RNS Institute of Technology

Department of MBA & Research Centre

Dr. Vishnuvardhan Road, Channasandra, Bengaluru

MANAGEMENT AND ORGANISATIONAL

BEHAVIOUR
20MBA11

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
 MANAGEMENT & ORGANISATIONAL BEHAVIOUR
Course Code 20MBA11 CIE Marks 40
Teaching Hours/Week 3:0:2 SEE Marks 60
(L:T:P)
Credits 04 Exam Hours 03
Course Objectives
1. The student will be able to recite the theories and models of Management and
Organisational Behavior.
2. The student will be able to apply and solve the workplace problems.
3. The student will be able to classify in differentiating between the best methods
to solve the problem.
4. The student will be able to compare the appropriate framework for solving the
problems at the workplace
5. The student will be able to design model in dealing with the problems in the
organisation.
Module 1 - Management
Management: Introduction, Meaning, Nature, Objectives, Importance, Difference
between Administration and Management, Levels of Management, Types of Managers,
Managerial Skills, Managerial Competencies, Scope of Management, Functions of
Management, Evolution of Management Thought, Fayol’s fourteen principles of
Management, Recent Trends in Management.
Module 2 – Functions of Management
Planning- Definition, Features, Nature, Importance, Types, Steps in Planning,
Planning Tools and Techniques, Essentials of a Good Plan. Organisation-Definitions,
Importance, Principles, Types of Organisation Structures, Span of Control,
Centralisation and Decentralisation of Authority. Directing-Definitions, Importance,
Elements of Directing, Principles of Directing, Characteristics of Directing;
Controlling-Definitions, Need of Controlling, Characteristics of Control, Steps in the
Controlling Process, Resistance to Control, Design of Effective Control System, Types
of Control, Control Techniques. Decision-making- Concepts, Types, Models,
Difficulties in Decision-making, Decision-making for Organisational Effectiveness,
Decision-making Styles.
Module 3 – Organisational Behaviour
Organisational Behaviour: Introduction, Definitions, Nature, Goals, Importance,
Approaches to Organisational Behaviour, Models. Attitude- Meaning, Definition,
Types, Components, Attitudes and Behaviour, Changing Attitudes in the Workplace;
Perception-Perception, Perceptual Process, Factors Influencing Perception, Perception
and Decision-making; Personality-Definitions, Factors Influencing Personality, Big
Five Personality Traits, Myers–Briggs Type Indicator (MBTI), Personality Tools and
Tests; Motivation-Definitions, Process of Motivation (Cycle of Motivation), Nature,
Importance, Types, Theories.
Module 4 – Managing Human at Work
Group Dynamics- Meaning of Group, Group Characteristics, Classification of Groups,
Models of Group Development, Meaning of Group Dynamics, Group Behaviour, Impact
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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
of Group on Individual’s Behaviour, Impact of External Factors on Group Behaviour.
Teamwork- Nature of Teams, Team Characteristics, Teams Versus Groups,
Teamwork, Processes of Teamwork, Types of Teams, Reasons for Team Failure,
Creating Effective Teams.
Module 5 – Organisational Power, Politics and Culture
Power and Politics- Nature of Power and Politics, Early Voices, Questioning Power
and Authority, Sources of Power for Individuals, Managing Organisational Politics.
Culture- Definitions of Organisational Culture, Strong Versus Weak Culture,
Characteristics, Types, Levels, Dimensions, Creating Organisational Culture,
Changing Organisational Culture.
Module 6 – Change and Stress Management
Change- Nature, Characteristics, Process, Forces Responsible for Change in
Organizations, Resistance to Change, Managing Resistance to Change. Stress
Management-Definitions, Understanding Stress, Relation between Stress and
Performance, Level, Signs and Symptoms of Stress, Types of Stress, Causes of Stress,
Managing Stress.

Course outcomes:
1. Gain practical experience in the field of Management and Organization
Behaviour
2. Acquire the conceptual knowledge of Management, various functions of
Management and theories in Organizational Behaviour.
3. Apply managerial and behaviour knowledge in real world situations.
4. Develop a greater understanding about Management and Behavioural aspects
to analyse the concepts related to individual behavior, attitude, perception and
personality.
5. Understand and demonstrate their exposure on recent trends in management.

Practical Components:
1. Visit an Organisation and meet HR / Manager and note the Roles played in a
Day.
2. Conduct an event and try understanding the dynamics that goes on group.
3. Develop few questions, interact with people in the organisation and try
observing personality and reaction.
4. Meet any Leader / HOD / Dean and observe the Management of depts. under
the leader.

Note: Faculty can either identify the organizations/ leaders/job profile or

students can be allowed to choose the same.

Question Paper Pattern:

The SEE question paper will be set for 100 marks and the marks scored will be
proportionately reduced to 60.
 The question paper will have 8 full questions carrying equal marks.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
 Each full question is for 20 marks.
 Each full question will have sub question covering all the topics under a Module.
 The students will have to answer five full questions; selecting four full question
from question number one to seven and question number eight is compulsory.

Recommended Text Books

SL. Name of the Edition
Title of the Book Publisher Name
No. Authors and Year
Essentials of 8th
1 Harold Koontz McGraw Hill
Management Edition
Principles and Practices
of Management and Chandrani Singh
2 Sage Publication 2016
Organisational and AditiKhatri
Behaviour
Stephen Robbins 14th
Organisational
3 and Timothy A Pearson Edition,
Behaviour
Judge 2012
Reference Books
SL. Name of the Edition
Title of the Book Publisher Name
No. Authors and Year
12th
Organisational McGraw Hill
1 Fred Luthans Edition,
Behaviour International
2011
Principles of Tata McGraw
2 Ramesh B Rudani 2013
Management Hill
Masters of Management MahanandCharathi& Sapna Book
3 2015
Thought M MMunshi House

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
 MODULE – 1
MANAGEMENT
STRUCTURE:
1.0 Introduction
1.1 Meaning
1.2 Nature
1.3 Objectives
1.4 Importance
1.5 Difference between Administration and Management
1.6 Levels of Management
1.7 Types of Managers
1.8 Managerial Skills
1.9 Managerial Competencies
1.10 Scope of Management
1.11 Functions of Management
1.12 Evolution of Management Thought
1.13 Fayol’s fourteen principles of Management
1.14 Recent Trends in Management

1.0. INTRODUCTION
Management is the act of getting people together to accomplish desired goals
and objectives using available resources efficiently and effectively. Since
organizations can be viewed as systems, management can also be defined as
human action, including design, to facilitate the production of useful outcomes
from a system. This view opens the opportunity to manage oneself, a pre-
requisite to attempting to manage others.

Management functions include: 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.

There are several different resource types within management. Resourcing

encompasses the deployment and manipulation of:
 Human resources
 Financial resources
 Technological resources
 Natural resources

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
1.1. MEANING
Management is the process of designing and maintaining an environment in
which individuals, working together in groups, efficiently accomplish selected
aims.
Management is the process of decision making and control over the actions of
human beings for the purpose of attaining predetermined goals.
Management is that function of an enterprise which concerns itself with the
direction and control of the various activities to attain the business objectives.
Management is the art of getting things done through and with people in
formally organised groups. It is the art of creating an environment in which
people can perform as individuals and yet cooperate towards the attainment of
group goals.

1.2. NATURE OF MANAGEMENT

The nature of management can be described as follows:
1. Multidisciplinary: Management is basically multidisciplinary. This implies
that, although management has been developed as a separate discipline, it
draws knowledge and concepts from various disciplines such as psychology,
sociology, anthropology, economics, ecology, statistics, operations research,
history, etc.

2. Dynamic Nature of Principles: Management has framed certain principles

based on integration and supported by practical evidences. However, these
principles are flexible in nature and change with the changes in the
environment in which an organisation exists. Because of the continuous
development in the field, many older principles are being changes by new
principles.

3. Relative, not Absolute Principles: Management principles should be

applied according to the need of the organisation. Each organisation may be
different from others. The difference may exist because of time, place, socio-
cultural factors, etc. Thus a particular management principle has different
strengths in different conditions. Principles of management should be applied
in the light of prevailing conditions.

4. Management: Science or Art: There is a controversy whether management

is science or art. However, management is both a science and an art.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
5. Management as Profession: Management has been regarded as a
profession by many while many have suggested that it has not achieved the
status of a profession.

6. Universality of Management: Management is a universal phenomenon.

However, management principles are not universally applicable but are to be
modified according to the needs of the situation.

1.3 OBJECTIVES OF MANAGEMENT

The main objectives of management are:
1. 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.

2. 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 and money
which is essential for the growth & prosperity of the enterprise.

3. 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.

4. 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.

1.4 IMPORTANCE OF MANAGEMENT

The importance of management may be traced in the following contexts:
1. Effective Utilisation of Resources: Management tries to make effective
utilisation of various resources. The resources are scarce in nature and to meet
the demand of the society, their contributions should be maximum for the
general interests of the society. Management not only decides in which

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
particular alternative a particular resource should be used, but also takes
actions to utilize tit in that particular alternative in the best way.

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. To Incorporate Innovations: Today, changes occur at a very fast rate in

both technology and social process and structure. These changes need to be
incorporated to keep the organisations alive and efficient. Business
organisations are moving from primitive to sophistication. Therefore, they
require high degree of specialisation, high level of competence, and complex
technology. All these require efficient management so that organisations work
in the most efficient way.

4. Integrating Various Interest Groups: In the organised efforts, there are

various interest groups and they put pressure over other groups for maximum
share I the combined output. For example, in the case of a business
organisation, there are various pressure groups such as shareholders,
employees, government etc. These interest groups have pressure on an
organisation. In a more advanced and complex society, more such pressure is
on organisation. Management has to balance these pressures from various
interest groups.

5. 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.

6. Stability in the 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
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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
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.

1.5 DIFFERENCE BETWEEN ADMINISTRATION AND

MANAGEMENT
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.

BASIS FOR
MANAGEMENT ADMINISTRATION
COMPARISON

Meaning An organized way of The process of administering

managing people and an organization by a group of
things of a business people is known as the
organization is called the Administration.
Management.

Authority Middle and Lower Level Top level

Role Executive Decisive

Concerned with Policy Implementation Policy Formulation

Area of It works under It has full control over the

operation administration. activities of the organization.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
 BASIS FOR
MANAGEMENT ADMINISTRATION
COMPARISON

Applicable to Profit making Government offices, military,

organizations, i.e. clubs, business enterprises,
business organizations. hospitals, religious and
educational organizations.

Decides Who will do the work? What should be done? And

And How will it be done? When is should be done?

Work Putting plans and policies Formulation of plans, framing

into actions. policies and setting objectives

Focus on Managing work Making best possible

allocation of limited
resources.

Key person Manager Administrator

Represents Employees, who work for Owners, who get a return on

remuneration the capital invested by them.

Function Executive and Governing Legislative and Determinative

1.6 LEVELS OF MANAGEMENT

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

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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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

Managers at all these levels perform different functions. The role of managers
at all the three levels is discussed below:
1. 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 -

a. Top management lays down the objectives and broad policies of the
enterprise.
b. It issues necessary instructions for preparation of department budgets,
procedures, schedules etc.
c. It prepares strategic plans & policies for the enterprise.
d. It appoints the executive for middle level i.e. departmental managers.
e. It controls & coordinates the activities of all the departments.
f. It is also responsible for maintaining a contact with the outside world.
g. It provides guidance and direction.
h. The top management is also responsible towards the shareholders for the
performance of the enterprise.

2. Middle Level of Management

The branch managers and departmental managers constitute middle level.
They are responsible 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 -

a. They execute the plans of the organization in accordance with the

policies and directives of the top management.
b. They make plans for the sub-units of the organization.
c. They participate in employment & training of lower level management.
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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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 d. They interpret and explain policies from top level management to lower
level.
e. They are responsible for coordinating the activities within the division or
department.
f. It also sends important reports and other important data to top level
management.
g. They evaluate performance of junior managers.
h. They are also responsible for inspiring lower level managers towards
better performance.

3. 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, “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 -

a. Assigning of jobs and tasks to various workers.

b. They guide and instruct workers for day to day activities.
c. They are responsible for the quality as well as quantity of production.
d. They are also entrusted with the responsibility of maintaining good
relation in the organization.
e. They communicate workers problems, suggestions, and recommendatory
appeals etc to the higher level and higher level goals and objectives to the
workers.
f. They help to solve the grievances of the workers.
g. They supervise & guide the sub-ordinates.
h. They are responsible for providing training to the workers.
i. They arrange necessary materials, machines, tools etc for getting the
things done.
j. They prepare periodical reports about the performance of the workers.
k. They ensure discipline in the enterprise.
l. They motivate workers.
m. They are the image builders of the enterprise because they are in direct
contact with the workers.

1.7 TYPES OF MANAGERS

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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1.7.1 Vertical Management
Vertical management, also called top-down management, refers to the various
levels of management within an organization. Managers at different levels are
free to focus on different aspects of the business, from strategic thinking to
communicating information to operational efficiency. During the nineteenth
century and much of the twentieth century, vertical management was highly
structured with many layers of management (as depicted by a pyramid). In
industries where processes and conditions are stable and where ongoing
innovation is less critical, the vertical structure of management can still be very
efficient. Workers in labor-intensive industries such as manufacturing,
transportation, and construction need to follow established procedures and
meet specific goals. Everyone knows who is in charge and assumes the job they
do today will be the same next year or in five years.

A main disadvantage of vertical management is that it limits information flow

from the lower levels of the organization to the upper levels (like water,
information flows downhill easily). Without easy two-way communication, top
management can become isolated and out of touch with how its plans affect
core processes in the organization. It also fosters vertical thinking. Vertical
thinking refers to using traditional and recognized methods to solve particular
problems. It is the opposite of “thinking outside of the box.” The digital age
exposed the shortcomings of management that addressed problems in formal
or bureaucratic approaches at the expense of creativity and innovation. Today,
many organizations use “flatter” structures, with fewer levels between the
company’s chief executives and the employee base. Most organizations,
however, still have four basic levels of management: top, middle, first line, and
team leaders.

1.7.1.1 Top-Level Managers

Top-level managers (or top managers) are the “bosses” of the organization. They
have titles such as chief executive officer (CEO), chief operations officer (COO),
chief marketing officer (CMO), chief technology officer (CTO), and chief financial
officer (CFO). A new executive position known as the chief compliance officer
(CCO) is showing up on many organizational charts in response to the
demands of the government to comply with complex rules and regulations.
Depending on the size and type of organization, executive vice presidents and
division heads would also be part of the top management team. The relative
importance of these positions varies according to the type of organization they
head. For example, in a pharmaceutical firm, the CCO may report directly to
the CEO or to the board of directors.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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Top managers are ultimately responsible for the long-term success of the
organization. They set long-term goals and define strategies to achieve them.
They pay careful attention to the external environment of the organization: the
economy, proposals for laws that would affect profits, stakeholder demands,
and consumer and public relations. They will make the decisions that affect the
whole company such as financial investments, mergers and acquisitions,
partnerships and strategic alliances, and changes to the brand or product line
of the organization.

1.7.1.2 Middle Managers

Middle managers have titles like department head, director, and chief
supervisor. They are links between the top managers and the first-line
managers and have one or two levels below them. Middle managers receive
broad strategic plans from top managers and turn them into operational
blueprints with specific objectives and programs for first-line managers. They
also encourage, support, and foster talented employees within the organization.
An important function of middle managers is providing leadership, both in
implementing top manager directives and in enabling first-line managers to
support teams and effectively report both positive performances and obstacles
to meeting objectives.

1.7.1.3 First-Line Managers

First-line managers are the entry level of management, the individuals “on the
line” and in the closest contact with the workers. They are directly responsible
for making sure that organizational objectives and plans are implemented
effectively. They may be called assistant managers, shift managers, foremen,
section chiefs, or office managers. First-line managers are focused almost
exclusively on the internal issues of the organization and are the first to see
problems with the operation of the business, such as untrained labor, poor
quality materials, machinery breakdowns, or new procedures that slow down
production. It is essential that they communicate regularly with middle
management.

1.7.1.4 Team Leaders

A team leader is a special kind of manager who may be appointed to manage a
particular task or activity. The team leader reports to a first-line or middle
manager. Responsibilities of the team leader include developing timelines,
making specific work assignments, providing needed training to team
members, communicating clear instructions, and generally ensuring that the
team is operating at peak efficiency. Once the task is complete, the team leader

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position may be eliminated and a new team may be formed to complete a
different task.

1.8 MANAGERIAL SKILLS

Managerial skills are the knowledge and ability of the individuals in a
managerial position to fulfill some specific management activities or tasks. This
knowledge and ability can be learned and practiced. However, they also can be
acquired through practical implementation of required activities and tasks.

Robert Katz identifies three types of skills that are essential for a successful
management process:
i. Technical skills,
ii. Conceptual skills and
iii. Human or interpersonal management skills.

MANAGEMENT SKILLS PYRAMID

1.8.1 Technical Skills

Technical skills give the manager’s knowledge and ability to use different
techniques to achieve what they want to achieve. Technical skills are not
related only for machines, production tools or other equipment, but also they
are skills that will be required to increase sales, design different types of
products and services, market the products and services, etc.
Technical skills are most important for first-level managers. When it comes to
the top managers, these skills are not something with high significance level.
As we go through a hierarchy from the bottom to higher levels, the technical
skills lose their importance.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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1.8.2 Conceptual Skills
Conceptual skills present knowledge or ability of a manager for more abstract
thinking. That means he can easily see the whole through analysis and
diagnosis of different states. In such a way they can predict the future of the
business or department as a whole.
Conceptual skills are vital for top managers, less critical for mid-level
managers, and not required for first-level managers. As we go from the bottom
of the managerial hierarchy to the top, the importance of these skills will rise.

1.8.3 Human or Interpersonal Managerial Skills

Human or interpersonal management skills present a manager’s knowledge
and ability to work with people. One of the most critical management tasks is
to work with people. Without people, there will not be a need for the existence
of management and managers. These skills will enable managers to become
leaders and motivate employees for better accomplishments. Also, they will
help them to make more effective use of human potential in the company.
Simply, they are the essential skills for managers.

1.9 MANAGERIAL ROLES/COMPETENCIES

Managerial Roles can be defined as the organized sets of behaviors identified
with the position. These roles were developed by Henry Mintzberg in the late
1960s after a careful study of executives at work. All these roles in one form or
another, deal with people and their interpersonal relationships.

These ten managerial roles are divided into three categories. The first category
of interpersonal roles arises directly from the manager’s position and the
formal authority bestowed upon him. The second category of informational
roles is played as a direct result of interpersonal roles and these two categories
lead to the third category of decisional roles.

1.9.1 INTERPERSONAL ROLES

Managers spend a considerable amount of time in interacting with other people
both within their own organizations as well as outside. These people include
peers, subordinates, superiors, suppliers, customers, government officials and
community leaders. All these interactions require an understanding of
interpersonal relations. Studies show that interacting with people takes up
nearly 80 per cent of a manager’s time. These interactions involve the following
three major interpersonal roles:

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Figurehead: Managers act as symbolic figureheads performing social or legal
obligations. These duties include greeting visitors, signing legal documents,
taking important customers to lunch, attending a subordinate’s wedding or
speaking at functions in schools and churches. All these/ primarily, are duties
of a ceremonial nature but are important for the smooth functioning of the
organization

Leader: The influence of the manager is most clearly seen in his role as a
leader of the unit or organization. Since he is responsible for the activities of
his subordinates, he must lead and coordinate their activities in meeting task-
related goals and he must motivate them to perform better. He must be an
exemplary leader so that his subordinates follow his directions and guidelines
with respect and dedication.

Liaison: In addition to their constant contact with their own subordinates,

peers and superiors, the managers must maintain a network of outside
contacts in order to assess the external environment of competition, social
changes or changes in governmental rules, regulations and laws. In this role,
the managers build up their own external information system.

1.9.2 INFORMATIONAL ROLES

By virtue of his interpersonal contacts, a manager emerges as a source of
information about a variety of issues concerning the organization. In this
capacity of information processing, a manager executes the following three
roles:

Monitor: The managers are constantly monitoring and scanning their

environment, both internal and external, collecting and studying information
regarding their organization and the outside environment affecting their
organization. This can be done by reading reports and periodicals, by asking
their liaison contacts and through gossip, hearsay and speculation.

Disseminator of Information: The managers must transmit their information

regarding changes in policies or other matters to their subordinates, their peers
and to other members of the organization. This can be done through
memorandums, phone calls, individual meetings and group meetings.

Spokesperson: A manager has to be a spokesman for his unit and he

represents his unit in either sending relevant information to people outside his
unit or making some demands on behalf of his unit. This may be in the form of
the president of the company making a speech to a lobby on behalf of an
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organizational cause or an engineer suggesting a product modification to a
supplier.

1.9.3 DECISIONAL ROLES

On the basis of the environmental information received, a manager must make
decisions and solve organizational problems. In that respect, a manager plays
four important roles.

Entrepreneur: As entrepreneurs, managers are continuously involved in

improving their units and facing the dynamic technological challenges. They
are constantly on the lookout for new ideas for product improvement or
products addition. They initiate feasibility studies, arrange for capital for new
products if necessary, and ask for suggestions from the employees for ways to
improve the organization. This can be achieved through suggestion boxes,
holding strategy meetings with project managers and R & D personnel.

Conflict Handler: The managers are constantly involved as arbitrators in

solving differences among the subordinates or the employee’s conflicts with the
central management. These conflicts may arise due to demands for higher pay
or other benefits or these conflicts may involve outside forces such as vendors
increasing their prices, a major customer going bankrupt or unwanted visits by
governmental inspectors. Managers must anticipate such problems and take
preventive action if possible or take corrective action once the problems have
arisen. These problems may also involve labor disputes, customer complaints,
employee grievances, machine breakdowns, cash flow shortages and
interpersonal conflicts.

Resource Allocator: The third decisional role of a manager is that of a

resource allocator. The managers establish priorities among various projects or
programs and make budgetary allocations to the different activities of the
organization based upon these priorities. They assign personnel to jobs, they
allocate their own time to different activities and they allocate funds for new
equipment, advertising and pay raises.

Negotiator: The managers represent their units or organizations in negotiating

deals and agreements within and outside of the organization. They negotiate
contracts with the unions. Sale managers may negotiate prices with prime
customers. Purchasing managers may negotiate prices with vendors.

All these ten roles are important in a manager’s job and are interrelated even
through some roles may be more influential than others, depending upon the
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managerial position. For example, sales managers may give more importance to
interpersonal roles while the production managers may give more importance
to decisional roles.

The ability to recognize the appropriate role to play in each situation and the
flexibility to change roles readily when necessary, are characteristics of effective
managers. Most often, however, the managerial effectiveness is determined by
how well the decisional roles are performed.

1.9 MANAGERIAL COMPETENCIES

Managerial competencies is set of skills and knowledge that is required at
different levels of business operations for the decision making process and for
business management. In 21st century managers or managerial persons shall
possess certain competencies for discharging their duties effectively and to gain
effectiveness in their duties. Managers are expected to have more of people
handling or team management skills i.e. to manage others to achieve
objectives. There are some generic skills that manager or managerial person
shall possess and this also includes ability to manage and understand
emotions of self and of others. Requirement of managerial competencies are
divided into three broader areas i.e. cluster, competency and threshold
competency and each requires different set of skills and capabilities. The core
six managerial competency skills are below:

 Communication Competency
 Planning and Administration Competency
 Teamwork Competency
 Strategic Action Competency
 Multi-Cultural Competency
 Self-Management Competency

Business operation of organisations is conducted in competitive working

environment and ever changing environment. In order to cope with the
changing and complex external business environment, manager or managerial
person requires develop some competencies in order to survive in the
organisation. Some of the required managerial comp entices are ability to read
business environment, proactive or advance management, managerial person
shall promote innovation, creativity and learning, shall possess skills of
managing complex situations or complexities, etc. These are some examples of
managerial competencies required by the organisation. Another most important
managerial competency that manager shall possess is to look forward or ahead,

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identify weakness and strength of the business organisation, identify issues
and their solution, etc.

Another aspect of managerial competencies in the management or mangers is

ability to link their skills and ability with the demand of job or with job
description. Managers having managerial competencies are of no use if they are
not able to link or use in performing duties. Competencies are required to be
applied on day to day operations, in specific job, for specific demand, etc. There
are various jobs that managers are required to perform in the business
organisation and managers shall perform their task with high competencies.
Therefore manager shall employ competencies while planning, controlling,
motivating, organising and coordinating i.e. these are major job of managers in
the organisation. In order to serve organisation with high level of competencies
or with effective performance management, manager shall maintain balance
between individual performances, job demand or job requirement and
environment in which organisation operates. Therefore it is noted that
managerial competencies are not fixed but they shall vary according to the
demand and changing nature of business organisation. Up-gradation and
amendments are required in the skills or competencies that manager possess.

1.10 SCOPE OF MANAGEMENT

The field of management is very wide. Although it is difficult to precisely define
the scope of management, yet the following areas are included in it:
Subject-Matter of Management
Planning, organizing, directing, coordinating and controlling are the activities
included in the subject matter of management.

Functional Areas of Management

These include:
 Financial Management includes accounting, budgetary control, quality
control, financial planning and managing the overall finances of an
organization.
 Personnel Management includes recruitment, training, transfer
promotion, demotion, retirement, termination, labor-welfare and social
security industrial relations.
 Purchasing Management includes inviting tenders for raw materials,
placing orders, entering into contracts and materials control.
 Production Management includes production planning, production
control techniques, quality control and inspection and time and motion
studies.

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  Maintenance Management involves proper care and maintenance of the
buildings, plants, and machinery.
 Transport Management includes packing, warehousing and
transportation by rail, road, and air.
 Distribution Management includes marketing, market research, price-
determination, taking market- risk and advertising, publicity and sales
promotion.
 Office Management includes activities to properly manage the layout,
staffing, and equipment of the office.
 Development Management involves experimentation and research of
production techniques, markets, etc.

1.11 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.

1.11.1 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-

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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.

1.11.2 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:
 Identification of activities.
 Classification of grouping of activities.
 Assignment of duties.
 Delegation of authority and creation of responsibility.
 Coordinating authority and responsibility relationships.

1.11.3 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:
 Manpower Planning (estimating man power in terms of searching, choose
the person and giving the right place).
 Recruitment, Selection & Placement.
 Training & Development.
 Remuneration.
 Performance Appraisal.
 Promotions & Transfer.

1.11.4 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
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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:
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.

1.11.5 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 Haimann, “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’Donell “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:

a. Establishment of standard performance.
b. Measurement of actual performance.
c. Comparison of actual performance with the standards and finding out
deviation if any.
d. Corrective action.

1.12 EVOLUTION OF MANAGEMENT THOUGHT - HISTORICAL

PERSPECTIVE
Management is studied in business academics since earlier times and it is
considered as an integral part to understand business operations. People have
been changing and redesigning organizations for centuries. Though the 20th
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century is noticeable in history as an 'Era of scientific management', still it
does not indicate that management tactics were not used in yester years. Many
studies indicated that Management theory evolved with "scientific" and
"bureaucratic" management that used measurement, procedures and routines
as the basis for operations. Firms developed hierarchies to apply standardized
rules to the place of work and penalized labour for violating rules. With the
"human relations" movement, companies emphasized individual workers.
Modern management theories, including system theory, contingency theory
and chaos theory, focus on the whole organization, with employees as a key
part of the system.

The evolution of management can be categorized in to different parts:

 Pre-Scientific Management Era (before 1880),
 Classical management Era (1880-1930),
 Neo-classical Management Era (1930-1950),
 Modern Management era (1950 Onwards)

Classical Management includes Scientific Management School, Administration

Management School, and Bureaucracy Management. Neo- classical
Management includes Human relation school and Behavioural Management
School. Modern Management includes Social system school, Decision theory
school, Quantitative Management School, System Management School, and
Contingency Management School.

Early Management Thought

The period of 1700 to 1800 emphasizes the industrial revolution and the
factory system highlights the industrial revolution and the importance of
direction as a managerial purpose. Thus, the development of management
theory can be recognized as the way people have struggled with relationships at
particular times in olden periods. Many economic theorists during this period
described the notion of management. Adam Smith and James Watt have been
recognized as two theorists who launched the world toward industrialization.
Adam Smith brought about the revolution in financial thought and James
Watt's steam engine provided cheaper power that revolutionized English
commerce and industry. Both provided the base for modern concepts of
business management theory and practice. Adam Smith explicated the concept
of division of labour and Jacques Turgot described the importance of direction
and control. Smith stated that market and competition should be the
controllers of economic activity and that tax policies were destructive. The
specialization of labour was the basis of Smith's market system. According to
Smith, division of labour provided managers with the maximum opportunity for
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improved output. In the period of 1771–1858, Robert Owens studied for
concern for the workers. He was repulsed by the working conditions and poor
treatment of the workers in the factories across Scotland. Owen became a
reformer. He reduced the use of child labour and used ethical influence rather
than physical punishment in his factories. He reproached his fellow factory
owners for treating their equipment better than they treated their workers.

In quantitative approach of early management thought, Charles Babbage

(1792–1871) is recognized as the supporter of operations research and
management science. Babbage's scientific innovations are mechanical
calculator, a versatile computer, and a punch-card machine. His projects never
became a commercial reality. However, Babbage is considered the creator of the
concepts behind the present day computer. The most popular book of Babbage,
On the Economy of Machinery and Manufacturers, described the tools and
machinery used in English factories. It discussed the economic principles of
manufacturing, and analysed the operations and the skills used and suggested
improved practices. Babbage considered in the benefits of division of labour
and was a supporter of profit sharing. He developed a method of observing
manufacturing that is the same approach utilized today by operations analysts
and consultants analysing manufacturing operations. Other theorists who
contributed in quantitative approach of early management thought were Robert
Owen, Andrew Ure and Charles Dupin, Henry Robinson Towne.

Another theorist Baptiste, explained the significance of planning. But

management is appeared as a different discipline in the second half of 19th
century with the beginning of Joint Stock Company. This type of enterprises
separated management of business from their ownership and gave emphasis to
labour incompetence and improper systems of wage payments. To resolve such
problem, people began to identify management as a separate field of study.
During 20th century, Management has become more scientific discipline with
standard principles and practices.

1.13 APPROACHES TO MANAGEMENT / CONTRIBUTION BY

DIFFERENT THEORISTS
THE CLASSICAL APPROACH
The classical approach is the earliest thought of management .The classical
approach was associated with the ways to manage work and organizations
more efficiently. The classical approach are categorized into three groups

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namely, scientific management, administrative management, and bureaucratic
management.

I. SCIENTIFIC MANAGEMENT
Scientific management which is also referred to Taylorism or the Taylor system
is a theory of management that evaluates and synthesizes workflows, with the
aim of improving labour productivity. In other words, conventional rules of
thumb are substituted by accurate procedures developed after careful study of
an individual at work.

TAYLOR’S SCIENTIFIC MANAGEMENT

Frederick Taylor is known as the father of Scientific Management and he
published Principals of Scientific Management in which he proposed work
methods designed to boost worker productivity. Taylor asserted that to succeed
in these principles, it is necessary to transform completely the part of
management and labour. His philosophy was based on some basic principles.

The first principle is separation of planning and doing. In the pre-Taylor era, an
employee himself used to choose or plan how he had to do his work and what
machines and equipment would be necessary to perform the work. But Taylor
divided the two functions of planning and doing, he stressed that planning
should be delegated to specialists.

Second principle of Taylor's management approach is functional foremanship.

Taylor launched functional foremanship for administration and direction.
Under eight-boss-scheme of functional foremanship, four persons like route
clerk, instruction card clerk, time and cost clerk and disciplinarian are
associated with planning function, and the remaining four speed boss,
inspector, maintenance foreman, and gang boss are concerned with operating
function.

Third principle is elements of scientific management. The main constituents of

scientific management are work study involving work important and work
measurement using method and time study, standardization of tools and
equipment for workmen and improving working conditions, scientific Selection,
placement and training of workers by a centralized personal department.

Fourth principle is bilateral mental revolution. Scientific management involves

a complete mental change of employees towards their work, toward their fellow-
men and toward their employers. Mental revolution is also necessary on the

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part of management's side, the foreman, the superintendent, the owners and
board of directions.

Fifth principle is financial incentives. In order to encourage workers to give

better performance, Taylor introduced differential piece-rate system. According
to Taylor, the wage should be based on individual performance and on the
position which a worker occupies.
Economy is other principle of management devised by Taylor. According to
him, maximum output is achieved through division of labour and
specialization. Scientific Management concentrates on technical aspects as well
as on profit and economy. For this purpose, techniques of cost estimates and
control should be adopted. Taylor concluded that science, not rule of thumb,
Harmony, not discord, Cooperation and not individualism, Maximum output,
in place of restricted output.

II. ADMINISTRATIVE MANAGEMENT

Administrative Management emphasizes the manager and the functions of
management. The main objective of Administrative management is to describe
the management process and philosophy of management. In contradiction of
scientific management, which deals mainly with jobs and work at individual
level of scrutiny, administrative management gives a more universal theory of
management.

Henry Fayol's Administrative Management (1841–1925)

Henri Fayol is known as the father of modern Management. He was popular
industrialist and victorious manager. Fayol considered that good management
practice falls into certain patterns that can be recognized and analysed. Fayol
provided a broad analytical framework of the process of management. He used
the word Administration for Management.
Foyal categorized activities of business enterprise into six groups such as
Technical, Financial, Accounting, Security, and Administrative or Managerial.
He stressed constantly that these managerial functions are the same at every
level of an organization and is common to all firms. He wrote General and
Industrial Management.
His five function of managers were plan, organize, command, co-ordinate, and
control. In the year 1916 Fayol wrote a book entitled “Industrial and General
Administration”. In this book, he gave the 14 Principles of Management.
Division of work: This is the principle of specialization which is detailed by
economists as an important to efficiency in the utilization of labour. Fayol goes
beyond shop labour to apply the principle to all kinds of work, managerial as
well as technical.
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Authority And Responsibility: In this principle, Fayol discovers authority and
responsibility to be linked with the letter, the consequence of the former and
arising from the latter.
Discipline: This discipline denotes "respect for agreements which are directed
at achieving obedience, application, energy and the outward marks of respect".
Fayol declares that discipline requires good superiors at all levels, clear and
fair agreement, and judicious application of penalties.
Unity of Command: This is the principle that an employee should receive
orders from one superior only.
Unity of Direction: Fayol asserted that unity of direction is the principle that
each group of activities having the same objective must have one head and one
plan. As distinguished from the principle of unity of command, Fayol observes
unity of direction as related to the functioning of personnel.
Subordination of Individual Interest to General Interest: In any group the
interest of the group should supersede that of the individual. When these are
found to differ, it is the function of management to reconcile them.
Remuneration of Personnel: Fayol recognizes that salary and methods of
payment should be fair and give the utmost satisfaction to worker and boss.
Centralization: Fayol principle of centralization refers to the extent to which
authority is concentrated or dispersed in an enterprise. Individual
circumstances will determine the degree of centralization that will give the best
overall yield.
Scalar Chair: Fayol believe of the scalar chair as a line of authority, a 'Chain
of Superiors" from the highest to the lowest ranks and held that, while it is an
error of subordinate to depart 'needlessly' from lines of authority, the chain
should be short-circuited when scrupulous following of it would be detrimental.
Order: Breaking this principle into 'Material order' and 'Social Order', Fayol
thinks of it as the simple edge of "a place for everything (everyone), and
everything (everyone) in its (his) place". This is basically a principle of
organization in the arrangement of things and persons.
Equity: Fayol perceives this principle as one of eliciting loyalty and devotion
from personnel by a combination of kindliness and justice in managers dealing
with subordinates.
Stability of Tenure of Personnel: Finding that such instability is both the
cause and effect of bad management, Fayol indicated the dangers and costs of
unnecessary turnover.
Initiative: Initiative is envisaged as the thinking out and execution of a plan.
Since it is one of the "Keenest satisfactions for an intelligent man to
experience", Fayol exhorts managers to "Sacrifice Personal Vanity" in order to
permit subordinates to exercise it.

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Esprit De Corps: This is the principle that 'union is strength' an extension of
the principle of unity of command. Fayol here emphasizes the need for
teamwork and the importance of communication in obtaining it.

III. BUREAUCRATIC MANAGEMENT

Bureaucratic management denotes to the perfect type of organization. Principal
of Bureaucracy include clearly defined and specialized functions, use of legal
authority, hierarchical form, written rules and procedures, technically trained
bureaucrats, appointment to positions based on technical expertise,
promotions based on competence and clearly defined career paths.

Max Weber (1864-1920) devised a theory of bureaucratic management that

emphasized the need for a firmly defined hierarchy governed by clearly defined
regulations and lines of authority.
He considered the perfect organization to be a bureaucracy whose activities
and objectives were reasonably thought out and whose divisions of labour were
clearly defined. Weber also believed that technical capability should be
emphasized and that performance evaluations should be made completely on
the basis of merit. Presently, it is considered that bureaucracies are huge,
impersonal organizations that put impersonal competence ahead of human
needs.
Like the scientific management theorists, Weber sought to advance the
performance of socially important organizations by making their operations
predictable and productive. Although we now value innovation and flexibility as
much as efficiency and predictability, Weber's model of bureaucratic
management evidently advanced the development of vast corporations such as
Ford. Bureaucracy was a particular pattern of relationships for which Weber
saw great promise.
Although bureaucracy has been successful for many companies, in the
competitive global market of the 1990s organizations such as General Electric
and Xerox have adopted bureaucracy, throwing away the organization chart
and replacing it with ever-changing constellations of teams, projects, and
alliances with the goal of unleashing employee creativeness.

Chester I. Barnard: Chester Barnard (1886-1961) also devised components to

classical theory such as Follett that would be further developed in later
schools. Barnard, who became president of New Jersey Bell in 1927, used his
work experience and his wide reading in sociology and philosophy to devise
theories about organizations.
Barnard stated that people join in formal organizations to accomplish such
goals that cannot be fulfilled by working alone. But as they follow the
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organization's goals, they must also gratify their individual needs. Barnard
came to conclusion that an enterprise can operate efficiently and survive only
when the organization's goals are kept in balance with the aims and needs of
the individuals working for it.
Barnard denotes a principle by which people can work in stable and mutually
constructive relationships over time. Barnard believed that individual and
organizations purposes must be in balance if managers understood an
employee's zone of indifference that is, what the employee would do without
questioning the manager's authority. Apparently, the more activities that fell
within an employee's zone of indifference the smoother and more cooperative
an organization would be.
Barnard also believed that managers had a duty to inspire a sense of moral
purpose in their employees. To do this, they would have to learn to think
beyond their narrow self-interest and make an ethical promise to society.
Although Barnard emphasized the work of administrative managers, he also
focused substantial attention on the role of the individual employee as the
basic strategic factor in organization.

Behavioural Approach (Neo-Classical Theory)

The Human Relations Movement
The Human relations movement emerged in part because managers found that
Taylor’s scientific management and Fayol’s administrative management did not
quite achieve complete production efficiency and work place harmony.
Managers still faced difficulties because employees did not always follow
predicted or rational patterns of behaviour.
The real inspiration for the movement, however, came from the Hawthorne
experiments which were done by Prof. Elton Mayo and his colleagues at the
Western Electric Company’s plant in Cicero, Illinois from 1927 to 1932.

Hawthorne studies consist of the following experiments.

i. Illumination experiment: The main purpose of conducting this experiment
was to assess the effect of illumination on the output of the employees. It
revealed that productivity cannot be raised only by improving physic working
conditions but philosophy of HR was needed to provide better treatment to
them to raise output.

ii. Relay assembly test room experiment: This study was conducted with a
purpose to remove anomalies of previous experiment and confirm tentative
conclusion drawn from it. In this experiment some new variables were
introduced such as friendly and informal supervision, shorter working hours
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and days, interaction among members of the group study, improved working
conditions and more wages etc. These experiments finally summed up that
physical environment may or may not increase productivity rather more
important than these conditions are attitude of mgt, morale of the employees
and other socio-psychological factors like importance, involvement and informal
relations etc.

iii. Mass interviewing programme: The programme was aimed to find out the
attitude of employees towards their job, working conditions and supervision
styles. By interviewing thousands of workers it was further confirmed that
informal relationship, social and psychological needs and the attitude of
employee have definite influence on their working behaviour.

iv. Bank wiring observation room experiment: It was conducted to

investigate social pattern of behaviour of group of 14 workers and their
supervision. The study confirmed that there existed informal group norms
which regulated and affected their behaviour. This study further proved the
importance of small informal social groups like cluques in organisations.

The Modern Management Approach

The modern approach to management represents the latest development in the
field of management that took place after 1950.

The modern approach has three streams, namely:

(i) System approach
(ii) Contingency approach
(iii) Operation research approach.

(i) System Approach

A system is a set of interacting subsystems (i.e., components) that constitute a
united whole. Organization is composed of elements that are dependent on one
another. These elements (or components) are viewed as subsystems of a larger
system. These subsystems interact with each other by getting influenced and
influencing others.
Every business organization is a system of its environment. Again, the main
parts of the ‘management system’ are organizational inputs, organizational
transformation process, and organizational outputs. The cycle of inputs,
transformation, and outputs is continuous. It is an open system that interacts
with its environment. It is subject to changes from within and outside to meet
the needs of an organization.

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A whole system cannot be understood without the knowledge of the
subsystems (or parts) that make up the whole. It is also essential to know the
relations among different subsystems of the organization. The study in any
area is based on the assumption that it is a part of the larger whole system.
For instance, the ‘solar system’ is a complete system of which ‘earth’ is a
subsystem. Again, ‘earth’ is a whole system of which our country ‘India’ is a
part. Again, ‘India’ is a complete system of which a particular State ‘West
Bengal’ is a part and so on. Likewise, in every ‘business organization’ there are
many subsystems known as ‘departments’. These departments are separate
but interdependent on others. Major contributors in this field are L. V
Bertalanffy, C. I. Bernard, H. A. Simon, R. A.Johnson, F. E. Kast, K. Boulding,
and others.

(ii) Contingency (or Situational) Approach

Management techniques that are effective in one situation may not be effective
in another situation. In other words, effective management principles and
practices vary with the situation in which the organization operates. It is a
systematic attempt to determine package of management techniques,
approaches, and practices that are appropriate in a specific situation.
Manager should have flexibility and freedom for devising a course of actions
that are effective and efficient for a particular situation. It may also be
considered as common sense approach. The key to a manager’s success lies in
his ability to perceive and analyse every situation and to apply management
principles accordingly.
The application of this approach requires the managers to have thorough
knowledge of the situation in terms of situational variables and external
factors. It places more emphasis on appropriateness of management tools and
techniques for a specific situation.
This approach is pragmatic in nature and encourages multivariable analysis.
Managers must do what the situation demands.
In other words, managers’ actions must be contingent upon the organizational
situation or environment. There is no ready-made solution to the problems of
every situation. Managers should apply correct principles and/or techniques
depend on the prevailing situation. Main contributors of this approach are J.
Woodward, H. M. Carlisle, Lorsch, and Lawrence.

(iii) Operation Research (or Quantitative) Approach

This approach is also known as ‘Management Science Approach’. It is based on
the approach of scientific management. It offers a systematic and scientific
analysis and solution to the problems faced by managers. It aims at achieving
a high degree of precision, perfection, and objectivity in solving a managerial
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problem. It uses mathematical and statistical tools for solving complex
problems.
This approach uses quantitative tools of decision-making known as ‘operation
research’. Linear programming, game theory, queuing theory, simulation, etc.,
are often used for making rational decisions. It uses computer aided technology
for handling problems on production, finance, storage, transportation, etc.

The approach to solve, complex problems using management science

consists of the following stages:
i. Formulating the problem and dividing the same into small simple
components;
ii. Gathering required information on each component;
iii. Constructing a mathematical model to represent the system under study;
iv. Finding the solution to the problem at hand;
v. Establishing controls over the solution;
vi. Putting the solution to work implementation.

Major contributors in this field are H. Simon, C. Barnard, K. Arrow, Newmann,

Leontieff, and others. This approach believes that the management’s main job
is decision-making and organization is a decision-making unit. Organizational
efficiency depends on the quality of managerial decisions. Management science
techniques increase the effectiveness of managers’ rational decision-making.

1.14 RECENT TRENDS IN MANAGEMENT

Recent trends in management refer to the latest managerial practices that
managers use to effectively manage their employees. As the market situation
evolves, the managerial trends also evolve and change. These changes are
subject to the market conditions of that time period. The most popular recent
trends in management are Total Quality Management, Risk Management,
Crisis Management etc. Let’s understand in detail the following topics:

Total Quality Management

All business management principles unanimously agree on the importance of
quality. One can measure the success of an organization from the quality of its
goods and services. Due to the importance of this factor, total quality
management has gained vast prominence over the years. Managers strive to
maintain the highest quality standards to meet their market competition.

Quality is one of the most important factors determining the success of a

business. Customers always consider the quality of a business’s goods and
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services while purchasing them. In fact, in some cases, quality gets prominence
over price as well.

Good quality of products always gives every organization a strong edge over its
competitors. It also rewards the business with customer patronage, word of
mouth and goodwill. It is because of these benefits that total quality
management has become so important.

With the emergence of newer ways of doing business, the importance of quality
management has only increased. Its principles have seen tremendous change
over time under modern service-oriented economies.

Previously, only business entities took quality management seriously. These

days, however, even governments and NGOs focus on quality management.
This shows that apart from consumers, even common citizens can be the focus
of quality management.

Another thing one needs to understand is that quality management does not
relate to just production-related functions. Other managerial activities like
planning, organizing, controlling, etc. also require quality standards.

Risk Management
Risk management basically means the identification and mitigation of losses. It
is a systematic process by which an organization identifies, analyzes, prepares
and reduces losses.

Apart from that, it also focuses on helping a business find profitable

opportunities. Every business organization faces an unavoidable influence from
its external and internal environments.

Management of risks reduces the chances of such factors affecting an

organization negatively. Managers can either avoid or reduce risk or even
transfer it to another entity.

Management of risks has, these days, become an inherent part of decision

making and planning. Employees at all levels, from top management to lower
levels, have to deal with risks. This, in turn, implies that risks can affect all
aspects of an organization’s management. Hence, knowledge of risk
management is crucial for every organization.

Crisis Management
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A crisis is basically any mishap, tragedy or ill event that carries negative
effects. It causes damage to an organization, its members, its business or
customers. It can even affect an organization’s reputation and legal or financial
position.

As the expression suggests, crisis management is simply the act of handling a

crisis effectively. It refers to the response of an organization to an incident that
can affect it negatively.

A business can anticipate crisis situations that may strike it but it can never
completely prevent them. It is practically impossible to prohibit tragedies from
occurring. Each kind of tragedy carries unique effects.
Not all crisis situations have common features. Hence, managers have to
understand each possible crisis and deal with it differently.

Resistance to Change
One of the most important tasks of managers is to facilitate changes smoothly.
Change is always inevitable but so is resistance to change. It is basic human
nature of people to try and keep their methods and customs constant. This is
where change management comes into play. An organization always must
strive to adapt to change if it wants to be successful.

Change is basically a variation in pre-existing methods, customs, and

conventions. Since all organizations function in dynamic environments, they
constantly have to change themselves to succeed. Change management
contains several strategies that help in facilitating the smooth adoption of such
changes.

One of the most important facets of change management is resistance to

change. It is simply human nature to counteract any changes and maintain the
status quo. But since change is inevitable, instead of resisting changes the
organization must try to implement them with minimum hassle.

Resistance to change may be either overt or implicit. For example, employees

may react to a change in policies with outright rejection and protests.
They may even refrain from showing disapproval expressly, but they may do so
implicitly by not accepting changes. Managers must understand these
problems and help the employees adopt these changes smoothly.

Change through Management Hierarchy

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It is usually the top level of a management hierarchy that makes the most
important changes in any organization. The lower level only implements these
changes. Such a hierarchy often misses out small and minute details of
planning. Managers must, hence, understand how to plan for changes under
such conditions.

The term management hierarchy basically refers to a structure of superior and

subordinate rankings. Almost every small and large organization follows this
structure. Under this hierarchy, members of an organization follow a fixed
chain of command.

In a management hierarchy, it is always the top-level executives who decide all

important matters. For example, in a company, this would include the board of
directors. Thus, they are the ones who take all the major decisions. In the next
level, managers and executives simply implement plans that the top level
makes. They take only small and simple decisions in order to enforce those
plans. In other words, they do not really play a big role in enforcing changes.

Under such structures, it is common for finer details of changes to get left out.
For example, let’s say a company’s board decides to revamp its business by
adopting the latest technology available. The board will inform the management
of this decision and leave its implementation to them.

In such cases, the management will have to consider finer details that the
board is likely to leave out. This includes details like the purchase of new
machinery, termination of certain employees, training of workers, etc.

*******

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 MODULE – 2

STRUCTURE:
2.0 Planning
2.0.1 Definition
2.0.2 Features
2.0.3 Nature
2.0.4 Importance
2.0.5 Types
2.0.6 Steps in Planning
2.0.7 Planning Tools and Techniques
2.1 Organisation
2.1.1 Definition
2.1.2 Importance
2.1.3 Principles
2.1.4 Types of Organisation Structure
2.1.5 Span of Control
2.1.6 Centralisation and Decentralisation of Authority
2.2 Directing
1.2.1 Definition
1.2.2 Importance
1.2.3 Principles of Directing
1.2.4 Characteristics of Directing
2.3 Controlling
2.3.1 Definition
2.3.2 Need of Controlling
2.3.3 Characteristics of Control
2.3.4 Steps in Controlling Process
2.3.5 Resistance to Control
2.3.6 Design of Effective Control System
2.3.7 Types of Control
2.3.8 Control Techniques
2.4 Decision Making
2.4.1 Definition
2.4.2 Types
2.4.3 Decision-Making Process
2.4.4 Models
2.4.5 Difficulties in Decision-Making
2.4.6 Decision-Making Styles

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2.0.1 DEFINITION
Planning is fundamentally a mental predisposition to do things in an orderly
way, to think before and to act in the light of the fact rather than of guesses –
L. F. Urwick.

Planning is deciding in advance what to do, how to do it, where to do it and

who is to do it. Planning bridges the gap from where we want to go. It makes it
possible for things to occur while would not otherwise happen – Koontz and
O’Donnell.

Planning as a process involves thinking before doing. Planning is determination

of courses of action to achieve desired goals.

2.0.2 FEATURES OF PLANNING

1. Planning is Goal-Oriented: The main condition of planning is determination

of objectives. Once the objectives are set up, the next step is to determine the
steps that are to be followed to achieve these objectives.

2. Primacy of Planning: Planning is the ‘first among equals’ of all the other
management functions, because it starts with objectives which are the basis of
all the other functions. The process of management starts with planning. It is
followed by organizing, staffing, directing & controlling.

3. Forward Looking: Planning means looking ahead. Planning is never done

for the past. It is done for the future to achieve certain objectives.

4. Pervasiveness: Planning is required at all levels within the organization. The

pervasiveness of planning is generally overlooked. It is felt that planning is
done at top levels only. This may be true to certain extent that people at the top
level devote most of their time to planning than the managers at middle and
lower levels, but manager at every level has to plan his activities.

5. Efficiency of Operations: Planning has no relevance if it does not

contribute to the efficiency of the corporate operations. All the actions &
activities performed in the achievement of corporate objectives should be
thought of with minimum cost and wastage. If possible, better technology can
be applied.

6. Various Alternatives: Planning cannot be visualized in the absence of

alternatives. Only if there are alternatives, there would be a need for the

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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evaluation of all the alternatives. Planning is essentially decision making since
it involves choosing among alternatives.

7. Continuous Process: Planning is never ending activity of a manager.

Planning always tentative and subject to revision and amendment as new facts
become known.

8. Intellectual Process: Planning is an outcome of mental exercise involving

imagination, foresight & sound judgment.

9. Critical Factors: A planner should consider critical factors like money,

manpower, materials, market etc. before taking up planning. If a planner
ignores the limiting factors, then the planning is bound to fail. The planning
should start only after considering the availability of limiting factors.

10. Co-ordination: Co-ordination is essential for the harmonious working of

the organization. Planning co-ordinates the what, who, how, why and where of
planning.

11. Elasticity: Planning should be adaptable to the changing business

environment. If planning is rigid, it will not be able to achieve business goals.
Planning is dynamic process and it adjusts with the needs & requirements of
the situations.

2.0.3 NATURE OF PLANNING

The basic nature of planning may be understood in terms of it being a rational
approach, open-system approach, and its pervasiveness.

Planning: A Rational Approach

Planning is a rational approach for defining where one stands, where one
wants to go in future, and how to reach there. The concept of rationality
denotes the choice of appropriate means for achieving stated objectives. In
organisational context, planning as a rational approach tries to fill the gap
between actual status (current performance) and desired status (desired
performance). The current and desired status is usually expressed in terms of
objectives which can be achieved by an action or set of actions. For completing
an action, various types of resources – human as well as non-human – are
required. The rational approach of planning emphasizes the most appropriate
use of these resources.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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Planning: An Open System Approach
Planning adopts an open system approach. It takes inputs from inputs from
the environment, processes these, and exports outputs to the environment. The
open system approach of planning indicates that the identification of gap
between current status and desired status in future and the action required to
bridge this gap is influenced by a variety of environmental factors – economic,
political-legal, technological, socio-cultural, and competitive. These factors are
dynamic and change with the time. Therefore, while adopting open system
approach in planning, managers have to take into account the dynamic
features of the environment.

Pervasiveness of Planning
Planning is pervasive and extends throughout the organisation. Every manager
has a planning function to perform. This stems from the fact that he is a
manger and that planning is a fundamental management function. However,
the pervasiveness of planning is commonly overlooked and planning is
frequently considered as being the function of top level managers. While it is
true that they devote more of their time to planning and work with more vital
issues than the managers of the middle and lower levels do, the fact remains
that every manager has to perform planning within his particular area of
activities. Top management is responsible for overall objectives and actions of
the organisation. Therefore it must plan what these objectives should be and
how these can be achieved. Similarly, a departmental head has to devise the
objectives of his department within the organisational objectives and also the
methods of achieving these; a foreman has to devise the objectives of his shop
and also how to achieve these.

2.0.4 IMPORTANCE OF PLANNING

Plans are very useful for an organization and perform a number of functions for
it. Plans help in meeting environmental uncertainties. A manager always
operates in an environment, which is uncertain, and he is expected to meet
this environment in the best possible manner. Plans prepare against any such
uncertainties based on prediction for future and plans can be as good as the
predictions. If your forecast goes wrong the plans too may go haywire.

For example, if your company is planning to purchase cars for office and
forecast is that government is supposed to increase taxes on cars in the coming
budget ad you decide to purchase cars in the month of February itself. Your
plan seems good if prices of cars increase but if opposite happens than your
plans hardly carry any value. So plans can be as good as the forecasts on
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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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which plans are based. To meet such situation alternate plans can be kept
ready to meet alternated situations.

1. Plans help in better utilization of resources: The resources with a firm

are limited and can be spent on a number of purposes. Plans ensure that best
outputs are attained with the given input by putting the resources at the
proper place. Without proper plans resources may be diverted in the non-
priority areas. For example, a firm can use its money either to train its existing
manpower or to recruit new people. In the absence of planning decision will be
arbitrary and can lead to using money in the area with low returns.

2. Planning provides focus to firm’s activities: A firm may have a large

number of options to exercise. Plans decide the priority so that right work is
performed at right time. For example, If a firm decides to use its internal
production capacities to meet its requirements as well as to outsource the
same supplies, only plans give proper direction for when to outsource and
when not.

3. Planning helps in coordination and control of activities: A properly

framed plan takes care to integrate different functions of an organization so
that benefits of unified actions can be reaped. Besides plans act as standards
against which performance is measured to provide feedback and control. For
example, a firm may decide that all its decisions and activities will be customer
oriented. If there is any difference among various departments of company to
launch new products then this yardstick of customer orientation can be used
to sort differences and to arrive at a decision that gets the cooperation of
everybody in the organization.

4. Planning reduces risks and oversight: Planning minimizes possibilities of

risk and uncontrollable uncertainties for the future. It involves foreseeing all
possible risks and uncertainties a business can experience thus reducing the
costs of damage to life (or health) and property. For example, risks like fire in a
factory, or accidents at work place or burglary can be foreseen and avoided by
planning and undertaking safety and precautionary measures.

5. Planning makes controlling easier: Planning does not only mean thinking
about the future but also acting upon it. This implies that to attain a desired
future, planning also suggests effective ways or a controlled design for attaining
them. These effective ways for planning can be determined by forecasting. For
example, car manufacturers control the production of passenger vehicles (cars
for consumers) depending upon the calendar dates of festivals and accordingly

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
control the purchasing costs of auto- components and raw materials, human
resources, etc., by planning ahead. Demand for cars is mostly believed to rise
during the festival seasons (especially with the onset of Diwali in India).

6. Planning enables creativity and innovation: Planning enables identifying

the best alternatives out of many options and encourages businesses to put
efforts into discovering new ideas that support their goals and objectives. For
example, when Cavincare Company (based in South India) wished to introduce
shampoos in rural markets in south and where bottled shampoo were
perceived to be bulky and expensive, Cavincare introduced their shampoos in
sachets worth 50 paise that were easier to carry and used by many members in
a household.

2.0.5 TYPES OF PLANNING

The process of planning may be classified into different categories on the
following basis:
(i) Nature of Planning
a. Formal Planning: Planning is formal when it is reduced to writing. When
the numbers of actions are large it is good to have a formal plan since it will
help adequate control.
The term formal means official and recognised. Any planning can be done
officially to be followed or implemented. Formal planning is aims to determine
and objectives of planning. It is the action that determines in advance what
should be done.

b. Informal Planning: An informal plan is one, which is not in writing, but it is

conceived in the mind of the manager. Informal planning will be effective when
the number of actions is less and actions have to be taken in short period.

(ii) Duration of Planning

a. Short Term Planning: Short term planning is the planning which covers
less than two years. It must be formulated in a manner consistent with long-
term plans. It is considered as tactical planning.
Short-term plans are concerned with immediate future; it takes into account
the available resources only and is concerned with the current operations of
the business. These may include plans concerning inventory planning and
control, employee training, work methods etc.

b. Long Term Planning: Long-term planning usually converse a period of more

than five years, mostly between five and fifteen years. It deals with broader
technological and competitive aspects of the organisation as well as allocation
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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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of resources over a relatively long time period. Long-term planning is
considered as strategic planning.
Short-term planning covers the period of one year while long term planning
covers 5-15 years. In between there may be medium-term plans. Usually,
medium term plans are focusing on between two and five years. These may
include plan for purchase of materials, production, labour, overhead expenses
and so on.

(iii) Levels of Management

a. Strategic Planning: The strategic planning is the process of determining
overall objectives of the organisation and the policies and strategies adopted to
achieve those objective. It is conducted by the top management, which include
chief executive officer, president, vice-presidents, General Manger etc. It is a
long range planning and may cover a time period of up to 10 years.
It basically deals with the total assessment of the organisation’s capabilities, its
strengths and its weaknesses and an objective evaluation of the dynamic
environment. The planning also determines the direction the company will be
taking in achieving these goals.

b. Intermediate Planning: Intermediate planning cover time frames of about 6

months to 2 years and is contemplated by middle management, which includes
functional managers, department heads and product line mangers. They also
have the task of polishing the top management strategic plans.
The middle management will have a critical look at the resources available and
they will determine the most effective and efficient mix of human, financial and
material factors. They refine the broad strategic plans into more workable and
realistic plans.

c. Operational Planning: Operational planning deals with only current

activities. It keeps the business running. These plans are the responsibility of
the lower management and are conducted by unit supervisors, foremen etc.
These are short-range plans covering a time span from one week to one year.
These are more specific and they determine how a specific job is to be
completed in the best possible way. Most operational plans .ire divided into
functional areas such as production, finance, marketing, personnel etc.
Thus even though planning at all levels is important, since all levels are
integrated into one, the strategic planning requires closer observation since it
establishes the direction of the organisation.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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(iv) Use
a. Standing Plan: Standing plan is one, which is designed to be used over and
over again. Objectives, policies procedures, methods, rules and strategies are
included in standing plans. Its nature is mechanical. It helps executives to
reduce their workload. Standing plan is also called routine plan. Standing or
routine plan is generally long range.

b. Single Use Plan: Single use plan is one, which sets a course of action for a
particular set of circumstances and is used up once the particular goal is
achieved. They may include programme, budgets, projects and schedules. It is
also called specific planning. Single use plan is short range.

(v) Based on What the Plans Seek to Achieve

a. Objectives: The first step in planning is setting objectives. Objectives,
therefore, can be said to be the desired future position that the management
would like to reach. Objectives are very basic to the organisation and they are
defined as ends which the management seeks to achieve by its operations.
Therefore, an objective simply stated is what you would like to achieve, i.e., the
end result of activities.
For example, an organisation may have an objective of increasing sales by 10%
or earning a reasonable rate of return on investment, earn a 20% profit from
business.
They represent the end point of planning. All other managerial activities are
also directed towards achieving these objectives. They are usually set by top
management of the organisation and focus on broad, general issues. They
define the future state of affairs which the organisation strives to realise. They
serve as a guide for overall business planning. Different departments or units
in the organisation may have their own objectives.
Objectives need to be expressed in specific terms i.e., they should be
measurable in quantitative terms, in the form of a written statement of desired
results to be achieved within a given time period.

b. Strategy: A strategy provides the broad contours of an organisation’s

business. It will also refer to future decisions defining the organisations
direction and scope in the long run. Thus, we can say a strategy is a
comprehensive plan for accomplishing an organisation’s objectives.
This comprehensive plan will include three dimensions, (i) determining long
term objectives, (ii) adopting a particular course of action, and (iii) allocating
resources necessary to achieve the objective.
Whenever a strategy is formulated, the business environment needs to be
taken into consideration. The changes in the economic, political, social, legal
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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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and technological environment will affect an organisation’s strategy. Strategies
usually take the course of forming the organisation’s identity in the business
environment.
Major strategic decisions will include decisions like whether the organisation
will continue to be in the same line of business, or combine new lines of
activity with the existing business or seek to acquire a dominant position in the
same market. For example, a company’s marketing strategy has to address
certain questions i.e., who are the customers? What is the demand for the
product? Which channel of distribution to use? What is the pricing policy? and
How do we advertise the product. These and many more issues need to be
resolved while formulating a marketing strategy for any organisation.

c. Policy: Policies are general statements that guide thinking or channelise

energies towards a particular direction. Policies provide a basis for interpreting
strategy which is usually stated in general terms. They are guides to
managerial action and decisions in the implementation of strategy. For
example, the company may have a recruitment policy, pricing policy within
which objectives are set and decisions are made. If there is an established
policy, it becomes easier to resolve problems or issues. As such, a policy is the
general response to a particular problem or situation.

There are policies for all levels and departments in the organisation ranging
from major company policies to minor policies. Major company policies are for
all to know i.e., customers, clients, competitors etc., whereas minor polices are
applicable to insiders and contain minute details of information vital to the
employees of an organisation. But there has to be some basis for divulging
information to others. Policies define the broad parameters within which a
manager may function. The manager may use his/her discretion to interpret
and apply a policy. For example, the decisions taken under a Purchase Policy
would be in the nature of manufacturing or buying decisions.

Should a company make or buy its requirements of packages, transport

services, printing of stationery, water and power supply and other items? How
should vendors be selected for procuring supplies? How many suppliers should
a company make purchases from? What is the criterion for choosing suppliers?
All these queries would be addressed by the Purchase Policy.

d. Procedure: Procedures are routine steps on how to carry out activities. They
detail the exact manner in which any work is to be performed. They are
specified in a chronological order. For example, there may be a procedure for
requisitioning supplies before production.
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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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Procedures are specified steps to be followed in particular circumstances. They
are generally meant for insiders to follow. The sequences of steps or actions to
be taken are generally to enforce a policy and to attain pre-determined
objectives. Policies and procedures are interlinked with each other. Procedures
are steps to be carried out within a broad policy framework.

e. Method: Methods provide the prescribed ways or manner in which a task

has to be performed considering the objective. It deals with a task comprising
one step of a procedure and specifies how this step is to be performed. The
method may vary from task to task. Selection of proper method saves time,
money and effort and increases efficiency.
For imparting training to employees at various levels from top management to
supervisory, different methods can be adopted. For example for higher level
management orientation programmes, lectures and seminars can be organised
whereas at the supervisory level, on the job training methods and work
oriented methods are appropriate.

f. Rule: Rules are specific statements that inform what is to be done. They do
not allow for any flexibility or discretion. It reflects a managerial decision that a
certain action must or must not be taken. They are usually the simplest type of
plans because there is no compromise or change unless a policy decision is
taken.

g. Programme: Programmes are detailed statements about a project which

outlines the objectives, policies, procedures, rules, tasks, human and physical
resources required and the budget to implement any course of action.
Programmes will include the entire gamut of activities as well as the
organisation’s policy and how it will contribute to the overall business plan.
The minutest details are worked out i.e., procedures, rules, budgets, within the
broad policy framework.

h. Budget: A budget is a statement of expected results expressed in numerical

terms. It is a plan which quantifies future facts and figures. For example, a
sales budget may forecast the sales of different products in each area for a
particular month.
A budget may also be prepared to show the number of workers required in the
factory at peak production times. Since budget represents all items in
numbers, it becomes easier to compare actual figures with expected figures
and take corrective action subsequently.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
Thus, a budget is also a control device from which deviations can be taken care
of. But making a budget involves forecasting, therefore, it clearly comes under
planning. It is a fundamental planning instrument in many organisations.

Let us take an example of Cash Budget. The cash budget is a basic tool in the
management of cash. It is a device to help the management to plan and control
the use of cash. It is a statement showing the estimated cash inflows and cash
outflows over a given period. Cash inflows would generally come from cash
sales and the cash outflows would generally be the costs and expenses
associated with the operations of the business.

The net cash position is determined by the cash budget i.e., inflows minus (–)
outflows = surplus or deficiency. The management has to hold adequate cash
balances for various purposes. But at the same time, it should avoid excess
balance of cash since it gives little or no return. The business has to assess
and plan its need for cash with a degree of caution.

MANAGEMENT BY OBJECTIVES
Normally the long-term objectives of the organization are set by chief executives
and the subsidiary goals by middle level managers. This is one-way process in
which the commitment of the subordinates is not obtained. To overcome this
limitation, Peter F. Drucker suggested a concept MBO, i.e., “Management by
Objectives”.

Meaning: The system of management by objectives can be described as a

process whereby the superior & subordinate managers of an organization
jointly identify its 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 has been defined as a result oriented, non-

specialist, operational managerial process for the effective utilization of
material, physical & human resources of the organization, by integrating the
individual with the organization and organization with the environment.
MBO represents a way of thinking that concentrates on achieving results. It
forces management to plan explicitly, provides a systematic and rational
approach to management and helps prevent “Management by Crisis”. MBO
emphasizes measurable achievement and results and active participation in
objective setting at all levels of management. It facilitates linking of
goals/objectives and plans. Goals/objectives are used as bases of planning,
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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
For Classroom discussion only
managing organizational activities and assessing performance of individuals
and for rewarding contributions of individuals as a means of motivation.
Management objectives constitute a source of legitimacy, which justifies the
activities of the organization and its existence. Objectives serve as standards
for assessing the success of the organization. It will check the members of the
organization from deviating from the route they have set for themselves.
Planning has no meaning if it is not related to certain objectives. It will be an
empty mental exercise if it does not determine what objectives are to be
accomplished. MBO is a key to effective planning which is an important
function of every manager. Clear objectives encourage consistency in
managerial planning and decision making over a period of time. An
organization having well defined objectives will not give up long-range
development program and policies for short-term monetary gains. Objectives
represent not only the end-point of planning but also the end towards which
the other managerial activities like organizing, directing and controlling are
aimed. Planning may lose its consistency unless all plans have same focus of
action.

Features of MBO
 An attempt is made by the management to integrate the goals of the
organization & individuals. This will lead to effective management
 MBO tries to combine the long range goals of an organization with short
range goals.
 It relates the organization goals with the society goals
 It emphasis is not only on goals but also on effective performance
 It plays constant attention to refining, modifying and improving the
goals.
 It increases the organizational capability of achieving goals at all levels
 A high degree of motivation and satisfaction is available to employees
through MBO.
 Recognizes the participation of employees in goal setting process
 Aims at replacing the exercise of authority with consultations
 Encourages a climate of trust, goodwill and a will to perform.

Process of MBO
MBO has an objective in itself that focuses on changing behaviour and
attitudes towards getting the job done. MBO is essentially results-oriented, it is
performance that counts. It is a management system and philosophy that
stresses GOALS rather than METHODS.

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Setting of MBO requires following steps:
The following are the stages of the process of the management by objectives:
Stage 1: Organisational Objective Setting:
The first stage of the MBO is setting of the organisational objectives. The chief
objective of every business is its development and extension. For the
achievement of the chief objective, many subsidiary objectives are laid down.
The activities done under the chief objective and the subsidiary objectives are
extensively evaluated. These objectives are determined by the superior
managers with the advice of the subordinate managers.
While determining these objectives case must be taken that they can actually
be realised. Once these objectives are determined, every individual working in
the enterprise must be informed about them so that they should understand
the final goal of the enterprise of which they happen to be a part.

Stage 2: Determination of Key Result Areas – KRAs:

After setting the organisational objectives, the key result areas are decided
upon. Key result areas are those areas and activities in which the owners of the
business have a special interest. These areas determine the priorities of the
business. In short, it can be said that they are those areas which require
special attention. Usually the chief key result areas in all the business are
managers’ performance, profitability, market goodwill, social responsibility,
financial resources, etc.

Stage 3 Subordinates’ Objectives Setting:

After setting the organisational objectives, the subordinates’ objectives are
determined. Subordinates’ objectives are determined at the departmental and
individual level. While determining objectives at the departmental and
individual level, it should be kept in mind that they are not different from the
organisational objectives. Setting of the objectives at every level should be
finalised only after consulting the subordinates. Such consultations motivate
the subordinates.
Such motivated and inspired employees are helpful in the attainment of the
objectives. Objectives determined at this level are short-term objectives. At this
stage the actual work standards are also determined with the help of the
subordinates.

Stage 4: Matching Objectives and Resources:

The setting of the objective is meaningful only when the resources to achieve
them are available. At this stage of MBO process the objectives and resources
are matched. It is ensured as to what objective needs what resource for its
attainment. This facilitates the distribution of resources. Like the setting of the
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objectives, the distribution of resources should also be done in consultation
with the subordinates. In conclusion, it can be said that in the absence of
proper distribution of resources the setting of proper objectives is meaningless.

Stage 5: Periodic Meeting:

At this stage of MBO process the seniors and the subordinates hold occasional
meetings in order to find out whether the expected work progress is being
achieved or not. If it is not being achieved, the causes for it are found out along
with the possible remedy. These meetings are held at regular intervals. Their
purpose is to find out the weaknesses of the organisation so that immediate
remedial action can be taken to avoid any loss.
The special thing about these periodic meetings is not to punish the non-
performers and reward the true performers. It is an integral part of the MBO
concept and an effort is made through its medium to ensure that the work is
being carried out in a planned way and that the objectives of the organisation
will be achieved.

The periodic meetings send a message to the employees that their boss is
taking interest in their work. This raises their morale. In addition to this, the
periodic meetings increase the possibility of the attainment of the objectives.

Stage 6: Final Performance Appraisal:

At the end of a definite period, the actual work done by the subordinates is
evaluated on the basis of the pre-determined standards. On the basis of the
work evaluation the deviations are known. Those employees who do not achieve
their objectives effectively are given the facilities of training so that they are
able to perform better in future.

Management by objectives is repeated time and again in a regular business.

The moment the work of a particular session is completed, the same process
has to be observed in the next session.

2.0.6 STEPS IN PLANNING

The sequences of various steps in planning are in such a way that they lead to
the translation of an idea into action by reaching to the state of establishing of
sequences of activities. Each stage contributes to plan formulation in the
following ways:

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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 STEPS IN PLANNING

Step 1: Perception of Opportunities

Perception of opportunities is not strictly a part of the planning process. But
this awareness of opportunities in the external environment as well as within
the organisation is the real starting point for planning. It is important to take a
preliminary look at possible future opportunities and see them clearly and
completely.
All managers should know where they stand in the light of their strengths and
weaknesses, understand the problems they wish to solve and know what they
gain. Setting objectives depends on the awareness. Planning requires realistic
diagnosis of the opportunity situation.

Step 2: Establishing Objectives

This is the second step in the planning process. The major organisational and
unit objectives are set in this stage. This is to be done for the long term as well
as for the short range. Objective specify the expected results and indicate the
end points of what is to be done, where the primary emphasis is to be placed
and what is to be accomplished by the various types of plans.
Organisational objectives give direction to the major plans, which by reflecting
these objectives define the objective of every major department. Major
objectives, in turn, control the objectives of subordinate departments and so on
down the line. In other words, objectives form a hierarchy. The objectives of
lesser departments will be more accurate if subdivision managers understand
the overall enterprise objectives and the derivative goals. Managers should also

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have the opportunity to contribute their ideal to setting their own goals and
those of the organisation.

Step 3: Planning Premises

After determination of organisational objectives, the next step is establishing
planning premises that is the conditions under which planning activities will be
undertaken. Planning premises are planning assumptions the expected
environmental and internal conditions.
Thus planning premises are external and internal. External premises include
total factors in task environment like political, social, technological,
competitors, plans and actions, government policies. Internal factors include
organisation’s policies, resources of various types, and the ability of the
organisation to withstand the environmental pressure. The plans are
formulated in the light of both external and internal factors.
The nature of planning premises differs at different levels of planning. At the
top level, it is mostly externally focused. As one moves down the organisational
hierarchy the composition of planning premises changes from external to
internal. The major plans both old and new will materially affect the future
against which the managers at lower units must plan.

Step 4: Identification of Alternatives

The fourth step in planning is to identify the alternatives. Various alternatives
can be identified based on the organisational objectives and planning premises.
The concept of various alternatives suggests that a particular objective can be
achieved through various actions.
For example, if an organisation has set its objectives to grow further, it can be
achieved in several ways like expanding in the same Field of business or
product line diversifying in other areas, joining hands with other organisations,
or taking over another organisation and so on. Within each category, there may
be several alternatives.
The most common problem is not finding alternatives but reducing the number
of alternatives so that the most promising may be analysed. Even with
mathematical techniques and the computer, there is a limit to the number of
alternatives that can be thoroughly examined. The planner must usually make
a preliminary examination to discover the most fruitful possibilities.

Step 5: Evaluation of Alternatives

The various alternative course of action should be analysed in the light of
premises and goals. There are various techniques available to evaluate
alternatives. The evaluation is to be done in the light of various factors.
Example, cash inflow and outflow, risks, limited resources, expected pay back
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etc., the alternatives should give us the best chance of meeting our goals at the
lowest cost and highest profit.

Step 6: Choice of Alternative Plans

This is the real point of decision-making. An analysis and evaluation of
alternative courses will disclose that two or more alternatives are advisable and
beneficial. The fit one is selected.

Step 7: Formulation of Supporting Plan

After formulating the basic plan, various plans are derived so as to support the
main plan. In an organisation there can be various derivative plans like
planning for buying equipment, buying raw materials, recruiting and training
personal, developing new product etc. These derivative plans are formulated
out of the basic or main plan and almost invariably required to support the
basic plan.

Step 8: Establishing Sequence of Activities

After formulating basic and derivative plans, the sequence of activities is
determined so those plans are put into action. After decisions are made and
plans are set, budgets for various periods and divisions can be prepared to give
plans more concrete meaning for implementation.
The overall budgets of an enterprise represent the sum total of income and
expenses, with resultant profit or surplus, and budgets of major balance sheet
items such as cash and capital expenditures. Each department or programme
of a business or other enterprise can have its own budgets, usually of expenses
and capital expenditures, which tie into the overall budget.

2.0.7 PLANNING TOOLS AND TECHNIQUES

A number of tools and techniques exist to help managers in planning and
decision making process. Some of these techniques include: Tree Diagrams;
Matrix Diagrams; Arrow Diagrams (or CPM); Pest Analysis; and Competitor
Analysis.

Tree Diagrams
Tree Diagrams are also called: systematic diagram, tree analysis, analytical
tree, hierarchy diagram. The tree diagram starts with one item that branches
into two or more, each of which branch into two or more, and so on. It looks
like a tree, with trunk and multiple branches. It is used to break down broad
categories into finer and finer levels of detail. Developing the tree diagram helps
you move your thinking step by step from generalities to specifics.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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When to Use a Tree Diagram:
 When an issue is known or being addressed in broad generalities and
you must move to specific details, such as when developing logical steps
to achieve an objective.
 When developing actions to carry out a solution or other plan.
 When analyzing processes in detail.
 When probing for the root cause of a problem.
 When evaluating implementation issues for several potential solutions.
 After an affinity diagram or relations diagram has uncovered key issues.
 As a communication tool, to explain details to others.

Matrix Diagrams
Matrix Diagram is also called: matrix, matrix chart. The matrix diagram shows
the relationship between two, three or four groups of information. It also can
give information about the relationship, such as its strength, the roles played
by various individuals or measurements.
Six differently shaped matrices are possible: L, T, Y, X, C and roof–shaped,
depending on how many groups must be compared.

Arrow (CPM) Diagrams

It is also called: activity network diagram, network diagram, activity chart,
node diagram, CPM (critical path method) chart or PERT (program evaluation
and review technique) chart.
The arrow diagram shows the required order of tasks in a project or process,
the best schedule for the entire project, and potential scheduling and resource
problems and their solutions. The arrow diagram lets you calculate the “critical
path” of the project. This is the flow of critical steps where delays will affect the
timing of the entire project and where addition of resources can speed up the
project.

When to Use an Arrow Diagram:

1. When scheduling and monitoring tasks within a complex project or process
with interrelated tasks and resources.
2. When you know the steps of the project or process, their sequence and how
long each step takes, and.
3. When project schedule is critical, with serious consequences for completing
the project late or significant advantage to completing the project early.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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PEST Analysis
Another planning tool utilized by managers is PEST Analysis. PEST analysis
stands for "Political, Economic, Social, and Technological analysis" and
describes a framework of macro environmental factors used in the
environmental scanning component of strategic management.
It is a part of the external analysis when conducting a strategic analysis or
doing market research, and gives an overview of the different macro
environmental factors that the company has to take into consideration. It is a
useful strategic tool for understanding market growth or decline, business
position, potential and direction for operations.

Competitor Analysis
Some businesses think it is best to get on with their own plans and ignore the
competition.
Others become obsessed with tracking the actions of competitors (often using
underhand or illegal methods). Many businesses are happy simply to track the
competition, copying their moves and reacting to changes. Thus, Competitor
analysis is an important part of the strategic planning process
Role of Competitor Analysis in Planning
Competitor analysis has several important roles in strategic planning:
 To help management understand their competitive
advantages/disadvantages relative to competitors
 To generate understanding of competitors’ past, present (and most
importantly) future strategies
 To provide an informed basis to develop strategies to achieve competitive
advantage in the future
 To help forecast the returns that may be made from future investments
(e.g. how will competitors respond to a new product or pricing strategy?

ESSENTIALS OF A GOOD PLAN

1. It is based on Clearly Defined Objectives: A good plan is based upon clear,
well-defined and easily understood objectives. General objectives like improving
morale or increasing profits are ambiguous in nature and do not lend to
specific steps and plans. If possible, objectives must be quantified for sake of
simplicity.

2. It is Simple: A goods plan must be simple and comprehensive. When the

plan is simple, all employees of the organisation can know its significance and
it can be easily put into operation, which leads to achieve objective.

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3. It Provides for a Proper Analysis and Classification of Action: It provides
for a proper analysis and classification of action i.e., it establishes standards. A
good plan should establish standard. Comparing actual results with standards
can make a proper analysis. It leads to effective control.

4. It is Flexible: Planning should be flexible enough to incorporate any

changes in the resources, if necessary. Additionally, it should be responsive to
changed conditions so that if future events do not follow the anticipation, the
same plan can be modified and adopted to the altered situation.

5. It is Balanced, Practicable and Suitable According to the Size and form

of the Business:A good plan should be well balanced so that the existing
resources are properly utilized for all functions and short-term gains are not at
the cost of long-term gains and vice-versa.

6. It is Time Bound: The time period allowed for achieving goals should be
reasonable even though planning is an attempt to anticipate the future. Long-
range planning are more uncertain. Hence, the time period covered should be
reasonable and reasonably stable.

7. It Uses Available Resources to the Utmost before Creating New

Authorities and New Resources: A good plan strives for optimal utility of
physical as well as human resources in unison and harmony.

8. Participation by Subordinates: Planning should not be an exclusive

responsibility of top management. Subordinates will not be responsible if a
plan is imposed upon them. Also subordinate participation generally ensures
the sincere and serious effort on their part to make the plan successful.

9. Unity: Planning is initiated by different managers of different divisions at

different times. It is necessary that a good plan should incorporate all these
departments, maintaining the consistency, and centralised objective must be
the focus.

10. It is Comprehensive: It is comprehensive and includes each and every

aspect of the objectives.

**************

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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 ORGANISATION
2.1.1 DEFINITIONS
Organisation is the process of identifying and grouping work to be performed,
defining and delegating responsibility and authority and establishing
relationships for the purpose of enabling people to work most effectively together
in accomplishing objectives. – Louis Allen.

Organisation is the process so combining the work which individuals or groups

have to perform with the facilities necessary for its execution, that the duties so
performed provide the best channels for the efficient, systematic, positive and
coordinated application of the available effort. – Oliver Sheldon.

Organising is the process of bringing together physical, financial & human

resources and developing productive relationship amongst them for achievement
of organizational goals. It involves establishing an intentional structure of roles
for people to fill in an organization.

2.1.2 IMPORTANCE OF ORGANISATION

A comprehensive approach to organizing helps the management in many ways.
Organizing aligns the various resources towards a common mission.

Efficient Administration
It brings together various departments by grouping similar and related jobs
under a single specialization. This establishes coordination between different
departments, which leads to unification of effort and harmony in work.
It governs the working of the various departments by defining activities and
their authority relationships in the organizational structure. It creates the
mechanism for management to direct and control the various activities in the
enterprise.

Resource Optimization
Organizing ensures effective role-job-fit for every employee in the organization.
It helps in avoiding confusion and delays, as well as duplication of work and
overlapping of effort.

Benefits Specialization
It is the process of organizing groups and sub-divide the various activities and
jobs based on the concept of division of labor. This helps in the completion of
maximum work in minimum time ensuring the benefit of specialization.
Promotes Effective Communication

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Organizing is an important means of creating coordination and communication
among the various departments of the organization. Different jobs and
positions are interrelated by structural relationship. It specifies the channel
and mode of communication among different members.

Creates Transparency
The jobs and activities performed by the employees are clearly defined on the
written document called job description which details out what exactly has to
be done in every job. Organizing fixes the authority-responsibility among
employees. This brings in clarity and transparency in the organization.

Expansion and Growth

When resources are optimally utilized and there exists a proper division of
work among departments and employees, management can multiply its
strength and undertake more activities. Organizations can easily meet the
challenges and can expand their activities in a planned manner.

2.1.3 PRINCIPLES OF ORGANISATION

1. Principle of Objective:
An organisation and every part of it should be directed towards the
accomplishment of basic objectives. Every member of the organisation should
be well familiar with its goals and objectives. Common objectives create
commonness of interests.

In the words of Urwick, “Every organisation and every part of the organisation
must be an expression of the purpose of the undertaking concerned.” The
application of this principle implies the existence of clearly formulated and
well-understood objectives. An organisation structure must be measured
against the criterion of effectiveness in meeting these objectives.

2. Principle of Division of Work:

The total task should be divided in such a manner that the work of every
individual in the organisation is limited as far as possible to the performance of
a single leading function. The activities of the enterprise should be so divided
and grouped as to achieve specialisation.

However, the principle of division of work does not imply occupational

specialisation. The allocation of tasks should be on the basis of qualification
and aptitude and should not make work mechanical and boring.

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3. Principle of Unity of Command:
According to this principle, an employee receives orders only from one superior
officer and none else. He is responsible only to one particular superior and to
none else in the organisation. If two superiors exercise their authority over the
same individual or department, there is going to be confusion.
In order to expedite decisions and, at the same time, to prevent the
consequences of dual command, Urwick has recommended the device of the
Gang Plank. It means that two or more supervisors may authorise their
immediate subordinates to settle directly certain matters but require that they
will be kept informed.

The principle of unity of command, in other words, reduces to “no man will
serve to two masters”. It avoids conflict and frictions arising out of dual
commands. It also helps effective communication.

4. Principle of Span of Control:

No executive should be required to supervise more subordinates than he can
effectively manage on account of the limitation of time and ability. There is a
limit on the number of subordinates that an executive can effectively supervise.
However, the exact number of subordinates will vary from person to person
depending upon the nature of job, and basic factors that influence the
frequency and severity of the relationships to be supervised.The Span of
Control is the number of subordinates that a manager can supervise.

5. Principle of Scalar Chain:

Authority and responsibility should be in a clear unbroken line from the
highest executive to the lowest executive. As far as possible, the chain of
command should be short. The more clear the line of authority from the
ultimate authority in an enterprise to every subordinate position, the more
effective will be decision-making and organisation communication.

6. Principle of Delegation:
Authority delegated to an individual manager should be adequate to enable
him to accomplish results expected of him. Authority should be delegated to
the lowest possible level consistent with necessary control so that co-ordination
and decision-making can take place as close as possible to the point of action.

7. Principle of Absoluteness of Responsibility:

The responsibility of the subordinate to his superior is absolute. No executive
can escape responsibility for the delegation of authority to his subordinates.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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8. Principle of Parity of Authority and Responsibility:
Authority and responsibility must be co-extensive. The responsibility expected
for a position should be commensurate with the authority delegated to that
position, and vice-versa. In addition, authority and responsibility should be
clearly defined for all positions.

9. Principle of Co-Ordination:
There should be an orderly arrangement of group efforts and utility of action in
the pursuit of a common purpose. This would help in securing unity of effort.

10. Principle of Flexibility:

The organisation must permit growth and expansion without dislocation of
operations. Devices, techniques and environmental factors should be built into
the structure to permit quick and easy adaptation of the enterprise to changes
in its environment. Good organisation is not a straight jacket.

11. Principle of Efficiency:

An organisation is efficient if it is able to accomplish predetermined objectives
at minimum possible cost. An organisation should provide maximum possible
satisfaction to it members and should contribute to the welfare of the
community. The principle of efficiency should be applied judiciously.

12. Principle of Continuity:

The organisation should be so structured as to have continuity of operations.
Arrangements must be made to enable people to gain experience in positions of
increasing diversity and responsibility.

13. Principle of Balance:

The various parts of the organisation should be kept in balance and none of the
functions should be given undue emphasis at the cost of others. In order to
create structural balance, it is essential to maintain a balance between
centralisation and decentralisation, between line and staff, etc. Vertical and
horizontal dimensions must be kept in reasonable balance by ensuring that the
structure is neither too tall nor too flat.

14. Principle of Exception:

Every manager should take all decisions within the scope of his authority and
only matters beyond the scope of his authority should be referred to higher
levels of management. In other words, routine decisions should be taken at
lower levels and top management should concentrate on matters of exceptional
importance.
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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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2.1.4 TYPES OF ORGANISATION STRUCTURE
The following are the various types of organization structure:
1. Line Organization
2. Functional Organization
3. Line and Staff Organization
4. Committee Organization
5. Project Organization

1. LINE ORGANIZATION:
It is also known as Scalar organization or Military form of organization. It is the
oldest form of organization. Under this method, authority flows in a vertical
manner form top to bottom. Each position in the structure has an authority
over a lower position. Line executives are directly involved in the performance
of the activities of an enterprise and are called the ‘doers’.

Line organization is of two types, viz., Pure Line Organization and

Departmental Line Organization. Under pure line organization all perform same
type of work at any level. On the other hand, under departmental line
organization, each department performs different type of work.

Merits of Line Organization:

1. It is simple to understand and easy to establish.
2. Each individual knows clearly to whom he is responsible.
3. It provides unit of command.
4. It helps in taking quick and effective decisions.
5. It ensures personal contact between workers and manager.
6. It ensures discipline between the employees and employer.

Demerits of Line Organization:

1. There is concentration of authority at the top level. It leads to autocratic
control.
2. Communication flows from top to bottom. There is no participation of
workers.
3. It lacks specialization as a line manager is responsible for both planning
and execution of work.
4. Overburdens the top executives and they cannot perform their work
properly.

Suitability:
In spite of these limitations, it is suitable for small concerns where there are
fewer levels of authority.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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2. FUNCTIONAL ORGANIZATION:
This concept was devised by F.W. Taylor. It is based on the functional
foremanship. Under this method, the structure of the enterprise is classified
into different functional areas. Each functional area is headed by a specialist
who has full control of that function over the organization and gives
instructions direct to the personnel, rather than through the chain of
command.

Each chief manager is in charge of a particular activity. For example, chief

finance manager is in charge of finance function of all the three units. Thus, he
enjoys functional authority over the employees of other departments also.

Merits of Functional Authority:

1. It helps to reap the benefits of specialization
2. Subordinates can make use of the expertise of functional experts
3. The burden of top executive is reduced as each expert looks after only
one function.
4. It leads to joint supervision by different experts
5. There is expert and better control can be exercised by functional experts
6. It provides better scope for expansion and diversification

Demerits of functional organization:

1. It is against the principle of unity of command as the subordinate is
responsible to a number of superiors
2. Lower level people are not given an opportunity for all round experience
and hence they do not fit into top level positions.
3. The complex nature of functional organization with its cross relationship
creates a confusion among workers
4. The decision making is very slow as involvement of many experts is
required
5. There is a scope of lack of coordination as each specialist thinks of only
his function and ignores other functions.

Suitability:
It is suitable to all kinds of organization provided applied at higher levels. At
lower levels too many cross relationship creates confusion throughout the
organization.

3. LINE AND STAFF ORGANIZATION:

Line and staff organization is a combination of functional and line structure.
Line authority flows from top to bottom and the line executive is directly
concerned with the accomplishment of primary objectives. They are actual
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doers and generally do not possess specialized knowledge to solve complex
problems.

To provide specialized assistance to line mangers, staff positions are created.

Staff means a stick in the hand for support. Thus, staff helps the line
executives in their work. They play the role of an advisor.

The distinction between line and staff though not rigid, is important because
staff must be provided if the growing organization is to accomplish its goals.
The differentiation between line and staff is necessary for the following reasons.

In line and staff organization, the line authority remains the same in the
organization. But staff executives are attached with line executives who help
them by providing necessary advice on important matters. Staff executives
have no power to command subordinates in other departments.

It is clear that PA to Managing Director, Personnel Manager and Budget

Manager play role of staff executives. In most business units, staff executives
are used for collecting data required for taking decisions and to provide expert
advice to line managers.

Merits of Line and Staff Organization:

1. This combination provides for specialized knowledge where staff
executives guide and advise line executives.
2. It reduces the burden of line executives because staff carries on detailed
investigation of each activity.
3. Better decisions are possible as expertise of the staff is used.
4. It is flexible in the sense that staff can be added to line executives.

Demerits of Line and Staff Organization:

1. Always it creates confusion as it is very difficult to define the authority
relationship between line and staff.
2. Staff executives are not accountable and they may not take the tasks
seriously.
3. There is always constant conflict between line and staff because the
nature of their functions differs from each other.

4. COMMITTEE ORGANIZATION:
A committee is a group of persons who consciously and deliberately formed to
discuss a problem and provide solutions to overcome it. They meet on an
organized basis to discuss and deal with the matter placed before it.

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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The following are the characteristics of a committee:
a. A committee is a group of people. There must be a minimum of two
people and there is no limit for maximum.
b. The scope of committee is limited to the extent of task assigned to it.
c. Democratic principle of ‘One man one vote’ is followed
d. It may be executive committee or non-executive committee. Executive
committee takes decisions and implements them. Non-executive
committee only provides suggestions and recommendations.

Merits of Committee Organization:

1. Pooling of knowledge and experience- Knowledge and experience are
pooled together to take joint decisions on the principle of two heads are
better than one.
2. Motivation through participation- Members are allowed to participate
in the decision making process. It makes them more committed to the
decision.
3. Effective and proper coordination- Through coordination of experts
bringing together diverse viewpoints many problems could be solved
effectively.
4. Tool for management development- Every member has an opportunity
for learning from the experience and mistakes of others. Thus it helps for
management development.
5. Representation of diverse interest groups- When different interest
groups are represented in a committee, conflicting views can be easily
settled through motivation and participation.
6. Effective communication- By convening a committee any information
can be easily passed on the all members of the organization.
7. Consolidation of authority- It enables management to consolidate
splintered authority. This is helpful to a manager who has limited
authority with which he cannot solve the problem without simultaneous
exercise of authority by other managers related to the problem.

Demerits of Committee Organization:

1. The committee is one made of the unfit, selected by the unwilling to do
the unnecessary.
2. The excessive or lack of use of committees creates problems to the
management as follows:
3. It is costly and time consuming activity. The cost incurred is far below its
benefits.
4. Committees do not help in taking quick decisions.

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 5. To arrive at unanimous decisions agreements are arrived at on the basis
of a compromise which may not be really a right decision, Compromise is
not the solution.
6. When unanimous decisions are taken by dominant members, a few
persons may accept them under pressure.
7. Committees fix group responsibility where no individual can be made
accountable. This leads to inefficiency.
8. Committee is a tool to misuse to delay or avoid or to take unpleasant
decision.

5. PROJECT ORGANIZATION:
The use of the project organization has increased in the last few years. It is
currently being employed in numerous undertakings engaged in the execution
of construction activities, turnkey projects and research and development
projects. The project organization can take various forms, but the important
characteristic that distinguishes it from other forms is once the project is
completed the organization is disbanded or phased out.

By definition, project management involves, “the gathering of the best available

talent to accomplish a specific and complex undertaking within time, cost and
quality parameters, following by the disbanding of the team upon completion of
the undertaking”.

The group members then go on to another project, return to their permanent

home department in the organization, are given jobs elsewhere in the
organization, or, in some cases, are phased entirely out of the firm.

Merits of Project Organization:

1. It allows maximum utilization of specialization
2. It is tailor-made to meet specific needs of a particular project
3. It provides more flexibility in handling resources by allocating them when
they are needed.

Demerits of Project Organization:

1. It has a limited time and creates a feeling of uncertainty and insecurity
among people in the organization.
2. Lack of proper vertical authority makes the job of a project manager
difficult. He is responsible for the completion of the project but without
authority over people in the project.
3. Undue influence of specialists from diverse field makes the decision
making very difficult.
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6. MATRIX ORGANIZATION:
It is a combination of project organization and functional organization.
“Any organization that employs a multiple command system that includes not
only multiple command structure but also related support mechanism and an
associated organization culture and behaviour pattern is Matrix Organisation.” —
Paul R. Lawrence and Stanley M. Davis
It is clear from the above that matrix organization leads in overlapping of
command, control and behaviour pattern.

Merits of Matrix Organization:

1. It focuses attention on a single project and facilitates better control.
2. It is more flexible than traditional organization
3. It provides motivation for the people engaged in a project
4. It leads to better utilization of services of professionals.

Demerits of Matrix Organization:

1. People receive instructions and order both from functional and project
managers. Thus, it violates unity of command.
2. The complex relationship leads to confusion and makes coordination
difficult. Subordinates are not in a position to identify their superiors.
3. In the absence of mutual trust and confidence, in sharing the resources
and in taking joint decisions, conflicts arise.
4. As people are drawn from various departments, there is a lack of
commitment and morale is low.

2.1.5 SPAN OF CONTROL

Span of Control simply refers to the number of employees that a manager can
supervise effectively at any given time without compromising his or her own
performance, or that of the employees he or she manages.
Generally speaking, the effort to identity a specific number or range of
subordinates has not been productive. In practice, the number varies widely.

Types of Span of Control

The span of control can be of two type’s i.e. wide span of control and narrow
span of control.
1. Wide Span of Control: Wide span of control means a manager can supervise
and control effectively a large number of persons at a time. It is because shorter
span of control leads to rise in number of steps or levels in vertical chain of
command which leads to tall organization. Wide span of control has features as
it leads to maximized communication; better supervision; better co-ordination;

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suitable for routine and easy jobs; prompt response from employees; less
overhead cost of supervision and greater ability to respond to environmental
changes. A wide span of control results in an organization that has relatively
few levels or steps of management which can be termed as flat or horizontal
organization.

Wide span of control is suitable when people are competent, prefer low
supervision and tasks are similar and standardized. Simon pleads for wider
span of control. It is because shorter span of control leads to rise in number of
steps or levels in vertical chain of command which leads to tall organization.
This makes vertical communication difficult and indirect. Wider span of control
leads to maximized communication.

To make the span of control wider Delayering Process is used. In this process,
the span of control is increased which results in reduction of the number of
managers and layers in the organization. Delayering helps in improving
communication from the top and saving cost.

2. Narrow Span of Control: When the work and authority is divided amongst
many subordinates and a manager supervises and controls a small group of
people, then narrow span of control exists. It adds more layers or levels of
management and so leads to tall organization.

Main features of narrow span of control are as specialization work can be

achieved; work which is complex and requires tight control and supervision,
there narrow span of control is helpful; messages can be distorted; co-
ordination is difficult to achieve; communication gaps can come; more
overhead cost of supervision and no quick response to environmental changes.

When the span of control is narrow then the structure of the organization is tall
and there may be ineffective, inaccurate and incomplete communication which
could lead to decreased morale, increased executive payroll and red-tapism.

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 SPAN OF CONTROL

Factors that Determine the Best Span for a Manager:

1. Ability of subordinates: when the subordinates are enough competent to
complete the allotted work easily, the manager will not be required to give more
attention to them and more subordinates can be supervised. But, when if
subordinates are less competent, the manager will be required to devote more
time for supervision and span of control will be narrow.

2. Degree of Delegation: A manager who delegates more authority of taking

decisions to his subordinates can supervise a greater number of subordinates
and enlarge the span of control. But, if a manager keeps more authority of
taking decisions with him can supervise a small number of subordinates.

3. Capability of the Supervisor: The qualities and qualifications of the

supervisor affect the span of control to a great extent. If the supervisor is
competent enough, he can easily supervise a large number of employees and
span of control can be wider. In case when supervisor is new, less competent
and has less administrative ability, the span of control will be narrow.

4. Age of the Organization: The span of control is wider in old organizations

than in newer organizations because in old organizations things get stabilized.

5. Nature of Work: As the work is more routine, the span of control can be
wide. The similarity and simplicity of functions can be tackled easily while if

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work is of complex nature, the supervisor’s span of control will be narrow. So,
nature of work determines the span of control.

6. Geographical Dispersion: If 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. A manager can supervise easily the work of a
large number of subordinates, if they are located in one compact place.

7. Techniques of Supervision: Supervision Techniques such as delegation,

planning, programming, the use of staff specialists, etc., help extend a
manager’s span of control.
Span of control can be extended where the direction of operations is done more
by goals and objectives rather than by ever-present supervisor. Also, an
administrator can broaden his span of control by the use of staff specialists
who can provide another set of legs, eyes and ears for the executive.

8. Communication System: A well organized and sensitive proper

communication system in an organization will make possible a larger span of
control than a power and ill-organized system of communication.

9. Use of Standing Plans:- It reduces the work load of managers, as a result

span of control increases considerably.

10. Use of Communication Technology: In modern times, because of the use

of automation in administration, of control has widened. Further, the
application of mechanization to such activities as accounting and computation
work had increased the span of control.

11. Level of Management: The higher the superior is in the organizational

hierarchy, the narrower the span of control. Based on empirical studies,
Newman suggested that executives in higher echelons should have a span of
three to seven operating subordinates, whereas the optimum range for first-line
supervisors of routine activities is usually from fifteen to twenty employees.

There are other factors such as well-defined authority and responsibility;

availability of staff services; economic restrictions; superior-subordinates
relationship; degree of centralization; financial position of the organization;
clarity of plans and responsibilities etc which also affect the span of control.

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Formula of V. A. Graicunas
The strongest arguments that have advanced to support a limited span of
control have a theoretical rather than a practical basis. Graicunas, the French
mathematician and consultant, puts forward a theoretical formula for
determining the span of control.
The possible total number of “relationships”, according to Graicunas, can be
found from the following formula-

Where, N- number of subordinates

According to this formula, where there are only two subordinates, there could
be six relationships, where there are- subordinates, there could be as many as
one thousand and eighty relationships, all of which could demand the attention
of the supervisor. This formula is quantitative rather than qualitative.

2.1.6 CENTRALISATION AND DECENTRALISATION OF

AUTHORITY
CENTRALISATION
Centralisation of authority denotes the concentration of authority in a few
hands, generally at the top of the organisational hierarchy.
Decisions are taken at the top by a few, and communicated down to the lower
rungs of the management. That’s means that all operational and policy
directions are given by a few at the top management level while those below
have to carry out the instructions.

Factors Responsible for Centralisation:

(1) To Facilitate Personal Leadership:
Where company’s size is not large, personal leadership plays an important role
particularly at the early stage of its growth. Under such a form of organisation,
personal leadership will have a potent influence retaining power of authority
and responsibility at the central point. The existence and success of new but
small enterprises may depend upon singleness and flexibility.

He is a talented leader, who, with all powers in his hand, not only commands
but takes quick decisions, and imaginative action. He further sees that his
small centralised company often shows distinctive flair in adopting new
fashionable style, production pattern and new techniques is sales. All these
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may put his concern at a competitive advantage as against those that are
decentralised. Therefore, centralisation in a small company is adopted giving
full scope to a dynamic leader.

(2) To Provide Integration:

For the accomplishment of operation of the enterprise, it is found by many
companies that integration of activities is an essence of operation and tins
objective can be fulfilled only when there is centralisation in the company.
Common objectives can be fulfilled by integrating different activities. This is
possible by issuing central directions; hence is the need of centralisation.

(3) To Promote Uniformity of Action:

When a company desires that it’s all branches must have a uniform policy as
regards purchases, sales, advertisements etc. and feels that there should be
uniformity in existence, there must be centralisation of the appropriate
decisions.
Centralisation is practiced largely where:
(a) Uniformity of action is desired particularly in a multi- unit company;
(b) Uniformity of action for handling personnel matters is important;
(c) Framework within which salary, job classifications and salary ranges are to
be established;
(d) Uniformity in the goods offered for sale is necessary; buying of such goods is
centralised;
(e) To schedule production more effectively in its own factories, buying of
materials is centralised;
(f) Uniformity of these, quality as to type of advertisement art work, copy and
design etc. to be ensured on uniform basis for advertisement programme.

(4) To Handle Emergencies:

Emergency decisions that are likely to affect all units of the company are made
by the central authority to maintain proper equilibrium between executives and
subordinates of all different units. As we find that the competition is more
acute or the emergency is urgent and immediate, the need for centralised
decision making is also great.

Advantages of Centralisation
(i) Symbol of Prestige:
Because of centralized power, the chief executive of the enterprise will get more
power and importance, which is a Prestige Symbol for him.

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(ii) Uniformity in Policies, Decisions etc.:
As policies, decisions and practices are made at top level of the enterprise,
there will be uniformity in them.

(iii) Lower Costs:

Few number of specialist staff are required under centralization as they are
pooled up centrally and fewer physical resources are required which aims at
reduction in operating costs.

(iv) Better Specialists:

Centralization aims at use of few highly qualified specialists, as the quantum of
their work and scope are adequate to support and challenge such executives.

(v) Tighter Control:

Under centralization, all the facts are coming to the notice of the top executive.
He himself can use his authority to set the things right. In this way,
centralization aims at greater and tighter control.

Disadvantages of Centralisation
1. Remote control- Since the employees are already loaded with extra work,
better supervision becomes difficult. As a result, absence of better control and
supervision leads to slackness in work.

2. Delay in communication and decision-making- Though centralised

decision making is supposed to be free of red tape it is seen that at times
decision-making is affected because of delay in information flow from multiple
management layers to the centralised command. Quick decisions especially
those at the ground level cannot be taken because decision-making authority
does not rest with the subordinates. They can only communicate information
and wait for the decision. This affects the working of the business organisation.

3. Lack of loyalty- In centralisation, the subordinate does not take any

initiative at work because they are expected to perform only a given set of
duties. They go on working like a machine in such case and lack any
enthusiasm. These factors prove a roadblock in the development of employee
loyalty towards the organisational work.

4. No secrecy – In a centralised set-up, orders flow freely from one place and
reach all. Hence, there is no secrecy.

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5. Lack of specialisation- Centralisation is marked by a lack of specialisation.
In the absence of specialisation, the centralised leadership has to be very
vigilant and extremely efficient regarding business decisions. This decision-
making becomes all the more challenging when the power of centralised
leadership rests in just one person. Chances of making the wrong decision are
always present in such situations.

6. Very heavy burden on central leadership- In the centralised system, the

responsibility of running the organisation rests solely at the top. This could be
one body or just one person who has to outline the business vision and
mission, set out business objectives and then after motivate the employees
towards attaining these goals. These responsibilities place a very heavy burden
on the centralised leadership.

DECENTRALISATION:
Decentralisation of authority may be defined as “a situation in which ultimate
authority to command and ultimate responsibility for results is localised as far
down in the organisation as efficient management of the organisation, permits.
It is carried out by creating; under a central organisation, a number of
autonomous units with mandates to operate as independent units.”

The degree of Decentralisation is determined by:

(a) What kind of authority is delegated?
(b) How far down in the organisation it is delegated, and
(c) How consistently it is delegated.

Advantages of Decentralisation:
(1) To Ease Burden on Top Executive:
Centralisation of authority puts the whole responsibility on the shoulders of
the executive and his immediate group. This will put the executive in an
embarrassing position, because he is over-burdened with each and every
aspect of management and, therefore, will hardly find any time to think over
and plan ahead, for organisational problems, co-ordination and business
controls.
Proliferation of personal staff by the executives is an indication that he is tired
of his job and would like to get assistance from his colleagues to complete part
of his workload. When this has been practised very often, there will be a
general discontent among his assistants, since they are to do the work without
having any authority.
Centralised executive also forms committee to get rid of his work-load. Through
this method, he brings together experienced managers who are well qualified to
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take approximate decisions. This is how the executive tries to lessen the
burden of his work by introducing systematic decentralisation.

(2) To Facilitate Diversification:

Diversification of products or marketing is possible when divisionalisation is
generally based on the principle of decentralisation. Even without
diversification, a company can grow very large either in sales or employees and
can be managed by one man, provided problems presented to him are limited
in respect to his capacity and are not complex and varied. This is possible
again only when one line of business is prevailing.
But where a company deals in varied products such as chemicals, feeds and
pharmaceuticals etc., one man’s control over all the different aspects of
marketing these products will not be effective. So, in order to grow markets for
these varied products, decentralisation must be adopted to such point where
skilled and experienced judgement can be brought fully to solve the major
problems.
Thus we find that it is diversity, rather than size, which is mainly responsible
for decentralisation. This conclusion holds good in any type of company
irrespective of its size.

(3) To Provide Market and Product Emphasis:

When a company is not in a position to satisfy its customers by supplying the
products and fails very badly to face the competition, it is ascribed to the
inefficiency of a highly centralised management. In a competitive market,
customers expect salesman to offer them a new style, lower prices, qualitative
goods etc. without bothering themselves with the difficulties of the top
management.
Therefore, a customer can be given full satisfaction in respect of quality,
delivery, novelty and prices of products he intends to purchase if different
departments are formed with full responsibility and authority. This ends the
process of centralisation and given birth to decentralisation.

(4) To Encourage Development of Managers:

This method provides no opportunity to others either at the middle or lower
level management to develop their thinking power nor gives them a chance to
show their ability, skill or efficiency in handling matters independently.
The development of managers is possible only by giving them a management
job to do and delegating to them the authority to make important decisions. It
is also found that decentralisation gives managers freedom to try new methods
and techniques and a chance to every individual to learn how to lead. Further,

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decentralisation helps managers to develop their skill, because it spreads
decision -making to more positions.

(5) To Improve Motivation:

The large-scale decentralisation stimulates the formation of small cohesive
groups. Where the organisation is decentralised, leadership in this type of
organisation demands a high degree of participation, constant effort to
communicate, and continuing personal interest in the welfare of the members
of the company. Under decentralisation scheme, the executive will be further
motivated since he gets opportunity to work closely with his subordinates and
is, therefore encouraged to guide them and also to appraise their performance.

Disadvantages of Decentralisation
1. Costly – Decentralised management system requires greater financial
resources because more trained and experienced employees are needed to
ensure effective decentralisation, especially at the lower level, which grows up
the administrative cost.

2. Uniform policies not followed – It has been seen that there is an

inconsistency in the level of policies and procedures that are followed.
Decentralisation fails to bring about uniformity when it comes to framing and
following of policies and procedures. These are followed to varying extent by
managerial personnel who work according to their talents and experience.

3. Problem of coordination – As an organisation expands and brings in

greater degree of decentralisation; coordination across the organisation
becomes an ever growing problem. As authority becomes more widely
dispersed, controlling becomes unwieldy. Problems of coordination arise.

4. Conflict of interest – As decentralisation sets in and each department is

required to function as an independent and profit making center there is
increasing pressure on the departmental heads to make their department
perform. This creates conflicts of interest between different departments.

5. Not practicable for small organisations – Decentralisation is expensive

both in terms of manpower and administrative costs. It requires at times
specialised staff. All this makes it impracticable for a small organisation with
limited financial resources.

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 DIRECTING
2.2.1 DEFINITIONS
Planning and organising provide foundation to the organisation and direction
initiates action towards achievement of the goals. Having appointed the work
force, managers ensure they work to achieve the organisational standards of
performance and in the course of doing so, satisfy their personal wants and
needs also. They act as catalysts for achieving organisational and individual
goals.

They act as agents who influence the behaviour of employees to achieve the
organisational goals and also ensure that organizational plans and policies
satisfy the interests of the workforce. Managers, thus, direct employees’
behaviour towards organisational and individual/group goals.

Directing is “a managerial function that involves the responsibility of managers

for communicating to others what their roles are in achieving the company plan.”
— Pearce and Robinson

Directing is “getting all the members of the group to want and to strive to achieve
objectives of the enterprise and of the members because the members want to
achieve these objectives.” — Terry and Franklin

2.2.2 IMPORTANCE
Well executed direction function has the following merits:
1. Initiates action:
Direction initiates action that motivates people to convert the resources into
productive outputs. It gives substance to managerial functions of planning,
organising, staffing and controlling. People learn to manage the resources in
the most effective way that results in their optimum utilisation.

2. Creates a sound work environment:

If directions are issued in consultation with employees (participative), it creates
an environment of understanding where people work to their maximum
potential, willingly and enthusiastically to contribute towards organisational
goals.

3. Develops managers:
Managers who are personally motivated to work can also direct others to work.
Managers develop their skills and competence to direct others to follow. If
managers and employees work in harmony, it promotes skills of the employees

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and develops managers to assume responsibilities of higher levels in the
organisation.

Motivation, leadership and communication help in bringing people together.

They exploit employees’ talent to the fullest and also provide scope for their
skill enhancement. This is beneficial for both the employees and organisation.
Direction, thus, prepares future managers.

4. Behavioural satisfaction:
Since direction involves human behaviour and psychology, employees feel
behaviourally satisfied and personally inspired to achieve organisational goals.

5. Increase in productivity:
Personally satisfied employees contribute towards output and efficiency of the
organisation. Direction gets maximum out of subordinates by exploiting their
potential and increasing their capabilities to work.

6. Achieves coordination:
Directing aims at continuous supervision of activities. It achieves coordination
by ensuring that people work towards planned activities in a coordinated
manner. It integrates the actions of employees that increases their
understanding of mutual interdependence and their collective effort to achieve
the organisational goals. It also helps to harmonies individual goals with
organisational goals.

7. Facilitates control:
Coordination brings actual performance in conformity with planned
performance. The controlling function is, thus, facilitated through effective
direction.

8. Facilitates change:
Direction helps in introducing change in the organisation structure and
adapting the organisation structure to external environment. Organisation
operates in the society as an open system and has to accept social changes for
its survival and growth. People are not easily receptive to changes. Direction
helps in changing attitude of people towards change and accepts it as a way of
life.

9. Facilitates growth:
Organisation open to change is responsive to growth. Direction harmonizes
physical, financial and human resources, balances various parts of the
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organisation and creates commitment amongst people to raise their standards
of performance.

Elements of Directing
Supervision
Supervision means when senior employees of the organization guiding,
commanding and regulating the efforts of employees towards the goals. it direct
involves personal contact with the employees. Supervision is most important
for the execution of plans.

Communication
Communication means the transfer of information from one to another person
and it involves the interchange of information and thoughts create mutual
understanding between sender and receiver. it creates a flow of the
information, from the top-level to low level and low level to top level. So
communication involves a continuous process.

Leadership
According to Keith Davis, “Leadership is the ability to persuade others to seek
defined objectives enthusiastically. It is a human factor which binds a group
together and motivates it towards goals.” Leadership process consists of three
factors—leader, the follower, and other variables.

Motivation
Motivation means when someone creates an inner force for doing work and
increase willpower of doing work. Everyone should clearly understand that
motivation is the psychological process. A effective manager should know the
process of motivation and how will employees be motivated. Because it helps to
create better workplace and improves productivity.

2.2.3 PRINCIPLES OF DIRECTING

Direction function deals with people. Understanding the behaviour of people is
a complex phenomenon and directing them to contribute to organisational
goals with a common vision is, thus, a complex task.
However, the following principles help managers perform the complex function
of direction:
1. Appropriate selection of employees:
Direction is related to the function of staffing. While selecting employees,
managers should ensure that people can adjust to the organisation structure
and willingly carry out the directions of the superiors. Chances of demotions
and separations should be reduced to as low as possible. It is easy to direct
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people who are committed to their task and see organisational goals as a
means to achieve the individual goals.

2. Participation:
Since direction influences the behaviour of others, managers follow the
principle of participation (while preparing the directives). If those who carry out
the directions participate in making policies regarded directions (motivational
plans, leadership styles, communication pattern), direction function will be
able to accomplish its purpose effectively.

3. Communication:
To make direction effective, managers ensure two-way flow of communication
between them and the employees. Employees should be allowed to express
their feelings to superiors. An effective system of communication ensures
passing of orders and instructions by superiors which are smoothly carried by
subordinates and expressing problems and grievances by subordinates to
superiors which are solved by the superiors. Direction function aims at
maximising the interest of not only self but also others in the organisation.

4. Counselling and guidance:

When employees face problems in carrying out their tasks, managers provide
them the necessary counselling and guidance. This makes direction effective as
employees can approach the superiors for counselling whenever required. It is
important that subordinates carry out the instructions the way they are
intended by the superiors. There should be complete understanding of
communication between the superiors and subordinates. Doubts and queries
of subordinates should be cleared by superiors through proper guidance and
counselling.

5. Unity of command:
The basic principle that makes direction effective is one boss for one
subordinate i.e., all directions, orders and instructions should come from one
boss. If subordinate receives instructions from more than one superior, he may
not be able to carry out the instructions of any of them. This will create
confusion and conflicts to the dissatisfaction of both, the superiors and
subordinates.

However, in the contemporary business environment characterised by extreme

specialisation, it may not always be possible to follow the principle of unity of
command. Functional organisation, project organisation, matrix organisation
have the system of dual command and even multiple command.
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The direction function should ensure that employees are able to maintain
balance amongst the instructions issued by bosses of different functional
areas. Direction function cannot be performed in an environment of
restrictions. There are different techniques of direction (authoritative,
participative, free reign) which are followed depending upon the need of the
situation.

6. Unity of direction:
One plan or related set of activities should have one head. All activities related
to marketing must be headed by the marketing manager and those related to
personnel should be headed by the personnel manager. This avoids duplication
of actions and instructions and results in optimum use of scarce resources.

7. Synthesis of conflicting objectives:

Every group of people, whether owners, managers, or workers has personal
interest as supreme while carrying out the organisational activities. This can
lead to conflicting interests which may hamper the organisational growth.
Effective directions, motivation, guidance and counselling make people
understand that their goals are subordinate to organisational goals.

This enables different groups of people move towards the same direction. The
conflicting objectives are, thus, synthesized into a single plan, one objective,
one direction and one goal, that is, to maximise the organisational goals. If
subordinates view organisational interest as supreme, organisation also takes
care to look after the interest of subordinates.

8. Direct supervision:
Direct supervision of employees helps them know deviations in their
performance and ways to remove them. This also maintains direct contact
between superiors and subordinates and increases interest in their work and
confidence and loyalty in their supervisors.

9. Contribution:
Direction aims at getting maximum contribution from employees by exploiting
their talent to the best. If employees have the potential to contribute more than
their present performance, direction helps in enhancing the contribution
towards organisational objectives.

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10. Use of informal organisation:
Though directions are issued in a formal organisation structure, managers
should make use of informal organisation also to speed up the process of
direction. Information travels faster amongst informal groups and directions
can be effectively carried out because people can freely interact with each
other.

11. Follow-up:
Managers should receive constant feedback on their directions to know
whether or not employees are working according to their directions. If
employees have problems, they should solve their problems and if need arises,
even revise the directions.

2.2.4 CHARACTERISTICS OF DIRECTING

1. Directing Initiates Action
Other functions prepare a base or setting of action, i. e., how action has to be
carried on the directing initiate or start action.
By giving directions or instructions the managers get the work started in the
organisation.

2. Pervasive Function
Directing is required at all levels of organization. Every manager provides
guidance and inspiration to his subordinates.

3. Continuous Activity
Direction is a continuous activity as it continuous throughout the life of
organization.

4. Human Factor
Directing function is related to subordinates and therefore it is related to
human factor. Since human factor is complex and behaviour is unpredictable,
direction function becomes important.

5. Creative Activity - Direction function helps in converting plans into

performance. Without this function, people become inactive and physical
resources are meaningless.
Executive Function - Direction function is carried out by all managers and
executives at all levels throughout the working of an enterprise, a subordinate
receives instructions from his superior only.

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6. Delegate Function - Direction is supposed to be a function dealing with
human beings. Human behaviour is unpredictable by nature and conditioning
the people’s behaviour towards the goals of the enterprise is what the executive
does in this function. Therefore, it is termed as having delicacy in it to tackle
human behaviour.

CONTROLLING
2.3.1 DEFINITIONS
Controlling consists of verifying whether everything occurs in confirmities with
the plans adopted, instructions issued and principles established. Controlling
ensures that there is effective and efficient utilization of organizational
resources so as to achieve the planned goals. Controlling measures the
deviation of actual performance from the standard performance, discovers the
causes of such deviations and helps in taking corrective actions

According to Brech, “Controlling is a systematic exercise which is called as a

process of checking actual performance against the standards or plans with a
view to ensure adequate progress and also recording such experience as is
gained as a contribution to possible future needs.”

According to Donnell, “Just as a navigator continually takes reading to ensure

whether he is relative to a planned action, so should a business manager
continually take reading to assure himself that his enterprise is on right course.”

Controlling has got two basic purposes

1. It facilitates co-ordination
2. It helps in planning

2.3.2 NEED OF CONTROLLING

The need of controlling becomes clear from the following facts:
(1) Accomplishing Organisational Goals:
The controlling process is implemented to take care of the plans. With the help
of controlling, deviations are immediately detected and corrective action is
taken. Therefore, the difference between the expected results and the actual
results is reduced to the minimum. In this way, controlling is helpful in
achieving the goals of the organisation.

(2) Judging Accuracy of Standards:

While performing the function of controlling, a manager compares the actual
work performance with the standards. He tries to find out whether the laid

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down standards are not more or less than the general standards. In case of
need, they are redefined.

(3) Making Efficient Use of Resources:

Controlling makes it possible to use human and physical resources efficiently.
Under controlling, it is ensured that no employee deliberately delays his work
performance. In the same way, wastage in all the physical resources is
checked.

(4) Improving Employee Motivation:

Through the medium of controlling, an effort is made to motivate the
employees. The implementation of controlling makes all the employees to work
with complete dedication because they know that their work performance will
be evaluated and if the progress report is satisfactory, they will have their
identity established in the organisation.

(5) Ensuring Order and Discipline:

Controlling ensures order and discipline. With its implementation, all the
undesirable activities like theft, corruption, delay in work and uncooperative
attitude are checked.

(6) Facilitating Coordination in Action:

Coordination among all the departments of the organisation is necessary in
order to achieve the organisational objectives successfully. All the departments
of the organisation are interdependent. For example, the supply of orders by
the sales department depends on the production of goods by the production
department.

Through the medium of controlling an effort is made to find out whether the
production is being carried out in accordance with the orders received. If not,
the causes of deviation are found out and corrective action is initiated and
hence, coordination between both the departments is established.

2.3.3 CHARACTERISTICS OF CONTROL

1. Control is a Managerial Process: Management process comprises of five
functions, viz., planning, organizing, staffing, directing and controlling. Thus,
control is part of the process of management.

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2. Control is forward looking: Whatever has happened has happened, and the
manager can take corrective action only of the future operations. Past is
relevant to suggest what has gone wrong and how to correct the future.

3. Control exists at each level of Organization:

Anyone who is a manager, has to involve into control – may be Chairman,
Managing Director, CEO, Departmental head, or first line manager. However, at
every level the control will differ – top management would be involved in
strategic control, middle management into tactical control and lower level into
operational control.

4. Control is a Continuous Process: Controlling is not the last function of

management but it is a continuous process. Control is not a one-time activity,
but a continuous process. The process of setting the standards needs constant
analysis and revision depending upon external forces, plans, and internal
performance.

5. Control is closely linked with Planning: Planning and controlling are

closely linked. The two are rightly called as ‘Siamese twins’ of management.
“Every objective, every goal, every policy, every procedure and every budget
become standard against which actual performance is compared.

Planning sets the ship’s course and controlling keeps it on course. When the
ship begins to veer off the course, the navigator notices it and recommends a
new heading designed to return the ship to its proper course. Once control
process is over its findings are integrated into planning to prescribe new
standards for control.

6. Purpose of Controlling is Goal Oriented and hence Positive: Control is

there because without it the business may go off the track. The controlling has
positive purpose both for the organisation (to make things happen) and
individuals (to give up a part of independence for the attainment of
organisational goals.

2.3.4 STEPS IN THE CONTROLLING PROCESS,

Following are the steps involved into the process of control:
1. Establish the Standards:
Within an organization’s overall strategic plan, managers define goals for
organizational departments in specific, precise, operational terms that include

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standards of performance to compare with organizational activities. However,
for some of the activities the standards cannot be specific and precise.

Standards, against which actual performance will be compared, may be derived

from past experience, statistical methods and benchmarking (based upon best
industry practices). As far as possible, the standards are developed bilaterally
rather than top management deciding unilaterally, keeping in view the
organization’s goals.

Standards may be tangible (clear, concrete, specific, and generally measurable)

– numerical standards, monetary, physical, and time standards; and intangible
(relating to human characteristics) – desirable attitudes, high morale, ethics,
and cooperation.

2. Measure Actual Performance:

Most organizations prepare formal reports of performance measurements both
quantitative and qualitative (where quantification is not possible) that the
managers review regularly. These measurements should be related to the
standards set in the first step of the control process.

For example, if sales growth is a target, the organization should have a means
of gathering and reporting sales data. Data can be collected through personal
observation (through management by walking around the place where things
are happening), statistical reports (made possible by computers), oral reporting
(through conferencing, one-to-one meeting, or telephone calls), written
reporting (comprehensive and concise, accounting information – normally a
combination of all. To be of use, the information flow should be regular and
timely.

3. Compare Performance with the Standards:

This step compares actual activities to performance standards. When managers
read computer reports or walk through their plants, they identify whether
actual performance meets, exceeds, or falls short of standards.

Typically, performance reports simplify such comparison by placing the

performance standards for the reporting period alongside the actual
performance for the same period and by computing the variance—that is, the
difference between each actual amount and the associated standard.

The manager must know of the standard permitted variation (both positive and
negative). Management by exception is most appropriate and practical to keep
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insignificant deviations away. Timetable for the comparison depends upon
many factors including importance and complexity attached with importance
and complexity.

4. Take Corrective Action and Reinforcement of Successes:

When performance deviates from standards, managers must determine what
changes, if any, are necessary and how to apply them. In the productivity and
quality-centered environment, workers and managers are often empowered to
evaluate their own work. After the evaluator determines the cause or causes of
deviation, he or she can take the fourth step— corrective action.

The corrective action may be to maintain status quo (reinforcing successes),

correcting the deviation, or changing standards. The most effective course may
be prescribed by policies or may be best left up to employees’ judgment and
initiative. The corrective action may be immediate or basic (modifying the
standards themselves).

2.3.5 RESISTANCE TO CONTROL

Change management contains several strategies that help in facilitating the
smooth adoption of such changes.
One of the most important facets of change management is resistance to
change. It is simply human nature to counteract any changes and maintain the
status quo.
But since change is inevitable, instead of resisting changes the organization
must try to implement them with minimum hassle.

Resistance to change may be either overt or implicit. For example, employees

may react to a change in policies with outright rejection and protests.
They may even refrain from showing disapproval expressly, but they may do so
implicitly by not accepting changes. Managers must understand these
problems and help the employees adopt these changes smoothly.

2.3.6 DESIGN OF EFFECTIVE CONTROL SYSTEM

Managers are responsible for controlling in the organization and a manager
must improve the effectiveness of the organization’s control system; as can do a
great deal to improve the effectiveness of their control systems.
Controlling is the last step of management where how the implemented plan is
working is assessed and evasive actions are taken.

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9 principles of the effective control system are:
1. Matching Controls to Plans and Position
Control techniques should reflect the plans they are designed to follow.
Managers need the information that will tell them how the plans for which they
are responsible are progressing.
Controls should also be tailored to positions, i.e. they may differ in between
positions. Some control techniques, such as those involving standard hours
and costs, budgets, and various financial ratios, have general application in
various situations. However, none of these techniques are completely
applicable in any given situation. Managers should, therefore, be aware, of the
critical factors in their plans requiring control, and they must use techniques
and information suited to them.
Controls should also reflect the place in the organization wherein responsibility
for action lies, thereby enabling managers to correct deviations from plans.

2. Ensuring Flexibility to Control

Flexibility is another essential characteristic of an effective control system. This
means that the control system itself must be flexible enough to accommodate
the change. In other words, the controls should remain workable in the face of
changed plans, unforeseen circumstances, or outright failures.
The illustration may be of an organization whose diverse product lines require
101 different raw materials. The company’s inventory control system must be
able to manage and monitor the current levels of inventory for all the 101
materials.
When a change in the product line changes the number of raw materials
needed, or when the required quantities of any of the existing materials
change, the control system, should be able to accommodate the revised
requirements. Yet the seniors and probably other students with certain
problems may simply have to take the course and they will be accommodated
in its flexible computerized admission registration system.

3. Ensuring Accuracy
Control systems must also be accurate managerial decisions based on
inaccurate information that may prove costly and harmful.
If for example, sales estimates are artificially high, a manager might either cut
advertising on the assumption that it is no longer needed or increase
advertising to enhance the sale. In either case, the action may not be
appropriate.
Similarly, a manager, unaware of the hidden production cost, may quote a
sales price much lower than is desirable. The accuracy of control systems goes
a long way in preventing such damaging upshots.
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4. Seeking Objectivity of Controls
As far as possible the information provided by the control system should be
objective. If on the other hand, controls are subjective, a manager’s or an
executive’s personality may influence judgments of performance and make
them less accurate. Thus, the control system should ideally provide objective
information to the manager for evaluation and action.

5. Achieving the Economy of Controls

A limiting factor of control systems are their cost. So to be effective, controls
must be worth their cost. Although it sounds simple, it is very difficult to
accomplish. If tailored to the job and the size of the enterprise, control will
probably be economical.
To be precise, control techniques and approaches can be called efficient when
they bring to light actual or potential deviations from plans with the minimum
of cost.

6. Tailoring Control to Individual Managers

Control systems and information are, of course, intended to help individual
managers carry out their function of control. If they are not of a type that a
manager can or will understand, they will not be useful. What managers
cannot understand they will not be useful; what managers cannot understand
they will not trust; and what they do not trust they will not use.

7. Pointing up Exceptions
One of the best ways to make control effective is to make sure that it is
designed to point up exceptions. Controls that concentrate on exceptions from
planned performance allow managers to benefit from the time-honored
exception principle and detect those areas that require their attention.

8. Fitting the System of Control to the Organizational Culture

An effective control system must fit in with the organizational culture. For
example; if employees have been managed without allowing them any
participation in decision making, the sudden introduction of a permissive
control system will hardly succeed.

On the other hand, in an organization where people have been allowed

participation and freedom, the tight control system may fail to produce positive
results.

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9. Ensuring Corrective Action through the Control
An effective control system will disclose where failures are occurring and who
is/are responsible for the failures and it will ensure that some corrective action
is taken. Control is justified only if deviations from plans are corrected by an
appropriate authority. Taking the proper corrective action necessitates
sufficient authority to accomplish this task.

Conclusion
An effective control system is important for an organization to run properly and
achieve its goals. Any good control system will pass these 9 principles. If any
part of it is ignored; then controlling the organization’s resources will be very
difficult for managers.

2.3.7 TYPES OF CONTROL

The three organizational controls used in the controlling step of the
management process are: Feed-Forward Controls, Concurrent Controls and
Feedback Controls.

To review, controlling is the fourth step of the management process. In this

step, management develops measuring tools to use to determine whether
organizational goals are being met. Management also compares data to
measure for results and, if needed, takes corrective action.

There are several controls a manager can use to affect change and fluctuations
in the goals for the organization. Since problems can occur at any time during
a process, it is important to have a few different ways to manage issues. A
manager's toolbox should be equipped with three types of controls: Feed-
Forward Controls, Concurrent Controls and Feedback Controls.

Controls can focus on issues before, during or after a process. The best way to
understand the three different types of organizational controls is to think about
the controls as before, during and after decisions made by managers.

1. Feed-Forward Control
Feed forward controls are future-directed — they attempt to detect and
anticipate problems or deviations from the standards in advance of their
occurrence (at various points throughout the processes). They are in-process
controls and are much more active, aggressive in nature, allowing corrective
action to be taken in advance of the problem. Feed forward controls thus
anticipate problems and permit action to be taken before a problem actually
arises.
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Feed forward control devices are of two broad categories: Diagnostic and
Therapeutic.
i. Diagnostic controls seek to determine what deviation is taking (or has
taken) place. The sales manager, for instance, who receives the monthly sales
figures (showing sales quota results) is virtually working with a diagnostic
control device. It will no doubt indicate deviations from the acceptable standard
(i.e., what is wrong) but not why. Discovering the ‘why’ is often the most
difficult part of the process.

ii. Therapeutic controls tell us both what and why, and then proceed to take
corrective action. For example, engines having internal control system such as
an engine speed governor and automatic transmission are designed to take
necessary corrective actions when warranted by the conditions.
An example of utilisation of such control can be found in case of a manager
who conducts employee training using the coaching method. When, for
instance, the trainee is performing the task, the manager observes him closely
by standing on his side. The objective is to discover if any deviations from the
intended processes take place.

In case a deviation occurs, the manager observes it, diagnoses the reason for
the incorrect technique, and corrects the deviation immediately (i.e., without
any loss of time). Thus the control and correction take place during the process
itself, not after a few days.

2. Concurrent (or Prevention) Control

Concurrent control, also called steering control because it allows people to act
on a process or activity while it is proceeding, not after it is proceeding, nor
after it is completed. Corrections and adjustments can be made as and when
the need a rises. Such controls focus on establishing conditions that will make
it difficult or impossible for deviations from norms to occur.
An example of concurrent control is the development by companies of job
descriptions and job specifications. It may be recalled that job description
identifies the job that has to be done, thus clarifying working relationships,
responsibility areas, and authority relationships. It thus assists in preventing
unnecessary duplication of effort (work) and potential organisational conflict.

In a like manner job specification identifies the abilities, training, education

and characteristics needed of an employee to do the work. It is control device
inasmuch as it works to prevent a person who is totally unqualified and unfit
from being selected for the job, thereby saving money and time, and thus
precluding potential poor performance.
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3. Feedback Control
Feedback control is future-oriented. It is historical in nature and is also known
as post-action control. The implication is that the measured activity has
already occurred, and it is impossible to go back and correct performance to
bring it up to standard. Rather, corrections must occur after the act.
Such post-action controls focus on the end results of the process. The
information derived is not utilised for corrective action on a project because it
has already been completed. Such control provides information for a manager
to examine and apply to future activities which are similar to the present one.
The basic objective is to help prevent mistakes in the future.
For example, at the end of an accounting year, the manager should carefully
review the analysis of the budget control report.

2.3.8 CONTROL TECHNIQUES

There are various techniques of managerial control which can be classified into
two broad categories namely-
I. Traditional techniques
II. Modern techniques

I. Traditional Techniques of Managerial Control

Traditional techniques are those which have been used by the companies for a
long time now. These include:
1. Personal observation
2. Statistical reports
3. Break-even analysis
4. Budgetary control
1. Personal Observation
This is the most traditional method of control. Personal observation is one of
those techniques which enables the manager to collect the information as first-
hand information.
It also creates a phenomenon of psychological pressure on the employees to
perform in such a manner so as to achieve well their objectives as they are
aware that they are being observed personally on their job. However, it is a very
time-consuming exercise & cannot effectively be used for all kinds of jobs.

2. Statistical Reports
Statistical reports can be defined as an overall analysis of reports and data
which is used in the form of averages, percentage, ratios, correlation, etc.,
present useful information to the managers regarding the performance of the
organization in various areas.

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This type of useful information when presented in the various forms like
charts, graphs, tables, etc., enables the managers to read them more easily &
allow a comparison to be made with performance in previous periods & also
with the benchmarks.

3. Break-even Analysis
Breakeven analysis is a technique used by managers to study the relationship
between costs, volume & profits. It determines the overall picture of probable
profit & losses at different levels of activity while analyzing the overall position.
The sales volume at which there is no profit, no loss is known as the breakeven
point. There is no profit or no loss. Breakeven point can be calculated with the
help of the following formula:
Breakeven point = Fixed Costs/Selling price per unit – variable costs per unit

4. Budgetary Control
Budgetary control can be defined as such technique of managerial control in
which all operations which are necessary to be performed are executed in such
a manner so as to perform and plan in advance in the form of budgets & actual
results are compared with budgetary standards.
Therefore, the budget can be defined as a quantitative statement prepared for a
definite future period of time for the purpose of obtaining a given objective. It is
also a statement which reflects the policy of that particular period.
Some of the types of budgets prepared by an organisation are as follows,
i. Sales Budget: A statement of what an organization expects to sell in
terms of quantity as well as value
ii. Production Budget: A statement of what an organization plans to
produce in the budgeted period
iii. Material Budget: A statement of estimated quantity & cost of materials
required for production
iv. Cash Budget: Anticipated cash inflows & outflows for the budgeted
period
v. Capital Budget: Estimated spending on major long-term assets like a
new factory or major equipment
vi. Research & Development Budget: Estimated spending for the
development or refinement of products & processes

II. Modern Techniques of Managerial Control

Modern techniques of controlling are those which are of recent origin & are
comparatively new in management literature. These techniques provide a
refreshingly new thinking on the ways in which various aspects of an
organization can be controlled.
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These include:
1. Return on investment
2. Ratio analysis
3. Responsibility accounting
4. Management audit
5. PERT & CPM

1. Return on Investment
Return on investment (ROI) can be defined as one of the important and useful
techniques. It provides the basics and guides for measuring whether or not
invested capital has been used effectively for generating a reasonable amount
of return. ROI can be used to measure the overall performance of an
organization or of its individual departments or divisions. It can be calculated
as under- Net income before or after tax may be used for making comparisons.
Total investment includes both working as well as fixed capital invested in the
business.

First Method of Calculation

Second Method of Calculation

2. Ratio Analysis
The most commonly used ratios used by organizations can be classified into
the following categories:
i. Liquidity ratios
ii. Solvency ratios
iii. Profitability ratios
iv. Turnover ratios

3. Responsibility Accounting
Responsibility accounting can be defined as a system of accounting in which
overall involvement of different sections, divisions & departments of an
organization are set up as ‘Responsibility centers’. The head of the center is
responsible for achieving the target set for his center. Responsibility centers
may be of the following types:
i. Cost center

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 ii. Revenue center
iii. Profit center
iv. Investment center

4. Management Audit
Management audit refers to a systematic appraisal of the overall performance
of the management of an organization. The purpose is to review the efficiency
&n effectiveness of management & to improve its performance in future
periods.

5. PERT & CPM

PERT (programmed evaluation & review technique) & CPM (critical path
method) are important network techniques useful in planning & controlling.
These techniques, therefore, help in performing various functions of
management like planning; scheduling & implementing time-bound projects
involving the performance of a variety of complex, diverse & interrelated
activities.
Therefore, these techniques are so interrelated and deal with such factors as
time scheduling & resources allocation for these activities.

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 DECISION MAKING
2.4.1 DEFINITIONS
The word decision has been derived from the Latin word ‘decidere’ which
means ‘a cutting away or a cutting off, or in a practical sense’. Thus, a decision
involves a cut of alternatives between those that are desirable and those that
are not desirable.

Decision making is a process to arrive at a decision; the process by which an

individual or organisation selects one position or action from several alternatives.

Decision making is a conscious human process involving both individual and

social phenomenon based upon factual and value premises which concludes
with a choice of one behavioural activity from among one or more alternatives
with the intention of moving toward some desired state of affairs. – Shull et al.

2.4.2 TYPES OF DECISIONS

The following are the main types of decisions every organization need to take:
1. Programmed and Non-Programmed Decisions:
Programmed decisions are concerned with the problems of repetitive nature
or routine type matters. A standard procedure is followed for tackling such
problems. These decisions are taken generally by lower level managers.
Decisions of this type may pertain to e.g. purchase of raw material, granting
leave to an employee and supply of goods and implements to the employees,
etc.

Non-programmed decisions relate to difficult situations for which there is no

easy solution. These matters are very important for the organisation. For
example, opening of a new branch of the organisation or a large number of
employees absenting from the organisation or introducing new product in the
market, etc., are the decisions which are normally taken at the higher level.

2. Routine and Strategic Decisions:

Routine decisions are related to the general functioning of the organisation.
They do not require much evaluation and analysis and can be taken quickly.
Ample powers are delegated to lower ranks to take these decisions within the
broad policy structure of the organisation.

Strategic decisions are important which affect objectives, organisational goals

and other important policy matters. These decisions usually involve huge
investments or funds. These are non-repetitive in nature and are taken after

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careful analysis and evaluation of many alternatives. These decisions are taken
at the higher level of management.

3. Tactical (Policy) and Operational Decisions:

Decisions pertaining to various policy matters of the organisation are policy
decisions. These are taken by the top management and have long term impact
on the functioning of the concern. For example, decisions regarding location of
plant, volume of production and channels of distribution (Tactical) policies, etc.
are policy decisions.

Operating decisions relate to day-to-day functioning or operations of

business. Middle and lower level managers take these decisions. An example
may be taken to distinguish these decisions. Decisions concerning payment of
bonus to employees are a policy decision. On the other hand if bonus is to be
given to the employees, calculation of bonus in respect of each employee is an
operating decision.

4. Organisational and Personal Decisions:

When an individual takes decision as an executive in the official capacity, it is
known as organisational decision. If decision is taken by the executive in the
personal capacity (thereby affecting his personal life), it is known as personal
decision.
Sometimes these decisions may affect functioning of the organisation also. For
example, if an executive leaves the organisation, it may affect the organisation.
The authority of taking organizational decisions may be delegated, whereas
personal decisions cannot be delegated.

5. Major and Minor Decisions:

Another classification of decisions is major and minor. Decision pertaining to
purchase of new factory premises is a major decision. Major decisions are
taken by top management. Purchase of office stationery is a minor decision
which can be taken by office superintendent.

6. Individual and Group Decisions:

When the decision is taken by a single individual, it is known as individual
decision. Usually routine type decisions are taken by individuals within the
broad policy framework of the organisation.

Group decisions are taken by group of individuals constituted in the form of a

standing committee. Generally very important and pertinent matters for the
organisation are referred to this committee. The main aim in taking group
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decisions is the involvement of maximum number of individuals in the process
of decision-- making.

2.4.3 DECISION MAKING PROCESS

A decision is reasonable if it is suitable for organization that means choose best
alternative to accomplish goals. There are various steps in rational decision
making:
1. Recognizing the problem.
2. Deciding priorities among the problems.
3. Diagnosing the problem.
4. Developing alternative solutions or courses of activities.
5. Evaluating alternatives.
6. Converting the decision into effective action and follow up of action.

(1) Recognizing the problem: Decision has great impact on organization's

operations. When a manager takes any decision, it is in effect the
organization's response to a problem. Therefore, it is essential to search the
environment for the existence of a problem. A problem exists when there is
divergence from past experience or deviation from plan. Problem emerges when
competitors do well or when people bring problems to the manager. It is the
responsibility of manager to thoroughly explore the root causes of problems.

(2) Deciding priorities among problems: After identifying problems, manager

must assess which problem has more harmful impact on organization. He may
find that some of the problems are such that they can be solved by their
assistants because they are closest to them. All such problems should be
transferred to subordinates. Some problems may need information available
only at higher level or affecting other departments. Such problems are referred
to higher level managers. And those problems which can be best solved by him
are to be focused.

(3) Diagnosing the problems: It is necessary to understand the intensity of

problem. Symptoms of the problem that are observed by the manager may
sometimes misinform him. The symptom may lead manager to think one part
when the defect may lie hidden in another part. For example if there is decline
in sales, the management may think that the problem is one of poor selling
procedure or the saturation of the old market. But the real problem may be
incapability to move quickly to meet varying needs of the clients. To diagnose
the problem, a manager should follow the systems approach. He should study
all the sub-parts of his organization which are connected with the sub-part in
which the problem seems to be located.
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(4) Developing alternative solutions: A problem in organization has many
solutions. However, all the ways cannot be uniformly satisfying. Decision
maker must recognize various alternatives available in order to get best result
of a decision. It can be said that all alternatives are not possible to consider
either because information about all alternatives may not be available or some
of the alternatives cannot be considered because of limitations. Therefore while
choosing alternatives, it is necessary to consider the concept of limiting factor.
Limiting factor is one which stands in the way of accomplishing a desired
objective.
A decision maker can categorize alternatives using his own experience,
practices followed by others and using creative practice. From past experience,
decision maker takes into account the action. The successful action of the past
may become an alternative for the future. But main restriction of such thought
is that success in past experience may not necessary in the present context
because of changing business situation.
Other method of developing alternatives is through creative process where
various exercises are taken to create completely new ideas. Creative ideas of
individuals or groups help in developing alternatives. One popular group
technique is brain storming. The brain storming group consists of 5 to 10
people. The best idea behind brain storming is to think of as many alternatives
as possible without pausing to evaluate them.

(5) Measuring and comparing consequences of the alternative solution:

After developing various alternatives, it is essential to measure and compare
their outcomes of alternatives using quality and acceptability. The quality of a
decision must be determined considering both tangible and intangible
consequences. Tangible consequences are those which can be quantitatively
measured or mathematically demonstrated. Intangible consequences cannot be
measured quantitatively. A decision though good in quality may be poor in
acceptability or decision though acceptable may not be good in quality. In such
cases managers must find the relative importance of these two.

(6) Converting the decision into effective action and follow up of action: in
this step, decision must be communicated to the employees in clear and
unmistakable terms. All necessary efforts should be made to secure employees
involvement in some stages of decision making. Association of employees in
decision making not only improve the acceptability, but also improves the
quality of decision.

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Environment of decision-making: In organization, decision making process
has immense importance and sometimes managerial team may not be
competent to select best alterative. This problem may be highly complex and
vague. These conditions of knowledge are referred to as the 'environment of
decision making'. The environment of decision making is categorized into three
types that are certainty risks and uncertainty. The environment of decision-
making is a range, at one end there is complete certainty and at the other end
there is complete ambiguity.

2.4.4 MODELS OF DECISION MAKING

The decision-making process though a logical one is a difficult task. All
decisions can be categorized into the following three basic models.
1. The Rational/Classical Model.
2. The Administrative or Bounded Rationality Model.
3. The Retrospective Decision-Making Model.

All models are beneficial for understanding the nature of decision-making

processes in enterprises or organisations. All models are based on certain
assumptions on which the decisions are taken.

1. The Rational/Classical Model:

The rational model is the first attempt to know the decision-making-process. It
is considered by some as the classical approach to understand the decision-
making process. The classical model gave various steps in decision-making
process which have been discussed earlier.

Features of Classical Model:

 Problems are clear.
 Objectives are clear.
 People agree on criteria and weights.
 All alternatives are known.
 All consequences can be anticipated.
 Decision makes are rational.
 They are not biased in recognizing problems.
 They are capable of processing ail relevant information
 They anticipate present and future consequences of decisions.
 They search for all alternatives that maximizes the desired results.

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2. Bounded Rationality Model or Administrative Man Model:
Decision-making involve the achievement of a goal. Rationality demands that
the decision-maker should properly understand the alternative courses of
action for reaching the goals.

He should also have full information and the ability to analyse properly various
alternative courses of action in the light of goals sought. There should also be a
desire to select the best solutions by selecting the alternative which will satisfy
the goal achievement.

Herbert A. Simon defines rationality in terms of objective and intelligent action.

It is characterised by behavioural nexus between ends and means. If
appropriate means are chosen to reach desired ends the decision is rational.

Bounded Rationality model is based on the concept developed by Herbert

Simon. This model does not assume individual rationality in the decision
process. Instead, it assumes that people, while they may seek the best solution,
normally settle for much less, because the decisions they confront typically
demand greater information, time, processing capabilities than they possess.
They settle for “bounded rationality or limited rationality in decisions.

This model is based on certain basic concepts.

a. Sequential Attention to Alternative Solution:
Normally it is the tendency for people to examine possible solution one at a
time instead of identifying all possible solutions and stop searching once an
acceptable (though not necessarily the best) solution is found.

b. Heuristic:
These are the assumptions that guide the search for alternatives into areas
that have a high probability for yielding success.

c. Satisficing:
Herbert Simon called this “satisficing” that is picking a course of action that is
satisfactory or “good enough” under the circumstances. It is the tendency for
decision makers to accept the first alternative that meets their minimally
acceptable requirements rather than pushing them further for an alternative
that produces the best results.
Satisficing is preferred for decisions of small significance when time is the
major constraint or where most of the alternatives are essentially similar.

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Thus, while the rational or classic model indicates how decisions should be
made (i.e. it works as a prescriptive model), it falls somewhat short concerning
how decisions are actually made (i.e. as a descriptive model).

3. Retrospective Decision Model (Implicit Favourite Model):

This decision--making model focuses on how decision-makers attempt to
rationalise their choices after they have been made and try to justify their
decisions. This model has been developed by Per Soelberg. He made an
observation regarding the job choice processes of graduating business students
and noted that, in many cases, the students identified implicit favorites (i.e. the
alternative they wanted) very early in the recruiting and choice process.
However, students continued their search for additional alternatives and
quickly selected the best alternative.

The total process is designed to justify, through the guise of scientific rigor, a
decision that has already been made intuitively. By this means, the individual
becomes convinced that he or she is acting rationally and taking a logical,
reasoned decision on an important topic.

2.4.5 DIFFICULTIES IN DECISION MAKING

The efforts of the management are to take correct decisions. A wrong decision
at any level of management may create difficulties for the whole business. In
spite of best efforts there are certain problems in decision-making.

Some of these are discussed as follows:

1. Correctness of Decisions:
Whether the decisions taken are correct or not is the first problem faced by the
management. If the decision is not correct then it will mean a waste of money
and efforts. The correctness of a decision depends on the caliber of decision-
maker, information available and its analysis. If proper facts and figures are
not available then decision will be based on wrong premises. When they are
based on a correct problem and its proper analysis then decisions will not be
correct.

2. Timing of Decision:
Timing of decisions is the other difficulty faced by management. It is important
to take decisions at the most opportune time. The determination of that time in
itself is a problem. The decisions will be in vain if not taken at right time.

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3. Effective Communication of Decisions:
The communication of decisions to the persons for whom they have been taken
is another administrative problem faced by the management. The decisions
should be communicated in a language in which they are well understood by
the receiver. If a decision is not conveyed to those who are to implement them
then it will remain on paper and the purpose will not be served. The
management has to cross many barriers in the communication system so that
they are conveyed properly.

4. Participation in Decision-Making:
The best way of arriving at important decisions is to get the views of concerned
persons before finalizing them. Different viewpoints will give a wider thought to
the problem and its analysis. The general tendency in management is to keep
decision-making at top level only. A few persons are given the authority of
making decisions. This type of thinking will create more problems in
implementing them.

The viewpoints of those who are to be directly influenced by the decisions may
not be taken into consideration. Such decisions suffer from many lacunae. To
avoid such situations management should try to involve more and more
persons in decision-making process.

5. Decision-Environment:
The organizational and physical environment prevailing in the business will
have an influence on decision-making process. If the environment is conducive
then there will be proper co-operation and mutual understanding among
various persons. The decisions will be accepted in a good spirit and will be
honestly implemented. It will also provide scope for research and creative
thinking.

6. Implementation of Decision:
The implementation of decisions is the other difficulty faced by management.
Once a decision is taken then all efforts should be made honestly to implement
it. The manager and subordinates should help in proper implementation of
decisions. Manager may consult staff persons or specialists from outside but
final decision will be his own. The responsibility for implementing decisions will
lie on the manager. When a decision goes wrong then manager is criticized and
when it proves correct then he may not be applauded. So decision
implementation brings a number of problems which need to be tackled.

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2.4.6 DECISION MAKING STYLES
Decision making style basically depends on managers’ approach to decision
making. Decision making can be grouped into four main styles. The four styles
are, Directive style, Analytic style, Conceptual style, and Behavioral style.
Decision-making styles propose that people differ in two dimensions when they
approach decision making. The first is an individual’s way of thinking and
second is individual’s tolerance for ambiguity.

On the basis of the way of thinking and tolerance for ambiguity, decision
making styles may be classified as directive, analytic, conceptual and
behavioral. Each style looks at decisions in a somewhat different way. Each
style deals with processing the information on which the decision is based
differently.

1. Directive Decision Making Style

Managers who use directive decision making style have low tolerance for
ambiguity and they rational in the way they think. This form of decision
making relies on a rational and autocratic style that results in the employee
using his own knowledge, experience and judgment to choose the best
alternative.

This type of leader is very rational, but thinks mostly about the short-term.
John believes that a shopping mall is the best type of development for the land.
They are very logical, efficient and take quick decisions within a short time.
They assess few alternatives and also consider limited information while taking
any decision. Basically such managers use their logic and idea while taking
decisions.

Directive style decision-making has low tolerance for ambiguity and is rational.
When a manager spots the dirt on the window, and orders the cleaner to clean
the window now, that is a directive style decision-making.

2. Analytic Decision Making Style

Managers using analytic decision making style have much greater tolerance for
ambiguity and rational way of thinking. They want more information before
making a decision and also consider more alternatives. Analytic style decision-
making has high tolerance for ambiguity and is rational. The decision-making
style is due to uncertainty, and lack of information.
Such managers are more careful decision makers as they consider factual and
detailed information before taking any decision. They have the ability to adapt
or cope with unique situations.
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For example, when the management is discussing about acquisition they do
not make decision fast. They want to have more information before they make
the major acquisition. They have to find answers to many “what if” questions.

3. Conceptual Decision Making Style

Conceptual style decision-making is characterized by high tolerance for
ambiguity and is intuitive in nature. Managers using conceptual decision
making style have high tolerance for ambiguity and have intuitive in their way
of thinking. They look at many alternatives. They focus on the long run and are
very good at finding suitable solutions.

This kind of decision making is for a long term, and subjected to changes. For
example, after Singapore gained independence, the Singapore government
decided on industrialization. That was a conceptual style decision-making.
There was no guarantee of success, and no historical data for analysis. As a
result of the decision, Jargon Industrial Park was developed along with roads
and infrastructure.

4. Behavioral Decision Making Style

Behavioral style decision-making has low tolerance for ambiguity and is
intuitive. Managers using behavioral decision making style have low tolerance
for ambiguity and intuitive in their way of thinking. The manager possesses
behavioral style decision-making will engage in team discussion. He is
responsive to the mood of the team members.

He makes decision based on what feels right, and what will motivate the team
members to perform. The decision is communicated clearly and leaves no room
for doubt. They are concerned about the achievement of subordinates and
always take suggestions from others. They organize meetings of subordinates
time and again to get information and suggestions. However, they try to avoid
conflict. Acceptance by others is important to this decision making style.

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 *********

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BHARATH BHUSHAN B (Assistant Professor, Dept. of MBA & Research Centre)
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