class: i b.com (ib) sem: i subject: principles of management 1
TRANSCRIPT
Class: I B.Com (IB) Sem: I Subject: Principles of Management
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UNIT-I:
Management Concepts
Definition of Management – Management and Administration – Nature and Scope of
Management - Levels of Management - Functions of Management –Objectives– Contribution
of F.W. Taylor – Henry Fayol – Mc Gregor and Peter F. Drucker – Hawthorne experiments.
MANAGEMENT
INTRODUCTION
Management in all business and organizational activities is the act of getting people together to
accomplish desired goals and objectives using available resources efficiently and effectively.
Management comprises planning, organizing, staffing, leading or directing, and controlling an
organization (a group of one or more people or entities) or effort for the purpose of
accomplishing a goal. Resourcing encompasses the deployment and manipulation of human
resources, financial resources, technological resources and natural resources.
Management is a purposive activity. It is something that directs group efforts towards the
attainment of certain pre - determined goals. It is the process of working with and through others
to effectively achieve the goals of the organization, by efficiently using limited resources in the
changing world. Of course, these goals may vary from one enterprise to another. E.g.: For one
enterprise it may be launching of new products by conducting market surveys and for other it
may be profit maximization by minimizing cost.
Management involves creating an internal environment: - It is the management which
puts into use the various factors of production. Therefore, it is the responsibility of management
to create such conditions which are conducive to maximum efforts so that people are able to
perform their task efficiently and effectively. It includes ensuring availability of raw materials,
determination of wages and salaries, formulation of rules & regulations etc.
Therefore, we can say that good management includes both being effective and efficient.
Being effective means doing the appropriate task i.e, fitting the square pegs in square holes and
round pegs in round holes. Being efficient means doing the task correctly, at least possible cost
with minimum wastage of resources.
MEANING OF MANAGEMENT
Management is a universal phenomenon. It is a very popular and widely used term. All
organizations - business, political, cultural or social are involved in management because it is
themanagement which helps and directs the various efforts towards a definite purpose.
DEFINITION OF MANAGEMENT
According to Harold Koontz, “Management is an art of getting things done through and
with the people in formally organized groups. It is an art of creating an environment in which
people can perform and individuals and can co-operate towards attainment of group goals”.
According to F.W. Taylor, “Management is an art of knowing what to do, when to do and see
that it is done in the best and cheapest way”.
THE MAIN OBJECTIVES OF MANAGEMENT ARE:
Getting Maximum Results with Minimum Efforts - The main objective of management is to
secure maximum outputs with minimum efforts & resources. Management is basically concerned
with thinking & utilizing human, material & financial resources in such a manner that would
result in best combination. This combination results in reduction of various costs.
Increasing the Efficiency of factors of Production - Through proper utilization of various
factors of production, their efficiency can be increased to a great extent which can be obtained by
reducing spoilage, wastages and breakage of all kinds, this in turn leads to saving of time, effort
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and money which is essential for the growth & prosperity of the enterprise.
Maximum Prosperity for Employer & Employees - Management ensures smooth and
coordinated functioning of the enterprise. This in turn helps in providing maximum benefits to
the employee in the shape of good working condition, suitable wage system, incentive plans on
the one hand and higher profits to the employer on the other hand.
Human betterment & Social Justice - Management serves as a tool for the upliftment as well
as betterment of the society. Through increased productivity & employment, management
ensures better standards of living for the society. It provides justice through its uniform policies
It helps in Achieving Group Goals - It arranges the factors of production, assembles and
organizes the resources, integrates the resources in effective manner to achieve goals. It directs
group efforts towards achievement of pre-determined goals. By defining objective of
organization clearly there would be no wastage of time, money and effort. Management converts
disorganized resources of men, machines, money etc. into useful enterprise. These resources are
coordinated, directed and controlled in such a manner that enterprise work towards attainment of
goals.
Optimum Utilization of Resources - Management utilizes all the physical & human resources
productively. This leads to efficacy in management. Management provides maximum utilization
of scarce resources by selecting its best possible alternate use in industry from out of various
uses. It makes use of experts, professional and these services leads to use of their skills,
knowledge, and proper utilization and avoids wastage. If employees and machines are producing
its maximum there is no under employment of any resources.
Reduces Costs - It gets maximum results through minimum input by proper planning and by
using minimum input & getting maximum output. Management uses physical, human and
financial resources in such a manner which results in best combination. This helps in cost
reduction.
Establishes Sound Organization - No overlapping of efforts (smooth and coordinated
functions). To establish sound organizational structure is one of the objective of management
which is in tune with objective of organization and for fulfillment of this, it establishes effective
authority & responsibility relationship i.e. who is accountable to whom, who can give
instructions to whom, who are superiors & who are subordinates. Management fills up various
positions with right persons, having right skills, training and qualification. All jobs should be
cleared to everyone.
Establishes Equilibrium - It enables the organization to survive in changing environment. It
keeps in touch with the changing environment. With the change is external environment, the
initial co-ordination of organization must be changed. So it adapts organization to changing
demand of market / changing needs of societies. It is responsible for growth and survival of
organization.
Essentials for Prosperity of Society - Efficient management leads to better economical
production which helps in turn to increase the welfare of people. Good management makes a
difficult task easier by avoiding wastage of scarce resource. It improves standard of living. It
increases the profit which is beneficial to business and society will get maximum output at
minimum cost by creating employment opportunities which generate income in hands.
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Organization comes with new products and researches beneficial for society.
According to Theo Hayman, “Administration means overall determination of policies, setting
of major objectives, the identification of general purposes and laying down of broad
programmes and projects”. It refers to the activities of higher level. It lays down basic
principles of the enterprise. According to Newman, “Administration means guidance,
leadership & control of the efforts of the groups towards some common goals”.
Whereas, management involves conceiving, initiating and bringing together the various
elements; coordinating, actuating, integrating the diverse organizational components while
sustaining the viability of the organization towards some pre-determined goals. In other words,
it is an art of getting things done through & with the people in formally organized groups.
FEATURES OF MANAGEMENT
1. Management is not A Group of People, It is Group of Function
Management is not a group of people who are managing the work or a people at a high
position but it is a group of function, which is done by this people. It includes planning,
staffing, directing, controlling, reporting, monitoring, and communication.
2. Management is Universal
A management is universal. It can be apply anywhere. Any organization can be called,
management, management at work, organization, at business, at club, at army, at charitable
institution, religious institution or a government office. Example: a successful manager of a
soap factory would be equally successful as a manger of Soft Drink Company.
3. Co-Ordination is the Soul of Management
There should be coordination between each and every employees of the organization. The
various departments in the organization must work in harmony with one another. If there is a
conflict between employees organization goal can be achieved.
4. Management is Dynamic
Management cannot remain static. It changes with the situation. Management is always
forward looking and pragmatic. It changes with the change in environment. Management
converts the environmental threats in to opportunities .it changes just as the needs, objectives
and challenges of business change.
5. Management is Essentially a Leadership Activity
Management is getting things done through people. Management activates manpower. A
manager act as leader of the group and create environment for follower to follow them to
attain organization objectives.
6. Management is Decision Making
Generally all managers take decision. They take decision based upon some data and their
analysis. Decision are the choice of management from of several alternatives for that they use
several technical methods. Example: sales manager takes decision for sale, marketing manger
for marketing.
7. Management is Profession
Managerial ability is not inherent. It is not natural gift. Training can develop it. It it’s a body
of knowledge, which can be mastered by anyone. Example: BBA, MBA institute for training,
management is rapidly emerging as a profession. Example: Management-consulting services
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are available.
8. Management is A Critical Element to Attain Organizations Objective
Management strives consciously to attain the common objectives of the business. In the
absence of management the organization objectives and individual objectives will come in
conflict with each other. So to attain organization goal there should be proper management.
CHARACTERSTICS OF MANAGEMENT
(1) Management is Goal-oriented Process:
No goal in the hand no need of management. In other words, we need management when we
have some goals to be achieved. A manager on the basis of his knowledge and experience tries
to achieve the goals which are already decided. Hence, nothing is wrong to say that
management is a goal-oriented process.
(2) Management is All-pervasive:
Anything minus management is nothing or zero. Here by anything we mean all types of
activities-business and non-business. If we deduct management out of these activities, the
result will be failure or zero. It means management is necessary to conduct any type of
activities. Hence, it is pervasive or universal.
(3) Management is Multidimensional:
The management is a three-dimensional activity:
(i) Management of Work:
Every organisation is established for doing some work, like a school provides education, a
hospital treats patients, a factory produces, etc. Of these, no work can be completed
satisfactorily without management,
(ii) Management of People:
Each organisation is established for doing some work and the same is conducted by people.
Hence, it is necessary to manage the people so that the work can be accomplished in a better
way.
(iii) Management of Operations:
To achieve the goals of an organisation many operations or activities need to be conducted,
such as, production, sale, purchase, finance, accounting, R&D, etc. Again, management is
needed to make sure that operations are accomplished efficiently and effectively.
(4) Management is a Continuous Process:
The various managerial activities cannot be performed once for all, but it is a continuous
process. A manager is busy sometimes in doing one managerial activity and at other times
some other activity.
(5) Management is a Group Activity:
It means that (|T-2 it is not a single person who consummates all the activities of an
organisation but it is always a group of persons (managers). Hence, management is a group
effort.
(6) Management is a Dynamic Function:
Management is a dynamic activity as it has to adjust itself to the regularly changing
environment. In this context, it can be rightly said that nothing is eternal in management.
It is necessary here to clearly understand that the recognition of management in the form of
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group is only in reference to big organisations, because in these kinds of organisations many
managers are appointed at various managerial levels.
On the other hand, in small organisations only one manager is sufficient as he can himself
manage all the affairs of the organisation. For these kinds of organisations it would not be
right to call management a group activity.
(7) Management is an Intangible Force:
Management is that power which cannot be seen. It can only be felt. If any organisation is
heading toward higher levels of achievement, it signifies the existence of good management
and vice versa. In other words, achievement reflects the quality of management and its
effectiveness.
Administration
Business administration is the process of managing a business or non- profit organization so
that it remains stable and continues to grow.The administration of a business includes the
performance or management of business operations and decision making as well as the
efficient organization of people and other resources to direct activities toward common goals
and objectives.In general, administration refers to the broader management function, including
the associated finance, personnel and MIS services.
In some analyses, management is viewed as a subset of administration, specifically associated
with the technical and operational aspects of an organization, distinct from executive or
strategic functions. Alternatively, administration can refer to the bureaucratic or operational
performance of routine office tasks, usually internally oriented and reactive rather than
proactive. Administrators, broadly speaking, engage in a common set of functions to meet the
organization's goals. These "functions" of the administrator were described by Henri Fayol as
"the five elements of administration". Sometimes creating output, which includes all of the
processes that create the product that the business sells, is added as a sixth element.
MANAGEMENT AND ADMINISTRATION
According to Theo Haimann, “Administration means overall determination of policies, setting of
major objectives, the identification of general purposes and laying down of broad programmes
and projects”. It refers to the activities of higher level. It lays down basic principles of the
enterprise. According to Newman, “Administration means guidance, leadership & control of the
efforts of the groups towards some common goals”. Whereas, management involves conceiving,
initiating and bringing together the various elements; coordinating, actuating, integrating the
diverse organizational components while sustaining the viability of the organization towards
some pre-determined goals. In other words, it is an art of getting things done through & with the
people in formally organized groups.
The difference between Management and Administration can be summarized under 2
categories: -
1. Functions
2. Usage / Applicability
On the Basis of Functions: -
Basis Management Administration
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Meaning Management is an art of getting things done
through others by directing their efforts
towards achievement of pre-determined
goals.
It is concerned with formulation of
broad objectives, plans & policies.
Nature Management is an executing function. Administration is a decision-
making function.
Process Management decides who should as it & how
should he dot it.
Administration decides what is to
be done & when it is to be done.
Function Management is a doing function because
managers get work done under their
supervision.
Administration is a thinking
function because plans & policies
are determined under it.
Skills Technical and Human skills Conceptual and Human skills
Level Middle & lower level function Top level function
On the Basis of Usage: -
Basis Management Administration
Applicability It is applicable to business concerns
i.e. profit-making organization.
It is applicable to non-business
concerns i.e. clubs, schools, hospitals
etc.
Influence The management decisions are
influenced by the values, opinions,
beliefs & decisions of the managers.
The administration is influenced by
public opinion, govt. policies, religious
organizations, customs etc.
Status Management constitutes the
employees of the organization who
are paid remuneration (in the form
of salaries & wages).
Administration represents owners of
the enterprise who earn return on their
capital invested & profits in the form of
dividend.
Practically, there is no difference between management & administration. Every manager is
concerned with both - administrative management function and operative management function
as shown in the figure. However, the managers who are higher up in the hierarchy denote more
time on administrative function & the lower level denote more time on directing and controlling
worker’s performance i.e. management.
NATURE OF MANAGEMENT
Management is an activity concerned with guiding human and physical resources such that
organizational goals can be achieved. Nature of management can be highlighted as: -
1. Management is Goal-Oriented: The success of any management activity is accessed by its
achievement of the predetermined goals or objective. Management is a purposeful activity. It is a
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tool which helps use of human & physical resources to fulfill the pre-determined goals. For
example, the goal of an enterprise is maximum consumer satisfaction by producing quality goods
and at reasonable prices. This can be achieved by employing efficient persons and making better
use of scarce resources.
2. Management integrates Human, Physical and Financial Resources: In an organization,
human beings work with non-human resources like machines. Materials, financial assets,
buildings etc. Management integrates human efforts to those resources. It brings harmony among
the human, physical and financial resources.
3. Management is Continuous: Management is an ongoing process. It involves continuous
handling of problems and issues. It is concerned with identifying the problem and taking
appropriate steps to solve it. E.g. the target of a company is maximum production. For achieving
this target various policies have to be framed but this is not the end. Marketing and Advertising
is also to be done. For this policies have to be again framed. Hence this is an ongoing process.
4. Management is all Pervasive: Management is required in all types of organizations whether
it is political, social, cultural or business because it helps and directs various efforts towards a
definite purpose. Thus clubs, hospitals, political parties, colleges, hospitals, business firms all
require management. When ever more than one person is engaged in working for a common
goal, management is necessary. Whether it is a small business firm which may be engaged in
trading or a large firm like Tata Iron & Steel, management is required everywhere irrespective of
size or type of activity.
5. Management is a Group Activity: Management is very much less concerned with
individual’s efforts. It is more concerned with groups. It involves the use of group effort to
achieve predetermined goal of management of ABC & Co. is good refers to a group of persons
managing the enterprise.
SCOPE OF MANAGEMENT
1. It helps in Achieving Group Goals –
It arranges the factors of production, assembles and organizes the resources, integrates the
resources in effective manner to achieve goals. It directs group efforts towards achievement of
pre-determined goals. By defining objective of organization clearly there would be no wastage of
time, money and effort. Management converts disorganized resources of men, machines, money
etc. into useful enterprise. These resources are coordinated, directed and controlled in such a
manner that enterprise work towards attainment of goals.
2. Optimum Utilization of Resources –
Management utilizes all the physical & human resources productively. This leads to efficacy in
management. Management provides maximum utilization of scarce resources by selecting its
best possible alternate use in industry from out of various uses. It makes use of experts,
professional and these services leads to use of their skills, knowledge, and proper utilization and
avoids wastage. If employees and machines are producing its maximum there is no under
employment of any resources.
3. Reduces Costs –
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It gets maximum results through minimum input by proper planning and by using minimum
input & getting maximum output. Management uses physical, human and financial resources in
such a manner which results in best combination. This helps in cost reduction.
4. Establishes Sound Organization –
No overlapping of efforts (smooth and coordinated functions). To establish sound organizational
structure is one of the objective of management which is in tune with objective of organization
and for fulfillment of this, it establishes effective authority & responsibility relationship i.e. who
is accountable to whom, who can give instructions to whom, who are superiors & who are
subordinates. Management fills up various positions with right persons, having right skills,
training and qualification. All jobs should be cleared to everyone.
5. Establishes Equilibrium
It enables the organization to survive in changing environment. It keeps in touch with the
changing environment. With the change is external environment, the initial co-ordination of
organization must be changed. So it adapts organization to changing demand of market /
changing needs of societies. It is responsible for growth and survival of organization.
6. Essentials for Prosperity of Society –
Efficient management leads to better economical production which helps in turn to increase the
welfare of people. Good management makes a difficult task easier by avoiding wastage of scarce
resource. It improves standard of living. It increases the profit which is beneficial to business and
society will get maximum output at minimum cost by creating employment opportunities which
generate income in hands. Organization comes with new products and researches beneficial for
society.
FUNCTIONS OF MANAGEMENT
Management has been described as a social process involving responsibility for economical and
effective planning & regulation of operation of an enterprise in the fulfillment of given purposes.
It is a dynamic process consisting of various elements and activities. These activities are
different from operative functions like marketing, finance, purchase etc. Rather these activities
are common to each and every manger irrespective of his level or status. Different experts have
classified functions of management. According to George & Jerry, “There are four fundamental
functions of management i.e. planning, organizing, actuating and controlling”. According to
Henry Fayol, “To manage is to forecast and plan, to organize, to command, & to control”.
Whereas Luther Gullick has given a keyword ’POSDCORB’ where P stands for Planning, O for
Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for reporting & B for
Budgeting. But the most widely accepted are functions of management given by KOONTZ and
O’DONNEL i.e. Planning, Organizing, Staffing, Directing and Controlling.
For theoretical purposes, it may be convenient to separate the function of management but
practically these functions are overlapping in nature i.e. they are highly inseparable. Each
function blends into the other & each affects the performance of others.
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1. Planning
It is the basic function of management. It deals with chalking out a future course of action
& deciding in advance the most appropriate course of actions for achievement of pre-
determined goals. According to KOONTZ, “Planning is deciding in advance - what to do,
when to do & how to do. It bridges the gap from where we are & where we want to be”.
A plan is a future course of actions. It is an exercise in problem solving & decision
making. Planning is determination of courses of action to achieve desired goals. Thus,
planning is a systematic thinking about ways & means for accomplishment of pre-
determined goals. Planning is necessary to ensure proper utilization of human & non-
human resources. It is all pervasive, it is an intellectual activity and it also helps in
avoiding confusion, uncertainties, risks, wastages etc.
2. Organizing
It is the process of bringing together physical, financial and human resources and
developing productive relationship amongst them for achievement of organizational
goals. According to Henry Fayol, “To organize a business is to provide it with everything
useful or its functioning i.e. raw material, tools, capital and personnel’s”. To organize a
business involves determining & providing human and non-human resources to the
organizational structure. Organizing as a process involves:
1. Identification of activities.
2. Classification of grouping of activities.
3. Assignment of duties.
4. Delegation of authority and creation of responsibility.
5. Coordinating authority and responsibility relationships.
3. Staffing
It is the function of manning the organization structure and keeping it manned. Staffing
has assumed greater importance in the recent years due to advancement of technology,
increase in size of business, complexity of human behavior etc. The main purpose o
staffing is to put right man on right job i.e. square pegs in square holes and round pegs in
round holes. According to Kootz & O’Donell, “Managerial function of staffing involves
manning the organization structure through proper and effective selection, appraisal &
development of personnel to fill the roles designed un the structure”. Staffing involves:
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1. Manpower Planning (estimating man power in terms of searching, choose
the person and giving the right place).
2. Recruitment, selection & placement.
3. Training & development.
4. Remuneration.
5. Performance appraisal.
6. Promotions & transfer.
4. Directing
It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. It is considered life-spark of the
enterprise which sets it in motion the action of people because planning, organizing and staffing
are the mere preparations for doing the work. Direction is that inert-personnel aspect of
management which deals directly with influencing, guiding, supervising, motivating sub-ordinate
for the achievement of organizational goals. Direction has following elements:
i. Supervision
ii. Motivation
iii. Leadership
iv. Communication
Supervision- implies overseeing the work of subordinates by their superiors. It is the act of
watching & directing work & workers.
Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work.
Positive, negative, monetary, non-monetary incentives may be used for this purpose.
Leadership- may be defined as a process by which manager guides and influences the work of
subordinates in desired direction.
Communications- is the process of passing information, experience, opinion etc from one
person to another. It is a bridge of understanding.
5. Controlling
It implies measurement of accomplishment against the standards and correction of deviation if
any to ensure achievement of organizational goals. The purpose of controlling is to ensure that
everything occurs in conformities with the standards. An efficient system of control helps to
predict deviations before they actually occur. According to Theo Hayman, “Controlling is the
process of checking whether or not proper progress is being made towards the objectives and
goals and acting if necessary, to correct any deviation”. According to Koontz & O’Donnell
“Controlling is the measurement & correction of performance activities of subordinates in order
to make sure that the enterprise objectives and plans desired to obtain them as being
accomplished”. Therefore controlling has following steps:
1. Establishment of standard performance.
2. Measurement of actual performance.
3. Comparison of actual performance with the standards and finding out deviation if any.
4. Corrective action.
LEVELS OF MANAGEMENT
The term “Levels of Management’ refers to a line of demarcation between various managerial
positions in an organization. The number of levels in management increases when the size of the
business and work force increases and vice versa. The level of management determines a chain
of command, the amount of authority & status enjoyed by any managerial position. The levels of
management can be classified in three broad categories: -
1. Top level / Administrative level
2. Middle level / Executory
3. Low level / Supervisory / Operative / First-line managers
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Managers at all these levels perform different functions. The role of managers at all the three
levels is discussed below:
Top Level of Management
It consists of board of directors, chief executive or managing director. The top management is
the ultimate source of authority and it manages goals and policies for an enterprise. It devotes
more time on planning and coordinating functions.
The role of the top management can be summarized as follows -
1. Top management lays down the objectives and broad policies of the enterprise.
2. It issues necessary instructions for preparation of department budgets, procedures,
schedules etc.
3. It prepares strategic plans & policies for the enterprise.
4. It appoints the executive for middle level i.e. departmental managers.
5. It controls & coordinates the activities of all the departments.
6. It is also responsible for maintaining a contact with the outside world.
7. It provides guidance and direction.
8. The top management is also responsible towards the shareholders for the
performance of the enterprise.
Middle Level of Management
The branch managers and departmental managers constitute middle level. They are
resposible to the top management for the functioning of their department. They devote more time
to organizational and directional functions. In small organization, there is only one layer of
middle level of management but in big enterprises, there may be senior and junior middle level
management. Their role can be emphasized as They execute the plans of the organization in
accordance with the policies and directives of the top management.
• They make plans for the sub-units of the organization.
• They participate in employment & training of lower level management.
• They interpret and explain policies from top level management to lower level.
• They are responsible for coordinating the activities within the division or
department.
• It also sends important reports and other important data to top level management.
• They evaluate performance of junior managers.
• They are also responsible for inspiring lower level managers towards better
performance.
Lower Level of Management
Lower level is also known as supervisory / operative level of management. It consists of
supervisors, foreman, section officers, superintendent etc. According to R.C. Davis,
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“Supervisory management refers to those executives whose work has to be largely with personal
oversight and direction of operative employees”. In other words, they are concerned with
direction and controlling function of management. Their activities include -
1. Assigning of jobs and tasks to various workers.
2. They guide and instruct workers for day to day activities.
3. They are responsible for the quality as well as quantity of production.
4. They are also entrusted with the responsibility of maintaining good relation in the
organization.
5. They communicate workers problems, suggestions, and recommendatory appeals etc to
the higher level and higher level goals and objectives to the workers.
6. They help to solve the grievances of the workers.
7. They supervise & guide the sub-ordinates.
8. They are responsible for providing training to the workers.
9. They arrange necessary materials, machines, tools etc for getting the things done.
10. They prepare periodical reports about the performance of the workers.
11. They ensure discipline in the enterprise.
12. They motivate workers.
13. They are the image builders of the enterprise because they are in direct contact with the
workers.
CONTRIBUTION OF F.W.TAYLOR
Frederick Winslow Taylor - Theory of Scientific Management. F.W.Tylor is considered as the
"Father of scientific management" and his contributions mark a new era in Modern Management
Thought. The concepts propounded by him have an impact on management service practice as
well as on management thought up to the present day.. Taylor formalized the principles of
scientific management, and the fact-finding approach put forward and largely adopted was a
replacement for what had been the old rule of thumb. He also developed a theory of
organizations, which has been largely accepted by subsequent Management Philosophers
F.W. Taylor's Contributions to Scientific Management
By 1881 Taylor had published a paper that turned the cutting of metal into a science.
Later he turned his attention to shoveling coal. By experimenting with different designs of shovel
for use with different material (from 'rice' coal to ore) he was able to design shovels that would
permit the worker to shovel for the whole day. In so doing, he reduced the number of people
shoveling at the Bethlehem Steel Works from 500 to 140. This work, and his studies on the
handling of pig iron, greatly contributed to the analysis of work design and gave rise to method
study.To follow, in 1895, were papers on incentive schemes.
A piece rate system on production management in shop management, and later, in 1909,
he published the book for which he is best known, Principles of Scientific Management. A
feature of Taylor's work was stop-watch timing as the basis of observations. However, unlike the
early activities of Perronet and others, he started to break the timings down into elements and it
was he who coined the term 'time study'.
Taylor's uncompromising attitude in developing and installing his ideas caused him much
criticism. Scientific method, he advocated, could be applied to all problems and applied just as
much to managers as workers. In his own words he explained: "The old fashioned dictator does
not exist under Scientific Management. The man at the head of the business under Scientific
Management is governed by rules and laws which have been developed through hundreds of
experiments just as much as the workman is, and the standards developed are equitable."
Objectives of Scientific Management
The four objectives of management under scientific management were as follows:
• The development of a science for each element of a man's work to replace the old
rule-of-thumb methods.
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• The scientific selection, training and development of workers instead of allowing
them to choose their own tasks and train themselves as best they could.
• The development of a spirit of hearty cooperation between workers and
management to ensure that work would be carried out in accordance with scientifically
devised procedures
• The division of work between workers and the management in almost equal
shares, each group taking over the work for which it is best fitted instead of the former
condition in which responsibility largely rested with the workers. Self-evident in this
philosophy are organizations arranged in a hierarchy, systems of abstract rules and
impersonal relationships between staff.
F.W. Taylor's Contribution to Organizational Theory
This required an organization theory similar for all practical purposes to that advocated by those
organizational theorists who followed. These theorists developed principles of management
which included much of Taylor's philosophy
His framework for organization was:
• clear delineation of authority
• responsibility
• separation of planning from operations
• incentive schemes for workers
• management by exception
• task specialization
Criticism Of Theories Expounded by Taylor
Taylor's Philosophy though gained immense popularity, was also widely criticised on three
grounds.
1. Scientific management ignored human side of organization.. Taylor viewed on average
worker as a machine that could be motivated to work hard through economic incentives.
Workers and Trade Unions opposed his views strongly on the plea that it was exploitative.
2. Taylor's theory is narrow in scope having direct application to factory jobs at the Shop
Floor Level. Taylor and his disciples were called "Efficiency Experts" because they concentrated
attention on improving efficiency of workers and machines. Scientific management is therefore
restricted in scope as a theory of Industrial Engineering or Industrial Management, rather than a
general theory of management.
3. Taylor advocated excessive use of specialization and separation of planning from doing.
Excessive division of labor had disastrous consequences in the form repetitive and monotonous
jobs and discontent among workers. Nevertheless, Taylor's theory and principles have exercised
considerable influence on modern management thought. His emphasis on use of scientific
methods in solving work-related problems is widely accepted by modern experts on
management.
Taylor's impact has been so great because he developed a concept of work-measurement,
production control and other functions that completely changed the nature of industry. Before
scientific management, such departments as work-study, personnel, maintenance and quality
control did not exist. What was more his methods proved to be very successful. Quantitative
approach or management science approach is based largely on Taylor's philosophy.
"Scientific Management focuses on job-productivity at the shop floor, in particular upon
techniques that could be used on manual workers. Scientific management principles continue to
be widely applied today. In a typical manufacturing organization one will see scientific
management ideas and techniques being applied to the shop floor, and bureaucratic principles of
organization being used in the office areas".*
CONTRIBUTION OF HENRY FAYOL
Class: I B.Com (IB) Sem: I Subject: Principles of Management
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Henri Fayol (Istanbul, 29 July 1841–Paris, 19 November 1925) was a French mining engineer
and director of mines who developed a general theory of business administration.[1] He and his
colleagues developed this theory independently of scientific management but roughly
contemporaneously. He was one of the most influential contributors to modern concepts of
management.
Principles of Management
A principle refers to a fundamental truth. It establishes cause and effect relationship between two
or more variables under given situation. They serve as a guide to thought & actions. Therefore,
management principles are the statements of fundamental truth based on logic which provides
guidelines for managerial decision making and actions. These principles are derived: -
a. On the basis of observation and analysis i.e. practical experience of managers.
b. By conducting experimental studies.
There are 14 Principles of Management described by Henri Fayol.
1. Division of Labor
• Henry Fayol has stressed on the specialization of jobs.
• He recommended that work of all kinds must be divided & subdivided and allotted to
various persons according to their expertise in a particular area.
• Subdivision of work makes it simpler and results in efficiency.
• It also helps the individual in acquiring speed, accuracy in his performance.
• Specialization leads to efficiency & economy in spheres of business.
• Party of Authority & Responsibility
• Authority & responsibility are co-existing.
• If authority is given to a person, he should also be made responsible.
• In a same way, if anyone is made responsible for any job, he should also have concerned
authority.
• Authority refers to the right of superiors to get exactness from their sub-ordinates
whereas responsibility means obligation for the performance of the job assigned.
• There should be a balance between the two i.e. they must go hand in hand.
• Authority without responsibility leads to irresponsible behavior whereas responsibility
without authority makes the person ineffective.
2. Principle of One Boss
• A sub-ordinate should receive orders and be accountable to one and only one boss at a
time.
• In other words, a sub-ordinate should not receive instructions from more than one person
because -
- It undermines authority
- Weakens discipline
- Divides loyalty
- Creates confusion
- Delays and chaos
- Escaping responsibilities
- Duplication of work
- Overlapping of efforts
• Therefore, dual sub-ordination should be avoided unless and until it is absolutely
essential.
• Unity of command provides the enterprise a disciplined, stable & orderly existence.
• It creates harmonious relationship between superiors and sub-ordinates.
3. Unity of Direction
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• Fayol advocates one head one plan which means that there should be one plan for a group of
activities having similar objectives.
• Related activities should be grouped together. There should be one plan of action for them
and they should be under the charge of a particular manager.
• According to this principle, efforts of all the members of the organization should be directed
towards common goal.
• Without unity of direction, unity of action cannot be achieved.
• In fact, unity of command is not possible without unity of direction.
Basis Unity of command Unity of direction
Meaning It implies that a sub-ordinate should
receive orders & instructions from only
one boss.
It means one head, one plan for a
group of activities having similar
objectives.
Nature It is related to the functioning of
personnel’s.
It is related to the functioning of
departments, or organization as a
whole.
Necessity It is necessary for fixing responsibility of
each subordinates.
It is necessary for sound organization.
Advantage It avoids conflicts, confusion & chaos. It avoids duplication of efforts and
wastage of resources.
Result It leads to better superior sub-ordinate
relationship.
It leads to smooth running of the
enterprise.
Therefore it is obvious that they are different from each other but they are dependent on each
other i.e. unity of direction is a pre-requisite for unity of command. But it does not automatically
come from the unity of direction.
5. Equity
• Equity means combination of fairness, kindness & justice.
• The employees should be treated with kindness & equity if devotion is expected of them.
• It implies that managers should be fair and impartial while dealing with the subordinates.
• They should give similar treatment to people of similar position.
• They should not discriminate with respect to age, caste, sex, religion, relation etc.
• Equity is essential to create and maintain cordial relations between the managers and
subordinate.
• But equity does not mean total absence of harshness.
• Fayol was of opinion that, “at times force and harshness might become necessary for
thesake of equity”.
6. Order
a. This principle is concerned with proper & systematic arrangement of things and
people.
b. Arrangement of things is called material order and placement of people is called
social order.
c. Material order- There should be safe, appropriate and specific place for every
article and every place to be effectively used for specific activity and commodity.
Class: I B.Com (IB) Sem: I Subject: Principles of Management
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d. Social order- Selection and appointment of most suitable person on the suitable
job. There should be a specific place for every one and everyone should have a specific place so
that they can easily be contacted whenever need arises.
7. Discipline
a. According to Fayol, “Discipline means sincerity, obedience, respect of authority
& observance of rules and regulations of the enterprise”.
b. This principle applies that subordinate should respect their superiors and obey
their order.
c. It is an important requisite for smooth running of the enterprise.
d. Discipline is not only required on path of subordinates but also on the part of
management.
e. Discipline can be enforced if -
- There are good superiors at all levels.
- There are clear & fair agreements with workers.
- Sanctions (punishments) are judiciously applied.
8. Initiative
a. Workers should be encouraged to take initiative in the work assigned to them.
b. It means eagerness to initiate actions without being asked to do so.
c. Fayol advised that management should provide opportunity to its employees to
suggest ideas, experiences& new method of work.
d. It helps in developing an atmosphere of trust and understanding.
e. People then enjoy working in the organization because it adds to their zeal and
energy.
f. To suggest improvement in formulation & implementation of place.
g. They can be encouraged with the help of monetary & non-monetary incentives.
9. Fair Remuneration
a. The quantum and method of remuneration to be paid to the workers should be
fair, reasonable, satisfactory & rewarding of the efforts.
b. As far as possible it should accord satisfaction to both employer and the
employees.
c. Wages should be determined on the basis of cost of living, work assigned,
financial position of the business, wage rate prevailing etc.
d. Logical & appropriate wage rates and methods of their payment reduce tension &
differences between workers & management creates harmonious relationship and pleasing
atmosphere of work.
e. Fayol also recommended provision of other benefits such as free education,
medical & residential facilities to workers.
10. Stability of Tenure
a. Fayol emphasized that employees should not be moved frequently from one job
position to another i.e. the period of service in a job should be fixed.
b. Therefore employees should be appointed after keeping in view principles of
recruitment & selection but once they are appointed their services should be served.
c. According to Fayol. “Time is required for an employee to get used to a new work
& succeed to doing it well but if he is removed before that he will not be able to render
worthwhile services”.
d. As a result, the time, effort and money spent on training the worker will go waste.
e. Stability of job creates team spirit and a sense of belongingness among workers
which ultimately increase the quality as well as quantity of work.
11. Scalar Chain
a. Fayol defines scalar chain as ’The chain of superiors ranging from the ultimate
authority to the lowest”.
Class: I B.Com (IB) Sem: I Subject: Principles of Management
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b. Every orders, instructions, messages, requests, explanation etc. has to pass
through Scalar chain.
c. But, for the sake of convenience & urgency, this path can be cut shirt and this
short cut is known as Gang Plank.
d. A Gang Plank is a temporary arrangement between two different points to
facilitate quick & easy communication as explained below:
In the figure given, if D has to communicate with G he will first send the communication
upwards with the help of C, B to A and then downwards with the help of E and F to G which will
take quite some time and by that time, it may not be worth therefore a gang plank has been
developed between the two.
e. Gang Plank clarifies that management principles are not rigid rather they are
very flexible. They can be moulded and modified as per the requirements of situations
12. Sub-Ordination of Individual Interest to General Interest
a. An organization is much bigger than the individual it constitutes therefore interest
of the undertaking should prevail in all circumstances.
b. As far as possible, reconciliation should be achieved between individual and
group interests.
c. But in case of conflict, individual must sacrifice for bigger interests.
d. In order to achieve this attitude, it is essential that -
- Employees should be honest & sincere.
- Proper & regular supervision of work.
- Reconciliation of mutual differences and clashes by mutual agreement. For example, for
change of location of plant, for change of profit sharing ratio, etc.
13. Espirit De’ Corps (can be achieved through unity of command)
a. It refers to team spirit i.e. harmony in the work groups and mutual understanding
among the members.
b. Spirit De’ Corps inspires workers to work harder.
c. Fayol cautioned the managers against dividing the employees into competing
groups because it might damage the moral of the workers and interest of the undertaking in the
long run.
d. To inculcate Espirit De’ Corps following steps should be undertaken -
▪ There should be proper co-ordination of work at all levels
▪ Subordinates should be encouraged to develop informal relations among
themselves.
▪ Efforts should be made to create enthusiasm and keenness among
subordinates so that they can work to the maximum ability.
▪ Efficient employees should be rewarded and those who are not up to the
mark should be given a chance to improve their performance.
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▪ Subordinates should be made conscious of that whatever they are doing is
of great importance to the business & society.
e. He also cautioned against the more use of Britain communication to the
subordinates i.e. face to face communication should be developed. The managers should infuse
team spirit & belongingness. There should be no place for misunderstanding. People then enjoy
working in the organization & offer their best towards the organization.
14. Centralization & De-Centralization
a. Centralization means concentration of authority at the top level. In other words,
centralization is a situation in which top management retains most of the decision making
authority.
b. Decentralization means disposal of decision making authority to all the levels of
the organization. In other words, sharing authority downwards is decentralization.
c. According to Fayol, “Degree of centralization or decentralization depends on no.
of factors like size of business, experience of superiors, dependability & ability of subordinates
etc.
d. Anything which increases the role of subordinate is decentralization & anything
which decreases it is centralization.
e. Fayol suggested that absolute centralization or decentralization is not feasible. An
organization should strike to achieve a lot between the two.
CONTRIBUTION OF MARY PARKER FOLLET
Mary Parker Follett (3 September 1868 – 18 December 1933) was an American social worker,
management consultant and pioneer in the fields of organizational theory and organizational
behavior. She also authored a number of books and numerous essays, articles and speeches on
democracy, human relations, political philosophy, psychology, organizational behavior and
conflict resolution.
Along with Lillian Gilbreth, Mary Parker Follett was one of two great women
management gurus in the early days of classical management theory. She admonished
overmanaging employees, a process now known as micromanaging, as “bossism” and she is
regarded by some writers as the “mother” of Scientific Management. As such she was one of the
first women ever invited to address the London School of Economics, where she spoke on
cutting-edge management issues.
She also distinguished herself in the field of management by being sought out by
President Theodore Roosevelt as his personal consultant on managing not-for-profit, non-
governmental, and voluntary organizations. In her capacity as a management theorist, Mary
Parker Follett pioneered the understanding of lateral processes within hierarchical organizations
(which recognition led directly to the formation of matrix-style organizations, the first of which
was DuPont, in the 1920s),
the importance of informal processes within organizations, and the idea of the "authority
of expertise"--which really served to modify the typology of authority developed by her German
contemporary, Max Weber, who broke authority down into three separate categories: rational-
legal, traditional and charismatic.
Follett was born in Massachusetts and spent much of her early life there. In September
1885 she enrolled in Anna Ticknor's Society to Encourage Studies at Home. In 1898 she
graduated from Radcliffe College, but was denied a doctorate at Harvard on the grounds that she
was a woman.
Over the next three decades, however, she published many works, including:
• The Speaker of the House of Representatives (1896)
• The New State (1918)
• Creative Experience (1924)
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• Dynamic Administration (1942) (this collection of speeches and short articles was
published posthumously)
She recognized the holistic nature of community and advanced the idea of "reciprocal
relationships" in understanding the dynamic aspects of the individual in relationship to others.
Follett advocated the principle of what she termed "integration," or no coercive power-sharing
based on the use of her concept of "power with" rather than "power over." Her ideas on
negotiation, power, and employee participation were highly influential in the development of the
fields of organizational studies, alternative dispute resolution, and the Human Relations
MovementShe was also a pioneer in the establishment of community centers.
Even though most of Mary Parker Follett's writings remained known in very limited
circles until republished at the beginning of this decade (beginning with Pauline C. Graham's
first-rate work), her ideas gained great influence after Chester Barnard, a New Jersey Bell exec
and advisor to President Franklin D. Roosevelt, published his seminal treatment of executive
management, The Functions of the Executive. Barnard's work, which stressed the critical role of
"soft" factors such as "communication" and "informal processes" in organizations, owed a telling
yet undisclosed debt to Follett's thought and writings. In addition,
Her emphasis on such soft factors paralleled the work of Elton Mayo at Western
Electric's Hawthorne Plant, and presaged the rise of the Human Relations Movement, as
developed through the work of such figures as Abraham Maslow, Kurt Lewin, Douglas
McGregor, Chris Argyris, Dick Beckhard and other breakthrough contributors to the field of
Organizational Development or "OD". Her influence can also be seen indirectly perhaps in the
work of Ron Lippitt, Ken Benne, Lee Bradford, Edie Seashore and others at the National
Training Laboratories in Bethel,
Maine, where T-Group methodology was first theorized and developed. Thus, Mary
Follett's work set the stage for a generation of effective, progressive changes in management
philosophy, style and practice, revolutionizing and humanizing the American workplace, and
allowing the fulfillment of Douglas McGregor's management vision—quantum leaps in
productivity effected through the humanization of the workplace.
CONTRIBUTION OF MCGREGOR
A simple definition of motivation is the ability to change behavior. It is a drive that compels one
to act because human behavior is directed toward some goal. Motivation is intrinsic (internal); it
comes from within based on personal interests, desires, and need for fulfillment. However,
extrinsic (external) factors such as rewards, praise, and promotions also influence motivation. As
defined by Daft (1997), motivation refers to "the forces either within or external to a person that
arouse enthusiasm and persistence to pursue a certain course of action"
People who are committed to achieving organizational objectives generally outperform
those who are not committed. Those who are intrinsically rewarded by accomplishments in the
workplace are satisfied with their jobs and are individuals with high self-esteem. Therefore, an
important part of management is to help make work more satisfying and rewarding for
employees and to keep employee motivation consistent with organizational objectives.
With the diversity of contemporary workplaces, this is a complex task. Many factors,
including the influences of different cultures, affect what people value and what is rewarding to
them. From a manager's perspective, it is important to understand what prompts people, what
influences them, and why they persist in particular actions. Quick (1985) presented these four
underlying principles that are important to understanding motivation:
• People have reasons for everything they do.
• Whatever people choose as a goal is something they believe is good for them.
• The goal people choose must be seen as attainable.
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• The conditions under which the work is done can affect its value to the employee and his or
her perceptions of attainability or success.
When management was first studied in a scientific way at the turn of the twentieth
century, Frederick Winslow Taylor worked to improve productivity in labor situations so
important in those days of the developing Industrial Revolution. Taylor developed efficiency
measures and incentive systems. When workers were paid more for meeting a standard higher
than their normal production, productivity increased dramatically. Therefore, workers seemed to
be economically motivated. At this time in history, social issues involved in human behavior
were not yet considered. Amore humanistic approach soon developed that has been influencing
management ever since.
During the late 1920s and early 1930s, Elton Mayo and other researchers from Harvard
University conducted studies at a Western Electric plant in Hawthorne, Illinois, to measure
productivity. They studied the effects of fatigue, layout, heating, and lighting on productivity. As
might be expected when studying lighting, employee productivity levels increased as the
illumination level was increased; however, the same effect was noted when the illumination level
was decreased. The researchers concluded that the attention paid to the employees was more of a
contributing factor to their productivity level than the environmental conditions.
The fact that paying attention to workers could improve their behavior was called the
Hawthorne effect. As a result of this research, it was evident that employees should be treated in
a humane way. These findings started the human relations movement—a change in management
thinking and practice that viewed increased worker productivity as grounded in satisfaction of
employees' basic needs. [Many years later, it was discovered that the workers in the Hawthorne
experimental group had received an increase in income; therefore, money was probably a
motivating factor, although it was not recognized as such at the time. (Daft, 1997)].
Ongoing changes in the workplace require that managers give continuous attention to
those factors that influence worker behavior and align them with organizational goals. No one
theory is appropriate for all people and for all situations. Each individual has his or her own
values and
Differing abilities. In business settings, managers apply motivation theories to influence
employees, improve morale, and implement incentive and compensation plans.
The following discussion of motivation theories is grouped according to need, process, and
reinforcement theories.
NEED THEORIES
Need theories are based on some of the earliest research in the field of human relations. The
premise behind need theories is that if managers can understand the needs that motivate people,
then reward systems can be implemented that fulfill those needs and reinforce the appropriate
behavior.
Hierarchy of Needs Abraham Maslow, a professor at Brandeis University and a practicing
psychologist, developed the hierarchy of needs theory. He identified a set of needs that he
prioritized into a hierarchy based on two conclusions (Daft, 1997; McCoy, 1992; Quick, 1985):
• Human needs are either of an attraction/desire nature or of an avoidance nature.
• Because humans want beings, when one desire is satisfied, another desire will take its
place.
• The five levels of needs are the following (see Table 1):
• Physiological: These are basic physical comfort or bodily needs: food, sex, drink, and
sleep. In the workplace, these needs translate into a safe, ergonomically designed work
environment with an appropriate base salary compensation.
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• Security/safety: People want to feel safe, secure, and free from fear. They need stability,
structure, and order. In the workplace, job security and fringe benefits, along with an
environment free of violence, fills these needs.
• Belongingness and love: This is a need for friends, family, and intimacy—for social
acceptance and affection from one's peers. In the workplace, this need is satisfied by
participation in work groups with good relationships among co-workers and between
workers and managers.
• Esteem: People want the esteem of others and they want to be regarded as useful,
competent, and important. People also desire self-esteem and need a good self image. In
the workplace, increased responsibility, high status, and recognition for contributions
satisfy these needs.
• Self-actualization: This highest motivation level involves people striving to actualize
their full potential, to become more of what they are capable of being. They seek to attain
self-fulfillment. In the workplace, people satisfy this need by being creative, receiving
training, or accepting challenging assignments.
Focusing on the needs of retraining for growth and challenge as well as rewards and recognition
is important to the quality of work life. Managers can affect the physical, social, and
psychological environment in the workplace, and they have a responsibility to help employees
fulfill their needs.
ERG Theory In his work, Clayton Alderfer expanded on Maslow's hierarchical theory. He
proposed three need categories and suggested that movement between the need levels is not
necessarily straightforward. Failure to meet a higher-order need could cause an individual to
regress to a lower-order need. These ERG theory categories are:
• Existence needs: Needs for physical well-being
• Relatedness needs: Needs for satisfactory relationships with others
• Growth needs: The development of human potential and the desire for personal growth
and increased competence (Daft, 1997)
Motivation-Hygiene Theory Frederick Herzberg, a professor of psychology at Case Western
Reserve University, studied the attitudes of workers toward their jobs. Herzberg proposed that an
individual will be moved to action based on the desire to avoid deprivation. However, this
motivation does not provide positive satisfaction because it does not provide a sense of growth.
Herzberg's research found that positive job attitudes were associated with a feeling of
psychological growth. He thought that people work for two reasons: for financial reasons to
avoid physical deprivation, and for achievement because of the happiness and meaning it
provides. Herzberg also identified the concept of job enrichment, whereby the responsibilities of
a job are changed to provide greater growth and challenge (McCoy, 1992; Quick, 1985 p. 10-
12)] 1985. His motivation-hygiene theory includes two types of factors:
1. Motivation is based on the positive satisfaction that psychological growth provides. The
presence of factors such as responsibility, achievement, recognition, and possibility for growth or
advancement will motivate and satisfy people. The absence of these factors will not necessarily
demotivate or cause dissatisfaction.
2. Hygiene is based on an individual's desire to avoid deprivation and the resulting physical
and emotional discomfort. Hygiene factors include willingness to supervise; positive working
conditions; interpersonal relations with peers, subordinates, and superiors; status; job security;
and salary. These factors do not motivate, nor will their presence cause job satisfaction. Their
absence, however, will cause dissatisfaction.
Although salary is considered a hygiene factor, it plays an indirect part in motivation as a
measure of growth and advancement or as a symbol of recognition of achievement.
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Theory X and Theory Y Douglas McGregor, a professor at the Massachusetts Institute of
Technology and a social psychologist, was greatly influenced by the work of Maslow. McGregor
recognized that people have needs and that those needs are satisfied at work. He described two
sets of assumptions about people that he labeled Theory X and Theory Y (Bruce and Pepitone,
1999; Quick, 1985):
• The assumptions of Theory X are that most people will avoid work because they don't
like it and must be threatened or persuaded to put forth adequate effort. People have little
ambition and don't want responsibility. They want to be directed and are most interested
in job security.
• The assumptions of Theory Y are that work is very natural to people and that most people
are self-directed to achieve objectives to which they are committed. People are ambitious
and creative. They desire responsibility and derive a sense of satisfaction from the work
itself.
• These assumptions were, at one time, applied to management styles, with autocratic
managers labeled as adhering to Theory X and democratic managers to Theory Y.
Unfortunately, this fostered a tendency to see people as members of a group rather than
as individuals. The important contribution of McGregor's theory was to recognize these
two perspectives and to recognize that people can achieve personal objectives through
helping organizations achieve their objectives. Their work can be a motivator.
• Acquired Needs Theory David McClelland developed the acquired needs theory
because he felt that different needs are acquired throughout an individual's lifetime. He
proposed three needs:
• Need for achievement: The desire to accomplish something difficult, attain a high
standard of success, master complex tasks, and surpass others
• Need for affiliation: The desire to form close personal relationships, avoid conflict, and
establish warm friendships
• Need for power: The desire to influence or control others, be responsible for others, and
have authority over others.
• McClelland found through his research that early life experiences determine whether
people acquire these needs. The need to achieve as an adult is influenced by the
reinforcement of be havior received as a child when a child is encour aged to do things
independently. If a child is reinforced for warm, human relationships, then the need for
affiliation as an adult develops. If a child gains satisfaction from controlling others, then
the need for power will be evident as an adult (Daft, 1997).
• PROCESS THEORIES
• Process theories help to explain how individuals select particular behaviors and how
individuals determine if these behaviors meet their needs. Because these theories involve
rational selection, concepts of cognition are employed. Cognition, according to Petri
(1996), "is generally used to describe those intellectual or perceptual processes occurring
within us when we analyze and interpret both the world around us and our own thoughts
and actions (p. 236).
• Expectancy Theory Victor Vroom developed the expectancy theory, which suggests that
individuals' expectations about their ability to accomplish something will affect their
success in accomplishing it. Therefore, this theory is based on cognition—on thought
processes that individuals use.
• The expectancy theory is based on an individual's effort and performance, as well as the
desirability of outcomes associated with high performance. The value of or preference for
a particular outcome is called valence. To determine valence, people will ask themselves
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whether or not they can accomplish a goal, how important is the goal to them (in the
immediate as well as the long term), and what course of action will provide the greatest
reward. An individual's expectation of actually achieving the outcome is crucial to
success, and many factors influence this (Daft, 1997; Quick, 1985).
• The expectancy theory can be applied through incentive systems that identify desired
outcomes and give all workers the same opportunities to achieve rewards, such as stock
ownership or other recognition for achievement.
• Equity Theory The equity theory focuses on individuals' perceptions of how fairly they
are treated in comparison to others. It was developed by J. Stacy Adams, who found that
equity exists when people consider their compensation equal to the compensation of
others who perform similar work. People judge equity by comparing inputs (such as
education, experience, effort, and ability) to outputs (such as pay, recognition, benefits,
and promotion).
• When the ratio is out of balance, inequity occurs. And inequitable pay can create an
impossible situation when implementing salary and incentive systems. According to Daft
(1997), Individuals will work to reduce perceived inequity by doing the following:
• Change inputs: Examples include increasing or reducing effort.
• Change outcomes: Examples include requesting a salary increase or improved working
conditions.
• Distort perceptions: This occurs when individuals cannot change their inputs or
outcomes; one example is artificially increasing the importance of awards.
• Leave the job: Individuals might do this rather than experience what they perceive to be
continued inequity.
• When administering compensation and incentive programs, managers must be careful to
assure that the rewards are equitable; if programs are not perceived as equitable, then
they will not contribute to employee motivation.
REINFORCEMENT THEORIES
Theories of reinforcement are based not on need but on the relationship between behavior and its
consequences. In the workplace, these theories can be applied to change or modify on-the-job
behavior through rewards and punishments.B. F. Skinner, a professor at Harvard, was a highly
controversial behavioral psychologist known for his work in operant conditioning and behavior
modification.
His reinforcement theories take into consideration both motivation and the environment,
focusing on stimulus and response relationships. Through his research, Skinner noted that a
stimulus will initiate behavior; thus, the stimulus is an antecedent to behavior. The behavior will
generate a result; therefore, results are consequences of behavior.
According to McCoy (1992), "The quality of the results will be directly related to the
quality and timeliness of the antecedent. The more specific the antecedent is and the closer in
time it is to the behavior, the greater will be its effect on the behavior.…The consequences
provide feedback to the individual"
If the results are considered positive, then the behavior is positively reinforced. When the
behavior is positively reinforced, the individual is more likely to repeat the behavior. People tend
to have an intrinsic (internal) need for positive reinforcement. And when a behavior is ignored,
the behavior tends to go away or become extinct. The four types of reinforcement are the
following (Daft, 1997):
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• Positive reinforcement: The application of a pleasant and rewarding consequence
following a desired behavior, such as giving praise.
• Negative reinforcement: The removal of an unpleasant consequence following a desired
behavior, such as a manager no longer reminding a worker about a weekly deadline when the
worker meets the deadline. This reinforcement is also called avoidance.
• Punishment: The application of an unpleasant outcome when an undesirable behavior
occurs to reduce the likelihood of that behavior happening again. This form of reinforcement
does not indicate a correct behavior, so its use in business is not usually appropriate.
• Extinction: The withdrawal of a positive reward. If the behavior is no longer positively
reinforced, then it is less likely to occur in the future and it will gradually disappear.
Continuous reinforcement can be effective in the early stages of behavior modification, but
partial reinforcement is more commonly used. Reinforcement is most powerful when it is
administered immediately.
The appropriateness of a reward depends on the situation. But for managers to apply
rewards appropriate for work performance, it is necessary to understand what constitutes a
reward. And no single reward will be perceived as positive by all employees. Rewards, however,
are important in behavior-based incentive plans because they reward employee behavior that is
desirable for the company.
According to McCoy (1992), both incentives and recognition provide a reward; however,
incentives drive performance while recognition is an after-the-fact display of appreciation for a
contribution.Financial rewards are certainly important in compensation programs. Social
recognition provides employees with a sense of self-worth by acknowledging the contributions
they have made. This recognition could be given in the form of a ceremony that helps to validate
and is an important compensation—and one that probably costs a company very little in
relationship to the benefit to employees (McCoy, 1992).
CONTRIBUTION OF PETER F. DRUCKER
Introduction
Peter Ferdinand Drucker (November 19, 1909 – November 11, 2005) was an influential writer,
management consultant, and self-described “social ecologist.” Drucker's books and scholarly and
popular articles explored how humans are organized across the business, government and the
nonprofit sectors of society. He is one of the best-known and most widely influential thinkers
and writers on the subject of management theory and practice.
His writings have predicted many of the major developments of the late twentieth
century, including privatization and decentralization; the rise of Japan to economic world power;
the decisive importance of marketing; and the emergence of the information society with its
necessity of lifelong learning. In 1959, Drucker coined the term “knowledge worker" and later in
his life considered knowledge work productivity to be the next frontier of management. The
annual Global Peter Drucker Forum in his hometown of Vienna Austria honors his legacy.
1. Invest Like Peter Drucker by Investing in Entrepreneurial Companies
Invest in companies that are entrepreneurial, and avoid companies that are too bureaucratic.
Drucker, an Austrian economist, was a big believer in entrepreneurship, innovation and capital
formation. He favored companies that took big risks and spent lots of capital on R&D. He hated
companies that had nothing better to do than repurchase their stock, or pay out big dividends.
He was born in Austria in 1909, and his roots stayed with him all his life. His favorite
economist was fellow Austrian Joseph Schumpeter, a believer in entrepreneurship and a dynamic
model of capitalism ("creative destruction"). Drucker would probably love our top three
candidates for the new "Benny" award - Steve Jobs at Apple Computers; Pierre Omidyar,
Class: I B.Com (IB) Sem: I Subject: Principles of Management
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founder of eBay; and John Mackey, CEO of Whole Foods Markets.
2. Spend Less, Save, and Invest More
You can never save and invest too much. Drucker disliked big spenders, heavy borrowers and
governments that couldn't balance budgets. The smart investor always lives within his means,
and uses his savings productively - either in expanding his business, or investing in other
people's successful businesses (i.e., buying quality stocks). He blamed Keynesian economics for
an unhealthy anti-saving mythology, causing "under-saving on a massive scale" in the West,
both by individuals and government.
Government, Drucker said, is only good at three things: Inflation, taxation and making
war! He once bluntly told a U.S. president, "Government is obese, muscle-bound and senile."
Yet he wasn't against government, per se. He wanted a strong, healthy, vigorous government. To
accomplish this goal, he recommended privatization of many state services.
In fact, Peter Drucker and Robert Poole (founder of Reason magazine) invented the term
"privatization." Drucker was a longtime supporter of privatizing pension plans, both by
government and corporations (he preferred defined-contribution plans like 401k's and IRA's,
rather than defined-benefit plans such as Social Security and corporate pensions).
3. Be an Optimist - Look for Bull Markets around the World
Be an optimist. Drucker was encouraged by the collapse of the Soviet Marxist model in the early
1990s, which helped developing countries privatize, denationalize and open up their domestic
economies to foreign capital. He recommended investing in emerging market economies. Not
surprisingly, stock markets have boomed in Russia, Eastern Europe, Asia and Latin America.
Criticism of Drucker's work
The Wall Street Journal researched several of his lectures in 1987 and reported that he
was sometimes loose with the facts. Drucker was off the mark, for example, when he told an
audience that English was the official language for all employees at Japan’s Mitsui trading
company. (Drucker’s defense: “I use anecdotes to make a point, not to write history.”) And while
he was known for his prescience, he wasn’t always correct in his forecasts. He predicted, for
instance, that the nation’s financial center would shift from New York to Washington.
Others maintain that one of Drucker’s core concepts—“management by objectives”—is flawed
and has never really been proven to work effectively. Critic Dale Krueger said that the system is
difficult to implement, and that company often wind up overemphasizing control, as opposed to
fostering creativity, to meet their goals.
Drucker's classic Concept of the Corporation criticized General Motors at a time when it was, in
some ways, the most successful corporation in the world. Many of GM's executives considered
Drucker persona non grata for a long time afterward. Alfred P. Sloan refrained from personal
hostility toward Drucker, but even Sloan considered Drucker's critiques of GM's management to
be "dead wrong".
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SUMMARY
Management: Management is the act of getting people together to accomplish desired
goals and objectives using available resources efficiently and effectively. Management
comprises planning, organizing, staffing, leading or directing, and controlling an
organization (a group of one or more people or entities) or effort for the purpose of
accomplishing a goal.
Definition of management: According to Harold Koontz, “Management is an art of
getting things done through and with the people in formally organized groups. It is an art
of creating an environment in which people can perform and individuals and can co-
operate towards attainment of group goals”.
Administration : Administration is the process of managing a business or non- profit
organization so that it remains stable and continues to grow.The administration of a
business includes the performance or management of business operations and decision
making as well as the efficient organization of people and other resources to direct
activities toward common goals and objectives.In general, administration refers to the
broader management function, including the associated finance, personnel and MIS
services.
Functions of management: There are four fundamental functions of management i.e.
planning, organizing, actuating and controlling. Whereas Luther Gullick has given a
keyword ’POSDCORB’ where P stands for Planning, O for Organizing, S for Staffing, D
for Directing, Co for Co-ordination, R for reporting & B for Budgeting.
Levels of management: The term “Levels of Management’ refers to a line of
demarcation between various managerial positions in an organization. The number of
levels in management increases when the size of the business and work force increases.
The levels are a) Top level / Administrative level, b) Middle level / Executory, c) Low
level / Supervisory / Operative / First-line managers.
Contribution of F.W.Taylor: F.W.Tylor is considered as the "Father of scientific
management" and his contributions mark a new era in Modern Management Thought. The
concepts propounded by him have an impact on management service practice as well as on
management thought up to the present day.Taylor formalized the principles of scientific
management, and the fact-finding approach put forward and largely adopted was a
replacement for what had been the old rule of thumb.
Contribution of Henry Fayol: Henri Fayol was a French mining engineer and director of
mines who developed a general theory of business administration. He and his colleagues
developed this theory independently of scientific management but roughly
contemporaneously. He was one of the most influential contributors to modern concepts of
management.
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UNIT-I:
Section-A
1. The father of modern theory of management is________________.
2. ____________is the function of industry.
3. Administration denotes the determination of ______________.
4. Management is only a word ____________.
5. Management is the art of _____________.
6. Management is the creation and maintenance of a ________environment.
7. Management as a system of ________________.
8. The first step in the management is _______________.
9. _____________Management is concerned with the human resources of enterprises.
10. Management leads to greater _______________.
Section-B
1. Define Management and Administration.
2. Explain the objectives of Management.
3. Explain the three levels of Management.
4. What are the qualities of an effective manager?
5. Write any five function of management.
6. Difference between entrepreneur and Manager.
7. What are the functions comes under top management?
8. Discuss "Management is an art".
9. Difference between management and Administration.
10. What are the principles of management?
Section-C
1. Explain the function of Management.
2. Describe the nature of a Management.
3. Explain the scope of Management.
4. Explain the contribution of F.W.Taylor about the management.
5. Explain the contribution of Mary Parker Follett about the management.
6. Explain the benefits of Scientific Management.
7. Is Management is an Art or Science-Explain.
8. Explain the importance of Management.
9. State why management is regarded as a profession.
10. Explain briefly the levels of Management.
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UNIT-II:
Planning and Forecasting
Planning – Meaning – Nature and Importance of Planning – Planning premises – Methods and
Types of plans – Forecasting and Decision Making – MBO – MBE.
PLANNING-MEANING
It is the basic function of management. It deals with chalking out a future course of action &
deciding in advance the most appropriate course of actions for achievement of pre-determined
goals. A plan is a future course of actions. It is an exercise in problem solving & decision
making. Planning is determination of courses of action to achieve desired goals.
Thus, planning is a systematic thinking about ways & means for accomplishment of pre-
determined goals. Planning is necessary to ensure proper utilization of human & non-human
resources. It is all pervasive, it is an intellectual activity and it also helps in avoiding confusion,
uncertainties, risks, wastages etc. Planning (also called forethought) is the process of thinking
about and organizing the activities required to achieve a desired goal.
Planning involves the creation and maintenance of a plan. As such, planning is a
fundamental property of intelligent behavior. This thought process is essential to the creation and
refinement of a plan, or integration of it with other plans; that is, it combines forecasting of
developments with the preparation of scenarios of how to react to them.
An important, albeit often ignored aspect of planning, is the relationship it holds with
forecasting. Forecasting can be described as predicting what the future will look like, whereas
planning predicts what the future should look like.[1] The counterpart to planning is spontaneous
order.
DEFINITION OF PLANNING
According to Prof. L. Robbins economic planning is “collective control or suppression of private
activities of production and exchange.”
To Hayek, planning means, “the direction of productive activity by a central authority.”
According to Dalton, “Economic planning in the widest sense is the deliberate direction by
persons in charge of large resources of economic activity towards chosen end.”
According to KOONTZ, “Planning is deciding in advance - what to do, when to do & how to do.
It bridges the gap from where we are & where we want to be”.
What is a Process?
A process is a set of steps that result in a specific outcome. For example, a customer service
request might have the following steps:
• Customer requests service
• Service department enters request into a tracking system
• The request is routed to the repair department
• A repair technician is assigned to evaluate the request, and to respond to the customer
• A technician is dispatched, if appropriate
• Once the response is made, a survey is sent to the customer to confirm their issue was
resolved
• In this case, the process is 'Response to Customer Service Request', and the outcome is
resolution of the customer's problem.
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Goal of Process Planning
The goal of process planning is to improve and streamline the business methods of a company.
This would have results like:
• Lower costs, due to fewer staff needed to complete the same process
• Higher efficiency, by eliminating process steps like loops and bottlenecks
• Higher accuracy, by including checkpoints and success measures to make sure process
steps are completed accurately
• Greater understanding by all staff of what they need to do to meet their department
objectives
What is a Management Plan?
A management plan is a document that outlines the vision and direction for a protected area. A
management plan:
• Situates the protected area within a landscape context, both geographically and as a part
of the protected areas network, in short, where is it, and what is its role in BC Parks
system.
• Describes the key features and values of the protected area (such as natural, cultural and
recreation values).
• Identifies future appropriate management activities.
• Determines the appropriate levels of use and development.
• Establishes the long-term vision and management objectives to be met.
• Responds to current and predicted future threats to the values and opportunities to
enhance or change the values and uses of the area.
The Basic Steps in the Management Planning Process
Management planning is the process of assessing an organization's goals and creating a realistic,
detailed plan of action for meeting those goals. Much like writing a business plan, a management
plan takes into consideration short- and long-term corporate strategies. The basic steps in the
management planning process involve creating a road map that outlines each task the company
must accomplish to meet its overall objectives.
Establish Goals
The first step of the management planning process is to identify specific company goals. This
portion of the planning process should include a detailed overview of each goal, including the
reason for its selection and the anticipated outcomes of goal-related projects. Where possible,
objectives should be described in quantitative or qualitative terms. An example of a goal is to
raise profits by 25 percent over a 12-month period.
Identify Resources
Each goal should have financial and human resources projections associated with its completion.
For example, a management plan may identify how many sales people it will require and how
much it will cost to meet the goal of increasing sales by 25 percent.
Establish Goal-Related Tasks
Each goal should have tasks or projects associated with its achievement. For example, if a goal is
to raise profits by 25 percent, a manager will need to outline the tasks required to meet that
objective. Examples of tasks might include increasing the sales staff or developing advanced
sales training techniques.
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Prioritize Goals and Tasks
Prioritizing goals and tasks is about ordering objectives in terms of their importance. The tasks
deemed most important will theoretically be approached and completed first. The prioritizing
process may also reflect steps necessary in completing a task or achieving a goal. For example, if
a goal is to increase sales by 25 percent and an associated task is to increase sales staff, the
company will need to complete the steps toward achieving that objective in chronological order.
Create Assignments and Timelines
As the company prioritizes projects, it must establish timelines for completing associated tasks
and assign individuals to complete them. This portion of the management planning process
should consider the abilities of staff members and the time necessary to realistically complete
assignments. For example, the sales manager in this scenario may be given monthly earning
quotas to stay on track for the goal of increasing sales by 25 percent.
Establish Evaluation Methods
A management planning process should include a strategy for evaluating the progress toward
goal completion throughout an established time period. One way to do this is through requesting
a monthly progress report from department heads.
Identify Alternative Courses of Action
Even the best-laid plans can sometimes be thrown off track by unanticipated events. A
management plan should include a contingency plan if certain aspects of the master plan prove to
be unattainable. Alternative courses of action can be incorporated into each segment of the
planning process, or for the plan in its entirety.
The management planning process
Overview of the process
Management planning is a continuous process – a ‘circle’ with three main elements:
• Preparation of a Management Plan
• Implementation of the plan
• Monitoring and review of the plan.
Protected area management planning steps
It is important that these steps are understood and carried out in a logical sequence. An orderly
approach provides a more systematic and rational way of identifying and addressing all the
factors involved. This is most important for complex cases. However, while a carefully phased
sequence is desirable, experience suggests that a strictly sequential process may not always work
best; this is particularly the case in the initial phases, when information gathering and evaluation
are likely to take place almost simultaneously. Hence the work is likely to move forward
opportunistically as delays are overcome and with several planning steps being worked on at
once. Provided the overall framework is understood and complied with, this approach should not
jeopardise the development of a good plan.
Fundamental to this process is ‘feedback’, which allows the planner to correct for future
action in light of past experience. This feedback loop could also be thought of as a ‘quality
cycle’, where the monitoring and review of the plan ensures that all parts are appropriate,
realistic, efficient, economic and effective. It is the continuous nature of this process that ensures
that the resulting management is flexible and can adapt to changing circumstances – and is thus
of adequate quality.
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4.2 Preparing a Management Plan
Step 1. Pre-planning phase
The pre-planning phase is one of the most important steps in the planning process. This stage
defines what the process will achieve, how it will be carried out, timing considerations and who
is to be involved. These decisions need to be made at the highest possible management level and
are critical to starting the planning process on the right footing. This pre-planning phase
generally includes the following steps:
Clearly identify the purpose and management objectives of the protected area – and ensure that
they are understood by all involved. These broad objectives should have been set out in the
legislation (or formal agreements designating the area), but it may be necessary to re-examine
them and confirm their meaning, as they will set the direction of the plan from the start. The
purposes should of course be reflected in the categorisation of the site within the IUCN protected
area management categories system.
1. Identify the steps to be followed in applying the planning process, their sequence and the
methods to be used. Many organisations have their own ‘manual’ or guidelines on the approach
to be followed, which will have been designed to fulfil the needs and policies of the organisation.
Otherwise, an approach should be designed which will best suit the protected area and its
management context, but containing the basic stages of management planning (common to all
planning processes).“With the many sound approaches to planning protected areas, it is not
surprising that there are many ‘right’ answers. The best approach is the one most suited to the
social and institutional environment of the country involved” (Child 1994).
2. Determine who are the audiences for the plan. Management Plans are prepared mainly for
regular use by protected area managers, but they are not intended as detailed work programmes.
Members of the public, the bureaucracy, commercial interests and neighbours are also important
users. In some situations, traditional owners, local government and commercial operators can
also be key users. The style of presentation adopted should reflect the most important user
groups. In certain circumstances it may be necessary to produce the Management Plan in the
official language(s) of the country and in local languages to meet local user requirements.
3. Ensure that the protected area will be considered as a whole i.e. adopt a ‘systems approach’.
This recognises the importance of an analysis of separate issues, but stresses a complete view of
all issues or ‘systems’ that are involved.
4. Use an inter-disciplinary approach – bringing experts and interested parties together to discuss
the future management of the protected area.
5. “In this approach, a problem is not disassembled (which is what happens in a multi-
disciplinary approach). It is treated as a whole by representation of different disciplines working
the solution out together. This brings synthesis of knowledge in the sciences, technologies and
humanities. Integration of disciplines yields broader synthesis of methods and knowledge and
usually results in more complete and workable solutions” (Kelleher and Kenchington 1991).
6. Identify a ‘planning team’. Management planning should be a ‘team effort’, but within this,
one person should be given responsibility for production of the plan. This individual should be
accountable to a clearly defined manager. If preparation is contracted out, decisions should be
made as to how the contract will be managed to ensure that the plan delivers the requirements
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effectively. In such cases, it is essential to agree a ‘brief’ between the contractor and the
organisation responsible for the management of the protected area before planning work
commences. NB: The Annex provides information on the skills required within a planning
team.
7. Prepare and follow a well-laid out work schedule for the management planning process.
Project management techniques are often used to carry out this task. They help to organise and
control the production of the Management Plan. The ‘project’ is defined as ‘production of the
plan’ and a ‘project manager’ is identified to co-ordinate and oversee completion of the project.
8. Identify a process for involving people (other than the planning team) in preparing the plan.
These will include other staff, experts, government officials, local communities and other
affected parties. It should be clear to these and other interested parties when and how their
participation will take place.
9. Clarify and agree a procedure with senior management for the approval of the final
Management Plan. If the approval of external parties (e.g. funding bodies, advisory committees
and government departments) is required, the procedures to be followed in achieving this should
be identified and a timetable agreed to for the submission of a final version for approval.
Planning and management should be informed by reliable data. There are two views about
the relationship between data collection and setting management objectives:
1. That, through the collection and analysis of data, management objectives are refined and
agreed upon after data is collected and analysed.
2. Management objectives are set for the area and these determine what data is collected.
In practice a protected area is established on the basis of an initial data set which is used to
determine management objectives (e.g. protect rare habitat and species). Planning processes
inevitably conclude more data are required before some management options can be evaluated
and decided. In many cases there is a history of earlier planning or research efforts that help to
identify the key topics where further data collection is required. Therefore data collection can
almost always be informed to a considerable extent by the appropriate management objectives
for the area. The stages involved are to:
i) gather available background information (historical data can be invaluable);
ii) carry out a field inventory to check the information (and to acquire additional data if required);
and
iii) document it in the form of a description of the protected area (sometimes called a ‘State of the
Protected Area’ report).
The information collected in this way should include both information about the area as it is, and
about trends affecting it. The data should relate to both the physical aspects of the area, and to its
social/cultural and economic significance (see Guidelines in Box 5).
Checking documentary information in the field is frequently not done because of the expense. It
can be very useful, however, to confirm the accuracy of information; for historical sites, for
example, it is an opportunity to examine the current physical state and to build up an
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understanding of how the site evolved and was used in the past. Moreover, evidence of
meaningful data collection can help to build public confidence in the planning process.1
It may be necessary to define a long-term research programme for a site. This could apply to a
range of factors where change over time is either evident or expected. The programme would
form part of the Management Plan prescriptions.
It should not be expected that all the information collected for a protected area would necessarily
be included in the Management Plan. A short summary should be included with the full text
included as a companion document or, where this already exists, placed on the organisation's
web site.
Step 2 is completed before moving through to the evaluation of this information, although in
practice there is often some overlap, and iteration between these steps.
Principles of Process Planning
Here are some general principles to keep in mind when evaluating or improving processes:
• First define the outputs, then look toward the inputs needed to achieve those outputs
• Define the goals of the process, and evaluate them regularly to make sure they are still
appropriate. This would include specific measures like quality scores and turnaround
times.
• When mapped, the process should appear as a logical flow, without loops back to earlier
steps or departments.
• Any step performed needs to be included in the documentation. If not, it should be
eliminated or documented, depending on whether or not it's necessary to the process.
• People involved in the process should be consulted, as they often have the most current
information on what works and what does not.
Steps To Plan a Process
Process planning involves the definition, documentation, review and improvement of steps in
business processes used at a company. Each of these steps will be described below.
Definition:
The first step is to define what the process should accomplish. Make sure you can answer the
following questions about the process:
• What is the output of this process?
• Who receives the output, and how do they define success?
• What are the inputs for the process?
• Are there defined success measures in place - such as turnaround time or quality scores?
• Are there specific checkpoints in the process that need to be addressed?
For example, let's look at an order fulfillment process.
• Output of the process: a complete and accurate order shipped to the buyer.
• Recipient of the order is the buyer, and they define success as receipt of their purchase
within a reasonable timeframe (generally as specified at the point of purchase).
• Inputs: order information from the sales department
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• Defined success measures: these would be specific to the company; examples might be a
2-day turnaround time from payment receipt to shipping, a 99% accuracy rate in terms of
items shipped, and a backorder rate of less than 5%.
• Specific checkpoints: one example might be ensuring payment has been received prior to
fulfilling the order, or alternatively that the customer has a credit account with the
company with sufficient credit available to cover the purchase.
NATURE OF PLANNING:-
1. Planning is an intellectual process :- Planning as an intellectual process, the conscious
determination of course of action. Thus, it is an intellectual stimulation. It possesses an element
of day-dreaming. In the initial stage it may involve what might be called vision. It involves
foreseeing future developement, making forecasts or predictions and then taking decisions. Thus,
it becomes an important mental exercise.
2. Planning contributes to the objective :- A plan starts with the setting of objectives and in
order to realize it develops policies, procedures, and strategies, etc. Obviously, without setting
the goals to be reached and lines of action to be followed, there is a continuous and never-ending
activity of a manager to keep the enterprise going.
3. Planning is a selecting process :- Planning is a selective process. It involves the study and a
careful analysis of various alternatives and then selecting the best one. It not only pertains to
defining a problem which immediately confronts the manager, but often it mentally searches the
possibilities for problems that might appear in the future.
4. Planning forms the premises for the decision of the future :- Plans become premises, for
the decisions of the future. Detailed planning may include several plans, which are mutually
exclusive. It provides series or sets of decision that can be made under various possible
circumstances. Thus, planning aids in making specific decisions, since it includes all of the
important alternatives, which
5. Planning pervades all managerial activities :- Planning is a pervasive activity convering the
entire enterprise with all its segments and its every level of management. It is not the exclusive
responsibility of top management but it extends to middle and lower management as well. It is a
primary function of the management and its level and extent, etc. Will depend upon the level of
management.
6. Planning is directed towards efficiency :- The main purpose of planning is to increase the
efficiency of the enterprise. It is an attempt on the part of a manager to anticipate the future in
order to achieve better performance. It has become an important function due to uncertain and
ever changing environmental of business.
7. Planning is a continuous and flexible process :- Because of uncertainties of the future the
planner must be ever alert and should form his plans in such a way as to adopt them to changing
circumstances without inconvenience and undue costs.
Characteristics of Planning
1. 1. Planning is goal-oriented.
a. Planning is made to achieve desired objective of business.
1.
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b. The goals established should general acceptance otherwise individual efforts &
energies will go misguided and misdirected.
c. Planning identifies the action that would lead to desired goals quickly &
economically.
d. It provides sense of direction to various activities. E.g. Maruti Udhyog is trying
to capture once again Indian Car Market by launching diesel models.
2. 2. Planning is looking ahead.
a. Planning is done for future.
b. It requires peeping in future, analyzing it and predicting it.
c. Thus planning is based on forecasting.
d. A plan is a synthesis of forecast.
e. It is a mental predisposition for things to happen in future.
3. Planning is an intellectual process.
• Planning is a mental exercise involving creative thinking, sound judgement and imagination.
• It is not a mere guesswork but a rotational thinking.
• A manager can prepare sound plans only if he has sound judgement, foresight and
imagination.
• Planning is always based on goals, facts and considered estimates.
4. Planning involves choice & decision making.
• Planning essentially involves choice among various alternatives.
• Therefore, if there is only one possible course of action, there is no need planning because
there is no choice.
• Thus, decision making is an integral part of planning.
• A manager is surrounded by no. of alternatives. He has to pick the best depending upon
requirements & resources of the enterprises.
5. Planning is the primary function of management / Primacy of Planning.
• Planning lays foundation for other functions of management.
• It serves as a guide for organizing, staffing, directing and controlling.
• All the functions of management are performed within the framework of plans laid out.
• Therefore planning is the basic or fundamental function of management.
6. Planning is a Continuous Process.
• Planning is a never ending function due to the dynamic business environment.
• Plans are also prepared for specific period f time and at the end of that period, plans are
subjected to revaluation and review in the light of new requirements and changing
conditions.
• Planning never comes into end till the enterprise exists issues, problems may keep cropping
up and they have to be tackled by planning effectively.
7. Planning is all Pervasive.
• It is required at all levels of management and in all departments of enterprise.
• Of course, the scope of planning may differ from one level to another.
• The top level may be more concerned about planning the organization as a whole whereas
the middle level may be more specific in departmental plans and the lower level plans
implementation of the same.
8. Planning is designed for efficiency.
• Planning leads to accompishment of objectives at the minimum possible cost.
• It avoids wastage of resources and ensures adequate and optimum utilization of resources.
• A plan is worthless or useless if it does not value the cost incurred on it.
• Therefore planning must lead to saving of time, effort and money.
• Planning leads to proper utilization of men, money, materials, methods and machines.
9. Planning is Flexible.
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a. Planning is done for the future.
• Since future is unpredictable, planning must provide enough room to cope with the changes
in customer’s demand, competition, govt. policies etc.
• Under changed circumstances, the original plan of action must be revised and updated to
male it more practical.
The benefits of planning include (from McDonald, Marketing Plans, 1999):
• To help identify sources of competitive advantage
• To force an organized approach
• To ensure consistent relationships
• To inform
• To get resources
• To get support
• To gain commitment
• To set objectives and strategies
• To spell out the desired mix of products and services
Planning involves consideration of complex issues covering the whole organization, and the
marketer may come across barriers to planning, for example:
• The culture of the organization – is it focused internally rather than externally?
• Power and politics
• Analysis – not action
• Resource issues – money and time
• Skills and technology – may not match customer need
• Ability to challenge existing ideas
In the era of digital marketing, it is increasingly important to use planning as a means of
discovering and best harnessing the new found powers of digital strategies. Information is
accessed and absorbed differently by both consumers and businesses alike, and so the entire
process of planning digital marketing needs to be assessed accordingly.
The planning process
This involves a series of steps in which it is asked:
1. Where are we now?
2. Where do we want to be?
3. How might we get there?
4. Which way is best?
5. How can we ensure arrival?
1. Where are we now?
This involves a full analysis of the company’s present situation, with an external and internal
audit. Kotler suggests there are six specific dimensions of interest to the auditor:
External environment – macro and micro
Internal environment – covering:
• Marketing strategy
• Marketing organization
• Marketing systems
• Marketing productivity
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• Marketing functions
Information from the audit is then analysed into a SWOT framework in which specific emphasis
is placed on determining strategic drift, competitive advantage, and corporate capability. From
this analysis the process of matching organizational strengths to the market place and
overcoming weaknesses takes place.
2. Where do we want to be?
The mission is now set, objectives decided upon, and strategies related to the product portfolio
and competition decided. The company also decides who its customers are: the STP process –
segmentation, targeting and positioning.
The organization needs to examine its portfolio of products or companies and decide what
strategy to adopt – for example, whether to grow or divest a particular product.
A competitive strategy is then adopted with the firm taking up a particular competitive position,
one that will give it an advantage over competitors. For example, will the company adopt a niche
position, not challenging the major players, or will it decide to go for aggressive growth by
taking market share from competitors?
Having settled on a particular market to enter or exploit, the marketer must carefully divide up
the market by identifiable segments – segmentation – in order to target the most profitable areas.
Positioning is then decided upon in order to place the product clearly in the minds of consumers
against that of the competition so that it is clearly differentiated. For example, having segmented
the car market and decided to target the family market with its estates, Volvo positioned its cars
as the vehicle for the safety conscious.
3. How might we get there?
The marketing mix is the toolbox from which marketers can choose elements to influence the
target market. The four Ps – product, price, place and promotion – make up the marketing mix.
Also can be added physical evidence, people and process to make up the full mix, especially in
relation to services.
With the ever increasing digital usage of society, all aspects of the marketing mix should be
considered with digital in mind. Although it is not advisable for companies to take the entirely
digital route, it should play a large part in the planning of the strategies.
4. Which way is best?
Decisions need to be taken about what is important.
5. How can we ensure arrival?
Following through on the strategy and decisions about the marketing mix, it is important to make
sure that the plan is implemented. What practical steps are going to be followed to implement the
plan? Internal marketing might be necessary in order to ensure that everyone in the organization
is pulling in the same direction.
The plan and its objectives must also be monitored and evaluated. The success of the plan can be
measured and further steps taken, if problems arise, to correct the situation.
The beauty of the digital marketing era is that monitoring and evaluation can be far more in
depth than they have ever been before, aiding both in the success of the present campaign and
future planning of strategies.
IMPORTANCE OF PLANNING
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Planning helps an organization chart a course for the achievement of its goals. The process
begins with reviewing the current operations of the organization and identifying what needs to be
improved operationally in the upcoming year. From there, planning involves envisioning the
results the organization wants to achieve, and determining the steps necessary to arrive at the
intended destination--success, whether that is measured in financial terms, or goals that include
being the highest-rated organization in customer satisfaction.
Efficient Use of Resources
All organizations, large and small, have limited resources. The planning process provides the
information top management needs to make effective decisions about how to allocate the
resources in a way that will enable the organization to reach its objectives. Productivity is
maximized and resources are not wasted on projects with little chance of success.
Establishing Goals
Setting goals that challenge everyone in the organization to strive for better performance is one
of the key aspects of the planning process. Goals must be aggressive, but realistic. Organizations
cannot allow themselves to become too satisfied with how they are currently doing--or they are
likely to lose ground to competitors. The goal setting process can be a wake-up call for managers
that have become complacent. The other benefit of goal setting comes when forecast results are
compared to actual results. Organizations analyze significant variances from forecast and take
action to remedy situations where revenues were lower than plan or expenses higher.
Related Reading: Strategic Planning at All Organization Levels
Managing Risk And Uncertainty
Managing risk is essential to an organization’s success. Even the largest corporations cannot
control the economic and competitive environment around them. Unforeseen events occur that
must be dealt with quickly, before negative financial consequences from these events become
severe. Planning encourages the development of “what-if” scenarios, where managers attempt to
envision possible risk factors and develop contingency plans to deal with them. The pace of
change in business is rapid, and organizations must be able to rapidly adjust their strategies to
these changing conditions.
Team Building
Planning promotes team building and a spirit of cooperation. When the plan is completed and
communicated to members of the organization, everyone knows what their responsibilities are,
and how other areas of the organization need their assistance and expertise in order to complete
assigned tasks. They see how their work contributes to the success of the organization as a whole
and can take pride in their contributions. Potential conflict can be reduced when top management
solicits department or division managers’ input during the goal setting process. Individuals are
less likely to resent budgetary targets when they had a say in their creation.
Creating Competitive Advantages
Planning helps organizations get a realistic view of their current strengths and weaknesses
relative to major competitors. The management team sees areas where competitors may be
vulnerable and then crafts marketing strategies to take advantage of these weaknesses. Observing
competitors’ actions can also help organizations identify opportunities they may have
overlooked, such as emerging international markets or opportunities to market products to
completely different customer groups.
Primacy of Planning
1.Planning precedes all other managerial functions.
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Since managerial operations in organizing, staffing, directing, and controlling are designed to
support the accomplishment of organizational objectives, planning logically precedes the
execution of all other managerial functions. Although all the functions intermesh in practice as a
system of action, planning is unique in that it establishes the objectives necessary for all group
effort. All other functions are performed to achieve the objectives set b the planning process.
2. To Offset Uncertainty and Change
There is continuous change in the environment and the organization has to work in accelerating
change. This change is reflected in both tangible and intangible forms. Tangible changes are in
the form of changes in technology, market forces, government regulations, etc. Intangible
changes reflect in changes in attitudes, values, cultures, etc. In order to cope up with the
requirements of such changes, organization must look ahead for its future course of action which
is basically provided by planning process. Planning does not stop changes in the environment but
gears the organization to take suitable actions so that it is successful in achieving its objectives.
3. To Focus Attention on Objectives
Planning focuses on organizational objectives and direction of action for achieving these
objectives. Sometimes people in the organization may not be specific about its objectives
because of lack of clarity and precise definitions. For example, often we take profit as the
objective of a business organization. It is too abstract to be pursued. In order to enforce
managerial actions, 1ihis should be defined more precisely. When planning action is taken, these
objectives are made more concrete and tangible. The objectives are defined in more meaningful
terms so that managerial actions are possible. For example, even if the organizational objective is
profit earning, planning activity will specify how much profit is to be earned looking into all
facilitating and constraining factors.
4. To Help in Coordination.
Though all managerial functions lead to coordination in the organization, real beginning is made
at the level of planning stage. Well considered overall plans unify interdepartmental activities
and consequently restrict the area of freedom in the development of purely departmental plans.
Thus, various departments work in accordance with the overall plan, and harmony is achieved. It
is true to say that coordination is essence of management and planning is the base
5. To Help in Control
Control involves the measurement of accomplishment of events against plans and the correction
of deviations to assure the achievement of objectives as set by the plans. Thus, control is
exercised in the context of planning action as standards against which actual results are to be
compared are set up through planning. At the control stage, an attempt is made to monitor the
performance on continuous basis so that immediate action is taken if anything goes wrong.
6. To Increase Organizational Effectiveness
Planning ensures organizational effectiveness in several ways. The concept of effectiveness is
that the organization is able to achieve its objectives within the given resources. Thus, for
effectiveness, it is not only necessary that resources are gut to the best of their efficiency but also
that they are put in a way which ensures their maximum contribution to organizational
objectives. In fact, taking appropriate planning can do this. Planning states the objectives of the
organization in the context of given resources. Therefore, each resource of the organization has a
specific use at a particular time. Thus, planning along with control ensures that resources are put
in action in a way in which these have been specified. If this is done, organization will achieve
effectiveness.
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PLANNING PREMISES
Planning premises may be classified as follows:
1. Internal and external premises:
Internal premises are the resources and abilities which pertain to the firm's own climate. These
include sales forecasts, capital investment in plant and equipment, skill of labor force,
competence of management policies and programmers of the organization, values and beliefs of
organization members, management philosophy, etc.Such premises are amenable to management
control. On the other hand, external premises are related to the external environment of business.
They consist of economic, technological, social and political factors such as population trends,
Government policies and regulations, employment figures, national income, price levels, techno-
logical changes, sociological factors, etc.External premises may be classified in three groups,
namely general business environment, product market and the factor market characteristics.
2. Controllable, semi-controllable and uncontrollable premises:
Controllable premises are those factors over which management has full control. Plant location,
expansion programme, advertising policy, capital investment, etc are examples of controllable
premises.
Uncontrollable, or non-controllable premises refer to war, population trends, new inventions,
natural calamities, business cycles, government policy, legislation, etc which are beyond the
control of management.
They upset the plans and require periodical revision of plan in accordance with current
developments. Semi-controllable premises are those over which management has partial control.
Union management relations, firm's share in the market, etc. are examples of such premises.
3. Tangible and intangible premises:
Tangible or quantitative premises are those which can be expressed or measured in quantitative
terms, e.g., labor hours, units of production, number of machines, capital investment, industry
demand, population growth, etc.
On the other hand, intangible premises are those which can not be measured quantitatively, e.g.,
company reputation, public relations, employee motivation and morale, attitudes and philosophy
of the owners, political stability, etc. In spite of their qualitative nature, intangible premises play
an important role in managerial planning.
4. Foreseeable and unforeseeable premises:
Foreseeable premises tend to be definite and well-known and they can be foreseen with certainty.
Requirements for men, money and machines are examples of foresee able premises.
Unforeseeable premises "such as war, strike, natural calamities are unpredictable.
METHODS OF PLANNING
Inactive Planning – there is actually no planning involved and you just go along with the flow.
This is actually the worst thing that a ‘planner’ can do.
Reactive Planning – a plan is made only in reaction to some event or circumstance which
triggered the need to actually create a plan. In other words, the damage has already been done
well before the plan was made. This helps only in preventing the same problem from occurring
in the future.
Pre-active Planning – the planner anticipates for the future and creates a plan according to how
he predicts the future will happen. Most planners use this method and it works quite well. The
problem with this method though is that one doesn’t really know what will actually happen in the
future and thus only anticipations are made.
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Pro-active Planning – in this case, the planner designs his future. He decides what he wants to
happen in the future and makes it happen. This way, the planner doesn’t have to worry much on
whether the future that he has in mind will happen because is quite certain that it will. This
method is the best but is also the most difficult. The best people I can think of who does this are
the chess players. Good chess players actually force their opponents to move according to their
plan.
TYPES OF PLANNING:
Planning by Direction and Planning by Inducement:
Planning by direction is an integral part of a socialist society. It entails complete absence of
laissez-faire. There is one central authority which plans, directs, and orders the execution of the
plan in accordance with pre-determined targets and priorities. Such planning is comprehensive
and encompasses the entire economy.
Planning by inducement is democratic planning. It means planning by manipulating the market.
There is no compulsion but persuasion. There is freedom of enterprise, freedom of consumption
and freedom of production. But these freedoms are subject to state control and regulation. People
are induced to act in a certain way through various monetary and fiscal measures. Thus, planning
by inducement is able to achieve the same results as are likely to be achieved in planning by
direction but with less sacrifice of individual liberty.
Financial Planning and Physical Planning:
Financial planning refers to the technique of planning in which resources are allocated in terms
of money. Financial planning is essential in order to remove maladjustments between supplies
and demand and for calculating costs and benefits of the various projects. Thus, financial
planning is thought to secure a balance between demands and supplies, avoid inflation and bring
about economic stability.
Physical planning refers to the allocation of resources in terms of men, materials and machinery.
In physical planning, an overall assessment is made of the available real resources such as raw
materials, manpower, etc., and how they have to be obtained so that bottlenecks may be
eliminated during the plan. Physical planning requires the fixation of physical targets with regard
to agricultural and industrial production, socio-cultural and transportation services, consumption
levels and in respect of employment, income and investment levels of the economy. Physical
planning has to be viewed as an overall long-term planning rather than a short-term piecemeal
planning.
Perspective Planning and Annual Planning:
Perspective planning refers to long-term planning in which long range targets are set in advance
for a period of 15, 20, or 25 years. A perspective plan, however, does not imply one plan for the
entire period of 15 or 20 years. In reality, the broader objectives and targets are to be achieved
within the specified period of time by dividing the perspective plan into several short-period
plans of 4, 5 or 6 years.
Not only this, a five year plan is further broken up into annual plans so that each annual plan fits
into the broad framework of the five-year plan. Plans of either kind are further divided into
regional and sectoral plans. Regional plans pertain to regions, districts and localities and sectoral
plans pertain to plans for agriculture, industry, foreign trade etc.
Indicative Planning and Imperative Planning:
This is the French system of planning which is based on the principle of decentralization in the
operation and execution of the national plans. This type of planning is not imperative but
flexible. In indicative planning the private sector is neither rigidly controlled nor directed to
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fulfill the targets and priorities of the plan. Even then, the private sector is expected to fulfill the
targets for the success of the plan. The state provides all types of facilities to the private sector
but does not direct it, rather indicates the areas in which it can help in implementing the plan.
On the other hand, under imperative planning all economic activities and resources of the
economy operate under the direction of the state. There is complete control over the factors of
production by the state. The entire resources of the country are used to the maximum in order to
fulfill the targets of the plan. There is no consumers’ sovereignty in such planning. What and
how much to produce – such decisions are taken by the managers of firms and factories on the
direction of the planning commission or a central planning authority. Since the government
policies and decisions are rigid, they cannot be changed easily.
Democratic Planning and Totalitarian Planning:
In totalitarian or authoritarian planning there is central control and direction of all economic
activity in accordance with a single plan. There is planning by direction where consumption,
production, exchange, and distribution are all controlled by the state. In totalitarian planning, the
planning authority is the supreme body. It decides about the targets, schemes, allocations,
methods and procedures of implementation of the plan. There is absolutely no opposition to the
plan. People have to accept and rigidly implement the plan.
In democratic planning, the philosophy of democratic government is accepted as the ideological
basis. People are associated at every step in the formulation and implementation of the plan.
Cooperation of different agencies, and voluntary groups, and associations plays a major role in
the execution of the plan. Democratic planning respects the institution of private property. Price
mechanism is allowed to play its due role. The government only seeks to influence economic and
investment decisions in the private sector through fiscal and monetary measures. The private
sector operates side by side with the public sector. Democratic planning aims at the removal of
inequalities of income and wealth through peaceful means by taxation and government spending
on social welfare and social security schemes. Individual freedom prevails and people enjoy
social, economic and political freedoms.
Rolling and Fixed Plans:
In a rolling plan, every year three new plans are made and acted upon. First, there is a plan for
the current year which includes the annual budget and the foreign exchange budget. Second,
there is a plan for a number of years, say three, four or five. Third, a perspective plan for 10, 15
or 20 or even more years is presented every year in which the broader goals are stated and the
outlines of future development are forecast. The annual one-year plan is fitted into the same
year’s new three, four or five year plan, and both are framed in the light of the perspective plan.
In contrast to the rolling plan, there is a fixed plan for four, five, six or seven years. A fixed plan
lays down definite aims and objectives which are required to be achieved during the plan period.
For this purpose, physical targets are fixed along with the total outlay. Physical targets and
financial outlays are seldom changed except under emergencies. Planning in India (Five-Year)
and Russia (Seven-Year) is of the fixed type.
Centralized and Decentralized Planning:
Under centralized planning, the entire planning process is under a central planning authority. The
authority formulates a central plan, fixes objectives, targets, and priorities for every sector of the
economy. The principle problems of the economy – what and how much to produce, how and for
whom to be produced etc, are decided by this authority. The entire planning process is based on
bureaucratic control and regulation. Naturally, such planning is rigid. There is no economic
freedom and all economic activities are directed from above.
On the other hand, decentralized planning refers to the execution of the plan from the grass roots.
Under it, a plan is formulated by the central planning authority in consultation with the different
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administrative units of the country. The central plan incorporates plans under the central
schemes, and plans for the states under a federal set-up. The state plans incorporate district and
village level plans. Under decentralized planning, prices of goods and services are determined by
the market mechanism despite government control and regulation in certain fields of economic
activity.
Purposes of Planning:
Planning is important and serves many significant purposes.
1. Planning gives direction to the organization.
2. Planning reduces the impact of change.
3. Planning establishes a coordinated effort.
4. Planning reduces uncertainty.
5. Planning reduces overlapping and wasteful activities.
6. Planning establishes objectives or standards that are used in controlling.
ADVANTAGES OF PLANNING
Planning facilitates management by objectives.
a. Planning begins with determination of objectives.
b. It highlights the purposes for which various activities are to be undertaken.
c. In fact, it makes objectives more clear and specific.
d. Planning helps in focusing the attention of employees on the objectives or goals of
enterprise.
e. Without planning an organization has no guide.
f. Planning compels manager to prepare a Blue-print of the courses of action to be followed
for accomplishment of objectives.
g. Therefore, planning brings order and rationality into the organization.
Planning minimizes uncertainties.
a. Business is full of uncertainties.
b. There are risks of various types due to uncertainties.
c. Planning helps in reducing uncertainties of future as it involves anticipation of future
events.
d. Although future cannot be predicted with cent percent accuracy but planning helps
management to anticipate future and prepare for risks by necessary provisions to meet
unexpected turn of events.
e. Therefore with the help of planning, uncertainties can be forecasted which helps in
preparing standbys as a result, uncertainties are minimized to a great extent.
Planning facilitates co-ordination.
a. Planning revolves around organizational goals.
b. All activities are directed towards common goals.
c. There is an integrated effort throughout the enterprise in various departments and groups.
d. It avoids duplication of efforts. In other words, it leads to better co-ordination.
e. It helps in finding out problems of work performance and aims at rectifying the same.
Planning improves employee’s moral.
a. Planning creates an atmosphere of order and discipline in organization.
b. Employees know in advance what is expected of them and therefore conformity can be
achieved easily.
c. This encourages employees to show their best and also earn reward for the same.
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d. Planning creates a healthy attitude towards work environment which helps in boosting
employees moral and efficiency.
Planning helps in achieving economies.
a. Effective planning secures economy since it leads to orderly allocation ofresources to
various operations.
b. It also facilitates optimum utilization of resources which brings economy in operations.
c. It also avoids wastage of resources by selecting most appropriate use that will contribute
to the objective of enterprise. For example, raw materials can be purchased in bulk and
transportation cost can be minimized. At the same time it ensures regular supply for the
production department, that is, overall efficiency.
Planning facilitates controlling.
a. Planning facilitates existence of certain planned goals and standard of performance.
b. It provides basis of controlling.
c. We cannot think of an effective system of controlling without existence of well thought
out plans.
d. Planning provides pre-determined goals against which actual performance is compared.
e. In fact, planning and controlling are the two sides of a same coin. If planning is root,
controlling is the fruit.
Planning provides competitive edge.
a. Planning provides competitive edge to the enterprise over the others which do not have
effective planning. This is because of the fact that planning may involve changing in work
methods, quality, quantity designs, extension of work, redefining of goals, etc.
b. With the help of forecasting not only the enterprise secures its future but at the same time
it is able to estimate the future motives of it’s competitor which helps in facing future challenges.
c. Therefore, planning leads to best utilization of possible resources, improves quality of
production and thus the competitive strength of the enterprise is improved.
Planning encourages innovations.
a. In the process of planning, managers have the opportunities of suggesting ways and
means of improving performance.
b. Planning is basically a decision making function which involves creative thinking and
imagination that ultimately leads to innovation of methods and operations for growth and
prosperity of the enterprise.
DISADVANTAGES OF PLANNING
Rigidity
a. Planning has tendency to make administration inflexible.
b. Planning implies prior determination of policies, procedures and programmes and a strict
adherence to them in all circumstances.
c. There is no scope for individual freedom.
d. The development of employees is highly doubted because of which management might
have faced lot of difficulties in future.
e. Planning therefore introduces inelasticity and discourages individual initiative and
experimentation.
Misdirected Planning
f. Planning may be used to serve individual interests rather than the interest of the enterprise.
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g. Attempts can be made to influence setting of objectives, formulation of plans and
programmes to suit ones own requirement rather than that of whole organization.
h. Machinery of planning can never be freed of bias. Every planner has his own likes, dislikes,
preferences, attitudes and interests which is reflected in planning.
Time consuming
i. Planning is a time consuming process because it involves collection of information, it’s
analysis and interpretation thereof. This entire process takes a lot of time specially where there
are a number of alternatives available.
j. Therefore planning is not suitable during emergency or crisis when quick decisions are
required.
Probability in planning
k. Planning is based on forecasts which are mere estimates about future.
l. These estimates may prove to be inexact due to the uncertainty of future.
m. Any change in the anticipated situation may render plans ineffective.
n. Plans do not always reflect real situations inspite of the sophisticated techniques of
forecasting because future is unpredictable.
o. Thus, excessive reliance on plans may prove to be fatal.
False sense of security
p. Elaborate planning may create a false sense of security to the effect that everything is taken
for granted.
q. Managers assume that as long as they work as per plans, it is satisfactory.
r. Therefore they fail to take up timely actions and an opportunity is lost.
s. Employees are more concerned about fulfillment of plan performance rather than any kind of
change.
Expensive
t. Collection, analysis and evaluation of different information, facts and alternatives involves a
lot of expense in terms of time, effort and money
u. According to Koontz and O’Donell, ’ Expenses on planning should never exceed the
estimated benefits from planning. ’
External Limitations of Planning
• Political Climate- Change of government from Congress to some other political party, etc.
• Labour Union- Strikes, lockouts, agitations.
• Technological changes- Modern techniques and equipments, computerization.
• Policies of competitors- Eg. Policies of Coca Cola and Pepsi.
• Natural Calamities- Earthquakes and floods.
• Changes in demand and prices- Change in fashion, change in tastes, change in income level,
demand falls, price falls, etc.
DECISION MAKING
MEANING:
Decision making can be regarded as the mental processes (cognitive process) resulting in the
selection of a course of action among several alternative scenarios. Every decision making
process produces a final choice. The output can be an action or an opinion of choice.
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Definitions
A good place to start is with some standard definitions of decision making.
1. Decision making is the study of identifying and choosing alternatives based on the values
and preferences of the decision maker.
Making a decision implies that there are alternative choices to be considered, and in such a case
we want not only to identify as many of these alternatives as possible but to choose the one that
(1) has the highest probability of success or effectiveness and (2) best fits with our goals, desires,
lifestyle, values, and so on.
2. Decision making is the process of sufficiently reducing uncertainty and doubt about
alternatives to allow a reasonable choice to be made from among them.
This definition stresses the information-gathering function of decision making. It should be noted
here that uncertainty is reduced rather than eliminated. Very few decisions are made with
absolute certainty because complete knowledge about all the alternatives is seldom possible.
Thus, every decision involves a certain amount of risk. If there is no uncertainty, you do not have
a decision; you have an algorithm--a set of steps or a recipe that is followed to bring about a
fixed result.
Features of Decision Making
1. Decision Making Is A Selective Process
Decision making is the process of selecting a course of action from among many alternatives to
solve problems. Managers have to consider the various factors before selecting a course of
action. These factors involve nature of organization, existing working environment, objectives of
the organization, time factors and so on.
2. Decision Making Is Human And Rational Process
Decision making is mental or human process and is needed in all types of organizations. A
manager has to make mental exercise to study the impact of course of action before taking a
decision. He/she has to invest personal skills, experience, knowledge and capability to study the
course of action from various angles. Hence, decision making is common in all types of
organizations. Therefore, it is known as human and rational process.
3. Decision Making Is A Dynamic Process
It is essential to consider time factor and existing environment, whenever any course of action is
taken for implementation. Managers have to take decisions at the right time for its effectiveness.
Besides, they have to consider future environments, which may affect future activities. Thus,
decision making process is not static but dynamic process.
4. Decision Making Is Goal Oriented Process
Decision making focuses on the organizational objectives. In course of functioning many
problems may arise in the organization. The management has to solve all the problems in proper
time and also in a systematic manner by considering organizational goals. Thus, right decision at
the right time contributes to achieve predetermined objectives within the defined time and
standard.
5. Decision Making Is A Continuous Process
Decision making is a continuous process till the existence of the organization. In the course of
regular performance, many problems may arise in different time and situation. Managers have to
solve those problems in proper time so that the organizational performance is smooth.
6. Freedom To Decision-Maker
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Managers have freedom to take any kind of decision. As a chief of organization, a manager may
take any course of action to solve a problem by using his/her own logic, knowledge and
experience.
7. Positive Or Negative Impact
A course of action may either have positive or negative impact on organizational performance.
Managers have to consider, as far as possible, the positive impact of the action before coming to
a decision.
Characteristics of Decision Making
(i) Decision making is a process of selection or choice among alters native courses of action. The
need for decision making arises only when more than one alternative exists for doing the work.
(ii) The aim of decision making is to find out the best possible course of action. It is a rational
and purposeful activity designed to attain well-defined objectives.
Decisions relate means to ends. In order to identify the best alternative, it is necessary to evaluate
all available alternatives. As decision making is always purposeful, there may just be a decision
not to decide.
(iii) Decision making is an intellectual or rational process. As a mental exercise, it involves
considerable deliberation and thoughtful consideration of various factors influencing the choice.
It is the end process preceded by reasoning and judgment.
(iv) Decision making involves a certain commitment. A decision results into the commitment of
resources and reputation of the organisation.
This commitment may be for short term or long term depending upon the type of decision.
Decision making involves a time dimension and a time lags.
(v) Decision making is always related to the situation or the environment. A manager may take
one decision in a particular situation and an opposite decision in a different situation. In some
situations, there may just be a decision not to decide.
(vi) Decision making is a pervasive function of management. This function is performed by
managers at all levels though the nature of decisions may differ from one level to another.
Decision making is a continuous process.
(vii) Decision making is a human and social process. It involves the use not simply of the
intellectual abilities but also of intuition, subjective values and judgment.
It is not a purely intellectual process. Perception and human judgment are indispensable and no
technique can replace them. But knowledge and experience also provide basis for correct
decisions.
(viii) The choice in decision making implies freedom to choose from among alternative courses
of action without coercion. It also implies uncertainty about the final outcome.
When there is no choice of action, no decision is necessary. The need for making any decision
occurs only when some uncertainty as to outcome exists.
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THE ELEMENTS OF DECISION MAKING
1. THE PROBLEM CONTEXT All decisions are about problems, and problems shape context
at three levels. The macrocontext draws attention to global issues (exchange rates, for example),
national concerns (the cultural orientations toward decision processes of different countries), and
provincial and state laws and cultures within nations. The mesocontext attends to organizational
cultures and structure. The microcontext addresses the immediate decision environment—the
organization's employees, board, or office.
Decision processes differ from company to company. But all companies need to take these three
context levels into consideration when a decision needs to be made. Fortunately, economical
ways to obtain this information are available and keep the cost of preparing for decisions from
becoming prohibitive.
2.PROBLEM FINDING AND AGENDA SETTING An important difficulty in decision
making is failure to act until one is too close to the decision point—when information and
options are greatly limited. Organizations usually work in a "reactive" mode. Problems are
"found" only after the issue has begun to have a negative impact on the business. Nevertheless,
processes of environmental scanning and strategic planning are designed to perform problem
reconnaissance to alert business people to problems that will need attention down the line.
Proactivity can be a great strength in decision making, but it requires a decision intelligence
process that is absent from many organizations.
Moreover, problem identification is of limited use if the business is slow to heed or resolve the
issue. Once a problem has been identified, information is needed about the exact nature of the
problem and potential actions that can be taken to rectify it. Unfortunately, small business
owners and other key decision makers too often rely on information sources that "edit" the
data—either intentionally or unintentionally—in misleading fashion. Information from business
managers and other employees, vendors, and customers alike has to be regarded with a
discerning eye, then.
Another kind of information gathering reflects the array and priority of solution preferences.
What is selected as possible or not possible, acceptable or unacceptable, negotiable or non-
negotiable depends upon the culture of the firm itself and its environment. A third area of
information gathering involves determining the possible scope and impact that the problem and
its consequent decision might have. Knowledge about impact may alter the decision preferences.
To some extent, knowledge about scope dictates who will need to be involved in the decision
process.
3.PROBLEM SOLVING
Problem solving—also sometimes referred to as problem management—can be divided into two
parts—process and decision. The process of problem solving is predicated on the existence of a
system designed to address issues as they crop up. In many organizations, there does not seem to
be any system. In such businesses, owners, executives, and managers are apparently content to
operate with an ultimately fatalistic philosophy—what happens, happens. Business experts
contend that such an attitude is simply unacceptable, especially for smaller businesses that wish
to expand, let alone survive. The second part of the problem management equation is the
decision, or choice, itself. Several sets of elements need to be considered in looking at the
decision process. One set refers to the rationales used for decisions. Others emphasize the
setting, the scope and level of the decision, and the use of procedural and technical aids.
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4.RATIONALES Organizational decision makers have adopted a variety of styles in their
decision making processes. For example, some business leaders embrace processes wherein
every conceivable response to an issue is examined before settling on a final response, while
others adopt more flexible philosophies. The legitimacy of each style varies in accordance with
individual business realities in such realms as market competitiveness, business owner
personality, acuteness of the problem, etc.
5.SETTINGS Certainly, some entrepreneurs/owners make business decisions without a
significant amount of input or feedback from others. Home-based business owners without any
employees, for example, are likely to take a far different approach to problem-solving than will
business owners who have dozens of employees and/or several distinct internal departments. The
latter owners will be much more likely to include findings of meetings, task forces, and other
information gathering efforts in their decision making process. Of course, even a business owner
who has no partners or employees may find it useful to seek information from outside sources
(accountants, fellow businesspeople, attorneys, etc.) before making important business decisions.
"Since the owner makes all the key decisions for the small business, he or she is responsible for
its success or failure," wrote David Karlson in Avoiding Mistakes in Your Small Business.
"Marketing and finance are two of several areas in which small business owners frequently lack
sufficient experience, since they previously worked as specialists for other people before they
started their own businesses. As a result, they generally do not have the experience needed to
make well-informed decisions in the areas with which they are unfamiliar. The demands of
running and growing a small business will soon expose any achilles heel in a president/owner. It
is best to find out your weaknesses early, so you can develop expertise or get help in these
areas."
6.SCOPE AND LEVEL Finally, attention must be paid to problem scope and organizational
level. Problems of large scope need to be dealt with by top levels of the organization. Similarly,
problems of smaller scope can be handled by lower levels of the organization. This is a failing of
many organizations, large and small. Typically, top level groups spend much too much time
deciding low-level, low-impact problems, while issues of high importance and organizational
impact linger on without being addressed or resolved.
7.PROCEDURAL AND TECHNICALAIDS In recent years, a number of procedural and
technical aids have been developed to help business managers in their decision making
processes. Most of these have taken the form of software programs that guide individuals or
groups through the various elements of the decision making process in a wide variety of
operational areas (budgeting, marketing, inventory control, etc.). Leadership seminars and
management training offer guidance in the decision making process as well.
8.OUTCOME Whatever decision making process is utilized, those involved in making the
decision need to make sure that a response has actually been arrived at. All too often, meetings
and other efforts to resolve outstanding business issues adjourn under an atmosphere of
uncertainty. Participants in decision making meetings are sometimes unsure about various facets
of the decision arrived at. Some meeting participants, for example, may leave a meeting still
unsure about how the agreed-upon response to a problem is going to be implemented, while
others may not even be sure what the agreed-upon response is. Indeed, business researchers
indicate that on many occasions, meeting participants depart with fundamentally different
understandings of what took place. It is up to the small business owner to make sure that all
participants in the decision making process fully understand all aspects of the final decision.
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9.IMPLEMENTATION The final step in the decision making process is the implementation of
the decision. This is an extremely important element of decision making; after all, the benefits
associated with even the most intelligent decision can be severely compromised if
implementation is slow or flawed. Steps in an effective decision-making process
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Steps in effective decision making process
A. The first step is to identify the organizational problem, i.e., discrepancies between a
current state or condition and what is desired.
1. The scanning state involves monitoring the work situation for changing circumstances that
may signal the emergence of a problem.
2. The categorization stage entails attempting to understand and verify signs that there is some
type of discrepancy between a current state and what is desired.
3. The diagnosis stage involves gathering additional information and specifying both the nature
and the causes of the problem.
B. The generation of alternative solutions step is facilitated by using the four principles
associated with brainstorming.
1. Don’t criticize ideas while generating possible solutions
2. Freewheel, i.e., offer even seemingly wild and outrageous ideas in an effort to trigger more
usable ideas from others.
3. Offer as many ideas as possible to increase the probability of coming up with an effective
solution.
4. Combine and improve on ideas that have been offered.
C. The choice of an alternative step comes only after the alternatives are evaluated
systematically according to six general criteria:
1. Feasibility is the extent to which an alternative can be accomplished within related
organizational constraints, such as time, budgets, technology, and policies.
2. Quality is the extend to which an alternative effectively solves the problem under
consideration.
3. Acceptability is the degree to which the decision makers and others who will be affected by
the implementation of the alternative are willing to support it.
4. Costs are the resource levels required and the extent to which the alternative is likely to have
undesirable side effects.
5. Reversibility is the extent to which the alternative can be reversed, if at all.
6. The ethics criterion refers to the extent to which an alternative is compatible with the social
responsibilities of the organization and with ethical standards.
D. Finally, the implementing and monitoring the chosen solution step must be planned to
avoid failure of the entire effort.
1. Implementation requires careful planning.
a. The amount of planning depends upon whether the projected changes are minor or major.
b. Irreversible changes require a great deal of planning.
2. Implementation requires sensitivity to those involved in or affected by the implementation.
a. Affected individuals are more likely to support a decision when they are able to participate in
its implementation.
b. If Participation is not feasible, individuals should be kept informed of the changes.
3. Monitoring is necessary to ensure that things are progressing as planned and that the problem
that triggered the planning process has been resolved.
Decision Making Situation:
Decision-making situations differ according to the types of problems that must be handled.
Certainty is a situation in which a manager can make accurate decisions because the outcome of
every alternative is known. However, this isn’t characteristic of most managerial decisions.
Uncertainty is a condition in which the decision maker chooses a course of action without
complete knowledge of the consequences that will follow implementation.
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Risk is the possibility that a chosen action could lead to losses rather than the intended results.
a. Uncertainty is seen as the reason why situation is risky.
b. A rapidly changing environment is a major cause of uncertainty.
Decision-Making Steps
Each step in the decision making process includes social, cognitive and cultural obstacles to
successfully negotiating dilemmas. Becoming more aware of these obstacles allows one to better
anticipate and overcome them. Pijanowski (2009, p.7) developed eight stages of decision making
based on the work of James Rest:
• Establishing community: creating and nurturing the relationships, norms, and procedures
that will influence how problems are understood and communicated. This stage takes
place prior to and during a moral dilemma
• Perception: recognizing that a problem exists
• Interpretation: identifying competing explanations for the problem, and evaluating the
drivers behind those interpretations
• Judgment: sifting through various possible actions or responses and determining which is
more justifiable
• Motivation: examining the competing commitments which may distract from a more
moral course of action and then prioritizing and committing to moral values over other
personal, institutional or social values
• Action: following through with action that supports the more justified decision. Integrity
is supported by the ability to overcome distractions and obstacles, developing
implementing skills, and ego strength
• Reflection in action
• Reflection on action
When in an organization and faced with a difficult decision, there are several steps one can take
to ensure the best possible solutions will be decided. These steps are put into seven effective
ways to go about this decision making process (McMahon 2007).
The first step - Outline your goal and outcome. This will enable decision makers to see exactly
what they are trying to accomplish and keep them on a specific path.
The second step - Gather data. This will help decision makers have actual evidence to help them
come up with a solution.
The third step - Brainstorm to develop alternatives. Coming up with more than one solution
ables you to see which one can actually work.
The fourth step - List pros and cons of each alternative. With the list of pros and cons, you can
eliminate the solutions that have more cons than pros, making your decision easier.
The fifth step - Make the decision. Once you analyze each solution, you should pick the one that
has many pros (or the pros that are most significant), and is a solution that everyone can agree
with.
The sixth step - Immediately take action. Once the decision is picked, you should implement it
right away.
The seventh step - Learn from, and reflect on the decision making. This step allows you to see
what you did right and wrong when coming up, and putting the decision to use.
Decision-Making Stages
Developed by B. Aubrey Fisher, there are four stages that should be involved in all group
decision making. These stages, or sometimes called phases, are important for the decision-
making process to begin
Orientation stage- This phase is where members meet for the first time and start to get to know
each other.
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Conflict stage- Once group members become familiar with each other, disputes, little fights and
arguments occur. Group members eventually work it out.
Emergence stage- The group begins to clear up vague opinions by talking about them.
Reinforcement stage- Members finally make a decision, while justifying themselves that it was
the right decision.
Kinds of Decisions
There are several basic kinds of decisions.
1. Decisions whether. This is the yes/no, either/or decision that must be made before we proceed
with the selection of an alternative. Should I buy a new TV? Should I travel this summer?
Decisions whether are made by weighing reasons pro and con. The PMI technique discussed in
the next chapter is ideal for this kind of decision.
It is important to be aware of having made a decision whether, since too often we assume that
decision making begins with the identification of alternatives, assuming that the decision to
choose one has already been made.
2. Decisions which. These decisions involve a choice of one or more alternatives from among a
set of possibilities, the choice being based on how well each alternative measures up to a set of
predefined criteria.
3. Contingent decisions. These are decisions that have been made but put on hold until some
condition is met.
For example, I have decided to buy that car if I can get it for the right price; I have decided to
write that article if I can work the necessary time for it into my schedule. OR even, We'll take the
route through the valley if we can control the ridge and if we detect no enemy activity to the
north.
Most people carry around a set of already made, contingent decisions, just waiting for the right
conditions or opportunity to arise. Time, energy, price, availability, opportunity, encouragement-
-all these factors can figure into the necessary conditions that need to be met before we can act
on our decision. Some contingent decisions are unstated or even exist below the awareness of the
decision maker. These are the type that occur when we seize opportunity. We don't walk around
thinking, "If I see a new laser printer for $38, I'll buy it," but if we happen upon a deal like that
and we have been contemplating getting a new printer, the decision is made quickly. Decisions
made in sports and warfare are like this. The best contingent and opportunistic decisions are
made by the prepared mind--one that has thought about criteria and alternatives in the past.
Decision Making is a Recursive Process
A critical factor that decision theorists sometimes neglect to emphasize is that in spite of the way
the process is presented on paper, decision making is a nonlinear, recursive process. That is,
most decisions are made by moving back and forth between the choice of criteria (the
characteristics we want our choice to meet) and the identification of alternatives (the possibilities
we can choose from among). The alternatives available influence the criteria we apply to them,
and similarly the criteria we establish influence the alternatives we will consider. Let's look at an
example to clarify this.
Suppose someone wants to decide, Should I get married? Notice that this is a decision whether.
A linear approach to decision making would be to decide this question by weighing the reasons
pro and con (what are the benefits and drawbacks of getting married) and then to move to the
next part of the process, the identification of criteria (supportive, easy going, competent,
affectionate, etc.). Next, we would identify alternatives likely to have these criteria (Kathy,
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Jennifer, Michelle, Julie, etc.). Finally we would evaluate each alternative according to the
criteria and choose the one that best meets the criteria. We would thus have a scheme like this: DECISIONMAKING METHODS: ADVANTAGES AND DISADVANTAGES
DECISIONMAKING METHODS
> Individual: The designated leader makes all the decisions without consulting the group
in any way.
>Authority: Select the most expert member of the group and abide by his/her decision.
> Average of members' opinions: Poll members of the group, then average the results.
> Majority control: Discuss an issue, then vote when 51% or more accept the course of
action.
> Minority control: Two or more members serve as an executive with committee
authority to make decisions.
> Consensus: Discuss until the group arrives at a collective opinion acceptable to all
members of the group.
DISADVANTAGES
> Individual: One person is not a good resource for every decision; advantages of group
interaction are lost; no commitment to implementing the decision is developed among
other group members; resentment and disagreement may result in sabotage and
deterioration of group effectiveness; resources of other members are not used.
> Authority: It is difficult to determine who the expert is; no commitment to implement
the decision is built; advantages of group interaction are lost; resentment and
disagreement may result in sabotage and deterioratiaon of group effectiveness; resources
of other members are not used.
> Average of members' opinions: There is not enough interaction among group members
for them to gain from each other's resources and from the benefits of group discussion; no
commitment to implement the decision is built; unresolved conflict and controversy may
damage group effectiveness in the future.
> Majority control: Usually leaves an alienated minority, which damages future group
effectiveness; relevant resources of many group members may be lost; full commitment
to implement the decision is absent; full benefit of group interactionis not obtained.
> Minority control: Does not use the resources of many groupmembers; does not
establish widespread commitment to implement thedecision; unresolved conflict and
controversy may damage future group effectiveness; not much benefit from group
interaction.
> Consensus: Takes a great deal of time and psychological energyand a high level of
member skill; time pressure must be minimal;there must be no emergency in progress.
ADVANTAGES
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> Individual: Applies more to administrative needs, useful for sim-ple, routine decisions;
should be used when very little time isavailable to make the decision, when group
members lack the skillsand information to make the decision any other way.
> Authority: Useful when the expertise of one person is so farsuperior to that of all other
group members that little is to begained by discussion, should be used when the need for
membershipaction in implementing the decision is slight.
> Average of members' opinions: Useful when it is difficult to getgroup members
together to talk when the decision is so urgent thatthere is no time for group discussion,
when member commitment isnot necessary for implementing the decision, and when
group memberslack the skills and information to make the decision any other
way;applicable to simple routine decisions.
> Majority control: Can be used when sufficient time is lacking fordecision by consensus
or when the decision is not so important thatconsensus needs to be used, and when
complete mem- ber commitmentis not necessary for implementing the decision; closes
discussionon issues that are not highly important for the group.
> Minority control: Can be used when everyone cannot meet to makea decision, when the
group is under such time pressure that it mustdelegate responsibility to a committee,
when only a few membershave any relevant resources, and when broad member
commitment isnot needed to implement the decision; useful for simple, routine decisions.
> Consensus: Produces an innovative, creative, and high-qualitydecision; elicits
commitment by all members to implement thedecision, uses the resources of all
members; the future decisionmaking ability of the group is enhanced; useful in
makingserious, important, and complex decisions to which all members are to be
committed.
The Components of Decision Making
The Decision Environment
Every decision is made within a decision environment, which is defined as the collection of
information, alternatives, values, and preferences available at the time of the decision. An ideal
decision environment would include all possible information, all of it accurate, and every
possible alternative. However, both information and alternatives are constrained because the time
and effort to gain information or identify alternatives are limited. The time constraint simply
means that a decision must be made by a certain time. The effort constraint reflects the limits of
manpower, money, and priorities. (You wouldn't want to spend three hours and half a tank of gas
trying to find the very best parking place at the mall.) Since decisions must be made within this
constrained environment, we can say that the major challenge of decision making is uncertainty,
and a major goal of decision analysis is to reduce uncertainty. We can almost never have all
information needed to make a decision with certainty, so most decisions involve an undeniable
amount of risk.
The fact that decisions must be made within a limiting decision environment suggests two things.
First, it explains why hindsight is so much more accurate and better at making decisions that
foresight. As time passes, the decision environment continues to grow and expand. New
information and new alternatives appear--even after the decision must be made. Armed with new
information after the fact, the hindsighters can many times look back and make a much better
decision than the original maker, because the decision environment has continued to expand.
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The second thing suggested by the decision-within-an-environment idea follows from the above
point. Since the decision environment continues to expand as time passes, it is often advisable to
put off making a decision until close to the deadline. Information and alternatives continue to
grow as time passes, so to have access to the most information and to the best alternatives, do not
make the decision too soon. Now, since we are dealing with real life, it is obvious that some
alternatives might no longer be available if too much time passes; that is a tension we have to
work with, a tension that helps to shape the cutoff date for the decision.
Delaying a decision as long as reasonably possible, then, provides three benefits:
1. The decision environment will be larger, providing more information. There is also time for
more thoughtful and extended analysis.
2. New alternatives might be recognized or created. Version 2.0 might be released.
3. The decision maker's preferences might change. With further thought, wisdom, and maturity,
you may decide not to buy car X and instead to buy car Y.
And delaying a decision involves several risks:
1. As the decision environment continues to grow, the decision maker might become
overwhelmed with too much information and either make a poorer decision or else face decision
paralysis.
2. Some alternatives might become unavailable because of events occurring during the delay. In
a few cases, where the decision was between two alternatives (attack the pass or circle around
behind the large rock), both alternatives might become unavailable, leaving the decision maker
with nothing. And we have all had the experience of seeing some amazing bargain only to
hesitate and find that when we go back to buy the item, it is sold out.
3. In a competitive environment, a faster rival might make the decision and gain advantage.
Another manufacturer might bring a similar product to market before you (because that company
didn't delay the decision) or the opposing army might have seized the pass while the other army
was "letting the decision environment grow."
The Effects of Quantity on Decision Making
Many decision makers have a tendency to seek more information than required to make a good
decision. When too much information is sought and obtained, one or more of several problems
can arise. (1) A delay in the decision occurs because of the time required to obtain and process
the extra information. This delay could impair the effectiveness of the decision or solution. (2)
Information overload will occur. In this state, so much information is available that decision-
making ability actually declines because the information in its entirety can no longer be managed
or assessed appropriately. A major problem caused by information overload is forgetfulness.
When too much information is taken into memory, especially in a short period of time, some of
the information (often that received early on) will be pushed out.
The example is sometimes given of the man who spent the day at an information-heavy seminar.
At the end of the day, he was not only unable to remember the first half of the seminar but he had
also forgotten where he parked his car that morning.
(3) Selective use of the information will occur. That is, the decision maker will choose from
among all the information available only those facts which support a preconceived solution or
position. (4) Mental fatigue occurs, which results in slower work or poor quality work. (5)
Decision fatigue occurs where the decision maker tires of making decisions. Often the result is
fast, careless decisions or even decision paralysis--no decisions are made at all.
The quantity of information that can be processed by the human mind is limited. Unless
information is consciously selected, processing will be biased toward the first part of the
information received. After that, the mind tires and begins to ignore subsequent information or
forget earlier information. (Have you ever gone shopping for something where you looked at
many alternatives--cars, knives, phones, TVs--only to decide that you liked the first one best?)
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Decision Streams
A common misconception about decision making is that decisions are made in isolation from
each other: you gather information, explore alternatives, and make a choice, without regard to
anything that has gone before. The fact is, decisions are made in a context of other decisions. The
typical metaphor used to explain this is that of a stream. There is a stream of decisions
surrounding a given decision, many decisions made earlier have led up to this decision and made
it both possible and limited. Many other decisions will follow from it.
Another way to describe this situation is to say that most decisions involve a choice from a group
of preselected alternatives, made available to us from the universe of alternatives by the previous
decisions we have made. Previous decisions have "activated" or "made operable" certain
alternatives and "deactivated" or "made inoperable" others.
For example, when you decide to go to the park, your decision has been enabled by many
previous decisions. You had to decide to live near the park; you had to decide to buy a car or
learn about bus routes, and so on. And your previous decisions have constrained your subsequent
ones: you can't decide to go to a park this afternoon if it is three states away. By deciding to live
where you do, you have both enabled and disabled a whole series of other decisions.
As another example, when you enter a store to buy a DVD player or TV, you are faced with the
preselected alternatives stocked by the store. There may be 200 models available in the universe
of models, but you will be choosing from, say, only a dozen. In this case, your decision has been
constrained by the decisions made by others about which models to carry.
We might say, then, that every decision (1) follows from previous decisions, (2) enables many
future decisions, and (3) prevents other future decisions. People who have trouble making
decisions are sometimes trapped by the constraining nature of decision making. Every decision
you make precludes other decisions, and therefore might be said to cause a loss of freedom. If
you decide to marry Terry, you no longer can decide to marry Shawn. However, just as making a
decision causes a loss of freedom, it also creates new freedom, new choices and new
possibilities. So making a decision is liberating as well as constraining. And a decision left
unmade will often result in a decision by default or a decision being made for you.
It is important to realize that every decision you make affects the decision stream and the
collections of alternatives available to you both immediately and in the future. In other words,
decisions have far reaching consequences.
Concepts and Definitions
1. Information. This is knowledge about the decision, the effects of its alternatives, the
probability of each alternative, and so forth. A major point to make here is that while substantial
information is desirable, the statement that "the more information, the better" is not true. Too
much information can actually reduce the quality of a decision. See the discussion on The Effects
of Quantity on Decision Making above.
2. Alternatives. These are the possibilities one has to choose from. Alternatives can be identified
(that is, searched for and located) or even developed (created where they did not previously
exist). Merely searching for preexisting alternatives will result in less effective decision making.
3. Criteria. These are the characteristics or requirements that each alternative must possess to a
greater or lesser extent. Usually the alternatives are rated on how well they possess each
criterion. For example, alternative Toyota ranks an 8 on the criterion of economy, while
alternative Buick ranks a 6 on the same criterion.
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4. Goals. What is it you want to accomplish? Strangely enough, many decision makers collect a
bunch of alternatives (say cars to buy or people to marry) and then ask, "Which should I
choose?" without thinking first of what their goals are, what overall objective they want to
achieve. Next time you find yourself asking, "What should I do? What should I choose?" ask
yourself first, "What are my goals?"
A component of goal identification should be included in every instance of decision analysis.
5. Value. Value refers to how desirable a particular outcome is, the value of the alternative,
whether in dollars, satisfaction, or other benefit.
6. Preferences. These reflect the philosophy and moral hierarchy of the decision maker. We
could say that they are the decision maker's "values," but that might be confusing with the other
use of the word, above. If we could use that word here, we would say that personal values dictate
preferences. Some people prefer excitement to calmness, certainty to risk, efficiency to esthetics,
quality to quantity, and so on. Thus, when one person chooses to ride the wildest roller coaster in
the park and another chooses a mild ride, both may be making good decisions, if based on their
individual preferences.
7. Decision Quality. This is a rating of whether a decision is good or bad. A good decision is a
logical one based on the available information and reflecting the preferences of the decision
maker.
The important concept to grasp here is that the quality of a decision is not related to its outcome:
a good decision can have either a good or a bad outcome. Similarly, a bad decision (one not
based on adequate information or not reflecting the decision maker's preferences) can still have a
good outcome.
For example, if you do extensive analysis and carefully decide on a certain investment based on
what you know about its risks and your preferences, then your decision is a good one, even
though you may lose money on the investment. Similarly, if you throw a dart at a listing of
stocks and buy the one the dart hits, your decision is a bad one, even though the stock may go up
in value.
Good decisions that result in bad outcomes should thus not be cause for guilt or recrimination. If
you decide to take the scenic route based on what you know of the road (reasonably safe, not
heavily traveled) and your preferences (minimal risk, prefer scenery over early arrival), then
your decision is a good one, even though you might happen to get in an accident, or have a flat
tire in the middle of nowhere. It is not justified to say, "Well, this was a bad decision."
In judging the quality of a decision, in addition to the concerns of logic, use of information and
alternatives, three other considerations come into play:
A. The decision must meet the stated objectives most thoroughly and completely. How well does
the alternative chosen meet the goals identified?
B. The decision must meet the stated objectives most efficiently, with concern over cost, energy,
side effects. Are there negative consequences to the alternative that make that choice less
desirable? We sometimes overlook this consideration in our search for thrills.
C. The decision must take into account valuable byproducts or indirect advantages. A new
employee candidate may also have extra abilities not directly related to the job but valuable to
the company nonetheless. These should be taken into account.
8. Acceptance. Those who must implement the decision or who will be affected by it must
accept it both intellectually and emotionally.
Acceptance is a critical factor because it occasionally conflicts with one of the quality criteria. In
such cases, the best thing to do may be to choose a lesser quality solution that has greater
acceptance.
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For example, when cake mixes first were put on the market, manufacturers put everything into
the mix--the highest quality and most efficient solution. Only water had to be added. However,
the mixes didn't sell well--they weren't accepted. After investigation, the makers discovered that
women didn't like the mixes because using the mixes made them feel guilty: they weren't good
wives because they were taking a shortcut to making a cake. The solution was to take the egg
and sometimes the milk out of the mix so that the women would have something to do to "make"
the cake other than just adding water. Now they had to add egg and perhaps milk, making them
feel more useful. The need to feel useful and a contributor is one of the most basic of human
needs. Thus, while the new solution was less efficient in theoretical terms, it was much more
acceptable. Cake mixes with the new formula became quite popular.
Thus, the inferior method may produce greater results if the inferior one has greater support. One
of the most important considerations in decision making, then, is the people factor. Always
consider a decision in light of the people implementation.
A decision that may be technologically brilliant but that is sociologically stupid will not work.
Only decisions that are implemented, and implemented with thoroughness (and preferably
enthusiasm) will work the way they are intended to.
Approaches to Decision Making
There are two major approaches to decision making in an organization, the authoritarian method
in which an executive figure makes a decision for the group and the group method in which the
group decides what to do.
1. Authoritarian. The manager makes the decision based on the knowledge he can gather. He
then must explain the decision to the group and gain their acceptance of it. In some studies, the
time breakdown for a typical operating decision is something like this:
make decision, 5 min.; explain decision, 30 min.; gain acceptance, 30 min.
2. Group. The group shares ideas and analyses, and agrees upon a decision to implement.
Studies show that the group often has values, feelings, and reactions quite different from those
the manager supposes they have. No one knows the group and its tastes and preferences as well
as the group itself. And, interestingly, the time breakdown is something like this:
group makes decision, 30 min.; explain decision, 0 min.; gain acceptance, 0 min.
Clearly, just from an efficiency standpoint, group decision making is better. More than this, it
has been shown many times that people prefer to implement the ideas they themselves think of.
They will work harder and more energetically to implement their own idea than they would to
implement an idea imposed on them by others. We all have a love for our own ideas and
solutions, and we will always work harder on a solution supported by our own vision and our
own ego than we will on a solution we have little creative involvement with.
There are two types of group decision making sessions. First is free discussion in which the
problem is simply put on the table for the group to talk about. For example, Joe has been offered
a job change from shift supervisor to maintenance foreman. Should he take the job?
The other kind of group decision making is developmental discussion or structured discussion.
Here the problem is broken down into steps, smaller parts with specific goals. For example,
instead of asking generally whether Joe should take the job, the group works on sub questions:
What are Joe's skills? What skills does the new job require? How does Joe rate on each of the
skills required? Notice that these questions seek specific information rather than more general
impressionistic opinions.
Developmental discussion (1) insures systematic coverage of a topic and (2) insures that all
members of the group are talking about the same aspect of the problem at the same time.
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Some Decision Making Strategies
As you know, there are often many solutions to a given problem, and the decision maker's task is
to choose one of them. The task of choosing can be as simple or as complex as the importance of
the decision warrants, and the number and quality of alternatives can also be adjusted according
to importance, time, resources and so on. There are several strategies used for choosing. Among
them are the following:
1. Optimizing. This is the strategy of choosing the best possible solution to the problem,
discovering as many alternatives as possible and choosing the very best. How thoroughly
optimizing can be done is dependent on
A. importance of the problem
B. time available for solving it
C. cost involved with alternative solutions
D. availability of resources, knowledge
E. personal psychology, values
Note that the collection of complete information and the consideration of all alternatives is
seldom possible for most major decisions, so that limitations must be placed on alternatives.
2. Satisfying. In this strategy, the first satisfactory alternative is chosen rather than the best
alternative. If you are very hungry, you might choose to stop at the first decent looking restaurant
in the next town rather than attempting to choose the best restaurant from among all (the
optimizing strategy). The word satisficing was coined by combining satisfactory and sufficient.
For many small decisions, such as where to park, what to drink, which pen to use, which tie to
wear, and so on, the satisficing strategy is perfect.
3. Maximax. This stands for "maximize the maximums." This strategy focuses on evaluating and
then choosing the alternatives based on their maximum possible payoff. This is sometimes
described as the strategy of the optimist, because favorable outcomes and high potentials are the
areas of concern. It is a good strategy for use when risk taking is most acceptable, when the go-
for-broke philosophy is reigning freely.
4. Maximin. This stands for "maximize the minimums." In this strategy, that of the pessimist,
the worst possible outcome of each decision is considered and the decision with the highest
minimum is chosen. The Maximin orientation is good when the consequences of a failed
decision are particularly harmful or undesirable. Maximin concentrates on the salvage value of a
decision, or of the guaranteed return of the decision. It's the philosophy behind the saying, "A
bird in the hand is worth two in the bush."
Quiz shows exploit the uncertainty many people feel when they are not quite sure whether to go
with a maximax strategy or a maximin one: "Okay, Mrs. Freen, you can now choose to take what
you've already won and go home, or risk losing it all and find out what's behind door number
three."
Example: I could put my $10,000 in a genetic engineering company, and if it creates and patents
a new bacteria that helps plants resist frost, I could make $50,000. But I could also lose the
whole $10,000. But if I invest in a soap company, I might make only $20,000, but if the
company goes completely broke and gets liquidated, I'll still get back $7,000 of my investment,
based on its book value.
Example: It's fourth down and ten yards to go on your twenty yard line. Do you go for a long
pass or punt? Maximax would be to pass; Maximin would be to punt.
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Decision Making Procedure
As you read this procedure, remember our discussion earlier about the recursive nature of
decision making. In a typical decision making situation, as you move from step to step here, you
will probably find yourself moving back and forth also.
1. Identify the decision to be made together with the goals it should achieve. Determine the
scope and limitations of the decision. Is the new job to be permanent or temporary or is that not
yet known (thus requiring another decision later)? Is the new package for the product to be put
into all markets or just into a test market? How might the scope of the decision be changed--that
is, what are its possible parameters?
When thinking about the decision, be sure to include a clarification of goals: We must decide
whom to hire for our new secretary, one who will be able to create an efficient and organized
office. Or, We must decide where to go on vacation, where we can relax and get some rest from
the fast pace of society.
2. Get the facts. But remember that you cannot get all the facts. Get as many facts as possible
about a decision within the limits of time imposed on you and your ability to process them, but
remember that virtually every decision must be made in partial ignorance. Lack of complete
information must not be allowed to paralyze your decision. A decision based on partial
knowledge is usually better than not making the decision when a decision is really needed. The
proverb that "any decision is better than no decision," while perhaps extreme, shows the
importance of choosing. When you are racing toward a bridge support, you must decide to turn
away to the right or to the left. Which way you turn is less important than the fact that you do
indeed turn.
As part of your collection of facts, list your feelings, hunches, and intuitive urges. Many
decisions must ultimately rely on or be influenced by intuition because of the remaining degree
of uncertainty involved in the situation.
Also as part of your collection of facts, consult those who will be affected by and who will have
to implement your decision. Input from these people not only helps supply you with information
and help in making the decision but it begins to produce the acceptance necessary in the
implementers because they feel that they are part of the decision making process. As Russell
Ackoff noted in The Art of Problem Solving, not consulting people involved in a decision is
often perceived as an act of aggression.
3. Develop alternatives. Make a list of all the possible choices you have, including the choice of
doing nothing. Not choosing one of the candidates or one of the building sites is in itself a
decision. Often a non decision is harmful as we mentioned above--not choosing to turn either
right or left is to choose to drive into the bridge. But sometimes the decision to do nothing is
useful or at least better than the alternatives, so it should always be consciously included in the
decision making process.
Also be sure to think about not just identifying available alternatives but creating alternatives that
don't yet exist. For example, if you want to choose which major to pursue in college, think not
only of the available ones in the catalog, but of designing your own course of study.
4. Rate each alternative. This is the evaluation of the value of each alternative. Consider the
negative of each alternative (cost, consequences, problems created, time needed, etc.) and the
positive of each (money saved, time saved, added creativity or happiness to company or
employees, etc.). Remember here that the alternative that you might like best or that would in the
best of all possible worlds be an obvious choice will, however, not be functional in the real world
because of too much cost, time, or lack of acceptance by others.
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Also don't forget to include indirect factors in the rating. If you are deciding between machines
X, Y, and Z and you already have an employee who knows how to operate machine Z, that fact
should be considered. If you are choosing an investigative team to send to Japan to look at plant
sites and you have very qualified candidates A, B, and C, the fact that B is a very fast typist, a
superior photographer or has some other side benefit in addition to being a qualified team
member, should be considered. In fact, what you put on your hobbies and interests line on your
resume can be quite important when you apply for a job just because employers are interested in
getting people with a good collection of additional abilities.
5. Rate the risk of each alternative. In problem solving, you hunt around for a solution that best
solves a particular problem, and by such a hunt you are pretty sure that the solution will work. In
decision making, however, there is always some degree of uncertainty in any choice. Will Bill
really work out as the new supervisor? If we decide to expand into Canada, will our sales and
profits really increase? If we let Jane date Fred at age fifteen, will the experience be good? If you
decide to marry person X or buy car Y or go to school Z, will that be the best or at least a
successful choice?
Risks can be rated as percentages, ratios, rankings, grades or in any other form that allows them
to be compared. See the section on risk evaluation for more details on risking.
6. Make the decision. If you are making an individual decision, apply your preferences (which
may take into account the preferences of others). Choose the path to follow, whether it includes
one of the alternatives, more than one of them (a multiple decision) or the decision to choose
none.
And of course, don't forget to implement the decision and then evaluate the implementation, just
as you would in a problem solving experience.
One important item often overlooked in implementation is that when explaining the decision to
those involved in carrying it out or those who will be affected by it, don't just list the projected
benefits: frankly explain the risks and the drawbacks involved and tell why you believe the
proposed benefits outweigh the negatives. Implementers are much more willing to support
decisions when they (1) understand the risks and (2) believe that they are being treated with
honesty and like adults.
Remember also that very few decisions are irrevocable. Don't cancel a decision prematurely
because many new plans require time to work--it may take years for your new branch office in
Paris to get profitable--but don't hesitate to change directions if a particular decision clearly is
not working out or is being somehow harmful. You can always make another decision to do
something else.
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SUMMARY
Planning:It is the basic function of management. It deals with chalking out a future
course of action & deciding in advance the most appropriate course of actions for
achievement of pre-determined goals. A plan is a future course of actions. it is an
intellectual activity and it also helps in avoiding confusion, uncertainties, risks,
wastages etc. Planning (also called forethought) is the process of thinking about and
organizing the activities required to achieve a desired goal.
Definition of planning: According to KOONTZ, “Planning is deciding in advance -
what to do, when to do & how to do. It bridges the gap from where we are & where
we want to be”.
Planning process: Management planning is a continuous process – a ‘circle’ with
three main elements such as a) Preparation of a Management Plan, b) Implementation
of the plan, c) Monitoring and review of the plan.
Planning premises: Planning premises may be classified as a) Internal and external
premises, b) Controllable, semi-controllable and uncontrollable premises, c)Tangible
and intangible premises. d) Foreseeable and unforeseeable premises.
Methods of planning: Methods of planning may be classified as a)Inactive Planning,
b) Reactive Planning , c)Pre-active Planning, d) Pro-active Planning.
Decision making: Decision making can be regarded as the mental processes
(cognitive process) resulting in the selection of a course of action among several
alternative scenarios. Every decision making process produces a final choice. The
output can be an action or an opinion of choice.
Decision Making Procedure
• Identify the decision to be made together with the goals
• Get the facts
• Develop alternatives Rate each alternative
• Rate the risk of each alternative
• Make the decision
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UNIT-II:
Section-A
1. Planning is an ____________process.
2. ___________refers to the determination of a course of action.
3. _______________is the first function in the management.
4. Planning is not a _____________work.
5. Planning is the ______________function of Management.
6. Planning is ________oriented.
7. Planning involves ________________.
8. Planning facilitates _____________utilization of resources.
9. Planning provides _____________of authority.
10. Decision making is a ________________process.
Section-B
1. What are the objectives of planning?
2. Explain kinds of planning.
3. Write about the planning process.
4. What are the features of decision making?
5. Explain Budgets.
6. Difference between Planning and Forecasting.
7. What are the elements involved in business forecasting?
8. What are the steps in MBO?
9. Explain importance of Forecasting.
10. Explain the nature of Planning.
Section-C
1. Explain business forecasting.
2. Explain the importance of planning.
3. Explain the methods of planning.
4. What are the advantages and dis advantages of planning?
5. What are the various types of managerial decision?
6. Explain the steps involved in planning process.
7. What are the factors affecting the decision making?
8. Enumerate the different types of plans
9. Describe the different types of strategies.
10. Explain the merits and demerits of decision making.
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UNIT-III:
Organisation Structure
Organization – Meaning, Nature and Importance – Process of Organization – Principles of Sound
Organization – Organization Structure – Types: Line, Functional and Line and Staff - Span of
Control – Departmentation – Delegation and Decentralization - Organization Chart
Organization
An organization (or organization — see spelling differences) is a social group which
distributes tasks for a collective goal. The word itself is derived from the Greek word organon,
itself derived from the better-known word ergon - as we know `organ` - and it means a
compartment for a particular job.
There are a variety of legal types of organizations, including: corporations, governments, non-
governmental organizations, international organizations, armed forces, charities, not-for-profit
corporations, partnerships, cooperatives, and universities. A hybrid organization is a body that
operates in both the public sector and the private sector, simultaneously fulfilling public duties
and developing commercial market activities. As a result the hybrid organization becomes a
mixture of a government and a corporate organization.
In the social sciences, organizations are the object of analysis for a number of disciplines, such as
sociology, economics, political science, psychology, management, and organizational
communication. The broader analysis of organizations is commonly referred to as organizational
structure, organizational studies, organizational behavior, or organization analysis. A number of
different perspectives exist, some of which are compatible:
• From a process-related perspective, an organization is viewed as an entity is being (re-
organized), and the focus is on the organization as a set of tasks or actions.
• From a functional perspective, the focus is on how entities like businesses or state
authorities are used.
• From an institutional perspective, an organization is viewed as a purposeful structure
within a social context.
Meaning and Definition
• According to Allen an organization may be defined, "as a process of identifying and
grouping the work to be performed, defining and delegating responsibility and authority and
establishing relationship for the purpose of enabling people to work most effectively together in
accomplishing objectives.”
• According to Harold Koontz and O'Donnell, "Organizing involves the grouping of
activities necessary to accomplish goals and plans, the assignment of these activities to
appropriate departments and the provision for authority delegation and co-ordination.”
NATURE OF ORGANIZATION
(i) Outlining the objectives: Born with the enterprise is its life-long objectives of profitable
manufacturing and selling its products.
• (a)Weigh the necessity of the organization and the possibility of its success.
• (b)Decide if they harmonize with other objectives.
• (c)Estimate what financing and personnel are needed.
• (d)Break the objectives into functional parts to be assigned to a particular department for
accomplishment.
(ii)Identifying and enumerating the activities: After the objective is selected, management has
to identify the total task involved and its break up into closely related component activities that
are to be performed by an individual or division or a department.
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(iii)Assigning the duties: When activities have been grouped according to similarities and
common purposes they should be assigned to a particular department.
(iv)Defining and granting the authority: The authority and responsibility should be well
defined and should correspond to each other.
(v)Creating authority relationship: After assigning the duties and delegation of authority, the
establishment of relationship is done.
IMPORTANCE OF ORGANISATION
1. Facilities Administration
A properly designed organization facilitates both management and operation of the enterprise by
helping in its smooth functioning through various factors, such as well-defined areas of work for
employees; effective delegation and decentralization of authority; clear mutual relationships;
good communication network; coordination of the activities of individuals, groups and units,
adequate and control.
2. Facilitates growth, expansion and diversification
A sound organization structure is flexible enough to accommodate future changes with regard to
growth expansion and diversification of enterprise’s activities. Besides, certain organization
practices are developed which lead the business enterprise to expand and diversify.
3. Permits Optimum Utilization of Resources
Sound organisation permits optimum use of technological improvements and human resources
and efforts (right persons being placed in right positions on the basis of their skills, knowledge
and experience). It develops competent people through the facility of appropriate effective
training and promotion opportunities.
4. Stimulates Creativity
Specialization provides individuals with well-defined duties, clear lines of authority and clearly
defined responsibilities. Delegation and decentralization makes it possible for superiors to assign
routine and repetitive jobs to their subordinates and to concentrate themselves on important
issues in order to better exploit their own potential and encourage the creative thinking and
innovative skills of the people.
PROCESS OF ORGANIZATION
Organizing, like planning, must be a carefully worked out and applied process. This process
involves determining what work is needed to accomplish the goal, assigning those tasks to
individuals, and arranging those individuals in a decision-making framework (organizational
structure). The end result of the organizing process is an organization — a whole consisting of
unified parts acting in harmony to execute tasks to achieve goals, both effectively and efficiently.
A properly implemented organizing process should result in a work environment where all team
members are aware of their responsibilities. If the organizing process is not conducted well, the
results may yield confusion, frustration, loss of efficiency, and limited effectiveness.
In general, the organizational process consists of five steps
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The organizational process.
Review plans and objectives.
Objectives are the specific activities that must be completed to achieve goals. Plans shape the
activities needed to reach those goals. Managers must examine plans initially and continue to do
so as plans change and new goals are developed.
Determine the work activities necessary to accomplish objectives.
Although this task may seem overwhelming to some managers, it doesn't need to be. Managers
simply list and analyze all the tasks that need to be accomplished in order to reach organizational
goals.
Classify and group the necessary work activities into manageable units.
A manager can group activities based on four models of departmentalization: functional,
geographical, product, and customer.
Assign activities and delegate authority.
Managers assign the defined work activities to specific individuals. Also, they give each
individual the authority (right) to carry out the assigned tasks.
Design a hierarchy of relationships.
A manager should determine the vertical (decision-making) and horizontal (coordinating)
relationships of the organization as a whole. Next, using the organizational chart, a manager
should diagram the relationships.
Organizational Analysis Models
Strategic Triangle Model
This model relies on three key calculations to determine the efficiency and effectiveness of an
organization. First, is the value, or mission, that guides the organization. Second, is operational
capacity, the knowledge and capability to carry out the mission. Third, is legitimacy and support,
or the environment, that authorize the value of the organization, and offer support, (specifically
financial support). Using this model, a strategy for an organization is considered good if these
three components are in alignment.
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SWOT model
A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to evaluate
the strengths, weaknesses, opportunities and threats involved in a project or in a business
venture. A SWOT analysis can be carried out for a product, place, industry or person. It involves
specifying the objective of the business venture or project and identifying the internal and
external factors that are favorable and unfavorable to achieve that objective.The degree to which
the internal environment of the entity matches with the external environment is expressed by the
concept of strategic fit.
• Strengths: characteristics of the business or project that give it an advantage over others.
• Weaknesses: characteristics that place the business or project at a disadvantage relative to
others
• Opportunities: elements that the project could exploit to its advantage
• Threats: elements in the environment that could cause trouble for the business or project
First, the decision makers should consider whether the objective is attainable, given the SWOTs.
If the objective is not attainable a different objective must be selected and the process repeated.
Users of SWOT analysis need to ask and answer questions that generate meaningful information
for each category (strengths, weaknesses, opportunities, and threats) to make the analysis useful
and find their competitive advantage.
The McKinsey 7S Model
The McKinsey 7S Framework emphasizes balancing seven key aspects of an organization,
operating unit, or project.[3] Three of the seven elements—strategy, structure, and systems—are
considered "hard" elements, easily identified, described, and analyzed. The remaining four
elements—shared value, staff, skill, and style—are fluid, difficult to describe, and dependent
upon the actors within the organization at any given time. The 7S organizational analysis
framework is based on the premise that all seven elements are interdependent, and must be
mutually reinforcing in order to be successful. Changes in a single element can result in
misalignment and dysfunction throughout the organization, disrupting organizational harmony.[4]
Rational Model
The rational model stems from the Frederick W. Taylor's (1911) Structural Perspective. Taylor
was the father of time-and-motion studies and founded an approach he called "scientific
management."[5] It was Taylor's stance that organizations should be as mechanistic and efficient
as possible. These Scientific Management principles served a valuable purpose for the Ford
Motor Company, where the first American, mass-produced automobiles were being created.[6]
The rational model views organizations as a mechanism that is made up of various parts that can
be modified in order to create an output in the shortest amount of time and without deviation.
Natural System Model
The natural system model is in many ways the opposite of the rational model in that it focuses on
the activities that may negatively impact the organization and therefore aims at maintaining an
equilibrium in order to meet its goals.[6] The Natural System model views organizations as an
organic organism which is holistically interconnected. The parts of the organization are not seen
as independent units but rather as a whole that can orchestrate together to prepare for inevitable
change.
Sociotechnical Model
The sociotechnical model, also known as Sociotechnical Systems (STS), is an approach to
complex organizational work design that recognizes the interaction between people and
technology in workplaces. The term also refers to the interaction between society's complex
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infrastructures and human behavior. This model identifies the environment as a key factor that
interacts with the organization.
Cognitive Model
Behavior, cognitive, and other personal factors as well as environmental events, operate as
interacting determinants that influence each other bidirectionally.[7] Personal goals of the
managers and staff are seen as assisting in the effort toward organizational objective attainment.
Decision making processes are focused on and specialization is deemed as important to the flow
of information.[6]
Meta Models
Attempts have also been made to put elements of the above models into a kind of meta-model.
Based on a theorized blindness of a single perspective, Lee Bolman and Terrence Deal have
designed a model that splits analysis into four distinct paradigms. These 'frames' are to be used as
a pluralistic model, and therefore allow analysts to change thinking by re-framing understanding
and points of reference.
• Structural Frame Here organisations are to be understood by role definitions and clear
hierarchy. Problems come from overlapping responsibilities and unclear instructions. The
assumptions are similar to the rational model shown above and Taylorism.
• Human Resource Frame According to this frame organisations exist to serve society, they
are places for growth and development. Problems come from when people are not motivated
or trained sufficiently. This is Similar to the Sociotechnical model, or the work of Daniel
Pink.
• Political Frame this frame posits that organisations are cutthroat jungles, where only the
strongest survive. Problems come from poor power coalitions or overly centralized power.
• Symbolic Frame This frame supposes that organisations are deeply symbolic and successful
business is about the representation genuine meaning. Problems occur when actors fail to
play their parts.
Bolman and Deal lay out these frames in their book Reframing Organizations: Artistry, Choice
and Leadership [5] the authors also provide many examples of how best to apply their four frames
analysis.
Organizational Strategies and Structure
Organizational Strategy
"An organization can be said to have a strategy when the leaders and the organization as a
whole have committed themselves to a particular vision of how the organization will operate to
create value and sustain itself in the immediate future"
Evaluating or crafting an organizational strategy requires analysis of the relationship between
mission, value and resources. Strategy allows managers to focus on an organization's long-term
plan and ensure that mission objectives are met. Organizational strategy explores the relationship
between unit and the environment. It involves action—matching skills and resources with
opportunities and threats. According to Michael Porter, a professor from Harvard Business
School and leading expert in organizational strategy, the basics of a competitive model have Five
Forces:
• Threat of new entrants
• Threat of substitute products or services
• Bargaining power of customers
• Bargaining power of suppliers
• Intensity of competitive rivalry
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Private and Public Strategy
Strategy can vary between public and private sectors. In the private sector the mission is to make
money for stockholders, however in the public sector its mission is full-filling a social purpose or
need. Measuring success is much harder in the public sector as it’s based on when a social need
or issue has been full-filled. There is often no direct link between meeting mission and being
sustainable. Sometimes a social value does not align with financial performance or
organizational survival.
Organizational Structure
How an organization is structured depends on the coordinating mechanism used to produce the
product or service. Think in terms of labor division for specific tasks and how authority is to be
distributed among employees. Henry Mintzberg outlines five ways to consider labor division:
• Simple Structure: Direct Supervision with little specialization
• Machine Bureaucracy: Standardization of work with horizontal and vertical
specialization
• Professional Bureaucracy: Standardization of skills with horizontal specialization
• Divisional Form: Standardization of outputs with some horizontal and vertical
specialization (mainly between divisions)
• Adhocracy: Mutual adjustments with much horizontal specialization
Performance Management
Performance management can be defined as 'an ongoing and continuous process of
communicating and clarifying job responsibilities, priorities, and performance expectations in
order to ensure understanding between supervisor and employee.
An important aspect of performance management involves designing specific measurable
indicators as a means of gauging progress. Outcome indicators are not to be confused with actual
outcomes, although both are pertinent to measuring progress. Outcome indicators are assigned a
specific numerical measurement "that indicates progress toward achieving an outcome,but are
not the outcomes themselves.
PRINCIPLES OF SOUND ORGANISATION
There are some general guiding principles, which help to form a good organization. There
principles are.
1. Principle of Organization Objective: It should be same, consistent, defined and clear. It
should aim at achieving high production with customer focus, growth and survival. At the core,
there should be unity of objective.
2. Principle of Division of Work and Specialization: Every unit or person of an organization
is assigned to a specific task and accomplishment. For this, there is a need to focus on
specialization and assignment of specific work to individual.
3. Principle of Parity of Responsibility and Authority: Responsibility is the obligation on the
path of a person towards the boss for completing the assigned task. It is also called as
accountability. A person at a higher position in the organization exercises authority or power
over his subordinates for getting the task done. Authority is vested in the superior of the
organization so as to extract work from subordinates. Therefore, authority is always associated
with responsibility to get things done. There should be a balance between authority and
responsibility.
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4. Principle of Functional Definition: Each employee must be assigned specific task, role,
relationship and job-related activities. What is expected of him, must be defined in the
organization.
5. Principle of Scalar Chain: Scalar chain, chain of command or line of authority, means that
there should be a continuous line of authority (or scalar chain) from top of the organizational
pyramid to the lower levels. The chain provides a superior-subordinate relationship. Levels
above in the chain are superiors while lower levels in the scalar chain are subordinates. Scalar
chain is useful in the delegation of authority down the chain. It is also useful in maintaining
effective communication between different layers of the organization.
6. Principle of Unity of Command: Unity of command means that there should be only one
source of authority for each subordinate. This also means: one subordinate-one boss. The
principle of unit of command is important for maintaining discipline and for fixing responsibility
for the result.
7. Principle of Balance: All the techniques and values of the organizations must be effectively
balanced. Many issues have divergent focus in organization. These are: line vs. staff;
centralization vs. decentralization, unity of command vs. specialization, vertical hierarchy vs.
span of control, etc. Proper balance between these issues must be maintained.
8. Principle of Flexibility: Flexibility means adaptability to change. This is needed due to
uncertainty, scope for diversification and growth, new opportunity, and competitive forces in the
environment. Organization-design should have some in-built flexibility to withstand the
rebaptism, excessive control, complicated procedure, etc.
9. Principle of delegation: Authority needs to be delegated in the organization. Delegation is
for empowering the subordinates to achieve results.
10. Principle of Efficiency: Organization structure should be useful in achieving the optimum
utilization of resources at least cost and least effort. Considering system view of the organization
(which is input-processing-output framework), the maximization of output and minimization of
inputs will improve the efficiency.
11. Principle of Continuity: Continuity means survival and existence despite turbulence in
market forces. Therefore, the organization must look at long-term goals rather than mere profit-
making and short-terms goals.
12. Principle of Cooperation: Cooperation means involvement as a team and solving the
functional goal of the organization as one unit. This can be achieved by evolving a proper code
of conduct, rule of business, conflict resolution mechanism and cooperation.
13. Principle of Coordination: There are many functions, such as marketing, finance, HRD,
etc., in an organization. Different groups have different priorities and local level objectives.
Proper coordination is needed to work in one direction and for achieving the overall (global)
corporate goals. Proper communication, meetings, news-letters, etc., are helpful to achieve this.
14. Principle of Span of Control: Any superior can handle only limited numbers of
subordinates. Narrow span of control is useful for complex jobs while wider span of control is
useful for routine type of jobs. By span of control, we mean how many subordinates a manager
(or, superior) can handle.
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Organization structure
An organizational structure consists of activities such as task allocation, coordination and
supervision, which are directed towards the achievement of organizational aims.[1] It can also be
considered as the viewing glass or perspective through which individuals see their organization
and its environment.
Most organizations have hierarchical structures, but not all.
Organizations are a variant of clustered entities.
An organization can be structured in many different ways, depending on their objectives. The
structure of an organization will determine the modes in which it operates and performs.
Organizational structure allows the expressed allocation of responsibilities for different functions
and processes to different entities such as the branch, department, workgroup and individual.
Organizational structure affects organizational action in two big ways. First, it provides the
foundation on which standard operating procedures and routines rest. Second, it determines
which individuals get to participate in which decision-making processes, and thus to what extent
their views shape the organization’s actions.
Organizational structure types
Pre-bureaucratic structures
Pre-bureaucratic (entrepreneurial) structures lack standardization of tasks. This structure is most
common in smaller organizations and is best used to solve simple tasks. The structure is totally
centralized. The strategic leader makes all key decisions and most communication is done by one
on one conversations. It is particularly useful for new (entrepreneurial) business as it enables the
founder to control growth and development.
They are usually based on traditional domination or charismatic domination in the sense of Max
Weber's tripartite classification of authority
Bureaucratic structures
Weber (1948, p. 214) gives the analogy that “the fully developed bureaucratic mechanism
compares with other organizations exactly as does the machine compare with the non-
mechanical modes of production. Precision, speed, unambiguity. strict subordination, reduction
of friction and of material and personal costs- these are raised to the optimum point in the strictly
bureaucratic administration.” Bureaucratic structures have a certain degree of standardization.
They are better suited for more complex or larger scale organizations, usually adopting a tall
structure. The tension between bureaucratic structures and non-bureaucratic is echoed in Burns
and Stalker's distinction between mechanistic and organic structures.
The Weberian characteristics of bureaucracy are:
• Clear defined roles and responsibilities
• A hierarchical structure
• Respect for merit.
Post-bureaucratic
The term of post bureaucratic is used in two senses in the organizational literature: one generic
and one much more specific. In the generic sense the term post bureaucratic is often used to
describe a range of ideas developed since the 1980s that specifically contrast themselves with
Weber's ideal type bureaucracy. This may include total quality management, culture
management and matrix management, amongst others. None of these however has left behind the
core tenets of Bureaucracy. Hierarchies still exist, authority is still Weber's rational, legal type,
and the organization is still rule bound. Heckscher, arguing along these lines, describes them as
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cleaned up bureaucracies,[8] rather than a fundamental shift away from bureaucracy. Gideon
Kunda, in his classic study of culture management at 'Tech' argued that 'the essence of
bureaucratic control - the formalisation, codification and enforcement of rules and regulations -
does not change in principle.....it shifts focus from organizational structure to the organization's
culture'.
Another smaller group of theorists have developed the theory of the Post-Bureaucratic
Organization.,[8] provide a detailed discussion which attempts to describe an organization that is
fundamentally not bureaucratic. Charles Heckscher has developed an ideal type, the post-
bureaucratic organization, in which decisions are based on dialogue and consensus rather than
authority and command, the organization is a network rather than a hierarchy, open at the
boundaries (in direct contrast to culture management); there is an emphasis on meta-decision
making rules rather than decision making rules. This sort of horizontal decision making by
consensus model is often used in housing cooperatives, other cooperatives and when running a
non-profit or community organization. It is used in order to encourage participation and help to
empower people who normally experience oppression in groups.
Still other theorists are developing a resurgence of interest in complexity theory and
organizations, and have focused on how simple structures can be used to engender organizational
adaptations. For instance, Mineretal. (2000) studied how simple structures could be used to
generate improvisational outcomes in product development. Their study makes links to simple
structures and improviser learning. Other scholars such as Jan Rivkin and Sigglekow, and Nelson
Repenning revive an older interest in how structure and strategy relate in dynamic environments.
Functional structure
Employees within the functional divisions of an organization tend to perform a specialized set of
tasks, for instance the engineering department would be staffed only with software engineers.
This leads to operational efficiencies within that group. However it could also lead to a lack of
communication between the functional groups within an organization, making the organization
slow and inflexible.
As a whole, a functional organization is best suited as a producer of standardized goods and
services at large volume and low cost. Coordination and specialization of tasks are centralized in
a functional structure, which makes producing a limited amount of products or services efficient
and predictable. Moreover, efficiencies can further be realized as functional organizations
integrate their activities vertically so that products are sold and distributed quickly and at low
cost.[11] For instance, a small business could make components used in production of its products
instead of buying them. This benefits the organization and employees faiths.
Divisional structure
Also called a "product structure", the divisional structure groups each organizational function
into a division. Each division within a divisional structure contains all the necessary resources
and functions within it. Divisions can be categorized from different points of view. One might
make distinctions on a geographical basis (a US division and an EU division, for example) or on
product/service basis (different products for different customers: households or companies). In
another example, an automobile company with a divisional structure might have one division for
SUVs, another division for subcompact cars, and another division for sedans.
Each division may have its own sales, engineering and marketing departments.
Matrix structure
The matrix structure groups employees by both function and product. This structure can combine
the best of both separate structures. A matrix organization frequently uses teams of employees to
accomplish work, in order to take advantage of the strengths, as well as make up for the
weaknesses, of functional and decentralized forms. An example would be a company that
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produces two products, "product a" and "product b". Using the matrix structure, this company
would organize functions within the company as follows: "product a" sales department, "product
a" customer service department, "product a" accounting, "product b" sales department, "product
b" customer service department, "product b" accounting department. Matrix structure is amongst
the purest of organizational structures, a simple lattice emulating order and regularity
demonstrated in nature.
• Weak/Functional Matrix: A project manager with only limited authority is assigned to
oversee the cross- functional aspects of the project. The functional managers maintain control
over their resources and project areas.
• Balanced/Functional Matrix: A project manager is assigned to oversee the project.
Power is shared equally between the project manager and the functional managers. It brings the
best aspects of functional and projectized organizations. However, this is the most difficult
system to maintain as the sharing power is delicate proposition.
• Strong/Project Matrix: A project manager is primarily responsible for the project.
Functional managers provide technical expertise and assign resources as needed.
SPAN OF CONTROL
Span of control is the term now used more commonly in business management, particularly
human resource management. Span of control refers to the number of subordinates a supervisor
has.
In the hierarchical business organization of some time in the past it was not uncommon to see
average spans of 1 to 4 or even less. That is, one manager supervised four employees on average.
In the 1980s corporate leaders flattened many organizational structures causing average spans to
move closer to 1 to 10. That was made possible primarily by the development of inexpensive
information technology. As information technology was developed capable of easing many
middle manager tasks – tasks like collecting, manipulating and presenting operational
information – upper managers found they could hire fewer middle managers to do more work
managing more subordinates for less money.
The current shift to self-directed cross-functional teams and other forms of non-hierarchical
structures, have made the concept of span of control less salient.
Theories about the optimum span of control go back to V. A. Graicunas. In 1933 he used
assumptions about mental capacity and attention span to develop a set of practical heuristics.
Lyndall Urwick (1956) developed a theory based on geographical dispersion and the need for
face to face meetings. In spite of numerous attempts since then, no convincing theories have
been presented. This is because the optimum span of control depends on numerous variables
including organizational structure, available technology, the functions being performed, and the
competencies of the manager as well as staff. An alternative view is proposed by Elliott Jaques
(1988) that a manager may have up to as many immediate subordinates that they can know
personally in the sense that they can assess personal effectiveness.
Factors affecting span of control
These are the factors affecting span of control:
1. Geographical Location, if the branches of a business are widely dispersed, then the
manager will find it difficult to supervise each of them, as such the span on control will be
smaller.
2. Capability of workers, if workers are highly capable, need little supervision, and can be
left on their own, e.g.: Theory Y type of people, they need not be supervised much as they are
motivated and take initiative to work; as such the span of control will be wider.
3. Similarity of task, if the task that the subordinates are performing are similar, then the
span of control can be wider, as the manager can supervise them all at the same time. However,
of course the capability of the supervisor has to also be taken into consideration.
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ORGANIZATIONAL CHART
An organizational chart (often called organization chart, org chart, organigram(me), or
organogram(me)) is a diagram that shows the structure of an organization and the relationships
and relative ranks of its parts and positions/jobs. The term is also used for similar diagrams, for
example ones showing the different elements of a field of knowledge or a group of languages.
The French Encyclopédie published in France between 1751 and 1772 had one of the first
organizational charts of knowledge in general. The Scottish-American engineer Daniel
McCallum (1815–1878) is credited for creating the first organizational charts of American
business around 1854 [3].
An organizational chart of a company usually shows the managers and sub-workers who make
up an organization. It also shows the relationships between directors: managing director chief
executive officer: various departments... In many large companies the organization chart can be
large and incredibly complicated and is therefore sometimes dissected into smaller charts for
each individual department within the organization.
There are three different types of organization charts:
Hierarchical organization
A hierarchical organization is an organizational structure where every entity in the organization,
except one, is subordinates to a single other entity. This arrangement is a form of a hierarchy. In
an organization, the hierarchy usually consists of a singular/group of power at the top with
subsequent levels of power beneath them. This is the dominant mode of organization among
large organizations; most corporations, governments, and organized religions are hierarchical
organizations with different levels of management, power or authority. For example, the broad,
top-level overview of the general organization of the Catholic Church consists of the Pope, then
the Cardinals, then the Archbishops, and so on.
Members of hierarchical organizational structures chiefly communicate with their immediate
superior and with their immediate subordinates. Structuring organizations in this way is useful
partly because it can reduce the communication overhead by limiting information flow; this is
also its major limitation.
Matrix management
Matrix management is a type of organizational management in which people with similar skills
are pooled for work assignments. For example, all engineers may be in one engineering
department and report to an engineering manager, but these same engineers may be assigned to
different projects and report to a different engineering manager or a project manager while
working on that project. Therefore, each engineer may have to work under several managers to
get their job done.
Flat organization
Flat organization (also known as horizontal organization) refers to an organizational structure
with few or no levels of intervening management between staff and managers. The idea is that
well-trained workers will be more productive when they are more directly involved in the
decision making process, rather than closely supervised by many layers of management.
This structure is generally possible only in smaller organizations or individual units within larger
organizations. When they reach a critical size, organizations can retain a streamlined structure
but cannot keep a completely flat manager-to-staff relationship without impacting productivity.
Certain financial responsibilities may also require a more conventional structure. Some theorize
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that flat organizations become more traditionally hierarchical when they begin to be geared
towards productivity.
The flat organization model promotes employee involvement through a decentralized decision-
making process. By elevating the level of responsibility of baseline employees and eliminating
layers of middle management, comments and feedback reach all personnel involved in decisions
more quickly. Expected response to customer feedback becomes more rapid. Since the
interaction between workers is more frequent, this organizational structure generally depends
upon a much more personal relationship between workers and managers. Hence the structure can
be more time-consuming to build than a traditional hierarchical model.
Limitations
There are several limitations of organizational charts:
• If updated manually, organizational charts can very quickly become out-of-date,
especially in large organizations that changes their staff regularly.
• They only show 'formal relationships' and tell nothing of the pattern of human (social)
relationships which develop. They also often do not show horizontal relationships.
• They provide little information about the managerial style adopted (e.g. 'autocratic',
'democratic' or an intermediate style)
• In some cases, an organigraph may be more appropriate, particularly if one wants to show
non-linear, non-hierarchical relationships in an organization.
• It often does not include customers.
FORMS OF ORGANISATION STRUCTURE
Introduction
Organisation requires the creation of structural relationship among different departments
and the individuals working there for the accomplishment of desired goals.
In order to organize the efforts of individuals, one of the following types of
organisation structure may be set up.
1. Line organisation
2. Line and Staff Organisation
3. Functional organisation
4. Committee organisation
5. Project Organisation
6. Matrix Organisation
7. Free form Organisation
1. LINE ORGANISATION
The line organisation represent structure in a direct, vertical, relationship through which
authority flows. It is the simple form of organisation structure and is also know as scalar or
military organisation. Under this, the line of authority flows vertically downward from top to
bottom throughout the organisation. The question of authority is highest at the top and reduces at
each successive level down the hierarchy. Every person in the organisation is in the direct chain
of command.
Characteristics
The chief characteristics of the organisation.
1. It consists of direct vertical relationship .
2. Authority flows directly from the top of the organisation down to the lowest positions.
3. Whereas authority flows downward, response flows upward.
The chief characteristic of the type of organisation is the flow of authority from to to bottom
through various levels. The general manager issues instructions to various departmental heads,
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who pass it on to supervisors. The supervisors pass on the institution to the workers. Here each
member knows from whom he has to receive orders and to whom he can give orders. In the chart
for instance, the order flow from production manager to workers thorough line authorities viz,
the Chief Engineer, Production Engineer, Superintendent of the Manufacturing Plant, Senior
Supervisors and Foreman.
Kinds of Line Organisation
There are two types of line Organisation.
1. Pure line organisation and
2. Departmental Line organisation.
Pure Line Organisation
In pure line organisation activities at any one level are the same. Every employee, more
or less has the same type of work both the salesman organising sales under the sales manager.
One in looking after counter sales, and the other is looking after house to house sales.
Departmental Line Organisation
In a departmental line organisation there is the chief executive at the top under him, there
are a number of department each headed by departmental manger. Each departmental head
derives his authority from the general manager and delegates authority from the general manager
and delegates authority to his immediate subordinates. These subordinates, in term delegate
authority to their own subordinates and so on.
All departmental heads enjoy equal states and authority. Also they function
independently of one another. The production manager, for example will not interfere in the
decision-making by sales manager or finance manger and vice-versa.
Thus, in the production department there may be a number of foremen each having a
certain number of workers under him. But, as between one foreman and another, there is no
formal line of authority or responsibility. Each foreman is supposed to take his order from the
production manager and is responsible to him for planning and execution of the work assigned to
him.
Merits of Line Organisation
1. Simple: A line organisation is easy to establish. There are no complications in defining
the relationships. Moreover it is easily understood by workers.
2. Clear division of authority and responsibility:-Each individual has his area of authority
clearly indicated. Also he knows to whom he is responsible for his work performance.
3. Unity of Command:-There is unity of command, and control according to which an
employer can be given orders by one superior only. As such, a subordinate does not have to carry
out the orders of a number of superiors.
4. Speedy Action:- Because of a clear division of authority and responsibility as unity of
command and control. Decisions can be made and exercised promptly.
Sales Manager
Sales man through house to house Sales man Counter Sales
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5. Flexibility:- Each executives knows what he has to do and feels free to make suitable
adjustment to realize the goals ser for him.
Demerits
1. Lack of Specialisation
Line executives are responsible for both planning and execution of the work assigned to
them. This amount to relying to heavily on the capacity and capability of individual executive
few foremen for eg., can at one and the same time plan the work of their subordinates and also
guide them properly in doing it.
2. Over Burdening of Keymen.
An executive with line authority has complete control over his unit. Also he alone is held
responsible for the performance of his subordinates. This places a great burden on a single
individual.
If the individual concerned is sincere and competent, he will certainly succeed in his job.
3. Limited Communication
A line organisation does not usually proved for communication from the subordinates
upwards. In time, they may develop the habit of working as per orders of the superiors and lose
the sense of creativity and capacity for independent thinking. As they are not supposed to express
their opinions about those orders communicated to them even where a particular decision has
been incorrectly made, they have no alternative, but to confirm to the decisions. May do so
because they discriminate between a right and wrong decision. But, atleast some of them do so
deliberately, so that the superior is exposed for his incompetence.
4. Subjective Approach
A line executive has monopoly over decision-making, and he is not obliged to seek
advice or listen to suggestion from any quarter. This may result in orbitrariness in decision-
making, leaving sample. Scope for decision to be based on individual likes and dislikes of the
executive, rather than objectivity of expertise.
FUNCTIONAL ORGANISATION
Functional organisation is based on the concept of “Function al Foremanship” developed
by F.W.Taylor. He suggested that there should be eight specialists (rather than one foreman) to
guide workers in the factory. Four of then should be concerned with the planning of work and the
other four with the execution of plans.
Under functional organisation the organisation is divided into a number of functional
areas. Each function is managed by an expert in that area. Every functional area serves all other
areas in the organiation. For example, the purchase department handles purchases for all
departments. The executive in charge of a particular function issues orders throughout the
organisation with respect to his function only for example, the personnel manager will decide the
questions relating to salary, promotions, transfers, etc., for every employee in the organisation
whether he is in production, sales or any other department. Thus, an individual in the
organisation relieves instructions from several functional heads. Every functional expert enjoys
functional authority over subordinates in other departments. Within a functional department
every operating executive receives orders from several functional specialist for example, each
foreman in the factory receives orders from factory superintendent, chief Engineer chemist etc.,
Advantages
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1. Specalisation
Functional organisation promotes logical division work. Every functional head is an
expert in his area and all workers get the benefit of his expertise.
2. Reduction of Workload
Every functional head looks after one function only, and therefore burden on top
executives is reduce, mental and manual functions are seperated.
3. Better Control
One-man control is done away with and there is joint supervision of work. As a result
control becomes more effective.
4. Easier Staffing
Recruitment, selection and training of managers is simplified because each individual is
required to have knowledge of one functional area only.
5. Higher Efficiency
Every individual in the organisation concentrates on one function only and receives the
expert guidance from specialists. Therefore efficiency of operations is high. There is scope for
functional improvements through application of expert knowledge
6. Scope for Expansion
The success and growth of the organisation is not limited to the capabilities of a few line
managers. Standardisation and specialization facilitate mass production.
Disadvantages
1. Double Command
A person is accountable to several superiors. As a result, his responsibility and loyalty get
divided. In the absence of unity of command responsibility for results cannot easily be fixed.
2. Complexity
There are many cross-relationships which create confusion. A worker may receive
conflicting orders. He cannot easily understand his place in the organisation.
3. Delay in Decision-Making
A decision problem requires the involvement of several specialists. Therefore decision
making process in functional organisation is slow.
4. Problem of Succession
Executives at the lower level do not get opportunity of all round experience. This may
create problem in succession to top executive position.
5. Lack of Co-ordination
A functional manager tends to have a limited perspective. He thinks only in terms of his
own department rather than of the whole enterprise. He may be jealous of his prerogatives and
fight to promote his own specialty.
Functional organisation is generally suitable for large and medium-size concerns. But is
should be applied at higher levels because it does not work well at the lower levels.
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Managing Directors
Production Manager
Line and Staff Organisation
Line and staff organisation is a combination of line and function structures. Under it, line
authority flows in a vertical line in the same manner as in the line organisation. In addition, staff
specialists are attached to line positions to advise them on important matters. These specialists do
not have power to command over subordinates in other departments. They are purely of advisory
nature. When the work of line executives increases, they need advice information and help of
staff specialist. Therefore, staff positions are created to support the line managers. Every staff
specialist however has line authority over the subordinates in his own department. For example,
the chief accountant has command authority over accountants and clerks in the accounts
department. But he has only advisory relationship with other departments like production, sales
etc.,
Advantages
1. Expert Advice
Line managers receive specialized advice and assistance from staff experts. They are
enabled to discharge their responsibilities more efficiently.
2. Relief to Top Executives
Staffs carry out detailed investigation and supply information to line executives.
Therefore, the burden of line executives is reduced. They get ample chance for creative thinking
to generate new ideas.
3. Quality Decisions
Staff specialists provideadequate information and expert advice. As a result line
executives can take better decisions.
4. Training of Personnel.
As every executive concentrates in one field, he acquires valuable experience. Young
staff executives get opportunity of acquiring expertise in their respective fields of activity.
5. Flexibility
Chemist Superintendent of Production ENGINEER
Foremen Foremen Foremen Foremen
Workmen Workmen
Workmen
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Line and staff organisation is comparatively more flexible. As the organisation expands,
staff can be added to help the line managers. There is more opportunity for advancement because
a greater variety of responsible jobs is available.
-------------------------------------------------------------------------------------
-------------------------------------------------------------
Quality control inspector Repairs and Maintenance officer
Foreman shop A
Foreman Shop B Foreman Shop C
Workers
Disadvantages
1. Line and Staff Conflicts
The main problem of line and staff organisation is that conflict often arise between line
managers and staff specialist.
2. Confusion
In actual practice, it is often very difficult to define clearly the authority relationships
between line and staff. Different managers may not be clear as to what is the actual area of
operations and what is expected of them. In the absence of clear allocation of duties, co-
ordination may be hampered.
3. In Effective Staff
Staff personnel are not accountable for the results. Therefore, they may not take their
tasks seriously. The may also be ineffective due to lack of command authority.
Despite these limitations, line and staff organisation is very suitable for large
organizations. It provides ample scope for specialization without violating the unity of command.
Its success depends upon the degree of harmony that is maintained among line and staff.
However, it may not be useful for small organisation which cannot take full advantage of staff
experts.
Comparison of Line, functional and Line and Staff Organisation
Line Organization
S.No Advantages Disadvantages
1. Simple to establish Lack of Specialization
2. Clear division of authority and responsibility Overburdening of key executives.
3. Facilitates quick action. Rigid and inflexible.
4. Effective discipline Lack of continuity and stability.
5. Unity of Command Centralized and subjective control
6. It is stable.
Managing Director
Chief Accountant Works Manager Personnel Manager
Plant Superintendent
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Functional Organisation
S.No Advantages Disadvantages
1. Maximum Specialization Complicated and difficult to
understand.
2. Burden on top executives reduced Difficult to fix responsibility.
3. Higher degree of efficiency Week discipline.
4. Facilitates mass production. Conflicts among specialists.
5. Easier Staffin Ineffective co-ordination.
Line and Staff Organization
S.No Advantages Disadvantages
1. Planned Specialisation relief to line
managers
Confusion in relationships
2. Better decision due to application of expert
knowledge
Conflict between line and staff.
3. Greater opportunity for advancement. Ineffective and irresponsible staff.
Types of Staff
Staff may be divided into the following these categories.
1. Personal Staff.
Personal staff consists of these assistant position which provide advice and service to one
manager in carrying out his responsibilities such staff positions are known by different names,
eg, personal assistant, private secretary, executive assistant etc. such positions are generally
created at higher levels of the organisation. For example, a private secretary may be employed to
help the managing director in performing his job.
2. Specialised staff.
Such staff renders advice and service to all departments in the organisation. It consists of
specialist or experts in different areas like accounting, personnel, etc. these specialized staff
become reservoirs of special knowledge and experience. For example, a personnel department
may advise and guide all departments in the recruitment, selection, training, etc of employees.
3.General Staff.
It consists of a group of exports in different fields who are attached to the head office of
the organisation. It is generally employed to provide advice and assistance to the top
management.
Committee Organisation
A committee in a group of persons keeping formed to discuss and deliberate on problems
and to recommend or decide solutions. Its area of operation is determined by its constitution. It
may be authorized to deal with all or specific activities. Generally, the scope of its activities is
limited and it cannot handle problems not assigned to it. Members of the committee have
authority to go into details of the problems. The authority is expressed in terms of one member
one vote. A committee may be constituted at any level of organisation and its members may be
drawn from various departments.
Committees have become an important instrument of management in modern
organisation. They may be used for the following objectives.
i) To see line view points and consultation of various persons in the organisation.
ii) To give participation and representation to different groups of interests.
iii) To coordinate the activities of different departments.
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iv) To review the performance of certain units .
v) To facilitate communication and co-operation among diverse groups.
Types of Committees
On the basis of their constitution and functions, committees may be classified into the
following categories.
1. Standing or Adhoc Committee
A standing or permanent committee exists continuously for an indefinite period of time.
On the other hand, an adhoc, or temporary committee in constituted for a specific purpose. It is
dissolved when the purpose is served.
2. Executive or Advisory Committee
An executive committee has the authority to make and execute decisions. On the
contrary, an advisory committee has authority only to make recommendations.
3. Line or Staff Committee
A line committee is purely executive as it coordinates and controls the activities of
subordinates. But, a staff committee simply disseminates information, advice and assistance to
line managers.
4. Formal or Informal Committee
Formal committees are duly constituted by management as per organizational policies
and rules. They are a part of the organisation structure and they are depicted on the organisation
charts informal committees. On the other hand, are not constituted and no specific
responsibilities are assigned to them these arise when some employees informally meet and
discuss common problems due to the desire for group thinking. They cut across formal lines of
authority.
Advantages
Committees are used in management for the following reasons.
1. Group Judgment
In committee decision-making, combined judgement and experience of a group of
persons are brought together for the solutions of intricate problems. Group deliberations permity
a through analysis of the problem form different angles. There is exchange of ideas and opinions.
Therefore, committee decisions are likely to be more balanced, logical and objective than those
taken by a single person.
2.Effective Co-ordination
Committees serve as an important technique of unifying and integrating various points of
view by bringing together managers from different departments.
3. Motivation through participation
By allowing the people to participate in the decision making process committees help to
improve the loyalty and commitment of employees. Their involvement increases whole-hearted
co-operation in the implementation of decisions.
4. Representation of Diverse Interest Groups
Committees are a useful means for giving representation to various interest groups
representatives helps to avoid conflicts among groups and improves group cohesiveness.
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5. Management Development
By serving on various committees managers acquire valuable experience. Their outlook
and knowledge are widened and they are exposed to the art and science of decisions making.
6. Effective Communication
Committee are useful for quick transmission of information throughout the organisation.
The objectives, policies, and programmes of the organisation can be effectively communicated
through committee meetings.
7. Consolidation of Authority
Some special problems cannot be solved by a particular manager because of splintered
authority. No individual has adequate authority and has to consult others before taking the
decision. Committee permits management to consolidate authority that is splintered over several
departments. In this way, the decision can be taken without referring it to the higher authorities.
8. Check Against Misuse of Powers
Sometimes, committees are constituted to avoid the concentration of too much authority
in a single individual. The committee is vested with line authority to provide checks and balances
against the abuse of power. For example, board of directors serves to prevent misuse of power by
a single director similarly, in government, committees and boards are constituted to check the
administrative machinery.
9. Avoiding Action
Management may use committees to delay or postpone action. As a strategy, a committee
may be constituted to cool off agitation to over come resistance, to buy much needed time or to
avoid individual responsibility. In non-business organisations, committees are after used as a
device to cool off temper or to overcome presume and opposition from affected people.
Disadvantages
Committees suffer from the following limitations.
1. Expensive
Committee meetings are a costly affair both in terms of money and time. In addition to
the salary of the committee members, there are heavy incidental expenses like printing and
stationery, refreshment, conveyance, daily allowance etc.,
2. Slow Decisions
The functioning of a committee is slow and it cannot take quick decisions. A lot of time
is involved in calling meetings. Debate and discussion of the issue, etc., very often, the real issue
might be clouded and extraneous matters may creep into the decision committees tend to tbe
indecisive
3. Compromise Decisions
While reaching a decision, committees tend to adopt the path of least resistance. A
compromise or unanimity is sought to accommodate opposite viewpoints. There is leveling
effect. As a result, a committee decision is not necessarily the best decision, but merely an
acceptable one.
4. Tyranny of the Minority
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Very often, a few vocal members dominate committee deliberations. In an attempt to
make a unanimous decision, the minority group may be shown unwarranted consideration. This
is likely to leave behind a legally of bitterness, discontent and frustration. The force of a stronger
personality may overshadow and even sabotage committee action.
5. Divided Responsibility
The responsibility wrong decisions by a committee cannot be fixed on any one
individual. In such group responsibility, every member feels un accountable. Therefore,
committees may become a freeding ground evasion of responsibility and in efficiency.
6. Misuse of Committees
Committees are sometimes misused to avoid action to take unpleasant decision or to
delay decisions.
PROJECT ORGANISATION
Project and Matrix structure are of recent origin, developed after world war II. When an
organisation has to execute large prospects of long duration, may adopt a project organisation
under project organisation each project organisation each project organized as a semi-
autonomous project division. A project team consists specialists in different fields. The activities
of project team members are co-ordinated by a project manager successful completion of the
project once a project is complete, the regular project division undertakes a new project. A
simple project organisation is given below.
Project Organisation
Managing Director
Manager Manager
Project Division 1 Project division II
Engineer R & D Accounts Personnel Engineer R & D Accounts
Personnel
Manager officer Officer Manager Manager Officer
Clerks Clerks
Project organisation can be effectively applied under the following situations.
1. The project offers a unique or unfamiliar challenge
2. The project has definite goals and well-defined specifications.
3. Successful completion of the project is critical to the organisation.
4. The project is complex with interdependent tasks.
5. The assignment is to be completed within the given time limit.
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Advantages
1. Project organisation facilitates concentrated attention that a complex project requires. It
can be tailored to meet the specific requirements of the particular project.
2. It allows maximum use of specialized knowledge and skills.
3. It provides greater flexibility in handling specialized projects. It also provides better co-
ordination of organizational resources.
4. Project organisation provides greater check over the project work. Facilitates fixation of
individual responsibility for results. It makes for meaningful control.
Disadvantages
Project Organisation Suffers From The Following Weaknesses.
1. There is great uncertainty because the project manager has to deal with specialists from a
number of diverse fields. These specialists often have different approaches and interest.
2. The job of the project manager becomes very difficult due to lack of clearly defined
responsibility, lack of clear communication line and lack of performance standards for various
professional.
3. The project manager has to devise a decision process where information could be
monitored quickly and without much delay in decision. Decision-making is very difficult due to
unusual pressures from specialists and time limits for completion of the project.
4. The project manager cannot apply the traditional approach for motivating and controlling
the professionals. Lack of awareness of project problems, personal prejudice and different
orientations of professional create serious problems.
MATRIX ORGANISATION
Matrix organisation is a hybrid grid structure wherein pure project organisation is super
imposed on a functional structure. It is a two-dimentional pattern developed to meet the
problems of growing size and complexity of undertakings. Such under taking require on
organisation structure more flexible and technically oriented than the traditional and staff
structures. Matrix structure has been defined as any organisation that employs a multiple
command system that includes not only multiple command structure but also related support
mechanism and associated organizational culture and behaviour pattern. Thus, a matrix
organisation is characterized by an overlapping of command, control and behaviour patterns.
Matrix organisation
Managing Director
Production Personnel Engineer Finance
Project 1 Prod Pers Engineer Finance
Manager 1 Group Group Group Group
I II I I I
Project Production Personnel engineer Finance
Manager Group Group Group Group
II II II II II
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Advantages
1. It effectively focuses attention and resources on a single project. This leads to better
planning and control, which, in turn, help in completion of project in time.
2. It is more flexible than the traditional functional organisation. It can be more easily
adapted to changes in technology.
3. It stresses authority of knowledge rather than status. Therefore, services of professional
can be better utilized. They can test their professional competence and widen their scope to
contribute maximum towards the achievement of objectives.
4. Matrix structure provides motivation to personnel engaged in a project. It also improves
communication by encouraging direct contact between project manager and functional groups.
Disadvantages
1. It violates the principle of unity of command as functional groups receives orders from
both functional bosses and project manager. This may give rise to power struggle and
jurisdictional conflicts in the organisation.
2. The organizational relationship become very complex and there is great confusion among
personnel. They fair to identify their respective superiors as there are both formal and informal
relationships.
3. Co-ordination of people drawn temporarily from different functional department becomes
very difficult.
4. Joint decision-making and sharing of resources are required. In the absence of spirit of
understanding and accommodation vital decisions get delayed. Each executive may emphasis his
own area of the cost of the success of the organisation. This will result into conflict and projects
might not be completed in time.
Matrix structure can be successful only when there is an agreement amongst the key
executives regarding the sharing of authority and resources. There should be common
willingness among both functional manager and project managers to resolve the conflicts that
may arise due to the sharing of resources.
Free Form Organisation
A free form organisation is a rapidly changing adaptive, temporary system organized
around problems to be solved by groups of relative strangers with diverse professional skills.
Free form organisation is in many ways similar to the project and matrix organisation some of
the important characteristics of free form organisation are as follows.
1. Objectives
A free form organisation is created generally to accomplish long-range and development
oriented goals. But tasks, roles and relationships are not well-defined.
2. Environment
A free form organisation is a highly flexible and dynamic structure that is constituted in
response to a volatile and unstable external environment. Every design to meet effectively the
demands of the fast-changing environment.
3. Time Span
There is no rigid time span. The structure may last a week, a month or a year depending
on changes in the environment.
4. Structure
A free form organisation reduces the emphasis on positions, departments and other
formal units and on the organizational hierarchy. This is because problems differ from one
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situation to another. The structure is related to individual expertise in resolution of the problems
at hand. There is however, a mechanism to avoid any chaos or confusion that may result from
lack or a formal structure. Focus is on interpersonal and groups co-operation and co-ordination.
5. Authority
Specific tasks are assigned keeping in view individual expertise and competence. There
are no definite levels with which authority could be associated forever. Rather authority is
located wherever there is required competence and skills to accomplish the given task.
6. Roles
Job tasks in a free form organisation cannot be defined with certainty. Roles performed
are inter changeable depending on the nature and complexity of the ----------. There is no specific
chain of command
7. Profit Centres
Profit centers rather than functional departments are used. Profit centers place all
contributions to an integrated single unit with unified goals so that all gain or lose by the results.
Major functions are treated as profit centers.
8. Flexibility
The free form organisation is highly fluid and dynamic. It is so constituted that its
constituent units are operated quite flexibly. A small central group at the top is relatively stable.
It consists mainly of planners and those who evaluate and control. Operating divisions are highly
flexible and changing.
9. Communication
There are no fixed channels of communication focus is on team approach and not on
organisation charts or chain of command. Communication is in the form of advice and
information rather than orders and instructions.
10. Control
Criteria used for evaluating performance is both objective and subjective but the focus is
always on activities and result. Free form organisation is suitable for industries which operate in
a highly dynamic environment. Such an environment requires fast information procuring, quick
decisions and highly flexible units. Free form organisation is also useful in a democratic society.
Democratic values put greater emphasis on equality rather than subordinate relationships.
DEPARTMENTATION
Departmentation is a process resulting out of choice to group tasks according to some criterion.
The resultant process of departmentation includes decisions regarding segregating organizational
work, allocation of work to persons, telling all involved who is in charge and provide for the
support needed by those. Given the nature of these choices and decisions, departmentation and
the criteria or bases used for creating departments can have serious impact on the organization's
effectiveness.
Bases of departmentation
(a)Departmentation by numbers: Perhaps this is the simplest way to create groups or units within
the organization, if we assume that all the individuals available are possessing same skills,
abilities and other required qualifications. If so, and if the manager has a fair idea of how many
people might be required to carry out the task, the grouping by size is ready. Given this nature,
we might guess that this method is more useful where the task requires more of a muscle force
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(for example, an army battalion, or the building contractors' work-force) rather than use of
specialized skill.
(b) Departmentation by time of duty: Generally this basis is chosen when the operation or
organizational activity is required to be carried on round the clock. The staff which is divided as
per the time or shift basis might possess a set of different skills and abilities. Usually we find
departmentation using this method at the lower levels of the organization, including
manufacturing operations at the plant level, various security and control operations. Within the
service sector, we find medical or firefighting services available round the clock, all days of the
week.
(c) Departmentation by function: This widely used method of departmentation is found in almost
all organizations at some level and to some degrees. Groups are created such that within a group,
people perform same function or activity, which at the lower level can even be identical.
Example is a production department where all the jobs are focused on one activity, and the
machine operators or workers assigned to a particular job such as machining or turning might be
doing the same work. When work is divided like this, we have different groups performing
different activities, so after functional departmentation, coordination among these groups is
required.
(d) Departmentation by Process or Equipment: This basis of departmentation is sometimes
required by the technology itself as part of the production activity, where the transformation of
raw material into finished goods is achieved through performance of various processes. Example
is production unit of textiles, where workshops dedicated to processes like spinning, weaving,
dying etc. sequentially operate to manufacture the finished goods. For other organizations also,
sometimes the cost of specialized technology makes more sense for some facilities to be
organized by process and be shared. Example is the Electronic Data Processing unit in small a
organization.
(e) Departmentation by Location or territory: If an organization's activities are scattered and if
the differences across locations are significant in terms of customer preferences or the difficulty
in handling complex scheduling issues, or the importance of local participation in decision-
making , it makes sense to use departmentation by territory or location. The Indian Railway, for
example is divided along territorial lines into central railway, western railway and so on. This
method of departmentation is observed in the sales and service departments of many
organizations where the major departmentation at the first level below the head of the
organization is along functional line, but at the sub-department level, the sales department would
have geographic regions or zones catered to by regional or zonal offices.
(f) Departmentation by Product: as the name suggests, the grouping of activities is by the
product, which evolves mainly in organizations that have grown into multi-product set-up. The
usually preceding functional organization might not be supporting the growth and spread of
business across different types of products. The head of the organization might be supported by
product managers, in turn who might be supported by various functional sub-departments
dedicated to specific product. On a large scale, these product managers become heads of
divisions run like separate companies within the overall company. While this arrangement is
good for paying close attention to the market, the demand and the competitive scenario for each
of the products, it might be too expensive to maintain this type of departmentation unless the
sales volumes or profits are high enough to justify it.
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(g) Departmentation by Customer: One more method to pay close attention to the needs of the
customer is to create departments by customer types. We have within banks this type of
departments - retail banking for retail customers, corporate banking for business clients, separate
services for high net worth individuals, and so on. The rates offered for same products or
services might be different in case of some departments compared to the routine business with
retail individual customers, because again the volumes or the deal values might be very high. If
so, even the procedures and rules, the purchase process, payment methods etc. might be different
for these departments.
(h) Departmentation by Market or Distribution Channel: Companies who want to ensure that
their product reaches the intended customers through multiple channels so that the product
enjoys high saliency and provides easy reminder to the customers can consider this type of
departmentation. You can take the example of VIP luggage. This product is available in its
dedicated, company owned show rooms as well as through the distributors and retailers. Each of
the last two sell this brand along with several others. If so, once again you might wonder if the
commonly needed service functions such as accounting or human resource management would
be provided separately for each department managing a separate channel of distribution or
market of the same product. If so, there might be confusion also, apart from high costs. But
examining the structures of the organization, we would realize that departmentation by this type
is also usually combined with some other basis for the best results.
(i) Departmentation by Services: This type is especially meant for combination with other type(s)
of departmentation, because it refers to the type of internal services provided within the
organization and the number of people engaged in those services. The examples are Management
Information System (MIS), Human Resource Management, Legal, Secretarial Assistance,
House-keeping, Maintenance, Medical facilities and so on. These services are helpful in keeping
the business activities and the flow of revenue-generating processes smooth. However, when
dedicated in-house departments are created, sometimes they add to staff and operational costs
because the support work required may vary and during the down-side of fluctuating type of
business. Additionally, when separate departments such as MIS are created, they might generate
volumes of reports which are not found usable by the intended users. Finally, the separation of
service form the intended users sometimes leads to great importance attached to the service
itself, for example purchasing of most cost-effective parts, but it does not satisfy the need of the
intended users.
Key Factors in Departmentation
1. Taking advantage of specialization
2. Facilitating control
3. Aid to co-ordination
4. Balancing the costs
5. Preparation for departmentation
Advantages:
• Logical reflection of functions
• Maintain power and prestige of major functions
• Follow principle of occupational specialization
• Simplifies training
• Furnishes means of tight control at top
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Disadvantages:
• De-emphasis of overall company's objective
• Overspecializes and narrow viewpoint of key personnel
• Reduces coordination between functions
• Responsibility for profits is at the top only
• Slow adaptation to changes in environment
• Limits development of general managers
Need or importance of Departmentation
The basic need for Departmentation arises because of specialization of work and the limitation
on the number of subordinates that can be directly controlled by a superior. Therefore, if there is
no Departmentation, there would be serious limitation on the size of the organization. Grouping
of activities and consequently of the personnel into departments makes it possible to expand an
organization to any extent. However, when the departments are created to overcome this basic
limitation, they serve a number of other functions leading towards the organizational efficiency.
The major importance of the Departmentation is along to the following lines.
Advantages of the specialization: probably the most important single principal in an analysis of
the classical approach to organizational design is specialization to work. This principal affects
everyone every day. The basic advantage of the specialization lies in the terms of efficiency with
which the work is performed because of a person focused his attention on a narrow aspect of the
work and he gets mastery over that aspect naturally this result into performing the work more
efficiently. Thus if the managerial function is conceived as a set of activities facilitating the work
of the organization, these activities can be carries out more efficiently and effectively through the
division of work leading to a specialization of the managerial function.
Fixation of responsibility: Departmentation helps in fixing the responsibility and consequently
accountability for the results. Responsibility can be discharged properly when it is clear, precise,
and definite. Through Departmentation, the work is divided into small units where it can be
defined precisely and responsibility can be fixed accordingly. The manager concerned to whom
responsibility is given can be delegated corresponding authority. When the both responsibility
and authority are clearly specified, a manger knows what exactly he has to do in the
organization. This helps the manager to become more effective.
Development of the managers: Departmentation helps in the development of the managers.
Development is possible because of two factors. First, the managers focus their attention on
some specific problems which provides them effective on the job training. Second, managerial
need for further training can be identified easily because the manager's role is prescribed and
training can provide them opportunity to work better in their area of specialization. Thus need for
training and its methods can be easily identified.
Facility in the appraisal: managerial performance can be measured when the area of the
activities can be specified and standards in respect to these can be fixed. Departmentation
provides helps in both these areas. When a broader function is divided into small segments and a
particular segment is assigned to each manager, the area to be appraised is clearly known, the
factors segment affecting the performance can be pointed out more easily. Similarly, standards
for the performance can be fixed easily because the factors affecting the work performance can
be known clearly. Thus the performance appraisal will be more objective when departments have
been created.
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Feeling of autonomy: Departmentation provides motivation by developing feeling of
autonomy to the extent possible. Normally departments are created in the organization
with creation degree of autonomy and freedom. The manager in charge of a department
can take independent decisions within the overall framework of the organization. Thus he
enjoys satisfaction of being important to the organization. This feeling itself is a source of
better performance among managers.
ADVANTAGES OF DEPARTMENTATION
1. It contributes to systematic distribution of work among individuals.
2. It contributes to the attainment of specialisation
3. It simplifies managerial tasks.
4. By defining the duties and responsibilities of the executives clearly, departmentation
fixes accountability for the results. This makes the executive alert and efficient.
5. Departmentation increases the operating efficiency of the organisation.
6. By bringing about division of functions and responsibilities, departmentation provides
sufficient scope for growth and expansion.
7. By giving sufficient powers to the managers in charge of different departments and
allowing them to take their own decisions within the powers given to them,
departmentation increases the prestige of the managers.
8. Departmentation is helpful to the management to evaluate the performance of the various
departments and find out the departments which are not managed properly.
9. Departmentation facilities proper supervision, as the authority for making decisions is
diffused to the managers of the departments.
10. As the authority for making decisions is diffused to the managers of the departments
under departmentation, departmentation frees the top management from routine matters
and helps them concentrate on important matters.
11. Departmentation makes budget preparation easy.
12. Departmentation contributes to performance appraisal. It helps not only in fixing
responsibility but also in evaluation of work carried out by the individuals.
13. Departmentation facilities effective control by grouping activities and personnel within
well-defined areas, setting standards of performance and by preparing budget.
14. Departmentation contributes to the development of managerial personnel.
Types of Departmentalization
An organization can structure itself into departments in the following ways:
Functional Departmentalization. An organization can be organized into departments based
upon the respective functions each performs for the organization. For example, a manufacturing
company may create a production department, sales and marketing department, an accounting
department, and a human resources department. Functional departmentalization may be
advantageous as it can increase efficiency and expertise because all related activities are
performed in one place by one group of people that specialize in that activity.
Geographic Departmentalization. Organizing departments along geographic lines is often a
good idea for large multinational firms with offices around the world. All activities related to the
organization's activities in each region are handled by a department in that region. One advantage
of this method is that it ensures the development of expertise specific to the political, social, and
cultural needs of the region. Moreover, sending managers to work in each region provides
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excellent training for upper level management positions where a broad perspective is required for
success.
Product Departmentalization. An organization can also divide itself by its product lines. It
creates a department for each product and that department controls all activities related to the
product including development, production, marketing, sales, and distribution. This structure
provides the organization the advantage of developing personnel with a high level of expertise
and specialization for each of its products.
DELEGATION
Delegation (or deputation) is the assignment of authority and responsibility to another person
(normally from a manager to a subordinate) to carry out specific activities. However the person
who delegated the work remains accountable for the outcome of the delegated work. Delegation
empowers a subordinate to make decisions, i.e. it is a shift of decision-making authority from
one organizational level to a lower one. Delegation, if properly done, is not abdication. The
opposite of effective delegation is micromanagement, where a manager provides too much input,
direction, and review of delegated work. In general, delegation is good and can save money and
time, help in building skills, and motivate people. Poor delegation, on the other hand, might
cause frustration and confusion to all the involved parties. Delegation in IT network is also an
evolving field.
Elements of Delegation
Authority - in context of a business organization, authority can be defined as the power and
right of a person to use and allocate the resources efficiently, to take decisions and to give orders
so as to achieve the organizational objectives. Authority must be well- defined. All people who
have the authority should know what is the scope of their authority is and they shouldn’t
misutilize it. Authority is the right to give commands, orders and get the things done. The top
level management has greatest authority. Authority always flows from top to bottom. It explains
how a superior gets work done from his subordinate by clearly explaining what is expected of
him and how he should go about it. Authority should be accompanied with an equal amount of
responsibility. Delegating the authority to someone else doesn’t imply escaping from
accountability. Accountability still rest with the person having the utmost authority.
1.
Responsibility - is the duty of the person to complete the task assigned to him. A person who is
given the responsibility should ensure that he accomplishes the tasks assigned to him. If the tasks
for which he was held responsible are not completed, then he should not give explanations or
excuses. Responsibility without adequate authority leads to discontent and dissatisfaction among
the person. Responsibility flows from bottom to top. The middle level and lower level
management holds more responsibility. The person held responsible for a job is answerable for
it. If he performs the tasks assigned as expected, he is bound for praises. While if he doesn’t
accomplish tasks assigned as expected, then also he is answerable for that.
Accountability - means giving explanations for any variance in the actual performance from the
expectations set. Accountability can not be delegated. For example, if ’A’ is given a task with
sufficient authority, and ’A’ delegates this task to B and asks him to ensure that task is done well,
responsibility rest with ’B’, but accountability still rest with ’A’. The top level management is
most accountable. Being accountable means being innovative as the person will think beyond his
scope of job. Accountability, in short, means being answerable for the end result. Accountability
can’t be escaped. It arises from responsibility.
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For achieving delegation, a manager has to work in a system and has to perform following steps :
-
1. Assignment of tasks and duties
2. Granting of authority
3. Creating responsibility and accountability
Delegation of authority is the base of superior-subordinate relationship, it involves following
steps:-
Assignment of Duties - The delegator first tries to define the task and duties to the subordinate.
He also has to define the result expected from the subordinates. Clarity of duty as well as result
expected has to be the first step in delegation.
Granting of authority - Subdivision of authority takes place when a superior divides and shares
his authority with the subordinate. It is for this reason, every subordinate should be given enough
independence to carry the task given to him by his superiors. The managers at all levels delegate
authority and power which is attached to their job positions. The subdivision of powers is very
important to get effective results.
Creating Responsibility and Accountability - The delegation process does not end once
powers are granted to the subordinates. They at the same time have to be obligatory towards the
duties assigned to them. Responsibility is said to be the factor or obligation of an individual to
carry out his duties in best of his ability as per the directions of superior. Responsibility is very
important. Therefore, it is that which gives effectiveness to authority. At the same time,
responsibility is absolute and cannot be shifted. Accountability, on the others hand, is the
obligation of the individual to carry out his duties as per the standards of performance.
Therefore, it is said that authority is delegated, responsibility is created and accountability is
imposed. Accountability arises out of responsibility and responsibility arises out of authority.
Therefore, it becomes important that with every authority position an equal and opposite
responsibility should be attached.
Therefore every manager,i.e.,the delegator has to follow a system to finish up the delegation
process. Equally important is the delegate’s role which means his responsibility and
accountability is attached with the authority over to here.
Importance of Delegation:
1. Effective management:
In the delegation process managers pass routine work to the subordinates. So they are free to
concentrate on other important matters. The main job of managers is to get the work done
effectively and by delegating the authorities and responsibilities managers can get the work done
effectively and efficiently from the subordinates.
2. Employees’ Development:
As a result of delegation employees get more opportunities to utilise their talents. It allows them
to develop those skills which help them to perform complex task. Delegation help in making
better future managers by giving them chance to use their skills, gain experience of work related
to higher job position.
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3. Motivation of employees:
In the delegation when the manager is sharing his responsibilities and authority with the
subordinates it motivates the subordinates as they develop the feeling of belongingness and trust
which is shown to them by their superiors. Some employees can be motivated by such kind of
non-financial incentives.
4. Facilitates organisational growth:
In the process of delegation when the managers are passing their responsibility and authority to
the subordinates they keep in mind the qualification and capability of all the subordinates. This
leads to division of work and specialisation which is very important for organisational growth.
5. Basis of Management Hierarchy:
Delegation establishes superior-subordinate relationship which is the base for hierarchy of
managers. The extent of power delegated to subordinates decides who will report to whom, and
the power at each job position forms the Management Hierarchy.
6. Better Coordination:
In delegation systematically responsibility and authority is divided and employees are made
answerable for non-completion of task. This systematic division of work gives clear pictures of
work to everyone and there is no duplication of work clarity in duties assigned and reporting
relationship brings effective coordination in the organisation.
7. Reduces the work load of managers:
In the process of delegation, the managers are allowed to share their responsibilities and work
with the subordinates which help the managers to reduce their work load. With the process of
delegation the managers can pass all their routine work to the subordinates and concentrate on
important work. Without delegation managers will be overburdened with the work.
8. Basis of superior-subordinate relationship:
In the delegation process only two parties are involved that is superior and subordinate. If
superiors share or pass their responsibilities and authorities to the subordinates it indicates good
relationship between the superior and subordinate because superiors will transfer their
responsibility and authority to their subordinates only when they have trust in them. So
delegation improves the relations between superiors and subordinates.
PRINCIPLES OF DELEGATION OF AUTHORITY
1. Principle of parity of authority and responsibility- parity of authority and responsibility is
one of the important principles of delegation of authority. There is equality in assigned task and
power to do the work. Authority to the subordinates is given by the superior on the basis of
assigned task. So Authority to the subordinates is given nether more or less than the task
otherwise their can be improper utilization of authority and mismanagement of task.
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2. Principle of absoluteness of responsibility- according to it, responsibility can’t be delegated.
Only authority can be delegated. The person who delegates authority is himself responsible for
his seniors.
3. Principle of unity of command- according to it, subordinates must be commanded by one
superior, they should take their task from one superior and should be accountable fro their
responsibility toward the superior level of operation
4. Principle of functional definition of authority and responsibility- as per this principle.
Duties and task assigned by the superior and the authority given to fulfill the task should be
clearly explained and decided. But these subordinates can know about the limit of one’s right,
duties and responsibility.
5. The scalar chain- according to it, authority flows from top to bottom. So that scalar chain is
the basis of relationship between the superior and subordinates. It emphasizes the relation
between superior and subordinates by which delegation will be easier.
Relationship between Authority and Responsibility
Authority is the legal right of person or superior to command his subordinates while
accountability is the obligation of individual to carry out his duties as per standards of
performance Authority flows from the superiors to subordinates,in which orders and
instructions are given to subordinates to complete the task. It is only through authority, a
manager exercises control. In a way through exercising the control the superior is demanding
accountability from subordinates. If the marketing manager directs the sales supervisor for 50
units of sale to be undertaken in a month. If the above standards are not accomplished, it is the
marketing manager who will be accountable to the chief executive officer. Therefore, we can
say that authority flows from top to bottom and responsibility flows from bottom to top.
Accountability is a result of responsibility and responsibility is result of authority. Therefore,
for every authority an equal accountability is attached.
Differences between Authority and Responsibility
Authority Responsibility
It is the legal right of a person or
a superior to command his
subordinates.
It is the obligation of subordinate to perform the
work assigned to him.
Authority is attached to the
position of a superior in concern.
Responsibility arises out of superior-subordinate
relationship in which subordinate agrees to carry
out duty given to him.
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Authority can be delegated by a
superior to a subordinate
Responsibility cannot be shifted and is absolute
It flows from top to bottom. It flows from bottom to top.
Principles of Delegation
The principles of delegation are as follows: -
1. Principle of result excepted- suggests that every manager before delegating the powers
to the subordinate should be able to clearly define the goals as well as results expected from
them. The goals and targets should be completely and clearly defined and the standards of
performance should also be notified clearly. For example, a marketing manager explains the
salesmen regarding the units of sale to take place in a particular day, say ten units a day have to
be the target sales. While a marketing manger provides these guidelines of sales, mentioning the
target sales is very important so that the salesman can perform his duty efficiently with a clear
set of mind.
2. Principle of Parity of Authority and Responsibility- According to this principle, the
manager should keep a balance between authority and responsibility. Both of them should go
hand in hand.
According to this principle, if a subordinate is given a responsibility to perform a task, then at the
same time he should be given enough independence and power to carry out that task effectively.
This principle also does not provide excessive authority to the subordinate which at times can be
misused by him. The authority should be given in such a way which matches the task given to
him. Therefore, there should be no degree of disparity between the two.
3. Principle of absolute responsibility- This says that the authority can be delegated but
responsibility cannot be delegated by managers to his subordinates which means responsibility is
fixed. The manager at every level, no matter what is his authority, is always responsible to his
superior for carrying out his task by delegating the powers. It does not means that he can escape
from his responsibility. He will always remain responsible till the completion of task. Every
superior is responsible for the acts of their subordinates and are accountable to their superior
therefore the superiors cannot pass the blame to the subordinates even if he has delegated certain
powers to subordinates example if the production manager has been given a work and the
machine breaks down. If repairmen is not able to get repair work done, production manager will
be responsible to CEO if their production is not completed.
4. Principle of Authority level- This principle suggests that a manager should exercise his
authority within the jurisdiction / framework given. The manager should be forced to consult
their superiors with those matters of which the authority is not given that means before a
manager takes any important decision, he should make sure that he has the authority to do that on
the other hand, subordinate should also not frequently go with regards to their complaints as well
as suggestions to their superior if they are not asked to do. This principle emphasizes on the
degree of authority and the level upto which it has to be maintained.
Delegation means assigning tasks to others.
Advantages:
1. it increases the level of motivation of employees.
2. Allows for new and innovative ideas from the employees.
3. Leads to development of employees' creative and decision making skills.
4. Improved decision quality
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5. time saving - we can achieve 10 to 20 times more through delegation than we can by doing all
the work by ourselves.
STEPS IN DELEGATION
Step 1: Know What to Delegate
In every business, there are some things that can be delegated and others that can not. For
example, you should probably think twice before delegating tasks that involve sensitive or
confidential client information. And you may not want to delegate a task that hasn’t been clearly
defined.
Step 2: Be Picky with Who You Choose
This step is one of the most important and the most difficult. It takes a lot of time to find people
you can delegate to that meet all of the necessary criteria for a successful relationship:
• Trust and loyalty
• Necessary skills
• Adequate availability
• Work ethic comparable to yours
• Positive performance history
It may take time, but by having thorough discussions about your expectations and the other
person’s ability, you can make a good decision about who you choose to bring into the fold.
Step 3: Provide Documentation and Clear Instructions
Just as it is vitally important in business continuity planning, having documentation that clearly
outlines the details of the work and provides all of the necessary information is important in
delegation.
But don’t leave it at that. Once you have shared all of the necessary information, take time to
review the specifics and answer any questions that may arise.
Step 4: Track Work and Provide Feedback
When you’ve found your team and assigned the work, don’t simply write it off and forget about
it. It makes sense to follow along with the work being completed to ensure it’s being done
correctly and to your specifications.
You certainly don’t want to micromanage work that you delegate, but you should be kept in the
loop so you can monitor the work and provide feedback for improvements. And your goal should
be to remain available to all parties so you can address and resolve any potential questions or
problems.
Step 5: Make it Ongoing
Your business responsibilities change, so your delegation needs will also change. On a
regular basis, take a look at what you have coming in and who you are delegating to in order to
determine if you need to outsource more work and possibly expand your team. By making this a
regular evaluation process in your business.
Decentralization
Decentralization or decentralization (see spelling differences) is the process of dispersing
decision-making governance closer to the people and/or citizens. It includes the dispersal of
administration or governance in sectors or areas like engineering, management science, political
science, political economy, sociology and economics. Decentralization is also possible in the
dispersal of population and employment. Law, science and technological advancements lead to
highly decentralized human endeavors.
"While frequently left undefined (Pollitt, 2005), decentralization has also been assigned many
different meanings (Reichard & Borgonovi, 2007), varying across countries (Steffensen &
Trollegaard, 2000; Pollitt, 2005), languages (Ouedraogo, 2003), general contexts (Conyers,
1984), fields of research, and specific scholars and studies." (Dubois and Fattore 2009)
A central theme in decentralization is the difference between:
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• a hierarchy, based on authority: two players in an unequal-power relationship; and
• an interface: a lateral relationship between two players of roughly equal power.
The more decentralized a system is, the more it relies on lateral relationships, and the less it can
rely on command or force. In most branches of engineering and economics, decentralization is
narrowly defined as the study of markets and interfaces between parts of a system. This is most
highly developed as general systems theory and neoclassical political economy.
Definitions of decentralization:
1. “Decentralization refers to tire systematic effort to delegate to the lowest levels all authority
except that which can only be exercised at central points.” —Louis A. Allen
2. “Decentralization means the division of a group of functions and activities into relatively
autonomous units with overall authority and responsibility for their operation delegate to time of
cacti unit.’—Earl. P. Strong
3. “Decentralization is simply a matter of dividing up the managerial work and assigning specific
duties to the various executive skills.”
—Newman, summer and Wairen
Thus, decentralization is concerned with the decentralization of decision-making authority to the
lower levels in managerial hierarchy.
Degree of Decentralisation:
The degree of decentralisation is determined by:
(a) Nature of the authority delegated,
(b) How far down in the organisation it is delegated,
(c) How consistently it is delegated.
So, the degree of decentralisation is determined by the authority given. For example, manager A
in a company is given the authority to buy certain material worth Rs. 1500 whereas manager B is
allowed to do similar type of work to the extent of Rs. 4500.
It is clear that the degree of decentralisation is less in case of A. Similarly decisions about the
matters referred, measure the degree of decentralisation depending upon the power to take
decisions vested in an officer without the need of getting consent of somebody else.
Advantages of Decentralisation:
1. Reduces the burden on top executives:
Decentralisation relieves the top executives of the burden of performing various functions.
Centralisation of authority puts the whole responsibility on the shoulders of an executive and his
immediate group. This reduces the time at the disposal of top executives who should concentrate
on other important managerial functions. So, the only way to lessen their burden is to
decentralise the decision-making power to the subordinates.
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2. Facilitates diversification:
Under decentralization, the diversification of products, activites and markets etc., is facilitated. A
centralised enterprise with the concentration of authority at the top will find it difficult and
complex to diversify its activities and start the additional lines of manufacture or distribution.
3. To provide product and market emphasis:
A product loses its market when new products appear in the market on account of innovations or
changes in the customers demand. In such cases authority is decentralised to the regional units to
render instant service taking into account the price, quality, delivery, novelty, etc.
4. Executive Development:
When the authority is decentralised, executives in the organisation will get the opportunity to
develop their talents by taking initiative which will also make them ready for managerial
positions. The growth of the company greatly depends on the talented executives.
5. It promotes motivation:
To quote Louis A. Allen, “Decentralisation stimulates the formation of small cohesive groups.
Since local managers are given a large degree of authority and local autonomy, they tend to weld
their people into closely knit integrated groups.” This improves the morale of employees as they
get involved in decision-making process.
6. Better control and supervision:
Decentralisation ensures better control and supervision as the subordinates at the lowest levels
will have the authority to make independent decisions. As a result they have thorough knowledge
of every assignment under their control and are in a position to make amendments and take
corrective action.
7. Quick Decision-Making:
Decentralisation brings decision making process closer to the scene of action. This leads to
quicker decision-making of lower level since decisions do not have to be referred up through the
hierarchy.
Disadvantages of Decentralisation:
Decentralisation can be extremely beneficial. But it can be dangerous unless it is carefully
constructed and constantly monitored for the good of the company as a whole.
Some disadvantages of decentralisation are:
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1. Uniform policies not followed:
Under decentralisation, it is not possible* to follow uniform policies and standardised
procedures. Each manager will work and frame policies according to his talent.
2. Problem of Co-Ordination:
Decentralisation of authority creates problems of co-ordination as authority lies dispersed widely
throughout the organisation.
3. More Financial Burden:
Decentralisation requires the employment of trained personnel to accept authority, it involves
more financial burden and a small enterprise cannot afford to appoint experts in various fields.
4. Require Qualified Personnel:
Decentralisation becomes useless when there are no qualified and competent personnel.
5. Conflict:
Decentralisation puts more pressure on divisional heads to realize profits at any cost. Often in
meeting their new profit plans, bring conflicts among managers.
Types of Decentralization
Types of decentralization include political, administrative, fiscal, and market decentralization.
Drawing distinctions between these various concepts is useful for highlighting the many
dimensions to successful decentralization and the need for coordination among them.
Nevertheless, there is clearly overlap in defining any of these terms and the precise definitions
are not as important as the need for a comprehensive approach. Political, administrative, fiscal
and market decentralization can also appear in different forms and combinations across
countries, within countries and even within sectors.
1.Political Decentralization
Political decentralization aims to give citizens or their elected representatives more power in
public decision-making. It is often associated with pluralistic politics and representative
government, but it can also support democratization by giving citizens, or their representatives,
more influence in the formulation and implementation of policies. Advocates of political
decentralization assume that decisions made with greater participation will be better informed
and more relevant to diverse interests in society than those made only by national political
authorities. The concept implies that the selection of representatives from local electoral
jurisdictions allows citizens to know better their political representatives and allows elected
officials to know better the needs and desires of their constituents.
Political decentralization often requires constitutional or statutory reforms, the development of
pluralistic political parties, the strengthening of legislatures, creation of local political units, and
the encouragement of effective public interest groups.
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2.Administrative Decentralization
Administrative decentralization seeks to redistribute authority, responsibility and financial
resources for providing public services among different levels of government. It is the transfer of
responsibility for the planning, financing and management of certain public functions from the
central government and its agencies to field units of government agencies, subordinate units or
levels of government, semi-autonomous public authorities or corporations, or area-wide, regional
or functional authorities. The three major forms of administrative decentralization -- deconcentration, delegation, and devolution -- each have different characteristics.
Deconcentration. Deconcentration--which is often considered to be the weakest form of
decentralization and is used most frequently in unitary states-- redistributes decision making
authority and financial and management responsibilities among different levels of the central
government. It can merely shift responsibilities from central government officials in the capital
city to those working in regions, provinces or districts, or it can create strong field administration
or local administrative capacity under the supervision of central government ministries.
Delegation. Delegation is a more extensive form of decentralization. Through delegation central
governments transfer responsibility for decision-making and administration of public functions
to semi-autonomous organizations not wholly controlled by the central government, but
ultimately accountable to it. Governments delegate responsibilities when they create public
enterprises or corporations, housing authorities, transportation authorities, special service
districts, semi-autonomous school districts, regional development corporations, or special project
implementation units. Usually these organizations have a great deal of discretion in decision-
making. They may be exempt from constraints on regular civil service personnel and may be
able to charge users directly for services.
Devolution. A third type of administrative decentralization is devolution. When governments
devolve functions, they transfer authority for decision-making, finance, and management to
quasi-autonomous units of local government with corporate status. Devolution usually transfers
responsibilities for services to municipalities that elect their own mayors and councils, raise their
own revenues, and have independent authority to make investment decisions. In a devolved
system, local governments have clear and legally recognized geographical boundaries over
which they exercise authority and within which they perform public functions. It is this type of
administrative decentralization that underlies most political decentralization.
3.Fiscal Decentralization
Financial responsibility is a core component of decentralization. If local governments and private
organizations are to carry out decentralized functions effectively, they must have an adequate
level of revenues –either raised locally or transferred from the central government– as well as the
authority to make decisions about expenditures. Fiscal decentralization can take many forms,
including a) self-financing or cost recovery through user charges, b) co-financing or co-
production arrangements through which the users participate in providing services and
infrastructure through monetary or labor contributions; c) expansion of local revenues through
property or sales taxes, or indirect charges; d) intergovernmental transfers that shift general
revenues from taxes collected by the central government to local governments for general or
specific uses; and e) authorization of municipal borrowing and the mobilization of either national
or local government resources through loan guarantees. In many developing countries local
governments or administrative units possess the legal authority to impose taxes, but the tax base
is so weak and the dependence on central government subsidies so ingrained that no attempt is
made to exercise that authority.
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4.Economic or Market Decentralization
The most complete forms of decentralization from a government's perspective are privatization
and deregulation because they shift responsibility for functions from the public to the private
sector. Privatization and deregulation are usually, but not always, accompanied by economic
liberalization and market development policies. They allow functions that had been primarily or
exclusively the responsibility of government to be carried out by businesses, community groups,
cooperatives, private voluntary associations, and other non-government organizations.
Privatization. Privatization can range in scope from leaving the provision of goods and services
entirely to the free operation of the market to "public-private partnerships" in which government
and the private sector cooperate to provide services or infrastructure. Privatization can include:
1) allowing private enterprises to perform functions that had previously been monopolized by
government; 2) contracting out the provision or management of public services or facilities to
commercial enterprises indeed, there is a wide range of possible ways in which function can be
organized and many examples of within public sector and public-private institutional forms,
particularly in infrastructure; 3) financing public sector programs through the capital market
(with adequate regulation or measures to prevent situations where the central government bears
the risk for this borrowing) and allowing private organizations to participate; and 4) transferring
responsibility for providing services from the public to the private sector through the divestiture
of state-owned enterprises.
Deregulation. Deregulation reduces the legal constraints on private participation in service
provision or allows competition among private suppliers for services that in the past had been
provided by the government or by regulated monopolies. In recent years privatization and
deregulation have become more attractive alternatives to governments in developing countries.
Local governments are also privatizing by contracting out service provision or administration.
CENTRALISATION
Centralization implies that a majority of the decisions concerning the work being
performed are not made by those doing the work but at higher levels in the organisation. In other
words, decision making authority is concentrated at the top levels of management.
Advantages
1. Personal Leadership
Centralisation provides opportunity for personal leadership. Personal leadership is
important for the success of small firms and during the early stages of big firms. In both the
cases the operations are relatively on a small scale and the top executive can concentrate
authority with himself. This will result in quick decisions and imagination action which are
essential for success in business.
2. Uniformity of Action
Centralisation is essential when an enterprise wants all its operating units to do the same
thing in the same manner. Only the top management having central authority for decision-
making can being uniformity of procedures on the part of operating units.
3. Flexibility
Centralization permits greater flexibility in the utilization of existing personnel and
facilitates proper handling of fluctuations in the volume of work.
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4. Integration
Certain degree of centralization is essential for co-ordinating different operations of the
organisation centralization control helps to keep all the parts of the organisation moving
harmoniously towards the common objective. Thus, centralization facilitates integration of
efforts.
5. Handling Emergencies
Emergent conditions threaten the survival of business. Centralization enables the top
management to handle emergent situation in a rational manner.
6. Utilisation of Personnel
Centralised structure permit better utilization of highly qualified personnel in technical
and administrative areas. It reduces wastage of efforts by avoiding duplication.
Disadvantages
1.Problems in Decision-Making
Under centralization, most of the decisions are taken at higher levels. This may cause
delays and cost in making the decision.
2. Overburdening
Centralization of authority increases the burden on top managers.
3. Lack of Executive Development.
Under centralized structure lower level executives get very little opportunity for
developing decision-making skills.
4. Low Morale
Centralisation hampers the motivation and morale of employees as their freedom is
reduced.
CENTRALISATION- ADVANTAGES AND DISADVANTAGES.
S.NO ADVANTAGES DISADVANTAGES
1. Effective utilization of talents of the top leader. Delay in decision-making and
communication.
2. All parts move together. Al unifying force that
integrates all operations.
Centralized power and authority
may be abused.
3. A strong co-ordinated top management team is
developed.
Inhibits development of lower level
people.
4. Uniformity of policy and places Low motivation and morale of
lower level people.
5. Best-arrangement to tackle emergencies. Resources
and information can be mobilized quickly and
effectively.
Fortunes of the enterprise depend
on the health and vitality of top
executives.
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TYPES OF AUTHORITY:
3 main types of authority can exist within an organization:
1. Line Authority
2. Staff Authority
3. Functional Authority
Each type exists only to enable individuals to carry out the different types of responsibilities with
which they have been charged.
LINE AUTHORITY:
The most fundamental authority within an organization, reflects existing superior-subordinate
relationships. It consists of the right to make decisions and to give order concerning the
production,sales or finance related behaviour of subordinates.
In general, line authority pertains to matters directly involving management system production,
sales, finance etc., and as a result with the attainment of objectives.
People directly responsible for these areas within the organization are delegated line authority to
assist them in performing their obligatory activities.
STAFF AUTHORITY:
Staff authority consists of the right to advise or assist those who possess line authority as well as
other staff personnel.
Staff authority enables those responsible for improving the effectiveness of line personnel to
perform their required tasks.
Line and Staff personnel must work together closely to maintain the efficiency and
effectiveness of the organization. To ensure that line and staff personnel do work together
productively, management must make sure both groups understand the organizational mission,
have specific objectives, and realize that they are partners in helping the organization reach its
objectives.
Size is perhaps the most significant factor in determining whether or not an organization
will have staff personnel. The larger the organization, the greater the need and ability to employ
staff personnel.
As an organization expands, it usually needs employees with expertise in diversified
areas. Although small organizations may also require this kind of diverse expertise, they often
find it more practical to hire part time consultants to provide it is as needed rather than to hire
full time staff personnel, who may not always be kept busy.
LINE – STAFF RELATIONSHIPS :
e.g. A plant manager has line authority over each immediate subordinate, human resource
manager, the production manager and the sales manager. However, the human resource manager
has staff authority in relation to the plant manger, meaning the human resource manager has staff
authority in relation to the plant manager, meaning the human resource manager possesses the
right to advise the plant manager on human resource matters. Still final decisions concerning
human resource matters are in the hands of the plant manager, the person holding the line
authority.
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ROLE OF STAFF PERSONNEL:
Harold Stieglitz has pinpointed 3 roles that staff personnel typically perform to assist line
personnel:
1. The Advisory or Counseling Role : In this role, staff personnel use their professional
expertise to solve organizational problems. The staff personnel are, in effect, internal
consultants whose relationship with line personnel is similar to that of a professional and
a client.
2. The Service Role : Staff personnel in this role provide services that can more efficiently
and effectively be provided by a single centralized staff group than by many individuals
scattered throughout the organization. This role can probably best be understood if staff
personnel are viewed as suppliers and line personnel as customers.
3. The Control Role : Staff personnel help establish a mechanism for evaluating the
effectiveness of organizational plans.
The role of staff in any organization should be specifically designed to best meet the needs of
that organization.
CONFLICT IN LINE – STAFF RELATIONSHIP:
From the view point of line personnel, conflict is created because staff personnel tend to
• Assume Line Authority
• Do not give Sound Advice
• Steal Credit for Success
• Fail to Keep line personnel informed of their activities
• Do not see the whole picture.
From the view point of Staff Personnel, conflict is created because line personnel do not
make proper use of staff personnel, resist new ideas and refuse to give staff personnel enough
authority to do their jobs.Staff Personnel can often avert line-staff conflicts if they strive to
emphasize the objectives of the organization as a whole, encourage and educate line personnel in
the appropriate use of staff personnel, obtain any necessary skills they do not already possess,
and deal intelligently with the resistance to change rather than view it as an immovable barrier.
Line personnel can do their part to minimize line staff conflict by sing staff personnel wherever
possible, making proper use of the staff abilities, and keeping staff personnel appropriately
informed.
FUNCTIONAL AUTHORITY:
Functional authority consists of the right to give orders within a segment of the organization in
which this right is normally non existent.This authority is usually assigned to individuals to
complement the line or staff authority they already possess. Functional Authority generally
covers only specific task areas and is operational only for designated amounts of time. It is given
to individuals who, in order to meet responsibilities in their own areas, must be able to exercise
some control over organization members in other areas.
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SUMMARY
Organization: An organization is a social group which distributes tasks for a collective goal. The word
itself is derived from the Greek word organon, itself derived from the better-known word ergon - as we
know `organ` - and it means a compartment for a particular job.
Definition of organization: According to Harold Koontz and O'Donnell, "Organizing involves the
grouping of activities necessary to accomplish goals and plans, the assignment of these activities to
appropriate departments and the provision for authority delegation and co-ordination.”
Nature of organization:
• Outlining the objectives
• Identifying and enumerating the activities
• Assigning the duties
• Defining and granting the authority
• Creating authority relationship
Importance of organisation:
• Facilities Administration
• Facilitates growth, expansion and diversification
• Permits Optimum Utilization of Resources
• Stimulates Creativity
Process of organization:
• Review plans and objectives
• Determine the work activities necessary to accomplish objectives
• Classify and group the necessary work activities into manageable units
• Assign activities and delegate authority
• Design a hierarchy of relationships
Principles of sound organisation:
• Organization Objective
• Division of Work
• Responsibility and Authority
• Scalar Chain
• Unity of Command
• Flexibility
• Coordination
Organizational structure types:
• Pre-bureaucratic structures
• Bureaucratic structures
• Post-bureaucratic
• Functional structure
• Divisional structure
• Matrix structure
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UNIT-III:
Section-A
1. Define staff organization.
2. ___________is a diagrammatical form which shows the important aspects of an organization.
3. What you meant by organization?
4. The word Organisation is derived from the word________________.
5. List out any two functions of organization.
6. Line organization is also called as ______________.
7. ____________is the oldest and simplest type of organization.
8. Who is route clerk?
9. In _________________organization various specialists are selected for various functions
performed in an organization.
10. Define committee organization.
Section-B
1. Define committee organization and explain the types of committee.
2. Describe the advantages and disadvantages of committee organization.
3. Define departmentation and explain the process of departmentation.
4. Define organization chart and state its contents.
5. Explain the types of organization chart.
6. Explain the principles of organization chart.
7. What are the advantages of organization chart?
8. What are the dis-advantages of organization chart?
9. Define organization and explain the functions of organization.
10. Explain the nature of organization.
Section-C
1. Explain the principles of sound organization.
2. Explain the importance of organization.
3. Explain the various types of organization.
4. Define matrix organization. Explain the merits and demerits of matrix organization.
5. Explain the advantages and disadvantages of line organization
6. State the factors in span of management.
7. Describe the various types of departmentation.
8. Explain the various types of delegation.
9. What are the problems in delegation?
10. Explain the advantages and disadvantages of decentralization.
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UNIT-IV:
Staffing and Training
Staffing – Meaning – Importance – Staffing Process – Job Evaluation - Recruitment, selection
and placement – Training and development – Methods of Training – Training Programme –
Performance Appraisal and Promotion.
Motivation: Motivation is the core of effective management action. The phrase ‘motivation is
the core of management implies that it is the central task of management to motivate his
subordinates to work for the attainment of common organizational goals’.
Motivation is the process of influencing or stimulating a person to take action by creating
a work environment whereby the goals of the organization and the needs of the people are
satisfied. In an organization, people are said to be motivated if they perform their jobs effectively
and efficiently.
Motivation is not a simple concept. It involves a complex combination of individuals
needs, tensions, discomforts and expectations.
Motivation is a theoretical construct, used to explain behavior. It is the scientific word used to
represent the reasons for our actions, our desires, our needs, etc. Motives are hypothetical
constructs, used to explain why people do what they do.
A motive is what prompts a person to act in a certain way or at least develop an
inclination for specific behavior.[1] For example, when someone eats food to satisfy the need of
hunger, or when a student does his/her work in school because they want a good grade. Both
show a similar connection between what we do and why we do it. According to Maehr and
Meyer, "Motivation is a word that is part of the popular culture as few other psychological
concepts are".
Types of theories and models
Motivation theories can be classified on a number of basis.
• Natural vs. Rational based on whether the underlying theory of human Cognition is based
on natural forces (drives, needs, desires) or some kind of rationality (instrumentality,
meaningfulness, self-identity).
• Content vs. Process based on whether the focus is on the content ("what") motivates vs
process ("how") motivation takes place.
Monist and pluralistic motivational theories
A class of theories about why people do things seeks to reduce the number of factors down to
one and explain all behaviour through that one factor. For example, economics has been
criticized for using self-interest as a mono-motivational theory. [3] Mono-motivational theories
are often criticized for being too reductive or too abstract.
Conscious and unconscious motivations
A number of motivational theories emphasize the distinction between conscious and unconscious
motivations.A conscious motivation is a form of motivation that people recognize and are aware
of it themselves. Unconscious motivation refers to hidden or unknown desires that makes people
push themselves to achieve their goal. In evolutionary psychology, the "ultimate", unconscious
motivation may be a cold evolutionary calculation, the conscious motivation could be more
benign or even positive emotions.
For example, while it may be in the best interest of a male's genes to have multiple
partners and thus break up with or divorce one before moving onto the next, the conscious
rationalization could be, "I loved her at the time".
Freud is associated with the idea that human beings have many unconscious motivations
that cause them to make important decisions because of these unconscious forces, such as
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choosing a partner. According to Freud and his followers, majority of the how people in different
situations/environments are the result of desires, impulses, and memories that have been
imprinted into an individual unconscious state, however it would still influence their
performances or actions.
Some psychologists believe that a significant portion of human behavior is energized and
directed by unconscious motives. According to Maslow, "Psychoanalysis has often demonstrated
that the relationship between a conscious desire and the ultimate unconscious aim that underlies
it need not be at all direct."
Psychological theories and models
Motivation can be looked at as a cycle where thoughts influence behaviors, and behaviors drive
performance, performance impacts thoughts and the cycle begins again. Each stage of the cycle
is composed of many dimensions including attitudes, beliefs, intentions, effort, and withdrawal
which can all affect the motivation that an individual experiences.
Rational motivations
The idea that human beings are rational and human behavior is guided by reason is an old one.
However, recent research (on Satisfying for example) has significantly undermined the idea of
homo economics or of perfect rationality in favour of a more bounded rationality. The field of
behavioral economics is particularly concerned with the limits of rationality in economic agents.
Intrinsic and extrinsic motivation
Motivation can be divided into two types: intrinsic (internal) motivation and extrinsic (external)
motivation.
Intrinsic motivation
Intrinsic motivation is the self-desire to seek out new things and new challenges, to analyze one's
capacity, to observe and to gain knowledge.[8] It is driven by an interest or enjoyment in the task
itself, and exists within the individual rather than relying on external pressures or a desire for
reward. Intrinsic motivation has been studied since the early 1970s. The phenomenon of intrinsic
motivation was first acknowledged within experimental studies of animal behavior. In these
studies,
it was evident that the organisms would engage in playful and curiosity driven behaviors
in the absence of reward. Intrinsic motivation is a natural motivational tendency and is a critical
element in cognitive, social, and physical development.[9] Students who are intrinsically
motivated are more likely to engage in the task willingly as well as work to improve their skills,
which will increase their capabilities.[10] Students are likely to be intrinsically motivated if they:
• attribute their educational results to factors under their own control, also known as
autonomy or locus of control
• believe they have the skills to be effective agents in reaching their desired goals, also
known as self-efficacy beliefs
• are interested in mastering a topic, not just in achieving good grades
Extrinsic motivation
Extrinsic motivation refers to the performance of an activity in order to attain a desired
outcome and it is the opposite of intrinsic motivation.[8] Extrinsic motivation comes from
influences outside of the individual. Common extrinsic motivations are rewards (for example
money or grades) for showing the desired behavior, and the threat of punishment following
misbehavior. Competition is in an extrinsic motivator because it encourages the performer to win
and to beat others, not simply to enjoy the intrinsic rewards of the activity. A cheering crowd and
the desire to win a trophy are also extrinsic incentives.[11]
Comparison of intrinsic and extrinsic motivation
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Social psychological research has indicated that extrinsic rewards can lead to
overjustification and a subsequent reduction in intrinsic motivation. In one study demonstrating
this effect, children who expected to be (and were) rewarded with a ribbon and a gold star for
drawing pictures spent less time playing with the drawing materials in subsequent observations
than children who were assigned to an unexpected reward condition.
However, another study showed that third graders who were rewarded with a book
showed more reading behavior in the future, implying that some rewards do not undermine
intrinsic motivation.[13] While the provision of extrinsic rewards might reduce the desirability of
an activity, the use of extrinsic constraints, such as the threat of punishment, against performing
an activity has actually been found to increase one's intrinsic interest in that activity. In one
study, when children were given mild threats against playing with an attractive toy,
it was found that the threat actually served to increase the child's interest in the toy, which
was previously undesirable to the child in the absence of threat.[14]For those children who
received no extrinsic reward, self-determination theory proposes that extrinsic motivation can be
internalized by the individual if the task fits with their values and beliefs and therefore helps to
fulfill their basic psychological needs.
Operant conditioning
Operant conditioning, a term coined by B.F. Skinner, is a method of learning that occurs through
rewards and punishments for behaviour. Skinner believed that internal thoughts and motivations
could not be used to explain behaviour; instead to look at external, observable causes of human
behaviour. His theory explained how we acquire the range of learned behaviors we exhibit each
and every day.[15]
Push and pull
Push motivations are those where people push themselves towards their goals or to achieve
something, such as the desire for escape, rest, and relaxation, prestige, health and fitness,
adventure, and social interaction.[16] However, with push motivation it's also easy to get
discouraged when there are obstacles present in the path of achievement. Push motivation acts as
a willpower and people's willpower is only as strong as the desire behind the willpower. [17]
Pull motivations is another type of motivation that is much stronger than push motivation.
"Some of the factors are those that emerge as a result of the attractiveness of a destination as it is
perceived by those with the propensity to travel. They include both tangible resources, such as
beaches, recreation facilities, and cultural attractions, and traveler's perceptions and expectation,
such as novelty, benefit expectation, and marketing image."[16] Push motivation can be seemed as
the desire to achieve a goal so badly that it just seems that goal are pulling us to it.
Self-control
The self-control aspect of motivation is increasingly considered to be a subset of emotional
intelligence; it is suggested that although a person may be classed as highly intelligent (as
measured by many traditional intelligence tests), they may remain unmotivated to pursue
intellectual endeavours. Vroom's "expectancy theory" provides an account of when people may
decide to exert self-control in pursuit of a particular goal.
Drives
Main article: Drive theory
A drive or desire can be described as a deficiency or need that activates behavior that is aimed at
a goal or an incentive.[18] These drives are thought to originate within the individual and may not
require external stimuli to encourage the behavior. Basic drives could be sparked by deficiencies
such as hunger, which motivates a person to seek food whereas more subtle drives might be the
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desire for praise and approval, which motivates a person to behave in a manner pleasing to
others.
Incentive theory
Incentive theory is exactly what it sounds like it is, it’s an incentive or motive to do something.
The most common incentive would be a reward. Rewards can be tangible or intangible, and is
presented generally after the occurrence of the action or behavior that one is trying to correct or
cause to happen again. This is done by associating positive meaning to the behavior and or
action. Studies show that if the person receives the reward immediately, the effect is greater, and
decreases as delay lengthens. Repetitive action-reward combination can cause the action to
become a habit.[21] Motivation comes from two sources: oneself, and other people. (Refer to
Intrinsic and Extrinsic motivation for more information)
"Reinforcers and reinforcement principles of behavior differ from the hypothetical
construct of reward." A reinforcer is anything that follows an action, with the intentions that the
action will now occur more frequently. Positive reinforcement is demonstrated by an increase
in the future frequency or magnitude, this is due to the fact that in the past such action was
followed by a reinforcing stimulus. Positive reinforcement involves a stimulus change consisting
of the presentation or magnification of a positive stimulus following a response. Negative
reinforcement involves stimulus change consisting of the removal of a stimulus following a
response. From this perspective, the concept of distinguishing between intrinsic and extrinsic
forces is irrelevant.
Another principle of reinforcement is intermittent reinforcement this is the off-and-on use
of reinforcement. It is very effective in locking in behaviors that precede it. This way of
reinforcement prevents that the reward lose its value. Although, through intermittent
reinforcement it can also become hard to later modify a behavior. "Dr. Skinner actually mapped
out schedules of reinforcement in thousands of studies showing how the strength of
reinforcement changed as a function of how often the reinforcer occurred."
Applying proper motivational techniques can be much harder than it seems, especially
because its different for every person. Take note that when creating a reward system, it can be
easy to reward A, while hoping for B, and in the process, reap harmful effects that can jeopardize
your goals.
Incentive theory in psychology treats motivation and behavior of the individual as they
are influenced by beliefs, such as engaging in activities that are expected to be profitable.
Incentive theory is promoted by behavioral psychologists, such as B.F. Skinner. Incentive theory
is especially supported by Skinner in his philosophy of Radical behaviorism, meaning that a
person's actions always has social ramifications: and if actions are positively received people are
more likely to act in this manner, or if negatively received people are less likely to act in this
manner.
Definition of Motivation:
The word ‘Motivation’ has been derived from the word ‘Motive’ which means an idea, need or
emotion that prompts a man into action.
Derbin has derived Motivation as “the complex of forces starting and keeping a person at
work in an organization. Motivation is something that moves the person to action’ and continues
him in the course of action already initiated”. Motivation is a process of getting the needs of the
people realized with a view to induce them to work for the accomplishment of organizational
goals.
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NATURE OR CHARACTERISTICS OF MOTIVATION:
1. A Psychological Concept:
Motivation deals with workers on the psychological plane. Even workers with extraordinary
abilities will not be able to perform as desired w\until they are effectively motivated. Effective
performance on the part of workers can be said to be the result of their abilities backed by proper
motivation. Thus performance = Abilities opportunity x motivation.
2. Motivation is total not piece meal:
A worker cannot be motivated in parts for successful motivation, he should be treated as an
indivisible unit, taking into account all his urges and aspirations. A motivational device which
promotes fulfillment of some needs of workers and not others will fall short of its objectives of
evoking total commitment of workers.
3. Motivation is determined by human needs:
A worker will perform the desired activity only so long as he sees his action as a means of
continued fulfillment of his strategy felt needs once a particular need is satisfied for good, he
may lose interest in the activity that provides him satisfaction of the said need. In such a case, he
will have to be provided awareness of satisfaction of his other needs so that he continues to be
inclined to pursue the said activity.
4. Motivation may be financial or non-financial:
Motivation may be provided in several ways depending upon the needs, emotions and sentiments
of workers. It may be classified as financial and non-financial. Financial motivation seeks to
satisfy physiological and security needs and it is by way of wages, allowances, bonus prizes and
other perquisites on the other hand, non-financial motivation which seeks to satisfy social,
recognition and creative needs may be by way of appreciation for the work done, higher status
and greater responsibility, or increased participation in decision-making.
5. Motivation is a Constant Process:
Human needs are infinite. No sooner a person has satisfied one need than he seeks to satisfy
another. As very aptly put by MC.Gregor, “Man is a wanting animal – as soon as one of his
needs is satisfied, another appears in its place. This process is unsending”.
ROLE AND SIGNIFICANCE OF MOTIVATION:
Rensis Likert has called Motivation as the ‘Core of Management’. Motivation is an important
function which every manager performs for actuating the people to work for the accomplishment
of objectives of the organization. Motivation is an effective instrument in the hands of a manager
for inspiring the workforce and creating a confidence in it. By motivating the work force,
management creates ‘will to work’ which is necessary for the achievement of organizational
goals. The following results may be expected if the employees are properly motivated.
1) The workforce will be better satisfied if management provides them with opportunities to
fulfill their physiological and psychological needs. The workers will co-operate voluntarily with
the management and will contribute their maximum towards the goals of the enterprise.
2) Workers will tend to be as efficient as possible by improving upon their skills and
knowledge so that they are able to contribute to the process of the organization. This will also
result in increased productivity.
3) The rates of labour turnover and absenteeism among the workers will be low.
4) There will be good human relatives in the organization as friction among the workers
themselves and between the workers and the management will decrease.
5) The number of complaints and grievances will come down. Accident rate will also be
low.
6) There will be increase in the quantity and quality of production. Wastage and scrap will
be less. Better quality of products will increase the public image of the business.
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Elements of Motivation:
In any motivational system, there are three elements, namely
(a) The individual who is being motivated.
(b) The job and
(c) The work situation
The individual:
Every individual, whether a top ranking manager or a lower-level worker is a unique being.
Workers may differ from one another in several respects, such as age, sex, education,
intelligence, personality, physical characteristics, experience, heredity and social and cultural
background. These differences will determine the needs and determine the needs and attitudes of
workers. They will also determine how each worker will react to motivational devices such as
monetary and non-monetary incentives.
The job:
Every job within the set-up of an organization prescribes different requirements and holds a
different level of attractiveness for each worker. Routine job are not liked by because of the
monetary and dullness involved in doing them. But sometimes even challenging jobs may not
hold attraction for some people. This means there will rarely be a job which is regarded as a
source of enjoyment and pride by one and all.
The Work Situation:
The environment within which work is to be performed also creates motivation. This includes
(a) Organizational goals and values which help to identify desired outcomes or results and
the nature of behaviour that will help to achieve them.
(b) The type of technology and structural relationship which together determine how work is
to be divided and integrated.
(c) Leadership style in terms of participation in decision making and
(d) The rewards such as salary perquisities benefits, promotional prospectus, status etc.
Human Needs:
Human needs are of various kinds and may be classified in many ways. They are influenced by
the social, economic, and cultural background of the individual experiencing a particular need.
Classification of Needs:
Human needs may be broadly classified as
1. Basic, Primary or Physiological Needs:
The human body, without doubt, needs some basic physical satisfactions, the lack of which over
a long time may be harmful to it, and may even prove fatal. For example, it needs oxygen, food,
water and sleep which are vital to its existence. It needs shelter and clothing to escape the pain of
extreme cold, heat etc and to preserve body temperature at a particular level.
Basic needs are universally felt but they are different in their types and intensity from
person to person. For example, a child needs more sleep than an adult. Social and economic
status of a person will also determine the basic needs.
2. Secondary, Social, Psychological or Acquired needs:
Secondary needs are often vague because they are the needs of the mind and spirit, rather than of
the body. Management will find it easy to satisfy basic needs of employees. It easy to satisfy
basic needs of employees. However, secondary needs are not as easy to be satisfied. Therefore,
while planning any motivational effort, management should consider its effect on secondary
needs.
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Characteristics of Secondary Needs:
• They are developed as one matures in age and experience.
• They differ in their roles and intensity from person to person may have need such that he
may assert himself forcefully and move against people, may have need for affiliation
such that he may even submit to their unreasonable demands.
• They are not constant and may, over time change in the case of the same individuals.
• At any point of time more than one secondary need is felt by an individual.
• Often, a person feeling secondary needs is himself not aware of it.
• They have a perceptible effect on human behaviour.
Motivation in the Workplace
Generally speaking, motivation is what energizes, maintains, and controls behavior. As such, it is
clear why it plays an important role in the workplace. But empirically measuring that role is
another matter; it is challenging to capture an individual's drive in quantitative metrics in order to
ascertain the degree to which higher motivation is responsible for higher productivity. However,
it is widely accepted that motivated employees generate higher value and lead to more
substantial levels of achievement. The management of motivation is therefore a critical element
of success in any business; with an increase in productivity, an organization can achieve higher
levels of output.
Research has shown that motivated employees will:
• Always look for a "better" way to complete a task
• Be more quality-oriented
• Work with higher productivity and efficiency
In summary, motivated employees will retain a high level of innovation while producing
higher-quality work more efficiently. There is no downside—i.e., the opportunity cost of
motivating employees is essentially zero, assuming it does not require additional capital to coach
managers to act as effective motivators.
Internal and External Motivation
Salary is often enough to keep employees working for an organization, but it's not always
necessarily enough to push them to fulfill their full potential. Herzberg's theory emphasizes that
while salary is enough to avoid dissatisfaction, it is not necessarily enough to propel employees
to increase their productivity and achievement.
In fact, the output of employees whose motivation comes solely from salary and benefits
tends to decline over time. To increase employees' efficiency and work quality, managers must
turn to understanding and responding to individuals' internal and external motivations. External
motives include work environment (e.g., cramped cubicle vs. airy, open office); internal
motivations include thoughts and emotions (e.g., boredom with performing the same task over
and over vs. excitement at being given a wide variety of project types).
Motivation is a very important for an organization because of the following benefits it provides:
1. Puts human resources into action
Every concern requires physical, financial and human resources to accomplish the goals. It is
through motivation that the human resources can be utilized by making full use of it. This can be
done by building willingness in employees to work. This will help the enterprise in securing best
possible utilization of resources.
2. Improves level of efficiency of employees
The level of a subordinate or a employee does not only depend upon his qualifications and
abilities. For getting best of his work performance, the gap between ability and willingness has to
be filled which helps in improving the level of performance of subordinates. This will result into-
• Increase in productivity,
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• Reducing cost of operations, and
• Improving overall efficiency.
3. Leads to achievement of organizational goals
The goals of an enterprise can be achieved only when the following factors take place :-
• There is best possible utilization of resources,
• There is a co-operative work environment,
• The employees are goal-directed and they act in a purposive manner,
• Goals can be achieved if co-ordination and co-operation takes place simultaneously
which can be effectively done through motivation.
4. Builds friendly relationship
Motivation is an important factor which brings employees satisfaction. This can be done by
keeping into mind and framing an incentive plan for the benefit of the employees. This could
initiate the following things:
• Monetary and non-monetary incentives,
• Promotion opportunities for employees,
• Disincentives for inefficient employees.
In order to build a cordial, friendly atmosphere in a concern, the above steps should be taken by a
manager. This would help in:
• Effective co-operation which brings stability,
• Industrial dispute and unrest in employees will reduce,
• The employees will be adaptable to the changes and there will be no resistance to the
change,
• This will help in providing a smooth and sound concern in which individual interests will
coincide with the organizational interests,
• This will result in profit maximization through increased productivity.
Leads to stability of work force
Stability of workforce is very important from the point of view of reputation and goodwill of a
concern. The employees can remain loyal to the enterprise only when they have a feeling of
participation in the management. The skills and efficiency of employees will always be of
advantage to employees as well as employees.
This will lead to a good public image in the market which will attract competent and
qualified people into a concern. As it is said, “Old is gold” which suffices with the role of
motivation here, the older the people, more the experience and their adjustment into a concern
which can be of benefit to the enterprise.
From the above discussion, we can say that motivation is an internal feeling which can be
understood only by manager since he is in close contact with the employees. Needs, wants and
desires are inter-related and they are the driving force to act. These needs can be understood by
the manager and he can frame motivation plans accordingly. We can say that motivation
therefore is a continuous process since motivation process is based on needs which are unlimited.
The process has to be continued throughout.
We can summarize by saying that motivation is important both to an individual and a business.
Motivation is important to an individual as:
• Motivation will help him achieve his personal goals.
• If an individual is motivated, he will have job satisfaction.
• Motivation will help in self-development of individual.
• An individual would always gain by working with a dynamic team.
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Motivation is important to a business as:
• The more motivated the employees are, the more empowered the team is.
• The more is the team work and individual employee contribution, more profitable and
successful is the business.
• During period of amendments, there will be more adaptability and creativity.
• Motivation will lead to an optimistic and challenging attitude at work place.
IMPORTANCE OF MOTIVATION:
The importance of motivation in an organization can be summed up as follows:
1. High Performance Level:
Motivated employees put higher performance as compared to other employees. The high
performance is a must for an organization and motivation is a vital requirement for high
performance. A number of researches have proved the relationship between high performance
and high motivation.
2. Low employee turnover and Absenteeism:
A motivated employee stays in the organization more and their absenteeism is quite low. High
turnover and absenteeism create many problems in the organization. Recruiting, training and
development of number of new personnel does not take long time but it is expensive too. In a
competitive economy, this is almost an impossible task. Moreover, this also affects reputation of
the firm adversely. Motivation brings these rates lower.
3. Acceptance of organizational changes:
The changes in organization are an usual phenomenon due to various reasons such as change in
technology, value system etc., organization has to cope with these changes to cope up with the
requirement at time. When the changes are introduced in the organization there is a tendency to
resist them by the employees. However if they are properly motivated they accept those changes
with zeal and enthusiasm and support in their proper implementation too.
4. Proper utilization of Human Resources:
Motivation induces men to work and it results in increased production and productivity because
men try to put their efforts to produce more & more for the benefit of the organization and thus
their efficiency increases. Moreover, the inheritent qualities of workers are developed by
employing different techniques in the interest of the organization so that they are able to use the
methods, systems and technology effectively.
5. Best utilization of other Resources:
All other resources except human resource can produce no results unless the men try to put them
in action. Men should be motivated to carry out plans, policies and programmes laid down by the
organization by utilizing the other resources to the best of their efforts.
6. Willingness to Work:
The function if motivation influences the willingness of people to work and willingness comes
from within. It may be possible that a man has a capacity in work and he is physically, mentally
and technically fit for work but he may not be willing to work. Motivation concerns to create a
need any desire on the part of the workmen to present his better performance.
7. Building of good Labour Relations:
All the members of the organization concentrate their efforts to achieve the objectives of the
organization and carry out the plans in accordance with the policies and programmes laid down
by the organization if the management introduces motivational plans. Both parties, labourers and
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management plans. Both benefited by such plans. On the other hand, efficiency and wages of
operating force increases due to consolidated efforts of the motivated people and the labour
problems such as absenteeism, Labour turnover, indiscipline, grievances etc are considering
reduced. Thus motivation helps build good labour relations.
8. Basis of Co-operation:
In a zeal to produce more, the members work as a team to pull the weight effectively, to yet their
loyalty to the group and to the organization, to carryout properly the activities allocated and
generally to pay an efficient part in achieving the goals which the organization has undertaken.
Thus motivation is the basis of co-operation to get the best results out of the efforts of the men
on the job.
9. Improvement upon skill and knowledge:
All the members will try to be as efficient as possible and improve upon their skill and
knowledge, so that they may be able to contribute to the progress at the organization as much as
possible because they know that they, in turn will get what have been promised and ultimately
they will be able to satisfy their personal as well as social needs.
10. Builds Human Relations:
Motivation builds human relations, because the human concept of Labour has changed and now
labour is treated as human being. He is behaved as a man and not as commodity. This attitude
contributes towards motivating the people at work. Now workers are invited to participate in the
decision making function of the management. Thus motivation builds human relations. Motivation can be defined as the driving force behind our actions, fuelled by our desire for
something. It is that internal strength that gets us to move, and give 100% to whatever goal or end we
desire or plan to achieve. From a manager’s point of view motivation is the process to energise, direct and
sustain your subordinates’ efforts to attain the goals.
Characteristics of motivation
1. Motivation is a Psychological Concept:
Motivation has to come from within each individual. There are two desiring factors in
motivation-(a) Fundamental needs, such as food, clothes and shelter and (6) Ego-satisfaction
including self-esteem, recognition from others, opportunities for achievements, self-development
and self actualization which act as powerful though unconscious, motivator of behaviour. Inner
motivation can be more decisive for behaviour than any external influence.
2. Motivation affects the Whole Individual, not part of Him /Her:
A person’s basic needs determine to a great extent what he will try to do at any given time. All
these needs are inter-related because each individual is an integrated organised whole.
3. Motivation is never an Unending Process:
Man is a social animal. As a social animal he has innumerable wants which induce him to work.
If one basic need is adequately satisfied for a given individual it loses power as a motivator and
does into determine his current behaviour but at the same time others needs continue to emerge.
Wants are innumerable and cannot be satisfied at one time. It is an unending process so the
process of motivation is also unending to induce the person to satisfy his innumerable wants. The
importance of motivation is to keep it alive and not to let it dwindle.
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4. Non-fulfilment of Basic Needs Makes a Man Sick:
If anybody fails in trying to meet a need which he feels is essential for him, he becomes to some
extent mentally ill and such frustrated man cannot be motivated any further until his essential
need is satisfied.
5. Goals are Motivators:
Goals and motives are inseparable. Man works to achieve the goals. A soon as the goal is
achieved he would be no longer interested in work. Therefore, it is very essential for the
management to know his goal to push him to work.
6. The Self-concept as a Unifying Force:
According to Geller-man unifying forces run through each individual’s history. Unifying force
means the drive to activate his/her image of him-herself. The outline of a person’s self image is
fairly well checked in early childhood and thereafter does not act ordinarily change. Thus, two
things that individual is always trying to do are (a) to act like the person; he thinks he is, and (b)
to get what he thinks, he can.
7. Motivation is a complex phenomenon:
Motivation being an internal feeling cannot be observed directly. Since motives themselves are
dynamic, it further adds to complexity.
8. Motivation is different from Satisfaction, Inspiration, and Manipulation:
Motivation refers to the drive and efforts to satisfy a want or goal, whereas satisfaction refers to
the contentment experienced when a want is satisfied. In contrast, inspiration is bringing about a
change in the thinking pattern. On the other hand Manipulation is getting the things done from
others in a predetermined manner.
Advantages of motivation
Better Production
Motivation, by definition, drives people to perform at a higher level than they otherwise would.
This is why organizations that pay higher wages, invest in training and offer major incentives do
so. Better production could mean making more products in the same amount of time. It could
also mean selling more or delivering a higher level of customer service. All of these examples of
better performance typically correlate to benefits for an organization's bottom line.
Higher Retention
Motivated employees are more likely to stay with an employer because they value what they get
in return for their work. Higher retention means human resources professionals can spend more
time developing a motivated workplace than constantly replacing and training new hires. Higher
retention means your workers are more experienced and knowledgeable about your company and
more familiar to your clients and customers.
Reduced Costs
Related to improved worker retention are reduced costs when workers are motivated. While you
might have to invest in good compensation programs and training, you save a lot of money other
companies lose because of high turnover rates. A January 2007 Coca-Cola Retailing Research
Council study of supermarket cashiers making $6.50 per hour found total direct and indirect
costs of replacement of $3,637. Additionally, experienced and knowledgeable employees are less
likely to waste time and resources and to make costly mistakes.
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Workplace Morale
A major advantage of a motivated workplace is the broad impact it has on workplace morale. A
positive work environment contributes to the other advantages noted, and it also leads your
employees to provide better benefits to your stakeholders. Customers are likely treated better.
Communities benefit from a thriving company. Business partners enjoy working with employees
who are positive at your company. All of these often cause higher profits and better shareholder
returns.
DETERMINANTS OF BEHAVIOUR
Organizational behavior is the analysis and application of knowledge about how people act
within organizations, according to the textbook "Organizational Behavior: Human Behavior at
Work," by John W. Newstrom and Keith Davis. There are three primary determinants of
behavior on which small companies focus when studying organizational behavior: employee
dynamics, available resources and work environments.
People
The first primary behavioral determinant in organizations is people. Small company employees
are inherently different. Their ages and genders vary. They also come from diverse ethnic
backgrounds. Moreover, people bring different skill sets to their companies. Employees are also
different with respect to their goals and ambitions. Some strive to get promoted more quickly.
Others enjoy more tactical functions and are satisfied becoming more efficient at their present
jobs. Managers must understand what motivates employees so they can adopt the right
management styles with them. For example, some workers prefer closer supervision, while
others are more self-directed and thrive on independence. Employees also exhibit different
behaviors in group settings. Some individuals are more reserved, and group settings almost
hamper their capabilities. Others are naturally leaders and tend to take over group tasks and
projects. Managers who correctly identify which employees work best on their own or in groups
stand to gain the most productivity from them.
Technology
Technology also greatly influences working relationships between employees. Companies that
have more updated equipment or computer software usually can expect greater production from
workers. There also tends to be more cohesiveness among employees. Managers spend less time
harping over details when they know employees have the proper tools. For example, a marketing
manager may assign an analyst the task of creating a 10-page presentation for the department
meeting. The manager knows the presentation software provides tutorials and spends less time
explaining how to set up the presentation. Contrarily, employees who do not have the proper
technology and equipment may become agitated. They may start viewing their job as drudgery
and start taking their frustrations out on other workers.
Organizational Structure
Small companies also must ensure they have the proper organizational structure for employees to
work effectively. A tall, bureaucratic structure, for example, would not work efficiently for a
small company with 50 employees. There would be too many management levels. Workers
would spend more time waiting for approval on projects or budgets, as more managers would be
involved in the decision-making process. Creativity and communication also may be hampered
in a taller organizational structure. This may lower the morale of employees who are creative and
have high ambitions. Small companies servicing diverse customer groups may be better off using
a customer-based structure, according to ReferenceforBusiness.com. Workers become more
specialized by customer, which may increase both customer and employee satisfaction.
Confusion and frustration may be averted because employees don't have to know the different
procedures for serving all customers.
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Considerations
A small company's environment also affects employees' performance and morale. Employees
exposed to hazardous working conditions, for example, may feel that management doesn't care
about them. Their attitudes may become more negative, hindering their productivity levels.
Additionally, workers may develop health problems working under such conditions. This can
lead to lawsuits and other legal issues for the company. Some workers may know employees
working under better conditions in competitive companies. This may lead to resentment and even
job attrition.
MASLOW’S THEORY OF HUMAN MOTIVATION:
Maslow was the pioneer in contributing to a systematic scheme of need hierarchy. He arrived at
a conclusion, after a proper research, that there are certain perceived needs of their employees
and when they join any organization they some how believe that the needs can be better satisfied
by doing so. Thus, they have a perceived expectation from organization working. If the
perceived needs are satisfied according to their expectation they feel satisfied and motivated. On
the other hand, if there is a gap between these, two, they become slow or refuse to work.
The following are the important propositions advanced by A.H.Mashow about human behaviour.
I. Man is a wanting being:
Man continuously wanting more and more. What he wants depends upon what he already has.
As soon as one of man’s needs is satisfied, another appear in its place. This process is unending.
It helps man to work continuously.
II. A satisfied need is not a motivator:
A man works to satisfy his needs. When a particular need is satisfied fresh needs can motivate
persons to work.
III. Man’s needs have a Hierarchy of Importance:
Marlow thinks that a man’s needs are arranged in series of levels. As soon as needs on a lower
level is by and large fulfilled, those on the next higher level will emerge and demand satisfaction.
The need hierarchy is as follows:
1. Basic Physiological Needs:
The needs that are taken as the starting point for motivation theory are the so called physiological
needs. These needs relate to the survival and maintenance of human life. These needs include
such things as food, clothing, shelter, air, water and other necessaries of life.
Marlow’s Need Hierarchy
2. Safety and security needs:
After satisfying the physiological needs, people want the assurance of maintaining a given
economic level. They want job security, personal bodily security, security of source of income,
provision for old age, insurance against risks etc.
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3. Social Needs:
Man is a social being. He is, therefore, intensified in conversation, sociability, exchange of
feelings and grievances, companionship, recognition, belongingness etc.
4. Esteem and Status Needs:
These needs embrace such things as self-confidence, independence, achievement, competence,
knowledge and success. They are also known as egoistic needs. They are concerned with prestige
and status of the individuals.
5. Self-fulfillment Needs:
The final step under the need priority model is the need for self-fulfillment or the need to fulfill
what a person considers to be his mission in life. It involves realizing one’s potentialities for
continued self-development and for being creative.
After his other needs are fulfilled, a man has the desire for personal achievement. He
wants to do something which is challenging and since this challenge gives him enough dash and
initiative to work, it is beneficial to him in particular and to the society in general. The sense of
achievement gives him satisfaction.
Conclusion:
A survey of 200 factory workers in India reported that they give top priority to job security,
earnings and personal benefits. All lower order needs studies have also revealed that those needs
which are though to be most important like social needs, egoistic needs and self-realization are
also thought to be the best satisfiers. One study of two thousand and eight hundred (2800)
managers in eleven countries reported that security belonging, esteem and self-realization needs
are progressively less satisfied according to the pattern of the need priority model.
MC. Gregor’s ‘X’ and ‘Y’ Theories: Gregor has based his theories of motivation on
assumptions about basic human nature. These assumptions range from good, hardworking,
creative, and responsible to bad, lazy, unimaginative and irresponsible. These assumptions are
unrealistic because human beings are neither completely good nor completely bad Gregor has
termed his theories as ‘X’ theory (negative / pessimistic) and ‘Y’ theory (positive / optimistic).
X THEORY:
‘X’ theory is traditional in its outlook. The role or part played by the manager is more. It
completely excludes workers from the process of managerial decision-making. The theory is
based on certain very negative assumptions.
a) Inherent dislike for work:
People in general have a deep aversion (dislike) to work. They would use even the slightest
pretext to use shirk work (or) do it half heartedly.
b) Lack of ambition and love for direction:
People are often unambitious. They are not keen to accept any responsibility for fear of blame of
not coming up to the desired expectation. If they even accept any responsibility, it is only due to
the fear of harmful consequences arising from refusal to do so. Most of the time they would
prefer being directed by their superiors.
c) Lack of Creativity:
Most workers prefer the status – quo. They are adverse to break new ground, or try out
unconventional methods to solve problems. This breeds a sense of complacency with their work,
the existing methods and procedures even when these have become outdated.
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d) Satisfaction of Physiological and Safety needs being the only goal:
For most workers, the only motivating force is satisfaction of physiological and safety needs.
The basic instinct of a human being is to seek self preservation and few people can think beyond
satisfaction of the basic human needs. Thus, the main motivation for workers is adequate wages
and job security or the threat of being deprived of them.
e) Close, often coercive control a must:
Most workers need to be instructed, controlled and closely supervised. In other words, a worker
must work only as ordered. He is not to have any say in decision-making. He is not to be
encouraged to make any suggestions about his work or work conditions and in case he does one
forward with, any these should not be taken seriously.
Conclusion:
X theory regards coercive authority as the only effective means to supervise and control workers.
Decision – making in all fields and at all levels is considered as an exclusive domain of
managers. Decisions, whether right or wrong have to be made by managers only.
Y THEORY:
The ‘Y’ theory is the exact opposite of the negative / positive X theory. Y theory keenly
emphasizes active partnership and co-operation between workers and management so as to
accomplish the enterprise objectives.
According to the ‘Y’ theory workers are not habitual work shinkers, and it is wrong to
think that they work only under fear of punishment properly motivated, they would willingly
accept responsibility, and display creativity and imaginative in their work performance.
Theory Y assumes that employees are happy to work, are creative and enjoy taking on additional
duties. Theory Y managers and supervisors are sometimes called hands-off managers.
Hands-off managers usually give their employees more freedom and trust with the hope
that the result will be happier workers who will go the extra mile for the company. Also, hands-
off managers will often involve their employees in the decision-making process. For example, a
hands-off manager may ask the staff to help interview a new candidate that has just applied for a
job.
This expounds a participative style of management that is de-centralized. It assumes that
employees are happy to work, are self-motivated and creative, and enjoy working with greater
responsibility. It assumes that workers:
• Take responsibility and are motivated to fulfill the goals they are given.
• Seek and accept responsibility and do not need much direction.
• Consider work as a natural part of life and solve work problems imaginatively.
This more participative management style tends to be more widely applicable. In Y-Type
organizations, people at lower levels of the organization are involved in decision making and
have more responsibility. With Theory Y assumptions, management's role is to develop the
potential in employees and help them to release that potential towards common goals.
• Work is as natural as play and rest.
• People will exercise self-direction if they are committed to the objectives (they are NOT
lazy).
• Commitment to objectives is a function of the rewards associated with their achievement.
• People learn to accept and seek responsibility.
• Creativity, ingenuity, and imagination are widely distributed among the population.
People are capable of using these abilities to solve an organizational problem.
• People have potential.
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Theory Y Characteristics
Now that you know the difference between Theory X and Theory Y managers, let's go a little
deeper into the characteristics of a Theory Y manager. A Theory Y manager:
• Assumes that people are self-motivated and thrive on responsibility
• Involves employees in decision making but retains power to implement decisions
• Allows employees to work alone
• Constantly gives rewards and feedback
• Gives employees frequent opportunities for promotion
‘Y’ theory is based on the following assumptions.
1. Work as natural as play:
In favourable conditions, a worker would take to work as naturally as play or any other
interesting activity. Work is a purposeful activity and once the worker understands its purpose,
he will exert himself to perform it to the best of his ability, irrespective of the remuneration. It is
wrong to think that all work is interesting and that, for this reason a worker is instinctively averse
to work. In fact, like eating and playing, it does not lose its charm even though performed as a
regular routine.
2. Self-Control:
Most workers are not, by nature, lazy or adverse to accepting responsibility. The fact of
the matter is that people can be self-directed and creative at work because it is part of human
nature to feel enthusiastic about performing one’s job or accepting increased responsibility.
3. Creativity:
Initially, a person may not be psychologically matured but it is wrong to assume that he
lacks the potential to mature. In any case, recognition of creativity and self-motivation on the
part of workers depends on the attitude and pre-disposition of the management. If there is
positive outlook workers may be encouraged to display initiative and creativity in resolving work
problems.
4. Money not the only motivator:
A person is prompted to work to satisfy his physiological and safety needs. But, it is
wrong to think that motivation can only occur at these two levels. Given favourable conditions,
workers would willingly accept responsibility and discharge it successfully with a view to
seeking recognition from others. In fact, in a right motivation environment, workers might also,
without any extrinsic reward, seek to achieve their potential to the maximum. To sum up,
motivation occurs at all levels, and not just at physiological and safety levels.
5. Self-direction:
As people are by nature self-directed and creative, it is only left to the management to
provide a right environment for this purpose. Such environment will consist in in-built flexibility
promotion of authentic relationships, internal commitment and psychological success.
Conscious efforts must be made to involve workers in the spheres of planning,
organization, direction and control of all activities of the enterprise once the workers develop a
sense of belonging to the enterprise, they can be trusted to show a sense of imagination and zeal
toward solving managerial problems.
Theory X Management
Theory X assumes that employees are unmotivated, lazy, hate working and must be supervised
constantly throughout the day for work to get done. Theory X managers and supervisors are
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sometimes called micro-managers. Micro-managers believe that they must oversee every single
task assigned to the employee, and they believe employees will try to avoid work and must be
forced with the threat of punishment in order to do their jobs. his assumes that employees are
naturally unmotivated and dislike working, and this encourages an authoritarian style of
management. According to this view, management must actively intervene to get things done.
This style of management assumes that workers:
• Dislike working.
• Avoid responsibility and need to be directed.
• Have to be controlled, forced, and threatened to deliver what's needed.
• Need to be supervised at every step, with controls put in place.
• Need to be enticed to produce results; otherwise they have no ambition or incentive to
work.
X-Type organizations tend to be top heavy, with managers and supervisors required at every step
to control workers. There is little delegation of authority and control remains firmly centralized.
McGregor recognized that X-Type workers are in fact usually the minority, and yet in mass
organizations, such as large scale production environment, X Theory management may be
required and can be unavoidable. With Theory X assumptions, management's role is to coerce
and control employees.
• People have an inherent dislike for work and will avoid it whenever possible.
• People must be coerced, controlled, directed, or threatened with punishment in order to
get them to achieve the organizational objectives.
• People prefer to be directed, do not want responsibility, and have little or no ambition.
• People seek security above all else.
Theory X and Theory Y
What motivates people to get up and go to work every day? Some people get great satisfaction
from their work and genuinely enjoy it. Others view working as a burden and simply have jobs to
pay the bills. American social psychologist, Douglas McGregor, created two different theories
on human motivation and management in the 1960s: Theory X and Theory Y.
Distinction between ‘X’ and ‘Y’ Theories:
X Theory Y Theory
1. Most people have an inherent dislike for
work.
2. Given proper environment most people will
take to work as naturally as play.
2. Most people are unambitious, averse to
accepting responsibility and prefer to be
directed by others.
2. With proper motivation, most people would
willingly accept responsibility and go in for
self-direction.
3. Most people lack creativity in resolving
organizational problems.
3. Creativity is not the monopoly at a few and
in a right environment people can be made to
display this trait on a wide scale.
4. Only satisfaction of physiological and safety
needs will motivate workers.
4. Satisfaction of physiological and safety
needs is not the only source of motivation,
which also occurs at social, esteem and self
actualization levels.
5. Close, often coercive control is the only
means to achieve organizational objectives.
5. With proper motivation people may be self-
directed and creative.
Comparing Theory X and Theory Y
• Motivation
Theory X assumes that people dislike work; they want to avoid it and do not want to take
responsibility. Theory Y assumes that people are self-motivated, and thrive on responsibility.
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• Management Style and Control
In a Theory X organization, management is authoritarian, and centralized control is retained,
whilst in Theory Y, the management style is participative: Management involves employees in
decision making, but retains power to implement decisions.
• Work Organization
Theory X employees tend to have specialized and often repetitive work. In Theory Y, the work
tends to be organized around wider areas of skill or knowledge; Employees are also encouraged
to develop expertise and make suggestions and improvements.
• Rewards and Appraisals
Theory X organizations work on a ‘carrot and stick’ basis, and performance appraisal is part of
the overall mechanisms of control and remuneration. In Theory Y organizations, appraisal is also
regular and important, but is usually a separate mechanism from organizational controls. Theory
Y organizations also give employees frequent opportunities for promotion.
• Application
Although Theory X management style is widely accepted as inferior to others, it has its place in
large scale production operation and unskilled production-line work. Many of the principles of
Theory Y are widely adopted by types of organization that value and encourage participation.
Theory Y-style management is suited to knowledge work and professional services. Professional
service organizations naturally evolve Theory Y-type practices by the nature of their work; Even
highly structure knowledge work, such as call center operations, can benefits from its principles
to encourage knowledge sharing and continuous improvement.
Theory 8:
The “Z” theory, proposal by William Ouchi, is an integrated motivational model, based
on the Japanese management practices. It provides an example of how management can transfer
the organizational environment and bring about close, co-operative and trusting relationships
between workers, managers and other groups.
The distinguishing features of the ‘Z’ theory are as follows:
a. Life time employment:
There should be life-time employment granted to all employees so as to promote a strong
bond between them and the organization. During adverse business conditions, share-holders /
owners should forgo dividend / profits rather than resort to retrenchment of workers.
b. Restricted Promotions:
Upward mobility of workers through promotions should be restricted as it only leads to
saturation in advancement prospects, sooner or later. Instead, the emphasis should be on
horizontal mobility. So that employees do not suffer from a sense of stagnation arising from
working at the same post for a long time.
c. Greater workers involvement:
Promotions or financial incentives are only a short-term motivational device. On the
other hand, if employees are involved in working with their superiors or on specific projects,
they will be motivated more intensely due to prospectus of greater income in future.
d. Participated decision-making:
Employees should be allowed increasing participation in the decision-making process,
particularly in regard to matters which significantly affect them. If financial decisions are based
on the alternatives suggested by the lower-level workers, after analysis of the problems on hand,
they will feel a sense of responsibility because of such involvement and will be enthusiastic in
implementation of such decisions.
e) Informal control systems:
Organizational control system should be as informal as possible. There should be greater
emphasis on co-operative and sharing of information, resources and plans rather than on formal
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authority – responsibility relationships. Employees should be frequently shifted from one job to
another. So that they get to have an integrated view of the organizational functions and how each
function affects the others.
f) Stable and Cohesive work environment:
The work environment should be appropriately stable and cohesive to provide for
increasing satisfaction of multiple employee needs. Mutual relationship marked by trust,
openness, candour and co-operation will induce employees to develop a sense of commitment to
the organization.
The ‘Z’ theory has been criticized on grounds. First, it is based on the Japanese
Management Practices which have evolved from that country’s unique cultural setting. As such,
it may not be relevant in organizations based in different cultural settings. Secondly there is little
by way of research findings to indicate that the firms following this theory of motivation have
achieved greater productivity than others. Lastly, it does not provide guidelines as to at which
point of time it may be applied in any organization.
LEADERSHIP:
Introduction:
Leadership is a process of influencing the subordinates so that they co-operate enthusiastically in
the achievement of group goals.
Definition:
According to Theo Hayman “Leadership is the process by which an executive imaginatively
directs, guides and influences the work of others in choosing and attaining specified goals by
mediating between the individuals and the organization in such a manner, that both will obtain
maximum satisfaction.
SIGNIFICANCE OF LEADERSHIP:
Leadership is a process of influence on a group. It is an important part of a manager’s job. A
manager must be able to lead the group working under him for inspiring team work for the
accomplishment the objectives of the enterprise. Leadership is the ability of a manager to induce
subordinates to work with confidence and zeal. It is the driving force which gets things done by
others. A good leader achieve maximum co-operation from the group members by motivating.
He is also able to co-ordinate the activities of the followers to achieve common objectives.
Effective leadership is necessary for inspiring the people to work for the accomplishment of
given objectives.
Functions of a leader:
1. Determination of goals:
A leader performs the creative function of laying down goals and policies for the followers. He
acts as a guide in interpreting the goals and policies.
2. Organization of Activities:
A good leader divides organization activities among the employees in a systematic manner. The
relationship between them is clearly laid down. This reduces the chances of conflict between
them.
3. Achieving Co-ordination:
A leader integrates the goals of the individuals with the organizational goals and creates a
community of interests. He keeps himself informed about the working of the group. He shares
information with the group for the co-ordination of its efforts.
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4. Representation of Workers:
A leader is a representation of his group. He takes initiative in all matters of interest to the group.
He also attempts to fulfill the psychological needs of his followers.
5. Providing Guidance:
A leader guides the subordinates towards the achievement of organizational objectives. He is
available for advice whenever a subordinate faces a problem.
6. Inspiration of employees:
A good leader inspires the subordinates for better performance. Motivation is necessary for
getting the desired work from the subordinates. The leader motivates the employees by providing
them economic and non-economic rewards.
7. Building Employee’s Morale:
Good leadership is indispensable to high employee morale. The leader shapes the thinking and
attitudes of the group. He develops good human relations and facilitates interaction between the
members of the group. He maintains voluntary co-operation and discipline among followers.
8. Facilitating Change:
Leadership is the mechanism to convince workers about the need for change. An effective leader
is able to overcome resistance to change on the past of workers and thus facilitate change.
Characteristics of Leadership:
Leadership is a psychological process of influencing followers or subordinates and providing
guidance to them. It is always related to a situation which means a leader may be effective in one
situation while ineffective in another to be effective, a leader should change his leadership style
depending upon the requirement of the situation.
1. Leadership is a process of influence:
Leadership is a process whose important ingredient is the influence exercised by the leader on
group members. A person is said to have a influence over others when they are willing to carry
out his wishes and accept his advice, guidance and direction. Successful leaders are able to
influence the behaviour, attitudes and beliefs of their followers.
2. Leadership is related to a situation:
When we talk of leadership, it is always related to a particular situation at a given point of time
and under a specific set of circumstances. At one point of time, the subordinates may accept the
autocratic behaviour of the leader, while at a different point of time and under a different set of
circumstances, only participative leadership style may be successful. That is why, it is that,
leadership is always particular and not general.
Eg: For example. Factory supervisor, who is normally autocratic, may be participative in
determining vacation schedules and free rein in selecting a departmental representative for safety
committee.
3. Leadership is the function of stimulation:
Leadership is the function of motivating people to strive willingly to attain organizational
objectives. Leaders are considered successful when they are able to subordinate the individual
interests of the employees to the general interests of the organization. A successful leader allows
his subordinates to have their individual goals set up by themselves in such a way that they do
not conflict with the organizational objectives. When this congruency is achieved, workers act
enthusiastically to achieve these goals.
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4. Leadership gives an experience of helping attain the common objectives:
Under successful leadership, every person in the organization feels that his operation, however
minor it may be is vital to the attainment of organizational objectives. It happens when the
manager feels the importance of individuals, gives them recognition and tells them about the
importance of activities performed by them.
5. Employees must be satisfied with the leadership provided:
Only short term productivity of employees can be increased by pressure and punishment. This
approach is not in the long-term interests of the organization. Long term interests of the
organization are best served when managers allow subordinates to influence their behaviour.
Particularly when subordinates are knowledgeable and competent. A good manager recognizes
the fact, that leadership is a shared function. A good leader shares everything with his followers,
he shares credit, he shares blame, he shares ideas, opinion and experience.
Leadership
Leadership has been described as "a process of social influence in which one person can enlist
the aid and support of others in the accomplishment of a common task". For example, some
understand a leader simply as somebody whom people follow, or as somebody who guides or
directs others, while others define leadership as "organizing a group of people to achieve a
common goal". Studies of leadership have produced theories involving traits, situational
interaction, function, behavior, power, vision and values, charisma, and intelligence, among
others.
Myths
Leadership, although largely talked about, has been described as one of the least understood
concepts across all cultures and civilizations. Over the years, many researchers have stressed the
prevalence of this misunderstanding, stating that the existence of several flawed assumptions, or
myths, concerning leadership often interferes with individuals' conception of what leadership is
all about (Gardner, 1965; Bennis, 1975).
Leadership is innate
According to some, leadership is determined by distinctive dispositional characteristics present at
birth (e.g., extraversion; intelligence; ingenuity). However, according to Forsyth (2009) there is
evidence to show that leadership also develops through hard work and careful observation.[82]
Thus, effective leadership can result from nature (i.e., innate talents) as well as nurture (i.e.,
acquired skills).
Leadership is possessing power over others
Although leadership is certainly a form of power, it is not demarcated by power over people –
rather, it is a power with people that exists as a reciprocal relationship between a leader and
his/her followers (Forsyth, 2009).[82] Despite popular belief, the use of manipulation, coercion,
and domination to influence others is not a requirement for leadership. In actuality, individuals
who seek group consent and strive to act in the best interests of others can also become effective
leaders (e.g., class president; court judge).
Leaders are positively influential
The validity of the assertion that groups flourish when guided by effective leaders can be
illustrated using several examples. For instance, according to Baumeister et al. (1988), the
bystander effect (failure to respond or offer assistance) that tends to develop within groups faced
with an emergency is significantly reduced in groups guided by a leader. Moreover, it has been
documented that group performance, creativity, and efficiency all tend to climb in businesses
with designated managers or CEOs. However, the difference leaders make is not always positive
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in nature. Leaders sometimes focus on fulfilling their own agendas at the expense of others,
including his/her own followers (e.g., Pol Pot; Josef Stalin). Leaders who focus on personal gain
by employing stringent and manipulative leadership styles often make a difference, but usually
do so through negative means.
Leaders entirely control group outcomes
In Western cultures it is generally assumed that group leaders make all the difference when it
comes to group influence and overall goal-attainment. Although common, this romanticized
view of leadership (i.e., the tendency to overestimate the degree of control leaders have over
their groups and their groups' outcomes) ignores the existence of many other factors that
influence group dynamics. For example, group cohesion, communication patterns among
members, individual personality traits, group context, the nature or orientation of the work, as
well as behavioral norms and established standards influence group functionality in varying
capacities. For this reason, it is unwarranted to assume that all leaders are in complete control of
their groups' achievements.
All groups have a designated leader
Despite preconceived notions, not all groups need have a designated leader. Groups that are
primarily composed of women, are limited in size, are free from stressful decision-making, or
only exist for a short period of time (e.g., student work groups; pub quiz/trivia teams) often
undergo a diffusion of responsibility, where leadership tasks and roles are shared amongst
members (Schmid Mast, 2002; Berdahl & Anderson, 2007; Guastello, 2007).
Group members resist leaders
Although research has indicated that group members' dependence on group leaders can lead to
reduced self-reliance and overall group strength, most people actually prefer to be led than to be
without a leader (Berkowitz, 1953).This "need for a leader" becomes especially strong in
troubled groups that are experiencing some sort of conflict. Group members tend to be more
contented and productive when they have a leader to guide them. Although individuals filling
leadership roles can be a direct source of resentment for followers, most people appreciate the
contributions that leaders make to their groups and consequently welcome the guidance of a
leader
Seven Qualities of a Good Leader
Seven Personal Qualities Found In A Good Leader:
1. A good leader has an exemplary character. It is of utmost importance that a leader is
trustworthy to lead others. A leader needs to be trusted and be known to live their life with
honestly and integrity. A good leader “walks the talk” and in doing so earns the right to have
responsibility for others. True authority is born from respect for the good character and
trustworthiness of the person who leads.
2. A good leader is enthusiastic about their work or cause and also about their role as leader.
People will respond more openly to a person of passion and dedication. Leaders need to be able
to be a source of inspiration, and be a motivator towards the required action or cause. Although
the responsibilities and roles of a leader may be different, the leader needs to be seen to be part
of the team working towards the goal. This kind of leader will not be afraid to roll up their
sleeves and get dirty.
3. A good leader is confident. In order to lead and set direction a leader needs to appear confident
as a person and in the leadership role. Such a person inspires confidence in others and draws out
the trust and best efforts of the team to complete the task well. A leader who conveys confidence
towards the proposed objective inspires the best effort from team members.
4. A leader also needs to function in an orderly and purposeful manner in situations of
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uncertainty. People look to the leader during times of uncertainty and unfamiliarity and find
reassurance and security when the leader portrays confidence and a positive demeanor.
5. Good leaders are tolerant of ambiguity and remain calm, composed and steadfast to the main
purpose. Storms, emotions, and crises come and go and a good leader takes these as part of the
journey and keeps a cool head.
6. A good leader as well as keeping the main goal in focus is able to think analytically. Not only
does a good leader view a situation as a whole, but is able to break it down into sub parts for
closer inspection. Not only is the goal in view but a good leader can break it down into
manageable steps and make progress towards it.
7. A good leader is committed to excellence. Second best does not lead to success. The good
leader not only maintains high standards, but also is proactive in raising the bar in order to
achieve excellence in all areas.
These seven personal characteristics are foundational to good leadership. Some characteristics
may be more naturally present in the personality of a leader. However, each of these
characteristics can also be developed and strengthened. A good leader whether they naturally
possess these qualities or not, will be diligent to consistently develop and strengthen them in
their leadership role.
The Role of a Leader
Your ability to negotiate, communicate, influence and persuade others to do things is
indispensable to everything you accomplish in life. The most effective men and women are those
who can competently organize the cooperation and assistance of other people to accomplish
goals and objectives.
Of course, everyone you meet has different values, opinions, attitudes, beliefs, cultural
values, work habits, goals, ambitions and dreams. Because of this incredible diversity of human
resources, it has never been more difficult and yet more necessary for diplomatic leaders to
emerge and form these people into high-performing teams.
Fortunately, leaders are made, not born. You learn to become a leader by doing what
other excellent leaders have done before you. You become proficient in your job or skill, and
then you become proficient at understanding the motivations and behaviors of other people. As a
leader, you combine your personal competencies with the competencies of others into a smoothly
functioning team that can outplay and outperform all its competitors.
When you become a team leader, even if your team only consists of one other person,
you must immediately develop a whole new set of leadership skills. To determine what these
skills are, you need to consider the genesis of high-performing teams.
Teams generally go through four phases as they evolve toward high performance: forming,
storming, norming and performing.
Forming
The forming stage is very important, perhaps even critical, to the success of the team. Your
ability to select the proper team members to accomplish a particular task--personal or business--
is the mark of the superior leader. If you select the wrong people in the first place, it becomes
almost impossible afterward to build a winning team, just as it would be impossible to win
athletic championships with unskilled or ill-suited players.
In the forming stage, the team members come together and begin to get a feeling for each other.
There will be a good deal of discussion, argument, disagreement, personal expression of likes
and dislikes, and the forming of friendly alliances between team members.
This stage, especially the discussions and conversations that take place, may seem time
consuming, but it's indispensable to developing a unified group of people that you can lead. One
of the most important qualities of a leader is patience. And patience is never more necessary than
when you're going through the early stages of assembling your team.
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Storming
The second stage of team development is storming--a shortened form of "brainstorming." During
this stage, the group, whose members are now comfortable with each other, begins the hard work
of setting goals and deadlines, dividing up the tasks and getting on with the job. During the
storming phase, people learn about the contributions each member can make to achieve the
team's objectives.
Norming
The third stage of team development is norming. This is when norms and standards are
established among the team members so that everyone feels secure and confident in his or her
place. All members know what's expected and how their performance will be measured. They
also are aware of the responsibilities and obligations that they have, not only to the job, but to
each other. Your ability as a leader to promote the norming process is critical to the team's
success.
Performing
The fourth stage of team development is performing. In the final analysis, your ability to get
results is all that really matters. Your lifestyle, your rate of promotion and level of rewards, and
your respect and esteem among your co-workers and bosses will all be determined by your
ability to perform and to get others to perform.
Getting Results From Your Team
There are basically five qualities you need to foster throughout the stages of team development.
The degree to which you accomplish this before you start working will determine your success
as a team leader and the success of the team.
LEADERSHIP STYLES:
A leadership style is a leader's style of providing direction, implementing plans, and motivating
people.[1] There are many different leadership styles that can be exhibited by leaders in the
political, business or other fields.
1. Facilitative Leadership
This is a special style that anyone who runs a meeting can employ. Rather than being directive,
one using the facilitative leadership style uses a number of indirect communication patterns to
help the group reach consensus.
2.Bureaucratic Leadership
An autocrat doesn’t require a bureaucracy, but the autocrat and the bureaucracy goes together
like a hand and glove. One reason has be do with obedience to authority. In fact, one can make
an argument that in large groups such as the multinational corporations and government
agencies authority is the most common type of influence used.
3. The Coaching Style
“A groom used to spend whole days in currycombing and rubbing down his Horse, but at the
same time stole his oats and sold them for his own profit. “Alas!” said the Horse, “if you really
wish me to be in good condition, you should groom me less, and feed me more.” — Aesop’s
Fables.
A great coach is definitely a leader who also possess a unique gifts ability to teach and train.They
groom people to improve both knowledge and skill.
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4. Cross-Cultural Leadership
Not all individuals can adapt to the leadership styles expected in a different culture whether that
culture is organizational or national. In fact, there is some evidence that American and Asian
Leadership Styles are very different, primarily due to cultural factors.
5. Emergent Leadership
“The superior man understands what is right; the inferior man understands what will sell.” –
Confucius
Contrary to the belief of many, groups don’t automatically accept a new “boss” as
leader. Emergent leadership is what you must do when one taking over a new group.
6. The Leader Exchange Style
Sometimes known as leader-member exchange, the style involves the exchange of favors
between two individuals. An exchange can be hierarchical between the boss and subordinate or
occur between two individuals of equal status. For this leadership style to work, you need to
know how to develop, maintain and repair relationships.
7. The Laissez Faire Leadership Style
The style is largely a “hands off” view that tends to minimize the amount of direction and face
time required. Works well if you have highly trained, highly motivated direct reports.
8. Situational Leadership
In the 1950s, management theorists from Ohio State University and the University of Michigan
published a series of studies to determine whether leaders should be more task or relationship
(people) oriented. The importance of the research cannot be over estimated since leaders tend to
have a dominant style; a leadership style they use in a wide variety of situations.
Surprisingly, the research discovered that there is no one best style: leaders must adjust their
leadership style to the situation as well as to the people being led. Hershey and Blanchard’s
Model of Situational Leadership. Going back to the 1970s, the model primarily focuses on the
nature of the task as the major variable in choosing your style. In this model, there are four
options: telling, selling, participating and delegating.
9 Strategic Leadership
This is practiced by the military services such as the US Army, US Air Force, and many large
corporations. It stresses the competitive nature of running an organization and being able to out
fox and out wit the competition.
10. Team Leadership
A few years ago, a large corporation decided that supervisors were no longer needed and those in
charge were suddenly made “team leaders.” Today, companies have gotten smarter about how to
exert effective team leadership, but it still takes leadership to transition a group into a team.
TYPES OF STYLES OF LEADERSHIP:
Leadership style refers to a leader’s behaviour. The behaviour pattern in which a leader
adopts in influencing his followers is known as the styles of leadership.
1. Autocratic or Authorization Leadership:
An autocratic leader is one who likes to run the show himself. He gives order and insists
that they should be obeyed and expects to do what they are told. He considers his subordinates
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immature and delegates no authority to them. A autocratic leader exercises close supervision
over subordinates. He hold out threats of punishment or uses his powers to distribute rewards.
Advantages:
• Quick actions are taken to solve the problems.
• It provides strong motivation and satisfaction to the leader.
• Many subordinates prefer to work under centralized authority and strict discipline.
• Less competent subordinates are needed at lower levels.
• It can be successful where subordinates are reluctant to take initiative.
Disadvantages:
• People dislike this style especially when the motivational style is negative.
• It leads to frustration, low morale and conflict which affect organization efficiency.
• Due to lack of knowledge decision go wrong.
• Monotonous decision creates mis-agreement among followers.
2. Participation or democratic leadership:
He takes the decision by consultation with his followers. He decentralizes authority and allows
the group to share his power with others. He takes unilateral decisions and allows the
subordinates to discuss the problems and express their opinions freely.
Advantages:
• It reduces resistance to change and increase acceptance of new ideas.
• It improves the attitude of employees towards their jobs and the organization.
• It increases co-operation between management and workers.
• It improves employee morale and reduces complaints.
• It facilitates the development of future leaders.
Disadvantages:
• It may be dilatory leading to delay in decisions.
• It may be used covertly to manipulate employees.
• Participation will not be meaningful unless the subordinates understand thoroughly the
complex problems of the organization.
• It may not be liked by people who want minimum interaction with superiors and
colleagues.
3. Free – Rein or Faire Leadership:
A free rein leader gives complete freedom to his followers to establish their own goals and
policies. He does not lead and avoids power. He maintains contracts with outsiders to bring the
information and resources required by the group.
Advantages:
• Complete freedom to subordinates improves their motivation and morale.
• There is maximum opportunity for the development of subordinates.
Disadvantages:
• Full control of followers is impossible.
• Frequent misunderstanding arises among the subordinates.
• Followers or successors frequently create tension and disturb the leadership.
• It avoid practically manager role.
4. Paternalistic Leadership:
He serves as the head of the family and treat his followers like his family members. He
assume a paternal or fatherly role to help, guide and protect the followers. He provides them with
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good working conditions, fringe benefits and welfare cohesiveness. There is little opportunity for
them to exercise initiative to grow and realize their full potential. It is based upon ‘Japanese
System’.
Approaches to Leadership:
Leadership is the process of influencing behaviour and activities of an individual or group for
achieving common goals. Thus, the existence of leader is very essential to guide to inspire and
direct the activities of a group. Basically, there are three approaches to leadership, the ‘trait
theory’, the situational theory and the follower’s theory.
1. The Trait Theory:
It is a traditional approach to the theory of leadership. According to trait theory, it is thought that
a leader has specific traits of mind and intelligence. These special qualities of head and heart
generally include mental capacities and moral qualities. The trait theory holds the view that
successful leader possess these basic qualities and these are inherited rather than acquired. Out of
this approach came the popular belief that ‘leaders are born and not made’. For a long time this
theory has been widely accepted and it is still very common.
1) It is not clear as to which of the traits are most important one and which are the
less important, various authorities have different qualities of successful leadership.
2) It does not consider the influence of situation factors in leadership.
3) It has not been possible so far to isolate and identity specific traits that are
common to all leaders.
4) It assumes that leadership can be examined to isolation. But, it is not possible.
5) This approach does not suggest any thing for developing future leaders, since it is
based on the assumption that leaders are born.
2. The Situational Theory:
According to situational approach to leadership, it is presumed to be specific and relative to the
situations in which, it occurs. These are the circumstances of a group which produce a leader. A
leader may be good for group at one level and under one set of circumstances and he may not
prove to be so in other circumstances. So, the situationist, approach states that leadership
phenomena are the product of situations in particular groups. Thus, this approach, does not
believe that leader are born but assets that leaders are made. Thus, it necessitates, the executive
training and development programmes for the development of future leaders.
This theory also suffers from the following weakness:
1. It gives much emphasis on situation aspect and overlooks the qualities needed in a
successful leader.
2. Leadership is a subjective consideration in which qualities of head and heart of a leader
plat well their part. But, this theory overlooks it.
The Follower’s Theory: This theory tells us that leadership is developed on the basis of
acceptance of followers group is also necessary to understand the nature of leadership. if a leader
is ‘successful in leading his group, satisfying them and motivating them, he will be assumed to
be a good leader. It is therefore, necessary that leadership function’ is analysed and understood in
terms of the characteristics of the group of followers and their dynamic relationship between
leader and his group.
Qualities of Leadership:
To be able to provide effective leadership to his subordinates, a leader needs to have certain
qualities. According to Ordway Tead, a leader must possess “Physical and nervous energy, a
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sense of purpose and direction, enthusiasm, friendliness and affection, integrity, technical
mastery, decisiveness, intelligence, teaching skill and faith”. According to Henry Fayol, the
qualities that a leader must possess are
1. Physical and Mental Vigour:
The leader has to put in a hard mental and physical work, which requires tremendous stamina
and vigour to sustain long and irregular hours of work.
2. Emotional Stability:
The leader should not be unduly moved by emotion or sentiment. He should be able rationally
and logically to analyse the various problems before him and reach a decision without any before
him and reach a decision without any fear or favour. He should not lose his temper or show in
decision even in the face of heavy odds.
3. Sense of Judgement:
The leader should be a master of human psychology. He should possess deep understanding of
human behaviour, emotions, sentiments, needs, motives etc. This would enable him to anticipate
the response to his decisions and actions.
4. Balance:
The leader should be rational and objective in his approach. He should be free from bias,
prejudice and pre-conceived nations. Only then he would be able to decide issued on their merits.
5. Understanding or empathy:
The leader should show understanding for others viewpoints. If he tends to have his own way in
all matters he might lose their goodwill.
6. Motivation:
Only a person who is himself well motivated can motivate others. The desire to lead people
should come from within. If a person is forced to do his job under fear of punishment, he would
behave more like a follower than a leader.
7. Communicating Skill:
The leader should be good at communicating ideas, feelings, decisions, orders etc. He should be
a good and effective speaker and writer. Then alone he would be able to persuade inform,
stimulate and direct his subordinates.
8. Ability to Guide:
The leader should help his subordinates to learn. Both by word and deed, he should demonstrate
to them the best ways of accomplishing the jobs.
9. Sociability:
The leader should show keen interest in his subordinates. He should try to meet them often, and
encourage them to discuss their problems and difficulties with him. He should be friendly,
helpful and easily accessible to all his subordinates.
10. Technical Competence:
The leader should possess a thorough knowledge of the theory and practice of his job. Besides,
he should be quite familiar with the jobs done at different work points in his department.
11. Other personal abilities:
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The leader should have an attractive and pleasing personality. He should possess optimistic and
cheerful outlook. He should have sound physical and mental health. His subordinates will accept
his leadership only when they find him full of youthful vigor, energy, vitality, endurance and
creativity. Besides, he should be honest, sincere, fair and reasonable in his dealings with his
subordinates. If he is a man of integrity and behaves with his subordinates in a dignified manner,
his leadership will be cheerfully and enthusiastically accepted by one and all.
MANAGEMENT BY OBJECTIVES:
Introduction:
Managing by objectives or results is an important. Practice for accomplishing the objectives of
an enterprise in an effective way. The concept of ‘Management by Objectives’ was introduced
by Peter Drucker in 1954 and later developed by various writers like John Humble, Dale Mc
Conkey, George Ordiorne, Edward Schleh and Douglas Me Gregor.
Management by objectives (MBO), also known as management by results (MBR), is
a process of defining objectives within an organization so that management and employees agree
to the objectives and understand what they need to do in the organization in order to achieve
them. The term "management by objectives" was first popularized by Peter Drucker in his 1954
book The Practice of Management.
The essence of MBO is participative goal setting, choosing course of actions and decision
making. An important part of the MBO is the measurement and the comparison of the
employee’s actual performance with the standards set. Ideally, when employees themselves have
been involved with the goal setting and choosing the course of action to be followed by them,
they are more likely to fulfill their responsibilities.
According to George S. Odiorne, the system of management by objectives can be
described as a process whereby the superior and subordinate jointly identify its common goals,
define each individual's major areas of responsibility in terms of the results expected of him, and
use these measures as guides for operating the unit and assessing the contribution of each of its
members.
Features and advantages
Behind the principle of MBO is for employees to have a clear understanding of the roles and
responsibilities expected of them. Then they can understand how their activities relate to the
achievement of the organization's goal. Also places importance on fulfilling the personal goals of
each employee.
Some of the important features and advantages of MBO are:
• Motivation – Involving employees in the whole process of goal setting and increasing
employee empowerment. This increases employee job satisfaction and commitment.
• Better communication and coordination – Frequent reviews and interactions between
superiors and subordinates help to maintain harmonious relationships within the organization
and also to solve problems.
• Clarity of goals
• Subordinates tend to have a higher commitment to objectives they set for themselves than
those imposed on them by another person.
• Managers can ensure that objectives of the subordinates are linked to the organization's
objectives.
• Common goal for whole organization means it is a directive principle of management.
Domains and leveltivities
Some objectives are collective, for a whole department or the whole company, others can be
individualized. Managers must determine the mission and the strategic goals of the enterprise.
The goals set by top-level managers are based on an analysis of what can and should be
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accomplished by the organization within a specific period of time. The functions of these
managers can be centralized by appointing a project manager who can monitor and control
activities of the various departments. If this cannot be done or is not desirable, each manager’s
contributions to the organizational goal should be clearly spelled out.
Meaning:
MBO is a philosophy of decentralization and participation management. MBO allows the
subordinate to set goals for themselves. Their performance is evaluated against these goals and
they are advised by the superior as to how deficiencies could be removed, if their performance is
not fully satisfactory. This is result-oriented appraisal.
Definition:
John Humble defined managing by objectives as a dynamic system which integrates the
company’s need to achieve its goals for profit and growth with manager’s need to contribute and
develop himself. According to George .S. Ordinorne, the system of management by objectives
can be described as a process whereby the superior and subordinate managers of an organization
jointly identify the common goals, define each individual’s major areas of responsibility in terms
of results expected of him and use these measures as guides for operating the unit and assessing
the contribution of each of its members. Management by objectives is also known as
management by results and goals setting approach.
Features of managing by objectives:
1. Operational technique:
Management by objectives is a highly practical technique. The goals have to be set in measurable
or quantitative terms. As Drucker puts it, “Objectives must be operational; they must be capable
of being converted into specific targets and specific assignments. They must be capable of
becoming the basis, as well as the motivation for work and achievement”.
2. Comprehensive technique:
MBO represents a comprehensive tool of management. It is not a piece-meal tool of personnel
management for measuring performance, but an overall management technique concerned with
realization of objectives at each level in the organization.
3. Participative Management:
MBO emphasizes participative approach to management. The goals are determined by managers
in consultation with their subordinates. MBO is not merely a meeting of minds, but joint
authorship at goals and their joint implementation.
4. Result Oriented:
MBO is performance – oriented. That is why, its other name is management by Results. This
approach concentrates on ends rather than means and is diagnostic rather than punitive in
character. The performance of person or unit is evaluated according to the results obtained.
5. Systems Approach:
MBO attempts to integrate the individual with the organization and the organization with its
environment. It seeks to ensure the accomplishment of both personal and enterprise goals by
creating goal congruence.
6. Concentration on Key Result Areas:
The emphasis in MBO is on performance improvement in the areas which are of critical
importance to the organization as a whole. By identification of key result areas, MBO ensures
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that due attention is given to the priority areas which are crucial for good performance and
growth of the organization.
Benefits of Management by Objectives
1) Improved Planning:
MBO involves participative decision-making which makes objectives explicit and plans more
realistic. It focuses attention on goals in key result areas. MBO forces managers to think in terms
of results rather than activities. It encourages people to set specific pleasurable goals instead of
depending on hunches or guesswork. An integrated hierarchy of objectives is created throughout
the organization. Precise performance objectives and measures indicating goal accomplishment
are laid down. There is a time bound programme.
2) Coordination:
MBO helps to clarify the structure and goals of the organization. Harmony of objectives enables
individuals at various levels to have a common direction. Every individual knows clearly his role
in the organization, his area of operation and the results expected of him. Interlinking of
corporate, unit and individual objectives helps in the decentralization of authority and fixation of
responsibility. MBO result in clarification of organizational roles and structure. It promotes and
integrated view of management and helps interdepartmental co-ordination.
3) Motivation and Commitment:
Participation of subordinates in goal setting and performance reviews tend to improve their
commitment to performance. The corporate goals are converted into personal goals at all levels
to integrate the individual with the organization Timely feedback on performance creates a
feeling of accomplishment Job enrichment and sense of achievement help to improve job
satisfaction and morale. Improved communication and sense of involvement provides
psychological satisfaction and stimulates them for hard work Conversion of organizational goals
into personal goals helps to integrate the individual with the organization. MBO ensures perfor-
mance by converting objective needs into personal goals and by providing freedom to
subordinates.
4) Accurate Appraisals:
MBO replaces trait based appraisal by performance based appraisal. Quantitative targets for
every individual enable him to evaluate his own performance. Performance under MBO is
innovative and future oriented. It is positive, more objective and participative. Emphasis is on
job requirements rather than on personality. MBO is not a scapegoat approach rather it involves
constructive criticism to assess why operations have failed or lagged behind and suggests
remedial actions like organizational restructuring, better communication systems, more effective
incentives to motivate executives, etc. MBO provides an objective criterion for evaluation of
actual performance. "Indeed one of the major contributions of MBO is that it enables us to
substitute management by self-control, for management by domination."'Control becomes more
effective due to verifiable standards of performance. Subordinates know in advance how they
will be evaluated.
5) Executive Development:
The MBO strategy is a kind of self-discipline whereby shortcomings and development needs are
easily identified. It stresses upon a long term perspective and self-development. MBO releases
potential by providing opportunities for learning, innovation and creativity. It encourages
initiative and growth by stretching capabilities of executives. MBO makes possible a high degree
of self- control by individual managers and increases decentralization of authority.
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6) Organizational change and Development:
MBO provides a frame work for planned changes. It enables managers to initiate and manage
change. It helps to identify short-comings in organizational structure and processes. In this way,
MBO improves the capacity of the organization to cope with its changing environment. When an
organization is managed by objectives, it becomes performance-oriented and socially-useful.
Originally MBO was developed for business organizations but now it is being used by social
welfare organizations also. But MBO might not be very successful in welfare organizations
because of the abstract nature of the values to be measured in specific and quantified terms,
general unwillingness on the part of personnel to subject their efforts to precise evaluations and
lack of measuring instruments which could generate valid and reliable data. MBO has special
significance in the areas of long range planning and performance appraisal.
Advantages of MBO:
• MBO leads to unity of planning in the sense that plans made at various levels of the
organization have the same focus of action.
• Objectives serve as a device for organizational control by classifying the contribution of
each unit as well as each job.
• MBO fits individual goals into overall organizational goals and makes the job meaningful
and worthwhile. This stimulates human motivation in the organization.
• Managing by objectives leads to increase productivity because management concentrates
on the important tasks rather than wasting energies on unimportant matters.
• Objectives facilitate co-ordination of efforts and resources of the enterprise by providing
unity of direction. Objectives force managers to think in terms of results.
• Objectives lead to improved communication and organization structure which help in
locating problem areas.
• Managing by objectives is an important means of decentralization of authority.
Objectives classify organization roles and structure which are indispensable for
decentralizing authority.
• MBO provides a realistic means of analyzing training needs and opportunities for growth
on the basis of measurement of performance against accepted standards.
• There is a greater sense of identification by the management team with the objectives of
the enterprise wherein controls are reckoned as tools of ‘self-control’ rather than devices
to be used against managers.
Steps in managing by objectives:
The steps in MBO are described below:
1. Setting of Organizational Objectives:
The first step while installing the system of ‘Management by Objectives’ in an organization is to
establish verifiable objectives for the organization as a whole. In order to set the objectives of the
enterprise, a detailed assessment has to be made of the various resources at its disposal. A market
survey must be conducted to know what types of goods and services are required by the
community. Proper forecasts should be made to estimate the demand and the business conditions
in the country. This detailed analysis would lead to highlighting of desirable objectives, both
long-range and short-range. An attempt should be made to set specific goals in various key areas
on which the survival and growth of the business depends. These are the objectives which the top
management will tend to achieve.
2. Formulation of Departmental Objectives:
The major activities of every enterprise are divided on some basis of departmentalization. The
top management must determine the objectives of every department. At this stage, the top
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management should discuss the objectives with the departmental managers. So that a statement
of agreed objectives may be evolved. Each department sets its long-range and short-range
objectives and gets it approved, by the top management. This process of setting objectives is
repeated at lower of management. At each level, objectives are set in verifiable units. So that
performance of every department and individual may be reviewed after the end of a particular
period.
3. Establishing Goals or Targets of Subordinates:
Each subordinate sets the goals of his job and discusses the same with the superior. Agreement
over the goals and targets of the subordinates is the crux of MBO. Once this process is complete,
there will exist a meeting of minds of each superior and his subordinates as to what is to be
accomplished and why is it to be accomplished.
4. Establishing Check-Points:
Management by objectives calls for periodic meetings between the superior and the subordinate
to review the progress towards the accomplishment of targets of the subordinate. For this,
superior must establish check points or standards of performance for evaluating the progress of
the subordinate. The standards should be defined quantitatively as far as possible and the
subordinate must understand them fully. This practice should be followed by every superior for
each of his subordinates and it should lead to key result area analysis as targets or goals are
represented in terms of results.
It should contain the following information:
• The overall objectives of the job of the subordinate.
• The key results be must achieve to fulfill his objectives.
• The long-term and short-term priorities of tasks he must adhere to.
• The scope and extent of assistance he may expect from his superior and related
departmental managers and the assistance he must extend to other out self-evaluation.
• The nature of information and reports he will receive to carry out self-evaluation.
• The standards by which his performance shall be evaluated.
5. Appraisal of Performance and Counselling:
Under this, achievement are carefully analysed against the background of prevailing
circumstances and given objectives. The design and format of the performance review form will
depend on the nature of the enterprise and the job.
The performance of every individual is evaluated in terms of the standards or end results
cleared agreed upon by the superior and the subordinate. Under MBO, the superior does not
evaluate the individual concerned, but appraise his performance in terms of the standards set in
aimed to assist the subordinate to improve his performance in the future. The superior will
discuss with the subordinate the ways to remove deficiencies in performance and advise him as
to how his efficiency could be improved.
After the performance appraisal of each individual employee, the performance of each
unit, division and the organization as a whole is judged. Based in this exercise, corporate
departmental and individual goals are redefined and integrated to respond to changes in the
environment. The system of MBO is also integrated with the organization design, processes and
practices of the organization. so that it gets institutionalized and becomes a way of managing.
Difficulties in Managing by Objectives:
The weaknesses or limitations of MBO are as follows:
1. Difficulty in setting quantitative targets:
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Management by objectives is successful if the objectives are set in measurable terms. It is
difficult to judge the performance of individuals where the objectives cannot be set in
quantitative terms. Thus, it will not be possible to implement MBO effectively.
2. Emphasis on short-term goals:
Under MBO, goals are set only for a short period; say for six months or one year. The
subordinates may concentrate on their immediate goals without caring for the long-range
objectives of the enterprise which is not a healthy sign of organizational efficiency and
effectiveness. Because performance of the subordinates is to be reviewed after every six months
or one year, they tend to concentrate on their immediate objectives.
3. Resistance to Change:
The system of MBO appears to be simple, but it requires for reaching changes in traditional
thinking and practices. In practice, it is often resisted by both the executives and the operative
workers. Moreover, functional departmentation, hierarchical structure, unilateral goal setting,
trait – oriental appraisals etc are major impediments to the successful implementation, of MBO
which requires real hard work and patience on the part of managers.
4. Lack of Training:
There is generally lack of training and knowledge on the part of the supervisors in implementing
the programme. Many are prone to sit down with the subordinate, dictate the goals and targets
with no input permitted from the subordinate and then demand they be met in a specified time.
Whether they be met in a specified time. Whether they are realistic goals or not does not enter
the picture. No consideration is given to any outside factors over which the subordinate has no
control or influence. In such situations there can be no two-way communication because of the
outer – imposed objectives. This may destroy morale, initiative and good results faster than
anything else in an enterprise.
5. Lack of follow-up:
Lack of follow-up by the superior at the appropriate time is another hurdle in the successful
implementation of MBO. The superior must get with the subordinate at the appropriate time. The
subordinate is prepared to tell the boss exactly what has been accomplished and how. If the
superior delays the meeting, the subordinate will also take the MBO programme casualty.
6. Rigidity:
Management by objectives may tend to introduce inflexibility in the organization. Since goals
are set after every six month or one year, the superior may not like to modity there in between
because of fear of resistance, from the subordinate. There may arise a need to revise the goals at
lower levels to achieve the long-range objectives of the enterprise. The manager must handle
such a situational properly.
7. Limited Application:
Management by objectives is not appropriate for all levels and for everyone. It is suitable only
where both managers and subordinates feel comfortable with it and are willing to participate in
it. The heavy largely to made by it make MBO useful largely to managerial and professional
employees.
8. Costly Process:
MBO is costly and time consuming. The setting and valuation of objectives is done over such a
short period that it may not be able to provide for adequate interaction among all superiors and
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subordinates in the organization. MBO requires a great deal of analysis for which senior
executives do not have sufficient time and practice.
Effective Implementation of MBO:
In order to achieve all the advantages from managing by objectives, the following guidelines
should be followed.
1. Top Management Support:
It is essential that MBO should start at the top of the organization. The active participation of top
management to this programme is essential for its implementation. If the top managers use the
objectives as an instrument for managing, this practice will be followed down in the
organization.
2. Education about MBO:
The organizational members must be adequately educated about the philosophy of the MBO
programme. MBO is a means rather than an end in itself. The details and emphasis of the MBO
system will vary with the purpose for which it is designed. MBO can produce the anticipated
results only when its purpose is precisely defined and techniques chosen are appropriate to the
purpose.
3. Active Participation is Goal Setting:
It is essential that goals should be set by participation with the subordinate. There should be face-
to-face communication between the superior and the subordinate for setting the goals, discussing
the subordinate’s problems and for resetting the goals, discussing the subordinate’s problems and
for reviewing his performance. Thus, there must be effective two-way communication in the
organization.
4. Decentralization of Authority:
A greater degree of decentralization of authority is required for the success of MBO. The
subordinates who have accepted the challenging assignments through discussion with the
superior must be given adequate authority to accomplish their goals. MBO will not work if the
manger is not willing to delegate sufficient authority to the subordinate as the subordinates will
not be willing to accept new assignments and may even resist the setting of clearly defined goals.
5. Orientation of Executives:
The philosophy of MBO is to be implemented by the executives. They must be adequately
oriented about the value of MBO. They should be imported adequate training for the effective
implementation of management by objectives.
6. Integration of MBO programme:
MBO should not be implemented as an isolated programme. It must be integrated with all the
organization programmes including human resource planning, human resource development,
product planning and development, production control, financial planning and so on.
MANAGEMENT BY EXCEPTION:
Management by exception is an important principle of organizational control put forward by
classical management writers. This principle holds that only significant deviations (i.e.
exceptions, from standards of performance should be brought to the management’s attention. If
actual performance is according to the planned performance (i.e., standards already laid down), it
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need not be brought to the attention of the concerned manager as no follow up action is
necessary. But if there is a major deviation from the standard, it should be reported to the
manager. For eg., a manager establishes a quality control standard which lays down that five
defects per 100 units produced are permissible. Under the management by exception principle,
only significant deviations from the standard – six or more defects per 100 units in this case –
should be brought to the notice of the manager concerned.
Minor deviations from the standards are usually given less attention. But in some cases,
small deviations may mean a great deal and have greater significance than large deviations in
other concerned if the cost of Labour is five percent more than the budgeted labour-cost as
compared to cost of postage stamps which is fifteen percent more than the budgeted one. So the
principle of management by exception must be practiced in conjunction with the principle of
critical or strength point control. In other words, management should be selective in exercising
control. It should select key areas of activity on which the performance of the entire organization
depends and concentrate more on these areas. The exception principle logically refers to the size
of deviations from the standards in the critical control points or areas.
Management by exception is an attempt to conserve managerial time, effort an talent and
apply these in more important areas. It is a technique of separating important information from
the unimportant information. Only such information which is critical for managerial control
action is sent to the management. This facilitates the installation of an effective control system.
Management by exception is a style of business management that focuses on identifying and
handling cases that deviate from the norm, recommended as best practice by PRINCE2.
Management by exception has both a general business application and a business intelligence
application. General business exceptions are cases that deviate from the normal behavior in a
business process and need to be cared for in a unique manner, typically by human intervention.
Their cause might include: process deviation, infrastructure or connectivity issues,
external deviation, poor quality business rules, malformed data, etc. Management by exception
here is the practice of investigating, resolving and handling such occurrences by using skilled
staff and software tools. Good management can contribute to efficiency of business processes.
Often in these cases the process will be called exception management, as exceptional cases are
not the sole focus of the managerial policy, and exception management (as opposed to
management by exception) denotes a more moderate application of the process.
Management by exception (MBE), when applied to business is a style of management
that gives employees the responsibility to take decisions and to fulfill their work or projects by
themselves.[1] It consists of focus and analysis of statistically relevant anomalies in the data. If an
unusual situation or deviation in the recorded data appears, which could cause difficulties for the
business and can’t be managed by the employee at his level, the employee should pass the
decision on to the next higher level.
For example, if all products are selling at their expected volumes for the quarter, except
one particular product which is underperforming or overperforming at a statistically relevant
margin, only the data for that product will be presented to the managers for further investigation
and discovery of the root cause. Management by exception can bring forward business errors and
oversights. ineffective strategies that need to be improved, changes in competition[4] and business
opportunities. Management by exception is intended to reduce the managerial load and enable
managers to spend their time more effectively in areas where it will have the most impact.
Process of management by exception
Primarily, it is necessary to set objectives or norms with predictable or estimated results. These
performances are assessed and get equated to the actual performance.[8] Next, the deviation gets
analysed. With an insignificant or no deviation, no action is required and senior managers can
concentrate on other matters. If actual performances deviate significantly, the concern needs to
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be passed to the senior managers, as an “exception has occurred”. Finally, the aim is to solve this
“exception” immediately.
Management by exception using variance analysis
The accounting department is responsible for the forecasting of budgets and cost performance
reports. The difference between the estimated and actual figures is defined as variance.[11] To
understand the cause of the difference, managers need to investigate the questions how the
variance differs from last period and what are the causes for not reaching the estimated
figures.[12] Analysers consider two types of variances: adverse variance and favourable variance.
Adverse variance “exists when the difference between the budgeted and actual figure leads to a
lower than expected profit”.[13] Favourable variance “exists when the difference between the
budgeted and actual figure leads to a higher than expected profit”.[13] Rather than considering all
variances, managers establish criteria to determine which variances are significant to focus on.
Management by exception focuses mainly on large adverse variances, to find the areas of
business, which deviates from predetermined standards in a negative way.
Advantages of management by exception
The main advantage of management by exception is that problematic issues are identified rapidly
and managers are able to use their time and energy more wisely for important issues rather than
for less important ones that could provoke delays in their daily operations.[15] Additionally,
managers need to work less on statistics and the frequency of making decisions becomes less,
which saves time. As managers take fewer decisions, employees have more responsibility, which
increases their motivation.
Disadvantage of management by exception
Occurrences of mistakes in calculating budgets results in large variance differences and finding
the errors can be time-consuming. Furthermore, financial analysts responsible for calculation
variances are increasing overhead costs of a company. If the financial analysts are not
performing well, it will become a waste of time and money. Another disadvantage is that only
managers have the power over really important decisions, which can be demotivating for
employees at a lower level. Furthermore, the time taken for passing the issues to managers can
be time-consuming.
How is MBE Implemented?
If a company is going to implement MBE, they need to first set up a basic framework which will
identify items that vary from plan to plan. These are the critical things that must be in place to
make MBE work:
• An appropriate budget to measure performance against. This budget must be well
designed, so that the business will meet its strategic objectives if the plan is conformed
with.
• A matrix of exception amounts and who will be notified. The degree of variance allowed
in different categories needs to be defined in advance, along with the appropriate level(s)
of management who will respond to the variance in question. In some cases, different
levels of variance will be brought to the attention of different levels of management. For
example, a $5,000 variance might be reported to a department manager, while a $50,000
variance is brought to the attention of the functional V.P.
• A timely and accurate reporting system. Information needs to be accurately captured and
compared to the overall budget on a regular basis. Exceptions need to be noted so that
information can be sent to the correct team members.
• Once these items are present, the process can be rolled out to all staff. Anything that falls
outside the budget by an amount as defined in the matrix of exceptions will be sent to the
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appropriate level(s) of management for review and action. Otherwise, staff is in charge of
decision making.
Difference between MBO and Management by Exception:
Management by exception is a principle or technique of managerial control whereas MBO is a
philosophy of decentralization and participative management. MBO allows the subordinate to set
goals for themselves. Their performance is evaluated against these goals and they are advised by
the superior as to how deficiencies could be removed. If their performance is not fully
satisfactory. But under management by exception, only significant deviations from the standards
are reported to the higher level management. This conserves time and energy of top executives.
Immediate corrective measures can be initiated whenever significant deviations are reported up.
Nature and Scope of Directing
Once the plans are prepared the organization structure is created and employees are assigned
jobs, the enterprise can begin its operations. No, tangible results can be achieved unless the
directing or activating function is performed. Directing literally means moving into action.
Meaning of Directing: Directing is that part of the management process, which activates the
members of an organization to work efficiently and effectively for the attainment of organization
goals. It may be defined as the process of telling people what to do and ensuring that they do it to
the best of their ability. It includes making assignments, issuing orders and instructions,
providing guidance and inspiration to subordinates for the achievement of organizational
objectives. It consists of the following elements.
• Issuing orders and instructions that are clean, complete and within the capabilities of
subordinates.
• Continuing guidance and supervision of subordinates to ensure that they carry out their
assignment effectively and efficiently.
• Motivating subordinates to work hard for meeting the expectations of management.
• Maintaining discipline and rewarding those who perform well and
• Providing leadership to subordinates, so that they follow the right path,
• Thus, motivation, leadership, supervision and communication are the elements of the
directing function of management.
Nature and Characteristics of Direction:
Directing is characterized by the following distinguishing features:
Element of Management: Direction is one of the important functions of management. It is
through direction that management initiates action in the organization.
Continuing Function: Direction is a continuous process and it continues throughout the life of
an organization. A manager never ceases to guide, inspire and supervise his subordinates. A
manager cannot get things done simply by issuing orders and instructions. He must continually
provide motivation and leadership to get the orders and instructions executed.
Pervasive Function: Direction initiates at the top and follows right up to the bottom of an
organization. Every manager in the organization gives direction to his subordinates as superior
and receives direction as subordinate from his superior. Direction function is performed at every
level of management and in every department of the organization.
Creative Function: Direction makes things happen and convert plans into performance. It is the
process around which, all performances revolves. Without direction human factors in the
organization becomes inactive and consequently physical factors become useless. It breathes life
into the organization.
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Linking Functions: Planning, organizing and staffing are merely preparations for doing the
work and work actually starts when managers perform the directing function. Direction puts plan
into action and provides performance for measurement and control. In this way, direction serves
as a connecting link between planning and control.
Management of Human Factors: Direction is the inter-personal aspect of management. It deals
with the human element of the organization. Human behaviour is dynamic and is conditioned by
a complex of forces about which not much is known. Therefore, direction is a very difficult and
challenging function.
Significance of Direction:
Direction is the heart of administration as it is indispensable for work performance. In every
organization beings use physical resources like materials, machinery, money etc to perform
certain functions by which organizational objectives can be achieved. Direction is needed to tell
them what to do and when to do. Effective direction provides following advantages.
I. Initiates Action:
Direction constitutes the life spark and like electrical current it sets into motion the
organization. A good plan may have been prepared, a sound organization may have been
developed and a team of efficient workers may be employed. But, all of these will not produce
result until people are directed is the efficient use of resources. Without direction planning,
organizing and staffing become ineffective.
2. Ensures Co-ordination:
Each individual in the organization is related with others. His functioning affects others
and is, in turn, affected by others. Therefore, it becomes necessary to integrate individuals
efforts. So that organization achieves its objectives in the most efficient manner. Direction helps
in coordination and among various operations of the enterprise. It is the essence of operation, and
coordination is a by product of effective direction.
3. Improves Efficiency:
In an organization every individual has some potential and capacity through direction,
managers encourages, and influence employees to contribute to the best of their capability for the
achievement of the organizational objectives. In the absence of proper motivation and leadership
the potential of employees may remain under-utilizing.
4. Facilities Change:
An organization must adopt itself to environmental changes in order to be effective.
Moreover, there are changes in organization structure and in its members. In order in incorporate
and implement these changes, management has to motivate and guide the employees.
5. Assists Stability and Growth:
In order to survive, and grow in the long run, an organization must maintain balance its different
parts. Effective leadership and communication provide stability in the organization and help to
ensure that its parts work in a harmonious way.
Principles of Direction:
Direction is a complex function as it deals with people, whose behaviour is unpredictable.
Effective direction is an art which a manager can learn and perfect through practice. However,
managers can follow the following principles while directing their subordinates.
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1. Harmony of Objectives:
Individuals join the organization to satisfy their physiological and psychological needs. They are
expected to work for the achievement of organizational objectives. They will perform their tasks
better if they feel that it will satisfy their personal goals. Therefore, management should
reconcile the personal goals of employees with the organizational goals.
2. Maximum Individual Contribution:
Organizational objective are achieved at the optimum level when every individual in the
organization makes maximum contribution towards them. Managers should, therefore, try to
elicit maximum possible contribution from each subordinate.
3. Unity of Command:
A subordinate should get orders and instructions from one superior only. If he is made
accountable to two posses simultaneously, there will be confusion, conflict, disorder and
indiscipline in the organization. Therefore, every subordinate should be asked to report to only
one manager.
4. Appropriate Techniques: The manager should use correct direction techniques to ensure
efficiency of direction. The techniques used should be suitable to the superior, the subordinates
and the situation.
5. Direct Supervision:
Direction becomes more effective when there is a direct personal contact between a superior and
his subordinates. Such direct contact improves the morale and commitment of employees.
Therefore, wherever possible direct supervision should be used.
6. Strategic used of informal organization:
Management should try to understand and make use of informal groups to strengthen formal or
official relationships. This will improve the effectiveness direction.
7. Managerial Communication:
A good system of communication between the superior and his subordinates helps to improve
mutual understanding. Upward communication enables a manager to understand the subordinates
and gives an opportunity to the subordinates to express their feelings.
8. Comprehension:
Communication of orders and instructions is not sufficient. Managers should ensure that
subordinates correctly understand. What they are to do and how and when they are to do. This
will avoid unnecessary queries and explanations.
9. Effective Leadership:
Managers should act as leaders, so that they can influence the activities of their subordinates
without dissatisfying them. As leaders, they should guide and counsel subordinates in their
personal problems too. In this way they can win the confidence and trust of their subordinates.
10. Principles of follow through:
Directing is a continuous process. Therefore, after issuing orders and instructions a manager
should find out whether the subordinates working properly and what problems they are facing.
He should modify, if necessary, his orders in the light of these findings.
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Techniques of Direction:
In order to direct the subordinates effectively, managers use several techniques. Some of these
techniques are delegation, supervision, orders and instructions, motivation, leadership,
communication.
Delegation as a means of Directing:
Delegation of authority implies that a superior entrusts his subordinates with certain rights or
powers. He assigns a part of his work to the subordinate and authorities him to do the work.
Delegation is a useful technique of directing. It is a means of sharing authority with a
subordinate and providing him an opportunity to learn.
Use of delegation as a means of direction may, however gives rise to the following problems.
• It may not be possible to spell out the tasks and duties of every subordinate. The
subordinate managers have, therefore, to learn, to live with over lapping of jobs and
uncertainties in job descriptions.
• The extent of delegated authority may not be exactly clear and some vagueness in this
regard may unavoidable.
• The detail in which authority granted to a subordinate is spelt out may differ with the
nature of the work assignment. When work assignments are detailed, authority has to be
detailed.
• A manager has normally to accept some acts of the subordinate in excess of the delegated
authority as a part of the subordinates implied authority.
• If the authority delegation is too rigid it may stifle initiative and creativity on the part of
the subordinates.
• Indiscriminate delegation may create imbalances in organization because, different
individuals do not have identical capacity and maturity.
Supervision:
Supervision implies expert overseeing of people at work in order to ensure compliance
with established plans and procedures. Every executive has to supervise the work of his
subordinates. At the operating level, supervision is the most significant part of a manager’s job.
The supervisor is in direct touch with the workers. He teaches proper work methods, maintains
discipline and work standards and solves worker’s grievances or problems.
Issuing Orders and Instructions:
Issuing of orders and instructions is essential to direct the subordinates, so that they may
work efficiently and effectively for the realization of predetermined objectives. The giving of
orders and instructions to subordinates is an indispensable component of directing and no
manager can get things done without them. Generally, the terms order, instruction, directive and
command are used inter-challenge ably in management literature. An order is a means of
initiating, modifying, or stopping an activity. It is a primary tool of directing by means of which
activities are started, altered, guided and terminated.
Essentials of a Good Order:
A good order must possess the following essential characteristics.
• The order should be stated in clear cut and unambiguous words, so that it is easily
understood by the subordinates.
• The order should be compatible with the objectives and policies of the enterprise and
with the interests of subordinates.
• The order should be reasonable and within the authority of the subordinates.
• The order should specify the time within which it should be carried out and completed.
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• As far as possible, the order should be in writing. A written order is more precise than an
oral one and it helps to avoid over lapping instructions. A superior may issue instructions
orally because of his faith in subordinates.
Morale
The term ‘Morale’ is not very specific. It conveys different meanings to different people.
According to Theo Haimann, Morale is “the state of mind and emotions, affecting the attitude
and willingness to work, which in turn affects individual and organizational objectives”.
Nature of Morale:
The main characteristics of morale are as follows:
• Morale is basically a psychological concept. It is a mental process which, once started,
permeates in the entire group creating a mood which results in the formation of a
common attitude.
• Morale is a relative concept and does not indicate by itself, the existence of either a good
or bad state. Therefore, it is in accurate to speak of morale as something which is either
present or absent in a group. There is no absolute state of morale. Thus, morale is a
neutral concept and it has to be qualified with the degree as high morale or low morale. If
the attitude of a group is poor, morale is low and vice versa.
• Morale is a group phenomenon consisting of a pattern of attitudes. It is the sum total of
employees attitudes, feelings and sentiments.
• Morale is an indicator of attitudes employees towards their jobs, superiors, work
environment and the organization.
• Morale is a by product of group relationships. It reflects the degree of willingness and
enthusiasm with which the members of a group carry out their assignments.
• Morale is dynamic in nature. It cannot be developed overnight. Managers have to make
continuous efforts to build and maintain high morale. Morale is a long-term concept.
• Morale is multi-dimensional. It represents a complex mixture of several elements. It
recognizes the influence of job situation human needs and motivational forces on
attitudes of individuals and groups.
• Morale is contagious.
• Morale is intangible and, therefore, it is very difficult to measure the degree of morale
accurately. But it can be judged from employee absenteeism and turn over.
Significance of Morale:
When the morale of employees in an organization is high, they co-operate fully with the
management towards the achievement of organizational objectives. It will lead to enthusiasm
among the workers for better performance. High morale is indispensable for the efficiency and
effectiveness of the organization in the long run. It makes people committed to the organization
of the employee’s strength, dependability, confidence and devotion. High morale leads to good
discipline, high degree of interest in the job, loyalty to the organization and high performance.
Low morale indicates mental unrest among the employees. It hampers production and
productivity and leads to ill health of employees. The other consequences of low morale are as
follows:
• High rates of absenteeism and labour turnover.
• Excessive complaints and grievances.
• Frustration and Friction among workers.
• Lack of discipline.
• Antagonism towards the organization.
• Low quantity and quality of output.
• Resistance to change.
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Building High Morale
Morale building is a dynamic and perpetual exercise. It is the responsibility of every
manager. Both individuals and collective efforts are required to develop and maintain high
morale. The following suggestions may be followed in order to improve morale in organization.
1. Two Way Communication:
There should be a two way communication between management and workers. The
workers should be kept fully informed about the policies and programmes of the organization.
But more important than this is upward communication through which workers can express their
doubts and seek clarification. For this purpose, effective suggestions schemes and grievances
handling procedures should be created. Managers shall also have informal discussions with the
workers.
2. Human Relations Approach:
Human relations approach suggests that individual should be treated as human being. No
individual or group is more important than others. Therefore, the contribution of each individual
should be recognized. Trustful and cooperative relationships should be created among
employees. They should be given the opportunity to develop to their fullest potential.
3. Management of attitudes:
Morale is contagious in the sense that people learn from each other. Moreover, the
attitudes of a manager very often influence the attitudes of his subordinates. Therefore, a
manager should become the master of his own attitudes before trying to cultivate favourable
attitudes among his subordinates. The first line supervisor is a key figure in morale building
because his morale has a multiplier effect on subordinates. Persuasion and genuine concern for
people are more effective in raising morale than threat or punishment.
4. Incentive Schemes:
There should be an effective incentive system to provide financial and non-financial
awards to employees who perform well. The discipline rules must also be clear.
5. Welfare Measures:
Employee welfare schemes like housing, medical benefits, education facilities for
children. Canteens, sports, clubs, credit facilities safety measures etc are very helpful in
developing positive attitudes among employees. The schemes reflect management’s interest in
workers welfare. Management should also encourage social activities among workers to improve
group cohesiveness and morale.
6. Workers participation in management:
Management should allow workers a say in the decision making process. They should be
consulted and taken into confidence before a change which affects them is introduced. This will
help to improve their enthusiasm in implementing decisions. Joint consultation and collective
bargaining are useful in resolving conflicts in the organization.
7. Job Enrichment:
Workers should be given challenge and exciting tasks to perform. Job enrichment helps
to avoid monotony, fatigue and disinterest among employees. This attitude towards work
becomes more positive. Moreover, workers should be given proper training, so that they may
perform their jobs without frustration and get job satisfaction.
SUMMARY
Motivation: Motivation is the core of effective management action. The phrase ‘motivation is the core
of management implies that it is the central task of management to motivate his subordinates to work for
the attainment of common organizational goals’.
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UNIT-IV:
Section-A
1. The achievement of goals is doubtful in the absence of ____________.
2. Motivation is based on ____________.
3. ____________motivation gives maximum benefit in the short run.
4. ____________are achieved through the right direction of human behaviour in a desired manner.
5. ____________is concerned with the direction of functions of management.
6. ____________deals with the psychology of workers.
7. The motivation may be divided into ________and___________.
8. ___________means the drive to actualize one's own image.
9. Positive motivation is based on __________.
10. __________motivation is available at the time of performance of work.
Section-B
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1. Describe the various techniques of leadership.
2. Explain the features of leadership.
3. Define MBO and state its features.
4. Explain the process of MBO.
5. What are the guidelines for setting effective objectives?
6. Explain the various needs of Maslow's Theory.
7. Describe the criticism of Z theory.
8. Explain the various kinds of motivational techniques.
9. Explain the assumptions of X theory.
10. Explain the assumptions of Y theory.
Section-C
1. Define motivation and the nature of motivation.
2. Explain the importance of motivation.
3. Explain McGregore's X and Y theory.
4. Explain elaborately the need and importance of leadership.
5. Explain the various theory's of leadership.
6. Discuss the various functions of a leader.
7. Describe the qualities of a leadership.
8. Explain various benefits and limitations of MBO.
9. Explain different style of leadership.
10. What do you mean by incentives? Specify non-financial incentives.
UNIT-V:
Motivation and Communication
Motivation – need – determinants of behaviour – theories of motivation - X, Y and Z theories –
Maslow’s theory.
Leadership – function – styles – theories – communication – meaning – need – objectives –
controlling – techniques – coordination.
Communication
Communication is an indispensable element in human relationships. Human beings interact with
one another through communication. There is communication when a salesman talks to a
customer or a supervisor gives order to a worker. When we read a book, its author (writer)
communicates with us. When we watch the TV or a film or write a letter, there is communication
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of ideas and feelings. Effective communication is essential in any type of human grouping –
business, government, military, hospitals, universities, community, and homes. In fact, it is
difficult to imagine any kind of interpersonal activity which does not depend upon
communication.
Meaning of Communication:
The word “Communication” has been derived from the Latin word ‘Communis’ which implies
common. Thus, communication may be defined as interchange of thought and information to
bring about mutual understanding. It involves exchange or sharing of ideas, opinions and facts
between two or more persons. It is the process of conveying written, verbal or gestural messages
from one person to another, so that they are understood. According to Theo Haimann,
“Communication is the process of passing information and understanding from one person to
another. It is the process of imparting ideas and making one self understood by others”.
Nature of Communication:
Communication is characterized by the following salient features.
1. Communication is essentially a two-way process, involving a sender and a receiver. One
person alone cannot communicate. There is no communication until the message is received and
understood by the receiver. It takes two to complete communication.
2. The message should be interpreted by the receiver in the same sense as intended by the
sender. The basic purpose of communication is to create mutual understanding. Therefore
communication is complete only when the message is correctly understood and the response to it
becomes known to the sender.
3. The message must have substance. It should contain information or ideas which are of
interest to the receiver. It is meaningless to talk about books to a person who cannot read.
4. Communication is a pervasive function. It is used by managers at all levels of
organization and in all areas of operations.
5. Communication is an on-going process. There must be continuous inter-change of
messages between people working together in a group.
6. Communication does not mean mere oral or written messages. It includes everything
done to convey meaning. Sometimes, the wave of hand, movement of lips, twisting of the face,
rolling of the eyes or shaking of hands may convey more than a hundred written or spoken
words.
7. Speaking, writing, acting and listening, reading observing or watching are the
fundamental aspects of communication.
Features of communication
1. Simple language : The language used in the communication should be simple and
understandable.
2. Clearness : The communicator should be clear in his mind about the objective of his
communication. There should not be any ambiguity in communication.
3. Adequacy of information : It should contain adequate information and should be complete in
all respect; otherwise it will not serve the purpose of communication.
4. Proper medium of communication : The communicator should select the proper media of
communication by considering such factors as the nature of communication, urgency of
communication, distance between communicator and recipient of communication etc.
5. Accurate : An effective communication should be accurate. False and misleading statement
will seriously undermine the reputation of the business. It may also lead to expensive litigation.
6. Courtesy : Politeness is, of course, one of the important attributes of good business
communication. A polite language should be used in communication. It helps improve business
relations.
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Elements of Communication
The basic elements of communication are:
a) Communicator: The sender, speaker, issuer, or writer who intends to convey or transmit a
message.
b) Message: The subject matter of communication.
c) Transmission: The act of conveying the message.
d) Channel: The medium used to transmit the message.
e) Receiver: The person to whom the message is meant
f) Response: Replying or reaction of the receiver.
Different Types of Communication
Learning Objectives
• Understand the features and advantages of verbal communication.
• Understand the features and advantages of written communication.
• Understand the features of nonverbal communication and how it interacts with verbal
and written communications.
Communication can be categorized into three basic types: (1) verbal communication, in which
you listen to a person to understand their meaning; (2) written communication, in which you read
their meaning; and (3) nonverbal communication, in which you observe a person and infer
meaning. Each has its own advantages, disadvantages, and even pitfalls.
Verbal Communication
Verbal communications in business take place over the phone or in person. The medium
of the Message is oral. Let’s return to our printer cartridge example. This time, the Message is
being conveyed from the Sender (the Manager) to the Receiver (an employee named Bill) by
telephone. We’ve already seen how the Manager’s request to Bill (“We need to buy more printer
toner cartridges”) can go awry. Now let’s look at how the same Message can travel successfully
from Sender to Receiver.
Manager (speaking on the phone): “Good morning, Bill!”
(By using the employee’s name, the manager is establishing a clear, personal link to the
Receiver.)
Manager: “Your division’s numbers are looking great.”
(The Manager’s recognition of Bill’s role in a winning team further personalizes and
emotionalizes the conversation.)
Manager: “Our next step is to order more printers toner cartridges. Could you place an order for
1,000 printer toner cartridges with Jones Computer Supplies? Our budget for this purchase is
$30,000, and the cartridges need to be here by Wednesday afternoon.”
(The Manager breaks down the task into several steps. Each step consists of a specific task, time
frame, quantity, or goal.)
Bill: “Sure thing! I’ll call Jones Computer Supplies and order 1,000 more printer toner
cartridges, not exceeding a total of $30,000, to be here by Wednesday afternoon.”
(Bill, who is good at active listening, repeats what he has heard. This is the Feedback portion of
the communication, and verbal communication has the advantage of offering opportunities for
immediate feedback. Feedback helps Bill to recognize any confusion he may have had hearing
the manager’s Message. Feedback also helps the manager to tell whether she has communicated
the Message correctly.)
Storytelling
Storytelling has been shown to be an effective form of verbal communication; it serves an
important organizational function by helping to construct common meanings for individuals
within the organization. Stories can help clarify key values and help demonstrate how things are
done within an organization, and story frequency, strength, and tone are related to higher
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organizational commitment. The quality of the stories entrepreneurs tell is related to their ability
to secure capital for their firms. Stories can serve to reinforce and perpetuate an organization’s
culture, part of the organizing P-O-L-C function.
Crucial Conversations
While the process may be the same, high-stakes communications require more planning,
reflection, and skill than normal day-to-day interactions at work. Examples of high-stakes
communication events include asking for a raise or presenting a business plan to a venture
capitalist. In addition to these events, there are also many times in our professional lives when
we have crucial conversations—discussions where not only the stakes are high but also where
opinions vary and emotions run strong. One of the most consistent recommendations from
communications experts is to work toward using “and” instead of “but” as you communicate
under these circumstances. In addition, be aware of your communication style and practice
flexibility; it is under stressful situations that communication styles can become the most rigid.
Written Communication
In contrast to verbal communications, written business communications are printed messages.
Examples of written communications include memos, proposals, e-mails, letters, training
manuals, and operating policies. They may be printed on paper, handwritten, or appear on the
screen. Normally, a verbal communication takes place in real time. Written communication, by
contrast, can be constructed over a longer period of time. Written communication is often
asynchronous (occurring at different times). That is, the Sender can write a Message that the
Receiver can read at any time, unlike a conversation that is carried on in real time. A written
communication can also be read by many people (such as all employees in a department or all
customers). It’s a “one-to-many” communication, as opposed to a one-to-one verbal
conversation. There are exceptions, of course: a voicemail is an oral Message that is
asynchronous. Conference calls and speeches are oral one-to-many communications, and e-mails
may have only one recipient or many.
Most jobs involve some degree of writing. According to the National Commission on Writing,
67% of salaried employees in large American companies and professional state employees have
some writing responsibility. Half of responding companies reported that they take writing into
consideration when hiring professional employees, and 91% always take writing into account
when hiring (for any position, not just professional-level ones).
Luckily, it is possible to learn to write clearly. Here are some tips on writing well. Thomas
Jefferson summed up the rules of writing well with this idea “Don’t use two words when one
will do.” One of the oldest myths in business is that writing more will make us sound more
important; in fact, the opposite is true. Leaders who can communicate simply and clearly project
a stronger image than those who write a lot but say nothing.
Nonverbal Communication
What you say is a vital part of any communication. But what you don’t say can be even more
important. Research also shows that 55% of in-person communication comes from nonverbal
cues like facial expressions, body stance, and tone of voice. According to one study, only 7% of
a Receiver’s comprehension of a Message is based on the Sender’s actual words; 38% is based
on paralanguage (the tone, pace, and volume of speech), and 55% is based on nonverbal cues
(body language).
Research shows that nonverbal cues can also affect whether you get a job offer. Judges
examining videotapes of actual applicants were able to assess the social skills of job candidates
with the sound turned off. They watched the rate of gesturing, time spent talking, and formality
of dress to determine which candidates would be the most successful socially on the job.]For this
reason, it is important to consider how we appear in business as well as what we say. The
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muscles of our faces convey our emotions. We can send a silent message without saying a word.
A change in facial expression can change our emotional state. Before an interview, for example,
if we focus on feeling confident, our face will convey that confidence to an interviewer.
Adopting a smile (even if we’re feeling stressed) can reduce the body’s stress levels.
To be effective communicators, we need to align our body language, appearance, and tone with
the words we’re trying to convey. Research shows that when individuals are lying, they are more
likely to blink more frequently, shift their weight, and shrug.
Another element of nonverbal communication is tone. A different tone can change the perceived
meaning of a message. demonstrates how clearly this can be true, whether in verbal or written
communication. If we simply read these words without the added emphasis, we would be left to
wonder, but the emphasis shows us how the tone conveys a great deal of information. Now you
can see how changing one’s tone of voice or writing can incite or defuse a misunderstanding.
For an example of the importance of nonverbal communication, imagine that you’re a customer
interested in opening a new bank account. At one bank, the bank officer is dressed neatly. She
looks you in the eye when she speaks. Her tone is friendly. Her words are easy to understand, yet
she sounds professional. “Thank you for considering Bank of the East Coast. We appreciate this
opportunity and would love to explore ways that we can work together to help your business
grow,” she says with a friendly smile.
At the second bank, the bank officer’s tie is stained. He looks over your head and down at his
desk as he speaks. He shifts in his seat and fidgets with his hands. His words say, “Thank you for
considering Bank of the West Coast. We appreciate this opportunity and would love to explore
ways that we can work together to help your business grow,” but he mumbles, and his voice
conveys no enthusiasm or warmth.
Which bank would you choose?
The speaker’s body language must match his or her words. If a Sender’s words and body
language don’t match—if a Sender smiles while telling a sad tale, for example—the mismatch
between verbal and nonverbal cues can cause a Receiver to actively dislike the Sender.
Here are a few examples of nonverbal cues that can support or detract from a Sender’s Message.
Body Language
A simple rule of thumb is that simplicity, directness, and warmth convey sincerity. And sincerity
is key to effective communication. A firm handshake, given with a warm, dry hand, is a great
way to establish trust. A weak, clammy handshake conveys a lack of trustworthiness. Gnawing
one’s lip conveys uncertainty. A direct smile conveys confidence.
Eye Contact
In business, the style and duration of eye contact considered appropriate vary greatly across
cultures. In the United States, looking someone in the eye (for about a second) is considered a
sign of trustworthiness.
Facial Expressions
The human face can produce thousands of different expressions. These expressions have been
decoded by experts as corresponding to hundreds of different emotional states. [8] Our faces
convey basic information to the outside world. Happiness is associated with an upturned mouth
and slightly closed eyes; fear with an open mouth and wide-eyed stare. Flitting (“shifty”) eyes
and pursed lips convey a lack of trustworthiness. The effect of facial expressions in conversation
is instantaneous. Our brains may register them as “a feeling” about someone’s character.
Posture
The position of our body relative to a chair or another person is another powerful silent
messenger that conveys interest, aloofness, professionalism—or lack thereof. Head up, back
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straight (but not rigid) implies an upright character. In interview situations, experts advise
mirroring an interviewer’s tendency to lean in and settle back in her seat. The subtle repetition of
the other person’s posture conveys that we are listening and responding.
Touch
The meaning of a simple touch differs between individuals, genders, and cultures. In Mexico,
when doing business, men may find themselves being grasped on the arm by another man. To
pull away is seen as rude. In Indonesia, to touch anyone on the head or touch anything with one’s
foot is considered highly offensive. In the Far East, according to business etiquette writer Nazir
Daud, “it is considered impolite for a woman to shake a man’s hand.” [9] Americans, as we have
noted, place great value in a firm handshake. But handshaking as a competitive sport (“the bone-
crusher”) can come off as needlessly aggressive, at home and abroad.
Space
Anthropologist Edward T. Hall coined the term proxemics to denote the different kinds of
distance that occur between people. These distances vary between cultures.
How Are You Communicating to Your Team?
Communication involves the imparting or interchanging thoughts, opinions, or information
among people by speech, writing, or signs. People communicate in different ways. How effective
is your communication style? Are you giving away thoughts you don't mean to?
Verbal
Verbal communication entails the use of words in delivering the intended message. The two
major forms of verbal communication include written and oral communication.
Written communication includes traditional pen and paper letters and documents, typed
electronic documents, e-mails, text chats, SMS and anything else conveyed through written
symbols such as language. This type of communication is indispensable for formal business
communications and issuing legal instructions.
Communication forms that predominantly use written communication include handbooks,
brochures, contracts, memos, press releases, formal business proposals, and the like. The
effectiveness of written communication depends on the writing style, grammar, vocabulary, and
clarity
Oral Communication
The other form of verbal communication is the spoken word, either face-to-face or through
phone, voice chat, video conferencing or any other medium. Various forms of informal
communications such as the grapevine or informal rumor mill, and formal communications such
as lectures, conferences are forms of oral communication. Oral communication finds use in
discussions and causal and informal conversations. The effectiveness of oral conversations
depends on the clarity of speech, voice modulation, pitch, volume, speed, and even non-verbal
communications such as body language and visual cues.
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Verbal communication makes the process of conveying thoughts easier and faster, and it remains
the most successful form of communication. Yet, this makes up only seven percent of all human
communication!
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Nonverbal Communication
Nonverbal communication entails communicating by sending and receiving wordless messages.
These messages usually reinforce verbal communication, but they can also convey thoughts and
feelings on their own.
Physical nonverbal communication, or body language, includes facial expressions, eye contact,
body posture, gestures such as a wave, pointed finger and the like, overall body movements, tone
of voice, touch, and others.
Facial expressions are the most common among all nonverbal communication. For instance, a
smile or a frown conveys distinct emotions hard to express through verbal communication.
Research estimates that body language, including facial expressions, account for 55 percent of all
communication.
Paralanguage
The way something is said, rather than what is actually said, is an important component of
nonverbal communication. This includes voice quality, intonation, pitch, stress, emotion, tone,
and style of speaking, and communicates approval, interest or the lack of it. Research estimates
that tone of the voice accounts for 38 percent of all communications.
Other forms of nonverbal communication usually communicate one’s personality. These include:
• Aesthetic communication or creative expressions such as dancing, painting, and the like.
• Appearance or the style of dressing and grooming, which communicates one’s
personality.
• Space language such as paintings and landscapes communicate social status and taste.
• Symbols such as religious, status, or ego-building symbols.
Visual Communication
A third type of communication is visual communication through visual aids such as signs,
typography, drawing, graphic design, illustration, color and other electronic resources. Visual
communication with graphs and charts usually reinforces written communication, and can in
many case replace written communication altogether.
As the adage goes “a picture is worth a thousand words”; such visual communication is
more powerful than verbal and nonverbal communication on many occasions. Technological
developments have made expressing visual communications much easier than before.
A good understanding of the different types of communication and communication styles
can help you know and deal with people better, clear up misunderstandings and misconceptions,
and contribute to the success of the enterprise.
Elements of Communication Process:
The communication process consists of the following step.
1. Sender
The person who sends a message is known as the sender or the source. He formulates the
message which he wants to convey to others. He initiates the process of communication. The
sender or communication may be a writer, a speaker or an actor.
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2. Message:
Message is the subject-matter of communication. It may contain facts, ideas or feelings. It exists
in the mind of the sender.
Sender Message Encoding Channel Receiver Decoding
Feed back
Communication Process
3. Encoding:
It is the act of translating the message into words, pictures, symbols, signs or some other form.
4. Channel:
It is the act media through which the message passes from the sender to the receiver. Channel
may be formal or informal. The sender may use spoken or written methods. Channel is used for
transmission of the message.
5. Receiver:
The person who receives the message is called receiver. He may be a reader, listener or observer.
Receiver is also known as communicatee.
6. Decoding:
The receiver interprets the message to draw meaning from it. He converts symbols, signs or
pictures into meaning.
7. Feed Back:
It is the response, reaction or reply by the receiver. It is directed to the sender. When the sender
receives the feedback, the communication process is said to be complete.
Importance of Communication:
Communication is a part and parcel of the management process. It is an important element of a
manager’s job. It is the responsibility of every executive to develop and maintain a system of
communication. Every manager spends the major portion of his time in communicating with his
subordinates. Management is a series of communication processes. Communication is the life
blood of an organization and no organization can function without effective communication.
Sound communication provides the following advantages.
1. Improves Managerial Performance:
Communication enables a manager to diagnose the various problems and to secure information
for decision making. A manager explains the meaning and significance of the organizational
goals and policies to his subordinates through communication. In order to assign duties and
responsibilities and to issue orders and instructions also a manager requires communication.
Thus, communication enables a manager to plan logically to organize systematically, to direct
effectively and to control efficiently
Importance of Communication:
Communication is a part and parcel of the management process. It is an important element of a
manager’s job. It is the responsibility of every executive to develop and maintain a system of
communication. Every manager spends the major portion of his time in communicating with his
subordinates. Management is a series of communication processes. Communication is the life
blood of an organization and no organization can function without effective communication.
Sound communication provides the following advantages.
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1. Improves Managerial Performance:
Communication enables a manager to diagnose the various problems and to secure information
for decision making. A manager explains the meaning and significance of the organizational
goals and policies to his subordinates through communication. In order to assign duties and
responsibilities and to issue orders and instructions also a manager requires communication.
Thus, communication enables a manager to plan logically to organize systematically, to direct
effectively and to control efficiently.
2. Facilitates Leadership:
Communication enables a manager to understand the attitudes, feelings and ideas of his
subordinates. The modern concept of Leadership exercised through persuasion rather than
command places a great premium on communication.
3. Increases Job Satisfaction:
Individuals get greater satisfaction from their jobs when they are told clearly how well they are
doing and what they should do to improve performance. Through communication a manager can
keep his subordinates informed of the results of their efforts. He can develop their interest and
motivation in work by communicating effectively with them.
4. Reduces Time and Effort:
An effective system of communication results in great saving of time and efforts. A manager can
keep in touch with his subordinates by sitting in his office. He need not go to them every now
and then. Similarly, the subordinates can keep the manager informed the progress of their work
through reports and without visiting him personally. Such economy in time and effectiveness in
the organization.
5. Enhances Co-ordination:
Individuals working in an organization perform different activities. It is necessary to integrate
and unity these activities and human efforts. Communication helps to energize and co-ordinate
human efforts by transmitting information, ideas and feelings. It makes team-work possible by
promoting mutual trust and co-operation. Effective communication serves as a cementing force
by uniting the members of an organization into a well-knit team.
Helps Public Relations:
A business enterprise comes in contact with several social groups e.g. Customers, Shareholders,
Government and the Public. It must maintain, harmonious relationships with these groups.
Communication enables the management to maintain contacts with these groups and to develop a
favourable image of the enterprise, in the outside world. Public relations is mainly the job of
effective communication with the external environment.
Channels or Types of Communication
A channel of communication is the path through which messages are transmitted from the sender
to the receiver. Channels of communication may be formal or informal.
Formal Communication:
Formal Communication follows the routes formally laid down in the organization
structure of the enterprise. Formal channels are the paths of communication which are
institutionally determined and which are associated with status or position of the sender and the
receiver. Formal channels are deliberately created to regulate the flow of communication. An
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attempt is made to make the flow of information orderly, so that it flows smoothly and timely to
the points, where it is required.
The officially prescribed path of communication is orderly in nature. It can easily be
maintained because it derives support from authority relationships. It provides for close contact
between members of the organization. It allows for the flow of essential information. It helps in
exercising control over subordinates and in fixation of responsibility. But formal communication
tends to be slow and rigid. Organizational distance, screening at various points and narrow route
are the main bottle necks in the flow of formal communication.
One way of overcoming these problems is to provide multiple channels linking one
position with various other positions. But widespread use f such a system may create confusion
and undermine the superior’s authority. There are three forms of formal communication as it
flows in three directions – downward, upward, and horizontal. Downward and upward flows are
two types of vertical communication.
Downward Communication:
Downward communication refers to the flow of information from a superior (higher level) to a
subordinate (lower level). The purpose here is to issue orders and instructions to the
subordinates. It also involves communication of policies, procedures and programmes of the
organization. It often takes place in the form of notices, circulars, letters, memo, group, meeting
etc.
Upward Communication:
It implies the flow of communication from lower levels (subordinates) to the higher levels
(superiors) of the organization. The purpose of upward communication is to keep the superiors
informed about the progress of work and response to the downward communication. It is in the
form of reports, suggestions, recommendations, inquiries, appeals, grievances, etc. It enables the
top management to know how well the employees understand the policies and programmes.
Management should always encourage upward communication as it helps to improve the moral
of the employees and in overcoming resistance to change.
Horizontal Communication:
It refers to the transmission of information among the positions at the same level of organization.
Persons with same status exchange information and ideas for achieving co-ordination among
different departments or divisions. Such communication is also known as lateral or sideward
communications. It takes the forms of memoranda, letters, telephones, talks, face-to-face
contacts, and inter-departmental committee meetings.
Informal Communication or Grapevine:
Informal communication or grapevine implies communication among people through informal
contacts or relations. Informal communication co-exists with the formal communication system.
It arises from social interactions of people. It is the expression of their natural desire to
communicate. People resort to informal communication when there are barriers in the formal
channels. Managers may also use informal channels when they find it difficult to collect
information through the formal channels.
Informal communication provides several benefits. It is easier and faster than formal
communication. It fills in the steps existing in the formal communication system. It is a primary
means of developing identification with the group and interest in work. Informal communication
is the main source of information about the feelings and attitudes of employees. In the absence of
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grapevine, the ability of the manager to motivate people and to build team work is reduced. It
also helps to satisfy the information needs of employees.
On the other hand, informal communication tends to carry inaccurate and baseless
information. It contains rumours, and gossips. Grapevine has no definite origin and direction.
Therefore, it is difficult to assign responsibility for false information or rumours. The informal
communication is a part and parcel of the organization. Management cannot eliminate it. The
only thing management can do is to minimize its adverse effects. For this purpose, management
should be aware of the utility and positive contributions of grapevine. Management should
analyse informal communications. It should stop rumours as early as possible, because once
employees accept the rumour, they destort future events to conform to the rumour. The best way
to deal with rumour is to supply true facts in face to face contacts. So as to eliminate ambiguities
in the minds of the individuals.
Distinction between Formal and Informal Communication:
Formal Communication Informal Communication
1. Official Channel. 1. Unofficial Channel.
2. Deliberately planned and systematic. 2. Unplanned and spontaneous.
3. Part of organizational structure. 3. Cuts across formal relationships.
4. Oriented towards goals and tasks of the
enterprise.
4. Directed towards goals and need satisfaction
of individuals.
5. Impersonal 5. Personal and Social.
6. Stable and Right. 6. Flexible and instable.
7. Slow and structured. 7. Fast and unstructured.
Grapevine – Merits and Demerits
Merits Demerits
1. Useful for developing group co-hesiveness 1. Based on rumours and hearsay.
2. Serves as an emotional safety value. 2. Misleads people.
3. Effective source of knowing feelings and
attitudes of employees.
3. May breed animosity against particular
executives.
4. Supplements the channels of official
communication.
4. May lead to more talk and less work.
5. Tells management when to be firm and
when to yield.
5. May distort official channels of
communication.
Media or Methods of Communication
There are three important types of communication media:
• Oral Communication
• Written Communication
• Gestural Communication
Oral Communication:
Oral communication involves exchanges of message through spoken words. It may take place (i)
by face-to-face contacts (ii) through mechanical devices like telephone. Face-to-face
conversation is the most natural way of transmitting the message. It is very speedy and helps to
interchange feelings and attitudes.
Face-to-face communication may like place through lectures, group discussions,
interviews, committee meetings broad cast and social gatherings. Such communication enables
the speaker to secure greater understandings and co-operation. The listener can make on-the-spot
queries to clear his doubts if any. These days, mechanical devices like alarm bell, telephone,
signals, intercom system, Dictaphone etc are becoming increasingly popular for communicating
messages.
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Merits: Oral or verbal communication offers the following advantages:
• Economical: Oral communication is relatively less expensive both in terms of time and
money.
• Personal Touch: Oral communication is more effective due to direct contact between the
sender and the receiver.
• Speed: Oral communication is faster as compared to written communication.
• Flexibility: Oral communication is more flexible because, the mode of delivery and the
tone can be adjusted according to the type of listener of the audience. One is always free
to modify or withdraw his comments because normally no record is kept in verbal
communication.
• Quick Response: In oral communication, response or reaction to the message can be
obtained on the spot. Queries, doubts or misgiving can also be removed easily. Therefore,
oral communication leads to better under standing and mutual satisfaction.
Demerits:
Oral communication suffers from the following weaknesses:
• Lack of Record: Oral communication does not provide an authentic and permanent
record of communication unless the conversation is tape-recorded. It is therefore of
immediate value. Where the message has to be kept as a record it will not be appropriate.
Therefore, oral communication is not useful in communicating service contracts policy
statements, purchase orders and other matters of record.
• Time Consuming: Oral communication in the form of face-to-face talk may become
time consuming and costly. In meetings and conferences nothing concrete may take place
after lengthy deliberations.
• Lengthy Message: If the subject matter to be communicated is quite lengthy, oral
communication may not produce satisfactory results. In such a case, the listener may not
patiently listen and understand the whole matter.
• Physical Distance: When there is a long physical distance between the speaker and the
listener, oral communication may be ineffective. Communication through mechanical
devices is not very reliable due to the possibility of breakdown in the mechanical system.
Oral communication is not possible when the parties are at distance places and no
telephone service is available.
• Misunderstanding: Oral communication may be misunderstood or not heard due to
mutual distrust or suspicion between the speaker and the listener. Poor vocal expression
may also lead to misunderstanding. Immediate response or instant reaction may result in
conflicts in certain situations. Sometimes, oral words are not taken seriously by the
receiver. In attention or poor listening on the part of the receiver also creates problems.
Written Communication:
Written communication is transmitted through written words in the form of letters, circulars,
memos, bulletins, instruction cards, manuals, hand books, reports, returns etc. Managers
frequently use written communication in the course of performing their functions. It is frequently
used to issue specific orders and instructions to subordinates.
Merits:
Written communication provides the following advantages:
• Effectiveness: Written messages are more carefully formulated than oral messages.
Therefore, written communication tends to be more clear and specific. It is more orderly
and binding on subordinates.
• Lag Lengthy Messages: Written communication is more appropriate when the message
is quite lengthy or where it is to be conveyed to a large number of persons
simultaneously.
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• Economical: Written communication is cheaper when the sender and the receiver are
situated at distance places.
• Repetition: Written communication can be used again and again. Sometimes written
communication is also used to elaborate complement oral messages.
• Permanent Record: Written communication provides a reliable record for future
reference. It is very difficult to alter the contents of a written message. When the subject
matter of communication needs to be preserved for future, written communication is the
only way out.
• Better Response: Response to written communication is generally well through out
because, the receiver gets sufficient time to understand and valuate the message.
Demerits:
Written communication is subject to the following limitations:
• Time Consuming: Written communication requires greater time in the preparation and
transmission of messages. Therefore, it tends to be slower than oral communication
written messages give rise to queries for glorification and elaboration which lead to
further loss of time and money.
• Expensive: As it takes long time to convey the message, written communication is more
expensive especially for transmitting short messages over short distances.
• Inflexibility: Once a written message is sent, there is no scope for making amends for
inaccuracy that may have crept into it. Moreover, a written message once transmitted
cannot be withdrawn.
• Little Secrecy: It is difficult to maintain complete secrecy about written messages.
• Lack of Personal Touch: Written communication tend to be very formal and lack
personal touch. One cannot make use of postures to convey one’s feelings and emotions
with a written message.
• Misunderstanding: There is greater chance of the message being understood. If the
written message is poorly drafted it may create confusion and conflict. Written
communication may be blocked due to bureaucratic procedures in the organization.
Gestural Communication:
Communication through gestures or postures is known as gestural communication. It is often
used to supplement oral communication. Gestural communication is very useful in conveying
feelings, emotions and attitudes. For example, hand shake with a subordinate or a pat on his back
helps to motivate the subordinate. A person can convey much through wave of hands, parting of
lips, movement of eyes, etc. Similarly, gestures by the audience indicates reaction or response to
the oral message.
Each media of communication has its strengths and weaknesses. In practice, different
media are used simultaneously to make communication effective. Oral communication is more
useful when the message to be conveyed is complex or when the time available is very short. It is
also appropriate when reaction of the receiver is needed quickly. Where the message is lengthy,
and reference, written communication is more useful.
Communication Networks:
Communication network is a pattern of inter-connected lines. It is a system where the message
may flow in one direction or in several directions. As a pattern of contacts among the members
of an organization communication network contains, channels. It determines the rapidity
accuracy and smoothness with which the messages flow in the organization. If the network is too
long or roundabout, there will be delay in the flow of communication. If it is too narrow the
message may get blocked. When the network contains several filtering points the message may
get distorted.
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There are several types of communication networks depending upon the nature of
channels and the number of persons involved in the communication process. There are four main
communication networks.
Communication Networks
1. Circle Network:
In case of circle network, the message moves in a circle, under it each person can communicate
with two others located on both of his sides. Such network offers a wider choice of channels and
offers greater satisfaction to employees. But it is very slow, noisy and unorganized.
2. Chain Network:
Under this network, the message flows in a direct vertical line. All the subordinates receive
orders and instruction from one superior. This type of network tend to be faster and less noisy.
3. Wheel Network:
Under it, a number of subordinates report to one superior. It is called wheel because all
communications pass through the center person similar to the hug of a wheel. It provides no
direct communication among the subordinates. It is the fastest and most accurate network.
4. All Channel Network:
It represents a free flow of communication. Every member is allowed to communicate freely
with all other members. It provides highest satisfaction. But it is relatively slow and less
accurate.
Barriers to Communication:
There are several obstacles that tend to distort the flow the messages. Such distortion tends to
misunderstanding and frictions among the members of the organization. These barriers do not
permit healthy human relationships and they are injurious to teamwork and morale. Therefore it
is necessary to analyse and remove the barriers to communication. The various barriers to
communication may be
I. Organizational Barriers:
Organizational barriers arise due to inadequate or improper policies rules and facilities regarding
communication.
1. Ambiguous Policies, Rules and Procedures:
Organization policies, rules and procedures lay down the communication channels and
the subject matter of communication. When these policies and rules are not clear, flow of
communication is not smooth. Too rigid rules and regulations may cause delays in
communication. Strict adherence to rules and regulations also abstructs the flow of
communication.
2. Status Patterns:
Formal relationships and status symbols high light the position or rank of individuals. The
subordinates become conscious of their distance from the center of authority and this awareness
tends to widen the communication gap between superiors and subordinates. Greater the
difference between the hierarchical positions in terms of their status, higher is the possibility of
breakdown in upward communication. A free and fair two-way flow of communication is
required to overcome the barrier due to status or position.
3. Long Chain of Command:
In a complex organization structure, there are several levels of authority. Formal communication
has to pass through this chain. As a result there are delays and distortion in communication. At
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every level, the message may be twisted or altered intentionally. Such filtering is more common
in the case of upward communication. Subordinates may highlight the good points of their
performance and suppress the adverse ones while submitting written or oral reports to their
superiors. Communication may break down at any level due to faulty transmission.
4. Inadequate Facilities:
Lack of meetings, conferences, suggestion schemes, grievances procedures, social and cultural
gatherings and open door system hampers effective communication.
Mechanical Barriers:
Mechanical barriers arise due to problems in communication channels. These barriers are as
follows.
1. Overloading:
When the number of messages is greater than the capacity of communication, channel, there is
overloading. This causes delays and breakdowns in communication. In such a case urgent and
important messages should be given preference over routine messages. Overloading can be
solved by introducing additional channels of communication.
2. Semantic Barriers:
Words used to convey messages have several meanings. Sometimes the message is not expressed
in clear and precise language. Omission of important details, faulty translation, use of technical
language and unclassified assumptions are the main semantic barriers to communication. Many
times the receiver of the message does not interpret it in the desired manner. In order to
overcome the semantic barrier it is essential that the message is put into words understandable to
the receiver. The sender should improve his vocabulary.
3. Noise:
Very often the communication is distorted and misunderstood due to noise in transmission and
fault in the instrument. The noise problem can be overcome by reorganization of the
communication system and by repairing the mechanical defects.
Personal Barriers:
Most of the failures in communication arise due to faults on the part of the sender or receiver of
the message. The important personal or human barriers are given below.
i) Lack of Attention or Interest:
When the receiver is not attentive to the message, he fails to grasp its meaning. Sometimes,
subordinates do not want to communicate upward due to the fear that it may displease the
superior. Lack of proper attention or interest may arise due to several reasons. The receiver may
be busy in his own thoughts, he may face difficulty in understanding the message, he may
believe that the message is not worthy of attention or there may be lack of incentive to
communicate.
ii) Failure to Communicate:
A manager may fail to communicate effectively on account of various reasons. He may have the
fear that sharing information with subordinates may reduce his prestige and power. He may have
little time to talk to subordinates. He may not be aware of significance of the message for
subordinates. A manager may lack confidence in his subordinates and may deliberately ignore
the messages sent by them.
iii) Hasty Conclusion:
The receiver may be in a hurry or may by habit jump to hasty conclusions before analyzing the
complete message. Such premature evaluation stops transfer of information and leads to wrong
interpretations. Such halfway communication yields halfway results.
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iv) Distrust of Communication:
When the receiver lacks confidence in the competence or integrity of the sender, he may receive
the message with doubt or suspicion. Repeated experience of this type makes the receiver to
delay or postpone action. It may also reduce the sender’s enthusiasm to communicate.
v) Love for Status Quo:
People by nature prefer to maintain the status quo as change creates uncertainty when the
message tends to disturb the existing state of affairs or it is against the interests of the receiver, it
is likely to be resisted and ignored.
vi) Improper State of Mind:
Sometimes the receiver may not be in a proper state of mind to receive the message correctly.
When he is mentally upset, his reception to the message is likely to be ineffective.
Making Communication Effective (Gateways):
The following guidelines may be followed to make communication effective.
1. Sound Organization Structure:
The organization structure should be simple with a few levels of authority. The organization
policy, rules and procedures must be clear and explicit. These should encourage free flow of
communication in the organization. Wherever necessary communication through the proper
channel should not be insisted upon.
Top management should set an example in effective communication. Interpersonal
relationship based on mutual respect and trust should be developed. Status differentials and class
distinctions should be reduced. Managers should develop close personal contacts and informal
relations among subordinates. Adequate organizational facilities should be provided for effective
communication. Employees may be educated in the importance and methods of effective
communication. Standard procedures should be laid down by to specify the type of information
to be communicated, the person to whom it is to be communicated and the time of its
communication.
2. Clear Messages:
The beginning of all communication is some message. The message can be conveyed properly
only when it is clearly formulated in the mind of the communicator. The sender ,ist encode the
message in the direct and simple language, so that the receiver can understand it without
difficult. He should be sensitive to the needs feelings and perceptions of the receiver. He should
use the appropriate language with which the receiver is quite familiar.
3. Two-way Communication:
Two-way communication requires continuous dialogue between the sender and the receiver.
Upward communication should be encouraged. The sender should try to know the reaction and
the response to the message through face to face contacts and otherways.
4. Multiple Channels:
Exclusive reliance on official channels or chain of command creates delays and distraction in
communication. All possible channels should be used to speed up communication and to avoid
communication overloads. Informal communication channels should be used to support formal
channels and to overcome gaps in formal communication systems.
5. Good Listening:
A communicator should be a good listener, so that he can collect reaction or response to his
message. When the message is listened with attention and interest the receiver can get a much
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better understanding of what is being said. For this purpose, all distractions must be removed.
The speaker must be patient and cool-headed. He should stop talking in between the message.
6. Effective Control:
These should be a continuous programme of evaluating the flow of communication in all
directions. This would high light the problems, identify their cause and suggest corrective
measures to make communication effective. The communication system should provide for some
checks and balances to prevent suppression of points from the message, especially in upward
communication.
7. Modern Investments:
Use of sophisticated instruments or mechanical services helps to improve speed and accuracy in
communication. Electronic computers, intercom, telex, Dictaphone, etc permit faster and more
accurate transmission and processing of information in the organization.
8. Human Relations Attitude:
Cordial interpersonal relations based on mutual trust and confidence must be developed. This
will enable the persons to appreciate the viewpoint of each other and will make them more
receptive to new ideas. As a result, the problems of status quo and differences in perceptions can
be overcome.
Essential of good communication system (Principles):
1. Clarity of Message:
A good system of communication must be perfectly clean and free from all ambiguity. It should
be encoded in the direct and simple language which the receiver can understand easily and
quickly.
2. Completeness of Message:
The message should be adequate and complete, otherwise it is likely to be misunderstood. The
process of communication must ensure that various individuals in the organization get all the
required information for proper discharge of their duties.
3. Consistency of Message:
All messages should be consistent with the objectives, policies and rules of the organization. If
the new message is contrary to the previous messages, this fact should be stated clearly, so that
there is no confusion and chaos.
4. Proper Timing:
The communication system should ensure that the message reaches the receiver when it is
required. The utility of a message depends upon its timeliness. It will not create the desired
response, if the message is not timely. The communicator should have, therefore, a sense of
timing and presentation.
5. Creditability:
Actions speak louder than words. Therefore, the communicator must follow in action, what he
says in a message. This will ensure, believability, and seriousness in communication. He should
demonstrate that he is worthy of trust. He should not convey a message unless he believes it to
be true and correct.
6. Empathy:
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In order to communicate, effectively the communication should understand the receiver and
develop between human relations with his subordinates. The format, the mode, frequency and the
media of communication should not hurt the feelings or sentiments of the communicates. He
may appeal to their emotion to secure the desired response.
7. Follow-Up:
All communications should be followed up systematically. In other words, the communicator,
must try to ascertain through some signals whether or not he is properly understood. For
example, he may ask the communicatee, to repeat back the contents of the message. This is
known as the principle of feed back in communication.
8. Economy:
The communication system should be economical keeping in view its efficiency. The cost of
communication should be kept under check by discouraging unnecessary messages and by
avoiding the need for frequent clarifications or queries.
CO-ORDINATION
Introduction:
Henry Fayol considers coordination as a Function of a manager. Louis A. Allen also regards
coordination as one of the separate managerial functions. James D. Mooney considers
coordination as the first principle of organization. Ralph C.Davis looks upon coordination
primarily as a vital phase of controlling. In social sciences, coordinated management of
meaning (CMM) "theorizes communication as a process that allows us to create and manage
social reality".
People have unique interpretations of the world around them - they have different
"meanings" of what they encounter. These meanings/interpretations are dependent on myriad
factors including history, personality, affiliations etc. Through communication, an underlying
process takes place in which communities negotiate a common or conflicted interpretation of the
world around them thereby creating a social reality in which the community lives. CMM
advocates that these meanings can be managed in a productive way so as to improve the general
state of the community by coordinating and managing the meaning-making process. Much of the development of the theory consists of heuristic models and concepts that enable the
user to perceive and describe the ongoing processes of communication.CMM heavily relies on three basic
processes: coherence, coordination, and mystery. Separately and sometimes in combination, these
processes help to clarify and explain how social realities are created through conversation.
Definition of Coordination:
Coordination is the orderly synchronization of efforts of the subordinates to provide the proper
amount, timing and quality of execution so that their united efforts lead to the stated objective.
• According to Terry, “Coordination deals with the task of blending efforts in order to
ensure successful attainment of an objective. It is accomplished by means of planning,
organizing, actuating and controlling”. Thus, Terry considers coordination as a
permeating function of management passing through the managerial functions of
planning organizing, directing and control.
• In the words of Mooney and Railey, “Coordination is the orderly arrangement of group
efforts to provide unity of action in the pursuit of a common purpose”. Coordination is a
continuous process for achieving unity of purpose in the organization. It includes all such
deliberate efforts on the part of management whereby efforts of various departments of
the enterprise are so blended that they move harmoniously towards the accomplishment
of organizational objectives.
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6 Important Characteristics of Coordination in an Organisation
Coordination is a process to establish harmony among the different activities of an organisation,
so that the desired objectives can be achieved. Definitions of coordination present the following
facts about its characteristics:
Characteristics of coordination in an organisation:
(1) Coordination Integrates Group Effort:
The need for coordination is felt when group effort is needed for the accomplishment of an
objective. In short, it can be said that coordination is related to group effort and not individual
effort. The question of coordination does not arise, if the job is done by one person only.
(2) Coordination Ensures Unity of Action:
The nature of coordination is of creating unity in action. It means during coordinating process an
effort is made to create unity among the various activities of an organisation. For example, the
purchase and sales departments have to coordinate their efforts so that supply of goods takes
place according to purchase orders.
(3) Coordination is a Continuous Process:
It is not a job which can be performed once and for all, but its need is felt at every step. Many
activities are performed in a business. Sometimes or the other, if any one of the activities goes on
fluctuating either for more or less than required, the whole organisational balance is disrupted.
Thus, a close watch has to be kept on all the activities to maintain the balance.
(4) Coordination is an All-pervasive Function:
Pervasiveness refers to that truth which is applicable to all spheres (business and non-business
organisations) and places uniformly. The nature of coordination is pervasive. Like making of
timetable in an educational institution is an apt example of establishing coordination.
In the game of cricket, the placement of players at pre-determined positions is nothing but
coordination. In the same manner, to synchronise the activities of different departments, like
purchase, sales, production, finance, etc. in a business organisation is coordination.
(5) Coordination is the Responsibility of All Managers:
Coordination is needed at all the three, i.e., top, middle and lower managerial levels. Different
activities performed at all the levels are equally important. Thus it is the responsibility of all the
managers that they make efforts to establish coordination. That is why, it could not be said that
coordination is of more importance to any one particular managerial level or a manager.
(6) Coordination is a Deliberate Function:
Coordination is never established by itself but it is a deliberate effort. Only cooperation does not
suffice but coordination is also needed. For example, a teacher aspires to teach effectively (this is
cooperation) but the timetable is not prepared in the school (this is lack of coordination).
In this situation, classes cannot be arranged for. Here, the effort made by the teacher is
meaningless, in the absence of coordination. On the other hand, in the absence of cooperation,
coordination dissatisfies the employees. Thus, both are required at a given point of time.
Nature of Coordination:
The features of coordination are as follows:
• It is an essential managerial activity. It is needed at all levels of management.
• It involves an orderly arrangement of group efforts.
• It is a continuous process carried on by the managers.
• Its purpose is to secure unity of action towards common objectives.
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• It is the essence of managing. Each of the managerial function is an exercise in
managing.
Relationships between Co-ordination and Cooperation:
Coordination is an orderly arrangement of group efforts to provide unity of action in the pursuit
of common objectives. It is a process of deliberately bringing together the efforts of various
components of an enterprise in order to give them a unity of purpose. Cooperation denotes the
collective efforts by the persons working in the enterprise voluntarily for accomplishing a
particular purpose
.
Distinction between Coordination and Co-operation:
Basis Coordination Cooperation
1. Definition Coordination is a deliberate effort by a
manager.
Co-operation is voluntary attitude of
organizational members.
2. Purpose It is an orderly arrangement of group
efforts to provide unity of action in the
pursuit of common objectives.
It denotes collective efforts of the
group contributed voluntary to
accomplish a particular objective.
3. Essential It is essential where a group of people
work together for a common purpose.
It is voluntary in nature. It arises out of
desire of the people to work together.
4. Relations It is achieved through both formal and
informal relations.
Co-operation arises out of informal
relations.
5. Result Coordination seeks whole-hearted
support of employees and departments.
Co-operation without coordination is
fruitless.
Objectives of Coordination:
The main purposes which are sought to be realized through coordination are as follows:
(i) Reconciliation of Goals:
This can be done by coordination only. The conflict of goals arises because everybody perceives
the organizational goals differently and tries to achieve them in his own way. This lead to
confusion and chaos in the organization. Therefore, coordination is necessary to bring unity of
action in the organization.
(ii) Total Accomplishment:
Through coordination it is possible to bring about total accomplishment which will be far in
excess of the sum of the individual parts. This happens because through coordination,
duplication of efforts is prevented and the time and energy thus saved are better utilized in more
creative tasks.
(iii) Economy and Efficiency:
Through coordination, it is possible to bring about economy and efficiency in the organization.
Coordination will avoid duplication of efforts due to which there will be economy in labour, time
and equipment. When the activities are properly integrated, there will be least delays which will
bring efficiency in the business organization.
(iv) Goods Personnel Relations:
Coordination is achieved through systematic efforts. Good coordination gives job satisfaction to
the employees which keep their morale high. Moreover, there are good human relations because
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the authority-responsibility relationships are clear. The conflict between line and staff personnel
can also be avoided through proper coordination of their efforts.
(v) Retention of Managerial and other Personnel:
It has been pointed out that sound coordination has a significant effect on the development and
retention of good personnel in business. If the total organization is so designed and patterned that
each executive and employee derives job satisfaction, there will be a tendency on the part of the
executives and employees to stay with the organization. The absence of this will create
suffocating conditions in which it would be difficult for any person to stay for long in the
organization.
NEED AND SIGNIFICANCE OF COORDINATION:
When a number of people are working to carry out a task, coordination is the only method of
synchronization. It is an important method by which a manager can avoid potential sources of
conflict between organizational members. Through coordination, duplication of work and work
at cross-purposes can be eliminated. The efficiency of various departments will increase. This
will lead to increased profitability of the organization.
Coordination is the essence of management. It is a creative force to harmonise the efforts
of various individuals towards certain goals. It gives unity of direction to the group members.
Without proper coordination, the organizational objectives cannot be achieved. The quality of
coordination is the crucial factor in the survival of an organization.
A manager creates results which are more than the sum total of the efforts of his
subordinates. If a manager lacks coordinating skill, there will be wastage of efforts and the
excepted results will not be achieved. For instance, if a sales, promotion campaign is launched
without ensuring the goods on the retailers’ shelves, the customers will be disappointed and the
prestige of the organization will be lowered.
(1) Size of the Organisation:
These days, the scale of doing business is increasing day by day. Any increase in the scale of the
business also results in an increase in the number of people employed in the organisation, with
each person having different interests, way of working, mutual understanding, objective of
working, tolerance, etc.
However, all these people have to work together as a group despite these differences, which is
not a very easy task. Therefore, it is very necessary that through coordination a proper
environment is created so that everybody gives his full contribution towards the attainment of
organisational goals.
(2) Functional Differentiation:
There may be a clash of interests among the various departments in an organisation. Such a
situation becomes a very big hindrance in the achievement of organisational goals. There is only
one way to avoid clashes, and that is by establishing proper coordination between the
departments.
(3) Specialisation:
In every organisation, in order to avail the benefits of specialisation, one main activity is divided
into various sub activities, and each of these is allotted to different persons who are experts in
their particular sub activity.
Every person wants to do his work in his own way, without having any regard for the ‘total
work’ to be performed. In such a situation, in order to complete the activities being performed by
various people successfully, it is very necessary to establish coordination among them.
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It is only upon the establishment of coordination that everyone completes his or her own work in
time keeping in view the ‘total work’ to be performed.
(4) Interdependence of Different Processes:
The next major point which delineates the importance of coordination is that the various units in
an organisation are interdependent. The higher the interdependence among the units, the greater
is the need for coordination.
Importance of coordination
1. Unity of action: – an enterprise has diverse resources; technique, activities etc and they all
must be coordinates to bring unity through unity in action.
2. Increase in efficiency and economy: – coordination brings efficiency because it is an effort
of all organizational members. It also helps to maintain good relation among all levels of
management.
3. Development of personnel: – coordination helps to obtain information about job, qualities of
a job holder which helps to analyze about the potentialities of the job holder and improve
coordination system
4. Differential perception: – different people have different perception. When all people are
coordinated effectively their effort and power are concentrated to achieve organizational goals.
5. Survival of the organization: – coordination helps o harmonize the work resources and
physical facilities. When there activities are not harmonized the organization can’t achieve the
goal and it can’t survive in the society
6. Accomplishment of objectives: – when the employees , their task and available resources are
coordinated, their production will be increased and it helps to accomplish the objectives of the
organization
7. Basis of managerial function: – all managerial functions such as planning, organizing,
directing, controlling etc can’t be conducted effectively without communication.
8. Specialization: – in the absence of coordination in the organization the activities can’t be
moved in specialized areas.
What is the Need and Significance of Coordination for an organization?
Coordination is required whenever and wherever a group of persons work together to achieve
common objectives. It is the basic cementing force in an organisation. Coordination becomes
necessary because of the following disintegrating forces.
1. Increase in size and complexity of operations:
Growth in the number and complexity of activities is the major factor requiring coordination.
Need for coordination arises as soon as the operations become multiple, diversified and complex.
In a large organisation, a large number of individuals are employed.
These people may work at cross purposes if their efforts and activities are not properly
coordinated. Increasing scale of operations may also increase geographical distance among the
members of the organisation. Several layers of authority create problem of communication.
Personal contact is not possible and formal methods of coordination become essential.
Operations are multifarious and there are too many centrifugal forces.
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Therefore, constant efforts are requited to ensure harmonious functioning of the enterprise. As
the size of organisation increases, the task of coordination becomes increasingly difficult.
2. Specialization:
Division and subdivision of work into specialized functions and departments leads to diversity;
of tasks and lack of uniformity. Specialists in charge of various departments focus on their own
functions with little regard to other functions.
For example, production department may insist on the manufacture of those products which are
convenient and economical to produce overlooking their suitability to consumers. It becomes
necessary to synchronies the diverse and specialized activities of different units to create unity in
the midst of diversity.
Generally, greater the division of labor. More is the need for coordination. Specialization will not
yield desired results unless specialized efforts are 'effectively integrated. Where division of labor
is inevitable, coordination becomes mandatory.
Need to specialize leads to horizontal and vertical differentiation of organizational activities. The
greater the differentiations, more serious are the problems of communication and coordination.
3. Clash of interests:
Individuals join an organisation to fulfill their personal goals, i.e., their physiological and
psychological needs. Often individuals fail to appreciate how the achievement of organizational
goals will satisfy their own goals. They may pursue their own specialized personal interests often
at the expense of the larger organizational goals.
They tend to work at cross-purposes. Coordination helps to avoid conflict between individual
and organizational goals. It brings about harmony between the two types of goals by making
individuals see how their jobs contribute to the common goals of the organisation. Coordination
avoids all splintering efforts that may destroy the unity of action.
4.Different outlook:
Every individual in the organisation has his own way of working and approach towards
problems. Capacity, talent and speed of people differ widely. It becomes imperative to reconcile
differences in approach, timing and effort of different departments to secure unity of action.
Cooperation serves as the binding force in an organisation in the face of narrow and sectional
outlook. Coordination becomes difficult due to differences in the attitudes and working styles of
personnel.
5. Interdependence of units:
Various units of an organisation depend upon one another for their successful functioning. For
instance the spinning plant supplies yarn to the weaving plant.
The output of one unit serves as the input of another unit. James D. Thompson has identified
three types of interdependence, namely, (a) pooled interdependence, (b) sequential
interdependence, and (c) reciprocal interdependence.
Pooled interdependence refers to the situation wherein the various departments of an
organisation function as autonomous units and do not depend on each other for the performance
of their day-today-activities. In sequential interdependence, the work of different units forms a
sequence and one unit cannot do its work until the work in preceding unit has been com pelted.
In reciprocal interdependence, different units are reciprocally related and there is a give and take
relationship among them. The need for coordination increases with an increase in the
interdependence between organizational units. It is highest in reciprocal interdependence, higher
in sequential interdependence and high in pooled interdependence.
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6. Conflicts:
In an organisation, conflicts may arise between line managers and staff specialists or between
management and workers. Human nature is such that a person emphasizes his own area of
interest and does not want to get involved in the activities of others. Coordination avoids
potential sources of conflict.
7. Empire-building:
In order to boost up self-importance and personal ego, some members of the organisation tend to
over-emphasize their own activities. Such empire-builders try to get maximum possible share of
the total resources for their own units as if the units were separate entities.
This empire building tendency does not allow cooperation and self-coordination. Special efforts
become necessary to coordinate the activities and efforts of empire-builders.
8. Personal jealousies and rivalries:
Personality clashes are quite common in human organizations. Members of rival groups
deliberately sabotage coordination. In their efforts to settle personal scores, some persons do not
permit harmonious action or team work. Such rivalry is often accentuated by lack of clear-cut
goals and specific authority limits.
Coordination as the essence of Management:
Coordination is the essence of managership.
(i) Coordination through Planning:
The planning stage is the ideal time to bring about coordination by properly integrating the
various plans through mutual discussion, exchange of ideas, etc. For instance, if the Advertising
Manager is to plan his advertising campaign, it would be helpful if he discusses the plan with the
Production Manager, the Sales Manager, the Finance Manager, and so on. In this way, as he
performs his managerial function of planning, he is attempting to achieve coordination by
seeking co-operation of all the managers who are directly or indirectly concerned with it.
(ii) Coordination through Organising:
Mooney considers coordination as the very essence of organizing. In fact, when a manager
groups and assigns the various activities to subordinates, and when he creates departments,
coordination is one thing which is uppermost in his mind. By placing related activities in the
same administrative unit, coordination will be facilitated. Coordination is an essential part of
organizing. Unless the manager bears in mind how various groups are to function together, the
organization structure will not be a successful one.
Poor coordination is caused quite often by a lack of understanding of who is to perform
what or due to the fact that the manager did not clearly delegate authority and responsibility.
This may lead to the duplication of efforts.
(iii) Coordination through Staffing:
The staffing function of management involves manpower planning, employment, training, wage
determination, performance appraisal, etc. All these sub-functions are performed in such a
manner that there are right persons on different jobs. This will help in achieving coordination in
assigning tasks to various individuals.
(iv) Coordination through Directing:
When a manager directs, he is also performing the function of coordination. The very essence of
giving orders, instructions, coaching and teaching subordinates means to coordinate their
activities in such a manner that the overall enterprise objective will be achieved in the most
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efficient way. Thus, manager’s expertness in effectively directing his subordinates will bring
about coordination.
The manager should use free and open discussion and group decision-making techniques
with subordinates in order to achieve the necessary coordination. It is the vital that various
subordinates have an opportunity for free and open discussion and for an interchange of ideas so
that the details of a particular directive are properly understood. In short, as the manager
performs his directing function, he will invariably coordinate.
(v) Coordination through Controlling:
While performing the function of controlling, the manager comes to know whether or not current
activities are in keeping with the desired activities. Such frequent evaluation of operations helps
to synchronise the efforts of the subordinates. If, while controlling, the manager finds that the
performance is not as planned or as directed, he should immediately take remedial action so that
whatever deviations have occurred can be remedied. By doing this, he brings about coordination.
The very nature of the controlling function brings about coordination and leads the organization
to the desired goals.
Good communication will be of immeasurable help in the coordination of various
activities. There must be continuous and free flow of communication which will give the
subordinates the necessary information needed for coordination. Personal contact is probably the
most effective means of communication to achieve coordination. However, there are many other
additional devices such as written communications, reports, procedures, bulletins and numerous
modern mechanical devices which will ensure a speedy dissemination of the necessary
information to the subordinates who must have this information to achieve proper coordination.
Types of Coordination:
Coordination can be classified into two broad categories, one on the basis of its shape in the
organization and the other on the basis of its scope and coverage. On the former basis, it can be
classified into vertical and horizontal coordination; and on the latter basis, into internal and
external coordination.
1. Vertical and Horizontal Coordination:
The term ‘vertical coordination’ is used when coordination is to be achieved between various
links or different levels of the organization. Vertical coordination is needed to ensure that all the
levels in the organization act in harmony and in accordance with organizational policies and
programmes. It is the function of the top executives to bring about this coordination. Vertical
coordination is secured through delegation of authority and with the help of directing and
controlling. There is no doubt that the delegated authority will carry great weight, but vertical
coordination cannot be achieved by the mere weight of authority itself. This should rather come
about as a by product of the superior’s efficient and expert performance of the managerial
functions.
The term ‘horizontal coordination’ is used when coordination has to be achieved between
departments on the same level in the managerial hierarchy. Thus, when coordination is brought
about between production department, sales department, personnel department etc., it is said to
be horizontal coordination. Coordination between interdependent managers of different
departments is facilitated in a small enterprise due to proximity of working arrangements, close
contacts, and short lines of communication. However, when a large company is involved, the
problems become more complicated, and it is the fine art of the superior manager to achieve
coordination in the horizontal sense.
2. Internal and External Coordination:
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Coordination may be internal and external to the organization. Coordination is internal when it is
achieved between different departments, sections and units of an enterprise. It is both vertical
and horizontal.
A business enterprise is a system in itself. It acts and reacts with the environment
continuously. The various factors with which it has interaction include Government, customers,
suppliers and competitors. An enterprise has to keep proper coordination with these. Such type of
coordination is known as external coordination and it is essential for the survival of the
enterprise. External coordination also involves interaction with other business, economic and
research institutions to have the benefits of latest information and technological advances.
Difficulties in Coordination:
Henri Fayol stated that in a well-coordinated enterprise the following facts are to be observed:
• Each department should work in harmony with the rest.
• Each department, division, and sub-division should be precisely informed as to the
schedule they must take in the common task.
• The working schedule of the various departments and sub-divisions should be constantly
attuned to circumstances.
In practice, these requirements are not always fulfilled. The lack of coordination is apparent
because of the following difficulties:
• Lack of co-operation and understandings between and among individuals, groups and
departments.
• Lack of good interpersonal relations.
• Failure in accomplishing objectives according to time and work schedule.
• Lack of direction and consequently aimless individual efforts.
• Functioning of departments in the organization as water-tight compartments.
• Lack of initiative and loyalty towards the organization.
Techniques of Effective Coordination:
The following steps should be taken for achieving effective coordination:
(i) Clearly defined goals: The goals of the enterprise should be laid down clearly. Every
individual in the enterprise should understand the overall objectives and the contribution by his
job to these objectives. Unity of purpose is a must for achieving proper coordination.
(ii) Clear lines of authority and responsibility: There is a line of authority in every
enterprise which indicates as to who is accountable to whom. The line of authority and
responsibility should be clearly defined to achieve coordination. Clear-cut authority relationships
help in reducing conflicts among different positions (particularly line and staff) which is
essential for sound coordination.
(iii) Precise and comprehensive programmes and policies: Laying down well-defined
programmes and policies is another measure for achieving effective coordination. This brings
uniformity of action because every body understands the programmes and policies in the same
sense.
(iv) Cooperation: Coordination must be accompanied by cooperation. The individuals in the
organization must be willing to help each other voluntarily. Cooperation can be brought about by
keeping harmonious relations among the people in the organization by encouraging informal
contacts to supplement formal communication and using exchange of ideas and views at the top
level.
(v) Effective Communication: Effective communication is the key to proper coordination.
The channels of communication used in the enterprise should be reliable so that they are able to
create proper understanding in the minds of the receivers. Personal contacts should be
encouraged as it is the most effective means of communication for achieving coordination.
(vi) Effective leadership and supervision: Management can achieve better coordination
through effective leadership and supervision. Effective leadership ensures coordination both at
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the planning and the implementing stage. Effective supervision is necessary to guide the
activities of individuals in the proper direction.
Principles of Coordination:
Mary Parker Follett has laid down the following principles of coordination:
(i) Principle of Direct Contact: The activities of different individuals can be
coordinated effectively through direct personal contacts. This helps in exchanging the opinions
and ideas in a better way and clarifying the misunderstandings more easily.
(ii) Principle of Early Start: Coordination can be achieved easily during the early stages
of planning and policy-making. It becomes difficult to secure coordination at the execution stage.
(iii) Principle of Reciprocal Relationship: This principle states that all the factors in a
situation like men, materials, and environment are reciprocally related. For instance, when A
works with B, each finds himself influenced by the other and both are influenced by the other
persons and factors in the total situation.
(iv) Principle of Continuity: Coordination should be a continuous process starting with
planning and running through the other managerial processes. It is something which must go on
all the time. It should be viewed as a never-ending process and every manager should strive for it
constantly.
ADVANTAGES OF COORDINATION 1. Higher Efficiency and Economy: Coordination helps to improve the efficiency of operations by avoiding overlapping efforts and
duplication of work. Integration and balancing of individual efforts provide a smooth and
harmonious team work. Coordination is a creative force which makes possible a total result
which is greater than the sum of individual achievements. This is the synergetic effect
coordination. Coordination enables an organisation to rake optimum use of its resources.
The success of organized Endeavour depends upon the quality of coordination. In fact,
coordination is the first principle of organisation as it expresses the principle of organisation in
to. The quality of coordination is the crucial factor in the survival of an organisation. 2. Good Human Relations: Besides promoting the efficiency of operations, coordination improves the morale and job
satisfaction of employees. Composite and orderly effort established through team spirit and
executive leadership enables employees to derive a sense of security and personal contentment
from their job. A well-coordinated organisation can attract, retain and utilize better personnel.
Coordination improves human relations by reconciling individual and organizational objectives. 3. Unity of direction: Coordination helps to ensure unity of action in the face of disruptive forces. By welding together
different departments and sections into one entity, coordination ensures the stability and growth
of an organisation. It enables the executives to see the enterprise as a whole instead of narrow
sectional goals. Individual interests are subordinated to the common interest more easily and
effectively. 4. Quintessence of management: Coordination is an all inclusive concepts or the end result of the management process.
Management is nothing more than coordination of all activities, efforts and forces that affect the
organisation from within and without. Coordination serves as a key to all managerial functions.
According to Mary Parker Follett, "the first test of a business administration should be whether
you have a business with all its parts so coordinated, so moving together in their closely knit and
adjusting activities, so linking, inter-locking, inter-relating, that they make a working unit that is
not a congenis of separate pieces, but a functional whole or integrated unit".
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5. Organizational Effectiveness: Coordination fosters loyalty and commitment among employees. This enhances the effectiveness
and stability of the organisation. According to McFarland, "if job satisfactions are present,
executives will tend to remain longer with the company. They will feel that they have a place in
the organisation. They will feel that they have earned that place. The presence of coordination
becomes part of their job experience and hence can form a very useful part of their training."
Thus, coordination is the sine qua non of effective management.
Coordination is required whenever and wherever a group of persons work together to achieve
common objectives. It is the basic cementing force in an organisation. Coordination becomes
necessary because of the following disintegrating forces.
Need of coordination
1. Increase in size and complexity of operations:
Growth in the number and complexity of activities is the major factor requiring coordination.
Need for coordination arises as soon as the operations become multiple, diversified and complex.
In a large organisation, a large number of individuals are employed.
These people may work at cross purposes if their efforts and activities are not properly
coordinated. Increasing scale of operations may also increase geographical distance among the
members of the organisation. Several layers of authority create problem of communication.
Personal contact is not possible and formal methods of coordination become essential.
Operations are multifarious and there are too many centrifugal forces.
Therefore, constant efforts are requited to ensure harmonious functioning of the enterprise. As
the size of organisation increases, the task of coordination becomes increasingly difficult.
2. Specialization:
Division and subdivision of work into specialized functions and departments leads to diversity;
of tasks and lack of uniformity. Specialists in charge of various departments focus on their own
functions with little regard to other functions.
For example, production department may insist on the manufacture of those products which are
convenient and economical to produce overlooking their suitability to consumers. It becomes
necessary to synchronies the diverse and specialized activities of different units to create unity in
the midst of diversity.
Generally, greater the division of labor. More is the need for coordination. Specialization will not
yield desired results unless specialized efforts are 'effectively integrated. Where division of labor
is inevitable, coordination becomes mandatory.
Need to specialize leads to horizontal and vertical differentiation of organizational activities. The
greater the differentiations, more serious are the problems of communication and coordination.
3. Clash of interests:
Individuals join an organisation to fulfill their personal goals, i.e., their physiological and
psychological needs. Often individuals fail to appreciate how the achievement of organizational
goals will satisfy their own goals. They may pursue their own specialized personal interests often
at the expense of the larger organizational goals.
They tend to work at cross-purposes. Coordination helps to avoid conflict between individual
and organizational goals. It brings about harmony between the two types of goals by making
individuals see how their jobs contribute to the common goals of the organisation. Coordination
avoids all splintering efforts that may destroy the unity of action.
4.Different outlook:
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Every individual in the organisation has his own way of working and approach towards
problems. Capacity, talent and speed of people differ widely. It becomes imperative to reconcile
differences in approach, timing and effort of different departments to secure unity of action.
Cooperation serves as the binding force in an organisation in the face of narrow and sectional
outlook. Coordination becomes difficult due to differences in the attitudes and working styles of
personnel.
5. Interdependence of units:
Various units of an organisation depend upon one another for their successful functioning. For
instance the spinning plant supplies yarn to the weaving plant.
The output of one unit serves as the input of another unit. James D. Thompson has identified
three types of interdependence, namely, (a) pooled interdependence, (b) sequential
interdependence, and (c) reciprocal interdependence.
Pooled interdependence refers to the situation wherein the various departments of an
organisation function as autonomous units and do not depend on each other for the performance
of their day-today-activities. In sequential interdependence, the work of different units forms a
sequence and one unit cannot do its work until the work in preceding unit has been com pelted.
In reciprocal interdependence, different units are reciprocally related and there is a give and take
relationship among them. The need for coordination increases with an increase in the
interdependence between organizational units. It is highest in reciprocal interdependence, higher
in sequential interdependence and high in pooled interdependence.
6. Conflicts:
In an organisation, conflicts may arise between line managers and staff specialists or between
management and workers. Human nature is such that a person emphasizes his own area of
interest and does not want to get involved in the activities of others. Coordination avoids
potential sources of conflict.
7. Empire-building:
In order to boost up self-importance and personal ego, some members of the organisation tend to
over-emphasize their own activities. Such empire-builders try to get maximum possible share of
the total resources for their own units as if the units were separate entities.
This empire building tendency does not allow cooperation and self-coordination. Special efforts
become necessary to coordinate the activities and efforts of empire-builders.
8. Personal jealousies and rivalries:
Personality clashes are quite common in human organizations. Members of rival groups
deliberately sabotage coordination. In their efforts to settle personal scores, some persons do not
permit harmonious action or team work. Such rivalry is often accentuated by lack of clear-cut
goals and specific authority limits.
CONTROL:
Controlling is one of the managerial functions like planning, organizing, staffing and directing. It
is an important function because it helps to check the errors and to take the corrective action so
that deviation from standards are minimized and stated goals of the organization are achieved in
a desired manner.
According to modern concepts, control is a foreseeing action whereas earlier concept of control
was used only when errors were detected. Control in management means setting standards,
measuring actual performance and taking corrective action.
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Definition: According to EFL Breach: “Control is checking current performance against pre-determined
standards contained in the plans, with a view to ensure adequate progress and satisfactory
performance”.
According to Harold Koontz: “Controlling is the measurement and correction of performance
in order to make sure that enterprise objective and the plans devised to attain them are
accomplished”.
According to Robert J. Mockler: “Management control can be defined as a systematic effort by
business management to compare performance to predetermined standards, plans, or objectives
in order to determine whether performance is in line with these standards and presumably in
order to take any remedial action required to see that human and other corporate resources are
being used in the most effective and efficient way possible in achieving corporate objectives”.
Characteristics of Control: • Control is a continuous process
• Control is a management process
• Control is embedded in each level of organizational hierarchy
• Control is forward looking
• Control is closely linked with planning
• Control is a tool for achieving organizational activities
• Control is an end process
• Control compares actual performance with planned performance*
• Control point out the error in the execution process
• Control helps in minimizing cost
• Control helps in achieving standard
• Control saves the time
The Elements of Control
1. The four basic elements in a control system:
2. The characteristic or condition to be controlled - We select a specific characteristic
because a correlation exists between it and how the system is performing. The
characteristic may be the output of the system during any stage of processing or it may be
a condition that is the result of the system. For example, in an elementary school system,
the hours a teacher works or the gain in knowledge demonstrated by the students on a
national examination are examples of characteristics that may be selected for
measurement, or control.
3. The sensor - This is the means for measuring the characteristic or condition. For example,
in a home-heating system, this device would be the thermostat; and in a quality-control
system, this measurement might be performed by a visual inspection of the product.
4. The comparator - This determines the need for correction by comparing what is occurring
with what has been planned. Some deviation from the plan is usual and expected, but
when variations are beyond those considered acceptable, corrective action is required. It
involves a sort of preventative action to indicate that good control is being achieved.
5. The activator - This is the corrective action taken to return the system to expected output.
The actual person, device, or method used to direct corrective inputs into the operating
system may take a variety of forms. It may be a hydraulic controller positioned by a
solenoid or electric motor in response to an electronic error signal, an employee directed
to rework the parts that failed to pass quality inspection, or a school principal who
decides to buy additional books to provide for an increased number of students. As long
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as a plan is performed within allowable limits, corrective action is not necessary,
however, this seldom occurs in practice.
Principles of Control:
The setting up of a good control system should be guided by certain important principles.
1. Principle of Reflection of Plans:
The more clear and complete the plans of the organisation and the more contr61s are designed to
reflect these plans, the more effectively will controls serve its needs.
2. Principle of Prevention:
The truth of the saying 'Prevention is better than cure' is well-established. In control more
attention should be directed to prevention of shortfalls than, remedying them after they occur.
Peed forward control is very helpful in this respect.
3. Principle of Responsibility:
Responsibility for control particular measurement of deviations taking corrective action should
be given to specific individuals at each stage of the operation.
4. Exception Principle:
The managers should concern themselves with exceptional cases i.e., those where the deviations
from standards are very significant. Deviations of a minor mature may be left to subordinates for
necessary action.
5. Principle of Critical Points:
All operations have got' certain vulnerable or critical points. It is these which cause most of the
troubles - give rise to major deviations. The managers should pay more attention to the guarding
of these points.
6. Principle of Pyramid:
Feedback data should first be communicated to the bottom of the pyramid i.e., those supervisors
and even operating staff who is at the lowest levels. This will give the employees opportunity to
control their own situations, apart from quickening remedial action.
Effective Organizational Control Systems:
The management of any organization must develop a control system tailored to its organization's
goals and resources. Effective control systems share several common characteristics. These
characteristics are as follows:
• A focus on critical points. For example, controls are applied where failure cannot be
tolerated or where costs cannot exceed a certain amount. The critical points include all the areas
of an organization's operations that directly affect the success of its key operations.
• Integration into established processes. Controls must function harmoniously within
these processes and should not bottleneck operations.
• Acceptance by employees. Employee involvement in the design of controls can increase
acceptance.
• Availability of information when needed. Deadlines, time needed to complete the
project, costs associated with the project, and priority needs are apparent in these criteria. Costs
are frequently attributed to time shortcomings or failures.
• Economic feasibility. Effective control systems answer questions such as, “How much
does it cost?” “What will it save?” or “What are the returns on the investment?” In short,
comparison of the costs to the benefits ensures that the benefits of controls outweigh the costs.
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• Accuracy. Effective control systems provide factual information that's useful, reliable,
valid, and consistent.
• Comprehensibility. Controls must be simple and easy to understand.
NATURE AND PROCESS OF CONTROL
Meaning: Control means the power or authority to direct, order or restrain. It also implies a
standard of comparison for the result of any operation or experiment. In the context of an
enterprise, control may be defined as ‘comparing operating results with the plans, and taking
corrective action when results deviate from the plans’. Thus control is a mechanism according to
which something or someone is guided to follow the pre-determined course. In an enterprise,
naturally, it is the task of manager to control the performance of work and the workers placed
under his charge.
Control requires two things, first, that there is a clear cut and specific plan according to
which any work is to proceed, and secondly, that is possible to measure the results of operations
with a view of detecting deviations. Only then action can be taken to prevent or correct
deviations.Process control is an engineering discipline that deals with architectures, mechanisms
and algorithms for maintaining the output of a specific process within a desired range. For
instance, the temperature of a chemical reactor may be controlled to maintain a consistent
product output.
Process control is extensively used in industry and enables mass production of consistent
products from continuously operated processes such as oil refining, paper manufacturing,
chemicals, power plants and many others. Process control enables automation, by which a small
staff of operating personnel can operate a complex process from a central control room.
An organisation is a system of interrelated parts working in conjunction with each other for
accomplishing its goals and those of the people involved in it. Management is the process
whereby the resources of man, machine and material are integrated to accomplish these goals.
Therefore, the role of management is to plan, organize, integrate, and interrelate organizational
activities and resources in order to achieve the organizations objectives.
This role is facilitated through appropriate management control systems and processes.
To understand the systems and processes related to management control, it may be useful to
draw upon meaning of "Control" from other disciplines such as control system engineering and
cybernetics. An important characteristic of systems is control. Control focusses on the prevention
and correction of deviations in a system's behaviour from those of standard that have been
specified at a given time. In self regulating systems the key element for control procedure is
feedback. A comparison of output values is made with the standards, and information concerning
the degree of deviation is fed back to the other elements in the systems structure. so that
replanted activities may be changed .The closed systems are called information - tight systems.
This means the information lop is closed and the control mechanism has the capability to affect
the processor so that the desired output is achieved. The open systems receive signals of changes
in environment and adapts itself in keeping its character and goals.
Control systems operate in the same manner as control systems, the basic framework being the
same. In organizations the controls involve people, it is compared by people with the desired
state decided by people and a course of action decided by people and action taken by people. The
purpose of management control system is to encourage managers to take actions that are in best
interests of the company. Technically this purpose can be described as goal congruence.
Activities such as communicating, persuading, exhorting, inspiring are an important part of the
process.
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A management control system is or should be, coordinated, integrated system, that is although
data collected for one purpose may differ from those collected for another purpose, these data
should be reconcilable with one another. In a sense, the management control system is a single
system but more accurately it is interlocking sub systems. In organizations three types of cost
information are needed for management control:
• Costs by responsibility centers, used for planning and controlling the activities of
responsible supervisors.
• Full program costs, used for pricing and other operating decisions in normal
circumstances.
• Direct programme costs, used for pricing and other operating decisions in special
circumstances, such as when management wishes to utilize idle capacity.
Types of processes using process control
In practice, processes can be characterized as one or more of the following forms:
• Discrete – Found in many manufacturing, motion and packaging applications. Robotic
assembly, such as that found in automotive production, can be characterized as discrete process
control. Most discrete manufacturing involves the production of discrete pieces of product, such
as metal stamping.
• Batch – Some applications require that specific quantities of raw materials be combined
in specific ways for particular durations to produce an intermediate or end result. One example is
the production of adhesives and glues, which normally require the mixing of raw materials in a
heated vessel for a period of time to form a quantity of end product. Other important examples
are the production of food, beverages and medicine. Batch processes are generally used to
produce a relatively low to intermediate quantity of product per year (a few pounds to millions of
pounds).
• Continuous – Often, a physical system is represented through variables that are smooth
and uninterrupted in time. The control of the water temperature in a heating jacket, for example,
is an example of continuous process control. Some important continuous processes are the
production of fuels, chemicals and plastics. Continuous processes in manufacturing are used to
produce very large quantities of product per year (millions to billions of pounds).
Applications having elements of discrete, batch and continuous process control are often called
hybrid applications.
Examples
• An anti-lock braking system (ABS) is a complex example, consisting of multiple inputs,
conditions and outputs.
• Aircraft stability control is a highly complex example using multiple inputs and outputs.
Controlling as a management function involves following steps:
1.
2. Establishment of standards- Standards are the plans or the targets which have to be
achieved in the course of business function. They can also be called as the criterions for judging
the performance. Standards generally are classified into two-
a. Measurable or tangible - Those standards which can be measured and expressed
are called as measurable standards. They can be in form of cost, output, expenditure, time,
profit, etc.
b. Non-measurable or intangible- There are standards which cannot be measured
monetarily. For example- performance of a manager, deviation of workers, their attitudes
towards a concern. These are called as intangible standards.
Controlling becomes easy through establishment of these standards because controlling is
exercised on the basis of these standards.
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2. Measurement of performance- The second major step in controlling is to measure the
performance. Finding out deviations becomes easy through measuring the actual performance.
Performance levels are sometimes easy to measure and sometimes difficult. Measurement of
tangible standards is easy as it can be expressed in units, cost, money terms, etc. Quantitative
measurement becomes difficult when performance of manager has to be measured. Performance
of a manager cannot be measured in quantities. It can be measured only by-
• Attitude of the workers,
• Their morale to work,
• The development in the attitudes regarding the physical environment, and
• Their communication with the superiors.
It is also sometimes done through various reports like weekly, monthly, quarterly, yearly reports.
3. Comparison of actual and standard performance- Comparison of actual performance
with the planned targets is very important. Deviation can be defined as the gap between actual
performance and the planned targets. The manager has to find out two things here- extent of
deviation and cause of deviation. Extent of deviation means that the manager has to find out
whether the deviation is positive or negative or whether the actual performance is in conformity
with the planned performance. The managers have to exercise control by exception. He has to
find out those deviations which are critical and important for business. Minor deviations have to
be ignored. Major deviations like replacement of machinery, appointment of workers, quality of
raw material, rate of profits, etc. should be looked upon consciously. Therefore it is said, “ If a
manager controls everything, he ends up controlling nothing.” For example, if stationery charges
increase by a minor 5 to 10%, it can be called as a minor deviation. On the other hand, if
monthly production decreases continuously, it is called as major deviation.
Once the deviation is identified, a manager has to think about various cause which has led to
deviation. The causes can be-
• Erroneous planning,
• Co-ordination loosens,
• Implementation of plans is defective, and
• Supervision and communication is ineffective, etc.
4. Taking remedial actions- Once the causes and extent of deviations are known, the
manager has to detect those errors and take remedial measures for it. There are two alternatives
here-
• Taking corrective measures for deviations which have occurred; and
• After taking the corrective measures, if the actual performance is not in conformity with
plans, the manager can revise the targets. It is here the controlling process comes to an
end. Follow up is an important step because it is only through taking corrective measures,
a manager can exercise controlling.
FACTORS THAT MAKE CONTROL POSSIBLE
1. Planning:
Control is not possible in the absence of planning. Planning involved the setting or objectives to
be accomplished, as also the action that needs, to be taken to accomplish them. It is necessary
that the goals and objectives are specific. Also, the course of action that has been charted to
reach them should be specific. Only then it will be possible to know if the action if proceeding
along the right lines, and whether the objectives achieved are as per the plans.
Control is concerned with deviations from the charted course and also with taking measures to
set things right. Thus for control to be effective, planning must preceded it.
2. Action:
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Prevention is better than cure. It is the duty of the manager to guide operations along the desired
lines. He must tell his subordinates what to do, and teach and lead them to do it. Certainly, he
should not assume the role for a fire brigade, which moves into action only when fire actually
breaks out. In such a situation, the manager should be quick to act. And be should be quick not
only in identifying deviations, but also in rectifying the.
3. Delegation of authority:
Control implies authority – authority to detect deviations, and authority to take the necessary
corrective action. It would be impossible for a manager to exercise control in the absence of
proper authority.
4. Information feedback :
For control to be effective there must be a prompt flow of information to the manger. Reports on
the performance at the lower levels must be available to him on a regular basis. And instructions
from as to the necessary corrective action should also promptly reach the person concerned. The
system of communication to a manager is called ‘feed back’. An effective feedback enables the
manager to know where and when deviation from any plan has taken place.
Time is of the very essence of standards:
THE CONTROL PROCESS
1. DETERMINATION OF STANDARDS :
A standard may be defined as a yardstick consisting of a specific set of factors, relating to a
particular entity (organization, departments, groups of workers or individuals), which may be in
the form of a specification or measurable quantity to provide guidelines for acceptable levels of
performance.
The overall goals of objectives of an organization represent the standards for
organizational performance as a whole. These goals are broken down into sub-goals for
individual departments for the organization, which becomes standards for performance of the
respective departments. THE departmental goals are further translated into standards as to
quality, production, cost, time standards,. Sales quotes, schedules, budgeting, and such other
specific standards. These standards serve as the criteria to exercise control, i.e., to measure and
appraise performance, and to correct the deviations, if any.
The standards for the purpose of exercise of control may be classified as:
Tangible standards: A Tangible standard as regards performance may be defined as a standard
which is specific, definite and clearly intelligible, and it is possible for the persons concerned to
know when the standard is reached. These may be:
Physical Standards: They are non-monetary standards which are quite commonly applied at
operating levels, such as in the factory or which ship where raw material are used, labour in
hired, services are performed and goods are produced. Measurement of performance in such a
case may be quantitative or qualitative, it is quantities when standard; are expressed in terms of
man-hours per unit of output, or units of production per machine hour, etc. It is qualitative when
thickness, hardness, durability, or colour of the goods, is made the basis of control.
Cost Standards: Capital standards are fixed to measure the return on investment, An enterprise
may, for example, plan 10% net return and then see how far its actual performance helps in the
accomplishment of this target.
Programme Standards: They are determined with a view to accomplishment of a certain
programme, they are mainly qualitative in natural and as such, subjective.
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Intangible standards: A intangible standard is one, which cannot be precisely measured, assessed
on quantified. To that extent, it makes the control function difficult to be performed. For
example, it is difficult to lay down an criteria to assess employee morale, consumer satisfaction,
or product leadership. In the absence of proper quantative or qualitative standards, measurement
of performance will have to depend on the subjective, even artitray, credibility due to lack of
objectivity.
Employee Morale: It often refers to attitudes of groups of employees based on the feelings with
which they view their work. As it happens, an individual will view his work favorably or
otherwise based on the extent of agreement between his expectations and the rewards provided to
him, Moreover, his attitude may be influenced by a multiplicity of factors. Consumer satisfaction
that factors which contribute to consumer satisfaction or otherwise may be varied, such as, price,
quality, durability and timely availability of goods and services, after-sales service, enterprises,
image and so on.
Product Leadership: There have to be more than one yardstick to asses the product leadership
of any enterprise, The determinants in this respect woule be the types and quality of goods,
pioneered role in the introduction of basis products, product improvement, consumer satisfaction,
promo ability, etc.
2. MEASUREMENT AND APPRAISAL OF PERFORMANCE:
Having set standards, the nest task is the control process if to ensure that the performance at
various levels is as per those standards. This involves the laying down if the methods of
evaluating performance, e.g., observation, inspection and reporting.
If the standards of priority set, and it is possible to get the necessary feedback as to what
exactly is happening at the different levels of a technical nature actual performance can be easily
measured to detect deviations if any,
But measurement and appraisal of performance becomes difficult in the case of less technical
kinds of work performed at places away from the workshop, assembly line or the accounting
machine.
3. CORRELATION OF DEVIATIONS:
Measurements and appraisal of the actual performance is done with a view to detecting
deviations from the pre-determines standards. But more important than this is to take the
necessary corrective action, not only to rectify the present deviations but also to prevent any
deviations in future.
This calls for an analysis of the causes of deviations and may be, a review of the plan
itself. Reports and explanations received from the subordinates are of great help in the diagnosis
of the deviation. But whatever corrective action is decided upon. It should be implemented
promptly and effectively, therein lies the success of the entire control system.
Management is an integrated process:
The last step in the control process i.e., correcting of deviations, is nothing but an extension of
the other managerial functions, Viz, planning, organizing, directing and co-ordinating. In any
action to correct a deviation, one or more of these functions will naturally be perfumed
simultaneously.
Obviously, control can be viewed as a separate function only to the extent that is
concerns itself with detecting deviations; Setting of the standards is essentially a planning
function. And correlation of deviation in nothing but performance of a number of other
managerial functions. Management is integrated process and system, One function easily and
naturally combines and integrates with the other.
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ORGANIZATIONAL CONTROL TECHNIQUES
Control techniques provide managers with the type and amount of information they need to
measure and monitor performance. The information from various controls must be tailored to a
specific management level, department, unit, or operation.
Financial controls
After the organization has strategies in place to reach its goals, funds are set aside for the
necessary resources and labor. As money is spent, statements are updated to reflect how much
was spent, how it was spent, and what it obtained. Managers use these financial statements, such
as an income statement or balance sheet, to monitor the progress of programs and plans.
Financial statements provide management with information to monitor financial resources and
activities. The income statement shows the results of the organization's operations over a period
of time, such as revenues, expenses, and profit or loss. The balance sheet shows what the
organization is worth (assets) at a single point in time, and the extent to which those assets were
financed through debt (liabilities) or owner's investment (equity).
Financial audits, or formal investigations, are regularly conducted to ensure that financial
management practices follow generally accepted procedures, policies, laws, and ethical
guidelines. Audits may be conducted internally or externally. Financial ratio analysis examines
the relationship between specific figures on the financial statements and helps explain the
significance of those figures:
• Liquidity ratios measure an organization's ability to generate cash.
• Profitability ratios measure an organization's ability to generate profits.
• Debt ratios measure an organization's ability to pay its debts.
• Activity ratios measure an organization's efficiency in operations and use of assets.
In addition, financial responsibility centers require managers to account for a unit's progress
toward financial goals within the scope of their influences. A manager's goals and
responsibilities may focus on unit profits, costs, revenues, or investments.
Budget controls
A budget depicts how much an organization expects to spend (expenses) and earn (revenues)
over a time period. Amounts are categorized according to the type of business activity or
account, such as telephone costs or sales of catalogs. Budgets not only help managers plan their
finances, but also help them keep track of their overall spending.
A budget, in reality, is both a planning tool and a control mechanism. Budget development
processes vary among organizations according to who does the budgeting and how the financial
resources are allocated. Some budget development methods are as follows:
• Top-down budgeting. Managers prepare the budget and send it to subordinates.
• Bottom-up budgeting. Figures come from the lower levels and are adjusted and
coordinated as they move up the hierarchy.
• Zero-based budgeting. Managers develop each new budget by justifying the projected
allocation against its contribution to departmental or organizational goals.
• Flexible budgeting. Any budget exercise can incorporate flexible budgets, which set
“meet or beat” standards that can be compared to expenditures.
Marketing controls
Marketing controls help monitor progress toward goals for customer satisfaction with products
and services, prices, and delivery. The following are examples of controls used to evaluate an
organization's marketing functions:
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• Market research gathers data to assess customer needs—information critical to an
organization's success. Ongoing market research reflects how well an organization is meeting
customers' expectations and helps anticipate customer needs. It also helps identify competitors.
• Test marketing is small-scale product marketing to assess customer acceptance. Using
surveys and focus groups, test marketing goes beyond identifying general requirements and
looks at what (or who) actually influences buying decisions.
• Marketing statistics measure performance by compiling data and analyzing results. In
most cases, competency with a computer spreadsheet program is all a manager needs.
• Managers look at marketing ratios, which measure profitability, activity, and market
shares, as well as sales quotas, which measure progress toward sales goals and assist with
inventory controls.
Unfortunately, scheduling a regular evaluation of an organization's marketing program is easier
to recommend than to execute. Usually, only a crisis, such as increased competition or a sales
drop, forces a company to take a closer look at its marketing program. However, more regular
evaluations help minimize the number of marketing problems.
Human resource controls
Human resource controls help managers regulate the quality of newly hired personnel, as well as
monitor current employees' developments and daily performances. On a daily basis, managers
can go a long way in helping to control workers' behaviors in organizations. They can help direct
workers' performances toward goals by making sure that goals are clearly set and understood.
Managers can also institute policies and procedures to help guide workers' actions. Finally, they
can consider past experiences when developing future strategies, objectives, policies, and
procedures.
Common control types include performance appraisals, disciplinary programs,
observations, and training and development assessments. Because the quality of a firm's
personnel, to a large degree, determines the firm's overall effectiveness, controlling this area is
very crucial.
Computers and information controls
Almost all organizations have confidential and sensitive information that they don't want to
become general knowledge. Controlling access to computer databases is the key to this area.
Increasingly, computers are being used to collect and store information for control purposes.
Many organizations privately monitor each employee's computer usage to measure employee
performance, among other things. Some people question the appropriateness of computer
monitoring. Managers must carefully weigh the benefits against the costs—both human and
financial—before investing in and implementing computerized control techniques.
Although computers and information systems provide enormous benefits, such as improved
productivity and information management, organizations should remember the following
limitations of the use of information technology:
• Performance limitations. Although management information systems have the potential
to increase overall performance, replacing long-time organizational employees with information
systems technology may result in the loss of expert knowledge that these individuals hold.
Additionally, computerized information systems are expensive and difficult to develop. After the
system has been purchased, coordinating it—possibly with existing equipment—may be more
difficult than expected. Consequently, a company may cut corners or install the system carelessly
to the detriment of the system's performance and utility. And like other sophisticated electronic
equipment, information systems do not work all the time, resulting in costly downtime.
• Behavioral limitations. Information technology allows managers to access more
information than ever before. But too much information can overwhelm employees, cause stress,
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and even slow decision making. Thus, managing the quality and amount of information available
to avoid information overload is important.
• Health risks. Potentially serious health-related issues associated with the use of
computers and other information technology have been raised in recent years. An example is
carpal tunnel syndrome, a painful disorder in the hands and wrists caused by repetitive
movements (such as those made on a keyboard).
Regardless of the control processes used, an effective system determines whether employees and
various parts of an organization are on target in achieving organizational objectives.
CHARACTERISTICS OF AN IDEAL CONTROL SYSTEM
An ideal system of control is one that makes the controlling function easy, effective and smooth,
the characteristics of an ideal control system are:
1. Suitability: No two firms can be exactly alike in every respect. Therefore, a control system
that good enough for a small firm may be quite inadequate in the case of a large firm. In the
same way, a firm using machine-based methods of production will required a different control
system as compared to the one, which relies on labour intensive methods. As such, the control
system should be appropriate to the nature, needs and circumstances of a concern and each level
of activity inside it.
2. Quick reporting or feedback: Time is an important element in enforcing the control system,
Subordinates should keep their superiors posted with the feedback as to performance of work at
different levels, and Delay in sending reports might prove harmful to the undertaking.
3. Forward Planning: A Good control system is one that makes it possible to think of deviation
even before they have taken place. As far as possible, it should try to prevent rather than remedy
the subordinates’ arising from deviations.
4. Pragmatic: The control system should concern itself with practical results and view things in a
matter-of-fact and practical way. It can do so only when it has enough flexibility so that it can be
adjusted to suit the needs of a modification.
5. Objective: A control system can be effective only with it objective and improve mental, and
not subjective and arbitrary
6. Economical: A good control is one that can be easily be installed and inexpensively
maintained.
7. Simple: To be effective, a control system should be easy to understand an operate.
8. Internal Corrective Mechanism: A control system is good only, when besides observing and
detecting deviations, it also provides for solutions to the problems that cause deviations.
IMPROVEMENT DEVICES OR TOOLS OF CONTROL
Control is the monitoring process for ensuring that scarce reasons are utilized in the most
effective and productive way, so as to achieve the organizational objective, Planning is essential
to the effectiveness of any control system, because then only a manner can compare what should
have happened to what has actually happened, As such, the techniques when are useful in
planning, can be equity effective in control.
The various control devisees may be classified as:
I. Traditional devices.
Budgeting or Budgetary Control- A budget is a quantitative expression of a plan for a defined
period of time. It may include planned sales volumes and revenues, resource quantities, costs and
expenses, assets, liabilities and cash flows. It expresses strategic plans of business units,
organizations, activities or events in measurable terms. · A formal statement of the financial
resources set aside for carrying out specific activities in a given period of time.
· It helps to co-ordinate the activities of the organisation.
An example would be an advertising budget or sales force budget.
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A control technique whereby actual results are compared with budgets.
· Any differences (variances) are made the responsibility of key individuals who can either
exercise control action or revise the original budgets.
1. Cost Control- The practice of managing and/or reducing business expenses. Cost controls
starts by the businesses identifying what their costs are and evaluate whether those costs are
reasonable and affordable. Then, if necessary, they can look for ways to cut costs through
methods such as cutting back, moving to a less expensive plan or changing service providers.
The cost-control process seeks to manage expenses ranging from phone, internet and utility bills
to employee payroll and outside professional services
2. Production Control- production equipment control involves production equipment that
resides in the shop floor of a manufacturing company and its purpose is to produce goods of a
wanted quality when provided with production resources of a required quality. In modern
production lines the production equipment is fully automated using industrial control methods
and involves limited unskilled labour participation. Modern production equipment consists of
mechatronic modules that are integrated according to a control architecture. The most widely
known architectures involve hierarchy, polyarchy, hetaerarchy and hybrid. The methods for
achieving a technical effect are described by control algorithms, which may or may not utilize
formal methods in their design.
3. Inventory Control - inventory Control is the supervision of supply, storage and
accessibility of items in order to ensure an adequate supply without excessive oversupply.It can
also be referred as internal control - an accounting procedure or system designed to promote
efficiency or assure the implementation of a policy or safeguard assets or avoid fraud and error
etc.
4. Break-even point strengths - Break-even analysis is used to determine the point at which
revenue received equals the costs associated with receiving the revenue. Break-even analysis
calculates what is known as a margin of safety, the amount that revenues exceed the break-even
point. This is the amount that revenues can fall while still staying above the break-even point.
Break-even analysis is a supply-side analysis; it only analyzes the costs of the sales. It does not
analyze how demand may be affected at different price levels.
5. Profit and Loss Control - Every business must focus continually on managing profit and
loss to remain solvent. Profit is the money a company keeps after paying all of its expenses. A
loss results from expenses exceeding the amount of sales a company makes in a specific
accounting period. Companies must manage their income statements, also known as profit and
loss statements, to keep earnings positive and expenses under control and in line with revenue.
6. Statistical Data Analysis - Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with the goal of discovering useful information, suggesting conclusions, and supporting decision-making. Data analysis has multiple facets and approaches, encompassing diverse techniques under a variety of names, in different business, science, and social science domains.
Data mining is a particular data analysis technique that focuses on modeling and knowledge
discovery for predictive rather than purely descriptive purposes. Business intelligence covers
data analysis that relies heavily on aggregation, focusing on business information. In statistical
applications, some people divide data analysis into descriptive statistics, exploratory data
analysis (EDA), and confirmatory data analysis (CDA). EDA focuses on discovering new
features in the data and CDA on confirming or falsifying existing hypotheses. Predictive
analytics focuses on application of statistical models for predictive forecasting or classification,
while text analytics applies statistical, linguistic, and structural techniques to extract and classify
information from textual sources, a species of unstructured data.
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7. Audit - Auditing is defined as a systematic and independent examination of data, statements,
records, operations and performances (financial or otherwise) of an enterprise for a stated
purpose. In any auditing the auditor perceives and recognizes the propositions before him for
examination, collects evidence, evaluates the same and on this basis formulates his judgment
which is communicated through his audit report.[1]Any subject matter may be audited. Audits
provide third party assurance to various stakeholders that the subject matter is free from material
misstatement. The term is most frequently applied to audits of the financial information relating
to a legal person. Other areas which are commonly audited include: internal controls, quality
management, project management, water management, and energy conservation.
II. Modern Devices
1. Return on Investment Control.
2. Programmed Evaluation and Review Techniques (PERT).
3. Management Information System (MIS)
4. Cybertics.
5. Management Audit.
TRADITIONAL CONTROL DEVICES
1. Budgetary Control
A Budget is a financial plan for a definite period of time. It is based on estimates of expenditure
during the period, and also proposed for financing them. According, it is a plan for the co-
ordination of resources and expenditure. A budget is formulated for a certain future period and it
states everything in precise, numerical terms. It is a statement or policies and plans to be pursed
during a certain period to attain certain specified goals and objectives.
The policy decisions will need to be given concrete shape. This is done in the form of various
budgets, In a sales budget, for instance, the targeted annual sales for Rs. Ten crores will be
broken into sales per month per product etc.
Essentials of Effective system Control:
• Quick Feedback: There should be regular reports by subordinates as regards performance
at their ends. These reports should be analyzed on the basis of the part data and other
available information for quick remedial action to be ordered.
• Seriousness in implementation: Top management should take every budget and its
implementation seriously.
• Responsibility matched by authority. Those charged with responsibility to accomplish the
budgeting targets should also be given appropriate authority to do so.
• Reward and punishment: For performance as per the budget, the employees concerned
should be suitable rewarded.
• Flexibility: There should no hesitation in altering or remodeling a budget in the light of
any change in circumstances. Budgets are a means to an end. To be meaningful, they
must remain flexible.
Classification of Budgets:
Based on the purposes for which they are prepared, budgets may be classified as:
• Sales Budget
• Selling and Distribution Cost Budget
• Production Budget
• Production Cost Budget
• Purchase Budget
• Labour Budget
• Production Overheads Budget
• Capital Expenditure Budget
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• Cash Budget.
1. Sales Budget:
A sales budget shows what products would be sold, in what quantities and at what prices,
Sales estimates are prepared by the sales manager who is assisted in this task by salesman and
market research officers. Past sales, present market condition, extent of advertising, competition
conditions these and other relevant factors serve as the premises for preparing sales estimates.
• Selling and distribution cost budget: It forecasts the cost of selling and distributing
products during the budget period. It is based on the sales budget, because only sales
estimates would be pointed to the costs to be incurred in selling and distribution.
• Production budget: Production budget may be defined as an estimate of quantity of goods
to be produced during the budget period.
• Promotional Cost Budget: Production cost budget maps out the estimated cost of carrying
out the production budget.
• Purchase Budget: Purchase budget should the purchases to be made during the budget
period, sometimes, it may deal with the purchase of raw materials only.
• Labour budget: Labour budget gives the estimate of labour requirements to meet the
production needs during the budget period. Preparation of labour budget differs from firm
to firm.
• Production Overhead Budget: Production overheads budget contains the forecast of all
production overheads which are estimated to be incurred during the budget period It deals
with production overheads in three parts – fixed, variable and semi-variable.
• Capital Expenditure Budget: Capital expenditure budget points to the plans concerning
additions, improvement and replacement of all fixed assets during the budget period.
• Cash Budget: Cash Budget points to the cash requirements of the business during the
budget period. It gives the estimated cash receipts and disbursements during the budget
period and shows the overall cash position. Cash budget serves as an effective device for
controlling and co-ordinating activities that involves receipt or payment of cash.
Master Budget: The master budget is prepared after the budget relating the various functions of
the enterprise have been finalized. It incorporates all functional budgets into a single integrate
unit. In this sense, It nay be defined as a summarized version of the plans proposed to the
undertaken by an enterprise over a definite period of time.
Periodic Budgetary Reviews: Periodic budgetary reviews are intended to incorporate and
reflect the charges during the budget period in the budget targets. Periodic budgetary review may
be defined on summary basis preferring at the beginning of the nest month. To reinforce the
monthly review, a quarterly review may also be undertaken at the end of each quarter to modify
the budgeted targets, if necessary.
Performance Budgeting: The terms ‘performance budgeting’ refer to laying down of
performance standards as yardstick for assessing deviations of actual performance from the
planned performance.
Standards in the Case of Performance budgeting are mainly non-financial, through these
are related to financial standards to assess deviations from planned performance and to plan for
the future, For example, in the case of education budget, the number of school-going children, or
the number of schools and teachers may bean aid to explaining how the financial resources
allowed for the purpose in the past have been used, and the need to make further allocations for
the future.
Zero-Base Budgeting: It is a method of budgeting under which all activities are re-evaluated
each time and budget is formulated. Each functional budget starts with the assumption that the
function drops not exist and it at zero cost. Increments of cost are compared with the increments
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of benefit, culminating in the planned maximum benefit for a given budget cost. Under zero-
based-budgeting, a manager is required, each time a new budget is formulated, to justify why a
particular programme or activity of function should be continued. The budgeting function
performed by every manager is a specified Area. The second step is concerned with appropriate
analyses of these activities and functions. The third step relates to determining the priority of the
individual activity and functional areas, based on the ranking in order of importance to
accomplishment of organizational objectives. Zero-based budgeting helps to increase
productivity and control cost. IT enables allocation of resources based on the importance of
individual activities and functions to the attainment of organizational objectives.
Evaluation of Budgetary Control Merits
Budgetary control has advantages to offer some of these are:
• Planned approach, it promotes a planned approach to every activity of the enterprise. The
frame work within which expenses have to be incurred and results to be achieve, is distinctly
laid down in the budget relating to each major function. This elements uncertainty.
• Fruit of combined wisdom: Budgets are often prepared by a committee which consists of the
budget director, chief executive officer and executives of all important departments of the
enterprise. This ensures that budgets are not framed according to subjective standards.
• Incentive effect: Budgeting targets, if these are not impossible or too difficult to achieve,
provide a strong motivation to employees to work for their fulfillment.
• Optimum use of capital resources: Budgeting enable an enterprise to use its capital resources
in the most profitable manner.
• Easy availability of working capital The budget of cash receipt and expenditure ensures
sufficient working capital and other necessary resources for the efficient functioning of the
business.
• Effective co-coordinating: Budgeting makes it possible to set the goals and limits for
Individual departments of the enterprise. This greatly facilitates ineffective co-ordination of
activities of different departments.
• Accountability: Departmental heads are held accountable for the realization of budgeting
targets for their respective departments.
• Spotlight on deviations: Budgeting makes it possible to locate deviations from the
predetermine standards. Any weak sports or areas of inefficiency can be easily discovered
and suitable corrective action taken.
• Optimum utilization of resources: Budgeting aim and at distributing the production program
according to plant capacities and ensures the cost effective utilization of me, material and
machines.
• Decon Hight : Budgeting indicates the lines along which performance is planned to proceed
and provides a yardstick against which actual performance may be compared with the
budgeted one.
VARIABLE COSTS:
Variable costs may be defined as the costs, which are directly, associated with the product
such/as direct material dived labour and other variable expenses, like fuel used in production
carriage inward, and so on. Variable cost increase of decrease in direct proportion to the increase
or decrease to production.
Contribution: Contribution may be defined as the excess of sales revenue over the variable
costs of sales, also called the marginal cost, i.e., the cost of an additional unit.
Contribution = Sales revenue – as a cost of sales.
Net-profit / loss = Contribution – Fixed costs.
Computation of Break-Even point:
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Break – even point is reached when the contribution is equal to total cost, i.e. fixed overheads
and variable costs of sales. It may be computed on the basis of unit or sales as follow:
Break-even units = Fixed overhead
Contribution per unit
Break even sales value Fixed ever heads
Contribution to sales ratio
6. PROFIT AND LOSS CONTROL
Profit and loss control refers to a control system under which system under which sales,
expenses, and hence profits of each branch or 'product division' are compared with those of other
branches and product divisions, as well as with, with a view to measuring deviations and taking
necessary corrective action.
7. STATISTICAL ANALYSIS
Statistical analysis may be by means of comparison of ratio, percentage, averages, etc, of
different periods with a view to monitoring deviations and their cause.
Analysis of statistical with a view to discovering and correcting deviations is highly
useful in the case of inventory control, production control and quality control , in the use of
which enter and inner control limits may be defined and if the deviation goes beyond the
statistical expectation suitable action may be immediately taken.
8. EXTERNAL AND INTERNAL AUDIT
Law in respect of all joint stock companies, co-operatives, etc enforce external audit
control. Its object is to ensure that the interests of shareholders and other interested parties are
duly safeguarded against any manipulations and malpractices of management. The external
auditor is a character accountant, or is otherwise qualified to work as an auditor. Besides an also
be a system of internal audit under which staff members of the company, especially verification
of financial transactions and financial records and may also be concerned with an analysis of the
overall control system of the organization.
MODERN CONTROL DEVICES
1. Return on investment control:
Profits earned in relation to the capital employed in a business are an important control
device, if the rate of return on the capital employed in optimum. i.e. if it adequate to satisfy the
owners (shareholders) of the undertaking and is also satisfactory for the type of business carried
on by it, it can be assumed that the business operating with a reasonable degree of efficiency.
The return an investment is computed by dividing the not operating profit (before interest and
tax) by operating capital employed in the business.
2. Programme Evaluations and Review Technique (ERT)
It is broadly similar to the Critical Path Analysis (CPA), Critical Path Method (CPM) and
Network Analysis techniques. The PERT is concerned with the planning and controlling of
complex projects consisting of many inter-related activities and events, some of which are
performed simultaneously in parallel, and others which are performed sequentially, one after the
other.
The PERT is extensively used for planning the construction of buildings, manufacture of
a variety of products, establishment of an advertising campaign, etc. Even small-sized business
establishments can derive considerable advantages from the systematic and logical technique of
PERT.
3. MANAGEMENT INFORMATION SYSTEM (MIS)
Management information system may be defined as an organized system to provide all
levels of management with relevant Information for the control of their functions at the most
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relevant time and at an acceptable level of accuracy, with an appropriate degree of privacy and at
an economical cost.
The MIS may be developed to help various organizational functions, such as, wage
payment, inventory control, accounting, and so on. Information gathered by the MIS may be
relating to past, present or future projections and the sources of such information maybe Internal
and/or external.
However, computers can be useful only in processing of non-quantifiable Information-
such as opinions-which is equally important to decision-making. Therefore, the MIS should be
so designed that it gives equal attention to quantifiable and non-quantifiable inputs.
4. CYBERNETICS
Cybernetics is an important concept for the control system. it may be defined as the
science of communication and control in compels and man-machine system. It is the foundation
in modern factories for interval movement of raw and processed materials and manufacturing
operations performed by automated equipment.
5. MANAGEMENT AUDIT
According to Taylor and Perry, “management audit is a method to evaluate the efficiency
of management at all levels throughout the organization, or more specifically, it comprises the
investigation of a business by an independent body from the highest executive level downwards
in order to report as to its efficiency or otherwise, with recommendations to ensure its
effectiveness where such is not the case”. The objectives of management audit may be
summarized as follows:
(a) Whether the basic aims and objectives of the enterprise are being fulfilled in practice.
(b) Whether the enterprise is being successful in adapting itself to
technological change.
(c) Whether the management structure is suitable.
(d) Whether management is efficient at all levels and the extent to which
economics are possible.
(e) Whether the policies with regard to staff recruitment and training are
adequate, and whether staff morale is satisfactory.
(f) Whether there is a proper communications system both upwards and
downwards throughout the enterprise, including a proper management information system.
(g) Whether the return on capital employed is adequate, and how it
compares with other companies in the same industry.
(h) Whether the enterprise's share of the market is increasing or declining
and how it compares with its main competitors; and
(i) Whether its relationship with the outside world is effective and whether
its corporate image in the eyes of the outsiders is satisfactory.
10 Types of Traditional Control Techniques
1. Direct Supervision and Observation
'Direct Supervision and Observation' is the oldest technique of controlling. The supervisor
himself observes the employees and their work. This brings him in direct contact with the
workers. So, many problems are solved during supervision. The supervisor gets first hand
information, and he has better understanding with the workers. This technique is most suitable
for a small-sized business.
2. Financial Statements
All business organisations prepare Profit and Loss Account. It gives a summary of the income
and expenses for a specified period. They also prepare Balance Sheet, which shows the financial
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position of the organisation at the end of the specified period. Financial statements are used to
control the organisation. The figures of the current year can be compared with the previous year's
figures. They can also be compared with the figures of other similar organisations.
Ratio analysis can be used to find out and analyse the financial statements. Ratio analysis helps
to understand the profitability, liquidity and solvency position of the business.
3. Budgetary Control
A budget is a planning and controlling device. Budgetary control is a technique of managerial
control through budgets. It is the essence of financial control. Budgetary control is done for all
aspects of a business such as income, expenditure, production, capital and revenue. Budgetary
control is done by the budget committee.
4. Break Even Analysis
Break Even Analysis or Break Even Point is the point of no profit, no loss. For e.g. When an
organisation sells 50K cars it will break even. It means that, any sale below this point will cause
losses and any sale above this point will earn profits. The Break-even analysis acts as a control
device. It helps to find out the company's performance. So the company can take collective
action to improve its performance in the future. Break-even analysis is a simple control tool.
5. Return on Investment (ROI)
Investment consists of fixed assets and working capital used in business. Profit on the investment
is a reward for risk taking. If the ROI is high then the financial performance of a business is good
and vice-versa.
ROI is a tool to improve financial performance. It helps the business to compare its present
performance with that of previous years' performance. It helps to conduct inter-firm
comparisons. It also shows the areas where corrective actions are needed.
6. Management by Objectives (MBO)
MBO facilitates planning and control. It must fulfill following requirements :-
• Objectives for individuals are jointly fixed by the superior and the subordinate.
• Periodic evaluation and regular feedback to evaluate individual performance.
• Achievement of objectives brings rewards to individuals.
7. Management Audit
Management Audit is an evaluation of the management as a whole. It critically examines the full
management process, i.e. planning, organising, directing, and controlling. It finds out the
efficiency of the management. To check the efficiency of the management, the company's plans,
objectives, policies, procedures, personnel relations and systems of control are examined very
carefully. Management auditing is conducted by a team of experts. They collect data from past
records, members of management, clients and employees. The data is analysed and conclusions
are drawn about managerial performance and efficiency.
8. Management Information System (MIS)
In order to control the organisation properly the management needs accurate information. They
need information about the internal working of the organisation and also about the external
environment. Information is collected continuously to identify problems and find out solutions.
MIS collects data, processes it and provides it to the managers. MIS may be manual or
computerised. With MIS, managers can delegate authority to subordinates without losing control.
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9. PERT and CPM Techniques
Programme Evaluation and Review Technique (PERT) and Critical Path Method (CPM)
techniques were developed in USA in the late 50's. Any programme consists of various activities
and sub-activities. Successful completion of any activity depends upon doing the work in a given
sequence and in a given time. CPM / PERT can be used to minimise the total time or the total
cost required to perform the total operations.Importance is given to identifying the critical
activities. Critical activities are those which have to be completed on time otherwise the full
project will be delayed.So, in these techniques, the job is divided into various activities / sub-
activities. From these activities, the critical activities are identified. More importance is given to
completion of these critical activities. So, by controlling the time of the critical activities, the
total time and cost of the job are minimised.
10. Self-Control
Self-Control means self-directed control. A person is given freedom to set his own targets,
evaluate his own performance and take corrective measures as and when required. Self-control is
especially required for top level managers because they do not like external control.The
subordinates must be encouraged to use self-control because it is not good for the superior to
control each and everything. However, self-control does not mean no control by the superiors.
The superiors must control the important activities of the subordinates.
SUMMARY
Communication: The word “Communication” has been derived from the Latin word ‘Communis’
which implies common. Thus, communication may be defined as interchange of thought and
information to bring about mutual understanding. It involves exchange or sharing of ideas, opinions and
facts between two or more persons. It is the process of conveying written, verbal or gestural messages
from one person to another, so that they are understood.
Elements of Communication Process:
• Sender
• Message
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UNIT-V:
Section-A
1. __________are used to standardize performance for increasing efficiency.
2. __________is the process which ensure smooth interplay of the functions of the management.
3. List out any two techniques of co-ordination.
4. __________co-ordination is the establishment of a relationship between the employees and
outsiders of the organisation.
5. What is meant by natural hindrances?
6. __________is the passing of information.
7. The term communication is derived from the Latin word_______.
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8. A manager can take appropriate decisions with the help of _______.
9. State the two barriers to communication.
10. BEP stands for__________________.
Section-B
1. What are the characteristics of control?
2. What is the need of control?
3. Define co-ordination and state its characteristics.
4. What are the different types of co-ordination?
5. What are the elements of communication?
6. Mention any five methods of overcoming the barriers.
7. Define control and explain the areas of control.
8. What is meant by PERT/CPM and list out its merits and demerits ?
9. Explain the various steps in control process.
10. What are the problems of co-ordination?
Section-C
1. Explain the barriers to communication.
2. Explain the characteristics of effective communication.
3. Bring out the process of communication.
4. What are the principles of effective communication?
5. Explain the factors deciding the communication program.
6. What are the different types of communication?
7. What are essential requirements of effective control system?
8. Explain various techniques of control.
9. What are the advantages and disadvantages of controlling?
10. Explain the types of managerial control.
Books for Reference: 1. Principles of Management - Koontz and O’Donald
2. Business Management - Dinkar - Pagare
3. The Principles of Management - Rustom S. Davan
4. Business Organization and Management - Y. K. Bhushan
5. Business Management - Chatterjee