Académique Documents
Professionnel Documents
Culture Documents
~ ~ ~ INDEX ~ ~ ~
Chapter CHAPTER 1: ENTREPRENEURSHIP 1.1 Concept 1.2 Meaning 1.3 1.4 1.5 Need Competencies/Qualities of an Entrepreneur Current Scenario Pages 3~4 3 3 3 3 4 4~6 4 4 4
CHAPTER 2: ENTREPRENEURIAL SUPPORT SYSTEM 2.1 2.2 2.3 District Industry Centres (DICs) Commercial Banks State Financial Corporations
CHAPTER 3: MARKET SURVEY AND OPPORTUNITY/IDENTIFICATION (BUSINESS PLANNING) 3.1 How to Start a Small Scale Industry 3.2 Procedure for Registration of Small Scale Industry 3.3 3.4 3.5 Assessment of Demand and Supply in Potential Areas of Growth Considerations in Product Selection Data Collection for Setting up Small Ventures
6 ~ 10 6 7 7 9 10 10 ~ 12 10 11
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CHAPTER 5: MANAGERIAL ASPECTS OF SMALL BUSINESS 5.1 Principles of Management 5.2 Operational Aspects of Production 5.3 5.4 5.5 5.6 5.7 5.8 5.9 Inventory Management Physical Stock Verification (Stock Verification) Basic Principles of Financial Management Marketing Management Objectives of Marketing Research and its Benefits The Elements of the Marketing Mix Personnel Management
12 ~ 25 12 13 14 15 16 16 17 20 21 22 23 24 25 ~ 29 25 26 26 27 28 28 29 ~ 33 29 30 30 31 33 ~ 38 33 34 34 34 37 38 38
5.10 Sources of Manpower 5.11 Recruitment and Selection Procedure 5.12 Importance of Communication in Business CHAPTER 6: LEGAL ASPECTS OF A SMALL BUSINESS 6.1 Income Tax 6.2 Sales Tax Registration 6.3 6.4 6.5 6.6 How to Calculate DVAT Patent Rules Factory Act Minimum Wages Act, 1936 (Amended up to 1957)
CHAPTER 7: BUSINESS ORGANIZATION 7.1 Introduction 7.2 7.3 7.4 Individual Ownership/Proprietorship Authority and Responsibility Types of Organization
CHAPTER 8: MISCELLANEOUS 8.1 8.2 8.3 8.4 8.5 8.6 8.7 Human Relations and Performance in Organization Industrial Relations and Disputes Relations with Subordinates, Peers and Superiors Wages and Incentives Leadership Labour Welfare Workers Participation in Management
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ENTREPRENEURSHIP
1.1 CONCEPT
The concept of the entrepreneur is to make a person to establish his own unit/industry for the benefit of his own and to give jobs to various persons employed in industry. The term entrepreneur itself indicates that the person can start his business by spending his own money along with the money from the contribution from various sources. The person, whosoever, starts business is known as an entrepreneur.
1.2 MEANING
The person who wants to establish industry for the manufacture of any product by investing any amount by his own source or by collecting finance from financial corporations or by any other means is called as an entrepreneur.
1.3 NEED
In the present scenario, there is a severe need of an entrepreneur to establish different kinds of industries to strengthen the hands of the Government. Day by day, the prices of the commodities are increasing without any control of the Government. Therefore, once different kinds of industries are established in our country, the rates of the commodities can be controlled as the big manufacturers, charge more for the same commodity, which is being manufactured by the small-scale manufacturers. Due to this problem also, there is the need of various industries, which can provide jobs in various sectors and to reduce the unemployment, which is very essential for our country.
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product whatever is being manufactured may be affected and the losses may occur at later stage.
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ranges from 10 to 15 lakhs to the small-scale sectors. The banks give finance with a concession (subsidy) up to 10 percent for the various development programs.
COMMERCIAL BANKS
State Bank of India United Commercial Bank Syndicate Bank Agricultural Banks State Financial Corporation Industrial Development Bank of India Fig. 2.5
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1. 2. 3. 4.
Technical knowledge, how to set up an industry? To provide loan at a concessional rate to the entrepreneur. To guide entrepreneur about how to set up an industry. To provide training to the entrepreneurs in the field of their desires by giving training for a period of six months or one year as per the need. 5. Providing loan against the hypothecation of land, building plant & machinery.
Production Unit
Fig. 3.1 Factor Effecting Production Process To start with, first of all the entrepreneur has to prepare a detailed project report in which the complete detail of the land & building, plant & machinery, pre-operative expenses, escalation, contingencies, manpower required are to be given along with the fixed capital and the working capital which is required to run the business. There are certain points which are to be considered while selecting a place of production where all kinds of things are available. Some of them are : 1. Market of the Product. 2. Industrial Area. 3. The Suppliers availability. 4. Manpower availability.
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5. Electricity. 6. Water. 7. Transport facility. All the above factors are the essential factors, which are to be considered before starting any small-scale industry. The small-scale industrialists always face many problems while starting the business. If one considers all the above factors before starting the business, there will be no problem at all in future. To start any business is easy but to sell the product in the market is difficult without having experience in the field. The market survey is must, which gives the idea to tackle the market position by supplying the material of good quality at a cheaper rate in the competitive environment.
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There are various stages like introduction, growth, maturity and the decline. These stages occur in any kind of business to be started. The graph of the product life cycle is shown in figure.
Y
Output
O X
Time Fig. 3.2 In any industry, the entrepreneur must have the knowledge of demand and supply. The steps are as follow: 1. To assess the demand the questionnaires are required to be prepared and brought to the notice of consumer by asking the questions like why, where, how, when, terms and by showing the comparative statement of the other manufacturers. 2. This demand can also be assessed by the entrepreneur by visiting various industries manufacturing the goods in the field of interest of the entrepreneur. 3. To go through the economic report, list of industries is available at Udyog Bhawan, New Delhi. 4. To assess the requirement of demand the entrepreneur must have the survey report of the various organizations dealing in the line of providing literatures and manuals, which help the entrepreneur to set up his own industry. As the supply is concerned once, the demand is known in the market as per product life cycle. The items can be manufactured at the site of the industrialist. The demand and supply affects as per the 4 Ps. a. Product b. Price c. Promotion d. Place. As per the marketing management, first of all for start any product its demand should be known in the market, then the price should be decided by going through various factors, after it promotion
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of the product should be launched in the market. Lastly, the place where the product is to be sold should be decided.
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survive in the market. Therefore, the price decision is also to be taken after going through the market survey to decide about the cost of the product to sell the component at competitive price in the market. Thirdly, in the promotion of the product the entrepreneur has to decide how to promote the product in the market as there are different ways to promote the product in the market : by giving advertisement in a newspaper, by using electronic media, by using questionnaires and by visiting various industries. Lastly, the place itself plays a very important role.
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Accounting Rate of Return Method The accounting rate of return method uses accounting information as revealed by financial statements, to measure the profitability of the investment proposals. The accounting rate of return is found out by dividing the average income after taxes by the average investment. The average investment would be equal to the original investment plus salvage value if any divided by two. A.R.R. = Average Income Average Investment
The Net Present Value The net present value method is the classic economic method of evaluating the investment proposals. It is one of the discounted cash flow techniques explicitly recognizing the time value of the money. It correctly postulates that cash flows arising at different time period differ in value and all are comparable only when their present values are found out. The steps involved in the Net Present Value Method are - first an appropriate rate of interest
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should be selected to discount cash flows. Generally the appropriate rate of interest is the firms cost of capital which is equal to the minimum rate of return expected by the firm on its investment proposals. Second, the present value of investment outlay i.e. cash outflows should be computed by using cost of capital as the discounting rate if all the cash flows are made in the initial year then their present value will be equal to the amount of cash actually spent. Thirdly, the net present value should be found out by subtracting the present value of cash outflows from the present value of cash inflows. Thus, the Net Present Value Method is a process of calculating the present value of cash flowsinflows and outflows of an investment proposals, using the cost of capital as the appropriate discounting rate and finding out the present value by subtracting the present value of cash outflows from the present value of cash inflows.
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taken and control is not done then also everything goes waste. Planning Planning means thinking before doing, before actual work is started, in planning it is decided what is to be produced, how is to be produced, when is to be produced, and who are to produce it etc. Organization When complete planning is done, rest step is to arrange material, men and money for actual execution of manufacture. The main function consists of two divisions namely : a. Material Organization. b. Human Organization. It is the human organization which forms an important function of management. The purpose of organization is the delegation of authority and responsibility. Directing Directing means the system of directing the plan into operation. Only giving orders is no directing. The person who directs must have dynamic leadership. This work is done by the directors or Managing Directors/Chairman. He issues the instructions to his staff. These instructions must be simple, clear, complete and reasonable in all respect and as far as possible must be written and simple. Motivating Suppose a person is highly qualified, technically and physically sound, but he is not willing to work hard his output will be much less. So the function of motivating is to find out the motive of work in a man and then he should encourage to do work by keeping his moral high. Motivating is the skill of Manager and is linked with coordination. Coordinating In an enterprise, there may be large number of workers, altogether with the object of producing particular product. This is the task of coordination to integrate and harmonize them to achieve a common object. Control The function of control is to match actual performance with the plans and to point out defective work to rectify them and prevent re-occurrence. The various forms of control are quality control, cost control, material control and production control etc.
Feed Back Fig. 5.2 Operational Control Land & Building Manpower Machinery Raw Material
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Escalation and Contingencies Pre-Operative Expenses Electricity & Water Drinking Water Raw Material As per the above flow diagram the raw material is required as per the requirement of the industry either the trading unit, manufacturing unit or assembly unit. In all these units the raw material is purchased according to the product being manufactured in the production hall. Pre-operative Expenses The expenses utilized before starting any kind of production are called the pre-operative expenses. Escalation & Contingencies This is the amount kept for the hike in prices of the raw material at the time of emergency. Land and Building In any kind of production unit either the constructed unit or on rent can be taken or the land to be purchased and the building is to be constructed as per the requirement of the production unit. In all kinds of operations the production plays a very important role as the quality of the product itself speaks the value of the item sold in the market.
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8. Store accounting system - FIFO, LIFO, approx. cost, stand cost. 9. Physical stock verification - need method period in perpetual, law inventory method, had to handle discrepancy export - unjust by inspection.
Usage
Minimum Stock
X Time Y
Fig. 5.3 1. Must involve store people who know the physical location and can advise on the right method of measurement. 2. Must rectify omissions by discussion before reporting. Major discrepancies should be reADCPM
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verified. Possible Sources of Discrepancy 1. Large scale pilferage. It may be true for valuable items in short supply in the market due to lack of adequate security check. 2. Wrong posting of records 3. Loose document control. 4. Evaporation losses due to poor storage matter Applications 1. Safety Margin. 2. Improve Profit. 3. Machinery Selection. 4. Product Addition. 5. Economic Strength.
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Marketing Research helps in reducing the risks involved in the marketing decisions in two ways: 1. Current information for marketing to take decision. 2. Generalized knowledge about the marketing process. Scope of Marketing Research The scope of marketing research is very wide and it is ever expanding. Marketing research includes various subsidizing types of research like: 1. Market Analysis. 2. Sales Analysis. 3. Customer Research. 4. Advertising Research.
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The following figure shows the relationship between manufacturer and customer in modern industry. CHANNEL OF DISTRIBUTION Manufacturer Wholesalers Distributors Sub. Distributors Retailers Consumers Fig. 5.4 Sales
Production
Dealer
Research Customer Fig. 5.5 Manufacturer and Customer Relation Undertaking Market Research For undertaking marketing research the process of market research is divided into four general groups described below: 1. Product Analysis: Product Analysis is used for finding out customers for the product and will fulfill the present requirement of the market. Check List of Questions: a. Whether the product fulfills market requirement? b. Whether the product is competitive in character, performance and price? c. Whether the product permits efficient distribution? d. Whether the product can be sold at handsome profit? e. Whether the reductions of selling prices have effects on demands? 2. Market Analysis: Its objective is to find the location of market, scope of sales and buying habit of customers. Check List of Questions: a. Who purchases the product? b. Where are the markets? c. What is the volume of sales during a particular time? d. On what factors does buyer pays stress? e. Whether demand is seasonal? f. What discount and credit terms are prevailing? 3. Distribution Analysis: This consists of the study of the Channels of Distribution, Methods of Pricing, Resale Price, Maintenance, Selling Methods, Sales Promotion, Sales Training,
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Warehousing and Distribution Cost Analysis. 4. Competition Analysis: It is generally included as a part of marketing analysis. It makes study to recent or proposed production sales and pricing policies of the competition. Technique of Market Research 1. Collection of Data. 2. Interviews. 3. Market Survey. 4. Statistical Method. Functions of Market Research 1. Helps in knowing who and where the customer is and what he wants. 2. Helps in knowing the sales trend, market potential and its shares in market. 3. Helps in knowing the defects in the products and then rectify them in function. 4. Studies the distribution channel and its effectiveness. 5. Exploits new markets and helps in developing new products. 6. Safeguards the market interest of the company against changes in the market in future. 7. Keeps the business in touch with its market and thus helps the sales promotion effects. Four Ps in Marketing 1. Product: Marketing managers plan and develop the right product or services in the terms of quality, packing, branding and design for the market segment. This planning includes determining the product line and product mix of the firm. 2. Price: Marketing managers determine a competitive fair price for products which would earn fair profits. 3. Promotion: Marketing managers inform customers about their products or services by means of such marketing functions as personnel selling and advertising. 4. Place: Marketing managers make products or services available to customers by distributing goods through channels of distribution. It provides place and time utility to the products. Product Mix It has the marketing plan that satisfies the desires of consumers identified in the marketing segment. The knowledge of utmost importance for guiding marketing decision in product planning Break Even Point Break-even point is the point where there is no profit and no loss. B.E.P. = Applications 1. Safety Margin. 2. Improve Profit. 3. Machinery Selection. 4. Product Addition. 5. Economic Strength.
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Place or Distribution Related Activities Basically place or distribution related activities are used to transfer ownership to consumers and to place products, services and ideas at the right time and place. Distribution is made up of two components, i.e. 1. Physical Distribution. 2. Channel of Distribution. Physical Distribution consists of the activities involved in moving products or services from producer to consumer, for example, 1. Transportation. 2. Warehousing and storage. 3. Order Processing. 4. Inventory Control. 5. Location. Identification of Problems and Opportunities Here the marketer has to identify the strength and weaknesses as well as the opportunities and threats which exist in the environment in relation to the company product. The data required to be collected in respect of the current marketing situation should help him in identifying major strength, weaknesses, opportunities and threats.
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Planning of manpower is done by making a layout of all the machinery. It is finalized by counting machine in numbers and the steps required to complete the process at the earliest and the delay period of work etc.
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8. Through Trade Associations The trade associations register the names of different organizations running different types of business and they are in touch with different industries all the time. Therefore they can suggest suitable kind of skilled/unskilled workers/managers etc. for companies as per their requirement. 9. As Recommended by Professional Bodies and Societies There are some of the professional organizations/societies those are working for the welfare of the employees. They can reclaim their name for the similar opportunities in industries. As these peoples are already working as the line these have their expertise knowledge. 10. Former Employees who had good service records when they left the Organizations In the case the senior employees those have already worked in the same organization and have good service record can provide workers as they now about the organization report.
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The applications received up to the last date of submission are collected. The summary sheet on the basis of qualification and experience are made by giving suitable weight age to qualification and experience etc. The sheet is prepared and the suitable candidates are then called for interview. The persons scrutinized during the recruitment procedure are called for interview for selection. The test of selection is done for selecting a suitable candidate required for the particular post and to reject the unsatisfactory candidates Need of Scientific Selection The need of scientific selection arises because in previous days the person who was running his business felt that he knew each and every thing 1. Trade Test: This test gives the idea to the employer about the knowledge of the candidate for doing work on a particular machine. 2. Medical Test: This test helps the employer to know about the candidates suitability for the required post. By going through medical test the suitable candidate can be found and to know whether the candidate is suffering from any disease or not etc. 3. Interview: In an interview the person is selected by going through the educational qualification and experience and his ability to work under the environment of the industry etc. As in interview there is a face to face discussion, the interviewer can judge about the candidates real willingness for the job and his personality and by asking questions on the relevant topics. The knowledge of the candidate can be known as in teaching job the candidate is asked to explain some topic in the presence of all the students which gives an idea about his way of teaching. Thus, interview is an additional point for the interviewer. 4. Aptitude Test: By this test the persons interest towards the job is checked. As the person may be interested in different line but he likes the job because of unemployment. Aptitude can be categorized as under: a. Mental Abilities. b. Visual Skill. c. Specialized Aptitude. 5. Personality Test: By this test the persons characteristics like leadership in work, appearance, sociability, the way of representing the fact etc., can be judged. 6. Psychological Test: This test shows the general knowledge ability of the topic given. In this test generally the set of questions are prepared by computer set or on typewriter and about 200-250 questions are given in all fields like General Knowledge questions, Mathematics questions, and English questions like paragraph and find out the correct answers from the paragraph given. The marks secured by the candidate show his intelligence level.
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2. The entrepreneur must be good in spoken English. 3. Entrepreneur must write different letters to different consumers those are willing to purchase the product by giving the idea of the product to be manufactured. 4. The entrepreneur must remember while speaking (a) what to speak (b) Why to speak (c) how to speak (d) where to speak (e) when speak. As all the above points may help the entrepreneur to have good result while doing any kind of business. The flow diagram is shown below: Input SystemA Feed Back Fig. 5.2 Communication Process Output
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Commodities To go cheaper: ACs, cell phones, imported fabric, cakes and pastries, tea, vanaspati, edible oils, imitation jewellery, polyester imports. To get expensive: Petrol/diesel, branded jewellery, tobacco products, steel, cement, IT hardware, imported cut flowers, mosaic tiles, road tractors. 6.2 SALES TAX REGISTRATION Any kind of business where the sales/purchase is being made the sales tax is to be charged by the party (seller). The tax is to be paid by the buyer and for this purpose the sales tax registration is must. To deduct sales tax from the invoice the sales tax number is required. This number is given by the Sales Tax Department Types of Sales Tax 1. Central Sales Tax: Central Sales Tax is charged by the party when inter-state sales are made i.e., from one state to another state and this tax is charged according to the tax to be imposed on a particular item given in list available at the sales tax office/govt. budget of each year. 2. Local Sales Tax: This is the local tax charged by the party in case of sales made locally. Here in this case how much tax is to be charged on a particular item can be seen from the book of sales tax procedure.
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input tax credits on purchases of inputs for use in making these sales. Exempt Sales are those sales that are exempted from tax, and no tax credits are allowable for purchases or use in making these sales. Non-Taxed Sales are sales that are not subject to DVAT, but you may claim tax credits on purchases related to these sales. They consist of inter-state and export sales from Delhi. Types of Sale Taxable Exempt Non-taxed VAT Payable Yes No No Input Tax Credit Allowed Yes No Yes
Taxable sales include all sales of goods in Delhi by registered dealers (including those required to be registered), except those which are specified to be exempted or non-taxed. Exempt sales Include Sale of goods specified in the first schedule, such as books, periodicals, newspapers, and maps, coarse grains other than paddy, rice and wheat, fresh vegetables and fruits, fresh plants, saplings and fresh flowers, and meat, fish eggs, and livestock. Resale of capital goods used exclusively for purposes other than making non-taxed sales, provided no tax credit has been claimed. Non-taxed sales are Sales in the course of the inter-state trade or commerce; and Sales in the course of import or export from India. What is Input Tax Credit? An important point to remember is that tax credits are allowed only in respect of the DVAT paid or payable on your inputs, and for which you have a valid tax invoice. Another point to remember is that tax credits are allowed in respect of the DVAT paid on those of your purchases that are for use in making taxable or non-taxed sales. Tax Identification Number (TIN) Under VAT every registered dealer (except those opting to pay tax under the composition scheme) is required under the law to issue a Tax invoice to the purchasers. This Tax invoice contains the details of the registered selling dealer and also his registration number which is the Tax Identification Number (T.I.N.)
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Wages Wages means all remuneration expressed in terms of money payable to persons while in employment, and it will include: 1. Basic Wages. 2. Dearness Allowance. 3. Bonus. 4. Payments under any award. 5. Settlement or order of a court. Wages will not include: 1. The value of any house accommodation, supply of light, water, medical facilities and other amenities of life specified by the State Government. 2. Travelling allowances. 3. Employers contribution of pension or Provident Fund. 4. Gratuity etc. Methods of Payment 1. A factory employing 1000 or less workers must make payment of wages within 7 days after completion of the month. 2. In case a worker is discharged, his claim must be settled within 2 days. 3. Wages must be paid in current coin and currency notes and not in other kind. 4. The employers can, however, with-hold the payment of wages in the event of stay in or sit-down strikes. Deductions The following deductions from the wages are permitted by this Act. 1. Fines. 2. Absence from duty. 3. Damage or loss of any factory property. 4. House accommodations and for amenities and services supplied by the employer. 5. Recovery of advances of over-payment of wages. 6. Income-tax, contributions to provident fund etc. 7. Insurance premium. 8. On account of penalties under the service rules.
BUSINESS ORGANIZATION
7.1 INTRODUCTION
In broad sense, business includes industry, commerce, and trade. Its main aim is to increase wealth. Industry means a place where materials are converted into finished or semi finished products. Trade means a process of buying and selling of commodities, while commerce is a process that relates to financing, transportation, insuring and allied activities. The form of organization to be selected will be decided by the factors such as: 1. Size and nature of the business to be started. 2. Technical difficulties.
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3. Market conditions (i.e., competition and scope of the article in market). 4. Capital required starting the business and the means to collect the funds. 5. Limitations and restrictions put forth by the government (i.e., grant of loans; foreign exchange and other such things). After considering the above factors a suitable type of organization is discussed below. Various types of Business Organizations: 1. Individual ownership or Sole trade or Proprietorship. 2. Partnership. 3. Joint Stock Companies. 4. Cooperative Organization. 5. State owned or in Government ownership. 6. Joint Sector Management.
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position to perform his task properly unless he is given necessary powers i.e., authority. Hence, whenever a task is assigned to a person, he must be given sufficient powers to exercise his control to achieve this task. Responsibility is the obligation of a subordinate for the performance of any job allotted by the superior. As explained earlier a superior officer cannot perform all the activities himself and hence certain responsibilities and authorities are delegated to his assistants. He must check that the task assigned by him is carried out properly and he must hold his delegates responsible for proper working of job and utilization of powers as the delegate himself is also responsible to his superiors. Thus the authority and responsibility both go hand in hand unless a man is given necessary authority to perform certain duties he cannot be held responsible. Centralization of Authority Centralization means systematic reservation of authority at central points in an organization. Hence, the majority of the decisions regarding the work are taken up at higher levels and not by those who actually do it. Decentralization of Authority Decentralization is the systematic delegation of authority in an organization. Decentralization is said to be complete only when the fullest possible delegation is made to the persons who are delegated with any kind of responsibility.
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2. A clear cut division of authority and responsibility, hence no scope of shifting the responsibility. 3. Strong in discipline. 4. It permits the quick decision. 5. As responsibility of each individual is fixed, hence faults can be easily and quickly known. 6. Everybody from top to bottom remains busy like a machine and hence total cost of product will be less. 7. Flexible and able to extend the contract. Disadvantages 1. It requires different departmental heads to be expert in various functions, hence lack of specialization. 2. Departmental heads are over burdened with various routine jobs hence no time to think for further expansion and planning. 3. Certain people become key points and they are loaded with maximum work. 4. Chances of accidents, wastage of material and labour are more because of insufficient knowledge of all the work by one man. 5. Chances of delaying the orders of General Manager or any other departmental head are up to the workers and therefore possibility of distortion, due to long channel. 6. Over-burdened foreman can give orders twice for the same job and will cause wastage and error. 7. It has no means of rewarding good workers. Applications 1. Such organization is suitable for factory of small and medium size in which subordinate and operational staff is not too much. 2. Suitable for continuous process in industries such as sugar, paper, oil refining, spinning and weaving etc. 3. Suitable where labour problems are not difficult to solve. 4. Suitable where automatic plants are used. Functional Organization The difficulties in finding the man all round qualified to be foreman in the old line organization are overcome with this organization. He is replaced by various functionalized people. This system is advantageous because each will be specialized in a particular field and workers will be controlled by him. He attends to one factor in all the departments. Below is its layout. GENERAL MANAGER
GANG BOSS
REPAIR BOSS
This is a short and simplified form, showing the structure of functional type of organization. In the same way in some of the organizations there are different experts and the bosses/foremen - all have the responsibility to do the job of all experts and the experts can also have direct contact with the foreman in this case. Due to more bosses the work suffers and the other side as all can
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have direct contact with different bosses/foreman their work also moves smoothly. Line and Staff Organization In the firm of larger size operating on big scale, a single manager cannot give careful attention to every part of the management. Individual staff is unable to think and plan. They are busy with ordinary task of production and selling. Hence, some staff is deputed to do the other work of investigation, research, recording and advertising to managers. Thus, staff brings specialization by assisting the line officer. The line maintains discipline and stability. Staff provides expert information and helps to improve the overall efficiency, thus the members of staff are thinkers and the lines are doers.
Table 7.3 Line and Staff Organization Line Staff and Functional Organization Due to scientific methods, there are more competition in the market and complications in the business. To obtain a sound system the combination of line a staff and functional type of organization is required. In this system as regards the discipline and output are concerned, the workers are kept under the direct control of foreman. Committee Organization A committee is a group of persons formed for the purpose of giving advice on certain important problems, which cannot usually be solved by an individual. It helps by pulling the thoughts of several persons on problems involving several functions and offered for criticism. Therefore, nowa-days many large companies have a network of committees to the line and staff organization. These committees may be either permanent sometimes referred to as a standing committee or they may be organized to serve a temporary function only. Various committees may be such Research Committee, Co-ordination and Advisory Committee, Purchase Committee and Educational Committee etc.
MISCELLANEOUS
8.1 HUMAN RELATIONS AND PERFORMANCE IN ORGANIZATION
The human relation is the relation between the employer and employees working in any kind of organization. The organization may be the manufacturing unit, trading unit, consultancy unit, assembly unit or any other kind of business. The relation of employees and employer plays a very important role to give better output by minimum investment. The human relation itself shows the performance of any kind of organization. As in an organization different types of persons visit for
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their various purposes. The performance may be for the purchase, sale or for any kind of administrative work. The human relation plays a very important role therefore, the relation between the employer and employees can only speak the truth of the organization.
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vide him with other necessities of life in addition of food for his family. The rates for the fair wages range between these two ranges, the actual wages will depend on production capacity of worker, rates in the surrounding areas, the level of the national income and its distribution, the place of industry in the economy of the country and the bargaining power of employer and employee. Minimum Wages: Wages cannot be raised beyond the capacity of industry to pay. The productivity of an industry is the source from which wages are paid at the same time it cannot be forgotten that labour is a human being, and from humanitarian point of view he is to be protected. Hence there is the problem of fixing minimum wages for the workers. This minimum should be sufficient for allowing the worker to maintain himself according to his needs. Minimum wages may be deputed as the wage, which provides not only for bare subsistence but something more than this. It must be sufficient for the preservation of the efficiency of the worker. It must also provide some measure of education, medical requirements and other amenities of life. Thus, in fixing a minimum wage we have to take into consideration the cost of living. To ensure this in India, Minimum Wages Act 1948 has been in force where wages have been fixed for different parts of the country and this has forced employers to give not less than this fixed minimum wages to any of their workers. The main objectives of the minimum wages are: 1. To protect those sections of the working population whose wages are very low and whose conditions are materially unsatisfactory. 2. To prevent exploitation of workers and to secure wages according to the values of the work done. 3. To promote peace in industry. 4. To improve the normal standard of living. The factors which influence wages are: 1. The condition of demand and supply. 2. The respective bargaining capacity of employers and employees. 3. Cost of living which may vary from time to time according to industrial situation of each industrial district. 4. Economic capacity of the industry to pay wages. 5. Level of wage rates ruling in each industrial area for the same class of industry and same grade of workers. 6. The workers skill training and experience. 7. Nature of task involved i.e., risky, noisy, requiring high concentration, heavy or light work, heat work etc. 8. Economic outlook of the employer. 9. The regularity in service. 10. Extra earning on the job. 11. Prospective of future promotions. Characteristics of a Good Wage or Incentive System: 1. This should guarantee an adequate minimum day wage. 2. It must have the free consent of the worker. 3. It must reward the worker according to his capacity and merit. 4. It must be simple in its working. 5. It must not involve heavy clerical work and thereby increase of ultimate cost.
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6. It should aim at increasing production, without adversely affecting its quality. 7. It should reduce wastage of material and careless use of plant, tools and equipments. 8. It should have effective supervision but it should not be too heavy. 9. Incentive, bonus, etc., should be paid with the wages, and not put off for future. 10. The system should be fair both to the employer and the employees. Methods of Wage Payments Time or day rate system: This is the most common system found in practice. Under this the worker is paid hourly, daily or weekly rate of wages. Thus, his remuneration depends upon the number of hours for which he is employed and not upon the amount of his production. Advantages 1. There is no dispute about the amount of payment, because it has been fixed from the very beginning and the worker knows in advance what he is going to get. 2. It possesses security from the stand point of the workers because they are sure to receive their wages irrespective of temporary reductions in personnel efficiency, which may result from unavoidable accident or sickness or fatigue from outside activities. 3. The interruptions to work due to breakdown of machinery of some other part of the organization will not make workers suffer from the loss of wages. 4. The quality of the work can be raised very easily, as there is no need of hurrying about the things to be done. 5. There is no rough handling of machinery due to slow and steady working of workers. 6. There are no difficult calculations to be made. If there are many calculations to be made to arrive at the remuneration of a worker, it is possible that an illiterate worker may doubt the exactness of his remuneration from time to time. Disadvantages 1. The employer bears the losses resulting from slow and sluggish workers as they are paid the same wages irrespective of their output. 2. This system tends to reduce production unless a strict supervision is managed. Therefore, a well qualified and strict foreman is required to obtain satisfactory production. 3. This system tends to give higher production cost. 4. This system is not suitable in case of lazy workers. Straight Piece Work Rate System This is an improvement on the time rate system. Under this system a fixed rate of wage is paid for each piece or unit produced. Advantages 1. It is simple in its working and the workmen can easily calculate their wages. 2. An inducement is given to the workers to increase their production and thus the overhead expenses are reduced per unit of production and the margin of profit is increased and scope for reduction of selling price is therefore, increased. 3. The relations of the workers and employers improve and no dispute takes place for wages as the workers get satisfactory reward for their work. 4. The employer is enabled to know his labour cost per unit of job. 5. Workers are paid on their merits. 6. The work and time spent on preparing pay rolls and bills are eliminated.
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7. Wasted time is not paid as is done in time rate system. 8. There is no need of keeping strict supervision and workers are taught self reliance and responsibility. 9. In this method the production will improve as workers demand material and machinery is free from defects and under perfect working condition. Disadvantages 1. It is difficult to fix accurate piece work rate. 2. When the wages earned by workers are high, the employer may be induced to reduce the rate, which will cause friction between the employer and the employees. 3. The workers put maximum efforts to earn more and more which results suffering with their health. 4. This causes displacement of labour as with increase in production, the number of workers engaged will be reduced. It will cause an increase in the wastage of materials because the worker will always try to obtain the maximum output. 5. Accidents occur frequently due to hasty work and improper use of machines and tools in order to give more production. It also damages machines earlier. 6. Mis-utilization of costly machines and tools. 7. The quality of work may deteriorate. This can be checked, if a rigid system of inspection is enforced. 8. It may cause over production and may result in losses if there is only a limited demand for the product in the market. 9. The entire benefit of the extra wages earned goes to the workmen and there is no direct benefit to employer. Suitability Hence this system is only suitable when the worker repeats regularly a definite operation or produces the same type of products constantly. Many employers in India have introduced this system and it has been found efficient, easy and economical. Combination of Day Rate and Piece Rate System Under this system a minimum weekly wage is fixed for every worker, which shall be paid to him irrespective of his output during the work provided he has worked for the full working hours required in a week. If a worker is absent for some length of time during a week, his wages will be deducted proportionately.
8.5 LEADERSHIP
Quality of Leadership The following are some of the qualities which a good administrative leader must possess: Intelligence and Technical Knowledge: A good leader must have intelligence which is more than that of his followers. He must be able to understand and solve the problems in accordance with the prevailing situation. He must also be technically sound, i.e. skilled in planning, organization, coordination and control. Responsibility: He must be able to know and feel his responsibilities. He must not shrink from his responsibilities and must be in a position to take the burden of decisions on his shoulders. Persuasiveness: Pursuance is also a good quality of a leader. It also helps him in implementing his decisions or order. Initiative: He must initiate good activities and must be capable of taking the initiative.
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Decisiveness: A leader must be able to make proper decision at proper time and must stick to it, as lack of decisiveness results in the losses of efficiency. Generally ability to decide comes from self- confidence. Ability to Inspire: A leader cannot do whole of the work himself. He has to inspire his men so as to get the work done by them. Generally, the best inspiration is from the conduct and personality of the leader and the standards set by him. Social Consciousness: He must always have to realize that he is dealing with human beings, who have feelings of social status and a sense of respect. Positive Attitude: He should always have a positive attitude towards the problems of the industry or workers. Types of Leadership There are relatively two distinct leadership styles: 1. Authoritarian Leadership. 2. Democratic Leadership. Authoritarian Leadership: In such leadership: a. The leader makes all the decisions on every matter whether it is right or wrong. He demands obedience from the people he supervises. b. The leader decides the particular work for a person. c. All policies are determined by the leader without consulting his subordinates. d. Decisions can be taken quickly. e. Authoritarian leadership succeeds where subordinates do not want to take initiative. Democratic Leadership: In such cases: a. A democratic leader promotes participation of subordinates & develops strong team work. b. The leader gives decisions only after consulting his subordinates. c. Subordinates know the long term plans on which they are supposed to work. d. It promotes good relations between workers and management.
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