mba_p79_semester_i_mba104 final_16092015.pdf

8/16/2019 MBA_P79_Semester_I_MBA104 Final_16092015.pdf

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MBA 104

Management Process & Organisational Behaviour

Unit 1 Introduction to Management and Organisational Behavior 1Unit 2 Evolution of Management Thoughts 19

Unit 3 Planning 33

Unit 4 Coordinating and Organising 49

Unit 5 Departmentation and Structural Formats 69

Unit 6 Directing and Controlling 87

Unit 7 Individual Behavior 105Unit 8 Motivation 117

Unit 9 Groups and Decision Making 130

Unit 10 Leadership 146

Unit 11 Organisational Conflict 158

Unit 12 Organisational culture and Change Management 169

kmZJ§Jm KamoKar

Yashwantrao

Chavan

Maharashtra

Open University


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Yashawantrao Chavan Maharashtra Open University

Vice-Chancellor : Dr. M. M. Salunkhe

Director (I/C), School of Commerce & Management : Dr. Prakash Deshmukh

NATIONAL ADVISORY BOARD

Dr. Pandit PalandeHon. Vice ChancellorDr. B. R. Ambedkar UniversityMuaaffarpur, Bihar

Prof. Sudhir .K.JainVice Chancellor ,Shri Mata Vaishno Devi University(SMVDU) KatraJammu and Kashmir.

Prof. Vinay .K.Nangia,Ex- Head,Department of Business Studies,Indian Institute of Technology, (IIT-Roorkee) Roorkee.

Prof. Devanath Tirupati,Dean Academics,Indian Institute of Management(IIM-Bangalore) Bangalore.

Prof. Karuna Jain,Director,N I T I E, Vihar Lake,Mumbai - 400087

D. Prakash DeshmukhDirector (I/C), School of Commerce& ManagementYashwantraoChavan Maharashtra OpenUniversity, Nashik

Dr. Surendra PatoleAssistant Professor,School of Commerce &Management,Yashwantrao Chavan MaharashtraOpen University, Nashik

Dr. Latika Ajitkumar AjbaniAssistant Professor,School of Commerce &

Management,Yashwantrao Chavan MaharashtraOpen University, Nashik

Instructional Technology Editing & Programme Co-ordinator

Production

Shri. Anand YadavManager, Print Production Centre Y. C. M. Open University, Nashik- 422 222

Copyright © Yashwantrao Chavan Maharashtra Open University, Nashik.

(First edition developed under DEC development grant)

First Publication : Sept. 2015

Typesetting : Arya Enterprises, Nashik

Cover Print :

Printed by :

Publisher : Dr. Prakash Atkare, Registrar, Y. C. M. Open University, Nashik- 422 222

-------

Dr. Ashu KhannaAssistant Professor,Department of Polymer and Process Engineering,IIT-Roorkee, Saharanpur Campus

Dr. Latika Ajitkumar AjbaniAssistant Professor,School of Commerce & Management, Yashwantrao ChavanMaharashtra Open University, Nashik

Author & Editor


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Copyright © Yashwantrao Chavan Maharashtra Open University, Nashik.

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The information contained in this book has been obtained by authors from sources believed to be reliable and are correct to

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Management Process

& Organisational

Behaviour : 1

Introduction to Management

and Organization Behavior

NOTES

UNIT 1 INTRODUCTION TO

MANAGEMENT AND

ORGANISATIONAL BEHAVIOR

Structure

1.0 Introduction

1.1 Unit Objectives

1.2 Management Defined

1.3 Nature of Management

1.4 Importance of Management

1.5 Managerial Roles

1.5.1 Interpersonal Roles

1.5.2 Informational Roles

1.5.3 Decisional Roles

1.6 Levels of Management

1.6.1 Top Level Management

1.6.2 Middle Level Management

1.6.3 First Level Management

1.7 Managerial Skills

1.7.1 Technical Skills

1.7.2 Human Skills

1.7.3 Conceptual Skills

1.7.4 Diagnostic Skills

1.8 Scope of Management

1.8.1 Human Resource Management

1.8.2 Financial Management

1.8.3 Production Management

1.8.4 Marketing Management

1.9 Functions of Management

1.10 Organizational Behavior

1.11 Importance of Organizational Behavior

1.12 OB Model

1.13 Summary

1.14 Key Terms

1.15 Questions & Exercises

1.16 Further Reading and References

MBA106 unit


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1.0 Introduction

Human beings have variety of needs, that can’t be satisfied by their individual

efforts alone. They need to perform numerous activities to satisfy their wants. Hence

organizations are formed to cater to the need of the society. Individuals join organization

and contribute their part for the well- being of the society.

There is one basic organization to which we all belong and that is family. Family is

the basic unit of the society. It has almost all the characteristics of the organization.

Organization is a group of two or more people working together to achieve a common

objective and so is the family. The main aim of the family is to provide mental, physical

and emotional satisfaction to the members of the family along with general survival

goals. Family applies basic economic concepts such as division of labour , planning,

distribution etc. The family as a unit decides as to which member of the family will do

which task. Each person in the family has his or her role for e.g. the mother is expected

to manage the home and take care of children while father is supposed to provide

financial support to the family. The family prepares budget for the month and plans it

various activities like education, shopping, holidaying, socializing etc .

Just like family, management activities and organizations have existed for thousands

of years. Someone in the past always had a plan to accomplish whether it was building

up of Egyptian pyramids or Great Wall of China. In order to accomplish objectives the

people and material were organized, the workers were directed and controls were

imposed on them.

We can trace various practices of management that we apply today in ancient

scriptures and books. “The Great Plan” is a document that combines astrology, moral

principles, physics, politics and religion. It is a mixture of ideas from various areas. The

text itself mentions the time period 1121 BC. The document includes a passage in it that

scholars judge it to be older than 2200 BC. One passage of the document discusses

about contingency theory of leadership. Its interpretation reveals the advice given to the

manager to consider characteristics of subordinates and situation in applying the leadership

style. We can correlate this passage written in “The Great Plan” to the contingency

theory of leadership proposed by Fielder. Written around 1100 BC “The officials of

Chou” is book containing a long exhaustive and detailed list of job description for the

huge number officials in the kings service ranging from prime minister to household

services. According to the book, the prime minister could use rules and regulations (a)to classify departments (b) to distribute responsibilities among departments (c) to specify

coordination links among officials (d) to define standards and procedures for operations

(e) to assess officials’ performance. The philosophy was that by standardizing operating

procedure efficiency will improve and formalizing procedure would provide stability to

the organizations. Officials had to behave in accordance with rules; they were punished

for not complying with the standard. Ancient bureaucracies are well articulated in the

book “The Officials Of Chou”. Similar kind of bureaucracy was proposed by Max

Weber in 1920.


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Management is as old as civilization; it is a life giving element in every organization.

Management is the most challenging, comprehensive, central of all human activities.

Managers not only affect the organizational effectiveness but also accomplish many

special economic goals of the society.

The primary function of the management is to satisfy the various stakeholders of

the organization. He has to make sure that organization earn enough profit that satisfies

shareholders. The management also aims at providing valued products at a reasonablecost to the customer. After all customers is the king. The growth and survival largely

depends upon the demands of the customer. Another important objective is to provide

rewarding employment to the employees so that best talent can be retained and all this

has to be done with efficiency. With the advent of industrial revolution the increase in

size and complexity of organizations lead to the split between owner and manager. This

resulted in emergence of management as a distinct discipline. The 21st century has

brought new challenges before workforce. Everyone must adapt to rapidly changing

society with constantly changing demands and opportunities.

1.1 Unit Objective

After studying this unit, you should be able to-

Introduce and define the concept of management.

Understand the nature and importance of management.

Explain the various managerial roles.

Describe the levels of management.

Explain the various skills required by managers.

Identify the scope of management.

Describe the functions of management.

Understand organizational behavior and its importance.

Describe OB Model.

1.2 Management Defined

Organizations process human and nonhuman input into valuable outputs. The

input may include men, money, machinery, material, methods and the output consists of products, services, profitability, customer and employee satisfaction etc. Management

acts as a unifying force. It focuses on the attainment of organizational goal in an effective

and efficient manner through the use of human and non human resources

Managers have a responsibility of ensuring that individuals make their best

contribution to group activities thus enhancing their productivity. All organizations need

good management for growth and survival. The aim of all managers is same i.e.

accomplishment of organizational goals efficiently and effectively.


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Productivity can be measured in terms of output input ratio, within a time period

with due consideration for quality. Productivity includes efficiency and effectiveness,

where effectiveness means achievement of objectives and efficiency means achievement

of the output with least amount of resources and efforts.

Fig. 1.1 Management Process

The following are some of the definitions given by leading thinkers and practitioners

Management is the art of knowing what you want to do and then seeing that is

done in the best and cheapest way.

- F.W Taylor

Management is the creation and maintenance of an internal environment in an

enterprise where individuals working in groups can perform efficiently and effectively

towards the attainment of group goals. Management is the art of getting things done

through and with people in formally organized group.

- Harold Koontz and Cyrill O Donnell

Management is the coordination of all resources through the process of planning,

organizing , directing and controlling in order to attain stated objectives.

- Henry L. SiskLuther Gulik coined the word POSDCORB which tells about the management

process i.e. Planning, Organizing, Staffing, Directing, Coordinating, Reporting and

Budgeting

1.3 Nature of Management

1. Management is Universal in Nature: it is the central force of every organized

activity. All types of organization for e.g. university, government, hospitals, hotels ,

army, club, cricket or business enterprise require application of fundamentalprinciples of management. Management is a pervasive activity and is applicable to

every organized activity irrespective of size or type of activity.

2. Management aims at Attainment of Predetermined Goals and Objectives:

management is a mean to achieve organizational goals. It ensures economy and

efficiency in the use of human and non human resources. Management is purposeful

and success of the management is measured in terms of magnitude of goal attained.

3. Management is a group Activity: whenever two or more people work towards

MACHINE

MONEY

MEN

MATERIAL INPUT

PLANNING ORGANIZING STAFFING DIRECTING CONTROLLING

PRODUCT

PROFITA

BILITYOUTPUT

CUSTOMER

SATISFACTION

EMPLOYEE

SATISFACTIONSERVICES


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a common goal management is required to coordinate their efforts .Management

means group of individuals occupying managerial positions and performing

managerial function. All the managers e.g. chief executive officer, departmental

heads foreman, supervisor all are collectively known as management.

4. Management is Continuous Process: it is an ongoing process and refers to

series of interrelated functions such as planning, organizing, staffing, leading and

controlling. This cycle is repeated every now and then till the goals of the organizationare achieved.

5. Management is a Social Process: it is also a social process as it concerned with

people. Management is of the people for the people and by the people. It focuses

on interpersonal relationship and team building.

6. Management is a Integrative Process: management brings all human and non

human resources together, unifying them and employing them to achieve goals

7. Management is multi Disciplinary: management is a specialized branch of

knowledge that has received inputs from several other disciplines. The vast body

of knowledge in management draws heavily from other fields of study like

engineering, sociology, psychology, anthropology economics, mathematics,

commerce etc.

8. Management is an Art as well as Science: It is science as it a systematic body

of theoretical knowledge capable of general application. Management is an art

because it involves the application of knowledge and skills to achieve results like

any other art such as painting, music etc. The organized body underlying the practice

of management is a science, while applying the principles and practices is an art.

Science is an organized knowledge having clear concepts, theory and other

accumulated knowledge developed from hypothesis experimentation and analysis.

Principles in management are fundamental truths that explain the relationship

between variables. Principles are descriptive and not prescriptive. They tell us the

outcome of the interaction of variable but do not tell us what to do. Management as

an art require personal skill , creativity and result oriented approach. For e.g. An

individual may have technical knowledge of painting but to produce a good piece of

artwork he should be creative and should be able to practically apply the knowledge.

1.4 Importance of Management

Achievement of goals : Management act as a unifying force and brings

together factors of production both human and non human to achieve the

objectives of the organization. Management is also one of the factors of

production. Without coordinated efforts of management no other factor of

production can produce the desired results in isolation.

Optimum utilization of resources : The resources of the organization are

limited and management aims at utilizing the resources in best possible manner.


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Manager tries to avoid wastage by using the resources efficiently and effectively.

Integrates various interest : Shareholders are interested in earning profit

from business. Employees expect a decent pay from their employment.

Government expects tax and compliance with rules and regulations set by

them. The manger tries to balance these diverse goals that may be sometime

conflicting.

Survival and Growth : The factors in the environment are constantly

changing. The change in Government policies, customer preferences or

technology can sometimes provide opportunity for growth or can act as threat

for survival. Manager is constantly scanning the environment and analyzing

the possible effects of the change on the organization. Manager takes

appropriate steps to eliminate threats and grab opportunity.

Development of Nation : Peter Drucker has rightly said that developing

nations are not underdeveloped they are undermanaged. The development of

country largely depends on the quality of management of its scarce resources.

The manager produces wealth for the nation by deploying factors of productionto produce output that are needed and desired by the people. This way it

generates wealth and employment and improves standard of living of the people.

1.5 Management Roles

A role is a organized set of behavior that is expected from an individual. Roles

throw light on how managers perform their work. Henry Mintzberg, management expert

professor after studying the work performed by executives in 1960 ,proposed that

manager’s work can be put down to ten common roles.. The roles or expectations of manager’s behavior at work are grouped into three categories. The three roles that

managers usually perform in any organizations are : interpersonal roles, informational

roles and decisional roles

Fig. 1.2 Management Roles

1.5.1 Interpersonal Roles

This role is concerned with interpersonal relationships and interaction of managers

INTERPERSONAL ROLES

FIGURE HEAD LEADERSHIP LIASON

INFORMATIONAL ROLES

MONITOR DISSEMINATOR SPOKESMAN

DECISIONAL ROLES

ENTREPRENEUR DISTURBANCE HENDLER RESOURCE ALLOCATOR NEGOTIATOR


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with the people inside and outside the organizations. The three interpersonal roles are as

follows:

1. Figurehead Role: the manager performs duties that are ceremonial in nature.

They represent the organization in all matters of formality for e.g. attending

social functions, greeting visitors, making speeches, hosting receptions,

bestowing honors etc. They perform social and legal duties and act as a

symbolic leader.2. Leadership Role: it includes directing and motivating people towards

organizational objectives. He influences his sub-ordinates to exert high level

of efforts. He builds relationship with employees, coaches them and supports

them so that they meet work related goals that are essential for organization’s

growth and survival.

3. Liaison Role: a manager serves as a link between their organization and

others outside the organization in order to maintain mutually beneficial relations.

They maintain contact with the people outside the organization so as to evaluate

environmental factors effecting the organization. Self developed network of

contacts with government and other organization group can help in obtaining

favor and information.

1.5.2 Informational Roles

Informational roles involve receiving, collecting and disseminating information so

that manager can serve as nerve centers of their organizational units. Three informational

role are as follows:

1. Monitor Role: He seeks internal and external information that are relevant

to the organization through various sources. He usually receives and collects

information about the issues that can affect the organization through readingmagazines, reports and talking to others.

2. Disseminator: Manager transmits valuable and important information to the

members of the organization that would otherwise be inaccessible to them.

The manager transmits factual and value based information to the subordinates

through memorandums and holding informal meetings with them.

3 . Spokesperson: Manager represents his unit to the outside world. He

communicates about the performance and policies of his unit to the people

outside his unit. He transmits information regarding organization’s plans, future

actions to the people external to the organization .They do it by holding boardmeeting and giving information to the media.

1.5.3 Decisional Roles

The manager has to make important decisions that have a significant impact on

the organization. The four decision roles that the manager adopts are as follows:

1. Entrepreneur: Manager encourages innovation, brings about change in

organization and starts new project to improve the organization. Environment

is ever changing. Change in technology, political, social and economic setup


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may change the business definition of the organization. Managers look for

the ideas and opportunities in the environment and then design and initiate

change so that the organization is not left behind.

2. Disturbance handler: When the organization is threatened with unexpected

difficulties the manager is responsible for formulating organizational strategy.

He has to deal with unexpected operational breakdowns for e.g. strikes by

the workers for higher pay package. Increase in the price of imported rawmaterial due to increase in customs duty. He has to provide solution to overcome

such unexpected problems.

3. Resource allocator: Manager is responsible for allocation of all types of

resources including funding, equipment, human resources, time etc to various

organizational units. He does it through budgeting and scheduling. Manager

controls and authorizes use of resources.

4. Negotiator: He represents his organizational unit and carries out negotiations

in bargaining process. He may negotiate with people outside the organization

for e.g. negotiating price with the vendor . He may negotiate with other units

in his organization to gain advantage for his own unit for e.g. negotiating for

allocation of limited resources of organization.

1.6 Levels of Management

The levels of management tell about the position of managers in an organization

on the basis of authority and responsibility. Each level has its distinctive functions and

roles. The number of managers at each level reduces as we move towards the top of

the pyramid. The management can be classified on the basis of hierarchy. They perform

different task and roles.

Fig. 1.3 Levels of Management

1.6.1 Top Level Management

Top level management consists of board of directors, presidents and CEOs. They

are responsible for overseeing the entire organization.

They develop goals, strategic plans, objectives and broad policies of the

enterprise.

They decide about the structure of the organization. They appoint middle

TOP

LEVEL

MIDDLE

LEVEL

FIRST LEVEL


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level executives and coordinate the activities of all departments.

They are answerable to shareholders of the organization and responsible for

the overall performance of the organization.

They should have understanding of competition, world economies, politics

and social trends that affect organizational effectiveness.

They decide about the factors that are vital for survival and growth of the

organization ,like shutting down of an unprofitable plant, entering into a new

market, introducing a new product in the market, opening new plant etc.

They maintain liaison with outside world such as government, trade associations

, association of industry etc.

They make decisions regarding distribution of profit and retained earnings.

1.6.2 Middle Level Management

Middle level management consists of general managers, branch managers and

departmental managers. They control and oversee the departmental activities.

They are accountable to top management.

They decide departmental goals in conformance with the company policies

and objective set by top management. They are responsible for preparing

departmental plan covering all the activities related to the department within

the basic framework of the corporate plan set by top management.

They perform all the management functions related to their department for

smooth functioning of the department.

They interpret and explain the policies set by the top management to the

lower level managers.

They provide guidance to lower level managers.

They monitor group level performance and resolve problem within and among

work group.

1.6.3 First Level Management

First level management consists of supervisors, foreman etc. They are in direct

contact with workers.

They control and direct them by assigning task to employees, guiding and

supervising them for day to day activities.

They give performance feedback of the workers working under them.

They should have technical skills so that standards set for quality and quantity

of production can be met.

They plan for day to day activities.

They maintain close personal contacts with workers to ensure discipline in

the organization.

They act as a line of communication between the employees in an organization

and upper levels of management. They report grievances and suggestions of

Check Your Progress

1. What do you under-

stand by the manage-

ment team``POSDCORB’’?

2. What are the various

informational roles of

the manager?


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the workers working under them to higher authorities.

They make sure that workers have all the resources, tools and materials they

need to accomplish their tasks.

1.7 Managerial Skills

Managers require certain skill or competencies to accomplish their goals. In order

to be effective manager must possess the following skills.

1.7.1 Technical Skills

It is the ability to perform a job by the use of tools, procedures or techniques of a

specialized field. This involves proficiency in the mechanics of a particular job so that

job can be performed effectively. This skill is very important to lower level managers as

they are in charge of the actual operations. For e.g. the success of team leader in the

software company depends on his technical knowledge in software development. As

one moves to the higher level of management the importance of technical skills diminishes.

1.7.2 Human Skills

It is the ability to work with people, understand their needs and motivate them.

Technical skill involves mastery over job while human skills are concerned with mastery

over people. Such skills require leadership qualities, emotional intelligence in the manager

so that he can win cooperation of others and build effective teams. Human relations

skills are required by all managers at all levels of management since all managers have

to interact and get work done through others.

1.7.3 Conceptual Skills

It is the ability of manager to analyze the cause and effect relationship. It is the

ability to visualize the organization as a whole and see the big picture and understand the

interrelationship among organizational parts. It focuses on problem solving ability of the

managers. This skill is mostly required by top management as they are involved in broad

long term decisions that affect large parts of the organization.

Fig. 1.4 Managerial Skills

1.7.4 Diagnostic Skill

Another important skill required by the management is the ability to visualize most

appropriate response to the situation. Diagnostic skill is not just the ability to specify

why the problem has happened but also the ability to develop certain alternatives to

Top level

Middlelevel

Lower(Supervisiory)

level

H u m

a n

R e l a t i o

n s

C o n

c e p t u a l

T e c h

n i c a l


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solve the problem. It requires sound judgment, analytical ability, intelligence and common

sense.

1.8 Scope of Management

The scope of management is very wide. Management can be applied to various

functional areas in the organizations. The main areas are human resource management,

financial management, production management and marketing management.

1.8.1 Human Resource Management

It is a managerial functions involving planning, organizing and controlling process

related to hiring, developing, compensating and maintaining people in an organization.

The activities included are

1. HR planning : This activity aims at providing the organization the right number

of people with right knowledge, skills and attitude at the right time.

2. Recruitment and selection : The term applies to the process of attracting

potential employees of the company and choosing the best ones that suit the

requirement of the organization.

3. Orientation and placement : It refers to welcoming of new employees and

providing him information about organization so that he is able to adjust well in

the organization.

4 . Placement : The allocation of people to jobs is known as placement. The

new employees are assigned initial assignment while existing employees are

relocated through transfer , promotion or demotion .

5. Training and development : The quality of employees is improved by

training them to enhance their skills and developing their personality.

6. Remuneration : The employee is compensated for his services through

various financial and nonfinancial resources.

7. Communication and motivation : The managers motivate employees so

that the they work with complete dedication and to the best of their capabilities

and knowledge towards achieving the organization’s goal. Motivating them

helps to build a long term association of the employees with the organization.

8. Performance Appraisal : It is a systematic, periodic and impartial rating of

an employee’s excellence in matters pertaining to his present job so that

performance gap can be identified and corrective actions can be taken. It

also forms as a basis for incentives and promotions.

9. Welfare safety and health : This aspect of HRM is concerned with the

working condition and the amenities at the work place. It makes the

environment worth working by eliminating work place hazards, providing job

safety, medical and health benefits.

10. Industrial relations : It aims at avoiding industrial conflict or strife and

developing harmonious relations between employer, employee and state. It


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aims at eliminating as far as possible and practicable strikes, lockouts and

gheros.

1.8.2 Financial Management

Financial management is concerned with procurement of funds and their effective

utilization. The major functions of finance are:

1. Investment decisions : It relates to selection of assets in which the funds

will be invested. The criteria are based on cost, benefit and risk analysis.

Assets can be long term or short term. Decisions relating to long term assets

are known as capital budgeting decisions while relating to short term assets

are known as working capital decisions.

2. Financing decisions : Financing decisions relates to the raising of funds

through different sources of funds for investing activities. The sources of

funds can be debt and equity. It deals with raising the funds in reasonable

proportion of debt and equity capital so that shareholder’s wealth is maximized.

3. Dividend policy decisions : When the firm earns profit, two alternatives

are available to it. It can either distribute the profit or retain some of the profit

for future growth of the organization or for meeting some contingency. It

includes the decision as to how much profit to retain and how much to distribute.

4 . Reporting : Financial accounting relates to record keeping of various financial

transactions, their classification and preparation of financial statements to

show the financial position to the various stake holders of the company.

5. Planning and controlling : Management accounting deals with analysis

and interpretation of financial record so that management can take corrective

actions in case the standards are not met. It also includes budgeting and

forecasting and setting targets for profit and cost.

6. Taxation : This area deals with various direct and indirect taxes which

organization has to pay.

7. Costing : Costing deals with recording of costs, their classification, analysis

and ascertainment of cost and cost control.

1.8.3 Production Management

Production means creation of utilities by converting raw material in to final product

so that right goods are produced in right quantity at the right time and at the right cost.

It is very important field of management. Various sub-areas of the production department

are as follows.

1. Plant lay out and location : This area deals with deciding a suitable location

where factory will start functioning, designing of plant layout i.e designing of

factory and placing various facilities within the plant.

2. Production planning and control : It requires forecasting, routing, scheduling,

dispatching, progress reporting and taking corrective actions if targets are not

achieved. Managers have to plan about various production policies i.e. deciding

about how, where and in which sequence the work will be done.


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3. Material management : This area deals with procurement, storage, issue

and control of the raw material required for production department.

4. Product, Design planning and development : Product design is done

when new idea is conceived and an attempt is made to develop the product to

the point that it becomes technically and commercially viable. This area deals

with research and developmental activities of manufacturing department.

Refinement in existing product line or development of a new product are themajor activities.

5. Quality Control : Quality control department works for production of quality

product by inspecting the product on the basis of strength, hardness, dimension,

finish, chemical composition etc. which ensure the customer satisfaction.

1.8.4 Marketing Management

Marketing management involves analysis, planning, implementation and control of

programs designed to bring out desired exchange with customers that satisfies their

needs and wants and build long term relationships. It is the process of creating, delivering

communicating the value of a product or service through positioning to customers andmanaging customer relationship for the benefit of organization. The following are its sub

areas.

1. Market research : It involves in collection of data related to product demand,

customer’s needs and wants, advertising effectiveness and price studies.

Marketing research provides an effective sales forecast and promotes sound

marketing strategies

2. Promotional Activities : This area deals with promotion of the product,

introducing new product in market by various means and encouraging the

customers to buy the products. This activities decide upon the promotion mixi.e what should be the means of approaching the customer, whether it should

be advertising, publicity, personal selling etc.

3. Sales distribution and after sales services : Sales management deals

with handling of inquires and orders from the customer , fixation of prices,

actual transfer of products to the customer after fulfilling certain formalities

and after sales services.

1.9 Functions of Management

Manager is required to perform certain basic functions which may be broadly

classified into five categories: planning, organizing, directing, staffing and controlling.

Planning: It includes determination of objectives and selection of appropriate course

of action. Planning provides direction by deciding in advance what is to be done, how

it is to be done, when and where it is to be done and by whom it is to be done.

Organising: it is concerned bringing together men, money, material, technology

etc for production of output. It involves decisions regarding division of work, formulating


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structure to ensure co-ordination and assigning authority and responsibility.

Staffing: It aims at providing right kind and right number of human resources at

the right time. It involves activities relating to recruitment, selection, training and

development, motivation and compensation.

Directing: It is the act of guiding and inspiring people to perform. It involves four

important elements: leadership, motivation, communication and supervision.

Controlling: The objectives of controlling is to ensure that organization is moving

in the desired direction. It involves the following steps:

1. Establishing standards for performance.

2. Measuring actual performance

3. Comparing actual performance with the standards

4. Taking corrective action in case of negative deviations.

The above mentioned functions are discussed in details in the following chapters.

1.10 Organisational Behaviour

Organizational behavior is study that relates to individual, working together in group

or teams. Organizational behavior is a field of study that investigates the impact that

individuals, groups and structure have on behavior of the employees within the organization

for the purpose of applying such knowledge towards improving organization effectiveness.

1.11 Importance of Organisational Behaviour

Consciously or unconsciously we try to interpret and predict the behavior of others.

Our prediction about the behavior is based on our experience with the people in the

environment that we get by observing and interacting with them. We also learn through

the experience of others. The result is that we form generalization about human behavior

which is based on intuition. The feeling of intuition is not supported by facts about

behavior. Our generalization is not always accurate.

For e.g. let is consider the following generalization:

1. Everyone can be motivated by financial rewards.

2. The most effective group is the one that do not have any conflict.3. Interview is an effective selection technique.

All the above generalization do not hold true in every condition. No two individuals

are likely to behave in the same manner under similar set of conditions. There are lots of

individual differences.However, there are certain fundamentals consistencies underlying

the behavior of all individuals. The consistencies can be identified and modified to explain

individual differences.

These fundamentals consistencies allow predictability. If we replace intuition with


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systematic study we are in better position to predict behavior. A systematic study attempts

to identify relationship between variables, determine the causes and effects of relationship

and draw conclusion based on scientific evidence.

The objective of organizational behavior is to predict, explain and control individual

behavior, group behavior in team and organization in order to attain organizational

effectiveness. Organizational effectiveness is measured in terms of quantity and quality

of work, satisfaction and commitment of employees.

1.12 OB Model

A model is a systematic and simplified representation of some real world

phenomenon. OB model identifies its primary dependent and independent variables and

their relationship with each other. The dependent variables are productivity, job satisfaction,

absenteeism and attrition. The independent variables work at three levels. They are as

follows:

1. Individual level: The characteristics related individual like personalitycharacteristics, attitude, values, perception etc

2 . Group level: The behavior of people in groups like group norms, group

cohesiveness etc.

3. Organizational level: The designs of organization structure, organization

culture and human resources policies and practices also have a impact on

dependent variables.

Fig. 1.5 depicts the linkages between the three levels and their — with dependent

variables.


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Fig. 1.5 O B Model

1.13 Summary

Management is a life giving activity to an organization. All organizations need

management irrespective of size and activity for growth and survival. Management

bring together human and nonhuman input to produce valuable output by utilizing the

input efficiently. Management is universal, goal oriented, group activity, the process of

management includes planning, organizing, staffing, directing and controlling. The

management helps in achieving organizational goals. Managers are required to posses’

technical, human, conceptual and diagnostic skills. The technical skills are required by

first level of management as they are in direct contact with workers and are responsible

for day to day operations. Conceptual skills are required by top management as they

have to make long term strategies for the organizations after scanning the internal and

external environment of the organization and understanding the relationship of variables

present in environment. Human skills are required at every level. The managers have to

play interpersonal roles, informational roles and decisional roles in their day to day

functioning. The scope of the management is very wide. The functional areas of

management are human resource management, financial management, production

management and marketing management.

Organisational Level

* Organisational Culture

* Organisation Structure

* Work Design

* Human Resource Policies

and Practices

Group Level

* Group Norms

* Group Cohesiveness

* Leadership

* Conflict

* Team

* Group Structure

* Group Decision Making

Individual level

* Personality

* Values

* Attitude

* Perception

* Motivation

* Individual decision making

Input

independent

variables

Output

dependent

variables

Productivity

Absenteeism

Attrition

Job

satisfaction

Check Your Progress

1. What are the variousactivities of Human

Resource Management

2. Briefly explain OB

Model.


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Organizational behavior is a systematic study of individual behavior, working in

group and in organization. It helps in predicting behavior of individuals. OB Model depicts

the relationship between independent variable at individual group and organizational

level and dependent variables that are productivity, job satisfaction turnover and

absenteeism.

1.14 Key Terms

Management: It is the coordination of all resources through the process of

planning, organizing , directing and controlling in order to attain stated

objectives.

Management roles: A role is an organized set of behaviour that is expected

from an individual. Roles throw light on how managers perform their work.

Interpersonal roles: This role is concerned with interpersonal relationships

and interaction of managers with the people inside and outside the

organizations. Informational role: Informational roles involve receiving, collecting and

disseminating information so that manager can serve as nerve centres of

their organizational units.

Decisional roles: The manager has to make important decisions that have

a significant impact n the organization.

Top level management: It consists of board of directors, presidents and

CEOs. They are responsible for overseeing the entire organization.

Middle level management : It consists of general managers, branch

managers and departmental managers. They control and oversee thedepartmental activities.

First level management: It consists of supervisors, foreman etc. who are

in direct contact with workers.

Technical skills It is the ability to perform a job by the use of tools, procedures

or techniques of a specialized field.

Human skills: It is the ability to work with people, understand their needs

and motivate them.

Conceptual skills: It is the ability of manager to analyze the cause and

effect relationship. It is the ability to visualize the organization as a whole andsee the big picture and understand the interrelationship among different

organizational parts.

Diagnostic skill: It is the ability to visualize most appropriate response to

the given situation.

Organization behaviour: It is a field of study that investigates the impact

that individuals, groups and structure have on behaviour within the organization

for the purpose of applying such knowledge towards improving organization

effectiveness.


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1.15 Questions and Excercises

Short Answer type questions

Q1. What do you understand by diagnostic skills of manager?

Q2. What is the concept of universality of management?

Q4. Why is management both science and art?

Long Answer type questions

Q1. What are the roles and responsibilities of each level of management? What

are the managerial skills required at each level of management?

Q2. What do you understand by organizational behavior? Why is it important?

Q3. Explain briefly the roles of Managers as proposed by Mintzberg.

Q4 . Discuss in brief the scope of management.

Q5 . List and briefly describes the function of management.

Q6. Define management. Explain its nature and importance.


(1) Koontz and O Donnell, ``Essentials of Management ”, Tata McGraw Hill,

New Delhi 1990.

(2) Lindoya, P., ``Chinese theories of control by violence”, Newyork University,

published in journal of management inquiry, 1997 , vol 6 : 144-159.

(3) V.S.P Rao, V. Harikrishnan, ``Management Text and cases”, Excel books ,

fourth edition

(4) Robbins Stephens, Judge Timothy A, ``Organisational Behaviour”, Pearson

Education


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Evolution of Management

Thoughts

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UNIT 2 EVOLUTION OF

MANAGEMENT THOUGHTS

Structure

2.0 Introduction

2.1 Unit Objectives

2.2 Classical Approach

2.2.1 Scientific Approach (1900)

2.2.2 Administrative Theory- Henry Fayol

2.2.3 Bureaucracy- Max Weber

2.3 Neoclassical Approach

2.3.1 Hawthorne Studies- Elton Mayo

2.3.2 Human Relations Approach

2.3.3 Behavioral Approach

2.4 Quantitative Approach

2.5 System Approach

2.6 Contingency Approach

2.7 Modern Approach

2.7.1 Contribution of Peter Drucker

2.8 Summary

2.9 Key Terms

2.10 Questions and Exercises


2.0 Introduction

Origin of management can be traced to ancient roots. Many books were produced

during ancient and medieval time that contained advice about how the kings should

administer and govern their territory. “The Prince”, by an Italian author Nicco Machiavelli

and “Arthashatra” by chanakya are examples of conceptualization of management

practices during those times. The ancient monuments and irrigation systems of the

medieval period required organized and coordinated efforts of thousands of workers,

artisans, architects etc, which was not possible without the use of sound management

practices. Industrial revolution marked the beginning of modern management thought.

The driving force in shaping what management is today is the urge of the human being

to improve and flourish. After industrial revolution search began to find better ways to

utilize organizational resources. With the rise in use of machine and large scale

mechanized manufacturing new problems were identified which resulted in the

development of classical approach. After classical approach many other school of


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thoughts were developed that added value to the previous school of thought and helped

in aligning management practices to the ever changing dynamic environment. The

classical approach was followed by neoclassical approach, quantitative approach,

systems approach, contingency approach and modern approach.

2.1 Unit Objectives

After studying this unit you should be able to-

Explain the Scientific Approach and contribution of F.W taylor.

Explain the characteristics of Bureaucracy proposed by Max Weber.

Explain Administrative theory and understand the principles of Henry Fayol.

Understand the importance of human beings in improving organizational

effectiveness through findings of Hawthorne studies done by Elton Mayo.

Understand Behavioral and Human relations approach.

Explain Quantitative approach and its importance in decision making.

Explain Systems approach to management.

Explain Contingency approach to management.

Understand the contribution Peter Drucker.

2.2 Classical Approach (1900)

The classical approach is the oldest form of management thought also known as

traditional approach, management process or empirical approach. Management principles

and practices were formalized for the first time after careful observation. The aim of the classical approach was based on experience of practicing managers. Universality

of functions and principles of the management was recognized during this period.

Management is viewed as systematic process of interrelated functions like planning,

organizing, staffing, directing and controlling to attain worker’s efficiency through

economic incentive.

The branches of classical approach:

CLASSICAL APPROACH

SCIENTIFIC ADMINISTRATIVE BUREAUCRACY

The major contributors of classical approach were F.W Taylor, Max Weber and

Henry fayol.

2.2.1 Scientific Approach

Frederick W. Taylor known as the father of scientific management is the most


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famous management pioneer. He rose from the position of common laborer to chief

engineer in just 6 years. The goal of Taylor was to find out “one best” way to perform

a task. In order to do so he did time and motion studies. One of his experiments was the

study of workers loading pig iron to rail car. Taylor first tried to break tasks into elementary

movements like walking speed, carrying positions, bending etc. and noted the time of

each elementary movement with a stop watch. After that Taylor tried various

combinations of procedures, tools and technique to arrive at “one best way”. He also

used rest periods of specific duration and interval to improve the output. Taylor also

developed incentive plans for workers to improve their performance. With his efforts

Taylor was able to increase the efficiency of workers from 12 to 47 tons per day.

In 1911, Taylor published his famous book “principles of scientific management”.

Later on Henry Gantt, disciple of Taylor developed charts for use in planning and

controlling. Frank Gilbreths, an associate of Taylor developed micro motion study in

which he identified seventeen micro motions known as herbligs to help analyze any

worker movement. The main principles of scientific management are as follows:

The task should be designed scientifically and not by the old rule of thumb methods.

Selection, training and development of workers should be based on scientific methods.

There should be a proper match between job and worker’s skill. There must be division

of labor thus increasing specialization. There should be equal division of responsibility

between management and workers and close cooperation between them.

Taylor summed up his philosophy in these words:

1. Science, not rule of thumb- People should develop logical and scientific

methods to do a job.

2. Harmony, not discord- People should avoid conflict at work place.

3. Cooperation, not individualism- Teamwork should be given importance.4. Maximum output, in place of restricted output.- Optimum utilization of

organizational resources.

5. Development of each man to his greatest efficiency.

6. Equitable distribution of work and responsibility between management and

labor.

Limitations

Scientific management did not take psychological aspects of workers. Workers

were treated as economic tools. They had to perform same task over and over again

leading to boredom and monotony.

2.2.2 Administrative Theory

Around the time when F. W. Taylor was developing principles of scientific

management, Henry Fayol, known as the father of modern management was developing

administrative theory based on his own experiences as CEO. Henry Fayol, administrative

theory provides a more general framework of management that emphasis on the process

and principles of management.

He classified business activities into six categories:


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1. Technical (manufacturing).

2. Commercial (buying and selling).

3. Security (protection of property).

4. Accounting (maintaining financial records).

5. Managerial

6. Financial (raising and optimum utilization of funds)

Fayol argued that managerial activity involves performing five functions1. Planning

2. Organizing

3. Commanding

4. Coordinating

5. Controlling

Henry Fayol gave the following fourteen management principles:

(1) Division of work: every person should perform a single leading function repeatedly

so that advantage of specialization can be achieved. Specialization improves the

efficiency of worker and increases the output.

(2) Authority and responsibility: individuals are given responsibility to achieve the

goals and right measure of authority should be given to them to achieve the goal.

Parity should be maintained between them. Authority and responsibility co- exits,

whenever a person is given authority responsibilities arise.

(3) Discipline: employees should follow rules and regulations of the organization and

should respect agreements that are designed to secure obedience. There should

be effective leadership, clear understanding of rules and judicious use of penalties

so that discipline prevails throughout the organization.

(4) Unity of command: no employee should have more than one boss. In order to

avoid conflicting orders every employee should receive orders from one boss only.

(5) Unity of direction: there should be one head and one plan for those activities that

aim at same objective. The same sense of purpose should prevail in the organization.

It helps in unifying and coordinating actions and goals towards the common

objectives.

(6) Subordination of individual interest to general interest: whenever there is

conflict between personal interest and organizational interest, the organizational

interest should be given first priority. The manager should ensure that individual’s

are ready to sacrifice their personal interest for organizational goal. He can do this

by setting his own example.

(7) Remuneration of personnel: employees should be compensated for their work

justly and fairly. Moreover the employer and employee should be satisfied about

amount of remuneration and method of remuneration.

(8) Centralization: when authority is concentrated and subordinates have less role

in decision making it is centralization. When authority is disbursed and subordinates


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also play role in decision making it is said to be decentralization. The proportion of

centralization to decentralization is a matter of individual circumstances and forces

of environment. The degree of centralization and decentralization should aim at

achieving twin objective i.e maximum utilization of resources and adaptability

towards changing environment.

(9) Scalar chain: it is the chain of line of authority ranging from highest rank to the

lowest rank. This also represents the chain of communication.

It is usual practice that if A wants to communicate with G then the communication

should flow from A via B, C to D and then from D via E and F to G

But in case of emergency A can communicate with G by the use of gang plank.

But they should also inform their immediate boss about action taken by them.

(10) Order: it relates to the arrangement of things and people in the organization. The

principle emphasis that there should be material as well as social order. It means that

there should be “a place for everything and everything should be in its proper place”

and “a place for everyone and everyone should be in his or her appointed place.

(11) Equity : Manager should be kind, fair and impartial in dealing with subordinates.

(12) Stability of tenure: employee should be given some job security. It takes time by

the worker to understand his new job and become skillful in it. If he is not given

adequate time to learn his job and is removed before he gets accustomed to it, he

cannot render valuable service to organization.

(13) Initiative: the employees should be encouraged to think new ideas and should

also be allowed to implement them independently. It will help them to develop and

grow. Moreover freedom to perform will act as a morale booster. It will lead to job

satisfaction and motivation of the employees.

(14) Espirit de corps: the employees should be encouraged to work in team. Unity is

strength and unity in the employees is the foundation of team spirit. Managers

should avoid the philosophy of divide and rule. Unity among the workers can be

developed through informal communication also.

2.2.3 Bureaucracy

Max Weber, a professor of political economy in Germany propagated the concept

of highly formalized structure. He argued that organizations can reduce variability through

formalization of behavior by introducing bureaucratic organization. This will make the

activities of the organizations predictable and easy to control. The main features of


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bureaucracy are given below:

Rational legal authority: the managers do not exercise authority according to

their whims and fancies. Instead authority is exercised through a system of rules and

procedures attached to his position. In the bureaucratic structure the rules, decisions

and dictions of the managers are written down so that they can act as guidelines in

future for decision making.

Hierarchy: The formal hierarchial structure is a firmly ordered system of

supervision and subordination in which each level of operation follows the direction of

the level above and gives the directions to the level below.

Division of work: The total work is divided into small units of routine, well defined

task. Each unit takes a form specialized job. When the worker does the same job

repeatedly efficiency is increased and the worker becomes an expert in course of time.

Rules, regulation and procedures: in order to ensure predictability and uniformity

of behavior, rules and procedures are established. Employees are expected to follow

the rules and procedures strictly.

Records: files are maintained to record the actions and decision taken in the

organization for future reference.

Impersonal relationship: the decision should be made strictly according to rules;

there is no room for personal relationships, sentiments or emotions in decision making.

Competence of employees: the employees are selected on the basis of

qualification and competency and promoted according to their ability and skills. Their

competency is improved through regular training and orientation program. The experience

and achievements of the employees are valued. Only those employees form the part of

management who are able and efficient.

Adavntages of Bureaucracy

1. Bureaucratic structure helps in gaining the advantage of specialization;

specialization improves efficiency by reducing mistakes, increasing speed

and quality of work.

2. Highly formalized structure based on rules, regulations, specialized task lead

to predictability. There is no room for uncertainty and chaos. Everyone knows

what is expected from them and no one crosses his or her boundaries. The

problem of role ambiguity is highly reduced.

3. Rules and regulations are formed after deliberate discussions. Pros and cons

of every rule are discussed. The decisions taken are more rational and not

subjective.

4. Promotion, selection is on the basis of qualification and competence there is

no room for biasness or privileged treatment for some. Rules and regulations

are uniform for everybody. Such equitable treatment leads to high degree of

democracy.

Disadvantages of Bureaucracy

1. The bureaucracy is characterized by highly rigid and static structure. There


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is strict adherence to rules. The rules are not changed frequently. The

environment in which the organization function is very dynamic, thus making

rules redundant sometime. In the name of following rules people may also

avoid their responsibility.

2. Too much emphasis on rules gives no space for emotions and needs of people.

This is a highly mechanized structure where innovative ideas of people do

not get much attention.3. Too much compartmentalization of activities do not allow people to do those

activities that they are capable of performining but are outside their boundaries.

In bureaucratic structure there is a tendency for continuing a job even if it is

not required by the organization.

4. Superiors try to increase their power and status by adding more people and

more resources to their departments, even if they are not necessary for the

organization. Such approach of superiors leads to empire building.

5. Due to rigid hierarchy, vertical line of communication and necessity to record

every action as well as decision on paper makes the files move throughelaborate official channels causing inordinate delays. Due to red tapism

decision cannot be taken promptly.

Classical theory made available a scientific base for management studies. It laid a

foundation for education and training of managers. It was for the first time that universal

nature of management was recognized. But the limitation of this approach is that role of

humans and their contribution towards organizational effectiveness has been discounted.

2.3 Neo classical Approach

This approach is also known as behavioral approach. The founder of behavioral

approach is Elton Mayo, who was a professor at the Harvard business school. The

importance of human behavior was recognized for the first time after the findings of

famous Hawthorne studies.

Classical approach treated human beings as economic beings, who could be

motivated through money alone. Neo classical approach argued that human beings can

show better results if they are treated well. Individual behavior as well as group behavior

plays a very crucial role in determining the performance of workers.

2.3.1 Hawthorne studies

A series of experiment were conducted at Hawthorne plant of the Western Electric

company during late 1920s and early 1930’s. Some of the experiments are discussed

below:

(1) Illumination experiment

Two groups were created and the effect of different levels of illumination on

workers’ productivity was studied. One of the group i.e. test group received different

intensity of light during their work hours. Each time intensity of light was increased the


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productivity increased. In the second group i.e. control group no variation in the light

was done. The intensity of illumination was kept constant.

However the productivity of control group was also increased though it received

no added light. It was felt that some other factor is also influencing productivity besides

lightening. The reason for increased productivity can be attributed to informal social

relations that were developed among the members of work group during the experiment.

(2) Relay assembly test room experience

In this experiment a small homogeneous group was created. The workers of the

group were placed in separate rooms during the experiment. Numbers of changes

were introduced like shorter working hours, improved physical conditions, and rest periods

of verifying duration and then their effect on productivity was studied. The productivity

of work group increased consistently during the experiments and it continued to be

same even when the improvements in working conditions were withdrawn. The reason

for such improvement in performance was later termed as Hawthorne effect. The

study revealed that workers knew that they were part of experiment they felt important

because they received added attention during the experiment. The researchers actedas friendly superiors and allowed the workers to have their say in suggesting changes

for e.g. they can choose their own rest periods. Group cohesiveness and friendly informal

supervision was the major factor behind the increased productivity.

The human relations approach was the outcome of Hawthorne studies. It focused

on individual’s need behavior and their interpersonal relationship.

2.3.2 Human Relations Approach

According to Keith Davis: ̀ `Human relation is motivating people in organization in

order to develop teamwork which effectively fulfils their needs and achieves

organizational goals”

The man is not just an economic being but also a social being. The human relations

approach focuses on people and believes that every individual is unique. Individuals can

be motivated through varied social and psychological factors. The manager should aim

at creating a positive work environment, if worker’s needs are satisfied they will become

more happy and productive. Human relations approach emphasized that productivity

can be increased by motivating people.

2.3.3 Behavioral Approach

Human relation approach was succeeded by behavioral approach which focusedon group dynamics, group behavior, leadership, communication and conflict among other

issues. Behavioral approach is an improved and wider version of human relations.

Behavioral approach considers conflict as unavoidable and sometimes useful while

human relations approach consider all conflict avoidable and harmful.

The major contributors of neo classical approach are A.H. Maslow, McGregor, F

Herzberg and Rensis likert.

The neo classical approach emphasized that managers success depends upon his

Check Your Progress

1. What are the main

features of Bureau-cracy?

2. What are the various

branches of classical

Approach?


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skill in handling the human element in the organization. The quality of leadership is

another critical factor in determining the success of organization. The limitation of this

approach is that it lacks scientific validity. It is criticized for its simplistic and manipulative

assumptions about relationship between worker’s attitude and productivity.

2.4 Quantitative Approach

It is also known as operation research, decision theory approach and management

science. This approach gained popularity during world war and was used to develop

strategic and tactical military operations by the use of management science and operations

management.

Management science aims to improve the effectiveness of decision making through

the use of statistical and mathematical model. Quantitative approach aims at finding

best solutions for the problem. After all managers success depends upon his decisions.

The correct decisions can be made through the use of logical reasoning backed by

quantification.It aims at formulating mathematical model that represents the decision situation.

The variables present in the decision situation are identified and the interrelationship of

variables is determined to form a model. The best solution can be achieved by solving

the equations in the model.

Some of the quantitative techniques used in decision making are:

Linear programming,

Game theory

Inventory control

Information theory

Linear programming

Probability theory

Queuing theory

Simulation theory

Statistical decision theory

Sampling theory

It helps in finding the best solution with accuracy, precision and factual data. The

drawback of this approach is that it requires quantification of all the variables affecting

the given problem situation. Some of the variables are qualitative in nature for e.g.

human behavior cannot be quantified with precision. A lot of time an effort is required

to model the decision situation and gather input for it. Manager cannot postpone his

decision every time. More over decision quality depends upon the accuracy of model

and data.

Sometimes it is difficult to identify all variables and establish functional relationship

between them. Erroneous model and inaccurate data may lead to wrong decisions.


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2.5 System Approach

All the previous approaches share a common problem of viewing things in narrow

perspective. Classical approach focused on scientific and administrative side of doing

work. Neo classical approach focused on human behavior at the individual and group

level while quantitative approach was limited to optimization of decision making. In

order to overcome this weakness system theory was developed to view the “big picture”.

The organization should be looked as ‘whole’ and as a part of the larger external

environment. Dealing with the various parts of an organization separately can be

erroneous for e.g. if the marketing department brings huge orders from the customers

through aggressive campaign while the production capacity is not adequate to meet

those orders in time then the overall organizational performance will get hampered .

The manager should attempt to increase the overall effectiveness of the system rather

than effectiveness of any sub part of the system in isolation.

An organization is viewed as an open system. An open system is one whichinteracts with the environment. The open system is responsive and adaptive to the

changes in environment. A closed system is independent of the environment. Organization

is vulnerable to the changes in environment. Any change in customer’s tastes and

preferences may affect the demand of the product of the organization.

A system is a set of interrelated subsystems. Any change in one system causes a

change in another system. The sub systems also have their sub parts. Every system is

also a part of a super system. The subsystem in the organization can be departments.

There are basically five subsystems in organization. They are goals, resources, structure,

management, psychosocial subsystem.

There exists a system boundary which separates it from the environment. The

boundary is rigid in case of closed system while it is flexible in case of open system.

The boundary determines that which part is internal to the system and which part is

external to the system for e.g. employees are internal to the organization system and

customers are external to the organization system.

Synergy is said to happen when two plus two becomes five, in other words when

the whole is greater than parts. Synergy can be attained when all the parts of the

organization are well coordinated and function properly so that output is optimal.

The advantage of this approach is that the managers are forced to see the broader

picture, and look at the totality of the situation before arriving at any decision.

The limitation of the system approach is that it does not have specific tools and

techniques for the manager to practice. The conceptual framework of this approach is

criticized for being too vague.

The major contributors of the system are Chester Bernard, R.A Johnson, Nesbit

Wiener and E. L. Trist.


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2.6 Contingency Approach

According to this approach there is no single best way of managing organization.

Management entirely depends upon the situation. One principle or practice of management

may be valid and effective in one situation but it might completely fail in the other

situation. Organization work in a very dynamic environment which is very uncertain

and complex. The choice of a management style depends upon the particular situation

and people involved in the situation. The management principles, practices and techniques

cannot be considered as universal. Hence there is no one best motivation technique,

organization structure, leadership style that will fit into all types of situations. The

characteristics of job, characteristics of employees, the limitation of resources and

environment dynamics etc, determines the situation and every situation is different from

the other and thus no single management practices or principle can provide solutions to

all organizational problems e.g. all employees can not be motivated through money.

Manager should develop diagnostic and problem solving skills. Manager must first try

to comprehend the variables in the situation. After understanding the situation, he should

attempt to match specific concepts and techniques of management with the situation.

The contingency theory is more pragmatic and action oriented and forces the

manager to be more alert and adaptive to environmental variables while choosing their

styles and techniques. This approach makes the work of the manager more challenging

as he is required to think through all possible alternatives to deal with the situation and

then choose the one that best fits the situation. It provides freedom of choice and

opportunity for innovation and creativity.

The drawback of this approach is that it lacks theoretical frame work. Moreover

it is a reactive approach rather than proactive. The managerial actions are reactive to

environmental dynamics. He has to first analyze the environment thoroughly and then

try to find best possible solution.

2.7 Modern Approach

The modern management theory is an integrative theory that has combined the

valuable concepts from classical, neo classical, system, contingency and quantitative

approach. The main characteristics are:

1. Open system view: Organizations are open system that continuously interacts

with the environment. They receive input from environment, process them and

then sends output to the environment. The change in the environment can affect

their input, process or output.

2. Dynamic and adaptive: in order to survive the organization should change according

to the changes in environment.

3. Multi motivated: managers has to satisfy the interest of various stakeholders i.e.

shareholders, consumer, employees government and community. At the same time

manager should adopt different methods of motivating employees. He has to strike

Check Your Progress

1. Distinguish between

open and closed

system.

2. Explain quantitative

approach towards

management?


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Thoughts

NOTES

a judicious balance between financial and non financial rewards so that employees

are motivated.

4. Multi disciplinary: management discipline draws its input from various other disciplines

like economics, sociology, commerce, mathematics, engineering psychology etc.

5. Probabilistic: manager’s decision is based on future events. But it is not possible to

predict future with certainty since the variables in the environment are vulnerable

to change, thus organization is a probabilistic system with high degree of uncertaintyin it . Manager can never be hundred percent sure of the consequences of his

action which is future oriented.

6. Integrative: modern management integrates the valuable concepts, practices and

principles from the previous management approaches to be used in managing the

organization.

2.7.1 Contribution of Peter Drucker

Peter Drucker is the known as the founding father of modern management theory.

His practices revolutionized management thinking in fifties. His famous publications are

“The End Of Economic Man”, “The Future Of Industrial Man”, “Management For

Results” and “The Effective Executive And Management Task, Responsibilities And

Practices”.

His main contribution includes

(1) Nature and Role of Management : He opined that management is a dynamic

life giving element in every organization and is needed everywhere. He stated that

developing countries are not underdeveloped, they are undermanaged. Management

is a distinct discipline and social function.

(2) Manager’s Job : Manager’s job is to focus on economic performance by making

work productive and worker achieving.

(3) Social Responsibility : Manager should have some social obligation towards society.

In order to flourish it is important that the organization function in healthy society.

Manager’s actions have a direct impact on the society. He should be concerned

with human and social environment and not just goods and services the organization

deliver.

(4) Customer Orientation : Drucker emphasized that customer is very important for

the business. The organization should produce goods that satisfy needs and wants

of the customer.

(5) Key Result Areas : Drucker specified the following areas in which managementshould stress meaningful objectives they are :

1. Market Standing

2. Innovation

3. Productivity

4. Physical and financial resources

5. Profitability

6. Manager’s performance and development


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7. Worker’s performance and social responsibility

(6) MBO : He proposed management by objectives that involves goals set by

subordinates and supervisors in a participative way for a predetermined period with

regular feedback on goal progress.MBO philosophy is his most important contribution

towards management discipline

(7) Decentralization : Drucker has emphasized that manager should create independent

product division rather than division according to function. Departments basedaccording to product make

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