MANAGEMENT

A central agency is required to coordinate the activities and efforts of various

individuals working together in the organization. Such agency is called Management.
The term management has been used as a ‘noun’, has a ‘process’, and has a ‘discipline’.

As a noun: management refers to the individual who perform the managerial job. That
is Managers.

As a process: management means a series of functions like planning, organizing,

staffing, directing, and controlling.

As a discipline: management means organized body of knowledge that can be taught

and researched. That is a branch of study.

Meaning

Management is the effective utilization of human and material resources to achieve the
objectives of the enterprise.

Definition

There is no universally accepted standard definition for management.

According to Mary Parker Follet, “Management is the art of getting things done through
people”.

According to Peter F Drucker, “Management is the multipurpose organ that manages

business, and manages managers, and manages workers and work”.

According to Louis Allen, “Management is what a manager does”.

Nature / Features / Characteristics of Management

1. Management is Goal-Oriented: All activities of management are goal oriented.

Management exists for the achievement of specific objectives. The success of
 management is measured by the extent to which the desired objectives are
attained.
2. Management integrates Human, Physical and Financial Resources: In an
organization, human beings work with non-human resources like machines.
Materials, financial assets, buildings etc. Management integrates human efforts
to those resources. It brings harmony among the human, physical and financial
resources.
3. Management is Continuous: Management is not a onetime activity but it takes
place continuously in the organization. There is the requirement of continuous
effort to achieve the organizational goals; therefore, management is a continuous
process.
4. Management is all Pervasive: Management is required in all types of
organizations and in all levels of organizations.
5. Management is a Group Activity: Management is very much less concerned
with individual’s efforts. It is more concerned with groups. It involves the use of
group effort to achieve predetermined goal.
6. Management is Intangible: Management cannot be visible or it cannot be felt in
real sense. Only the result of management can be observed by comparing a well-
managed organization with a poorly managed organization.
7. Management is situational: There are so many ways of doing things and which
way will be suitable, it depends upon situation. Sometimes it happens that
management is not using the best way of doing things due to the situation. The
situational differences must be taken into account by successful managers.
8. Management is a Science and Art: Certain characteristics of art and science are
cope with the features of Management. So management is considered as an art
and science.
9. Management is a Process: Management is a process which is involved planning,
organizing, directing, and controlling the efforts of human resources in the use of
material resources. These are the basic functions which every manager perform
for the accomplishment of certain goals.
Management as an Art

Art is the skillful and personal application of existing knowledge to achieve desired
results. The management can be said to be as an art, because, they have certain
similarities. i.e.,

 Both Art and Management require personal skills.

 Practical experience is required to perform an art and to do managerial
functions.
 There is always a risk regarding the success of an art. There is an uncertainty
regarding the success of a manager also.
 Management and art are situational

Management is a Science

Science is a systematically organised body of knowledge based on proper findings and

exact principles and is capable of verification. Any subject which is scientifically
developed and consists of universally accepted principles is a science.

In this respect, management can be considered a science. It satisfies the following basic
characteristics of a science.

 Science is an organised body of knowledge comprising general principles.

Management is also an organised body of knowledge comprising general
principles.
 Science has a predictive power. A manager also can predict from practice that
sales will increase if advertisement expenses are increased.
 Science uses scientific and systematic methods for observations. Management
also uses scientific methods for observations and calculations.
 The principles of Science are derived from practice and are verified by
competent people. The management principles are also derived from practice
and are proved to be true.
 The scientific principles are exact and are universally applicable. The principles
of management are also exact and are universally applicable.
Thus, management can rightly be called a ‘science’. But, management is not a perfect
science like Astronomy, Physics, Chemistry or Biology. Management falls in the area of
“Social Sciences.” Ernest Dale has called management a ‘soft’ science.

Management as a Profession

Management is regarded as a profession by many, although it does not possess all the
features of a profession. A profession is an occupation for which specialised knowledge,
skills and training are required.

Management as a profession should possess the following attributes:

 A profession involves the application of expert knowledge for solving problems.

Management also requires expert knowledge for solving problems.
 Honesty and integrity are essential for a profession. They are equally essential
for management also.
 The principal motive of any profession is service. Modern management aims at
giving priority to service to the customers.
 Every profession has certain social responsibilities. The management has
responsibilities to the various sections of the society like, owners, creditors,
customers, employees, the government and the public at large.
 Professional needs continues practice, and managers also need continues
practice to become effective manager.
 Professionals are needed specialized knowledge, management also requires
knowledge.

Thus, we can conclude that management is a profession, although it is not a full-fledged

profession. It is this aspect that has raised the status of the manager.

Importance of Management

1. Management helps in achieving group goals: Management is required to

achieve the goals of the organization. The task of a manager is to give a common
direction to the individual effort in achieving the overall goal of the organization.
 2. Management increases efficiency: The aim of a manager is to reduce costs and
increase productivity through better planning, organizing, directing, staffing and
controlling the activities of the organization.
3. Management helps in achieving personal objectives: A manager motivates
and leads his team in such a manner that individual members are able to achieve
personal goals while contributing to the overall organizational objective.
Through motivation and leadership the management helps individuals to
develop team spirit, co-operation and commitment to group success.
4. Minimize the element of risk: Management involves the function of forecasting.
Though the exact future can never be predicted yet on the basis of previous
experience and existing circumstances, management can minimize the element
of risk. Management always keeps its ears and eyes to the changing
circumstances.
5. Optimum Utilization of Resources: Management is essential for the optimum
utilisation of resources like land, labour, capital, materials, etc.
6. Meeting Challenges: Through better planning and control management is able
to meet the challenges from the changing environment.
7. Social Benefits: Management is beneficial to the society as well. It raises the
standards of living of the people by providing good quality products at the lowest
price.

Management and Administration

According to Theo Haimann, “Administration means overall determination of policies,

setting of major objectives, the identification of general purposes and laying down of
broad programmes and projects”. It refers to the activities of higher level. It lays down
basic principles of the enterprise. According to Newman, “Administration means
guidance, leadership & control of the efforts of the groups towards some common
goals”.

Whereas, management involves conceiving, initiating and bringing together the various
elements; coordinating, actuating, integrating the diverse organizational components
while sustaining the viability of the organization towards some pre-determined goals. In
other words, it is an art of getting things done through & with the people in formally
organized groups.

Basis Administration Management

Meaning It is concerned with Management is an art of
formulation of broad getting things done through
objectives, plans & policies. others by directing their
efforts towards
achievement of pre-
determined goals.
Nature Administration is a Management is an
decision-making function. executing function.
Process Administration decides Management decides who
what is to be done & when it should as it & how should
is to be done. he dot it.
Function Administration is a thinking Management is a doing
function because plans & function because managers
policies are determined get work done under their
under it. supervision.
Skills Conceptual and Human Technical and Human skills
skills
Level Top level function Middle & lower level
function
 Levels of Management

The term “level” means arrangement of persons in a series. Thus the term “levels of
management” refer to the arrangement of managerial position in an organisation.
Management levels determine the authority relationship in an organisation.

There are three levels of management in view of authority and responsibility

relationship. They are;

1. Top Level Management

2. Middle Level Management
3. Lower Level Management

Top Level Management: This level of management consists of Board of Directors, Chief
Executive Officer, Managing Director, General Manager, etc. It is the ultimate source of
power and authority, since it oversees the goals, policies, and procedures of a company.

The roles and responsibilities of the Top Level Management

 Determining objectives of the business enterprise.

 Preparing plans and policies for the enterprise.
 Issuing necessary instructions for the preparation of department-specific
budgets, schedules, procedures, etc.
 Preparing strategic plans and policies for the organization.
 Appointing the executives for middle-level management.
  Building and maintaining relations with the outside public.
 Providing overall guidance, leadership, direction, and encouraging harmony and
collaboration.

Middle Level Management: Middle Level Management generally consists of

Departmental heads, i.e., Finance Manager, HR Manager, Production Manager,
Marketing Manager, etc.

The roles and responsibilities of Middle Level Management

 They execute the plans of the organization in accordance with the policies and
directives of the top management.
 They make plans for the sub-units of the organization.
 They participate in employment & training of lower level management.
 They interpret and explain policies from top level management to lower level.
 They are responsible for coordinating the activities within the division or
department.
 Act as a link between top level and lower level management

Lower Level Management: Lower level is also known as supervisory / operative level
of management. It consists of supervisors, foreman, section officers, superintendent etc.

Roles and Responsibilities of Lower Level Management

 Assigning of jobs and tasks to various workers.

 They guide and instruct workers for day to day activities.
 They are responsible for the quality as well as quantity of production.
 They are also entrusted with the responsibility of maintaining good relation in
the organization.
 They communicate workers problems, suggestions, and recommendatory
appeals etc. to the higher level and higher level goals and objectives to the
workers.
 Functions of Management

The important functions of Management include;

1. Planning
2. Organizing
3. Staffing
4. Directing
5. Controlling

Planning: It is the basic function of management. Planning is deciding in advance what

to do, when to do and how to do. Planning seeks to bridge the gap between where we
are and where we want to go. Planning is determination of courses of action to achieve
desired goals.

Organizing: It is the process of identifying and grouping the 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.

Staffing: It is concerned with obtaining, utilizing and maintaining a satisfactory and

satisfied work force. In simple terms, staffing is the process of placing right person at
the right place.

Directing: It refers to the process of instructing, guiding, counseling, motivating and

leading people in the organization to achieve its objectives.

Controlling: Controlling means ensuring that activities in an organization are

performed as per the plans.
 Scientific Management

Scientific Management refers to the application of science to management.

In the words of F W Taylor, “Scientific management means knowing exactly what you
want men to do and seeing that they do it in the best and cheapest way.”

Scientific Management Principles

1. Replacement of old rule of thumb method by a scientific one: This principle

says that we should not get stuck in a set routine with the old techniques of
doing work, rather we should be constantly experimenting to develop new
techniques which make the work much simpler, easier and quicker.
2. Scientific selection, placement, training and development of workers: The
management should design scientific selection procedure so that right men are
selected for the right jobs. The first step in scientific selection is determining the
jobs for which workers are required. After that the most appropriate
qualification, training, experience and the level of efficiency for the requisite post
are determined. Employees are selected according to pre-determined standards
in an impartial way.
3. Harmonious relationship between the workers and the management:
Taylor emphasized that there should be complete harmony between the
management and workers. Both should realize that each one is important. To
achieve this state, Taylor called for complete mental revolution on the part of
both management and workers. It means that management and workers should
transform their thinking. In such a situation even trade unions will not think of
going on strike etc.
4. Co-operation between the workers and the management and between
workers: There should be complete cooperation between the labour and the
management instead of individualism. Competition should be replaced by
cooperation. Both should realize that they need each other.
5. Maximum and not restricted output: For the management maximum output
would mean greater profits and lower cost of production. Greater output enables
 the workers to earn more remuneration. Thus, both the management and the
workers are interested in maximising production under scientific management.

Techniques of Scientific Management

1. Scientific Task Setting: It is essential to set a standard task which an average

worker should do during a working day. Taylor called it a fair day’s work. He
emphasized the need for fixing a fair day’s work because it will prevent the
workers from doing work much below their capacity. The standard task will act
as a norm before the workers. If no standard is set, the workers will work below
his capacity.
2. Standardisation of Tools and Equipments: Taylor advocated standardisation
of tools and couplings, cost system and several other items. Efforts should be
made to provide standardised working environment and methods of production
to the workers. Standardisation would help to reduce spoilage and wastage of
materials, improve quality of work, reduce cost of production and reduce fatigue
among the workers.
3. Work Study: It means to conduct the deep analysis of all the activities being
performed in the organisation with the aim of producing maximum possible
quality output at minimum costs. Taylor has conducted the following studies:

a. Method Study: This study is conducted to know the best method of doing
a particular job. To conduct this study, process chart and operation
research techniques are used. The main objective of this study is to
minimise the cost of production and maximise the quality and level of
consumer satisfaction.
b. Motion Study: Motion study is a technique which involves close
observations of the movement of body and limbs of an individual required
to perform a job. It is the study of the movement of an operator or a
machine to eliminate useless motions and find out the best method of
doing a particular job.
c. Time Study: It refers to determine the standard time required to
complete a particular activity. The standard time is determined on the
basis of average time taken by the several experiences of the same work.
 d. Fatigue Study: It refers to determine the duration and frequency of rest
intervals to complete a particular job. The rest refreshes the workers.
They work again with their full capacity.

4. Differential Wage System/Differential Piece Rate: Taylor has advised the

adoption of differential wage systems in order to motivate the employees.
According to this system, wages are paid on the basis of work done and not on
the basis of time spent in doing the work.
5. Scientific Selection and Training: The management should design scientific
selection procedure so that right men are selected for the right jobs. The first
step in scientific selection is determining the jobs for which workers are
required. After that the most appropriate qualification, training, experience and
the level of efficiency for the requisite post are determined. Employees are
selected according to pre-determined standards in an impartial way.
6. Mental Revolution: The technique of Mental Revolution involves a change in the
attitude of workers and management towards each other. Both should realize the
importance of each other and should work with full cooperation. Management as
well as the workers should aim to increase the profits of the organisation. For
this the workers should put in their best efforts so that the company makes
profit and on the other hand management should share part of profits with the
workers. Thus, mental revolution requires a complete change in the outlook of
both management and workers. There should be a spirit of togetherness
between workers and management.
7. Functional Foremanship: Taylor advocated that specialization must be
introduced in a factory. He advocated ‘functional foremanship’ for this purpose.
Functional foremanship is a form, of organisation which involves supervision of a
worker by several specialist foremen.
 Henry Fayol’s Principles of Management

Henry Fayol, gave a new perception of the concept of management. He introduced a

general theory that can be applied to all levels of management and every department.
The Fayol theory is practiced by the managers to organize and regulate the internal
activities of an organization. He concentrated on accomplishing managerial efficiency.

1. Division of Work
2. Balancing Authority and Responsibility
3. Discipline
4. Unity of Command
5. Unity of Direction
6. Subordination of Individual Interest to General Interest
7. Remuneration of Personnel
8. Centralization and Decentralization
9. Scalar Chain
10. Order
11. Equity
12. Stability of tenure of Personnel
13. Initiative
14. Esprit De corps

1. Division of Work: Dividing the full work of the organization among individuals and
creating departments is called the division of work. Division of work leads to
specialization, and specialization helps to increases efficiency and efficiency which
results in improvements in the productivity and profitability of the organization.
2. Authority and Responsibility: Authority must be equal to Responsibility. According
to Henri Fayol, there should be a balance between Authority (Power) and
Responsibility (Duties). The right to give orders should not be considered without
reference to responsibility. If the authority is more than responsibility then chances
are that a manager may misuse it. If responsibility is more than authority then he may
feel frustrated.
3. Discipline: Discipline is the obedience to organizational rules and employment
agreement which are necessary for the working of the organization. According to
 Fayol, discipline requires good superiors at all levels, clear and fair agreements and
judicious application of penalties.
4. Unity of Command: According to Fayol there should be one and only one boss for
every individual employee. If an employee gets orders from two superiors at the same
time the principle of unity of command is violated. The principle of unity of command
states that each participant in a formal organisation should receive orders from and be
responsible to only one superior.
5. Unity of Direction: All the units of an organization should be moving towards the
same objectives through coordinated and focused efforts. Each group of activities
having the same objective must have one head and one plan. This ensures unity of
action and coordination.
6. Subordination of Individual Interest to General Interest: According to Fayol, the
interests of an organization should take priority over the interests of any one
individual employee. The interest of one individual or one group should not prevail
over the general good. The individual interest should be given less importance, while
the general interest should be given the most importance.
7. Remuneration of Employees: The overall pay and compensation should be fair to
both employees and the organization. The employees should be paid fair wages, which
should give them at least a reasonable standard of living. At the same time it should be
within the paying capacity of the company. In other words, remuneration should be
just and equitable. This will ensure congenial atmosphere and good relations between
workers and management. Consequently, the working of the company would be
smooth.
8. Centralization and Decentralization: The concentration of decision-making
authority is called centralization whereas its dispersal among more than one person is
known as decentralization. According to Fayol, “There is a need to balance
subordinate involvement through decentralization with managers’ retention of final
authority through centralization.” The degree of centralization will depend upon the
circumstances in which the company is working. In general large organizations have
more decentralization than small organizations.
9. Scalar chain: Scalar chain is the formal line of authority which moves from highest to
lowest rank in a straight line. This chain specifies the route through which the
information is to be communicated to the desired location/person. Fayol emphasized
 that every information in the organization must flow according to this chain to
facilitate clear communication of orders of the superiors and feelings of the
subordinates. This chain must be strictly followed in the organization. Fayol also
stated that there should be no overlapping of steps during the communication process.
This principle is very effective and clear, but it consumes a lot of time. In case of
emergency, information will take a lot of time to reach the desired position which may
delay the action as well as decision. For overcoming this limitation of scalar chain,
fayol introduced the concept of ‘Gang Plank’. According to this concept, two
executives of the organization of different department at the same level can
communicate directly in case of emergency, so that speedy decisions and actions could
be taken.

10. Order: There should be an order for material/things and people in the organization.
Order for things is called Material Order and order for people is called ‘Social Order’.
Material Order refers to “a place for everything and everything in its place.” Social
Order refers to the selection of the “right man in the right place”. According to Fayol,
“People and materials must be in suitable places at appropriate time for maximum
efficiency.”
11. Equity: While dealing with the employees a manager should use kindliness and justice
towards employees equally. Equity is a combination of kindness and justice. It creates
loyalty and devotion in the employees toward the organization. The equity principle
suggests that the managers must be kind as well as equally fair to the subordinates.
12. Stability of Tenure of Personnel: “Employee turnover should be minimized to
maintain organizational efficiency”, according to Fayol. Personnel should be selected
and appointed after due and rigorous procedure. But once selected they should be
 kept at their post/ position for a minimum fixed tenure. Recruitment, selection and
training cost will be high. So stability in tenure of personnel is good for the business
13. Initiative: Management should encourage initiative. That is, they should encourage
the employees to make their own plans and to execute these plans. This is because an
initiative gives satisfaction to the employees and brings success to the organization. It
allows the subordinates to think out a plan and do what it takes to make it happen.
14. Esprit de corps: Esprit de Corps means “Team Spirit”. This principle implies that
union is strength. Management should promote a team spirit of unity and harmony
among employees, according to Fayol. Management should promote teamwork
especially in large organizations because otherwise objectives would be difficult to
realize. It will also result in a loss of coordination. A manager should replace ‘I’ with
‘We’ in all his conversations with workers to foster team spirit. This will give rise to a
spirit of mutual trust and belongingness among team members. It will also minimize
the need for using penalties.

Roles of a Manager

A manager occupies different positions in an organisation. He plays different roles

depending upon the situation. The Henry Mintzberg in his book ‘The Nature of
Managerial Work’ describes the ten roles of a manager in an organisation which are
broadly divided into three categories:

 Interpersonal Roles
 Informational Roles
 Decisional Roles

Interpersonal Roles of a Manager

In their interpersonal roles, manager act as figurehead, lead, and interact with members
of the organisation, within the department or outside the department.

 Figure Head: A manager is the symbolic head of a firm. Every manager has to
perform various regular duties which are of legal or social nature.
  Leader: In the leader role, every manager must motivate and encourage his
employees. He must try to align the needs of individuals with the goals of
organization.
 Liaison: Every manager must maintain a network of outside contacts that can
provide information useful for the organization.

Informational Category

The managerial roles in this category involve processing information.

 Monitor: In this role, you regularly seek out information related to your
organization and industry, looking for relevant changes in the environment. You
also monitor your team, in terms of both their productivity, and their well-being.
 Disseminator: This is where you communicate potentially useful information to
your colleagues and your team.
 Spokesperson: Managers represent and speak for their organization. In this
role, you're responsible for transmitting information about your organization
and its goals to the people outside it.

Decisional Roles

In their decisional roles, managers take proactive actions, sort out differences in opinion
amicably, allocate resources to various departments in optimum way, and negotiate
implementation of new projects.

 Entrepreneur: In this role the manager searches for innovative opportunities to

bring about positive change in organisation.
 Disturbance Handler: In this role, the manager works to seek solutions of
various unanticipated problems. He is responsible for corrective action when
organization faces important, unexpected disturbances
 Resource Allocator: In this role, the manager divides the work and delegate
authority among his subordinates.
 Negotiator: A manager is responsible for representing the organization at major
negotiations. He may have to negotiate with union leaders for a strike issue,
negotiate with workers for addressing their grievances and so on.
 Schools of Management Thought

The various approaches to the study of management has propounded by specialist from
different disciplines have come to be called schools of management thought.

All these thoughts are basically different point of views or guidelines regarding man-
agement which enables the managers to achieve their organizational goals easily and
effectively. Major schools of management thought are as follows –

1. Management Process School

2. Empirical School
3. Human Behaviors or Human Relations School
4. Social School
5. Decisions Theory School
6. Mathematical or Quantitative Management School
7. Systems Management School
8. Contingency School

Management Process School or the Operational Approach

This school regards management as a process of getting things done with people
operating in organized groups. Henry Fayol is known as the father of this school.
According to this, school management can best be studied in terms of the process that it
involves. According to this school the management process divided into five functions
such as planning, organizing, staffing, directing and controlling. Those subscribing to
this school are of the view that management principles are of universal application. This
approach is also designated as the traditional approach, the universal approach, or the
classical approach. The contributors and thinkers who belong to this school are William
Newman, Summers, McFarland, Henry, J.D. Mooney, A.C. Railey, Lyndell Urwick, and
Harold Koontz.

The Empirical School:

The approach is also known as Management by Customs School/Case study approach as

it gives much importance to case studies of management. The important contributors to
this approach are Earnest Dale and group of researchers from Harward Business School
and The Management Associations of different countries. As per this school problems
could be solved better by drawing upon the experience of manager. This school of
thought believes that by analyzing the experience of successful managers or the
mistakes of poor managers, we somehow can learn about applying the most
effective management techniques.

The Human Behavioural School:

It is concerned with the recognition of the importance of human element in business

organizations. Elton Mayo and his associates made significant contributions to this
approach. The studies in this school have highlighted the relationship between social
factors productivity. The thinkers of this approach are in the opinion that the
effectiveness of any organization depends upon the quality of relationships among the
people working in the organization. The key concepts of this school are motivation,
leadership and group dynamics.

The Social System School:

In this approach an organization is considered as a social consisting of various groups of

people. Chester Barnard was the father of this approach. The main contribution of this
school of thought is its focus on cultural factors in the working of an organization. This
approach much concentrated on cooperation and teamwork among the group members
for achieving organizational objectives. So the management should attempt to create
and maintain harmony between the organizational goals and goals of the group.

The Decision Theory School:

Herbert A Simon and James March are the pioneers of this school. The concentrated on
rational decision-making, selecting from among possible alternatives of a course of
action or policy. The approach of this school of opinion is concerned with the persons or
organizational groups making the decision or with the analysis of the decision-making
process. Attempt is also made in this theory to cover the social and psychological
aspects and environment of the decisions and decision-makers.
The Mathematical School

According to the approach of the Mathematical school, decision-making is a logical

process that can be expressed in terms of mathematical symbols and relationships. This
approach forces the analyst to define a problem and allows for the insertion of symbols
through a logical methodology which provides a powerful tool for solving complex
phenomena. This is also known as quantitative school. It views management as a system
of mathematical models and logical processes. It was developed by W.C. Churchman &
others. It focused on findings right answers to the managerial problems.

The System Management School:

This approach is based on the generalization that an organization is a system and its
components are inter-related and inter-dependent. The effectiveness of system mainly
depends upon the interdependency and inter-relations of the various sub-systems. The
organization is responsive to environmental effect. It provides a strong conceptual
framework for meaningful analysis and understanding of organizations. This approach
is better than others because it is close to reality.

Contingency/Situational School:

This approach was developed by J. W. Lorsch and P. R. Lawrence. This is new approach
to management. The basic essence of this approach is that organizations have to cope
with different situations in different ways. So, managers should develop variable
methods, tools and action plans as per the required situations. Managers should
understand that there is no one best way to manage.
 PLANNING

Planning is a pre-decided course of action which will be taken in future. It deals with the
determination of objectives to be achieved and the activities required achieving the
objectives. Planning is a mental exercise that requires Imagination, forecasting and
sound decision making; it requires a lot of thinking before doing. Planning is looking
forward, anticipating the future and deciding the appropriate course of action to be
taken.

Definitions

• “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 are and where we want to go.
It makes possible for things to occur while would not otherwise happen.” –
Koontz and o’ Donnell.
• “Planning is a continuous process of making present entrepreneurial decisions
systematically.” - Peter F. Drucker

Features / Nature of Planning

1. Planning is Primary Function: Planning provides the base for another function
of management. It is followed by organizing, staffing, directing and controlling.
All the managerial functions are performed within the framework of plans.
2. Planning is Pervasive: Planning is practiced in all kinds of organizations and
each and every level of management. However, the nature and scope of planning
is different at different organizations and level of management.
3. Planning is Future Oriented: Planning is looking ahead and preparing for the
future which is based on proverb “look before you leap.” It is preparing
organizations to meet future challenges and opportunities.
4. Planning is Goal-Oriented: Planning seeks to achieve certain goals of the
organization. Planning is a useful exercise when it does contribute in some
positive way to the accomplishment of desired objectives. It also ensures the
actions that would lead to the desired results quickly and economically.
 5. Planning is Continuous: Plans are prepared for a specific time period. At the
end of specific time new plans have to be prepared. On the same way the existing
plans must be revised, when change takes place in the conditions. Therefore, we
can say planning is an on-going process.
6. Planning is an Intellectual Process: Creative thinking and imagination of
planning is a mental exercise. It depends on Intellect of an human being. If a
manager had foresight, vision and sound Judgment then he can prepare sound
plans. This is only because planning is not more guess work but involves logical
and systematic thinking. A mental predisposition to think before acting is
required in planning.
7. Flexible process: Planning should be flexible and able to adjust it to meet future
changes and challenges. Planning helps the organization to adjust its activities in
response to the changing environment. Planning must cope with changes in
future conditions. Existing plans should be revised from time to time for
incorporating the changes taking place in the external environment.
8. Planning is a difficult Mental Exercise: Planning requires foresight,
intelligence, ability to analyse the given situation or future possibilities to
determine the best course of action to be taken. Though planning is thinking
rather than doing but it does need logical and systematic evaluation of facts and
forecasts.

Importance / Significance / Needs of Planning

1. Planning provides Direction: Planning is concerned with predetermined

course of action. It provides the directions to the efforts of employees. Planning
makes clear what employees have to do, how to do, etc. By stating in advance
how work has to be done, planning provides direction for action. Employees
know in advance in which direction they have to work.
2. Planning Reduces the risk of uncertainties: Organisations have to face many
uncertainties and unexpected situations every day. Planning helps the manager
to face the uncertainty because planners try to foresee the future by making
some assumptions regarding future keeping in mind their past experiences and
scanning of business environments. The plans are made to overcome such
uncertainties.
3. Planning reduces over lapping and wasteful activities: If the managers, non-
managers and all the employees are following course of action according to plan
then there will be integration in the activities. Plans ensure clarity of thoughts
and action and work can be carried out smoothly.
4. Planning Promotes innovative ideas: Planning requires high thinking and it is
an intellectual process. So, there is a great scope of finding better ideas, better
methods and procedures to perform a particular job. Planning process forces
managers to think differently and assume the future conditions. So, it makes the
managers innovative and creative.
5. Planning Facilitates Decision Making: Planning helps the managers to take
various decisions. As in planning goals are set in advance and predictions are
made for future. These predictions and goals help the manager to take fast
decisions.
6. Planning establishes standard for controlling: Controlling means comparison
between planned and actual output and if there is variation between both then
find out the reasons for such deviations and taking measures to match the actual
output with the planned. But in case there is no planned output then controlling
manager will have no base to compare whether the actual output is adequate or
not.
7. Focuses attention on objectives of the company: Planning function begins
with the setting up of the objectives, policies, procedures, methods and rules, etc.
which are made in planning to achieve these objectives only. When employees
follow the plan they are leading towards the achievement of objectives. Through
planning, efforts of all the employees are directed towards the achievement of
organisational goals and objectives.
8. Facilitates Optimum Utilization of Resources: Various resources that are
relevant to an organization namely, funds, physical resources, manpower,
technological know-how, etc., are by and large inadequate due to demand from
competing organizations and have alternative uses. This necessitates the
organization to make the best possible use of resources. Planning facilitates
optimum use of available resources.
Types of Planning

The planning may be classified on the following basis:

1. Nature of Planning:

• Formal planning.
• Informal planning.

2. Duration of planning:

• Short term planning.

• Long term planning.

3. Levels of Management:

• Strategic planning.
• Intermediate planning.
• Operational planning.

4. Use:

• Standing plans
• Single-use plans.

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 recognized. 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 determine in advance what should be done.

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.
Short term Planning: Short term planning is the planning which covers the period of
one year. 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.

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 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.

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.

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.

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.

Standing Plan: Standing plan is one, which is designed to be used over and over again.
Objectives, policies procedures, 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.

 Objectives: Objective is the destination point or end point of the endeavours

made by the staff of an organisation.
 Policies: A policy serves as a valuable guide to those individuals who have to
make certain important decisions in the course of accomplishment of the
business objectives.
  Procedures: A procedure will lay down the manner in which certain works has
to be performed. It prescribes the sequence of activities to complete a given task.
 Rules: Rules are concerned with ‘do’s and ‘don’t’s.
 Strategies: A strategy is nothing but a tactics adopted to counter competitor’s
action.

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
programmes, and budgets,. It is also called specific planning. Single use plan is short
range.

 Programmes: A programme is nothing but the business agenda. It specifies the

date and time by which activities of the enterprise will be carried out.
 Budget: Budget is a financial plan of a business. It always express in numerical
terms.

Planning Process

Planning is an activity there are certain logical steps for every manager to follow.

1. Setting Objectives: The first and foremost step is setting objectives. Every
organisation must have certain objectives. Objectives may be set for the entire
organisation and each department or unit within the organisation. Objectives or
goals specify what the organisation wants to achieve. Objectives should be
stated clearly for all departments, units and employees.
2. Developing Planning Premises: The manager is required to make certain
assumptions about the future. These assumptions are called premises.
Assumptions are the base material upon which plans are to be drawn. The base
material may be in the form of forecasts, existing plans or any past information
about policies.
3. Identifying alternative courses of action: Once objectives are set, assumptions
are made. Then the next step would be to act upon them. There may be many
ways to act and achieve objectives. All the alternative courses of action should be
identified. The course of action which may be taken could be either routine or
 innovative. An innovative course may be adopted by involving more people and
sharing their ideas..
4. Evaluating alternative courses: The next step is to weigh the pros and cons of
each alternative. Each course will have many variables which have to be weighed
against each other. The positive and negative aspects of each proposal need to be
evaluated in the light of the objective to be achieved.
5. Selecting an alternative: This is the real point of decision making. The best plan
has to be adopted and implemented. The ideal plan, of course, would be the most
feasible, profitable and with least negative consequences. Most plans may not
always be subjected to a mathematical analysis. In such cases, subjectivity and
the manager’s experience, and at times, intuition play an important part in
selecting the most viable alternative. Sometimes, a combination of plans may be
selected instead of one best course.
6. Formulation of Derivative Plans: Derivative plans are the subsidiary plans or
sub plans prepared to support the main plan. Without the derivative plans, it is
not possible to carry out the main plan.
7. Implementing the plan: This is the step where other managerial functions also
come into the picture. The step is concerned with putting the plan into action, i.e.,
doing what is required.
8. Follow-up action: To see whether plans are being implemented and activities
are performed according to schedule is also part of the planning process.
Monitoring the plans is equally important to ensure that objectives are achieved.
 Decision Making

Decision-making is a process of selecting the best among the different alternatives. It is

the act of making a choice. There are so many alternatives found in the organization and
departments. Decision-making is defined as the selection of choice of one best
alternative. Before making decisions all alternatives should be evaluated from which
advantages and disadvantages are known.

According to Stephen P. Robbins, “decision-making is defines as the selection of a

preferred course of action from two or more alternatives.”

According to George Terry, “decision making is the selecting of an alternative, from two
or more alternatives, to determine an opinion or a course of action.

Characteristics of Decision-Making

The important characteristics or features of decision-making are given below

1. It is a goal-oriented activity: The objective of decision-making is always to

attain a specific goal.
2. Existence of alternative courses of action: The need for decision-making
would arise only when there are alternative ways of performing a task. If there is
only one course of action available there is nothing to decide.
3. It may be positive or negative: Another interesting feature of decision making
is that the decision made may be either positive or negative.
4. Decision-making is both science and art: As a science, decision- making
requires knowledge of the method, rule or principle concerning the problem. As
an art, it requires skill for making the decision a success.
5. It is situational: It means that the decision-maker may make different decisions
for the same problem under different situations.
6. It may be voluntary or induced: When the decision-maker makes the decision
himself and is not pressurised by anyone, such a decision is known as a
voluntary decision. He makes the decision spontaneously and with an open mind.
On the other hand, when he is pressurised either by individuals or by the
situation to evolve a decision to solve a problem, the decision becomes induced.
 7. It is a complex mental exercise: Decision-making involves careful
consideration of the alternative courses of action, evaluation of the same and
selection of the best course of action. The entire process of decision making
requires application of mind and intelligence. Only then the decision-maker will
be able to evolve a wise decision. Moreover, the decision made once also
becomes a precedent and will be quoted always in future.
8. It is an on-going (Continues) activity: Decision-making is a continuous
process. Decisions are to be taken in everyone's life right from cradle to grave. In
a business organisation too several decisions need to be taken right from its
inception to dissolution.

Importance of Decision Making

1. Better Utilization of Resources: Decision making helps to utilize the available

resources for achieving the objectives of the organization. The available resources
are the 6 M’s, i.e. Men, Money, Materials, Machines, Methods and Markets. The
manager has to make correct decisions for all the 6 M’s. This will result in better
utilization of these resources.
2. Facing Problems and Challenges: Decision making helps the organization to
face and tackle new problems and challenges. Quick and correct decisions help to
solve problems and to accept new challenges.
3. Business Growth: Quick and correct decision making results in better utilization
of the resources. It helps the organization to face new problems and challenges. It
also helps to achieve its objectives. All this results in quick business growth.
However, wrong, slow or no decisions can result in losses and industrial sickness.
4. Achieving Objectives: Rational decisions help the organization to achieve all its
objectives quickly. This is because rational decisions are made after analyzing and
evaluating all the alternatives.
5. Increases Efficiency: Rational decisions help to increase efficiency. Efficiency is
the relation between returns and cost. If the returns are high and the cost is low,
then there is efficiency and vice versa. Rational decisions result in higher returns
at low cost.
6. Motivates Employees: Rational decision results in motivation for the employees.
This is because the employees are motivated to implement rational decisions.
 When the rational decisions are implemented the organization makes high
profits. Therefore, it can give financial and non-financial benefits to the
employees.
7. Selecting the best alternatives: Decision making is the process of selecting the
best alternatives. It is necessary in every organization because there are many
alternatives. So decision makers evaluate various advantages and disadvantages
of every alternative and select the best alternative.
8. Helpful in planning and policies: Any policy or plan is established through
decision making. Without decision making, no plans and policies are performed.
In the process of making plans, appropriate decisions must be made from so
many alternatives. Therefore, decision making is an important process which is
helpful in planning.

Problems in Decision Making

1. Lack of knowledge of the alternative courses of action: Often, the decision-

maker is oblivious of the alternatives available. In such a situation, he selects the
option according to his intuition. Best decision can be made only if all the
alternatives are properly evaluated. The alternative selected by him, therefore,
may not give the expected results.
2. Indecisiveness: It means 'unable to decide'. It may not be possible for some
managers to arrive at a decision easily. Such managers tend to business
opportunities. Sometimes, they may take a hasty decision at the postpone
decisions to the extent possible. This may result in loss of last minute and such a
decision may not produce the desired results.
3. Failure to make correct diagnosis: The decisions are taken to solve the
problems. So, it is essential to understand the actual problems. If the diagnosis of
the problem is incorrect, then the decision will be failed. The actual cause of the
problem, therefore, has to be identified and only then remedy can be provided.
4. Quick Decisions: The decision-maker cannot always take his own time for
making decisions. Certain problems may be so urgent that a quick decision may
be necessary – A stitch in time saves nine. But only some managers are capable
of making quick decisions. If the decision is not made at the right moment, the
enterprise may have to suffer.
 5. Unavailability of necessary information: The information needed for the
purpose of decision may not be easily available. In such a situation, the correct
decision cannot be made. There may also be delay in arriving at a decision.
6. Making decision by itself cannot solve any problem: Implementation of the
decision and periodical review alone can produce the expected results.

Types of Decisions

Managerial decisions may be of the following types:

1. Organisational decisions
2. Personal decisions
3. Strategic or basic decisions
4. Routine or repetitive decisions
5. Policy decisions
6. Operating decisions
7. Programmed or structured decisions
8. Non-programmed or unstructured decisions
9. Individual decisions, and
10. Group decisions

Organisational Decisions: These decisions are made by a manager in his official

capacity. For example, the manager of a concern may decide to place an employee, who
has misappropriated the company's funds, under suspension, such decisions are made
in the interest of the organisation.

Personal Decisions: The decisions made by a manager in his personal capacity are
called personal decisions. For example, the manager of a concern may give a personal
loan, out of his own funds, to a subordinate. If the subordinate does not repay, the
manager cannot take action against him in his official capacity.

Strategic or Basic Decisions: Strategic decisions are complex in nature and are always
taken after deep deliberations. Any mistake in such decisions will prove to be dangerous
for the concern. These decisions can determine the very fate of the organisation.
Implementation of strategic decisions would require heavy investments and also
greater commitment on the part of the staff. The decision to introduce a new product in
the market or install very expensive machinery is an example of a strategic decision.

Routine or Repetitive Decisions: These decisions are of a recurring nature and are
taken almost on a daily basis. Such decisions do not have a serious impact on the future
or fate of the organisation. The decision to buy certain raw materials for the factory,
stationery items for the office, sanction leave for an employee etc., may be cited as an
example of a routine decision.

Policy Decisions: Obviously, these decisions relate to certain policy matters and they
provide suitable guidelines for certain important organisational issues. For example, the
basis for employee promotion has to be evolved by every organisation and it calls for a
policy decision. Usually, 'seniority' and 'merit' are the criteria used for the purpose of
employee promotion. An organisation may favour either seniority or merit or both.

Operating decisions: These decisions are necessary for implementing or executing

policy decisions. Taking the example for policy decision given above, if seniority is to be
adopted as the basis for promotion, the manner in which seniority should be
determined also needs to be decided. Seniority of an individual may be determined in
different ways. An employee's length of service in the present organisation alone may
be considered for determining seniority or his service in other organisations also may
be taken into account for the purpose. Likewise, the merit of an employee may be
determined by his academic qualifications, achievement in the present job, level of
efficiency, etc. Operating decisions are concerned only with such matters.

Programmed or Structured Decisions: These decisions have already been evolved

and they provide a basis for action. These decisions are the outcome of past experience,
tradition, custom and so on. For example, if an employee is regularly late for work, the
employer knows how to deal with him.

Non-programmed or Unstructured Decisions: These decisions are concerned with

unexpected or unprecedented situations. The basis for action does not exist already.
Every time a peculiar situation arises, a decision has to be evolved. For example, all the
employees working in department avail leave on a particular day as sheer coincidence,,
the manager has to refer the matter to the top management. He will not able to take an
independent decision

Individual Decisions: These are decisions made by individuals over an organisational

issue. The individual, by virtue of his position or knowledge or efficiency may be
enjoying such a decision making authority. For example, when there is a dispute
between the workers and the management, the matter may be referred to a mediator
who may conduct an enquiry and announce his decision. The decision of the mediator
will be binding on both the workers and the management

Group Decisions: These are decisions made by a group of persons in an organisation,

there may exist a committee consisting of the representatives of both the workers and
the management. When there is any dispute between the workers and the management,
the matter will be referred to the committee. The committee may conduct an enquiry
and announce its decision which is binding on both the workers and the management

Techniques of Decision Making

Techniques of decision-making could be classified into the following two categories:

• Qualitative techniques
• Quantitative or mathematical techniques

Qualitative Techniques:

These techniques are also known as traditional techniques of decision-making.

• Intuition
• Experience
• Considered opinions (or mutual consultations)
• Brain storming
• Delphi technique
• Expert consultation

Intuition: Intuition is the ability to know something by using feelings rather than
considering the facts. Some managers are highly intuitive by nature; and arrive at
decisions more sharply and quickly, by virtue of their intuitive powers than others who
just indulge in elaborate decision-making formalities and procedures and even then
cannot arrive at precise decisions.

Experience: Experience as a technique of decision-making implies that an experienced

manager utilizes feedback of his past experiences in judging the soundness of present
decisions. In this technique, the manager may also take advantage of the experiences of
others, operating in the same lines of activities and faced with similar decision-making
situations.

Considered opinions (or mutual consultations): The advantage of considered

opinion technique of decision-making is that it helps in generating diverse and creative
ideas of a number of persons; which facilitate the process of sound decision-making.

Brain Storming: In a brain storming session, a problem is posed before a number of

managers (or other participants); and ideas are invited from them for a solution to the
problem. As the name implies, in a brain storming session, when a problem is posed
before participants; there is a sort of storm in their minds and each one under ‘brain-in-
storm’ offers his/her own ideas for solving the problem. After the brain-storming
sessions is over; the ideas of members are critically examined and useful ideas are
processed further, for arriving at a solution to the problem. In this way, through this
technique, many-a-times, unique solutions to complicated problems are obtained.

Delphi Technique: Under this technique of decision-making, a panel of experts related

to a particular problem area is prepared. The experts are kept apart and their identity is
kept secret from one another. A questionnaire is carefully designed and sent to each
expert, for obtaining his/her response to the questions contained in the questionnaire.
The answers are studied carefully and on those answers on which experts have
differences of opinion; feedback is provided to such experts. The experts are requested
to communicate the reasons for their divergence; and give further opinions on which
also feedback is sent to them.This process of giving feedback is repeated till a
convergence of opinions begins to emerge. Decision is taken when a convergence of
opinions has taken place.
Expert Consultation: Consultation with experts is very helpful to take a better decision.
If a business need to arrive a better decision, then they can consult with a person who is
expert in that particular area.

Quantitative or Mathematical Techniques:

Some popular quantitative techniques of decision-making are as follows:

• Marginal cost analysis

• Cost-benefit analysis
• Operations Research (OR)
• Linear Programming (LP)
• Queuing Theory
• Network Techniques
• Probability Theory.

Marginal Cost Analysis: This technique of decision-making is a borrowing from

Economic Theory. It involves a comparison of marginal cost (i.e. cost resulting from the
addition of one more unit) with marginal revenue (i.e. benefit arising from the marginal
unit); since profits are maximum at a point where marginal cost and marginal revenue
are equal. This point of equality of MC (Marginal Cost) and MR (Marginal Revenue)
guides the entrepreneur as to the decision required for maximizing profits.

Cost-benefit Analysis: It is a technique of weighing alternatives, in terms of their costs

and benefits; so that an alternative where benefits are maximum against costs involved
may be selected. Cost models may be developed to show cost estimates for each
alternative; and benefit models to show the relationship between each alternative and
its effectiveness. Next, synthesizing models (combining these results) may be
developed-to show the relationships between costs and benefits of each alternative.
This technique of decision-making is used when objectives are less specific e.g. social
objectives.

Operations Research (OR): Various quantitative techniques are integrated into a new
discipline, normally known as ‘Operations Research (or OR). OR is the application of
specific methods, tools and techniques to operations of system with optimum solution
to the problem.

Special Tools or Techniques of OR:

Linear Programming (LP): Linear programming is a mathematical technique used for

the purpose of allocation of limited resources in an optimum manner. The word linear
means that relationships handled are those which are represented by straight lines; and
the word programming means making decisions systematically.

Queuing (or waiting line) Theory: Queuing theory involves a mathematical study of
queues or waiting lines the formation of which is a common phenomenon at service
stations, railway or airline reservation counters, retail stores, bank counters etc., in
order to balance the costs of waiting lines versus the costs of preventing waiting lines
by increased services.

Probability Theory: Probability theory is a statistical device which is based upon the
inference from experience that certain things are likely to happen in accordance with a
predictable pattern.

Network techniques: Complex activities often require concentrated efforts by

personnel in order to avoid wastage of time, energy and money. This technique aims to
solve this by creating strong network structures for work. There are two very important
quantitative techniques under this approach. These include the Critical Path Method
and the Programme Evaluation & Review Technique. These techniques are effective
because they segregate work efficiently under networks. They even drastically reduce
time and money.
 Management by Objectives (MBO)

It is a modern method of performance appraisal. It was propounded by Peter. F. Drucker

in 1954. The concept of MBO was described by Drucker as “a process whereby the
superior and subordinate managers of an organization jointly identify its common goals,
define each individual’s major area of responsibility in terms of results expected from
him and use these measures as guides for operating the unit and assessing the
contributions of each of its members.

MBO is a process whereby superiors and subordinates jointly identify the common
objectives, set the results that should be achieved by the subordinates, assess the
contribution of each individuals, and integrate individuals with the organization so as to
make the best use of organizational resources.

According to Koontz and O‘ Donnel, ―MBO is a comprehensive managerial system that

integrates many key managerial activities in a systematic manner, consciously directed
towards the effective and efficient achievement of organizational objectives.

Steps in MBO

An MBO programme consists of four main steps. They are;

1. Goal Setting: Goals are set each individual is to attain. The superior and
subordinates jointly establish these goals.

2. Performance Standards: In performance standards, the standards are set for

the employees as per the previously arranged time period.

3. Comparison: The actual levels of goals attained are compared with the goals
agreed upon. It enables the evaluation to find out the reasons for variation
between the actual and standard performance of the employees.

4. Periodic Review: Finally in the periodic review step, corrective measure is

initiated when actual performance deviates from the standards established in
the first step.
Features of MBO

1. MBO is an approach and philosophy to management and not merely a technique.

2. MBO gives emphasis on objectives.
3. MBO reviews performance periodically.
4. MBO is concerned with the participation of concerned managers I objective
setting and performance reviews.
5. Objectives in MBO provide guidelines for appropriate systems and procedures.

Advantages of MBO

1. It promotes better communication relationship between the superior and his

subordinates.
2. It gives the subordinates an opportunity to fix his own targets in consultation
with his superior.
3. The subordinates feel motivated and also show keen interest in their attainment.
4. The periodic review enables the subordinates to know whether he is proceeding
in the right direction.

Disadvantages of MBO

1. Periodic review involves lot of time and paper work.

2. MBO has not much do with the lower levels of management.

Management by Exception (MBE)

Management by exception is a concept that managers use to focus on key areas of

business performance instead of looking at the business as a whole. Managers only look
at the areas that have large variances from the standard or budgeted projections.
Management by exception is a way for managers to effective save time and more
efficiently run their department or business. Management by exception usually is most
effective when managers have control over the problem areas. That way they can
change processes to improve the company.
Advantages of MBE

1. It helps in the best possible utilization of time as managers are asked to resolve
problems only at crucial levels.
2. As managers are free from routine work, they can apply their full energy with
concentrated efforts on critical problems.
3. Due to the limited workload, managers can undergo an in-detailed analysis of
work to be done.
4. It predicts the management opportunities and problems which may arise in
future.
5. It helps the lower and subordinate staff to implement their own ideas to achieve
the desired target.

Disadvantages of MBE

1. There is no parameter available by which one can differentiate important

deviations from the unimportant ones.
2. Only an organisation that has a perfect system of control will be able to employ
the technique of MBE.
3. It may lead to dispersal of authority that has its own limitations.
 ORGANISING

It is the process of identifying and grouping the 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.

According to Theo Haimann, "Organising is the process of defining and grouping

the activities of the enterprise and establishing the authority relationships among
them."

Steps in Organizing

1. Identification and Division of work: The organizing function begins

with the division of total work into smaller units. Each unit of total work
is called a job. And an individual in the organization is assigned one job
only. The division of work into smaller jobs leads to specialization
because jobs are assigned to individuals according to their qualifications
and capabilities.
2. Grouping the Jobs and Departmentation: After dividing the work in
smaller jobs, related and similar jobs are grouped together and put
under one department.
3. Assignment of Duties: After dividing the organization into specialized
departments each individual working in different departments is
assigned a duty matching to his skill and qualifications. The work is
assigned according to the ability of individuals. Employees are assigned
duties by giving them a document called job description. This document
clearly defines the contents and responsibilities related to the job.
4. Establishing Reporting Relationship: After grouping the activities in
different departments the employees have to perform the job and to
perform the job every individual needs some authority. So, in the fourth
step of organizing process all the individuals are assigned some
authority matching to the job they have to perform. The assignment of
the authority results in creation of superior-subordinate relationship
 and the question of who reports to whom is clarified. The individual of
higher authority becomes the superior and with less authority becomes
the subordinate.

Importance of Organizing

1. Benefits of specialization: Organizing leads to a systematic allocation of

jobs amongst the work force. This reduces the workload as well as
enhances productivity because of the specific workers performing a
specific job on a regular basis. Repetitive performance of a particular task
allows a worker to gain experience in that area and leads to
specialization.
2. Clarity in working relationships: The establishment of working
relationships clarifies lines of communication and specifies who is to
report to whom. This removes ambiguity in transfer of information and
instructions. It helps in creating a hierarchical order thereby enabling the
fixation of responsibility and specification of the extent of authority to be
exercised by an individual.
3. Optimum utilization of resources: Organizing leads to the proper usage
of all material, financial and human resources. The proper assignment of
jobs avoids overlapping of work and also makes possible the best use of
resources. Avoidance of duplication of work helps in preventing
confusion and minimizing the wastage of resources and efforts.
4. Effective administration: Organizing provides a clear description of jobs and
related duties. This helps to avoid confusion and duplication. Clarity in working
relationships enables proper execution of work. Management of an enterprise
thereby becomes easy and this brings effectiveness in administration.
5. Development of personnel: Organizing stimulates creativity amongst the
managers. Effective delegation allows the managers to reduce their workload
by assigning routine jobs to their subordinates. The reduction in workload by
delegation is not just necessary because of limited capacity of an individual but
also allows the manager to develop new methods and ways of performing tasks.
It gives them the time to explore areas for growth and the opportunity to
innovate thereby strengthening the company’s competitive position. Delegation
 also develops in the subordinate the ability to deal effectively with challenges
and helps them to realize their full potential.

Organisation Structure

An organisation structure explains the positions and official relationships between the
various individual working in organisation. The organization structure can be defined
as the framework within which managerial and operating tasks are performed. It
specifies the relationships between people, work and resources. The organisation
structure can be classified as;

 Line Organisation Structure

 Line and Staff organisation structure
 Vertical Organisation structure
 Horizontal Organisation structure
 Functional Organisation structure
 Divisional Organisation structure
 Matrix Organisation structure

Line Organisation Structure: Line organisation is the simplest and the oldest type of
organisation. It is also known as scalar organisation or military type of organisation. In
the words of J.M. Lundy, “It is characterized by direct lines of authority flowing from the
top to the bottom of the organizational hierarchy and lines of responsibility flowing in
an opposite but equally direct manner”. Under this type of organisation authority flows
downwards, responsibility moves upwards in a straight line. Scalar principle and unity
of command are strictly followed in line organisation.
Line and Staff Organisation: In this kind of organisation, staff experts, who specialist
in specific areas assist the line personnel. These experts do not have the powers to
command any subordinate other than those who are under their direct control. They
can only advice the line personnel on certain matters. They also do not have the
authority to take decisions on vital issues. It is for the line manager to decide whether
accept the suggestions of the staff specialists or not.

Vertical (tall) Structure: Tall' structure has many leaders and layers of management,
and businesses with this structure often use a 'top-down' approach with a long chain of
command . In a hierarchical structure, managers will have a narrow span of control and
a relatively small number of subordinates or staff.
Horizontal (flat) structure: A horizontal or ‘flat' structure is an organisational
structure with only a few layers of management. In a flat structure, managers have a
wide span of control with more subordinates, and there is usually a short chain of
command. The communication pathway when using this structure is short and often
results in quicker, more effective communication. Smaller businesses or those adopting
a more modern approach to management are most likely to use a flat organisational
structure.

Functional structure: This is the simplest & the most prevalent form of organizational
structure. Functional organizational structure refers to the structure in which different
departments are created on the basis of major functions (Finance, Production, HR, etc.)
performed in the organization. Each department is headed by a functional manager and
employees are grouped as per their role.

Divisional Structure: In a divisional structure, the various departments or divisions

are created on the basis of different products manufactured, or geographical are they
are operating. In each department or division, different functions like production,
purchase, finance, sales etc. are performed in order to achieve organizational goals.
Each division has a divisional manager who is responsible for the working of his
division and has full authority over it. In each department, functional structure
automatically develops.

Matrix Structure: A matrix organization is a work structure where team members

report to multiple leaders. In a matrix organization, team members (whether remote or
in-house) report to a project manager as well as their department head. This
management structure can help your company create new products and services
without realigning teams.
 Difference between Functional Structure and Divisional Structure

BASIS FOR
COMPARISON FUNCTIONAL STRUCTURE DIVISIONAL STRUCTURE

Meaning Functional Structure is one in An organizational structure

which the reporting wherein the organizational
relationships of the functions are classified into
organization are bifurcated divisions as per product or service
according to their functional lines , market, is called Divisional
area. Structure.

Basis Functional areas Specialized divisions

Responsibility Difficult to fix responsibility on a Easy to fix responsibility for

particular department. performance.

Autonomy of Managers do not have Managers have autonomy of

decisions autonomy of decisions. decisions.

Cost Economical, as the functions are Expensive as it involves

not repeated. repeatation of resources.

Appropriate for Small and simple organizations. Large and dynamic organizations.
 Principles of Organizing

1. Unity of Objectives: The goals of the organization influence the organization

structure. Hence, the goals and objectives must be clearly defined for the entire
organization, for each department and even for each position in the organization
structure. If there is contradiction among the various levels of objectives, then
entire goals of the organization cannot be achieved. There must be unity of
objectives so that all efforts can be concerned on the set goals.
2. Specialization: The total task in an organization should be divided in such a
manner that every person is confined to a single job. This leads to specialization.
An employee repeatedly performing a specific single job becomes an expert in
that job. The work assigned should be according to his abilities and aptitude.
Then he can work with greater economy and efficiency.
3. Span of Control: Span of control represents a numerical limit of subordinates to
be supervised or controlled by a manager. As there is a limit to the number of
subordinates that can be supervised effectively. However, the exact number of
subordinates will vary depending upon the nature of job, competence of the
manger, quality of subordinates etc.
4. Exception: Each manager should make all decisions within the limitation of
delegated authority. However, only exceptionally complex matters should be
referred to the higher levels for their decision. This will enable the executives at
higher levels to devote time to more important and crucial issue.
5. Scalar Principle: This principle sometimes known as the ''chain of command''.
It is unbroken line of authority from the top level to the bottom of an
organization. It makes clear about who will work under whom. The chain of
command (scalar chain) should be short and clear which makes decision making
and communication more effective.
6. Unity of Command: The principle of command suggests that an employee
should have one and only one boss. Each subordinate should have only one
superior whose command he has to be obey. Directions from several superiors
may result in confusion, chaos, conflict.
7. Delegation of Authority: Proper authority should be delegated at all levels of
management. The authority delegated should be equal to responsibility so as to
 enable each manager to accomplish the task assigned to him.
8. Responsibility: According to this principle, the responsibility of all employees
should be made clear. The superior should not be allowed to avoid responsibility
by delegating authority to his subordinates.
9. Authority: Authority is the tool by which a manager is able to accomplish the
desired goals. Hence, the authority of each manager should be clearly defined
and it should be equal to responsibility. In the absence of adequate authority,
responsibility leads to frustration and ineffective performance.
10. Efficiency: The efficiency of an organization is measured through the ability of
achieving the predetermined goals at minimum cost. The organization structure
should enable accomplishment of organizational goals. Hence, it should ensure
optimum utilization of all resources.
11. Simplicity: The organizational structure should be simple with minimum
numbers of levels so that each member can understand his duties and authority
relationships. An organization with few levels in organization means difficulty of
communication and coordination.
12. Flexibility: The organization structure should be adaptable to changing
environment and needs of the organization. For this organization structure
should be flexible. It should permit replacement without dislocation and
disruption of the basic design.
13. Balance: The principle of balance should be followed while organizing structure.
There should be a reasonable balance in the size of various departments and
between centralization and decentralization.
14. Unity of Direction: There should be one objectives and one plan for a group of
activities having the same objectives. There should be one official for each group
of the same activity. By this there will be unity of direction. This facilities
verification and coordination of activities.
 Formal and Informal Organization

Formal Organization: Formal organisation is deliberately and consciously created for

the accomplishment of the enterprise objectives. In Formal Organization, job of each
member is clearly defined; authority, responsibility and accountability are fixed.

Features of Formal Organisation:

1. Deliberately created structure: It is a deliberately created structure that

defines official relationships amongst people working at different job positions.

2. Job-oriented: It focuses more on jobs than people. It allocates jobs to people and
defines the structure of relationships to achieve the formal organisational
objectives.
3. Division of work: Work is divided into smaller units and assigned to individuals
on the basis of their skills and abilities. Division of work results in specialisation
and increases organisational output.
4. Departmentation: Departmentation is the foundation of organisation structure,
that is, organisation structure depends upon departmentation. Departmentation
refers to division of work into smaller units and their re-grouping into bigger
units (departments) on the basis of similarity of activities. The functional
departmentation divides organisation structure into production, finance,
personnel and marketing departments. Departmentation helps in fixing
responsibility of various departmental heads.
5. Formal authority: People exercise authority by virtue of their position in the
organisational hierarchy. Authority is linked to position and through it, in the
person occupying the position. It involves the right to command, to perform, to
make decisions and spend resources.

6. Delegation: Work is officially delegated from top to lower levels. The work load
is divided into units, a part is assigned to subordinates with authority to carry
out the assigned task. The concept of division of work and its assignment to
people down the scalar chain is called delegation.
Merits of Formal Organisation:

1. It clearly defines objectives of the organisation and authority- responsibility

relationships amongst people to attain those objectives.
2. It results in optimum utilisation of scarce organisational resources.
3. Division of work and relationships amongst people develops effective system of
communication in the organisation.

4. The organisational hierarchy avoids overlapping of activities between two

individuals or two departments. Two individuals are not assigned the same task.

5. Career advancement and promotional avenues are clearly defined in the formal
structure of organisation.

6. The rate of absenteeism and labour turnover (the rate at which people join and
leave the organisation) remains low. (Because of clear objectives, policies,
strategies etc.).

7. Formal organisation integrates formal goals of the organisation with goals of

individuals working in the organisation. There is, thus, synthesis of individual,
group and organisational goals.

Limitations of Formal Organisation:

1. Loss of initiative: As too much emphasis is placed upon formal rules and
regulations, workers do not use their creative and innovative skills to perform
organisational tasks. There is loss of initiative and innovative abilities due to strict
adherence to rules.
2. Delay in Action: While following scalar chain and chain of command actions get
delayed in formal structure.
3. Ignores Social Needs of Employees: Formal organisational structure does not
give importance to psychological and social need of employees which may lead to
demotivation of employees.

Informal Organization: An organization formed within the formal organization as a

network of interpersonal relationship, when people interact with each other, is known
as informal organization. Informal organisation is the outcome of personal and social
relationships between the individuals in an organisation. It is not consciously or
deliberately created.

Features of informal organisation

1. Informal organisational structure gets created automatically without any intended

efforts of managers.

2. Informal organisational structure is formed by the employees to get psychological

satisfaction.

3. Informal organisational structure does not follow any fixed path of flow of

authority or communication.

4. Source of information cannot be known under informal structure as any person

can communicate with anyone in the organisation.

5. The existence of informal organisational structure depends on the formal

organisation structure.

Advantages of Informal Organisation:

1. Fast Communication: Informal structure does not follow scalar chain so there

can be faster spread of communication.

2. Fulfills Social Needs: Informal organization gives due emphasis to

psychological and social needs of employees which motivate the employees.
3. Fast Communication: It serves as a faster channel of communication.

4. Fulfills Organisational Objectives: It helps in achieving organisational objectives

by compensating the limitations of the formal structure.

Disadvantages of Informal Organisation:

1. Creates Rumours: Sometimes informal organisation becomes a disturbing force,

which can go against organisational interests, e.g., spreading rumours in the
organisation.
2. Leads to interpersonal and inter-group conflicts: Being and in a formal
environment, it leads to creating interpersonal and inter-group conflicts.
Sometimes it hinders the work of the organization.
 BASIS FOR FORMAL ORGANIZATION INFORMAL ORGANIZATION
COMPARISON

Meaning An organization type in which An organization formed within the

the job of each member is formal organization as a network of
clearly defined, whose authority, interpersonal relationship, when
responsibility and people interact with each other, is
accountability are fixed is formal known as informal communication.
organization.

Creation Deliberately by top Spontaneously by members.

management.

Purpose To fulfill, the ultimate objective To satisfy their social and

of the organization. psychological needs.

Nature Stable, it continues for a long Not stable

time.

Communication Official communication Grapevine

Control Rules and Regulations Norms, values and beliefs

mechanism

Focus on Work performance Interpersonal relationship

Authority Members are bound by All members are equal.

hierarchical structure.

Size Large Small

Delegation of Authority

Delegation refers to the downward transfer of authority from a superior to a

subordinate. Delegation of authority can be defined as subdivision and sub-allocation of
powers to the subordinates in order to achieve effective results.

According to Haimann,”Delegation of authority merely means the granting of authority

to subordinates to operate within prescribed limits”.

Elements of Delegation

Authority - in context of a business organization, authority can be defined as the power

and right of a person to use and allocate the resources efficiently, to take decisions and
to give orders so as to achieve the organizational objectives.

Responsibility - is the duty of the person to complete the task assigned to him. A
person who is given the responsibility should ensure that he accomplishes the tasks
assigned to him.

Accountability - means giving explanations for any variance in the actual performance
from the expectations set.

Steps in Delegation

Delegation of authority is the base of superior-subordinate relationship, it

involves following steps:-

1. Assignment of Duties - The delegator first tries to define the task and
duties to the subordinate. He also has to define the result expected
from the subordinates. Clarity of duty as well as result expected has to
be the first step in delegation.
2. Granting of authority - Subdivision of authority takes place when a
superior divides and shares his authority with the subordinate. It is for
this reason, every subordinate should be given enough independence
to carry the task given to him by his superiors. The managers at all
levels delegate authority and power which is attached to their job
positions. The subdivision of powers is very important to get effective
results.
3. Creating Responsibility and Accountability - The delegation process
does not end once powers are granted to the subordinates. They at the
same time have to be obligatory towards the duties assigned to them.
Responsibility is said to be the factor or obligation of an individual to
carry out his duties in best of his ability as per the directions of
superior.
Features of Delegation of Authority

1. Delegation means giving power to the subordinate to act independently

but within the limits prescribed by the superior. Also, he must comply with
the provisions of the organizational policy, rules, and regulations.
2. Delegation does not mean that manager give up his authority, but certainly
he shares some authority with the subordinate essential to complete the
responsibility entrusted to him.
3. Authority once delegated can be further expanded, or withdrawn by the
superior depending on the situation.
4. The manager cannot delegate the authority which he himself does not
possess. Also, he can not delegate his full authority to a subordinate.
5. The delegation of authority may be oral or written, and may be specific or
general.
6. The delegation is an art and must comply with all the fundamental rules of an
organization.

Advantages/Importance of Delegation

1. Vital for every Organisation - Delegation of authority is indispensable for every

organisation. No individual, in any organisation, can perform all the tasks
himself. He needs the support of a team of individuals. The work, therefore, has
to be shared by different persons working in a department. The task of sharing
the work and accomplishing the same is done through the process of delegation.
2. Relief to Managers - The manager of each department is able to divide the entire
work of his department among his subordinates. After assigning work to every
subordinate staff, the manager also gives him the requisite authority. The
manager, thus, is able to concentrate on more important duties. The routine
work is being attended by his subordinates
3. Prompt Decisions - Delegation of authority to subordinates enables them to
make decisions within the scope of their authority. For example, a foreman has
the authority to make certain decisions within his level of authority. It is,
therefore, not necessary to refer every matter to the superior and to await his
decision.
 4. Improvement of Job Satisfaction - Assignment of work and responsibilities to
subordinates gives them the feeling that they are being recognised. This would
certainly motivate them to put in greater efforts in order to show good results. A
subordinate showing good results should definitely be rewarded. The reward
may come to him in the form of tangible or intangible benefits. Such a person,
therefore, is bound to have a higher level of job satisfaction.
5. Scope for business expansion - As the subordinates of the organisation are well
versed in performing their tasks and also have the expertise in decision-making,
the business can successfully undertake expansion or diversification activities.

Decentralization

It refers to downward transfer of authority from one level to another level.

Decentralisation of Authority‟ refers to the dispersal of authority for decision-
making in various levels of organisational operations throughout the organisation.

“Decentralisation refers to the systematic effort to delegate to the lowest levels all
authority except that which can only be exercised at central points.”— Allen.

Importance / Advantages of Decentralisation of Authority

1. Relief to the Top Executives: Diminishing the work-load of the senior

executives who are already over-burdened, decentralisation helps to reduce
the volume of their routine affairs. They can devote greater time and attention
to important policy matters by decentralizing authority for routine
operational decisions.
2. Motivation of the Subordinates: Decentralisation motivates the lower level
managers by increasing their chances of recognition, improving their status
and offering them a feeling of accomplishment. The facility to make decision
and function independently activates strong drives among the individuals
and, thus, results in increased productivity.
3. Ensuring Quick Performance: The close contact and consequent greater
understanding between the managers and the managed can cope successfully
with constant business changes. Thus, it provides a dynamic character to the
 business and ensures quick decision and prompt action.
4. Developing Future Executives: When authority is decentralised, the
subordinates get the opportunity of exercising their own judgement. They
learn how to decide and develop managerial skills. Thus, decentralisation
provides a better means of developing future managers and executives.

Disadvantages of Decentralisation

1. Increase the administrative price: Now and again, decentralization may not
be conceivable by any stretch of the imagination. Outer factors make this
troublesome, for example, expansive strikes.
2. High Cost of operation: It builds the authoritative costs in light of the fact
that generously compensated administrators must be selected.

Difference between Delegation and Decentralization

BASIS FOR
COMPARISON
DELEGATION DECENTRALIZATION
Meaning Delegation means handing Decentralization is the final
over an authority from one outcome achieved, when the
person of high level to the delegation of authority is
person of low level. performed systematically and
repeatedly to the lowest level.
What it is? Technique of management Philosophy of management.

Accountability Superiors are accountable Department heads are accountable

for the acts done by for the acts of the concerned
subordinates. department.
Requirement Yes, for all organization No, it is an optional philosophy
delegation of authority is which may or may not be adopted
very necessary. by the organization.
Liberty of Work Subordinates do not have full
A substantial
liberty. amount of freedom is
there.
 Departmentation

Departmentation refers to the grouping of operating tasks into jobs, the combining of
jobs into efficient work groups and combining of groups into divisions called as
“Departments”. In simple words, Departmentation is the way in which an organization
groups its various activities.

Simply stated, Departmentation is the process of classifying or grouping of activities of

an organisation into different units and sub-units with the aim of carrying out the
activities efficiently for achieving the overall objectives.

“Departmentation is the process of grouping activities into units for purposes of

administration.” —William H. Newman

“Departmentation is the process of grouping the various activities into separate units.”
—Theo Haimann

Importance / Needs of Departmentation

1. Increases Efficiency: Grouping of activities and specialization help in the

optimum use of all resource which increases efficiency.
2. Fixes Responsibility: Departmentalization leads to delegation of
authority and accountability and fixes responsibility of the manager.
3. Managerial Appraisal: Appraisal of managerial responsibility becomes easy.
4. Better Budgeting: Departmental organization its function help in better
budget allocation and utilization.
5. Specialization: Specialized activities can be carried out through
effective departmentation.
6. Helps in Human Resources Development: Requirement of more skilled
human resources is achieved through training and developments.
7. Coordination and Control: Departmentation helps the top
management to control and coordinate in better manner.
Bases of Departmentation

1. Functional basis.
2. Territorial basis.
3. Process basis.
4. Product basis.
5. Customer basis.
6. Time basis.
7. Number basi

Departmentation by Function

The most commonly accepted practice is the grouping of the activities in

accordance with the functions of an enterprise. The basic enterprise functions
generally consist of production, marketing, finance, etc. This method is more
logical and hence present in almost all enterprises at some level.

Departmentation by Territories

When the organization is large and geographically dispersed, departmentation on

territorial basis is the best. This is also considered suitable where the branches
produce the same goods or perform similar services at various locations.

Departmentation by Process

Activities can also be grouped according to the process involved or the equipment
used, This form of departmentation is often employed in manufacturing
enterprises. It is also called equipment departmentation. Large retail or
marketing enterprises may also have process departments for receiving goods in
stores, transportation, wrapping and delivery. Departmentation by process is
usually decided on the basis of costs that is mainly on economic considerations.

Departmentation by Product

This type of departmentation is desirable for large undertakings which deal with
a variety of products or product lines. To departmentalise on product basis
means to establish each product or group of closely related products in a product
line as a relatively autonomous integrated unit within the overall framework of
the company. Under this method, an executive will be in charge of and
responsible for all the activities relating to a particular product from production
to distribution.

Departmentation by Customer

Departmentation can also be made on the basis of customers served that is

customer departmentation. In this case, the firm shows its paramount interest in
the welfare of the customer and attention given to them. Under this method, the
customers are divided into separate categories, such as distributors, retailers and
consumers, and the task of satisfying the needs of different categories of
customers assigned to specific departments.

Departmentation by Time

It is a common practice to departmentalize activities on time basis. Enterprise

engaged in continuous process can follow this pattern. We are familiar with the
second shift, third shift, or night shifts, etc. Under this method, the activities
performed in each shift are similar and almost identical. But they are
departmentalized on time basis. This kind of departmentation is generally found
in public utilities and manufacturing establishments.

Departmentation by Number:

In case of departmentation by number, activities are grouped on the basis of their

performance by certain number of persons. For instance, in the army, soldiers are
grouped into squaders, battalions, companies, brigades and regiments based on
the number prescribed for each unit. However, this type of departmentation is
not found in business concerns.
 Span of Management

It is also known as span of control. The Span of Management refers to the number
of subordinates who can be managed efficiently by a superior. Simply, the
manager having the group of subordinates who report him directly is called as
the span of management.

Factors Determining Span of Management

1. Capacity of Superior: Here the capacity means the ability of a superior to

comprehend the problems quickly and gel up with the staff such that he
gets respect from all. Also, the communication skills, decision-making
ability, controlling power, leadership skills are important determinants of
supervisory capacity. Thus, a superior possessing such capacity can
manage more subordinates as compared to an individual who lack these
abilities.
2. Capacity of Subordinate: If the subordinate is trained and efficient in
discharging his functions without much help from the superior, the
organization can have a wide span. This means a superior can manage a
large number of subordinates as he will be required just to give the broad
guidelines and devote less time on each.
3. Nature of Work: If the subordinates are required to do a routine job, with
which they are well versed, then the manager can have a wider span. But, if
the work is complex and the manager is required to give directions, then
the span has to be narrower.Also, the change in the policies affects the
span of management. If the policies change frequently, then the manager
needs to devote more time and hence the span would be narrow whereas if
the policies remain stable, then a manager can focus on a large number of
subordinates. Likewise, policies technology also plays a crucial role in
determining the span.
4. Degree of Decentralization: If the manager delegates authority to the
subordinates then he is required to give less attention to them. Thus,
higher the degree of decentralization, the wider is the span of
management. But in case, subordinates do not have enough authority, then
 the manager is frequently consulted for the clarifications, and as a result
superior spends a lot of time in this.
5. Planning: If the subordinates are well informed about their job roles, then
they will do their work without consulting the manager again and again.
This is possible only because of the standing plans that they follow in
their repetitive decisions. Through a proper plan, the burden of a manager
reduces manifold and can have a wider span of management.
6. Staff Assistance: The use of staff assistance can help the manager in
reducing his workload by performing certain managerial tasks such as
collecting information, processing communications and issuing orders, on
his behalf. By doing so, the managers can save their time and the degree of
span can be increased
7. Supervision from Others: The classical approach to the span of
management, i.e., each person should have a single supervisor is changing
these days. Now the subordinates are being supervised by other managers
in the organization such as staff personnel. This has helped the manager to
have a large number of subordinates under him.
8. Communication Techniques: The mode of communication also
determines the span of management. If in the manager is required to do a
face to face communication with each subordinate, then more time will be
consumed. As a result, the manager cannot have a wider span. But in case,
the communication is in writing and is collected through a staff personnel;
the manager can save a lot of time and can have many subordinates under
him.

Organisation Chart and Organisational Manual

Organisation Chart

Organisation Chart is the vital tool for providing information about organisational
relationships. Organisation chart is a diagrammatical form, which shows the
major functions and their respective relationships, the channels of formal
authority and the relative authority of each manager who is incharge of each
respective function.
George R. Terry defines an organisation chart as a “diagrammatical form, which
shows important aspects of an organisation including the major functions and
their respective relationship, the channels of supervision and the relative
authority of each employee who is in charge of each respective functions.”

The organisation chart has the following characteristics:

 It is a diagrammatical presentation
 It shows principal lines of authority in the organisation
 It shows the interplay of various functions and relationships
 It indicates the channels of communication.

Advantages of Organisation Chart

1. Organisation chart gives a clear picture of the organisation structure and

the relationships that exist in an organisation.
2. It shows at a glance the lines of authority and responsibility. From it, the
individuals can see who their associates are, to whom they report and from
whom they get instructions.
3. By providing a detailed and clear picture of the authority relationships
existing in an organisation, they help to avoid misunderstanding of
jurisdictional problems and minimise organisational conflicts.
4. It plays a significant part in organisation improvement by pointing out
inconsistencies and deficiencies in certain relationships. When
management sees how its organisation structure actually looks, it may
discover some unintended relationships.
5. With the help of an organisation chart, outsiders can easily know the
persons whom they have to approach in connection with their work. This
helps the outsiders to save their time and also to form a better opinion of
the concern.
6. By providing a clear picture of the lines of authority and responsibilities,
they help to avoid overlapping and duplication of authority and secure
unity of command.
7. It serves as a valuable guide to the new personnel in understanding the
 organization and for their training.
8. It provides a framework of personnel classification and evaluation systems.
They show to the personnel what promotions they can expect, and what
extra training is required for promotion to a higher position.

Disadvantages or Limitations of Organisation Chart

1. Organisation chart shows only the formal relationships and fails to show
the informal relations within the organisation. Informal relationships are
also important in any organisation.
2. Organisation charts, no doubt show the line of authority but they do not
show the quantum of authority vested in different managerial positions.
Thus, it is not bale to answer the questions like how much authority can be
exercised by a particular executive, how far he is responsible for his
functions and to what extent he is accountable.
3. An organisation chart is incomplete. It is not possible to include all
information affecting the organisation.
4. It shows a static state of affairs and does not represent flexibility which
usually exists in the structure of a dynamic organisation.
5. When there is an organisation chart, the personnel in the organisation
become too conscious of their responsibilities and boundary line. This
injects rigidity and inflexibility into the organisation structure. Updating is
not possible without disturbing the entire set-up.

6. Organisation chart gives rise to a feeling of superiority and inferiority

which causes conflicts in the organisation and affects team-spirit adversely.
7. It does not show the relationships that actually exist in the organisation but
shows only the "supposed to be" relationships.
8. The organisation charts just display the organisation structure. They
neither guarantee a good organisation structure nor good management.

Organisational Manual

Organisation manual is a small book containing information about the

organisational objective, authority and responsibility of various positions and
 methods and procedures followed. The manual can be prepared either for the
organisation as a whole or parts thereof.

The organisation manual consists the information such as organisational

objectives and policies, job descriptions of major positions, organisational
procedures, methods and rules.

Good organisation manual has the following contents.

1. Nature of the enterprise

2. Objectives of the enterprise
3. Policies of the management
4. Job Descriptions
5. Duties and responsibilities of various personnel
6. Instructions relating to the performance of standard as well as non-standard
jobs.

Types of Manuals

The different types of manuals are:

1. Policy Manuals: It describes the overall limitations within which

activities are to take place and thus reveals the broad courses of
managerial action likely to take place under certain conditions.
2. Operations Manual: It is prepared to inform the employees of
established methods, procedures and standards of doing the various
kinds of work.
3. Organisation Manual: It explains the organisation, the duties and
responsibilities of various departments, and their respective sub-
divisions. Promotional charts may be included in the organisation
manual which will show possible promotional lines throughout the
entire organisation.
4. Departmental Practice Manual: It deals in detail with the internal
policies, organisation and procedures of one department.
 5. Rules and Regulations Manual: It gives information about he
operating rules and employment regulations. It is a handbook of
employment rules.

Advantages of Manuals

1. It contains in writing all-important decisions relating to internal

organisation of the enterprise.
2. It avoids conflicts and overlapping of authority.
3. It enables new employees to know the various procedure and practice
in the shortest possible time.
4. It enables quick decisions.
5. It contains rules and regulations which employees must follow.

Disadvantages of Manual

1. The preparation of manual is costly and time consuming and process.

2. Manuals leave little scope of individual's initiative and direction.
3. Manuals bring rigidity to the organisation.
4. Manuals may put on record those relationships which no one would like to see
exposed.
 STAFFING

Staffing is a managerial function which involves obtaining, utilising and retaining,

qualified and competent personnel to fill all positions of an organization. In finer terms,
staffing is placing the right person at the right job.

Staffing involves the determination of manpower requirements of the enterprise and

providing it with adequate competent people at all its levels.

According to Theo Hainmann, “Staffing function is concerned with the placement,

growth and development of all those members of the organisation whose function is to
get things done through the efforts of other individuals.”

“Staffing can be defined as filling and keeping filled positions in the organisation
structure.” —Koontz and Weihrich

Importance of Staffing

1. It helps in the finding out efficient and effective workforce, to fill different posts
in the organisation.
2. It improves organisation’s performance and productivity by appointing the right
person at the right job.
3. It facilitates in identifying the staffing requirements of the organisation in future.
4. It ensures continuous survival and growth of the organisation, by way of
succession planning for executives.
5. It develops personnel to take up top managerial positions of the organisation.
6. It ensures training and development of the people working in the organisation.
7. It assists the organisation in making the optimum use of human resources.
8. Staffing increases employee morale and job satisfaction.

Objectives of staffing:

1. To procure right type of personnel for right jobs.

2. To train and develop human resources.
3. To develop personnel policies as regards transfer, promotion, etc.
 4. To mould effectively the human resources and motivate them for higher
performance.
5. To establish desirable working relationship between employers and employees
and between groups of employees.
6. To ensure satisfaction of the needs of the workers so that they become loyal and
committed to the organisation.
7. To build high morale among employees by maintaining good human relations.

Features / Nature of Staffing

1. People-oriented – Staffing deals with efficient utilization of human resources in

an organization. It promotes and stimulates every employee to make his full
contribution for achieving desired objective of the organization.
2. Development-oriented – It is concerned with developing potentialities of
personnel in the organization. It develops their personality, interests, and skills.
It enables employees to get maximum satisfaction from their work. It assists
employees to realize their full potential. It provides opportunities to employees
for their advancement through training, job education, etc.
3. Pervasive function – Staffing is required in every organization. It is a major sub-
system in the total management system that can be applied to both profit making
and non-profit making organizations. It is required at all levels of organization
for all types of employees.
4. Continuous function – Staffing is a continuous and never-ending process. It
requires constant alertness and awareness of human relations and their
importance in every operation.
5. Human objectives – It develops potentialities of employees so that they can
derive maximum satisfaction from their work. It creates an atmosphere where
employees willingly cooperate for the attainment of desired organizational goals.
6. Individuals as well as group-oriented – Staffing is concerned with employees
both as individuals and as group in attaining goals. It establishes proper
organizational structure to satisfy individual needs and group efforts. It
integrates individual and group goals in such a manner that the employees feel a
sense of involvement towards the organization.
 7. Developing cordial working environment – It develops a cordial environment
in the enterprise where each employee contributes his best for the achievement
of organizational goals. It provides a very comfortable physical and psychological
working environment.
8. Interdisciplinary nature – Staffing has its roots in social sciences. It uses
concepts drawn from various disciplines such as psychology, sociology,
anthropology, and management. It has also borrowed principles from
behavioural sciences. It is a science of human engineering.
9. Integral part of general management – Staffing is an integral part of the
general management. It is very much a part of every line manager’s
responsibility. Every member of the management group (from top to bottom)
must be an effective personnel administrator. It renders service to other
functional areas of management.
10. Science as well as art – Staffing is a science of human engineering. It is an
organized body of knowledge consisting of principles and techniques. It is also an
art as it involves skills to deal with people. It is one of the creative arts as it
handles employees and solves their problems systematically. It is a philosophy of
management as it believes in the dignity and worth of human beings.

Process of Staffing / Elements of Staffing

Staffing process stresses on equipping the organisation with an exact number of people,
and that too at the right time and place, which will help the organisation to attain its
objectives effectively. The staffing process involves a series of steps, discussed as under:

1. Manpower Planning: Popularly known as human resource planning, it is the

process of forecasting the firm’s demand for and supply of competent workforce,
in the adequate number in future.
2. Recruitment: It entails seeking, stimulating and obtaining, as many applications
as possible from the eligible and competent candidates.
3. Selection: It is the decisive step of the staffing process, which involves
differentiating between applicants, so as to identify and choose the candidate
who best fulfils the qualifications and requirements of the vacant position.
 4. Training and Development: In this step, the new joinees undergo training to
acquire specific skills. Development implies learning opportunities, designed by
the organisation, to ensure the growth of employees.
5. Placement: The allocation of rank and responsibility to selected candidate, is
known as Placement.
6. Orientation and Induction: After the placement, the next step is to provide the
new employee with the information they require for functioning comfortably and
efficiently in an organisation. Induction is the process of introducing the new
joinees to the job and the organisation as well.
7. Performance Appraisal: A rational assessment and evaluation of employee’s
performance against clear-cut benchmarks.
8. Career Management: Career Management is a process in which the individual
understand and learns new skills and interests and use them for the betterment
of the organisation and self.
9. Compensation: Compensation refers to the consideration which an individual
gains, in return for his/her contribution to the organisation.
10. Promotion and transfer: Promotion is said to be a non- monetary incentive in
which the worker is shifted from a higher job demanding bigger responsibilities
as well as shifting the workers and transferring them to different work units and
branches of the same organization.

Recruitment

Recruitment may be defined as the process of searching for prospective employees and
stimulating them to apply for jobs in the organisation. This step involves locating the
potential candidate or determining the sources of potential candidates.

Sources of Recruitment

The object of recruitment is to attract potential employees with the necessary

characteristics or qualification, in the adequate number for the jobs available. It locates
available people for the job and invites them to apply for the job in the organisation.

The various activities involved with the process of recruitment includes;

 1. Identification of the different sources of labour supply
2. Assessment of their validity
3. Choosing the most suitable source or sources, and
4. Inviting applications from the prospective candidates, for the vacancies.

The requisite positions may be filled up from within the organization or from outside.
Thus, there are two sources of recruitment

 Internal and
 External.

Internal source: There are two important sources of internal recruitment, namely,
transfers and promotions, which are discussed below:

Transfers: It involves shifting of an employee from one job to another, one department
to another or from one shift to another, without a substantive change in the
responsibilities and status of the employee. It may lead to changes in duties and
responsibilities, working condition etc., but not necessarily salary.

Promotions: Business enterprises generally follow the practice of filling higher jobs by
promoting employees from lower jobs. Promotion leads to shifting an employee to a
higher position, carrying higher responsibilities, facilities, status and pay. Promotion is a
vertical shifting of employees.

Advantages of Internal Sources of Recruitment

 Selecting and transferring existing employees is a simpler process.

 The managers are aware of the talents and abilities of already existing employees.
 Internal recruitment serves as a tool to boost the morale of employees as internal
hiring creates job and promotion opportunities for existing employees.
 Internal hiring promotes a feeling of loyalty amongst the employees.
 Existing employees are already aware of the company’s working methods and
don’t take a long time to adjust to new positions.
Disadvantages of Internal Source of recruitment

 However, there is a potential drawback to the internal recruitment process. It can

lead to stagnation in the company’s workforce. No introduction of new employees
or fresh ideas.
 Often employees who are not suitable for a higher position are given promotions
just because they have been at the organization for a long time, not because of their
skills and qualifications.

External Sources: The External Sources of Recruitment mean hiring people from
outside the organization. In other words, seeking applicants from external to the
organization.

1. Media Advertisement: The advertisement is the most common and preferred

source of external recruiting. The ads in newspapers, professional journals, give a
comprehensive detail about the organization, type, and nature of job position, skills
required, qualification and experience expected, etc. This helps an individual to self-
evaluate himself against the job requirements and apply for the jobs which best
suits him.
2. Employment Exchange: The employment exchange is the office run by the
government wherein the details about the job seekers such as name, qualification,
experience, etc. is stored and is given to the employers who are searching for men
for their organizations. For certain job vacancies, it is mandatory for every
organization to provide details about it to the employment exchange. It is the most
common source of external recruitment that offers jobs to unskilled, semi-skilled
and skilled workers.
3. Direct Recruitment: The direct recruitment also called as factory gate recruitment
is an important source of hiring, especially the unskilled workers or badli workers
who are paid on a daily-wage basis. Here, the company puts up a notice on a notice
board or on the factory gate regarding the jobs available, such that the applicant
sees it and apply for the job directly.
4. Casual Callers (Unsolicited Applicants): The casual callers, also called as
unsolicited applications are the job seekers who come to the well-renowned
organizations casually and either mail or drop in their job applications seeking the
 job opportunity. This could be considered as an important source of external
recruitment as the personnel department maintains the folder of unsolicited
applications and call those who fulfill the job requirements, whenever the vacancy
arises.
5. Educational Institutions or Campus Placement: Creating a close liaison with the
educational institutes for the recruitment of students with technical and
professional qualifications has become a common practice of external recruitment.
Here, the companies visit the technical, management and professional colleges to
recruit the students directly for the job positions. The recruitment from educational
institutions is also termed as campus recruitment.
6. Labour Contractors: This is the most common form of external recruitment
wherein the labor contractors who are either employed with the firm or have an
agreement to supply workers to the firm for the completion of a specific type of a
task. This method is again used for hiring the unskilled and semi-skilled workers.
The contractor keeps in touch with the workers and sends them to the places where
their need arises. In doing so, the contractors get the commission for each worker
supplied.
7. Walk-Ins: This is again a direct form of recruitment wherein the prospective
candidates are invited through an advertisement to come and apply for the job
vacancy. Here, the specified date, venue, and time are mentioned, and the
candidates are requested to come and give interviews directly without submitting
their applications in advance.
8. E-recruiting: The e-recruiting means searching and screening the prospective
candidates electronically. There are several online job portals that enable the job
seekers to upload their resume online which are then forwarded to the potential
hirers. Such as naukri.com, monster.com, shine.com, etc. are some of the well
renowned online job portals.
9. Management Consultants (Job Consultancy Services): There are several private
management firms that act as a middleman between the recruiter and the recruit.
These firms help the organization to hire professional, technical and managerial
personnel, and they specialize in recruiting middle level and top level executives.
These firms maintain data of all the job seekers, such as education, qualification,
experience, etc. and give their details to the companies who are looking for men.
 Nowadays, the engineers, accountants, lawyers help their counterparts to get
suitable jobs in industrial organizations.
10. Poaching or Raiding: The term employee poaching is used to describe practices
that involve companies hiring employees from their competitors. In simple words,
Raiding means luring the talented staff of the competitor, generally in the same
industry; with an objective to save training cost and gains the competitive
advantage over the competing firms.
11. Waiting List: The business concern prepares a waiting list of candidates who have
already been interviewed. But they are not appointed for lack of vacancy. Whenever
vacancies arise, the vacancy may be filled up by the company out of the waiting list.

Advantages of External sources of recruitment

1. Attracts New Skills and Inputs: External recruitment greatly increases the
possibility of identifying and attracting fresh talent. This talent comes onboard
with new skills and business ideas that have the ability to take your business to
the next level.
2. Increased chances: In this increased chance, the company receives a diversity
and number of candidates who owns knowledge and capability to hold that job.
When an organization recruits externally, it opens the organization up to a
bigger pool of applicants, which increases its possibility of finding the correct
individual for the job. This increased chance provides better accessibility of
skilled and qualified employees for the company by using the external
recruitment method.
3. Qualified Personnel: By using external sources of recruitment, the management
can attract qualified and trained people to apply for vacant jobs in the
organization.
4. Ideas from other industries: Another benefit that can be observed from
candidates recruited from external recruitment is that they offer exclusive and
new ways which are followed in the opponent or other companies they worked
for.
5. Lesser internal politics: In the external recruitment procedure, there is a very
fewer risk that the candidate might face internal politics of existing candidates.
 6. No fear and favour: The externally recruited candidates will perform without
any fear and favour. Because, they are strangers to the organisation, so they need
not fear and favour anyone.

Disadvantages of External Recruitment

1. A limited understanding of the company: When an applicant is selected from

an external recruitment procedure, there is a chance that the candidate might
have less chance of understanding the environment of the company.
2. Dissatisfaction among existing staff: External recruitment may lead to
dissatisfaction and frustration among existing employees. They may feel that
their chances of promotion are reduced. When a company considers a new
applicant for the senior position than the existing candidates, then there is a
higher chance that the company existing employees might show some sort of
internal dispute among the officials of the company.
3. Lengthy process: Recruitment from external sources takes a long time. The
business has to notify the vacancies and wait for applications to initiate the
selection process. The major disadvantages of external recruitment are that it is
time-consuming as the majority of the companies post an advertisement for their
company recruitment constrain.
4. Costly process: It is very costly to recruit staff from external sources. A lot of
money has to be spent on advertisement and processing of applications. As most
part of the external recruitment procedure mostly deals with absolute new
candidates then the companies need to come up with a pay scale for that
candidate which should value his/her ability and skill.
5. Higher risk: There is an opportunity that the applicant selected for the post is
not worthy of the position offered and he/she can take advantage of their
situation in the company.
6. Invites unsuitable applicants: External advertising methods are something
that happens in large scale through print media and hence a huge number of
applicants who are not fit for the job post are drawn in.
 Selection

Selection is the process of identifying and choosing the best person out of a number of
prospective candidates for a job. Towards this purpose, the candidates are required to
take a series of employment tests and interviews. The process may start right from the
screening of the applications. It may continue even after the offer of employment,
acceptance and joining of the candidate. It is so because the process of selection, like any
other managerial decision, involves judgment about the performance potential of the
candidate. The effectiveness of the selection process would ultimately be tested in terms
of on-the-job of the chosen person.

Process of Selection

The important steps in the process of selection are as follows:

1. Preliminary Screening: Preliminary screening helps the Manager eliminate

unqualified or unfit job seekers based on the information supplied in the
application forms. Preliminary interviews help reject misfits for reasons, which
did not appear in the application forms.
2. Selection Tests: An employment test is a mechanism (either a paper and pencil
test or an exercise) that attempts to measure certain characteristics of
individuals. These characteristics range from aptitudes, such as manual
dexterity, to intelligence to personality. Important Tests Used for Selection of
Employees are;

a. Aptitude Test: An aptitude test is conducted to know whether the

candidate has the potentials to learn the skill necessary to the work to be
assigned to him. A candidate who is going to be employed as a salesman
cannot be judged by academic achievements. His potentials will be judged
by his ability to communicate .effectively and answer questions.
b. Intelligence Test: The object of conducting intelligence test is to test the
mental capacity of the candidates. A person's intelligence is measured by
what is called 'Intelligence Quotient (IQ). The IQ of a person is judged by
 his ability to answer a certain number of questions within a stipulated
time.
c. Proficiency Test: A proficiency test is conducted to measure a person's
skill to do his job. For certain jobs the skill of the individual is more
important than his IQ or aptitude. A typist's performance, for example,
will be judged by his or her ability to type with maximum speed and
without committing mistakes.
d. Interest Test: The purpose of interest test is to measure a candidate's
interest in a particular type of work. For example, office work consists of
maintenance of records and files, receiving and sending mail, managing
cash, etc. If the candidate shows preference for records management, he
can be considered for such a job. Interest test enables the employer to
assign the job for which the candidate has greater interest so that he can
derive maximum job satisfaction.
e. Personality Test: Personality test helps to judge the personal traits of a
candidate. It brings out such qualities of an individual as his courage,
values, initiative, curiosity, temperament, judgement, likes and dislikes.
Personality test is necessary to select executives for an organisation.

3. Interview: Interview is a formal, in-depth conversation conducted to evaluate

the applicant’s suitability for the job. The role of the interviewer is to seek
information and that of the interviewee is to provide the same. Though, in
present times, the interviewee also seeks information from interviewer. The
interview may be of different types. They are;

a. Structured interview: In a structured interview the interviewer has a list

of questions with answers prepared well in advance. The candidates
interviewed are asked questions only from the prepared list. Marks may
be awarded to the candidates based on the answers they give and thereby
their suitability for the job may be assessed.
b. Unstructured Interview: In this case the interviewer does not keep any
list of questions. He can ask any question that he thinks is relevant and
see how the interviewee responds. Sometimes the interviewer may ask
the candidate to express his views on the job he has applied for, the work
 he did earlier, the organisations he served earlier, the present
organisation and so on. The interviewer, in this kind of an interview, is a
patient listener. He does not interrupt the interviewee nor does he give
his opinions on what is stated.
c. Depth Interview: As the very name suggests depth interview attempts to
know the in-depth knowledge of the candidate in his chosen field of
activity. This type of interview is necessary where the candidates are
expected to be experts in performing the job to be assigned to them. For
example, a person who is going to be appointed as the office manager
must be well versed in all aspects of office work. Similarly, a person who
is going to be employed as the labour welfare officer must be sound in
labour laws, human relations and so on.
d. Stress Interview: This kind of interview is necessary to select candidates
for jobs that require tremendous amount of patience, the capacity to
overcome resistance or protest and the mental courage to overcome
stress and strain. Candidates, who are interviewed for such jobs as those
of sales representatives, receptionists, public relations officers etc., need
to be subjected to a stress interview.
e. Board or Panel Interview: In this kind of an interview the candidate is
interviewed simultaneously by a panel of experts. Such an interview is
necessary where the employer desires that assessment of the candidate
by a group or a team of experts is required. Each member of the board or
panel may ask questions from certain specific areas. One interviewer may
ask questions pertaining to the candidate's field of work, another person
regarding his interests and so on. The selection of the candidate will
depend on the assessment of all the board members.
f. Group Interview: In this case a group of candidates will be interviewed
simultaneously. Such an approach is normally used for the selection of
management trainees. A practical problem is given to them and each one
is asked to discuss it to find a solution. The performance of each
individual in the group discussion will decide whether he will be selected
or not.
 4. Reference and Background Checks: Many employers request names,
addresses, and telephone numbers of references for the purpose of verifying
information and, gaining additional information on an applicant. Previous
employers, known persons, teachers and university professors can act as
references.
5. Selection Decision: The final decision has to be made from among the
candidates who pass the tests, interviews and reference checks. The views of the
concerned manager will be generally considered in the final selection because it
is he/she who is responsible for the performance of the new employee.
6. Medical Examination: After the selection decision and before the job offer is
made, the candidate is required to undergo a medical fitness test. The job offer is
given to the candidate being declared fit after the medical examination.
7. Job Offer: The next step in the selection process is job offer to those applicants
who have passed all the previous hurdles. Job offer is made through a letter of
appointment/confirm his acceptance. Such a letter generally contains a date by
which the appointee must report on duty. The appointee must be given
reasonable time for reporting.
8. Contract of Employment: After the job offer has been made and candidate
accepts the offer, certain documents need to be executed by the employer and
the candidate.

Training and Development

Training refers to a programme that facilitates an employee to perform the job

effectively through acquiring increased knowledge.

According to Edwin Flippo, “Training is the act of increasing the knowledge and skill of
an employee for doing a particular job”.

Training and Development is an attempt to improve the current or future employee

performance by increasing an employee’s ability to perform through learning, usually
by changing the employee’s attitude or increasing his or her skills and knowledge.
Training and development refers to educational activities within a company created to
enhance the knowledge and skills of employees while providing information and
instruction on how to better perform specific tasks.

Difference between training and development

Training is a short-term reactive process meant for operatives and process while
development is designed continuous pro-active process meant for executives. In
training employees' aim is to develop additional skills and in development, it is to
develop a total personality.

In training, the initiative is taken by the management with the objective of meeting the
present need of an employee. In development, initiative is taken by the individual with
the objective to meet the future need of an employee.

Benefits/Needs/Importance of Training and development

Benefits to the organisation

The benefits of training and development to an organisation are as follows:

1. Training is a systematic learning, always better than hit and trial methods which
lead to wastage of efforts and money.
2. It enhances employee productivity both in terms of quantity and quality, leading
to higher profits.
3. Training equips the future manager who can take over in case of emergency.
4. Training increases employee morale and reduces absenteeism and employee
turnover.
5. It helps in obtaining effective response to fast changing environment –
technological and economic.

Benefits to the Employee

The benefits of training and development activity to the employees are as follows:

1. Improved skills and knowledge due to training lead to better career of the
individual.
 2. Increased performance will help the employee to earn more.
3. Training makes the employee more efficient to handle machines. Thus, less
prone to accidents.
4. Training increases the satisfaction and morale of employees.

Training Methods

There are various methods of training. These are broadly categorized into two groups:

 On-the-Job and
 Off-the-Job methods

On-the-Job methods refer to the methods that are applied to the workplace, while the
employee is actually working.

Off-the-Job methods are used away from the work place.

On the Job Methods:

1. Apprenticeship Program: Apprenticeship program put the trainee under the

guidance of a master worker. For example, plumbers, electricians or iron-
workers, are often required to undergo apprenticeship training. These
apprentices are trainees who spend a prescribed amount of time working with
an experienced guide, or trainer.
2. Coaching: In this method, the superior guides and instructs the trainee as a
coach. The coach or counselor sets mutually agreed upon goals, suggests how to
achieve these goals, periodically reviews the trainees progress and suggests
changes required in behavior and performance.
3. Internship Training: It is a joint program of training in which educational
institutions and business firms cooperate. Selected candidates carry on regular
studies for the prescribed period. They also work in some factory or office to
acquire practical knowledge and skills.
4. Job Rotation: This kind of training involves shifting the trainee from one
department to another or from one job to another. This enables the trainee to
 gain a broader understanding of all parts of the business and how the
organisation as a whole functions.
5. Job Instruction Training: This method is also known as training through step
by step. Under this method, trainer explains the trainee the way of doing the
jobs, job knowledge and skills and allows him to do the job. The trainer appraises
the performance of the trainee, provides feedback information and corrects the
trainee. The benefit of JIT is that the training is real time and based on the real
workplace. Hence the trainee not only observes the trainer perform the job but
also gains hands on experience in performing the job under supervision.

Off the Job Methods:

1. Class Room Lectures/Conferences: under the off the job methods of training,
classroom method or lecture method is well-known to train white collar or
managerial level employees in the organisation. Under this method employees
are called to the room like that of classroom to give training by trainer in the
form of lectures. This method is effectively used for the purpose of teaching
administrative aspects or on management subject to make aware of procedures
and to give instructions on particular topic. This technique can be used to a large
group with low cost.
2. Films (Audio-Visual): Providing training by way of using Films, Televisions,
Video, and Presentations etc. In the corporate sector, mainly in customer care
centers employers are giving training to their employees by using audio visuals
material to teach how to receive, talk and behaviour with the customer.
3. Simulation: The simulation Method of training is most famous and core among
all of the job training methods. In the simulation training method, trainee will be
trained on the especially designed equipment or machine seems to be really used
in the field or job. But, those equipment or machines are specifically designed for
training. This method of planning is mostly used where very expensive
machinery or equipment used for performing Job or to handle that job.
4. Case Study: It is a written description of an actual situation in the past in same
organisation or somewhere else and trainees are supposed to analyze and give
their conclusions in writing. This is another excellent method to ensure full and
whole hearted participation of employees and generates good interest among
 them. Case is later discussed by instructor with all the pros and cons of each
option. It is an ideal method to promote decision-making abilities within the
constraints of limited data.
5. Vestibule Training: Mostly this method of training will be used to train
technical staff, office staff and employees who deal with tools and machines.
Employees learn their jobs on the equipment they will be using, but the training
is conducted away from the actual work floor by bringing equipments or tools to
certain place where training is provided, but not work place. Vestibule training is
provided to employees when new or advanced equipment or tools introduced in
to the organisation to do a particular job by using them. For this purpose such
equipment is brought to a separate place to give demonstration and train how to
use and that handle it by employees safely.
6. Role Playing: During a role play, the trainees assume roles and act out situations
connected to the learning concepts. It is good for customer service and training.
This method is also called ‘role-reversal’, ‘socio-drama’ or ‘psycho-drama’. Here
trainees act out a given role as they would in a stage play. Two or more trainees
are assigned roles in a given situation, which is explained to the group. There are
no written lines to be said and, naturally, no rehearsals. The role players have to
quickly respond to the situation that is ever changing and to react to it as they
would in the real one.
 Directing

Directing is the function of guiding, inspiring, overseeing and instructing people

towards accomplishment of organizational goals. Directing is said to be the heart of
management process. Directing initiates action and it is from here actual work starts.

In simple words, it can be described as providing guidance to workers is doing work. In

field of management, direction is said to be all those activities which are designed to
encourage the subordinates to work effectively and efficiently.

According to Human, “Directing consists of process or technique by which instruction

can be issued and operations can be carried out as originally planned”

Features of Directing

1. Initiates Action: A directing function is performed by the managers along

with planning, staffing, organizing and controlling in order to discharge
their duties in the organization. While other functions prepare a platform for
action, directing initiates action.
2. Pervasive Function: Directing takes place at every level of the organization.
Wherever there is a superior-subordinate relationship, directing exists as every
manager provides guidance and inspiration to his subordinates.
3. Continuous Activity: It is a continuous function as it continues throughout the life
of organization irrespective of the changes in the managers or employees.
4. Management Function: Directing is a key function of management. Direction
brings plan into action by motivating subordinates for higher productivity. So, it
is a tool of management to achieve organizational goals and objectives.
5. Directing Flows From Top To Bottom: Directing flows from superior to the
subordinate as it follows scalar chain system. Directing starts with top and ends
with bottom level of management.
6. Directing Is A Psychological Factor: It influences and inspires human behavior.
Directing deals with feelings, emotions, and psychological of an individual.
Therefore, it is also known as psychological factor.
 7. Directing Is A Creative Activity: Direction brings plans into action. It motivates
subordinates to perform their job accurately and effectively. It requires
innovative thoughts, proper techniques, and ideas to convert plan into actual
performance. So, directing is a creative activity of the manager.
8. Directing Is Performance Oriented: Direction motivates subordinates to
perform their work more effectively. It brings plan into action. So, main objective
of directing is to boost employees’ performance.

Importance of Directing

1. Activates human factor: Directing is essential to get things done by the

employees. Employees always await orders and instructions from their
superiors. The moment such orders are issued, they swing into action. In other
words, in the absence of direction, the human factor will remain passive in any
work place.
2. Improves communication relationships: Directing helps to improve
communication relationships between the superior and his subordinates. For the
purpose of issuing orders and instructions, the manager may meet his
subordinates directly or indirectly. If the subordinates need any clarification,
they do ask their superior.
3. Provides guidance: One of the main aims of directing is to guide the
subordinate staff in their work. This helps them to understand and perform their
job better.
4. Motivates employees: Direction further aims at motivating the employees.
Giving orders and instructions alone may not be adequate to get things done by
the staff. The employees need to be persuaded and motivated constantly to
perform well. Motivation may be done by offering financial subordinate.
Sometimes, the subordinates may be firmly dealt with in order to protect the
interests of the organisation.
5. Ensures effective control: Supervision is an integral part of direction. The
manager, while supervising the work of subordinates, will be able to know
whether they are sincere and committed. Action can be taken against a
subordinate showing indifference. The manager will also be able to help any
 employee who needs his assistance. Thus, direction helps to have effective
control over the staff.
6. Promotes efficiency: Direction helps the manager to get the best out of every
subordinate. It further ensures that the other organisational resources, namely,
machines, materials and money are put to optimum use and thereby promotes
overall efficiency.
7. Improves human relations: Directing involves identifying the capacities,
qualities and weaknesses of subordinates. Provision of incentives for those who
perform well and guidance for those who need help and assistance will certainly
improve human relations in the work place.
8. Helps to adapt to changes: Normally workers resist any kind of change in their
work methods or pattern. Direction enables the managers to make the workers
accept changes without resistance. The managers may explain the need for
certain changes in the work methods in the interest of both the organisation and
the individual.
9. Ensures growth and stability: The manager, through direction, is able to
motivate, lead and guide his subordinates. This certainly helps to achieve
uninterrupted growth. Once the required level of growth is achieved, directing
helps to maintain it at that level.

Elements of Directing
Directing as a management function comprises the following elements.
1. Communication
2. Supervision
3. Motivation
4. Leadership
 Communication

Communications is fundamental to the existence and survival of humans as well as to an

organization. It is a process of creating and sharing ideas, information, views, facts, feelings,
etc. among the people to reach a common understanding. Communication is the key to the
Directing function of management.

According to Haimann, “Communication is the process of passing information and

understanding from one person to another”

According to Koontz and O’Donnel, “Communication is an intercourse by words, letters,

symbols, or messages, and is a way that one organisation member shares meaning and
understanding with another”

Features of Communication

1. It involves minimum two persons: Communication involves at least two

persons, a sender and a receiver. The sender is called communicator and the
receiver of the message is known as communicate.
2. Communication may be Written, Oral or Gestural: Communication is
generally understood as spoken or written words. But in reality, it is more than
that. It includes everything that may be used to convey meanings from one
person to another, e.g., movement of lips, or the wink of an eye or the wave of
hands may convey more meaning than even written or spoken word.
3. Communication is a Two Way Process: It involves both information and
understanding. Communication is not complete unless the receiver has
understood the message properly and his reaction or response is known to the
sender. Understanding is the end result of communication but it does not imply
agreement.
4. Communication may be Formal or Informal: Formal communication follows
the formal channels provided in the organization structure. Informal
communication flows from informal channels of communication which are not
provided in the organization structure. These channels develop among members
because of personal contacts through working with each other.
5. Purpose of communication: The basic purpose of communication is to create
an understanding. The receiver should understand the message sent and should
response accordingly.
Communications Process / Elements of Communication

Communications is a continuous process which mainly involves three elements viz.

sender, message, and receiver. The elements involved in the communication process are
explained below in detail:

Sender: The sender or the communicator generates the message and conveys it to the
receiver. He is the source and the one who starts the communication

Message: It is the idea, information, view, fact, feeling, etc. that is generated by the sender
and is then intended to be communicated further.

Encoding: The message generated by the sender is encoded symbolically such as in the
form of words, pictures, gestures, etc. before it is being conveyed.

Media: It is the manner in which the encoded message is transmitted. The message may
be transmitted orally or in writing. The medium of communication includes telephone,
internet, post, fax, e-mail, etc. The choice of medium is decided by the sender.

Decoding: It is the process of converting the symbols encoded by the sender. After
decoding the message is received by the receiver.

Receiver: He is the person who is last in the chain and for whom the message was sent by
the sender. Once the receiver receives the message and understands it in proper
perspective and acts according to the message, only then the purpose of communication is
successful.

Feedback: Once the receiver confirms to the sender that he has received the message and
understood it, the process of communication is complete.

Noise: It refers to any obstruction that is caused by the sender, message or receiver during
the process of communication. For example, bad telephone connection, faulty encoding,
faulty decoding, inattentive receiver, poor understanding of message due to prejudice or
inappropriate gestures, etc.

Types of Communication

Communication may be classified into the following categories;

1. Based on relationship
a. Formal Communication
b. Informal Communication
2. Based on Flow of Direction
a. Vertical Communication – Upward Communication and Downward
Communication
b. Horizontal Communication
c. Diagonal Communication
3. Based on the Method used
a. Verbal Communication – Oral Communication and Written Communication
b. Non Verbal Communication

Formal Communication

Formal communication is also known as official communication. Formal communication

is the structured and official flow of information between leaders, employees,
colleagues, and other people at various levels in the organization. It is a deliberate and
controlled effort that is effective when it is systematic and timely.

Informal Communication
Informal communication is any type of communication that doesn't take place using the
formal methods or structures in a company. Informal communication is casual
communication between coworkers in the workplace. It is unofficial in nature and is
based in the informal, social relationships that are formed in a workplace outside of the
normal hierarchy of business structure.

Vertical Communication

Vertical communication is a type of communication where the flow of information takes

place among people at different levels and positions from top to bottom and vice-versa.
Here the communication moves both downward and upward from superiors to a
subordinate or vice-versa. The vertical formal communication is further subdivided into
the following form of communication

 Upward Communication: When communication moves in an upward motion

and the flow of information is from the lower levels to the superiors it is known
as upward communication. Upward communication includes complaints,
requests, opinions, reports, reactions, suggestions etc.
 Downward Communication: Messages pass from the top management level to
various subordinate levels is known as downward communication. Downward
communication includes instructions, policies, information, and order. It may be
written like displays, electronic news, notice, reports, handbooks, and manuals
or oral like meetings, speeches, telephonic conversation, and face-to-face
personal conversation.

Horizontal Communication

Horizontal communication is also referred to as lateral communication and occurs when

the flow of information is between two people belonging to the same level or status. As
the name suggests this type of communication channel moves horizontally between
employees belonging to the same level of departments even if their area of
responsibility is different. Horizontal formal communication includes mutual issues,
information, suggestions, requests, etc., and usually may occur between managers and
colleagues of different departments like finance, marketing Human resources, etc.
Diagonal Communication

When information flow and communication is neither vertical nor horizontal instead is
diagonal or zig-zag it is known as diagonal communication. Here the employees
belonging to the different departments may communicate with each other. This type of
communication is not bound by a chain of command, position, or different levels.
Diagonal communication is also referred to as Crosswise Communication and might
occur between a manager and a specific team.

Verbal Communication

Verbal communication is the use of words to convey a message. Some forms of verbal
communication are written and oral communication.

 Oral Communication: Oral communication is the exchange of information and

ideas through spoken word. It can be directly in person in a face-to-face
interaction or through an electronic device such as a phone, video platform or
radio.
 Written Communication: The Written Communication refers to the process of
conveying a message through the written symbols. In other words, any message
exchanged between two or more persons that make use of written words is
called as written communication. In any organization, the electronic mails,
memos, reports, documents, letters, journals, job descriptions, employee
manuals, etc. are some of the commonly used forms of written communication.

Non Verbal Communication

Nonverbal communication is the transmission of messages or signals through a

nonverbal platform such as eye contact, facial expressions, gestures, posture, and body
language.

Formal Communication Network

Communication network is the structure and flow of communication and information

between individuals within a group.
 Single chain: In this type of network communications flows from every superior to
his subordinate through a single chain.
 Wheel: In this network, all subordinates under one superior communicate through
him only. They are not allowed to talk among themselves.
 Circular: In this type of network, the communication moves in a circle. Each person
is able to communicate with his adjoining two persons only.
 Free flow: In this network, each person can communicate with any other person
freely. There is no restriction.
 Inverted V: In this type of network, a subordinate is allowed to communicate with
his immediate superior as well as his superior’s superior also. However, in the latter
case, only ordained communication takes place.

Barriers to Communication

1. Semantic Barriers: The Semantic barrier in communication can be defined as

the misunderstanding and interpretation of meaning which restrict effective
communication. It can be in form of language, sign and symbol. Differences in
dialect, cultural differences, body language, and the choice of word,
pronunciation differences and spelling errors are the main causes of a semantic
barrier. For example, an English origin manager has to communicate with
workers who have no knowledge of the English language.
2. Psychological Barriers: Emotional or psychological factors also act as barriers
to communication. The state of mind of both sender and receiver of
communication reflects in effective communication. A worried person cannot
communicate properly and an angry recipient cannot understand the message
properly. Some common forms of psychological barriers includes:

a. Anger: Emotional state can pose damaging barrier to communication. If

the sender is angry when he or she sends the message, it will affect the
way in which the receiver interprets the message.
b. Attitudes: Whether your attitude is positive or negative, it can influence
the communication process either positively or negatively. If one of your
beliefs is being threatened, you are likely to react emotionally instead of
listening attentively to the message.
c. Negative self-image: Negative self-image can affect both the sender and
receiver in the communication process, leading in communication
breakdown. If the sender has a negative self-image, he or she may not be
able to relay the message appropriately. Again, the message may be
forceless and lacking in conviction.
d. Fear: When a sender is fearful or defensive about the subject matter that
needs to be communicated, the sender may go too far in the attempt to
communicate and alienate the receiver(s) with melodramatic gestures
and words. Instead of accepting the mistake, the sender might try to
justify the action or refuse to admit the mistake altogether, creating
further misunderstanding.
e. Close mindedness or overconfidence: People are sometimes not
prepared to receive new information on a subject about which they
assume to know everything. Thus, their mind is closed to new ideas, facts
and suggestions. When a person is in this state of mind, such a person
runs the risk of showing overconfidence.
f. Distortion, Filtering, and Editing: When a message is transmitted
through translations, interpretations, explanations and simplifications, it
tends to lose originality and becomes distorted. The accuracy of the
message is lost and the transmission becomes imperfect as the message
goes through the filters of translations and simplifications.
g. Poor Listening: Most people do not listen very well due to various
distractions, emotions, excitement, indifference, aggressiveness and
wandering attention. One of the major reasons for bad listening is an
individual’s continual thinking about his own problems and worries. The
poor listener always feels that the thought in his mind is more interesting
than what the speaker is saying.
h. Emotion: Emotions are our feelings about the world around us. Usually,
positive emotions such as joy, love or affection do not interfere with
communication; it is the negative emotions that create barriers. An
emotionally excited communicator is unable to organize his message
properly.
 i. Information Overload: Whenever the information we have to work with
exceeds our processing capacity, the result is an information overload.
Thus, the communicator could select, ignore, pass or even forget
information. Hence, there is loss of information and less effective
communication.

3. Organizational Barriers: The factors related to organizational structure, rules

and regulations authority relationships, etc. may sometimes act as barriers to
effective communication. In an organization with a highly centralized pattern,
people may not be encouraged to have free communication. Also, rigid rules and
regulations and cumbersome procedures may also become a hurdle to
communication.
4. Personal Barriers: The Personal Barriers relate to the factors that are personal
to the sender and receiver and act as a hindrance in the communication
process. These factors include the lack of knowledge, lack of listening skill, lack
of vocabulary, lack of confidence, etc.

Supervision

Supervision is a Latin Word. Super means ‘from the above’ and vision means ‘to see’. In
ordinary sense of the term, supervision means overseeing the activities of others. In
management, supervision means “Overseeing the subordinates at work with authority
and with an aim to guide the employees, if he is doing wrong.”

According to Vitiates – “Supervision refers to the direct and immediate guidance and
control of subordinates in the performance of their task.”

Importance of Supervision

1. Mediator: Supervisor acts as an important link between workers and

management. Supervisor not only explains the objective/ideas of the
management to the workers but also explains the problems/grievances of the
workers to the management.
2. Motivating Subordinates: A supervisor is a leader at the lowest rung of
management ladder. He serves as a friend, philosopher and guide to workers. He
 inspires team work and secures maximum co-operation from the employees. It is
he who can help in getting optimum utilization of manpower.
3. Feedback to Workers: A supervisor compares the actual performance of
workers against the standards laid down and identifies weaknesses of workers
and suggests corrective measures to overcome them. In this way, workers can
improve their performance in future.
4. Proper Assignment of Work: A supervisor makes systematic arrangement of
activities and resources for his group. He assigns work to each worker and
delegate’s authority to workers. Workers feel frustrated when the work being
done by them is not properly arranged. Some workers may sit idle whereas
others may be overburdened if work is not properly assigned.
5. Favourable Work Climate: The best supervisor creates and maintains high
performance standards under congenial work atmosphere. He goal oriented and
strives to attain expected results by adopting the right type of leadership to
inspire confidence and voluntary discipline from his people.
6. Personal Maturity and Sensitiveness: The best supervisor acquires personal
maturity and emotional stability as well as empathy, i.e., sensitiveness to the
feelings of others and capacity to understand feelings and emotions of those wor-
king under his command.

Motivation

Motivation is the process of stimulating people to actions to accomplish the goals. It

improves, stimulates and induces employees leading to goal-oriented behaviour.

Motivation’ is the process of inspiring people in order to intensify their desire and
willingness for executing their duties effectively and for co-operating to achieve the
common objectives of an enterprise.

According to Dubin, “Motivation is the complex of forces starting and keeping a person
at work in an organization.”

According to W G Scott, “Motivation means a process of stimulating people to action to

accomplish desired goals”.
Characteristics of Motivation in Psychology

1. Motivation is an Internal Feeling: Motivation is a psychological phenomen on

which generates in the mind of an individual the feeling that he lacks certain
things and needs those things. Motivation is a force within an individual that
drives him to behave in a certain way.
2. Nature of Motivation is Related to Needs: Needs are deficiencies which are
created whenever there is a physiological or psychological imbalance. In order to
motivate a person, we have to understand his needs that call for satisfaction.
3. Motivation Produces Goal-Directed Behaviour: Goals are anything which will
alleviate a need and reduce a drive. An individual's behavior is directed towards
a goal.
4. Motivation can be either Positive or Negative: Positive or incentive
motivation is generally based on reward. According to Flippo -"positive
motivation is a process of attempting to influence others to do your will through
the possibility of gain or reward". Negative or fear motivation is based on force
and fear. Fear causes persons to act in a certain way because they are afraid of
the consequences if they don't.
5. Motivation is a complex process. Motivation is a complex and difficult task. In
order to motivate people a manager must understand various types of human
need. Human needs are mental feelings which can be measured accurately. If
manager measures them accurately then also every person uses different
approaches to satisfy his need.
6. Motivation is a dynamic and continuous process. Human beings are ever-
changing. Human needs are unlimited and go on changing continuously.
Satisfaction of one need gives rise to another so managers have to continuously
perform the function of motivation.

Process of Motivation

1. Unsatisfied need: Motivation process begins when there is an unsatisfied need

in a human being.
2. Tension: The presence of unsatisfied need gives him tension.
 3. Drive: This tension creates an urge of drive in the human being an he starts
looking for various alternatives to satisfy the drive.
4. Search Behavior: After searching for alternatives the human being starts
behaving according to chosen option.
5. Satisfied need: After behaving in a particular manner for a long time then he
evaluates that whether the need is satisfied or not.
6. Reduction of tension: After fulfilling the need the human being gets satisfied
and his tension gets reduced.

Importance of Motivation

1. Motivation helps to change from negative attitude to positive attitude.

2. Motivation improves performance level of employees.
3. Motivated employees help in achieving the organizational goals.
4. Motivation helps to improve the relationship between employer and employee.
5. Motivation helps to introduce changes in the organisation.
6. Motivation reduces absenteeism and employee turnover.
7. Motivation creates satisfied workforce.

Types of Motivation

1. Positive Motivation: It is the reward based motivation which tries to create

willingness to perform better. It improves performance, increase mutual
cooperation and develops trust between employees and management. Positive
motivation may take the form of monetary, nonmonetary or both. Examples;
Monetary Incentive- pay increment, cash reward, bonus payment, leave with pay,
 profit sharing scheme, retirement benefit and Non-monetary Incentive:-
promotion, participation in decision-making ,recognition, autonomy or freedom
to work, challenging work.
2. Negative motivation: It means the act of forcing employees to work by means of
threat and punishment. It involves disciplinary actions. Examples: Monetary: -
fines, penalties, pay cut, Non-monetary:- demotion, threat of dismissal from job,
transfer to remote areas, and group rejection. Since, this is not good practice.
However, sometimes manager may be compelled to use this technique with a
view to prevent them from undesirable behavior.
3. Extrinsic motivation: Extrinsic motivation refers to behavior that is driven by
external rewards. These rewards can be tangible, such as money or grades, or
intangible, such as praise or fame.
4. Intrinsic motivation: This is when motivation comes from "internal" factors to
meet personal needs. For example; the hunger is driving force coming from
inside to compel an individual to eat food. Intrinsic motives include; Biological
drives; eg: hunger, thirst, sleep, temperature, Curiosity, etc.

Theories of Motivation

Motivation theory is the study of understanding what drives a person to work towards a
particular goal or outcome. Many experts have developed different theories on the concept
of motivation. Popular ones are given below;

1. Maslow’s Need Hierarchy Theory

2. McGregor’s X and Y Theories
3. Herzberg’s Two Factor Theory
4. McClelland’s Need Theory
5. Vroom’s Expectancy Theory

Maslow’s Need Hierarchy Theory

Abraham. H. Maslow, an American Psychologist, developed a theory called the ‘Need

Hierarchy Theory’. It is one of the oldest theories on motivation. Maslow was of the view
that human behaviour is directed towards the satisfaction of certain needs. He classified
human needs into five categories and arranged the same in a particular order as given
below.

I. Physiological Needs
II. Safety Needs
III. Social Needs
IV. Self-Actualisation Needs, and
V. Esteem Needs

Maslow regarded the first three (Physiological, Safety, and Social Needs) as ‘lower order
needs’ and the remaining two (Self-Actualisation and Esteem Needs) as ‘higher order
needs’.

1. Physiological needs: The first needs on Maslow's hierarchy are physiological

needs. These most basic human survivals needs include food and water,
sufficient rest, clothing and shelter, overall health, and reproduction. Maslow
states that these basic physiological needs must be addressed before humans
move on to the next level of fulfillment.
 2. Safety needs: Next among the lower-level needs is safety. Safety needs include
protection from violence and theft, emotional stability and well-being, health
security, and financial security.
3. Love and belonging needs: The social needs on the third level of Maslow’s
hierarchy relate to human interaction and are the last of the so-called lower
needs. Among these needs are friendships and family bonds—both with
biological family (parents, siblings, and children) and chosen family (spouses
and partners). Physical and emotional intimacy ranging from sexual
relationships to intimate emotional bonds are important to achieving a feeling
of elevated kinship. Additionally, membership in social groups contributes to
meeting this need, from belonging to a team of coworkers to forging an
identity in a union, club, or group of hobbyists.
4. Esteem needs: The higher needs, beginning with esteem, are ego-driven
needs. The primary elements of esteem are self-respect (the belief that you are
valuable and deserving of dignity) and self-esteem (confidence in your
potential for personal growth and accomplishments). Maslow specifically
notes that self-esteem can be broken into two types: esteem which is based on
respect and acknowledgment from others, and esteem which is based on your
own self-assessment. Self-confidence and independence stem from this latter
type of self-esteem.
5. Self-actualization needs: Self-actualization describes the fulfillment of your
full potential as a person. Sometimes called self-fulfillment needs, self-
actualization needs occupy the highest spot on Maslow's pyramid. According
to Maslow, a person, who reaches this stage, wants to achieve all that one is
capable of achieving. In other words, a person wants to perform to his
potentials. A professor may, for example, author books. A singer may compose
music, an actor may direct film and so on.

McGregor’s X and Y Theories

Douglas McGregor developed two theories on motivation that explain the positive and
negative qualities of individuals. He gave the theories the names ‘X’ Theory and ‘Y’
Theory. These theories have been discussed below.
Theory ‘X’

This theory believes that employees are naturally unmotivated and dislike working, and
this encourages an authoritarian style of management. According to this theory,
management must firmly intervene to get things done. Theory ‘X’ is negative or
pessimistic in approach. It is based on the following assumptions.

i. People, in general, dislike work. They shirk their duties and basically lazy.
ii. Most people are unambitious. They do not voluntarily accept any
responsibility.
iii. Most people lack creativity. They show no preference for learning anything
new.
iv. Satisfaction of physiological and safety needs alone is important for most
people. Workers in general are only bothered about their salary, job security
and such other extrinsic factors.
v. While at work, an employee needs to be closely supervised and watched.

Theory ‘Y’

Theory Y managers have an optimistic, positive opinion of their people, and they use a
decentralized, participative management style. This encourages a
more collaborative , trust-based relationship between managers and their team
members. People have greater responsibility, and managers encourage them to develop
their skills and suggest improvements. Theory ‘Y’ is based on the following assumptions.

i. People are not averse to work. Given the proper working condition the
workers would do their work with the kind of enthusiasm.
ii. Workers are ambitious and they do come forward to accept responsibility.
iii. Workers do have the potentials to be creative. If the manager has a positive
outlook, it will certainly encourage the workers to display their creative ideas
and skill.
iv. Workers need not be directed and closely supervised. They are good in what
is called ‘self-direction’.
 Leadership

Leadership is the ability of a manager to induce the subordinates to work with

confidence and zeal. Leadership is the potential to influence behaviour of others. It is
also defined as the capacity to influence a group towards the realization of a goal.
Leaders are required to develop future visions, and to motivate the organizational
members to want to achieve the visions.

According to Keith Davis, “Leadership is the ability to persuade others to seek defined
objectives enthusiastically. It is the human factor which binds a group together and
motivates it towards goals.”

According to George R. Terry, “Leadership is the activity of influencing people to strive

willingly for group objectives.”

Features of Leadership

1. Influence the behaviour of others: Leadership is an ability of an individual to

influence the behaviour of other employees in the organization to achieve a
common purpose or goal so that they are willingly co-operating with each other
for the fulfillment of the same.
2. Inter-personal process: It is an interpersonal process between the leader and
the followers. The relationship between the leader and the followers decides
how efficiently and effectively the targets of the organization would be met.
3. Attainment of common organizational goals: The purpose of leadership is to
guide the people in an organization to work towards the attainment of common
organizational goals. The leader brings the people and their efforts together to
achieve common goals.
4. Continuous process: Leadership is a continuous process. A leader has to guide
his employees every time and also monitor them in order to make sure that their
efforts are going in the same direction and that they are not deviating from their
goals.
5. Group process: It is a group process that involves two or more people together
interacting with each other. A leader cannot lead without the followers.
 6. Dependent on the situation: It is situation bound as it all depends upon
tackling the situations present. Thus, there is no single best style of leadership.

Importance of Leadership:

1. Providing Motivation: A leader motivates the employees by giving

them financial and non-financial incentives and gets the work done efficiently.
Motivation is the driving force in an individual’s life.
2. Providing guidance: A leader not only supervises the employees but also guides
them in their work. He instructs the subordinates on how to perform their work
effectively so that their efforts don’t get wasted.
3. Creating confidence: A leader acknowledges the efforts of the employees,
explains to them their role clearly and guides them to achieve their goals. He also
resolves the complaints and problems of the employees, thereby building
confidence in them regarding the organization.
4. Building work environment: A good leader should maintain personal contacts
with the employees and should hear their problems and solve them. He always
listens to the point of view of the employees and in case of disagreement
persuades them to agree with him by giving suitable clarifications. In case of
conflicts, he handles them carefully and does not allow it to adversely affect the
entity. A positive and efficient work environment helps in stable growth of the
organization.
5. Co-ordination: A leader reconciles the personal interests of the employees with
the organizational goals and achieves co-ordination in the entity.
6. Creating Successors: A leader trains his subordinates in such a manner that they
can succeed him in future easily in his absence. He creates more leaders.
7. Induces change: A leader persuades, clarifies and inspires employees to accept
any change in the organization without much resistance and discontentment. He
makes sure that employees don’t feel insecure about the changes.

Qualities of a Leader

1. Personality: A pleasing personality always attracts people. A leader should also

friendly and yet authoritative so that he inspires people to work hard like him.
 2. Knowledge: A subordinate looks up to his leader for any suggestion that he
needs. A good leader should thus possess adequate knowledge and competence
in order to influence the subordinates.
3. Integrity: A leader needs to possess a high level of integrity and honesty. He
should have a fair outlook and should base his judgment on the facts and logic. He
should be objective and not biased.
4. Initiative: A good leader takes initiative to grab the opportunities and not wait
for them and use them to the advantage of the organization.
5. Communication skills: A leader needs to be a good communicator so that he can
explain his ideas, policies, and procedures clearly to the people. He not only needs
to be a good speaker but also a good listener, counselor, and persuader.
6. Motivation skills: A leader needs to be an effective motivator who understands
the needs of the people and motivates them by satisfying those needs.
7. Self-confidence and Will Power: A leader needs to have a high level of self-
confidence and immense will-power and should not lose it even in the worst
situations, else employees will not believe in him.
8. Intelligence: A leader needs to be intelligent enough to analyze the pros and cons
of a situation and take a decision accordingly. He also needs to have a vision and
fore-sightedness so that he can predict the future impact of the decisions taken by
him.
9. Decisiveness: A leader has to be decisive in managing his work and should be
firm on the decisions are taken by him.
10. Social skills: A leader should possess empathy towards others. He should also be
a humanist who also helps the people with their personal problems. He also
needs to possess a sense of responsibility and accountability because with great
authority comes great responsibility.

Leadership Styles

Leadership style is the results of a leader’s philosophy, personality, and experience and
value system. Leadership styles based on authority can be 4 types:

1. Autocratic Leadership,
2. Democratic or Participative Leadership,
 3. Free-Rein or Laissez-Faire Leadership, and
4. Paternalistic Leadership.

Autocratic leadership: Autocratic leadership, also known as authoritarian leadership,

is a management style wherein one person controls all the decisions and takes very
little inputs from other group members. Autocratic leaders make choices or decisions
based on their own beliefs and do not involve others for their suggestion or advice.

Democratic leadership: Democratic leadership, also known as participative leadership

or shared leadership, is a type of leadership style in which members of the group take a
more participative role in the decision-making process. This type of leadership can
apply to any organization, from private businesses to schools to government. Everyone
is given the opportunity to participate, ideas are exchanged freely, and discussion is
encouraged.

Free-rein Leadership Style: Under this style, a manager gives complete freedom to his
subordinates. The entire decision-making authority is entrusted to them. There is least
intervention by the leader and so the group operates entirely on its own. There is free
flow of communication. In this style manager does not use power but maintains contact
with them. Subordinates have to exercise self-control. This style helps subordinates to
develop independent personality.
Paternalistic leadership: Paternalistic leadership is a managerial approach that entails
a dominant authoritative personality who acts as a matriarch or patriarch and treats
partners and employees just like they are members of large extended families. In turn,
the leaders expect trust, obedience and loyalty from the employees. A Paternalistic
Leader creates such an amicable ambience at the workplace that employees consider
their team as a family.
 CONTROLLING

Controlling is one of the managerial functions and it is an important element of the

management process. After the planning, organising, staffing and directing have been
carried out, the final managerial function of controlling assures that the activities
planned are being accomplished or not.

It is a process of comparing the actual performance with the set standards of the
company to ensure that activities are performed according to the plans and if not then
taking corrective action.

George R. Terry defined “controlling is determining what is being accomplished, that

is evaluating the performance and, if necessary, applying corrected measures so that the
performance takes place according to plans.”

Nature or Characteristics of Controlling

1. Control is a Function of Management: Actually control is a follow-up action to

the other functions of management performed by managers to control the
activities assigned to them in the organisation.

2. Control is Based on Planning: Control is designed to evaluate actual

performance against predetermined standards set-up in the organisation. Plans
serve as the standards of desired performance. Planning sets the course in the
organisation and control ensures action according to the chosen course of action
in the organisation.

3. Control is a Dynamic Process: It involves continuous review of standards of

performance and results in corrective action, which may lead to changes in other
functions of management.

4. Information is the Guide to Control: Control depends upon the information

regarding actual performance. Accurate and timely availability of feedback is
essential for effective control action. An efficient system of reporting is required
for a sound control system. This requires continuing monitoring and review of
operations.

5. The Essence of Control is Action: The performance of control is achieved only

when corrective action is taken on the basis of feedback information. It is only
 action, which adjust performance to predetermined standards whenever
deviations occur. A good system of control facilities timely action so that there is
minimum waste of time and energy.

6. It is a Continuous Activity: Control is not a one-step process but a continuous

process. It involves constant revision and analysis of standards resulting from
the deviations between actual and planned performance.

7. Control Aims at Future: Control involves the comparison between actual and
standards. So corrective action is designed to improve performances in future.

8. Controlling is Positive: The function of controlling is positive. It is to make

things happen i.e. to achieve the goal with instead constraints, or by means of the
planned activities. Controlling should never be viewed as being negative in
character.

Needs or Importance of Controlling

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 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.

Controlling Process

1. Setting Performance Standards: The first step in the process of controlling is

concerned with setting performance standards. These standards are the basis for
measuring the actual performance.
2. Measurement of Actual Performance: Once the standards have been
determined, the next step is to measure the actual performance. The various
techniques for measuring are sample checking, performance reports, personal
observation etc. However, in order to facilitate easy comparison, the
performance should be measured on same basis that the standards have.
3. Comparing Actual Performance with Standards: This step involves comparing
the actual performance with standards laid down in order to find the deviations.
For example, performance of a salesman in terms of unit sold in a week can be
easily measured against the standard output for the week.
4. Analysing Deviations: Some deviations are possible in all the activities.
However, the deviation in the important areas of business needs to be corrected
more urgently as compared to deviation in insignificant areas. Management
should use critical point control and management by exception in such areas.
5. Taking Corrective Action: The last step in the process of controlling involves
taking corrective action. If the deviations are within acceptable limits, no
 corrective measure is required. However, if the deviations exceed acceptable
limits, they should be immediately brought to the notice of the management for
taking corrective measures, especially in the important areas.

Types of Controlling

1. Feed-Forward Controls: 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.

2. Concurrent (Prevention) Control: Concurrent control, also called steering

control. Concurrent control takes place while an activity is in progress. It
involves the regulation of ongoing activities that are part of transformation
process to ensure that they conform to organizational standards. Concurrent
control is designed to ensure that employee work activities produce the correct
results.

3. Feedback Controls: 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.

Controlling Techniques

1. Traditional Techniques

2. Modern Techniques

Traditional Techniques:

These are the techniques which were commonly used by various companies. Although
in present environment these have become outdated but still many companies are using
these:

1. Personal Observation

2. Statistical Reports.

3. Breakeven Analysis.

4. Budgetary Control.
1. Personal Observations: This is the most traditional and most popular method
of control. Under this manager observe the subordinates while they are
performing jobs. They generally note down their observations. With the help of
these observations they can easily analyze the performance of employees. By
comparing the performance chart of current year with the previous year the
managers can know the progress of their performance.

2. Statistical Reports: Various concepts of stats such as graphical presentation,

correlation, average, percentage, ratios etc. are very useful in analyzing the
performance of employees. By converting performances report into statistical
chart or table you can easily point out the progress or deviation of performance.

3. Budgetary Control: Under this technique, different budgets are prepared for
different operations in an organisation in advance. These budgets act as
standards for comparing them with actual performance and taking necessary
actions for attaining organisational goals. A budget can be defined as a
quantitative statement of expected result, prepared for a future period of time.
The budget should be flexible so that necessary changes, if need be, can be easily
made later according to the requirements of the prevailing environment.

4. Break Even Analysis: Break even analysis is a useful technique to study

relationship between costs and profit. Break-even point is a point of no profits no
loss. When sales reach break-even point, it refers to sale amount at which
company is neither earning profit nor incurring loss. With the help of break-even
analysis technique manager can estimate profits at levels of cost and revenue.
This technique helps the managers in estimating profits at different levels of
activities. The following figure shows breakeven chart of a firm.
 The point at which the total revenue and total cost curves intersect is breakeven
point. The figure shows that the firm will have the breakeven point at 60,000
units of output. At this point, there is neither profit nor loss. The firm starts
earning profit beyond this point. Through breakeven analysis, a firm can keep a
check on its variable cost and can also determine the level of activity at which it
can earn its profit target.

Modern Techniques

1. Return on Investment.

2. Ratio Analysis.

3. Responsibility Accounting.

4. Management Audit.

5. PERT and CPM.

6. Management Information System

1. Return on Investment (ROI): It is a useful tool of controlling overall

performance of an enterprise. It is also called ‘Return on Capital Employed’
(ROCE). It provides the basics and guides for measuring whether or not invested
capital has been used effectively for generating a reasonable amount of
return. The basic aspect of this technique is that profit is taken not as an absolute
figure but is considered in relation to the invested capital. Rate of return is
calculated by dividing the net profits by the total amount of investment. It can be
 computed in respect of historical data so as to reveal the rate of return realised,
or it may be applied to budgeted data to give a projected rate of return.

2. Ratio Analysis: It refers to evaluation and analysis of financial statements by

calculating some important ratios. A ‘Ratio’ is an arithmetical relationship
between two figures. ‘Ratio Analysis’ is a study of ratios between various items
or groups in the financial statement of an organisation. With the help of such
analysis, the efficiency of financial performance of an enterprise can be judged. It
measures financial condition, profitability and efficiency of the enterprise. This
analysis is an important technique to exercise control over the departments of an
enterprise. Some important examples of Ratio Analysis are the analysis of
Liquidity Ratio, Leverage Ratio, Turnover Ratio, Profitability Ratio, etc.

3. Responsibility Accounting: This technique of controlling organization is

divided into various responsibility centres and head of each centres are generally
various sections or departments of an organization and the head of the
department is considered as “Responsibility Head” as he is responsible for the
overall growth and achievement of his department or centre. Following are the
various types of centres:

a) Cost Centre: In a cost centre the targets are fixed in terms of costs. The
performance of cost centres is evaluated by making a comparison
between the actual expenses and the budgeted costs. In cost centres, the
control system measures only the costs incurred by responsibility
centres; no attempt is made to measure the value of their outputs.

b) Profit Centre: In a profit centre the targets are set in terms of profits. The
performance of this centre is evaluated by comparing the profits actually
earned with the target profit. This is done by preparing departmental
profit and loss account.

c) Investment Centre: The head of this centre is responsible not only for
costs and profits but also for the effective use of assets. The investment
made in each centre is separately calculated and the return on investment
is applied as the basis of evaluating the performance of the centre. It is the
ultimate extension of responsibility.
4. Management Audit: This control technique helps to measure the efficiency level
of managers. Financial audit has been used by firm from long time but the
management audit is a new concept. Management audit is a comprehensive and
constructive review of the performance of management team of any
organization. It reviews overall plan and policies of managers. It would highlight
possible opportunities for the organization. It ensures updating of existing
managerial policies and strategies in the light of environment changes.

5. Network Techniques (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.

6. Management Information System (MIS): This technique provides information

and support for effective managerial decision making. Right decision can be
taken at the right time only when managers receive accurate and timely
information. MIS is a communication tool for managers by which they can take
timely actions from the standards.
 RECENT / EMERGING 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:

1. Total Quality Management: Total Quality Management is an extensive and

structured organization management approach that focuses on continuous
quality improvement of products and services by using continuous feedback.
Total quality management (TQM) helps an organization improve its internal
functioning and customersatisfaction.
2. Crisis Management: Crisis management is the process by which an organization
deals with a disruptive and unexpected event that threatens to harm the
organization or its stakeholders. In other words, Crisis management refers to the
identification of a threat to an organization and its stakeholders in order to
mount an effective response to it.
3. Risk Management: A risk is an uncertain event happening in an organisation
that may lead to a positive or negative result. It is a future event that has not
occurred. A risk that has already taken place is considered an issue. Risk
Management is a process of identifying, assessing and prioritizing risks
followed by the application of resources to minimize or control or monitor the
impact of negative future events or to take maximum advantage of positive
risks.
4. Change Management: Change is to modify or make something different from
the previous state of a thing or a condition. Change management is a process in
which the organisation implements change by preparing and supporting the
employees, taking necessary steps for change, etc. Monitoring the activities
before and after the change is implemented to ensure its success. Change often
includes many different entities in an organisation. A systematic approach is to
be followed to bring in the transition and alleviate disruption. There can be
resistance to change by people or processes or systems that are outdated.

5. Remote Workers: A remote worker is someone who works outside of a

traditional office. An employee might work from home, from a coffee shop, or
 from anywhere that is not a regular office; although depending on the type of
job they do, they might find themselves going into an office on occasion (if the
company’s hub is geographically close to them). A company might have a team
of remote workers (i.e., a remote workforce) or a mix of both office workers
and remote workers.

6. Video Marketing: It means using video to promote or market brand, product

or service. A strong marketing campaign incorporates video into the mix.
Customer testimonials, videos from live events, how-to videos, explainer
videos, corporate training videos, viral (entertainment) videos — the list goes
on.

7. Artificial Intelligence: Artificial intelligence (AI) is the simulation of human

intelligence processes by machines, especially computer systems. These
processes include learning (the acquisition of information and rules for using
the information), reasoning (using rules to reach approximate or definite
conclusions) and self-correction. AI is being used more and more to improve
the overall customer experience. Many call centers are incorporating artificial
answering services with the ability to help customers with most of their issues
or questions.

8. Team Brand Ambassadors: Influencer marketing is becoming more popular

and useful every year. While hiring an influencer to promote your brand or
product has its benefits, some managers are finding ways to use resources
they already have at their disposal: employees. The person who better to boost
and advocate for a brand than its own employees are inviting to share info and
promotional material on their personal social media profiles can be free, but
effective, PR for the company.

9. Outside Consultants: Someone who is employed externally to the client

(either by a consulting firm or some other agency) whose expertise is provided
on a temporary basis, usually for a fee. Consultants can be hired to improve a
team’s communication, collaboration skills, organization, and more. They will
typically start by assessing the needs of the group and then develop a plan to
achieve a higher level of effectiveness.
10. Work Life Balance: Work–life balance is a term commonly used to describe
 the balance that a working individual needs between time allocated for work
and other aspects of life. Areas of life other than work–life can include personal
interests, family and social or leisure activities.

Modern Theories of Management

Management theories represent ideas that provide recommendations for management

strategies, frameworks and tools that organizations can implement to aid their
workforce or culture. Leaders can use these theories as guidance to meet organizational
goals or motivate employees. They can also apply ideas from different theories rather
than solely relying on one management theory. Modern management theory represents
one of the numerous theories used by organizations. This theory recognizes that today's
organizations face rapid change and added complexities, with technology serving as
both a potential cause and solution for these factors.

Modern management theories started after 1950s. Modern management theory focuses
the development of each factor of workers and organization. Modern management
theory refers to emphasizing the use of systematic mathematical techniques in the
system with analyzing and understanding the inter-relationship of management and
workers in all aspect.

It has following three Streams-

1. Quantitative Approach
2. System Approach
3. Contingency Approach

Quantitative Approach

Quantitative approach also called Operation Research. Quantitative approach is a

scientific method. It emphasizes the use of statistical model and systematic
mathematical techniques to solving complex management problems. Its helps the
management to making decisions in operations. It can only suggest the alternatives
based on statistical data. It cannot take final decision.
It helps the management for improving their decision making by increasing the
number of alternatives and giving faster decisions on any problem. Management can
easily calculate the risk and benefit of various actions.

Major contributors in Quantitative Approach are- Johan MacDonald, George R. Terry,

and Andrew Szilagyi

System approach

System approach was developed inlate1960s. Herbert A. Simon is the father of system
theory. A System is defined as a set of regularly interacting or interdependent
components that create as a whole unit. The system concept enables us to see the
critical variables and constraints and their interactions with one another.

According to Cleland and King; ― A system is composed of related and dependent

elements which when in interaction from a unity whole.

Characteristics of system approach:

 A system must have some specific components, units or sub units.

 A Change in one system affects the other subsystems.
 Every system is influenced by super system.
 All systems along their subsystem must have some common objectives.
 A system is a goal-oriented.
 A system cannot survive in isolation.

Major contributors in system theories are- Daniel Katz, Robert L. Khan, and Richard A.
Johnson.

Contingency Approach

Contingency Approach also knows as situational approach. In 1980s, it is recognized

as a key to effective management. This approach accepts the dynamics and
complexities of the organization structure. An organization is affected by its
environment and environment is composed by physical resources, climate, persons,
culture, economic and market conditions and their laws.
This approach argues that there is no one universally applicable set of rules by which
to manage organization.

Major contributors in the contingency theories are- G.M. Stalker, Joan Woodward, Tom
Burns, Paul R. Lawrence, and L.W. Lorsch.

Features of Contingency Approach:

1. The contingency approach does not accept the universality of management

theory. It stresses that there is no one best way of doing things. Management is
situation, and managers should explain objectives, design organisations and
prepare strategies, policies and plans according to prevailing circumstances.
2. Managerial policies and practices to be effective, must adjust to changes in
environment.
3. It should improve diagnostic skills so as to anticipate and ready for
environmental changes.
4. Managers should have sufficient human relations skill to accommodate and
stabilise change.