UNIT III

ORGANIZING
DEFINITION

According to Koontz and O'Donnell, "Organization involves the grouping of activities necessary to
accomplish goals and plans, the assignment of these activities to appropriate departments and the
provision of authority, delegation and co-ordination."

Organization involves division of work among people whose efforts must be co-ordinated to achieve
specific objectives and to implement pre-determined strategies.

NATURE OR CHARACTERISTICS OF ORGANIZING

Division of Work: Under division of work the entire work of business is divided into many
departments. The work of every department is further sub-divided into sub-works. In this way each
individual has to do the work repeatedly which gradually makes that person an expert.
Coordination:
even though it happens to be different. The work of one person starts from where the work of another
person ends. It is thus, clear that it is in the nature of an organization to establish coordination among
differentworks, departments and posts in the enterprise.
Plurality of Persons: Organization is a group of many persons who assemble to fulfil acommon
purpose. A single individual cannot create an organization.
Common Objectives: There are various parts of an organization with different functions to perform
but all move in the direction of achieving a general objective.
Well-defined Authority and Responsibility: Every individual working in the organization is given
some authority for the efficient work performance and it is also decided simultaneously as to what will
be the responsibility of that individual in case of unsatisfactory work performance.
Organization is a Structure of Relationship: Relationship between persons working on different
posts in the organization is decided. In other words, it is decided as to who will be the superior and
who will be the subordinate. Leaving the top level post and the lowest level post everybody is
somebody's superior and somebody's subordinate.
Organization is a Machine of Management: In the absence of organization no function can be
performed in a planned manner. It is appropriate to call organization a machine of management from
another point of view. It is that machine in which no part can afford tube ill-fitting or non-functional.
In other words, if the division of work is not done properly or posts are not created correctly the whole
system of management collapses.
Organization is a Universal Process: Organization is needed both in business and non-business
organizations. Not only this, organization will be needed where two or mom than two people work
jointly. Therefore, organization has the quality of universality.
Organization is a Dynamic Process: Organization is related to people and the knowledge and
experience of the people undergo a change. The impact of this change affects the various functions of
the organizations. Thus, organization is not a process that can be decided for all times to come but it
undergoes changes according to the needs. The example in this case can be the creation or abolition of
a new post according to the need.

IMPORTANCE OR ADVANTAGES OF ORGANIZING

(1) Increase in Managerial Efficiency: A good and balanced organization helps the managers to increase
their efficiency. Managers, through the medium of organization, make a proper distribution of the whole work
among different people according to their ability.

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 (2) Proper Utilization of Resources: Through the medium of organization optimum utilizationof all the
available human and material resources of an enterprise becomes possible. Work is allotted to every
individual according to his ability and capacity and conditions ant created to enable him to utilize his ability
to the maximum extent. For example, if an employee possesses the knowledge of modem machinery but the
modern machinery is not available in the organization, in that case, efforts are made to make available the
modem machinery.

(3) Sound Communication Possible: Communication is essential for taking the right decisionat the right
time. However, the establishment of a good communication system is possible only through an organization.
In an organization the time of communication is decided so that all the useful information reaches the officers
concerned which. in turn, helps the decision-making.

(4) Facilitates Coordination: In order to attain successfully the objectives of the organization,coordination
among various activities in the organization is essential. Organization is the only medium which makes
coordination possible. Under organization the division of work is made in such a manner as to make all the
activities complementary to each other increasing their inter-dependence. Inter-dependence gives rise to the
establishment of relations which, in turn, increases coordination.

(5) Increase in Specialization: Under organization the whole work is divided into differentparts. Competent
persons are appointed to handle all the sub-works and by handling a particular work repeatedly they become
specialists. This enables them to have maximum work performance in the minimum time while the
organization gets the benefit of specialization.

(6) Helpful in Expansion: A good organization helps the enterprise in facing competition. Whenan enterprise
starts making available good quality product at cheap rates, it increases the demand for its products. In order
to meet the increasing demand for its products an organization has to expand its business. On the other hand,
a good organization has an element of flexibilitywhich farfromimpedingthe
expansionworkencouragesit.

ORGANIZING PROCESS
Organization is the process of establishing relationship among the members of the enterprise. The
relationships are created in terms of authority and responsibility. To organize is to harmonize, coordinate or
arrange in a logical and orderly manner. Each member in the organization is assigned a specific responsibility
or duty to perform and is granted the corresponding authority to perform his duty. The managerial function of
organizing consists in making a rational division of work into groups of activities and tying together the
positions representing grouping of activities so as to achieve a rational, well-coordinated and orderly structure
for the accomplishment of work. According to Louis A Allen, "Organizing involves identification and
grouping the activities to be performed and dividing them among the individuals and creating authority and
responsibility relationships among them for the accomplishment of organizational objectives." The various
steps involved in this process are:

a) Determination of Objectives:It is the first step in building up an organization. Organization is always

related to certain objectives. Therefore, it is essential for the management to identify the objectives before
starting any activity. Organization structure is built on the basis of the objectives of the enterprise. That
means, the structure of the organization can be determined by the management only after knowing the
objectives to be accomplished through the organization. This step helps the management not only in framing

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the organization structure but also in achieving the enterprise objectives with minimum cost and efforts.
Determination of objectives will consist in deciding as to why the proposed organization is to be set up and,
therefore, what will be the nature of theworktobeaccomplishedthroughtheorganization.

b) Enumeration of Objectives:If the members of the group are to pool their efforts effectively, there must be
proper division of the major activities. The first step in organizing group effort is the division of the total job
into essential activities. Each job should be properly classified and grouped. This will enable the people to
know what is expected of them as members of the group and will help in avoiding duplication of efforts. For
example, the work of an industrial concern may be divided into the following major functions production,
financing, personnel, sales, purchase, etc.

c) Classification of Activities:The next step will be to classify activities according to similarities and
common purposes and functions and taking the human and material resources into account. Then, closely
related and similar activities are grouped into divisions and departments and the departmental activities are
further divided into sections.

d) Assignment of Duties:Here, specific job assignments are made to different subordinates for ensuring a
certainty of work performance. Each individual should be given a specific job to do according to his ability
and made responsible for that. He should also be given the adequate authority to do the job assigned to him. In
the words of Kimball and Kimball - "Organization embraces the duties of designating the departments and the
personnel that are to carry on the work, defining their functions and specifying the relations that are to exist
between department and individuals."

e) Delegation of Authority:Since so many individuals work in the same organization, it is the responsibility
of management to lay down structure of relationship in the organization. Authority without responsibility is a
dangerous thing and similarly responsibility without authority is an empty vessel. Everybody should clearly
know to whom he is accountable; corresponding to the responsibility authority is delegated to the subordinates
for enabling them to show work performance. This will help in the smooth working of the enterprise by
facilitating delegation ofresponsibilityandauthority.

ORGANIZATION STRUCTURE
An organization structure is a framework that allots a particular space for a particular department or an
individual and shows its relationship to the other. An organization structure shows the authority and
responsibility relationships between the various positions in the organization by showing who reports to
whom. It is an established pattern of relationship among the components of the organization.

Significance of Organization Structure

Properly designed organization can help improve teamwork and productivity by providing a framework
within which the people can work together most effectively.
Organization structure determines the location of decision-making in the organization.
Sound organization structure stimulates creative thinking and initiative among organizational members
by providing well defined patterns of authority.
A sound organization structure facilitates growth of enterprise by increasing its capacity to handle
increased level of authority.
Organization structure provides the pattern of communication and coordination.
The organization structure helps a member to know what his role is and how it relates to other roles.

PRINCIPLES OF ORGANIZATION STRUCTURE

Modern organizational structures have evolved from several organizational theories, which have
identified certain principles as basic to any organization structure.
a) Line and Staff Relationships:Line authority refers to the scalar chain, or to the superior-subordinate
linkages, that extend throughout the hierarchy (Koontz, O'Donnell and Weihrich). Line employees are

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responsible for achieving the basic or strategic objectives of the organization, while staff plays a supporting
role to line employees and provides services. The relationship between line and staffis crucial in
organizational structure,design and efficiency. It is also an important aid to information processing and
coordination.
b) Departmentalization:Departmentalization is a process of horizontal clustering of different types of
functions and activities on any one level of the hierarchy. Departmentalization is conventionally based on
purpose, product, process, function, personal things and place.
c) Span of Control:This refers to the number of specialized activities or individuals supervised by one
person. Deciding the span of control is important for coordinating different types of activities effectively.
d) De-centralization and Centralization:De-centralization refers to decision making at lower levels in the
hierarchy of authority. In contrast, decision making in a centralized type of organizational structure is at
higher levels. The degree of centralization and de-centralization depends on the number of levels of hierarchy,
degree of coordination, specialization and span of control.

TYPES OF ORGANISATION STRUCTURE

LINE ORGANISATION STRUCTURE

It is also known as scalar, military, or vertical organisation and perhaps is the oldest form. In this form of
organization managers have direct responsibility for the results; line organisation can be designed in two
ways.

1. PURE LINE ORGANISATION:Under this form, similar activities are performed at a particular level.
Each group of activities is self contained unit and is able to perform the assigned activities without the
assistance of others
Production Manager
|
|
| | |
Foreman-A Foreman-B Foreman-C
| | |
Worker Worker Worker

2. DEPARTMENTAL LINE ORGANISATION:Under this form, entire activities are divided into different
departments on the basis of similarity of activities. The basic objective of this form is to have uniform control,
authority and responsibility.
Production Manager
|
|
| | |
Foreman-A Foreman-B Foreman-C
(Body Moulding) (Seating) (Finishing)
| | |
Worker Worker Worker
Merits Demerits
1) It is simple to understand 1) Lack of specialization
2) Easy supervision & control 2) Low Morale
3) Quick decisions 3) Autocratic approach
4) It sets clearly the direct lines of 4) Overburden to manager
authority and responsibility of a line
manager

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LINE AND STAFF ORGANISATION:It refers to a pattern in which staff specialists advise line managers
to perform their duties. When the work of an executive increases its performance requires the services of
specialists which he himself cannot provide because of his limited capabilities on these matters. Such advice
is provided to line managers by staff personal who are generally specialists in their fields. The staff people
have the right to recommend, but have no authority to enforce their preference on other departments.
FEATURES:-
This origin structure clearly distinguishes between two aspects of administration viz., planning and
execution.
Staff officers provide advice only to the line officers; they do not have any power of command over
them.
The staff supplements the line members.

MERITS DEMERITS
1. It enhances the quality of decision 1. It may create more friction or
2. Greater scope for advancement Conflict between line and staff
3. It relieves the line managers. 2. It is expensive
4. Reduction of burden. 3. It creates confusion

FUNCTIONAL ORGANISATION STRUCTURE: It is the most widely used organization structure in the
medium and large scale organizations having limited number of products. This structure emerges from the
idea that the organization must perform certain functions in order to carry on its operations.Functional
structure is created by grouping the activities on the basis of functions required for the achievement of
organizational objectives. For this purpose, all the functions required are classified into basic, secondary and
supporting functions according to their nature & importance.

FEATURES:
1) The whole activities of an organisation are divided into various functions
2) Each functional area is put under the charge of one executive
3) For any decision, one has to consult the functional specialist

MERITS DEMERITS
1) Planned specialization 1) calls for more coordination
2) Facilitates large scale production 2) no clear line of authority
3) Disciplinary controls are well 3) slow decision making
defined 4) lack of responsibility
4) Offers clear career paths

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COMMITTEE ORGANISATION: A committee does not represent a separate type of organization like line
and staff, or functional. It is rather a device which is used as supplementary to or in addition to any of the
above types of organizations. A committee may be defined as a group of people performing some aspects of
Managerial functions. Thus, a committee is a body of persons appointed or elected for the Consideration of
specific matters brought before it.

MERITS DEMERITS
1. Group Deliberation and Judgement: 1. High Cost in Time and Money
2. Fear of Authority 2. Indecisive Action
3. Representation of interested Group 3. Compromising Attitude
4. Coordination of Functions 4. Dominance of a Few
5. Transmission of Information 6. Splitting of Responsibilities

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MATRIX ORGANISATION: It is also called project organization. It is a combination of all relationships in
the organization, vertical, horizontal and diagonal. It is a mostly used in complex projects. The main objective
of Matrix organisation is to secure a higher degree of co-ordination than what is possible from the
conventional, organizational structures such as line and staff.In matrix organization structure, a project
manager is appointed to co-ordinate the activities of the project. Under this system a subordinate will get
instructions from two or more bosses, Viz., administrative head and his project manager.

Merits
1. It offers operational freedom & flexibility
2. It focuses on end results.
3. It maintenance professional Identity.
4. It holds an employee responsible for management of resources.

Demerits:-
1. It calls for greater degree of coordination,
2. It violates unity of command.
3. Difficult to define authority & responsibility.
4. Employee may be de motivated.

General Manager

Production Personnel Finance Marketing

Project B W W W W
Manager

Project B W W W W
Manager

Project C
Manager W W W W

FORMAL ORGANIZATION
Chester I Bernard defines formal organization as -"a system of consciously coordinated activities or
forces of two or more persons. It refers to the structure of well-defined jobs, each bearing a definite measure
of authority, responsibility and accountability." The essence of formal organization is conscious common
purpose and comes into being when persons
Are able to communicate with each other
Are willing to act and Share a purpose.

The formal organization is built around four key pillars. They are:
Division of labour Structure and
Scalar and functional processes Span of control

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Thus, a formal organization is one resulting from planning where the pattern of structure has already been
determined by the top management.

Characteristic Features of formal organization

Formal organization structure is laid down by the top management to achieve organizational goals.
Formal organization prescribes the relationships amongst the people working in the organization.
A formal organization is bound by rules, regulations and procedures.
In formal organization, position, authority, responsibility & accountability of each level clearly defined.
Organization structure is based on division of labor and specialization to achieve efficiency in operations.
In a formal organization, coordination proceeds according to the prescribed pattern.

Advantages of formal organization

The formal organization structure concentrates on the jobs to be performed. It, therefore, makes
everybody responsible for a given task.
A formal organization is bound by rules, regulations and procedures. It thus ensures law and order in the
organization.
The organization structure enables the people of the organization to work together for accomplishing the
common objectives of the enterprise

Disadvantages or criticisms of formal organization

The formal organization does not take into consideration the sentiments of organizational members.
The formal organization does not consider the goals of the individuals. It is designed to achieve the goals
of the organization only.
The formal organization is bound by rigid rules, regulations and procedures. This makes the achievement
of goals difficult.

INFORMAL ORGANIZATION
Informal organization refers to the relationship between people in the organization based on personal
attitudes, emotions, prejudices, likes, dislikes etc. an informal organization is an organization which is not
established by any formal authority, but arises from the personal and social relations of the people. These
relations are not developed according to procedures and regulations laid down in the formal organization
structure; generally large formal groups give rise to small informal or social groups. These groups may be
based on same taste, language, culture or some other factor. These groups are not pre-planned, but they
develop automaticallywithintheorganizationaccordingtoitsenvironment.

Characteristics features of informal organization

Informal organization is not established by any formal authority. It is unplanned and arises spontaneously.
Informal organizations reflect human relationships. It arises from the personal and social relations
amongst the people working in the organization.
Formation of informal organizations is a natural process. It is not based on rules, regulations and
procedures.
The inter-relations amongst people in an informal organization cannot be shown in an organization chart.

Benefits of Informal organization

It blends with the formal organization to make it more effective.
The presence of informal organization in an enterprise makes the managers plan and act more carefully.
An informal organization has a powerful influence on productivity and job satisfaction.
Informal organization helps the group members to attain specific personal objectives.

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 DIFFERENCES BETWEEN FORMAL AND INFORMAL ORGANIZATION

DEPARTMENTATIONBYDIFFERENTSTRATEGIES

DEPARTMENTATION refers to the process of grouping activities into departments. Departmentation

is the process of grouping of work activities into departments, divisions, and other homogenous units.

Key Factors in Departmentation

It should facilitate control.
It should ensure proper coordination.
It should take into consideration the benefits of specialization.
It should not result in excess cost.
It should give due consideration to Human Aspects.

Departmentation takes place in various patterns like departmentation by functions, products, customers,
geographic location, process, and its combinations.

a) FUNCTIONAL DEPARTMENTATION

Functional departmentation is the process of grouping activities by functions performed. Activities can be
grouped according to function (work being done) to pursue economies of scale by placing employees with
shared skills and knowledge into departments for example human resources, finance, production, and
marketing. Functional departmentation can be used in all types of organizations.

Advantages:
Advantage of specialization
Easy control over functions
Pinpointing training needs of manager
It is very simple process of grouping activities.

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Disadvantages:
Lack of responsibility for the end result
Overspecialization or lack of general management
It leads to increase conflicts and coordination problems among departments.

b) PRODUCT DEPARTMENTATION

Product departmentation is the process of grouping activities by product line. Tasks can also be grouped
according to a specific product or service, thus placing all activities related to the product or the service under
one manager. Each major product area in the corporation is under the authority of a senior manager who is
specialist in,
largest Ayurvedic medicine manufacturer is an example of company that uses product departmentation. Its
structure is based on its varied product lines which include Home care, Health care, Personal care and Foods.

Advantages
It ensures better customer service
Unprofitable products may be easily determined
It assists in development of all around managerial talent
Makes control effective
It is flexible and new product line can be added easily.

Disadvantages
It is expensive as duplication of service functions occurs in various product divisions
Customers and dealers have to deal with different persons for complaint and information of different
products.

c) CUSTOMER DEPARTMENTATION

Customer departmentation is the process of grouping activities on the basis of common customers or
types of customers. Jobs may be grouped according to the type of customer served by the organization. The
assumption is that customers in each department have a common set of problems and needs that can best be
met by specialists. UCO is the one of the largest commercial banks of India is an example of company that
uses customer departmentation. Its structure is based on various services which includes Home loans,
Business loans, Vehicle loans and Educational loans.
Advantages
It focused on customers who are ultimate suppliers of money
Better service to customer having different needs and tastes
Development in general managerial skills

Disadvantages
Sales being the exclusive field of its application, co-ordination may appear difficult between sales
function and other enterprise functions.
Specialized sales staff may become idle with the downward movement of sales to any specified group
of customers.

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d) GEOGRAPHIC DEPARTMENTATION

Geographic departmentation is the process of grouping activities on the basis of territory. If an

organization's customers are geographically dispersed, it can group jobs based on geography. For example,
the organization structure of Coca-
such as Central North American group, Western North American group, Eastern North American group and
European group

Advantages
Help to cater to the needs of local people more satisfactorily.
It facilitates effective control
Assists in development of all-round managerial skills

Disadvantages
Communication problem between head office and regional office due to lack of means of
communication at some location
Coordination between various divisions may become difficult.
Distance between policy framers and executors
It leads to duplication of activities which may cost higher.

e) PROCESS DEPARTMENTATION

Geographic departmentation is the process of grouping activities on the basis of product or service or
customer flow. Because each process requires different skills, process departmentation allows homogenous
activities to be categorized. For example, Bowater Thunder Bay, a Canadian company that harvests trees and
processes wood into newsprint and pulp. Bowater has three divisions namely tree cutting, chemical
processing, and finishing (which makes newsprint).

Advantages
Oriented towards end result.
Professional identification is maintained.
Pinpoints product-profit responsibility.

Disadvantage
Conflict in organization authority exists.
Possibility of disunity of command.
Requires managers effective in human relation

f) MARTIX DEPARTMENTATION
In actual practice, no single pattern of grouping activities is applied in the organization structure with
all its levels. Different bases are used in different segments of the enterprise. Composite or hybrid method
forms the common basis for classifying activities rather than one particular method. One of the mixed forms

Organizing varies from case to case. The form of structure must reflect the tasks, goals and technology if the
originations the type of people employed and the environmental conditions that it faces. It is not unusual to
see firms that utilize the function and project organization combination. The same is true for process and
project as well as other combinations. For instance, a large hospital could have an accounting department,

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surgery department, marketing department, and a satellite centre project team that make up its organizational
structure.

Advantages Disadvantages
Efficiently manage large, complex tasks Requires high levels of coordination
Effectively carry out large, complex tasks Conflict between bosses
Requires high levels of management skills

SPAN OF CONTROL
Span of Control means the number of subordinates that can be managed efficiently and effectively by
a superior in an organization. It suggests how the relations are designed between a superior and a subordinate
in an organization.
It determines the complexity of individual manager job.
It determines the shape or configuration of the organisation.
The classical writers suggest that between 3 to 8 subordinates as ideal depending up on the level of
management.

V.A.Gracuna a French management consultant has suggested a mathematical formula to fix the number of
subordinates.He classified superior and subordinate relationship into the following:
Direct single relationship: - Direct single relationships arise from the direct individual contacts of the
superior with his subordinates. Ex: - A, B,C are subordinates to X. Here three single relationships.
Direct group relationships:-Direct group relationships arise between the superior and subordinates in
all possible combinations. Thus the superior may consult his subordinates with one or more
combinations.Ex:-A with B, B with C, A with C, etc..
Cross relationships:- Cross relationships arise because of mutual interaction of subordinates
working under the common superior , such as A and B,B and C,A and C,C and A etc.. The
relationship is quite different between A and B than B and A from management point of view because
the type of interaction will be different in both cases.

Gracuna has given formula to find various relationships with varying number of subordinates.

Number of subordinates = n,
Direct single relationship = n,
Direct group relationship = n(2n-1-1)
Cross relationship = n(n-1),
Total relationship = n(2n/2+n-1)
(or)
= n(2n-1 +n-1).

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 No. of sub ordinates No. of relationships

1 . 1
2 . 6
3 . 18
4 . 44
5 . 100
6 . 222
8 . 1080
10 . 5210
Gracuna suggest that most ideal span for a manager is 6 subordinates with 222 relationships.

Factors effecting span of management:-

1. Capacity of superior 5. Degree of planning
2. Capacity of subordinate 6. Communication technique
3. Nature of work 7. Use of staff assistance
4. Degree of decentralization 8. Supervision from others

Span of control is of two types:

1. Narrow span of control: Narrow Span of control means a single manager or supervisor oversees few
subordinates. This gives rise to a tall organizationalstructure.

Advantages:
Close supervision
Close control of subordinates
Fast communication

Disadvantages:
Too much control
Many levels of management
High costs
Excessive distance between lowest level and highest level

2. Wide span of control: W ide span of control means a single manager or supervisor overseesa large number
of subordinates. This gives rise to a flat organizational structure.

Advantages:
More Delegation of Authority
Development of Managers
Clear policies

Disadvantages:
Overloaded supervisors
Danger of superiors loss of control
Requirement of highly trained managerial personnel
Block in decision making

CENTRALIZATION
It is the process of transferring and assigning decision-making authority to higher levels of an
organizational hierarchy. The span of control of top managers is relatively broad, and there are relatively
many tiers in the organization.

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Characteristics
Philosophy / emphasis on: top-down control, leadership, vision, strategy.
Decision-making: strong, authoritarian, visionary, charismatic.
Organizational change: shaped by top, vision of leader.
Execution: decisive, fast, coordinated. Able to respond quickly to major issues and changes.
Uniformity. Low risk of dissent or conflicts between parts of the organization.

Advantages of Centralization
Provide Power and prestige for manager
Promote uniformity of policies, practices and decisions
Minimal extensive controlling procedures and practices
Minimize duplication of function

Disadvantages of Centralization
Neglected functions for mid. Level, and less motivated beside personnel.
Nursing supervisor functions as a link officer between nursing director and first-line management.

DECENTRALIZATION:
It is the process of transferring and assigning decision-making authority to lower levels of an
organizational hierarchy. The span of control of top managers is relatively small, and there are relatively few
tears in the organization, because there is more autonomy in the lower ranks.

Characteristics
Philosophy / emphasis on: bottom-up, political, cultural and learning dynamics.
Decision-making: democratic, participative, detailed.
Organizational change: emerging from interactions, organizational dynamics.
Execution: evolutionary, emergent. Flexible to adapt to minor issues and changes.
Participation, accountability. Low risk of not-invented-here behaviour.

Three Forms of decentralization

De-concentration. The weakest form of decentralization. Decision making authority is redistributed
to lower or regional levels of the same central organization.
Delegation. A more extensive form of decentralization. Through delegation the responsibility for
decision-making are transferred to semi-autonomous organizations not wholly controlled by the
central organization, but ultimately accountable to it.
Devolution. A third type of decentralization is devolution. The authority for decision-making is
transferred completely to autonomous organizational units.

Advantages of Decentralization
Raise morale and promote interpersonal relationships
Relieve from the daily administration
Bring decision-making close to action
Develop Second-line managers
Promote enthusiasm and coordination
Facilitate actions by lower-level managers

Disadvantages of Decentralization
Top-level administration may feel it would decrease their status
Managers may not permit full and maximum utilization of highly qualified personnel
Increased costs. It requires more managers and large staff
It may lead to overlapping and duplication of effort

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DELEGATION OF AUTHORITY
A manager alone cannot perform all the tasks assigned to him. In order to meet the targets, the
manager should delegate authority. Delegation of Authority means division of authority and powers
downwards to the subordinate. Delegation is about entrusting someone else to do parts of your job. Delegation
of authority can be defined as subdivision and sub-allocation of powers to the subordinates in order to achieve
effective results. Elements of Delegation

1. Authority - in context of a business organization, authority can be defined as the power and right of a
person to use and allocate the resources efficiently, to take decisions and to give orders so as to achieve
the organizational objectives. Authority must be well- defined. All people who have the authority should

commands, orders and get the things done. The top level management has greatest authority. Authority
always flows from top to bottom. It explains how a superior gets work done from his subordinate by
clearly explaining what is expected of him and how he should go about it. Authority should be

imply escaping from accountability. Accountability still rest with the person having the utmost authority.

2. Responsibility - is the duty of the person to complete the task assigned to him. A person who is given the
responsibility should ensure that he accomplishes the tasks assigned to him. If the tasks for which he was
held responsible are not completed, then he should not give explanations or excuses. Responsibility
without adequate authority leads to discontent and dissatisfaction among the person. Responsibility flows
from bottom to top. The middle level and lower level management holds more responsibility. The person
held responsible for a job is answerable for it. If he performs the tasks assigned as expected, he is bound
for praises. While if he accomplish tasks assigned as expected, then also he is answerable for that.

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

rest

accountable means being innovative as the person will think beyond his scope of job. Accountability ,in
short, means being answerable for the end result. Accountability be escaped. It arises from
responsibility.

DELEGATION PROCESS
The steps involved in delegation are given below

1. Allocation 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.

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 3. Assigning of Responsibility and Accountability The delegation process does notend 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 orobligation of an individual to carry out his
duties in best of his ability as per the directions of superior. Therefore, it is that which gives
effectiveness to authority. At the same time,
Responsibilityisabsoluteand cannotbeshifted.
4. Creation of accountability Accountability, on the others hand, is the obligation of theindividual to
carry out his duties as per the standards of performance. Therefore, it is said that authority is
delegated, responsibility is created and accountability is imposed. Accountability arises out of
responsibility and responsibility arises out of authority. Therefore, it becomes important that with
every authority position an equal and opposite responsibility should be attached.

Therefore every manager, i.e., the delegator has to follow a system to finish up the delegation process.

authority over to here.

STAFFING
Staffing involves filling the positions needed in the organization structure by appointing competent
and qualified persons for the job.

STAFFING/HRM Process

a) Manpower requirements: Manpower Planning which is also called as Human Resource Planning consists
of putting right number of people, right kind of people at the right place, right time, doing the right things for
which they are suited for the achievement of goals of the organization. The primary function of man power
planning is to analyze and evaluate the human resources available in the organization, and to determine how
to obtain the kinds of personnel needed to staff positions ranging from assembly line workers to chief
executives.

b) Recruitment: Recruitment is the process of finding and attempting to attract job candidates who are
capable of effectively filling job vacancies. Job descriptions and job specifications are important in the
recruiting process because they specify the nature of the job and the qualifications required of job candidates.

c) Selection: Selecting a suitable candidate can be the biggest challenge for any organization. The success of
an organization largely depends on its staff. Selection of the right candidate builds the foundation of any
organization's success and helps in reducing turnovers.

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d) Training and Development: Training and Development is a planned effort to facilitate employee learning
of job- n

though, the distinction is often blurred (mainly because upgrading skills in present jobs usually improves
performance in future jobs).

RECRUITMENT PROCESS
Recruitment is the process of finding and attempting to attract job candidates who are capable of
effectively filling job vacancies. The recruitment process consists of the following steps
a) Identification of vacancy c) Selection of sources
b) Preparation of job description and job d) Advertising the vacancy
specification e) Managing the response

a) Identification of vacancy:The recruitment process begins with the human resource department receiving
requisitions for recruitment from any department of the company. These contain:
Posts to be filled
Number of persons
Duties to be performed
Qualifications required

b) Preparation of job description and job specification:

A job description is a list of the general tasks, or functions, and responsibilities of a position. It may often
include to whom the position reports, specifications such as the qualifications or skills needed by the person in
the job, or a salary range. A job specification describes theknowledge, skills, education, experience, and
abilities you believe are essential to performing a particular job.

c) Selection of sources:Every organization has the option of choosing the candidates for its recruitment
processes from two kinds of sources: internal and external sources. The sources within the organization itself
(like transfer of employees from one department to other, promotions) to fill a position are known as the
internal sources of recruitment. Recruitment candidates from all the other sources (like outsourcing agencies
etc.) are known as the external sources of the recruitment.

d) Advertising the vacancy:After choosing the appropriate sources, the vacancy is communicated to the
candidates by means of a suitable media such as television, radio, newspaper, internet, direct mail etc.

e) Managing the response:After receiving an adequate number of responses from job seekers, the sieving
process of the resumes begins. This is a very essential step of the recruitment selection process, because
selecting the correct resumes that match the job profile, is very important. Naturally, it has to be done rather
competently by a person who understands all the responsibilities associated with the designation in its
entirety. Candidates with the given skill set are then chosen and further called for interview. Also, the
applications of candidates that do not match the present nature of the position but may be considered for
future requirements are filed separately and preserved.The recruitment process is immediately followed by the
selection process.

Sources of recruitment

Internal sources of recruitment involve motivating the employees of the organization to apply for the
openings within the organization
1. Transfers: The employees of the organization are transferred to the similar jobs of other departments.
It may not involve a change in salary, responsibility, and position of the job. Transfers help in

17
 reducing the boredom and monotony of the employees or it may be used to fill the vacancies with
suitable internal candidates.
2. Promotions: Promotions involve vacancies of the organization are filled by promoting the skilled
employees to the suitable jobs and it can motivate the employees by giving higher position, increased
salary, status, and responsibility. Promotions can help in reducing employee turnover by creating the
hope of getting higher positions.
3. Demotions: Depending on the performance of the employees of the organizations, sometimes
managers have to take decisions regarding lowering the positions of few employees of the
organization. These employees can act as a source of recruitment to the lower positions.
4. Employees of the organization: Employees of the organization communicate or inform about the
vacant positions of the organization to their friends and relatives. In many organizations, they allowed
referring potential candidates for the suitable vacancies.
5. Retired employees: If the organizations do not find the right persons to fulfil the key managerial
positions then they call back the retired employees for achieving the objectives.

External sources of recruitment involve motivating the skilled and more efficient candidates external to the
organization to apply for the vacant positions in the organization.
1. Advertisements: To find the skilled and more efficient manpower giving advertisement for the vacant
job position is the better way. Advertisements help in attracting the right candidates and in maximizing
brand image. Advertisements may be given in print media or electronic media, it gives better results
and it is cheaper than approaching third parties.
2. Job portals: With the growing technology and internet usage, job portals are playing a major role in
finding right candidates for right jobs. Job portals can inform up to date job alerts to the candidates and
offer attractive benefits and packages to the employers. The tools and techniques used by the job
portals highly reduce the efforts in finding the skilled candidates.
3. With the increase in business operations and globalization, the need for human
resources is also increasing day by day. To face a severe competition and to reduce the cost during the
long run, many companies are setting up their own websites for finding and attracting candidates with
competitive skills.
4. Social networking sites: Communicating about vacant positions of the organization through social
networking sites help in motivation and attracting the highly skilled and more efficient candidates to
apply for the jobs.
5. Placement agencies: Approaching placement agencies reduces the time and efforts to find the right
candidates from the pool of skilled candidates. They use various tools and techniques to filter the
resumes and they send it to the companies for further processing. The main drawback of this method is
commission basis on hiring the candidates.
6. Job fairs and walk in interviews: Walk in interviews and job fairs are declared and conducted by
companies to find the skilled candidates. Following this method highly reduces efforts in finding more
efficient human resources for the bulk requirement.
7. Campus interviews: This is an easy and economical method helps in finding eligible candidates,
through this method organization can find energetic and more competitive candidates for suitable
vacancies, this method is beneficial for both the candidates and companies.

JOB ANALYSIS
Job Analysis is the process of describing and recording aspects of jobs and specifying the skills and
other requirements necessary to perform the job.
The outputs of job analysis are
a) Job description
b) Job specification

Job Description: A job description (JD) is a written statement of what the job holder does how it is done,
under what conditions it is done and why it is done. It describes what the job is all about, throwing light on

18
job content, environment and conditions of employment. It is descriptive in nature and defines the purpose
and scope of a job. The main purpose of writing a job description is to differentiate the job from other jobs
and state its outer limits.

Contents
A job description usually covers the following information:
§ Job title: Tells about the job title, code number and the department where it is done.
§ Job summary: A brief write-up about what the job is all about.
§ Job activities: A description of the tasks done, facilities used, extent of supervisory help, etc.
§ Working conditions: The physical environment of job in terms of heat, light, noise and other hazards.
§ Social environment: Size of work group and interpersonal interactions required to do the job.

Job Specification: Job specification summarizes the human characteristics needed for satisfactory job
completion. It tries to describe the key qualifications someone needs to perform the job successfully. It spells
out the important attributes of a person in terms of education, experience, skills, knowledge and abilities
(SKAs) to perform a particular job. The job specification is a logical outgrowth of a job description. For each
job description, it is desirable to have a job specification. This helps the organization to find what kinds of
persons are needed to take up specific jobs.
Contents
A job specification usually covers the following information:
Education Work Orientation Factors
Experience Age
Skill, Knowledge, Abilities

SELECTION PROCESS
Selecting a suitable candidate can be the biggest challenge for any organisation. The success of an
organization largely depends on its staff. Selection of the right candidate builds the foundation of any
organization's success and helps in reducing turnovers.

Though there is no fool proof selection procedure that will ensure low turnover and high profits, the
following steps generally make up the selection process-

a) Initial Screening: This is generally the starting point of any employee selection process. Initial Screening
eliminates unqualified applicants and helps save time. Applications received from various sources are
scrutinized and irrelevant ones are discarded.

b) Preliminary Interview: It is used to eliminate those candidates who do not meet the minimum eligibility
criteria laid down by the organization. The skills, academic and family background, competencies and
interests of the candidate are examined during preliminary interview. Preliminary interviews are less
formalized and planned than the final interviews. The candidates are given a brief up about the company and
the job profile; and it is also examined how much the candidate knows about the company. Preliminary
interviews are also called screening interviews.

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c) Filling Application Form: An candidate who passes the preliminary interview and is found to be eligible
for the job is asked to fill in a formal application form. Such a form is designed in a way that it records the
personal as well professional details of the candidates such as age, qualifications, reason for leaving previous
job, experience, etc.

d) Personal Interview: Most employers believe that the personal interview is very important. It helps them in
obtaining more information about the prospective employee. It also helps them in interacting with the
candidate and judging his communication abilities, his ease of handling pressure etc. In some Companies, the
selection process comprises only of the Interview.

e) References check: Most application forms include a section that requires prospective candidates to put
down names of a few references. References can be classified into - former employer, former customers,
business references, reputable persons. Such references are contacted to get a feedback on the person in
question including his behaviour, skills, conduct etc.

f) Background Verification: A background check is a review of a person's commercial, criminal and

(occasionally) financial records. Employers often perform background checks on employers or candidates for
employment to confirm information given in a job application, verify a person's identity, or ensure that the
individual does not have a history of criminal activity, etc., that could be an issue upon employment.

g) Final Interview: Final interview is a process in which a potential employee is evaluated by an employer
for prospective employment in their organization. During this process, the employer hopes todetermine
whether or not the applicant is suitable for the job. Different types of tests are conducted to evaluate the
capabilities of an applicant, his behaviour, special qualities etc. Separate tests are conducted for various types
of jobs.

h) Physical Examination: If all goes well, then at this stage, a physical examination is conducted to make
sure that the candidate has sound health and does not suffer from any serious ailment.

i) Job Offer: A candidate who clears all the steps is finally considered right for a particular job and is
presented with the job offer. An applicant can be dropped at any given stage if considered unfit for the job.

EMPLOYEE INDUCTION/ORIENTATION
Orientation or induction is the process of introducing new employees to an organization, to their
specific jobs & departments, and in some instances, to their community.

Purposes of Orientation
Orientation isn't a nicety! It is used for the following purposes:
1. To Reduce Start-up-Costs:Proper orientation can help the employee get "up to speed" much more
quickly, thereby reducing the costs associated with learning the job.
2. To Reduce Anxiety:Any employee, when put into a new, strange situation, will experience anxiety that
can impede his or her ability to learn to do the job. Proper orientation helps to reduce anxiety that results from
entering into an unknown situation, and helps provide guidelines for behaviour and conduct, so the employee
doesn't have to experience the stress of guessing.
3. To Reduce Employee Turnover:Employee turnover increases as employees feel they are not valued, or
are put in positions where they can't possibly do their jobs. Orientation shows that the organization values the
employee, and helps provide tools necessary for succeeding in the job.
4. To Save Time for Supervisor & Co-Workers:Simply put, the better the initial orientation, the less likely
supervisors and co-workers will have to spend time teaching the employee.
5. To Develop Realistic Job Expectations, Positive Attitudes and Job Satisfaction:It is important that
employees learn early on what is expected of them, and what to expect from others, in addition to learning

20
about the values and attitudes of the organization. While people can learn from experience, they will make
many mistakes that are unnecessary and potentially damaging.

An orientation program principally conveys 3 types of information, namely:

a) General information about the daily work routine to be followed
b) A review of the history, founders, objectives, operations & products or services, as well as
how the contributes to the needs.
c) A detailed presentation of the policies, work rules & employee benefits.

Two Kinds of Orientation

There are two related kinds of orientation. The first we will call Overview Orientation, and deals with the
basic information an employee will need to understand the broader system he or she works in.

Overview Orientation includes helping employees understand:

Management in general Accident prevention measures
Department and the branch Employee and union issues (rights,
Important policies responsibilities)
General procedures (non-job specific) Physical facilities
Information about compensation

Often, Overview Orientation can be conducted by the personnel department with a little help from the branch
manager or immediate supervisor, since much of the content is generic in nature.

The second kind of orientation is called Job-Specific Orientation, and is the process that is used to help
employees understand:
Function of the organization, Policies, procedures, rules and regulations
Responsibilities, Layout of workplace
Expectations, Introduction to co-workers and other
Duties people in the broader organization.

Job specific orientation is best conducted by the immediate supervisor, and/or manager, since much of the
content will be specific to the individual. Often the orientation process will be ongoing, with supervisors and
co-workers supplying coaching.

CARRER DEVELOPMENT
Career development not only improves job performance but also brings about the growth of the personality.
Individuals not only mature regarding their potential capacities but also become better individuals.

Purpose of development
Management development attempts to improve managerial performance by imparting
Knowledge Changing attitudes Increasing skills
The major objective of development is managerial effectiveness through a planned and a deliberate process of
learning. This provides for a planned growth of managers to meet the future organizational needs.

Development Process:

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The development process consists of the following steps
1. Setting Development Objectives:It develops a framework from which executive need can be determined.
2. Ascertaining Development Needs:It aims at organizational planning & forecast the present and future
growth.
3. Determining Development Needs: This consists of
Appraisal of present management talent
Management Manpower Inventory
The above two processes will determine the skill deficiencies that are relative to the future needs of the
organization.
4. Conducting Development Programs:It is carried out on the basis of needs of different individuals,
differences in their attitudes and behaviour, also their physical, intellectual and emotional qualities. Thus a
comprehensive and well-conceived program is prepared depending on the organizational needs and the time
& cost involved.
5. Program Evaluation:It is an attempt to assess the value of training in order to achieve organizational
objectives.

TRAINING
Training is a process of learning a sequence of programmed behaviour. It improves the employee's
performance on the current job and prepares them for an intended job.
Purpose of Training:
To improve Productivity: Training leads to increased operational productivity and increased company
profit.
To improve Quality: Better trained workers are less likely to make operational mistakes.
To improve Organizational Climate: Training leads to improved production and product quality which
enhances financial incentives. This in turn increases the overall morale of the organization.
To increase Health and Safety: Proper training prevents industrial accidents.
Personal Growth: Training gives employees a wider awareness, an enlarged skill base and that leads
to enhanced personal growth.

Steps in Training Process:

1) Identifying Training needs: A training program is designed to assist in providing solutions for specific
operational problems or to improve performance of a trainee.
Organizational determination and Analysis: Allocation of resources that relate to organizational goal.
Operational Analysis: Determination of a specific employee behaviour required for a particular task.
Man Analysis: Knowledge, attitude and skill one must possess for attainment of organizational
objectives.
2) Getting ready for the job: The trainer has to be prepared for the job. And also who needs to be trained -
the newcomer or the existing employee or the supervisory staff.
Preparation of the learner:
Putting the learner at ease Placing the learner as close to his normal
Stating the importance and ingredients of working position
the job Familiarizing him with the equipment,
Creating interest materials and trade terms

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3) Presentation of Operation and Knowledge: The trainer should clearly tell, show, illustrate and
question in order to convey the new knowledge and operations. The trainee should be encouraged to ask
questions in order to indicate that he really knows and understands the job.

4) Performance Try out: The trainee is asked to go through the job several times. This gradually builds up
his skill, speed and confidence.

5) Follow-up: This evaluates the effectiveness of the entire training effort

TRAINING METHODS

Training methods can be broadly classified as on-the-job training and off-the-job training

a) On-the-job training: On the job training occurs when workers pick up skills whilst working alongside
experienced workers at their place of work. For example this could be the actual assembly line or offices
where the employee works. New workers may simply or observe fellow employees to begin
with and are often given instruction manuals or interactive training programmes to work through.

1. Coaching: Coaching is a one-to-one training. It helps in quickly identifying the weak areas and
tries to focus on them. It also offers the benefit of transferring theory learning to practice. The
biggest problem is that it perpetrates the existing practices and styles. In India most of the scooter
mechanics are trained only through this method.
2. Mentoring: The focus in this training is on the development of attitude. It is used for managerial
employees. Mentoring is always done by a senior inside person. It is also one-to- one interaction,
like coaching.
3. Job Rotation: It is the process of training employees by rotating them through a series of related
jobs. Rotation not only makes a person well acquainted with different jobs, but it also alleviates
boredom and allows to develop rapport with a number of people. Rotation must be logical.
4. Job Instruction: 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.
5. Committee Assignments: Under the committee assignment, group of trainees are given and asked
to solve an actual organisational problem. The trainees solve the problem jointly. It develops team
work.
6. Apprenticeship: Apprenticeship is a formalized method of training curriculum program that
combines classroom education with on-the-job work under close supervision. The training
curriculum is planned in advance and conducted in careful steps from day to day. Most trade
apprenticeship programs have a duration of three to four years before an apprentice is considered
completely accomplished in that trade or profession. This method is appropriate for training in
crafts, trades and technical areas, especially when proficiency in a job is the result of a relatively
long training or apprenticeship period, e.g., job of a craftsman, a machinist, a printer, a tool maker,
a pattern designer, a mechanic, etc.
7. Understudy: In this method, a superior gives training to a subordinate as his understudy like an
assistant to a manager or director (in a film). The subordinate learns through experience and
observation by participating in handling day to day problems. Basic purpose is to prepare
subordinate for assuming the full responsibilities and duties.

Advantages of On-the-Job Training:

1. It is directly in the context of job
2. It is often informal
3. It is most effective because it is learning by experience

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 4. It is least expensive
5. Trainees are highly motivated
6. It is free from artificial classroom situations

Disadvantages of On-the-Job Training:

1. Trainer may not be experienced enough to train or he may not be so inclined.
2. It is not systematically organized
3. Poorly conducted programs may create safety hazards.

b) Off-the-job training: This occurs when workers are taken away from their place of work to be
trained. This may take place at training agency or local college, although many larger firms also have their
own training centres. Training can take the form of lectures or self-study and can be used to develop more
general skills and knowledge that can be used in a variety of situations. The various types of off-the-job
training are
1. Instructor presentation: The trainer orally presents new information to the trainees, usually
through lecture. Instructor presentation may include classroom lecture, seminar, and workshop.
2. Group discussion: The trainer leads the group of trainees in discussing a topic.
3. Demonstration: The trainer shows the correct steps for completing a task, or shows an example of
a correctly completed task.
4. Assigned reading: The trainer gives the trainees reading assignments that provide new
information.
5. Exercise: The trainer assigns problems to be solved either on paper or in real situations related to
the topic of the training activity.
6. Case study: The trainer gives the trainees information about a situation and directs them to come to
a decision or solve a problem concerning the situation.
7. Role play: Trainees act out a real-life situation in an instructional setting.
8. Field visit and study tour: Trainees are given the opportunity to observe and interact with the
problem being solved or skill being learned.

Advantages of Off-the-Job Training

Trainers are usually experienced enough to train
It is systematically organized
Efficiently created programs may add lot of value

Disadvantages of Off-the-Job Training:

It is not directly in the context of job Trainees may not be much motivated
It is often formal It is artificial in nature.
It may not be based on experience.
It is expensive.

CAREER STAGES
What people want from their careers also varies according to the stage of one's career. What may
have been important in an early stage may not be important in a later one. Five distinct career stages have
been identified: trial, establishment/advancement, mid-career, and late career. Each stage represents
different career needs and interests of the individual

a) Trial stage: The trial stage begins with an individual's exploration of career-related matters and ends
usually at about age 25 with a commitment on the part of the individual to a particular occupation. Until the
decision is made to settle down, the individual may try a number of jobs and a number of organizations.
Unfortunately for many organizations, this trial and exploration stage results in high level of turnover
among new employees. Employees in this stage need opportunities for self-exploration and a variety of job
activities or assignments.

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b) Establishment Stage: The establishment/advancement stage tends to occur between ages 25 and 44. In
this stage, the individual has made his or her career choice and is concerned with achievement,
performance, and advancement. This stage is marked by high employee productivity and career growth,
as the individual is motivated to succeed in the organization and in his or her chosen occupation.
Opportunities for job challenge and use of special competencies are desired in this stage. The employee
strives for creativity and innovationthrough new job assignments. Employees also need a certain degree
of autonomy in this stage so that they can experience feelings of individual achievement and personal
success.

c) Mid Career Crisis Sub Stage: The period occurring between the mid-thirties and mid-forties during
which people often make a major reassessment of their progress relative to their original career ambitions
and goals.

d) Maintenance stage: The mid-career stage, which occurs roughly between the ages 45 and64, has also
been referred to as the maintenance stage. This stage is typified by a continuation of established patterns
of work behavior. The person is no longer trying to establish a place for him or herself in the
organization, but seeks to maintain his or her position. This stage is viewed as a mid-career plateau in
which little new ground is broken. The individual in this stage may need some technical updating in his
or her field. The employee should be encouraged to develop new job skills in order to avoid early
stagnation and decline.

e) Late-career stage: In this stage the career lessens in importance and the employee plans for retirement
and seeks to develop a sense of identity outside the work environment.

PERFORMANCE APPRAISAL
Performance appraisal is the process of obtaining, analyzing and recording information about the
relative worth of an employee. The focus of the performance appraisal is measuring and improving the
actual performance of the employee and also the future potential of the employee. Its aim is to measure
what an employee does.

Objectives of Performance appraisal:

To review the performance of the employees over a given period of time.
To judge the gap between the actual and the desired performance.
To help the management in exercising organizational control.
To provide feedback to the employees regarding their past performance.
Provide information to assist in the other personal decisions in the organization.
To judge the effectiveness of the other human resource functions of the organization such as
recruitment, selection, training and development.
To reduce the grievances of the employees.

Process of performance appraisal:

a) Establishing performance standards:The first step in the process of performance appraisal is the
setting up of the standards which will be used to as the base to compare the actual performance of the
employees. This step requires setting the criteria to judge the performance of the employees as successful
or unsuccessful and the degrees of their contribution to the organizational goals and objectives. The
standards set should be clear, easily understandable and in measurable terms.In case the performance of the
employee cannot be measured, great care should be taken to describe the standards.

b) Communicating the standards:After establishing the standards, it is the responsibility of the

management to communicate the standards to all the employees of the organization.The employees should
be informed and the standards should be clearly explained to them. This will help them to understand their
roles and to know what exactly is expected from them. The standards should also be communicated to the
appraisers or the evaluators and if required, the standards can also be modified at this stage itself according
to the relevant feedback from the employees or the evaluators.

c) Measuring the actual performance:The most difficult part of the Performance appraisal process is
measuring the actual performance of the employees that is the work done by the employees during the
specified period of time. It is a continuous process which involves monitoring the performance throughout
the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care
that personal bias does not affect the outcome of the process and providing assistance rather than
interfering in an employees work.

d) Comparing the actual with the desired performance:The actual performance is compared with the
desired or the standard performance. The comparison tells the deviations in the performance of the
employees from the standards set. The result can show the actual performance being more than the desired
performance or, the actual performance being less than the desired performance depicting a negative
deviation in the organizational performance. It includes recalling, evaluating and analysis of data related to
the

e) Discussing results: The result of the appraisal is communicated and discussed with the employees on
one-to-one basis. The focus of this discussion is on communication and listening. The results, the problems
and the possible solutions are discussed with the aim of problem solving and reaching consensus. The
feedback should be given with a positive attitude as this can have aneffect on the
performance. The purpose of the meeting should be to solve the problems faced and motivate the
employees to perform better.

f) Decision making: The last step of the process is to take decisions which can be taken either to improve
the performance of the employees, take the required corrective actions, or the related HR decisions like
rewards, promotions, demotions, transfers etc.

METHODS OF PERFORMANCE APPRAISALS

PAST ORIENTED METHODS

1. Rating Scales: Rating scales consists of several numerical scales representing job related performance
criterions such as dependability, initiative, output, attendance, attitude etc. Each scales ranges from
excellent to poor. The total numerical scores are computed and final conclusions are derived.
Advantages Adaptability, easy to use, low cost, every type of job can be evaluated, large number of
employees covered, no formal training required. Disadvantages biases

2. Checklist: Under this method, checklist of statements of traits of employee in the form of Yes or No
based questions is prepared. Here the rater only does the reporting or checking and HR department does
the actual evaluation. Advantages economy, ease of administration, limited training required,
standardization. Disadvantages Raters biases, use of improper weighs by HR, does not allow rater to
give relative ratings
3. Forced Choice Method: The series of statements arranged in the blocks of two or more are given and
the rater indicates which statement is true or false. The rater is forced to make a choice. HR department
does actual assessment. Advantages Absence of personal biases because of forced choice.
Disadvantages Statements may be wrongly framed.

4. Forced Distribution Method: here employees are clustered around a high point on a rating scale. Rater
is compelled to distribute the employees on all points on the scale. It is assumed that the performance is
conformed to normal distribution. Advantages Eliminates Disadvantages Assumption of normal
distribution, unrealistic, errors of central tendency.

5. Critical Incidents Method: The approach is focused on certain critical behaviors of employee that
makes all the difference in the performance. Supervisors as and when they occur record such incidents.
Advantages Evaluations are based on actual job behaviors, ratings are supported by descriptions,
feedback is easy, reduces recency biases, chances of subordinate improvement are high. Disadvantages
Negative incidents can be prioritized, forgetting incidents, overly close supervision; feedback may be
too much and may appear to be punishment.

6. Behaviorally Anchored Rating Scales (BARS): statements of effective and ineffective behaviors
determine the points. They are said to be behaviorally anchored. The rater is supposed to say, which
behavior describes the employee performance. Advantages helps overcome rating errors.
Disadvantages Suffers from distortions inherent in most rating techniques.

7. Field Review Method: This is an appraisal done by someone

usually from corporate or HR department. Advantages Useful for managerial level promotions, when
comparable information is needed, Disadvantages Outsider is generally not familiar with employees
work environment, Observation of actual behaviors not possible.

8. Performance Tests & Observations: This is based on the test of knowledge or skills. The tests may be
written or an actual presentation of skills. Tests must be reliable and validated to be useful. Advantage
Tests may be apt to measure potential more than actual performance. Disadvantages Tests may suffer
if costs of test development or administration are high.

9. Confidential Records: Mostly used by government departments, however its application in industry is
not ruled out. Here the report is given in the form of Annual Confidentiality Report (ACR) and may
record ratings with respect to following items; attendance, self-expression, team work, leadership,
initiative, technical ability, reasoning ability, originality and resourcefulness etc. The system is highly
secretive and confidential. Feedback to the assessee is given only in case of an adverse entry.
Disadvantage is that it is highly subjective and ratings can be manipulated because the evaluations are
linked to HR actions like promotions etc.

10. Essay Method: In this method the rater writes down the employee description in detail within a number
of broad categories like, overall impression of performance, promoteability of employee, existing
capabilities and qualifications of performing jobs, strengths and weaknesses and training needs of the
employee. Advantage It is extremely useful in filing information gaps about the employees that often
occur in a better-structured checklist. Disadvantages It its highly dependent upon the writing skills of
rater and most of them are not good writers. They may get confused success depends on the memory
power of raters.

11. Comparative Evaluation Method (Ranking & Paired Comparisons): These are collection of
different methods that compare performance with that of other co-workers. The usual techniques used
may be ranking methods and paired comparison method.
a. Ranking Methods: Superior ranks his worker based on merit, from best to worst. However how best and why
best are not elaborated in this method. It is easy to administer and explanation.
b. Paired Comparison Methods: In this method each employee is rated with another employee in the form of pairs.
The number of comparisons may be calculated with the help of a formula as under.

Future Oriented Methods

1. Management By Objectives: It means management by objectives and the performance is rated
against the achievement of objectives stated by the management. Advantage It is more useful for
managerial positions. Disadvantages Not applicable to all jobs, allocation of merit pay may result
in setting short-term goals rather than important and long-term goals etc.

2. Psychological Appraisals: These appraisals are more directed to assess employees potential for
future performance rather than the past one. It is done in the form of in-depth interviews,
psychological tests, and discussion with supervisors and review of other evaluations. It is more
focused on employees emotional, intellectual, and motivational and other personal characteristics
affecting his performance. This approach is slow and costly and may be useful for bright young
members who may have considerable potential. However quality of these appraisals largely depend
upon the skills of psychologists who perform the evaluation.

3. Assessment Centers: An assessment center is a central location where managers may come
together to have their participation in job related exercises evaluated by trained observers. It is more
focused on observation of behaviors across a series of select exercises or work samples. Assesses
are requested to participate in in-basket exercises, work groups, computer simulations, role playing
and other similar activities which require same attributes for successful performance in actual job.
The characteristics assessed in assessment center can be assertiveness, persuasive ability,
communicating ability, planning and organizational ability, self-confidence, resistance to stress,
energy level, decision making, sensitivity to feelings, administrative ability, creativity and mental
alertness etc. Disadvantages Costs of employees traveling and lodging, psychologists, ratings
strongly influenced by assesses inter-personal skills. Solid performers may feel suffocated in
simulated situations. Those who are not selected for this also may get affected.

4. 360-Degree Feedback: It is a technique which is systematic collection of performance data on an

individual group, derived from a number of stakeholders like immediate supervisors, team
members, customers, peers and self. In fact anyone who has useful information on how an
employee does a job may be one of the appraisers. This technique is highly useful in terms of
broader perspective, greater self-development and multi-source feedback is useful. 360-degree
appraisals are useful to measure inter-personal skills, customer satisfaction and team building skills.
However on the negative side, receiving feedback from multiple sources can be intimidating,
threatening etc. Multiple raters may be less adept at providing balanced and objective feedback.

PLANNING TOOLS AND TECHNIQUES FOR STRATEGIC MANAGEMENT

BCG GROWTH-SHARE MATRIX:

Companies that are large enough to be organized into strategic business units face the challenge of
allocating resources among those units. In the early 1970's the Boston Consulting Group developed a
model for managing a portfolio of different business units (or major product lines). The BCG growth-
share matrix displays the various business units on a graph of the market growth rate vs. market share
relative to competitors:
Resources are allocated to business units according to where they are situated on the grid as follows:
Cash Cow - a business unit that has a large market share in a mature, slow growing industry. Cash
cows require little investment and generate cash that can be used to invest in other business units.
Star - a business unit that has a large market share in a fast growing industry. Stars may generate
cash, but because the market is growing rapidly they require investment to maintain their lead. If
successful, a star will become a cash cow when its industry matures.
Question Mark (or Problem Child) - a business unit that has a small market share in a high
growth market. These business units require resources to grow market share, but whether they will
succeed and become stars is unknown.
Dog - a business unit that has a small market share in a mature industry. A dog may not require
substantial cash, but it ties up capital that could better be deployed elsewhere. Unless a dog has
some other strategic purpose, it should be liquidated if there is little prospect for it to gain market
share.

SWOT ANALYSIS

A scan of the internal and external environment is an important part of the strategic planning
process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses
(W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of
the strategic environment is referred to as a SWOT analysis.

Strengths
A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive
advantage. Examples of such strengths include:
patents exclusive access to high grade natural
strong brand names resources
good reputation among customers favourable access to distribution networks
cost advantages from proprietary know-
how
Weaknesses
The absence of certain strengths may be viewed as a weakness. For example, each of the following may be
considered weaknesses:
lack of patent protection high cost structure
a weak brand name lack of access to the best natural resources
poor reputation among customers lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large
amount of manufacturing capacity. While this capacity may be considered a strength that competitors do
not share, it also may be a considered a weakness if the large investment in manufacturing capacity
prevents the firm from reacting quickly to changes in the strategic environment.
Opportunities
The external environmental analysis may reveal certain new opportunities for profit and growth. Some
examples of such opportunities include:
an unfulfilled customer need loosening of regulations
arrival of new technologies removal of international trade barriers

Threats
Changes in the external environmental also may present threats to the firm. Some examples of such threats
include:
shifts in consumer tastes away from the new regulations
firm's products increased trade barriers
emergence of substitute products

The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better
chance at developing a competitive advantage by identifying a fit between the firm's strengths and
upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to
pursue a compelling opportunity.To develop strategies that take into account the SWOT profile, a matrix of
these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:

SWOT / TOWS Matrix

Strengths Weaknesses

S-O strategies W-O strategies

Opportunities

S-T strategies W-T strategies

Threats

S-O strategies pursue opportunities that are a good fit to the company's strengths.
W-O strategies overcome weaknesses to pursue opportunities.
S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external
threats.
W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly
susceptible to external threats.

FIVE FORCES OF COMPETITIVE POSITION ANALYSIS

Porter's Five Forces of Competitive Position Analysis were developed in 1979 by Michael E Porter
of Harvard Business School as a simple framework for assessing and evaluating the competitive strength
and position of a business organization.

This theory is based on the concept that there are five forces that determine the competitive
intensity and attractiveness of a market.
situation. This is useful both in understanding the strength of an current competitive
position, and the strength of a position that an organization may look to move into.The five forces are:

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1. Supplier power. An assessment of how easy it is for suppliers to drive up prices. This is driven by
the: number of suppliers of each essential input; uniqueness of their product or service; relative size
and strength of the supplier; and cost of switching from one supplier to another.
2. Buyer power. An assessment of how easy it is for buyers to drive prices down. This is driven by
the: number of buyers in the market; importance of each individual buyer to the organization; and
cost to the buyer of switching from one supplier to another. If a business has just a few powerful
buyers, they are often able to dictate terms.
3. Competitive rivalry. The main driver is the number and capability of competitors in the market.
Many competitors, offering undifferentiated products and services, will reduce market
attractiveness.
4. Threat of substitution. Where close substitute products exist in a market, it increases the
likelihood of customers switching to alternatives in response to price increases. This reduces both
the power of suppliers and the attractiveness of the market.
5. Threat of new entry. Profitable markets attract new entrants, which erodes profitability. Unless
incumbents have strong and durable barriers to entry, for example, patents, economies of scale,
capital requirements or government policies, then profitability will decline to a competitive rate.

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