based on rationality, finding limited applicability in actual practice and resulted into inefficient organisation. It reduces its validity simply because the changing business environment is very uncertainand diverse.

The principles of this theory has given no guarantee of success and are often contradictory to

each other.

II) BEHAVIORAL OR NEO-CLASSICAL APPROACH

In the Neo-classical or Behavioral approach of management human factor remains cont rolfocus in the organisation. This approach stressed of successful management depends on managersability to understand the work and people with different background, needs, values, perception and

personality. This approach has been studied into two phases as under :

A) Human Relation Movement.

B) Behavioural Science Approach.A) Human Relation Movement : Human relation movement made managers more sensitive

towards employees needs. This movement is marked by threats of unionisation. Elton Mayo is generally



recognised as the father of human relations school.

Elton Mayo Mary Parker Follet and Douglas, Mc-Gregor have been main contributors to thismovement. Elton Mayo was a sociologist at the department of industrial research at Harvard. Elton

Mayo and his associates John Dewey Kert Lewin, F.J. Roethisberger and W.J. Dickson has conducteda study at Western. Elecric Hawthorn plant in USA during 1924 to 1932 to evaluate the attitudes and

psychological reactions of workers in on the job. situations. Finally Mayo and his associates concludedHawthorn Experiment as under :

1) The quantity of work to be done by a worker is not determined by his physical capacity but

by the social norms.

2) Usually workers do not act or react as individuals but as members of the group.

3) Non-monetary rewards play a significant role in influencing the behaviour of the workers.

4) Informal leaders play an important part in setting and enforcing the group norms.

Elton Mayo with his associates social scientists started experiments to examine t he effect o

lighting on the productivity of the workers, rest pauses of different length and number shorter work-day and so on. These social scientists for the first time recongnised the important of a new aspect of

the problems of industrial civilisation and his new aspect adds to the complexity of the work situation.

EVALUATION / APPRAISAL OF HAWTHORNE EXPERIMENTElton Mayo and his associates mainly focused of interpersonal relations, group dynamics,

leadership skills and human motivation. But the critics of the human relations approach pointed outthat human relations are not the ultimate answer to the problems of management. Moreover one more

critic is made on the research methodology employed. The experiment is done in one plant on a smallgroup of employees at work. Hawthorn researchers minimised the effects of economic incentives for appa rent justifiable reason an elevat ed supervison and int erpersonal relations has given pri maryimportance.

The supporters of t his experiment cl aimed that the Hawthorne studies ma de a significant contribut ion by placing monetary incentives in their proper place with in the social context. The

researchers of this experiment did not ignore the importantce of economic incentives but said it is oneof he factors infl uencing workers performance.

Mayo authoured two books namely, The Industrial Civilisation (1933 ) and The Social Problems

of Industrial Civilisation (1949). In both of the books discused in detail the factors which cause achange in human behaviour. He concluded that, for increasing productivity of workers here are not

only factors such as changing working hours, rest pauses but there are a number of factors such asliberal supervision, autonomy to workers, allowing i nformal groups of workers, co-operation andmutual understanding between workers and managemnent. Hawthorne studies were landmark to analyse the behaviour of worker and his relationship to the job, his fellowworkers and the organisation. Moreover

this studies proved that informal work groups, workers particpation in decision making have an importantimpact on the productivity of the workers. Because of the efforts of Mayo and his associates themanagers in different organisations recognise that workers performanc is relat ed to psychological,sociological and physical factors. Hawthorne studies and its findings provided concrete base of human

relation approach. This study made it clear that the workers is not merely an ‘Economic man’ motivated

solely by financial incentives but his working behaviour is more influenced by his social and psychologicalneeds.



After rigourous studies it was also discovered that productivity of workers can not be increasedmerely by changing physical working condition but it can be increased by developing better human

relationship between workers and supervisors and managers. In fact studies revealed that the worker responds to his tota l work setting and social relations and interpersonal relations. If focussed onimportance of informal groups basd on personal and social relations among workers on their working

behaviour. This studies advocated that effective communication, friendly supervision workers attitudesand informal leadership are more contributary to productivity than the physical working conditions, personal and emotional factors were more important determinant of productivity than any other factors.

“ The Human Relation Movement” was marked by the following factors :

1) Human organisation was considered as phcycho-social system.

2) This movement turned management theoriests away from “Economic Man to social man

model”.

3) Highly positive / optimistic asumptions were made about the workers such as they like to work, assume responsibility are willing to cooperate for achieving organisational common

goal. For the cooperation, managers have to establish congenial interpersonal relationshipand by recognising and providing for their social, psychological and other needs.

4) It advocates strongly the Human Relations Approach and believes in avoiding conflicts or clashes.

5) For getting maximum contribution from workers managers should get along with them by

fair and Frank communication with them.

6) Proper attention should be given to employees emotions beliefs attitudes and habits in loder

motivate them.

7) Employees should be involving decision making process to create a sense of belongingness

amongest them.

8) This approach aims at providing high degree of satisfaction and motivation through improvedworking condition liberal supervision and sense of security.

Thus human relation theorists realised that satisfied employees are least interested in joiningTrade Union Movements. Therefore managers should adopt morale boosting human relation techniques.

They also recongnised the importance of psychological and social dynamics in work setting.B) Behavioural Science Approach : Due to certain inadequacies and drawbacks associated

with man relation approach effotrs were made by a number of social and behavioural scientist for analysing human behaviour methodocally. Behavioural science approach is a systematic as well as

scientific analysis of human behaviour to determi ne causes of working behaviour of an individual.This approach is also known as organisational behaviour approach.It is an interdisciplinary approach

deals with human behaviour sociology dealing with behaviour of an individual in a group and anthropologyis a study of physical, biological, and cultural variables affecting individuals behaviour as a member of

group.The behavioural sciences are transactional. They are concerned with also relevant aspects of human behaviour including the interactions among all the important factors.

“ Behavioural Science Approach” is based on the following assumption:

1) According to this approach the organisation is a socio technical system, consist of individuals

and their social and interpersonal relationship with each other and the techniques methodsand procedures used by them for performing their jobs.

2) Behavioural science approach focused that the individuals goals and interest of employees

had integrated with organisational goals as to avoid clashes and conflicts between them.



3) This approach advocates that the conflicts and co-operation is co-exist in organisation to some extent conflicts are inevitable and desirable because individuals are coming from

different backgrounds perception and goals to work in the organisation, such type of diversity is bound to create some conflicts. The managers t end t o beha ve carefullycontinuously and have to handle the situation tactfully.

4) The behavioural scientists recognise the individual differences in terms of their personality,goals, bel ieves, values and percepti on and believes t hat these differences have greatimportance at the time of designing motivational techniques.

5) This approach assumes that the people are the key to productivity and higher performanceand other physical factors technology, work stands do not give the guarantee of higher

performance mostly productivity or performance depends on employee satisfaction their level of morale, motivation, attitude, sensitivity of manager towards employees and their

needs etc.

6) The behavioural scientists such as, Douglas Mc.Gregor, Abraham Maslow, Chester Barnard,Rensis Likert and Herbett Simmon etc. have developed various aspects towards this

apporach.

It is observed that as compared to behavioural science approach human relation approach seems

to be more limited in scope because it deals only with set of economic, social and psychological needsand physical working conditions which contribute to higher efficiency. But behavioural scientistswere more concerned about technological aspect s of j ob design group dynami cs leadershipcommunication and motivation which provide broad base to this approach.

Contribution of Elton Mayo (1880 - 1949) :Elton Mayo born in Australia was graduated in Psychology and he was a professor in Harvard

University. He is known as a “Father of Human Relations Approach to Management”. In 1927 Mayoand his associates conducted an experiment in Western Electric Company in Chicago in its Hawthorne

Plant. This experiment aimed at determining the effect of illumination and other working conditions onthe efficiency of workers. Initially this experiment was conducted on five workers and later on it was

expanded to cover Twenty thousand workers.

i) Elton Mayo and his associates, John Dewey, Kurt Lewin, F.J.Roethisberger and W.J. Dickson, evaluated the attitude and psychological reactions of workers in on-the-job situations. Elton Mayo was

a sociologist at the Department of Industrial Research at Harvard. He and his team of social scientists,started experiments to examine the effect of illumination / lighting on the productivity of the workers.

Later on other factors such as rest pauses of different length & number, shorter work day and so on.

They also conducted experiment to determine the aspects of working conditions the employeeseither liked or disliked, to determine the nature and extent of employee satisfaction, or dissatisfaction,

to determine the employee morale. This team first time recognised the importance of a new aspects of the problems of industrial civilisation and this new aspects adds to the complexity of the work situation.

They used interview and observation methods for the research work. Their findings were assuch that the sentiments, feelings and attitudes of the people at work is more significant. Mere economic

factors do not influence the productivity and satisfaction of the workers but the social and psychological

factors are highly influence the productivity, efficiency and satisfaction of the employees.Mayo concluded that the cause of increase in the productivity of workers is not a single factor

like changing working hours or rest pauses, but a combination of these and several other factors such



as least supervision giving atonomy, allowing workers to form informal groups, creating favourableconditions which will encourage and support cooperation between workers and management.

In fact because of the efforts of Mayo and his associates the managers in different organisationrecognise that workers performance is related to psychological, sociological, and physical factors.The Hawthorne experiment was a sigificant landmark to analyse the behaviour of worker and his

relationship to the job, his fellow workers and the organisation. It proved that informal work groupand the opportunity to be heard and participation in decision making have an important impact on the productivity of the workers.

Criticism of Howthorne Studies :This study focussed interpersonal relations, group dynamics (informal groups) leadership skills,

human mot ivation and so on. But the critics pointed out that human relation approach is not theultimate answer to the problem of management.

The another criticism made on this studies related to the research methodology employed. It

was done on small group of workers there for therefore findings may not be applicable t o other

worker s.

Other criticised by claiming that the Howthorne studies minimises the importance of monetaryincentives within the social context.

Elton Mayo authored two books that is -

1) The Industrial Civilisation (1933 )

2) The Social Problems of Industrial Civilisation ( 1949 )

In both the books, he discussed in detail the factors that cause a change in human behaviour.

Elton Mayo a nd his associat es came to the following conclusions from the Howthorneexperi ments:

1) Non-monetory / economic rewards and sanctions play a significant role in influencing the

behaviour of the workers.

2) The amount of work to be done by a worker is not determined by his physical potential but

by the social norms.

3) Informal leaders play a significant role in setting and enforcing the group norms.

4) Generally, workers do not act or react as indivisuals but a members of group.

5) Howthorne studies discussed the engineering approach as in scientific management, to the problems of work. Rather it proved that informal wor k groups and part ici pat ive

management have animportant impact on the productivity of the workers.

Criticism on Neo- Classical Theory :The modern management scientist criticised the Neo- Classical thoughts ideas and view points

on the ground that it is one sided and not a balanced theory. It is simply a reflection of thoughts o

classical theory. In fact mere consideration of human factor in management is not the solution of the problems faced by the organisation. The higher efficiency, productivity and overall organisational

effectiveness is a combined effect of so many factors which are not considered at all by The Neo-Classical Theory.

Features / Characteristics of Classical theory of Management :The Classical Thinkers emphasised features of classical Theory of Management as under.



1) Formal Organisation : Classical Thinkers strongly belived in formal organisations which is the essence of management . They stress on formal rules and procedures, dut ies/

responsibilities and authority, relationships, better working condition for the employees.

2) Division of work and specialisation : In a formal organisation division of work is necessary and should be based on specialisation which makes the employees expert i n their jobs

ultimately improve employees performance. 3) Accountability : The Classical Thinkers emphasis on accountability of the individuals. In

a formal organisat ion workers duties/ responsibilities are clearly defi ned therefore they

should be made answerable for the completion of the tasks and responsibilities assinged tothem.

4) Task-Centered Approach : The Classical approach is task- oriented / centered rather

than employee Centered. And Stressed the use of some techniques like productive planning,

machine layout, forcasting and market research, standardisation of products and proceduresetc. Maximum utilisation of human research by placing right man on the right job.

5) Foundation for further scientist and researchers to advocate new principles of management

on the basis of ideas, thoughts and theories advocated by Classical Thinkers.

Principles of Classical Theory of Management :Classical Thinkers proponded the following principles of management

1) Principle of Objective

2) Principle of Division of work and specialisation

3) Principle of Co-ordination

4) Principle of Direction

5) Principle of Athority and Responsibility

6) Principle of Unity of Command

7) Principle of Span of Control

8) Principle of Standardisation

9) Principle of Cost Reduction

10)Principle of hierarchy of positions

11) Better persone relation and working conditions

12)Distinction between personal and work matters

Limitations of Classical Theory of Management and following are the limitations of this Theory.

1) Lack of Scietific approach : The ideas advocated by classical thikers did not have any

scientific basis its just outcome of observations and experience of intellectuals in those days.

2) Lack of initiative : This Theory did not leave any scope for workers t o show t hei r initiative and leadership talents which helps in the workers growth and development.

3) Lack of employee - orientation : This theory stressed on task orientation rather t hanemployee orientation resulted in the exploitation and unjust remuneration and welfare

measures.

4) Owne rship is not separated from management : There was no distinction bet ween



management and ownership resulted in poor management and was responsibility for slowgrowth and development of management movement.

5) Lack of Consistency : The ideas and management thoughts propounded by classical

thinkers are inconsistence and failed to give any solutions to the problems faced by theorganisation.

6) Delays in work performance : A bureaucratic model of Max Webber resulted into delays and ethargy in work performance.

7) Poor layout and working conditions : In those days plant layouts were defective or

faulty. Moreover working conditions were unsatisfactory therefore the use of science andmathematics for improving the manufacturing operations, which was emphasised by Charles

Babbage become imposible.

8) More emphasis on formalities : In a classical theory of management there is no enough

scope for group dynamics simply because it stressed on strict adherence to the systems of rules, regulations and procedures.

9) Decision making based on Trial and error method : In those days decisions rest on trial

and error method or rule of thumb or on guess work. The classical thinkers did not stresson information based decisions and on rational decision making process.

10) Lack of belongingness : In those days there was no sense of belongingness among the employees towards the organisation.

11) Absence of social business responsibil ity : During classical days t he ownershi p o industries and businesses were self centred and profit oriented. A concept of socialresponsibilities was totally neglected by them.

III) MODERN APPROACH OF MANAGEMENT

This approach represents latest developments which took place after 1950 this approach can bestudied and analysed in the following four phases :

a) Quantitative approach b) System approachc) Contingency approach

d) Excellence approach

a) Quantitative Approach : This approach was developed during 1950 known as “ManagementScience Approach ” and is based on the scientific management approach. It aims at achieving highdegree of precision, perfection and objectivity by utilizing mathematical and statistical tools for solving

complex problems. Operation research consists of linear programming stimulation, querying theoryand game theory etc. are the quantitative tools for decision making. It is regarded as application of

scientific methods for solving problems and this scientific method consist of the four stages mentioned bel ow.

1) Dividing problem into small component.

2) Gathering the fact or relevant of required information on each small component.

3) Analysis of data collected on each small component

4) Finding the solution on the problem.



The approach utilises the knowledge and skill of various other discipline such as mathematics,statistics. engineering, electronics, economics, physical sciences, behavioural sciences, cost accounting

as well as management experts. The knowledge and skill of several other disciplines has contributedsignificantly to management theory and practice.The use of logic and reasoning for solving problems

may help in reducing personal bias and institution of managers. But in fact this approach has very

limited application in respect of problem solving and decision making process. ) System Approach : System approach t o management has developed after 1950 It has

represented new thinking and latest developments related to organisation and management. This approachemphasising interdependence among various activities of organisation. Basically this approach aims at

identifying the nature of relationships of various parts of the system and sub-systems. The managementshould integrate and co-ordinate all the sub-system of the organisation, whenever this approach is

applied organisations objectives and over all performance have to be taken into consideration and notonly the object ives and performance of it s different departments or sub-systems. This approachstressed on the inter-relationship between different parts and the over all effects of these inter-relationships. A system approaches to management provi des a conceptual basis and guideline for

establishing a more efficient system from planning to controlling it stressed the managers to look toworkers his business as an open adaptive system. Moreover information is an important aspect of thesystem simply because an organisation act and interact with its environment. This approach attemptsto desi gn an overall theory of management by consi dering forma l and informal relations. Themanagement should integrate and co- ordinate all the sub- systems of the organisation. The systemsapproach recognised that an organisation as an open system should not be merely adaptive but anticipate

direct and help to create forces for change through appropriate leadership. No doubt an organisationinfluences and is influenced by its surrounding environment therefore relationship and interdependenceof all the component or sub-systems. The management have to integrate and co-ordinate all thesubsystems and systems of the organisation. Basically organisation is an input-out system and obtainsvarious inputs both physical and human from the society which is l arger system. These inputs are

processed and converted in some goal s and serri cer which i s considered as output of the system

supplied back to the society. Through feedback an organisation gets valuable information which helpsin adjusting the system. An organisation may not be considered as completely open system simply

because to some extent it has to preserve its identify, maintain stability and protect its autonomy.

Some management scientists criticise system approach as being purely theoretical conceptualvogue and abstract, it can not be applied successfully to practical situation. It is considered only aconstructive way of thinking rather than providing solution to a problem. The approach did not provide

any tool or technique for analysis and synthesis and did not recognises the differences which exist between the systems. The system approach can be concluded as it provides new style of thinking to

management knowledge.

c) Contingency approach : The contingency approach is not new, the earlier writers like Fayol and Mary Parker Follett have a ready emphasised he need for analysing situation and using the

principal of management as required by situation different situations require different kinds of leadership.Contingency approach advocates that managerial actions and organisational design must be appropriate

to the given situation and a particular action is valid only under certain conditions. none of the approachis best to the management,it all depends on the situation. This approach basically aims at attempting to

take a step away from universal application of managerial principles and recommending that theapplication of these principles is subject to appropriateness of the situation. It is a systematic attemptto determine and utilize appropriate management techniques, approaches and practices which are



appropriate in specific situation. There are three major element of the overall conceptual framwork for contingency management that the environment, management concepts and techniques and the contingent

relationship between them. This approach advocates that the managers should develop situationalsensitivity and practical selectivity. The application of this approach require the managers should havethorough knowledge of the situation in terms of situation variables and external factors. Moreover he

must possess enough knowledge of management theory, principles tools and techniques and analytical abilities on the part of managers about the contingencies under which a particular managerial response in the form of strategy or technique would work well. Contingency theory attempt to analyse and

understand the inter-relationships between the variable in a situation and the managerial action. Thisapproach is a combination of both analytical and situational. Moreover the effectiveness of a particular leadership style will vary from situation to situation. However the contingency approach suffers fromtwo limitations. firstly it does not recognise the influence of management concepts and techniques on

environment and secondly literature on contingency management is yet not adequate. Many managementscientists criticised on his approach on the ground that it is totally a practical approach without being

supported by required theorotical and conceptual framwork. In fact managers experience difficulty inanalysing situation and discovering apropriate management techniques for understanding behaviour of

the situation. However, this approach is regarded as a promising step towards the development of management theory a nd practice. The contingency approach has wide ranging applicability in

organisation and management.

Que st ions

1. What do you mean by Management ? Define the terms of Management ?

2. Explain the nature of Management ?

3. What do you mean by Management Process ? What are the steps in Management

Process ?

4. Explaine the role of Management ?

5. Describe the scope of management ?

6. State the importance of Management ?7. Explain the characteristic of Management ?

8. “Management is a science or art ” Explain.

9. How many are the levels of Management ?

10. What are the functions of various levels of Management ?

11. Distinguish between Administration, Management and Organisation ?

12. How the management has developed ?

13. Describe the stages in the development of management thought classical and Neo-classical systems.

14. Explain, the development of Management thought in a time of perspective.



2 MANAGEMENT OF CHANGE AND CONFLICT

Meaning and concept : In the modern world, it is most important to utilise all kinds of resources economically and

effeciently. None of the organi sations can achieve its objectives without the optimum use of the resorces. Organisation is a man made system working through individuals for accomplishing objectives.

The individuals along with the formal organisation, also form the informal organisational groups based on their personal and social relations. These informal groups affect directly the functioning of the

organisation. With the passage of time these groups get established and they feel more relaxed andcomfortable with them. But when changes took place due to the internal or external variations, the

individuals are not ready to change according to changes occured. The change is also expected it is inevitable and unavoidable in every organisation. A change is regulated to maintain stability to some

extent into the functioning of organisation. “An organisation which fails to change is sure to fail”. For

optimum utilisation of all the resources the manager has to moni tor both internal and externalenvironment and its impact on the organisation. The changed may be minor or ma jor, is equally important from organisations point of view.

The frequncy and nature of change differ from organisation to organisation depending on the

degree of interaction of orgainsations with external environment.

Types of ChangeAccording to Henry Mintberg : In an organisation there are periods of continuity in which

established strategies remain unchanged and there are periods of change. These changes may be ofour types (1) Incremental change (2) Piecemeal change (3) Transformational change (4) Flux change.

1) Incremental changes : These changes take place frequently and i n a gradual manner.These changes are logical and involve little deviation from the past, for example - upgradation

of existing technology, expansion of existing market etc.

2) Piecemeal changes : It is simply a change only in some strategies while others remainunchanged. For example - marketing strategy of an organisation is being changed because

of growing competition without affecting other functional strategies.

3) Transformational changes : This type of the change take place rarely. But the nature of these changes is major and involves significant departure from the past eg. adopting a new

technology, diversification of organisation, operations etc.

4) Flux changes : When the strategies of organisation are changed without any clear direction it is known as period of flux. For example some new products are added to existing

product line just for broadening.

According to David Nadler and Michael Tushman a management professor, organisational changes may be of 4 types

1) Anitcipatory changes2) Reactive changes

3) Incremental changes

4) Strategic changes



1) Anticipating changes : These changes are systematically planned by managers and are

made with an intention to take advantage of the situation which are expected to arise. Themanager continuously monitors the situation and whenever he expects change, he attemptsto make a change in organisation as to get maximum benefits.

2) Reactive changes : Such changes are generally made for survival of the organisation.

These changes are forced on the organisation by unexpected environment pressure. Insimple words if there is a change in external environment, reactive changes are madeinorganisation, to cope with this changing environment. Reactive changes some times arealso made to exploit new opportunities as provided by changing environment.

3) Incremental changes : These changes are made with an intention to maintain functioningof organisation on its selected / choosen path or way. For example, an organisation has

many sub-systems. These systems may be adjusted from time to time so as to securesmooth functioning of the organisation. Such type of adjustments are known as incremental

changes.

4) Strategic changes : This type of changes is more basic in nature and has great influnce

on the overall functioning of organisation. It can alter, overall shape, size natue or directionof the organisation, for example Change in technology, changes in location of plant or diversification of organisational operations etc.

PLANNED CHANGE

Concept of Planned Change : A planned change can be defined as “the deliberate design andimplementation of a structural innovation, a new policy or goal or change in operating philosophy,

climate or style ”

A planned change may be considered as systematic and deliberate change which the manager attempts to introduce in the organisation to face expected situation.

It is a systematic attempt to redesign an organisation in a way that will help to cope with

changing environment to achieve new goals. For this a manager keeps watch on and monitor theexternal environment. He makes an assessement of the impact of change in the environment.

Characteristic of Planned Change :

1) A planned change is always deliberate systematic and rational in nature. It is a result of

innovative, creative, possible thinking of managers.

2) Planned change aims at coping with changing environment and achieving new set of goalsof the organisation.

3) These changes result is both from internal as well as external environment.

4) Planned change is natural and inevitable.

5) Planned changes are broader in scope and magnitude.

6) Planned changes may have both positive as well as negative aspect.

7) Planned changes are difficult and expensive.

8) Planne d c hanges may focus on the structure, proce sses, technol ogy, peopl e a nd

organisational goal, depending on the nature and magnitude of change.

FORCES OF CHANGE

Forces of change can be classified in two catagories namely;



(1) External forces and (2) Internal forces.

1) External forces : There are a number of external forces which may bring changes, in the

organisat ion and which may directly or i ndirectly affect the functioning of an organisati on. Theorganisation has hardly any control on these factors. The external forces are as under.

i) Socio-cultural forces : These forces mainly include changing socio-culture values, norms

like education, population, literacy, traditions, customs, rate of urbanisation, leisure etc.

ii) Economic forces : Economic forces are complex and dominent for example economic

condition of the country, market condition, demand for the product, competition, price determination, buying capacity of the customer, cost and benefit position, distribution of income,cost index, quality

and availibility of various resources and their distribution in various sectors of the economy.

iii) Political and legal forces : Organisations have to function under the guidance of politicaland legal forces. These forces include political system, ideology of ruling and major opposition party,

political stability, morality and values, various legislations for business and industries, various govt. policies towards labour, capital investment, foreign trade, licences etc.

iv) Technological forces : Technological forces may bring major changes in organisation.

They include new techniques of production, procedure, innovative ideas of production process and in

product, research and development, transfer of technology, rate of obsolescence etc.v) Work environment forces : The work environment forces may also necessitate changes in

organisation. These forces include customer’s loyalty, suppliers regularity, community attitude andrecognition by society etc.

2) Internal forces : The internal forces include the following:

1) Top management, its philosophy and corporate policy.

2) Re tirement, promot ion, r esignation and transfer which are the key el ements of theorganisation.

3) Changes in the perception, attitude,feeling, beliefs and expectations of employees of an

organisation.

4) Change in work schedule, allocation of duties, job contents, duty hours and composition

of work group etc.5) Change in internal environment of the organisation.

The above mentioned forces may either be the effect of the change in external environment or may be induced by management.

RESISTANCE TO CHANGEChanges are desirable order to have proper functioning of the organisation and standing to

competition etc. But many times they are inevitable also such changes are required to be brought in

higher level performance and making optimum use of all the resources in a profitable manner. The changes are taking alone in every field very fast and therefore the organisation has to change and in the

opportunity profitable and maintain its survival. Whenever the changes are introduced the members of the organisation have to change or modify their attitude, perceptions and working behaviour. But in

actual practice the members of the organisation resist to change. If the changes brought into organisation are more positive and benificial to the member, the degree of their resistance is on the lower side and

if the change is less beneficial the degree of resistance is higher. In fact the “change” is a law of natureand t o resist the cha nge is a natural tendency of human behaviour. However for accepting the

changes by the member of the organisation, it is good to give them temptation of some regards andattract them



for the changes. In this way changes can be implemented with least resistance.

REASONS FOR RESISTANCE TO CHANGE

1) Insecurity of job : The employees feel in secure about their employment as the directimpact of change. This is one of the major reasons for resistance to change.

2) Changes in status-quo : If the change like redistribution of authority and responsibility,

re-defining the job and reallocation of it amoung the employees are introduced in organisationexisting position and schedule of the employees is bound to change. Under the situation

their position does not maintain status-quo. They have to adjust with new situation whichthey feel inconvenient and uncomfortable.

3) Lack or gap of communication : It is necessary to communicate the employees about

the expected changes. They must be taken into confidence and informed about the change.Their participation in implementation of change should be ensured. But if there is a

communication gap or lack of communication among the employees and mangement aboutthe change to be introduced then there may be resistance on the part the employees for thechange.

4) Socio- psychological reasons : As a result of change present position of the employeesmay change and their by they may be deprived of the existing usual set up with, they are

habituated, where in their superior subordinate relations may change as new and unknown person may replace the supervisors as well as subordinates. Under such a situation they

may become psychologically weak and feel socially displaced. Resistance to change alsoarises due to such social and psychological reasons as mentioned above.

5) Group pressure : The member of group generally remain loyal committed and sincere

towards the group norms, values and objectives. These individuals many times are preparedto sacrifice their individual interest, for the interest of the group. Because, of the group

pressure members of the group resist change.

6) Loss of power and control : Due to the change, the power of the individual employee or

of a group may be lost. Therefore,he or they may resist the change.

7) Nature of change : So long as the nature of changes is minor, temporary and does notaffect the members significantly, the resistance may be minimum, But if the change isintroduced suddenly that too major one, the resistance may be higher one.

8) Rigid organisational structure : If the organisational structure is rigid where no changeis possible such inflexibility or rigidity in the organisation structure may also become acause of resistance. On the other hand if the organisation structure is flexible, the pace ochanges will be fast. Fexible in organisation can help the changes to be made without any

problem or resistance from the employees.

9) Past experiences of the employees : If the previous change had not been handled by theorganisation efficiently and the members of the organisational had a bitter experience about

it they will oppose the existing as well as future changes too. Again due to lack of trust among the employees the i mport ants of change may be mis-interpreted a nd they may

oppose it.

REMEDIES TO OVERCOME RESISTANCE TO CHANGEResistance to change is a single rigid of something wrong either in the process of introducing or



implementing the change. The concerning authority must find out the real cause of resistance andovercome it as early as possible. There are some alternative means / ways / remedies for overcomingresistance to change.

1) Employees participation and involvement : To reduce employees resistance to change it is desirable to associate and involve the employees in the change process, because they

are the part and parcel of the organisation and whatever change introduced in the organisationmay affect them. The employees should be the party to change as to get their consent,

co-operation and commitment. If the employees active participation in the implementationof the change is ensured the manager can easily overcome their resistance to change.

2) Education and communication : One of the simplest way of getting the employees toaccept t he change is through t he process of education. It is necessary to educate the

employees about to change so as to reduce their resistance. The employees can be educatedthrough training, seminars, conference and meetings. The employees must be persuaded

about the need and importance of the change. Communica ti on is also one of the bestdevices for proving information about the change. They should be taken into confidence

and their doubts confusions etc. have to be removed. This will help to create a favourableatmosphere to change.

3) Leadership : The manager as a leader may develop his informal relationship with thesubordinates for seeking their cooperation to implement the change. He can also influence

to subordinates through leadership process and can convert their negati ve attitude into positive one. Basically the leadership process which is aimed at influencing the behaviour

of others may prove helpful in the successful implementation of the change.

4) Facilities and support : The manager must assure the employee that he will provide alltype of help whatever they require for adjusting with the new situation. And as well, if he

gives all support to the subordinates, there may be minimum resistance for change. Butthis remedy is time consuming and expensive too.

5) Negotiations and agreements : Negotiations and agreements are considered to be the

most effective way to overcome the major resistance to the change. For example if a

particular group of the members which is very important and powerful, is losing significantlydue to the change, the negotiation process is an effective way to overcome their resistance.The management may negotiate with the union leaders or representatives of employeeson the matter to arrive at a settlement through some via media. An agreement between

management and the employee be signed by both the parties and diffuse the resistance.

6) Time of the change : Whenever the changes are required to be introduced it should be

done at appropriate time and in a gradual manners. Resistance to change by the affectedmembers of the organisation can be reduced significant by two. Generally “ the sudden

and untimely change” may result in strong opposition. Therefore, the manager must introducethe changes at right time.

7) Use of group pressure : Generally there are two types of groups in an organisation (a )Formal group - which is a work group (b ) Informal group (when like minded people come

together as a natural process a group is automatically formed ) Such informal group havemuch influence of their own as well as other members. If these groups are convinced over the change and if they accept the change other members too accept the change, resultingin minimisation of resistance.



8) Change agent or initiator : An agent or an initiater is appointed to make the employees accept the change, when all other effort turn futile. An agent is a person who by hook or crook, gets the change accepted by the members. He may use the method of threatening or coercion towards the resisting members. But when the things are managed to be done put

their heart intelligence, and experience in doing the things i.e. job. Thus, the method may

turn to be detrimental to the organisation in future. MANAGEMENT OF CHANGE

The change is a must for successful growth and development. The change must be preplanned and has to be managed efficiently. The process of management of change is very crucial. Itrequires a lot of patience resources and efforts on the part of the manager. The steps that are involved

in the process of management of change are as under:

Steps in the Process of Management of Change :1) To indentity need for change: It is the first step in the process of management of change.

The manager must identify the need for change in terms of those internal as well as external

factors which demand the change. He has also to ascertain whether the change is strategic, process oriented, people oriented or a minor one.

2) To develop new objectives: The change is an outcome of internal as well as external environment. Many times such environment and there by desired change demands some

alterations in the organisational objectives and goals. The management is required to takesteps in that direction.

3) To determine type of change: After determining, the need and objectives of the change

the next step is to decide the type of change to be introduced. The change may take placein relation to the objectives, organisation structure, process or people etc. Thus, the third

step is to determine the type of change required.

4) Preparing plan for the change: The most important step is preparing a plan for t hechange such as, when, how, where and by whom the change is to be introduced. For

making the change successful it must be introduced at a right time. Such plan facilitates proper and smooth implementation of the change with least resistance on the part of the

affected members of the organisation.5) To implement the change: After preparing the plan, it is necessary to communicate it to

the concerning employees of the organisation, and convince the member about its need,

objectives, nature and possible benefits of change. An effective and proper communication definitely helps in reducing resistance and receiving all support for implementation of the

change.

6) Review and feedback: After implementation of the change it is necessary to make reviewand feedback evaluation. Regular review and feedback may provide necessary information

to the manager for i ts desired implementation. For ensuring smooth implementation ochange in the right direction it is necessary to make review and evaluation of the process of

management of change.

Thus, it is only through planned change and its efficient management, that the organisation can cope up with changing environment and may discover more profitable use of its resources.

Management In C hanging Environment :

Every sucessful manager always anticipates and adjusts himself to changing environment



rather than being passive and unprepared to face them. As the change takes place or likely to take place, the manager comes in action and develops new ways and means to cope up with the change asefficiently as possible. Every kind of change in environment does make the job of a manager more challenging, may it be random, casual complex and unstructural. The changes in business environment

or not within the control of manager but he has to monitor and analyse them and has to take suitable

action to overcome them and facilitate its survival , growth and development. The real test of knowledge,skill and other capabilities of the managers lies in how efficiently they work in the changing situationand how they adopt the new situations because of the rapid changes in economic, socio-cultural, legal,

political, educational, technological environment throughout the world. The management knowledgeis affected in various ways. The management theory has been greatly affected by these changes,

development of new principle. Generalisation has rendered, traditional management techniques lesseffective. As well as due to uncertainties, complexcities associated with external environment, theapplication of management knowledge in practice has also become more difficult. To overcomechallenging situation one ha s to have creativity, innovativeness, adaptability and other required

capabilities. Due to the drastic changes in the theory as well as practice of management, a successfulmanger is required to acquire new skill and talent which is more useful in meeting new situation. The

manager has to integrate theory and practice of management in such a way as to develop meaningful

and useful way of managing.

Acquiring new skills and abilities by integrating theory and PracticeManagement

Management New Skills andManagement Theory abilit iesPractice

Traditional Principles New roles functionsPost experience,techniques and and relationshipknowledge and

approach precedents

Development of New ways o f managing Innovativeness,new approaches challenging situation Creativity, Adoption

techniques and concept

The following are the Important Changes :

1) Environmental Changes :

a) Socio- cultural changes : The change in social values, objectives, population dynamics,

immigration to cities, emerging middle income group, higher rate of literacy, changes in

the life style, interface of industry with higher educational institution (by sharing a cost oeducation and making it more meaningful to be utilised in business) etc. example of socio-cultural changes.



2) Ec onomic changes : Changes li ke economic l ibe rl isation, growi ng competi tion,disinvestment in public sector, entry of multinantional organisations, changing credit policy,more operat ional autonomy to banking institutions, the governments relationship withindustries, new regulations groverning trade and industry etc, are the examples of economic

changes.

3) Globalisation of business : Global economy has become a need of every country. Working for foreign owned companies, meeting world a standards and pressure for free

trade etc. are giving new explosure to the managers.

4) Technological change : Technology basically is an out put of innovation process. It isregarded as a key t o economic and social progress.It has also facilitat ed the gradual

development of industrial age into “information age” The role of technology and informationincoming future will assume an important place in managing the orgainsation efficiently.

5) Ecological and environment changes : In modern era every country is in competitionof economic development and i s bound to face the problem of ecological imbalances.

Rapid industrialisation would lead to higher degree of pollution along with increased industrialoutput. The manager of today and tomorrow will have t o develop suitable strategy for

making enviromment friendly and to use of resources, for producing eco-friendly products. The ecology has assumed an important place in the social marketing. To restore ecological

balance, the manager has to co-operate with Govt. to use natural resources in cautiousmanner and to prevent all types of pollution. Ecological and environmental factors can

influence location decision of manager in a significant way.

Acquiring new skills and abilities by integrating theory and

Practice Management

Management Management New Skills andTherory Practice abilities

Traditonal Principles New roles functionsPost experience, techniques and and relationshipknowledge and

Õ Õapproach precedents

New ways o

Development of Innovativeness, managing

new approaches Creativity, challanging situa-

techniques and Adoptat ion tion. concept

Emerging horizons of Management in Changing Environment.

6) Political and legal change : The managers who are considered as custodian of socially,

economically and politically powerful organisation, are greatly influenced by the changing political situations. The manager should be politically conscious and active in his approach

as to preserve identity, the organisation and to seek its growth and prosperity.

Basic trends affecting management in future :The analysis of above changes indicates the following trends to follow in coming days.

1) Growth of international business : There is a tremandous growth in the international



busi ness, which gives new opportunitie s to many organisat ions for expansion anddiversification of their activities. In view of this changing situation the manager has to

become global player.

2) Information explosion : Due to the rapid development of communication and information

technology the world has become global. Because of both these technologies it has becomevery easy and simple to dessiminate information all over the world, promptly and accurately.

Now the manager knows very well how to understand, measure and manage the knowledge.

3) Reasearch and Development work : The manager has to set up research and development department. It is only through this department that the scientifi c and technological

department can be translated into products and services which are useful and available at cheapest rates to the customers.

4) Reawaking of ethical and moral values : Due to the growing realisation among the

managers regarding the fact that observation and practi cing of high ethical and moralvalues will help them in long run for raising the level of profitability of the organisation. It

is necessary to provide ethical training to manageres and specific code of conduct isenforced on them.

5) Customer satisfaction : In a competitive business world only those organisation canface the compitition and ma y survive, which are firmly committed to their customer’ssatisfaction. Customer satisfaction is the themeof 21st century.

6) Productivity improvement : Now a days the managers are expected to produce more with less inputs. The higher productivity has becomes a central challenge in the organisations

of all sizes. Due to the higher productivity, the cost of production will reduce eventuallythe prices will go down sal aries and wages will increase, more profits wil l be earned.

Growth and development will take place and employment opportunities will be increased.

NEW CHALLENGES FOR THE MANAGERSDue to the above mentioned environmental changes and new emerging the job of managers has

become more challenging. The manager has to face the following challengs to survive and grow.

1) Strategic management : In the context of global operation new dimentions and added tomanagement. One of them strategic management. In the last changing environment andgrowing competet ion th managere has to think a nd act strategi ca lly. The strat egic

management process helps in mobilising the resourse and efforts of organisation in thedirection and destination which are more profitable. The manager who succeds in thinkingand acting strategically would move ahead in the organisation.

2) Creative decision making : Rapid, varied, random, unforseen, unpredicted unstructuralchanges in the environment, have forced the manager towards the creative decision making.

It is only the creativity innovativeness, foresightedness, accurate decision making etc. thatcan help the managers to solve various problems of the orgainsation.

3) Restructuring and re-engineering of organisation : In order to bring improvement in

the existing level of performance, usiness organisation are required to be restructured and

re-engineered as per the demands of situation. In order to meet the future challeenge themanager has to fucus on modern forms of business organisation which are more flexible,open, transparent and adaptive.



4) Empowering the human resources : Human resources is a live asset of an organisation.The organisational objectives are achieved by human resource alone. By empowering thehuman resources it can be used at optimum level.

5) Seeking strategic alliances and to manage them : The multinational corporations are seeking strategic alliances. These alliances are sought as to get the benefits of complementrycompentencies of organisa ti on in different countries. The manager needs to devel ops required competance as to understand mutual interest of both self and partner and to

manage it in the long run for the mutual benefit.

6) Visionary leadership : The visionary leadership demands more authority to be given tothe lower level employees for improving the quality of product and productivity. Tomorrow’s

manager is expected to have a clear future vision of organisation and mobilise the resourcesaccordingly.

7) Managing relationship : It is the social responsibility of managers to maintain better and hormoni ous relati onship with the customers, empl oyees, gover ment, owners (shareholder ), creditors, suppliers, community in genaral. All these parties must be satisfied

with the business organisation. It is by improving relationship that the smooth functioningof an organisation can be achieved.

MANAGEMENT OF CONFLICTModern business organization are complex organizations. The smooth running of business, is

not an easy task. It requires effective and efficient planning, coordinating efforts, effective controlfrom both the management and employees. Moreover attainment of organizational obj ectives andgoals are also not easy. A desirable, suitable organization structure is required for the attainment of objectives. All the employees of the organization has to work hard. Despite all their efforts, the conflictingsituations may arise at any time in the organization due to difference of opinion, internal or externalforces may affect adversly and may cause hurdle in the smooth running of busi ness organization. Thus organizational conflicts are unavoidable and indispensable. Conflict is a one of the features of themodern complex organization, immediately the cognizance of it should be taken. Promptly these conflictsshould be handled, settled and redressed. The conflicts may arise because of unpredicable behaviour

and attitude of the individuals in the organization.Meaning and definition of conflict :

In simple words organizational conflicts may be defined as “a situations in which there is a breakdown in decision making, just because of irrational and incompatible stand taken by one or all

concerning parties to decision making.”

According to S.R. Robbins defines conflict as “a process in which an effort is purposefully made by a person or unit to block another that result in frustrating the attainment of others goals or furthering of his or her interests.

According to Morton Deutsch, conflict as a “situation whenever incompatible activities occur.” James D. Thompson defines, conflict as organizational conflict is that behaviour by the organizationalmembers which is expanded in opposition to other members.

It is observed from the above definitions that if the individual employee, managers, department heads, top managerial people, trade union leaders opposes certain issue the smooth running of business

organization gets obstructed and moreover it disturbs the routine work of the organization. It is calledas a conflict situation. Strike, lockout, slow tactics, high rate of absenteeism, labour turn over etc are



the example of conflicting situations in an organization. It is necessary to handl e these situationscarefully and tactfully.

Features or Characteristic of Conflict :Following are the characteristics of conflict revealed from the definitions mentioned above .

1) Two or more parti es : There must be two or more indi viduals or groups required for organization conflict. In modern times work performs by the not individuals but group o

individual & they achieves organizational objectives and goals. While performing in groupsthere are the chances of difference of opinion, point of view, expectations etc.

2) Conflicting objectives and goals, opinions etc. : While performing in groups, interacting with each other, conflicting situations may be arise due to different opinions, expectations,objectives or goals etc.

3) Sudden and unplanned events : Most of the conflicts arises suddenly, spontaneously. Basically they are unpl anned. Few of the conflicts can be planned for their occurance

when the organization becomes static and rigid and the top management want to put life inthe organization and to make it dynamic.

4) Expressed by behaviour and experienced by others : The conflicts are expressed by

the concerned parties in different ways and forms through their conduct or behaviour attitude and actions and is experienced by others or managers.

5) Conflict creates obstacles in the smooth flow of work : Genearally conflicts hinders

the smooth flow of work, it is of disruptive, interruptive and impairing in nature, thereforeit becomes difficult to achieve the organizational goals.

6) Opposite viewpoints of the parties : Whenever there are opposite opinions, viewpoints, ideas, thinking, attitudes on any subject matter, issues or event conflict situation may arise.

7) Interorganizational conflicts : When conflicts arise between two different organization

are called as inter organizational conflicts.

8) Intra organizational conflicts : W hen conflicts arises between two individuals or betweentwo groups of individuals working in the organization are known as Intra organizationalconflicts.

9) Conflicts differ from competition : Competition between individuals departments aimsto win over the other without any intereference in the interest of other. But in conflict there

is a strong opposition and intervention to cause disruption of the interests and objects of others.

10) Adverse effects : The effect of the conflict is always adverse on the organization, resulted

in to delays in decision making, wastage, misuse and destruction of various resources, inefficiency in work performance, breakdown of flow of work. Organizations growth

and development will be stopped.

Classification or conflicts :

The conflicts are broadly classified into two categories

1) Inter personal conflicts2) Int er group conflicts

1) Inter personal conflicts : The managers has to take congnizance, “when the personalinterest



of two individuals clash with other and resolve the same such conflict is called as inter personal conflict.” Interpersonal conflict occurs when there is a clash between personal interest of two individuals.

There are three remedies on inter personal conflict, such as lose-lose strategy, means parties tothe conflict prepared the conflict prepared to lose something and ready to accept a common solutionand enter at a mutual compromise. The second solution is win-lose st rategy. Bot h the parties feelwinning against thei r opponent.In fact none of the party gain much, but there is a psychologi calsatisfaction of their personal victory. And the third remedy on the interpersonal conflict is win-win

strategy, which is the best amongst all the remedies. In this strategy parties to the conflict think positively and rationally on the issue and resolve the conflict with such a solution, which will satisfy both the parties.

2) Inter-group conflicts : The inter group conflict may be arise due to absence of joint or participative decision making, differences in goals and perceptions, opinion and veiwpoints in different

groups.Each group and the department when strive for maximum share of limited resources, it leadsto enter departmental conflict. Participation or Join decision making is the best solution to resolve the

inter-group confl icts.

There are 4 remedies to resolve inter group conflicts as under -

The inter group conflict may be resolved by A) Interference or intervention of management : According to this strategy management

may interact with the parties hear and deal with both the parties and provide a amicable solution such

as by providing incentives to them and over come the conflicting situations. Something by adoptingcoercive measures resolve the conflicting situations. This conflict can be resolved by formal agreement

between the parties and by executing the agreements. A group conflict may resolve by the management

by adopting the some procedures such as identifying the conflict, gathering the facts and informationregarding it, analyzing the date, searching the reasons behind it and finding the solution on it and to

eliminate the very source of conflict.

B) Non-intervention or interference by the management : According to this strategy, themanagement is not intervene the conflict but left to parties concerned to come together and resolved

the same. Generally the management ignore the conflict situation , simply because they have provided

different techniques or machineries such as bargaining, persuations, consultation, counseling, politicsetc. which the parties to conflict can approach and can work out the alternative solutions on thisconflicts. Both the parties to conflict may be agree wi th the al ternative solution and on this way

confli ct comes to an end. Bargaining is also one of the powerful, strong effective technique for resolving the conflicts. Labour management conflict can be resolved effectively by bargaining technique.

C) Visualise and reduce negative consequences of conflict : There are a number of negative

consequences of conflict such as, employee inefficiency, poor performance, negligence, carelessness,indiscipline reduced production quality and quantity chaos, disorder wastage of valuable human and

non-huma n resources, delays in work, negative attitude towards the work, less involvement andinterest in the work etc. all these negative consequences of conflict must be visualized by the top

management and reduced it by developing and increasing inter group contacts, comminication betweenthem, negotiations, between them etc.

D) Adopting preventive measures : The inter group conflicts can be prevented by participatingemployees in decision making process, increasing their involvement, creating more interest in their work, developing communication network, facilltating inter group interaction by inculca ting team

spirit, team work, by telling them how important their role and work is in an oraganization. Conflict



can be prevented if the organizational goals and objectives are clear cut and understandable. Keep theemployees busy on their arrangements. Create the healthy and friendly environment in an organization.All these assist in prevention of conflicts where employees do not get time and energy in indulging inconflicts, clashes, disputes, quarrels, and frictions of any kind. There will be no scope for any kind o

inter group rivalry, hatred etc.

Reasons / Causes / Purposes of Organizational Conflicts :1) Inter-Relation- dependence of de partments : In a business organization vari ous

activities / functions are divided into various departments. There is a specilisation work and there is inter relationship and interdependency of department, the departmental executives have to interact and communicate each other on variety of matters for the attainment o

organizational objectives. During this process there are the chances of difference of opinion,disagree on some matters, clashes friction and all this ultimately resulted into the conflicts

which harmful to the organization.

2) Due to scarcity or l imited resources : Wherever the resources are limited every departmental head trying to get maximum resources their respective departments and this

may give rise to conflict. Moreover if there is unequal distribution of resources, conflictmay be arisen. Even if t here is any error is made distributi on of resources indifferentoperative areas may give rise to organizational conflict.

3) Ambiguous objectives and goals : If the organizational objectives and goals are not clear cut and easily understandable conflict may arise and obstruct the smooth flow of work.

4) Individual differences : Very individual is differ from the other individual. Every employee possess a different personality traits and characteristic or features. This ultimately resulted

in behaviour, conduct and attitude of the employees and may gives rise to organizationalconflict. Individual differences is one of the main causes of the conflict.

5) Absence of time management : For smooth running of organisation and timely attainment

of objectives, makes the organization profitable. If proper schedules are maintained for various activities the developmental executives may try to shift their responsibilities on one

another and start blaming one another it gives rise to conflicts among departments.

6) Lack of accurate forecasti ng of eventualities : In modern times changes are taking pl ace very fa st i n and a round t he business concern. The envi ronment changes are

indispensable and unavoidable in the world. If there is lack of accurate predictions of coming eventualiti es may give rise to conflicts in the organization. The adverse effects

these eventualities creat es, problems tension, clashes, frict ion, and conflicts among t he people working in an organization.

7) Employees dissatisfaction : The employees may be dissatisfied due to number of reasons

such as wrong placement, no promotion, poor wages and salaries, lack of leadership andmotivation, demotion, transfer, changes in duties or responsibilit ies, unhealt hy working

conditions, lack of welfare facilities etc. Such conditions depressed the employers. The stress, strain, tension, depression, frustration will be found among the employees at work

place causes conflicts for other organizations.

8) Poorly defined responsibilites, authority and role : If the duties, responsibilities andauthority of the employee is poorly defined, chaos and disorder may occur in the organization.If the role of the employee is also not clear, the role conflict is likely to occur.



9) Undesirabl e demands of Trade Union /workers : One of the l eadi ng causes of organizational conflict is undesirable, unjustifiable demands of organizational conflict betweenthe management and workers.

10) Lack of communication : If there is no proper communication between the employees definitely it gi ves rise to confli ct among the employees. In t he absenc of proper communication network, misunderstanding, confusion doubts may be created in the mindof the emloyees which ultimately resulted into organizational conflicts.

11) Poorly defined system of payment : The poorly defined system of wage and salary payment is one of the leading cause of conflicts among the employees at workplace.

12) Lack of discipline and rules and regulation : If there is no code of discipline, and

formal rules and regulation for leaves, promotion, transfer, training, demotion, holidaysmay give the scope for chaos and disorder, irregularities, indiscipline among the employeeswhich give rise to organizational conflict.

13) Faulty performance appraisal and reward system : If there i s faulty or defective performance appraisal and reward system is adopted, it definitely give rise to conflict

among the employees and management.

14) Poor, imbalanced authority / power distribution : Whenever there is imbalance betweenauthority and responsibility of the executives as well as employees give rise to conflicts.Moreover if there is authority hierarchy is not properly maintained there are chances of conflicts. The executives who gets more power may misuse it and conflicting situations

may be arise.

Classification of C onflictsThe organizational conflict may be classified on different basis as under. In fact there are three

basis of classification of conflicts.

1 On the basis of parties involved :

a) Individual conflicts

b) Inter personal conflicts

c) Inter-group conflicts d) Inter organizational conflicts

2 On the basis of organizational structure

a) Hierarchical conflicts

b) Functional conflicts

c) Line and staff conflicts

d) Formal and informal conflicts

3 On the basis of effects of conflict

a) Constructive conflicts

b) Destructive conflicts

On the basis of parties involved1) Individual conflict : In business concerns, people possessing different personality traits

and other characteristic employee on variety of jobs. Every individual is differ from other individual. Inmodern times individual differences i s one of the important characteristics of modern busi ness



organization. Different individuals having different behaviour and attitude which creates obstacle inintegrating and coordinating the activities cause to conflict. Moreover it create hurdle in co-ordinatingthe individual objectives / goals and organizational goals and objectives and may creat conflictingsituations in a business organization.

Inter organizational conflict : The conflicts arising between two different organizations are

called inter organizational conflicts. It is arise due to unhealthy competition, rivalry etc.

On the basis of organization structure.

1) Hierarchical conflicts : This type of conflict may arise between the people working atdifferent levels of management. A conflict situation may arise between top and middle level

or middle and lower level executives.

2) Functional conflict : Different department performs different functions. A conflict mayarise between the department, such as production and finance, production and marketing,

finance and research and development depart ment personnel and finance department, personnel and research development of department etc. The reasons may be inter relation

and interdependence of departments. limited resources lack of proper coordination poor and defective planning etc.

3) Line and staff conflict : Most of the time there is conflict between the line authority andstaff authority. Line executive posses the authority but staff executive does not, his role isonly to give advise to line executives. Whatever adevice given by staff executive it is not

mandatory on line execcutives to follow the advice given by him it may give rise toconflict.

4) Formal and informal conflicts : In formal organization structure whatever the conflictsarises are called formal conflicts It may arise due to their offi cially assigned duties,

responsibilities and authorities. On the other hand informal conflicts arise in informalorganization structure, here authority relationship does not exists. Due to informal groups

and organization of employees conflicting situations may arise.

3. On the basis of effects of conflicts :

1) Constructive conflicts : Constructive conflicts are positive in nature. They helps to increaseemployee performance, efficiency, goal qualit y of production / servi ces, less cost of production,

mi nimum absenteeism, smooth. And continous running of business, minimization of wast age etc.such conflicts are supportive to the attainment of organizational goals and objectives.

Positive / Healthy Effects of Constructive Conflicts :

1) Timely attainment of company’s goals and objectives

2) Identify the problems and solve it promptly

3) Active participation and involment of the employees in decision making process.

4) Elimination of wastages, lethargy delays etc.

5) Fostering team spirit, zeal, teamwork and motivation and enthusiasm.

6) To accept challenging work, responsibilities, duties.

7) To keep the organization modern, update and dynamic. 8) Develops positive attiude, unity of objectives among all the employees

9) Assist in expansion, growth and diversification

10) Assist in smooth running of organization and its survival and stability



11) Assist in progress and prosperity of organization.

Management of Constructive C onflicts :The following are the some of the important means or ways to manage t he constructive

conflicts.

1) Communication and Frequent Interaction : A sound communication network canestablish direct and healthy relations between the supervisor and his subordinates at any

level of management. The misunderstanding, confusion, doubts, suspicion, differences of

opinion etc will be removed and it can successfully develop among the employees a feelingof involvement positive attitude towards the work, cooperation honesty, oneness.

2) Positive and productive use of informal organization : The executive and managers

shoul d use the informal organization of employees for producti ve purposes of t heorganization such as activate them for better and effecient performance, develope amongthem team spirit, team work, stoping them from indulging themselves i n wasting their time, money and energy in unproductive activities, by threatening them of retrechmentand layoff incase of poor performance etc.

3) Educating and training : The employees should be educated on the recent trends

developments, advances indifferent areas of activities by inviting the experts and specialists.Arranging the training programme and adopting the different methods of training such asseminars, conference, symposia, workshops etc. Refresher and orientation training courses

will be arranged for improving and upgrading the knowledge and skill of the employees.And employees hidden talents and qualities should be utilized for the companys betterment.

4) Betterment, Rationalisation, M odernisation, Automation, Reorganization : All these

are the effective instruments or tools of managing constructive conflicts Rationalization,modernization, automation, reorganization keeps the organization, modern and update. Byadopting new technology, modified methods and procedures simplification of the jobs is

possible which helps the employees for better performance.

5) Unity of objects and goals : All the department activities should be integrated and co-

ordinated in such a way that ultimately organizations common objectives and goals can be

achieved. Remove all the clashes between the departmental heads and have to bring unityamong them. Frequentl y the departmental meetings should be convenced to know anddiscuss their issues, problems and to solve them timely.

6) Motivate by monetary and non-monetary incentives : In fact only monetary incentivesare not sufficient to motivate the employees but non monetary motivation is equally importantto motivate them, such as, promotion, praising them, offering more facili ties, benefits,

comforts, perks etc. at their workplace. By satisfying their higher needs such as socialesteem, self actualization etc. If the employees are highly motivated they can make more

profits for the organization.

7) Destructive conflicts : In fact constructive conflicts are in limited number but destructiveconflicts are in large number. The organizational conflicts are always of destructive nature. Due to destructive conflicts, the superior subordinate relations will be spoiled, delay in

decision making. employees will be frustrated, depress, distress, dissatisfied, their behaviour will be negative they are not interested in their work, lack of involvement in work. Becauseof these practices a company may suffer a loss. There will be low productivity, operative

efficiency, profitability more wastages of limited and valuable resources, more expenses,



delays in work, adeversely affects the goodwill and image of the organization. Employeesmorale and enthusiasm will be reduced. All this adversely affects the organizational survivaland stability.

The Major Effect of Destructive Conflicts1) It reduces productivity and overall efficiency of the organization.

2) More wastages, losses, damages of human and non human resources.

3) Lack of co-operation and unity and integration of work.

4) Long term plans, schemes, programmes policies will be hampered.

5) More disorder, confusion, chaos and indicipline will prevail.

6) Prime importance to personal interests of employees and companys common interest would be neglected.

7) More accidents, poor quality of work, corruption, etc.

8) Company’s image, reputation will be damaged.

Nothing is gained by the company in case of destruction conflicts. They are dangerous andvery harmful to the company. If these conflicts are severe company has to resolve them as early as

possible. If possible company has to introduce one preventive measures for non occurrence of it.The following are measures of destructive conflicts :-

1) Call the parties to compromise : The management has to call the parties to destructiveconflicts to compromise and has to take the intiative and arrive at the compromise. For

compromise between the conflicting parties some time management has to force them toit and resolve it.

2) Action against the conflicting employees : At a right time management has to take some

warning type or punitive type of action against the destructive employees such as demotion,transfer, charging fine etc.

3) Politi cs and diplomatic tactics : Whenever informed organizat ion, of employees are powerful. Trade union are powerful the management has to do all effort to weaken them

for this it has to, use politics and diplomatic tactics.4) Compulsory Arbitration : The management has to arrange for mediation or arbitration to

resolve the destructi ve conflicts. And the decision of arbitrator or mediator has to be binding on both the parties.

5) Cognizance at the right time : The managers has to take the cognizance of destructive conflict at the right time and have to resolve the same.

6) Appraisal of personnel policies : The personnel policies should be reviewed at a proper

time. And there must be introduction of modified, reviewed personnel policies. It helps tominimize destructive conflicts.

7) Enhancing employees morale : The management has to do all efforts to enhance t he

morale of the employees, which minimize the destructive conflicts among the employees.

8) Through communication and workers participation : Two way communication shoulddevel oped and workers should be participated in management. Their effect ive measure

keeps the control on destructive control.

9) Punishment Punitive measure : When employees resist the appeals, orders and commandsof the management. Then management has to go for punitive action such as demotion,



suspension, termination, compulsory retirement, dismissal, retrenchment, lay-off etc. but suchaction or step should be the last resort. Even if the threaten are given to the employees o

punitive action, would minimize destructive conflicts at a greater extent.

In this way management has to resolved these conflicts by adopting various preventive and precautionary measures so that they do not arise.

Q uestions

1. What do you mean by Change ?

2. Explain the various types of change ?

3. What do you mean by Planned Change ?

4. What are the characteristic of Planned change ?

5. Explane the various forces of change ?

6. What are the causes of resistance to changes ?

7. Suggest the remedies to overcome resistance to change. ?

8. What do you mean by Management of Change ?9. Describe the steps in the process of mangement of change ?

10. How the managers, manage the organisation in changing environment ?

11. Explain the various changes in environment ?

12. Explain, The basic trends affecting management in future

13. State the new challenge for the managers in future

14. What do you mean by conflict ? Define the term ‘conflict’ ?

15. Write the characteristic of Conflict ?

16. Explain the classification of conflicts ?

17. Describe the causes of organizational conflicts ?

18. How the conflict can be classified on various basis ?

19. Explain the positive effects of constructive conflicts ?

20. What are the devices of management of constructive conflicts?

21. What do you mean by destructive conflicts ?

Explain the effect of destructive conflicts ?

22. Describe the cases of organizational conflicts ?

23. How the conflict can be classified on various basis ?

24. Explain the positive effects of constructive conflicts ?

25. What are the devices of management of constructive conflicts?



3PLANNING

Planning is a prerequisite of every management function, whether it is organising, staffing, directing

or controlling. All these functions have to be preceded by a system of efficient planning otherwise the persons concerned with executing them will fi nd it difficult to perform them systematically and

efficiently, Planning enable to provide for the uncertain future. Planning is the most basic rock bottom

function of management. While performing the organisation function, the top management has toevolve the concept of proper flow of authority, responsibility among the superiors and the subordinates

and also the extent of delegation of authority. Under staffing, the top management has to determine policies and programmes in respect of recruitment, selection, placement, training etc. The direction

function can be performed efficiently, if the systems of communication and motivation are planned properly. The performance of t he control function is largely dependent upon t he effect iveness of

planning. The designing of control system starts with the formation of various plans.

Planning involves anitcipation of future course of events and deciding the best course of action.It is basically a process of thinking before doing. “To plan is to produce a scheme for future action, to

bring about specified results, at specified cost and in a specified period. It is a deliberate attempt toinfluence, exploit, bring about and control the nature, direction, extent,speed and effects of change. It

may even attempt deliberately to create change. But, while incorporating changes, it should always beremembered that change (like decision ) in any one sector may in the same way affect other sector.

Broadly speaking, planning is a major cluster of activities in the management process and consists of

formulating the objectives and the actions to be taken to achieve them. It is a process concerned withwhat has to be done and how it is to be done. Its focus is on laying down the ends and means. Thus,there are two essential aspects of planning. Merely, selecting goals and targets to reach, is not planning.That is only one phase of his process. Other necessary phase involves selecting or designing appropriate

techniques and procedurs that will be instrumental in arriving at the goals. One without the other does

not provide a plan.Meaning And Concept of Planning

Planning concentrates on setting and achieving objectives of an organisation. Planning is the firstManagement function to be performed in the process of management.It governs survival, growth and

prosperity of any organisation in competitive and ever-changing environment. The planning functionis performed by mangers at every levels of Management. It is necessary for discharging all other

management functions.

Planning is a primary function of Management. It decides in advance, what to do, how to do it ,

when to do it and who is to do it. Planning bridges the gap between ‘where we are’ and ‘where wewant to be.’ Planning is an intellectually demanding process. It requires the conscious determination

of course of action and founding of decisions on purpose, knowledge and considered estimat es.Planning is the determination of courses of actions to achieve the desired results. It involves anticipation

of future course of events and choosing the best course of action. Thus,it is a process of thinking before doing. We can say that planning is a systematic attempt to decide a particular course of action

for the future. It leads to determination of objectives of the group activity and the steps necessary to

achieve them. In a way planning seeks to answer to the following questions :-



What should be done ?

Why is action necessary ?

Where shall it be done ?

Who will do it ?

How will it be done ?What physical resources will be required ?

Planning is deliberate and conscious research used to formulate the design and orderly sequenceof actions through which it is expected to help to reaching its objectives. Planning chalks out a courseof action for the enterprise to follow. Planning is a major cluster of activities in the managing processand consists of formulating the objectives and the actions to be taken to achieve them.

In other words, it can be said, ‘Planning is an analytical thought process which covers :-

i) assessment of future,

ii) determination of objectives and goals in the light of the future,

iii) development of alternative courses of actions to achieve such objectives, and

iv) selection of the best course of action and its alternatives

Planning in business is an on going process because changes in business environment are continuous.A business enterprise is not living in a vaccum. It is an open, adaptive social sub system living in adynamic world, always trying to adapt itself to the ever changi ng conditions of demand, supply,

prices, competition, technology, goverment policies etc. A plan is based on reliable information andnot on emotions and feelings. It reflects vision,foresight and wisdom. It is a blueprint of action.

Planning is defined by different authorities as follows :-

“Planning is the selecting and relating of facts and the making and using of assumptions regardingthe furure in the visualization and formulation of proposed activities believed necessary to achieve

desired results.”

-George Terry

“The process of planning covers a wide range of activities, all the way from initially sensing that

something needs doing to firmly deciding who does, what,when. It is more than logic or imaginationor judgment. It is a combination of all those that culminate in a decision- a decision about what should

be done. The decision phase of planning is so important that we shall use the expression decisionmaking as a synonym of planning.”

- William H. Newman and Charles E. Summer Jr.

“The planning function determines organisational objectives and the policies, programmes, schedules, procedures and methods for achieving them. Planning is essentially decision making since it involveschoosing among alternatives and it also encompasses innovation.That planning is the process of makingdecision on any phase of organised activity.”

- Richard N. farmer and Barry M. Richman

Planning is fundamentally choosing and that, “a planning problem arises only when an alternativecourse of action is discovered.” -Bill E. Goetz

The selecting from among alternatives for future course of action for the enterprise as a wholeand each department within it

- Knnontz and O’Donnell



However, they immediately indicate that planning is more than mere decision making. Planningdoes involve decision making and is intimately connected. Final selection from alternatives or decisionmaking is merely a part of planning which depends on the existence of alternatives.

To conclude, planning is thus the first step in the management process concerned with the

establishment of objectives and goals to be attained in the future in the light of an analysis of presentlimitations for attaining such goals with a view to their removal or deduction, anticipation of the future

environmental factors and their impact and designing the course of action and programmes for attaining such preselected goals. It involves both thought and communication. In fact Harwick and Landuyt

described planning as “gan. mesmanship” or the employment of a strategy in the persuit of goals.”

They thus place special emphasis or imaginative thought , creativity and innovation.

Thus, planning involves thinking and analysis of information, arriving at certain assumptions inconnection with what is likely to happen in the future and then formulating the activities required to

achieve desired results or goals or objectives. The planner must be able to look into the future andconceptuali ze the proposed pattern of activities. Planning concerns the future. As Terry indicates,“Today’s, efforts are tommorrows work that the manager thought about yesterday”. Planning thus

deals with the proposed actions. Great emphasis is placed on planning by the modern managements

which strive for their organisation’s survival, growth, prosperity and healthy mode of operations. AManager desires to provide stability to his efforts by considering many complicated future variables,

since the future involves change and uncertainty. Moreover, planning is necessary to achieve resultsthrough the efforts of others. Hence, a manager must plan the efforts required to achieve the desired

results. The main principle of planning is that adequate planning or mental exercise must take place before doing the physical efforts to accomplish a goal most effectively. Planning exists in all enterprises

irrespective of their size. It is done consciously in some and unconsciously in others. Since planning

is a continuous and never ending activity, most managers re-examine plans regularly with a view tomodify or adjust them promptly in the light of the new situations or conditions.Managerial planning

draws up a blue print of activities to be undertaken.It is consciously choosing out of saveral given

alternative of the objectives to be achieved, policies to be followed, rules and methods to be adopted,and ascertaining i n advance the programmes,procedures and budgets so that they may serve as a

guide to the action yet to be undertaken. According to Alford and Booty? “Planning is the thinking

process, the organised foresight, the vision based on facts and experience that is required for intelligentaction.” Millet observes, planning is the process of determining the objectives of administrative effortand of devising the means calculated to achieve them”. Planning is essentially an intellectual process of careful thinking and analysis of facts, considering estimates of past events and future trends. It

requires a difficult mental exercise, a keen foresight, analytical mind and broad based knowledge of facts. In planning, the manager must be able to manipulate abstract ideas and anticipate the impact of

any possible outcomes which might affect the enterprise. Planning is pervasive. It is not an exclusiveresponsibility of the top management but is performed by each manager at every level in an enterprise.Although the nature and scope of planning will very with a manager’s authority, it is virtually impossibleto circumscribe his area of choice, that he has no discretion in any of his actions. In fact, unless amanager has some function of planning,how so ever limited, it is doubtful that he is truly a Manager.

In practice, the strategic and important plannings are performed by managers enjoying wider authority

and the lower level managers formulate their own plans within the framework of objectives set by the Management.Business planning should be a way or mode of life essential to maintain the health of an

enterprise. It demands a firm determination and conviction to plan constantly and systematically and business planning must be an integral part of the Management.



NATURE AND SIGNIFICANCE OF PLANNING

The basic features of managerial planning are given below :

1) Planning is base for to all Management functions : Planning is a basic function amongall Management functions, since managerial operations in organising, staffing, directing

and controlling are designed to support the accomplishment of enterprise objectives andgoals, Planning logically precedes the execution of all other Managerial functions.

2) Focus on objectives : A plan must concentrate on accomplishing certain objectives. Itlays down the ways and the means to achieve them. Planning is closely associated with

the objectives of the organisation. A plan can focus attention on purposes. It can forecast

which actions will tend towards the achievement of ultimate objective.

3) Primacy of planning : Planning is the first of the managerial functions to be performed.The beginning phase of the management process is planning. Planning is based upon the

organisational objectives. Other managerial operations in organising, staffing directing and

controlling are designed to support and accomplish organisational objectives. Planning isindispensable in every activity of the Management.

4) Forward looking : Planning is always concerned with looking into the future. It involves

forecasting of future environment in which the organisation is expected to function. Planningis intimately related to future. It is forward looking, trying to see, through the uncertain future, what lies ahead.

5) Planning is a pervasive function of Management : Planning is done by all managers,

although the scope of planning varies with their authority and with the nature of policies

and plans outlined by their superiors. Planning is an important part of every manager’s job.However, the degree of planning skills required will depend upon the manager’s position.

For example, the higher, one goes in the management structure, the more time of his will be spent in planning. Top management is concerned with strategic planning whereas middle

management is incharge of administrative planning. Lower management has to concentrateon operational planning.

6) Selection of alternatives : Planning is concerned with selecting the best course of actionfrom among the alternatives. Decision making is an intergral part of the planning function

of management .

7) Efficiency, Economy and Accuracy : Efficiency of plan is measured by its contribution

to the objectives as economically as possible. We must have the maximum results at minimumcost. Planning also focuses on accurate forecasts. Focus of every ki nd of pl an is ondetermination of the future course of action. But, the “Course of action” can be determinedonly on the basis of knowledge of future events. This automatically entails the need for the

forecasting of future events.

8) Co-ordination : Planning co-ordinates all the ‘ what, who, how,where and why ’ of planning.

We cannot have united and synchronised efforts, without co-ordination of all activities.

9) Effectiveness of planning : The planning function should be conducted efficiently and

effectively. The efficiency and effectiveness of planning is measured by its contribution in reaching organisat ional objectives versus its corresponding cost s. In other words, plans

should be developed after due consideration of potential benefits to be received versus



costs to be incurred.

10) Limited factors : A planner must recognise the limiting factors like money, manpower,material s, machinery and management and formulate plans in the light of these criticalfactors.

11) Fixibil ity : The process of pl anning should be adaptable to changing environmentalconditions. It is a bad plan that admits no modification. A plan must be adjustable, always

ready to incorporate internal as well as external changes.

Relation between planning and c ontrol :In a functional sense, planning is the determination of objectives, goals, strategies, policies and

programmes of an organisation to give purpose and direction to its activities over a specified period of time. It involves decision ma king in the above areas to chalk out the future course of action in

conscious, specific and comprehensive terms. Planning substantially reduces the areas of uncertainty,

confusion, chaos, crisis etc.in organisational life, by setting standards and targets in advance to guideand control enterprise activity. Pl ans are meant to be implemented. Therefore, by its very nature,

planning generates the need for control. The essence of control is action or directing the operations of the enterprise towards pre-determined standards and monitoring the progress in this regard for the

purpose of feed-back and correction. The basis of control is precise and timely information in thehands of the manager which wil l give them an opportunity for preventive and corrective action,whenever called for. The need for control is paramount to ensure that the plans are in fact moving

along the pre-determined paths with least deviation and disturbance. That the structure and pace of events conform to plan, that action towards securing results is as envisaged and that result do in fact

meausure up to the desired standards.

In an effective control system, the points of control are to be set up at their levels i.e. preventivelevel, current level and corrective level. At the first level, advance action needs to be taken to prevent

deviation from occurring at all. At the second level, action is directed at guiding the ongoing activityalong the set course. At the third level, actual deviations are corrected after they occur but before they

do any damage to the system. Effective feed-back of information at all levels keeps the control stytemalways on its toes.

Planning and decision making :Decision making is the activity that diffuses itsel f throughout the entire process of planning.

Decision making means making a choice between two or more alternatives. And the selected alternative

means only the decision. The best alternative so chosen is expected to accomplish the desired results,with efficiency, economy and certainty. The principle of alternative planning and decision making

process are identical or similar. Planning involves continuous collection, evaluation and selection odata. It involves scientific investigation and analysis of the possible alternative courses of action. The

best alternative becomes the plan. Planning precedes nearly every decision except the most routine.

Managerial planning in business :

Business planning begins with the setting of goals or objectives of the enterprise. It is based on forecasting the environment in which objectives are to be achieved. It determined the approach by

which the goals or objectives are to be achieved.

The approach i s described in the form of strategies, policies, programmes and procedures for achieving the chosen objectives in a given business environment.A proper and sound organisation

structure must be planned to implement the adopted plans and policies. The strategy of a company



(basic long-term goals and plans ) determines how the firm is to be structured and managed i.e. howthe business is to be organised and managed. Management decision and actions need a sound organisation.It helps the continued implementation of pl ans and programmes. Business planning also includes areview of performance and sound machinery for feed-back of information to introduce corrections

and a new planning-action-control cycle. Planning and contr ol can ensure the accomplishement of

stated goals.

Significance of Planning :Planning is an indispensable activity in globalised modern organisations. Without sound and proper

planning, the affairs of any enterprise are most likely to be haphazard. There may be repetition of certain activities, wastage of money, time, efforts and resources. Objectives and goals would not be

achieved in time. In short, without plans, action becomes merely random activity, producing nothing but chaos. Therefore, planning is a must to achieve consistent and co-ordinated structure of operationsfocused on desired objectives. Henry Fayol has explained the significance of planning as a function

of management in the following words :

“The maxim of Managing means looking ahead. It gives some idea of the importance attached to

planning in the business world and it is true that its foresight is not the whole of management. It is an

essential part of it. The plan of action, at one and the same time, is the result envisaged, the line of action to be followed, the stages to go through and the methods to use.”

An efficient system and planning enable a business enterprise to achieve the following advantages

or benefits.

1) Concentrates on objectives : Basic feature of planning is its relation with organisationalstructure. All the operations are planned to achieve the organisational objectives. Planning

facilitates the achievement of objectives by focusing attention on them. It provides clear

definition of objectives so that the most appropriate alternative course of action is chosen.In absence of planning, there is a danger that Manager and other members of the organisation

may get lost in the maze of routine activities and loose sight of the broad objectives, for theachi evement of which, t he organisati on is established. Thus it protects the management

from being the victim of means-becoming ends in themselves.

2) Reduction of uncertainty : Future is always unpredictable and always full of uncertainties.A business concern has to function in these uncertainties. It can operate smoothly andsuccessfully, if it is able to predict the uncertainties. Some of the uncertainties can be

predicted by undertaking, systematic forecasting. Thus, pla nning helps in foreseeing

uncertainties which may be caused by changes in technology, fashion and taste of people,government polici es, rul es and regulat ions, market condit ions etc. Coll ect ing such

information provides a better understanding of what is likely to happen in the future andhow an organisation should react, if different conditions crop up.

3) Co-ordination : It is one of the basic features of planning that it is related to the organisationalobjectives. All the operations are planned to achieve the organisational objectives. Planning

facili tates their achi evement by focusing attention on them. Good pl ans unify t heinterdevelopemental activities and clearly lay down the area of freedom in the develoment

of various sub-plans. Various activities are performed by differente departments. Variousdepartment work in accordance with the overall plans of the organisation. Thus there isharmony in oraganisation and duplication of efforts and conflict of jurisdictions are

avoided.



4) Economy in operations : Planning ensures economical operations because of emphasis on efficiency. Since planning involves the selection of the best possible courses of action,it is implied that best results would be achieved at the least possible cost.

5) Planning facilitates control : Planning and control are inseparable in the sense that unplanned

action can not be controlled because cotrol involves keeping activities on the predeterminedcourse and by rectifying deviations, if any, from plans. Planning helps control by furnishing

standards of performance.

6) Encouragement to innovations. : Planning helps innovative and creative thinking among

the managers because many new ideas come to the mind of a manager during planning. Itcreates a forward looking attitude among the managers.

7) Increase in competitive strength : Effective pl anning gives a competitive edge t o the enterprises over other enterprises that do not have planning or have ineffective planning.

Thus, planning may involves expansion of capacity, changes in work methods, changes inquality, anticipation of tastes and fashion of people and technology changes etc.

8) Planning focuses on the future directions, values and sense of purpose : Countinuous planning by management shows precisely what the entrerprise wants to achieve in a given

period as well as how it intends to accomplish the predetermined objectives. The organisationknows its present position and also where it wants to go. Basic objectives indicate the

direction of growth.

9) Planning provides a unifying decision making frame-work : Every company has a

number of functional departments, such as production, finance, marketing, personnel etc.Depart mental managers must develop their own functional st rategy or departmentaldirection. Whithout an overall corporate plan, there will be confusion and chaos. With aclear, effective masterplan, each department knows what it must do to contribute to the

achievment of company goals. And thus all the departments would work in unity to achievecommon corporate goals. Eventually planning improves the decision making process in theorganisation.

10) Planning helps to identify potential opportunities and threats : Peter Drucker has

pointed out that planning cannot completely eliminate the risk and uncertainties of t hedecisions in long term planning. But, it can certainly hel p to i dentify the potentialopportunities and threats and at least minimise the risk or uncertainties. A plan is based on

concrete and reliable information both about internal and external environments and our

sole aim is to secure a balance between our resources and our customer needs in order tooffer maximum customer satisfaction. Objectives are set on the basis of inside and outside

environmental forces revealing opportunities and threats.

11) Keeps the business organisation dynamic : Need for planning is arisen from constant changes, in economic, social, political, technological and cultural fields. Therefore, these changes must be noted and their influence must be given consideration in the plans and

policies from time to time. A business enterprise and its surrounding environments aremutually interdependent and interacting with each other, continuously. A business enterprise

lives in the world of resources, opportunities and limits. It can survive and grow onlywhen it continuously adapts and responds in time to environmental changes. Change isthe essence of life. If, there is anything constant, it is the change. We are living in a

dynamic world. Change also implies progress. Management through comprehencive business



planning can anticipate, meet and adopt creativity to ever changing environmental conditionsand demands. Planning aids the manager to assure the survival of the organisation under keen competition and changing environments.

12) Planning provides performance standards : Ideal plan clearly specifies the

targets to be reached. For example- If a standards production of one lac units of certainarticle during a specific period is prescribed, it, therefore, becomes imperative to achieve

this target. Secondly i f rate of ret urn on share holders investment is determined to bedoubled within five years, the organisation has to work in that direction. The performance

of a company is measured and control led on the basis of such a specific performance

standard.

MERITS AND DEMERITS OF PLANNING

Merits :

1) Integrated, consistent and purposeful action is more easily achieved by planning. All efforts

are directed towards desired objectives or results. Unproductive work, unnecessary operativeactivities and waste of resources can be minimised.

2) Planning enables a company to remain competitive with other rivals in the industry.Progressive management can improve product or service, methods and facilities, well in

time before it is forced to do so by the competition.

3) Through careful planning crisis can be aticipated and mistakes or delays avoided. Trouble can be more oftern easily removed in its earlier stages than after the crisis is developed. By

anticipating the future risk or uncertainty or impending crisis, planning helps the manager

to be prepared to meet such contingencies.

4) Planning can point out the need for future change and the enterprise can manage thechange effectively. For instance, planning can reveal future uncertainties or changes in the

economy and the management can be prepared to face t hem with reasonable success.Management of changes is based on planning.

5) Planning enables systematic and thorough investigation of alternative methods or alternatives

solutions to a problem. Thus we can have sound decisions by selecting the best method or alternative to any business problem.

6) Plans are based on adequate information of the past and present as well as on the intelligent forecasting of the future. Hence, we have a ccurate and realistic plans of production,marketing, finance etc. Planning maximises the utilisation of available resources and ensures

optimum productivity and profits.

7) Planning provides a sounds basis for reasonable and effective control. Planning and control go hand-in-hand. Under planning, we have deadliness for the starting and completion of a

project. We have also standards of performance, reflected in the goals or targets. A budgetis not only a plan but also an instrument of control. Thus, planning facilitates controlling.

8) Goals, policies, procedures and time-bound actions- programmes are determined in advance

and are co-ordinated as well as directed among the channels. This removes the problem of confusion and thereby chaos. The organisation can, thus, reach the destination in the time

that too effectively.

9) The systems approach to business planning and business management demands synthesis,



better co-ordination and integration of all functional areas of business organisation and tohave overall planning if the enterprise as a whole. Planning enables management to relatethe whole enterprise to its complex environment profitably. The manager can visualise theinterrelation of different departments as well as interelations of the enterprises with all

environmental forces.

10) Business planning in a comprehensive manner alone can assure survival, growth and

prosperity, under keen competition and the fast changing environmental forces, particularlyin the branch of science and technology.

11) Planning fa ci litates effective del egation of authority to act, removes communicationdefficulties, provides proper machinery for co-ordination and integration of all functions.

To sum up :Planning is a must for modern, complicated, large and diversified business enterprises. It is

because of planning, that business enterprises can make optimum use of resources and minimisationof the risks and uncertai nties is possible. Planning has assumed unique importance in the modern

ma nagement process due to accelerated rate of change in sci ence and technology, powerful social

changes, inter-dependence among modern organisations, emergence of complex and large business

enterprises, and changing environments.Demerits or Limitations of Planning :

Though there are so many merits of planning still there are some limitations of planning, whichare mentioned below :

1) Lack of accurate information : The planning process starts with the collection of relevant

data. The reliability of a plan depends upon facts and information on which, it is based. If reliable information and dependable data are not available, planning is surely to lose much

of its relevance.

2) Lack of accurate forecasts : Planning concerns future and its quality is determined by

the quality of forecast of future events. As no Manager can predict completel y andaccurately the events of future, the plans may pose problems in operation. These problems

are further intensified by problems in formulating accurate promises. Many times managersmay not be aware about the various conditions within which they have to formulate their

plan. It is difficult to measure immediately the correctness of planning, since it takes timefor the results to start flowing, in the form of feed back data.

3) Complex and expensive process : Planning is a complex and expensive process. Itdemands detailed and serious thinking, tremendous hard work. It is time consuming also.Some managers do not like to undergo such a complicated process as they prefer shourtcuts. Such short -cut planning may not yield the desi red results. Planning is a t ime

consuming and expensive process. Therefore, this may delay action in certain cases. Butit is also true that if sufficient time is not given to the planning process, the plan so producedmay prove to be unrealistic.

4) Rigidities : Internal inflexibility in the organisation may compel the planners to make rigid

plans. This may prevent the managers from taking initiative and from doing innovative thinking. Rigidities appear from managers negligence to revise the plan, polici es and

procedures.

5) Lack of specific goals and objectives : Qualitative objectives like social responsibility,

management development, quality of work etc. are often expressed in vague generalisations



which defy proper evaluation. If these objectives conflict with quantifiable ones, managers tend to ignore them totally. Planning can not become effective unless goals are specific, clear and actionable.

6) Lack of planning skills : Plan can be no bet ter than the competence of the pl anner.

Planning is an art and takes a special type of person to formulate it. Everyone is notcapable of planning and solving organisational problems. A planner must possess not only

skill but also intelligence and breadth of vision. Forecasting ability is a must for long term planning.

7) Resistance to change : Resistence to change is a nother factor which puts limits on planning. It is a commonly experienced phenomenon in t he business worl d. Somet imes,

planners themselves do not like change and on other occasions, they do not think it desirableto bring change as it will create resistance on the part of the workers. This attitude makes

the planning process ineffective.

8) Lack of participation : People who are not involved in the formulation of plan may tend

to resist the plans at their implementation stage. Plans imposed from above often lead toresentment and resistence among those forced to implement.

9) Psychological factors : Psychological factors also limit the effectiveness of planning.Some people consider present more important than future because present is certain. Such

persons are psychologically opposed to planning. But it should not be forgotten that dynamicmanagers always look ahead. Long-range well-being of the enterprise can not be achievedunless proper planning is done.

10) External factors : The planners are often confronted wit h external forces whi ch are beyond their control. The forces may be economic, social, legal, political, technological,geographical and international too. The managers have to formulate their plan keeping in

view the demand of these factors Thus, their scope of action is limited, and thus make planning ineffective in many cases. The effectiveness of planni ng is sometimes limited because of external factors which are beyond the control of t he planners. Ext ernal

stringencies are very difficult to predict. Sudden break cut of war, Government control,

natural havocs and many other factors may make the implementation of plans very difficult.11) Powerful group : Powerful group in the organisation may apply pressure to see that

“plan” goes in the direction that increases their power which may not exactly be the direction

from the view-point of overall good of the company.

12) Undue influence of chief executives : The planning organisation may be unduly influenced by what it considers to be the “pet projects” of the Chief Executive and may fail to applycritical analysis to its plans.

Some of the above mentioned limitations of planning can be overcome by taking the following measures :

Firstly ,the management information system should be properly organised so that all the relevantfacts and figures are made available to the planner before they make any plan.

Secondly , a system of forecasting coupled with a keen insight into the dynamics of fut ureenvironment will improve the reliability of planned projections and estimates.

Finally ,management should give sufficient time and attention to plannings as it is the basis o

every other managerial function.



The limitation of planning must be balanced against the benefits that can be expected, if the plans are simple, flexible and feasible, if we have well-defined objectives which are understood byall, if we evolve plans under democratic participative leadership and above all if we have adequateaccurate and up-to-date data for planning, we can safely conclude that planning is bound to be a

blessing or a boon to business organisations. In reality no enterprise can exist today without some

planning. In the modern computer era, management information service, research and developmentdepartment, marketing research section can provide ample raw material for building up the super

structure of a comprehensive business plan. The raw material is usually in the form of statistical data

i.e. facts and figures. The planners process this data by application of scinetific methods involvingsystematic clasification analysis and investigation. The latest mathematical or quantitative decision-making tools and techniques such as operations reserach enable us to secure rational solutions withminimum bias for many managerial problems. After the processing of data with the help of scientific

methods, we have the finished products viz. a plan on the basis of adequate, accurate and up-to-dateinformation. We can formulate a good plan of action which can yield optimum results and which canachieve the desired goals when it is implemented efficiently. Plans based on facts and figures can be

very sound and realistic. Planning should never be on wishful thinking.

Features of a good and ideal plan :1) A good plan should be based on clearly defined objectives-overall corporate objectives as

well as functional and / or individual objectives i.e. precise objectives of the departments aswell as the individuals workings in the departments.

2) A good plan should be simple and easily understandable.

3) It should be flexible or adaptable to deal with new conditions.

4) It should be balanced in all respects and gives equal emphasis to all vital areas of business.

5) It should provide for a proper analysis and classification of actions i.e. it establishes necessary

guides and standards of performance.

6) It should provide to use the available resources to the utmost, before creating new resourcesand a new managerial set up.

7) It should be viable, feasible and reasonable.

TYPES OF PLANS( Elements or components of planning )

There are different ways in which plans are classified. Basically plans are of two types, formal

and informal. Formal planning is comprehensive and rational. Informal planning is exclusive for managers who develop plans but never formally put them on paper and may not even communicatethem to others. The informal planning remains only within the minds of the managers as an image of

what should or shall be done. It lacks definiteness, expression and even rationality in the sense that it

is instinctive in nature and not systematic. But, however, i t is interesting to note that, at times, informal plans are more significant than formal ones. Another classification of planning can be done

according to the time dimension i.e. (1) Short-term plans extending up to one year, (2) Medium-term plans of more than one year but less than five years, (3) Long-terns plans of five years or a longer

period.

Plans could also be classified in terms of functions like production planning, marketing planningand so on as against over all company planning. Another way to classify plans is to divide them into :

(1) Objectives, (2) Policies, (3) Rules, (4) Procedures, (5) Programmes, (6) Shedules, (7) Budgets,

(8) Methods, (9) Strategies and tactics, (10) Standards, (11) Forecasting. These are now briefly

described



below :

1) Objectives or goals : The end results to be achieved or towards which an activity is to be

directed, are described as objectives or goals. Objectives are plans for the futures that willserve to provide direction for subsequent act ivity. W e have a hierarchy of objectives.

Primary or basic objectives are determined by top management. Each department has itsown objectives within the framework of basic goals. Objectives of the organisation have to

be crystalized for the enterprise as a whole which would constitute the basic plan of theorganisation. This requires creative thinking and foresight. These objectives constitute a

part of the planning activity.

Effective management is always management by objectives, corporate objectives influence

the management philosophy and practice. They have a great influence on the organisation, policies, personnel and leaderships as well as managerial control. All other elements o

planning such as policies, procedures, rules and budgets assist and guide in selecting thosealternatives that permit the achievement of predetermined objectives in the most economicaland efficient manner. They guide on the path leading to achievement.

2) Policies : Policies are general statements aimed at guiding and thinking during making

decisions. It is a guide to action or decision of Manager. They constitute broad boundaries, permitting initiative of the Manager to the extent of interpreting the particular policy. Policiesneed not necessarily be written as they may be implied from the past actions of managers.Policies are directives, providing continuous frameworks for executive actions on recurrent

managerial problems. A policy helps in keeping work in line with objectives. Both objectivesand policies guide the mental and physical actions of a manager. Policy assists decisionmaking,but there may be deviations in certain extraordinary circumsta nces. That onlymeans there is a limited scope for discretion in dishonouring a policy.

3) Rules : Rules are also looked upon as plans as they prescribe the course of action required.

Rules are related to procedure as they guide action but there is no time sequence attachedto them.

Rules are the simplest type of plan chosen from alternatives. Rules provide for a specific

action to be taken or not with respect to a situation. It is more rigid and more specific than policy. It guides action but provides no discretion in its strict application. Rules are essential for discipline and smooth operations of the business. A rule is designed to define in advanceas to what alternative must be selected or what decision must be made. Rules are related to

procedure.

4) Procedure : Procedure is another kind of plan as it involves selections and establishement of a logical series of tasks within the framework of predetermined policies and objevtives.

Procedures a re, therefore, more definite than policies. It is a standing action plan as a

means of implimenting the policy. For example, the sales department lay down a policy toexecute all orders within 24 hours. The procedures of execution of orders will prescribe a

sequence of steps that must be followed after the receipt of an order till the dispatch of

goods to the customer. These chronologically arranged series of steps or taskes constitute

a procedure. Procedures are, therefore, more definite than policies, defining specific activitiesto be completed towards a predetermined goal. Procedures exist throughout the organisation.Once a procedure is established, it ensures uniformly high level of performance. It results

in work simplification and eliminates overlap or duplication of efforts. A procedure lays



down the manner or method by which work is to be performed in a standard and uniformway.

5) Programmes : A programme integrates policies, procedure etc. required for effecting a

certain course of action. It thus integrates activities which are diverse but related. It may

be looked uponas “planned actions” integrated into a unity and designated to bring about

the stated objective. In other words, it is a sequence of activities designed to implement policies and accomplish objectives. It gives step by step approach to guide action necessaryto reach predetermined targets. It is an instrument of coordination i.e. a timetable of action.

A good programme ensures smooth and efficient operation. Procedure tells how it is to bedone whereas programme tells what is to be done. It enables a manager to prepare himself

carefully and systematically for difficulties before they arise.

6) Schedules : Schedules are the timings fixed for completing the programmed operations.

They lay down timings when each step in a programme is to be executed. Schedules are

necessary part of planning in order to ensure continuity in production, to secure constantflow of product into market and to avoid delays in various operations. A shedules specifies

the time when each of a series of actions should take place. Once the tasks to be done and persons who must do them are clear according to our standing plans, scheduling may be

only element needing immediate management attention.7) Budgets : Budget is described as both a planning and a controlling device. A budget is a

projcet of defining anticipated costs of attaining an objective.It is an appraisal of expectedexpenditure agai nst anticipated income for a future period. A budget is a st atement o

expected results expressed in numerical terms like rupees, product units and man hours. Itis also used as an instrument of managerial control. It provides the standard by whichactual operations can be measured and by which variations can be checked. But it should

not be forgotten that preparing a budget is clearly planning. A budget is a forecast of anenterprise to make, in advance, a numerical compilation of expected cash flow, expenses

and revenues, capital outlays or machine hour util isation,etc. Budgeting is essential for

control.coordinates the activities of various departments of a business enterprise by adjusting and incorporating the departmental budgets into the master budget. However, to be effective

means of planning budgets should have functional flexibility. They should not be rigidinstruments. They should be abl e to cope with unforeseen circumstances wi thin a

predictable range of activities.

8) Methods : The method prescribes specifically and in detail how a task is to be performed

constituting the best manner. Methods are sub-units of a procedure. They show clearly asto how a step of a procedure should be performed. They indicate the techniques to be

employed to make the procedure effective. The primary focus is on finding out the bestway of doning a piece of work. For example in a manufacturing concern, product samplingmay be a method used as a part of quality control procedure. A method is the manual or

mechani cal means by which each operation is performed. It means an esta blishedmanner of performing an operation. Thus, a method is more limited in scope, than a

procedure, because it deals with a task that is only one step of a procedure. For example in

the procedure for processing an order, there are methods for acknowledging the incomingorder, checking the credit status of the customer, preparing the sales invoice and distributing

its copies.

9) Strategies and tactics : “Strategy” is a military term which means to counter the movesof the enemy forces. This term is widely used in business also. A strategy involves preparing



oneself for unforeseen and unpredictable events. In other words a strat egy means placing oneself in the position of competitors and seeing what ones own reaction will be in asimilar situaltion. Strategies may be regarded as interpretative planning or plans made in thelight of the plans of a competitor. They are, therefore, a special type of plans based on the

background of the plans of the competitor. Obviously, the best kind of strategy can be

developed. The Manager has perfect knowledge of his competitors, plans. He can thenweigh his own plan in the light of those of his competitor, modify them to take advantage

of what his competitor is planning to do and reach his own goals with greater certainty.

Strategic programmes are planned in accordance with top management policies, for

accomplishig the company’s objecti ves by properly managing resour ce allocation,environmental adaptation, internal co-ordination and organisational strategic awareness.

Operational planning or tactical planning which systematises the operational activities to

produce best results, is effectively guided by strategic planning while strategic plans aredesigned to accomplish the broad objectives of the organisation. Operational, plans provide

details of how objectives can be achieved at the operational level to fulfil the expectation of the strategic plans. Thus operational tactical plans are meant to achieve the objectives

enshrined in the plans through effective operations.

10) Standards : A standard is a meausre of the level of expected achievement. It is a model for comparison or evaluation. Standards are t herefore very useful in measuring deviationsfrom the plan. Basically standards are set up to compare the standard with actual achievement

and if there is any deviations, t o fi nd out the measures to do away from deviations.Circumstances, situations are always changeable. therefore, everything may not happen

according to plans. The standards help in measuring the achievements as well as evaluation

of achievements. It is an important tool in the hands of management .

11) Forecasting : Forecasti ng is a integral part of managerial planning. The purpose of forecasting is to offer the best available basis for management’s expectation of the future

and to help management understand the implications for alternative course of action.

Forecasting implies the act of making a detailed analysis of the future to gain a foresight of

background situations and talents forces. Planning is essentially based on forecasting. If the future could be forecasted accurately, planning would be relatively simple. But the future is unforeseen,

uncertain, unpredictable and thus creates difficulties in designing the plans. The need of forecasting is

self evident in the field of planning. But it has values otherwise also. It improves quality of management by compelling it to look into the future and provide for it. The very act of forecasting may discloseareas where control is lacking and where adequate control is necessary. It helps in smooth functioning

of an enterprise. Henri Fayol speaks of pre-voance as the essence of management i.e. looking aheadwhich includes both assessing the future and making provisions for it. He further refers the plan as the

synthesis of the various forecasts whether short or long term, special or otherwise. It is interestingthat Fayal recommends yearly forecasts and ten yearly forecast, the later being revised at least each

five years and earlier one if proved necessary by the yearly ones. Each forecast is to include a widerange of subsidiary and elemental forecasts, comprising of such data as capital output, production,

costs, selling price and sales etc.

Although accurate forecasting is highly desirable, yet it is always subject to a degree of error.

Guesswork can never be omitted from forecasts, although guessing can be reduced to a minimum.Forecasts should therefore, carefully be made and still more carefully be relied upon by the managers.



PLANNING PROCESSSteps involved in planning

Planning process is concerned with making current decisions to allocate our resource in such amanner that we can achieve future objectives. Planning is a combination of information handling and

decision making systems. We have information inputs, outputs and a feed-back. Let us now brieflyview the steps generally involved in the planning activity. The following are the major steps in the

planning process :

1) Crystalizing the opportunities or problems : Crystalizing at the primary stage

means analysing the external environment and opportunities as well as threats. This further includesidentification of problems to which solutions are to be provided and the opportuniti es that can be

grabbed to make use of. It is necessary to clearly ascertain the areas requiring improvement for which planning is to be visualised. Answers to the following questions can help in planning. (i) Why a plan is

required to be prepared. ? (ii) Is an entirely new plan necessary or is it sufficint to modify the existing

lan. ? (iii) Will the organisation be benefited if such a plan is prepared and put into operation.? (iv) If yes how ? These answers will facilitate formulation of practical and realistic plans.

Determination of crystal clear objectives is the first step in planning. Rather planning starts with

it. Objectives are always at the center of plan because every planned action is directed to the objectives.This process can also be used as motivation to individuals in achieving the objectives because theyhave helped in establishi ng them al ongwith tasks to be performed for thei r achievement. Overall

objectives define the goals to be achieved in general, whereas derivative objectives provide focus on

their details i.e. what exactly is to be accomplished ? when action is to take place ? Who is to take this

action.? How and when these derivated objectives are to be accomplished.?

2) Securing and analysing necessary information :Plans are blue prints of what is to be

done. how is to be done. who has to do etc. Plans provide the course of action to reach predeterminedgoals, by departments and ultimately by the organisation. Any forecast of future action must havesome base which should further be improvised and processed with the help of anticipat ions. Such

base and anticipation is the information pertaining to past, present and future. Naturally, after the

setting of objectives, what is required t o be done is to secure required information from vari ous

sources. Such sources are located as well as identifi ed and required informat ion is gathered fromthem. Past i nformation related to past object ives, courses of action being adopted, its effect and

probability of achievement of objectives that can assess the effectiveness of current courses of action.Future informatin is nothing but logical anticipation of near as well as distant future.

Such information is regarding internal as well as external environment. External environmentincludes Govt. policies, social values, political conditions, international situation and other externalities

that may have effect on t he organisation in fut ure. Analysis of such information to the benefits of organisation only, must be made and thereby ‘Plus’ and ‘Minus’ or ‘strong’ and ‘weak’ points are

assessed and identified. Such analysis further helps in identifying organisational strength in all vital areas. Constructive approach can reveal the deficiencies and pinpoint weaknesses, particularly inrelation with competition. Such identified strength and weakness are assets and liabilities. They are

required to be balanced in the form of balance sheet. This will help in knowing “where we stand in thema rket.”

3) Establ ishi ng planning premises and constraints : This step involves making

assumptions concerning the behaviour of internal and external factors mentioned in the second step. It

is essential to identify the assumptions on which the plans will be based. An analysis of the data socollected will result in the formation of certain assumptions as a base. Assumptions denote the expected

environment



in the future and are known as planning premises. Again forecasting is important in premising. It helpsin making realistic assumptions about sale, costs, prices, products, technological developments etc. inthe future. The assumptions along with the future forecasts provide a basis for the plans. Since futureenvi ronments are so complex and uncertain; it would not be realistic to make assumptons in great

details about every environmental factor. It is advisable to limit premising to those factors which are

critical or strategic to the planning process. Some of the premises such as population growth areuncontrollable by the organisation whereas others such as advertising policy to be adopted by the

company are controllable. Constraints such as Governmental control will also exist. Planning will be

in the backdrop of such premises and constraints which must be watched to detect changes and their effect on plans.

4) Ascertaining alternaive courses of action or plans : There is always a possibility

of existence of certain limitations that could affect the ability of the work-group to reach its objectives.An intelligent manager must make plans anticipating the conditions or limitations that might restrict thesmooth operation of the plans. A good planner must consider combination of all possible limitations

and make provision for them.

Determining the alternative courses of action is an important step in the planning process. In thelight of the above analysis the possible alternative courses of action will have to be ascertained and

examined. There is hardly any plan for which alternatives do not exist. Generally in all situations, thereis more than one possible course of action. Ingenuity and imagination as well as experience are required

to ascertain a number of possible alternative courses of action available in a given situation. A manager should try to screen out the most viable alternative so that he has a small number of alternatives for final selection. This will help in the thorough analysis of the alternatives so developed.

5) Evaluation and selection of optimum plan : The fifth and most important step in planning

process is evaluation and selection of the optimum plan. After selecting the few viable alternatives,

they should be evaluated with the help of number of parameters which are related to planning premisesand objectives. These alternative courses of action will then be evaluated either by judgement alone or

with the help of quantitative techniques and staff assistance. This will help in evaluating and selecting

plan or course of action which will be the optimum or t he best , considering all the factors in t heinterest of the company. The evaluation of various alternatives will help in knowing which of them

offers the greatest chance of success in reaching the desired objectives. The purpose of evaluatingthe alternatives courses of action is to select the most suitable course of action, which will achieve

organisational objectives. Techniques of decision-making are applied to choose a particular course oaction. Some factors should be taken into account. While selecting the plan they are :

(1) The plan should be objective oriented,

(2) It should be flexible or adjustable,

(3) It should be specific and clear,

(4) It should be easily acceptable by the operating personnel,

(5) The resources required for the implementation of the plan should be made available.

Therefore, the management may decide to select two or more alternatives and combine them tohave most feasible plan.

6) Determining derivative plans : Basic organisational plans can not be executed effectivelyunless they are supported by the derivative or sub-plans. From the basic plans as selected above, other

plans will have to be developed, to support the basic plan. They are described as derivative plans.



These plans are developed within the framework of the overall planning. For instance a basic marketing plan may result in other derivative plans such as the advertising plan, recruiting personnel plan, training plan etc.

Important derivative plans used in business include policies, procedures programmes, projects,

methods, budget, rules etc. They help in achieving the overall organisational goals.

7) Fixing timing of introduction : The timing is fixed for introduction of plans. The questionof timing and who will do that, will then have to be enunciated. An appropriate time schedule has to be

prepared and detailed instructions are written for communication of the plan.

8) Arranging future evaluation of effectiveness of the plan : The ultimate objective of the plan is to achieve certain objectives, results or goals. The very fact of achievement of goals is requiredto be evaluated, by seeing whether these goals are accomplished. If not, it is essential to find out as towhere was the slip up. Such an evaluation must be made at the earliest possible opportunity so thatadequate controlling is resorted to for ensuring achievement of planned goals. This process is, at

times termed as decision making, as planning process and decision making are very closely interrelated.

Thus, planning is a continuing and ongoing process involving planning action-control and

replanning and plans are subject to alterations in the light of new circumstances. Thus planning needsreview, evaluation and recycling. Flexible plans can adapt with changes in the environment. Business

enterprise is an open, adaptive system with its own environment. For a socio-economic system, theonly vehicle for change (adaptation or innovation) is the business planning and decision making process

as described above. Planning not only gives direction, but becomes a powerful instrument of control

also. Managers throughout the chain of command are planners-cum-controllers.

CLASSIFICATION OF PLANSThere are severa l ways to cl assify plans. Classification of plans alongwith the basis o

calassification is shown in the following chart :

Basis of Classification Type of Plan

a) Time span i) Long range plan

ii) Short range plan

b) Level of management i) Strategic planii) Administrative plan

iii) Operational plan

c) Repetitiveness i) Standing planii) Single use plan

d) Scope i) Corporate or master plan

ii) Functional plan iii) Divisional plan

iv) Departmental plan.

Thus there always exist heirarchy of plans i.e. objective, strategic and policy according to varying degree of scope and importance. This heirarchy relates to time period or futurity of the plans.

Overall corporate or master plan interacts with administrative and operational plans, Long term plan

interacts with tactical plans.



Scope of planningCorporate planning is an intellectual process which requires analysis of future circumstances

both internal and external and the development of objectives policies, strategies and programmes

within the framework of that future. We have two divisions for total business planning.

1) Corporate or strategic or long-range plans.

2) Administrative (medium term) and operational (short range) plans.

1) Corporate or strategic planning : The concept of corporate planning has gained wide popularity particularly with the giant trans-national corporations. Corporate planning is defined

as a systematic and comprehensive process of long-range planning taking account of the resources

and capabilities of the organisation and the environment within which it has to operate and viewing theorganisation as a total corporate unit. It is usually a long range-plan covering near about 5 to 10 years.

It takes the overall view of the organisation and is prepared for the entire enterprise. A corporate planmust be frequently updated. Many organisations review performance at least once a yea r so thatmodifications can be made in the light of experience.

In strategic planning we deal with the major, the most vital basic objectives, basic policies and

corporate strategies. Under this planning we cover all important areas of business activities such as

profits, capital expenditure for growth or diversification, organisation structure, managerial philosophy, pricing, leadershi p in the market, finance, personnel , advertising, labour relations, technological

capabilities, product planning and development, research and development, management development,social responsibilities and such other company wide management development, social responsibilities

and such other company wide areas or subject matters. Strategic planning gives special considerationto environmental changes and uncontrollable factors. Future behaviour of these environmental variables

is predicted and alternative courses of action are formulated in the light of anticipated events. Strategic planning is mostly carried out by a planning committee consisting of top executives of the corporation.

This committee follows the steps listed below to evolve efficient corporate planning.

a) Determining long-range strategic objectives.

b) An appraisal of the existing internal situation of the enterprise.

c ) An review of the organisation’s position in the market.

d.) An evaluation of the present competition and a prediction of the futur competition.

e) An assessment of the genaral economic factors in the country like money condition, the

phase of trade cycle boom, recession, depression and recovery.

f) A review of Government policy. This involves study of government pol icy as regardsemployment, location of plant s, fi scal and budgetary measures, control of polluti on,consumer protection, taxation and so on.

‘The planning committee should follow a proper procedure and make use of operations researchtechniques to ensure effective planning. SWOT approach may be followed which is a distillation of all

the steps and considerations that should be taken to formulate an effective corporate strategic plan.

The term SWOT means Strengths Weakness Opportunities and threats which are di scussed

briefly as under :-

Strengths- This involves all the good or advantageous aspect s of the firm, for example,

exceptional customer, good will, reputation, brand loyalty, adequate financial resources etc.



Weaknesses - This involves all the bad or demeritous aspects of the organisation. W eaknessesrepresent retarding influences on the success of the organisation. These must be thoroughly andhonestly probed, for example, non adoption of advanced technology, poor sales, obsolescence of machinery, lack of arrangement for management succession at the higher level, inadequate research

and development activities etc. Remedies must be sought on them.

Opportunities- Opportunities are usually external whereas strength and weaknesses emanatechiefly from inside the organisation. The opportunities should be recognised and grasped firmly when

they arise.

Threats- Like opportunities, threats are most often from outside. Their adverse effect on theorganisation may be mainly due to weak management, inter-personel conflicts, lack of financial resources and so on. Some example of threats are changing technology, cut-throats competition, economic and

political uncertainty etc.

Thus, it is esent ial that the SWOT approach requires management to look very closely and analytical at every aspect of its operations so that objectives can be assessed as atttainable and a clear

picture of the strategies that must be followed , is built.

Long-range planning : “Long term planning deals with the futurity of present decision. It sets

goals and develops strategies to achieve them. Warren-in long range planning-defines, long-range planning, as a process directed towards making todays decisions with tomorrow in mind and formulatingmeans of preparing for future decisions so that they may be made more rapidly, economically andwith as little disruption to the business as possible.”

Long-range planning has become famous in all the developed countries particularly in capital-

intensive, complex and large industrial and multi-national concerns.

2) adiministrative and Operational planning : Some thinkers call it programming. It

is responsible for establishingshort-term objectives and action programmes for each functional area.There is a budget allocation for each function or decision centre and programme and all functional

budgets are incorporated in the master budget of the corporation. Administrative plans are essential to points out how an enterprise can optimise the use of its resources i.e. men, money, materials andfacilities within the strategic objectives. Planning indicates what an enterprise would do ? Whereas

adinimistrative strategic plans point out how to accomplish these objectives. Administrative andoperational plans must be intergrated with planned control machinary of the organisation in order toensure the achievement of goals or standards as per plan. If there is a big organisation having a number of divisions and each division is just like a separate company with its own set of functional departmentsthen there is :-

1) overall corporate or strategic plan for the entire enterprise

2) divisional strategic plan for each division and

3) functional plan within each divisional strategic plan.

A small organisation has only functi onal departments wit h departmental managers working

under the Chief Executive, for example Managing Director, President or Chairman. In a small enterprisethe Board of Directors and the Chief Executive formulate the company’s strategic plan in consultation

with Senior executives. The departmental managers formulate their functional or administrative plansfor one year in consultation with their subordinate officers. Each functional plan and budget is approved by the top management with or without modifications. The master plan of the company is based on

the functional or operating plans and budgets. In this way the comprehensive business planning covering



both long-range and short-range corporate objectives is integrated. Strategic and administrative plansare integral parts of the total planning process.

3) Tactical planning : Tactical planning is of shorter-range. For example production planningof a month or a week is a tactical planning. This type of planning has a narrow scope in comparison

to strategic planning which has much broader scope. Planning at the corporate level is more strategicwhile planning at the departmental or functional level is more tactical. Strategic planning is cncerned

with ends means prescribing goals and also means by which they can be achieved, while tactical planning is primarily concerned with selecting means by which the goals supplied by strategic planning

can be accomplished. Tactical planning fills up the gaps within strategic planning with details of steps

to be taken. A tactical plan is a short-term plan and it is more routine than a strategic plan. Strategicand tactical planning are bot h complementary parts of total planning process to secure maximum

progress and realisation of set objectives.

THREE KINDS OF BUSINESS PLANNING

There are three kinds of business planning

1) Plans for current operations : Plans for doning current business are the funcitonalor operating plans in details in the form of programmes and schedules i.e. time bound action plans. If

the current operations are put on a sond footing and are under firm control the future is bound to be bright under normal conditions.

2) Plans for survival : These business plans ensure the survival in buisiness under thedynamic environment through timely adjustments in the business.

3) Plans for growth : Corporate growth may be divided into two categories.

(a) internal growth and

(b) external growth

Interna l growth is through product improvement , product line extension,introduct ion o

innovations, new products emerging from research and development.

External growth is through product acquisitions and corporate acquisitions and markets. Thus

we can secure growth, product development, product acquisitions and lastly through mergers andamalgamations.

Planning in a business organisations can be outlined by mentioning five main instruments

a) Setting of objectives

b) Determining basic policies

c) Strategy

d) Long range plans

e) Operating plans.

ORGANISATION FOR PLANNING

1) Planning Board or Committee : The planning board or committee is manned by

top executives and a few specialist staff members who are experts inplanning techniques. Planningfor the entire enterprise which is a corporate planning is the responsibility of the Chief Executive andhead of the Finance Committee.



2) Marketing plan : It is formulated by the markieting manager with the help of salesmanager and managers incharge of product development, marketing research as the manager is closelyassociated with marketing mix.

3) Financial plan : It is formulated by the chief finance executive with the help of chie

accountant and treasurer.

4) Manufacturi ng plan : It is formul at ed by t he chief execut ive incha rge of manufacturing operations with the help of manager of product engineering, manager of production

planning and control, purchase manager and manager in charge of quality as well as inventory

control.

5) Research and development plan : It is prepared by the chief executive with the

help of manager incharge of research and development department.

6) Personnel plan : It is formulated by all line executives with the help of personnel manager

Questio ns

1. “Planning is fundamentally choosing and that a planning problems arises when an

alternative course of action is discovered”. - Bi ll E. Goetz.

Explain the statement and state role of decisions in planning process.

2. “Unplanned actions may lead to a mess” Elucidate the statement with the help of significance of planning.

3. Write merits and limitations of planning.

4. What do you mean by “planning ? How can an ideal plan be prepared?

5. Write in details various types of plans.

6. “Though planning is one of the management functions it is a process”. Explain

and explain ‘planning process’ ?7. Planning can be classified on the basis of Time, Management level, repetetiveness

and scope, Explain such a classification and write different types of plans on the basis.

8. Write short notes on :-(a) Types of Business plans(b) Planning organisation

(c) Master plan(d) Planning nature of Budget

(e) Defference between planning and Forecasting.

(f) Schedules under planning

(g) features of ideal plan.(h) Significance of planning as a management function.

(i) Relation between planning and control.

9. Define corporate planning ? W hat its features ?



10. Explain the steps in corporate planning process ?

11. Write a short notes on Environmental Analysis and Diagnosis ?

12. Describe the scope of impact of external environmental on the scorporate planning ?

13. What do you mean by Planning ?14. Describe the terms of planning.

What is planning ?

15. Explan the nature of planning ?

16. Describe the importance of planning ?

17. State the merits of planning ?

18. State the demerits of Planning ?

19. Explain the characteristic of ideal plan ?

20. Explain the element or component of plannings ?

21. Describe the steps in Planning Process. ?

22. What are the terms / types of plans?

23. Discuss the Scope of planning?



4DECISION MAKING

Meaning and concept of decision making :

Decision making is one of the most important functions of management. The word “decision”is derived from a Latin word “Decis” which means “Cutting away or cutting off to come to a conclusion

“this is itself means that a single thing is a to be brought in action by cutting off many other things thatlook alike. Thus decision making means choosing one alternative from available so many. Naturally it

is a bought work. This is based on the mental ability of the manager who has to take decisions. A

manager who is able to take proper and timely decision is supposed to be a good manager. Decision

making is a human process and depends upon the immediate assessment of pros and cons of the

available alternatives. Decision making is most important tool of management. This function of decision

making is the essence of managerial process because it is the decision and its proper implementation

that drives the organisation on right track.

Every human being has to take decisions in his life. Peter Drucker - the father of scientific

management -said, “Whatever a manager does, he does through decision making”. Haimann considersdecision as, “a course of action chosen by the manager as the most effective means at his disposal for

achieving goals and solving problems”.

Definitions :According to Mc Farland , “A decision is an act of choice wherein an executive forms a conclusion

about what must be done in a given situation. A decision represents a course of behaviour chosen from

a number of possible alternatives.”

According to G. R. Terry , “Decision making is the selection based on some criteria from two or

more possible alternatives”.

According to F. G. Moore, “Decision making is a blend of thinking, deciding and acting”.Haimann considers decision as, “a course of action chosen by the manager as the most effective

means at his disposal for achieving goals and solving problems.

Characteristics of decision making : From the above mentioned definitions, following features

of decision making process can be derived.

1) Decision making is an intellectual, human process.

2) Decision making consists of choosing a right, appropriate alternative from among many

available alternatives.

3) Decision making process is a continuous process prevailing in all business activities.

4) Decision making is always related to a situation and involves a certain commitment for whatever dura tion.

5) Decision making aims at achieving organisational objectives.6) Decision making process is always preceded by deliberations and reasoning.

Importance of decision making :

Following factors are indicative of the importance of decision making in the business organisation.



1) Decision making is the essence of managing : Decision making is a pervasive activity.

It perform through all mangement, exists in every part of enterprise and deals with every possible subject. It is inherent in all the managerial functions. The management has to take

a large number of decisions while performing managerial functions. Management is not

able to walk a single step without decisions.

2) Decision making always aims at achieving the goals and objectives : Basically decision

making is a goal oriented process. In fact the very determination of objectives, policies,

programmes, strategies etc. of the enterpris is a decision making process. Correct decisions

at right time, right place and by right person only can enable a business organisations toachieve goals and objectives.

3) Decision making seeks to reduce unc ertainty : Through decision making, managers

seek to reduce the element of uncertainty in the organisati onal environment. Managershave to exercise a good measure of judgement, based on knowledge and experience in

seeking from the alternative courses of action. Priorities are given to the consideration o practicability and acceptability of decisions. Timely taken decisions also help in reducing

uncertainty in business organisation.

4) Choosing alternatives : It is a great job to choose right alternative from among a set o alternatives. It is a difficult task on the part of the management. It requires an ability to

select right alternative. The managers must possess this ability. A single mistake in decision

making may cause collapse of the whole business organisation.

5) Decision maki ng is wider than or distinguished from problem solving and choice making : Decisions are to be taken to decide the policy, plans and the organisation through

a long long period. No doubt, decision making is a choice of an alternative out of available

many, like in solving problems, at time.s But the problems are not the policy or plan. Theymay crop up any time. They may hamper the process for a short while. But once a solution

is arrived at this hindrance in implementing the decided policy, plan and objective is

automatically removed. Secondly the problems, cropped up, may be restricted to a smallarea in the organisation. As such decision for solution of the problem is also restricted to

that area. Thus the scope of decision ma king is vey wide whereas problem solving isrestircted to a narrow area.

Types of Decisions :Decisions to be taken in any organisation can be classified in the following types :

1) Orgaisational and Personal decision : Decisions in any organisation are taken by persons

working in it. All the decisions are related either to organisation or to individual. Whenever a person

assuming the charge of a manager takes any decision i t i s a decision of the manager and not the person. Such decisions are related to organisational matters and taken by a person as a manager. These

decisions are known as organisational decisions. Capital formation, new methods or techni ques o

production, new production line, closing any unit, rules, methodology of working etc fall in the preview

of organisational decisions. Such decisions directly affect the organisation.

On the other hand, if the same person decides to go on leave, retire, or resign, such decisions

are his personal decisions. They directl y affect hi m though t hey may have indirect effect on theorganisation. Organisational decisions are to be implemented through out the organisation and they are



binding on al l concerned people. W hereas persona l decisions have nothing to do wi th the

organisation.They may have some indirect effect on the organisation as they are directly related to hisindividual personality and not his personality as a manager.

2) Basic (Strategic and Routine) operational decisions : Organisational decisions may

be related to either strategies or operational methodology and allied matters. Strategic decisions areknown as “Basic decisions” also. These are generally based on original plans and relate to formulate

policy to implement the plans. Such decisions are mostly one time decisions and are in implementation

for a pretty long period. These decisions provide guidelines for attainment of organisational goals.

Once the strategies and guidelines are decided, all the lower level managers have to work according

to the strategies and within the preview of guidelines. But methodology or the operational ethics are

needed to be prepared. Decisions in this regard are known as operational or routine decisions. Thesedecisions are required to be altered according to the prevailing situations. Naturally they are of repetitive

nature. Such decisions are taken for routine work therefore they are at times, known as day-to-day

decisions.

Economic and Organisational Basic/Strategic/

Non-Economic and personal Routine/operational

Short termed Structural and Unstructurallong terms

Types of Decisions

Major andIndividual andGroup Minor

Problem solvingand opportunity Referred Crisis and Intuitive and Research

Figure.

3) Structural (programmed) and Unstructured (Unprogrammed) decisions : As seen

above strategies are decided for a pretty long period alongwith guidelines for the implements i.e. lower level managers. In order to facilitate day-to-day working the lower level managers have to take some

decisions to set right the operational machinery for better performance. For example- assignment o

work to employee, grant of short leave to the worker, method of utilising resources etc. Such decisionsare known as structured or programmed decisions. These have a very short impact and are changeablefrom time to time.

But if a new unit is to be started or any of the existing units is to be closed, or change in product

line or change in the wage or salary structure is to be made, decisions are required to be taken by the

top level management. Such decisions have a long term impact on the organisation. These decisionsare known as unstructured or unprogrammed decisions.

4) Major and Minor decisions : Basic and unstructured decisions are major decisions. Theyare taken by top management. Operational and structured decisions are of minor nature and are taken

by



lower level managers. Major decisions may bring a major change in policy and strategy that affectsthe total organisation. These are independent decisions of the policy makers. Minor decisions areaimed at fulfilment of major decisions. Such minor decisions are to be kept in the sphere of major

decisions. Minor decisins are generally taken by lower level managers.

5) Crisis and Intuitive and Research decision : Whatever decisions are taken in crisis

situation like stress, surprise, unusual circumstances, emergencies are called as crisis or intuitivedecisions. Crisis decisions are often based on experience, detailed analysis and confidence. These

decisions are generally made under pressure. On the other hand research decision can be made under a minimum time-pressure.

6) Referred decisions : Lower level managers have to face situations arising during the

course of working. They have to overcome such situations by taking immediate decisions, But some

mnagers (Lower level) are unambitions, inactive and incapable of taking decisions. At time they areafraid about the correctness of the decision which they may taken for lack of confidence. They refer

the matter to their superiors and request for their decision. Such decisions are called referred decisions.

7) Problem solving and opportunity decisions : Top level management is required to pay

attention to problems that are existing and that may crop up in future. Capable top management can

foresee future problems, The same way good managers can imagine and foresee future situations and probable opportunities. Naturally top level management remains in readiness with problem solutionsand with utilisation plan of future situati ons and probable opportunities. Proper decisions are thus

taken by them in present period i.e. in advance. Such decisions are known as problem solving andopportunity decisions.

8) Individual and group decision : If a decision is taken by an individual person it isknown as individual decision. On the other hand when a number of persons collectively take t he

decisions they are known as group decisions. Individual decisions are, often, taken in small organisation

of small sized top level management. On the other hand big size organisatins like companies, are

managed not by an individual but by group of individuals like board of directors. Naturally strategicdecisions are taken by the group.

9) Short-term and long-term decisions : Short-term decisions are taken for short span o

period. Such decisions generally involve less uncertainty and risk. On the other hand long term decisions are taken for a longer duration. Therefore there is more risk and uncertainty. Most of the times short

term decisions are taken by subordinates and long term decisions are taken by the top management.

10) Economic and non-economic decisions : Economic decisions are related with financial

ma tt ers and non-economic decisions are related with, social values, ethical values, moral val ues,social, cultural, religious, educational, political psychological factors.

Decision making process :All the decisions by the managers have direct effect on the organisation as a whole. If decisions

are not taken carefully they may prove to be wrong with adverse effect on the organisations. Any

decision taken on spur of moment and with only mental instinct may not be a proper and correct

deci sion. Thus the management has to go al ong a number of steps to ensure correct and proper

decision, that too in a chronological order, Adherence to the following steps results in proper decisions.1) Identify the problem : Decisions are required to be taken on varied issues and problems.

It is, therefore, necessary first to know the issue or the problem. Many decisions are to be taken inanticipation of problems and situations. Unless such issues, problems, and situations are not identified,



taking decisions is not possible. Naturally the decision maker has first to identify the problems or

issues or situations alongwith their importance, nature and so on. Thus identification of problems isthe first step in decision making. to identify, is the responsibility of decision maker which he has tofulfil with proper knowledge, experience and capability.

2) Analysis of identified problem : Identification of problem does not provide sufficientinformation that may help in decision making. The known problem or the anticipated problem must be

studied in depth. Such a study includes analysis of the problem. All relevant information is required to

be collected, studied and arranged in a sequential order. This enables the decision maker to understand

the pros and cons of the problem and of probable decisions. Thus anlysing and understanding the problem is next step in the decision making process.

3) Discovery of alternatives : As we know decision making is choosing a fitting alternativefrom amongst available many. Once the problem is thoroughly understood, various solutions can beevolved. Each such solution may be the final decision. Thus all such solutions are generally identical

with some differences. All the solutions are thus discovered first. Every such possible solution is analt ernative. These alternatives can be evolved either by giving a detailed thought or by consultingexperts.

4) Selecting the best alternative i.e. decision making : As seen above almost all alternativeslook alike. But there are some differences regarding nature, time of implementation, good-better-besteffect, financial involvement. social impact etc. These differences matter more as they have organisationwide impact. Secondly it is to be seen whether the probable alternative provides long term solution or implementation. The problems may be temporary (timely) or permanent (constant) in nature. Naturally

soluti ons should also have the same nature. Thirdly the deci sion maker has to assess as well as

anticipate bad or good results (effects) of each of the alternatives. It, therefore, becomes a tough jobfor the decision maker. He has to use his wisdom, foresight ability and expereicne and hypothetically

test every probable solution . It is, only after the whole exercise, possible to confirm an alternativewhich in turn becomes the decision.

5) Implementation and follow up : Decisions are taken to resolve t he problems. These

problems are not with the decision makers. Thus the decisions have to reach the concerned people

who face the problems. It is, therefore, essential to communicate these decisions to all concerned.Many times methodology of implementing the decision is also required to be communicated. Decisionscan be impemented only after this. The top management has to observe the effects of decisions after implementation a feed back is sought. This enables the management to compare their assessment with

actual effects. Correctness of the decisions can be finally confirmed only after their implementation.

Such implementation must be supervised properly to ensure right compliance. If the decisions stand

to be supervised properly to ensure right compliance. If the decisions stand to the expectations,improvement, solution of problem, their correctness and effectiveness is confirmed. If there are any

lacunae, these can be removed by making required amendments to the decisions. All this is implementation

and follow up state.

Decision making of techniques :Decision may drive an organisation on right track or may make it stand still. Such is the importance

of “Decision” in any organisation. An effort, therefore, is being made to evolve techniques that mayfacilitate proper, correct and factual decision making. Naturally several new techniques for the purpose

have been evolved in recent years. We can classify these techniques in two broad categories. They

are-



1) Non-Quantitative techniques

2) Quantitative or Mathematical techniques

Non-Quantitative techniques : This is a quality based techniques. The word quality refers tothe quality, capability and intelligece of decisi on maker. Some may have natural intuition towardsdecision making. Some may not possess it; or may possess this intuition in a smaller degree. Intuitivedecision makers may reach the decision in the next moment of placement of problems before them.

Ot hers are required to apply much more thinking and then only they can decide. But one thing is common in both these types of decision makers, that they do not take help of modern techniques of mathematical analysi s or comptuers. Therefore such techni ques are known as non-quantit ative

techniques. This technique includes the following -

a) Intuitive : We have seen in previous paragraph that there are persons who have an

intuition power in them. Intuition is nothing but a power to come to conclusion immediately.Such persons rely more on their inner feelings than any other thing. Such persons arrive at

the decision at the spur of the moment. They do not require any analysis of the problem, or

any suggestions from others.Such persons take decisons without any careful or detailedanalysis and reasoning. Naturally such decisions are generally influenced by their psychology,

previous knowledge and experience, wisdom, mental capability and other personal qualities.

No doubt that such decisions come in much less time, money and energy. This can betaken as its only merit. But there is every possibility that such decisions may prove to beincorrect as they are not based on proper reasoning and analysis.

b) Facts based : A careful decision maker relies on reliable information and facts. He is never

inclined to take any decision off hand. He, for this, collects factual information and analyseit in the context of the problem and its analytical valuation. He arrives at the decision only

after knowing and analysisng the things. Naturally he takes more time,may involve moremoney and may consume more energy. But this little extra time, may involve more money

and may consume more energy minimise the chances of incorrect decisions, Since this

technique or methodology is based on facts it is known as facts based non-quantitativetechnique of decision making.

c) Experience based : Fact based technique is further improvised by using experience of the decision maker himself or the experiences, that are recorded n the files, of others. Past

experience facilitates early analysis of information and problem. Secondly the decisionmaker might have to his credit the experience of tackling and resolving like problems. Theonly thing the decision maker has to do, under such circumstances, is that he has to tally

the previous problems with present problems and amend his decisions accordingly. In

such conditions he has not to discover and consider more alternatives. Such a technique of decision making is known as “Experience based non-attention to changing circumstance.

If a decision maker, along with his experience uses and applies his assessment of future

probable changes as well as the changes in offing, there may remain negligible chances odecisions coming incorrect.

d) Based on opinions (considered opinion) : Decisions to be taken may relate to temporaryor permanent problems, concerning narrow area or wider area, affecting short period may

be resol ved by ndividual consideration of a manager. But other types of problems mayrequire wide consultations. These consultations may be in the form of group meetingssoliciting opinions from subordinates, as well as superiors. Subordinate’s opinions, manytimes, are useful even for solving temporary or short term problems. The decision making



manager discusses the problem wit h his colleagues, He expects free exchange of ideas,views and opinions from those with whom he discusses. After listening and consideringthe views and opinions the decision maker arrives at a decision. Naturally his decisions are

based on the opinions of others, which, being logical, scientific and analytical, are accepted

by him. This technique is known as “considered opinion non-quantitative technique.”

There may be some problems which may need technical consideration from the experts in the respective fields. In such a situation the manager may call for techical opinion from experts and may

take decision on that basis.

Quantitative or matheatical technique :In non-quantitative technique, the facts, infomation, experience are not quantified in terms of

numbers and thus are not represented in exact number. Naturally mathematical practices cannot beused but in quantitative technique, all these things are quantified in terms of real numbers. Real numbers

are the main components of mathematical practices.

A mathematical model is prepared to quantify i.e. to convert the data in numerical form. It is, then, presented and preserved in mathematical terms.

Whenever any problem arises and requires a solution by way of superiors’s decision the problem

is fitted in the pre-prepqred model it is, there after processed by various mathematical methods and practices. (generally linear programming) and the result is derived. Naturally such a result is in numericalform and is then translated in words form. Such decisions are usually factual and correct decisions

provided a proper mathematical model is evolved and the data is correctly quantified and fitted in it.

This method is very useful to resolve the problems of technical and mechanical snags, because

all methanical data can be easily quantified and converted in numerical form. But its utility in social, psychological and abstract type of problems is negligible. This is one of the limitations of this technique.Secondly there may be limitations of mathematical model which is evolved and accepted. This technique

has following three components.

a) Building a mathematical model : It is a vital part of this technique. Much care is essential

while building such a model.It requires complete understanding of the problems. Factors

to be considered and their interrelationship as well as relationship with the problem must

be carefully observed, while building a model.b) Processing of the model : Whenever problems arise and decision is required this model

is to be processed with the data collected and in relation to the problem.

c) Interpretation of the results : Once the model is processed and required data is fitted

there in the model gives you results i.e. solution in its own language. This language is nowinterpreted in usual language.

Apart from mathematical models, charts, graphs, statistical presentation, and some other formatsare also used in quantitative technique.

Following are other techniques of decision making -

1) Judgement technique

2) Operational Research Technique

3) Delphi Technique4) Decision Tree

1) Judgement technique : As is evident from the name itself, this technique is based onudgement. Every human being has a capacity to judge. This capacity is improvised by the experience.



As we know “Experience is the best school of learning”. Naturally human judgements are the resultsof thinking based on experience. But while taking decisions with the help of this technique it is essentialto have proper knowledge of the problem of future implications, and of future situations. Such technique

was being practised in the past for a pretty long period. It has its significance in modern days also. It

is one of the cheapest and quick techniques of decision making.

2) Operations Research Technique : Operations research has different menaing to different people. It is the application of scientific method, tools and techniques to operations of system with

optimum solution to the problem. It is a scienctific method of analysis of problem and to provide the

manager the required quantitative information in making decision. It gives emphasis on defining the problem and careful compilation and evaluation of dat a, devel opment and testi ng of hypothesis,

establishing relationship between various data and taking effective measures to control performance.The following are the steps involved in operations research.

1) Construction of a mathematical model in which important factors in the situation are pin

pointed.

2) Definition of criterial to be used for comparing therelative merits of various possible coursesof action.

3) Procuring empirical estimates of the numberical parameters in the model that specify the particular situation to which is applied.

4) Carrying through the matehematical process of finding courses of action which will give optimum solution.

Operations research itself includes many techniques like linear programming, queuing theory , replacement theory, network analysis etc.

a) Linear programming : This technique includes a systematic evaluation of plans, discovery

of the possible improvements and the suggestions of modifications to determine the best

plan- all within the predetermined limitations. This technique was evolved because themathematics deals with linear equations. Linear programming is used for determining the

operational combination of limited resources to acheive a given purpose. This technique isapplicable in production planning, transporatation, warehousing, location etc., as these are

the problem creating areas.b) Queuing theory (Waiting line theory) : This is applied to any situation which needs

balancing of increasing cost. This theory uses mathematical techniques to balance services.A group of articles, items, waiting for services is known as queue. queue exists where the

demand is more and services are less. Decisions in such situation are taken with the help of queuing theory.

c) Games theory : This theory is helpful when the problem is concerned fundamentally with

the actions of competitors. This theory assumes that the opponent will carefully consider what the decision maker may do before he selects his own strategy, For example, while

deciding business strategy, a businessman will try to maximise his profit and minimise the

loss, and to minimise competitors profit and maximise his loss.

d) Replacement theory : Machinery, equipment, plant etc. become obsolete in a certain period and ask for replacement. Decisions are required for their replacement. The cost of

production may go up and efficiency may go down if such replacements are not made.Therefore the management has to take replacement decisions in advance. Many times new



techniques and improvised machinery help in increasing profitability and profits. Decisionin this respect are taken on the basis of replacement theory.

e ) Network analysis : Generally network analysis is used for planning and controlling the project activities. According to this analysis, a project is divided into small operations, arranged in logical sequence. There are several network analysis techniques for instance

PERT (Programme evaluation and Review Technique) CPM (Critical path method) etc. Under this technique decision is taken in relation to project activities, its division, sequential

arrangement etc.

Del phi technique : It is a group decision technique. This technique is used for long term

forecasting planning. It is used to determining programme alternatives, to expose presumptions of

information leading to differnent judgements. etc. This technique involves four steps, establishing a

panel of experts for solving the problem each expert is asked to make predictions, each expert has to provide composite feed back, lastly, each expert is free to change his opinion on the basis of the feed

back and finally a consensus decisions is reached.

Decision tree : It is a graphic method. It is a visual device for illustrating all the chances that are available while taking a decision. The decisions form a kind of network or a tree, with decisions

branching out from the trunk, according to the decisions made a t each stage. Oftenly uncertaintysurrounds each step and a manager faces uncertainty after uncertainty. This technique deals with sucha problem.

Questions

1. Define the Concept of decision making.

2. What are characteristics of decision making?

3. Explain the importance of decision making.

4. Explain the various types of decisions.

5. Explain the steps in decision making process. 6. Describe the various decision making techniques.



5RECRUITMENT AND SELECTION

Recruitment :Recruitment occupies prime status in the functions of personnel department. It is recruitment

through which desired workforce is procured. This workforce is a factor on which, depends a major

proportion of achievement of organisational goals. Thus it can be said that “unless right people are

hired for right jobs, even the plans, organisation charts and control system would not do much good”.

Recruitment is the first stage in the process which continues with Selection, Placement, Induction,

Training of the manpower. It is the next-step in the procurement function. Recruitment makes it

possible to acquire the number and types of human resource necessary to ensure the continued operation

of the organisation. The success of an organisation la rgely depends upon the team of skilled andqualified workers who are selected out of a number of applicants for the concerned job. Recruitment

is the first step in the employment process which aims at developing and maintaining the adequatemanpower resources upon whom the organisation can depend when it needs additional employees.

An analysis of job is a pre-requisite to any recruitment process. It involves the preparation of job

description and job specification for individual job, Recruitment process begins only when the requisite

number of persons and the requirements of different jobs are known.

Definitions :

(1) “Recruitment is the process of searching for prospective employees and stimulating them

to apply for the jobs in the organisation.”

(2) The term “recruitment” stands for discovering the sources from where potential employees

will be selected. Systematic recruitment may ultimately result in greater productivity, higher

morale, reduction in labour turnover and better reputation of the concern.

(3) “Recruitment is a process to discover the sources of manpower to meet the requirements of the staffing schedule and to employ effective measures for attracting that manpower inadequate number to facilitate effective selection of an efficient working force.” According

to the purpose, recruitment is to locate sources of manpower to meet job requirements andob specifications - Dale Yoder.

(4) “It is a process of searching for prospective employees and stimulating and encouragingthem to apply for jobs in an organisation. It is often termed positive, in that it stimulates

people to apply for jobs to increase the hiring ratio of the number of applicants for a job and

number of jobs to increase the hiring ratio of the number of applicants for a job and

number of jobs. Selection on the other hand tends to be negative because it rejects a good

number of those who apply, leaving only the best to be hired- Flippo.

(5) Recruiting is the discovering of potential applicants for actual or anticipated organisational vacancies. In other words it is a “Linking activity” bringing together those with jobs and

those seeking jobs.

(6) “Recruitment is the development and maintenance of adequate manpower resources. It



involves the creation of a pool of available labour upon whom the organisation can depend

when it needs additional employees- D.S. Breach

Thus “ the purpose of a recruitment function is to seek, to evaluate, to obtain commitment, and

to orient the aspirants to fill positions, required for the successful conduct of the work of an organisation.”

Recruitment enables the management to select suitable employees for different jobs. It is significant to point out that hiring of employees through selection is a negative process since it involves the taking

of suitable candidates for the organisations and rejection or elimination of other applicants.

Recruitment Vs. SelectionThe recruitment process begins only when the number of persons required for different jobs

and requirements of different jobs are known. Recruitment process aims at developing and maintaining

adequate manpower resources upon whom the organisati on can depend when it needs additional

employees. Recruitment is basically a positive process of searching the prospective employees and

stimulating them to apply for the jobs in large numbers in the organisation, It increases the selection

ratio and enables the management to select suitable employees. As against this, selection is a negative

process as it involves the taking of suitable peoplefor the organisation and rejection or elimination of

the other applicants. The process of select ion leads to employment which establishes more than

contractual relationship between the employer and the employees.

The recruitment and selection process should look to the human adjustment with organisationalobjectives. It is important that the selected candidates possess the ability to perform the job assigned

to them and have the opportunity for development and growth in the organisation This is the mostimportant feature of a sound personnel policy.

SOURCES OF RECRUITMENT

Before starting the process of recruitment of applicants, the organisation should consider and

identify the most likely sources for the type which it needs. Most of the organisations do not want togo beyond the available sources with them. But there are some who always try to identify and develop

new sources.

Basically, there are two sources of recruitment :

(1) Internal and (2) External

1. Internal sources :Internal sources of recruitment are the most obvious sources. Many organisations may overlook

the value and importance of recruitment from within. It is not only reasonable but wise to let t he

existing employees know the vacancies by internal advertisement. But now it is being realised that the

best source of supply for higher or top posts is the personnel who are already in the organisation. This

type of recruitment source is ‘the personnel already on the pay-roll of the organisation i.e. its presentworking force.’ Whenever any vacancy occurs, somebody from within the organisation is upgraded,

transferred, promoted or sometimes demoted. This source also includes personnel who were once onthe pay roll of the company and plan to return, or whom the company would like to rehire such as

those on leave or absence, those who tetired voluntarily or those on prouduction lay-offs. Recruitment

from internal sources includes transfer and/or promotion. Transfer. involves shifting of an employeefrom one job to another. While transferring an employee it is ensured that the employee to be tranferred

to the new job, is capable of performing it. In fact transfer does not involve any drastic change in the

responsibilities ad status of employee. On the other hand, promotion leads to shifting and employee to



a higher position, carrying higher responsibilities, facilities, status and pay. If a higher vacant post is

given to an employee who deserves it, it will stimulate all other employees of the organisation. Thissource of recruitment is generally adopted to fill vacancies of middle and top level personnel. In order

to achieve the advantages of recrut ment of personnel from the existing employees, the personnel

manager should draw up a policy relating to pormotion from within and communicate it to all the

employees. Such sources of recruit ment practice l eads to healthy and progressive atmosphere andlower the cost of training and the rate of labour absenteeism and labour turnover.

Merits of internal sources of recruitmentThe advantages of recruiting from within the organisation are as follows :

(1) It ensures stability and continuity of employment.

(2) It creates a sense of security among the employees as well as opportunities for advancement.

(3) It increases the morale among employees, for they are assured of The fact that they would

be preferred over outsiders when vacancies occur.

(4) The employees in the employment are fully aware of and well acquainted with its policies

and know its operating procedures. They require little training and the chances are thatthey would stay longer in the employment of the organisation than a new outsider would.

Moreover existing employees are already familiar with the organisation’s activities and

requirements.

(5) They are tried people and can, therefore, be relied upon. They look forward to hi gher

posts.

(6) The valuable contacts with existing major customers are materialised.

(7) It is less costly than going outside to recruit employees.

(8) It eliminates the chances of hasty decisions.

Demerits :

Internal sources of recruitment have certain demerits also. These are given below :

(1) If vacancies are filled through internal sources i.e. by promotions, the scope for fresh

blood entering the organisation is restricted or reduced.(2) Frequent transfers reduce the overall productivity of the organisation.

(3) There are possibilities that the internal sources may “dry up”. It may be difficult to find the

requisite personnel from within an organisation.

(4) The employees may become lethargic if they are sure of time bound promotions

(5) The spirit of competition among the employees may be hampered.

External sources of recruitmentThough the internal source of recruitment is available, it is always not possible to recruit the

employee from within, specially in the vacancies at lowest level or recruitment at the time of expansion

of the firm or where job specifications can not be met by the present employees. In this situation the

employer has t o go t o external sources of manpower supply. Once it is decided to recruit from

outside, there are many ways by which possible candidates from outside sources can be located.

Merits :

(1) External sources provide the requisite type of personnel for an organisation, having skill,



training and education upto the required standard.

(2) When employees are recruited from a large market, the best selection can be made without

any distinction of caste, sex or colour.

(3) In the long run this sources proves economical because potential employees do not need

extra training for their jobs.However, this system suffers from what is called “brain drain” especially when experienced

persons are raided or hunted by sister concerns.

Methods Techniques of recruitment :There are three methods (1) Direct methods (2) Indirect methods and (3) Third party methods.

1. Direct methods :This type of recruitment refers to direct contacts of enterprises with prospective employees, as

they think such a method to be more effective. This can be done by sending recruiters to concerned

conventions and seminars, setting up exhibits at fairs as well as maintaining mobile offices to go to the

right centres. Some big companies maintain continuing contacts with institution’s placement officials

with a view to recruiting staff regularly for different responsible positions. Sometimes firms directly

solicit information from the concerned professors about students with an outstanding record.3. Indir ect methods :

Indirect method of recruitment involves advertising in newspapers, on the radio, in trade and

profession journals, technical magazines, brochures. etc. It is the most frequentl y used method o

recruitment specially for higher rank positions, and when qualified or experienced personnel are not

available from other sources. Even senior posts are largely filled by such method when they can not befilled by promotion from within. Other methods include advertising in publications, such as trade and

professional journals, radio and television announcements, as is done by many Indian manufactures.

Professi onal journals are read by people with special ised background a nd interest. Therefore

advertisement in these are, generally, selective.

3. Third party methods :

Third party methods include both commercial as well as private employment agencies.(a) Private agencies : Private agencies are quite successful in providing the personnel specially

in technical and professional field. Such agencies charge commission for providingthe job

to job seekers. Many private agencies tend to specialise in a particular type of job, like

sales, office, engineering, production etc. These agencies provide a nationwide service in

recruiting a variety of personnel. They are functioning very well.

(b) Employment exchanges : Thi s is one of the main agencies of public empl oyment.

Empl oyment exchanges are regarded as a good source of recruitment of skilled, semi-

skilled, unskilled and for operative jobs. Employment exchanges in India are in few number and they provide a clearing house for jobs and job information. The job seekers get their

names registered with employment exchanges, managed and controlled by the central and

state government. The employers give the information of vacancies to be filled in, to suchexchanges and then the exchanges refer the names of prospective registered candidates tothem. These agencies provide a wide range of services like counselli ng, assistance in

getting jobs, information about the labour markets, wage rates etc.



(c) Professi onal Bodies or organisations : The professional institutions like Insti tute of

Chartered Accountant, ICWA, Institute of company secretaries etc. maintain a register of qualified persons from which they recommend the names of the job seekers to the employers

when asked for. These consultancy firms recommend persons of high calibre for higher

posts as managers in general, marketing, production categories.

(d) Educational institutions like schools, colleges, universities, professional t echnical

institutions, are also the centres for procuring personnel.

A close liaison between the organisation and educational institutions helps in getting suitable

candidates for vari ous positions. These educational institutions offer opportuni ties for

recruiting their students. These general, technical and professional institutions provide blue

collar. white collar and managerial personnel. All the above are a very useful source of recruitment for a full range of jobs. They provide placement services where complete bio-

data and other particulars of the students are available. The employment managers of the business concern maintain close contact with these educational institutions for recruiting

officers, apprentices or management trainees. These institutions refers the names of the

prospective employees to the prospective employers as and when asked for.

(e) Recommendation of existi ng empl oyees : It is an import ant source of recruitment.Existing employees are asked to recommend their friends, family members, relatives to the

employer. The existing employees know both the organisation and the candidate being

recommended by them. Some business concerns give opportunity to their existing employees

to recommend the names of people (candidates) best known to them for filling the vacancies.

It is expected from the present employees that they will recommend the candidates who

have the potentital, qualification required for becoming successful on the job.

(f) Labour contractors : In the past this sources of recruitment was very important and

powerful. Today also labour contractors play vital role in recruiting semi skilled and unskilled

employees. Labour contractors having contacts with the job seekers or labour, bring them

at the place where they are required. They take commission from the labours for giving

them job and also from the employer. (g) Former employee s : Former employees mean those employees who worked in the

organisation and left afterwards for some personal reason for example for better prospects,

bright future in some other organisation etc. Only such former employees who have good

record at their credit may be entertained by the organisation many times. These former employees are eager to come back to the same organisation where they had worked.

(h) Interme diarie s : Thi s method of recruitment was most popula r in India . These

intermediaries called as jobbers, Mukadams, Choudharis etc. Employers generally consult

these intermediaries through their managers at the time of their recruitment. In India this

sources of recruitment is now out of date and not so popular.

(i) Trade Union : In some business enterprises trade uniouns also assist in recruiting the

staff. But only necessary thing that a required to be with them is that the trade union works positively towards the organisation and helps in achieving the targets and objectives, plans,

policies, help in developing better labour relations. Such trade unions assist in recruiting the

best employees.



(j) Recruitment at the factory gate : Under this method a notice of recruitment is displayed

on the notice board at the gate of the factory or office. In this notice, the organisationspecifies the details of the jobs or vacancies available This technique is used generally to fill

casual vacancies. This is an important source of recruitment.

(k ) Unsoliciated appli cations : Prospective employees apply for employment at their owninitiative. Such applications are known as unsolicited appli cations. Special ly in case of

reputed companies, a large number of unsolicited applications come to the office. These

applications are maintained or preserved in a file A proper record is maintained either incomputer or in file. This record is referred as and when vacancies occur and suitable

candidates are recruited.

Various sources for recruitment (as above) are available. But it is essential to know that any o

the sources taken singularly is not useful for all types of jobs, and for all the times. The concernedorganisation has to select one or more sources depending upon, the type of personnel it requires, job

specification, the positions it wants to fill etc. Similarly a source which suits to an organisation may

not be suitable for other because of the traditions followed by it, the atmosphere in which it works andso on. In nut-shell we can say that no sources is good at all the times, in all the circumstances and for

all the employees and employers.

Therefore the company has to use a variety of recuritument sources. Almost all the sources

(third party) are widely used for recruitment by the organisations in India.

SELECTION

Selection is a negative process and it starts a fter the completion of the recruitment process,

Selection is the process by which the qualified personnel can be chosen from the applicants who have

offered their services to the organisation for employment. This process is called a negative process,

since more candidates may be turned away than hired. Selection is the tool in the hands of themanagement to differentiate the qualified and unqualified applicants by applying various techniques

such as tests, interviews etc. In this sense, it is a negative process of employment in which only a fewwho qualify for the job are offered employment and others are denied the opportunities. Selection is

the process of logically choosing individuals who possess the necessary skills, abilities, qualities to suitthe job. As against this, recruitment is called a positive process, as its objective is to increase the

number of applicants.

According to Dale Yoder “Selection process divides the candidates for employment into two

categories, namely those who will be offered employment and those who will not be. Sel ection of employees is a decision making process, where the management decides certain norms or principles

on the basis of which, a discrimination between qualified and unqualified desirable and undesirable

candidates can be made. A sound selection policy will ensure the selection of a suitable candidate. The

objective of selection process is to determine whether an applicant meets the qualifica tions for aspecific job and to choose the applicant who is most likely to perform well on that job.”

Selection procedure :

After recruitment, the next important staffing function is selection. Selection of the best candidatesis the next logical task in the execution of procurement function. Selection of suitable candidates is

very essential because wrong selection adversely affects the organisation. Investment in an inefficient

or misfit employee is a great loss to it. At the same time wrong adversely affects the employee in the



run as he can never get job satisfaction. It increases the labour turnover and absenteeism. It also

reduces the morale among employees. Therefore it is essential that selecting authorities must be verycompet ent, expert s a nd wel l knowledged.The selecti on procedure must be very efficient and

satisfact ory. Selection problem does not have onlythe economic aspect but social aspect also. It

affects not only the organisation but the whole community. The subjective, imbalanced, unsystematic,

prejudiced, biased selection may have demoralising effects on the society. Therefore selection must be based on merits, and it must be just.

Selection procedure is certainly a negative procedure of screening as many candidates as arelikely to be rejected. It is concerned with securing maximum relevant information about an applicant.

The main objective of selection procedure is to see whether an applicant’s qualifications meet the j ob

requirements or not? Who is the right person for job? Who will be successful on the job? Who is most

suitable ordesirable for the job? And who is most likely to perform well on that job?

The selection procedure involves several steps and at each step secreening takes place. All these

steps are necessary for screening every candidate. It depends upon the type the job i.e. operative,

managerial, administrative, supervisory etc. Accordingly t he steps must be evolved in selection

procedure. Even while selecting the steps, it should be seen whether the job requirements are properly

tested or not. There is a series of steps, and every step is going to secure additional information of thecandidates. At every step, facts must come to light whichmay lead to the rejection of the applicant.

The applicant has to go through all these steps. This technique is known as the successive hurdletechnique. Thus, an effective select ion programme is a non-random process because those selected

have been chosen by assuming that they are more likely to be “better” employees than those who have

been rejected. For best or ideal selection procedure a selection policy should be formulated. While

formulating selection policy due consideration should be given to organisational requirements as wellas technical and professional dimensions of selection procedures. In simple words an effective policy

must assert the “why” and “what” aspects of the orgaisational objectives. The hiring process can be

successful if the following preliminary requirements are satisfied.

(a) A person should have the authority to hire. This authority comes from the employment

requisition, as developed by an analysis of the work load and work force.

(b) There must be some ideal or standard of personnel with which a prospective employee may be compared i.e. job description and job specification as developed by the job analysis.

(c) There must be a sufficient number of applications from whom the required number of employees may be selected.

Following are some steps involved in selection procedure.

(1) Preliminary interview : On receipt of applicati ons they are screened to sort out the

desirable and undesirable ones. Only the desirable applicants be permitted to face preliminary

interview. The preliminary interiew is generally quite brief and has the object of eliminatingthe unqualified, undesirable, and unsuitable candidates. Lack of certain requirements in

academic qualification, training, experience, skill, capacity may determine unsuitability othe candidates. In this brief interview appearance, ability in communication, impression,

salary expectation etc. of the applicant are quickly evaluated. This step is beneficial, not tothe organisation only but to the applicant also, in a way that, if an applicant is eliminated in

the early part of the selection procedure, he ma y be saved from the hurdle of passingthrough the long procedure, and organisation is saved from the expenses of processing



him through the remaining steps of the procedure. If the applicant appears to have somechance of being selected, he be given the application blank to fill in.

(2) Application Blank : After clearing the preliminary interviews application blank is given tothe candidates to fill up. The objective behind application blank is to secure information, in

the applicant’s own handwriting sufficient to properly identify him and to draw tentativeinferences regarding his suitability for employment. This is one of the important steps to

get a written record of qualifications, experience as well as any other specialisation of thecandidate. This application blank should be as simple as possible. It may prove to be useful

in a big organisations, as to enable them to plan their training programmes, special assignments

or promotions after the employee is hired.

(3) Employment tests : Testing and employment interviews are two very important devicesof screening. An employment test is an instrument designed to measure selected psychological

factors. The factors so measured are usually the psychological type, such as ability toreason, capacity for learning, temperament, specific aptitude, interest, mechanical dexterityetc. Such psychological tests were first introduced in military services in the first world

war and later adopted by business as a technique of selection. Employment tests are widely

accepted in the selection process. Real value of the tests lies in eliminating those applicantswho have very littl e chance of job success than in select ing applicants who would be

defi nitely successful on the job. But one should not rely upon tests alone. There are psychological and other steps which can measure the extent of differences among the

people. Tests reduce the cost of selection and placement because large number of applicantscan be evaluated within small period of time. Tests provide healthy basis for comparing

applicants background. Some important test are intelligence tests, aptitude tests, achievement

tests, personality tests, interest t est s etc. They hel p in matching the charact eristics oindividuals with the vacant jobs so as to employ right type of personnel. However, tests

should be considered simply as a step and not a replacement for the other phase of the

selection process . It should be remembered that when the tests are used, they should not be relied upon completely. Individuals differ from each other in almost all aspects. They

differ in respect to physical characteristics, capacity, level of mental ability, likes anddislikes

and also personality traits. Therefore right type of test should be applied to right type o personnel. Test should be selected according to job requirements.

(4) Employment Interviews : Interview is probably the most widely used selection tool. It is

a complete select ion technique because its scope includes measuring all the relevant

characteristics and integrating as well as classifying all other information about the applicant.

Although application blanks, tests and group discussions provide much valuable informationabout a candidate, yet they do not provide the complete set of information about a candidate

to enable the organisation to know about the applicant and vice versa. The main aim of an

employment interview is to find out the suitability of the candidate, to secure more information

about the candidate, to give the candidate an accurate picture of the job with details o

terms and conditions and idea of organisation policies and employer-employee relations.

The factual data on the application blank may also be checked. It also tests the capabilitiesof the candidate. It is an extensive device. It tests not only the personality but also the skill

and ability for the job, of an applicant. Interview procedures and technologies vary from

organisation to organisation and from individual to individual according to the



purpose of the interview. Interviewing is the most widely used single method of sel ection

despite its some obvious shortcomings. Sometimes the interviewers give different ratingsto same candidate and therefore it suffers from subjectivity and unreliability. Interview

tests only t he personality of the candidate and not his ski ll s and ability for the job. It

depends too much on the personnel judegement of the interviewer which may not always

be accurate. Prejudice may affect the result of the interview. Interview is personal, face toface meeting between the panel of interviewers and the candidate. They may also be used

for testing certain qualities and capabilities of the candidates.

(5) Checking of references : A referee is potentially an important source of information

about a ca ndidat e’s personalit y special ly if he holds a responsible position in some

organisation or has been the boss or employer of the candidate. Generally the applicant is

also asked to give names of certain persons or firms where he has worked, for references.Such references are very useful in getting information about the candidates.

An applicant may be asked in the application blank to supply two types of references (a)

character reference and (b) experience reference. The references may be requested to

provide information regarding behaviour of the applicant. It is very rare to get a frank

opinion about the candidate, even after giving an assurance to them that the informationsupplied would be kept confidential. Reference checking has its drawbacks also. The

reference may not give accurate information about the candidate. He may give his goodimpression about him because of his relations with him or if he is his employer, he may

give a good report to get rid of him. Therefore one should not remain totally relied upon

this method.

(6) Physical /Medical examination : After a candidate has cleared the above hurdles, he isasked to go through a medical examination by doctors appointed by the employer for this

purpose. The pre-employment physical examination or medical test of a candidate is an

important step in the selection procedure. The physical examination may be thorough and

comprehensive or it may be general and simple just to check up some important capabilities

i.e. eyesight, hearing, lungs, heart or to detect contagious or serious disease the candidate

is suffering etc. depending upon the nature of work. It is important, because the medically

fit and healthy employee is likely to work more efficiently as compared to physically unfit,and disabled employee. If the employee suffers from some serious and contagious disease,

other employees may suffer by coming in contact with such an employee or he may go on

leave and claim medical benefit and compensation. Such employees are the liability than the

asset of an organisati on. Such employees remain depressed havi ng l ow morale anddisinterested, which may be very expensive for the organisaion. These are some objectives

behind the medical check up. It serves to ascertain the applicant’s physical capabilities to

meet the job requirements. It serves to protect the organisation against the unwarranted

claims under the Workers Compensation Act. It helps to prevent contagious diseases entering

the organisation.

Simply making the prospective employee go through the medical test, ensures that employee is physically fit for the job at the time of actual entry. A proper medical examination ensures

higher standard of health and physical fitness of the employees and reduces the rate o

accidents, labour turnover and absenteeism too



(7) Approval of the supervisor : After the medical examination, sometimes, the personnel

department, which is generally in the staff nature, submits the candidate so selected to theline superior for his selection and approval. The reason behind this is, that the organisational

relationship often requires that the supervisor be given the right to pass upon his personnel,

otherwise he cannot be held accountable for their performance. Thus the equality of authority

and responsibility of the supervisors is preserved. It is better to have an appraisal to boththe staff employment interviews and the supervisor, who he better acquainted with t he

actual job conditions and the type of personnel at present in the department. This step may

be eliminated either by giving authority of final selection to the personnel department or the

superior concerned may be made the member of the interview committee, with a good

voice in selection or interview.

(8) Selection and placement : A final list of candidates, who have successfully passed all the

hurdles and therefore selected, is prepared. Such selected candidates are informed abouttheir selection and are asked to report to the department . They may be given a date before

which they are supposed to report.This can be divided in two phases. In first phase onlythe selection list is published either by displaying it on the notice board or by sending

individual letter or through circul ars. In second phase appointment letters are issued toindividual candidates.

Preliminary Interview

Applica tion Blank

Employment Tests

Employment Interviews

Checking of References

Physical or Medical Examination

Approval of the Supervisor

Selection and placement

Rejection

Selection ProcedureFigure:

The candidates may be appointed on a probation of six months or more. If during the probation

period, an employee is not found suitable, the management may give him some training or transfer himto some other job to which he may be expected to do justice. Even after this if, he is not found fit for

the job, he may be asked to leave the job.

It is also courteous to inform the rejected candidates expressing the inability to select them.



In this way the selection procedure functions. The procurement programme should be evaluated

from time to time in terms of realiability, validity, objectivity, difficulty, reasonableness, standardisation, practicability, independence and economy and appropriate corrective actions should be taken to improve

upon the existing system.

INTERVIEWINGInterview is one of the important steps in selection procedure. It is probably the most widely

used selection tools. Employment interview and tests are two of the most important screening devicesgenerally used in hiring procedure. Interview is the oldest method of evaluating a persons potential for

a job. It assists to reveal, examine and assess the capabilities, qualities and traits of an individual to beselected for the job in an organisation. Interview technique is quite complex in substance and difficult

to use property. Its scope includes measuri ng all the relevant characteristics and integrating and

classifying all other information about the applicant. Through this technique, needed information likenature, attitude, behaviour, perception, interest, motives, likes, dislikes, intelligence, personality etc. o

candidate can be obtained by a face-to-face contact. This technique is practically used in every business

and profession. Some activities call for a high degree of proficiency in interviewing candidates for thePosts like professors, engineers, psychiatrists, clinic al psychi atrist s, lawyers, soci al workers,

employment managers, industrial relations, managers, market analysts, salesmen, supervisors etc.Meaning and Defination :

Interview means a conversation between interviewer and intervi ewee a imed at assessing the potentialities for a job. It is a two way comunication between the condidate and the interviewer. In

simple words interviewing means “deliberate active listing with a purpose to draw the other person

out, to discover what he really wants to say and to give a chance to express himself freely”.

Scott and others defined interview as, “An int erview is a purposeful exchange of ideas, the

answering of questions and communication between two or more persons.”

An eminent author defines an interview as “a conversation with a purpose” and the purpose may

be to “get information”, “to give information” and “to make a friend”.

Bingham Moore and Gustad has defined the term interview as under :

“An interview is a conversation directed to definite purpose other than satisfation in the converstion

itself. There is give and take between the interviewer an interviwee and much of the interaction

between these two is carried on by gestures, postures, facial expression and other communicati ve

behaviour. Even the words acquire a veriety of meanings and values as they are spoken with different reflections and in different context. All of these are means of communication- the spoken words, the

gestures, the expressions, the reflections- contribute to the purposeful exchange of meanings which is

the interview”

In other words “An interview is an attempt to secure maximum amount of information from the

candidate concerning his suitability for the job under consideration”.

An interview may be defined as a systematic and scientific process used in the employee selection

which helps to acquire needed information with regard to the candidate’s capabilities and his interest,

aptitude and knowledge required for the job and also to provide him the requisit information about theconcerned organisation through face-to-face communication, thus creating a feeli ng of trust andconfidence in the mind of the prospective candidate.



Objectives of Interview :The following are the objectives of a well designed and an effective interview programme.

(1) To seek more information about t he candidate, which is not mentioned in “ApplicationBlank.”

(2) To judge an applicants qualities and characteristics as a basis for sound selection and placement.

(3) To verify the information given in the application form and in the Appliation Blank.

(4) To give essential and accurate facts about the job and the organisation such as nature of theob, hours of work, opportunities for advancement, employee welfare facilities, benefits

and services available, organisation’s policies, plans, future prospects etc to the candidate.

So that the candidate will be in a position to decide, whether to accept or not the employment

in that organisation.

(5) To establish rapport t o create a feeling of mutual understanding, confidence and trust

between the organisation (personnel department) and the applicant who is to be employed.

(6) To create a good image and to promote goodwill towards the organisation, whether the

interview culminates in employment or not.

(7) To give an idea of disciplinary action, grievence handling and relations with unions to the

candidate, because interview is a valuable tool for all these.

(8) Interview is the only technique which seeks correct and factual information a bout the

candidate.

Thus in brief, selection interviews give a chance to personally “ size up” the candidate and to

pursue questioning in a way employment tests can employ not. In other words interviews can bedescribed as a very important screening tool of the candidate.

TYPES OF INTERVIEW

The interview can be classified in the following ways on different basis.

1) Patterned, structur ed or Guided Interview : This is the most common method ointerview. It is a preplanned interview and more carefully designed to have a high degree oaccuracy, precision and exa ctide. Under this type of interview a list of questions to be

asked by the interviewer is prepared in advance on the basis of job specification, and tosecure information from the candidate. The questions would be asked in a particular order

with very little deviation, ideal and standard answers to the set questions are also determinedin advance. Therefore there is no scope for bias on the part of the interviewer. An adequate

opportunity is given to the candidate to express his ideas and viewpoints. The main purpose

of this type of interview is fact-finding and not awarding a judgement. It measures personality,

motivation and interest of the candidate, because this information can not be secured from

elsewhere. This type of interview is useful in selection of semi-skilled employees. It is alsocalled as directed or standardised interview. It assists in proper evaluation of the personality,

attitude and motivation of the candidate. It guards against faulty conclusion, due to bias.(2) Unstructured or Unguided interview : It is an unstructured and non-planned interview.

Therefore it is called as “non-directed interview” also. It is designed to let the interviewee

speak his mind freel y. The idea is to give candidate complete freedom to sel l himself without



the encumbrances of the interviewer’s questions. It is not directed by pre-determined list of

questions. It is very flexible in nature, candidate feels very comfortable and free. Fullfreedom is given to him to discuss and express his points of view and ideas. The basic

objectives of this type of interview is to find out the feeling, desire or problems of the

candidate. The interviewers look for trait of character and nature of his (candidate’s)

aspiration and his strength and weakness, mainfest or potential. For conducting such typeof interview, interviewer must be highly skilled and competent. This type of interview is

more offen used in situation othe than hiring such a counselling, processing of grievances

and exit interviews.

3) Depth interview : The object of this interview is to examine intensively the cadidates’s

background and thinking and to go into considerable details on particular subject of an

important nature and of social interest of the candidate. It is semistructured in nature andquetions are used in key areas, which have been studied in advance by the interviewer. The

typical subjects are discussed in such type of interview. The interviewer, as well, providesinstructional information about his organisation, the nature of work, pay, opportunities for advancement and demands likely to be made on the employee. The capability of performance

of the candidate in the specific area of work can be well-judged by asking relevant questions by the specialist interviewers.

4) Stress interview : Under this type of interview the strain is put on the candidate deliberately.It is designed to test the candidate and his conduct and behaviour by putting him under

conditions of stress and strain, Usually the interviewer in such a stress circumstances asks questions rapidly, criticises the interviwee’s answers, interrupts him frequently, too many

questions are asked at a time by many inerviewers, makes negative remarks, tries to puthim in an awkward situation, and carefully watches the interview’s emotional stability and

balance. The purpose of the interview is to find out how the candidate behaves in a stresssee whether he looses hissituation and temper, gets confused or frightened. This type o

interview does not necessarily reveal how a candidate will behave in real stressful life

situations involved on job.

5) Group interview : It is also called as Discussion Interview. In this type of interview,

groups rather than individuals are interviewed. A group of candidates (interviewees) isgiven certain problem and is asked to come to specific decision within a given time. The

interviewer sits over there and watches the interviewees. The candidates enter into group

discussion. The interviewer observes as to who has assumed leadership and the process

by which leadership is exercised and how it is accepted by the other members of thegroup. Group interview is generally conducted in a situation where leadership ability is to

be observed. Group intervi ew is resorted to for selecting management personnel. The

object of this interview is, to see how well individuals peroform on the particular task or in

a particular situtation. It is designed to save time, labour and cost and to see how t he

candidates react to and against each other.

6) Panel or Board Interview : In panel or board interview, candidate is screened by a groupof interviewers who are specialists in their respective fields. This type of interview is just

opposite to “Group Interview.” A candidate is interviewed by a number of interviewers,



and t he questions are asked by them in serial or in random order. The interviewee is

required to answer and to have dialogue with many interviewers at a time. This may cause pressure on the candidate. This is not a good practice. This type of interview pools the

collective judgement and wisdom of t he panel of interviewers in the assessment of the

candidate. The members of panel or board, jointly evaluate the performance of the candidate.

7) Formal interview : Formal interview may be held in the employment department by the

employment officer in a more formal atmosphere with the help of preplanned questions

and schedule, with predetermined procedures and practices. It may also be called as “plannedInterview”.

8) Informal Interview : It is an oral interview, that may take place anywhere. Usually when

staff is required urgently on some specific job, this type of interview is conducted. Informalinterview is not at all preplanned and scheduled. Informally the questions are asked to the

candidates.

9) Exit Interview : The exit interview is generally conducted at the time when an employee

is leaving the business organisation. The objecti ve behind this interview is to know theopinion, view and feelings of the out going employee regading his job and organisation, and

later on to develop/improve such policies in the light of defficiency so discovered.

PRINCIPLES OF INTERVIEWINGInterviewing is a universal tool utilises in any selection procedure.

The primary object of interview is to determine the suitability of applicant for the job. Interviewing

is an art. Successful interviews follow established principles in matching man and his qualifications to

the job requirements.

Bingham and Moore have mentioned the following principles of interview.

1) Expert, Skilled, experienced and trained interviewers : The interviewers must possessthe ability and skills required for interviewing the candidates. They should be expert, skilled,

experienced and trained for interview. They should be familiar with the interview requirements

or nature of the job, background of the organisation and industry which they represents.They should be well-versed in Behavioral Science, which helps them to Judge the different

personality traits of the candidates. They have to get them prepared for interviewing by

making a list of questions based upon the job specifications.

2) Provide Privacy and ample time : Full privacy should be provided for conducting theemployment interview. There should be no di sturbances, obstacl es, phone calls, noise,

visitors. Specific and healthy atmosphere should be deliberately created for interview purpose.Ample time should also be given for interview to the candidate during the interview.

3) Proper reception of the interviewees : All the interviewees should be warmaly welcomedand be treated nicely. A warm reception of the interviewees help to create a favourable

impression in the mind of the candidate appearing for the interview.

4) Comfort and ease : These help the interviewee feel at-ease and willing to give you the

facts a bout himself. The interviewers must be straight forward and frank rather than

clever.

5) Skillful and tactful qestions : The interviewers should ask t he questi ons in a simple

language, understandable to the applicant. Never argue or interrupt or change the subject



abruptly. They should not ask leadi ng (which gives clues or hints to the answer) or tricky

questions, because one of the objectives of interview is to seek more and accurate informationabout the candi date. The interviewers must respect the interest of the candidat e. Direct

and personal questions should be asked tactfully. The interviewer should try to get t he

relevant information and also answer candidate’s questions also.

6) Do not “oversell” the job opportunities : This means indirect discl osure tha t the

organisation is in need of the services of the candidate Even if the candidate is the right

person for thejob, the organisation should not beg to him. On the other hand the interviewer

should use his skill to impress the candidate in such a way that he himself accepts the job.The feeling that the candidate is obliging the organisation by accepting the job should never

be created in the mind of candidate.

7) Be courteous towards the candidate : The interviewers should adopt a courteous approach

towards the candidate and let him feel at home, so that she/he can say everything about

her/himself with an open and free mind.

8) Encourage the candidate to talk : Give full apportunity to the candidate to talk more and

there should not be much talking by the i nterviewers. The interviewer must avoid the

temptation of too much talking and should give ample apportunity and encouragement tothe candidate to talk more and in details about himself. The best interview is usually one inwhich the interviewers talk the least.

(9) Attentive and patient listening : The interviewer must listen attentively and patiently

to the interviewee during the interview. He should not divert his mind elsewhere during theinterview, though the candidate may or may not be to their satisfaction. The interviewer

should not impose upon the candidate, his own opinion, view points and beliefs. Theinformation from the applicant can be elicited only when the interviewer give him a patient,

prolonged and skillful hearing.

10) Objectivity in decision making : The interviewer should understand the interviewee’s

point of view and has to keep himself away from the bias, prejudice, personal judement

and whims. He must rely on the principle of objectivity rather than subjectivity. Thereshould be a scientific process and methodology of testing and interviewing the candidates.

11) Closing the interview : The interview should be concluded at the point of time when theinterviewer becomes sure collecting adequate information about the candidate and that he

has judged the personality traits as required. At this point the interviewer should stop the

interview extending his thanks to the candidate for the interest he exhibited towards the

organisation.

12) Rational selection : After the interview is over, the chairman and members of the interviewcommitte have to arrive at a specific decision with regard to the final select ion of the

candidates for the jobs to be filled-in.The interview board should be very rational in this.

Their decision should based on the performance of the candidates and the information the

board has collected during the course of interview.

Such decision should be conveyed to the concerned candidates in a clear-cut and simple language

along with the terms of employment by timely sending them the appointment letters. Every interview

should be result oriented. The interview programme should be scientifically impl emented for this



which ultimately helps in the final selection of the most suitable, competent and right employees for

the jobs in the organisation.

TRAININ G

Every job has its own speciality, Performining job does not only depend upon usual theoretical

or technical knowledge possessed by the performers, but such a knowledge is required to be madeappropriate and useful for the job also.

Training is the act of increasing the konwledge and skill of an employee for doing a particular ob. After selecting and placement of employees, they may be sent for training. These employees

require a systematic training. Arranging appropriate training programme is one of the important functionsof the personnel management. Every organisation has to make the arrangement of training for their

employees. If there is no planned training programme, the employees may engage themselves in self-

training by trial and error or by observing others. In the absence of a planned, pre-determined, and

systematic training programme, training cost will be much higher. For well planned, training programme,

employee’s as well as management’s interest are equally essential.

Meaning :

“Training is the act of increasing of knowledge and skill of an employee for doing a particular ob.”

The term “training” denotes a systematic procedure for transferring techincal knowledge to the

employees so as to increase their knowledge and skills for doing particular jobs”.

Edwin B. Flippo defines, “Training is the act of increasing the knowledge and skill of an employee

for doing a particular job.

Michael J. Jucius defines, the term training is used here to indicates only process by which theaptitudes, skills, and abilities of employees to perform specific jobs are increased”.

From the above meaning and definitions it becomes clear that, training is an organised procedurefor increasing the knowledge and skill of the employee for better performance on the job.

Training is not necessary for new employee alone it is equally essential for old, senior existingemployees too, Reason behind this is that training for employees is necessary, to keep the businessorganisation dynamic. Emplyees are required to be trained all through their service. Imparting training

once a while can not ensure refineness throughout. Naturally training becomes equally important for

senior, existing as well as new entrants. Training is a continuous process. Training should be given to

all old and new employees of an organisation, at regular intervals.

Significance of Training : (Employee point of view)

Training is equally imporant for employees as well as for the business organisation. From

employees point of view imparting enables them to acquire more and greater skills and thus increasing

their versatility for transfers and qualifications for promotions. Training helps in getting better status,

safety as well as security of j ob. It provides for better remuneration also. Trained workers are not

prone to accidents as they acquire knowledge of safety measures through training. Naturally various

wastages are avoided and productivity is increased that too in reasonable time, alongwith betterment inquality. Employees can improve their proficiency and ultimately get satisfication. This reduces the

chances of disputes, grievances and ensures optimum utilisation of skills.



All the above mentioned points show the significance of training from the employees point of

view.

Importance of training (Management point of view )

Training increases productivity in terms of both quantity and quality. It reduces wasteages and

scrap, damages to manchines and equipment. Training gives more safety to employees, so that areless or no claims for compensation. --- No much supervision is required. Therefore it reduces the cost

of supervisory staff. It does not require direct control. So the supervisors or other upper level employees

remain free from the burden of direct and regular control on the employees. This time, can be used for

other important tasks of the organisation. It also increases organisational stability and flexibility. Stability

in the sense, trained employees get attract ive remuneration therefore they continue i n the same

organisation. Because of stable workforce a business concern enjoys stability to business with flexibility,

i.e. the ability of an organisation to adjust with the changing circumstances, situtations and environmentetc. Flexible organisation requires flexible work force. Training enhances employees, morale. Systematic

training creates an atmosphere of competence and efficiency and employees find it a good place to

work. Employees start feeling proud working in such orgaisations. Only the trained employees can

boldly face new challenges such as new tchnology, greater specialisation, automation, mechanisation,

computerisation, globalisation, liberalisation, privatisation. All these factors stress the need for training.Only highly trained skilled specialised personnel can meet such challenges.

Kinds of Training :1) Induction or orientation training : This type of training is concerned with the problem

of acquainting a new employee to the organisation and its procedures, rules and regulations.

Under this kind of training the new-comer is acquainted with the company’s background,history, policies, plans, objectives, products, work environment etc. He is as well introduced

to his fellow workers. This traini ng is aimed at introducing the new employee to the

organisation.

2) Job training : Job training is necessary for new employees to acquaint them with the job

are expected to perform. The objective behind the job training is to enable the employees to

learn new techniques, skills and knowledge and create interest in the job and to minimise

the accidents. It is a different kind of training, Under this kind of training workers are

trained in handling machines, equipment and materials so that operations go on smoothlyand failures as well as accidents are avoided. It is more formal in plant training programme.

3) Craft training : Apprenticeship training is the major method adopted for this type of training. This kind of training involves, training for craftsmansip, preparing them not for a

single job but for many types of related jobs which can be assigned to a competent craftsman.

The extent and intensity of training vary from craft to craft. The Governments of various

countries have passed laws which make it obligatory on certain categories of employers to provide apprenticeship training to the young people.

4) Interniship Training : Interniship training is usually means for such vocations where

advance theoretical knowledge is to be backed up by practical experience on the job. In

modern era interniship training is quite popular just because of proper co-operation betweenemployees and professional, and vocational institutions. The duration of this training generally

varies from six months to two years. The way of imparting training is such that engineeringstudents are sent to big industrial enterprises for gaining practical work experience and



medical students are sent to big hospitals to get practical knowledge. Management institute’s

students are sent to big business enterprises to get the practical knowledge of management.These trainees are students only and not the employees of the organisation but when

suitable vacancies or jobs occur in the business organisation, these trained students get the

preference.

5) Refresher training or Retraining : According to Dale Yoder, “ Retraining programmes

are designed to avoid personnel obsolescence. This training is arranged for old or existing

employees of the business organisation. The main objective of this type of training is toacquaint the employees with the latest or advanced methods of performing their jobs or functions and thereby improving their performance and efficiency. This training is necessary

because, at every moment, there are lots of changes in technology, in methods of production

as well as introduction of new machines, etc. Refresher training is essential in managing business organisation effectively, efficiently and profitably.

Methods /Techniques of Training :Training is an organised procedure by which people learn knowledge and acquire the skills they

need for a definite purpose. Training is rooted in the learning process and learning is that human

process by which skills, knowledge, habits and attitudes are acquired and utilised in such a way that behaviour is modified. In simple words, training causes learning process that takes place within the

trainees, in which behavioural changes occur as a result of experience. Learning can not be measureddirectly but the changes in behaviour that occur as a result of learning can only be measured. Under

training the trainee has to learn something what he wishes to learn.

There are so many methods or techniques for imparting training to the trainees. The forms and

types of employee training methods are inter-related. In fact, methods are multifaceted in scope anddimension, and each is suitable for a particular situation. The best technique for one situation may not

be the best for different groups or tasks. The choice of any method will depend upon cost, t ime

available, number of persons to be trained, depth of knowledge required, background of the trainees,

type of the job, objectives behi nd training and many other factors. The following are methods o

training.

1) On-the-job-training

2) Vestibule training

3) Apprenticeship training

4) Classroom methods

(1) On-the-job-training :

This is considered to be the most effective method of training to the operative personnel. Under

this method the worker is trained on the job while he is working, at his working place, on the same

machine, material, methods, under same working conditions with the same process, that he will beusing ultimately after completing the training. This type of training is given by his immediate boss.Thus, the superior knows exactly the problem of the employee, and what the trainee should learn to

do. Sometimes, the professional outsider instructor, who is specialist in that area is invited for impartingtraining to the employees. The most important advantages of this type is ‘training while working.’ So

special time for training is saved. The workers start giving production and at the same time learn

something rela ted to work. Working and trai ning goes on simultaneously under this method.Effectiveness of on the -job training depends upon qualified trainees alone. Following methods o



training come under the classification of ‘on-the-job Training .’

a) Under study method : Under this method a senior and experienced employee teaches anew employee as his understudy. The trainee under this system may loose his motivation

and morale because the person under whom he is working may not take interest in him.This method takes a long time and the trainee looses his motivation because of uncertainty

in his promotion position. In other words under this system a man learns from the manabove him and teachers the man below him. This system is more suitable in circumstances

where the trainer requires an assistant.

b) Rotation : Rotation is another method of training on the job. Under this system the employeeis periodically rotated from one job to another instead of sticking to one job, just to acquire

functioning of other jobs. The main objective is to broaden the background of trainee on

various positions of jobs.

c) Training by superior : The superior in charge is responsible for the training to the operative

staff under t his system. The supervisor supervises and instructs the empl oyee while on

work. Sometimes he demonstrates the system of working to the employee. It enables the

supervisor and the employee to understand each other better and to maintain healthy relations

between them.Every employee, from clerk to company president, gets some on-the-job training. when he joins

it. Therefore William Trady has said that, the most common, the most widely used and accepted

method of training and the most necessary methods of training employees in the skills is essential for

acceptable job performance.

Merits :1) The trainee learns on the actual machines and equipment in use and in the true environment

of his job. So he gets a feeling of the actual production conditions and requirements.

2) If the employee is sent outside for training the organisation loses his working period. But under this method, there is no chance for loosing working time. Working and learning both

go on simultaneously.

3) It is highly economical, since no additional personnel or facilities, special or artificial arrangements are required for impatimg such training.

4) The trainee learns the rules, regulations and procedures by observi ng their day-to-day

appl ication. So the employees easi ly co-operat e with t he management in maintaining

discipline in the organisation.

5) This type of training is suitable for all organisations because it is suitable for every type o

ob.

6) Time taken under this method is very less. It is a time saving method. It is most appropriate

for teaching the knowledge and skills which can be acquired in a relatively short period.

that is to say, a few days or weeks.

Demerits :

1) Main demerit of on the job training is that training instruction are not properly organised. They are haphazard and training is not properly supervised.

2) The experienced employees may not possess skill to impart training to the trainee.



3) The working hours of employees remain unproductive while giving instructions.

4) The trainee, more often, lacks in motivation for such training.

5) Trainees, learners are often distracted because of a noisy shop or office.

6) Low productivy, low quality of work and inefficiency come to forefloor especially when

the employee is unable to fully develop his skills.Vestibule training (off-the-job training) :

This method attempts to duplicate on-the-job- si tuations in a class room. It is a classroom

training which is often imparted with the help of equipment and machines which are identical with

those in use at the place of work. This technique enables the trainee to concentrate on learning the newskills rather than on performing actual job. After t raining the worker is put on similar job in theworkshop. It should be noted that a well-qualified and trained insturctor is deputed as the incharge of

the programme. This method is quite expensive because there is a duplication of material, equipment

and conditions found in a real work place. But it is a correct way of imparting theory alongwith

acquainting with the practical work. it means theoretical training is given in the class room while the

practical work is conducted on the production line. This is an excellent method for a big number o

employees to be trained for the same kind of job and for training semi-skilled personnel. This methodis often used to train clerks, bank tellers, inspcectors, machine operators, testers, typist s etc. It is

most useful when philosophic concepts, attitudes, theories and problem solving abilities have to be

taught. This training is generally given in the form of class room lectures, conferences, case studies, role playing and discussion etc.

Merits :

1) There is less distraction because it is given in a separate room.

2) A well qualified and trained instructor who knows how to teach, can be more effectively

utilised.

3) Trainees can be taught without interrupting production.

4) It permits the trainee to pract ice without the fear of supervisor’s or fel low workers

observation, criticism and their possible ridicule.

Demerits :

1) Under this method responsibilities are split up between li ne and staff which l eads to

organisational problems.

2) An additional investment in equipment is necessary. Therefore it is a costly method.

3) The traini ng sit uation is artificial. When employee goes back to his working place, the

problem of working environment is posed before him.

4) It may lead to conflict between line and staff.

APPRENTICESHIP TRAINING

This type of training is designed for a higher level of skill. This t raining programme tends

towards more education than on-the-job training. The Government have passed law which makes it

obligatory on every employer to provide apprenticeship training to young people. Under this trainingsystem trainees are paid stipend during training period and generally offered jobs by the employer after

the completion of training. In this type of training knowledge and skill in doing a craft or series o

related jobs are involved. It involves both on-the-job training and experience with class room instructions

in particular subjects. This type of training is desirable in industries which require cotinuous flow o



new employees expected to become all round craftsmen. This type of training is mainly suitable

for employees working in printing trades, building construction and trades like mechanics, electricians,wel ders, a tool-make r, a pattern designer, carpenters, weavers, fitters, and in technical areas.

Apprenticeship training is the oldest and most commonly used method, especially when proficiency in

a job is required.

Merits :

1) A skilled and trained work force is maintained.

2) Instant returns can be expected from training-for example skil lful work, trained, more

efficient and good quality of workers etc.

3) The workmanship is good. It reduces labour turnover. So hiring cost is lower. It also helps

in reducing production cost.

4) It increases the loyalty and honesty among employees and opportunities for growth a refrequent .

Demerits :

1) The apprenticeship programme is generally too rigid. Every apprentice is required to undergo

a prescribed routine and follow a prescribed series of subjects. Little attention is given to individual differences and to varying knowledge and skills.

2) It is an expensive training. It is quite lengthy also and after training there is no assurance

that the apprentice will be absorbed in the firm.

3) If this programme is registered and sponsored by the government, the firm is required to

maintain certain standards and frequent interference and inspections may create day to day

difficulties.

CLASS -ROOM METHODS (OFF-THE-JOB)Off-the-job training is provided to the employees away from their job. It is basically theoretical

in nature and is imparted in class room type atmosphere. It simply means that training is not a part o

everyday job activity. Methods adopted for this are :

a) Lectures (Class room instructions) : Lectures are the most simple way of imparting knowledge to the trainees, especially when facts, concepts or principles, attitudes, theories and problemsolving abilities are to be taught. This method is used when a large number of employees are to be

trained for the same job, within a short time. This training reduces the cost per trainee. Lectures are

essential when it is a question of imparting technical or special information of a complex nature. It is

related discussions film shows, case studies role playing and demonstrations. Audio visual aids enhance

their value. It is a formal lecture by an instructor to the trainee. the instructor possesses a considerable

depth of knowledge of the subject at hand. The trainees, generally, take notes as aid to learning. It hascertain limitation also. The learners may be passive. It is a one way communication, but students may

be permitted to ask questions. Lectures can easily be combined with other techniques, but this is notdone. The instructor through lecture adds new information only. It violates the principle of learning by

doing.

b) Conferences, Seminars etc. : There are two types of seminar. The first is that in which

a student gives lecture on some predetermined topic and is followed by discussion and exchange of

views under a chairman who sums up the discussion by his fruitful advice and comments. The second



method is where all students participate in the seminar under a chairman who sparks off the idea and

discussion is followed, which in turn leads to further ideas.

In conference method of training the group members are asked to discuss and share a problem

common to them and to their experience. Sharing experience and giving solutions through participation

of all members create interest and satisfaction.Analytical thinking is encouraged. c) Case study method (Learning by doing) : Case studies are used to describe and provide

facts about entire situation. The purpose is to teach trainees to handle similar situations when they

ari se. Case studies are often used to illsutrate te broad principles and are used more for middlema nagement and executive training. Some busi ness organisations use case studies for supervisory

training also. The case study is based upon the belief that managerial competence can best be attained

case study is based upon the belief that managerial competence can best be attained through the study,contemplation and discussion of concrete cases. In a case study a practical problem that may be faced

by an indsutrial unit is discussed at large in the group, possibly to find best solution. The trainee studies the problem a nd finds the solution. The supervisor reviews the solution and discusses it with the

trainee. This system of class room method is not of much value for the operative staff. These are used

generally to train the employees for various executive positions. In case study method, the trainees are

expected to master the facts, become acquainted with the contents of the cases, define the objectivessought in dealing with the issues in the case, identify the problems in case and uncover their problem

causes, develop alternative courses of action, screen the alternatives, select the alternative that is mostin keeping with the stated objectives.

d) Role playing : This method was developed by Moreno, a venetian psychiatrist, He coined

the term as role-playing, role reversal, socio-drama, psychodrama and a variety of specialised terms,

with emphasis on learning human relations skills through practice and insight into one’s own behaviour and its effect upon others. The idea of role playing involves action, doing and practice. Under this

system the trainees play the assigned roles, such as role of superior, instructor etc. Under the supervision

of an instructor who prepares them and assigns different roles to play. This method is not of much

value of the opertive staff. Role playing methods is mainly good for increasing the skill of the trainee

in the field of human relations. Dramatisation and skits are other dramatic training methods somewhatrelated to role playing. The purpose of role playing is to aid trainees to understand certain business

problems and to enable observers to evaluate their reaction. This technique makes trainees self-consciousand imaginative and analytical of their own behaviour.

e) Special reading : Big business organisations run libraries and reading rooms and encourageand provide time to their supervisory and executive staff to study for advancing their general knowledge

and background. Reputed books, magazines journals are given to these trainees for careful studies.Books in the field of management, human relations, job, advance studies in the concerning subjects

etc., are made available.

f) Programmed Induction (Teaching by the machine method) : In such a programme,knowledge is imparted with the use of a text book or a teaching machine. The programme involves,

presenting questions, facts, or problems to the trainees, who, in turn utilise it and answer to it. They

receive feedback instantly. Sometimes rewards are given or penalties are imposed on the traineesaccording to accuracy of answers. This method highly motivates the trainees.

g) T- group Training : This usually comprises association, audio- visual aids, and plannedreading programmes. Members of a professional association receive training by it, in new techniques



and ideas pertaining to their own vocations. Through a regular supply of professional journals and

informal social contacts or gatherings, members are kept informed of the latest developments in their

particular field. Audio visual aids-records, tapes and films are generally used in conjunction with other

conventional teaching methods. Planned and supervised reading programmes are conducted.Technical

publications and the latest journals are kept in the library for the use of the trainees.

These are the available methods of training for the operative employees. These organisation hasto select a method best suited to it. Suitability of training method depends upon, size and field of the

organisations, its objects of training, jobs for which training is aimed at, abilities of the employees etc.

Different methods may be used for different groups of personnel and at different times. It is, verydifficult to choose a single method of training for all types of persons at all times. Proper evaluation o

training methods should be done at frequent intervals.

Que stions

1. What do you mean by Recruitment ?

2. Define the term recruitment ?3. What are the sources of recruitment ?

4. State the Merits and demerits of internal sources of recruitment ?

5. Explain the methods of recruitment.

Explain the various internal sources

State the various external sources of recruitment.

6. What is selection ? Define the term selection ?

7. Explain the steps in selection procedure.

8. Define interview? What do you mean by interview ?

9. Explain the objectives of interview.

10. Explain the principles of Interviewing11. Define the term Training. What do you mean by training ?

12. State the significance of training.

13. What are the different kinds of training?

14. Explain the various methods of training.



6 ORG ANISING

Introduction :Internal organisation is one of the aspects of management. Organisation is one of its important

functions. The term organisat ion denotes different meanings to different people. For example to a

sociologist, organisation means a study of the interactions of the people, classes or the hierarchy of anenterprise. To a psychologist organisation means an attempt to explain, predict and influence behavour

of individuals, in an enterprise. To a top executive it may mean the weaving together of functionalcomponents in the best possible combination so that an enterprise can achieve its goals. ‘Organisation’

is also used widely to mean a group of people, a structure of relationship and a function of management.

To organise means to identity and demarcate the functions of an establishment, to list the activities to

be contained in each function, to group the activities into to list the activities to be contined in each

funciton, to group the activited into positions within a funciton to determine the responsibilities andauthority of each position and to chart the organisation, showing the relationship between the positions

in a function and between the functions in the whole sturucture.

After the general and specific objectives have been determined and a plan prescribed, the next step

in the management process is to organise the activities of the enterprise with a view to work the plan

and ultimately attain the objectives. It, therefore, becomes necessary to ascertain the activities required

to attain the objectives of the enterprise. For this, departments are set up and managers are made theincharge of these departements, to whom must be delegated authority commensureate with their

responsibilities to enable them the attainment of pre selected goals. Proper ogranising would assist the

most effective use of both physical resources such as plant, tools, equipmets, materials and supplies

and human resources of the enterprise.

Planning provides the destination and the road map to destination, but the road map is of little use

without an efficient automobile. The implementation of plans requires an efficient organisation to

achieve objectives. Organisation provides mechanism or apparatus for purposive, integrated and co- operative action in any social institution. The need for adequate organisation grows with the increasein size of the business unit. Organisation constitutes the foundation upon which the whole managementstructure i s constructed.

Definitions :

The word ‘organising’ stems from the word ‘organism’ which means to create a structure with parts so integrated that their rela tion to each other is governed by their relation to the whole. Theorganisation has two important ingredients (i) parts and (ii) their relationships.

The parts mainly consist of human beings and physical resources whereas the relationship have to be established among the human beings in the sense, their relations with the work and activities and

those with physical resources. The independent part are unified, intergrated and co-ordinated in such

a way that the relationship leads to the achievement of the enterprise objectives.Organisation has been defined by various authors as follows :

According to Henri Fayol “To organise a business is to provide it with everything useful to its

functioning-raw materials, tools, capital and personnel”.



Fayol said that “organising is an improtant function of managers. By organising, managers bring

together the manpower and material resources for the achievement of the objectives of the enterprise.Thus organisation deals with establishing relationship between the factors of production”.

G.Terry defines organising as, “The establishing of effective authority relationships among selectedwork persons and work places in order, for the group to work together efficiently”.

William spriegal defines, “In its broadest sense, organisation refers to the relationship between

the various factors present in a given endeavour. Factory organisation concerns itself primarily with

the internal relationships within t he factory such as responsibilities of personnel arrangement and

grouping of machines and material control. From the stand point of the enterprise as a whole, organisationis the structure of relationship between the various factors in an enterprise”.

Barnard defines, “An organisation comes into existence when there are a number of persons in

communication and relati onship to each otehr and are willi ng to contribute towards a commonendeavour”.

Koontz and O’Donnell defines as “The establishment of authority relationships with provisions

for structural co-ordination both vertically and horizontally between positions to which have been assigned specialized tasks, required for t he achievement of the enterprise objectives. It is, thus,

structural relationships by which an enterprise is bound together and the framework in which individualeffort is co-ordinated”.

Theo Haimann defines, “Organising is the process of defining and grouping the activities of the

enterprise and establishing the authority relationships among them. Organisation is concerned with

the building, developing and maintaining of a structure of working relationships in order to accomplish

the objectives of the enterprise.”

Dimmock defines, “Organisation is the systematically bringing together of interdependent parts to

form a united whole, through which authority, co-ordination and control may be exercised to achievea given purpose, because the interdependent parts are made up also of people who must be directed

and motivated and whose work must be co-ordinated in order to achieve the objectives of the enterprise.Organisation is both structure and human beings ....... To try to deal with the organisation merely as a

framework and without considering the people who make it up and those for whom its services areintended, would be wholly unrealistic.”

John M. Pfiffner and Frank P. Sherwood defines “Organisation as the pattern of ways in which

large number of people, too many to have intimate face-to-face contact with all others, and engaged in

a complexity of tasks, relate themselves to each other in the conscious, systematic establishment andaccompli shment of mutually agreed purposes.”

Herbert Simon defines “The term organisat ion as the complex pattern of communication and other relations in a group of human beings. This pattern provides to each member of the group much

of the information, assumptions, goals and attitudes that enter into his decisions and provides him also

with a set of stable and comprehensible expectations as to what the other members of the group are

doing and how they will react to what he says and does.”

An organisation, thus, represents a group of people who work together for the achievement o common objectives. To achieve a common purpose people form some group pool their efforts by

defining and dividing the various activities, responsibilities and authority.

Organising is an organisational structure which can be thought of as a framework which holds the



various functions together, according to a patt ern, order, logical arrangement and harmonious

relationships. Organising supplies the nucleus around which human beings can unite thier efforts.Each contributing his maximum to the achievement of the stated goal. In other words an important

part of the task of organising is to harmonize a group of different personalities, to fuse various interests

and to utilize abilities all towards a given direction.

O. Sheldondefines “Organisation is the process of so combining the work which individuals or

groups have to perform with facilities necessary for its execution that the duties so performed provide

the best channels for efficient, systematic, positive and co-ordinated application of available effort”.

L. Allan defines “Organisation is the process of identifying and grouping the work to be performed,

defining and delegating responsibility an authority and establishing relationships for the purpose of

enabling people to work most effectively together in accomplishing objectives”.

G. Desslerdefines “An organisation consists, of people who carry out differentiated tasks which

are co-ordinated to contribute to the organisation’s goals”.

Mooney and Reiley defines “Organisation is the form of every human association for the attainment

of a common purpose”. “They visualise it as the process of relating specific duties or functions in a

co-ordinated whole”.

E. H. Schein defines “An organisation is the rational co-ordination of the activation or roles of a

number of people for the achievement of some common explicit purpose or goal through division o

labour and funcitions and through heirarchy of authority and responsibility”.

R. C. Davis defines “Organisation is a group of people who co-operating under the direction of leadership for the accomplishment of a common end.”

J.C. Denyer defines “Organisation is concerned with the arrangement of work with the division

of activities and with the allocation of duties, authority and responsibilities”.

It may be noted that the term ‘Organisation’ has been used in a two fold sense. Firstly, organisation

may refer to the function of organising and secondly it may refer to the structure of individuals and

facilities by means of which an office manager gets his plans carried out. We may also say that

“Organisaiton results from the exercise of the function of organising”.Effectiveness of organisation depends upon two factors :

i) The ease with which the organisation was set up and

ii) The wise direction and control of the organisation by a competent executive.

Characteristics of Organisation :

On careful analysis of the above definitions, t he following characteristics of an organisation

emerge:-

i) It is a group of individuals which may be small or large.

ii) The group in the organisation works under the direction of executive leadership.

iii) It is a function of the management.

iv) It consists of some directing authority which controls the collective effort of the group.

v) It refes to a structure of duties and responsibilities.

vi) It is established for the accomplishment of common objectives.



vii) It is a continuous function and is performed in varying degrees by all levels of managment

from the first line supervisor to the top executive of the enterprise.

viii) It can not be static for the simple reason that an organisation which is effective today may

not be satisfactory tomorrow. It needs periodic changes and modifications according to

current needs and situations in terms of objectives, jobs and personnel.The characteristics of an organisation as a group of people are :-

i) Communication.

ii) Co-operative efforts.

iii) Common objectives.

iv) Rules and regulations.

People who form the organisation are in a position to communicate with each other and are willing

to co-operate with each other for the achievement of their goals or objectives. The objectives must be

common for which the organisation comes into existence. Rules and regulations govern the work-

behaviour of the members of the organisation.

Scope of Organisation :

Organisation is the executive structure of an enterprise and a basic framework within which the executives decision making behaviour occurs. Organisation, as an element of management, is concerned

with the following aspects, called as scope of organisation.

1) Identifying and grouping of activities to attain corporate objectives and goals.

2) Assigning these activities to appropriate divisions, departments, sections and individuals.

3) Providing authority, delegation, co-ordination and communication.

4) Providing facilities and equipments, i.e. physical factors of good work environment. There

are four basic elements of all forms of living organisations around which any organisation centres : a)

The work b) The People. c) The authority, responsibility and d) The relationships. Clear-cut division

of work defines and prescribes each part of the work to be handled by each person, giving allocation

of duties and responsibilities and defining authority or power at each position in the organisation chart.

Co-ordination and integration ensure elimination of duplication of work and unity of action. A goodorganisation has to fulfil four special functions :

1) It must enable the management to maximise the outputs through provision of an efficient man-machine system.

2) It must ensure smooth and effective net-work of communication and information.

3) It must offer interesting and meaningful jobs to all individuals working in the organisation.

This alone will ensure job satisfaction. Organisation is developed for people. It must,

therefore, be humanistic also and not merely mechanistic. Both the approaches can be

reconciled.

4) It must create, maintain and develop its own image or individuality. This ensures customer

goodwill. Investors will also have confidence in the enterprise. Employees can develop a

sense of belonging to the organisation.

Principles of Organisation :Organising is a management process by which people, functions and physical factors are brought



together to form a controllable unit. Good organisation is based upon a careful planning of -what is to

be done? Who is to do it? Who is to supervise it? and how it is to be done most efficiently? Efficiencymeans speed, accuracy and low cost. Good organisation results in the creation of well balanced, low-

cost, teamwork that performs the necessary work. The organisation of business activities is a continuing

process. It should not be sta tic, rigid or fixed. It should be flexible and adaptable to the changing

objecti ves of enterprise. Because of exi stence of great varieties of organisations, there can be nostandard principles which could be followed in all individual circumstances.

However, there are certain principles which have more or l ess universal application and which

may be used as guidelines for organising business concern.

1) Principle of Consideration of unity of objectives : The object ive of the undertaking

influences the organisation structure.The organisation is a mechanism to achieve the goals.

The objective of an enterpise should be clearly laid down. Not only the objectives be statedin clear terms, the method of achieving them too, should be indicated indetail and in precise

terms so that the organisers may know the type of organisation that is needed. There must be unity of objectives so that all efforts can be concentrated on the set-goals. Organisational

structure and generated operations must be measured against the effectiveness in achieving

set objectives.2) Principle of Specialisation : Effective organisation must include specialisation. Optimum

output can be obtained when each person concentrates on doing the thing for which he/she is best qualified, Precise dividison of work facilitates specialisation. Organisation should

emphasise on the law of specialisation. However each area of specialisation must be

interrelated to the total integrated system by means of co-ordination in all departments and

activities.

3) Principle of co-ordination : Co-ordination express the principles of organisation in toto;

nothing less. Co-ordination is the orderly arrangement of group effort to provide unity of

action in the pursuit of common purpose. It is the beginning and end of all organised

efforts. A manager is mainly a co-ordinator. Co-ordination is a facilitative function helping

the integration of the basic managerial functions-Planning, Organisation, Motivation and

Control. Organisation involves division of work among people whose efforts must be co-ordi nated to achieve common goals, Co-ordination of aims at higher efficiency andeffect iveness.

4) Principles of Scaler chain : It points out clear and unbroken line of authority. The chainof authority must be clearly defined for sound organisational purposes. It is also called a

chain of command. The line of authority flows from the highest executive to the lowest

managerial level and the chain of command should not be broken. It should be short i.e. it

should have few levels of management. Every subordinate must know as to who is his

supervisor and to whom policy matters beyond his own authority must be referred to, for decision.

5) Principle of commensurate authority and responsibility : According to this principle

when an individual is responsible for a certain task, he should be given the authority tocarry out that task. Without commensurate authority and responsibility, he can not be held

accountable for the unsuccessful completion of the task as he has very little control over

the situation. Authority should be equal to responsibility i.e., each manager should have



enough authority to accomplish the task.

6) Principle of ultimate responsibility : The responsibility of higher authority for the acts

of his subordinates is absolute. Responsibility to perform a task, is given to a subordinate

by the supervisor and the subordinate commits mistake, in such situation the supervisor isanswerable to his superiors. He can not escape responsibility by saying that mistake was

committed by a particular worker.

7) Principle of efficiency : The organisation structure should enable the enterprise to attain

objectives with the lowest possible cost. An efficient organisation structure operates without

wasting its scarce resources. It permits maximum use of its human resources and their talents.

8) Principle of delegation : The chief executive, for obvious limitations, cannot do the

whole work of the organisation himself and hence he takes assistance from others to

accomplish the object ives. He divides the whole work int o a number of activities and

groups then on the basis of their similarity and thus he creates a number of departments.

The delegation is the process through which they are tied together by establishing relationship between them for co-operative and integrated action. Delegations may be vertical or

horizontal. This process ties together the whole organisational structure for integrated andco-operative action. If delegation of authority is not carefully done, the very existence of

the organisation is in danger and chaos and confusion may be arised.

Authority and responsibility should be delegated as far down in the organisation as possible

i.e. to the lowest level of the organisation at which the particular responsibility can be

efficiently discharged. Delegation of authority and decentralisation of authority mean the

same process.

9) Principle of unity of Command : The core of this principle is that a man can serve only

one boss. It means that instructions and directions to a subordinate must come from one

person only. Each subordinates must have one superior, to whom he should be answerable.

This helps in avoiding conflict in command and in fixing responsibility. According to this

principle each person should be accountable to a single superior. Thus, no one in t heorganisation should have more t han one boss. It clarifies authority- responsibility and

rel ationship. If an individual has to report to only one supervisor there is a sense o personal responsibility to one person for results. Let a person receive orders from and be

responsible to only one superior.

10) Principle of span of control : The maximum number of employees or subordinates thatcan be supervised effectively by a person is known as the span of control. The span of

control should be limited to a reasonable number according to circumstances. A span o

control of six subordinates has been considered to be the most desirable. There is a limit

to the number of subordinates which a manager can manage effectively. Grouping must

ensure that each supervisor and manager is not over burdened with subordinates.

11) Principle of balanc e : There should be reasonable balance in t he size of various

departments, between standardisation of procedures and flexibility between centralisationand decentralisation. Similarly, there should be balance between the principle of span of control and the short chain of command.



12) Principle of communication : A good communicati on network is essential for smooth

flow of information and understanding and for effective business performance. The line of

authority offers a standing channel for downward and upward communication.

13) Princi ple of personal ability : Peopl e consti tute an organisation. Proper select ion,

placement and training need not be over emphasized. Organisation structure must encouragemanagement development programmes and ensure optimum use of human resources.

14) Principle of exception : Under the exception principle recurring decisions should be handled

in a routine manner by the lower level manager, whereas problems involving unusual matters

should be referred to the higher level. The executives at the higher level of an organisation

have limited time and capacity. They should not be bothered by routine problems which

can as well be managed by subordinates.

15) Principle of flexibility : The structure of an organisation must be flexible so that adjustmentsnecessitated by changed circumstances may be planned and incorporat ed in it. The

organisation is expect ed to provide build-in devices to facilitate growt h a nd expansionwithout dislocation. It should be adaptable to changing circumstances. It should not be

rigid or inelastic.

16) Principle of departmentation : It enables the division of activities into specialised groups

to attain organisational objectives. A good organisation involves precise and systematicdistribution of work and responsibilities between managerial group and administrative

group. Departmentation maintains balance and harmony in the working of the organisation.

17) Principle of division of work : Specialisation in organisational functions is necessary for

the most effective attainment of objectives. Specialisation depends on division of work.

Total activities of an enterprise should be divided and grouped into departmental, sectional

and individual activities to facilitate division of work.

18) Principle of definiteness : Each activity must contribute to the primary or basic goals of

an enterprise with minimum of effort and maximum efficiency on the part of the employees.

This contribution should be well defined and definite.

19) Principle of discipline : Discipline is vitally important in all types of organisations. In its

absence, it is difficult to achieve success.

20) Principle of simplicity : The organisation should be kept as simple as possible so that

ther e should not be any confusion and misunderstanding among the superiors and

subordinates.

21) Principle of separation of line and staff function : Line function should be separatedfrom the staff functions.

22) Principle of continuity of operations : The form of an organisation should be such that it facilitates the continuous performance of all the activities necessary for the continuance

and growth of the enterprise.

23) Principle of leadership : Organisation structure should create a favourable environment

or situation in which the manager can most effectively lead and motivate his subordinates.

24) Principle of definition : The duties responsibilities, authority and relations of every one

in the organisational structure should be clearly and completely defined preferably in writing.



An individual will accomplish a task in a given period only when the responsibility for that task

is fixed upon him.

25) Princi ple of work assignment : The work assignment for each individual in the

organisation should take into consideration the special strength and talents of the individual.This means that an individual should be given an assignment commensurate with his or

her ability and interest.

26) Principle of employee participation : Employees should be encouraged to participate,

as much as possible, in the decision making process. Employees are given recognition and

are motivated to work harder by encouraging their participation. But, in spite of participation by employees in the decision making process, the ultimate responsibility for the decision

must rest with the manager or supervisor.

Importance of Organisation : The need for organisation arises when two or more people work

together. A one man business, will have no difficulty about co-ordinating the efforts of the buying,

selling and other management functions of the business. But once the business starts to grow and

separate departments are created for buying, selling, accounting, administration and so on, the needfor organisation undoubtedly grows with it. With the growing concepts and complexities of large scale

business, the need and importance of organisation has grown substantially.Organising makes possible the effective operations of a group. It is the basis for necessary team

work among the various members of a common enterprise and helps in co-ordinating their efforts. In

other words, the value of each i ndivi dual ’s contribution is enhanced and at t he same ti me the

accomplishements of the group are increased. “ Every member knows how he and his work fit in tothe total picture, what he is to do when and where he is to do it and who helps him” The importance

of organisati on can also be judged from the fact that a good organisation is now regarded as t hefoundation of sound management. According to Allen, “A sound organisation can contribute greatly

to the continuity and success of the enterprise”. It is a mechanism with the help of which management

directs, co-ordinates and controls the business.

Efficient organisation offers the following benefits :

i) Proper di vision of work : Organising provides proper assessment of t otal work to be performed and its division among workable departmental units and individuals. Since total work can

not be preformed by the manager alone, it must be divided among its staff in a well planned manner.This ensures that each person and department will contribute to his best capacity and skill, will feel

definite and specific responsibility, will avoid duplications and overlaps and will improve the efficiency

and speed of work. The person or department in the organisati on will neit her be overworked nor

underworked. It thus ensures the optimum use of staff.

ii) Optimum use of physical resources : Efficient organising provides for optimum and

economical use of all physical resources such as buildings, machines, tools, materials, finance etc.

iii) Avoids confusion and misunderstanding : By assigning definite duties and responsibilities,

establishing definite superior-supbordinate relationships, clear cut delegation of authority and by proper

selection and training of the staff, organisation brings definiteness and knits all its segments to operatetogether to realise its goals, Each of its departments or employees knows his specific mission, duty,

authority and responsibility. Efficient organisation, thus, avoids all misunderstanding, confusions,

conflicts, duplications and gaps.



iv) Brings unity in direction, facilitates control and co-ordination : Efficient delegation and

effective communication system, and well knitted relationships bring unity in command and direction,fixed responsibilities and division of work and facilitate control and co-ordination.

v) Increases management efficiency : Good organisation assures a ll round efficiency by

bringing definiteness all around, matching jobs with individuals and individuals with jobs, by utilising best skills, experience, abilities and specialisation and by avoiding delays and wastages.

vi) Efficient organisation revents growth of laggards, intrigues, wire-pulling and other forms

of corruption . Unsound organisation becomes breeding ground for dishonesty, lethargy and disloyalty.

vii) Organisation provides scope to its employees for development. By providing training and

practice on different jobs, and in different capacities, efficient organisation offers excellent scope toits employees for development. It gives them job satisfaction too.

viii) It provides effect ive communication.

ix) It gives smooth management and administration.

x) It is more than a chart-it is the best mechanism for managerial leadership, co-ordination and control.

xi) It ensures close co-operation and higher employee morale.

xii) It enables smooth management and operation of the enterprise, there by, enhancing managerialefficiency, e.g. quick disposal, minimum interdepartment rivalry or friction, absence of divided

responsibility, effective communication etc.

xiii) It ensures steady growth and diversification.

xiv) It ensures, above all, accomplishment of objectives and strategies.

xv) It provides for the optimum use of technological improvement, e.g. automation and

computerisation.

xvi) It offer ample scope for the training and development of managers e.g. job rotation, job

enlargement, delegation etc.,

xvii)It encourages creativity, i.e. resourcefulness, independent thinking, initiative, spirit of innovatinetc. with the help of clear-cut accountability, recognition, appreciation of talents etc.,

xviii) It permits management to respond in time to the changes in the environmental influences

and make necessary adjustments to satisfy new demands of the society.

xix) Sound organisation has flexibility and also stability. It responds in time to the changes in

the environment and thereby justifies its existence. It promotes effective leadership and thereby ensuresgood employee morale. It develops voluntary co-operation and best motivation of employees. All these

factors assure stability.

xx) Sound organisation offers effective managment of changes continuously and gives premiumto innovations.

Thus, the organisation climate is intangible. It can not be seen. It is fel t by people. It affects

employee performance. It is a combination of many factors, such as management style, managementvalues, the formal organisation (rules,policies, procedures, practices, organisation sturucture, rewardsystem) informal organi sation (norms of behaviour beliefs, values and attitude of the group) the

communication system and all other managerial systems. Good organisation improves interpersonal



and intergroup behaviour to secure team work, i.e. rise in the level of mutual trust, support, openness

and completeness of communication, widespread participation in planning and decision making.

Steps in organisation process :

Organising refers to the grouping of activities necessary for the attainment of objectives. It also

indicates the authority and the responsibility assigned to individuals charged with the execution of their respective functions. Following steps are involved in organising the structure of an enterprise.

1) Knowledge of objectives : While organising it is important to bear in mind the objectives or

targets of the enterprise or department. The objectives must be determined keepi ng in view t he

environmental situation. They must be clear, precise but complete and free from ambiguity or confusion.

Unless the manager or supervisor knows the objectives he may not be able to organise properly and

motivate people towards the attainment of the objectives.

2) Division of work into activities : After laying down the objectives, the manager must identify

the total work involved in achieving them. The total work to be performed should be divided intocomponent activities. For instance, the total work of a manufacturing enterprise may be divided into

production, finance, personnel, marketing and such other activities.

3) Grouping the activities : The next step is to group the various activities into practical units

based on similarity and importance as well as to indicate the person who would do the work. Similar activities should be grouped toget her under one headi ng, For instance purchasing, machining,

assembling may be placed under manufacturing while recruiting, training, job grading, compensationmay be placed under personnel, Other basis for gouping the activities may be utilised such as geographical

location, particular equipment utilisation or process to be employed.

4) Defining and assigning activities to jobs : Jobs must be clearly defined and the activities

related t o them must be clearly identified and assigned. Thi s will help the management to fix t he

authority and responsibility of the employees concerned.

5) Fitting personnel into jobs : A job must be allotted to a properly qualified person so that

none becomes a square peg in a round hole. Each person should be assigned specific job or jobs and

be made responsible for it.

6) Delegation of required authority : Proper authority must be vest ed in the personnel to

enable them t o ca rry out the job. Authority must be commensurate wit h responsibility. Authoritywithout responsibility and vice-versa is meaningless and futile.

7) Creating organisational relationships : Creation of different authority relationships suchas line, functional or line and staff is essential for the achievement of the objectives. Everyone in the

organisation must know as to whom he is accountable and his relatiohship with other persons in the

organisation should be clearly established.

Factors influencing organisation :Organising is a very complex activity. One can formally divide the work, assign people, supply

ideal work place, define authority and establish relationships with great care and precision to make the

organisation effective but still the desired behaviour, co-operation and initiative may be lacking on the

part of its incumbents.

Organisation can not merely be a structure purely based on logic, rationality or economic factors.

It is basically a social entity. The organisation influences the behaviour of its people. So the people



influence the organisation. People are influenced not only by the organisation in which they work but

also by the society and environment in which they live and pass most of their ti me. So there isinteraction between the individual and the organisation. Individual may be embodied in the organisation

and the features of the organisation becomes embodied in him or in contrast. His feelings may be

suppressed in the organisation and then he will eit her react to the organi sation’s features or try to

impose his own behaviour or he will become non-co-operative and unenthusiastic. It is, therefore,essential that the following infleuences are properly organised and incorporated while organising any

social institution.

1) Established social standards and relationships : The society or environment immenselyinfluences the behaviour of the individuals working in an organisation. Their level of work

performance, attitude, behaviour and satisfacion are determined by social norms, standards

practices, belief, customs etc and not by only physiological capacities. These social normsmust be understood and incorporated for effecti ve co-operation and satisfaction of the

members of the organisation. For instance if the custom of the society does not permit free mixing of two sexes at common workplace, the management should provide for different

places to work for men and women for better behaviour. This is because people learn most

of the practices, values, beliefs etc. from the society rather tha n from their personalknowledge and conviction about a matter, and which are firmly established in their thinking

and behaviour. Moreover, people usually dislike change because they fear that such changesmay break the established relationship to which they are accustomed.

2) Psychological factors : Organisation requires human beings to assume obligations, exercise

authority and to executive the work. Regardless of the duties and responsibilities assigned,

the basic fact is that the organisation has to deal with human beings who have differentneeds, emotions, aspirations, personalities, interests, abilities etc., which must be recognised,

utilised and satisfied for thier effective and harmoniuous behaviour towards the achievement

of enterprise objectives. There may be primary needs such as food, water, air, rest, clothing,shelter, sex and general well being and there may be secondary social needs, such as the

need of self assertion, self esteem social approval, freedom, association with others, self-

fulfilment and realisation, Such basic and social needs shoul d get due recognition andsatisfaction for effective co-operation.

3) Informal customs and groups : Many informal practices, customes and traditions become

well established in the organisation and many informal group crop up and influence the

conduct and the working of the people. So long as the established customs are desirable

and are in conformity with the formally prescribed way of behaviour, there is no difficultyin organising, rather they assist in securing the willing co-operation later on. The manager

shoul d try to convi nce the incumbents for the change of undesi rable customes and

behaviours. He should clearly note such undesirable practices, and explain the reasons for

their change, demonstrate the benefits of the new customs and introduce changes slowly

and gradually keeping in view the willing acceptance on the part of employees.

Groups, not officially prescribed by formal organisation, are termed as informal groups, which strongly influence the behaviour of workers. One informal leader emerges out of the group, who is

liked most by his group and then he represents the norms of his group. More than anyone else, his

advice is solicited and accepted by group members. He controls the behaviour of his group. He



becomes the spokesman of that group to the management and other personnel in the organisation. In

short, he leads the group of workers and helps them to function as a social group. These groups areusually bound together by common soical interests. It is folly to ignore the influence of these informal

groups in organising.. Clever management organises in such a way that the influences and activities o

such informal groups tend to support the organisation.

ORGANISATIONAL RELATIONSHIPS

Organising is mainly establishing harmonious relationships among human and physical resources

in the form of a structure which may help in achieving the pre-stated goals. Creating a humanisticstructure embraces problems relating to determining the total work, its requirement of the personnel

in terms of number and quality, selecting, training, remunerating, promoting and maintaining discipline

and moral among the people, fixing authority and responsibility, delegatin of authority and creating

subordinate superior relatinships as well as other thing relating to human beings and their internalrelationships or that with the organisation as a whole. On the other hand the physical or technical

aspects of organisation relates to the creation of a structure to secure the objectives. The physicalaspect of organisati on embraces problems relating to location, buildings, layouts, machines, tools,

fixtures, furniture, raw material, financing, accounting and audit. The human beings have to be provided

with these physical resources in order to discharge their duties. The physical means will not achieveaims by themselves unless human beings work on them and with the help of them.

The parts of an organisation are bound together by certain relationships. From the stand point of their bases, these may be classified as (a) formal and (2) informal. Social psychologists, under the

leadership of Elton Mayo, focused attentions on informal organisation in primary social groups. It was

chester I. Barnard who first drew a clear distinction and analysed the relationships between the formal

and informal organisations. According to him an organisation is formal when the activities of two or

more persons are consciously co-ordinated towards a given objective. It is informal when the aggregate

of interpersonal relatiohship is without conscious joint purpose, even though common or joint resultsmay come from them. (The functions of the executive, Harvard university Prest Cambridge mass,

1939 Chig) Formal organisatin, he said, “Creates additional informal organisations.” The inter-realtionship

of authority that cannot be charted, the unwrittten rules of organisational conduct, the necessity for

learning the “roper” and the patterns of behaviour that develop in any organisation are evidence oinformal relationships derived in this way. Moreover, by its very nature an organisation creates many

small gruping or associations which are not on the chart but which grow from departmentation.Machine-shop group, the production- engineering group, the floor group and so on.

Formal relationships are those which flow from the structure of the organisation itself. They

represent a system of formally defined duty authority and responsibility that set the limits for each

individual employee. He must obey orders from designed individuals and can demand obedience from

similarly market out subordinates. Because of its hard and fast requirements the formal organisation tends to restrict and circumscribe an employee’s activities. It sets up boundaries, signposts and path

ways which must be followed.

Informal relationships are those that develop outside the formal organisational structure. There are

various undefined behavioural patterns and personal attitudes that come into operation for puposes of mutual co-operation as soon as the management acti on starts. In other words- wha t people do is

because they are responsible human beings. Their actions in terms of needs and attitudes instead o

procedures and regulation fall in the domain of informal relationship. Experiments have shown that



people working in the same section or small unit fall themselves into an informal group. If one of them

is absent or transferred, the group behaviour is affected, as also the output of work. Informal relations

in these days are no less important than the formal ones. If they are not cordial and in its place, there

prevails conflict and opposition, and the smooth working of the organisation is greately affected,

Formal relationship are of a mechanical nature whereas informal relationships are based on personal

approach.

From the stand pint of the involved persons, relationship may be broadly classified as

(1) Direct (2) Functional and (3) Lateral.

1) Direct relationships are those that exist between a superior executive and his subordinatesand vice-versa. In practice they resolve themselves into relationships of instruction and

compli ance based ondirect authority. The supervisior gives orders and the subordinat es

obey them or the later takes matters to him for decision and direction. Direct relationshipsare illustrated by relationship between a factory manager and the departmental managers

responsibile to him, between a foreman and the workers under him, sales manager and

salesmen and so on.

2) Functional relationships are those that exist between specialist and the operation executives

including top management. The functional managers who have specialised knolwedge incertain technical fields, are responsible for rendering services in these fields to other parts

as well as the whole of the organisation. The relationship of functional managers to others

in the organisation is limited t o the prescribed functions. Of course, so far as his own

subordinates are concerned each functional manager has direct relationship with them.

But a personnel manager and organisation manager are bound by functional relationshipwith the general manager, the production manager and other in the management. The first

renders specialist service in personnel matters whereas the second in methods, procedures,

design of forms etc .

3) Lateral or crosswise relationship represents the working relationship of co-operationand co-ordination between executives or supervisors at the same level of managment.

They are of equal status or rank and may be responsible to a common supervisor or tosuperiors of comparable status in the organi sation structure. Smooth working of the

organisation calls for collaboration between them on points of material interest withoutreferring back to the common supervisor. Lat eral relationships are maintained through

regular conferences, meetings in formal committees or informal personal contacts. But

committees include executives of higher level as well. While direct and functional relationships

are prescribed by the organisation a structure, lateral relationships mostly arise in an informal

setting.

TYPES AND FORMS OF ORGANISATION

Introduction :One of the important components of the organisation process is the creation of appropriate

organisation structure. An organisation combines and co-ordinates individual as well as group effortsin an enterprise. An organisati on st ructure is the machine through which management works to

accomplish its objecteives. Various jobs of the enterprise are integrated into an effective operating

system to achieve the organisational objectives.



Organisation structure represents the hierarchical arrangement of various positions in the enterprise

It helps in allocating authority and responsibility formally. It specifies who is to direct and to whomand who is to report to whom. It also lays down the pattern of communication and co-ordination in the

enterprise. Thus the need for a structure of clearcut authority relationship in any enterprise is quite

clear. There is no best structure of organisational relationships which may be suitable for all organisations

and for all time. The management of every enterprise has to evolve its own organisation structure. Theform of organisation structure depends mainly upon the nature of activities of the business, competence

of personnel and the philosophy of management. An organisation structure is primarily concerned

with the allocation of duties and responsibilities and delegation of authority. It is a management tool for

achi eving the objectives or goals of the enterpri se. The following are important forms of internal

organisation found in many enterprise. These five basic types of organisation are quite popular in the

business world :

1) Line organisation.

2) Functional organisation.

3) Line and staff organisation.

4) Staff organisation.

5) Committee organisation.

1) Line organisation :

Line organisation is the basic framework of the whole organisation. It is the backbone of t he

organisational hierarchy. Line organisation represents a direct vertical relationship through which authorityflows. It is the simplest form of organisation structure and is also known as scalar or military organisation.

The relationships form a chain of comman or a hierarchy of authoirty in an organisation. It points out

direct vertical relationships (Supervisor-Subordinate relationships) connecting the positions at each

level with those above and below, Technically it describes a scalar principle. Line authority is a direct

authority exercised by a supervi sor over his subordinates and the flow of this authority is alwaysstraigh downward. The characteristic of line organisation is superior subordinate relationships i.e., a

supervisor delegates authority to a subordinate and who, in t urn, delegates authori ty to anot her

subordinate and so on, forming a line from the very top to the vary bottom level of the organisationalstructure. the line authority relationships establish a chain of command. The essence of line organisationis the power of command of a supervisor to his subordinate. The line of authority flows vertically

downward from top to bottom throughout the organisation. The quantum of authority is highest atthe top and reduces at each successive level down the hierarchy. Every person in the organisation is

in the direct chain of comman uninterrupted series of authority steps and forms a hierarchial arrangement.The line authority not only becomes the avenue of command to operating personnel, but also provides

the channel of communication, co-ordination and accountability in the enterprise. Line authority is also

called the operative authority.

Some important features of line organisation are as follows :

i) The lien managers possess wide authority of command to their subordinates. The line managers

issue orders, instructions and command their subordinates. The line superiors have got authority over

subordinates and are responsible for show of work to accomplish the objectives. The line operative people and the subordinates have to follow the instructions of their superiors and are accountable for

accomplishment of the work assigned to them by their superior. Thus, line executives have commandprerogatives.



ii) The line authority establishes a chain of command and becomes the avenue of communication.

It provides the channel for communicating orders and instructions from t op to the bottom, andsuggestions, reports and complaints from bottom to the top. The line authority acts as the artery inthe organisational structure for carrying all messages to the desired places.

iii) Line authority is a carrier of accountability. Accountability from the side of subordinate travelsupwards in the organisation structure and this flows only through the line authority. The line men alone

are responsible for show of work and accountability is the exclusive concern of line managers for

securing goals of the organisation.

Types of Organisation

Formal Organisation Informal Organisation

Forms/Types of Organisation Structure

Staf Committee Line Functional Line and Staf Organisation Organisation Organisation Organisation Organisation

A Chain of Command

Board of Directors

President

Vice-President (Production)

Works Manager

Plant superintendent

Foreman

Workers

Carrier of accountability

Figure: Line organisation of a manufacturing enterprise

iv) The delegation of line authority results in the shape of a pyramid. Several steps or grades o authority are created throughout the organisation and which are vertically linked to each other, connectingthe top executive with the lowest operative men in the line.



v) The line authority provides the asic framework to the organisation. No organisation can

exist without a line authority.

Thus the line organisation refers to the direct relationships between a superior and his subordinates.It is by force of the line authority, that a superior command his subordinates i.e. issues instructions

and demands accountability. The subordinates, in turn accepts the responsibility of carring out the

instructions and discharging the assigned duties. The military organisations and small enterprises are commonly organised on the basis of line authority. Exclusive use of line authority in the organisation is

also very common where the services of staff speciali sts are not required. In complex business

organisations line autghority is granted overwhelmingly to those managers who are engaged in basic

functions of the enterprise. The line authority is also given to the departmental head over its subordinates.

Line organisation is the simplest and the oldest from of internal organisation.

The line organisation indicates a direct straight line responsibility and control from the chief executiveto the works manager to the foreman to the worker. In other word decisions are taken and directions

are issued by the man at the top and are direct ly conveyed to the persons repsonsible for theimplementation of these decisions. There are two types of Line organisation namely, Pure and

Departmental. A pure line organisation is found only where the activities at any one level are the same

with each man performing the same type of work and the division exists solely as a basis of control and decision.

General Manager

Works Manager

Foreman

Shop supervisors

Worker Worker Worker (Pure line organisation)

Figure.

In the departmental line organisation too, authority and control flow vertically as shown inFig. 5.3.

The business is divided into different departments, depending on the identity of activities. Each department

is under the charge of a manager. The chief executive delegates authority to departmental managerswho in turn passes it on to supervisiors who pass it on to workers.

The method is also known as the military type of internal organisation because it is based on

military practice. The authority in the army flows vertically from top to bottom.



Managing Director

General Manager

Works Accountant SalesPurchaseManager Manager Manager

Purchase SalesAccountsDepartment Department Department

Foreman Foreman Foreman(Department-1) (Department-2) (Department-3)

Workers Workers Workers

Figure. (The departmental line organisation)

Merits of Line Organisation :1) It is simple and easily understood.

2) It is flexible and is able to expand or contract readily.

3) It encourages the development of all-round executives at the higher levels.

4) Discipline is easily maintained.

5) Morale may be quite good because of personal contact between the boss and the ank and

file.

6) It is best suited for small organisations because the line systems equires fewer members othe staff.

7) Line executive enjoys decision making power in his own area, as well as direct command

is exercised by him over his subordinates. Quick decision making and its communications

is fostered. Because of direct accountability on the part of a subordinate to discharge his

duties, buck passing is eliminated.

8) The line organisation fosters the unity of command, direction and promotes co-ordination.

9) The line organisation fosters the unity of command, direction and promotes co-ordination.

9) Communication is easy and quick.

10) Each employee knows whom to hold responsibl e and who is responsible to him. Thus

responsibility is more clearly fixed and clear-cut authority is nicely established.

Demerits of line organisation :1) If business concern starts growing the top boss is overburdened.

2) It involves little use of specialisation.



3) Initiative at lower levels is killed because the decisions are taken only by the man at the top.

4) Because of concentration of authority in the top man, he may turn to be a dictator.

5) This type of organisation is unsuitable for large sized business concerns There is lack of specialisation. Many jobs create problems of their own and require specialisation by the

persons concerned. It is rigid and suitable only for small enterprises, where the number of employees is limited.

6) It is sometimes characterised by absence of team work towards common end.

7) In such an organisations managerial planning, research and development activities may be

neglected because of greater reliance on line authority.

8) There is concentration of authority at the top. If the top executives are not able, the enterprise

will not be successful.

9) Departments may work for their self interest and may sacrifice the general interest of the

enterprise.

10) If there are too many levels of management, process of comunication or flow of information

becomes very difficult rather its speed is obstructed.

In spite of demerits of line organisation, it is very much popular in smaller concerns. in case theenterprise expands to greater extent line organisation can be combined with staff organisation and thusadopting line and staff organisation.

FUNCTIONAL ORGANISATION

In the functional organisation all activities in the enterprise are grouped together according to

certain functions like production, marketing, finance and personnel, and are kept under the charge of

different persons. The person incharge of a function fol lows it wherever it goes throughout the

organisation and also controls the individuals working in the functional area. This means that if a

person performs more functions, he will be under the direct charge of several persons i.e. incharges

of these functions. The functional incharge is expert in his own field and brings out the best in himself.Many business enterprises follow functional plan to some extent to carry out the primary unctions.

Managing Director

General Manager

Purchase Production Sales Department Department Department

Personnel FinanceDepartment Department

Figure. Functional Organisation



This form of organisation structure is mainly of historical importance. Functional organisation,often

called functional foremanship, was origi nated by F.W. Taylor, t o bring a bout specialisation of management. It permits a specialist in a given area to enforce his directive with the limited and clearly

defined scope of authority. It decreases the problems of line management. Taylor pointed out that a

foreman could not be a specialist in everything he is supposed to do. Instead of having a supervisor as

in the line organisation, Tayl or arranged for a group of specialists to boss t he worker in variousaspects of the business. So he advised the substitution of line authoirty by functional foremanship at

the lower levels of the organisation structure. Taylor recommended that instead of the usual practice

of putting one foreman incharge of 10 to 20 workers, there should be the following staff to guide the

workers in various functional areas : i) Route clerk, ii) Instruction card clerk iii) Time and cost clerk

(iv) Shop disciplinaria n (v) Gang boss (vi) Speed boss (vii) Repair boss (viii) inspector. There is

functional relationship in the structure because every worker is responsible to speed boss in t hematter of his work, to shop disciplinarian in the matter of discipline and so on. This is the extreme

form of functional organisation which is not found anywhere because it has been found to be urealistic

and it violates totally the principle of unity of command. In order to maintain unity of command in theorganisation, functionalisation is applied at the top of the structure only. Functional organisation uses

the services of experts in various functional areas. In a functional organisation authority does notflow from top to bottom, as in line organisation are divided according to functions like production, finance, sales etc. A specialist is placed in charge of each function of a group of related functions. The

specialist who may be called a functional manager, has control, has control over the functions in his

charge, no matter where those functions are performed through out the organisation. For instance, the

purchase manager is in-charge of the purchasing function, he will control this function where ever itexists in the organisation. This functional authority includes line authority with reference to a specialised

function. In such an organisation consultation wi th the functional authority becomes necessary for

decision making, However, the functional authority is confined to functional advise and/or guidance.

The staff working in the various departments conti nue to be account able to their respective line

supervisors.

Merits:

1) Expertise of specialised knowledge is efficiently utilised. 2) Line authority is relieved of taking specialised decisions.

3) It facilitates work specialisation. It helps in achieving the benefits of specialisation of work.

Every functional incharge is an expert in his area and he can help the subordinates in better

performance.

4) It makes for uniformity of decisions.

5) It facilitates better control and supervision in the organisation.

6) The department executive and his subordinates have to perform a limited number of activities, It ensures his/her efficiency.

7) If facilitates standardization of operation, methods and equipment.

Demerits :1) Subordinates get orders from different bosses. The principle of single accountability and

unity of command does not apply.

2) Operating subordinates as well as functional specialists are often overburdened.



3) It affects the position and status of the line authority in the organisation.

4) It makes management rigid and inflexible.

5) Co-ordination becomes difficult to activise.

6) Problems of discipline get complicated at lower levels of the organisation.

7) There is generally lack of coordination among the functional executives and thus, delay in

decision making, specially when it re quires the involvement of more than one specialist.

8) The operation of functional organisation is too complicated to be

easily understood by the workers, workers are supervised by a number of bosses. Thiscreates confusion in the organisation.

Line and staff organisation

Unlike the line organisation a pure functional organisation is rarely found in business houses.

However the basic principles of both the line organisation and the functional organisation are combined

in another form of organisation known as the line and staff organisation. This type of organisation

retains the merits of the line, staff and functional types of organisation. This form of organisation is

very popular. in business enterprises. It is an extension of the line organisation in which one or moreof the ancillary services are functionalised. According to E. F. Breach, “It is, in fact, a mixture o

direct executive responsibilities with the specialist ancillary services”.

Board of Director

Managing Director

Assistant to Managing Director

Purchaser Personal Financial Legal and TrafficeManager Controller Advisor Advisor

Divisional Divisional DivisionalManager Manager Manager

(1) (2) (3)

Staff Authority.Line Authority.

Figure. The Line and staff organisation



According to Allen, line refers to those positions and element of the organisation which have the

responsibil it y and authority and are accountable for accomplishment of primary objectives. Staf

refers to those elements which have responsibility and authority for providng advice and service to line

in attainment of objectives. Line elements provide decision, authority and a central means for the flow

of communication through a scaler chain of authority, Staff element facilitates the decision process by

bringing in expert and specialised knowledge.

In the line and staff organisation there are staff officers in addition to line officers in contrast to the

line type where only line officers are found at all the levels of authority. Line officers are those whohave the authority to take decisions, enforce them, control the performance and who are answerableto their supervisors for results. The Managing Director, the General Manager, the works Manager and

the Sales Manager are line officers. Staff officers are those who provide advice and service to the line

officers. The Personnel Manager, the Industrial Relations officer, the Industrial Engineer, the LegalAdviser, the Cost Accountant etc. are staff officers. Both the line and staff officers are necessary for

the effective functioning of an organisation.

Merits :

1) It enables an enterprise to secure full benefits of the specialised knowledge of its staff.

2) It permits line personnel to concentrate on the basic activities of the business because the necessary advice and service are provided by the staff. It thus improves efficiency and

performance.

3) The principles of the unity of command and unity of direction are followed by line executives. They exercise full authority over their staff.

4) It facilitates executive training and management development.

Demerits :

1) It often creates confusion between line and staff executives.

2) Staff officers may lack initiative because they are merely advisory people. Their suggestionsmay be turned down by the line officers.

3) The line department may not admit and probably may not realise that without staff help, it

would do a poor job.4) There is a tendency to “Pass on the Buck” when thins go wrong. Line officers tend to

blame the staff people for lapses ad vice versa.

5) Staff authority, because it is not responsible to higher authority, may act recklessly.

6) The expensive staff personnel may become a burden on the cost of production if i ts

services are not properly utilised.

7) Line authority may not be implementing the advice of the staff, making the later absolutely

ineffective and redundant.

Staff organisation“The staff refers to those elements in the organisation which provide advice and service to the line.

The work of investigation, research, recording, standardization and advising is in the hands of “staf

”. The responsibility of line is to arrange actual execution of the work planned by the staff. It is often

said that the “staff thinks while line acts”.



Types of staff Staff may be divided into the following three categories.

a) Personal Staff : The personal staff is meant to serve the executives and it refers to the

position created to help a manager in carrying out those parts of his responsibilities which

he cannot or does not want to delegate to others. Personal staff is required by top managers because their responsibilities go beyond their personal capacities, for instance a General

Manager of a company may have a personal secretary, to help him i n carrying out his

responsibilities. In the words of Haimann the personal staff assistant can be considered “asan extension of the managers hands, arms, legs and as an aid to his brain.”

b) Specialised Staff : Specialised staff helps the line by performing work that required special

skills or more objectivity than the line can normally be expected to possess. Such specialisedareas are Accounting, Public Relations, Research and Development etc. It counsels, advises

and helps all line and other staff elements in the organisation. Staff specialists, generally, provide both advice and service to the line departments of the organisation.

c) General Staff : It consists of a group of experts in different areas who are attached to thecentral office of the organisaton. It is generallyemployed to provide advice on specialised

matters to the top management. This category of staff serves as advisers to top managementin specialised area.

d) Thus staff authorities are advisory or service oriented in nature. Staff functions have nodirect responsibility for accomplishing the objectives of an enterprise. They only the line to

work most effectively in achieving the primary objectives of the enterprise. Staff authority

is purely advisory. The function of a pure staff authority is to investigate, research and giveadvice to line managers to whom they are to report. A pure staff authority has no right to

command. It is the prerogative of a line authority.

Staff activity is an organisational element or component existing mainly to provide technical or

special adivse and service to line units. As business grows, time must be allocated among manyfunctions which the line manager prefers to be most efficiently performed. The other functions that

are not preferred by line managers will sooner or later be given to specialists and their abilities can beincluded in the organisation.

Types of specialised staff authorityGenerally in a formal organisation there are three types of specialised staff authority as under :

1) Service authoirty : A staff speicalist offers a specific service to the line organisation i.e.

purchasing, supervising production planning etc. Control supervisor provides specialised service tothe planning manager.

2) Advisory authority : A staff specialist may be required to offer only expert advice to the line

organisation e.g., an industrial engineer, quality control supervisor and an accountant provide specialisedadvice to a planning manager.

3) Functional specialist : A staff manager may exercise effective directions and control of a

functional speciality. A staff manager may be allowed to make decisions and assure power of comandin a given functional area. For instance a director in charge of industrial Relations will have functionalauthority over Industrial Relations Managers operating in each division and the industrial Relations

managers will also report to the Divisional General Manager as a staff specialist. The specialist staff



form a kind of hierarchy of authority parallel to the operational or line heirarchy.

Conflict between line and Staff One of the drawbacks of the line and staff organisation as mentioned earlier, is the conflict between

lineman and staff people.

1) Major cause of line and staff conflict is the difference in their view points and perception. Conflict arises when any of them fails to appreciate the viewpoint of the other. When a

conflict between line and staff arises, both the parties try to explain the causes of conflictin terms of behaviour of the other. Important causes of t he line and staff confl ict as

reported by linemen and staff people are discussed below.

2) A line executive looks upon the specialist as a theorist, an academic and unrealistic. The

staff specialist views the line executive as a mere “log in the machine”, incapable of thinking

and discussing problems.

3) Staff officers encroach upon the line authority. They interfere in the work of line managers

and try to tell them how to do their work.

4) Staff specialists are academicians and are not well acquainted with the practical problems

of the enterprise.5) Since staff men are not directly accountable for any result they are generally overzealous

and recommend a course of action which is not pracitcable.

6) Staff men, generally, fail to see the whole picture objectively as they are specialists in their

particular area only.

7) Line managers often resist the new ideas given by the staff specialists and are sometimes

not prepared to listen to the arguments of staff specialists.

8) Staff specialists lack authority to have their ideas implemented. This creates frustration

among them.

9) Line managers, generally, do not take a proper use of the services of the staff specialists

10) Sometimes staff advise is sought only as a last resort as line executive feels that asking for their advise is admitting defeat.

11) Staff men have the tendency to take credit for the decisions which prove succesful and lay

the blame on the line men in case the decisions do not prove successful.

12) The confl ict erupts into the open when each tries to assert his opinion and at tempts to

dominate the other.

The conflict between the line manager and the staff speicalist is undesirable because it adversely

affects the organisation’s functioning. Effectiveness of organi sation depends on the harmonious

relationship between the two. It is the responsibility of the top management to ensure that the causesof conflict are eliminated and co-ordination between line executives and staff specialists is promoted.

Remedial measures for improving line staff relationship :

In order to eliminate conflict and to achieve cordial relationship between the line and staff peoplethe following remedial measures can be suggested.

1) The limits of line and staff authority should be laid down clearly. For this the roles,



responsibilities and functions of line and staff officials must be clearly defined and made known

to the concerned people.

2) Staff people should know that their role is advisory. They should be satisfied with rendering

advice on important problems. Line executives should give due consideration to the staff

advice and shoul d stat e reasons for not accept ing the staff advice. Line managers mustrespect the staff advice and utilise it for the betterment of the enterprise, as well.

3) The staff specialists should try to understand the diffi culties in implementing the new

ideas. They should not consider it as a prestige issue if sometimes thier advice is notfollowed.

4) Line and staff people should try to understand the orientation of each other. They shouldtry to achieve co-operation for the achievement of enterprise objectives.

5) Frequent and intimate contacts should be maintained between the two.

6) The staff specialists should not think themselves as supervisor and extraordinary in their

area. This kind of feeling creates ego in their mind.

7) The fear complex, from which line managers suffer due to the proximity of staff specialists

to and their intimacy with the top management should be removed.8) It is necessary to allow both the parties the right of appeal to the chief executive.

Some people argue that distinction between line and staff is an obsolete concept and should he

done away with. They argue that it is meaningless to segregate organisation activities on the basis o

their contribution to the achievement of goals. Moreover in the recent years, the horizontal and diagonal

relationships and work flow are gaining greater importance than the vertical relationships represented

by t he line authority. Line staff conflict and controversy may be meani ngless under the systems

approach’ to organisation and management.

COMMITTEE ORGANISATION

Committees being important components of an organisational structure and having various roles

to play are found at all levels of organisation and almost in all social, business and government

organisations. A committee organisation is not an independent form of organisation, but generallyfunctions in conjuction with some other form of organisation. Formation of committees has become

a usual and common feature of modern organisations. Committees are found to exist in different areasand at different levels of an organisatinal structure, in most business and non-business organisations.

It is because of the fact that people reach more favourably to a group decision than the single authority

of an individual.

A committee may be defind as “a group of persons entrusted with discharging some assigned

duties as a group collectively.” So group discussions and collective decisions are the identifying features of a committee. Committees are also known by different names, such as board, commission,

council etc. In other words a committee may be defined as a body of persons entrusted with discharging

some functions assigned to it as a group and in a corporate capacity.’

According to Terry “A committee is body of persons elected or appointed to meet on an organised basis for the discussion and for dealing with the matters brought before it.” According to Hicks, “A

committee is a group of people who meet by plan to discuss and to make a decision for a particular

subject.” In the words of Newmen, “ A committee consists of a group of people specifically designated



to perform some administrative acts. It functions only as groups and requires the free interchange o

ideas among its members”.

A popular and highly prevalent form of organisational structure is committee organisation whether

referred to as a committee, board, commission, team or task force. Its essential nature is the same, as

a group of persons formed for group working.Thus we see that committee is a group of persons composed to perform certain work as assigned

to it. As a matter of fact, committee organisation, as a method of managerial control, has very little

practical importance. They are widely used for the proposes of discharging advisory functions of themanagement. In most of the enterpri ses, these advi sory committees are formed to introspect in

finance, personnel, production, industrial relations etc.,

Committees may be temporary or permanent in nature. They may be named as adhoc committes

or special commi ttees.

They may be vested with line authority or staff authority, and they may be created for a specific

purpose or for general purpose. Committees such as management committees, joint consultative

committees or works committees are ideally suited for the interpretation and dissemination of policy

or for the resolving of grievances or conflicts.

Reasons for the w ide spread use of committees :

1) Group decision M aking : The fundamental purpose of committee is to obtain a goup

opinion or group decision after a careful consideration of the facts assembled by staff,executi ves of administrative management, to interchange ideas, concepts and points oview of the memnbers in selected groups, and to formulate joint decision based on a sound

udgement of organised facts. McGregor is of the opinion that group decision making

proves to be more effective as personal bias and prejudice are eliminated from such decisions.

2) Creativity : Through brain storming and other group creativity activities committees can

produce creative ideas, that are valuable practially to every organisation function.

3) Co-operation : Committee organisation encourages group co-operation and team spirit in

the organisation.4) Co-ordination : Committees promise co-ordination of various activities of an enterprise.

5) Communicating : A committee is an excellent means of transmit ti ng information and

ideas to interested organisational members.

6) Motivating : By participating in discussions and decisions in a committee a member will

naturally be highly motivated to accept a situation or implement a decision. His reactionswill be favourable and accepting.

7) Consolidation of power and authority : A more wide spread reason for the use of

committee organisation is the fear of derogating much authority to a single person. Acommittee can be an excellent means of collecting and combining the authority of several

individual members.

8) Facts, knowledge and experience : This form of organisation pools the facts, knowledge and experience on the part of several executive members of the committees.

9) Determining broad policies : Committee organisation helps in determining the broad

policies of the business enterprise.



10) Representation : Committee organisation gives representation to various groups in the

organisation.

11) Continuous review : Because making a continuous review and seeking an honest and

objective appraisal of the conduct of the business the management ensures that everything

is well in the organisation. Most committees are however either decision making or problem solving committees.

Difference between Individual Executive and the Committee :A committee differs from an individual executive in four important aspects. Firstly committee

requires a president or chairman to give a directive push and to set the committee in motion. Without

a co-ordinating and controlling authority a committee would merely be a gathering of a few persons

unable to reach a decision an individual executive can initiate action of his own and does not require

constant guidance from others.

Secondly a committee is intermittent in existence while an individual is perpetually in existence.

The committee dies for the intervening period between two sessions or meetings while the individualexecutive remains in actions.

Thirdly, a committee normally has strictly defined authority, duties and spheres while in case of an individual executi ve such limitations are not so specific and therefore he enjoys more freedom inworking.

Fourthly, the committee proceedings and decisions must be in writing as a matter of necessity and

must be formally communicated to all the committee members as well as to the operating people. The

very nature of committee decision encourages evasion of responsibility by its members and so writtendecisions bind all of them. In contrast the authority of an individual is made co-extensive with his

responsibility.

Types of Committee :Committees can be classified from different angles. Classificati on basis of committees and the

types of committee are discussed below -

1) Executive Committee : On the basis of authority the committees may be having line authorityor the staff authority. It is a committee having the power to act generally or specifically. It is, however more commonly, a body with power to govern or administer. It is coupled with the line authority. In

case of line authority the committee is vested with power of decision making and its enforcement, i.e.the committee has command prerogatives. The Board of Directors is a classic example of line authority

committee . In such a case the commttee is generally referred to as “ Plural executive”. But where thecommittee is organised for discharging staff functions for advising and making recommendations to a

line executive, it has only staff authority. The staff committee investigates, debates and discusses the

problems and concludes their deliberations wit h some recommendations. Such committees do not

take decisions nor enforce them but may make recommendations for the guidance, advice and help to

a line executive who is authorised to take ultimate decisions.

2) Standing Committee : On the basis of Premanency, a standing or a permanent committee is

formed for a specific purpose. It is a committee of a formal type and conducts the routine businessdelegated to i t at regular (Weekly or mont hly) meetings. For instance the finance committee, t he

transfer committee, the working or consultative committee etc. The standing committees are mostlyformal in nature.



3) Adhoc committee : On the basis of permanence an adhoc committee is formed which has a

temporary existance and formed for a particular purpose. It stops functioning as soon as its purposeis accomplished. Fact finding or exploration or investigation committees usually come under this

category.When the purpose of an adhoc committee is accomplished it submits its report to the appointing

authority and then ceases t o exist. For instance Finance commissions, pay commissions or some

enquiry committees or commisssions are temporary or adhoc committees.

4) Joint Committee : It is generally formed for the purpose of co-ordinating the activities o

two or more committees. For instance a joint consultative committee may consist of representativesof the employer and employees. A works committee or consultative committee is an example of jointcommittee.

5) Office Committee : Office committees are those committees which are entrusted with the

task of office management. These committees may either be executive committees or standing adhoc

committees or joint committees. Examples of office committee are the Management committee, theFinance comittee, the Audit committee, cost control committee, the Joint consultative committee etc.

The purpose and functioning of an office committee, depends upon its nature and the work assigned

to it.

6) Formal or Informal Committees : The committees may be classified as formal or informalcommittees on the basis of their organisational structure. A formal committee is one which has definite

place in the organisational structure and its duties are clearly outlined. The standing committees aremostly formal committees. The informal committee is one which is organised without any formal

standing within the organisation structure. It is created to achieve group thinking or group decision

making on a particular problem. Such committees are not provided for in the organisational structure.

7) Function Committees : On the basis of functions the committees may be called by different names as the subject may justify. For instance finance committee may be for dealing with the finance

ma tt ers., development committee might be for developing new products and methods and several

such committees as Product committee. Policy committee, Bonus and Salary committee etc might be

framed in business organisation dealing with different subjects.

8) On the basis of the organisational hierarchy the committees may be classified as centralcommittee, divisional committee, departmental committee etc.

Advantages of committee organisation :1) Integrated deliberations and Collective judegement : The group deliberations ensures

through considerations of problems with all their facts and ramifications before arriving at a decision.

The wide range of experience, back ground and combined abilities are brough together by way of the

committee and this pooling of knowledge and experience definitely improves the quality of decisions.More over a problem is discussed by different members having different interest and points of view.

An individual executive has many limitations as regards knowledge and experience.

2) Committees provide a platform : Committees provide a platform for exchange of ideas,information, facts etc. They have an educative value. They can be used to train young executives to

analyse and appraise critical and typical situation. Participation in committee meetings is an excellenttraining for junior as well as senior executives.

3) Promoter co-ordination : A committee is a useful device for co-ordinating business planning

for execution of business policies, and for an effective communication between the executives of



various departments or functions. Such a committee provides an important technique of co-ordinating

in ma ny enterprises. Particular commi ttee normally consists of members representing all necessarydepartments and interests. When joint deliberation takes place they are in a position to discuss and

listen to the views of others and offer their own suggestions and points of view. This direct contact

and opport unity of discussing, offering suggestions and listening to others before a ny decision is

taken, go a long way in promoting co-ordination. No written or oral communication is a effective andinformative as the participation in the discussions of the committee. Various co-ordination committees

are formed which integrate, harmonize, and syncronize the activities of the departments or sections.

4) Ease in communication : A committees is one of the means of transmitting information and

ideas to internal organisational members. It secures the facilitiy of communication and co-ordination

between executives. The major objective, policies and decisions of many enterprises cannot be precisely

stated in writing. The committees provide forum for communicating the real purport of such objectives

and policies to the managers. The decisions along with their background discussions are conveyed

clearly and uniformaly to all concerned through the committee members.

5) Greater motivation and co-operation : In the committee organisation, the participation of

many subordinates and sectional heads, in the discussions of a meeting gives them a sense of belonging

to the organisation. They are motivated towards the enterprise objectives. Moreover, once they have participated in the meeting, howsoever less might be their contribution, they are motivated to see that

such decisions are executed which they themselves have taken.

6) Avoids concentration and misuse of authority : The concentration of authority and power

in an individual is obviously dangerous. It is therefore, always safe to delegate authority to a group of

persons rather than to an individual. The policy and strategic decision making power is therefore given

to a committee in Government, educational organisations, and other institutions as a check andsafeguard against the abuse and misuse of power. The fear of delegati ng too much command and

executives authority to one person has given to the growth of plural executive in many institutions.

7) Medium of representation : The committee form of organisation is the best medium o

giving representation to various interested groups on matters of executive authority. A central committee

may be so constituted as to give representation to different departments and interests in an organisation.8) Democratisation : Where desired, a committee can be used to, “reduce the tyranny of an

executive, and to permit greater member participation in decision mkaing. Various interested groupsmay be represented in the committee. A committee may often be a meeting gouped where difference

are sorted out and comprmises are reached.

9) Avoiding action : Where an executive wishes to avoid action on a specific problem. he may

assign it to a committee and avoid the action.

10) Excaping responsibility : In some circumstances i t is desirable that a committee takesresponsibility for actions for which individuals do not wish to be responsible.

11) Stability : Committee organisation enjoys stability because it is never without members.Some members regularly retire or quit but they are replaced by others. Thus this type of organisation

has perpetual succession.12) Advising : Manager may wish advise and counselling before making decision. He may convence

a committee to provide needed advise and counselling.



13) Committees : usually take more time to come to a decision than a single individual. Hasty

decisions are, thereby, avoided.

14) Group discussion at committee meetings may lead to the emergence of new ideas.

15) Committee provides representation to various interests in the organisation. This generates a

climate of involvement on the part of various sections in the organisation.16) Other advantages : The decisions, by committee, are taken by experienced and liberal group

members. Naturally they are never narrow minded. They always have a blending of various characteristics

like balance, co-ordinativeness, comprehensiveness and liberalisation etc.

Disadvantages and misuse of committees :

A number of disadvantages are also inherent in committee organisation on account of which they

are widely criticized and their use is avoided by the management. The following demerits of committee

organisation are responsible for such reactions.

1) Delay in decisions : Because of conflicting view points of members or poor leadership acommittee is sometimes unable to reach a needed decision in time. This delay in decisions destroys the

utility of decisions.

2) Exp ensive and time consuming organisation : Committ ee is a n expensive form of organisation. Procedural activities like circulation of notice and agenda, recording discussions and

decisions and group deliberations etc. involve high cost and time. Thus the monetary cost of committeedecisions is very high. It becomes more pinching when a committee is assigned a problem that could

as well or better be solved by a single individual. The high cost in terms of time and money is quite

obvious as some member are expected to come from outstation. On the other hand the decisions by an

executive are much less costly and less time consuming.

3) Least denominator : If often happens that a committee decision is “watered down” and isnot the best from someone’s viewpoint. There is a general tendency of compromise in such decisions.

So nobody may possibly be happy with a committee decision.

4) Split accountability : It is often very difficult to enforce effective accountability against a

committee. Members do not show any personal initiative. They may hide behind the facade of thecommittee and may avoid personal responsibility by claiming, that it was not his decision, but the

decision was taken by committee.

5) Psychological weaknesses : Commitees are prone to a number of psychological weakeness

also. They have the tendency to indulge in irrelevant discussions, Members try to impress and flatter the superiors and show tendency to jump to conclusions. A committee, being a corporation, is neither

a soul to be damned nor a body to be kicked. Therefore it tends to be less considerate than individual.

6) Tyranny of minority : Since committees usually seek a consensus of unanimous agreement

it is easily possible for a minority of the committee to that committee action by refusing, to accept themajority viewpoint.

7) Self perpetuation : Committees are usually formed for a specific pupose. It often happens,

however, that a committee continues to meet long after it has ceased to serve a useful pupose. Thetendency to continue themselves is particularly noticeable in committees which have assembled their own staff.



8) Lack of secrecy : The committee organisation being a form of plural executives, lacks in

secrecy too.

9) Divide d responsibi lity : It i s an old saying “everybody’s irresponsibility i s nobody’s

responsibility”. Acting in a collective way, all members are jointly responsible for the decisions arrived

at, by the committee. In the absence of fixed individual responsibility the committee members becomes, more or less irresponsible and the committee proves to be a breeding ground of ineffciency

and evasion of real responsibility.

Misuses of C ommitt ees :

The committee form of organisation has fallen into disrepute due to its misuse. The following are some examples of mi suses of committee.

1) For routine work : The committees should not be assigned routine work in place of a

manager. Leadership is essentially a quality of individuals. If decision making is to be sharp, clear, prompt and subject to unquestioned responsibility, it is better exercised by the individual. the committees

should be entrusted with the advisory functions and decisions taken by them should be carried out by

single person-managing director.

2) For research Work : The marketing research and study of consumer behaviour etc. are such works that can not be accomplished by committees successfully . These require personal attention,

skill and individual attention. So committees should not be assigned such responsibilities. But they can be formed to analyse the results and for making final recomendations.

3) For unimportant work : The committees should not be set up to perform unimportant work

otherwise it will be a sheer wastage of time and money.

4) Nominations of representations : Generally members of a committee are the departments.

They do not have any authority of their own. They only refer the matter to their departmental boss. It

results in delay and the committee can not function properly.

5) Reservation of final authority : Generally the nature of committees is advisory only. They

do not possess any final authority. This also brings down their importance.

SUGGESTION FOR MAKING COMMITTEES EFFECTIVE

1) Minimum membership : The number of individuals on a committee should be minimum, sothat they may function fast and effectively. There is no st andard size of committees. Generally

membership of three to four persons is a normal size . Too many members will result in much wastage

of time in lengthy discussions resulting in delayed decisions.

2) Well defined authority and scope : Committees authority should be carefully spelled out.

Members should know the exact scope of subjects that the committee is expected to consider.

3) Proper selection of members : Persons to be appointed on committee should be selected

properly. They must represent all intrest that are intended to be served and t hey must be able to

perform well in a group They should have the capacity for discussing and for reaching group decisions.

4) Extensive use : The commi ttees should be used extensively. The chairman or secretary o

the meeting should prepare the agenda in advance and circulate it among the members of the committeeso that the members get sufficient time to consier the matters beforehand.

5) Proper conduct of meetings : The chairman should control the behaviour of members o



the committee, while it is in session so that there is a minimum waste of time and money. Participants

themselves should also behave in a nice manner.

6) Efficient Chairman : The success of a committee depends to a large extent on the skill and

capabilities of the Chairman of committee. A good chairman can avoid many of wastages and drawbacks

of committees by planning the meeting and conducting it properly.7) Cost consideration : Last but not the least, the committee must be worth the cost. A committee

can be justified only if costs, which are often considerable, are definitely offset by tangible and intangible

benefits.

8) Wire Pulling tendency : The chairman or some strong member overshadows the decision

and forces the members to simply endorse his views. Free opinions are not exchaged. Sometimes aminority resorts to expressing dissent and the issues are decided on the basis of voting, leaving behind

bitterness, discontent and frustration.

9) Committees weaken future executives who rely on them for decision making. Such executives

are reluctant to make decisions or to take responsibility.

Formal and Informal organisation :

An organisation may be divided into two categories, on the basis of the interrelationship of individuals, viz, formal organisation and informal organisation. Both types of relationships are necessry for anygroup action.

Formal organisation : A formal organisation is one in which position, responsibility, authority

and accountability at each level is clearly defined. In such organisation, authority is delegated from

higher to lower levels, and the whole structure, is designed to accompl ish the objectives, of theorganisation. Thus formal organisation is more or less an arbitrary structure to which the individual

must adjust. It tells him to do certain things in a specified manner, to obey orders from designated

inividuals and to co-operate with others. A formal organisation is bound by rules, systems, procedures

and methods as laid down by the top management from time to time. Co-ordination also proceedsaccording to a prescribed pattern in the formal organisation structure. According to George R. Terry,there are four basic comonents of a formal organisation.

i) The work which is divisionalised.

ii) persons who are assigned to and perform the divisionalised Jobs.

iii) The evironment under which the work is to be done.

iv) The relationship among persons or work units.

According to Barnard Chester, formal organisation is a system of consciously co-ordinated

act ivities or forces of two or more persons. Thus formal organisati on is creat ed through the co-

ordinat ion of efforts of various individuals. The formal organisation facilities the determination of

objectives and policies. The degree of success of these objectives, is determined on the basis of thecapacities and attitudes of the people within the organisation.

According to J. A. C. Brown formal organisation possesses the following characteristics :

i) It is deliberatery Impersonalii) It is based on ideal relationship and

iii) It is based on Rabble hypothesis of the nature of man.



Formal organisation is the official hierarchy as it appears on paper. It is the basis and official

version of the organisation.

The above ment ioned characteristi cs have al so been the main points of criticism of formal

orgnaisation. Firstly as it is deliberatery impersonal, emotions and sentiments of individuals are ignored

in determining the interacti ions, communication and accountability. But human beings can not livewithout social interactions and that is why they develop informal relations. Secondly it is base on ideal

relationships. Human beings are thought to be rational and economic beings. It is assumed that there

should be no unofficial channel of communication. But it is very difficult to find such ideal relationships in actual life. Lastly it is based on the rabble hypothesis of the nature of man It is assumed that therewill be the same kind of reaction if human beings are punished or rewarded. But the individuals are not

always motivated by the rewards and punishments in the same manner. Formal organisation is deliberately

constructed to acheive some goals. They are not changeable with the passage of time. This is another point of criticism put forward by the critics. The rules and regulations of the organisation may be too

rigid that it becomes difficult to achieve the goals. Moreover formal organisation does not consider thegoals of the individuals. Because of these reasons, formal organisation usually gives birth to infromalorganisation which cannot be separated from it. As a matter of fact, there is a close relationship

between the formal and informal organisation.Thus formal organisation is systematically planned and is based on the principle of delegation o

authority and the principle of responsibility. It makes use of organisation charts and attempts to maintaina balance among the various type of work to be done, each being given the importance that it true

value deserves. The merits and demerits of formal organisation include :-

Merits :

1) Avoidance of role conflict.

2) Avoidance of over-lapping of authority and responsibility.

3) Advantages of specialisation.

4) Defining and standardising systems, rules, policies and procedures

of the enterprise etc.,

Demerits or limitations1) It does not recognise informal relationship

2) It creates problem of communication.

3) It emphasises structure rather than people.

Informal organisation : An informal organisation always exists together with a formal organisation

in every enterprise. In such organisation people evolve informal groups among themselves which are bound together by common social or technological work or other interests. Such groups make an

informal organisation.

Informal organisation refers to the relationship between people in the ogranisaiton, based on personal

attitudes, emoti ons, prejudices, likes dislikes etc., Their relations are not developed according to

procedures and regulations laid down i n the formal organisation structure. Generally, large formal

groups give rise to small informal or any such other factor. These groups are not preplanned but theydeveloped automatically within the organisation.

Informal organisations are small groups and these groups can overlap because a person may be

member of more than one group. A manager can not eliminate the informal organisations because he



does not create them. many times informal organisations comes into being to support and supplement

the formal organisation. For instance informal communication is very fast and it can break the barriers.Informal organisations may also create problems for t he management by spreading rumours and

resisting the introduction of change. That is why some people do not favour the recognition of informal

groups by the management.

According to Davis, “an informal organisation is that network of personal and social relations

which is not established by formal organisation”. It is an accepted fact that wherever people work

together, social relationships and groupings are bound to arise on account of their frequent contractswith each ot her which gives rise to informal orgnisations. Such organisations are not needed byformal organisations and therefore they find no place in organisation charts or manuals. They establish

their own unwritten rules which are usually follwed by individuals in the informal group. Informal

organisations are never defined and have no structure like that of a formal organisation but they forman integral part of formal organisation.

Merits of informal organisation :

1) It provides a useful channel of communication.

2) It covers the deficiencies of formal organisation.

3) It influences the formal oranisation to work carefully.

4) It brings about mutuality among group members who derive job

satisfaction by exchange of ideas and views etc.

Demerits or limitations of informal organisation :

1) It may tend to act on the basis of mob psychology.

2) It may become a source of rumours or wastae of time.

3) It may tend to oppose change.

The informal organisation is a reality in every enterprise and every office manager should accept

this fact. He should utilise it as a part of the total organisation, as an effective channel of communication,

as a forum for exchange of ideas and as an instrument for obtaining support from the informal groups.As a matter of fact informal organisations are complementary to formal organisations and are in noway less important.

Selection of type of organisation structure : To select the right type of organisation is not an easyob. While deciding about the t ype of organisation the management should consider the following

fa ct ors.

1) Nature and size of business : Size of business is the most important factor. If a business is

small there are few management problems and therefore a simple type of organisation i.e. line organisationwould be suitable. But in a large business which has a number of departments or sections and whose

activities are varous and many, the complexity of management problems call for a more complex type

of organisation e.g. a functional or a line and staff organisation.

2) Period of establishment standing : An old established business is in a better position toevolve and develop its own ki nd of organisation over the course of years than a newly established

business for which a greater effort is required to set up even a simple type of organisation.

3) Continuity of work flow : An enterprise with a steady flow of business through out the



year needs a more complex and permanent type of organisation than a fi rm whose business is o

seasonal nature. In a seasonal type of business simple form of organisation is most suitable.

4) Geographical dispersion : When different units of an enterprise are located in the same

premises or in close proximity to one another, a comprehensive and complex type of organisation is

suitable. On the other hand, if different units are located at distant places, simple form of organisationat each of the units will have to be organised.

5) Staff strength and degree of mechanisation : The degree of mechanisation, total strength

of the workforce and the ratio of unskilled workers to supervisory staff, span of control and the levelsassigned to different functions must also be considered while selecting a particular type of organisation.

RESULTS OF GOOD ORGANISATION AND EFFECTSOF BAD ORGANISATION

Results of Good Organisation :A good organisation actually achieves many more things than those outlined above. It is more than

rewards to it s framers, leaders and members. In t he words o Claude S. George, Jr. a good

organisation typically,-

1) Establishes for easier communication 2) Provides for easier communication

3) Eliminates jurisdictional disputes between individuals.

4) Helps, to develop executive ability.

5) Aids in equitable distribution of functions and/or personnel supervision.

6) Aids in equitable distribution of function and/or personnel supervision.

7) Aids in measuring a person’s performance against his charge and responsibilities.

8) Affords movement in the direction of the “ideal” Organisation in times of change.

9) Makes for closer co-operation and higher morale.

10) Points out “dead-end” jobs.

11) Delineates avenues of promotion. 12) Prevents duplication of work.

13) Makes growth possible with adequate control and without literally killing top executives through

overwork.

14) Aids in wage and salary administration through forced job analysis and description.

Effects of Bad Organisation :Organisation is not an end in itself but means to an end. The end is better business performance

and better achievement of goals. A good organisation does not necessarily mean peak performance just

as a good constitution does not guarantee a good ministry or good laws, or a just and moral society.

But organisation structure is an indispensable means and a necessary foundation. If it is bad, good

management becomes an impossible proposition. As Drucker has put it, “The wrong structure will

seriously impair business performance and may even destroy it.”The consequences of bad organisation structure or symptoms of malorganisation are serious

1) Decisions will be slow and poor in quality. There may be reasons for it, (a) Those who decide



may be overloaded with wrok. (b) The information required for decision making may not be readily

available (c) Decisions may be made at the wrong place or level.

2) Bottlenecks will appear in the flow of work leading t o under-utilisation of resources and

diseconomics of all kinds. There will remain a constant pressure for what Drucker calls “Frictional

overhead”, for co-ordinators, expeditors or assistants with no other job than to help their superiorswithout much effect.

3) There will be lack of co-ordination, Functions will be performed haphazardly and loosely,

causing anomalies and conflicts between departments.

4) None of the departments or sections will be able to perform its respective tasks and justify

its costs. The net result will be shortfall in the realisation of overall objectives. The enterprises will bemoving backward instead of forward.

Problems of Organisation :

The problems of organisation from its start to later stages of growth have been outlined by two

authorities as follows :-

1) At the start, to create a new organisational system;

2) Thereafter to survive; 3) Then to stabilize ;

4) To earn a good reputation;

5) To achieve uniqueness;

6) To earn respect and appreciation.

Major problems in running an organisation are indicated below :

1) How to integrate personal needs with organisational goals?

2) How to distribute power and authority ?

3) How to develop mechanism capable of reducing intra-organisational conflicts ?

4) How to ensure effective adaptation to changes in the environment?and

5) How to assure vitality and growth and prevent delay ?REQUIREMENTS OF A SOUND ORGANISATION

1) Realisation of objectives : Organisation is an instrument for realising the objectives, goals

and purposes of the enterprise as a whole. Therefore every division, branch, department and sectionas well as the entire organisation must be tuned to the objectives and must contribute to their realisation.

2) Harmonious grouping of functions : For achieving the objectives and goals of a business

concern, the functions and tasks involved in the enterprise should be grouped in such a manner that

active consultation and co-ordination can take place with a minimum of over lapping, delay or confusion.

3) Clear allocation of duties and responsibilities : There should be a clear organisational

plan with well-defined duties, responsibilities and relationships. It is often achieved with the help of

organisation charts.

4) Re asonable span of control : The number of sub-ordinates over whom control is to be exercised at each level of management should neither be so large as to be unwieldy nor too small for the effective performance of the work or fuller utilisation of the managers ability to control.



5) Promotion of satisfaction : The most important element in organisation is human beings.

For biological necessity they first seek t o achieve t heir own personal goals. The obj ectives of theenterprises are realised more easily where there are good chances of the achievement of such personal

goals. Moreover, in an organisation men work in groups rather t han as individuals. Therefore the

success of an organisation depends largely on how far it can promote the satisfaction of its members

as individuals and as groups. Better results are achieved psychologicall y if, alongwi th a formalorganisation structure, some informal relationships are build up within it during the day-to-day

functioning of the organisation.

6) Effective communication : This is very essential for smooth working of an organisation.Top management must explain the policies and programmes of the ent erprise to the rank and file

workers. The later must also be given the opportunity to convey their feelings, reaction and grievances

to the former. The fl ow of information must be quick, easy and two-way. It removes uncertainty,

ambiguities, misunderstanding and friction. It provides co- ordination. Information is to organisation

is what headlights are to a driver and lighthouse to a sailor.

7) Provision for growth : While an organisation ought to be fairly stable over a long period, it

must contain within itself, the elements of growth and expansion. The mechanism must be such that

it can adapt itself, to changing circumstances. A business organisation has to be dynamic in character in this changing work environment.

Formal organisation Informal organisation

1. Formal organisation is based on 1. An informal organisation is basedthe formal relationship of superior on personal and social relat ions

and subordinator among the me mbers of the

organisation.

2. It i s an emergent of social and 2. It is designed deliberately and personal needs which are sponta- consciously and its activities areneous and natural.co-ordinated for the achievement

of the common goals.3. It is created for achieving com- 3. It i s basica ll y aimed at serving

mon goals. group inte rest a nd provi ding

social satisfaction to the members.

4. In formal organisat ion ther e is4. In informal orga ni sa t ionemphasis on work specialisation

peopl e are infl uenced i n their through utilisation of individualsco- operative efforts by recogni-talent and abilities.tion of desires, friendship, racial

ori gins, senti ment s a nd soci al customs. 5. The motivating force in a formal

organisation is economic incentive 5. The motivating force is fulfilmenti n t he form of promot ion, of social and personal needs.

increments etc.



6. Informal organisation “de-facto”6. F orma l or ga ni sat ion may bestr uc ture which refl ect s re alconsidered as “de-jure” structure,

having formal and legal sanction. pat te rn of functi oni ng of t heorganisation.

7. Informal groups are influenced by7. Formal structure is marked by asocia l , persona l and huma nhigh degree of rationality. factors.

8. Informa l organisat i on ha s a8. A formal orga nisat ion has a l eadershi p st ruc ture, rule s,hi era rchy of jobs, authorit y,sta nda rds, norms, wa y of r ela ti onship and rul es for rewa rding, compl iance but a llc ompl ia nce and codes for neither prescribed nor followed punishment in case of deviations

by any mandetory procedures for from rules.execution.

9. In a for mal orga ni sa t ion 9. In an i nformal or ga ni sat ioncommunication taks place through

informa tion is passed from oneauthority relationship of superior member t o a nother t hroughand subordinate which is lengthy, personnel and social relations.indirect and formal in nature.

10. Lea dership of the forma l 10. In an i nformal or ga ni sat ionorganisation is mainly authority l eader shi p i s backed by

based. compete nce of the leader andacceptance by the member.

11. In a formal organisation standard 11. In an i nformal or ga ni sat ionof performance and behaviour are members jointly frame their norms

prescribed for the member. of behaviour, procedure, rules and

They have to use pr esc ribe d regulations.methods, policies, norms, system

for performing the assigned job.

12. The forma l organi sa ti on i s 12. An informa l or ga ni sat ion i s idealistic and normative in nature, realistic in nature and it represents

prescri bed met hods, poli cies, how orga ni sa t ion ope rat es i nnor ms, system for performing practice.the assigned job.

13. The forma l organi sa ti on i s

idealistic and normative in nature,

pre scri bing how orga nisat ion

should be formed a nd how i tshould be operate.



Que stions

1. What do you mean by organising?

2. Explain the characteristics of Organisation

3. Explain in detail the scope of organisation.4. State the principles of organisation.

5. Describe the importance of organisation.

6. What are the benefits of efficient organisation ?

7. Explain the steps in organisation process.

8. State the factors influencing organisation.

9. Describes the various types and forms of organisation.

10. State the demerits of the Organisation.

11. State the merits of functional organisation.

12. State the demerits of functional organisation.

13. What are merits of line and staff of organisation.14. State the demerits of line and functional organisation.

15. State the causes of Conflict between line and Staff organisation.

16. State the remedial measures for improving line staff relationship.

17. Explain the term committee organisation.

18. Explain the reasons for the wide spread use of committee organisation.

19. How many types of committees can be formed in committee organisation.

20. Write the merits of Committee Organisation.

21. Write disadvantages and misuse of committees.

22. Can you suggest some measures to avoid misuse and eliminate disadvantages of committees ?

23. Define formal and informal organisation.24. State the factors influencing the selection of type organisation structure.

25. What are the effects of good organisation ?

26. State the effects of bad organisation.

27. Describe the problems of the organisation.

28. State the elements of sound organisation.

29. Difference between formal and informal organisation.



7DEPARTMENTATION AND DELEGATION

Meaning :The process of organising involves identification of activities necessary to attain in objectives of

the enterprises and grouping of similar activities on some logical basis. The process of dividing and

grouping related act iviti es int o units and sub-unit s for the purpose of a dministration is ca lled

departmentation. The units are designated as divisions, units, branches, sections jobs etc. Such units are managed as relatively independent administrative units and accountable for their own objectives.

The enterprise has to perform various tasks. These tasks can, at times, be in a chain of jobs. Butgenerally they can be divided in number of jobs. If so, personnel to undertake such jobs are also to be

grouped. Each such job alongwith a group of workers can be taken as a unit. If such a unit is

efficiently manageble by supervisor for administrative purpose, it can be identified as either a section,

or a unit. Similar such units are grouped together to form a depart ment. There can be number of

departments in an organisation. Thus ‘Departmentation’ can be the process of analysing dividing andarranging work or activities into manageable portions for individuals. Thus departmentation is the

organisation wide division of work. Logical grouping of activities gives us (a) individual jobs (b)

sections and (c) departments.

Departmentation is a process of grouping various activities into separate units. The process o

departmentation of any enterprise consists of defining and enumerating individual tasks, grouping and

classification of tasks, delegation of authority for their accomplishment and specification of authority

relationships between managers. The term department refers to a distinct area, sphere, division or branch of an enterprise over which a manager has authority for the performance of a specific group

of activities entrusted to him. Departments are various parts of divisions of an enterprise. Departmentation

is used to group various business functions and also personnel who will perform these funcitons. In

other words departmentation is the process of division of enterprise into diffenent parts known as

departments.

Departmentation or divisionalisation of the total activity into various self contained units is an

important thing in the developement of organisation. This grouping of similar activities into small units

for the purpose of facilitating administration is ca lled departmentation. According to Koontz andO’Donnell departmentation is a process of dividing the large monolithic functional organisation intosmaller and flexible administrative units.Thus departmentation is an integral part of the over all process

of organising. It involves the horizontal expansion of the organisation. It creates smaller administrable

units called departments. A department is a distinct area of activities over which a manager is given

authority and for which he has to accept responsibility. Thus it is functional divisionalisation of the

organisation. These departments may be called sections, units, branches or divisions also.

Reasons for Departmentation :

At the outset it may be emphasised that creation of departments and organisational levels leads tomore expendi ture, complications in the problem of communication, co-ordination and control . On

many occasions it delays work performance and creates confusion and conflicts. Basically therefore

creation of departments is not desirable. But departments exist primarily due to span of management,



the incapacity of a human being to effectively manage an infinite number of subordinates. So t he

limitations of human ability and of time necessitate the departentation for effective control. Moreover,departmentation facilitates specilization, better planning, better control and better work performance.

Need and Importance of Departmentation :

Deparetmentation is a very useful arrangement. It increases the operating skill and efficiency of organisation. It contributes to the success of enterprise in a number of ways that are as follows :

1) Increase in Efficiency : By grouping activities and employees into various departments, theoperation efficiency of the enterprise is increased considerably, It makes possible to expand organisations

to an indefinite degree.

2) Fixation of Responsibilities : Departmentation is basically the process of assigning specific

responsibility to an executive incharge of a particular department. It naturally increases his efficiency

as well as prestige and skills.

3) Development of Managerial Talent : When a manager looks after the affairs of a small

department and terms his own decisions within his authority his talent is developed resulting in moreconfidence.

4) Appraisal Facilitated : Departmentation offers an opportunity for managerial appraisal othe activities of various departments which can be evaluated either on performance basis, profitability

basis or any other suitable criteria.

5) Budgeting Facilitated : The departmental budget can be easily prepared. Computation o

departmental costs becomes easy. Control over the expenditure is increased.

6) Other Advantages : Departmentation offers distinct advantages of specialisation. Man power planning becomes effective and mangerial co-ordination becomes easy. It develops confident managerial

cadre.

Process of Departmentation :

Departmentation involves grouping of all operating tasks into jobs, combining of jobs into effective

work groups and combining all groups into divisions so often termed as “departments”. Grouping o

activities into department is a part of the process of setting up organisations and of expanding them to any degree. the impact of departmentation is a delineation of executive responsibilities and grouping of operating activities. Every level in the hierarchy below the apex is departmentalised and each succeeding

lower level involves further departmentalisation. Grouping of activities into manageable units is necessary

at all levels in the enterprise. The chief executive groups activities into major divisions such as production,

marketing, finance etc. These divisions are administered by senior executives who report directly to

the chief executive. The senior executivi es further assign duties to thei r juniors, for example, themarketing manager may divide his activities on the basis of operations like advertising, marketing

research, customer service and so on. At the lower level ther e may be sa les assist ants, sal es

representatives etc. Thus in terms of the level of management at which departmentation is to be done,

the process of departmentation may be divided into the following three stages :

1) Primary departmentations : Initial break up of organisational functions into basic activities

such as production, finance, marketing etc.

2) Intermediate departmentation : Creating departments in the middle levels of the organisation.



3) Ultimate departmentation : Dividing activities into separate units at the lower level to create

sections and sub-sections.

4) Main purposes of Departmentation :

i) To promote the attainment of overall organisational objectives.

ii) To simplify co-ordinationiii) To effect economics of scale and exploitation of special opportunities. iv) To assist in executive development.

Merits of Departmentation : Departmentation helps in simplifying the task of top management. It also facilitates overall control

of the functions of the enterprise. Other merits of departmentation are discussed below :

1) When jobs are well defined and responsibilities are clearly mentioned it is easier to fix

accountability for the results.

2) The effici ency of mangement and enterpri ses because every one knows his duties and

authority, Well defined jobs and limits of authority help the individual’s better performance.

3) Departmental managers are given the opportunity to take initiative. Departmentation is atraining device for them. They can learn managerial skills which helps them, going higher

in the hierarchy of management.

4) Departmentation facilitates better control because objectives of various departments are

well known. Budgets which are one of the control mechanisms can be prepared to control

the income and expenditure of different departments. Departmentation also provides a

basis on which top management can co-ordinate the activities.

Pattern or basis or ways of departmentation :Most enterprises are involved in producing a product or a service to the benefit of others. The later

aspects requires marketing or distribution so that the persons for whom the product or service isintended, accept them. These activities require money or sufficient capital or finance. Thus for every

organisation or enterprises there are three fundamental activities or functions to be performed namely

production, marketing and finance. Thus functional departmentation consists of grouping of common

activities to form an organisational unit. In short, units are formed around common function. The term

functional departmentation is often used at the higher organisational levels. In addition to the functional

departmenta tion on t he basis of production, marketing a nd finance, it is possi ble to attemptdepartment ati on in different ways such as by production by t erritory or region by customers by

process and by task force etc. Top management is at liberty to use any means of departmentation

while forming an organisation structure.

Although the top executive has responsiblity for initiating,planning and accomplishing the objectives

of the enterprise, he cannot personally supervise and control all affairs. So he divides the work anddelegates to others the authority for accomplishing what he cannot do himself. There are certain basicmethods on the basis of which he can divide responsibilities within his organisation structure.

Although the top executive has responsibilities for initiating, planning and accomplishing theobjectives of the enterprise, he cannot personally supervise and control all affairs. So he divides the

work and delegates to others the authority for accomplishing what he cannot do himself.There are



certain basic methods on the basis of which he can divide responsibilities with his organisation structure.

Thus basically departmentation can be done in the following ways namely :

1) Departmentation by Functions

2) Departmentation by product

3) Departmentation by territory, region or geographical area.

4) Departmentation by customer.

5) Departmentation by process.

6) Departmentation by task-force

7) Departmentation by time

8) Departmentation by numbers

9) Departmentation by marketing channels

10) Departmentation by appropriate combination of these types.

1) Departmetation by Functions :

This basis is widely employed in medium size enterprises. The simplest and the commonest type

of departmentation is the functional type of structure. Under this pattern of departmentation, all functionsof similar type of purpose are separted and then grouped into four basic funct ional departments-

Finance, Sales, Productions and Accounting, Each department is headed by an executive who is

directly responsible to the top executive. As the enterprise grows the management of a basic functional

department is entrusted with more and more activities, so that the departments may be further dividedinto smaller divisions or sub-departments. This system of departmentation was suggested by “Oliver

Sheldon”.

George Terry opines “The functions or activities are the pivot around which effective executives

develop effective and efficient organisation.

In short, departmentation by functions means to group the activities in accordance with the functions

of the enterprise, This is a most common practice. Since all the industrial enterprises are engaged

increating the utility in the form of some product or service for the use of others, the basic functionsrequired to be performed for this are producing, selling and financing.

Without these basic functions the enterprises cannot exist. Eventually production, sales and finance

departments are invariably created in every business enterprise. Although the basic functions remain

the same the terminology used for these functions and departments might differ in view of the differing

nature of the undertakings. For instance, a railway company or an airlines corporation divides its

functions as operations (production), traffic (sales) and finance, an insurance company groups themas underwriting and actuarian(production)general agencies (sales) and claims and investments(finance).

These fundamental divisions on t he basi s of funct ions are essential for proper performance of t hefunctions. These three basic departments might be sufficient and convenient in small organisation but

when the scale of operation increases, high degree of specialisation is intended to be practised and

other complex problems have to be solved. These divisions might further be subdivided or additional

units or departments might be created for the purpose. For instance the sales department might besubdivided as advertising, sales promotion and selling, the production department might be subdivided

as planning, development a nd research, manufacturing, egineering and mai ntenance, stores and

purchase etc.



Thus in this method, all similar activities of the enterprise are grouped into major departments on

the basis of functions such as Production Marketing Personnel and Finance. Figure below, showsdepartmentation by functions.

Share Holders

Board of Directors

Managing Director

Finance Marketing Production Personnel Department Department Department Department

Planning SalaryCost Marketing AdministrationAccounts Research

S t at i s t i c s Advertising Stores Welfareand data (Salesmanagement Administration processing Promotion)

Quality control TrainingBudgets Sales

Other Promotions,Financial Salesdepartments transfers,Planning Adminstration

based on Retirement

nature o Administration

activity

Personnelaudit and

research

Figure. Departmentation by Functions

This type of departmentation is suitable for small and medium sized organisations. A high degree o

centralisation is created by this type of structure.

Merits :

1) It is a logical reflection of functions in the enterprise.

2) It follows the principle of specialisation.

3) It maintains power and prestige of basic functions.

4) It facilitates the co-ordination at departmental level. 5) It facilitates effective utilisation of man-power and other resources.

6) It is good means of tight control at the top level.

7) It is a simple, economic and reasonable organisation pattern.



Demerits :

1) With the growth of enterprise it may lead to excessive centralisation of authority.

2) The control may slacken and be defective.

3) Due to lack of control and co-ordination, delay may be caused in decision making too.

4) It does not offer good training ground and opportunities to the departmental managers and

their talents.

5) A proper and satisfactory handling of diversified product lines is not possible.

6) Its utility is limited. It is suitable only for small enterprises, manufacturing limited number of product s.

7) It provides little possibility of developing managers for promotion.

2) Departmentation by product :If an enterprise produces a large number of products then the internal organisation may be developed

on a product basis. In short multi-product enterprises having extensive market can follow this type of

departmentation. All functions related to a particular product are brought together under the direction

of a production manager. Each product or group of closely related products in a product line can beorganised under a product department and an executive can be assigned all the responsibilitlies relating

to that gorup of product. Thus in such departmentation all the activities, relating to a product group,from mananufacturing to sales are controlled by only one departmental head. He enjoys extensive

authority over the manufacture, sales, service, accounting and other functions, which relate to t he

particular group of product.

The main advantage of product departmentation is that each product division could be considered

as a viable centre for the purpose of accountability. It becomes easier to assess the performance o

indi vidual product and dist inguish between profitable and unprofita ble products. This type odepartmentations permits decentralisation of decision making authority to the lowest level within an

organisation. The top level management can concentrate on centralised activities like planning, financing,

research and development, public relations etc.

Departmentation by product should be resorted to when the maximum emphasis is to be placed on

product expansion and diversification.

Merits :

1) It permits to make maximum use of specialisation in technical skills, managerial knowledge

and producion equipments.

2) It assists in co-ordination and control.

3) It provides an opportunity for the managers to show their allround ability.

4) It concentrat es on products, hence helps in expansion, improvement and product diversification etc.

5) It places definite responsibility on the particular mangerial personnel for profit in respect o

particular product. It simplifies the determination of profitability of each product line, aswell.

6) It is easier to evaluate and compare the performances of various product divisions.



7) It often results in good customer relationship.

Board of directors

Chief Executive

Production director

Asstt. Manager Asstt. ManagerAsstt. Manager(Product B) (Product C) (Product A)

1Production supdt. Production supdt.Production supdt.

Sales officer Sales officer Sales officer

Accountant Accountant Accountant

Figure. Departmentation by product

Demerits :1) It involves duplication of service functions at each departmental level and hence efforts

and equipments are not utilized fully.

2) It results in increased managerial and operating costs due to duplication of routine work in

respect of each product or product group.

3) Problem of control at the top executive level is increased. If it is not tight, whole organisation

may disintegrate.

4) Hi gh cost of opera tion prevent s the small companies from adopting this type o

departmentation. It is suitable only for fairly large organisations having multiproduct lines

and which can appoint top managerial personnel to handle semi-autonomous product

divisions.

3. Departmentation by region. territory or geographical area :Departmentation by region may be called as territorial or geographical departmentation also. This

type of departmentation is followed by many organisations. This type of departmentation means grouping

of the primary activities of the business in terms of the geographical regions to be served by t heconcern. Thus departments, organised on region-wise basis become complete administrative unit in

themselves and can concentrate on the needs of local customers and local market. Regional departmentalmanager, can take care of local problems and circumstances in a nice manner and can provide ready

service for his region. For instance, Railways and Life insurance business in India are organised on

this basis. This type of departmentation is beneficial to influence, adapt and respond to local situation

and needs with speed and accuracy. The geographic division becomes a relatively complete administrativeunit and is capable of catering to the needs of the region which constitutes its boundaries. This type o

departmentation is suitable for large scale firms whose activities are geographically spread over a largearea. It encourages local participation in decision making to gain advantage of certain economics of

localised operation.



Managing Directors

Personnel Deptt. Marketing Deptt. Finance Deptt.Production Deptt.

Western region Central region Southern region Eastern region

Merits :Figure. Departmentation by territory

1) It enables the concern to exploit the local market effectively.

2) The department can concentrat e on the local needs, circumstances of local market and

other like problems

3) It can encourages local participation in decision making and to take advantages of economics

of localised operations like economy in transport costs, cheap raw-material, low distributioncost etc.

4) This departmentation delegates equal authority and responsibi lity to zonal departmental managers. Thus it improves co-ordination on geographical basis.

5) It provides better face to face communication with local customers.

6) It provides numerous chances to improve the managerial skills in various fields.

7) This is very suitable system for large size enterprises providing individual services like

insurances, telephones, rail roads and diary business etc.

8) It facilitates the expansion of business in various regions.

9) It provides a good training ground for the salesmen to become sales supervisors.

Demerits :

1) It leads to duplication of many routine and service functions at regional level, which i performed centrally, are very economical.

2) It requires more persons with general managerial abilities at regional levels.

3) It is a costly system. Small organisations can not afford it.

4) There may be problems of integration between various regional offices. They may competewith each other in certain areas.

5) There will also be problems in providing centralised service to various departments whichare located in different regions.

6) Attempts to enforce uniform marketing and personnel policies in all the regional units may

be contrary to the local needs of some units.

4. Departmentation by customers :

This type of departmentation is resorted to by big enterprises engaged in providing specialised

services to different types of customers. For instance, an aut omobile company may organise its



departments in terms of car servicing, heavy vehicle servicing and scooter servicing as shown in

diagram. From this it is clear that this type of departmentation seeks to give exploit organisationalatt ention to the major groups of customers and to exploit unique market opportunities. A business

enterprises following this type of departmentation can give better services to the customers. In other

words the grouping activities of enterprise on the customers basis is called departmentation by customers.

This becomes necessity as customer ’s s atisfaction is main motive of such organisations. The customersmay be from different age as well as income groups. Naturally their satisfaction targets will also be

different. As such departmentation by customers is able to stand to their demands of satisfaction. It is

found in a variety of enterprises. A marketing department is usually subdivided on the basis of customers.

Such departmentation is useful in the case of companies which render specialised services.

Chief Executive

General M anager(Automobiles)

Heavy vehicles Light vehicles Scootersdivision division division

Figure. Departmentation by Customers

Merits :

1) Through this system the wi dely varied needs of customers can be satisfied to a great extent.

2) It is very suitable for such large scale products who want to develop their own sales net-

work besides producing.

3) It develops expertise in customer areas.

4) It focuses on the need to employ personnel with special abilities required for meeting

different customer requirements.

Demerits :

1) Its utility is limited. All activities of the enterprise cannot be organised on this basis. For example, sales department can be organised on their basis but not the production department.

2) There may be difficulty of co-ordination.

3) There is possibility of under employment of facilities and man power specialized in terms

of customer group.

4) Sometimes it is difficult to meet the competing demands of the customers.

5) It requires managers and staff well-versed in customer needs.

6) Some customer groups may disappear during times of recession and sales force may have

to remain idle.



5) Departmentation by process : (Equipment departmentation)

This form of departmentation may be used by manufacturing organisation. In a textile factory

processes like spinning weaving dyeing etc. may be grouped as departments at a secondary level to

enjoy benefits of specialised equipment or process.

Under this type of departmentation, whole enterprise can be organised on the basis of processes to be performed in the manufacture of the products. For example an oil concern can be divided in

crushing department refining department, and finishing department. Manufacturing enterprise very

often adopt the grouping of their activities on the basis of processses involved in their work. Thus

similar machines are located in one department to perform a distinct job. Such departmentation usually

saves time. Under this type of departmentation skilled personnel are required to operate the equipment.

Chi ef Executive

General Manager (Textile)

ManagerManager Manager Manager ManagerSpinning packing Ginning weaving dyeing and

printing sales.

Figure. Departmentation by processMerits :

1) It is a scientific method and makes possible the use of costly equipments in an efficient

manner.

2) Main advantage of this departmentation is the economy in operation. For example a large

computer requires heavy specialized capital and it can be utilized by installing it in separate

department .

3) The maintenance of the department is facilitated. Repairs, renewals and replacements of machines or equipment can be easil y made with out interrupting the whole production

process.

4) Due to rapid changes in technology, intensive and rapid use of machinery has become very

necessary. This system provides such opportunity due to its peculiar nature.

5) Process departmentation facilitates co-ordination by grouping production facilities needed

for the completion of each distinct phase of work.

6) It puts full responsibility for the completion of each stage in the production process on the

head of the process department.

Demerits :

1) One of the important demerits of this method is its costly nature which can be afforded by only large size enterprises.

2) It requires more space and investment.



3) The chief limitation is that the volume of activity must be large enough to warrant a separate

department .

4) There may be difficulty in the co-ordination of the departments based on different processes.

5) A break down in one process department may hinder the working of all the other process

departments which follow the former in sequential work flow.6) Departmentation by task- force :

Under this method the responsibility for the completion of work rests upon an entire task-team and

normally one individually acts as the leader of the task-force. Every member of the task indentifies theobjectivies and ful ly comprehence them. This type of departmentat ion is also termed “ Project

organisation” and is a refinement of advanced planning and controlling techniques such as PERT. This

system helps in building an organisation unit aimed at completing a series of events utilizing the best

available talent. After the project is completed the organisation is disbanded with the personnel and physical resources become available for reassignment. This system enables better utilization of personnel,

since each member is objective minded and thinks allways of achieving the goal.

Merits :

1) There is possibility of developing managers who can use different types of resources and 2) The specialized complete team set up for performing the task results in greater concentration

and more productive results.

Demerits :

1) Fosters the feeling of frustration caused by being a separate unit and not a part of t he

whole organisation.

2) The sense of insecurity, endangered by the feeling of not being part of the whole team,

with chances of promotion to the highest positions being less, starts growing.

7) Departmentation by Time :

One of the oldest forms of departmentation is to group activities on the time basis. It is normally

used at lower levels of organisation. At the lower levels of organisations activities are grouped on the

basis of time. When the normal work period is not adequate for economic and technological reasons,using of shifts if commonly adopted in many manufacturing units. In the same way the examinations

of an university are organised on session basis to cope with the volume and rush of work. This type

of departmentation is generally found in the production function of the enterprise.

The only disadvantage of this system is the problem of co-ordinating among the work of various

shifts as well as control on the executives of different shifts.

8) Departmentation by Numbers :

Departmentation by numbers was widely prevalent in the army and it was used among people who

were performing similar duti es with advanced t echnology and specialisati on. Usefulness of this

departmentation has declined over the decades. Moreover, it is useful only at the lowest level of theorganisation structure.

In other words, under this system the operating work-force is divided in small groups of 50 or 60

and then supervisors are appointed on t hem. This system is more suitable to the concerns where a

large number of people are employed, for example in army, as mentioned above. In industrial world

this system is not used.



9) Departmentation by Marketing channels :One of the new forms of basic departmentation is to organise an enterprise around channels of

marketing. It is just like customer-wise departmentation but its basis is the marketing channel. It may

be popular in future due to increasing emphasis on marketing aspect of the business.

10) Departmentation by Matrix organisation :It is a combination of functional and product form of departmentation in the same organisation

structure. Diagram below shows the model of matrix organisation.

Director of Engineer ing

Chief electricalChief Chief Mechanical Chief Designer engineer engineer Metallurgical

engineer

Project A

Project B

Project C

Figure. Model of a Matrix organisation

Merits :

1) It provides flexibility to the organisation.

2) It stimulates interdisciplinary co-operation.

3) It creates involvement among the employees.

4) It allows experts to move to crucial areas as and when needed.

Demerits :

1) The success of the matrix organisation requires a high level of interpersonal skills.

2) At times, it is found to be costly.

3) It leads to more discussion and conflicts than action.

II. Departmentation by mixing the above types

(Mixed departmentation)

According to nature of business and objectives of the organisation, it becomes difficult to adoptany one of the methods of departmentation. For example large production unit is located at one place

and entire country has to be covered for sale, that t oo, by sales promotion like drug (medicine)industries, Since the quantity to be produced is very large, such organisations may adopt “Departmentation

by functions for production unit and departmentation by territories for sales and distribution. Thereby

the organisation enjoys advantages of both. Thus departmentation by mixing can be defined as “a

combination of two or more methods of departmentation, providing flexible structure by grouping theactivities in such a manner that may contribute to the realisation of organisational goals”.



Best pattern of departmentationThere is no one best way of departmentation that can be made applicable to all situations and all

organisations. While departmentation is undertaken, factors such as the kind of job to be done, the

way the task is to be performed, the kind of people involved, the technology, the people being served

and other internal as well as external considerations are taken into account.

Thus, we see that there is a number of alternative methods of arranging activities to facilitate the

accomplishment of enterprise objectives. They all possess certain merits and demerits of their own.So a careful evaluation should be made. Departmentation is not an end in it self. It is not even an

unmixed good. So before taking any final decision in this respect, the top mangement must consider all

product etc. It must balance the gai ns derived from one kind of depart mentat ion as against the

disadvantages of another. In practice, therefore, a composite departmentation is used by most of the

organisations.

Factors influencing the choice of departmentationFollowing are important considerations or factors which should be considered by the management

at the time of making basic departmentation.

1) Specialisation : Whatever may be the pattern of departmentation it should be such as to yield

the advantages of specialisation. Benefits of specialisation can be secured by function and occupational

specialisation together. It means a proper person must be matched with the post.

The management should group the activities into various units in such a way which l eads to

specialisation of work. Specialisation brings about many economies in the business. Therefore, it is animportant consideration while choosing a particular method of departmentation but over specialisation

should also be avoided becasue it will result in loss of motivation among the personnel.

2) Co-ordination : Co-ordination is necessary to ensure that different act ivities contribute maximum towards the achievement of common objectives. To facilitate co-ordination, different activitiesrequiring different skills may be grouped together under a single executive incharge of a small department

because they need to be co-ordinated for effective performance. They should be co-ordinated in sucha manner that may not cause inconvenience in their performance.

3) Control : That departmentation is the best way which ensures the tight control. as a generalrule, one activity intended to serve as a check on another, should be under a separate executive.

Physical convenience of supervisi on shoul d also be kept in mind as an aspect of control whilegrouping the activities.

4) Significance of activities : An activity which is considered to be the basis for the success o

an enterprise must be given proper attention. It sould be assigned to a separate department at significantlevel of mangement in the overall organisation.

5) Appreciation of key areas : All the important areas of the business on which the success o

the business depends must be given proper weightage. That is why, in practice, function is taken at the top of t he organisat ion structure. Separate department s are created for important funct ions like

production, financing, marketing etc.

6) Full recognition of local conditions :The management should take local condition also into

consideration. They are the personalities of individuals, the nature of organisation, the pattern o

informal relationships in the organisation, the attitude of management towards, the market to be served

etc.



7) Minimum conflicts : Jurisdiction of the departments should be clearly laid down and thereshould be no conflict among them. The authority of the managers of different departments should also

be clearly specified.

8) Economy : This factor influences to a great extent the number of departments to be created.Creation of a new department increases various costs. This is because the new department requiresadditional personnel, space and equipments. Therefore management should see that the departmentscreated make the best possible use of these factors and that maximum economy is achieved in creating

the depa rtments.

Monetary and non monetary costs that are involved in creation of number of departments for any

special activity should also be considered. But efficiency of the organisation should not be at stake for

costs only. Relative efficiency and costs should be compared.

9) Human considerations : The mangement should not overvalue the techni cal aspects of departmentation. Social aspects also have important impact on departmentation. The availability o

competent managerial personnel at different levels, their attitude towards work and the managerial

attitude towards personnel will also influence the way the activities are departmentalised in an organisation.Existence of informal groups, cultural patterns, value system etc., should not be lost sight of, at the

time of grouping the personnel.

In short, what ever may be the basi s, the departmentation should be directed to promote the

attainment of organisational objectives economically and efficiently.

Naturally mangers concerned with taking such a decision have to consider relative advantages and

disadvantages of various types of departmentation in the light of the needs of t he organisation. In

practice, in many cases, it is not feasible to follow a single basis in grouping the activities throughout

the organisation. Most of the big organisations follow schemes of departmentation that are a composite

of several bases. Thus we see that departmentation is not an easy task. It is a radical procedure which

requires a careful consideration of various factors before proceeding to actual grouping of activities.If it is to be accomplished successfully, it should be treated as an important task. Otherwise it may

create more problems than it solves. Thus there is no ideal pattern to suit all occasions and situations.

It requires certain preparations on the part of management such as proper decentralisation of authority, enforcing adequate control, providing ground for management development and the communication

network etc. Various factors of departmentation discussed above do not provide much guidance for

deciding a method. The final decision will depend upon the foresight and initiative of the top management.

Therefore, the management has to be very careful and use high degree of imagination at the time of choosing a pattern of departmentation. Once a pat tern is chosen, it is very difficult and costly to

switch over to another pattern.

DELEGATION

Delegation is an act of vesting self authoity alongwith responsibility in some other with a specific

object. It is common in case of vertical organisation that total authority of decision making is vested in

the top executive. Naturally he is overburdened. Eventually he can not pay sufficient attention to all the

responsibilities. Thus he requires help of others in order to relieve him of some of the burdens. Thushe requires help of others in order to relieve him of some of the burdens. He therefore assigns some o

his jobs to others. If the assigned work is required to be performed correcly, the person to whom it is

assigned must have authority to perform or get performed. Naturally responsibility follows in opposite



way. Thus F.G. Moore has correctly said “Delegation means assigning work to other and giving them

authority to do it.”

AUTHORITY AND RESPONSIBILITY

Authority :

Authority is one of the important considerations in the process of management. Managerial action in a formal organisation needs authority. Without authority, the executive can not secure compliance o

his orders from his subordinates. It is always considered to be the key to a successful Managerial job.

It is the power of the superior to make decisions which guides the actions of his subordinates. Getting

things done by people is not possible without compliance on the part of subordinates and the authority

which ensures compliance. Authority is the only cohensi ve force that sets in motion the integrated

activities of sub-ordinates in an enterprise. It is the means through which co-operative activity becomesa success and common objectives are achieved. Securing compliance or obedience is the main objective

behind t he whole concept of authority. It can be acquired through persuation, sanction, coercion,constra ints or force.

The managerial authority is a rightful permission to act for the enterprise instruct the subordinates,

impose penalty for wrong doings, use company property or to speak or act as a representatives of the

enterprise.

The whole organisational structure is based on the concept of authority Without use of authority, anarchy and utter confusi on will prevail all around the enterprise Authority is usually respected,

recognised and followed in the organisation as a matter of course. Authority is generally adopted with

power to secure obedience. This customary acceptance of authority is a part of our culture and day-

to-day behaviour. But compliance of actions and carrying out of instructions by subordinates can not always be assured merely because the authority is customarily accepted. Delegation of authority

establishes relationships. Vertical delegation of authority determines relationship between a boss andhis subordinate and the horizontal division of authority determines the degree of decentralisation.

A few definitions of the term “authority” are given below :

1) “Authority is the right to give orders and the power to obedience”.

-Henry Fayol

2) “Authority i s the official and the legal right to command action by others and to enforce

compliance. Compliance is obtained in a number of ways trough persuation, sanctions, request, coercion,

constraint or force”.

-George R. Terry

3) “Authority means the Power to command others- to act or not to act in a manner deemed fit

by the possessor of the authority and is exercised in furtherence of the enterprise or departmental

purpose”.

Koontz and O’Donnell

From the above definitions, two points become clear that the possessor of authority influences the

activity and behaviour of other individuals or groups and t hat he has the right to issue orders and

ensure their compliance by subordinates.Authority Vs power : Authority may not mean the same thing as power A person many have the

power to influence the activity and behaviour of other persons but he may not have the official or legalright of command and thus enforce compliance by others. Such a person would have power but no



authority. It may, therefore, be said that authority includes power but power may or may not be

supported by authority. Also, all authority is formal.

Types of Authority :Authority is of five types.

1) Formal Authority : According to some writers all authority is formal. It stems from the top

and is transmitted downwards through the line by the process of delegation. The authority which amanager possesses, because of his organisational position, is known as formal authority.

2) Acceptance Authority : Under the acceptance theory, it is believed that authority comes to

the manager by the acceptance of power to make and enforce decisions through his subordinates.

Accordingl y manager has no authority until it is conferred upon him by his sub-ordinates. A sub-

ordinates may accept t he authority of the manager because - (a) he wants to contribute to the

accomplishment of organisational objective (b) he wants to obtain some reward by accepting it. (c) hewants to avoid disciplinary action. (d) he regards the maturity, age or experience of superior (e) he

wants to avoid responsibility. (f) he believes that the authority is legitimate and should be followed.

But the acceptance theory has been criticised on the grounds that -

i) It is unrealistic.

ii) It assumes that a subordinate has the option to accept or reject authority and

iii) It ignores the organisational situation of the possessor of the authority.

3) Authority of the situation : G. R. Terry observes “In almost every enterprise, emergency

and unusual events accur which are not provided for in the organisational set-up. When such an eventoccurs, the person assuming authority to meet the particular circumstances is said to have derived the

authority of the situation. Such an authority exists only till emergency lasts”.

4) Position Authority : It is the authority a person enjoys by virtue of his superior position in

the organisation. Normally subordinates recognize authority of those occupying higher hierarchical

positions.

5) Technical Authority : Since 1950 the term technical authority or computer authority has

come into use. Such authority stems the decision making power granted to the processed data by a

computer. But since authority is a human possession, such authority may be described as that authority

which is possessed by the person who either interprets computer processed results and data or underlinestheir significant managerial meanings for others.

Limits of authority

Unlimited authority always tends to be an instrumnent of corruption, It should therefore, have andgenerally does have some limitations, which may be express and implied. Some of these limitations

are:

1) Authority is subject to the physical and mental capacity of the subordinate who has to

exercise it.

2) Authority may be subjected to the bye-laws, standing orders, rules and regulation of the

company (as per articles and memorandum of the company)

3) Authority may be subject to the social beliefs, codes, creeds and habits of the group over

which it has to be exercised.4) Laws, trade practices etc, may also impose certain limitations on the use of authority.

Thus, as a matter of fact, there should be blending of power and influence to make the authority



really effective. The other means, that it can help in making authority more effective and may include

the backing and support to lower executives, from the top executives, due attention to their advice,usually confirming their decisions, permitting command to flow through proper channels and supplying

adequate information and materials to them.

Other General Limits of Authority :There are any limitations to the concept of authority. Authorty is never absolute like responsibility.

It changes with time, position and group behaviour of the subordinates etc. While exercising authority,the manager must keep the following limitations in his mind. It will help him in successful utilzation o

his authority. They are as follows :

1) Re gard for the Mores and Folk ways of the group : Authority when used commands

reaction from individual as well as groups. It may be favourable or unfavourable. So a manager while

using authority, must keep in his mind, the reaction of his orders on employees, shareholders and

customers etc.

2) Legal limitations : A manager’s authority is restricted by the enterprise goals, objectives,

politics, programmes and procedures etc. These are governed by the articl es and memorandum of

association which are governed themselves by the commercial and industrial laws of the country.

Every manager at any level in the organisation, must respect the laws, traditions and restrictions etc.

3) Natural or biological limitations : No subordinate can be ordered to do a job which is

impossible to be performed due to biological limitations. For example, one can hardly order a person to

walk up to side of a building or do such impossible things.

4) Physical limitations : Physical limitations such as climate, geography, chemical elements

and so on, have their limiting effect on authority. For example an order to make gold from copper.

5) Technological Limitations : There are technological limits on authority t oo. Until and

unless any performance is technically possible an order to do any such work would be unworthy.

6) Economi c Limitations : Sometimes a manager may not get the work done from the

subordinates if the wages are not according to their expectation. The competition i n prices of t he

product and other economic factors also affect the authority.

Board of director General managers

scope o

authority Departmental managers

Asstt. managers

First line supervisors

Figure: Limitation of authority



7) Authority delegation limitations : The extent of delegation of aut horit y also rest ricts the

authority of a manager. Generally the authority to make decisions or the right to command decreases

as it proceeds from the highest to lowest level of an organisation. It will be clear from the followingfigures.

Responsibility :

Responsibility is the most misunderstood term in the literature of management. It is common to

hear about delegating responsibilities, holding a person responsible, discharging responsibilities and

carrying out a responsibility. The term Responsibility is, most of the times, used to mean duty, activity,liability, accountability or even authority. According to Koontz and O’Donnell, “Viewed internally with

respect to the enterprise, responsibility may be defined as the obligation of a subordinate, to whom asuperior has assigned a duty to perform a service required. “The essence of responsibility is then,

obligation.”

Responsibility is also an important concept and has been defined as follows :

1) Responsibility is an obligation of the individual to perform assigned duties to the best of hisability under the direction of his executive leader.

-Keith Davis

2) Responsibility is the obligation of a subordinate to perform his duty as required by his superior

-Theo Haiman

Responsibility results from a superior subordinate relatiohship. It may continue or cease with theaccomplishment of the desired objective. It involves

i) Compliance ii) Obedience and iii) Dependability.

Failure to observe these elements may call for a penalty, punishment or disciplinary action against

the erring subordinate.

Responsibility Relates to human beings only. A building, a machine or an animal cannot be held

responsible. Responsibility arises from the superior subordinate relationship, from the fact that a

superior has the authority to get specific services from his subordinate. The relationship between a

president and his sales managers is typical of the continuing type of obligation. On the other hand, when the president hires some lowyer for seeking legal advice and advocating a particular case in the

court of law, his obligation comes to an end when the assignment is completed. In an enterpriseresponsibility is accepted by a subordinate due to contractual relationship and in turn, he gets monetary

or other rewards. While the authority flows from a superior to a subordinate when assignment of duty

is made, the responsibili ty fl ows from a subordinate to his superior when former undertakes the

obligation of accomplishing the duties assigned to him.

Thus, responsibility is an obligation to carry out certain tasks. In an organisation responsibility is

the obligation of a subordinate to perform his duty as required by his superior. Responsibility is closely

related to authority. It is exacted upwards whereas authority flows downwards. A manager is responsible

ultimately for the performance of his duties even though he has delegated i t to his subordinates.

Therefore responsibility cannot be delegated.

Authoirty : Responsibility Relationship :

Authority and responsibility of a manager should be co-equal i.e. authority should be commensurate

with responsibility. According to George R. Terry, “responsibility is inseparable, there is every danger



that it ma y be mi sused by the possessor. Similarly, if responsibility is greater than authority, the

tendency of the management becomes difficult and even ineffective. In order to ensure that authority

and responsibility are co-equal, a corelative action may be resorted to.

Ac countability :Accountability means to be responsible for explanation to any superior. When a subordinate works

under a boss and he is assigned some duties to be performed, he becomes accountable for doing or notdoing that work.

The concept of accountability operates as a condition in which one person is bound to report or render an account to another. When a subordinate accepts authority as well as responsibility, he, at

the same time, accepts an obligation to account for an report upon the discharge of his responsibility

or the use of authoity in terms of the performance standards which have been established. Thus “to be

accountable means to be answerable for the fulfilment or non-fulfilment of the authority or responsibility

assigned”. In simple words, accountability refers to the liability of a sub-ordinate for proper discharge

of his functions. It includes responsibility which arises from it. But accountability can not be delegated. Accountability refers to an individual and the concept of single accountability flows from the principle

of the unity of command.

Generally, both these words accountability and responsibility, are used interchangingly. In militaryscience the term accountability is more popular while in business management, both these terms are

used. The public accountability of public sector enterprises has become very important t opic of discussion in India.

Difference between Authority, Responsibility and Accountability

Though authority, responsibility and accountability all are inter-related terms there are some

significant differences too. Authority can be delegated to others but responsibility can not be delegated.Any superior can delegate his authority to his subordinates in respect of any problem but his responsibility

will be intact even then. He will be accountable himself for the performance of that work. As a matter

of fact authoirty and responsibility are two sides of the same coin. the manager can delegate a part of the authoirty received, but both the persons are not relieved of their responsibility. Responsibility of

superiors for the acts of subordinates is absolute. Responsibility is always upward i.e. from bottom to

the top levels of the organisation structure while the flow of authority is from top to the bottom.On the other hand accountability comes into being because the manager has to keep a record o

the authority delegated and tasks assigned to the subordinate. The subordinate must answer to his

boss about his performance. As McFarland has put it : “Accountability refers to the fact that each

person who is given authority must recognize that the executive above him will judge the quality of his performance”. Davis and Filley also agree with it. Each (organisation) member is obliged to report to

his superior how well he has exercised his responsibility and the use of the authority delegated to him”.

Thus, we see that as a man can not reduce his responsibilities by delegating he also can not reduce

his accountability to higher authority through delegation. A man will still be accountable directly to his

superior for authority he has delegated and for tasks he has assigned to his subordinates.

DELEGATION

Meaning :

Top executive, because of limitations, can not do whole work of the organisation himself and

hence he takes assistance from others to accomplish the objectives. He divides the whole work into a



number of activities and groups them on the basis of their similarity and thus creates a number of

departments. These departments are separate bundles of activities. Delegation is the process throughwhich they are tied together by establishing relationships between them for co-operative and integrated

action. The element that holds a formal organisation together, is made up of delegation and the resulting

relationship between the members of organisation, Delegation is essential in a formal organisation.

With the growth of enterprise, the task of management increases enormously. In such case a manager has to delegate some of his authority so that the entire work may be performed efficiently. However,

the overall authority and responsibility always remain with the manager who delegates the authority. A

manager cannot without any purpose, just delegate authority. He delegates it to get a certain job done.

By means of delegation, an executive extends his area of operations for, without delegation, his actions

are confined to what he himself can perfrom.

Delegation means “to send a representative, to entrust another, to act on ones behalf” The later meaning is adopted with reference to authority. When an organisation grows, all its activities cannot be

performed by a single individual. The individual may however, extend his personal capaci ty bydelegating some of his authority to other. Delegation is a way of dong work by sharing some of it withother. Delegation has been defined as follows :

1) “Delegation is the transference to other of the responsibility for the performance of a specific task and /or for the making of decisions in a general or specific area of management activity.”

2) “Delegation means the passing on the other a share in the essential elements of the management process-a share, that is to say, in the judgements/decision for determining specific objectives plans

and targets for directing given operations, and in the command/ control of the activities of the persons

performaning those operations”.

-E. F. L.Brech

3) “To delegate means to grant or confer and delegation means conferring authority from one

executive of organisational unit to another in order to accomplish particular assignments”.

-G.R. Terry

in simple words, it may be stated that delegation is the task of assgining authority and responsibility

to others for carrying out the operations for which such authority and responsibility is delegated.

Nature of D elegation : The process of delegation of authority is a continuous and downwards process. It takes place

constantly in a large formal organisation. Without it, formal organisations can not exist. There is a

natural human tendency in managers to resist delegation of adequate authority. A manager may fear

that subordinates can possibly do undesirable things with the delegated authority for which the managers

may be held responsible. Consequently, many managers tend to delegate as little authority as possible.

The authority and extent of delegation of of authority both are subjection factors like the attitude of thesuperior, his ethical and moral consideration etc.

Importance of delegation :Delegation is essential in a formal organisation. The importance of delegation of authority in

effective management is fai rly obvious, “Wherever a person’s job grows beyond his capacity, hissuccess lies in his ability to multiply himself through other personnel”. Delegation is necessary for

expanding the personal capacity of Individual manager. It is a very effective tool for effective



organisation. Different authority relationships that bind the specialised parts and position, of the

organisation structure are established through the process of delegation of authority. Delegation enables

the managers to distribute their load of work to others, thus leaving them free to concentrate on the

higher functions of management . That is why delegation has been said the “key of organisation.”

Importance of delegation may be summarised as follows :

a) It is a fundamental tool : Delegation is fundamental tool of organisation for achieving

objectives in time. Whole concept of organisation is based on delegation.

b) Assistance for Management : Managers and supervisors at all levels are able to free

themselves for the most significant tasks.

c) Even/Equal distribution of work : The workload is spread over the available personnel, sothat none is cal led upon to do more than he can reasonably accomplish. Work is thus done more

quickly and more efficiently and bottle-necks are avoided.

d) De velopment of ability : Sub-ordinates are given encouragement, and because they are

given a share in themanagment, a feeling of responsibility is created among them and their ability is

developed.

e) Avoidance of reference back : As delegation permits the applicati on of one of t he most important principles of good organisation i.e. ‘that decisions should be taken at the lowest possible

level a reference back to higher authority for decision is avoided.

f) Subordinates are trained : Each senior, who delegates work to his subordinates, is in facttraining someone to replace him when the need arises.

Basic Principles of Delegation

The following well-recognised principles govern the effective delegation of authority.

1) Assignment of duties in terms of expected results : The phrase “Delegation by the

expected results” implies that before assigning any duty to anybody, individual motives and organisationalobjectives should all be clarified. The plans should be made, communicated to and understood by the

subordinates. Duties are always related to objectives. So, before, delegating authority, the duties should

be clearly explained.In simple words the duties which have been assigned to a subordinate in the process of delegation

must be specifically stated in terms of the results of object ives which are expected to be realisedthrough the delegation process.

2) Authority should be co-extensive with responsibility : A balance between authority and

responsibility should be maintained. If sub-ordinates are assigned duties, they must be delegated requisite

authority to carry out those duties well. The equality of authority and responsibility is the basic principle

of a sound organisational relationship. The authority and responsibility in delegations should go hand inhand. When subordinate is assigned certain duties it is obligatory on his part to perform them properly.

Otherwise he is liable to be held responsible for negligence or misleagance. But unless he is given

adequate authority it will not be possible for him to discharge his duties effectively. But in practice, it

is diffi cult to suggest any mathematical equality for the party of authority and responsibility. The

nature and concept of duties assigned can suggest to a great extent, the type and extent of authorityrequired to perform them.

3) Accountability cannot be delegated : (Absoluteness of responsibility) The responsibility of



a subordinate to his superior is absolute and no delegator can escape responsibility by transferring it to

his subordinate although he might have delegated authority and assigned duties to his subordinate.Even after the delegation of authority and responsibility, the overall authority and responsibility continues

to be vested in the superior. The delegator continues to be accountable to his superior. Thus it becomes

clear that accountability can not be delegated.

4) Unity of command : This principle states that one subordinates should own his allegiance to

one superior only who has delegated him authoirty and assigned duties. The superior should have full

command over his subordinates. All orders, instructions and directions should go to a subordinatefrom one boss only and all his demands, requests, replies, problems explanations and suggestionsshould go through this boss. The unity in command enhances the respect for his superior, maintains

his position and brings certainty. When subordinate gets command from several bosses t here are

chances of confusion, evading duties and escaping responsibility.

5) Clarification of limits of authority : It is a very important concept in the area of delegation. By clarification of limits of authority we mean that while delegating authorities to the subordinates they

should be made to understand all the limits of authority. It will help them in knowing their area o

operation and extent of freedom of action. It will also be helpful in developing their personal capacity

and personality. Several organisational conflicts, confusions, overlaps and buck passing take place in the absence of clear limits of authority and area of operation. These limits can expressly be clarified by

written statements, manuals and standing plans. Sometimes they are implied and have to be understoodfrom prevailing conventions, traditional practices, habits and executives praise and blame.

6) Authority should be delegated to the posts only : Authority should be delegated to the

positions in the organisations and not to the individuals. Though theoretically it is done so, but in

practical life what happens is that the authorities are vested in individuals because they use them. So it is generally said that such and such man was empowered to do so.

7) Accountability flows upward : Accountability flows upward while the delegation of authority

normally flows downward. Accountability can never flow downward because an executive is always

accountable to his superior who has delegated the authority to him.

While determining the extent of delegation the following points should be borne in mind : 1) As far as possible the operative part of authority should be delegated.

2) While delegating, the abilities of subordinates should be an important consideration.

3) Work of a routine nature, which does not call for the exercise of much skill or intelligence

on the part of the executive, should be delegated.

4) Some part of the authority cannot and must not be delegated, This includes matters like

taking policy decisions, planning controlling etc.

5) The executive should not delegate all his authority and responsibility

6) The authority delegated should be sufficient to enable the subordinate to do his job well. Itshould be no less and no more.

7) Only those functions should be delegated which can be performed independently by the subordinates.

8) The delegated part of the authority must be within the effective control of the delegator

executive.



Effective Delegation :A manager has t o use the tool of delegation as an effect ive measure for achievement of the

organisational objectives. Effective delegation is a fine art. The delegating executive has to make a

number of subjective decisions before delegating. He must achieve a close relationship between

responsibility and authority. There are certain basic guidelines which should be followed both in letters

as well as in spirit if delegation is to be made effective. They are as follows :

1) Clear and Definite objectives : ‘Delegation of authority and responsibility’ must be adopted

to achieve clear and definite objectives of an enterprise. The goals may be established in terms oresults or objectives. The standard of an executive peformance should also be pre-determined.

2) The extent of delegation : The next step is that the manager should know what his authority

and responsibility are and how much of them he can delegate to his subordinate. The authority whichis capable of being delegated must be clearly defined and communicated to the subordinate. While

defining the extent of delegation, the abilities and limitations of the subordinates should be kept inmind.

3) Follow principles of delegation : For effective delegation it is of paramount importance that the principles of delegation should be strictly followed.

4) Proper communication network : For effective delegation, it is essential that two way open

lines of communication i.e. from superior to subordinate and vice versa should be maintained. This

will not only help the delegator to appraise the subordinates of job, but also make it possible for thesubordinate to receive proper advice and guidance for further improvement.

5) Provision for training facilities : The manager should create facilities for the training of the

executives to whom authority and responsibility are being delegated.

6) Subordinates should be motivated : The manager must attempt to motivate his subordinates

through incentives, monetary as well as non- monetary, to accept, undertake and act according to the

requirements of the delegated authority.

7) Adequate control : Establishment of adequate means of control is essential or an effectivedelegation of authority because, with it, the delegator receives information whether the authority is

being properly used or not.

8) Assignment of functioning of delegation : There must be a programme of evaluation of

working of the delegation of authority. If it is not satisfactory, appropriate measures on delegationmust be evolved and followed.

The Delegation Process :

The process of delegation involves three steps as under :

1) Assignment of duties or responsibilities : The process of delegation starts with dividing

the work into suitable parts. The manager has to decide what part of work be performed by him andwhat part be transferred to his subordinates. He then, can assign the duties to subordinates indicating

what he wants the subordinates to do. Duties to be assigned should be determined in advance and

should be clearly identified with the functions or tasks to be performed by the subordinates under

delegated authority. Only such duties should be assigned as are within the physical or mental competenceof the “delegate”

2) Granting of Authority : While assigning duties the delegator grants authority to make use of



men, materials, machines and money so that the assigned duties may be performed effectively.

Duties cannot be performed without grant of the necessary authority. So the subordinates should be given requisite authority such as use of resources, taking necessary action etc. to perform the given

ob.

3) Creation of Accountability or an obligation : Accountability is the obligation to carry outthe responsibility with the help of authoirity in relation to the job entrusted and to report. The subordinate

to whom authority is delegated is also made accountable for the proper performance of the job entrusted

to him.

Delegation creates an obligation or responsibility on the part of the subordinate so that he is made

accountable to the delegator -executive for the satisfactory performance of the duties assigned to him.

Be nefits of Delegation :

1) Provides Motivation : Delegation increases the job satisfaction of employess and encourages

them to look forward to promotions in the future. So it serves as a motivational device.

2) It reduces manager’s burden : Delegation relieves the managers from performing duties orouting nature. They are able to concentrate on important responsibilities. Thus delegation reduces a

manager’s burden.

3) Fosters expansions : Subordinates are adequately developed through delegation to take over

the superior positions. The organisation can, thus, be expanded through diversification.

4) Develops subordinates : Delegation of authority is a very important step in the development

of subordinates. The benefits of participation in various executive training programmes, seminars and

workshops may not be substantial enough if delegation of authority is neglected.

Delegation develops subordinates by broading their understanding and capacity.Subordinates assume

responsibilities, make important decisions and perform varied tasks. Thus subordinates develop their executive talents.

5) Improves Behavioural climate : Granting of freedom to subordinates is an indication o

confidence in them. Naturally, the subordnates also respond by developing a positive sense oresponsibility. This improves the behavioural climate in the organisation and paves way for improved

productivity.

6) Provides continuity : Delegation enables managers at lower level to acquire experience in

decision making and gain competence to fill higher positions in the organisation. Thus, delegationensures continuity in business.

The enterprise needs organisation depth. Many times the mangers go away from the organisation, because of illness, leave, business tours etc. At times they may leave the organisation. It is, therefore,

required to develop the subordinates so that they become capable of occupying the position and carry

on the duties of manager. Such a development in subordinates can be made by deletation of authority

and responsibility.

Obstacles or problems of delegation :

An authority is not self acting. In practice several obstacles come in the way of effective delegation.

Although the boss and subordinate agree on the desirability of transferring certain duties and authority,

yet for certain reasons the transfer does not actually take place. For certain reasons the boss is not



willing to transfer authority to a subordinate and for certain other reasons the subordinate shrinks

from accepting it, even though the boss is prepared to turn over authority.

Deposite the benefits of delegation. in practice there are many problems. Usually a person entrusted

with certain specific activities desires to perform all the activities by himself. Promotions to higher

posts are made partly as a results of the executives willingness to make decisions as demonstrated inthe past.

After getting promotion, such an executive naturally continues to be decision maker and refrains

from delegating, After promotion,such a person finds it difficult to train others also to excel in their

own performance. Ma ny managers want to be remembered for their outsta nding ability in their

respective work. Such managers hinder their own growth and full managerial development, through

their failure to appreciate that others also can do things well. Some executives want to take part in

almost every decision and make their presence felt at every company meeting. The desire to dominate presents another problem area. The extent of delegation of authority is also restricted by the unwillingness

of the manager to accept even calculated risks. It is always necessary to accept the risk that a subordinate

may make wrong decisions. Wi thout such acceptance, an executive can not delegate authorit y

successfully. The delegator’s attitude towards subordinates is also important as well. Some executives

think that subordinates cannot use the authority properly.Following are some of the obstacles or problems in delegation.

1) De sire for outstanding performance standard : An executive who expects very high

standards of performance is naturally tempted to perform himself any activity that he can do better

than his subordinates. Delegation revolves around the unconscious acceptance of the “indispensableman” theory. In many cases the delegation of authority is not practised as the manager feels that he is

an indispensable person in the organisation.

2) The dominance desire : Desire to dominate, which is very strong in certain executives,

unconsciously restricts such executives from delegating. Some executives want to take part in almostevery decision and make their presence felt on every occasion. Such executives want to work under

pressure and keep themselves busy with appointments and insist on subordinates approaching them

with matters for approval. They wish to make their presence felt everywhere in the organisation andthey feel satisfied when they participate almost in every decision. This tendency results in overwork

on the part of such executives. Power centralizes around them and others hardly get any opportunity

for their development.

3) Fear of sub ordinate’s potential growth/incompetency : The subconscious fear that

subordinate will prove superior to the executive himself prevents such an executive from delegating.

The fear of potential growth of subordina te acts against the delegation, for reasons, the delegator

thinks if the subordinate is promoted he will lose one of his competent assistants and he thinks that

the subordinate may occupy his own position or even may become his boss. Even buy withholding theauthority and assignment of important duties the boss limits the possibility of his subordinate’s potential

growth. But this is unjustified and against the interest of the organisation. This fear can be removed if

the position of the boss is made more influential and secure.

4) Lack of confidence in subordinates : The next important reason is lack of confidence in thesubordinate which may be subjective and almost unconscious. If the delegator thinks that thesubordinates are incompetent and unexperienced, he should arrange a training and systematic coaching



programme to enable them to learn the techniques of performance. Feeling of non-confidence is

baseless Therefore, he must releases some authority and assign duty to the subordinate.

5) Lack of trust towards subordinates : Del egation implies trustful attitude on the part o

superiors and subordinates. Quite often the superiors do not wish to delegate wisely, because they donot trust the subordinates.

6) Lack of receptiveness : A manager who knows how to delegate must be able to welcome

others ideas and compliment the ingenuity of his subordinates.

7) Lack of willingness to let go : A manager who effectively delegates authority should release

the right to make decisions to subordinates. It is quite common among managers to make decisionsfor posts which they have already left.

8) Unwillingness to accept calculated risk : Some executives do not part with authority as

they are not willing to accept calculated risk. They avoid any chance of taking risk of mistakes. Wrongudgement by subordinates is possible and the boss is likely to be held responsible for the acts of his

subordinates. This limi ts the scope of delegation. The executives should view t he delegation as a

means of developing his subordinates, to liberate their energies and build up a real management team.

He must be prepared to accept all such calculated risks and encourage and guide his subordinates to

take independent decisions, and to exercise their initiative and judgement.

9) Inability to direct : Executi ve’s lack of abilit y to direct is another barrier to successfuldelegation. The executive who wishes to delegate must think ahead and visualize the work situation,

formulate objectives and general plans of action and then communicate them to his subordinates.

10) Absence of adequate control system : Another obstacle in delegation is the absence o

selective control which provides warning of impending difficulties. Since a good executive is alwayssensitive to his continuing obligation, even though the work is delegated, he obviously wants to besure that he will know serious troubles in advance so that he may take necessary steps to overcome

them. If he finds control system is not adequate and the atmosphere is not congenial and does not

keep him informed, he restricts the scope of delegation to avoid risk. The desirability of a sensitive

system of control for effective delegation in the organisation is therefore very obvious.

Thus most of the obstacles or problems in effective delegation generally arise out of the executive’s psychological attitudes.

The obstacles in a subordinates accepting delegation or avoiding responsibilities :

Delegation is a two sided relationship. Even when an executive is ready to turn authority or willing

to delegate authority a subordinate may shri nk or may be reluctant to accept it, for the foll owing possible reasons.

1) De pendence on the superior : Making a wise decision involves hard mental work andcareful judgement. But many times the sub-ordiante does not want to bother to analyse a problem and

use his mind to take a decision himself. On the other hand he finds it easier to easier to ask his boss and

depend upon him. he invariably seeks his advice before doing.

2) Fear of criticism : Another important factor which restricts an individual from accepting

greater responsibility is of criticism for mistakes.

3) Lack of self confidence : Lack of self confidence and initiative on the part of subordinate

restricts the scope of delegation. This may be partly because the subordinates are not well qualified



and competent enough and partly because they do not have adequate resources and information at

their disposal. Therefore it is necessary to select only competent subordiantes, train them porperly and provide them with necessary power, information and resources for taking independednt decisions.

However, the delegator should also create an atmosphere free from fear and frustration. This will

build up t he confidence among subordinates so that they will take initiative and interest in taking

independent decisions, exercise their judgement and will get opportunity to develop themselves to usetheir skills. Building of self confidence is very essential for the enlargement and effective delegation.

4) Lack of positive incentives : Accepting new responsibility involves mental work, emotional pressure, extra risk and consuming more time and energy. No subordinate would like to take more

responsibility without any additional tangible or intagible incentives. Therefore, additional payment,

promotion, acknowledged status, recognition in the organisation or some other tangible or intangible

or incentives must follow the delegation, in order to enable them to accept the new responsibility

enthusiastically.

5) Excessive work load : Another obstacle in accepting responsibility may be that the subordinate

may be overloaded with work.

6) Feeling of inadequacy of resources : Most men hesitate to accept responsibility when they

believe that they lack in the necessary informatin and resources to do a good job.

Thus, there is a variety of possible reasons why a subordinate may hesitate to accept further

responsibilities. Therefore, there is a need to analyse objectively the specific individuals involved andthe factors that are likely to affect their reactions to a change in the delegation of authority.

If the delegation is required to be made really effective, the manager should not only give due

attention to the principles of delegation but recognize the obstacles in practical delegation also. He

should try to create an atmosphere wherein both the boss and the subordinate are prepared to give and

accept the authority and responsibility enthusiastically.

Types of D elegation :In every organisation small or large there is a number of different levels of executives performing

various functions. Main managerial function is concerned with the responsibility of decision making.

Centralisation and decentralisation describe the manner in which decision making responsibilities aredivided among executives at different hierarchial levels.

Highly important concept in organising which is related to the question of delegation is the extent

of centralisation or decentralisation of authority prevailing in a particular organisational structure.

Centalisation, in this context, refers to concentration of authority whilst decentralisat ion expresses

greater dispersion of authority. In actual practice, there is some decntralisation of authority in every

organisation as otherwise there cannot be a structure with management hierarchial levels. In such an

event all the authority would remain with the top executive of the organisation. Hence the extremes ocentralisation and decentralisation are not generally found in actual practice. Normally, absolute authority

is given to the chief execution and therefore, it assumes the situation complete centralisation of authority.

The extent of delegation of authority determines the degree of decentralisation. Some decentralisation

is absolutely essential in the organisation, without it, the organisation can not exist. Theoretically,

there may be absolute centralisation of authority in one person, but when it so happens, there are no

subordinate managers and hence no organisati on exists. Therefore, some decentralisation is acharacteristic of all organisations on the other hand there can not be complete decentralisation also,



for, if a manager delegates all of his authority, his status as manager would cease to exist and his

position in the organisational structure would be eliminated. In this case, again, there will be no

organisation. “Centralisation and decentralisation are therefore, tendencies. They are qualities like

hot and cold”. The central isation and decentralisati on, therefore, are judged from the proportion

between reservation decentralisation, therefore, are judged from the proportion between of authority

and the delegation of authority by the top management . Someti mes the words cent ralisation and decentralisation are also used with reference to performance. In this sense, it is a problem of geography

of activities, rather than of dispersal of authority. If greater number of decisions, strategic as well as

important alongwith the functions affected by them are made at lower level, the extent of supervision

as well as checking by top management will be narrowed. Eventually consultation with and information

from top management will also be less. Such a situation in organisation indicates greater degree of

decentralisation. And if lower executives are given little power in decision making, and they are required

to consult and seek permission of top management, off and on, it is a case of greater centralisation.

Centralisation is possible when a business is characterised by centralised performance in which all

the activities are carried on at a single location or under a single roof and decentralisation may be possible when performance is spread over many branches situated at different places and divided

among different departments on the basis of their functions or products.

CENTRALISATION OF AUTHORITY

Meaning of Centralisation :Cent ralisation means concentration. When authori ty is concentrated, there is centralisation. An

organisation is said to be centralised when most of the decision making power is reserved by one or

a few persons at the higher level. In a centralised organisation there is not much delegation of authorityand responsibility. According to Allen, “Centralisation is the systematic and consistent reservation o

authority at central points within an organisation “Centralisation reduces the importance of subordinates

and increases the importance of central authority in the organisation.

It implies the following :

a) Centralisation and reservation of the decision making power with regard to various managerial

functions, such as planning organisation, direction and control. b) Operating function to be performed by middle and low levels of management.

c ) Lower levels of management to operate under the direct command, direction and control

of the top level management. Power is concentrated at the top level.

Many organisations at the initial stage prefer centralisation of authority for two reasons :

1) Manager can be in touch with all operations (ii) It facilitates timely decisions. As the organisationgrows in size, the need for decentralisation arises due to the complexity of work. Centralisation may

also refer to the concentration of employees or of physical faciliteis. For example, centralisation of

sales may mean the grouping of employees performing the sales function and their tables chairs and

files are kept in one organisational unit. With the modern approach to business organisation, the presence

of large scale business houses and the increasing complexities of business, centralisation of authority

is some what rare.Centralisation denotes that a majority of the decisions related with the work being performed are

not made by those doing the work but by a point higher in the organisation. “Everything that gives to



increase the importance of the subordinates role is decentralisation everything which goes to reduce it,

is centralisation”.

In short, centralisation means the decision making prerogatives are retained by higher management

levels. It implies that decisions regarding the work are made not by those doing the work but at a

higher point in the organisation. Every manager must reserve certain authority for overall planning,organising, controlling and motivating.

Need and importance centralisation :

The following factors indicate the need and importance of centralised structure of the organisation.

1) Uniformity of action : Only the top managment having central authority to make decisions

can bring uniformity of procedures by the operative units. Where a business concern wishes all its

operative units to do the same thing in the same way there must be centrali sation of appropriate

decision making.

2) For improving personal leadership : This will result in quick decisions and enterprising andimaginative action which is essential for the success of the business. Improved personal leadership isimportant for the success of small enterprises. It is also important during the early st ages of the

enterprises. In both the cases, the operations are relatively on small scale and the top executive canconcentrate entire authority with himself.

3) Well handling of emergencies : Centralisation will help in taking rational decisions from

both short as well as long-term perspectives to meet uncertainties. Centralisation of decision making

is essential when the business conditions are uncertain and there are chances that emergency conditions

may develop to endangner the very existence of the enterprise.

4) Flexibility : Centralised organisation structure permits greater flexibility in the utilisation oexisting personnel and facilities, and in handling fluctuating volumes of work.

5) Integration : Centralised control is needed to keep all the parts of the enterprise movingharmoniously towards a common objective.

6) Utilisation of personnel : Centralised organisation structure permits better and optimum

utilisati on of highly qualified and t alented personnel, particularly in administrative and technicalcapacities.

Areas where centralisation is desirable :

1) Management planning and control.

2) Determination of objectives of the organisation.

3) Capital requirements and modes of procuring it.

4) Diversification, modernisation, expansion or contration of business activities.

5) Personnel or staffing function.

6) Legal and governmental relationships.

Merits of Centralisation :

Centralisation has certain merits as under :

Complete freedom and autonomy at all levels can be dangerous. A certain amount of centralised

control is therefore essential.



1) Power and prestige symbol : It provides power and prestige to the central authority. The

chief executive gets more power, prestige and feeling of importance.

2) Greater uniformity : Centralised organisation structure results in greater uniformity of policy

making, practices and decisions.

3) Attainment of objectives : Centralisation binds all parts of the organisation together to attain the common goals of the business organisation.

4) Uniformity of Action : For some matters, all units have to act in the same way e.g. advertising,

personnel policy etc. In such matters, centralised authority ensures uniformity of action.

5) Less expensive : It permits the use of cost saving or mechanical devices, better trainingmethods of personnel and closer supervision and control. Under centralised structure of organisation,

a smaller number of specialists would be required. Besides, physical facilities requirement, would be

less than those required in decentralisation.

6) Use of specialist (Standardisation and specialisation) : It is possible to utilise highly

qualified specialist since the quantum of their work and scope are adequate to support such executive.

It promotes greater standardisation and specialisation.

7) Effective control : A tight and effective control is induced without having to maintain extensive and expensive controlling machinery.

8) Quick decisions, imaginative action and flexibility are possible under centralisation. It permits

flexibility and rapidity of adjustment to changing business conditions.

9) Centralisation is ideal to meet emergencies such as change in government policy, declining

sales, competition and the like.

10) Duplication of activities, functions can be minimised.

11) It helps in the development of strong and co-ordinated management team.

Demerits :

Following are the disadvantages of centralisation.

1) Over burdened executive : Centralised structure of organisation increases the burden on the top executives and hampers the worth and development of managers and executives.

2) No scope for subordinates participation : Centralised authority does not offer any scope

for subordinates participation in management. Thereby excellent and ideal suggestions from subordinates

are restricted.

3) No motivation for subordinates : It lowers the morale, interest, initiative and enthusiasm at

the lower levels. Work-spirit can not be developed among the subordinates.

4) Increases problems of communication : It may raise the problems of communication of

the decisions made by the top managment, which may impair or adversely affect the subordinate’sability for prompt action.

Decentralisation of Authority :

The term “Decentralisation” is open to a number of interpretations. It may sometimes refer todepartmentation of all activities, divisions of responsibility or dispersal of the centres of authority etc. It is generally the third meaning of decentralisation which is popular with management experts. In



simple words decentrali sation is simply a matter of dividing the managerial work and assigning

specific duties to the various executive levels.

Decentralisation refers to the systematic efforts to delegate authority to the lower levels.

It implies that the decision making authoirty is spread throughout the organisation. Decentralisation

is associated with democratic management where an individual’s worth is respected.Decentralisation is defined by various experts as follows :

1) Allen : “Decentralisation is the systematic effort to delegate to lowest levels all authority

except that which can only be exercised at central points”.

2) Earl P. Strong : “Decentralisation means the division of a group of function and activities

into relatively autonomous units with overall authority and responsibility for their operation delegated

to the head of each unit”.

3) Fayol : “Everything that goes to increase the subordinate’s role is decentralisation, whereas everything which goes to reduce it, is centralisation”.

4) Koontz views that the degree of decentralisation is greater when :

a) More number of decisions are made at lower levels.

b) More important decisions are made at lower levels.

c) More functions are affected by the decisions made at lower levels

d) Minimum checking on the decisions made at lower levels.

Therefore, decentralisation actually refers to the degree in which authority is delegat ed to the

lower levels. Decent ralisation is an extension of the concept of delegation of authority. Absolute

centralisation or decentralisation is not possible in practice.

Thus we see that decentralisation is concerned with t he dispersion of the power of decision

making to lower levels in the managerial hierarchy. Actually centralisation and decentralisation both

should be viewed in relative rather than absolute terms. Complete centralisation is the concentration of

all decision making at the apex of the management hierarchy. If this were possible there would be no

need for a management hierarchy. In the same way, complete decentralisation or the delegation of all

decision making funcitons to the lowest level of the hierarchy is equally absurd. In decentralisationmanagment delegates the power of management coupled with the span of responsibility.

In short, centralisation is one extreme, and decentralisation is the other. Decentralisation refers to

the dispersal of authority or the delegation of authority to subordinates, George Terry says “Whenauthority is dispersed, decentralisation is present”.

Decentralisation Versus Dele gation :Decentralisation is not the same thing as delegation. It is something more than delegation. Delegation

means entrusting some part of his work by the superior to his subordinates. Decentralisation refers to

the dispersal of centres of authority (decision making) throughout the organisation. It leads to scattered

authority throughout the organisation, Decentralisation has been said to be an extension of delegation.

Need of decentralisation :There are certain circumstances that necessarily bring about decentralisation of authority in an

organisation. These are as follows :

1) Size of the business enterprises : The larger the size of an enterprise, the more urgent is the



need for decentralisation, as the growth of an organisation, increases the number of decisions and the

difficulty in arriving at them on the part of the top management.

2) Growth and Diversification of Activities : These factors bring about decentralisation, in an

organisation because growth and diversitification make organisation cumbersome and effective direction becomes difficult, The top management becomes surrounded by commit tees and is overburdened

with work and difficulties.

3) Training of executives : When management desires to train executives to handle hi gher

positions in the organisation, it resorts to decentralisation. On the other hand an autocratic management

does not resort to decentralisation and retains authority with itself.

4) Nature of competitors : The nature of a company’s product and the extent of competition it

encounters, influence the extent and degree of decentralisation. In a competitive market, decentralisation

may be practised to ensure special emphasis on a particular product line or to concentrate attention ona particular market.

5) Surroundings and atmosphere : Certain internal as well as external factors influence the

extent of decentralisation. These include technical developments, political factors, cost of decisions,availability of managers, the need for decentralisation of performance, personality of executives and

so on.

Merits of decentralisation :The merits of decentralisation are listed below :

1) Top executives are relieved from burden : Decentralisation stresses the importance of the

delegation of authority at all levels of management so that the top management may devote its entire

attention to decision making. It relieves top management of much workload.

Actuall y centralisation places heavy burden on the top executive who alone is responsible for

planning and decision making. In a decentralisat ion set up, the subordinates share the burden of decision making and leaves the top executives enough time to control the strategic things.

2) Possibilities of diversification : Under decentral isation the diversification of products,

activities and markets etc. is faciliated. This enables the concern to make up any losses in certain lines

by gains in other lines and thus reduces the risks of business.With the diversification and expansion of activities, an organisation tends to grow. Complex

decentralisation helps it to meet the challenges of the complexities of big business.

3) Improved moral e and job satisfaction : Decentrali sation is a unique step towards the

motivation. Since, local managers are given a large degree of authoirty and autonomy their moralegoes high.

Decentralisation encourages initiative and personal ties among the various levels of management, which results in a greater job satisfaction and motivation for the employees.

4) Executive development : Decentrali sation gives power, initiative and responsibility to a

number of executives. This provides an opportunity for the development of executives in the organisation.It provides training for future managers and develops management personnel.

5) Quick decision making : It promotes speed in decision making and avoids confusion. Quick implementation of decisions is made possible. In an decentralised structure, operations can be co-ordinated at the unit or divisional level, which is not possible under a centralised structure.



6) Other merits :

a) New ideas and techniques can more easily be implemented by lower level executives.

b) Effective control can be exercised by fixing standards of performance and comparison o

performance.

c ) Flexibility at all levels of management can more easily be achieved.d) Management by objectives can be practised more effectively.

e) Better management-employee relationship can be achieved.

Demerits :Decentralisation of authority may suffer from the following limitations or draw-backs.

1) Expensive : It increases the administrative cost due to duplication of specialist service and

the appointment of capable executives at lower levels. It entails heavy expenditure and duplication of

effort at junior levels.

2) Difficult control at lower level : It becomes difficult for top management to exercise control over what people at lower levels are doing or event to know what decisions they are taking. Since

every executive at a decentralised level exercises authority in his own way. Uniformity in policies and

practices may not be achieved.3) Lack of co-ordination in different departments : A wide dispersal of authority under a

decentralised set up may create problems of co-ordination among the various sections and departments

of the business.

4) Lack of uniformity in decision making : It hampers uniformity in decision making and

consistency of procedures.

5) Emergencies can not be tackled properly : Emergency situations can not be tackled properly

in a decentralised structure. Adjustment to changing conditions may be difficult. As well as flexibilityand adjustment to changing condition may become difficult in a decentralised set up.

6) Specialised services not utilised effectively : A decentralised set-up may not permit full

and effective utilisation of the services of specialised and technical personnel.

7) In absence of adequate number of competent managerial personnel, decentralisation may not

be practised effectively.

8) Some centralised areas : There are certain areas which ought to be centralised, These

include product pricing, managerial planning etc.

Factors leading to decentralisationThe following factors cause decentralisation :-

a) Decentralisation of authority is useful. When quick and appropriate decisions regarding the situation and/or problem at lower level are required to be taken in order to facilitate utilisation

of situation and opportunities that have defined at the lower level.

b) When the top management wants to reduce communication work decentalisation of authority

is preferred.c ) The nature of company’s products or markets may require decentrali sation of decision

making to provide special emphasis on a product line or a market. Technological changes

may also create conditions favourable to decentralisation.



d) Growth and diversification of activities of the company may make decentralisation necessary

to introduce flexibility in operation, to faci litate proper direction and to relieve the topexecutive of the burden of extra work.

e) Physical dispersion of activities of the organisation may require decentralisation of authority

for better results.Factor s determining the degree of decentralisation :

The degree of decentralisation depends upon several factors :

1) Costly decisions : The top management is normally better trained and in possession of morefacts and is likely to take better decisions and commit fewer mistakes, but it does not necessarily mean

that they are not opt to commit mistakes. The controlling factor behind withholding decision making

authority in such situations is the weight of responsibility. Since the responsibility can not be delegated

to a subordinate, the top executive does not delegate such authority are strategically vital and will prove more costly to a company, are normally taken by top management to avoid and will prove more

costly to a company, are normally taken by top management to avoid risk of mistakes. The cost may

be either in the monetary terms or in some intangible values such as company’s reputation, its competitive position or the effect on employee morale. So in actual practice, the risk of committing mistakes by

lower executives, and the cost of delay in decision on the part of top management, should properly becompared and the degree of decentralisaton be determined.

2) Uniformity of policy : The desire and need of uniformity in policies and practices determine

the degree of decentralisation. If the top management wants to take advantage of dissimilar situations

with respect to labour, customers, sources of supply, trade practices or local conditions, it may desireto have more decentralisation for better treatment of different situations and to encourage individual

initiative. The path of uniformity leads the organisation towards centralisation and the need of individual

treatment towards more decentralisation.

3) Economic size : The problem of co-ordination and control are more complex when the

business unit is la rge having various departments and a large number of employees. Complete

centralisation is neither possible nor desirable. Centralisation of decision-making will result in delay,

unnecessary increase in amount of paper work, overburden on top executives and poor quality decision.The decentralisation of decision making in a large concern, therefore, is essential but it must be

done so as to facilitate co-ordination and control. In large concerns divided into many a utonomous

groups, efficiency of management can be considerably improved. As it makes speedy decisions possible, saving time and energy of top executives. It reduces the amount of paper work and tends to

improve the quality of decision by reducing its magnitude to manageable proportions. It is, therefore,necessary that the major questions of policy must be decided at the top management level and the rest

be decided at unit levels. For decentralisation to be management level and the rest be decided at unit

levels. For decentralisation to be effective, the unit must possess a certain economic and managerial

self sufficiency.

4) Decentralisation of performances : Centralisation or decentralisation of performance is a

technical matter depending upon such factors as the economics of division of labour, the opportunities

for utilizing machines, the nature of service to be performed, location of markets for raw materials,labour and consurmers. Although the centralisation may be geographical or physical in nature, its

extent has a major influence on the concentration of authoirty. Aut hority tends to be decentrali sed

when performance is decentralised. But i t does not mean that a busi ness whose performance is



centralised will have authority centralised as well. It is true that authority can more easily be centralised

if the operations of the organisation are in one building or location. But there are several other factors in centralisation of authority that give geographical concentration (decentralisation).

5) Business dynami cs : The dynamic chara cter of a business will also affect the degree of

decentralisation. If the business is growing fast the facing complex problems of expansion, the manager is forced to take major responsibility of taking decisions. This dynamic condition may force him to

delegate authority to subordinates and take a calculated risk of their errors. The new discoveries,

inventions, vigorous competition, political changes, new government regulations, liberation, globalisation,major labour troubles are some of the factors that might introduce dynamic conditions and when this

occurs in an enterprise, the centrally managed firm may not be able to meet a situation requiring

decentralised decision making.

6) History of the enterprise : If the authority in the initial stage of an enterprise was completely

centralised in the few executive or owner, the delegation process is normally slow even in the expansion

stage and the enterprise remains mostly centralised even after expansion. On the other hand when an

enterprise is a result of amalgamation, consolidation of various units or companies, at least in the initialstages, it will be a case of a greater decentralisation.

7) Desire for independence : The subordinate managers and individuals amy resent when theyhave no freedom and the decisions are taken by absent management. They may be frustrated by the

delay in getting the decision, long lines of communication and by the greater business game of passingthe buck. This frustration may lead to dangerous loss of good men. Moreover every individual has a

desire for recognition of status and for autonomy. This desire of self assertion, power and status

requires that some delegati on of authority be made to subordinates to satisfy their desire of sel

assertion. More decentralisation leads to democratic way of doing and provides more freedom and power to subordinates.

8) Availability of Mangers : If there is a shortage of competent, honest and trained managerial personnel, it often leads to centralisation. But if the organisation has a good system of management

training and development there will be no difficulty in having trained personnel. The decentralisation

itself is the best key to training. Due to decentralisation the lower level managers get opportunity to

take actual decision9) Control techniques : Effective control system is a pre-requistite of delegation of authority.

No good manager can be expected to delegate his authority unless he has some means to control for assuring himsel f that the authority will be used as he intended. As well as the managers need for

understanding and utilizing appropriate control techniques, the state the development of these techniques

are also limiting factors of decentralisation.

10) Nature of top management : When the top management does not want any interference

from the subordinates the organisation tends to become centralised. And when the management wishes

to have a democratic organisation, where people enjoy freedom, status, power and may make positviecontribution by exercising their initiative, the organisation becomes decentralised.

11) Environmental changes : Even some external factors which tend to mould the extent o

decentralisation may include government controls, tax policies labour unionism etc. For example if the

labour union enters into a collective bargaining with the management on wage scales, bonus etc. theterms of the collective agreement will have to be uniformly applied irrespective of the fact where the

workers of company are working. so the government controls and regulations have to be uniformly



applied and regulated. This calls for centralisation as the top mangement cannot delegate authority to

its subordinates for their individual interpretation and application of the rules and regulations.

Thus the only way is to properly divide the work among several people of the organisation and yet

maintain control, co-ordination and unity of direction and commonness of purpose.

Q uestions

1. What do you mean by departmentation ? Write its need and important

2. State the stages in the process of departmentation.

3. Write the merits of departmentation.

4. Explain the basis of departmentation and its merits and demerits.

5. Explain the factors influencing the choice of departmentation.

6. What do you mean by delegation ?

7. Define authority and responsibility.

8. What are the types of authority ?

9. What are the limits of authority ?

10. Describe the relationship between authoirty and responsibility and accountability

11. Define delegation and Explain its nature.

12. Describe the importance of delegation.

13. What are the basic principles of delegation.

14. How much should be delegated ?

15. How a delegation can be made effective ?

16. Explain the steps in delegation process.

17. What are the benefits/merits of delegation ?

18. State the obstacles or problems of delegation.

19. What are the obstacles in a subordinates accepting delegation or avoiding responsibilities?20. Describe the types of delegation.

21. Define the term Centralisation.

22. Describe the need and importance centralisation.

23. What are merits of centralisation ?

24. Define the term decentralisation.

25. Explain the need of decentralisaiton.

26. State the Merits of decentralisation.

27. State the demerits of decentralisation.

28. Which factors causes decentralisation ?

29. State the factors determining the degree of decentralisation.



8D IRECTION

Meaning and scope of direction :Management is essentially the art and process of getting things done through and with the people.

The managers have, the responsibility not only of planning and organising the operations but also of guiding and directing the subordinates. Directing is the function that initiates organised action. Merely

by formulating good objectives, aims or goals and policies, providing well designed, effective, efficient

organisation structure, taking accurate decision, keeping effective control, the common objectives o

business organisation cannot be realised unless proper direction is given to the subordinates. Main

objective of directing is converting the managerial plans and decisions into effective actions. Directing

is a powerful step in management process and is aimed at encouraging subordinates through adequate

leadership to direct their exertions towards departmental and ultimately organisational objective or goals. Directing is the connecting link between managerial decisions and operating actions. Direction

is acutally a continuing function of managers. It is a managerial function performed by all the managers

at all the levels of the organisation. Direction also implies the creati on of an appropriate work environment which woul d release the creati ve powers of the subordi nates. It presupposes an

understanding of human behaviour. Application of human nature is the basis of effective directing.

Definitions :According to Haimann : “ Directing consists of t he process and echniques utilized in issuing

instructions and making certain that operations are carried on as originally planned. Directing is the process around which all performances revolve It is the essence of operations and co-ordination is a

necessary by-product of goods managerial directing.”

According to Knootz , “ Direction is the execution of guidance and overseeing subordinates.”

According to William Newman , “ Directing (activating) deals with the steps a manager takes to

get subordinates and others to carry out plans.”

According to Dale, “ Directing is telling people what to do and seeing that they do it to the best of their ability.”

According to Theo Hain , “ Direction consists of the process and techniques utilised in issuing

instructions and making certain that the operations are carried out as originally planned.”

According to S. Chatterjee , “ Direction is the sum total of managerial efforts that are applied for guiding and inspiring the working teams to make better accomplishments in the organisation.”

Thus direction in ‘simple words’ is, guiding subordinates in doing work. In managerial field,direction is a complex function that includes all those activities which are designed to encourage the

subordinates to work effectively and efficiently in both short and long run.

Following are the essential components of direction.

(i) Issue of instructions and orders : Henry Fayol has identified direction as the functionof command. While a manager issues orders, he should keep in his mind that he is dealing

with people.



(ii) Guiding the people : Mangement is the process of getting things done. It is, therefore,

necessary for the manager to guide and teach right methods, to his subordinates.

(iii) Supervising the people : Management has to supervise the subordinates to ensure that

their performance confirms to the plans. That is why Koontz and O’ Donnell has defined

direction as an executive function of guiding and observing subordinates.Thus the scope of directing becomes very wide. It consists of commandi ng, supervi sion,

communication, leadership and motivation. The ‘terms’, ‘order’, ‘inst ructi on’, ‘command’ and

‘di rective’ have been used interchangeably by the managements scholars. These are basic tools odirction by which activities are started, terminated, guided and altered. It is implied that an order or

instruction can be issued by a superior only. Anot her implicati on of direction is that the order is

enforceable because the superior has t he authority for that purpose. He can use either rewards or punishments to get his order implemented.

The orders or instructions may be issued either orally or in writing depending upon the relations

between the superior and subordinates.

Supervision means observing the subordinates at work to see that they re working according to

the plans and policies of the business organisation. The mangers at all levels are generally engaged in

direct contact with the subordinates, but the lowest level managers have, as their primary duty, tosupervise the workers in basic operations. That is why the managers at the lowest level are known as

supervisors. A supervisor is also known by different designations such as foreman, chargeman, overseer,superintendent, section officer etc. He gives orders and instructions to the workers and is responsible

to the departmental manager for the performance of the workers under his change. In a broader

sense, directing is providing all guidance and inspiration to people at work in order to carry out their assigned duties and responsibilities. Order, instruction supervision, motivation, leadership, guidance

etc. directly come under the scope of direction. Direction needs motivation, leadership as well as

supervision. Directing deals exclusively with people. It must be centred around the people. Hence, it is

also called leading or actuating.

Nature of direction :

Directing plays a vital role in an organisation. Direction is a complex function that includes all those activities which are designed to encourage subordinates to work efficiently and effectively. Thescope of direciton is wide. Modern management thinkers recognise directions an independent function

of the management. process. Direction has four elements viz., supervision, motivation, leadership,

communication.

Importance of direction :

Direction as an indispensable managerial function, since it is mainly concerned with human relations.

Direction plays a very important role in management. Planning, organising and staffing are not enough.The management must stimulate action by giving orders to the subordinates and by supervising them

as they proceed with their work. Direction is the heart of administration. It is the direction to subordinates

only that secures greater or less efforts from employees and make. The performance satisfactory or

unsatisfactory. Managements ability is to put to test by its capability of direction. Planning and organising

are only preparations for works whereas performance and the real work begins with the directing

function of management. Directi on motivates, direction commands and direction cont rols theorganisation. Direction provides necessary leadership in the business. It is a process of integration



also. It is concerned with securing the fullest co-operation of poeople for the realisation of objectives.

This co- operation can be achi eved only by good organisational communication, people oriented

supervision and motivation. Favourable and healthy conditions must exist both within and outside the

enterprise for enabling employees to develop their attitude to work. Directing play an important role in

this process. It stimulates the plans and enlightens the organisation. It keeps the activies continued. Asa matter of fact, without the issuance of directions or orders as well as without guiding and supervisingthe subordinates, nothing would be accomplished. Direction does not get only the workdone, but it

develops future managers also.

Principles of Direction :

Direction is the sum total of managerial efforts that are a pplied for guiding and inspiring the

subordinates to make better accomplishment in the organisation. It is concerned with the motivating,

leadership, supervision and commanding of subordinates and securing their best co-operation. It is anart which is learnt from a long experience. But there are certain principles also whi ch should be

observed by management in direction to its subordinates. All these principles can be divided into the

following sections.

Principles of direction

Principles relating to the Principles relating to the purpose of organisation process of organisation

i) Principle of unity of command i) Principle of maximumindividual contribution ii) Principle of direct supervision

iii) Appropriateness of directionii) Principle of harmony of objectives.techniques.

iii) Principle of efficiency of directioniv) Principles of managerial

communication

v) Principle of effective leadership vi) Principle of motivation

vii) Principle of group dynamics

viii)Principle of flow of information

ix) Principle of strategic use oinformation

x) Principle of follow through

Principles relating to the purpose of organisation :(i ) Principle of maximum individual contribution or efforts : The success of an organisation

depends on the contribution made by people working in it. Every business organisation has a commonobjective, the accomplishment of which requires hard labour and sustained efforts of the employees

engaged in different operations of the business. Therefore the managment should adopt such a technique of direction as will make a useful contribution in inspiring the employees to the achievement of the

common goal and for that they must be ready to contribute their maximum efforts.

(ii) Principle of harmony of objectives : The function of direction must try to remove the



conflict between individual goals and organisational goals. A manger must try to bring a bout co-

ordination of individual motives of the personnel working in the organisation, with the enterprise goals.Henry Fayol laid stress on the fact that common interest must prevail over individual interest. Harmony

of objectives makes the task of direction easy. When both the interests are harmonised through proper

direction, the management will get better results from the work force.

(iii) Principle of efficiency of direction : This principle calls for the use of appropriate techniques

of direction, effective system of transmission, efficient and effective leadership and effective supervision.

These guidelines are helpful to the management for efficient and effective direction to the employees.

Principles relating to the process of organisation : (i) Principle of unity of command : This principle requires that all employees should get

orders and instructions from one boss or superior only. The employees should know clearly to whom

they are accountable. If this principle is not followed strictly it may create dual command, mutualconflict, mismanagement, indiscipline in the organisation. Therefore it is essential that one subordinate

should report to one boss only.

(ii) Principle of direct supervising : According to this principle; the superior should himself

supervise the work of those working under him in order to ensure prompt and timely action. Every

superior must maintain direct contact with his subordinates. It also helps to motivate and enhance themorale of employees.

(iii) Appropriateness of direction techniques : There are various techniques of direction. Manager

has to use the right technique in right situation. There are three common techniques in the hands oma nagement : (a) consultative (b) Free rein and (c) a utocratic. They should be used according to

circumstances.

(iv) Principle of Managerial communication : If the management wants to be successful indirection, it requires an efficient and effective system of communication between the executive or

boss and his subordinates. Effective communication or two way communicat ion ensures effective

directi on. Misunderstanding between t he boss and subordinate can, thus be removed; mutual

understanding and co-operation can be developed.

(v) Principle of effective leadership : Leadership is the process of influencing individuals toachieve the goals of the organisation. If the boss possesses good leadership qualities and provides

perfect leadership to his subordinates, they feel very happy and satisfied. A good leader is one who

solves not only the work problems of the employees but also their personal problems. This attitude will

win the help in easily changing the behaviour of the employees.

(vi) Principle of motivation : Every manager has to provide such direction, which would inspirethe employees to contribute fully towards the well-being of the organisation. Basically employees do

not want to work to fullest honesty. Therefore, to get the co-operation and honest contribution from

the employees, managers must inspire the employees by providing both financial and non-financial incentives for better performances.

(vii) Principle of group dynamics : Basically there are two types of organisation, formal and

informal. For getting the things done through and with people, managers must permit informal groupsto supplement and upport the organisation. Managers can increase the effectiveness of direction by

securing the co-operation of informal leader and groups.

(vii) Pri nciple of fl ow of information : The use of both formal and informal channel s of



communication will prove to be extremely useful to the management in the accomplishment of this

principle. This principle signifies that the efficency of direction is largely dependent upon the flow o

information and the efficiency with which it is disseminated among those for whom it is meant.

(i x) Principle of strategic use of information : Though the existence of informal groups is not

good for the basic policy of the management, the management should identify such groups, recognisethe dignity of such groups and make their use constructively in the attainment of enterprise goals.

(x) Principle of follow through : Direction is a continuous process. Besides issuing directions,

the managment should get feed back from the work force. Feed back makes direction effective byadjusting the wheel of mana gement in action. The task of management does not end with the

formulation of policies. In addition, it is the prime responsibility of the management to see how far and

to what extent the policies laid down by it, are being followed by the subordinates. Hence the significanceof this principle can not be ignored.

Elements of direction :Every manager has to issue orders and instructions to the employees, inspire them and guide them

through the process of directing. According to Haimann, “Direction consists of the process of techiniques

utilised in issuing instructions and making certain that operations are carried out as originally planned.”

The elements of dierction are as follows :

(1) Issue of instructions and orders must be in simple and understandable language. Theyshould be very clear and complete. Orders and instructions may be communicated orallyor in writing. They should be such that they are in the capability of the subordinates toaccomplish.

(2) Better mutual understanding and team spirit can be acheived by proper communicationwith the subordinates. Speedy and proper communication, therefore, becomes an important

element of direction.

(3) Proper leadership has to be provided for influencing subordinates behaviour towards the

attainment of company’s objectives.

(4) Adequate supervision on subordinates has to be made to ensure that they use organisational resources effectively and efficiently.

(5) Inspiring and motivating the subordinates is another element of direction because that only

can assure the management about the fulfilment of its expectations.

(6) Mainta in discipline by punishing t hose whose performance is not good and rewardingthose employees whose performance is good.

Techniques of direction :

Effective direction can be achieved by adopting one or more of the ollowing techniques. The

manager can utilise them according to the need of the situation. There are basically three broad techniques

of direction namely consultative or participative, free rein and autocratic.

1) Consultative or participative technique : The essential feature of this technique is that the

executive should consul t his subordinates regarding the feasibility, workability and the extent andcontent of a problem before taking a decision and issue a directive. Under this techniques manager can

get best suggestions, ideas, opinions, from the subordinates. As well as he gets the knowledge of

reactions of the subordinates in order to extract new ideas and help from them. But then the manger



must have sincere desire of securing suggestions from his subordinates. Many times a manager with

no desire may simply pretend tobe consultative. But this attitude is dangerous and may cause conflicts

leading to non accomplishment of task. Under this technique there is actually no danger to managers

authority and powers, because ultimately decision is to be taken by him only. Right to take decisions

ultimately lies in his own hands.

The quantum of subordinates participation depends upon a number of factors such as the attitude,

interest, liking, past experience of the subordinates, the nature and type of the problem, availability of

time for olving the problem and so on. If the subordintes trust the managers, and believe that “ the bossknows the best” regarding making decisions and giving directives, there is no need for consultativedirection. But if the subordinates feel the superior to be incompetent, the boss should provide ample

opportunity for consultation with the subordinates. It is always better if the subordinates are informed

and supplied with necessary materials well in advance so as to enable them to think over it and giveconcrete suggestions. If managers or executives adopt this technique of direction they would be

successful in securing great er co-operati on, enthusia sm, motivat ion and hi gher morale of t hesubordinates. This ultimately would result in formation of better plans and better decisions because of

pooling of experience, better communication, closer contacts and training, growth and experiences of

the subordinates. All these merits can be enjoyed by the manager by extensive and careful applicationof consultative techniques. The technique suffers from the following shortcomings also.

1) If the subordinates form an opi nion that the manager is incompetent and incapable of taking decisions, they may undermine his authority and prestige.

2) Sometimes the discussion may lead to confusion and the ubordinates may not have any

clear-cut directives from managers.

3) Sometimes the subordinates think consultation to be their right. Under this situation, if a

manager takes some decision, even on important occasi ons, without consulting the

subordinates, it may lead to disputes, frustration, confusion, misunderstanding etc. among

the subordinates.

4) If this technique is not used properly, it may lead to unnecessary discussions, unhealthy

and out-of the way criticism of the boss and even to insubordination.2) Free rein direction Techniques : Under the free reign technique, the superiors motivate the

subordinates to contribute their ideas, thoughts etc. for solving a problem. This technique is widely

accepted by many managements. It shows the best and quick results, if the subordinates are highly

educated. The free rein technique encourages and enables the subordinates to contribute their owninitiative, independent thought, drive and ingenuity to the solution of the problem. This does not mean

that this technique gives full freedom to the subordinates. The superior who adopts free rein technique

must be sure that the subordinates know the overall objectives, their duties, responsibilities, policies,

plans of the organisation and their role as well as jurisdiction. Then only he should assign the work tohis subordinate and allow him to decide, the manner in which he has to proceed. But the superior must ensure that the subordinates are trust worthy, willing and capable of assuming responsibility. Thistechnique would be followed by the superior when the sub-ordinates possess high intelligence, strong

drive, high sense of responsibility etc. This type of directing gives pride to the capable men in their work. It develops their self confidence, motivates them to give independent thought. It develops their managerial ability and experience. In this type of direction technique there may be chances of difference



in the point of view of the manager and the subordinate. Then the manager has to take risk of such

mistakes and continue to provide opportunity to the subordinates to learn by their mistakes. Thesuperior should not criticise and should not discourage the subordinates. This technique requires a

great amount of patience and forfearance on the part of managers.

3) Autocratic Direction Techniques : This technique is just the opposite of the free rein directiontechnique. Under this technique, the superior gives direct, clear and precise orders to his subordinates

with detailed instructions as to how and what is to be done, The role of subordinates with detailed

instructions as to how and what is to be done. The role of sub-ordinates is simple to implement. Thistechnique is used in military organisation. Such superiors believe in minimum delegation of authority tosub-ordinates are expected to follow the instructions only. The manager has to perform both the

functions namely planning and taking decisions. The manager strongly believes that, without detailed

instructions from him, his subordinates would not properly carry out directives. Under his type odirection technique the subordinates depend totally upon their superiors. They do not think, and do not

have any interest, and motivation in taking decisions. They stop thinking and taking initiative. They become “Yes Men” and bedient employees.Such subordinates become frustrated. They lack in selconfidence. They are less motivated and less inspired. Naturally, they hardly acquire managerial ability.

This technique obstructs subordinates from becoming future executives. Merits of this techniques are that managers can take quick decisions, quick implementation of such decision, quick problem solving.

This also helps in maintaining peace and discipline. Employees are more obedient and can be effectivelyutilized.

Characteristics of good direction :Following are the inherent characteristics of direction :

1) It is an important function of management : Direction is concerned primarily with the

people who put the plans into action. It is one of the important functions of managers, in that they give

proper, adequate direction, guidance to the subordinates. This function is not related with lower level

of managment who directly deal with operative employees, engaged in achieving the organisationalgoals. At every level of management, manager has to perform the function of direction to his subordinates.

In the absence of proper direction, assigned work can not be performed effectively and efficiently by

the subordinates. One can plan, organise and staff, but nothing is accomplished until subordinates aretaught what and how to do. Direction is ultimately concerned with getting things done.

2) It is an executive function and extends from top to the bottom : Direction is an executive

function of high rank management. It involves determining the scope, giving orders and instructions

and providing the dynamic leadership. Instructions are given by the manager to subordinates.

3) Direction has wide dimensions : Direction is not concerned only with the orders and

instructions to work. It consists of supervision, communication and motivation too. It includes the

study of motives to work and to see that how a man can contribute his maxi mum effort for theattainment of common objectives to his maximum capacity.

4) Direct contact with the people : Here the direction is related to the direction of subordinates.

So it requires a direct contact with them. The manager or superior must have direct contact with their

subordinates, then only he will be able to issue orders, instructions and full guidance to his subordinates.

5) It is a continuous activity : Direction is a continuous activity. Directions, once given, willnot be useful and enough for future assignments. As such continuous flow of directions becomes



necessary, specially when new techniques are introduced, new assignment is given and so on. No

relaxation can be given to management in the function of direction , as it is the very basis of futureactivities.

Q uestions

1. What do you mean by direction ?

Define direction and Explain the scope of direction.

2. Describe the nature and importance of direction.

3. What are the principles of direction.

4. State the elements of direction.

5. Explain the techniques of direction.

6. What are the characteristics of good / ideal direction ?



9COMMUNICATION

Concept of Communication :

Effective and efficient working of an organisation depends upon effective communication system.It is possible for a manager to frame good plans, take good decisions, follow excellent organisation

structure only with the help of proper link or communication with the working force. Communication

is one of the most important functions of management like planning, organising, directing, control etc.

Management’s responsibility to get the things done by and through the people is just possible by

communication. All the working instructions, orders reach the required destination i.e. the implementors

through effective communication. Similarly all the suggestions, ideas, problems, difficulties, necessities, demands of the employees also go to the management through the communication system only.

Therefore there must be a sound and effective communication network established by the top

level of management. In the absence of communication in different levels of management nothing can be achieved. Someone has rightly said that effective directing involves effective communication. Communication system keeps the members informed about the things happening within and outside

the business organisation. Planning, organising, decisions instructions, feed backs etc., on paper are

otherwise static unless that achieve dynami sm and momentum. This dynamism and momentum is

preached in these through communication. Entire organisation is activated and is put on wheels by the

power and energy of communication. Communication system plays a vital role in an organisation likea nervous system in a human body. Therefore skill of communicating becomes an essential quality for every executive.

The word “communication” has its root in the Latin word “Communis” i.e. “common”. It denotes

imparting a common idea or it refers to the sharing of ideas, facts, opinions, information and

understanding. The term communication refers to transmission of some information and understandingfrom one person to another.

Definations of communication :

Different authors and management thinkers defined the term communication differently. According

to Willim Scott, “Communication is a process which involves the tranmission and accurate application

of ideas, ensured by feed back for the purpose of eliciting actions which will accomplish organisational

goals.”

According to Prof. Das Gupta, “ To communica te is to inform, to tell, to show or to spread

information. Whatever its etymological meaning from the managerial point of view, communication

is the means by which a management gets its job done. it can affect both the morale and efficiency of

employees.... Communication is a skill of management.”

According to McFarland , communication is a process of meaningful interaction among human

beings. More specifically it is the process by which meanings are perceived and understandings are



reached among human beings.”

According to Ordway Tead , “No business can exist without communication.”

Luthan defines communication as “the transmission of commonly meaningful information.” It is

a personal process that involves the exchange of behaviours.”Theo Haimann defines, “communication fundamental and vi tal to all managerial action is the

process of imparting ideals and making oneself understood by others.

Allen defines, “Communication is the sum of all the things one person does when he wants to

create understanding in the minds of another. It is a bridge of meaning. It involves a systematic and

continuous process of telling, listening and understanding.”

M. W. Cumming defines “Communication is a process of conveying messages (facts, ideas,

attitudes and opinions from one person to another so that they are understood.”)

According to Kelly it is a “field of knowledge dealing with systematic application of symbols to

acquire common information regarding an object or event.

Sigbond views communication as the transmission and reception of ideas, feelings and attitudes

both verbally and non-verbally eliciting a response. It is a dynamic concept underlying all kinds oliving systems.”

Thus communication can be finally defined “as a process of transmitting information, ideas,

facts,opinions, attitudes, feedbacks, problems, difficulties etc. from top level to bottom level and from

bottom level to top level as well as from person to person i.e. intrascaler with a view to meaningfully

understanding them by others so that activation and interaction can be acheived and ensured in

proper direction.

Characteristics of Communication :

After carefully study of all the above definitions we can enumerate the following characteristics o “ communication.”

1) Communication is the tranfer or transmission of some information and understanding from

one person to another. It i s t he process by which meanings are perceived and understandings are

reached among human beings.

2) It is essentially a link or bridge of meaning between people.

3) Communication works as a feedback mechanism.

4) Communication aims at achieving organisational objectives by facilitating human interaction.

5) In the absence of communication system nothing can be achieved by given concern.

6) Communication is the part and parcel of an organisation.

Key elements of communication :

After studying the various definitions of communication the following key elements of communication

become clear:



1) Communication is a process : It is called as a process, because it consists of a series of

steps. It is not an independent event. The steps in the process are emergence of ideas, placing them insome logical sequence and transmitting them through some media, received by some one at the other

end, and the reaction of that person after receiving information or message and again reversing the

ourney, communication is thus, called a process.

3) Transmission 1) Know- - - - - - - - - - - - - - - - - - - - - >

2) Working the idea M E D I A 2) Understand(decision)

1) Emergence of idea 3) Feed back

Figure : A SimpleManager (communicator) Subordinate (Receiver)communication process

2) Communication involves tranmitti ng information and understanding : It means that

the information should not only be transmitted and received but also understood.

3) Information sender and receiver may be human or non-human objects : The concept of communication is quite borader. It is wider field of human interchange of facts and opinions and

not the media like telephone, telex, telegraph, radio and others.

4) Communication requires some channel or medium : Communication i.e. transmission

can be made orally or in writing. Thus the words and paper assumes the nature of transmission media. But these are not the only mediums of communication. Even a silence can communicate some message.Radios, Televisions, Telexes, Telephones, letters etc. are general media of communi cation. Apart

from this, atti tudes, behaviours, acti ons, gestures, and si lence ar e a lso effecti ve medi ums of

communications. Communication can be made directly , consciously or unconcsiously.

5) Communication has three interlocking circuits : Transmitting information. (1) Upwards(2) Downwards and (3) Intra scaler, Upward circuit is aimed at knowing the idea, comments, actions,

reactions, attitudes, reports, complains and grieva nces from the lower level. Such a circuit flowsupwards. Downward circuit is meant for transmitting flow of instructions, directions, clarifications,

interpretations of rules, orders, plicies and procedures, to lower level who has to implement them.

Such a circuit has a downward flow. Intra scaler or cross contact circuit is for exchange of information

between departmental heads, members, executives or between workers all of equal rank

Redfierd has given the following elements of communication :

1) A communicator : A person who passes on the information.

2) Transmission : It is actual issuing of orders, instructions, directions or information.

3) Stimuli : It is a message, order, report or information

4) A communicate : A receiver of the information.

5) Response : A feedback or reaction of the receiver.



A manager should understand above basic key elements in order to make communication effective.

Objectives of communication :

Predetermined objectives of the business organisation can be achieved through communication

network only. Company’s objectives, plans, policies, procedures, rules regulations, budgets, orders,instructions, directions, programes, top managements expectations etc. pass through communication

only. The following are the objectives of the communication.

1) To transmit information and develop understanding among working group, which is a

must for group effort.

2) To develop positive attitude which is necessary for motivating the employees and gaining

their co-operation and job satisfaction.

3) To strictly prohibit the misinformation, rumours gossip. This helps in reducing the emotionaltensions of employees.

4) Workers can be made mentally prepared for changes by communicating such information

in advance.

5) Another very important objective of communication is to motivate the employees for newideas, suggestions, creative thinking, new methods of working, improvement in the product,

working conditions, encouraging new methods, and there by reducing time, wastages in

production activity.

6) Communication develops, maintains and improves better worker and management relations.

7) Communication ensures free exchange of information and ideas so that all the employees

understand and accept them by responding to the status and authority of every one in theorganisation.

8) Communicati on hel ps to satisfy employees basi c needs such as sel f-respect, status,

recognition, attachment, sense of belonging, and identity etc.

9) Communication helps to entertain and maintain social relations among the employees.

10) Communication ensures security and conformity of plans, policies and objectives of The business organisation.

Importance of Communication :

The following factors indicate the importance of communication.

1) Communication helps in keeping the employees informed and knowledge : Informed

and knowledged about the company’s problems, aims and objectives, policies, plans, targets etc. The

company as well gets knowledge about the employees problems, difficulties, demands, likes, dislikes,

interest, attitudes etc. This enables management to manage them properly.

2) Smooth, stable and efficient functioning of the business organisation : Business enterprise

can run smoothly, be stable and efficient with the help of communication network only. Every employeeknows his role very well, The employees become informed of the expectations of the organisation

from them. This motivates them to give better performance towards it.



3) Communication works as a tool of supervision : It is through personal contacts or good

communication that supervision of the subordinates is made. Next to personal observation is thecommunication system by which supervisors get report.

4) Quick decision and its implementation : Communication helps executives to take quick

decisions and implementation of the same can be done without any delay. The decisions, are based onfactual and continuous flow of information through communication. It is posssible to take correct andtimely decision only in the event of continuous flow of factual information. The employees, also, are

not hesitant in implementing such decisions.

5) Communication develops better industrial relations : Because of communication sysem

all the disputes conflicts grievances of employees can be avoided and even if they crop up, they can be

solved as early as possible.

6) Communication develops better understanding : By communication system all types o

misunderstandings can be removed and better understanding among the employees and management is developed.

7) Communication develops Managerial skill : Communication facilitates executives to acquiremore knowledge and share it with their subordinates. Communication itself is a learning process. All

these ultimately results in developing managerial skill in all employees. Thus every member of theorganisation accomplishes the assignment skilfully. One can find that the functioning of the organisation

is going on scientifically and systematically.

8) Communication binds together the working group : Communication is essentially a flux

that binds the concerned individuals together in group activities.

9) Communication ensures unity, co-ordination, co-operation etc. : Communication seeks

to unify, coordinate and combine all the problems of the organisation. After solving the problems of the

organisation, the attainment of predetermined objectives is possible only by coordination & cooperation.

10) Communication is a tool of motivation : Communication is a fundamental tool of motivationwhich enhances morale of the employees.

11) Communication ensures high productivity at a lower c ost : Through communi cation,executives get new ideas, views, suggestions, from the workers, which ultimately are converted into

higher production, the workers know their role very well by better understanding. Thus it helps inreducing the cost of production.

12) Communication facilitates sound management : With the help of planned communicationnet work, management succeeds in establishing link between different management functions, for

example planning, organising, co-ordinating, direction and control. That is why Peter has rightly said, “good communication is the foundation of sound managment.”

13) Communication takes the employees in confidence : Communication makes available allthe information to all concern. The employees, therefore can share it. this gives rise to the feeling o

loyalty in employees. This is the way by which management takes the employees in confidence with

the result that the targets are safely achieved.



Thus it becomes clear that communication is a management skill and it is an indispensable part of

any management.

Functions fo Communication :

Actually importance and functions can not easily be separated from each other. Importance of anything is derived and assessed on the basis of functions provided and how they are used for the

benefit of management. We have seen the importance of communication in the previous paragraphs.

This importance is further strengthened by the following functions which “Thayer” - a managementthinker, has told.

1) Communication provides information about the needs of the employees individually, specially

in respect of guidance in their performance. Along with this, the management is able to collect informationabout the desires of the employees and can just assess their effect on employee morale and ultimatelyon performance. Naturally communication enables the management to take full care of the employee.

2) Command and instructions : It is the communication network that conveys the commands

and instructions to the employees and gets a feed back. Their obligations, duties and responsibilities

are made known to the employees by communication. All these help in easy and effective attainment of the objectives.

3) The motivational function : This function is also known as influence and pursuation function.It motivates the employees towards better perfromance and to exhibit a certain behaviour. Through

communication management can convince the employees that their working actions should be

organisationally beneficial.

4) The integrative functions : This function facilitates to integrate the efforts and activities o

the employees in such a way, that business orgaisation’s objectives can be achieved ultimately. This

function is possible only through the effective communication.

Types of communication :

Basically the whole communication system is of two types (i) Formal communication (ii) Informal

communication.

1) Formal communication : It is official and well set communication channel. it facilitat es

authoritative communication. The information, instruction, message dealing with technical or functional

specialisation can also be conveyed more effectively by formal communication system. This type o

communication is based on formal organisation structure where formal relationship exists. It takes

place through official channels. For instance, departmental meetings, conferences, company’s news bulletins, journals, publications, some special publications etc. This formal communication is generally

rigid as well as slow. However a good control system is possible through formal communication.

2) Informal communication : Generally groups of like minded and like ideological persons are

formed in any organisation. They have their own contentions and interpretations of the things (right or wrong). Whatsoever they discuss informally is spread throughout. Such a spreading may be called

informal communication. Secondally the management may convey some information and guidelines to

the employees throughs its supervisors. Conveying of information is such a way which is not the part



of formal cmmuni cation channel i s a lso informal communi ca tion. Both for ma l and infor ma l

communication channels do exist in organisations. As far as informal organisation structure is concerned,there, necessarily, exists informal communi cation. Informa l communication has its acceptance in

social groups. Such a communi cati on is like a grapevine which spreads al l through. Informal

communication, though it is within the organisation, is not restricted only to official information. At

times such a communication system gives rise to spreading of false and distorted information, gossipsetc. as a result men in organisation are misinformed and misled.

As a matter of fact informal communication should be supplementary to formal communication

and should be carefully used for the benefit of all including the organisation itself. Both these channels provide opportunity to interaction among the members. Carefully and conscious use of informal channel may provide such information which the formal channel is not capable to. In other cases one should

not totally rely upon the informal communication.

Other types of communication :

Both the above channels are based on the service they provide. Communication is further divided

on the basis of ways of communication and how is it operated.

They are :

1) Oral or written communication

2) Downward and upward communication

3) Vertical communication

4) Horizontal communication

5) Extra organisationa communication

1) Oral or Silent and Written Communication : Generally informal communication is done

orally. But oral communication is resorted to when the communicatee is illiterate and uneducated aswritten communication is of no use to him. Such a communication is made with educated people also

specially through speeches before elite audience. Seminars, Conferences, Meetings etc. are the placeswhere oral communication is made. though it is an easy method it is not useful for conveying technical

instructions or messages. This type of communication does not leave any proof behind. Naturallyone may deny the things which he might have spoken. Secondly rules and regulations should necessarily

be in written form. Oral communication should not always be relied upon.

When messages and instructions are brought on papers in black and white and the papers

provided, it is a written communication. This type of communication may be in the form of letters,

memos, orders, booklets, standing orders, bulletins etc. It is an authentic form of communication. It

is valid everywhere. It can be used as evidence in the court of law. It is a formal and official type ocommunication. The only draw-back in this is that it is time consuming and costly. Such a communication

can be made with illiterates also as, such persons can get it explained from educated people.

2) Downward and upward communication : Downward communication flows from the toplevel to lowest level of management. Such a communication may pass through several point e.g.from General Manager-Asst.. General manager - Asst.. General Manager - Departmental manager -



shop boss-and so on. This type of communication is generally a written communication. If oral

communication is resorted to in downward communication there is every fear that at every pointthere may be some addition or subtraction or distortion, as it is very difficult to reproduce the same

words and sequence. Downward communication relates to issue of orders, i nstructions, general

information, punishments, rewards, rules, regulations etc.

Upward communication flows from lowest level to the top level. It is generally in the form of reporting to bosses regarding performance, accomplishments, difficulties, grievances and so on. It is

a type of feedback to top level. Upward communication helps the management to know as to what is

actually going on, on the floor and what are the opinions of the actual implementers. This may be oralor written.

3) Vertical communication : This type of communication flows from top to bottom as wellas from the rank and file workers towards the management. It consist of downward and upward

communication. It is also known as inter-scaler communication. Official top-to-bottom communicationchannels flow down with great force and reach many people but official bottom-to-top channels flow

up with difficulty and reach to few people only.

4) Horizontal or lateral communication : It is also known as crosswise or lateral or diagonalcommunication. It takes place between managers or supervisors of the same status or of the same

rank. It refers to flow of information between departmental managers i.e., people on the same level in

an organisation.

Horizontal communication is based on the concept of “gang plank” advocated by management

thinker Henry Fayol. It allows two employees for example E and Z to deal at one sitting and in few

hours, with some question or other, which via the Scaler chain would pass through twenty transmissions,

inconvenience many people, involve masses of paper, spend lot of time to get a conclusion that is less

satisfactory generally than the one which would have been obtained in direct contact as between E and

Z. Though all the points (from A to Z) are in the same level, any communication from starting point

will pass through all the points in between origin and destination and consume much more time i.e.

information from E to Z will flow like from E ÕD Õ C ....... X ÕYÕZ and in return again samenumber of points i.e. Z ÕYÕZ ... C ÕDÕE which measures to be so.

A

Henry Fayol’s Gang-Plank concept



Horizontal communication is essential because activities of different departments need co-ordination

for achieving organisational goal.

5) Extra organisational communication : This type of communication takes place betweendifferent agencies outside the organisation and the people within it. This communication is done through

letters, annual reports to the creditors, bankers, the governement and trade organisations.

Scope, Media, Essentials of effective communication :

Scope of communication : Communication is as necessary to an organisation as the blood-stream isto a person. It is a basic tool for motivation and an increase in the morale of the employees which

largely depends upon the effectiveness of communication. Supervision and leadership are impossible

without communication. Communication is also a means of bringing about maximum production atthe lowest cost by maintaining good human relations in the organisation, by encouraging suggestionsand implementing them, whenever feasible. In fact it is impossible to have human rel ation withut

communication. Many conflicts and misunderstandings can be resolved to a great extent by a good

communication skill on the part of the management. It becomes clear that communication has a very

wide scope. The scope of communication can be described as under.

1) One way Communication : In olden days, that is before the industrial revolution, when the

size of business organisation was limited, the scope of communication was also limited. At that time, one way communication was in existance. It was considered as a powerful tool in the hands of the

management to get the things done through employees. One way communication can be called as a

downward communication, which usually provides no scope for the rank and file people to show their

reaction or forward their opinions, point of views or suggessions to the top level poeple. In modern

times one way communication has become outdated, obsolete, inefficient and ineffective. In one way

communication there is a transmission of ideas or information from executives to the subordinates. itis generally directive in the sense that it causes action to be initiated by subordinates. In today’s

environment one way communication is not suitable at all.

2) Two way Communication : In the global business world two way communication is alwayswel comed. There is a wide scope for thi s type ofcommunication. Thi s upward and downward

communication completes of circuit. In this circuit communication goes in upward and as well as in

downdard direction. The communicator and the receiver get an opporunity to intereact wit h eachother and exchange their ideas, opinions, viewpoints, suggestions and emotions etc. Whenever the

orders regarding work are issued by the top level to the bottom level of organisation under tow waycommunication the employees/workers get an opportuity to express and convey to the top level people,

their reactions, feelings, opinion, ideas, suggestions etc. freely. It is the duty and responsibility of the

supervisor to know, how and what to communicate to the higher executives. Two way communication

helps in building the mutual trust, co-operation, better understanding, mutual respect, between themanagement and employees which ultimately helps in improving industrial relations and peace. Last

but not least, a good communication system should be like a two way traffic, and both the transmitter

and the receiver have a joint role in making this communication effective.

3) Intra-organisational (Internal) communication : In modern business organisation there

are a number of departments established to perform the specialised business activities. Therefore it is



necessary to integrate and co-ordinate the activities of these different departments for achieving the

common objectives of the organisation. It is necessswary to establish intra-organisationsal /Internal/ interdepartment /commuication which helps in developing a link between various departments and

brings in mutuality of interest, team spiri t, team work, co-operative att itude among t he personnel

working in the organisation. This can be done either through formal or informal communication.

Intra-orga nisational communication may be called as i ntra-scal are communi ca tion. It is acommunication from persons at one level in an organisation to others at the same level. It provides a

means by which managers at the same level of an organisation co-ordinate their activities without

refering all the matters to their superior. the main idea behind this is, that a lot of matters can be handleat the same level of an organi sation which relieves superiors of necessary problems and they can

devote their precious time to other important matters.

4) Extra-organisational (external) communication : In the global business worl d, intra

organisational communication is not sufficient and adequate. Every business organisation comes intoconta ct wi th different segments of the society such as bankers, fina ncial i nsti tutes, creditors,

underwriters, shareholders, customers, solicitors, auditors, chartered accountants, traders, government

authorities, suppliers, investors, community at large etc. Therefore it becomes necessary to interactand communicate with these parties regularly to establish good rapport and relationship with them and

thereby winning their trust and confidence. A Good extra organisational communication helps inenhancing the image and goodwi ll of the company. In simpl e words thi s extra-organisat ional

communication is the communication between agencies outside the organisation and the people within

it.

Media of communication :

Due to the development in science and technology a number of communicati on medias areavailable, and one has to choose the appropriate one. generally it depends upon a variety of factors

such as parties, their relationship with each other,place, distance, nature and importance of the message,

time, money etc., Basically medium of communication is classified into two categories.

1) Through channel of command 2) Miscellaneous

1) Communication through channel of command : There exist different levels of management

in an organisational framework. It is through the chain of command the instructions and orders of top

level executive pass on to the lower level of managment. The plans, policies, rules and procedurestargets, objectives, schemes, programmes etc., of the organisation are communicated by the top level

executive personnel through chain of command to the lower level of management. For instance from

chief executive to departmental managers, supervisors, foreman and then workers. It is a fundamentalmedia of communication.

Miscellaneous : Due to the large size business organisat ions, large number of employees,

complexities etc. communication t hrough channel of command is not proved to be convenient and

feasible in all situations and in all times. Delay, avoidance of responsibility, red-tapism, bureaucraticattitude etc. are the main hurdles in this communication. These obstacles can be removed in a better

way by the miscellaneous medium of communication as follows :



i) Employee handbook : The employee handbook is aimed to help in the induction of newcomers

and to provide all the employees of the organisation, a cl ear-cut understanding of policies, plans,objectives of business organisation as well as the nature of the business, its sources of supplies, its

customers, its products and benefit and services available ito its employees. Such handbook creates

an interest in the employee and he begins to feel that the firm takes interest in him and takes care of the

employees. Thereby the newcomer tries to learn about the progress, development and growth of theorganisation, right from his induction.

ii) House Magazines and Newspapers : Some business organisations publish empl oyees

magazines or journals, to acquaint the employees with the development in the business, the activitiesof the business, the personnel working in the organisation. It is a platform whereon top management

can come together in an informal and direct terms with its employees. This ultimately develops team

spirit and mutual understanding between them. Such magazines generally contain news, perosnal and

social items such as sreferences to parties, marriage, birth, retirements, honours, awards, pictures o

the plant, product and changes in it etc., stories of promotions, retirement s, homemaking activities,

sport, suggestions and safety measures, which motivate the employees.

iii) Employee’s paper : Employees paper is an important and excellant means of communication.Few pages of the paper are exclusively reserved for employees voice in the form of letters. It also

includes safety news, suggestions, transfers, promotions, sports, recreation, description of progressand how every employee’s job fits in to the total plant operation, increased or decreased production,

plant expansion, newplant, annual reports etc.

iv) Financial report to employe es : The most commonly used media for communication of reports is speci al pamplhl et, employee magazine etc. The fact about the financial position of the

business organisation is described in it, such as the expenses of the business, its profits, losses, its

income and distribution, wages and investments etc. This report indicates the financial position and

market standing of the business organisation and can create understanding between the managment

and its employees.

v) Published statements : The published statements generally cover the personnel policies andgive clear picture of employer employee relations. It is in written form and in a very simple language.

It is in a booklet form coverning the various subjects like provident fund, pension plans, production

bonus, profit sharing, co-operat ive soci ety, sta nding orders, grat uity etc. These booklets are very

useful in communicating the above mentioned subject matter.

vi) Display stands : The di splay stands or information racks are placed at such places from

where the employees frequently pass, for example, the front lobby, carridor, the shop floor, at factory

gate, cafeterias, canteen etc. Pamphlets, booklets etc.,are either displayed on the display stands or

kept in information racks, so that employee’s eyes fall on them every now and then. Such racks maycarry words like, “ help yourself”, “Have you read these”, “Take one for yourself”.

This display includes the information about education, accidents, safety instructions, preventions, budgeting, taxation etc.,

vii) Bulletin boards : The bulletin boards are placed or hanged in the premises of the factories

and offices in attractive colours, types and formates for employees. Necessary instructions, notices



or any other information is conveyed to the employees through the bulletin boards and immediately the

outdated information is removed from it. It also includes the cuttings from newpapers and magazines, photographs of various events or occasions such as births, deaths, retirements, picnics, marriages,

diverces in the lives of present or formers employees, safety posters, photographs of visitiors, schedules

of athletic and recreational events, calender, calls for special meetings and other items of common

interet are displayed on bulletin boards.

viii) Audio-visual aids : The audio-visual aid includes films, movies, slides, tape recorders, T.V.,

computer for the advantage of the employees which leave no room for any misunderstanding. An

internal broadcasting system provides a convenient medium for instant communication. This deviceis used for reducing the rate of absenteeism, tardiness, breakages and waste.

ix) Muse ums and exhibitions : Main objective of this media of communication is to createinterest among the workers in their own work. It displays good workmanship, quality control ideas

and good designs, old photographs of the concern or factory, old designs and good quality productsetc.

x) Posters : It is an old and rigid type of communication media. It’s effect is not direct butindirect. The items such as related to health and safety, hygiene, bonus, improvement in the mill etc.are displayed through such posters. The posters are in the form of charts, photographs, cuttings from

newspapers etc.

xi) Notice Board : The notices are often pasted on the factory walls or at the gate of the factory,

near canteen or placed in glass cupboards that are hung at appropriate places in the premises of the

business organisation. Extracts of various statutes, statutory notice, standing orders, notices about

the sports club, co-operative and/or dramatic society, circulars and notices issued by the management

for administrative purposes, are placed on such notice boards.

xii) Suggestion System : In modern times the suggestion system is real ly worthy and very

popular among the employees. It is designed to ensure the co-operation of subordinates in effecting

improvements and in eliminati ng waste to provide meaningful working communication with themanagment. Suggestion are invited from the employees and rewards are given to the best suggesion.

Suggestion boxes are placed at convenient places in the plant. Many times valuable as well as best

suggestions come from the employees of the organisation. When such suggestions are accepted andimplemented, the employees feel proud and happy which increases their morale. In this way they may

participate in decision making process. Such suggestions can be implemented quickly and without anyhurdles which develops harmony between management and employees.

xiii) M eet ings, C onfere nce s, S emi nars/Work sh op s : In t his t ype of medi a ver balcommunication ta kes place. Important issues, problems, subject matters are discussed wit h the

employees, executives, as well as managerial personnel. It is an effective media of communication.Important feature of this is two-way interaction by which dialogue becomes possible in best manner.

It is a popular media of communication in modern times.

Essentials of effective communication :

Most of the communication become ineffective because many administrators are poor listeners.



This drawback can be removed by t he managment and listeningability can be developed in such

administrators. Effectiveness of communication mostly depends upon the environment within theformal organisation structure. If lines of authority and channels of communication are not known to

the concerned employees, then miscommunication, excessive communication or lack of communication

takes place. Communication tends to become more impersonal if the span is too wide. Establishment

of ideal communication syst em requires planning, organising, co-operatin and control. The test of successful communication is the manner of its reception and the action thereon and the awareness o

the psychology and emotions of the parties involved. The effectiveness largely depends on reciprocal understanding, mutual exchange of ideas, facts etc., The following are the essentials of an effective

communication :

1) Two way communication : In communication there must be two parties i.e. sender or transmitter

and the receiver. Both have a joint role in making communication effective. It is a two way traffic.

Mere transmission of facts, ideas,opinions etc., is not effective and meaningful communication. Channel

must be open for knowing receivers views, opinions, ideas etc., Then only effective communication

can take place.

2) Mutual Trust : For effective communication, there must be mutual understanding between the transmitter and the receiver of the message. Lack of mutual understanding between them signifies

that there is a lacuna in the communication system. Presence of mutual trust between the superior andsubordinates indicates healthy interpersonal relationship between them.

3) Cl arity of message : Fi rst of all sender’s message must be clea r to himself. He should

thoroughly understand it. Feedback provision in the communication system is called a two-way traffic

or process. Therefore the sender should also try to know the reaction of the receiver of the message.In face to face communication it is easy to get feedback of the listener but in other cases the sender

of the message has to do a lot get clues of the reactions of the receiver of the message. The feedback

principle avoids the most likely errors in transmission of message and invokes effective participation

of the subordinates.

4) Timely message : Time factor is the most important factor in good communication system.The message shoul d be ti mely sent and received. Timeless c ommunicati on is worse than no

communication.

5) Completeness of message : Incomplete message requires repeated communications which

ultimately results in delay in action and causes misunderstanding, unhealthly human relations, andinefficiency. The message to be communicated must be adequate and complete.

6) Consistenc y of message : The message to be communicated should always be consistentwith the objectives, plans, policies and programmes of the enterprise.

7) Good Listener : One of the essentials of effective communication is that the executives and

supervisors must be good listeners. They must be attentive and patient when others are attempting to

communicate.

8) More emphasis on feedback : An effective communication is a two way process. Therefore

it is required that the sender of the message allows the receiver to express his view or reaction in



response to any message transmitted. More emphasis should be given on feedback from the receiver

of the message.

9) Channel of communication : Effective communication depends mostly on select ion o channel of transmission of message and the speed of transmission of message. But at the same time

accuracy of message is also needed.

10) Continuing process : The goal of communication is complete understanding. Therefore,

there should be a never-ending process of listening and reading. Communication should be constant, habitual and automatic.

Questions

1. Define the term Communication.

2. State the key elements of Communication.

3. Explain the objectives of Communication.

4. State the importance of Communication.

5. Describe the various media of Communication?

6. What are the essentials of effective Communication?

7. What are the characteristics of Communication.

8. What are the functions of Communications?

9. State the various types of communication.

10. Explain the scope of Communicaion.



10COORDINATION

Co-ordination :

Co-ordination is a classical concept developed at an early stage of the evolution of management

thought. Co-ordination is one of the important functions of management. Henri Fayol, James Moorey

and other management writers emphasised on the need for co-ordination in big as well as small

business enterprises. They regard an organisat ion as a system of coordinative group efforts which

requires co-ordination in all the efforts. It is the responsibility of a manager to coordinate among the

activities of all the segments of the organisation in order to achieve the predetermined objectives. All

the departmental activities have to be linked together in order to ensure the smooth and successful

functioning of an organisation.

Co-ordination means harmonious combination or interaction. It is an orderly arrangement of group-

effort; to provide unity of action in the pursuit of a common purpose. The concept of co-ordination is the “mother principle” of organisation from which all other principles are derived. Organisation is a

rational framework for blending group efforts. The mechanics of co-ordination is supposed to be builtinto the orgaisational structure by its very nature. Since co-ordination is the all inclusive principle of

organisation, it is the all inclusive function of management and not just one of its functions. In simple

words coordination stresses upon the balancing of various activities, harmony in the working of all the

units, unified and blended approach, pulling together the entire enterprise, timely communication witheach other and co-operation.

Co-ordination is a dynamic concept seeking always modification and changes in accordance with

the needs of the organisation. The changing technology, business environment, government policies,

market position, labour market position, changes in internal policies, make the old co-ordination disturbedand there arises a need for fresh co-ordination.

Co-ordination provides key to all the activities. Therefore it is rightly said that co-ordination is the

“heart of management.”

As per the concept of co-ordination as defined by traditional management thinkers like Louis Allen,

Henry Fayol, James Mooney etc., co-ordination is a separate function of management. They said thatmanagers should try to co- ordinate the activities through which organisational goals can be achieved.

After that the classicists said that “Co-ordination” is achieved automatically, when all the managerial

functions are performed effectively. Follett defined the concept of co-ordination as, “Co-ordination

starts from the very first stage of managerial functions.” Koontz and O’Donnell described Co-ordination

as “the essence of managership”. “Modern thinkers describe the concept Co-ordination as ‘it is not anindependent function which can be performed separately.’ They describe co-ordination as a continuous

process by which managers can achieve the integrated pattern of group efforts towards commongoals. co-ordination implies avoidance of all splintering efforts, delays, controversies and conflicts

that may destroy unity of working.



Definitions :Different authors have defined the term co-ordination as under.

1) Ordway Tead “Co-ordination is the effort to ensure the smooth interplay of the functions and

forces of all the components and parts of an organisation to the end that its purpose will be realisedwith a minimum of friction and a maximum of collaborative effectiveness.”

2) G. R. Terry , “Co-ordination deals with the task of blending efforts in order to ensure successfulattainment of an objective. It is accomplished by means of planning, organising, actuating and controlling”.

3) Herny Fayo l, “To co-ordinate is to harmonise all the act ivi ti es of a concern in order to

facilitate its working and its success”.

4) A. C. Railey and J. D. Mooney , “Co-ordination is an orderly arrangement of group effort to

provide unity of action in pursuit of a common purpose”.

5) William Gulick , “Co-ordination is a set of human and structural mechanism designed to link

the parts of the enterprise together to acheive the specified objectives.

6) J. L. Lundy , “Co-ordination involves the development of unity of purpose and harmonious

implementation of plans for the achievement of the desired ends.”

7) D. McFarland , “Co-ordination is the process by which managers achieve integrated patternsof group and individual effort. To co-ordination is to develop unity of action for common purpose.”

8) William H. Newman , “ Co-ordination deals with synchronising and unifying the actions of a

group of people. A co-ordinated operation is one in which the activities of the employee are harmonised,

and integrated towards common objectives.

Features or characteristics of co-ordination :

Following characteristics or features of co-ordination can be derived after studying the above

definitions.

1) It is an important function of a managerial leader.2) It is a continuous process in the field of management of an organisation.

3) It applies to group effort and united action. It is something more than co-operation.

4) It aims at the attainment of common purpose.

5) It ensures the stability of the organisation and focuses on organisational order, continuity, predictability, precision and reliability of results.

6) It calls for a conscious and deliberate effort on the part of managers at all the levels in theorganisation.

PURPOSE AND NEED OF CO-ORDINATION

Mentioned below are some important purposes that can be realised through co-ordination :

1) Integration of objectives, goals, aims of an organi sation : Every one preceives the

organisational goals separately and in his own ways and tries to achieve them. But this can not render



desired results unless all such efforts are integrated, directed and therefore coordinated. The integration

of all the objectives or goals can be done by co-ordination alone so as to remove and avoid confusion

in the organisation. Co-ordination is the only tool available to bring unity of action in the organisation.

2) Achievement of better performance and better results: Decentralisation, at least to certain

extent is inevitable in large manufacturing organisations. A single job may be spread over in differentdepartments or sections. As such effectiveness and efficiency in completion of such job depends

solely upon t he synchronisation of the work of these departments. Ot herwise success would beeopardised. Co-ordination between the departments, sections and jobs as well as personnel, is the

only tool for achievement of better performance and results.

3) Achievement of economy and efficiency : Co-ordination saves time, money and energy by

avoiding duplicat ion of work and efforts. Therefore it is possible to bring economy in performing

activities. If the activities are properly co-related with each other there will be minimum delays which

will bring efficiency in the business organisation.

4) Maintaining better Human relations : By ‘co-ordination function’ managements can provide

ob satisfaction to the employees which motivates them and helps to keep their morale high. Better

human relations can be maintained if the authority and responsibilities or duties given to the employeesare clear. Confusions and conflicts can be avoided through proper co-ordination of their efforts.

Ne ed for co-ordination :

a) Constant changes b) Poor leadership and (c) Inherent complexity of large scale organisationgive rise to problems of co-ordination and controls.

Diversified and specialised activities under the principle of division of labour leading to an extreme

specialisation, demand special attention to co-ordination. Departmentation also leads to co-ordination.Human nature of competition, rivalries and jealousies in large business organisations create special

need for co-ordination. Large number of employees work in big business organisation. It therefore

becomes essential to co-ordinate, that differences in efforts, approaches or interests are reconci led

and individual goals and actions are harmonized so that they may bring about common objectives. Co-ordination promotes efficiency, unity of command, team spirit, subordinates, individual interest s of

general interests of the enterprise, boost to good relations and enhancement of employee morale. Co-ordi na ti on avoids dupl ica ti on of work or effort s, i nter per sonal c onfli ct s, c ont roversi es, misunderstandings, delay, wastages and confusions. It harmonizes, unifies and blends all activities and

thus, ensures the achievement of predetermined objectives.

Types of co-ordination :

Co-ordination in any organisation is either Internal or External.

1) Internal co-ordination : Internal co-ordination exists within the organisation. It develops inter-

personnel relationship with a view to co- ordinate the activities of all departments. There are three

forms of internal co-ordination.

a) Co-ordination between different groups of employees working in the same department.



b) Co-ordination between managers and workers at different levels of management.

c) Co-ordination between board of directors and departmental managers

Basically internal co-ordination is broadly classified into two categories i.e. (i) Vertical co-ordination(ii) Horizontal co-ordination . All the forms as mentioned above come under the preview of these

types.

(i) Vertical co-ordination : Vertical co-ordination is needed to ensure that all the levels in the

organisation act in harmony and in accordance with organisational policies and programmes. Under this type of internal co-ordination, there is a co-ordination of relations and activities between t he

superior and his subordinates and between subordinate and his superior. For instance co-ordination

between the production manager and the production superintendent, marketing manager and themarketing superintendent etc. Vertical co-ordination is secured through delegation of authority and

with the help of directing and controlling.

(ii) Horizontal co-ordination : Co-ordination between the reacti on and acti vities among t he

authorities and employees of the same status come under this type, especially in large scale businessorganisation where problems become more complicated. It is the fine art of the manager to achieve

co-ordination in this horizontal sense. Co-ordination among the different departmental heads, superiors

of different sections are examples of this type of co-ordinati on. Co-ordination between production,

sales and personnel depart ment, is called horizontal co-ordination. In small business concerns co-

ordinati on is establi shed between interdependent depart ments, because of proximity of working

arrangement,close contacts and close communication.

2) External co-ordination : External type of co-ordination refers to the establishment of relationshipwith outsiders. Every enterprise has to establish such relations and co-ordinate its activities for the

benefit of the enterprise as a whole. Generally the duty of external co-ordination is assigned to the

public relations officers in a modern business organisation. Business organisations have to maintain

interaction with customers, creditors, bankers, suppliers, government, competitors etc. Therefore it

has keep proper co-ordination with all these people. This type of co-ordination is called an external co-ordination and it is a must for the survival of the business organisation.

Apart from these types there are another two types of co-ordination, namely diagonal co-ordination

and informal co-ordination.

Diagonal co-ordination :

Large scale, complex business organisation structure is, generally, dominated by projects. Many

times these projects are not in proximity of each other. As an effect they lack in working arrangements,

close contacts, short time communications amongst the personnel. This obstacle adversely affectsco- ordination. This can be removed by establishing diagonal co-ordination in which every departmental

head communicates to all others without waiting for completion of line of communication. With the

help of diagonal co-ordination certain common persons and facilities can be brought cl ose to each

other.

Informal co-ordination : Organisat ion may adopt informal means of co-ordination through processes of social, unofficial interactions, relationships and mutual adjustments. They may prove to

be more effective than normal means, if handled properly.



Principles of Co-ordination :

Effective co-ordination entirely depends upon effective leadership. Co-ordination and leadership

together can assure directi on of corporate efforts effectively towards the predetermi ned objectives.Co-ordination is a continuous process by which managers achieve the integrated common goals. It is

therefore, the responsibility of manager to establish better co-ordinati on. Better and effective co-ordination, according to Mary Parker Foliet, can be achieved if the following principles are adhered to

1) Principle of direct contact : Co-ordination can be best acheived by direct personal contacts

among the responsible people concerned. A must for effective co-ordination, as per this principle, is

direct face to face contact between important and responsible persons in the enterprise, through

interpersonal, horizontal relationship. People can interact with each other by exchanging their views,

ideas and face-to-face dial ogue. Personal communication is more effective than any other method.Direct contact is possible in small size organisation but in large organisation it is difficult to keep and

ma intain direct contact with the responsible persons. This difficulty can be removed by providingmechanical devices like telephones, fax machine, telex, e-mail etc. for the direct and effective personal

communication through which better co-ordination can be achieved.

2) Principle of achieving co-ordination in the early stages of planning and policy : Co-ordination must start at the earliest stage of planning, organising, policy making and control. Departments,

for which a policy is to be framed, must be consulted before hand. Secondly if any department is

going to be affected by such policy, that department also should be consulted before hand. For example

if the production ma nager plans to produce something in a particular period, he must contact all

departmental heads viz. purchase, stores, finance, sales and marketing, plant engineer etc. All t he

departments then can co-operate, synchronize and harmonize their activities. Lack of co-ordination inthe early stage may result in business failure. Therefore the general manager should try to co-ordinate

all departmental activities right from the beginning of the management process.

3) Principle of reciprocal relationship : Co-ordination must involve a reciprocal relationship

i.e. willingness to give and take among the persons and activities concerned. This principle indicates

that all factors in a situation are reciprocally related. For instance, financial manager has reciprocal relationship with production manager. Production manager, in turn, co- ordinates with sal es and

marketing manager and other managers. All the above managers find themselves influenced by all people in the total situation. In simple words every member of the organisation maintains relationship

with each other in the total situation. All the aspects or part are influenced by other aspects or parts.

4) Principle of continuity : Co-ordination is a continuous process. It is a never ending function

of management. If it stops some where, it will be harmful for the entire business organisation. Hence

adequate care must be taken by the top executives regarding the continuity of co-ordination of various

activities etc.

Adoption of the above menti oned principles ensures effective co-ordination at all levels o

ma nagement during actual operation and supervision of business activities. Along with the above

principles there must be democratic participative management as well as clear-cut and careful delegation

of authority. There should not be any overlapping of irresponsibility to achieve vertical and horizontal

co-ordination and for prevention of conflicts. Co-ordination helps in anticipating the problems and



measures to avoid them can be t aken. All these principles are required to be kept in mind whi le

performing co-ordination function.

Techniques of effective co-ordination :

Co-ordination is a continuous process and it is done at all levels of management. Mangers use a variety of techniques in the business organisation to achieve co-ordination. These techniques may be

divided as General techniques and Specific techniques.

1) General Techniques : Co-ordination can easily be achieved if managerial functions are properlydesigned and executed. Thoughtful and proper design of managerial functions is the key to successful

co-ordination. Almost all managerial functions directly affect co-ordination, for example pl anni ng,

organisation, departmentation, supervision, leadership and control. Policies and procedures should beco-ordinated while planning the objectives and goals of the business concern. If the policies and

procedures are in consistent with objectives, it will create problems to the business concern. Therefore

there should be clear-cut and effective delegation of authority and specified relationships to avoid

many conflicts and misunderstanding. This promotes co-ordination. It is the duty of top executives to

create various departments based on various functions and est ablish rel ationship between variousdepartmental heads, managers, executives and subordinates. People, leadership and supervision, too,

promote co-ordination which ultimately results in team spirit and honest effort for achievng ultimate

objectives. Control techniques also help the organisation towards achieving common objectives of the

organisation as well. The co-ordination can be achieved if manager starts co-ordination efforts of

unifying, blending and harmonizing from the very early stage of planning and continues to the last

stage of controlling.

2) Specific techniques : It is managers duty to see that the co-ordination exists in the entire

organisation although he cannot order for it. It is the product of efforts undertaken in the enterprise.Following are some specific techniques that can be used by managers for ensuring co-ordination.

a) Co-ordination by Meetings and conferences : Periodic meetings of staff of various levels

of management is an effective technique of co-ordination. Weekly group meeting or conference of thedepartmental heads under the chairmanship of the general manager is a very effective device for co-

ordination, suggested by Henri Fayol. It provides them an opportunity for direct contact, asking them

how the things are going on? Their problems difficulties, management’s expectation from them, solvingtheir problems, exchanging various ideas, opinions, points of view, problems, solutions are effectively

discussed and resolved in such meetings. All this leads to harmony and unity in working.

b) Co-ordination by committees : Establ ishment of departmental commi ttees is another

technique to ensure effective co-ordination. These committees meet periodically and discuss variousmanagerial problems and find soluti ons to these problems. Sometimes there are some permanent committees for the purpose of co-ordinating the activities of two or more departments. The committeesusually comprise of representatives from all depart ments. Thus committees solve many managerial

problems an serve as a sound technique of co-ordination

c) Co-ordination by liason officer : Instead of establishing permanent co-ordination committees,

appointing a liasion officer and entrusting him the co-ordination work is less expensive and more

effective as this liaison officer is always available. This liasion officer would do the work of establishing



and maintaining co-ordinati on among important departments. In modern days this practice is not

prevalent.

d) Co-ordination by order and command : This i s one of the effective techniques of co-ordination. A manager, by issuing orders and commands to their subordinates, achieves effective co-

ordinat ion. The manager can also clearly define the work of his subordi nates, their role, functi on,timing of performing the work, in order to achieve co-ordination. In modern days this technique is notconsidered good, since, it neglects significance of human relations.

e) Co-ordination by goals or targets : The top boss fixes targets for all the departments and

entrusts the job of fulfilling them to his subordinates i.e. departmental heads. He, by his own means,

ensures achievement of such goals and completion of the targets. This, indirectly, establishes co-

ordination.

f) Co-ordination by departmentation : Departmentation facilitates co-ordination in a better

way than other techni ques. It i s one of the important means of dividing the large scale business

concern into smaller administrative units. Departmentation is done on the basis of functions products,

customers, territories and so on. As these departments are interdependent, co-ordination is automaticallyestablished.

g) Co-ordi nation by communication : Proper communication is a successful system of co-ordination. As such adequate faciliti es for good communication should be provided. Defective

communication system may result in ineffective co-ordination.

h) Co-ordi nation by special co-ordinators : In big industrial concerns, along with various

managers, a project co-ordinator is appointed. His main duty is to co-ordinate various activities relating

to a particular project. The function of this co-ordination cell is to collect information and send it to thevarious departments. Smooth co-ordination and ultimate success of the enterprise is assumed by such a special co-ordination cell.

A company may adopt any type of technique from the above. Its choice depends upon the type,

size and objective of the business concern. Sometimes a company may adopt a combination of some

of the above techniques to achieve the desired results.

When a group of people works to achieve a common objective or purpose, co-ordination becomes

a must to synchronise their efforts. And when sub-division of work is not possible then co-ordination

becomes compulsory. Co-ordination is essential when diversified tasks are undertaken by some persons. co-ordination starts as soon as the operations begin. Without proper co-ordination the organisational

objectives can not be achieved. It is essential for the survival of an organisation.

Co-ordination is the essence of management. In all small and big organisations there are individuals

and groups competing for influence and resources. There are differences of opinion and values,conflicts of priorities and of goals. Individiuals as well as groups have different roles, different goals

and different skills. The overall task of management is to co-ordinate and integrate or blend thesedifferences into one united wholeness. Co-ordination is a central problem of the organisation. Ideally

co-ordination spreads throughout all managerial activities. Management has to secure effective co-

ordination of human efforts and non-human resources. Management of a big business is essaentially a



task of co-ordination. All departments, sections etc. are duly welded into one united and integrated

whole aimed at working to achieve common goals. Thus we have unity of direction and unity of

objectives. Co-ordination tones up general level of employee morale and job satisfaction. Various types

of plans such as objectives, policies, strategies schedules and programmes serve as means of co-

ordinating the activities of the enterprise spread over several departments and divisions. The organisation

can not be said to be efficicient unless it attempts to achieve co-ordination by creating a sound organisationstructure. It defines the activities of the enterprise in terms of individual tasks and the activities that are

grouped into homogenous work units and authority positions. Without the process of integration of diverse activities, roles and authority relationships will not be clear, Staffing function involves manpower

planning, employment, training, wage fixation, merit rating, job evaluation etc. All these sub- functionsare performed in such a manner that there are right persons on different jobs. All this helps in achieving

co-ordination in assigning tasks to various individuals. With the help of direction, manager can influence

the behaviour of individuals so as to evolve goal directed effort. Thi s is very much essential for achi eving co-ordina tion. Controll ing also contributes towards achievi ng co-ordinat ion. Under this

function, standards of performance are established, and actual performance is compared with standard

performance and deviation if any is measured, and then necessary corrective measures are undertaken.

By implementing these measures all activities are converted into achieving co-ordination in the business

enterprise. Finally it can be concluded in such a way that, co-ordination is achieved by performingvarious functions of management.

Although for the success of any organisation co-ordination must exist between different departments,

groups and activities. But there are some limitations in the area of co-ordination due to the following

circumstances.

1) Uncertainty of future is the greatest challenge to effective co- ordination. Every forecast is

not cent percent perfect and accurate, due to some natural calamities like heavy rains,

floods, droughts, earth quakes and certain abnormal changes in the behaviour of individuals

and groups in organisation. These create obstacles in successful co-ordination.

2) Incomplete knowledge, consciousness, capability, talent, experience, bad character of the

managers are also the constraints in effective co-ordination.

3) Lack of administrative and managerial skills and technique, on the part of executives and

managers limits the degree of co-ordination in a business organisation.

4) Lack of systematic method of developing and adopting new ideas and programmes act as

a constraint in effective co-ordination.

5) A vast number of variables due to the incompleteness of human knowledge limit the degreeof co-ordination.

6) Large number of units with the larger number of people in it who possess varying skills

and personal specialisation creates problem in securing co-ordination, because it is very

difficult to co-ordination all of them.

7) Due to Subordination of general interest to individual interest, it is difficult to achieve co-



ordination in the absence of proper motivation. Individual interest of people become more

important and works as a barrier to co-ordination.

8) If the authorities have not been properly delegated and responsibilities fixed, more conflicts

and confusions may arise which limit the degree of co-ordination.

9) Party politics, desire for self importance, dual superiors, lack of unity of command, lack oco-ordination, defective control are some other constraints in effective co-ordination.

Merits of co-ordination :

Follwing are some important merits of co-ordination.

1) It increases the effectiveness of managers. It pulls all the departmental activities towardsthe attainment of predertmined objectives in time.

2) It increases the production, efficiency and profitability of the business organisation andreduces the overall cost of organisational operations.

3) It helps in activa ting the predetermined desired goals and objectives of an businessorganisation.

4) It enhances workers morale.

5) It facilitates smooth, continuous running of an business organisaiton.

Questio ns

1. What do you mean by co-ordination ?

2. Define the term co-ordination .

3. State the characteristics of Co-ordination.

4. State the purpose and need of co-ordination :

5. Explain the various types of co-ordination.

6. State the principles of co-ordination.

7. Explain the techniques of effective co-ordination.

8. Explain Co-ordination - An effective tool of managing.

9. State the Constraints in co-ordination.

10. State the Merits of co-ordination.



11MOTIVATION

Meaning and Concept of Motivation :

The primary taks of managemnt is t o get the thi ngs done through and by the people for the

attainment of the common goa ls of an organi sation. The success or failure of a business concern

depends basically upon the performance given by the people working in it. Therefore, it is necessary

for managment to inspire and stimulate or encourage the people with a lead to do work for the

accomplishment of organisaional objectives. In simple words, it is necessary to motivate the personnelfor the attainment of predetremining objectives of the business organisation. To do so, a manager

must see that his subordinates work efficiently and enthusiastically and give results that are beneficalto the organistion. Business organisational goals can not be achieved without subordinates willingness

to put their best efforts. The problem of motivation arises here only. The “Capacity to work” and

“willingness to work” are two different things. A person can be physically, mentally and technically fit

to work but he may not be willing to work. hence, there is a need of something that awakens a desireto work. This something is motivation. Motivating is therefore, to create a need and a desire on the

part of worker to better his present performance. Thus motivation relates with the “willingness towork”. Performance results from the interaction of physical, financial and human resource. The first

two are inanimate, they are translated into “ productivity”, only when the human element is introduced.

However a human element interjects a variable over which a managment has limited control. While

dealing with employees, however is an intangible factor of will, or freedom of choice is introducedworkers can increase or decrease their productivity as they choose. This human quality gives rise to

the need for positive motivation. Generally, performance is determined by three factors, viz. ability,

knowledge and motivation. Performance = (ability + knowledge) x motivation. Among the three,motivation is the most important factor since it deals with human behaviour. A manager should know

that the performance of an employee is a function of his abilities and motivation. The first determines

what he can do ? The second determines what he will do? While there is a strong positive motivation,the employees output is i ncreased, but where it is negative or a weak positive motivation, this

performance level is low. One of the key elements in personnel management is motivation. Motivationis more important task than planning, organising and controlling. Only the good plans, and policies and

excellent organisation can not make the business organisation successful, in the absence of winningness

and enthusiasm on the part of workers. It has been experienced on various occasions that highly

motivated people have achieved success despite the absence of good plans and policies of effective

organisational structure. Moreover if there is highly motivated subordinate, the less controal is necessaryto be sure that work will be executed. However motivation is not a substitute for planning, organising

and controlling.

Meaning of Motivation :

Motivate is a “Latin word” meaning “to move” human motives are i nternalised goals within individuals. We can define motive as a factor that makes a peson act a particular way. It is an inner impulse causing man to action. Motive is defined as an inner state of our mind, that energizes, activates

or moves and directs or channelises our behaviur towards goals. A motive is the mainspring of human



action. A motive is the active form of a desire, craving or need, A motive works twoards a cherished

goal. It is goal-direced, it in itself is invisible. Motivation is the process which influences people to act.

The process involves need drives and goals. Motivation is always internal. It is externalised through

behaviour. Motivation-behaviour-goal is called the cycle of Motivation. The cycle continues till the

goal is achieved. It can be defined as the willingness to exert towards accomplishment of some goal.It focuses inner drives that activate or move an individual to action. The force of motivation lies within the mind. It is a dynamic force setting a person into motion and action. A man is motivated or set into

action either by extrinsic rewards and punishments or by intrinsic incentives. Motivation is, thus, anart of stimulating people to take desired course of action. Some people may be motivat ed by the

rewards while others are self-motivated. Thus motivation is a process to get the needs of the people

realised with a view to induce them to work. Indeed, motivation is nothing but an action of inducement.The skill of motivating the people is the life blood of an organisation. Hence it is improtant to understand

people and the way to handle this dynamic human resource, so that people work to the utmost ability

that too with interest. Psychologists define motivation as that which arouses behaviour, sustains it and

channelises the behaviour into a specific course. Motivation is the process of creating organisational

conditions which will impel emphasis to strive to attain organisational goals. Psychologists generally

agree that all behaviour, sustains it and channelises the behaviour into a specific course. Motivation isthe process of creating organisational conditions which will impel emphasis to strive to attain organisational

goals. Psychologists generally agree that all behavours are motivated and that people have reasons for

doing the things they do or for behaving in the manner that they do. In other words. all human behaviour is designed to acheive certain goals and objectives. Such goal directed behaviour revolves

around the desire for need satisfaction. We may define motivation as, “a willingness to expend energy

to achieve as goal or reward. It is a force that activates dormant energies and sets in motion the action of the people. It is a function that kindles a burning passion for action among the human beings of an

organisation”.

Here are some important definitions of motivation :

1) Michael J. Jucius : “Motivation is the act of stimulating one or oneself to get a desiredcourse of action to push the right button to get desired results”.

2) Dale Beach : “Motivation can be defined as willingness to expend energy to achieve a goal or

a reward”.

3) Mc Farland : Motivaton refers to the way in which urges, drives, desires, aspirations, striving

or needs, direct, control or explain the behaviour of human beings.

4) Koontz and O’Donnell : “Motivation is a general term applying to the entire class of drives,

desires, needs, wishes and similar force that induce an individual or a group of people to work”.

5) Edwin B. Flippo : “Motivation is the process of attempting to influence others to do their

work through the possibility of gain or reward”.

6) Scott : “Motivation means a process of stimulating people to action to accomplishing desired

goals”.7) Dubin : “Motivation is the complex of force starting and keeping person at work in an

organisation”.



8) Lillis : “Motivation is the stimulation of any emotion or desire operating upon ones will and

prompting or driving one to action”.

9) J. E. Rosenz Weig and F. K. Kast : “Motivation is an inspiration process which impels themembers of the team to accomplish the desired goals.”

10) S. Zedck and M. Blood : “Motivation is a pre-disposition to act in a specified goal directedway.”

11) The Encyclopaedia of Management observes : “Motivation refers to the degree of readinessof an organism to pursue some designated goal, and implies the determination of the nature and locus

of the forces, including the degree of readiness.”

12) Tolman : observes, “More specifically, the term motivation has been called an intervening

variable” Intervening variables are internal and psychological process which are not directly observable

and which, in turn, account for behaviour.

Thus motivation consists of the three interacting and interdependent elements of needs, drives and

goals. Needs are the deficiencies and are created whenever there is a physiological or psychologicalimbalance. Drives or Motives are set to alleviate needs. These are action oriented and provided an

energizing thrust towards goal accomplishment. They are the very heart of motivational process. Goals

are anything which will alleviate a need and reduce a drive. There are some facts about motivation

need, such as (i) Motivation is a hypothetical concept which is defined in terms of antecedent conditions

and consequent behaviour. (ii) Motivation is an intervening variable for it can not be seen, heard or felt

and can only be inferred from behavour. For instance, motives such as hunger, sex, power andachi evement can not be seen. Restlessness, walki ng, running, eating or t al king or winning a new

friend can be observed.

Above definitions reveal the following characteristics of motivation.

1) It is an internal instinct or it is a psychological concept : Motivation refers to a feeling

within individuals. It is an inner state that energizes, activates or moves and directs or channelises

behaviour towards goals. All human behaviour is desinged to achieve certain goals and objectives .Such a goal directed behaviour revolves around the desire for need satisaction. The needsetup drivesto accomplish goals. Motivation consists of the three interacting and interdependent elements of needs,

drives and goals.

2) Man is motivated as a whole and not in part :

It is not possible that a part of a man is motivated but whole man is motivated. A person’s basic

needs determine to a great extent, what he will try to do at any given time. Needs are the deficiencies

and are created whenever there is a physiological or psychological imbalance. Motivation representsan unsatisfied need which creates a state of tension or dis-equilibrium, causing individual to move in a

goal directed pattern towards restoring a state of equilibrium by satisfying the need. Motivation impliesany emotion or desire which so conditions ones will that the individual is properly led into action.

3) Motivation is always goal oriented :

Goals and motivates are inseparable. Man’s behaviour itself is goal oriented. Man works to achieve

some goals or objectives. Motivation has a profound influence on human behaviour. It directs human



behaviour towards the goals. As soon as his goal is achieved he would be no longer, interested in work.

Therefore i t is essenti al for management to know his goal t o push him t o work. In simple wordsmotivation causes goal oriented behaviour.

4) Motivation is a continuous or endless process :

The goals of the individual and the organisation can be achieved through stimulationg workerstowards productive performance called motivational process and it is a continuous process. Man is a

social being and has unli mited wants, needs, desires, which i nduce him to work. If one need is

satisfied, it loses its power as a motivator and at the same time another need arises. Needs, wants areinnumerable and can not be satisfied at one time. Satisfaction of needs is an unending process, therefore

the process of motivation is a continuous one.

5) Motivation can be positive or negative :

Workers can be motivated either positively or negatively. Positive motivation, sometimes called“anxiety reducing motivation” or the “carrot approach”, offer something valuable to the workers, for instance, pay, pra ise, appreciati on bonus, promotion etc. for bet ter performance from t hem.

Punishments, fear, removing security of job, demotion, fines, cut in pay, dismissal, retrenchment etc.

are the examples of negative motivation methods where people work in fear.

Objectives of Motivation :

Following are some important objectives of motivation

1) To create conditions : Main basic objective of motivation is to create conditions in which

people are willing to work with zeal, initiative, interest and enthusiasm with a high moral satisfaction- personal as well as group. Motivation, as well creates feeling or responsibility and loyalty. This

ultimately results indiscipline. Naturally the workers feel pride and confident towards achievement of

organisational goals effectively.

2) To stimulate employee growth : Motivational techniques are utilised to stimulate employee

growth.Clurence Francis rightly said that “You can buy a man’s time, you can buy a man’s physical

presence at a given place, you can even buy a measured number of skilled muscular motions per hour or day, but you can not buy enthusiasm, you can not buy initiative, you can not buy loyalty, you cannot buy devotion of hearts, minds and souls. You have to earn these things.” Moti vation helps

management in winning those that can not be bought.

Managers believe that motivation is one of the most important factors in managing human resourcestoday.

3) To achieve organisational goals : Predetermined objectives and goals of any organisation

can be achieved by willful as well as efficient work by the work force. Motivation only, can make theworkforce to stand to expected standards and efficiency. It, therefore, is a basic duty of every manager to motivate his subordinates for the attainment of predetermined organisational goals and objectives.

4) For better utilisation of human and non-human resources : It is the duty of every

manager to utilise both human and non-human resources in the best possible way. If managers motivatethe employees continuously, they will automatically ensure best utilisation of human resources. If

human resources are timely and properly motivated, they, in turn utilise the non-human resources



properly. Through motivation there will be better utilisation of resources and worker’s abilities and

capabilities.

5) For job satisfaction : Higher motivation leads to job satisfaction of workers whi ch canreduce absenteeism, turnover and labour unrest.

6) For better industrial relations : If management is successful in understanding the motivesor needs of the workers and provides an environment in which appropriate incentives are available for

their need satisfaction, it leads to better industrial relations between managment and workers. It also

will increase efficiency and effectiveness of the organisation. Motivation will also foster team spiritamong the workers and increase their loyalty to the organisation.

Classification of motives :

There is a lot of controversy raging in the minds of the psychologists about the classification of

motives. Classification of motives is not an easy job. However they agree that motives are unlearnedany physiologically based. Such motives are called physiological, biological, unlearned or primary.These usually include hunger, thirst, sleep, avoidance of pain, sex and material concern. Following

classification of motives, however, should be studied.

a) Competence or capacity motives : The motives which receive substantial contributions

from activities, which, though, playful and exploratory in character, at the same time show direct

selectivity and persistence in interacting with environment, are the drives for curiosity, manipulation

etc. these are known as competance or capacity motives,

b) Secondary motives : These motives are closely tide to the learning concepts. Such motives

are for power, achievement and affiliation.

c) Security motives : These motives are concerned with security regarding life, accident, love,

ob etc.

d) Status or prestige motives : These motives are concerned with achieving status or rank in

a group, organisation or society.

Murray has classified these motives into five categories, out of which the last three seem to have

a greater relevance to motivation to work. These are as under :

i) Homeostatic motives : For instance hunger, thirst, rest, sleep etc.

ii ) Sexual motives : These are powerful motives and their influence upon work behaviour

can well be pronounced.

iii) Emotional motives : Individuals commit themselves to occupations, jobs, organisations

and work groups as a result of their emotional motives. Fear, anger, rage, hate, terror,

anxiety, love etc. are the examples of emotional motives.

iv) Intrinsic motivation : Such as curiosity, cognition etc.

v) Social motives : Such as achievement motivation and affiliation motivation etc.Steps in Motivation :

As mentioned above motivation is a continuous process, according to Jucius the following steps

be adopted in motivation process.



1) Sizing up situations requiring motivation : Every individual has motivational needs. But

they very individual to individual. This steps involves ascertaining or determining the motivationalneeds of individuals. All employees need motivation but of various kinds and in varying degrees.

2) Preparing a set of motivating tools : There are so many tools of motivation. Different nuts

can be tightened by proper spanner, the same way every individual needs a motivation tool that benefitshim. Thus the management has to enlist such motivational tools with a view to make them availableneeded.

3) Selection and application of appropriate motivaion : The manager has to select, the typesof motivation requried for different types of personnel. He has to take decision to apply the same after

selection. Every manager has to consider where and when motivation is to be provided. The place,time and the purpose of selecting and providing motivation are of ultimate importance.

4) Feedback : After selecting and providing motivation the manager has to see whether t he

individual is motivated or not. If not, the manager has to think for another suitable device and itsapplication.

Jucius suggest ed certain rules, for gui dance of the executives while establishing the steps in

motivation.

a) Variability : The methods, tools and techniques of motivation should not be static, but they

should change according to circumstances as well as personnel. As mentioned above a singular type

may not be effective for all the personnel, for all the times and in all circumstances. Same way a type

of motivation may motivate an individual once but one can not be assured that the same type willmotivate the same individual again. Thus there should be variability in motivation types. This entails

enlistment of various types i.e. tools.

b) Self interest and Motivation : Human being by nature is self-cent red when a personrealises that his own interest is best served by the attainment of organisations goals, he is likely to be

automatically motivated.

c) Attainability of goals : Only the attainable organisational goals are required to be established. Workers will be motivated only by the attainable goals. Unattainable goals generally frustrate the workers.

d) Participation : The desire of participation of those to be motivated ensures their co-operation.

This ensures the success of manager’s motivational aims.

e) Proportionate rewards : Motivation in the form of reward should be made in proportion tothe efforts made by the personnel.

f) The human element : Motivation directly appeals to the emotions of the human beings. A

manager can be successful as a motivator if he can trace the emotions, feelings of the workers andskilfully deals with them for motivation.

g) Individual group relationships : Motivation must be based on group as well as individual.

Every worker must be motivated individually as well as in a group too.

h) Situational application : Different motivational devices should be used in different situations.

Motivation must be based on a sound managerial theory.



Maslow’s need hierarchy theory (Nature of Human Needs) :

Motivation is the core of management . Human behaviour is baiscally goal directed. The behaviour

of a person is usually shaped by a desire to attain something. There is no universally accepted theorythat can explain the factors influencing motives which direct a person’s behaviour at a particular point

of time. Infact, different motives operate at different times among different people to influence their behaviour. Therefore, only the concept of motivation has been identified as an indisputable fact of behaviour and mere explanatory fiction. The common element in diverse coneptions of motivation is

that motivation is a force, factor or agency that helps in explaining human behaviour to a great extent.

‘Motivation’ is a process by which a need or desiere is aroused and a ‘Motive’ is a particular need or desire- a psychological force within our mind-setting us in motion to fulfil our needs or desires which

are aroused

Motives or needs of a person are the starting point in the motivation process. An unsatisfied need

becomes the motive moving or activating a person to spend his energy in order to achieve a goal or a

reward, viz want satisfaction. The source of motivation is in the needs. The needs create tensions

which are modified by the person’s culture or habits to create certain wants or expectations. Thesewants are interpreted in terms of positive or negative incentives and the person’s perception of the

environment in order to produce a certain response or action. Motive implies action to satisfy a need.Motives are expressions of a persons needs. They are his inner drives - personal and internal. Mainsprings

of motivation under the need-satisfaction approach, are our primary and secondary needs. Man is awanting animal. As soon as one of his needs is satisfied another need appears in its place. Our needs

are unlimited and this process of need satisfaction is never ending. Whole life is spend by a human

being just to satisfy the needs. As soon as he partially satisfies one or two needs several others are

pressing on him, demanding attention. All the behavour around us, we see, is directed by a striving for the satisfaction of certain needs. In simple words unsatisfied needs resul t in tension within an

individual and engage him in search for the way to get relieved of them. He develops certain goals for

himself and tires to achieve them. This process continues within an individual. It is the intensity of

human wants which motivates people to work. Employee motivation gets support and nourishment

from the satisfaction of human wants. To increase individual work-effectiveness, motivation aims at providing all sorts of stimulus and incentives to employees at work or at home. As incentives increase

the intensity and duration of human efforts, motivation reacts to bring into operation the fullest of such

Õ ÕNEED BEH AV IOUR REWARD

Per ceived Tension or Goal Reduction of N eed Motivation Directed tension

activity

Õ Õ Õ1 2 3 4

Tension Identify Obtain Eat food andcaused by food as and prepare a chievement

hunger goal food of goal

(Motivation is the drive to reduce a tension caused by an unsatistied need)

Figure: The Motivation process.



incenti ves. Incentives may be either economic or non-economic. Hawthorne experi ments have

demonstrated that non-economic incentives are more impressive than financial and ecnomic incentives.

Motivation i.e. Willingness to make effort to achieve goals or a reward. As soon as first need issatisfied, another need appears and again the process st arts, keeping the process moving the same

wa y.As far as managment of an organisation is concerned the main problem of motivation is how to

induce the personnel at work, because the psychology and behaviour of people differ from person to

person. A manager should invariably know before planning for motivation, the reason why peoplework. In order to take effective motivational decision the manager should study and try to understand

the behaviour of people at work and thus plan to motivate it in the desired direction. A manager musthave knowledge of the motives of the worker which bring about purposeful behaviour and induce him

to behave in a particular manner. Human needs may be classified as :

a) Basic, physiological or primary needs :

b) Social, Psychological or secondary needs :

It should be noted that both primary and secondary needs co-exist in a person at the same time. It is very difficult to differentiate a mong the various needs. Thus motivation of workers is concerned

with the satisfaction of various needs. The manager should study and try to understand these needs

and arrange them according to priority to take necessary action to satisfy them in order to motivate

the workers to achieve the organisation objectives.

Amongst many philosophers of motivational theory, Mr. Maslow is supposed to be the pioneer of

“systematic scheme of need hierarchy” A psychologist as a profession Maslow, developed a widely

acclaimed conceptual frame work for understanding human motivation. Central thesis of the motivational

nature of man is that human needs are organised in a hierarchy, i.e. in a series of levels or a scale o preferences. According to Maslow, human needs tend to follow a basic hierarchy pattern that is from

the most basic needs to the highest level needs. He presented a theory on hierarchy of human needs.

Until the more basic needs are fulfilled, person will not try to meet his higher level needs. Human

neeeds tend to follow the classification of five cat egories. Maslow believed that human needs aresatisfied in a specifice order only. As soon as the lower level needs are satisfied, the next higher level

needs emerge and demand, attention and simultaneously satisfication. He advocated five categories oneeds :

1) Physiological or basic Needs : Physiological needs are at the lowest level of the hierarchy.

These are the needs which must be satisfied to maintain life. Food, clothing, shelter, air, water, rest,activity, temperature and other necessities of life etc. are included these needs. All these needs are

related to the survival and maintenance of human life.

2) Safety and security Needs : After satisfying the basic needs the next are safety and security

needs. These needs come second in the hierarchial order. These needs are concerned with the physical and financial security. People want assurance of maintaining a certain economic level. They want job

securit y, personal body security, security of source of income, provision for ol d age, insuranceagainst risks, protection against danger and threat on or off the job i.e. unemployment etc.

3) Social needs : Human being is a social being, therefore he is always interested to live in



society or groups. He is interested in concentration, sociability exchange of feelings and grievances,

companionship, recognition, bel ongingness, affection, love, friendship acceptance by the group,community etc.

4) Esteem and status needs : After satisfying social needs the next in this hierarchy is esteem

or egoistic need. These needs are concerned with prestige and respect of the individuals. These needsinclude self confidence, independence, achievements, competance, knowledge, ini ti ative, success,status, approval, appreciation, freedom from control, recognition, self respect, respect to others etc.

5) Self actualisation (fulfilment needs) : There are apex needs in the hierarchy. This is theneed for self fulfilment or the need to fulfil what a person considers to be his mission in life. It consists

of realising his own potentialities, opportunity for creativity and for continuous development of theindi vidual powers and skill. It also involves need for self-development, self actuali sation, sel

advancement, desire to take increased responsibilities, liberation of creative talents, In simple words, these are the needs which a person considers to be his mission in life He wants to do something which

is challenging, since this challenge gives his enough initiative to work. It is beneficial to him particularly

and to the society in genral. The sense of achievement gives him satisfaction.

Self Actualisation

N eeds

Esteem Needs

Social Needs

Safety Needs

Physiological Needs

Maslow’s Hierarchy of Human needsFigure:

Human beings struggle to satisfy their needs in a sequential manner as shown in the figure. All the

above mentionead needs have a particular structure. Physical needs are at the base of the hierarchy.Safety, social and esteem needs are positioned in the middle and self-actualisation needs are at theapex. W hen primary or lower needs are reasonably well-satisfied secondary or higher level needs

become relatively more pressing and important as motivators of our behaviour. The hierarchial nature

of human wants enables us to understand as to why people behave as they do. It is natural for human

beings as living beings, to seek to satisfy their physical needs first. Once people are able to satisfy

them reasonably by making arrangement for their continued satisfication, then only they feel the urgeto satisfy the next level that is safety or security needs. This goes sequentially upwards to apex needs.

This shows that all the needs are not felt at the same time, nor is human effort diffused.The basic and

security needs are finite, but the needs of higher order are sufficiently infinite and are likely to be

dominant in persons at higher levels in the organisation. This has been proved by various studies. One

study of three thousands and eight hudred managers in eleven countries reported that security, social,

esteem and self-actualisation needs are best satisfied according to the pattern of the need hierarchymodel. But all the persons were not able to reach and satisfy the apex need. Very few could do that.

Maslow was the pioneer in contributing a systematic scheme of need hierarchy. He after proper



and deep study and reserach, arrived at a conclusion, that there are certain preceived needs of the

human being and when they join any orga nisation, they somehow, believe that these needs can be better satisfied by doing so. Thus they have a perceived expectation from organisation. If the perceived

needs are fulfilled accordig to their expectation they feel satisfied and motivated. On the other hand, if

there is a gap between these, they become slow or refuse to work.

Following are three basic premises advocated by A. H. Maslow about human behaviour.

1) Man is a wanting being animal : Man continuously wants more and more. What he wants

or will want depends upon what he already has. As soon as one of man’s needs is satisfied, another appears in its place. This is a continuous or unending process. It keeps men to work continuously.

2) A satisfied need is not a motivator : A man works to satisfy his needs. When a need is

satisfied it does not motivate the man. Only unsatisfied needs or fresh needs can motivate persons towork.

3) Man’s needs have a hierarchy of importance : According to Maslow a man’s needs arearranged in a series of levels. Maslow is of the opinion that needs are satisfied in an order. As soon as

needs at lower level are satisfied, the needs which are on the next higher level will emerge and

demand satisfaction. thus Maslow views individual motivation as predetermined order of needs.

Critical evaluation of Maslow’s Need Hierarchy theory :

A. H. Maslow’s classification of needs has been a landmark in the field of motivation. Its main

advantage is that he has suggested the priority and nature of needs. This structure is important for

understanding the managerial task in relation to human resources working in organisations. His approach

is direct, simple and practical. Maslow’s theory of human motivation has attained broad acceptance in

the management world. There is strong acceptance of his basic tenets of a plural, and dynamic need

sturcture. “The motion that a person does have a need hierarchy” is also accepted by management.Management must, at all levels, be sensitive to the changing needs of subordinate groups and individuals

in order to provide the atmosphere for productivity and satisfaction. Apart from its ability, the concept

has certain limitations or weaknesses too. Firstly it is a general expression not specific. Secondly, the

levels in the hierarchy are not rigidly fixed. The boundaries between them are hazy and overlapping.The hierarchy structure may not apply at all times in all places and in all circumstances. It may not

follow the sequence as designed by Maslow, It may change also. For example, even if safety need isnot satisfied the exceptions. Fourthly, this approach overlooks the inter-action of needs. An act is

seldom motivated by a single need. An act is more likely to be caused by several needs. The same need

does not lead to the same response from all individuals. Surveys in Continental European contries and

Japan have shown that the model does not apply very well to their managers. Their degree o

satisfaction of needs does not very according to the need priority model. For i nstance workers inSpain and Belgium felt that their esteem needs are better satisfied than their security and social needs.

As well as some factors such as level of development, education, social, cultural, political, psychological

level, globalisation, liberalisation, Govt., policies etc. are totally ignored by Maslow. Maslows view

that one need is satisfied at one point of time has also of doubtful validity. Moreover, at different levels

of needs, the motivation will be different, Employees are enthusiastically motivated by what they areseeking, more than by what they already have. In simple words man works for bread alone as long asit is not available. Another cause of reversal of need hierarchy is that when a need has been satisfied for

a longtime, it may be under evaluated. Again people differ in their expectations significantly. Hence a



diversit y in motivat ional efforts is also required, These limitations should be kept in mind by the

management while preparing any plan for motivation.

Self actualisation needsEsteem needs

Social needsSecurity needs

Physyological needsA Human being

Figure: A. H. Maslow’s need hierarchy theory

Kinds of Motivation :

The emphasis in industrial psychology has shifted from the studies of the isolated individuals and

the physical environment to the consideration of motivation and morale. Management is an art of getting the work done by the pople and thereby achieving the best results. To get the things done

depends upon the inducement of the people to better their performance by inspiring them for, with a

zeal to work for the accomplishment of objectives of the organisation. It is rightly said that motivationof people is the most important function of the personnel management. Management should constantly

provide for incentives or motivating forces to intensity the desires and willingness of personnel to

apply their potentialities for the achievement of common objectives. Indeed motivation is nothing butan action of inducement. Employees may be motivated by different ways. They may be self motivated

or a manager either holds out a promise of reward for them for working in a better or improved way,

or he may constrain them by installing fear in them or by using force to do the desired work. In other

words a manager can motivate the employees by using positive or negative motivation. Both types of motivation are widely used by many managers.

1) Positive or incentive motivation : A positive motivation involves the possibility of increased

motive satisfacti on. It is based on rewards. This t ype of motivat ion is right ly cal led as “PULL”mechanism. Employees are automatically attracted towards incentives and start giving best performance.

It has its own benefits. The receipt of awards, due recognition and praise for well done work definitely

lead to good team spirit, co-operatin and a feeling of happiness. It provides for better facilities and

rewards for better performance. This positive motivation consists of both, financial and non-financial.

According to E. Flippo “ Positive motivati on is a process of attempting to influence others to do

according to your will through the possibility of gain or reward.” People work for incentives in theform of the four P’s of motivation that is- Praise, Prestige, Promotion and Pay cheque.

According to Peter Drucker , the “real and positive motivators are responsible for placement,

high standard of performance, information adequate for self control and the participation of the workersas responsible citizens in the plant community.”

In other words positive or incentive motivation generally includes- Praise and credit for work

done, a sincere interest in subordinates as individuals, competition, participation, pride, delegation of

responsibilities, appreciation in pay and recognition etc.

Positive motivation seeks to create a brighter cheerful and optimistic atmosphere in the enterprise.



2) Negative or fear motivation : Under this motivation, people work in fear. Negative motivation

may also include monetary and non-monet ary motivation. Punishment s, reprimands, fear or loss o

ob, demotion in position, cut in wages etc. are the methods used under this type of motivation.

Negative motivation is based on the presumption that man works out of fear. It is based on the

concept that if the man fails in achieving the desired results, he would be punished. If a man works in

fear he tends to produce minimum enough to get safety. Negative motivations is based force and fear.Fear causes a workers act in a certain direction because they are afraid of the consequences if they

don’t. If workers do not work they are threatened with lay-off, demotion etc. In other words it may be called a “PUSH” mechanism. Workers are pushed to work deliberately under fear or threat. This

type of motivation has some limitations, in that, workers give minimum efforts just to avoid punishment.On the other hand, punishment results in depression and frustration among the workers, which maylead to misbehaviour. Punishment also creates a hostile state of mind and a negative attitude towardsthe job. It may also reduce productivity. Though there are some limitations of negative motivation, it

has been used to achieve the desired behaviour, in case of a fire, a break down, panic or a riot. There

is no management which has not used the negative motivation at some time or the other. In recent

years, great emphasis is given on positive motivation, due to, literacy among employees, their unions

etc.

Apart from positive and negative motivation, they can be classified as follows-

i) Extrinsic motivation : It is concerned with external motivators such as pay, promotion,

status, fringe benefits, retirement benefits, holidays, vacation etc. Many of t hese motivators are

associated with financial benefits, these are actually material or physical motivators.

ii) Intrinsic motivation : Event or things that are aimed at satisfying intrinsic desires of a man

(status, appreciation etc.) are known as intrinsic motivations. These desires and their satisfaction are

more or less of psychological nature. These generally satisfy ego of persons. Everyone tries to nourishhis ego and for this he is motivated to work. This type includes, prai se, accepting responsibility,

recognition, esteem, power, status, competitive participation etc. It is concerned with the feeling of having accomplished something worthwhile. A word of praise after doing something counts great and

gives job satisfaction too.iii) Self motivation : One must motivate oneself, before some other tries to. There are lot of

factors which affect the conscious mind such as bad working conditions, monotonous work, dominating

and troublesome nature of boss, disputes alongwith associates, di ssatisfaction with work, constant

strain, insecurity of job, financial const rains, house hold difficulties, i nferiority complex etc. If a

worker overcomes all the above factors, he can successfull y motivate himself. One can motiva te

oneself by setting certain objectives and goals before oneself.

iv) Group motivation : Good communication newwork is very important for achieving group

motivation. The group motivation is as important as self motivation. Others can be motivated by

communicating properly the ideas, plans, inventions, systems, policies etc. Communication of ideas, plans, inventions, systems, policies etc.,can be made effective when certain personal qualities like,

honesty, loyalty, fairness, tolerance, ability to assume responsibility, co-operation, broad-mindedness, positive attitude towards work etc., are developed.

Group motivation is possible by improving human relations and dealing with people as human

beings, by giving proper treatment, by encouraging them to feel involved in their work, by giving them



an opportunity to improve their performance, by giving compliments for praise fo their achievements.

Under the group motivation managmement should keep in mind that each and every member of thegroup must be motivated, for enjoying the benefits of group motivation.

Techniques of Motivation :

Every individual has his own needs, which may be and many times, are different than those oother individual. Even if some needs of two or more individuals are the same, priority of their satisfaction

is different. Thus it becomes very difficult to provide common motivational factor for all. It is, therefore,

essential to provide attention to many important needs and goals, and combination of inputs in order tomake any motivational technique meaningful. Since human motives governing human behaviour and

attitude towards work are multiple, managements can employ a variety of techniques to motivate its

staff. However , some techniques which may generally be used to motivate employees are as follows:

1) Monetary techniques : These techniques are based on the presumption that a man works

for money. Money is the most powerful motivator. Incentives like more pay, fringe benefits, retirement benefit s etc., are some examples of monetary techniques of motivation. This technique is based on

monetary benefits.

2) Job based techniques : These are based on social, human and psychological beliefs, Job simplication, job rotation, job enlargement, job enrichment, freedom in planning for work, recognition,

responsibility, achievement are the examples of this technique.

3) Management by objective technique : Peter Drucker, a well known contributor to scientific

ma nagement, has developed this technique. This techni que emphasizes on self motivation. It is a participatory technique in which managers and their subordinates jointly participate in achieving the

common goals. It requires adoption of management by objectives by the concern.

4) Leadership styles : Leadership styles or supervisory techniques play a vital role in motivatingemployees. Autocratic, democratic and free rein techniques of leadership are important styles and

have their own impact on employee motivation, morale and productivity. The management must follow

different supervisory st yles in different circumstances for different employees.

5) Group-based techniques : Herbal Bonner has advocated this type of technique for motivatingemployees. According to him management should foster group consciousness and cohesiveness among

individual employees by laying down general norms and guidelines of work for the group as a whole.

6) Sensitivity training technique : This is a technique of training given to group of managers

so that they themselves behave in a better way with their subordinates and motivate them in a better

way. The managers can understand themselves better. They acqui re quality of open-mindedness aswell as they develop insight in the group. These taken together can cultivate a systematic approach

towards motivation of subordinates. A trained manager is supposed to be more consistent in ability and

willing to communicate with his subordinates and inspire them to contribute their best to the common

goals and objectives.

7) Fulfilment of needs : Every behaviour of a human being is motivated by certain needs. It is

one of the best motivational techniques. Needs and aims of the workers a re searched under this

technique. Steps are taken to fulfil them whether of individuals or of groups working in the organisation.

8) Opportunity of growth : This motivational technique believes in providing opportunities to



the employees for their growth. This is done by providing training. refershers etc. in which knowledge

and capacity of the workers are developed. If the employees are acquainted with new techniques o production their interest in adopting them is increased. Secondly such an up-to date knowledge can

prepare them to assume more responsibility which may satisfy their ego. Naturally such opportunities

of growth will motivate them towards better performance. Some extra efforts are required from

managers for making their employees more dynamic.

9) Praise : A word of praise satisfies the employees egoistic need. It is one of the effective

motivational techniques. A praise from boss inspires the employees tremendously.

10) Knowledge of performance : Every worker is always keen to know about his peroformance. Good rating of his performance gives him mental and job satisfaction. If a word of praise from the

boss is added that serves as a stimulant and motivates him. If the performance rating is made known

to the employees, they can add more effort s to improve their performance rating. In other words

performance ratings motivate them to work better. Thus performance rating also assumes the status

of motivation technique.

11) Participation and consultative management : Under t his technique opportuni ti es are

provided to the employees by managers for participation and consultation in managment plans, policies,important decisions, solving some problems, difficulties of the business organisation. If the employees,

are given a chance to be heard and to offer their views and suggestions, it creates a feeling of participation.This, in turn, acts as a motivational tool. As well as to have knowledge and understanding of the

problems and needs of their subordinates will also motivate the employees.

12) Career development plan : A well designed career-development plan for all levels of the

employees, motivate them to give best contribution towards the company. It, automatically, inspires

the workers to use their skills, talents, wisdom for future growth and development, which ultimately

results in attainment of organisational goals and objectives.

Management Techniques Designed to Increase Motivation :

Each of the above techniques, when adopted for motivating employees, in a singular form does

not offer or causes complete motivation. On the other hand some of these techniques are of abstracttype. Naturally they have indirect impact on the employees. Such indirect impact motivates them but

not instantly. Managements, most of the times, want instant motivation of the workers to meet urgentneeds. Secondly these techniques are grouped and tried to give desired effectiveness. The techniques

that, after adopting, are translated in the form of money are termed as Financial or monetary motivators.

Others which are not translated in this form are termed as non-financial or non-monetary techniques.

Managements, generally adopt this method and therefore they are known as management techniques

of motivation.

A) Financial or Monetary motivator techniques : Money is such a key that opens avenues

and provide capacity to satisfy desirable and undesirable needs of any human. An employee, generallyadjusts the satisfaction of his and his family’s basic needs from the regular monetary compensation/

remuneration he earns, Such a monetary position does not allow him to satisfy his needs, that aredreampt by him. If he is provided some extra money he will certainly try towards satisfaction of suchneeds. Such needs of middle and/or higher level nature when satisfied, provide good motivation to the

employee in which he tries to earn more and more. This extra money can be offered to the employees



by way of cash rewards, incentives, medical reimbursement, encashment of leave, extra bonus,

profit sharing etc. Other monetary benefits that are offered are not received by the employees immediately but provide him monetary cover for future. They are, retirement benefits, such as gratuity, pension,

provident fund, All such monetary incentives and benefits enable the employee to satisfy his future.

They are, retirement benefits, such as gratuity, pension, provident fund. All such monetary incentives

and benefits enable the employee to satisfy his actualisation and social ego needs. Naturally suchmonetary benefits motivate the employees.

B) Non-financial or non-monetary motivators : All other motivators which are not of monetary

nature are known as non-financial or non-monetary motivators. These incl ude, giving prestige andstatus, praise, competition, authority, participation in decision making etc.

While concluding it can be said that there is a variety of motivational techniques that might be used

to motivate employees. A management should known that a single technique can not motivate people.

Each individual and each group should be motivated by adoptings different motivational techniques.

Appropriate motivators should be used by management according to circumstances.

Importance of Motivation :

1) Best and optimum utilisation of resources : All the resources are activated by the humanresources and if the human resource is motivated then only they utilise all the other resources in the

best manner. The manpower should be motivated to carry out the plans, policies and programmes

whatever are laid down by the organsiation by utilising the other resources to the best of their effortsfor the attainment of the organisational goals.

2) Maximum contribution : If the employees are motivated in the right direction, they are

ready to give maximum contribution to the organisation. The motivation bridges the gap between

“capacity to work and “Willingness to work.”

3) Reduced cost : In fact the motivated employees are most cost conscious and always try to

minimize the waste, losses, damages, pilferages etc. which ultimately results in overall lowering the

operational cost.

4) Increased level of efficiency /productivity : As and when employees are motivated their level of efficiency is increased. Such employees give high productivity and better quality work. They

wrok with responsibilitiy and put their hard efforts of the organisation. Because of this the overall

operating efficiency of the employees is increased.

5) Co-operative attitude : Motivation is the basis for getting the co- operation from all the

employees. If adequate motivation is given to the employees they are ready to co-operate with theorganisation at all times.

6) Organisational effectiveness : Motivated employees work si ncerely, honestly and with

responsibility. They are well disciplined. They maintain the decorum and and decency. All this helps inmaking the organisation efficient and effective. Motivation is the powerful instrument in the hands of

the management for achieving the organisational effectiveness.

7) Activates, talent, abilities and capacities of the employees : The hidden talents, abilities,capacity as well as creativity among the employees can be activated through motivation, which can beused for organisational purpose. Motivation causes improvement in skill and knowledge of the employees



also.

8) Timely goal attainment : The organisational goals can be timely achieved if the employees

are properly motivated. In fact goals are achieved by employees alone.

9) Acceptance and adaptability to change : Change is the law of nature. A number of changes

takes place in and around the business organisation and in various fields. If the employees are adequatelyand effectively moti vated t hey are ready to accept all the changes according to the needs of the

organisation.

10) Dynamic organisation : If employees are properly motivated they automatically keep the

organisation dynamic.

11) Reduces labour problems and enhances better human relations : Because of motivatedemployees the labour problems are reduced to a greater extent. At times they do not arises at all. There

by better human relations can be developed between the management and the employees. Chances odisputes and clashes can also be eliminated.

12) Job satisfaction and high morale among employees : Motivation leads to job satisfactionand high morale among the employees. Team spirit, co- operation, zeal to work, more enthusiasm,

positive attitude etc.are reflected because of job satisfaction and high morale among the employees.

13) Enhances better and sound image : If the employees in the organisation are motivated agood image of such organisation is created in the minds of the people and ultimately the organisation

comes into limelight. Such organisation enjoys good status, reputation, goodwill, credit standing in the

market and becomes able to attract more qualified, trained, experienced, skilled, and competent personnel

for the organisation.

Factors of Motivation :

Following are some important factors of motivation :

1) Money : Money is the traditional factor of motivation. Peter Drucker also considered moneyto be the most important motivator for the employees. Today also money is a powerful motivator in

devel oping countries. “Money” a s a “motivator factor” means monetary incentives offered to all

categories of employees.

2) Achievement : ‘To achieve something’ is a natural instinct and urge in every human being.Achievement is, therefore, said to be one of the esteem needs. Naturally chances of achi evement

serve as motivating factor to the employees.

3) Recognisation : Every human desires to get recognised for his extra ordinary performanceor any great or positive thi ng achieved by him. This satisfies hi s ego. In such conditions he i s

automatically motivated to perform better. Getting recognition is also another need of a human being.Thus ha rd work, devotion outstanding performance by the employee must be recognised by the

organisation.

4) Advancement : Employee’s urge for self advancement is also powerful factor of motivation. Many employees are always after their advancement may be called as self actualisation. It is the apex

level of needs which always motivates the employees.



5) The work itself : Work motivating factor is a basic factor of motivation. Every human being

keeps himself busy in some work and earn money for livelihood.

6) The growth : The possibility of growth gives satisfaction to the employees. If the organisation provides opportunities for personal growth of employees, they will be highly motivated.

7) Responsibility : The opporttunities of higher responsibility motivate the employees more, asthey get along with higher responsibility more authority also. Therefore responsibility is also motivating

factor.

8) Job Security, Working condition, Status are same factors of motivation.

Douglus MCGregor’s Theory X and Y

Herzberg’s Two-Factor Model

Douglus Mcgregor’s Theory X and Y

During the last seven decades numerous thinkers, experts and researchers have studied different aspects and theories of organisational behaviour and individual interaction which have a bearing on

motivation. The studies can be cla ssified into two categories viz Traditional theories and moderntheories. A number of thinkers propounded different theories of motivation. Among these Douglus,

Mcgregor’s motivational Theory X and Y are very important. Prof. McGregor has represented twoopposite sets of assumptions about employees and about management point of view towards employees

at work. “Theory X’ i s called as traditional theory which is based on some traditional belifes and“therory Y” is called as modern theory which is based on researches in behavioural science, it is

concerned with modern social views on man at work.

Theory X

The Theory X is based on the following assumptions which represent the conventional concepttowards the man at work. Prof. Mcgregor enunciated this theory in 1957, which was later on elaborated

in his book “The Human side of enterprise in 1960.”

Assumptions of Theory X1) Typical individuals basically dislike work as by nature they are indolent and will avoid work

whenever they can.

2) As most of the people dislike the work they have to be pushed, closely supervised, threatened, coerced, persuaded and someti mes even punished to achieve t he obj ect ives of t he

organisation.

3) Most of the people basically are lazy unrealiable, have little ambition, prefer to avoid

responsibility and desire security as a major goal and prefer to be directed and led by

(others) managers.

4) The typical worker is self centred and has a very little concern for organisational goals.

5) The typical worker is, by nature resistant to change. He avoids the change, and sticks to rigidity.

6) He is gullible, not very bright, can be fooled by anyone. [The ready dupe of the charlatan

and the demagogue]



Prof. McGregor “said that it is just due to the nature, attitude and behaviour of human resource at

work which ultimately result in ineffective poor perfornance of the business organisation.”

The managers who accept this theory, think as follows.

1) Management is highly or solely responsibile for organising the elements of producti ve

enterprise, money, materials, equipment, people etc., in the interest of economic ends.

2) With respect to people the management has to direct their efforts, motivate them, control

all their actions and activities and modify their behaviour which is suitable and perfectly fitto the needs of the organisation.

3) Management’s active intervention is a must or otherwise the people would be passive and

even may resist to organisational needs. Therefore people at work must be persuaded,rewarded, punished as and when required, controlled and their all activities must be directed,

it is an important task of management while managing subordinate managers or workers.

The managers who believe in theory X put more emphasis on strict discipline, introduction o

incentive programme, welfare measures, pension and other benefit programmes and on close supervision.They believe in direct control because it is necessary for dealing with irresponsible, unreliable and

immature people at work,for gettings the things done by and through them. Such managers have

pessimistic view of humanity towards the people at work.

Critism :

Basically Prof. Douglus Mc.Gregor was inspired by Maslow’s Need Hierarchy Theory of motivation

and then advocated the Thory X a nd Y of motivation, But in fact assumptions of theory X whenuniversally applied are oftern found to be inaccurate and the management approaches that develop

from these assumptions, may fail to motivate many individuals to work towards organisational goals.

Management by direction and control may not succeed because that are useless methods. Moreover it

is a questionable method for motivating people whose physiological and safety needs are reasonably

satisfied and whose higher level needs such as social, esteem and self actualisation become predominant.

In the Indian context it is observed and stated that even today theory X is widely accepted because a large number of industrial employees is poorly (low) paid and therefore it is very difficult for them tomeet both ends. Problem of unemployment in the case of unskilled semi-skilled and skilled workers,

vicious circle of poverty, huge population, weak trade unions etc. ultimately resulted in the management

by direction and control. Therefore financial incentives would force the worker to work more hard.

Theory Y

When Prof. McGregor found that management by direction and control may not be successful

then he has developed an alternative theory of human behaviour called “Theory Y”. This theory has positive approach towards motivating the people. This theory represents the democratic approachand gives to the employees a wider scope for initiative, creativity, imagination, responsibility, sel

direction and self control etc.

Assumptions of Theory Y

1) Management is responsible for organising the elements of productive enterprise-money,

materials, equipment, people in the interest of economic ends.



2) People are not by nature passive or resistant to organisational needs. A average person

within a favourable human relation climate learns not only to accep but to seek responsibility.Avoiding the responsibility, lack of ambition on stress on security etc. are the consequences

of experience and not inherent human characteristics.

3) Work is a natural activity like play or rest and people generally develop an attitude towardsthe work, on their experience with it.

4) The motivation, potential for development, capacity for assuming responsibility, readyness

to direct behavour towards organisational goals, all these qualities, are present in people. Itis the responsibility of management only to recognise them and develop all these qualities

of people for business organisation.

5) A large number of people have a high degree of imagination ingenuity and creativity in thesolution of organisational problems.

6) An average human being possesses high degree of intellectual potentialities but in the modernindustrial life they are partially utilised.

7) One of the essential tasks of management is to arrange organisational conditions and

methods of operation in a way so that people can achieve their own goals best by directing

their own effort towards organisational objectives.

8) Strict and close supervision and control, threats of punishment are not the only ways to get the things done by and through the people.

9) Commitment to objectives is determined by the rewards associated with their achievement.

10) Mot ivation occurs not only at the social, esteem and self-actalisation level s but at the physiological and security levels also.

Theory Y assumes that people are not by nature lazy and unreliable. They enjoy their work like any

other natural activity like play or rest. People take the initiative towards more or higher responsibility.Theyhave high imagination. They are self-directed and self-controlled.They are highly capacitate, posses

creativity quality. The properly motivated people can achieve their own goals in a best way by directing

their own efforts towards attainment of organisational goals. The essence of thery Y is, if workers are

treated like human beings, than merely a factor of production, they can do much better than expected

and can experience job satisfaction also. The managers t hose believing in the assumptions of this

theory, put more emphasis on joint consultation, workers participation in management (in decisionmaking process) motivation, communication opportunities in formulating managerial and personnel

policies. The managers believe in greater decentralisation and delegation of authority, job enlargement

etc.

The Theories X and y of motivati on are not only two possible theories of management or not

managerial strategies but they believe in the nature of man and that influence managers to adopt one

strategy at a time. The managerial attitude and supervisory practices resulting from such assumptions,

have an important bearing on employees’ behaviour. Managers should not entirely depend on thesetheories. But they should see what type of people they got in an organisation, observe their nature,

behaviour attitude and then accordingly treat them and get the things done by and through them andultimately achieve the goals of the business organisation.



Two Factor of Hygiene Maintenance Theory of Herzberg

Herzberg Two-Factor Model :

Frederick Herzberg, a well known US behavioural scientist and management theorist has porposed

a thory of employee motivation based on satisfaction. in 1950 he conducted a study of need satisfaction

of 200 engineers and accountants employed by firms in and around Pittsburgh. He used the criticalincident method for obtaining data for analysis. The main purpose of his study was to find out what

people exactly want and what motivates them. He asked the employees to describe the situations in

which they found their jobs excepti onally good or bad.” It was found t hat the employees nameddifferent kinds of conditions which causd each of the two feelings about their jobs are significantly

different from the replies when they feel bad about it.

His Theory adovcated that, satisfied employee is motivated from within to work harder, Intrinsicfactor seem to be related to job satisfaction. On the other hand dissatisfi ed employees is not sel

motivated they were dissatisfied due to the extrinsic factors. Since Herzberg’s reserarch has discoveredtwo sets of factors assoicated with satisfaction and dissatisfaction of the employee. Therefore it is

known as Herzbergs two factor theory. The first set of factors known as satisfiers or motivators, are

responsible for self motivation of employees. These factors include job, its importance, opportunitiesavailable for growth, advancement, achievment, sense of responsibility, recognition etc. These factors

are known as job content factors and are real motivators because they are capable of providingsatisfaction to the employees. These are known as intrinsic factors as mentioned earlier.

The second set of factors called hygiene or maintenance factors or dissatisfiers. They are not

strong motivators. Since they are necessary to maintain current status. i.e. a reasonable level o

satisfaction. These factors cause much dissatisfaction when they are not present but do not provide

strong mot ivation. The hygiene or maintenance factors include working. conditions, j ob security,

salary, quality of supervision, organisational policies interpersonal relationship with supervisor with

subordinates, company policy and administration, personal life, work environment etc. These factorsare extrinsic to the job. Any deficiency or absence of these factors would simply create dissatisfaction,

demotivation and low performance but their presence does not motivate the employees. They have

been considered as hygiene maintenance factors because their role is supportive just to maintainhealthy atmostphere in work setting.

While identifying and differentiating various factors as dissatisfiers and motivators, Herzberg has

encouraged managers to think carefully about what actually motivat e the employees. In case of maintanance or hygiene factors, they do not provide motivation. If they are adequate and present they

only prevent dissatisfaction. They produce no improvement but are needed to avoid unpleasantnees.

In fact they provide an almost neutral feeling among the workers of an organisation but if withdrawn

create dissatisfaction

Like Maslows Need Hiererhy Theory Herzbergs t wo factor theory of motivation has also been

criticised on account of lack of empirical validation but stil l his contribution to motivat ion theory

remains very useful. He has made it clear that money is a weak motivational tool because at best it can

only eliminate or reduce dissatisfaction. Moreover this theory puts emphasis on motivating potentialswhich can be profitably used for redesigning job, through job enrichment and job enlargement.



Questions

1. Define the term .

2. What are the characteristics of Motivation ?

3. Explain the objectives of motivation.

4. Describe the classification of Motives.

5. What are the steps in motivations ? Explain in detail.

6. Describe the Maslow’s need hierarchy theory.

7. Explain the various techniques of motivation.

8. How motivation is important from organisations point of view ?

9. What are the factors of motivation ?

10. Describe the McGregor’s Theory X.

11. Describe the McGregors Theory Y. 12. Explain the Herzbergs two factor model.



12L EAD ER SH IP

Concept of Leadership :

To lead-a leader-leadership is the sequence. Thus concept of leadership is directly concerned with

the term ‘to lead’. To lead means to influence the people, to motivate them to induce them to action, togive them a direction, to awaken suppressed feelings, to change these feelings and desires to passion and to activate the people. A leader is a person or, at times, a group who is capable of doing all the

above things. Leadership is a nomenculature given to the quality of leader to lead. Quality of leading is

one of the essential qualities, a manager is supposed to possess, because without leading, the activitesof any enterprise may come to stand still. Activities taken individually or a series of activities or group

of activities is a barometer by which indentification of any business organisation’s existence is made,

because any business is dead in absence of continuous activities. The person or persons who get theseactivities performed by the members, subordinates and employees is a manager. Naturally he, who is

responsible for the performance of others i.e. the manager must be capable enough to enlive, to

stimulate the activities and for that, must be able to motivate people. All this can be done only if the

responsible person i.e. the manager possesses the quality to lead. Leadi ng the activities has many

angles as for as it is related to management. It is, therefore, that “Leadership” is regarded as one of the

main functions of management.

Quality of leadership is neither inborn nor a Gods gift. Any person, determined to acquire this

quality, can do it by developing the skills of leading. A person who leads, natually establishes certain

relationship between himself and his followers-subordinates in the organisation. Therefore the term

“Leadership” is a result of relationship between a superior and subordinate which triggers a person’s

wi ll t o do and transform lukewarm desire for achievements into burning passions for successful

accomplishment.

The term “Leadership” can be studied from two points of view -

(1) Leadership as a quality and (2) Leadership as a function.

Study of Leadership as a quality involves the study of extent of capabilities to lead people. It more

or less relates to psychological, social and mental aspects that are required to acquire such a quality.

Study of leadership as a function involves the study of activities to be undertaken by a leader i.e.

the manager. Our study of leadership is mainly related to this aspect or view point.

Various expert of management have defined the term leadership. Let us study some of t hesedefinitions. They are given below :

Robert tannenbaum defines, “Leadership is the interpersonal influence exercised in a situation

and directful through communication process towards the attainment of specified goals.”



Haimann has defined leadership as the process by which a n executive imaginatively directs,

guides and influences the work of others in choosing and attaining specified goals by mediating betweenthe individual and the organisation in such a manner that both will obtain maximum satisfaction.”

Peter Drucker said leadership is a characteristic of an individual”

Drucker defines, “Leadership is the listing of man’s visions to higher sights, the raising of man’s

performance to higher standards, the building of man’s personality beyond its normal limitations”.

Ke ith Davis defines, “Leadership is the ability t o pursue others to seek defined objecti vesenthusiastically. It is the human factor which binds a group together and motivates it towards goals.”

George Terry defines, “Leadership is the activity of i nfluencing people to strike willingly for

mutual objectives.”

Fielder F. E. defines, “Leadership is the activity of influencing people to strike relevant groupactivities.”

Chester Barnard , defines, “It refers to the quality of the behaviour of the individuals whereby

they guide people in their activities in organised efforts.

Alford and Beatty defines, “Leadership is the ability to secure desirable actions from a group ofollowers voluntarily without the use of coercion.”

Dubin R. defines, “Leadership is the exercise of authority and making of decisions.

Hemphill, J. K. defines, “Leadership is the initiation of acts which results in a consistent pattern

of group interaction directed towards the solution of a mutual problem.

Reuter, E. B. defines, Leaderhip is an ability to persuade or direct men without the use of prestige

or power of formal office or external circumstances.

Bass, B. M ., defines “Leadership in a group discussion is the assumption of the tasks of initiating,organising, clarifying, questioning, motivating, summarizing and formulating conclusion, hence the

leader is the person who spends most of his time talking to the group, since he carries out more of

these verbal tasks.

Birla, A. V. defines, “Leadership consists of leading men by their consent.

David, C. McClelland emphasizes a strong drive for achievement as an important attribute for motivation and the quality which characterizes outstanding leaders.

Characteristics of Leadership :

Study of the above definition reveals the following characteristics of leadership.

1) A Quality : Basically leadership is a quality present in individual. It may be inborn or developed by the individual.



2) Used by way of behaviour : The individual who possesses this quality has to show it

through his behaviour, character and way of commanding.

3) A motivational factor : Leadership as a function of management is used t o motivate the people by way of guiding them.

4) An Inte rpersonal relationship : Quality and functi on of l eadership is performed by

est ablishing relationship between the persons and the leader. Unless such a relationship exists the

leader may not be successful in influcencing people to act in a certain direction.

5) Influencing force : Leadership is such a function which implies influencing t he people.

People, without having influence of the leader will not willingly follow him. Thus a leader has first to

use his quality of leadership to influence the people whom he is to lead.

6) Guiding force : Main function of leaderhship is to guide the subordinates in problem areas

and in performance of their duties.

7) Directing force : After guidance comes directing the people towards organisational goals for

their achievement. Leadership is a force which does this.8) A managerial function : Above all leadership is one of the important functions of management

required for accomplishment of organisational goals smoothly.

9) Co-existive with followers : Leader and leadership can not exist without the followers.

10) Multidimensional : The way of leading the peopl e depends mainly upon the situation. In

some situations the leader has to pacify the followers while in some situation the leader is supposed to

represent them.

Thus the term “ Leadership” when used in connections with management, does not refer to

excelling, but to guiding others or their activities towards predetermined objectivies or goals. The

leader’s acts are goal oriented. He uses his influence to achieve some desired goals. The primary task

of a leader is to build a team for achievement of organisational objectives. This can be done by

convincing people to follow him by participating in the organisational activities.

Importance of Leadership :

Leadership function is a matter of pushing people until they do what the leader wishes them to do.

Leadership is primarily a mat ter of removi ng barriers so that people can act with freedom and

independence. Leadership, encourages and stimulates action from workers by innovat ing them in

planning and decision making activities. Following points indicate the importance of leadership.

1) Leadership influences to work more : Main function of leadership is to influence others.

This he does through showing his own interest in the work. he, being positive towards the work, can

automatically make others to work with the same interest and zeal.

2) Leadership provides guidace and direction : Main characteristics of leadership is the ability

to guide and direct the followers. The leader guides the followers away from the problem areas andleads as well as directs them on right path to do the jobs effectively.



3) Leadership leads the followers : Some people are not in a position to work independently.

They require someone to lead and guide them. They believe that they can do better if they are led bysomeone. This someone is a leader. the leader, therefore, works himself and automat ically ot hers

follow him. The leader leads the followers by representing them and understanding their problems and

difficulties.

4) Leadership discovers new methods : The leader has to try to implement organisation’s policies and programmes designed to acheive objectives. He has to resort to various methods for

getting in the jobs done by his team. Many times, existing methods may not be capable of providing

moivation. In such circumstances the l eader has to discover new methods and initiate them for the purpose.

5) Development of team spirit : A leader is a person who lead a group. The group members believe in him. The leader, by this, induces, persuades his members to work honestly to give maximum

contribution. The leader has to develop team spirit in the group because, without this, work can not be done effectively. once the leader is successful in developing team spirit in the group, half of the

work is as good as done.

6) Creation of confidence : The leader, in order to get the work done properly, has to take hisfollowers in confidence. He has to listen to their problems and difficulties and has to solve them, by

giving proper gui dance and direction. This creates confidence in the follower-workers. He has,

further, to give them proper training, education and clear instructions. Thus an employee is made

more confident to perform for better than others.

7) Excellent time management : A leader is further responsible to make maximum and proper

use of the available time, as he has to complete the assigned jobs in stipulated time period. He, therefore,

can not afford wastage of time on any other job or on any underproductive activity. He, therefore, hasto see that his workforce does not get bored and exhausted. All this can be done if the time management

is made properly and efficiently. Naturally leadership leads to excellent time management.

8) Builds high morale among people : High morale among the employees is essential for making organisation successful. It is the duty or responsibility of a leader to develop and maintain high

morale among the employees. Moral e denotes the attitude of employees towards organisation, its

objectives, management and their willingness to offer their honest contribution to the organisation.The employee having high morale are found to be happy and satisfied in an organisation. Rather high

morale is the outcome of worker’s happiness and satisfaction.

9) Effective utilisation of resources : A leader utilises human and non-human resources to

maximum extent for productive purposes. At the same time he uses both the resource efficiently andeffectively. It leads to minimum wastage, sometimes there would be elimination of wastages also.

Classification of Leadership :

To Lead-leader-leadership are three interrelated terms. A leader is a person who leads and leadershipis the nomenclature of the quality to lead as well as a function to be performed while leading. Hence

leader and leadership are so intermingled that it is not possible to separate them from each other. The

only difference is that a leader is a human and leadership is an abstract quality. But, since leader is a



human, so many factors psychological, social, intellectual, environmental status etc.- work on him.

These factors qualify him to be a certain type of leader. As seen above leadership is the performanceof a leader. Naturally, the type to which he belongs, affects his performance. Thus leadership is to be

classified by considering all these aspects. The type of leader is directly and positively correlated with

his performance i.e. leadership. Experts like Alfred and Beatty, Chris Argyris and Personnel research

board of Ohio University have given their own classification. There are some common categories, andsome are more distinctly classified categories i.e. type. If all these categories - types are taken and

read with reference to one another leadership can be classified as follows :

Types of leaders i.e. leadership :

1) Intellectual 7) Bureaucratic

2) Creative 8) Diplomatic

3) Persuasive 9) Expert

4) Institutional 10) Quarter back

5) Democratic 11) Directive

6) Autocratic 12) Permissive

13) Participative.

1) The Intellectual : The leader possessing specialised intellectual authority and having indepth

knowledge and technical competence is known as intellectual leader. For instance, financial advisor,Marketing advisor, legal advisor.

2) The Creative : A creative leader is one who encourages and welcomes new ideas from his

followers and vice-versa. For this he uses the technique of “Circular response” Because of this he can

easily point out the best of his followers and can keep proper control on them for the attainment o

enterprise goals. A creative leader gives opportunity to his followers to do some creative work for theenterprise.

3) The Persuasive : A Persuasive leader is one who by his personality and behaviour attractsma ny followers, The followers have faith and confidence in the persuasive leader. Therefore thefollwers are always ready to do anything told to them by the leader. This, in turn, helps the persuasive

leader to get the things done by and through his followers.

4) The Institutional : An institutional leader is one who become a leader because of his position

in the institution. For instance, president or the chairman of the institution, principal of an educational

institution, director or the chief executive of a company, secretary of an institution. The leadership is

bestowed upon him by the position held by him in the organisation.

5) The Democratic : A democratic leader is one who does not lead but is led by his followers. Democratic leader respects and adopts opinion of majority of his followers. Moreover many times he

delegates most of his powers to the followers. Democratic l eader is very honest and loyal to hisfol lowers.



6) The Autocratic : An autocratic leader is one who dominates or keeps command over his

follwers. He is not ready to listen to any follower. He believes that followers should obey his ordersonly. He gets the things done from followers through fear, threat, coercion, punishment, command.

He keeps all the powers and authority with him. He is never interested to delegate to the subordinates.

He believes in strict discipline and obedience by others.

7) The Bureaucrat : A bureaucrat leader is one who likes to stick to routine, who appeases is superiors and avoids his subordinates.

8) The Diplomat : A diplomat leader is one who is opportunist and whenever gets a chance to

exploit the people, he would exploit them. He does not trust his subordinates.

9) The Expert : An expert leader is one who possesses specialised knowledge in a particular field. He is concerned with his specialised knowledged. He disrespects his subordinates and treatsthem as fellow workers. He is always proud of his specialisation and treats others as inferior.

10) The quarter back : A leader who realises the contribution of his subordinates in attainment

of organisational goals in known as quarter back leader. Such a leader likes to be identified with his

subordinates even by displeasing his superiors. Many times the business organisations themselves, gofor such group leaders.

11) Directive : This type of leader always gives directions to his followers i.e. subordinates. Hewants them to work according to his instruciton. No one is a allowed to deviate from his instructions.He further judges the performance and announces rewards to workers having better performance and

punishments to workers having below satisfactory performance. That is why he is called initiator of awards and punishments. Such leaders think themselves to be far more superior to the subordinates.

Naturally dissatisfaction prevails in subordinates with the effect that employee morale goes lower.Such leadership mar the developmental opportunities of the subordinates.

12) Permissive : A leader who initiates action himself towards any job perfornance is known as permisive leader. He has high degree of tolerance. Naturally such leaders are very sensitive towards

the feeling of others. He is generally successful in getting the work done with a satisfactory result.

But the only demerit of such types may be mentioned as-no chance to the subordinates to develop

them as leader.

13) The participative : The participative leader helps subordinates to develops their own initiative

to take their own decisions and formulate their own methods and procedures for their work. He alsohelps them to recognise their own demands and wants. He, therefore, is able to win their co-operation

for achieving his objectives.

Thus leadership is a process of influencing others to act in a way that will accomplish the objectives

of the leader or the organisation. This process involves interpersonal influence in a specific situationtowards the attainment of a specific goal. Therefore it is rightly said by someone that a leader is a

person who stands out in influencing the activities of a group, making progress towards achieving the goals. He plays multidimentional role such as group task role, group building and maintenance role and

individual role. In group task role there are variety of roles played by him, for example as initiator, co-

ordinator, orienter, evaluator-critic, energizer, procedural technician, recorder etc. In group building



and maintenance he plays role of encourager, harmonizer, compromiser, gatekeeper and expeditor,

standard setter, group observer and commentator follower etc.

In individual role he plays the aggressor, blocker, recognition seeker, special helper, pleader etc. All successful organisations have one common attribute i.e. leadership. Leadership has become an ineviatable

aspect in business/industry during the past few decades.

Leadership functions and responsibilities of a Leader :

Whenever we talk of leadership, it is assumed that this leadership has so many functions inherentin it. Since leadership is an abstract quality and function, it can be identified only by its use through

functions. In other words leadership as one of the functions of management process is performed by

taking up and doing some certain functions.

Same way if an individual is entrusted with some job which he willingly accepts, its performance

now becomes his responsibility. A manager when acts as a leader he, willingly and by virtue of hisstatus, accepts leadership as a funct ion. He, for leadership, performs t hese functions. Naturally,

performance of leadership functions, now, becomes his responsibility.

A leader i.e. a manager has to accept the responsibility of successfully putting his efforts, though

related to the group which he leads, for accomplishment of organisational goals. Thus functions to be performed and responsibility go hand in hand. Because of this fact many management experts havedescribed leadership functions as responsibility and vice-versa.

Krench and Cruchfield has classified leadership functions in two categories : (1) Primary and

(2) Accesory. the first category belongs to the functions which a leader has himself to perform whereas the second category functions are incidental functions under “Primary” category-

(1) Executive, (2) Planner (3) Policy maker (4) Expert (5) External representative (6) controller

of internal relations (7) Purveyor of rewards and punishment and (8) Arbitrator and mediator.

All these functions represent leadership functions right from the top boss to the lower level manager. As seen above accessory functions are incidental to the status of a leader. A leader has to lead hisfollowers that means the followers follow the same path which is chosen by the leader and through

which he marches ahead. If a manager ha s to work for the final accomplishment of organisat ionalgoals, he has to choose a correct path. Accessory functions of a leader, therefore, are as follows -

1) He has to set an example because the followers have to follow it.

2) The leader leads a group. Integrity, loyalty, morale etc. of the group is, generally assessed

through the leaders. Thus he becomes a symbol of the group.

3) Being a leader and symbol of the group the responsibility of the group becomes his ownresponsibility. In others words he has to act as Substitute for individual responsibility.

4) The leader leads a group. Thus the ideology of the leader is accepted by the group members.

It, therefore, becomes the duty of a leader to be a good ideologist.

5) Being higher in the rank and status than the follower (members) he has to adopt paternal

attitude towards his group members. Thus he becomes a Father figure.



6) A leader is held responsible for the success or failure of the group led by him. Naturally he

is taken to task in case of failure of the group, though the work is not actually performed by him. In other words he is made a Scapegoat.

Mr. Bennis has enumerated leadership functions on the basis of problems which a leader has to

face. To lead means to resolve the problems of the followers and to guide them in right direction. Mr.

Bennis has stated the ways i.e. what a leader should do? to solve the problems. He has prepared a chartshowing this :

Problem Task to be performed by leader

1. Develop rewarding human system1. Integrati on of individual needs wi th organisational goals 2. Devel op executi ve l eadership in t he

group me mbers i. e. exec ut ive2. Soci al influence i.e. dist ribution of constel lation. power

3. Devel op congeni al at mosphere and3. Collaboration between employer and collaborative climate.employee and within employees to avoid

conflicts.

4. Adaptation i.e. the problem of turbulent 4. Identify the areas and correct them and uncertain environment

5. Identification of organisational goals 5. Develop integrity towards organisationalcl ear ly and commit ment a nd goals. consensus to them.

6. Revi t ali sat ion of the growth and 6. Organisational self renewal. removal of decay.

All other experts have enumerated the leadership functions on the same lines. they are (a) Milius,

(b) Dennis, (c) Killion, (d) Peter Drucker.

“ An effective leader is one who can make ordinary men do extra ordinary things, common people uncommon things. Leadership is lifting of man’s sight to higher vision, raising of man’s standard

to higher performance, building of man’s personality beyond normal limitations.” - Peter Drucker

What Peter Drucker has stated in above lines is a crux of leadership function. In order to achievethis a leader has to resort to following functions in addition to the primary functions as mentioned in

previous paragraphs :

1) Determination of realistic, factual performance objectives in terms of quantity, quality and

safety.

2) A leader should make the resources, that are required by the workers for proper performance

of the task, available in time and in quantity as well as quality.

3) He has to keep proper and effective communication with his workers and supervisors inorder to know and convey instructions.



4) A leader should prepare a plan and structure for the rewards and identify the areas where

workers avoid work in order to punish them, if required.

5) He should delegate a part of his authority to his subordinates, wherever and whenever possible He should look forward for the participation of workers in decision making.

6) He should arrange to remove barriers and stumbling blocks.

7) Performance appraisal of the workers and its communication to higher level is an important

function a lso.

8) He should render service to beneficiary individuals.

9) He should take decisions only after observing the facts and circustances.

10) He should respond to the workers and should ensure same response from them.

11) He should achieve co-operation a nd help of the workers towards accomplishment ogoals.

12) He should be one of the group members but even then he should keep himself differentfrom them.

13) He should integrate individual needs with organisational goals.

14) A leader should ensure industrial integrity.

15) He should resolve internal conflicts.

Qualities of a Leader :

As mentioned above a leader is expected to play many roles therefore he must possess the potential

to handle the interpersonal relations, to lead the working group, to achieve the organisational goals.

Robert Dubin has very rightly said that “All people are potential leaders and given the desire andopportunity, people can develop into effective ones. Every organisation has many people in it who can

exercise leadership at least temporarily, when there are positions of leadership to be filled. It is often in

situations of crisis, where an individual, not previously known to possess such qualities, becomes a

leader. The officials of an organisation learn where the potential leadership skills are to be found.

A good leader should posses the following qualities :

1) Energy : A leader should be energetic and strong. He must have both mental and physical energy to work. In the absence of either of the energy he is not able to work as a leader.

2) Courage : A leader should be bold enough. He should possess enough courage to face every

situation. According to Field Marshal Slim, “without courage there are no virutes like faith, hope,

charity and all the rest do not become virtues until there is courage to exercise them.

3) Will power : A leader should possess strong will-power. If he possesses strong will power,

impossible and difficult things become possible and easy. He should have confidence in him.



4) Emotional maturity and stability : A leader should have emotional maturity. He should have

clear and mature thinking. He should work with self-confidence. He should not be short-temperedand should avoid anger as well as losing tempter. His decisions should be based on rational reasonings.

He must have consistency in his actions. He must be cool and a patient as well as good listener. He

should avoid being more emotional.

5) Personal Motivation : A leader has to motivate group members. Unless the leader himself is

not motivated he will not be able to motivate others. Thus a good leader must be self motivated.

6) Communication skill : A leader has to lead his group. He has, for this, to give instructions,

and directions to his subordinates. All such instructions and directions must be very clear and in

understandable l anguage. This is done through communication. A leader, therefore, must possess

communication skills. In absence of such a skill he would not be able to inform, direct and convincehis subordinates and in turn would not win confidence and trust of his subordinates.

7) Knowledge of Human Rel ations : Good human relations is one of the important factors

which help in motivating employees and raising their morale. Principle of good human relations is

“treat human beings as human beings” This requires understanding the behaviour, attitude, opinion,demands, problems and difficulties of the subordinates, because only these can help establishing goodhuman relations. Therefore it is essential that a leader must have good knowledge of human relations.

8) Objectivity : A leader should possess the quality of objectivity. This means that a leader’s

approach to any issue, problem should be objective and should not be based on any personal bias,

prejudice, pressure fear etc. His decision should be based on reasoning and facts. Objectivity is a vital

aspect of analytical decision making.

9) Social skill : Human being is a social being. They should be treated like a human being. Aleader should have an ability to understand them, observe therefore, plus and minus points of hissubordinates. He should have the ability to win their confidence and loyalty. He should be helpful, co-

operative, friendly, and sympathetic. This can be done if a leader has social skills.

10) Empathy : A leader has to respect others, their emotions, sentiments, beliefs. He should be

able to look at things objectively and from the point of view of others. He should look into himself also,

so that he can know his own strengths and weaknesses.

11) Teaching ability : A leader should be a good teacher too. He should possess the ability to

explain, describe, demonstrate how to perform a particular task. He should possess the ability tocorrect mistakes, errors. As and when guidance or direction is asked by the employees, he should be

able to give proper guidance or direction to them.

12) Integrity : A leader should posses the quality of morality, which simply means he should be

morally sound. According to Fredrick Taylor, “integrity is that straight forward honesty of purpose

which makes a man truthful, not only to others but to himself, which makes a man high-minded and

gives him high aspirations and high ideals.”

13) Conceptual skill : A leader should have the ability to look towards t he entire businessorganisation as a whole, so that can understand the interdependency of the functions and the total



situation relevant to it.

14) Flexibility of mind : A leader should have a flexible mind. He should have ability to change

himself accordi ng to the changes taking place. He shoul d understand the changing situations andcircumstances Change in leadership function by the leader, certainly, can bring change and adjustment

to changed situations, by the subordinates. If he remains rigid there is a possibility that he may bethrown out of organisation.

15) Ability to decide priorities : A group of workers may be entrusted with more than one job.Any task required to be performed by the work group may have many jobs. A leader is a person who

has to get the jobs done. But unless a sequential order of the jobs and priorities are decided the whole

task may be converted into a mess. Thus arranging the jobs on the basis of sequence and pririty is

very much vital for correct, successful and early accomplishment of the objective. This is required to be done by the leader. He, therefore, must have knowledge of the jobs and skills to decide priorities.

Thus a leader should have a dynamic personality, only physical appearance or look is not enough.

He must possess mental ability too. He must have good moral character, politeness, good nature, good

listening, wisdom, intelligence, powerful voice, balanced temperament etc. All these abilities are essentialto become a successful leader of his subordinates.

So many management experts have enlisted the qualities that a good leader should possess. All the

fifteen qualities which are discussed above is a common enlistment of leadership qualities. However, it

is interesting to see the quality sets developed by these experts. These quality sets and their developers

are given below :

1) F. M. Viscount Slim :

(a) Courage (b) Will power (c) Judgement (d) Flexibility (e) knowledge (f) integrity

2) Ordway Tead :

(a) Physical and nervous energy (b) Sense of purpose and direction (c) Enthusiasm (d) Love and

affection (e) Integrity (f) Technical mastery (g) Decisiveness (h) Intelligence (i) Technical skills

(j) Faith.

3) Henry Fayol :

(a) Health and physical fitness (b) Intelligence and mutual vigour (c) Moral qualities (d) knowledge

(e) Managerial ability.

4) Chester Barnard :

(a) Vitality and endurance (b) Decisiveness (c) Persuasiveness (d) Stability in behaviour (e) Intellectual ability (f) Knowledge

5) Hill -

(a) Courage (b) Self confidence (c) Moral qualities (d) Self sacrifice (e) Paternalism (f) Fairness

(g) Decisiveness (h) Dignity (i) Knowledge.

6) Nitish R. De - (a) Good physical and nervous energy (b) Ability to shoulder responsibility and its discharge(c) Friendliness and affection (d) Tolerance (e) Sense of fair play and justice (f) Integrity

(g) Knowledge of men (h) Decisiveness (i) Ability to face opposition.



7) George Terry :

(a) Energy (b) Emotional relations (c) Knowledge of human relations (d) Personal motivation

(e) Teaching ability (f) Social skill (g) Communication skill (h) Technical competence.

Leadership Styles :

Any style is nothing but the approach to or a behaviour towards facing any situation. For example

a person may be offensive while facing a problem, another person may be defensive on the occasion.

The former possesses offensive or dominating style whereas the later is supposed to have defensivestyle. A leader too has to face many situations and problems while dealing with his subordinates and

getting the work done by them. The behaviour or approach that a leader may adopt represents hisleadership style.

Basically leadership styles are based on the type of leadership. The style is the way in which the

leader influences followers. As well as leadership styles are based on the functions, duties, responsibilities performed by a leader. The traditi onal a pproa ch to the analysis of leader behaviour i s to classify

various types of leadership into styles. Leadership style vary according to the duties performed byleaders. Actually a leader has to adopt a variety of styl es as per the situation or circumstances. A

leadership style can be defined as, “the pattern of behaviour which a leader exhibits while supervisiongsubordinates in an organisation”. The behavioural approaches to management have directly or indirectly

influenced the leadership styles. For instance McGregors theory ‘X’ present authoritarian style and his

theory ‘Y’ represents humanistic and participative style of leadership. Elton Mayo’s Howthorne studies represent superviosry style. Lippitt and style study analysed the impact of autocratic, democratic and

laissez-faire styles. The Ohio state studies represents a support type of style (consideration) and adirective type of style (initiating sturcture) as being major functions of leadership.

As mentioned above there are different styles of leadership identified by the management thinkers But fundamentally there are three leadership styles as under :

1) Autocratic leadership style

2) Democratic leadership style

3) Free rein leadership style.

According to the philosophies of leaders towards their followers; the techniques and styles may

be classified as under :

1) Autocratic or authoritarian or leaders centred leadership style.

2) Democratic or group centred, consultative, participative leadership style.

3) Free-rein, Laissez-faire leadership style.

4) Bureaucratic leadership style.

5) Manipulative leadership style.

6) Expert leadership style.

1) Autocratic or authoritarian or leaders centred leadership style :Under this type of leadership style, all the authority and decision making powers are vested in

leader himself. He is workcentred or leadercentred. He designs the workload and work situation for his employees. All the decisions are taken by him only, subordinates are not to participate in decision



making process. Autocratic leader directs, motivates and controls his subordinates. The subordinates

are bound to follow his orders and directives. The response expected from the subordinates is obedienceand adherence to his directions. In this type of style, quick decision and its quick implementation is

possible. It is a style of one way communication. In this style the leader instructs the subordinates and

the subordinates have simply to follow. It is also called as negative leadership style because of followers

are generally ill-informed insecure and afraid of the leader’s authority. This leadership style is alsotermed as tellers. Subordinates hardly get a chance to develop themselves. It is better to follow this

style in emergency, for example during the breakdown of machinery, fire break-out, danger to property

and premises of the factory etc. Under the umbrella of autocratic leadership, there are two different

styles, (i) the tough aut ocrat and (ii) the benevol ent autocrat. Under tough autocratic styl e the

subordinates must obey the orders of the leader. Subordinates feel insecured and tend to loose self

confidence. A leader takes all the decisions. Under benevolent autocratic style the leader behave like a

paternalistic leader. He believes himself to be a parental figure. He motivates, directs, understands the

subordinates. He praises them for good work. This style encourages subordinates for creativity, and

develops innovative ability in them.

Thus whatever the type, the autocratic leadership style is based on the authority conferred on the

leader by his position.

2) Democratic or group centred, consultative, participative leadership style:

Under democratic leadership style leader allows the participation of subordinates in decision making process. Leader gives responsibility as well as freedom to the subordinates. He believes that subordinate’s

co-operation for the attainment of organi sational objecti ves is a must. Therefore he encourages anhonest and open communication of ideas with them and develops team spirit in them. He motivates

the subordinates t o use their ful l talent, ability for the business organisation, Esteem needs of the

employees are fulfilled by this type. This type of leader adopts a helpful attitude towards his subordinates.

Basically there are two types of participative leaders viz. democratic leaders and consultative leaders.In the former the leader confers final authority to the group. They are bound by whatever the goup

decides. In the later type a leader requires a high degree of involvement from subordinates and they

alone have the authority to make final decisions. He develops friendly and healthy relations with theemployees. Such type of leadership style develops high morale among employees.

3) Free rein or Laisez-faire or group centred leadership styles :

Under this style a leader gives full freedom to his subordinates to take decisions. Entire authority

in decisions making is given to subordinates. Under this type of leadership, a little direction is involved.Subordinates assume responsibility for their own motivation, and guidance. A free and informal work

environment is created. There is complete freedom to the group or individual in decision making.

There is least interference by the leader but he is always in close contact with them. This leadership

style helps subordinates to develop their personality. This type of leadership style can be used only

when the subordinates are competent and duty conscious. Because of this they perform their jobs in

a very disciplined way.

4) Bureaucratic or rules centred leadership :

As is clear from the name of the style all activities of the groups are governed by the rules and

regulations already framed and brought into operation. The leaderer or his subordinates are not supposed



rather are not required to take any decision, as even the procedures are already laid down. None is

allowed to deviate his activities from the line and procedure. There is no question of any initiative to betaken by either the leader or subordinate, towards decision making. Since the rules and procedures are

so well set that the subordinates perform their activities without indulging emotionally or otherwise, in

decision making process. The only job left with the leader in this style is a supervise the work. He is

supposed to explain and direct the subordinates in interpretation of rules, if required. Such a style provokes the habit of passing the buck. But then the rules specify the obligation of the subordinates

and they are, therefore, accountable for any violation.

5) Manipulative leadership :

This is a typical style of leadership. The leader uses his acquaintance with the subordinates for

achievement of his goals. As the subordinates believe in their leader they tell him all their needs and

desires with an expectation that the leader will help them in fulfilment of these needs and desires. But,

contrary to the expectations of the subordinates the lea der makes use of such i nformation to his

benefit. He shows that he only can help them in satisfying their needs by giving promises and gets the

work done from them. This is a sort of manipulation of the objective of collecting and knowing about

the subordinates and their needs. Thus the possibility of satisfaction of subordinates needs serve as a

fear in the minds of these subordinates as they feel that, if they do not act according to the wishes of leader their needs may remain as dreams.

Such a leadership style is useful and effective only in specific circumstances specially when the

leader is otherwise a failure to provide motivation. Secondly when high degree of cooperat ion is

needed for performing specific job and when highly motivated workers are needed for the job, such

type of leadership style gives good results. The subordinates, in such situation, are given temptation of rewards which are based on satisfaction of needs. In other words such type of leadership style is

effective for a very short period. It can not be used for a long term, as one can not be fool all persons

all times.

6) Expert leadership :

This type of leadership style is basically meant for meeting critical situations. A regular leader needs not be expert in all the matters and therefore may not be able to sort out some problems. An

expert in the problem area becomes the need of the situation. Such an expert may be invited fromother groups. There is a possibility that someone from the subordinates may have the required expertise.

Naturally, as far as the resolution of cropped up problem is concerned, such a person assumes the

leadership role, irrespective of his age, sex, physical or other attributes. Expert leadership skills are

usually transferable. Other members of the group are also confident about the expert and believe that

they can achieve the goals by the advice and guidance from such an expert. As soon as normalcy isachieved this expert ceases to be the leader and the original leader re-assumes his position.

Leadership theories :

Leadershi p is a universal concept, required in every organisati on to get the thi ngs done by

subordinates, the manger has to find and guide their activities. It is an influence process. Leadershipmay be regarded as important part of managing process. A manager can become more effective andefficient if he is a good leader. Like the study of management knowledge, the leadership concept has



also been supported by various theories. These theories of leadership have been developed through the

several stages of evolution ranging from great man approach to transformation theory of leadership.Some of the theories are discussed as under :

There are three prominent theories of leaderships :

1) Trait Theory2) Situation Theory

3) System Theory

1) Trait Theory : This theory seeks to determine the personal characteri stics of an effective

leader. A successful leader must posses the traits such as good personality, intelligence, initiative vision

and foresight, social maturity, acceptance of responsibility, adaptability, human relations attitude, quick and accurate decision making capacity, reliability imagation, courage, persuasion, energetic etc.

Some trait theories mentioned that leadership traits are inherited while others mentioned that these

traits can be acquired by training and experience. The study of the lives of all successful leaders reveal

that they possessed most of those traits to a greater degree. This study does not consider the leadership

clear environment therefore has not produced the results. Though an individual possess certain traits

will not become active until a certain group or situation calls for its therefore is no direct connection

between traits and leadership acts.

Thus the leadership is always related to a particular situation. For example, an individual may

prove very successful in one situation due to some traits, but may fail in another situation. One more

short coming of the trait theory is that behavioural scientists have not formulated a common list of

traits found in all successful leaders. The theory also fails to mention the traits which are necessary tomaintain it. Measurement of a trait usually occurs after a person becomes a leader and it is difficult to

suggest the traits which are prerequisities of a successful leader. These are some of the limitation o

this theory.

2) Situation Theory : It is identified that there are three main components of the leadership process

as the leader, the follower and the situation. The situation theory advocated that leadership is stronglyaffected by a si tuation from which a leader emerges and in which he works. It is based on the

assumptions that there exists an interaction between a group and its leader and that people tend to

follow the leader who is capable of fulfilling their aspirations. In fact a leader is means of achieving the

goals of the groups and the individuals. Such leader recognises the need of the situation and then actsaccordingly. The drawback of this approach i s that it does not consider the role of traits of the

individuals. It has consider a very limited and incomplete view of leadership. In fact leadership is notrelated to the situati on from which a l eader emreges and in which he works. It is based on the

assumptions that there exists an interaction between a group and its leader and that people tend to

follow the leader who is capable of fulfilling their aspirations. In fact a leader is means of achieving the

goals of the groups and the individuals. Such leader recognises the need of the individuals. It has consider a very limited and incomplete view of leadership. In fact leadership is not related to t he

situation only, it is a result of so many other factors also. Which are not considered in this theory. Thistheory identified a common thread among the situational approaches that is a leader have to behave in

a flexible manner to be able to diagnose the leadership style appropriate to the situation and to be able



to apply the appropriate style. This theory emphases the situational approach to leadership rather than

leadership traits.

3) System approach theory : Leadership is known by a persons acts more than by his traits.Traits influence acts but so do followers goals and the situations in which he coordinatess the efforts

of the people and stimulates them towards the achievements of their goals in particular situations. Thisis called systems approach because it considers all the variables namely leader, followers, goals and

environment, which influences each other to determine suitable role behaviour. It considers leader as

one of the several influences each other to determine suitable role behaviour. It considers leader as one

of the several interdependent factors which create a particular type of leadership. Thus leader emergesas a consequences of the needs of the group of people and the nature of the environments within

which the group operates.

To sum up effective leadership dies not only in securing the desired behaviour among the subordinates

but also in creating a sense of satisfaction among them while following the instruction of the leader.

Tannenbaum - Schmidt continuum of leader behaviour theory :

This leadership theory was developed in 1958 by Robert Tannenbarm and Warren Schmidt but its more refined version came into being in 1973.

Robert Tannenbaum and Warren H. Schmidts 1957 Harvard Business revi ew article “How tochoose a leadership Pattern” was one of the initial and certainly one of the most significant situationalapproaches to leadership. In this model the leader selects one of seven possible l eader behaviours

depending upon the forces among the leader follower and situation. The following diagram indicates

the range of continuum of choices is bet ween democratic or relationship oriented behaviours and

authoritarian or task oriented behaviours. These dimensions are from the Michigan and Ohio statestudies respectively. Past writers have felt that concern for task tends to be represented by authoritarianleader behaviour while a concern for relationships is represented by democratic leader behaviour. This

feeling was popular because it was generally agreed that leaders influences their followers in either o

two ways : (i) they can tell their followers what to do and how to do it, or (ii) they can share their leadership responsibilities with their followers by involving them in the planning and execution of the

task.

The former is the traditional authoritarian style.Which emphasizes task concerns.

The lat ter is the more non-directive democratic style, which stresses the concern for human relationships.

The former authoritarian style of leader behaviour is often based on the assumption that the power

of leaders is derived from the position they occupy and that people are inherently lazy and unreliable

(Theory X). The democratic style assumes that the power of leaders is granted by the group they areto lead and that people can be basically self-directed and creative at work if properly motivated at work

(Theory Y).

Thus in the authoritarian style all policies are determined by the leader and in the democratic style policies are open for group discussion and decision.



In this theory R.Tannenbaum and W. Schmidt have described various leadership styles and have

placed leadership behaviour on a continuum having two extremes and many styles in between them.They strongly believed that situational variables play an important role in determinng variables they

have identified seven styles of leadership which seems to be appropriate in different situations. They

also advocated that there cannot be one best style of leadership which is effective and appropriate in all

situations. Therefore leader must be sensitive enough to choose and modify his style as per the need othe situation. He must consider his strength and weaknesses and match them with situational variable

as to select the style.

In the 1973 reprint of their article in the Harvard Business Review they commented that the interrelationships. among leader, follower and the situation were becoming increasingly complex

because of changes in social system and organisation environment, there would be many factors in

situational variables affecting the leadership pattern, Thus the new continuum of leadership pattern is

more complex.

Tannenbaum and Schmidt depicted a broad range of styles as a continuum moving from authoitarian

or manager centred, leader behaviour at one end to democratic or follower centred leader behaviour

one end they refer to these two extreme, as manager power and influence and non-manager power and influence.

Leaders whose behaviour is observed to be at the authoritatian end of the continuum tend to be

task oriented and use their power to influence their followers, leaders whose behaviour appears to be

at the democratic end tend to be group oriented and thus give their followers considerable freedom in

their work. This continuum is offenly extended beyond democratic leader behaviour to include laissez

faire style. Full freedom is given to the members of the group. No policies or procedure are established. No one attempts to influence anyone else.Tannenbaum and Schmidt elaborated the concepts of Michigan

studies by identifying the range of possible leadership behaviour available to a manager. Each type o

action is related to the degree of authoirty used by the boss and to the degree of freedom available to

his subordinater in reaching decisions.

Questions

1. What do you mean by Leadership ?

Define the term Leadership

2. Explain the characteristics of leadership.

3. State the importance of Leadership.

4. Describe the classification of Leadership.

5. State the functions of a Leader.

6. Explain the qualities of a leader.

7. Describe the leadership styles.

8. Describe detail the various leadership the series.



13MORALE

Morale :

If a number of persons are asked to respond to a given situation, their responses will certainly

differs slightly or to a greater extent. If any psychologist undertakes the study of such varied responses

he may come across so many factors, that might have affected the r esponses. These may be

intelligence, interest, satisfaction, atmosphere in which the respondent lives, his likes or dislikes for

the situation and so on.

Summarily we can say that one’s behavioural attitude towards another or a group, or a job or a

society, or an organisation is affected by so many factors. If a person is not subjected to any situation

or job the observer can not assess such an attitude. Thus we can say that the behavioural attitude o

any person is a cumulative effect of so many factors. For some, such an effect may be severe and

for some it may not be that severe. But this severity can be judged only if the behavioural attitude of the

person is keenly observed. This behavioral attitude as an effect of various factor may be known as

“Morale”. The term morale is a nomanclature of the abstract phenomenon. As we know sweetness is

a primary quality of sugar, But this sweetness can not be known unless sugar is subjected to sometreatment. Sweetness of sugar can be known only if he /she is subjected to some task. If it is done, the

performance of that person can be observed (not performance appraisal) and his enthusiasm towards it, which represents his behavioural attitude, can be observed and the degree of morale can be assessed.

Following are some definitions of morale made by experts.-

“Morale is a feeling, somewhat related to spirit, enthusiasm or zeal ”.

- Dale Yoder“Morale is a mental condition or attitude of individuals or groups which determines their willingness

to co-operate. ”

-Edwin B. Flippo

Nature of Morale :

(1) It is evident from the above discussion and definitions that morale is not a thing or concept

conveying particular meani ng. On the other hand the term moral e is used to describe

overall climate prevailing in a group.

(2) Morale is a degree of enthusiasm or a zeal alongwith willingness of persons towards

contributing their efforts to achieving goals.



Perf or ma nceMORALE o rk

pr oduc tiv ity

Fig. Building morale

(3) If any person is a t work, he has to work willi ngly or unwi llingly. Working can not be

undertaken wit hout any affilia tion (may be the effect of some fa ctor). Thus only

unwillingness can not speak that there is no morale. In other words morale always exists.

Its degree may vary.

(4) Morale has many dimensions as it is a complex effect of manY elements or factors. It is,therefore, recognised as long-term phenomenon.

(5) Morale represents a composite effect of feelings, attitudes and sentiments that contribute

to general feeling of satisfaction.(Jack Halloram).

According to the nature of morale, as seen above, we can enumerate the factors that have direct,

complex and cumulative effect on the morale.

General satisfaction, security of job and earning, sufficient wages, availability of welfare facilities,

good treatment from co-workers and superiors, participation in decision making whenever possible

and tenable, congenial atmosphere at work place, good working conditions,mental attachment to job

as well as organisation, are some factors which create morale,

If all these factors have positive effect on the attitude and behavior, it results in creation oenthusiasm and zeal to high extent . Such a condition is “ High Morale Condition ” on the other hand

if these factors affect adversly or negativel y, existing enthusiasm and zea l may also reduce.Such

conditon is known as “Low morale condition.”



Thus morale can not be measured quantitatively. It can be stated by the relative terms like “High”

and “Low”.

Types of Morale :

It is evident from the above discussion that morale is an abstract quality of human being. Whenever

morale is to be assessed it is done in two ways

(1) Individual Morale and (2) Group Morale

The morale of either of the two may be

(1) High and (2) Low.

This morale is directed at two elements.

(a) Job and (b) Organisation

Following chart will in itself indicate the types of morale and how they are related.

Morale

Individual Group

High Low High Low

Towards

Job Organisation

Fig. Types of Morale

It is evident form the above figure that the morale may be towards job as well as organisation.

Morale may be either High or Low. This high or low morale is of either individual or a group.

(1) Individual Morale : The abstract quality represented by enthusiasm and zeal towards either ob or organisation by an individual in solitude is known as individual morale.

(2) Group Morale : Human is a social animal. Every human likes to be a part of a section or group of persons and ultimately the society, It is not true every time that the persons comprising a

group may have same attitude. But we know that birds of same feathers flock together. Thus the

group members, generally have maximum equal qualities. This is more true when the group is of

workers working on a job. If all the members of group are co-operative there is always congenial

relationship between them. Secondly such a group when undertakes any job they show collecti veenthusiaum and zeal (either high or low) towards the job. Such abstract quality demonstrated by agroup collectively is known as group morale.



(3) Morale towards Job : This is behavioural attitude of an individual or a group of individuals

demonstrated by them towards performing a job entrusted to them. This is known as morale towards

ob.

(4) Morale towards Oraganisation : When we think of morale of employees, the organisation

for which they work becomes centre point. All loyalti es and performances are directed to the well being of the organistion. Secondly the organisation through its policies and points of view towards the

workers affect the morale of the employees. No doubt, the employees work for the organisation, but

what is important is the enthusiasm, zeal and loyalty wi th which they work. Thus, their attitude is

known as morale torwards organisation.

(5) High Morale : The more the enthusiasm and zeal demonstrated by workers the more degree

of existence of morale. If the factors affecting the attitude of employees are dealt with positve approach

by the organisation i.e. the management, they bring satisfaction, security, self respect and so on. Allthese contribute to high degree of morale. As we know that morale can not be measured quantitatively,. the degree or level of morale is assessed from the performance and productivity of the employees. If

these two are achieved one can say that these exists high morale. But then one should not forget that

high productivity can also be achieved by force and coercion. If it so such a productivity is not

stable.Thus high productivity and better performance demonstrated consistently can be taken as ameasure of high morale.

(6) Low Morale : It is just opposite of a high morale.

Importance of Morale in Organisation :

A willling worker, a satisfied worker is mentally so set that he can devote more attention, apply

more skills, overcome the difficulties and achieve high productivity. All these are the effect of high

morale. If there is low prodictivity, and no congenial relation between the staff and supervisors and

management, the progress is bound to be affected adversely. Therefore existece of high morale amongest

the emloyees is of utmost importance.

Secondly, the employees are the representatives of the organisation. If they are respected by the

society in general, it gives name to the organisation and good reputation comes with it. Such a reputationalso makes the organisation seccessful.

Thirdly, if the employees have high morale, it is the positi ve effect of positive approach o

management towards allied factors. Organisations behaviour, policy and minimum disputes are evidencedfrom the existance of high morale. Such respect can be commanded by the workers having highmorale.

Forthly, a satisfied worker refrains himself from living away from the job. This reduced theabsenteeism and thereby high turnover is achieved.

Fifthly, if industrial disputes and employee grievances are avoided which is possible by raising

employee morale, it adds to the reputation of organisation.

Thus existence of high morale in the employee individually or in group is most important for the progress and high reputation of organisation.



Benefits of existence of high Morale :

Employees with high morale like their jobs and always co-operate to achieve organisational goals.

It comes from job satisfaction. High morale is indeed a manifestation of the strength of the employees,their dependability, confidence and devotion to the job. Existence of high level of morale benefits the

organisation in following ways-(1) The employees extend co-operation in achieving the goals of organisation that too willingly.

(2) High morale generates loyalty towards the organisation through leaderships.

(3) Employees follow the rules and regulations and thus behave in disciplined way.

(4) It generates high interest in the employees towards the jobs and ultimately towards organisation.

(5) The employees feel pride to be the part of organisation.

(6) Rate of absenteeism is reduced.

(7) Discipline is maintained highly.

Effects of low Morale :

Low morale is the outcome of mental unrest. Any one with disturbed mind can not concentrate on

any job. This, inturn, adversely affects his and ultimately organisational productivity. Doubtful and

suspicious atmosphere and how morale go hand in hand which result in mental tensions. Finally itleads to following consequences.

(1) Rate of absenteeism goes up which ultimately decreases productivity.

(2) Excessive complaints are made and grievances are put forward.

(3) Workers get frustrated.

(4) Congenial atmosphere in workers is disturbed giving rise to friction between the workers,

workers and supervisors et c.

(5) Dissent towards the management and its leadership goes on increasing.

(6) Discipline is not maintained.

Methods of measuring employee Morale :

Employee morale is the enthusiasm and zeal and willingness on employees towards their job andorganisation, individually or through group effort. Thus measuring their morale will mean measuring

of enthusiasm, zeal and willingness. All these are abstract and not physical qualities. Therefore their

quantitative measurement is not possible.Great enthusiasm, average enthusiasm, low enthusiasm or noenthusiasm may be the terms which may represent the extent of their existence. Now again there are

no standards to which these can be compared because great, high, average and low are relative terms.

If ‘one’ is taken as standard even ‘four’ will be high. On the other hand of ‘five’ is taken as standard

‘four’ will represent lower side. It is, therefore, very difficult to measure the morale. But the management

must know the level of existing morale. Secondly morale is not a stagnant element. It goes on changing.

It is the need of management to maintain high level of morale in the employees as it is closely relatedto its progress.Thus it is very essential for the management to assess the level of morale in its employees.



We have seen in previous paragraphs that morale is combined, complex and cumulative effect o

so many elements. If these elements move to negative side, morale, which is the effect will also belowered. This low morale is indicated by rise in complaints, increase in grievances, increased absenteeism

etc. Thus if these elements are continuously assessed such assessment will indicate the movement and

existence of morale. Measuring the morale, therefore, becomes assessment of these factors. It can be

measured as follows :

(1) Grievances-their emergence and redressal : Grievances against the job, supervisor and the

organisation directly affects the morale of employees. Thus the speed of rising grievances and the

pace of their redressal, enable the management to assess the morale. Less number of grivances andtheir speedy redressal represents high level of morale. But here also the mental set up of employees

may not allow some employees to put forth their grievances.

(2) Direct Observation : There are people who are shy at expressing themselves. They even do

not speak out their sufferings. Naturally they accept whatsoever comes. But such an acceptance by

them has a silent effect on their ment al set up. This knowingl y or unknowingly appears in their

attitude and performance. Such situations lower down their morale. Only their behavioural attitude isthe indication of their low morale e.g. An employee alongwith his juniour one was being considered for

promotion. Luckily or unluckily the second was promoted. The first did not express his disappointment.But then his attitude towards performance and towards organisation was diversely affected as he was

losing his morale . If the management wants to maintain high morale, it must take remedial measuresto rest ore his moral e. Here it is possible to understand him only through close observation by

supervisors.

Second aspect of this is that the supervisors and executives are supposed to have intimate relationshipwith their subordinates. In such a situation these supervisors or executives can well sense the attitude

of subordinates. They can nicely translate this and express their opinion about the attitude, feelings,satisfaction prevailing in their subordinates.The management should train their supervisor and executives

in this direction. The supervisors are well acquainted with regular behaviour and at titude of their subordinates. Whenever they sense a fall in these they can offer motivations to them and can try to

stop the fall and can change the trend to rise. Thus observation is one of the ways to measure themorale.

(3) Study of Statistics and Records : We know that high morale reduces the complaints, grievances, absenteeism, accidents, transfer requests and such other matters, which are the outcome

of prevalence of low morale. Statistics and records of all such matters are nicely maintained. A periodical

analysis of these is made. If such an analysis reveals rise in such matters it can be the indication o

flowering morale in the employees.

(4) Providing suggestion boxes : It is not always possible for the employees to express their

grievances. Rather they feel shy in doing this and may feel that their such expression may spoil their

record, if this expression is not taken in its true spirit and sense. Many times the workers have their own ways of overcoming the difficulties in performance, but they may not be according to the

procedures laid down by the supervisors. In such sit uation, though the productivity is affected bythese difficulties they avoid giving their suggestions as they are not sure about the attitude of the

supervisors. They may feel that supervisors may take it otherwise. It is therfore, suggested that a

suggestion box may be kept handy and the employees be informed that they can put their suggestions



in writing in such box, even without mentioning their name and putting their signature.

If the number of suggestions is on increase the management can understand that there is some

lacuna which in turn is affecting the overall morale of the employee.These suggestions may be discussedand paid sufficient heed to by them.

(5) Open door policy : Open door policy means keeping the doors of top executives open for theemployees to approach them and put forth their grievances. This is a democratic way of giving equal

importance to all. This facility itself can add to boosting the morale. Under this policy top executives

inform, through communications to their employees that they can see the people at top managementand put forth their feelings, dissatisfaction, grievances before them. The executives, inturn get complete

information and view points of workers, through discussion. This policy helps the management inassessment of employee morale.

This policy, though sounds very nice, is seldom gets operated not because of the top executives

but because of inferiority complex in the employees. There is always a difference in intellectual level,mannerism, rank in the status of executives and general employees. Therefore the employees hesitate

to directly approach the top bosses. Secondly direct approach to the top bosses ingnores the middle

level like supervisors, foremen etc. The employees always fear that their doing so may annoy thismiddle level.

Even then, i f this policy is operated wit hout any fear, it is one of the prominent met hods o

assessing employee morale.

(6) Personal counselling : Shyness and hesitation on the part of employees prevent them to open

up regarding their dissatisfaction. If a third person who does not belong to the chain of command and

who has authourity to approach proper persons / bosses to redress their grievances, is appointed the

employees may open up themselves before him. Such a person is counsellor. He basically is a trained

psychologist. He does not belong to the chain of command even then is a staff member.

This counsellor, himself, approaches the worker and discusses with them their problems. He

arrives at certain conclusions regarding the dissati sfacti on in them. The more is the degree o

dissatisfaction the lower is the degree of morale. He then enlists all the reasons and submits them tohigher authorities.

(7) Surveys : Surveys is collecting the information from almost all corners either through personal

discussions or through questionnaires. If this method of survey is undertaken to collect reasons for dissatisfaction. It may reveal so many things affecting morale. Such a survey of attitude and opinion

can discover conflicts and dissatisfaction and thus enables to assess morale.

A comprehensive questionnaire is prepared by experts by including suggestive as well as clear cut

questions regarding the elements affecting satisfaction. Number of answers are given. These may be

at least four. Such a printed questionnaire is handed over to each employee. The employee, in turn, has

to go through the questions and answer by simply ticking an answer which he thinks proper. These

answers are further tabulated and processed to arrive at collection of information that has an effect on

emloyee morale and thus assess the degree of morale.

This method is more time-consuming and keeps number of staff members engaged in this. It is

much more expensi ve too. An answer given to a questi on today may depend upon preva iling



circumstances and may not remain the same after some period because the circumstances then may

be different.

(8) Other methods : Apart from the above methods the managment may resort to group meetings,scheduled interviews, collective bargaini ng. exit interviews et c.These methods may enable the

ma nagement to know the points of dissa tisfaction. The more the poi nts of such dissatisfaction thelower is the degree of morale.

Finally morale is the knowing and /or unknowing effect of dissat isfaction on the behavioural

att itude of employees. Thus finding out the points and elements which led to dissatisfaction is the proper way of assessing the morale. Performance and productivity may not bear the impact of only

morale. But these things can be affected by so many other things. Thus only rise and fall in performancerating and productivity can not be the criteria of assessing the morale.

Relationship between Morale and Productivity :

As seen in the previous paragraph, rise and fall in roductivity is not because of high and low

morale only. But the productivity has major impact of employee morale. There are two conflictingopinions about relationship between morale and productivity.

According to one school of thinkers morale and producti vity have positi ve and almost perfect

correlation. In their opinion morale and productivity go hand in hand. Thus, more, the degree o

morale the more is the rate of productivity. If this rule is taken in the light of economic laws i.e. law

of diminishing utility, law of diminishing returns etc. it can be a perfect rule. But one should not forgetthat these economic laws are framed under certain situation i.e. “all other things being equal andsame.” Thus if all other factors relating to productivity are fairly good, the above law stands erect.

Nuturally this can not stress befitting relativity between morale and productivity. This is because

there are so many factors which affect the productivity positively or negatively.

It is often observed that productivity in some organisations is high though the degree of employee

morale i s low and vice versa. This does not mean that employee morale has nothing to do with

productivity. Thus another school of thinkers do not agree that there is always a perfect and positivecorrelation between morale and productivity. In their opinion, which is t rue, productivity of any

organisation depends upon so many things of which morale is one.

Both the hypothesis were tested with the result that in some organisations productivity is directly

and positively correlated. But in some organisation it was found that even in the situa tion of low

employee morale, productivity is high and in the situation of high employee morale productivity is low.

Following four situations will enlight the results.

(1) High morale and high productivity : If the atmosphere is congenial, co-operative along with provi ding good raw material, good working conditions, good j ob procedure, encouragement by

supervisors, good remuneration etc. the morale is at high level. Under such conditions, high moralestimutates productivity.

(2) High morale with low productivity : If all factors affecting morale are fairly good, theemployees are satisfied and resultantly their morale is high. This high morale enhances enthusiasm of workers towards job. But if there is intermittent supply of raw materials, if the machines are not

working properly, if there is resentment from group members and so on, the employees even with



higher degree of morale are handicapped and therefeore can not achieve high productivity. But one

thing should not be ignored that, had there been low morale the productivity would have gone still below.

(3) Low morale and low productivity : If all the elements as discussed in No.1 above are in

negative, status they are sure to affect the morale adversely and because of other inferior conditionsthe productivity too is at lower level.

(4) Low morale and High Productivity : Out of the elements affecting morale and productivity,

those which are directly related only to productivity are in good conditions but the elements affectingmorale are not there, there will exist low morale. As such even there is low morale the productivity

will be relatively high. This rate of productivity is further increased by strict supervision, punishmentand inhuman treatment to workers. Naturally the rate of productivity is not commensurate to level o

morale. But such conditions can not last longer. They give rise to abseteeism, strikes, arrogance on

part of the employees, resentment to obey orders etc. Thus the situation of low morale wi th high

productivity can not remain. As a result the situation will automatically converted into the situation o

low morale and low productivity.

Best of all the four situations will be fair degree of morale and fair degree of productivity. This can be achieved if the employees are kept satisfied and other elements of productivity are kept in fairly

good condition.

Measures to Improve Degree of Morale

Existence of fairly good degree of employee morale is an essential factor for progress and growthof organisation. Maintanace of good morale is a continuous process. Degree of employee morale is

direcly correlated with degree of employee satisfaction. This satisfaction makes the employee to show

enthusiasm and zeal towards work. This brings behavioural improvement in them. As such all efforts

for maintaining and improving employee morale should be the efforts to ensure more satisfaction of employees. Naturally the factors affecting such satisfaction diversely should be improved. Methods of improving these factors are the methods of improving morale.These are as follows :

1) Fair Remuneration : Every employee works to earn his livelihood. Everyone feels that heshould be able to maintain certain standard of living for his family. This is possible only if he earns a

remuneration commensurate to cost of living. Secondly such a remuneration should be decided on the basis of work / job done by him. There is always a cause of discontent if the wage structure of any

organisation is less than that exists in other organisations of same type. It is, therefore, essential to

evaluate a wage structure considering the type of job entrusted, cost of living and wage structure o

other organisations. It is an old saying that, way to satisfaction goes through stomach. Thus remuneration

plays a vital role in boosting the morale.

2) Incentive Schemes : Fair remuneration gives compensation to the employee for performing

his job. This, at times, may not utilise his full capacity and skill. It is but natural that an employee may

feel that his showing more skills is not going to remunerat e him any more that regular wages,

Incentive, monetary or non-monetary, is a way to motivate an employee show more skills and utilisehis unused capacity. In other words incentive may raise his morale.

3) Welfare : Indian Factories Act has made it compulsory for the factories to provide certain

welfare facilities. These facilities are generally provided to employees. These facilities are bear minimum



requirements to keep the employees fit to work. There are many more facilities that can be provided to

the employees such as sports club, credit societies, education to their children, parks, cultural activitiesetc. If these and others depending upon the environment, are provided, this will certainly add to the

employee satisfaction and ultimately the morale.

4) Job Security : An employee is given a job and a sword of his extrication hangs over his head.Such a situation creates mental disturbance which leads to decrease his interest in job and his satisfaction.

If this sword is removed and an employee is assured of his continuance on his job, the fear of

extrication will be removed. This will boost his interest leadig to satisfaction and finally rise in his

morale.

5) Fair promotion policy : Whenever any one joins any job he has in his mind a desire to riseand gain better remuneration and status. It is therefore better if the organisation has a policy of channel

promotion depending upon seniority-cum-qualifications. The existence of such a policy motivates the

employee to show more interest and aquire better qualifications. An employee with a goal of being

promoted before him, puts his all out efforts for better performance on the post he holds. This is rise

in morale degree.

6) Honest and competent leadership : Leadership, here, means the character of a person who leads the group of workers. The leader should be fair to all the members of the group. His being partial,

apathetic, corrupt, lazy, incompetent and being unreasonably egoistic certainly creates discontent inthe group. If he is so, it goes difficult for him also to control the group. On the other hand if the leader

is honest, impartial, sympathetic, capable of unerstanding the hopes, aspirations, emotions, sentiments

of t he empl oyees, he soon wins the hearts of his subordi nates. In addi tion to these menta l

characteristics a leader should be depends on quality leadership. The leader is a person who is always

with the employees and therefore can understand them. He can find out factors of dissatisfaction, if

any in the employees and can help in removing them. This will add to the degree of morale.

7) Congenial Atmosphere : It is a psychologically proved universakl truth that a person workingat a clean and hygienically good place along with co-operation from co-workers as well as supervisors

gives better performance than a person working at dirty and unhygienic place with lack of co-operations

from co-workers and supervisors. The factors as mentioned above are the factors which improve rather create atmosphere. These factors are physical as well as mental. These physical factors i.e.keeping the place clean, with good ventilation, sufficient air without pollution by smokes and fumes, humidity, resting place, canteen etc. be taken care of. But the same time co-operation between each

other and from supervisors should also be ensured. If the atmosphere is equipped with these, it is said

to be congenial atmosphere. This will certainly add to the morale.

(8) Effective communication system : Communication is the means by which required information

is polarised and made to reach appropriate person. As far as employees working on the floor are

concerned, they require timely instrucitons rega rdi ng performing jobs. Management policy if not

made known to them, they may not be able to implement it. Rather they will be confused. Many timesthe instructions given by higher authorities may create problems with the workers. It is, therefore,

required that there should be upward communication also. That helps the workers to overcome their difficulties in performance.

Secondly communication is required for redressal of the grievances of the employees. If there

exists a perfect system of discovering the grievances rather than communicated by employees and if



the management takes timely action to redress them at the earliest, this creat es a feeling that the

management cares for them. The same way conflicting interests and dissatisfaction should also bediscovered and remedial action, if taken in time, will help bringing congenial atmosphere and employee

satisfaction will be ensured.

(9) Efficient organisation : Unless a proper organisational structure is established, it will not be possible to have effective and correct flow of work. Whatsoever organisational structure is adopted-

centralisation, decentrali sation- combination of these two (system of communication personnel

department etc.) by the management it should be effective and suitable to t he work. Establishing

superior and subordinate relationship, principles of unity of direction and command, limits of authourityand responsibility are some factors of which due care should be taken. Effective control measures,

disciplinary procedures should also be well set. If confli cts and confusions are reconciled, through

organisational efficiency, co-ordination and control, employees morale is certain to be raised, leading

to greater satisfaction, pride, confidence and high spirits.

(10) Workers Participation : Workers participati on in management is a democratic way of

managing. Their participation in decision making creates a feeling of pride, and their participation inoverall management creates a feeling of pride and self importance in the minds of employees. Such a

prticipation is more essential when some policies affecting the workers are formulated, so that theycan put forth their views in their interest. This, in turn, boost growing satisfacti on and thus high

morale.

(11) Other measures : Morale is a n effect of psycological, social, economi c and physical

environment in whi ch t he employees work. Total such environment should be maintained a t high

standards. Social and cultural gatherings access to higher authorities, willingness to help each other and so on infulence the morale. Therefore such oppotunities should invariably be given to employees

to boost their morale.

Motivation and Morale :

Motivaton is a physical thing offered to employees in order to mobilise hidden capabilities and

skills in the emloyees. Motivation makes the employee to work.Morale is a mental thing that cannot be shown. It is experienced and felt by observing the zeal and

willingness to work as an effect of employee satisfaction.

Motivation helps boosting the morale to some extent. It is a type of reward given to employees for good efficient work.Thus motivation assumes status or cause which will not last long.

Morale

Behavioural Attitude, Sentiment of satisfaction, enthusiasm, zeal and willingness to work



Behavioural Attitude, Sentiment of satisfac-

tion, enthusiasm, zeal and willingness to work

H M L MIGH ORALE OW ORALE

Factors affecting morale

Fair- 1. Remuneration Poor Good- 2. Welfare Lacking

Yes- 3. Motivation No

Yes- 4. Job security NoGood- 5. Co-operation with Bad

co-workers and

superiorsAllowed 6. Participation in Rejected

decision makingCongenial 7. Working Atmosphere. Unhealthy

Quick 8. Grievance Redressal. LingeringExperience 9. Job satisfaction Not experienced.

Fig.

Morale is a sentiment of satisfaciton which creates interest in work that too, to perform it efficiently.

Motivation is a stimulant which temporarily moves one into action. As soon as its purpose isserved the action takes its own way.

Morale is a composite of feelings, attitudes and sentiments that contribute to general feeling o

satisfaction at work.

Motivation is a function of drives and needs.

Morale on the other hand is a function of freedom or restraint towards goal.

Motivation mobilises energy.

Morale mobilises sentiments and willingness.

Morale of Executives and Supervisors

Morale is an invisible thing. It is not easy to define, control or measure the morale. It is an psychologi cal phenomenon. It exercises a potent influence on t he human relati on climate in an

organisation. It refered to esprit-de-corps a feeling of enthusiasm, zeal confidence among indivisualsor groups, that they will be able to cope with the tasks assigned to them. The managers executivessupervisors are the live assests of an organisation. If their morale is high, it directly results in achievments

of organisational goals, targets, higher productivity, efficiency, best or outstanding performance etc.

The overall operational efficiency depends upon the level of efficiency of managers and executives.

Functions of Executives and Supervisors.

(1) Determining the objectives and goals, establishing the standards of work of workers, groups,units, divisions, sections or departments.



(2) Proper defining the task or work to be performed by subordinates.

(3) Accurate interpretation of companys plans, policies, programmes objectives and goals.

(4) Introduction of latest modern methods, procedures and techniques of work performance.

(5) Strictly following the rules and regulations.

(6) Adequate and proper evaluation of performance of the employees.

(7) Fair and equitable distribution of work among individuals and groups on individuals.

(8) Observing code of discipline and maintaining decorum.

(9) Decentralisation of authority or delegation of authority and fixing responsibilities of the subordinates.

(10) Developing communication network and there by securing team work and spirit harmony etc.

(11) Maintaining a high level of morale is one of the important responsibilities of executives andsupervisors.

The executives and suprvisors are required to adopt skills such as technical, decision making,analytical, conceptual, communication, human relation, maintenance of discipline, for performing the

above mentioned functions.

Effects of high morale among executives and supervisors :

1) Sound and healthy industrial relation.

2) Effective supervision and control over subordinates.

3) High level of overall managerial efficiency.

4) Higher and improved productivity.

5) Timely achieving the targets, objectives, goals etc.

6) Happy and satisfied employees.

7) Able to keep the organisation dynamic.

8) Improved adaptability (to change)

9) Elimination or minimisation of all the waste.

10) Democratic environment.

It is very true that high morale of the executives as well as supervisors ensures higher level of

productivity, efficiency and ultimaterly survival of business organisations.



Questions

1. Define the term Morale and Explain the nature of it.

2. Describe the various types of morle.

3. Explain the importance of Morale in the organisation.

4. What are the benefits of high Morale ?

5. What are the effects of low Morale ?

6. State the methods of measuring employee Morale.

7. Explain the relationship between morale and productivity

8. Suggest the measures to improve degree of morale.

9. Write a short note on motivation and morale.

10. What do you mean by executive’s and supervisor ’s Morale ?11. What are the functions of executives and supervisors ?

12. State the effect of high morale on executives and supervisors.



14CONTROL

Meaning and concept of control :

Controlling is one of the important steps in management process. It is a final step which ensuresthe attainment of objectives of the organisation. Control is one of the most important functions of

management. It is an essential feature of scientific management also. Control is necessary to minimise

variability and unpredictability in the use of means and attainment of ends or goals. Following are some

important definitions of control :

According to George Terry, “Controlling is determining what is being accomplished,that is, the

performance, evaluating the performance and if necessary, applying correct ive measures, so that performance takes place according to plans”.

According to Henry Fayol, “In an undertaking control consist of verifying whether everything

occurs in conformity with the plans adopted, the instructions issued and the principle established. Itsobject is to point out the weakness and error in order to rectify them and to prevent recurrence. It

operates on everything, i.e. people and action”.

According to Mc Farland, control, in its managerial sense, can be defined as, “The presence in a business of tha t force which guides it t o a pre-determined objective by means of pre-determined

policies and decisions”.

According to E.F.L. Breach , “ control is checking current performance against pre-determinedstandards contained in the pla ns, with a view t o ensuri ng adequate progress and satisfactory

performance.”

According to Billy E. Goetz , “Management control seeks to compel events to conform to plans”.

J. K. Rosen d efines, “Control is that function of t he system which provi des direct ion in

conformance to the plans”.

Peter Drucker defines, “Control maintains equilibrium between the ends and means, output and

effort s”.

Knoontz and O’Donnell defines, “Control, like planning, is ideally forward looking and the best

kind of managerial control corrects deviations from plans before they occur”.

After careful study of al l the above definitions we come to the conclution that , even though control is the last step in the process, it is equally important for efficient, smooth, speedy and proper

attainment of organisational goals. Even if all effort like, formulating policies, procedures and other

factors are put in by the management, next important and crucial part of the road to attainment of

goals is their implementation by the concerning personnel. If the implementers are lethargic, careless,

unloyal and inefficient, the performance is going to be adversely affected. It is, therefore, essential to

overcome all these. Control aims at this. Naturally prerequi site of control is observation of the



performance and locating points of lapses. Thi s can be done by evaluation of the performance, its

comparison with set out standards and by t aking measures to correct the deviations. The complete

process is “ Process of control.”

Control Process :

As seen in the previous paragraph control comprises of some sequential steps to be followed.

Basically the process of control involves three steps i. e. (a) setting up standards (b) performance

appraisal and (c) corrective measures. Management thinkers have also confirmed these steps. But

some feel that step of performance appraisal should be separated. They recommend the step o “measuring of performance ” before appraising it, though measuring of performance is, conceptually,

part of performance appraisal, bringing number of steps to four.

1) Establishing standards : The first and basic step in control is establishement of standards o

performance for ensuring that the performance is in accordance with the plans. Standards are expressions of goals of the enterprise or the department. They may be tangible or intangible, vague or specific.

The manager should select some of such standards which may best reflect the goals of department

and which will best show him whether or not these goals are being met. A manager has to answer

some questions while establishing standards. What type of standards are requi red? How to set thestandards? Which strategic points be selected ? etc. Whatever standards are established. They should

be feasible, accurate, precise, acceptable, workable and flexible. They have to concentrate on results,

and should be expressed in quantitative terms. They should be consistent with the organisati onalobjectives. Production, sales and finance are some important areas where control is a must.

2) Measuring performance : The next important step in the control process is the evaluation o

performance. Under this step actual performance is compared with the standard performance. The

standards are varied and their measurements too are different. There are some tangible standards in

terms of weight , colour, time, money etc, There is no difficulty in using these measurments. But thereare some intangible standards, direct measurement of which is quite difficult. For example measuringcompany’s good will, reputation, company’s status, creditability, name and fame company’s standing

in market, employees morale, attitude etc.3) Performance appraisal : After comparing actual performance with satndard performance,

the evaluator should point out the deficiencies or deviations or difference in performance and find out

the rea sons responsible for these. Important deviations should be brought to the notice of the t op

management and must be communicated to the concerned employee too.

4) Correcting the deviations (Suggesting measures) : The last step in control process, after

detecting the deviations, is a corrective action. A rightful corrective action can be taken only when the

cause of deviations is clearly established. Minor deviations can be removed by supervisors and themajor deviations can be corrected by the executives. Corrective act ions are necessary to avoid the

recurrence of unfavourable deviations in future. Effective control is possible through corrective actions.

Characteristics of the control :

Following are the important characteristics of control:

1) It is a basic and important managerial function : Like other functions of manager, for example, planning, organisation directing etc., control is equally important function. Every manager



has to essentially perform this function.

2) It perpares plans, objectives and sets the standards : Controlling involves the preparation

of plans, setting goals and objectives and setting the standards.

3) Looking ahead : Generally a control function is linked with future. A manager, after knowing

the deviations between the actual performance and standard, takes corrective action only in regard tofuture operations. That is why it is known as forward looking.

4) Control is a continuous process : Along with other managerial functions a manager has to

perform control function continuously. It involves setting up standards, comparing actual performancewith st andard performance, finding the reasons for deviation and suggesting the correcti ve action

over it. This process goes on continuously. It is an endless process upto the closing down of business

organisation.

5) Control is a dynamic (flexible. process) : Control is a flexible process. Control process

changes according to the changes within and outside the business organisation. That is why it is calleda dynamic process. Since management is managing a business organisation which keeps on changing,

managerial control is also required to be changing i.e. dynamic.

6) Corrective action : After knowing the deviation between the actual performance and standard performance, a manager has to take corrective action on it, by keeping in mind the future changes.

7) Control ensures the performance according to the plan : Control is the only function

which ensures that everything is going on according to the plans.

8) Control is neither order giving nor command : It is not a negative one. It is positive and

corrective, providing guidance for future actions.

Types of Control :

There are three types of control as under :

1) Historical control : Under this type of control performance or resul ts are measured and

compered after happening of the event or after accomplishing the performance. The management,thus, knows the extent to which the objectives or goals are achieved. This is taken as a base for future

or next performance and corrective measures are taken therefore. The performance is measured withthe help of budgetary control, financial ratios etc.

2) Predictive control : This type of control is concerned with the future. This predictive control

attempts to anticipate problems before they actually occur. For example problem of absent eeism,

labour turnover, disputes among workers, financial budgets etc. Predictive control is essential to keep

the control on the above matter.

3) Concurrent control : Concurrent control is a flexible one which changes according to

anticipated changes, based on observation and visualisation of future. It is concerned with the adjustment

of performance before any major damage, loss, destruction takes place. In manufacturing industry.

Control chart is an example of concurrent control. Control charts in production department, sellingdepartment are necessary to facilitate adjustments, corrections, etc in case of changes, if any andaccording to needs.



Managerial Control Techniques :

There are several techniques of control used by management. These techniques of control are

broadly classified into two categories, namely, budgetary control and non-budgetary control. These

techniques are useful in measuring the overall performance of the organisation and implementation o

effect ive control.

Managerial Control Techniques

Budgetary control techniques Non-Budgetary control techniques

1) Break-even analysis 1) Master budget2) Product life cycle2) Flexible budget and fixed budget 3) Production planning control 3) Functional budgets

4) Internal audit 4) Zero-based budgeting5) Management information system

6) PERT and CPM

(Programme Evaluation and Review

Technique, Critical Path Method)

a) Budgetary control te chniques :

There are a large number of control techniques used by managers, Budgetary control is the oldest

one amongst them. In modern times also budgetary control is one of the effective control techniques.

This technique involves budgets, to plan, to co-ordinate and to control day-to-day operations of business

in accordance with the overall objectives, goals and targets of the business organisiation.According to Walter W. Bigg, “The term budgetary control is applied to a system of management

and accounting control by which all operations and outputs are forecast as far ahead as possible and

the actual results, when known, are compared with the budget estimates.”

The Institute of Cost and Management Accountants Engl and has defined budgetary control as,

“the establishments of budget relating to the responsibilities of executives to the requirements of a

policy and the continuous comparison of actuals with budgeted results, either to secure by individual action the objectives of that policy or to provide a firm basis for its revision”. Budgets are taken as

standards for comparison and budgetary control revolves around them. Various types of budgets aregenerally prepared in an organisation based on objects. These budgets are, in turn, used as standards

for implementing control. They are of following types:

1) Master Budget : Master budget is a summary budget incorporating all functional budgetsand is prepared for the organisation as a whole. The object of this budgets is to secure overall co-

ordination in the budgetary programmes and accordingly it is utilised for exercising effective control

over the enterprise by the top managment.



2) Flexible and fixed budget : A budget which is prepared at a time for varied levels of operation,

is known as a flexible budget. It consists of a series of budgets depending upon varying levels of output and sales. Because of this special feature, a flexible budget automatically adjusts different levels

of activity and a new budget is not required to be prepared for each level of output or sales. It is

prepared after considering the fixed and variable elements of cost and the changes expected in each

item at various levels of operations. A flexible budget is used by such business enterprises in whichuncertainty is more.

A fixed budget is one which remains unchanged irrespective of the level of activity in a businessorganisation. Once the levels of different activities are decided, they are not supposed to be changed

or modified. This budget is useful where the forecast of the firms future activities are highly reliable

and certain.

3) Functional budgets : If any organisation has undertaken more functions, or if the activity of organisation is divided in various functions it is always in the interest of organisation to control every

one of t hem on the basis of certain standa rds. These stadards are budget s. Budget for evey such

function is functional budget. Main functions of an organisation are production, sales, marketing,finance personnel administration etc and for every such function an independent budget is prepared

which is called functional budget.

4) Zero based budgeting : It is originated in USA in 1970.The key element in ZBB is future- objective-orientation of past objectives. This budget assumes that instead of taking into consideration

the previous year ’s budget and a djusting it for preparing the fut ure budget therefrom, zero based

budgeting forces the managers to review the current objectives, goals and operations. This budgetrequires the managers to rejustify the past objectives, goals, targets, projects etc. and to give priorities

for the future. This budget provides an opportunity for the managers to examine, evaluate, review

each organisational activity. ZBB cuts down wastage, weeds out inefficiency and reduces the cost o

production becasue every budget porposal is evaluated on the basis of cost benefit analysis.

b) Non-budgetary control techniques

1) Break-Even Analysis : It is known as cost-volume profit analysis. Break-even analysis is

concerned with the changes in fixed costs, variable costs, sales volume, sales prices and sales mix andtheir effect on profits. Basically it is an analysis of three different factors- cost, sales volume and

profit. These three factors are interrelated and interdependent. The break even chart shows the break

even point, and the areas or volume of sales that results in profit or loss. The break even chart serves

as a control aid in a number of ways. The volume of sale at which there is no profit or loss is knownas break-even point. Break-even analysis can help the management to know the minimum volume o

sales it should aim at to avoid losses.

2) Product-life-cycle : The product life cycle concepts is derived from the fact that a product’ssales volume and sales revenue follow a typical pattern of five phase cycle. The life cycle of any

product is in fact the period during which it can exist in market yielding profit. It is similar to the

human life cycle. The length of the life cycle, the duration of each phase and the shape of the curve

vary widely for different products. The product life cycl e should be preferably termed as productma rket life cycle as it is related to a given particular market. For instance an old products in t he

American market will have a new life cycle when it is introduced in to a new foreign market. The

product life cycle concept indicates that the product is born or introduced, it grows, attains maturity



and the point of saturation in that market and then sooner or later it is bound to enters its declining

state i.e. decay in its sales. Every product moves through a life cycle having five stages : Introduction,Growth, Maturity, Saturation and Decline. The life cycle gives the sales revenue and profit margin

history of a product over a time frame. The most essential feature of the product life cycle is t he

difference between the two curves i.e. sales curve and profit curve because, usually, the profit margin

assumes declining trend before the sales volume entre that stage. Hence, marketer must generate acontinuous stream of new products in order to maintain market position, as well as the company’s

image and try to hold profitability at desired level. Similarly, marketers must consider the changing

relationship between sales revenue and profitability in the allocation of marketing and other resources

among the product lines.Product life cycle governs strategic marketing planning at all levels. It is

involved not only in product planning and development but also in pricing, promotion and distribution

policies. Thus product life cycle works as an effective non-budgetary control technique.

3) Production planning control : This control facilities to over come the multiple and complex

problems of production activities. Basically it relates to the decisions concerning quantity, quality, costof production, time required for production, etc. alongwith problems of replacing old methods of

production by new methods, problems of introduction of new technology etc. All this helps in the

control of the entire production process. Production control is effected through routing, scheduling,dispatching and follow up, as under :

a) Routing : The first thing required in routing is preparations of a list of operations, the machines,

equipment that are required in the production process. It involves planning of where and by whom

work should be done, the determination of the path through which work should follow. It determinesthe operati on through whi ch a product must pass and the arrangement of these operations in the

sequence that will require a minimum of handling, transportation, storage and deterioration through

exposure. The aim of routing is to determine the most feasible sequence of operations. Effi cient

routing permits the best utilisation of physical and human resources employed in production. Routing

is an essential element of production planning and control because its all other functions depend uponrouting. The person who prepares the list of sequential of operations must be thoroughly familiar with

all the operations and the machines as well as equipment in the plant so that proper routes, which will

ensure the maximum utilisation of the plant capacity can be established. The routes laid down should be the shortest and the most economical.

b) Scheduling : Scheduling determines as to when various operations are to be performed. It

consists of the assignment of starting and completion times for various operations to be performed.The aim of scheduling is to streamline a larger volume of work so that convenient and effective use o

plant, machinery and equipment is facilitated without any burden of overwork on them that may resultin adverse consequences. A master schedule is always prepared first, incorporating therein schedules

of various operations.

c) Di spatching : Dispatching deals with setting the product ive activities in motion through

release of orders and instructions in accordance with previously planned timings as embodied in

operation sheet, route card and loading schedules. It provides official authorisation and informationfor (i) movement of materials to different work places (ii) Movement of tools and fixtures necessary

for each operation. (iii) beginning of work on each operation (iv) recording of beginning and completion

time (v) movement of work in accordance with a routing schedule (vi) control of progess of all



operations and (vii) making necessary adjustments in the release of instructions. Dispatching may be

either centralised or decentralised.

d) Follow-up (Expediting) : An ideal follow up procedure helps to reveal the defects in routing

and scheduling. It also detects where communication of instructions is not clear. Lastly it identifies the

workshops which are either underloaded or overloaded. It involves human relations aspect also. Followup is essential to get the work done according to plans.

4) Internal Audit : Int ernal audit is also an effective tool of control. It is conducted by an

internal auditor, who is an employee of the organisation. Internal audit attempts at regular and independent

appraisal of accounting, financial and other operations. Internal audit is concerned not only with the

financial control but it includes, plans and the quality of management, effectiveness of methods etc.

Internal auditor can point out defects and neglected situations and can make suggestions based on hisanalysis. Internal audit is also instrumental in enhancing morale and motivation of employees.

5) Management information system : Information has been defined as the rules or guidelineswhich have the potential to influence managerials decisions. Manager is a decision maker. Information

may be a fact or set of facts which is valuable in specific decision, from among alternative courses of

action. Information provides the means by which problems are recognised, defined and eventuallysolved. Management information system is a system to provide selected decision oriented information,needed by management, to plan, control and evaluate the activities of the organisation. It is designed

within the frame work that emphasizes profit planning, performance planning and control at all levels.Thus MIS is a system which provides each manager, in the organisation with the information needed

to take decisions, plan and control within his area of responsibility.

6) PERT and CPM : Programme evaluation and review technique (PERT) was firstly used in

1957 in U.S.A. as a tool of planning and controlling the “Polaris Missiles Programme” by Booz, Allen

and hamilaton in association with the U.S. Naval department. PERT and critical path method (CPM)

are very useful techiques for planning large and one time projects in the area of research developmentand construction work etc. These, two techniques are basically variations of Network methods. The

Network concept in PERT provides the framework for treating wide range of project management

problems. There are some steps involved in PERT as given below:

a) Identifying the component activities that must be performed.

b) Indicating the sequence of component activities in a network.

c) Analysis of time required to complete individual activity and the entire porject.

d) Modification of initial plan.

e) Control the project.

Construction of ships, buildings and highways, launching a new product, publication of books,

computer systems are some areas where Programme evaluation and review technique is used. The

unique contribution of PERT as a form of network analysis is that it provides a means of obtaining a

probable estimate of the expected time to complete activities that have not been performed previouslyand therefore, have not been measured. It is both forward and backward looking control device. It

brings in focus, the danger signals or potential bottlenecks, but also provides management with timely

progress reports.



The critical path method was firstly employed in U.S.A. in 1958 by the E. I. Dy. Pont denemours

company. It is basically a technique of project management, used for planning and controlling themost logical sequence of acti vities for accomplishing a project. The process of control start s with

comparison between schedules and actual performance when the project begins, It locates the deviations

with their reasons and finally provides remedial actions. CPM is based on the assumption that the

expected time is actually the time taken to complete the project. It is suitable for construction projectsand plant maintenance.

Limitation of Control :

Even though the control process is essential and so many merits are demonstrated, it has some

limitations and short-comings. They are :

1) Control is an expensive and time consuming process.

2) There are some non-quantitative aspects of business like employee morale, public relations,employee motivation which can not be expressed in quantitative terms. In control process

measurable yardsticks are essential.

3) Some times control may be an obstacle in subordinates initiative and spirit. In the sense -

over control, strict direct control would not motivate the employee to take initiative and toenhance his spirit in working activities.

4) If every member of the organisation starts working with responsibility or as a responsible

member then only control process will be successful otherwise not . This thing is not

possible in all cases.

5) Effective control is possibl e onl y if t he subordinates accept i t. Control may loose its

importance if the subordinates decline to accept it.

6) Management can keep the control on internal factors but it is not possible for it to keep the control on external factors li ke, changing government policies, technological changes,social, cultural, political, psychological changes etc.

Nature of Control : The nature of control may be understood on the basis of the following points.

1) Control is a basic function of management : Efficient control is required to be exercised in

the process of management as to get better results and to achieve organisational objectives.

2) Control depends on and contributes to others functions of mangagement : By settingstandard of performance and behaviour for each employee and comparing their actual performance

with it, their efforts are made more meaningful and in the right direction as to achieve objectives of

organisation. It is not related only to planning but organising, staffing and directing also require efficient

control to get the desired results.

3) Control is related to people, things and actions : It is only by taking controlling measures

the employees are forced to behave in desired manner, to maintain discipline and order and to comply

with predetermined norms and rules and values. Similarly, by watching, monitoring and steeringcontinuously any situation may be brought under control. Not only this, controlling also ensures thateach action on the part of the employees is checked and made in conformit y with predetermined

standards and procedures.



4) Control is all pervasive function : Every manager working in organisation irrespective of

his posit ion has to control a nd command over the activities of subordinates as to produce desiredresults. Not only the managers but every organisat ion needs to exercise efficient control t o secure

optimum effective utilisation of all resources for the accomplishments of objectives.

5) Control is a continuous process : Like planning, controlling is also a continuous processhaving no definable end. It involves constant and regular monitoring of event and performance, analysis

of standard, procedures and policies and suggesting remedial measures as to control the situations or

to improve the performance.

6) Controlling process ai ms at taking corrective measures : In controlling process actual performance is measured and compared with standard of performance as to discover devi ations.

Once the devia ti ons are brought on the surface, suitable corrective acti ons are suggested by the

manager as to check reoccurrance of deviations in future.

7) Controlling is a line function : It is a duty of every manager working in a line of authority

to control the activities of his subordinates. Without exercising an efficient control one can not get thethi ngs done by ot hers. The process of contr oll ing hel ps the line mana ger i n di scharging his

responsibilities.

8) Controlling is forward looking approach : It is very clear that the manager can do little

about the past. But from the past he can learn a lesson and take necessary action for the future.

In brief the controlling function of the manager remains basi c and more important due to t he

following reasons :

a) Helps plans to be implemented effectively.

b) Facilitates co-ordination in organisational functioning by reducing diversity.

c ) Encourages high morale on the part of employees.

d) Ensures order, discipline and obedience on the part of subordinates.

e) Helps the organisation to preserve and promote its distinct identity against environmental

changes.f) Ensures efficient use of physical and human resources for achieving organisation goals.

g) Enables the organisational to keep watch on external environment and to achieve degree o

command over it, and

h) Promot es integrati on between short-term and long-term objectives, corporate goals anddepartmental goals and between enterprise and environment.

Significance of control :

Controlling is a basic function of every manager. It aims at taking action for imporving the results

or checking the reoccurance of an event. By exercising control, the manager ensures that the planned

activities are being carried out according to prescribed methods and procedures. The significance of

controlling function of manger can be described as under.1) Controlling helps inaccomplishing organisational goals : Controlling is a goal oriented

process. It aims at taking all necessary action for bringing actual results close to desired results. It



plays an important role in achieving objectives of organisation. It is only through controlling all activities

are directed towards the planned objectives. By exercising an efficient control the manager keeps aclose watch and monitors the performance at various levels of organisation.

2) Controlling brings order and discipline in organisation : Organisations are formed and

managed by human beings. Thus the working of these organisation is subject to many imperfectionsand mistakes. Because every individual has a natural tendency to distort the functioning of it and make

it as per his convenience and comfort. If such tendencies are not controlled timely, they may result in

disorder, indiscipline and chaotic conditions.

3) Control facililates efficient use of resources : By exercising a control, the manager attempts

to reduce wastage, spoilage and leakage with regard to the use of resources of an organisation. He

seeks the performace of each activity in accordance with predetermined standards and norms. Theresources are used in such a way so that neither they remain unutilised nor they are over used.

4) Control also helps in the effective implementation of plans : Without an efficient control system in the organisaiton plans prepared by the manager cannot be implemented properly. It is through

controlling, necessary actions are initiated to ensure that each plan is implemented in a predetermined

manner. Controlling also ensures required information regarding the progress of work so that proper monitoring of implementation of plan can be made on regular basis.

5) Controlling helps in boosting the morale of the employees : Controlling creates order and discipline in the organisation. Every employee knows it very well that what he is expected to do

and what are the standards of performance against which his performance is to be compared. Itultimately induces them to follow set standards. Such healthy attitude on the part of employee toward

the work helps in keeping morale of the employees at higher level.

6) Controlling facilitates co-ordination : Controlling provides direction to all activities and

efforts for achieving organisational goals in a planned manner. Each department and individual employee

is governed by prescribed standards of performance and pre-determined objectives. It all results in

well coordinated functions of these units towards the achievement of objectives.

Relationship between Planning and Control :

The process of management begins with planning and culminates at controlling for getting better

results and performance.Thus, these t wo basic function of management may be considered as twosides of a single coin because they cannot be separated out. In the absence of planning control cannot

be exercised and similarly it is a controlling pocess which ensures effective implementation of plans. In other words, planning has little meaning without control and control totally depends on planning.

Once a plan becomes operational control is necessary to monitor the progress, measures it, discover

deviations and initiate corrective measures. In some other cases, control may also result in setting new

goals, formulating new action plans, changing structure of organisation and making improvements in

staffing and techniques of directing and leading. Thus, the purpose of control is to ensure that event

confirms to plan. It keeps the plan in the right track by attacking on the forces of disruption and

distortion and again results of control are used to modify pl ans. On the other hand objectives,determined in the process of planning do form a basis of cont rolling mechanism. Because against

these objectives which are translated into standard of performance actual performances is compared

for conducting controlling process. The relationship between planning and controlling can be described



on the basis of the following points.

1) Planning basically is an intellectual process involving thinking, articulation and analysis, paving

a way to discover and select particular appropriate course of action for achieving object ives. The

matter which has been decided upon in the process of planning requires result-oriented practical and

administrative approach to implement it. It can be done through controlling process. Controlling processtranslates decisions into action for achieving organisational goals. Thus, control simply picks up where

the planning leaves off.

2) Planni ng impli es scientific and rational deci sion-maki ng on various problems faced by

organisation. It enhances the capability of organisation to cope with changing environment by containingand gaining control over the environmental factors. Controlling is more concerned with attacking andremoving disruptive force for preserving and promoting integrity and identity of organisation. It helpsin reducing inefficiency, spoilage and wastage with regard to use resources of organisation.

3) Planning and control may be considered as inseparable twins of management. Both help in

mobilising and utilising scarce resources of organisation in the most efficient manner for achieving

goals and enable the organisation to survive, grow and develop in the state of complexity, diversity and

uncertainty arising out of fast changing external environments.

4) Planning is considered to be a forward looking approach because in planning, future destination

of organisation is decided, future course of action is selected and decisions are made having full sense

of futurity. Hence, plans are made for future and got to be implemented in future involving a lot o

futurism. But controlling is regarded as backward looking activity. In controlling whatever remedial

measures are taken they are based on measurement and comparision of performance in the past.Controlling is based on the philosophy that whatever has happned it cannot be controlled but on that

basis control can be exercised further for checking recurrence of that events in future.

5) Planning and controlling are closely related, interacting and complementary to each other.Being a part of management process they are organically or functionally related to each other. An,

effective implementation of plan is influenced by controlling and vice-versa. Added to it, these two are

complementary to each other as controlling makes planning more meaningful and relevant and planningin turn makes controlling more effective and purposeful. Both these functions produce integral action

for seeking goals of organisation.

Control Cycle :

Application of system approach implies that mangement is a system or process consisting o

many sub-systems like planning, organising, staffing, directing and controlling, Controlling as a sub-

system of management has the following feautres which may also be regarded its elements.

1) Objectives or goals Controlling system aims at achieving some goals or objectives. These

goals of controlling system are formulated and co-ordinated with organisational goals in

such a way as former contributes to later one. In the context of control, goals are to be

formulated with respect to quantity, and cost of output and required time within which

they are to be produced. These goals are operational form of organisational goals, beacause

they are deri ved from organisational goals and are made i n t erms of st andard o

performnance, specifications of quality, cost of output and time frame of it.



2) ction Plan Once, objectives of controlling system are deterinmed, necessary action plan

and programmes are to be developed for achieving said objectives. These acti on plansindicate, controlling device or mechanism to be installed in organisation for maintaining

efficient control.

Feed Goals Action Back Plan

Performance Resour ceEvaluation Allocation

Author ityPerformanceDelegationComparison

Fig. Control Cycle.

3) Resource allocation To implement action plan it call for allocation, commitment and utilisationof various resources both physical as well human. Allocation of resources is made on the

basis of requirement in terms of workload since action plan may be proactive as well as

reactive so resource requirement is adjusted accordingly.

4) uthority delegation To operate controlling meachanism or device installed in organisation,

the manager, like all other managerial functions needs adequate authority for taking, actions,

monitoring performance and getting his orders and instruction followed by subordinates.

5) Performance comparison In controlling system performance of the employees is compared

with operational goals, which may be stated as standard of performance as to ascertain &ensure that everyone performs according to standards.

6) Performance evaluation Any deviation or difference in performance level of the employees

is to be evaluated and analysed thoroughly as to ensure conformity with standards in

future.

7) Feedback controlling system remains incomplete without feedback mechanism. It is requiredfor making desired changes and adjustments in the controlling system as to make it more

effective and responsive. It is only by feeding corrective and adaptive information the

entire controlling system may be set right. All above mentioned elements are to be put

together in a logical sequence to make out control cycle (Fig. 15.1) indicates that to achieve

goals of controlling system action plan is prepared on the basis of allocation of resources

and delegation of authority. When the action plan is implemented actual performance ismeasure and compared with desired goals and deviations are evaluated and analysed and

finally corrective actions may be initiated to make desired change in the system.



Q uestions

1. Define the term Control.

2. Explain the step in Contol Process?

3. Describe the charactertics of Control.

4. What are the types of Control?

5. Describe the techniques of control.

6. State the limitations of Control.

7. Explain the nature of Cotrol.

8. Write the need and significance of control.

9. Explain the relationship between Planning and Control.

10. Describe the control cycle.



15BUSINESS ETHICS

Introduction : Busi ness has to fulfill a number of social responsi bil ities towards t he

society and at the same time business requires to observe its ethics as a social responsibility.

O bser ving business ethi cs i s now uni versal phenomenon. Initial ly busi ness ethics is

concerned with the behavi our of a busi nessman whi le carring on his business activities. Thesurvi val, growth and devel opment of a ny business i s depends upon the ethics practi ced by a

businessman. The unethical, unfair business practices may create problems to the business as wellas to the person conducting the business activities.

M eaning and Definition

Business ethics means the behaviour of a businessman whi le conducting a busi ness, by

observing a code of moral ity in his business activities.The word, "ethics" is derived from "ethos", which refers to chara cter. Literally it means a

set of principles and morals should follow while doing a business in business context.

* Webstar defines ethics as "the discipline dealing with that which is good and bad andwith moral duty and obligation."

* According to Hurley, "Ethics as a system of moral principles."

* P. W. Wright defines, "Ethics is that branch of philosophy which is the systematic study

of reflective choice of the standards of right or wrong by which it is to be guided and othe goods towards which it may ultimately be directed."

* T.M. Garrett defines, "Business ethics is primarily concerned with t he relationshi p o

business goals and techniques of specifically human ends."A business has to obey the provisions of various laws applicable to his business. He should

observe ethics inspired by his own int erest in his business and society in large. According to Peter

Drucker, every individual and organisation in society should abide by certain moral codes.

As per W heeler, "Business ethi cs is an art and sci ence for maint aini ng, harmonious

relati onship with society, its various groups and i nstit utions as well as reorgani sing the moralresponsibility for the rightness or wrongness of business conduct."

Thus business ethi cs may be defined as a set of moral values/rules and principles to

protect the int erest of customers, employees, society, business unit and the industry as a whole."

Need and significance of Business Ethics

The following reasons indicates the need and signi ficance of business ethics. 1) To enhance goodwill and reputation : If a businessman obeys the ethics of business,

would earn goodwill and reputat ion and thereby enhance the image of his business unit



in the society. Profit motive should not be the sole aim of t he business but at the same time it has to follow the ethics of business too.

2) Developing maintaining & preserving inter-relationship : A businessma n and his business unit cannot be function i ndependentl y or separately. Business is a part and

parce l of t he society. Moreover t hey have to develop, maintain and preserve bestrelationship wit h society, customers, other business units, Govt. Creditors, suppliersand t he l ike. The root of such type of relati onshi p is business ethi cs, i f followe d

honestly a businessman will be successful in conducting his business activities.

3) Stability and survival of the business unit : Business ethi cs is concerned wi th the

behavi our of a businessmen is doi ng a business. Unethi cal practices would create problems to t he businessman and to his business unit, would lead to closure. It willcreate problems to investors, employees, society and ultimately to the economy of t henation. He can maximise the profit but not at the cost of the customer. The life, stability

and survival of a business unit depends upon the ethics practiced by a businessmen.

4) To im provised t he c onfid enc e : In fact busi ne ss e thics hel ps to i mprove theconfidence and fai th of the customers, creditors and government too, just because of

fair dealing with all of them and making them sati sfied by providing them best services.This improved confi dence of the above parties helps to enhance t he popularity of the

business unit.

5) For the growth and development of busine ss unit : Business et hics ensures the

growt h and development of business uni ts. Busi ness ethics protects the i nterest of customers, employees, society, business unit and the industry as a whole, therefore t hegrowth and development of that business unit is sure.

6) For solving social problems : If businessman strictly follows the business ethics, t hen

there would be no complaints from customers, empl oyees, investors and the like. All othem will be happy with the care taken by the businessman while providing them goodsand services. This will avoid social problems like strike, lockout, gherao, adulteration,

complaints of customers, trade unionism, red tapism etc.Principles of Business Ethics

Service motive should be first and then profit motive.

Optimum satisfaction to the consumers as a whole.

Awareness about clean environment, no pollution.

Consideration and focus on best human relationship.

No discriminati on on the basis of cast e, creed, religion, colour, financial position, againstany one.

Do not i nvolve in polities.

Elimination of wastages.

Best utilisation of human and rare physical resources.

Provide quality products and services at reasonable pri ce.



Mai ntain balance between supply and demand of products.

Improve the standard of living.

Create healthy competition.

To provide job securi ty to the employees.

Pay Fair and attractive pay scale and incentives to employees.

Provide best, inspiring working conditions.

Workers participation in management.

Pay taxes promptly.

To stop all unfair trade practices.

Prepare and get audited the books of account i.e. balance sheet and profit & loss account

of the company and present it to the shareholders

Enhance morale and motivation of the employees.

Develop mutual, understanding and co-operation.To introduce a well and balanced communication network.

Give freedom of expression to the employees.

Introduce best personnel pol ici es, like promoti on demotion, transfer, r ecrui tment, selection, training and the like.

Fulfill the promises committ ed.

Treat the employees like human being and not merely a factor of production.

Thus the above mentioned are some principles of business ethics should be followed by

the business communi ty.

Factors influencing Business Ethics There are some factors affecting the observati on or adoption of business ethics like sole

and huge profit motive, corruption and bribe, unhealt hy competitions, political uncertainty andinterference, l ack of education, awareness, ethical atti tude, non-cooperation of employees, strikes,

lockout, red tapism, unhealthy internal or external environment, lack of updated information, trade

unionism, unhealthy trade practices, unfair labour practices and many more factors affecting the busi ness ethics.

Business Ethics in India :

In India the scenario of business ethi cs is different due to the fast changes taking place in business and corporate world. Though the business community realises and admit ted their socialresponsibility towards various segments of the society but they fail to follow the business ethics in

true sense. Today, many business units having profit mot to by charging unreasonable price for their product, poor quality of producti on, adulteration of so many consumable products. No after

sales services are provided to customers. Artifi cial scarcity is created and then suddenly increasingthe prices of the products. Bogus books of account are maintained though the business unit



earning more profit, they show poor profit to avoid tax liability. Open price discrimination based onvari ous factors. Wage and salary structure is not fair and attractive, many business units are not

paying minimum wages, bonus, profit shari ng is become distinct dream for empl oyees. They areworki ng in poor working condi tions which cause to their health. No incentive means fringe

benefits are given t o the employees. Lengthly working hours, shift system, no heal th check up, no

social security is provided to the employees. No safety measures are provided while working on ha zardous assignments. Workers are not partici pat ed in mana gement, ill treat ment towards

employees. This is a picture of Indian business uni ts and their unethical practices against various

segments of the society.

Questions

1. What do you mean by Business Ethi cs?

2. Explain the need and significance of Business Ethics?

3. Describe the principles of Business Ethics?

4. State the factors influencing Businiess Ethics?

5. Write a short note on Business Ethics in India?



16 MANAGEMENT INFORMATION SYSTEM

(MIS)

Introduction :

Management i s responsibl e for decisi on making and effective control on the businessactivities. For that they must get the right i nformation in the right form at the right place, at theright t ime to sol ve the organisat iona l problems a nd to kee p effecti ve contr ol on it . Such

information is also useful for making important decisi ons of the business unit. Management expect the reliable information for effective functioning of the company. Thus the increased complexity of

business has forced management to rely heavi ly on information syst ems. MIS is a powerful t oolavailable to every management to deal with the data explosion and information needs right in front

of it . At every level of management sufficient and accurate i nformation i s required t o take ri ght

decisions in the interest of company. This picture reflects that management executives are enteringinto an "Information Era".

Meaning & Definition :

MIS is a planned, organised and systematic collection of rel evant , accurate, precise andtimely information, properly processed and make it available to the persons who required it for the

attainment of organisational objectives.

Definiti on :

The term management information can be defined as "an efficient and purposeful syst emwhich have the ca pacity to provi de al l levels of management, a timely, prompt, accura te and

reliable information". MIS is a nervous system of the business organisation and any defici ency inthi s syst em i s very l ikely to refl ect on the functi onal and admini st rat ive effici ency of the

organisation.

According to James A. F. St oner, "Management information system a s a formal method

of maki ng avail able to management accurate and timely, information necessary to fa cil it ate thedecision making process and enable the organisations planning, control and operational functions to

be carried out effectivel y."

Wal ter J. Kennevan defined MIS as, "a formal method of collecting timely information in a

presenta ble form in order to facilitate effective decisi on making and implementation i n order to

carry out organisational operations for the purpose of achieving the organisational goals."

The concept of MIS consist of three terms :

1) Management 2) Informati on 3) System

Management is an essential part of any group acti vity. An organisation can not survive

wi thout ma nagement. It is the mana gement which makes peopl e realise the objectives of t heorganisation directs the efforts towards their achievement. Management is a multipurpose organ or an organisation that manages the work and personnel at work. It is a creative and innovative force



to secure maximum results by using the available resources.

Informat ion is some thing w hi ch manageme nt expe cts to know a t a gi ven t i me.

Informati on is not data, the data compri ses of information. The information is needed to plan,organise, direct and control the business.

Information is different from mere data. Data means facts, are not able to use for decision making purposes. It may provide a base for the decision making process.

Information means a processed data which is di rectly used in decision making process.Dat a cannot be used a s subst it ut e of i nformat ion and vi ce-versa . The t erm da ta includes

production & sales details, human and physical resources available, debtors, credit ors, bonus and profit shari ng details, number of persons employed, competitors of the company, internal, external

busi ness envi ronment et c. Thi s various data ca n be processed, pre pared and presented in adesirable manner to decisions of the or gani sat ion. The conversion or t ransformation of dat ainvolves near about six functions i.e. (a) collection of data (b) processing the data (c) analysing the

data (d) storing of data (e) eva luation and supply of data to the needy persons i n the businessorganisation.

There are three important uses of information are :a) decision making b) Execut ion c) Control

The large amount of information can be processed with the help of computer on a daily basis with growing of business activities.

System can be defined as a set of interrelated elements working towards for achi eving

general objectives of an organisation. There may be a number of sub-systems, which are the partsof a large system. Application of principles of system is necessary in a business organisation. The

system concept of MIS is one of optimising the productivity of the organisation by connecting theoperating sub-system through the medium of exchange of information.

The system woul d have its tree components as :

a) Inputs b) outputs c) Processing devicesThe MIS plays its role in management processes. The management have to plan, organise,

direct and control its functions. The performance of these functions requires informat ion, is calledas int er nal i nformati on the business is also require the external informa tion too, would also

provided by the MIS.

Objectives of MIS :

A well designed and effective MIS would achieve the followi ng objectives.

1) MIS facilitates decision making process.

2) Eli minates overlapping and duplication of work.

3) It saves time, money & energy

4) Assist to introduce uniform methods and procedures.

5) For delegation of authorit y and responsibility.

6) To provide improved services.



7) To avoid wastages.

8) To avoid and elimina te mi sunderst anding and confusion among management and

employees.

9) To surviving in competition.

10) For smooth running of business organisation.

Process of MIS

MIS is a process and go in along way. A well developed and designed MIS involves sixsteps/phases to transform the data into information, enumerate in t he following points :

1) Assembling : At this stage data is collected from various sources and recorded in aset of files. The vari ous sources of data collection would be identified and sta rtcollecting and keeping it in a proper way.

2) Processing : At this stage the data collecting through assembly has been summarised, edit ed and processed. All the unnecessa ry, ir relevant i n-ac cura te dat a wi ll beeliminated from the records and only necessary rel evant and accurate dat a will be

consider for the next step.

3) Analyzing : At this st age data whatever processed has been analysed to develop or calcul ate percentages, ratios etc. These percentages and rati os a re providing verymuch useful information to the decision maker i.e. management executives.

4) Storage retrieval : At this stage indexing, coding, fil ing and location of informationi s done and proper provisi on or arrangement is done for quick rel ocation of suchinformation and retrieval whenever it is required.

5) Eval uati on : It means the determinations of usefulness of information in terms of a ccuracy pre cise and rel eva nce. But t he degree of ac cura cy preci se ness a nd

relevance is based upon the needs of the decision maker.

6) Dissemination : At this stage the information is supplied t o the right person who isin need of that, in the specified manner and at the right time and right place to thedecision makers.

Design of the MIS

A well developed MI System should be designed in the following ways :

1) Supplying complete, accurate and timely data, so that the decision makers can make the right decisions.

2) Identify and qua ntify inter-related operations. Thereby future trends can be projectedtimely and correctly.

3) Measure and control the performance by monitoring it closely.

4) Identify needs of decentralised organisation by a pool or bridge collect the data fromall such units and departments to take right decisions for the company.

5) Informati on is to be presented in a summarised from there by action can be initiated.



6) There must be flexibility in MIS so that the system can be changed or revised as andwhen necessary.

Meri ts of MIS

1) MIS facilitate planning.

2) MIS facilitate decision making.

3) It reduces informat ion over load.

4) It simplifies control. An easy control is possible.

5) It assist in cooperation & coordination.

6) It helps to improve decentralisation.

7) It helps to forecast accurately.

8) It elimina tes misunderstanding & confusion.

9) It avoids overlapping and duplication of work.

10) It helps the personnel to keep them well informed.11) It assist in achievi ng the objectives of the organisation.

Kinds/Types of information

Initially the management is in need of variety of information mentioned below :

1) Operating information

2) Resource information

3) Personnel information

4) Production information

5) Purchases information

6) Competitors information

7) Government information

8) Social information

9) Political information

10) Legal information

11) Educational informat ion

12) Planning & control information

13) Qualit y control information

14) Resource allocation information

15) Status information

16) Marketing information



17) Knowledge information

18) Future Trends information

Thus management require plenty of various types of information to run the organisation in

a successful way.

Factors affecting the MIS

The following factors are affecting the free flow of information.

1) Availability of sufficient/enough information.

2) Quality of information

3) Quantity of information

4) The time of informat ion

5) The place of information

6) The concerned person who needs the information.

Prerequisites of MISThe following pre-requisites are necessary for effective designing of MIS.

1) The top management has to finalise and decides what type of information they needed

for decision making.

2) It is necessary t o decide fi rmly and well in advance in what format the i nformation

has to be supply.

3) Remove all the constraints and barriers involved in smooth supply of information.

4) Identify all the sources of information by the person who is responsible for collecting

the information.

5) MIS require a high degree of imagination and foresight to design it effectively.

6) The finally desi gned MIS must cope with the requirements, needs and objectives of

the organisation.

7) Well comparison has to be done among the factors like cost required for int roduction

of this system, its feasibility, flexibility and its implementation while selection, the best

MIS pattern.

8) A suitable environment is to be created for its adoption.

9) MIS must be acceptabl e by all those who are concerned with this system.

10) Frequentl y the MIS should be reviewed to make it flexible and adjustable as per therequirements of the company.

Thus, until and unless the above menti oned pre-requisites are not available it is not possible to introduce MIS in the organisation.



Questions

1. Define the term MIS. Explain the objectives of MIS.

2. Explain the st ages in MIS process in detail.

3. What points/factors should be consider while designing the MIS?

4. Discuss t he various kinds of informati on.

5. Explain the factors affecting MIS system.

6. Describe the pre-requisites of MIS.



Documents

Principles of Management