MCS

IT T83 Management Concepts and Strategies
MANAGEMENT PROCESS
UNIT I : Nature of Management Tasks of a Professional Manager Social responsibilities
of Business Managers and Environment Systems Approach to Management Levels in
Management Managerial Skills
DEFINITION OF MANAGEMENT:
Manage = Man (human)+ Age( experience)
Management: It is a wide term. It is variously described as an activity, a process, and a group
of people vested with the authority to make decision.
Some important definition:
1. Allen Louis : Management is What a manager does.
The managerial job, in general, could be analyzed in terms of certain managerial function.
1. Planning
2. Organizing
3. Staffing
4. Directing 5. Controlling
Including co-ordination as the essence of manager ship.
2. Management is the art of getting work done out of others, working in a groupHarold Koontz
3. Management is art of directing and inspiring people.- James moony:
4. To manage is to forecast and plan, to organize to command, to co-ordinate, to
control.-Henry Fayol
NATURE AND CHARACTERISTICS OR FEATURES OF MANAGEMENT:
1. Management as an activity ( or a process):
manager performs a managerial activity
task performed by a manager
INPUT
5m
Men
Money
Machine
Materials&
Methods
PROCESS
Planning
Organizing
Staffing
OUTPUT
Achievement of goals
Profit/loss
Performance of the firm
Directing
Controlling
2. Management is a universal process:

- management can be noticed in all spheres of life
- management activity is basically the same everywhere
3. Management is factor of production:
- production activity
- just as land, labour. Capital and organization.

4. Management is goal-oriented:
- to accomplish the objectives of a enterprise
- may be economic, socio-economic, social and human
5. Management is intangible:
- the result of its efforts.
6. Management is purposeful:
- deals with the achievement of something
- success is measured by the objectives are achieved.
7. Decision-making:
- it involves the evaluation and selection of alternatives.
Evolution of management.
1. Pre- scientific management -1880 AD
2. Scientific management (1880- 1920)
3. Human Relation period (1920-1950)
4. Modern management period (1950- present)
I.PRE-SCIENTIFIC MANAGEMENT- 1880 AD
1. ROMAN CATHOLIC CHURCH:
formal organization in the history of the western civilization
Division work based on specialization
employment of staff officers to advise the line managers
2.. ROBERT OWENS (1771-1858)
-Robert owens, a successful textile mill manager
-treated the workers in a fair way
- provided incentives, improved working conditions, fair wages
- leads to co-operation and maximum production.
3.CHARLES BABBAGE (1792-1871)
-Charles Babbage, a scientist mainly interested in mathematics, contribution to the management
theory by developing the principles of cost accounting and the nature of relationship between
various disciplines.
-He concentrated on production problems and stressed the importance of a) division and
assignment of work on the basis of skill and b) the means of determining the feasibility of
replacing a replacing manual operations with automatic machinery.
II. SCIENTIFIC MANAGEMENT (1880-1920)
1.HENRY FAYOL (1841-1925)
-He was a French mining engineer who turned a leading industrialist and successful manager and
rose to the position the chief management director.
-In his famous work, General and industrial administration, Fayol has listed 14 principles of
administration.
-He evolved and general theory of administration to be applied in any field of organized activity,
particularly at the top level of management.
-He is father of management
2.F.W TAYLOR (1856-1915)

-He has earned for himself an important place in the management thought.
-He is called the father of scientific management movement which seeks to apply scientific
method to the problem of management.
-Taylor published the following articles:
-i.A Piece Rate System, ii. Shop Management iii. On the Art of Cutting Metals and The
Principles of Scientific Management which was published in 1911.
3. FRANK GILBERTH (1868-1924)
-Frank bunker Gilberth and Lillian Moller Gilberth were a husband and wife team. They made
significant contributions to motion study, fatigue study and work simplification.
-He analysis of the ob convinced him that many of the body movements could be eliminated or
combined to simplify the job and to increase productivity.
-He found the most efficient and economical motions for each task. This increased the workers
moral and productivity and reduced his fatigue.
4. HENRY L. GANTT (1861-1919)
-He was an associate of Taylor at Midvale and Bethlehem steel works.
-He developed the techniques of work scheduling and control.
-His significant contribution was the famous Gantt chart which is still used for scheduling and
control of work.
-He also developed the Task and Bonus Plan under which a minimum wage is guaranteed to all
workers irrespective of output.
-He believed that is all problems of management, the human element is the most important.
III. HUMAN RELATIONS PERIOD (1920-1950)
1. GEORGE ELTON MAYO (1880-1949)
-He was a professor of industrial psychology at the Harvard Business School. He published
several books and papers, e.g i. Human Problem of an Industrial Civilization, Management and
Morale, The Social Problem of an Industrial Organization, Training for Human Relation etc.
-He served as the leader of the team which carried out the famous Hawthorne Experiments, these
experiments were conducted in the Hawthorne plant of West Electric Company in Chicago (USA)
from 1927 to 1932.
-Hawthorne Experiments may be classified into four stages:
i.
Illumination experimentsdesigned to Asses the effects of illumination on employee
efficiency.
ii.
Team room experimentdesigned to judge the influence of working conditions
(duration of rest periods, length of the work week, wage incentives, etc) on worker
performance. These were experimental in nature.
iii.
Interviewing studies- undertaken to improve employee attitudes. These were
psychological in nature.
iv.
Observational studies carried out to understand the factors influencing informal
organization of work groups. These were sociological in nature.
IV. MODERN MANAGEMENT PERIOD 1950 at present
1. DOUGLAS MCGREGOR (1906-1964)
-He was a professor of management at the MIT(USA).
-He is known for the development of motivation theory. He developed Theory X and Theory Y.
-He advocated motivation by participation and job enrichment.

2. PETER F. DRUCKER (1909-TILL DATE)
-Drucker is now a professor of social sciences at Claremont graduate school, California.
-His most popular book is The Practice of Management published in 1954
-He introduced the concept of MBO (Management By Objectives) and self-control in early fifties.
-He has emphasized creative and innovative management and he is against bureaucratic
management
-He has identified three important phases in organizing activity analysis, decision analysis and
relation analysis.
SCHOOLS OF MANAGEMENT THOUGHT
(OR)
DIFFERENT APPROACHES TO MANAGEMENT.
Management thoughts have been termed as pattern approaches, or schools of
management. Each of these employs certain beliefs, views, and formats.
1.Empirical Approach: it bases its methods on a close study of past managerial experiences and
management cases. Studies experience through cases. Identifies successes and failures. Main
contributors to this approach are Earnest Dale, Moony and Rellay, Urwick and many other
management practioners.
2. Human Behaviour Approach: a) this approach draws heavily its concepts from psychology
and sociology. b) Emphasis is placed on getting greater productivity through motivation and good
human relations. c) Motivation, leadership, communication, participative management and group
dynamics are the core of this approach.
Beginning from the famous Hawthorne Experiments, contributions have come from
many psychologists and sociologist notably from Maslow, Hers berg. McGregor etc
.
3. Social System Approach: The organization is essentially a cultural system composed of
people who work in co-operation. a) Relationships exist among the external and internal
environment of the organization. b) Co-operation among the group members is necessary for the
achievement of organizational objectives. The real pioneer of social systems approach is Chester
Barnard.
4. Decision Theory Approach: It concentrates on rational decisions and it is real job of every
manager in the organization. Decision of what to achieve and how to achieve it are the vital
characteristics and challenges of every manager. Major contributors are Simon, Forrester Cyert
etc.
5.Mathematical approach: This school visualizes management as a logically entity. The action
can be expressed in terms of mathematical symbols, relationships and measurable data. The major
contributors included in this school are Newman, Russel Ackoff etc.
6.Social Technical system approach: This approach views an organization as two systems a) a
social system and b) technical system, which necessarily interact. By Trist and Bamforth.
7.Systems approach: the system approach of management is of recent origin, having developed
in late 1950. The system approach has made a significant contribution on management discipline

and practices. Systems have boundaries, but they also interact with the external environment; i.e.,
organizations are open system.
8.Group Behaviour approach: emphasis on behavior of the people in groups. Based on
sociology and social psychology. The study of large groups is often called organization
Behaviour
.
9.Mckinseys framework: the seven S are 1. Strategy, 2.structure, 3.systems, 4.style, 5.staff,
6.shared values, 7. skills
Management VS administration
There has been a controversy on the use of the two terms-management and
administration.
Administration is different from management: Administration is a higher-level activity
while management is a lower level management. Administration is a determinative function
concerned with the determination of objectives and policies while management is an
executive function involving the implementation of polices.
Administration
1. Legislative
function.
Management
and
determinative
1.executive function
2.Implementation of policies
2. Determination of objectives and

policies
3. Provides a sketch of the enterprise.
4. Influenced mainly by public opinion
and other outside forces.
5. Mainly a top level function
3.provides the entire body

4.influenced mainly by administrative
decisions
5.mainly a lower level function
6.involves doing and acting
6. Involves thinking and planning

BOD
MD
Plant
Supervisor
Administration
Production manager
superintendent
Management
LEVELS OF MANAGEMENT:
The different levels of management may be classified into three categories
Levels of management:

Board of directors
Managing director
Production
Manager
Finance
Manager
marketing
managermanag
Plant
Superintend
chief account
branch manager
HR manager
training officer
financial officer
Foremen
sales officer
clerks
Workers
salesmen
Management /industrial management has got the following activity levels.

1.Top-level management:
-Top level management includes a) Board of Directors b) Managing Director, c) Chief
executive, d) General manger, e) Owners, f) Shareholders.
Setting basic goals and objectives.
Expanding or contracting activities
Establishing policies
Monitoring performance
Designing/Redesigning organization system
Shouldering financial responsibilities etc.
2. Upper Middle Management
-Upper Middle Management includes a) sales executive (manager), production executive,
financial executive, R&D executives, Accounts executive
- Establishment of the organization.
Selection of staff for lower levels of management
Installing different departments
Designing operating policies and routines
Assigning duties to their subordinates etc.
3.Middle Management
It includes a) Superintends, Branch manager, General foreman, etc.
- To cooperate to run organization smoothly
- To understand interlocking of departments in major policies
- To achieve coordination between different parts of the organization
- To conduct training for employee development
- To build an efficient company team spirit

4. Lower Management
It includes a) Foremen, Supervisors, or charge-hands, office superintendent, inspectors,
etc.
- Direct supervision of workers and their work
- Developing and improving work methods and operations
- Inspection function
- Imparting instruction to workers
- To give finishing touch to the plans and policies of top management
- To act as a link between top management and the operating force (i.e workers)
- To communicate the feeling of workers to the top management.
5. Operating Force
It includes a) Workers, rank and file workman, skilled, semi-killed and unskilled.
- To do work on machines or manually, using tools, etc
- To work independently (in case of skilled worker) or under the guidance of
supervisor.
MANAGEMENT SKILLS:
By managerial skills, we mean the skills or qualities desired in managers, the possession of which
would enable them to act better as practicing managers.
1. Technical skill:
- Technical skill might be termed as technical expertise.
- It is an imperative sill for managers at the lower level management. Because it
is actually these people who guide and supervise work of operators under their
subordination.
- Accordingly, it may range from knowledge regarding operation and repair of a
machinery, storage of materials, to training of subordinates.
2.Human skill:
- By human skill we mean the ability to tactfully deal with human beings and mould
their behavior at work in the desired manner to help attain the common objectives
of the enterprise-most effectively and efficiently.
- A manager has to provide effective supervision, motivation and leadership that
part of his subordinates.
- A human skill is equally needed by all manages- from highest to the lowest
authority in the management hierarchy.
- Application of human knowledge and skill may involve motivating the sales
force to achieve revised targets, or persuading the subordinates to effect
economies, and so on.
3. Conceptual skill
- It is concerned with concepts or ideas.
- It is imperative for top management level, necessary for the middle
management level and desirable for the lower level management
- Application of conceptual knowledge and skills may involve formulation of a
plan to introduce a new product, to explore new markets, or trying out new
methods of production.
Skills and Management Level
Top
----------------------------------------
--------------------------Middle
--------------------------Lower
-------------
MANAGERIAL ROLES:
Many managers, especially at the top and middle management levels, perform some such
functions, as could not, properly, be called management functions.
I. Interpersonal roles:
a) Figurehead: i. Attending the wedding ceremony of an employee of the organization.
ii. Entertaining VIP visitors and taking them to lunch or dinner.
iii. In this role the manager performs duties of a legal or ceremonial nature, such
as welcoming visitors, giving testimonials to employees.
b) Leader: In this role the manager provides the dynamic force and direction to his subordinates
by means of guidance and motivation.
c) Liaison:
i.
Dealing with public grievances and complaints for betterment of public

relations.
ii.
The manager maintains or helps to maintain a link of the enterprise with
outside parties; which is necessary for collecting useful information for the
enterprise and developing good relations of the enterprise with important
sectors of society.
iii.
Liaison helps the manager to establish mutually helpful horizontal
relationship
II. Informational roles:
a) Monitor:
i.
In this role the manager receives and analyses information form the outside world
and from within the organization, for transmission to appropriate people.
b) Disseminator:
i.
The information received from outside and from within the organization is
analyzed from the point of view of its relevance. The relevant information is then
passed on to the appropriate persons both within and outside the organization.
ii.
Manager performs the role of a disseminator in the sense that he shares the
information and experience with others.
c) Spokesman:
i.
The manager acts as a representative of the organization to transmit information
to the outside world.
ii.
When he negotiates with the trade unions or talks to the press person, he acts as a
spokesman of the organization.
III. Decisional roles:
a) Entrepreneur:

i.
A manager assumes the role of an entrepreneur when he initiates any change in

technology or work methods.
ii.
Example: manager makes a decision to acquire new machine or modify work
methods.
b) Disturbance handler:
i.
In this role the manager is a troubleshooter, rushing in to provide speedy solution
to a crisis. Breakdown of a machine, dispute between subordinates, strike call by
labour union, withdrawal of credit facility by suppliers of material, loss of a
valued customer.
c) Resource allocator:
i.
The manager has to determine the distribution of organizational resources such as
5Ms.
ii.
Accordingly, setting of a time schedule for the completion of a job, or approval
of expenditure on a particular project is the functions which the manager
performs in the role of a resource allocator.
d) Negotiator:
i.
The managers role as a negotiator consists in settlement of terms and
conditions with various parties-particularly outside the enterprise.
ii.
A role could be-Settlement about wage, working conditions, bonus, workers
participation in management etc. with labour union.
-Settlement about price, delivery of goods, after-sales service and other
issue with major customers.
-Bargaining with suppliers of raw materials or goods.
HENTRY FAYOLS CONTRIBUTION TO MANAGEMENT:
a) Introduction to fayol and his work
Henry Fayol (1841-1925) was a French mining who turned a leading industrialist and
successful manager. He was a mining engineer in a French mining and rose to the position of
the chief Managing Director.
Fayols classification of business functions:
Technical activities (relating to production)
Commercial activities (relating to buying, selling or exchange)
Financial activities (relating to search for and optimum use of capital i.e.,
finances)
Security activities (relating to protection of the properties and personnel of
the enterprise)
Accounting activities(( relating to a systematic recording of business
transactions, including statistics also)
General principles of management:
Fayol advocated fourteen principles of management.
1. Division of Work: division of work leading to specialization result in increased human
efficiency; as through the application of this principle, much more production is possible with
the same amount of human efforts.
It results in efficient use of resources and increases productivity. This is applicable to both
managerial and technical functions.
2. Authority and responsibility: it is the power inherent in a managerial position which enables
a manager to command subordinates to work towards the attainment of enterprise objectives.
Responsibility, is the reverse of authority; whose essence is an obligation owed by a subordinate
to the superior for the proper performance of the job for which authority is granted to the former.

3. Discipline: discipline is absolutely necessary for the smooth running of an organization.
Discipline means following rules, regulations, policies and procedures by all employees of
organization.
4. Unity of command: an employee should receive orders from one supervisor only to avoid
possible confusion and conflict. This principle is useful in the clarification of authority
responsibility relationships.
5. Unity of direction: all the activities must be aimed at one common objective. It implies that
for each group of activities having the same objective. There must be one head and one plan.
6. Subordination of individual interest to general interest: the interest of one employee or
group should not be given importance over the interest and goals of organization.
7. Remuneration of personnel: remuneration of personnel is the price paid or payable to people
managers and workers- for their service rendered towards the attainment of the enterprise
objectives.
8. Centralization authority: it refers to a reservation of decision-making authority at top levels
of management. Decentralization, on the other hand, means a dispersal of authority from the
central (top-level) points to middle, and specially lower level of management.
9. Scalar chain
Management may be regarded as a chain of superiors. There should be an unbroken line
of authority and command through all levels from the highest ( i.e., general manager)to the lowest
ranks (employee).
10. Order: this promotes the idea that everything (e.g. materials) and everyone (human being)
has his place in the organization.
Materials and human beings should be arranged such that right material (think)/
person is in the right place.
11. Equity of treatment:
- Managers should have fairness in treatment for all his subordinates
-Manger should deal with his subordinates with kindness and justice.
-This will make employees more loyal and devoted towards the management.
12. Stability
-Stable and secure work force is an asset to the enterprise, because unnecessary labour turnovers
are costly.
-An average employee who stays with the concern is much better than outstanding employees
who merely come and go.
-Instability is the result of bad management.
13. Initiative:
-Mangers should sacrifice their personal vanity in order to permit their subordinates to exercise
their own initiative.
-A manager should encourage his subordinates to take initiative.
14. Esprit de corps
-This principle of management emphasizes the need for teamwork (harmony, and proper
understanding) among the employees and shows the importance of communications in obtaining
such teamwork.
- It is unity of strength
Contribution of F.W.Taylor
He is called that father of scientific management.
Taylors scientific management is popularly called as Taylorism.
Scientific management involves the application of a scientific approach to
management decision-making; and discarding at the same time, all unscientific
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approach as like-rule of the thumb, a hit or miss approach and a trial and error
approach.
Definition of scientific management:
Scientific management consists in knowing what you (i.e management) want men
to do exactly; and seeing to it that they do it in the best and the cheapest manner.
Principle of scientific management:
1. Science, not the rule of thumb.
The basic principle of scientific management is the adoption of a scientific approach to
managerial decision making; and a complete discard of all unscientific approaches, hitherto
practiced by management.
2. Harmony, not discord
Harmony refers to the unity of action; while discords refer to differences in approach.
3. Co-operation, not individualism
Co-operation refers to working, on the part of people, towards the attainment of group objectives;
while regarding their individual objectives as subordinate to the general interest.
4. Maximum production, in place of restricted production.
His view the most dangerous evil of the industrial system was a deliberate restriction of output.
5. Development of each person to the greatest of his capabilities.
Management must endeavor to develop people to the greatest of their capabilities to ensure
maximum prosperity for both employees and employers.
6. A more equal division of responsibility between management and workers.
This principle of scientific management recommends a separation of planning from execution.
7. Mental revolution on the part of management and workers.
It involves a complete mental revolution on the part of both sides to industry viz workers and
management.
AN OUTLINE STRUCTURE OF TAYLORS SCIENTIFIC MANAGEMENT
1. Separation of planning and doing.
Before Taylor scientific management, worker himself used to decide how he had to
work and what instruments were necessary. Taylor has emphasized that planning function
should be separated from actual performance and should be given to specialists.
2. Job analysis:
There is one best way of doing a job which requires least movement, consequently
less time and cost. In very industry, this way should be determined which involves time,
motion and fatigue study.
i. Time study: Time study involves the determination of time a movement takes to complete.
The movement, which takes minimum time, is the best.
ii. Motion study: it involves the study of movements in parts which are involved in doing a
job and thereby eliminating the wasteful movements and performing only necessary
movements.
iii. Fatigue study: this indicates that the workers feel fatigued after putting in work for a
certain period and they are not able to do the work at their full capacity. Thus, they should be
provided appropriate rest at appropriated intervals. The fatigue study shows the time and
frequency of rest.
3. Standardization of raw materials, tools and working conditions:
i) Raw materials, tools, machines and other facilities of work must be of a
reasonable good quality so that the quality of production is reasonable.
ii) Another variety of standardization which Taylor refers to is uniformity in
providing work facilities and work conditions to all workers, doing a similar type of job.
4. Scientific selection and training of workers.
11

Selection of workers should be on scientific basis. A worker should be given
worker which he physically and technically most suitable. Training should be provided to
workers to make them more efficient
5. Diiferent piece-rate system:
In order to motivate worker-positively as also negatively to product the standard
output. The inherent features of this scheme are: i.
A standard output for each worker is determined in advance through scientific
work-studies.
ii.
Two rate of wage-payment are established.
a) A higher rate per unit of output
b) A lower rate per unit of output.
6. Financial incentives:
Worker can be motivated by financial incentives. Taylor himself applied differential piece rate
system which is of a highly motivating nature. The wage should be based on individual
performance and o the position which he occupies.
7. Economy:
While applying scientific management, not only scientific and technical aspect should be
considered but adequate consideration should be given to profit and economy.
8. Function foremanship:
The scheme of functional foremanship recommended by taylor, is, in fact, an introduction
managerial specialization at the shop level. In this system eight persons are involved to direct
the activities of the workers.
Planning function
Route clerk
inspector
instruction time &

Card clerk
executive function
shop
cost clerk disciplinarian
gang
speed
boss boss
boss
repair
WORKERS
SOCIAL RESPONSIBILITY OF BUSINESS:

Concept:
It refers to such decisions and activities of a business firm which provide for the welfare of
the society as a whole along with the earning of profit for the firm.
It implies formulation of business objectives, plans, policies and programmes etc. with
emphasis on not only the economic concept of profit-maximization; but also with an orientation
towards meeting social obligations- so that business functioning does not impinge on the
legitimate interest of various segments of society.
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CONPONENTS OR AREAS OF SOCIAL RESPONSBILITY:

I. Responsibility to itself::
- A business entity is supposed to earn a reasonable amount of profits to ensure
its own survival and gradual growth.
- This can be achieved only by planning effectively, honestly and with a
foresight.
- Stability, expansion and growth are three watchwords which a business has to
keep in mind in order to fulfill its obligations toward its own self.
II. Responsibilities towards owners.
Paying a reasonable rate of dividend as reward for risking capital in business.
Ensuring safety of investment of funds provided by owners.
Showing due regard towards the interests of minority of members.
Ensuring growth of the company
Giving owners a true and fair account of the functioning, profitability and
financial position of the company.
Accessibility of chairman and directors to the owners for getting information
relating to the company.
III. Responsibilities towards workers:
Payment of adequate and timely wages
Providing adequate industrial safety devices
Granting job security
Providing congenial work environment
Providing opportunities for promotion and advancement
Ensuring reasonable workers participation in management
Protecting worker from occupational hazards
Encouraging participative management in the company
Giving humane treatment to workers
Encouraging the development of good trade union leadership
IV Responsibilities towards consumers
Ensuring availability of products in the right quantity, at the right place
and at the right time
Supplying products of high quality.
Avoidance of indulging in unfair trade practices like-Supplying lesser weight
-Defective packing of goods
-Black-marketing, hoarding and profiteering
-Adulteration etc.
o Providing good after-sales services.
o Using correct measures
o Immediate redress of consumer grievances
o Encouraging the formation of associations of consumers and
consumers advisory councils and maintaining close links with them.
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V. Responsibilities towards suppliers and fellow-businessmen:
- Fair settlement of accounts in time
- Abiding by the terms of contracts made with suppliers (and fellow
businessmen)
- Development of sound business relations with suppliers (and fellow
businessmen)
- Refraining from exploitation of the small businessmen, by their bigger
counterparts.
VI. Responsibilities towards the state:
- Timely payment of legitimate taxes
- Strictly observing the provisions of the various laws and enactments.
- Co-operating with the government in the implementation of its economic and
social policies
- Not to indulge in winning political favors for selfish interests.
- Supplying the required information to governmental departments, from time to
time.
VI Responsibilities towards the society at large:
- Optimizing the use of resources
- Generation of maximum employment opportunities.
- Controlling environmental pollution
- Preventing urban congestion
- Undertaking programmes for rural development
- Innovating and implementing schemes for the uplift of the downtrodden
THE SOCIAL AUDIT:
This led to the concept of the social audit, which was first proposed in the 1950s
by Howarad R.Bowen. The social audit has been defined as a commitment to systematic
assessment of and reporting on some meaningful, definable domain of the companys activities
that have social impact.
One may distinguish between two types of audits. One is required by the government
and involves, for example, pollution control, product performance requirements, and equal
employment standard. The other kind of social audit concerns a great variety of voluntary social
programs.
For example, General Electric developed a matrix that facilitates the analysis of the
expectation of customers, investors, employees, communities, and other claimants in the
following area: product and technical performance economic performance, employment
performance, environment and natural resources, community welfare and development and
government business relations, as well as international trade and development.
ETHICS:
Ethics is defined as discipline dealing with what is good and bad and with moral duty and
obligation.
Personal ethics: the rules by which an individual lives his or her personal life
Accounting ethics pertain the code that guides the professional conduct of accountants.
Business ethics is concerned with truth and justice and has a variety of aspects such as the
expectations of society, fair competition, advertising, public relations, social responsibilities,
consumer autonomy, and corporate behavior in the home country as well as abroad.
Code of ethics:
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A code is a statement of policies, principles or rules that guide behavior, certainly,
codes of ethics do not apply only to business enterprise; they should guide the behaviour of
persons in all organization and in everyday life.
The functions of code of ethic committee of a business enterprise may include
1. Holding regular meeting to discuss ethical issues
2. Dealing with gray areas
3. Communicating the code to all members of the organization
4. Checking for possible violations of the code
5. Enforcing the code
6. Rewarding compliance and punishing violations
7. Reviewing and updating the code
8. Reporting activities of the committee to the board of directors.
Concept of business ethics:
Definition: business ethics are moral principles which must govern the conduct of business
enterprise; and guide businessmen as to whether their decisions and actions are right or wrong
in terms of welfare of society.
Social
Welfare
ethical
business
behaviour
unethical
neglect of
social
welfare
The notion business ethical affecting social welfare

Analysis of the above definitions:
- Business ethics are moral principles which guide business behaviour
- Business ethics imply an idea of honesty in that these guide businessmen as to
rightness or wrongness of their decisions and actions
- The basic philosophy of business ethics is maximum social welfare, through
functioning of business enterprises.
Examples of unethical business behaviour
1Workers:
o
o
o
Overlooking industrial norms in order to get work done

Denying legitimate promotions
Discrimination among workers on the bases of caste, sex or relation.
2. Consumers:
- Indulging in vulgar and false advertising to attract consumers
- Neglecting after sales service
- Supplying lesser weight at higher prices, etc
3. Investors/shareholders:
- Indulging in unhealthy speculation to the detriment of the interests of genuine
investors
- Withholding payment of dividends; even when it is possible, etc.
4. Government:
- Keeping two sets books to evade taxes
15

-
Supplying wrong or misleading information to government departments

vis--vis labour strike, labour problems, production, etc.
5. Society at large
- Bribing public officials to obtain undue favours
- Black marketing and hoarding of goods
- Production of things injurious to health of people etc.
Ethics vs. Law
Law is also based on ethical considerations; in that all law is based on the notions of equity,
fairness and justice. However, in some cases it may be observed that a thing is unethical but
perfectly legal. In fact, law may be against ethics. For example, production of liquor, cigarettes,
and vulgar movies may be legal; but absolutely unethical.
FUNCTIONS OF MANAGEMENT:
1. Planning:
-
Planning involves the formulation of what is to be done, how, when and where
it is to be done, who is to do it and what results are to be evaluated.
Planning means looking ahead, it is mental work, it is selecting from among
many choices following the procedure given below:
i. Lay down the company objective/targets.
ii. Collect and classify the information relating to company objectives.
iii. Develop alternative course of action to do the things.
iv. Compare the alternatives in terms of objectives, feasibility and consequences
v. Select the optimum course of action yielding maximum benefit/gain
vi. Establish policies, procedure, methods, schedules, programmes, systems, standards and
budgets for the optimum course of action selected.
2. Organizing:
o After determining the course and make-up of action, the next step, in order to
accomplish the task, is to distribute the necessary work among the working
groups.
-It is the process of by which the structure and allocation of jobs is determined.
-It means, organizing people, materials, job, time etc., and establishing framework
.
in which responsibilities are defined and authorities and laid down
oThe process of organizing involves:
-Divide the work into component activities
-Assign people to task (component activities)
-Define responsibilities
-Delegate authority
-Establish structural relationship ( i.e organization structure) to secure coordination
3. Staffing:
-Staffing is the process by which managers select, train, promote and retire their
subordinates.
-Staffing involves the developing and placing of qualified people in the various jobs
in the organizations
16

-Staffing is a continuous process. The aim is to have appropriate persons to move
into vacated positions newly created in the enterprise.
-Function of staffing is from Recruitment to Retirement (RR)
4. Directing
-Directing is the process by which actual performance of subordinates is guided
towards common goals of the enterprises
-It includes
i)
Giving instructions to subordinates
ii)
Guiding the subordinates to do the work
iii)
Supervising the subordinates to make certain that the work done by them is
as per the plans established.
- Directing involves functions such as
a) Leadership: leadership is the quality of the behaviour of the persons
(mangers) whereby they inspire confidence and trust in their subordinates, get maximum
cooperation from them and guide their activities in organized effort.
b) Communication: it is the process by which ideas are transmitted, received
and understood by others for the purpose of effecting desired results.
c) Motivation: Motivating means inspiring the subordinates to do a work or to
achieve company objectives effectively and efficiently.
d) Supervision: supervision is necessary in order to ensure, I. that the work is
going on as per plan established, and ii) that the workers are doing as they were directed to do.
5. Controlling.
-
Function
Planning
Organizing
Staffing
Directing or
Commanding
Controlling
Controlling is the process that measures current performance and

guides it towards some predetermined goal.
Controlling means checking up to ensure that the planned work is
progressing as per schedule and if not, then to apply corrective action to
achieve the pre-determined objectives.
The process of controlling involves:a) Observe continuously and study the periodic results of
performance
b) Compare this performance with the present standards
c) Pinpoint deviations if any
d) Ascertain the exact causes of deviations
e) Initiate and implement the corrective action.
Sub-function
Forecasting, decision-making, establishing objectives, policy making,
programming, scheduling, budgeting strategy, formulation, problem-solving,
setting procedures, innovation research, investigation etc.
Functionlisation, divisionalisation, departmentation, assignment of duties,
delegation of authority, decentralization etc.
Recruitment, selection, training, placement, compensation, etc
Execution of implementation of plans, guiding, counseling supervision or
overseeing, motivation or activating, communication, leadership etc
Setting standards, recording measurement, reporting, review or appraisal or
evaluation, actuating, corrective action etc.
17
1. PLANNING:
Planning is said to be the first and foremost functions of management

The role played by planning is very vital in todays competitive scenario
Planning is decision making
Planning is thinking in advance what to do, when to do, how to do, where to do
and it is to be done by whom
Planning reflects authority and decision making
All levels of management play a vital role in contributing to the successful
implementation of planning process.
Planning is the management function anticipating the future and conscious determination of a
future course of action to achieve the desired results.
Planning consists of both problems solving and decision-making.
Major components parts of planning:
1. Initial (or basic) planning: Which is concerned with the determination of the objectives.
2. Subsequent (or route) planning: which is concerned with best alternative course of
action.
3. Final (or operational) planning: wherein, the planner would analyze the technical,
financial, personnel and other aspects involved in implementing the pre-selected course
of planning.
Meaning of planning:
Planning is a method or technique of looking ahead. It is a deliberate conscious search used to
formulate the design and orderly sequence of actions through which it is expected to reach the
objectives.
Nature of planning:
I. Constitutional features:
1. Planning is goal-oriented:
Planning has no meaning unless it contributes in some positive way to the
achievement of desired goals. All plans emanate from objectives.
The goals may be implicit or explicit but well-defined goals are essential for
efficient planning.
2. Planning is reference in future:
In fact, it is matter of common sense to understand that all planning is done for
future; and in the context of future conditions.
While planning, the planner has to do a forecasting of the relevant economic,
social, political and technological condition; within framework of which the plan
will have to operate.
Forecasting is the heart of planning.
3. Planning is primary function:
All other functions of management are designed to attain the goals set under
planning.
Planning provides the basis for efficient organizing, staffing, directing and
controlling,
18
4. Planning involves choice:

Planning is basically a problem of decision-making or choosing among alternative
course of action.
Planning are decisions made after evaluation of alternative course of action.
5. Planning is intellectual process:
Planning is a mental process involving imagination, foresight and sound
judgment.
It requires a mental disposition of thinking before doing and acting in the light of
facts, rather than guesses
II. Operational Features:
6. Planning is all pervasive:
Planning is the function of each and every manager irrespective of the level and
area of his/her operation.
Planning is an essential ingredient in management at all executive levels.
Managers at the top level prepare long-term plan for the company as whole,
middle level managers formulate departmental and functional plans for medium
term. At the lowest level, managers prepare operating and short-term plans.
7. Planning is both- long-range and short-range
Long-range planning usually covers a period ranging from 3 to 5 or 7
years, while plans for a period of upto 1 year (or even 2 years) are
regarded as short-range plans.
8. Planning is continuous:
Planning is an on-going and dynamic exercise.
As the assumptions and events on which plans are based change, old
plans have to be revised or new ones have to be prepared.
III. Desirable features:

9. Planning is actionable:
An ideal requirement of planning is that is must be actionable.
A plan is not just a paper-plan which either is not capable of implementation or is never
put into practice, for any reasons whatsoever.
10. Planning is flexible:
A plan is capable of modification, revision or readjustment, future; when some of those
future environmental factors change on which the plan is based.
11. Planning is an integrated system:
Ie. Various departmental plans, the plans of superiors and subordinates and the longrange and short-range plans- all must be harmonized and fitted into an integrated
structure of planning.
12. Planning is efficient:
The usual commercial cost-benefit formula is employed in the context of planning alsofor judging how far and to what extent, is a plan efficient or otherwise.
IMPORTANCE OF PLANNING:
19
1. Planning offsets future uncertainty and change:

A business concern has to work in an environment which is uncertain and ever-changing.
Planning helps the manager in carving out the future course of action and this brings a
higher degree of certainty.
2. It tackles increasing complexity in modern business:
To run a modern business undertaking, there is need for large number of people with
different specialization and complex machines.
3. It helps in co-ordination:
Planning is the best stage for the integration of diverse forces at work.
Sound planning interrelate all the activities and resources of an organization.
The activities and efforts of various departments and division can be harmonized with
the help of an overall plan.
4. Encourage innovation and creativity
Innovation and creativity are prerequisites to continuous growth and steady prosperity of
business.
Planning is forward looking and it enables an enterprise to cope with technological and
other developments.
Planning requires continuous monitoring of environment for new ideas and
developments.
5. It facilities unity of action.
Under planning, policies, procedure and programmes are predetermined and every
decision and action should within the framework of predetermined policies and
procedures.
6. It helps in avoiding business failure:
As planning involves the selection of vest objectives, unity of action, co-ordination of
activities, economy in operation and offsetting of futures uncertainty and change, there is
a great possibility of avoiding business failures.
7. Gudies decision-making:
Planned targets serve as the criteria for the evaluation of different alternatives so that the
best course of action may be chosen.
By predicting future, planning helps in taking future-oriented decisions.
In the absence of plans there is no sound basis for making future-oriented decisions.
8. Improves competitive strength:
The enterprises which adopt planning will have a competitive edge over other enterprises
which do not have planning.
Planning enables the enterprise to discovers new opportunities and thereby shape its own
future
9. Facilitates control
Planning provides the basis for control. Plans serve as standards for the evaluation of
performance.
Sound planning enables management to control the events rather than be controlled by
them.
STEPS IN PLANNING (OR PROCESS OR HOW TO MAKE A PLAN?)
20
Plans are made in all types of enterprises- business and non- business.
Plans are made at all levels of management from the highest to the lowest.
1. Being watchful:
It could be referred to as a pre-step in planning or a desirable pre-condition for making a
successful plan.
The management must, accordingly, initiate the planning process at the most opportune
moments expecting gains through the adage well-begun is half done.
2. Awareness of opportunities and problems:

The first step in planning is the awareness of the unexploited business opportunities or
the problem to be provided for in future.
3. Collecting and analyzing information:

The next step is to gather adequate information and data relating to the planning to be
made and analyze it to find out the cause-effect relationship between the various factors.
4. Setting objectives:
Analysis and interpretation of data facilitate in determining the enterprise objectives.
Objectives must be specific and clear and should indicate the end result of planning
activity.
5. Determining planning premises and constraints:

Before plans are prepared the assumptions and condition underlying them must be clearly
defined.
These assumptions are called planning premises and they can be identified through
accurate forecasting of likely future events.
Three types of planning premises:
i.
Controllable premises: These are under the control of management
( eg. Policies, objectives, and resources of the enterprise).
ii.
Semi-Controllable premises: these are partially under the
management control (e.g. trade union)
iii.
Non-Controllable premises: it refers to the external forces (e.g govt
policy, political situation etc.).
6. Finding out the alternative course of action:
After establishing the objectives and the planning premises, the alternative plans are
developed.
For every plan there are a number of alternative and hence, all possible alternatives to
work out a plan for achieving the desired objectives should be found out for their
evaluation.
Cost, risk and resources associated with different alternatives should also be considered.
Imagination and foresight are required to generate and evaluated policy alternatives.
7. Evaluation of alternatives and selection:
21
A critical evaluation of alternatives involves going into the plus and minus points of each
alternative; and to find out the net worth of each alternative-in terms of its contribution to
the objectives of the plan.
It is to evaluate all possible alternatives with reference to cost, speed, quality, etc., and
select the best course of action.
8. Selection of the best alternatives:

The management while selecting the best alternative might base decision on one or more
of the following bases:
a) Experience: the management might base its final selection of the best alternative, on its
experience. In fact, experienced manager knows what types of alternatives he adopted in the past;
and with what implications and consequences.
b) Experimentation: in terms, of experiments with the best alternative; and analyses the outcome
of the experiment, before finalizing the decision.
9. Formulation of derivative plans:
A major plan, usually calls for a number of derivative plans; plans derived from the main
plan. Derivative plans might also be called supporting or minor or secondary plans.
A plan e.g relating to the installation of a new plant for manufacturing a new product
might call for the following derivative plans:i.
a plan for design and manufacturing of the new product.
ii.
Plans of recruitment, selection and training of personnel for operating the plant.
iii.
A plan for the repairs and maintenance of the plant.
iv.
A plan for advertising the product to be produced by the plant, etc.
9. Implementation of the plan:
The step, which gives a finishing touch to the planning process, is concerned
with the implementation of the plan, which implies putting the plan into action.
10. Follow-up action:
Though the planning process comes to a close with the implementation of the
plan; yet a desirable step, which yet remains to be taken, relates to the follow-up
action on the implementation of the plan.
Follow-up action implies watching the consequences (both good and bad)economic, social psychological etc.
PLANNING LEVELS
TOP
MANAGEMENT
STRATEGIC PLANS
-------------------------Objective
Long range plans
Policies
MIDDLE
MANAGEMENT
ADMINISTRATIVE PLANS
-----------------------------------Organization
Motivation
22
long-range
plans
mediumrange
plans

Managerial control
LOW
MANAGEMENT
OPERATIONAL PLANS
----------------------------------Rules
Method
Procedure
shortrange
plan
TOP LEVEL MANAGEMENT:

It is concerned with the strategic of courses of action, programme, policies, procedures
and standards that will determine the procurement, use and disposition of these resources.
MIDDLE LEVEL MANAGEMENT:
Examples: Research and Development, Marketing, Manufacturing, finance etc.
LOWER LEVEL MANAGEMENT
Example: plans for finished goods inventories to meet current market demands, plans to
accelerate research projects which are behind schedule.
TYPES OF PLANNING:
In the process of planning several specific plans are prepared which may broadly be classified
into two categories: Standing and Single -Use plans
.
PLANS
PLAN
STANDING PLAN
SINGLE USE PLANS
Mission
Programmes
Objectives
Project
Policies
Schedules
Strategies
Budgets
Methods
Procedure
Standards
Rules
I. STANDING PLAN:
Standing plan or multi-use plans are the recurring plans and they are used repeatedly in
situation of a similar nature. A standing plan is a standing guide to recurring problem and it is
used again and again. It is also called long- term plans.
1. Mission:
The mission as a type of plan explains the most fundamental purpose of an enterprise.
For example
i. The mission of the government of a country might be eradication of poverty.
ii. The mission of a manufacturing enterprise might be producing high quality goods for
the common men of society at the most affordable price and so on.
23
2. Objectives:
Objectives provide a sense of direction to the thinking process of the planner; and to the
action process of the operators of the plan
Objectives must be formulated keeping in viewi.
The mission of the enterprise, and
ii.
The resources and limitation of the enterprise.
Objectives are known by different names, e.g goals, aims, purpose, mission,
targets, etc.
Kinds of objectives:
1. Market standing
2. Innovation
3. Productivity
4. Physical and financial resources
5. Profitability
6. Manager performance and development
7. Worker performance and attitude and
8. Public responsibility
MANAGEMENT BY OBJECTIVES: (MBO)
The philosophy of management by objectives (MBO) was highlighted in 1954

by Peter F. Drucker who stressed upon the need for management by objectives
and self-control.
MBO may be defined as a process in which a manager and his subordinates

jointly decide the targets and results to be achieved keeping in view the overall
objectives of the organization, jointly identify the Key Results Areas (KRA)
periodically evaluate the actual results in terms of results agreed upon in
advance.
Steps in MBO process:

MBO is also known as Management By Results because results are to be evaluated in terms of
objectives.
1. Preliminary setting of objectives at the top management level.
Top management usually gives a start to launching of scheme of MBO; by
identifying the fundamental objectives of the enterprise as a guide to superiors
and subordinates throughout the organization for setting their own objectives.
They constitute the basic and long-term ends towards which the activities of all
departments and individuals are directed.
The objectives that are set also indicate the measures for achieving the
objectives.
2. Unit sub-goals
Once the corporate objectives are formulated, the short-terms goals for each
organizational unit e.g., division, department or branch are established.
Such unit goals reflect what is expected of each unit.
3. Individual targets.
24
After the corporate and unit goals are set up the next step is to fix performance
targets for each individual manager at various level of the organization.
Superiors and subordinates throughout the enterprise determine their individual
objectives-through a process of mutual consultation. Such setting of individual
objectives is the core aspects of MBO.
4. Matching goals with resources.
To make MBO scheme realistic, goals of individuals are compared to the resources
available for their implementation.
This helps the organization in allocating the resources in an economical way.
5. Recycling objectives.
Recycling objectives under MBO is done to take care of the interconnection among
related objectives.
Every manager calls periodical meetings of his subordinates to discuss their
performance and to jointly identify the steps to betaken for improvements in future.
6. Performance of appraisal
At the end of the year, a detailed discussion between a manager and this subordinate
takes place in which results of the unit are evaluated and the targets reviewed.
Merits and demerits of MBO:

Merits:
1. Better managing.
MBO helps in better managing the organization. If forces management to think
of planning for results.
Objectives also force managers to think how these can be achieved and what
resources would require.
2. Clarity in organization.
MBO tends to force clarification in organization roles and structures.
3. Commitment
MBO elicits commitment performance. If the objectives are set by people who are
responsible for achieving them, they have a sense of feeling that they are achieving their
own objectives.
4. Helps in Appraisal
MBO provides the measurement criteria to judge where one stands. So that corrective
actions. If required, can be taken well in time.
Demerits:
1. Failure to teach the philosophy.
MBO seems to be easy on its face, but there is much to be understood and appreciated by
managers.
2. Problem of goal setting
Truly verifiable goals are difficult to set MBO requires verifiable goals. For example,
quantified goal setting for staff people is quite difficult.
3. Emphasis on short-run goals:
In most of the organizations practicing MBO, there is a tendency to emphasis short-run
goals.
4. Inflexibility:
25

Sometimes MBO presents the danger of inflexibility in the organization.
5. Wastage of time:
MBO involves a wastage of a lot of valuable time of managers in joint consultations; and
they left with little time for efficiently discharging their
STRATEGIES
The concept of strategy in business has been borrowed from military organization.
Strategy is the complex plan for bringing the organization from a given posture to a
desired position in a future period of time.
For example, if the management anticipates price-cut by competitors, it may decide upon
a strategy of launching an advertising campaign to educate the customers and to convince
them of the superiority of its products.
Strategy making process:
1. Environment analysis:
First of all the external environment of the enterprise is analyzed to determine the
opportunities and threats for the enterprise.
2. Self-appraisal
The internal environment of the enterprise (resources, capabilities, etc) is examined to know
the strengths and weaknesses of the firm.
3. Strategic alternatives
Alternative strategies are developed to deal with the environmental forces.
4. Strategic implementation
Detailed operational plans are developed and communicated to employees so as to execute
the chosen strategy.
I. SWOT Analysis:
SWOT analysis is a key concept in the world of corporate planning, strategy formulation and
other practical spheres of management.
SWOT is also called TOWS by same management people. In fact, TOWS is SWOT; just
written backwards.
Concept and purpose a SWOT analysis:
S
Strengths
Weaknesses
Opportunities
Threats
Internal environment
External environment
1. The purpose of SWOT analysis is:
To capitalize (i.e. to take best advantage) on the strengths of the company.
To overcome the weaknesses of the company
To exploit fully the opportunities available in the external environment
To manage successfully the threats posed by the external environment
26

2. A brief account of environmental analysis:
i. Internal environmental analysis
ii. External environmental analysis
I. Internal environmental analysis
All that environment which is found within the business enterprise itself, may be
termed as the internal environment of business.
a) Philosophical environment, consisting of the mission, values, beliefs and long-term goals of
the enterprise and organizational culture.
b) Managerial environment, consisting of the management hierarchy, quality of management
talents and the process of managerial development.
c) Structural environments, consisting of - rules, policies and procedures of the organization
- communication network
- controlling techniques etc.
d) Production environment, consisting of- raw material availability and utilizations system
- quality control system
- technology available to the organization
e) Marketing environment, consisting of - marketing research system and procedures
- advertising and other sales promotion techniques
- training and compensation of salesmen.
f) Personnel environment, consisting of- quantity and quality of manpower
- type and nature of manpower planning
g) Financial environment, consisting of
- working capital management
- capital budgeting-techniques and procedures
h) Human relations environment, consisting of- line-staff harmony and conflicts
- public relations etc
- management labour relations
II. External Environmental analysis:

It would be the fitness of things, to first identify the salient features of external environment It is quite difficult to identity specific factors comprised in this environment.
a) Legal factors:
Legal factors constitute the existing legal framework; as applicable to business enterprise
- commercial laws,
- industrial laws,
- import-export laws
- taxation laws
b) Political factors:
- political stability
- taxation attitude towards business
- policies of liberalization
27

- ideology of the government towards business reflected in its economic and
business policies
c) social-religious-cultural factors:
- population growth and trends
- level of education in society
- craze for a higher standard of living
- consumer awareness
- changing social and cultural value etc.
d) Competitive factors:
- Their patronage of business products (services) buying capacity, likes, dislikes,
preference etc. vitally ensure profitability for the business enterprise.
e) Technological factors:
-if they plan to adhere to the new technology, they may be
-problem of resource chrunch
-re-organizational problems
-resistance to organizational changes by workers
f) Financial factors
- policies of banks and financial institutions
- stock market environment
- structure of interest rates
- foreign capital etc
- control of central bank
g) Natural environment factors
- natural resources
- climate
- geographical features whether the area is hilly or plain etc.
TOWS MATRIX:
1. The WT strategy aims to minimize both weakness and threats and may
be called the mini-mini strategy. For example, form a joint venture,
retrench or even liquidate
2. the WO strategy attempts to minimize the weaknesses and maximize the
opportunities.(mini-maxi)
3. the ST strategy is based on the organizations strengths to deal with
threats in the environment. The aim is to maximize the former while
minimizing the latter.( maxi- mini)
4.
The most desirable situation is on in which a company can use its
strengths to take advantage of opportunities (the SO strategy). maximaxi
Internal factors
Internal strength (S)

e.g
strength
in
management, operations,
R&D
External factors
s
28
Internal weaknesses (W)

e.g weaknesses in areas
shown
in
the
box
strengths.
CONCEPT OF DECISION-MAKING:
Decision-making is an integrated part of the human life
The manager is a decision maker.
He decide what specific actions
selecting the best alternative course of action
DEFINITION:
1.Decision-making is the selecting of an alternative, from two or more alternatives, to
determine an opinion or a course of action. Beorge R.Terry.
2.Whatever a manager does, he does through making decisions. -Peter F. Drucker.
FEATURES OF DECISION-MAKING:
1. Decision-making is goal-oriented
29

2.
3.
4.
5.
6.
7.
8.
Decision is the choice of the best course among alternatives.

Decision-making is a mental process (thoughtful considerations).
Decision is aimed at achieving the objectives of the organization
It involves the evaluation of the available alternatives.
It may also be negative and may just be a decision not to decide.
Decision relates the means to the end.
Decision-making involves a certain commitment.
A major classification of the types of decisions:

1.Personal and Organization decisions:
Personal decisions are those which are taken by managers concerning their personal life
matters.
Organizational decisions are those which are taken by managers, in the context of
organization and for furthering the objectives of the organization.
2. Casual and routine decisions:

Casual decisions only on some special issues concerning organizational life. E.g. a
decision to install a new piece of machinery.
Routine decisions day-to-day operation of the organization. E.g. sending samples of a
product to the Govt. investigation center
3. Strategic and tactical decisions:
Decision relating to designing of strategies are strategic decisions. Eg. Major capital
expenditure decision.
For implementation purposes, strategies are translated into operational plans or tactical
decisions. Such tactical decisions are taken at middle and lower levels of management.
4. Policy and operative decision:
A policy decision is a decision - guidance and instruction
Policies are decided by superiors towards subordinates.
Decisions of subordinates taken within the prescribed limits are called operative
decisions.
5.Programmed and non-programmed decisions:
Programmed decisions are normally of repetitive nature
taken by lower level managers
Non-programmed decisions are of non-repetitive.
new branch, introducing a new product in the market etc.
5. Major and Minor decisions:
Major decision: if it relates to the purchase of a big machine worth, say a lakh of rupees,
it is a, major decision.
Minor decision: purchase of fountain pen ink a few reams are minor matters and may be
decided by the Office Superintendent.
30

6. Individual and collective decisions:
An individual (not personal) decision is taken by a manager is his individual capacity,
without being consultation with any other person. (Autocratic)
Collective decisions are those which are jointly taken by a group of managers forum.
(Democratic)
PROCESS OF DECISION MAKING:
I. Background steps:
1. Definition of the decision making problem:
define the problem, before he takes any decision.
take care of many factors in defining the problem.
Sufficient time should be spent on defining the problem.
2. Collection of data:
A decision as good as the adequacy and quality of data are on which it is based.
Accordingly management should proceed to collect necessary data for decisionmaking purposes.
Service of MIS in this regard may prove to be highly useful and valuable.
II. Technical Steps:
3. Development of alternatives:
This step usually guided by SWOT analysis. Accordingly, management must develop
those alternative; which-Capitalize on the strengths of the company
-Overcome its weaknesses/limitation
-Lead to best exploitation of environment opportunities.
-Manage threats successfully.
4. Evaluation of alternatives:
After development of alternative is critically evaluated in terms of its merits and
limitations- to get at the net worth of each alternative.
The following criteria for evaluation-Risk and resource implication associated with each alternative.
-Cost-benefit analysis for each alternative.
i. Quantitative and qualitative factors:
Quantitative factors: these are factors that can be measured in numerical terms, such as
time or various fixed and operating costs. (Tangible)
Qualitative factors: factors are those that are difficult to measure numerically, such as
the quality of labour relations, the risk of technological change, or the international
political climate.
ii. Marginal Analysis:
Evaluating alternatives may involve utilizing the techniques of marginal analysis to
compare additional revenues arising from additional costs.
If the additional revenues of a larger quantity are greater than its additional costs, more
profits can be made by producing more.
Marginal analysis can be used in comparing factors other than costs and revenues.
iii. Cost effectiveness analysis:
31
An improvement on, or variation of, traditional marginal analysis is cost effectives, or

cost benefit, analysis.
It seeks the best ratio of benefits and costs, this means, for example, finding the least
costly way of reaching an objective or getting the greatest value for given expenditure.
5. Selection of the best alternative:

In making a selection of the best alternative, management may base its decision on any of
the following two bases:
- Experience (experience managers take better decision)
- Experimentation. (A sample of decision may be put to implementation on a trial
basis)
III. Practical Steps:
6. Implementation of the decision:
A decision remains only a paper-decision; unless and until it is put into practice.
The following managerial aspects, to be taken care of:
- Communication of decision to those who are to implement it
- Making all resources and facilities available to the operators of the decisions
- Motivating people to implement the decision with enthusiasm.
- Exercising general supervision over the implementation of the decision.
7. Follow-up or feedback action:
The implementation of decision leaves certain information for the decision-making
process.
The result of decision-execution can imply two sets of information.
i. That the decision-making process was right and should be continued.
ii. that the decision-making was wrong and or should be enriched with new
ways and techniques.
Objective
Problem
Fact finding
Alternative
Test
X
Y
Z
Evaluation of
alternatives
Selection of best
Alternatives
Implementation
Feed back action

Decision-making process
32
ORGANIZATION
Meaning of organization.
The word organization originates from the work organism which means a structure
with its parts so integrated that their relation to each other is governed by their relation to be
whole.
The two important ingredients are:
1. The parts consist of human and physical resources. E.g., 5M and
2. As for relationships, these mean relationships
i.
Between one individual and another
ii.
Between an individual and his group
iii.
Between one group and another
iv.
Between individual and the physical resources to be used by them
to perform their work or activities.
Important Definition:
Mcfarland has characterized organisaiton as an identifiable group of people
contributing their efforts toward the attainment of goals.
Koontz and ODonnell. Organization involves the grouping of activities necessary to
accomplish goals and plans, the assignment of these activities to appropriate departments and the
provision for authority delegation and co-ordination.
Mooney and Railey Organisation is the form of every human association for the
attainment of a common purpose.
As a function of management, organizing is a process; broadly consisting of the following steps:
1.Determination of the total workload and division of work:
The very first step in the process of organizing is to make a determination of all the
activities of all the activities which are necessary to be undertaken for the attainment of
the enterprise objectives.
Fayol divided business activities into technical, commercial, financial, , security,
accounting and managerial.
2.Grouping and sub-grouping of activities i.e creation of Departmentation.
33
The various activities identified under the first step are then classified into appropriate
Departmentation and divisions according to similarities and common purpose. Such
grouping of activities is known as Departmentation.
Each department may be further divided into section to create a logical structure.
3. Assignment of duties.
The individual departments are then allotted to different positions and individuals. The
duties of every individual are defined on the basis of his ability and aptitude.
Every individual is made responsible for the specific job assigned to him. In this way,
duties are assigned to specific individuals.
4.Delegation of authority:
Once the duties and responsibilities of every individual have been fixed, he must be given
the authority necessary to carry out the duties assigned to him.
A chain of command is created from top to bottom through successive delegations of
authority.
Key elements of Organization Process: on the basis of the preceding discussion, the
organisation process may be said consist of the following three key elements:
1. DEPARTMENTATION
2. DELEGATION, and
3. DECENTRALIZATION
PRINCIPLE OF ORGANISATION OR FEATURES OR ORGANISATION:
1.Unity of objective: an organisation and every part of it should be directed towards the
accomplishment of common objectives. It implies the existence of formulated and understood
objectives.
2. Efficiency: an organisation is efficient if is able to accomplish predetermined objective at
minimum possible cost.
3. Division of work: the activities of the enterprise should be so divided and grouped that there is
the most efficient breakdown of tasks.
4. Span of control: no executive should be required to supervise more subordinates than he can
effectively manage. The number of employees a manager can directly supervise.
5. Scalar principle: Authority and responsibility should be in a clear unbroken line from the
highest executive to the lowest executive.
6. Delegation: authority should be delegated to the lowest possible level, consistent with
necessary control so that coordination and decision-making can take place as close as possible to
the point of action.
7. Functional definition: the duties and authority-relationships of different individual must be
clearly defined so that there is, no confusion or overlapping.
8. Correspondence: authority and must be coterminous and co-extensive.
9. Unity of command: each person should receive orders from only on superior and be
accountable him.
10.Unity of direction: there must be one head and one plan for a group of activities towards the
same objectives.
11. Balance: the various parts of an organisation should be kept in balance and none of the
functions should be given undue emphasis at the cost of others.
34

12. Exception principles: every manager should take all decisions within the scope of his
authority and only matters beyond the scope of his authority should be referred to higher levels of
management.
13. Coordination: the purpose of organizing is to secure unity of effort.
14. Flexibility: the organisation must be free from complicated procedures and red tape.
15. Continuity: the organisation should be so structured as to have continuity of operations.
Arrangements must be made to enable people to gain experience in positions of increasing
diversity and responsibility.
Concept of Formal and Informal organization:

Formal Organisation:
The formal organisation is a system of well-defined jobs, each bearing a definite measures of
authority, responsibility and accountability. - louis A.Allen
It is a deliberately designed structure of roles; which is built by management
through assigning a matching role to each one of the groups for facilitating individuals- to best
attain the objectives of the enterprise.
Informal Organisation:
Informal organisation is a social group of individuals which comes into
existence automatically as a result of the operation, and interaction of certain sociopsychological factors, among persons who are working in various capacities within the four wall
of the formal organisation.
Informal organisation is the network of personal and social relationships not established or
required by formal organisation. - Keith Davis
One most outstanding and popular example of informal organisation is a labour union.
ADVANTAGES AND LIMITATIONS OF INFORMAL ORGANISATION:
Advantages:
I. Advantages from the viewpoint of management
1. More productivity and production:
By winning the co-operation of informal groups and their leaders, management is assured
of more productivity on the part of workers leading to higher production.
2. Communication feedback
Through the forum of informal organizations, management could get the reaction of the
employees of the organisation i.e. the communication feedback, on the communications
transmitted by it.
3. Innovative and creativity encouraged.
35
Informal groups and their leaders might often come out with suggestions or
recommendations for the betterment of organizational functioning.
If, even some of such suggestions are accepted and implemented by the management; the
same acts as a spur to innovation and creativity on the part of the members of informal
groups.
4. A more humanistic formal organisation
The emergence, activities and growth of informal organizations lead to the development
of human-touch which makes the formal organizations more humanistic or prevents
dehumanization of the personnel.
II. Advantages from the viewpoint of the members
1. Solution to work-problem:
Informal groups provide a forum for discussion wherein members can discuss their workrelated problems with senior and expert members of the group.
2. Management made alert and responsible

The fact of the existence of informal organizations and the fear of their likely actions
makes management more alert and responsible- while designing its plans, policies and
actions.
3. Bulwark against management
Informal groups, especially labour unions, act as a bulwark of employees-against the
undesirable practices and actions of management.
4. Doing away emotional tensions
Informal groups, by providing a forum of entertainment, gossips etc. help members do
away with their emotional tensions- caused by personal affairs and family circumstances.
Limitations:
I. Limitations from the viewpoint of management
1. Spread of rumours
The grapevine communication carries with itself, a natural possibility of spreading
rumours which might injure the interests and intentions of management.
2. Less than optimum production.
Actions and activities of informal organizations lead to a wastage of the productive time
of members. There is also some amount of time wasted in gossips indulged in by the
members.
3. Problem of indiscipline
Informal organizations my-a-times invite and encourage rash and reckless behaviour on
the part of members. This creates long-run problems of indiscipline for the organisation
and management.
II. Limitation from the viewpoint of members

1. Political domination of informal groups
36
They mould the functioning of informal organizations to serve their own petty selfish
political interests injuring the interests of members badly.
2. Loss of self-entity
A vast majority of the members of informal groups-specially less educated, unskilled and
semi-skilled-seek pleasure in being blind followers of the leaders of these groups.
Formal organization
1. Origin
It is a deliberate or intentional creation by
management done for purpose of
achieving the objectives of the enterprise.
2. Objectives
Its different departments have specific
objectives which are developed through
definite planning and decision-making
process.
3. Functioning
To pre-planned rules, polices, procedures
and programmes.
Informal organisation
4.Authority-responsibility relationships
There are clear-cut and properly defined,
authority and responsibility relationship
which are usually shown through
organizational chart.
5. Leadership
Every group manager, is a leader; by
virtue of, his official status and authority.
There are no such specific authority and

responsibility relationships. It represents a
natural-social structure-never depicted on a
chart.
It is a self-generating process. It comes

into existence; due to the operation of
certain socio-psychological factors.
It does not have any specific objectives
evolved through planning etc.
There is no such rules and procedure of
functioning.
Leaders are those who are popularly

accepted by all or a majority of the group-to
act as leaders of the group.
-Personal power.
6. Communication system
There is well planned system of It is of a grapevine nature i.e it might spread
communication routed through the scalar- from any person to any person, in any
chain.
manner and in any direction.
7. Stability
It is most stable
It is least stable.
8. Political domination
At least on the face of it, is away form In a large number of cases are politically
political domination.
dominated.
Tips about organisation:
Organisation charts and manual
Organisation charts and manuals are the important tools for providing information on
organizational relationships and activities.
Organisation charts:
1.A organisation chart is a diagrammatic representation of the framework or structure of an
organisation.
37

2. An organisation chart portrays managerial positions and relationships in a company or
department unit.
3. An organisation chart is a graphic means of showing organisation data.
Contents:
Ranks, names, titles and the lines of command, various authorities from top to bottom of
the organisation.
Authority and responsibility of various authorities.
Relationships between different authorities
Kinds of relationships prevailing in the organisation.
Types
1. Circular
2. From top to down,, and
3. From left to right
Organisation Manuals:
It is a small book containing information such as the details of various positions,
their authority and responsibilities, job description, salaries, relationships, activities, duties and
functions of each position and organisaiton procedures and methods.
It is an authentic guide to the companys overall organisation and its sub-parts.
TYPES OF ORGANISATION:
The nature of authority-responsibility relationships found in an organisation makes for a
particular pattern of the organizational structure.
Types:
I. Line Organisation.
This is the oldest type of organisation. Under it, the persons having the greater decisionmaking authority are placed at the top and those having the least decision-making
authority at the bottom.
It consists of direct vertical relationships.
It does not make provision for staff specialists.
Operation of this system is simple
Existence of superior-subordinated relationship
The boss gives instructions directly to his subordinates.
Superior at each level makes decisions within the scope of him authority.
Shareholders
38

Authority
Flow
Directors
M.D
Production
Manager
Works
Manager
Workers
HR executive
Finance
Manager
Marketing
Manager
Personnel
Manager
accounting
officer
advertising
section
Training
section
clerk
salesman
Line Authority
Types of Line Organisation:
1. Pure line organization:
The activities at any one level are the same and all the individuals perform the
same type of work and the divisions or departments are made for the sake of
control and direction.
Example, at the lowest levels of an organisation all the workers may be engage in
a similar activity, but for better control and supervision.
Works manager
Foreman
Dept.No.1
workers
Foreman
Dept.No.2
Foreman
Dept.No.3
workers
workers
Foreman
Dept.No.4
workers
2. Departmental Line Organisation:

The whole unit is divided into different departments that are convenient for control
purposes.
All the departmental managers enjoy equal status and work independently.
For example, in the production, there may be a number of foremen each in charge of
a sub-department and controlling a certain number of workers.
Factory superintended
Foreman
Foreman
Shearing Dept. Press Dept.
Foreman
Welding Dept
Foreman
Finishing Dept
Workers
workers
workers
workers
Advantages of line organisation
39

1. Simplicity:
It is the simplest and the oldest type of organisation.
It is easy to establish and operate.
It is also easy to explain the workers.
2. Flexibility
As each executive has full authority and responsibility for his job, required changes can
be made quickly and easily.
The adjustments in the organization can be easily made to suit the changing conditions.
3. Quick decision:
Managers can take decisions quickly and act promptly as no staff officers are to be
consulted and there is adequate authority at every level.
4. Unified control:
There is unity of command and control according to which an employee can be given
orders by one superior only.
All activities affecting a department are under the control of one executive.
5. Fixed responsibility:
Every person knows from whom he gets orders and to whom he is accountable.
Every executive can be held fully responsible for the actions of his subordinates.
6. Effective discipline:
Singleness of responsibility and control ensures strong discipline among the employees.
7. Economy:
It less expensive in terms of overhead costs, as there are no staff specialists.
8. Speed action:
Because of a clear division of authority and responsibility, as also unity of command and
control, decisions can be made and executed promptly.
Limitation of line organization:
1. Overburdening:
Key executives are overloaded with administrative work.
Top executives have to be superman to effectively control diverse activities.
As the business grows in size, executives find it impossible to cope with their duties in
the absence of staff assistance.
2. Instability:
The success and survival of the enterprise depends upon a few individuals. There is little
scope for expansion of business beyond their capabilities.
Loss of key executives may put the future of the concern in jeopardy.
3. Lack of specialization:
There is no scope for specialization as one individual cannot be expert in all function.
Lack of specialization and over dependence on subordinates lower efficiency of
operation.
4. Autocratic control:
As each department is under the complete control of one executive, there is danger of
authoritarian. There is possibility of favouritism.
40

5. Delayed communication:
Subordinates hesitate to offer suggestions and to criticize a wrong decision taken by the
superior.
II. LINE AND STAFF ORGANISATION:
Line authority:
Responsibility for proper performance of work is not delegated. But authority can be
delegated and the term line is used to indicate the line of authority.
Staff authority:
Staff is a stick carried in the hand for support.
Staff authority means authority to support the line authority.
Staff authority denotes a non-executive relationship where personnel with expertise
provide assistance to the line management, but only in an advisory capacity.
STAFF
STAFF
L
I
N
E
Body of Members
Board of Director
Personal manager
Taxation expert
Chief Executives
Labour expert
Private
Secretary
PRO
Account
Officer
Production manager
Subordinates
finance manager
subordinates
LINE
STAFF
41
marketing
Manager
subordinates
Advantages of Line and Staff Organisation:

1. Discipline:
Unity of command is maintained, as staff is not given executive authority.
2. Expert advice:
Line executives, and through them the enterprise as a whole, benefit a great deal from the
expert advice and guidance provided by the staff officers.
3. Balance decisions:
With information and advice provided by staff specialists, line executes can take better
and more sound decisions.
4. Relief to line executives:
The staff officers look after the detailed analysis of each important managerial activity
which is a big relief to the line officers.
Disadvantages of line and staff organisaiton:
1.Conflicts:
Staff may undermine line authority while line may ignore staff. This may lead to friction
between them.
2. Advice ignored:
As the staff officers lack authority to put their recommendation into practice, the line
executives may ignore their advice.
3. Expensive:
It is expensive in terms of overheads as two separate sets of personnel are required.
4. Conflict between line and staff:
The allocation of responsibility between line and staff may not be very clear.
Staff advice may be confused with line authority creating confusion and disorder.
Line and Staff authority:
Line authority
1.It refers to those positions and
elements of the organisation, which
have the responsibility and authority,
and
are
accountable
for
accomplishment of primary objectives
2.line elements provide decision
authority and a central means for the
flow of communication through scalar
chain of authority.
3.line managers make the salient
decisions by exercising command
authority.
Staff authority
1. It refers to those elements which
have responsibility and authority for
providing for providing advice and
service to line in attainment of
objectives.
2. Staff elements facilities the
decision process by bringing expert
and specialized knowledge..
3.staff officials advise and counsel.
Example: production manager in an industrial concern is a line manager, since he is directly

responsible for achieving certain production targets. But an industrial engineer is a staff
man as he gives advice to all production methods and quality control techniques.
42

CONFLICT BETWEEN LINE AND STAFF.
The major source of line and staff conflict is the difference in their viewpoints and
perception. Conflicts arise when any of them fails to appreciate the view of the other. When a
conflict between line and staff arises both the parties try to explain the causes of conflict in terms
behaviour of the other.
The viewpoints of both line and staff on this conflict are given below.
a) The line viewpoint: the line managers have the following to say about the staff people.
1. Staff authority undermines line authority and interferes in the work of line managers.
2. Staff authorities are not acquainted with the practical problems of the enterprise, as they
are only academics.
3. As staff officers are specialists only in a specific area, they cannot see the whole picture
objectively.
4. Advice given by the staff is not always sound. Advice is only theoretical and unrealistic.
5. Staffs take credit if the programme (as per the advice of the staff) is successful and blame
the line if it is not successful.
b) The staff viewpoint: staff authorities have the following complaints against line officers:
1. Line officers do not make proper use of advice given by itself.
2. Line officers reject the advice without giving reasons.
3. Line officers are slow to accept new ideas and they resist change.
4. Staff authorities feel that they do not have authority to get their ideas implemented.
Improving Line and Staff Relationship:
1. The limits of authority of both line and staff should be prescribed clearly.
2. Staff authority should be restricted to a purely advisory role.
3. Line officers should give due consideration to staff advice. They should state reasons in
case they cannot accept the advice.
4. Line should value the special skills of staff and similarly the staff should try to appreciate
the difficulties in implementing new ideas.
5. The advice of staff should be realistic and practicable.
6. Both line and staff should try to understand can others responsibilities and difficulties
and try to co-operate with each other for the achievement of enterprise objectives.
III. COMMITTEE ORGANISATION
A committee is a group of people who meet by plan to discuss or make a decision for a
particular subject.
A committee means a group of persons formed for a stated purpose. It may be a standing
committee, or convened for a special purpose.
There may be executive committee, finance committee, audit committee, bonus
committee, grievance committee, etc.
Characteristics:
43

1. A committee is a group of person. There should be at least two persons and no limitation
on the maximum.
2. A committee is charge with dealing with dealing specific problems and it cannot go in for
actions in all spheres of activities.
3. A committee may be constituted at any level of organisation.
4. Members of committee have authority to go into details of the problems.
5.
Types of Committee:
1. Standing or Ad Hoc committee:
Standing: it exists continuously for indefinite period.
Ad hoc committee: it is constituted for a specific purpose or to solve a specific problem.
2. Decision-making committee.
It is one which is charged with the responsibility of making and executing its decisions.
3. Line and staff committee.

Line committee: it is responsible for controlling coordinating a specific business function
having executive authority over the subordinates within a formal chain of command.
Staff committee: only acts in an advisory capacity, having no authority to impalement its
decisions.
4. Formal and informal committee:
Formal: it is duly constituted by organizational rules, regulations with specific authority.
Informal: it is not as per any policies or rules of the organisation, and it has no formal
authority as such.
Advantages of committee organisation:
1. Pooling of knowledge and experience.
5.
6.
2. Facility of coordination
3. Motivation through participation
4. Easy communication
A tool of management development
Consolidation of authority.
Disadvantages of committee organisation:

1. High cost
2. Slowness in decisions
3. Dividend responsibility
4. Misuse of committee.
IV. MATRIX ORGANISATION:
When an enterprise undertakes a large number of small projects; a matrix organisaiton is
more suitable. A matrix organisation is characterized by two major features:
i.It undertakes a large number of small projects;
ii.There is a dual line of command, in a matrix organisation.
44
Matrix organisation = Dual line of command + matrix culture + matrix behaviour.

Matrix organisation represents a combination of functional departmental organisation
and project organisation.
Different project managers share resources and authority with functional heads.
When one project is over; its personnel and resources are diverted to some new project.
General Manager
Production
Manager
Finance
Manager
Marketing
Manager
personnel
manager
Project
Mgr 1
Project
Mgr 2
Project
Mgr 3
Project
Mgr 4
-- Authority of project manager
--- Authority of functional head.
Advantages:
1. It is oriented toward end results
2. Professional identification is maintained
3. Pinpoints product-profit responsibility
Disadvantages:
1. Conflict in organisation authority exists
2. Possibility of disunity of command exists
3. Requires manager effective in human relations.
V. STRATEGIC BUSINESS UNIT (SBUs)
Companies have been using an organizational device generally referred to as a strategic
business unit (SBU).
45
SBUs are distinct little businesses set up as units in a larger company to ensure that a
certain product or product line is promoted and handled as though it were an independent
business.
In some cases companies have also used the device for a major product line. Occidental
Chemical Company, for example, used it for such products as phosphates, alkalies, and
resins.
Generally a business unit must meet specific criteria. An SBU, for example must:
1. Have its own mission, distinct from the mission of other SBUs,
2. Have definable groups of competitors,
3. Prepare its own integrative plans, fairly distinct from those of others SBUs,
4. Manage it resources in key areas, and
5. Have a proper size- neither too large nor too small.
General
manager
business manager
Production
Manager
accounting
Manager
Marketing
Manager
Works man
Manager
Altanta
works
manager
Chicago
works
manager
dallas
Regional
manager
new york
Regional
manager
chicago
Regional
manager
los angeles
46
sales
Manager
product
development

Product
Manager
A
product
manager
B
product
manager
C
Key elements of organisation process:

1. Departmentation.
2. Delegation
3. Decentralization.
Organisa
tion
Process
1. DEPARTMENTATION:
Departmentation may be defined as the process of grouping individual jobs into
departments.
It involves grouping of activities and employees into departments so as to facilitate the

accomplishment of organizational objectives.
Once the total work of an enterprise is divided into individual functions and subfunctions, these functions are grouped together into work units on a particular basis.
Need and importance of Departmentation:
1. Specializations:
When every department looks after one major function of business, division of work
becomes possible.
It enables an enterprise to avail of the advantages of managerial specialization.
2. Expansion:
Grouping of activities and personnel into departments makes it possible to expand an
organisation to an indefinite degree.
3. Autonomy:
The feeling of autonomy provides job satisfaction and motivation which in turn lead to
higher efficiency of operation.
47

4. Fixation of responsibility:
It enables each person to know the specific part he is to play in the total orgnisation.
The responsibility for results can be defined more precisely and an individual can be
held accountable for performance.
5. Appraisal:
Appraisal of managerial performance becomes easier when specific tasks are assigned to
departmental personnel.
The sources of information, the skills and competence required for total managerial
decisions can be located.
6. Decentralization facilitates:
Many departmental heads may be granted full powers to run their departments efficiently
through systematic departmentation.
7. Managerial development:
It simplifies the training and development of executives by providing them opportunity to
take independent decisions and to exercise initiative.
8. Administrative control:
Standards of performance for each and every department can be precisely determined.
Bases or Types of Departmentation:

1.DEPARTMENTATION BY FUNCTIONS:
This is a very popular method of departmentation.
It refers to grouping of activities of the enterprise into major functional departments like
production, marketing, accounts, personnel etc.
The process of the functional differentiation may take place through successive levels in
the hierarchy. The process can continue as long as there exists a sound basis for further
differentiation.
M.D
General Managers
Production
Finance
Marketing
Personnel
Production
Planning
financial
planning
marketing
research
recruitment
section
Engineering
budgeting
market
Planning
training
officer
Accounting
48

Tool &
Equipment
sales
management
wage
administration
Costing
General
Production
data collection
processing
advertising
sales promotion
employee
welfare
Advantages of Functional Departmentaion:

1. It follows the principles of specialization. It can employ experts in the various functional
areas and thus can achieve specialization easily.
2. It facilitates delegation of authority
3. It permits effective control over performance
4. It eliminates costly duplication of effort.
5. It is economical, simple and easy to understand.
6. It represents a very natural and logical way of grouping activities.
7. It facilitates co-ordination both within the functions and at the interdependently level.
Disadvantages of Functional Departmentation:

1. It results in excessive work and responsibility for the departmental heads.
2. It hampers coordination between different functions.
3. It carries specialization a bit too and thus a functional manager becomes an expert in
handling problems of that particular function alone.
4. This method does not facilitate proper and satisfactory handling of diversified product
lines.
2. DEPARTMENTAION BY PRODUCT:
Each department looks after the production, sales and finance of one product.
It is useful when product expansion and diversification, manufacturing and marketing
characteristics of the product are of the primary significance.
This structural design is popular in multi-line large-scale enterprise; whose major
objectives is production expansion and development.
M.D
General Managers
49

Production
Finance
Motor division
Engineering
accounting
Marketing
scooter division
engineering
Production
Personnel
spare parts division
accounting engineering
production
accounting
production
Advantages:
1. The salesman has deeper product knowledge and this may lead to better customer service.
2. This method facilitates in ascertaining the performance of each product line and ,
therefore, an unprofitable line can be dropped.
3. It facilitates effective coordination.
4. T performance of each product division and its contributions to overall results can be
easily evaluated.
Disadvantages:
1. It necessitates employment of a number of managerial personnel.
2. It makes the control work difficult
3. There may be a duplication of activities.
4. There is the extra cost of maintaining a sales force for each product line.
3.DEPARTMENATION BY TERRITORIAL:
It is very useful to a large-scale enterprise whose activities are geographically spread.
Banks, insurance, railways are examples of such enterprise.
Under this activities are divided into zones, divisions, and branches.
BOD
MD
Northern
Region
western
region
Branch
I
central
region
branch
II
eastern
region
branch
III
southern
region
branch
IV
Advantages:
1. It facilities the expansion of business to various regions.
2. It facilities effective span of control
3. It enable the enterprise to gain intimate knowledge about customers in the local markets
4. Since accounting results of each territorial regions can be compared with each other,
control and competitors.
50

Disadvantages:
1. It requires employment of a numbers of managerial personnel.
2. It dilutes control from headquarters
3. It may lead to duplication of activities.
4. It is a costly system and hence small business concerns cannot afford it.
4.DEPARTMENTATION BY CUSTOMERS:
It takes into account the needs of customers.

Examples: i.)a large cloth store may be divided into wholesale, retail and expert
divisions.
A commercial bank may be divided into a number of departments, each specializing in
loan to farmers, traders, industrialists, professionals etc.
M.D
General Managers
Production
Wholesale
Finance
Marketing
exports
Personnel
retail
Advantages:
1. This system facilitates the company in meeting the widely varied needs of customers.
2. It promotes specialization among the staff of the enterprise.
3. The enterprise gains intimate knowledge of the needs of each category of customers.
4. Special attention can be given to the particular tastes and preferences of each class of
customers. Customers satisfaction enhances the goodwill and sales of the enterprise.
Disadvantages:
1. There may be duplication of activities.
2. There may be difficulty in co-ordination.
3. There may be under-utilization of facilities and manpower, particularly during periods of
low demand.
51
5.DEPARTMENTAION BY PROCESS
Manufacturing enterprise often group activities around a process or type it equipment and
bring together people and materials at one place to carry out a particular operation.
For example, Textile mills.
Board of Directors
Chief Executive
Ginning
Dept
Spinning
dept
Weaving
dept
Dyeing
dept
finishing
dept
Advantages:
1. This method facilitates the use of costlier equipment in an efficient manner.
2. The maintenance of departments is facilitated.
3. There may be economy in operation.
4. It enables effective performance control
Disadvantages:
1. This method requires more space and investment.
2. This method is costly and hence small organizations cannot afford it.
3. A breakdown is one process department may bring the entire production system to a halt.
6.COMPOSITE OR COMBINED DEPARTMENTATION:
Each basis of departmentation has its own merits and demerits. Therefore, the relative
advantages and limitations of various types of departmentation should be analyzed in the
light of the needs and circumstances of the particular enterprise.
That basis of departmentation is the best which facilitates the achievement of
organizational objectives most economically and efficiently.
Managing Director
Works
Manager
marketing
manager
finance
manager --------- Functional
52

Consumer product
Division
Domestic sales
Manager
--------------territorial
Private buyers
industrial supplies
division
-------------- product
export sales
manager
Govt agencies
--------------customers
DELEGATION OF AUTHORITY
AUTHORITY:
Authority may be defined as the right to give orders and to enforce them.
Applied to the managerial job, authority is the power to command others, to act or not
to act in a manner deemed by the possessor of the authority to further enterprise or
departmental purpose.
The power to make decisions which guides the actions of another. It is relationship
between two individuals- one superior, the other subordinate.
Salient features of the concept of authority:
1. Authority lies in managerial positions
2. Authority is the key to a managers job.
3. Authority is hierarchical in nature
4. Authority is exercised by making decisions that are to be carried out by the
subordinates.
POWER:
Powers refers to the ability of a person to influence others.
Persons power may be measured in terms of his capacity to i. Give rewards, ii. Punish
individuals, etc.
Difference between authority and power:
Authority
1.It is the right of a person to
influence others
2. It is institutional in character
(sum up= power +authority)
3. It is legitimate.
4. It can be delegated.
5. It is hierarchical in nature.
Power
1.It is the capacity of a person to
influence others
2. It is personal in nature.
3. It may have no legitimacy
4. Power, being a personalized attribute
cannot be delegated.
5. It does not have any system.
TYPES OF AUTHORITY:
1.Formal or Traditional or Top-Down Authority:
Authority flows downwards in an organisation, through the delegation process.
It is always from top or bottom
53
Examples, in case of a limited company, shareholders possess the ultimate authority to

manage the affairs of the company. The board of director delegates authority to the chief
executive and chief executive in turn to the departmental managers and so on.
2.Acceptance or Bottom-up Theory:
It states that authority is the power that is accepted by others.
The subordinates accept the authority only if the advantages to be derive by its
acceptance exceeds the disadvantages resulting form its refusal.
Authority flows from bottom to top. A manager has authority if he gets obedience from
the subordinates.
3.Competence of Personal Authority Theory:

Authority flows from the personal qualities or technical competence of a person.
A manager enjoys it by virtue of his intelligence, knowledge, skill and experience.
Many persons derive informal authority because of their competence.
RESPONSIBILITY:
It is the obligation of a subordinate to carryout the duties assigned to him.
By accepting delegated authority, a subordinated incurs a responsibility to use the
authority as desired by the delegator.
Responsibility is a duty or obligation owned by a subordinate to the superior, from whom
the former derives authority-for the proper discharge of the assigned job.
It proceeds in an anti-hierarchical manner from subordinates to superior.
ACCOUNTABILITY:
It is a subordinates obligation to render an account or report of his activities to his
superior.
It is the obligation of an individual to report formally to his superior on the discharge of
his responsibility.
To be accountable is to be answerable for ones conduct in respect to obligation fulfilled
or unfulfilled.
DELEGATES OF AUTHORITY:
To delegate means to entrust authority to a deputy so as to enable him to accomplish he

task assigned to him.
Authority is said to be delegated when a superior assigns a part of his rights to a
subordinate.
It is a process which involves sharing of either managerial work or operating work
between a manager and his subordinates.
Main features of delegation:

1. It occurs when a manager grants some rights to a subordinate.
2. A manager cannot delegate authority unless he himself possesses the authority.
3. A manager never delegates all his authority to subordinates. He transfers only a part of
his authority.
54

4. Delegation does not imply reduction in the status of manager. A manager can reduce,
enhance or take back the delegated authority.
5. No manager can avoid his responsibility by delegating authority to subordinates.
ELEMENTS (PROCESS) OF DELEGATION:

1. Determinination of the results expected of the subordinate.
While planning to delegate authority, first of all, the superior has to make a determination
of what results i.e how much performance and of what quality, could be expected of the
subordinate who is to be delegated authority.
2. Assignment of Duties:
A manager defines the duties or tasks to be performed by his subordinates. Before
assigning duties to subordinates, an executive subdivides his job and allocates a part of it
to each subordinate.
3. Granting authority:
Authority is the right granted to an individual to make possible the performance of work
assigned.
An executed then confers on his subordinates the rights necessary to perform the duties
assigned to them.
4. Fixation of responsibility on the subordinate:
Extraction of responsibility implies creating an obligation and to hold the subordinates
accountable for results.
Principle of delegation:
1. Principle of non-delegation of personalized matters
2. Principle of delegation by the results expected.
3. Principle of unity of command
4. Principle of scalar chain.
5. Principle of absolute responsibility.
Advantages:
1. Basis of organisation
2. Reduction in the work load of managers
3. Training of subordinates
4. Motivation and morals of subordinates
5. Organisation growth and expansion facilitated.
Disadvantages:
1. Lack of receptiveness
2. Lack of ability to direct
3. Lack of willingness to let go
55

4. Lack of control
5. Lack of willingness to trust subordinates.
CENTRALIZATION AND DECENTRALIZATION

Centralization:
It means centralization of power of decision making at one point or in a few hands.
Centralization is the systematic and consistent reservation or authority at central points
in the organisation.
All the important decisions and actions at the lower levels are subject to the approval of
top management.
Decentralization:
Decentralization is the opposite of centralization.
In centralized set-up, decision-making, authority is concentrated in a few hands at the top.
As against this, in a decentralized organisation, there is dispersal of decision-making
authority.
Form of i. Departmentalization or Divisionalisation, ii. Arrangement of activities in terms
of places or, iii. Dispersal of decision-making powers among executives at various levels.
Factors determining Degree of Decentralization:
1. Size and complexity: a very large and diversified firm finds it hard to practice centralization.
Decentralized to a greater extent than a small organisation with limited operation.
2. History of the enterprise: firms that have been built under the personal leadership of owners
are likely to minimize decentralization.
3. Availability of qualified executives: dispersal of decision-making is possible when the lower
level staff is of high caliber. Decentralization itself is essential for the development of good
managers.
4. Location of operation: authorities tend to be decentralized when performance is decentralized.
Geographical dispersion activities make communication difficult under centralized decisionmaking.
5. Uniformity of action: greater is the need for uniformity of policy or action, greater is likely to
be the degree of centralization. That is why pricing, wage fixation and public relations are more
centralized than production and sales.
6. Control techniques: decentralization is greater when techniques available for controlling
subordinates action are effective.
7. Number of decisions: the greater the number of decisions made lower down the management
hierarchy the greater of decentralization.
8. Effects o decisions: in decentralized authority structure the decisions affecting more function
are made at lower levels.
56
A COMPARATIVE ACCOUNT OF THE MERITS AND LIMITATION OF

CENTRALIZATION AND DECENTRALIZATION
Advantages of centralization /limitation of decentralization:
1.Consistency/ lack of consistency in decision-making.
Centralization- leads to consistency in decision-making
Decentralization lack of consistency in decision-making
2. Strong /weak top management
Centralization- strengthens top management
Decentralization weak top management
3. Lower /higher cost of administration.
Centralization- cost of administration is lesser
Decentralization cost of administration is higher.
4. Broad/narrow approach to a managing
Centralization- the top management has a broad outlook
Decentralization a narrow outlook to managing
5. Discourage /encourage inter-departmental conflicts:
Centralization- discourage inter-departmental conflicts
Decentralization encourage inter-departmental conflicts.
6. Mature/risky decision-making
Centralization- mature decisions carry the chance of being least risky
Decentralization less mature and high risky decision
7. Retention /loss of control by top management.
Centralization- top management retains tight control over the whole organisation,
because of its vast powers.
Decentralization top managements control over the organisation is.
Loosened
8. Efficient /inefficient handling of emergencies.
Centralization- there is an efficient handling of emergency by top management
Decentralization- lower level management may be frightened by emergencies.
9. Suitable/ unsuitable in the present-day environmental scenario.
Centralization- small firms (suitable)
Decentralization large firms
Limitation of centralization /advantages of decentralization:
1. Heavy burden/light burden on top management.
Centralization- there is heavy burden of management work on top management
Decentralization there is light burden on top management.
2. Lower/higher status of lower level management.
Centralization- decrease the status of lower level management
Decentralization adds to the status of lower level management.
57

3. Autocratic/democratic management
Centralization- it may lead to autocratic
Decentralization it leads to democratic features in organizational functioning.
4. Initiative discouraged/encouraged.
Centralization- it discourages the exercise of initiative on the part of the lower level
management
Decentralization it encourage the exercise of initiative on the part of lower level
Management
5. Delayed/quick decision-making:
Centralization- delayed decision-making
Decentralization quick decision-making
6. Inferior/superior decision-making
Centralization- there is inferior decision-making by top management
Decentralization it is superior.
7. Egoistic/rational planning
Centralization- sometimes, may indulge in egoistic planning for ambitious purposes;
Decentralization rational planning is done by lower level managers.
A centralized enterprise:
President
Vice president
Sales
Vice president
Production
vice president
Finance
Purchasing
Cost
Standards
Research
Engineering
Manager
Plant 1
Dept
Public Relations
manager
plant2
dept
manager
plant 3
dept
58
manager
plant 4
dept
A decentralization enterprise:
President
Vice president
Sales
Vice president
Production
Manager
Plant 1
manager
plant2
vice president
Finance
manager
plant 3
Standard
Standard
Cost
Cost
Cost
Cost
Purchasing
Purchasing
Purchasing
Purchasing
Research
Research
Research
Research
Engineering
Engineering
dept
dept
Engineering
Dept
Engineering
dept
Standard
manager
plant 4
Standard
DISTINCTION BETWEEN DELEGATION OF AUTHORITY AND

DECENTRALIZATION.
Basis
1. Nature
Delegation of authority
It is an act, or a process
It is the primary or basic
concept
Decentralization
It is the end-result of delegation
of dispersal of authority at various
levels.
It is the secondary concept.
2. Relationship
It refers to relationship between

two individuals, i.e a superior
and his immediate subordinates.
3.requirement
It is a way of organizational life

i.e without delegation,
organizational functioning is
It refers to a relationship between

the top management and various
departments and divisions in the
enterprise.
It is way of growing of expanding
organizational
life.
Some
minimum, it becomes a must.
59
4.choice
5.control
not possible
It is vital to management
process.
It is optional
Control over a subordinates

performance is exercised by his
superior
Even the power to control may

delegated to be departments
concerned.
ORGANIZATIONAL CULTURE
Culture is a social phenomenon.

Culture is the set of important understanding that members of community shares in
common.
It is a complex of values, beliefs, attitudes and understanding which are showed in
common by aggregates of people, living in organized societies; and which shapes human
behaviour to a particular style.
Concept of Organisation culture: it refers to a common perception of an organizations
mission, values, beliefs, expectation, policies, rituals, taboos etc. shared by members of
an organisation; making it look different from other organisation.
Examples: the hallmarks of the Japanese organizational culture are emphasis on seniority
based promotions, collective decisions making, life-long employment, a deep concern for
employees on the part of employers etc; which differentiate a Japanese organisation, from
organizations found in many other countries.
Determinants /components of organizational culture:

1. Individual autonomy; which implies opportunities to people for excising initiative in
work related matters.
2. Support provided by organisation/superiors to subordinates.
3. Equality of treatment to all; implying equal rights for equal performance i.e rewards
based on merit or performance.
4. Equity, which in Henry Fayols views refers to sense of kindliness and justice on the part
of managers, while dealing with their subordinates.
5. Job security; which infuses a sense of loyalty, commitment and devotion among
employees.
6. State of general motivation; i.e how much and to what extent people identify
themselves with the organisation
7. Degree of conflict, present among peers and among superiors and subordinates.
8. Industrial culture, i.e machines, power, technology, automated equipment etc; making
for a different type of sub-culture in the organisation, popularly called industrial culture.
9. Rituals of the organisation, e.g. farewell banquets held in honour of retiring employees,
welcome to new employees etc.
10. Organizational taboos, e.g not to accept gifts from others, not to call seniors (specially
superiors) by name etc.
60
Types of organisation culture

1.mechanistic Organisation culture:
It exhibits the values of bureaucracy and feudalism.
Organizational work is conceived as a system of narrow specialization, as among craft

guilds.
Authority is thought of as flowing down from the top and information and instructions
follow formally prescribed channels.
There is a great deal of departmental loyalty and inter-departmental animosity, a strong
we versus they perception. This sort of culture resists changes and innovations.
2.organic organisation culture.
The organics organizational culture is a contrast to the mechanistic culture.
Formal hierarch of authority, departmental boundaries, rules and regulations and so forth
are frowned upon.
There is a great deal of emphasis on teamwork. Free flow of information, ease of
communication, both and formal and informal, across departments and specializations
and up and down the hierarchy, are strongly emphasized.
The culture stresses flexibility, consultation, changes and innovation.
3. authoritarian organizational culture.
Power is concentrated in the boss and obedience to orders and discipline are stressed.
Any disobedience is punished severely to set an example to others.
People working in the organisation are looked after, so that they can give their best to the
organisation.
4.participative organizational culture
It rests on the notion that people are more committed to decisions that are participatively
made than to decisions that are imposed upon them.
It tends to emerge where most organizational members are professionals or otherwise see
themselves as equals (as in cooperative societies).
5.management systems culture.
Every operation is carefully analyzed to see how it could be done most efficiently, and in
doing this heavy use is made of textbook tools of management such as sophisticated
planning, budgetary control and information systems, sophisticated techniques of market
research, activity scheduling, network analysis, investment analysis, professional
selection and training of personnel, etc.
This sort of culture is frequently found in highly professionally management

corporations or technology intensive organisation.
6.entrepreneurial organizational culture
it is one which favours growth, big deals and empire building, big vision, boldness in
decision making and going in where angels fear to tend.
This sort of culture is frequently found in a new industry.
7.paternalistic or familial organizational
A culture that is very common in societies undergoing a transition from traditionalism to
modernity is the paternalistic or familial organizational culture.
This sort of culture is commonly found in family controlled enterprise and institutions.
61
STAFFING
Significance of the human factor:
Among all factors of production, the human factor is the only active factor of production.
To what extent and in what manner, the physical facilities of production( i.e the passive factors of
production) like raw-materials, machines, technology etc. would be utilized would very much
depend on the motivation and morale of the human factor i.e the human factor can make a good
or bad utilization of the passive factors of production; depending exclusive on its mood of work.
Meaning:
The managerial function of staffing involves manning the organisation structure through
proper and effective selection, appraisal, and development of personnel of fill the roles
designed into structure.
The essence of staffing is the placement of the right man on the right job and at the
right time.
Right
Job
Right
Time
Right
Man
Sometimes, a distinction is made between personnel management and staffing.

Personnel management is said to be concerned with plans, policies, and procedure
relating to operatives or rank and file workers while the plan, policies and procedure
concerning executive or managers are called staffing
Meaning of Personnel Management or Human Resource Management:

The planning, organizing, directing, and controlling of the procurement, development,
compensation, integration and maintenance of people for the purpose of contributing to
organizational, individual and societal goals.
The above definition indicates that staffing is that part of the management process,
which is concerned, with the management of the human resources of an organisation.
Personnel management is the science of human engineering.
62
Nature of staffing:
1. Personal department created to help line management, in-the best discharge of the staffing
function.
2. Staffing concerned with acquisition, utilization and maintenance of the human factor.
3. Crux of staffing: right man, at the right job, at the right time, i.e. 3Rs of staffing.
4. Provides finishing touch to organizing.
5. Key to directing and controlling.
6. Staffing of managers occupies prominent place.
7. Continuous exercise.
8. Crucial for successful functioning of the enterprise.
9. Affected by external factors also
Function of HRM(Human Resources Management)
The HRM activities play a key role in any organisation. The important functions of HRM are
discussed below:
1. Formulating HRM strategy
2. Restructuring of organisation
3. Training and development
4. Resourcing
5. Human resource planning
6. Compensation and Reward
HR Planning
compensation&
-HR analysis
-HR Strategy
-Assessments
reward
-wage/salary
HRM
Activit
y
ROLES OF THE PERSONNEL MANAGER:

1.Figurehead Role:
All the managerial and operational activities of this department are carried out under the
able leadership, guidance and control of the personnel manager.
2. Liaison Role:
The personnel manager plays the role of the liaison officer; in maintaining links with
labour organizations, government labour department, labour contractors, labour welfare
organisation etc.
63

3. Organisation Role:
He plays an advisory role regarding personnel matters.
He suggests best personnel plans, policies, and programmes, to the top management, for
the timely procurement and the best utilization of the personnel.
4. Legal advisory Role:
The industrial and commercial enterprises are subject to a number of labour legislations
concerning various labour issues- like hours of work, payment of wages and bonus,
workmen compensation, settlement of industrial disputes etc.
5. Welfare Role (or a well-wishers role):

Maintaining congenial work-environment.
Adequate and timely payment of remuneration, bonus, profit-share etc.
Ensuring opportunities for advancement or promotions to employees.
Planning for job-security
Fair dealing with employees, with a sense of justice.
Implementing industrial safety measures.
6. Reconciliatory role:
Settlement of terms with labour union leaders on the issues of wage and bonus payments.
Settlement of industrial disputes.
Securing co-operation on introduction of organizational changes.
Recruitment of workers based on the recommendations of labour unions, etc.
7. Researchers Role:
Developing new and better sources of recruitment
Suggesting improvements in selection procedures for various categories of personnel
Discovering better motivational techniques
Thinking over more effective measures towards assuring better labour relations etc.
8. Societary Role
He must be primarily concerned with generation of maximum employment opportunities
and ensuring social-peace through maintaining excellent industrial relations to the
benefit of the society and also to the benefit of the organisation.
Functions of the Personnel management (personnel manager):
Personnel Manager
a) Managerial Function
i. Planning
ii. Organizing
iii. Staffing
iv. Directing
v. Controlling
b)Operational function
i. Technical functions
ii. Efficiency functions
iii. Motivational functions
iv. Welfare functions
v. Procedural (legal) functions
vi. Social functions
vii. Research functions
64

a) Managerial Function:
1. Planning: the type of planning done by the personnel manager relates to
determination of the objectives of the personnel department.
2. Organizing: the processing of organizing followed by the personnel department
is the same as is required for developing the overall enterprise organizational
structure i.e. allocation of duties to various individuals.
3. Staffing: the personnel has to first care for its own staffing. There must be a
perfect matching of jobs and individuals.
4. Directing: the major components of the directing function i.e supervision,
motivation, leadership and communication are as much applicable to the
personnel department as to the enterprise, as a whole.
5. Controlling: the controlling processes are also enforced to regulate the
functioning of people working in the personnel department.
b) Operational functions:
1. Technical functions: i. Recruitment, ii. Selection.
2. Efficiency functions: i. Placement, ii. Training and development, iii. Promotions,
iv. Maintaining congenial work-environment.
3. Motivational functions: i. Development of a suitable system of compensation,
ii. Profit sharing, iii. Incentives plan of wage payment.
4. Welfare functions: i. Job-security, ii. Industrial safety, iii. Retirement benefits,
iv. Leave benefit, v. amicable settlement of industrial disputes, vi. Other
facilities.
5. Procedural functions: i. keeping personnel records, ii. Designing schemes and
methods for performance appraisal and job analysis, iii. Maintaining crucial
records of absenteeism, labour turnover, industrial accidents etc., iv. Keeping
legal records.
6. Societal functions: I. Generation of maximum employment opportunities, ii.
Maintaining excellent industrial relations, iii. Ensuring Maximum labour
productivity.
7. Research functions: i. Developing new and better sources of recruitment, ii.
Developing better motivational techniques, iii. Researching into better techniques
of job-analysis and job-evaluations etc., iv. Designing and implementing everimproving selection procedures, v. designing better and more acceptable methods
of performance appraisal.
The staffing process:
Staffing process
1. Primary phase
i. Man-power planning
ii. Recruitment
iii. Selection
iv. Placement
v. Induction
2. Secondary phase
i. Training and development
ii. Compensation
iii. Integration (motivation)
iv. Promotion, demotion and
Transfer
v. Personal welfare (health, safety,
Recreation etc
vi. Performance appraisal
vii. Human relations
65
I. MAN-POWER PLANNING
Manpower planning is planning done in relation to the manpower resource (human asset)
of the enterprise.
It refers to the number and quality of work force required in an organisation while
planning for work force involves anticipating needs for employees.
Man power planning is the process (including forecasting, implementing and
controlling) by which a firm ensures that it has the right number of people and right kind
of people at the right place, at the right time, doing things for which they are
economically most useful.
Manpower planning has two main aspects
a) Quantitative:
This aspect of manpower involves the determination of the number of
personnel required.
The number of employees is determined on the basis of workload analysis
and work-force analysis.
Workload analysis is based on production and sales budgets, time study and
work scheduling.
Work-force analysis is an analysis of the present manpower and its future
potential.
b) Qualitative: this aspect is concerned with the determination of the type of manpower
required.
It might be defined as a process, which is undertaken for matching or balancing
manpower demands of an enterprise-both in the short-run and the long-run with the
supplies of manpower; with the basic objective of providing the right man at the right
job, at the right time-through the formulation and implementation of the suitable
programmes and policies-for attaining the aforesaid objective.
Manpower
Demands
Manpower
Supplies
Manpower planning as a matching process
Manpower planning could be analyzed into short term and long term manpower planning.
The former covers a period upto 1 year or 2 years; while the latter extends to a period
ranging from 3 to 5 years-upto a maximum of 10 years.
Features of manpower planning:

1. It includes all activities in regard to human resources
2. It is concerned with finding out the manpower requirements of the organisation in the
right number and at the right time.
3. It takes decision to meet the difference between demand and supply of manpower.
4. It includes inventory of present manpower of the organisation.
66

5. To be effective, manpower planning must include not only recruitment, development of
workers, etc., but also their working conditions.
6. Control of wage and salary costs
7. Assessment of future skill requirements
8. Determination of future recruitment and selection needs.
9. Anticipation of surplus staff and avoidance of unnecessary dismissals.
10. Ensuring optimum utilization of human resources currently employed
Manpower Planning Process:
1.Phase One:
This phase is mainly concerned with both job analysis and skills inventory.
Job analysis is the process by which pertinent information relating to the nature of a
specific job in the organisation is obtained.
Job analysis involves job description and job specification.
a) Job description: it describes the job and specifies the requirements of a job. It is a detailed
outline of a job, specifying the attributes and factors involved in its performance, including
mental requirements, physical attributes, working conditions, responsibilities, stress factors etc.
Name or title of the job, and its location (department)
Nature of authority, responsibility, relationships.
Necessary qualifications, i.e education, skills, training, experience etc.
Working conditions
b) Job specification: it states the qualities needed for an individual to perform the job
successfully. It is based on job description and job analysis.
Education BE
Attainments experience
Intelligence common sense
Physical good health, eye-sight
Age - 25
2.Phase Two:
This phase is concerned with personnel forecasting
Personnel forecasting is process by which the future personnel requirements of the
organisation to achieve the organizational objectives is determined.
3.Phase Three:
This phase is concerned with the taking of measures to obtain the quantity and quality of
human resources to achieve the enterprise objectives.
2. RECRUITMENT
Recruitment is the process of searching for sources of manpower supplies; and include
preparation of recruitment list- to provide the basic man power data for final selection
purposes.
Recruitment is the process of searching for prospective employees and stimulating them
to apply for jobs in the organisation.
Recruitment sources:
Recruitment Source
a) Internal sources
b) External Sources
67

1. Promotions
2. Transfers
3. Old employees
1. Advertising the vacancies

2.employement exchange
3. Gate Hiring
4. Educational & technical insti.
5. Labour contracts
6. Personnel consultants
7. Labour unions
8. Recommendation of existing
Employees.
I. INTERNAL SOURCES:
Internal sources of recruitment are those through which the manpower supplies are
obtained, out of the personnel, already working in the organisation or out of the exemployees of the organisation.
1. Promotions/Demotions of existing employees:

Promotion means an upward placement of an existing employee on a higher-level job;
involving more responsibility coupled with higher status, and carrying more
remuneration and perks.
Demotion means a downward placement of an existing employee on a lower level job;
involving less responsibility coupled with lower status, and carrying less remuneration
and perks.
It is vertical shifting of employees
2. Transfers of existing employees
A transfer refers to the shifting of an employee from one job to another without a orastic
change in the responsibilities and status of the employee.
It is a horizontal shifting.
3. Appointment of ex-employees.
Sometimes ex-employees, of an organisation might be recalled; and assigned to suitable
posts, in the organisation.
Two types of situations
Recalling of ex-military personnel, in case of military organisation, especially
emergency situations, e.g the outbreak of war.
Recalling laid-off or retrenched employees, by any organisation, provided such
personnel are willing to rejoin the organisation.
Merits of internal sources of recruitment:
1. Easy availability:
From the internal sources of recruitment, personnel are easily available, specially in case
of promotion and transfers.
2. No recruitment costs:
It does not entail any substantial recruitment costs; as recruitment list can be prepared
without much time, efforts and costs, by management- on the basis of past personnel
record.
3. Selection procedure formalities, not required
A specified selection procedure formality is naturally rendered unnecessary, in case of
internal sources of recruitment.
4. No need for orientation
68
Existing employees or ex-employees of the organisation do not require any induction or

orientation; as these are already introduced to the organisation.
5. High moral and reduced labour turnover
It leads to high employee morale. This advantage is specifically applicable in case of
promotions; when promotions are to be made, on the basis of seniority or merit.
6. Correcting faults in placements
Through effecting demotions and transfers of existing employees, internal sources of
recruitment, provide an opportunity to management to correct defects in the original
placements of employees
7. To enrich experience of existing employees.
It enables management to enrich the experience of existing employees; by effecting
pleasant transfer and resorting to promotions of employees on new and challenging
jobs.
Limitations of internal sources of recruitment
1. Fresh talent from outside, not availed of
It limits the talent only to the limited talents of the existing employees. Fresh talent
from outside sources is ruled out, under this method of recruitment.
2. Favoritism and nepotism
It might lead of spoiling human relations in the organisation. At the same time,
meritorious employees might become negligent in their work in future.
3. Limited sources
When a large number of personnel are required for promotions or placement on
additional jobs created by the expansion of the enterprise.
4. Unsuitable for newer types of jobs
When certain newer types of jobs are created in an organisation, because of restructuring
of manner of functioning of the organisation; it might fail to serve the purposes of
management.
II. EXTERNAL SOURCES OF RECRUITMENT
1.Advertisements:
Vacancies might be advertised through the following media:
Press: including leading newspapers, local dailies, trade magazines and journals etc.
Audio- audio-visual media: including radio, T.V, cinema, Internet etc.
It is a convenient and economic method.
The disadvantages of advertising are that it brings in a flood of applications, many of
which are from unsuitable candidates.
2. Employment exchanges
It is the most popular medium of external recruitment.
Public employment exchange: i.e established by the state, there are usually, separate
exchange for unskilled, semi-skilled and technical types of personnel.
Private employment exchange, more often, specialize, in the registration of personnel
aspiring for management cadre jobs or technical type of jobs.
3. Campus recruitment i.e educational and technical institutions:
It relates to getting personnel from-schools, colleges, universities and technical institutes.
Representatives or agents of employers visit these educational institutions; and make a
fires-hand recruitment for willing personnel
4. Jobbers or contractors/personnel consultants
69
Jobber or contractors maintain close contacts with labourers and they can provide the
required number of workers at short notice.
They maintain contacts with employers, who would require personnel, available with
them; and supply the requisite number and quality of personnel to them- charging
commission, for their services.
5. Recruitment at the factory gates or gate hiring.
It is common practice, still today, in India, for unskilled labourers to throng factory gates;
aspiring for getting jobs-temporary or permanent.
Management can recruit personnel, out of this source, in the number required by it; on the
basis of preliminary interview or interrogation.
6. Waiting lists of unsolicited applicants.
Applications received from such persons have a short life, because properly qualified and
experienced applicants would not wait until the enterprise has a suitable vacancy for
them.
Unsolicited applicants may or may not get jobs of their suitability; depending on the
availability of vacancies, with employer.
7. Recommendations of existing employees.

Existing employees of the organisation might be asked to recommend the names of their
friends, relatives or acquaintances for recruitment to various posts lying vacant in the
organisation.
8. Labour union recommendations
The management of a business enterprise might invite recommendations from the leaders
of labour unions, to suggest the names of suitable personnel, for recruitment to certain
jobs, lying vacant in the organisation.
Sometimes, there might be an agreement management and labour union leaders, whereby,
at least some agreed percentage of personnel must be recruited on the recommendations
of the labour union.
It helps to the management in the way of good relation with trade union and gets trust and
confidence on personnel.
9. Field trips
An enterprise may send out teams of experts to different places where the kinds of
personnel needed by it may be found.
But in this case it is necessary to give wide publicity to the date, venue and the time when
such a team would interview candidates at a particular place.
3.SELECTION:
Selection might be defined as careful screening of recruited candidates (i.e prospective
candidates) through testing and interviewing them; with a view to discovering best-fit
from among them for assignment to various jobs in the organisation.
The process of selection in a process of elimination of unsuitable candidates-at various
stages, comprised in the selection procedure.
Significance of selection:
1. Reduced labour turnover:
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The phenomenon of unnecessary labour turnover is highly minimized-making for a stable

labour force in the organisation. This is benefit both the organisation and workers.
2. Lesser need for training:
Properly selected personnel exhibit a lesser need for training; as their suitability for the
jobs to be assigned to them, has already been verified through the selection-procedure. As
such saving organizations time, effort and cost.
3. Self-motivation and high morale:
When suitable candidates (i.e best-fit) are assigned to matching jobs; such personnel feel
self-motivated towards the best performance on their jobs.
It helps in building high morale of such personnel, for the organisation.
4. More and better production- leading to profit maximum
The derivative advantages of the self-motivation and high morale is that the production
(or performance) turned out by best fits is not only more in quantity; but also of a
superior quality.
This phenomenon leads to profit maximization, for the enterprise, in the long-run.
5. Good human relations
As a result of goods selections, there is a better environment for working in the
organisation.
Such environment helps to promote good human relations in the organisation.
An outline of the basic selection procedure:

A selection procedure differs From organisation to organisation, depending on the philosophy of selection.
A selection procedure suitable for clerical jobs might not be at all suitable for managerial
or technical jobs.
Following is a brief-comment on each of the above-stated steps of the basic selection procedure;
with a somewhat detailed account of selection-tests and interviews.
1. Requisition:
The requisition for personnel from any particular department must be duly authorized by
the head of that department further,
It must be accompanied by the relevant job specification to enable the personnel
department select the right quality of personnel, required by the department (sending the
requisition)
In particular, the requisition for personnel sent by a department must state- The number of personnel required
- The qualifications or qualities required in those personnel.
2. Recruitment
On the basis of Requisition received by the personnel department, the same will search
into various sources of recruitment.
Next, it will prepare a recruitment list.
3. Application blank/preliminary interview.
This stage is, perhaps, the real starting point of the selection procedure.
Each person whose name appears on the recruitment lists is sent a blank application
form-called the application blank; to be duly filled in by the candidate.
An ideal application blank might be suggested to contain the following particulars, under
some of the oft-used categories.
71

i. Personal data
ii. Educational and technical qualifications
- Academic examinations passed, with details
- Technical examinations passed with details
- Experience
- Employment exchange particulars
- Extra-curricular activities
- Work preferences salary, perquisites, type of work desired by the candidate.
- References i.e names of two or three renowned personalities
4.scrutiny of application forms
The application forms filled in by candidates are scrutinized i.e carefully examined on the
basis of job-specification and other organizational requirements, desired in candidates; so
as to eliminate the outright misfits, at this stage.
5.Test
Candidates, whose applications are accepted; are usually supposed to take certain tests, to
prove their suitability for the jobs, being applied for by them.
Various types of tests, in the selection procedure, might be placed in the following three
categories.
I. Trade Test
A trade test is test, given to a candidate in performing the job, for which, the
candidate has applied; and which would be assigned to him, if selected.
i. Job-test proper
- Example: a person applying for the job of a typist might be given a rest in typing
to test his speed and accuracy. Likewise, candidates who are to be placed on
various machines etc., might be asked to demonstrate their ability in the proper
and safe handling of such machines.
ii. Proficiency or achievements tests
- A refinement of the job-test proper
- An outstanding example of proficiency test could be traced in case of sports
organisation; which might ask sportsmen- candidate to exhibit their proficiency
by showing excellent- performances, at sports-trials, held for this purposes
under the invigilation of sports-experts.
II. Psychological Tests
- Psychology, as a branch of knowledge pertaining to social sciences, deals with a
study of mind and the mental processes involved in the functioning of mind.
a) Intelligences tests
- These are conducted for having an idea of the intelligence of a person; with
reference to an examinations of mental traits like the following: - Mental alertness, power of reasoning and drawing inferences, power of memory
i.e power to retain ideas and things, in mind, originality, initiative etc.
- The basic technique followed in analyzing intelligence tests is to obtain (from
conducting a particular intelligence test) rating called Intelligence Quotient (or
I.Q)
- I.Q. is calculated as per the following formula:
Mental age
I.Q = ------------------------------- x 100
Chronological age
72

-
If a person of the age of 20, replies questions which could be answered well by a
person of the age of 15; his I.Q will be 75, as calculated below:
15
I.Q = ------- x 100
20
Level of intelligence
IQ
Very poor
between 50 to 60
Average
between 100 to 110
Above average
130
Quite advanced
140 or 150 or higher
- Showing a short film and asking questions based on things shown in the film- to
test the power of memory etc.
b) Interest test:
- These tests are designed and given to candidates; to judge their areas of interests.
- Interests tests seek to discover- the special concerns of people for different jobs,
their fascination for particular jobs, their degree of involvement in jobs to their
liking.
c) Aptitude tests
- Aptitude means a natural ability to acquire knowledge or skills.
- The purpose of aptitude tests, ultimately, is to find out the potential of individuals
for development on the jobs of their interests- physically and mentally.
d) Personality tests
- To assess some of the following features of candidates:
- Self confidence
- Temperament
- Dominance
- Courtesy
- Emotional maturity
- Quality of mixing up with others
- Sense of social behaviour etc.
III. Special tests
This test seeks to judge the ability and speed with which persons can move their
hands and fingers.
An efficient use of hands, in an important requirement for the successful

performance of most of the manual jobs or machine operated jobs.
6. Employment Interview
Personal or face-to-face interview is the most popular step in selection procedure.
It helps to serve several purposes.
i. It provides additional information about the candidate.
ii. Face to face conversation helps in judging the suitability of the candidate.
iii. Interview serves as a check on the information obtained through application blank and
tests.
iv. Interview may be used to give detailed information about the job and the organisation.
v. A personal meeting between the candidate and the interview board can be used for
exploring the candidates aptitude and capabilities.
Types of Interview:
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I. Questions asked
a) Patterned or structured interview
In this type of interview, the interviewer has a list of standardized questions

prepared in advances; and each candidate is asked the same questions as per the
list, with the interviewer.
This type of interview is conducted, usually for routine type of jobs; where an
interview is held only as a matter of formality.
b) Unstructured or in depth interview
There is no standard list of questions, with the interviewer. The interviewer may ask
any type of questions from any candidate; depending on the nature of job and the
outwardly appearance of the candidates.
It usually is held for candidates to be selected for higher level of jobs.
It is concerning various social, political and organizational aspects etc. relevant for
efficient job functioning.
II. Technique of interviewing:
a) Directing interview:
This s type of interview is a brief but straight- forward, face-to-face question

answer session between the interview and the interviewee.
In such an interview, it is not possible to make any in-depth observation or

analysis of a candidates, skills, characteristics or attitudes.
b) Indirect interview:
There are no direct or straight questions put to the candidate.
The interviewer in such an interview is a patient listener, neither interrupting the
candidate, nor expressing any opinion or judgment on what he says.
III. Number of interviewers:
a) Single interviewer interview
There is only one interviewer; who would put questions to all candidates.
b) Panel or board interview
There is not one, but many interviewers to put questions to a candidates.
One interviewer may ask questions concerning the candidates educational
background, another about his professional skills, yet another regarding his
interest and aptitudes and so on.
A candidate is selected or rejected on the basis of the combined performance
rating by the interviewers.
IV. Number or interviewees:
a) Single candidate interview:
This type of interview is suitable where- There number of interviewees is rather, limited
- There is a need to examine each candidate in an in-depth manner.
b) Group interview:
A number of candidates are interviewed simultaneously. A question or
problem-situation is posed before them and each candidate is asked to
participated in the discussion that follows.
It is on the basis of a candidates performance during the group discussion
that he is selected or rejected.
V. Special or Stress interview:
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The interviewer deliberately creates situation that puts the candidate to considerable
stress and strain.
For example: the interviewer may, by turn, display anger, or highly critical reaction, and
may even try to draw the candidate into a verbal duel. Alternatively, he may display utter
passivity, not reacting to anything said by the interviewee.
An atmosphere of tension or stress in the interview might be created, e.g by- Putting unusual questions to candidates
- Posing a ticklish or complex problem concerning the candidates likely work field
and asking them to suggest a suitable solution to it.
Procedure for an Interview:

1.Review of background information it is advisable to collect and co-relate all relevant
information
2.Preparation of question plan- it is to prepare a question plan, particularly if the interviewer is
not sufficiently.
3.Putting the candidate at ease-the candidate should be provided all necessary facilities and
comforts so as to put him at ease with himself.
4.Drawing out the best in the candidate-interviewer to decide how best to tackle each candidate
so that he is enabled to give out the best in him.
5.Concluding the interview-the interviewer should quickly glance through his notes and bring to
mind his impressions about the candidate so as to make a provisional assessment of his
performance.
7.Medical Examination
Some organizations ask for a certificate of physical fitness from a medical expert while
others insist on a medical examination of the candidate by their own panel of doctors.
Physical examination fulfills fulfils at least three objectives.
- It serves to ascertain that the candidate is physically fit of perform the job.
- It helps to prevent communicable diseases entering the organisation.
- It serves to protect the organisation against unwarranted claims under the
Workmens Compensation Act.
A proper medical examination will ensure high standards of health and physical fitness of
employees and will reduce the rates of accident, absenteeism and labour turnover.
Minimum standards of physical fitness should be laid down according to the nature of
jobs.
8. References.
A candidate likely to be eligible for selection, might be asked to furnish certain references
i.e the names, addresses and designations of some men of status, trust and confidence;
who might be used by the employer for ascertaining the candidate, in question.
A referee is potentially an important source of information about the candidates
personality and character.
9. Final selection / issuance of letters of appointment.
A candidate who has crossed all the hurdles in the selection procedure is formally
appointed by issuing an appointment letter or by entering into a service agreement with
him.
Selection procedure
75

Requisition
Recruitment
R
Application Blank/Preliminary
Interview
Scrutiny of application
Test
E
J
E
Interview
C
T
Medical examination
Reference
Final selection
Placement
4. PLACEMENT
Selected candidates are put on or posted in appropriate jobs. This is known as placement.
Placement of selected candidate is done, keeping in view the matching ofi. The nature and volume of work on a particular position.
ii. The physical and mental capacities of the candidates
iii. The composition of the work group i.e the colleagues, in whose company the
candidate will have to work.
Iv. The nature and behaviour of candidates most immediate superior etc.
5. ORIENTATION OR INDUCTION
When a newly appoint employee reports for work, he should be made familiar with the
work environment and the fellow employees. This is known as induction or orientation.
The new employee can be inducted into the organisation by introducing his job, fellow
workers, superiors and subordinates to him.
The new employee should be oriented to the new organisation and its policies, rules and
regulations.
Orientation makes the employee feel at home and helps to adjust him into the new
environment.
It is designed to achieve the following objectives:
1. To build up the new employees confidence in the organisation and in himself so
that he may become an efficient employee.
76

2. To develop among the newcomers a feeling of belongingness and loyalty to the
organisation.
3. To faster a close and cordial relationship between the newcomers and the old
employees and their supervisors.
4. To give newcomers necessary information such as location of lockers rooms,
cafeteria and other facilities, rest period, leave rules, etc.
The following information may be provided under an orientation programme:
1. Short history of the company
2. Operations and products of the company
3. Companys organizational structure
4. Location of departments and employee facilities
5. Personnel policies and practices
6. Rules and regulation
7. Grievances procedure
8. Safety measures
9. Standing orders
10. Employees activities.
SECONDARY PHASE
1.TRAINING AND DEVELOPMENT
Training is the process of increasing the knowledge and skills of an employee for doing a
particular job.
In industry, it implies imparting technical knowledge, manipulative skill, problem-solving
ability and positive attitudes.
The effectiveness of a training programme should be evaluated so that necessary
improvements may be in it from time to time.
Training involves changing of skills, knowledge, attitude, or social behaviour.
Training is the art of increasing the knowledge and skill of an employee for doing a
particular job.
Development is the process of transition of an employee from a lower level of ability,
skill and knowledge to that of higher level. This transition is influenced by education,
training, work experience and environment.
Development will improve value of individual employee in terms of his selfdevelopment, career growth and contribution to the organisation.
Training and Development (T&D):
Training implies the act of increasing the knowledge and skills required for efficient
performance of a particular job.
Development means growth of an individual in all respects.
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All executive development programmes are designed to build up or improve competence

and potential for managerial jobs.
Training is largely job-centered while development is career bound.
Objectives of T&D
To increase productivity of employees/workers
To improve quality of work/product
To enhance and update knowledge and skill levels of employees in the organisation
To secures better health and safety standard
To improve quality of life of employees
To attain competitive advantages
To sustain competitive advantages, etc
Types of training:
Orientation training: it seeks to adjust newly appointed employees to the work

environment.
Job training: it refers to the training provided with view to increase the knowledge and
skills of an employee for a particular job. Employees may be taught in the techniques and
machines used in a job.
Safety training: training provided to minimize accidents and damages to machinery. It
involves instruction in the use of safety devices and in safety consciousness.
Promotional training: it involves training of existing employees to enable them to
perform higher-level jobs.
Refresher training: when existing techniques become obsolete due to the development
of better techniques, employees have to be trained in the use of new methods and
techniques.
Methods of Training or classification of Training:
I. ON-THE-JOB TRAINING
(Under this method, an executive learns by doing the job)
i. Coaching and under study:
A senior executive acts as the coach or counselor and is assigned the responsibility of
seeing that trainee learns the necessary skills.
The trainee receives personal instruction and guidance from his skills.
ii. Position Rotation:
It refers to the rotation of the trainee from one job to another so as to widen his
knowledge and skills.
The object in this case is to give the trainees an experience of actual participation in
managerial decision-making at higher levels.
iii. Apprenticeships
The apprentice learns the methods of work by observing and assisting his senior.
It is normally given to artisans, electricians, plumbers, bricklayers, and the like. The
duration is normally varied from 2 to 5 years.
iv. Orientation or induction training
It is meant for the new employees and its sole object is to adapt them to the specialized
job requirement and work methods of the enterprise.
v. Special Projects
78
The trainee may be asked to perform a special assignment so that he would be in a

position to acquire knowledge and also to learn the work procedure.
vi. Refresher training or retaining
While refresher training helps the workers in learning new methods and skills, it also
enables them to refresh their memory of thing which they had learnt a long time ago.
This is not all. Due to changes in demand for goods and services, many new jobs have to
be created and to master these, refresher training becomes necessary.
vii. Vestibule Training
It means training organized in a school in an industrial plant to train new workers in
specific skills, so as to prepare them to handle jobs on the shop floor.
It is provided by special instructors, away form the shop floor.
II.OFF-THE-JOB PROGRAMMES
i. Special course and lectures:
Special course and lectures are arranged by business organizations in numerous forms for
developing theirs managers.
SBI, HLL, RBI, These organizations also arrange some courses or lectures by the staff of
some universities and institutes.
Sometimes, the business concerns may send their employees to attend courses of one or
two week duration conducted by some university.
ii. Conference:
A conference is a group meeting in which the members participate in discussion on some
topic.
The purpose of the conference is to develop the knowledge and understanding of the
participants.
iii. Role Playing.
It refers to the process in which the trainees act out samples of real business behaviour.
The role players are given a written or oral description of the situation and the role they
are to play.
For instance, a trainee may play the role of a supervisor discussing a grievance with an
employee or a salesman making a presentation to the customer.
iv. Management or business games
It involves a group exercise in decision-making as regards an administrative problem.
As the business conditions are simulated in a game, this method is also known as
simulation training.
In the management games, trainees are asked to make decisions about production, sales,
inventory, research and development cost, etc.
It provides training in decision-making under uncertainty and experience in team-work.
v. Brainstorming
It is a problem-solving technique which consists of evaluation of ideas put forward by a
group of people who are convened especially for this purpose.
vi. Case study
In this method, in instructor describes the actual situation or problems of a specific
concern and the participants are encouraged to take part in objective discussion of the
problem.
This method increases the trainees power of observation and also his analytical ability.
vii. Sensitivity Training (T-group training)
79
It involves interaction in small-unstructured groups under conditions of stress so as to

develop awareness and sensitivity to behaviour patterns of oneself and others.
It seeks to increase tolerance power of a person and his ability to understand others.
In group discuss, the trainees freely express their ideas, beliefs and attitudes
viii. Transactional analysis
It is yet another training method to develop interactive and communication skills.
It is a means to know why people are what they are, and also why they do what they do.
When applied to job situations, it enables better understanding of how people relate to
each other, and how communication and human relationships between them can be made
more effective.
Systematic approach to Training
A systematic training is specifically designed to improve and develop the knowledge,
skills and attitude required by individuals to perform adequately a given task or job
Stage 1: Identify Training Needs
Organizational level/corporate level
Job/occupational level
Individual employee level.
Stage 2: Design Training Solution
Using various methods of training programme
Stage 3: Implement Training Solution.
On-the job training
Off-the job training
Stage 4: Evaluate Training Effectiveness
Subjective evaluation
Objective evaluation
Advantages of Training
1. Job satisfaction
2. Higher output of quality goods
3. Fewer accidents reducing numbers of accidents
4. Low spoilage rate
5. Reduction in number of complaints
6. Mastery in new methods
7. Better use of resources
8. Introduction of latest methods
9. Healthy inter-personal relations.
PERFORMANCE APPRAISAL (OR) MERIT RATING
Job Design:
Job design is the process of deciding on the content of a job in terms of its duties and
responsibilities, on the methods to be used in carrying out the job, and on the relationship that
should exist between the job-holder and his superiors, subordinates and colleagues.
Concept of performance appraisal:
80
It means the systematic evaluation or appraisal of the performance of an employee by

some qualified persons.
It is a systematic and impartial assessment of an employees performance on the assigned
job, with view to discovering how well or worse is the job being performed by him/ her;
and also unearthing his/her potential for further development.
It refers to various formal systems of appraisal, in which the individual is compared with
others and ranked or rated. He is rated in the sense that he is measured or compared and
classified.
It is made to find out the quality of performance of different employees in relation to the
requirements of each job.
Purpose or importance of performance appraisal:

1. It assists the supervisor to appraise the performance of his employee which is of immense
use to the management
2. It may be used for the selection and training of new employees
3. It is also useful in deciding the type and nature of training programme of the employees.
4. It forms a scientific and systematic basis for any increase in the wages of employee
5. It is helpful in preventing grievances because it is a definite aid to management in
promoting fairness to employees.
6. It guides and helps the employees in their self-improvement.
7. It enables close monitoring of the progress made by each employee.
TECHNIQUES OF PERFORMANCE APPRAISAL
(OR) APPRAISAL METHODS OR TOOLS OF (PA)
I. Traditional approach:
1.Ranking Method:
It is the oldest and the simplest method of performance appraisal.
Under this method, all the employees in a work group are ranked one against the other.
Names of employees are written on cards and on the basis of individual work
performance, attitudes, behaviour, sincerity, honesty and such other positive factors, the
cards are arranged in order from low to high.
5
Murgan
4
Robert
3
Singh
2
Shyam
1
Ram
Merits:
This method is the simplest.
It gives performance appraisal of employees immediately.
Demerits:
It cannot be effectively applied in large undertakings.
It does not accurately determine the degree of difference between any two employees.
2.Graphic scale method
Under this method, persons in a work group are ranked on against the other. But it
attempts to quantify each trait or factor in an employee.
81
As the very names implies, these methods provide some kind of a scale for measuring
absolute difference between individuals.
Suppose that employees are to be evaluated against the following yardsticks.
i. Knowledge of the job
ii. Quality of performance
iii. Quantity of output
iv. Honesty and loyalty
v. Capacity for hard work.
Further suppose that each trait is composed of 10 degrees, having categorization in five
classes of-Very Poor, Poor, Average, Above Average and Excellent.
VP P
A
AA
E
Knowledge of the job
0 1
2
3
4
Quality of performance
Quantity of output
Honesty and loyalty
Capacity for hard work
NOTE: There is a separate graphic rating card for each employee.

Merits:
This technique forces the rate of think in specific terms about each employee.
This is a quantitative method of performance appraisal. Therefore, better inter-employee
comparisons could be made.
This method is quite interesting for the rather; even when the number of employees is
considerable.
Demerits:
The same rating scale may not be valid for all the traits (like quantity of output, capacity,
for hard work etc.)
Specification of degrees into various classes like poor, average, excellent etc. is quite
arbitrary.
The rater could afford to be biased or prejudiced, which encircling degrees of particular
traits.
3.Paired Comparison Technique
Each employee is rated in comparison with each of the others in the rating list. But
whereas one employee is compared with all the others, only two of them are compared at
one time.
For example, if there are five employees A, B, C, D, and E; first of all A will be compared
with B; then A with C; next A with D and finally A with E. in a similar manner, B will be
compared with A, C, D, E and so on for C, D and E.
No. of comparisons = N(N-1)/2
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In case of 5 employees as stated in the example given above, the total number of
comparison will be 10 i.e 5(5-1)/2 =10
The results of comparisons are tabulated; and the ranking order is created from the
number of times a person is considered superior to others.
Merits:
This method gives a better ranking order than the overall ranking method
Demerits:
It suitable, when the number of employees preferably, does not exceed10; so that the task
of comparisons does not become boring and tiresome.
Its weak point is that it may become too lengthy and also complicated.
4.Forced Distribution Method
In this method, the employees are rated for overall performance and not for each trait
This method requires the rater to distribute his rating to follow predetermined
distribution.
All employees in a work-group are divided into following 5 categories, with a fixed
percentage of total employees being place in each category.
The ratings of employees performance are distributed along a bell-shaped curve.
No: of
Employees
10%
Poor
20%
40%
below average average
20%
10%
above average outstanding
Belled-Shaped curve.
In this way, all employee to be rated are classified in five categories, in a Normal
Distribution pattern
Merits:
This method is quite useful, when there are a large number of employees, in the work
group.
It is easy to understand and to administer and also minimizes or eliminates the bias of the
rater.
It enables the rater to make better inter-employee comparisons.
Demerits:
This method follows an illogical approach in placing employees in five categories.
There is difficulty in having a normal distribution of employees, on the basis of
performance appraisal.
5.Critical incident method.
83
Each job calls for several requirements on the part of workers, and that at least some of
these requirements are critical either a workers performance is extremely good, or it is
extremely bad.
The performance of an employee is rated on the basis of certain events or incidents which
may have really happened.
Some example of such events or incidents are as follows:
i.
Refused to co-operate with fellow workers
ii.
Refused to undergo further training
iii.
Becomes upset or angry over work
iv.
Suggested methods to avoid wastage
v.
Suggested methods to improve the quality of goods.
vi.
Refused to obey orders.
These types of critical events or incidents which may be exceptional success or
exceptional failure are noted and are taken as a basis for rating the employees.
Merits:
This method avoids unwarranted comparisons of an employee with others.
This method asks supervisor to develop habits and skills to judge exceptional
performance good or bad; making them more dutiful.
Demerits:
This method of performance appraisal fails; when there are no critical events, in the
working career of an employee.
There is no definite conception of critical events.
6.Checklist Method
In this method, the rater does not evaluate the performance of the employee but simply
reports it to the personnel department which does the job of final rating.
The rater checks to indicate, whether the answer to a question about an employee is in
yes or no and make a tick-mark( ) in the appropriate column on the checklist,
accordingly.
Following is an illustration of the checklist technique of performance appraisal.
Questions
Is the attendance of employee satisfactory?
Is he interested in the job?
Shows respect to supervisors
Co-operates with fellow workers
Makes mistakes
Is punctual on the job
Keeps ahead of work schedule
Does he follow orders?
Does he take initiative?
Yes
( )
( )
( )
( )
( )
( )
( )
( )
( )
No
( )
( )
( )
( )
( )
( )
( )
( )
( )
Merits:
In this method, as the rater is only to report to the personnel department without
evaluating the performance of the employee, this method is considered very simple.
84
Demerits:
This system is subject to bias or prejudice of the rater.
It is difficult to construct a good and comprehensive checklist.
7.Field Review Method.
An expert from the personnel pays a visit to the spot; (i.e. the field) where the employee
is performing his job. He observes the work performance and the behaviour of the
employee; interview the supervisor attending of the employee and takes detailed notes of
such interview.
The supervisor is asked to give his opinion on his subordinates regarding their
performance, progress etc., and on the basis of this personnel department specialist
prepares detailed notes.
Merits:
This method is useful for large organizations with a large number employee and appears
to overcome number of weaknesses found in some of the other methods of appraisal.
8.Performance evaluation:
Under this method of merit rating, the emphasis is on actual performance, and not on the
personality of the employee to be rated. For this purpose, written descriptions of
employees performance have to be prepared.
But this method necessitates a lot of paper work which makes it quite complicated and
time-consuming.
9. Modern approach
It consists of only one technique, called the goal-setting approach to performance
appraisal.
Since this approach is a by-product of MBO. It is also called the MBO approach to
performance appraisal.
The crux of goal setting approach is mutual setting of objectives by the superior and the
subordinate concerned (the subordinate and the subordinate jointly decide upon the
objectives)
Objectives which are set are both a method of planning and an instrument of control, in
that the performance of the subordinate is appraised against these very objectives.
Objectives, in order to be actionable and communicative; are set in verifiable terms i.e
numerical terms.
Goals or objectives are set for a short period, e.g a week, a fortnight, a month, but at the
most one year.
A review of performance is done, at frequent intervals. Final review of performance is
done at the end of the MBO period; usually a year.
REQUISITES OF AN EFFECTIVE PERFORMANCE
APPRAISAL PROGRAMME
1.Determination of objectives
The management, before introducing an appraisal programme, should set out the
objectives of appraisal programme, i.e whether to appraise to
i . Ones performance on his present job or
ii. Determine his potential for a higher job or
85

iii. Determine the training and development needs of employees
iv. For transfer or
v. Increase in pay, etc.
2. Selecting and training of appraiser
The management should select a proper person to appraise the employees and also to give
him sufficient training in the methods of appraisal.
3. Establishing standards of performance.
Determining the standards of performance in clear-cut terms for various individuals on
their jobs and put it in writing and communicating it to the subordinates well in advance
is another important requisite.
4.Frequency of appraisal
As far as practicable, the management should put forth efforts to make performance
appraisal a continuous process.
5. Preparation of forms
The contents and design of the form should be based on the nature of job, objectives of
performance of job.
6. It must be easily understandable
It may be anchored to the ground by its own-dead weight of complicated forms which
nobody but the experts understand
7. The system should fit the organizations operations and structure
Performance data pertaining to any one individual cant be regarded as sufficiently
discrete or reliable of appraising his performance.
8. The system should be both valid and reliable
The validity of ratings is the degree to which they are truly indicative of the intrinsic
merit of employees.
9. The system should have a built-in incentive, i.e a reward should follow satisfactory
performance.
10. The system should be periodically evaluated to be sure that it is continuing to meet its
goals
MERITS AND LIMITATION OF PERFORMANCE APPRAISAL (PA)
MERITS:
1. Assistance in operational decisions of personnel management
Performance appraisal is helpful in operational decisions of personnel management,
relating to,
-Pay increase
-Promotions/demotion
-Lay-offs
-Transfers etc.
2. Clues to medications in selection procedures etc.
86
PA of employees provides clues to management for effecting improvements in selection

procedures and placement of employees.
3. Development of training programmes
The top management can advise/direct the personnel department to design and implement
suitable training programmes, for the betterment of employee performance.
4. Encourages health competition
PA information encourages a healthy competition among employees; in that each one
would try to excel all others, in matters of work-performance.
5. Unearthing potential for growth
PA, besides measuring job performance, also seeks to discover the potential for growth in
employee.
6. Attracts good personnel to the organisation
If better than average performance is rewarded by management, based on PA records;
the same is likely to attract good personnel to the organisation.
7. Rule of thumb replaced
PA seeks to evaluate employees performance in a systematic manner; and replaces the
rule of the thumb of supervisor, in this regard.
LIMITATIONS
1. Ability of the rater; doubtful
The rater not be competent to do performance appraisal task; unless, of course, he is an
expert in the area concerning the actual job operations.
2. Distrust of superior
Apart from the modern goal setting approach to PA; almost all the methods comprised in
the traditional approach are alleged to carry the charge of the distrust of supervisor, in
PA procedure and practices.
3. Different standards of evaluation
Different raters, engaged in the performance appraisal process, likely to follow different
yardsticks or standards of performance evaluation.
4. Comprehensive appraisal, not possible
No technique of PA could be comprehensive enough to embrace all possible aspects of
the behaviour, qualities and performance of employees.
5. Vague measurement of abstract qualities
Abstract qualities of employees like aptitude for work, a sense of co-operation, initiative,
creativity etc., cannot be measured exactly, under any system of PA.
6. Ignore measurement of human values
Human values like honesty, sincerity, loyalty, love etc. seem beyond the scope of PA. In
CAREER STRATEGY
Introduction:
Performance appraisal findings provide the very basis for developing a career plan or
strategy for an individual.
87
Career strategy is a personal matter and a variable concept; whose dimensions and
implications differ from person to person in various enterprises and various societies.
Steps in Formulating Career strategy:

1.SWOT analysis.
A career plan must be realistic and capable of attainment, and not idealistic and
unattainable throughout ones life.
The acronym SWOT stands for: o S Strengths i.e plus point of the personality of an individual
o W Weakness i.e minus points of the personality of an individual
o O Opportunities for progress lying inside and outside the organisation
o T Threats or challenges posed by organizational environment or the
environment obtaining outside the organisation.
A realistic career strategy must be formulated in a way so as to exploit fully the

opportunities-while capitalizing on ones strengths and at the same time, overcoming
ones weakness and keeping away from threats.
2. Setting long-range personal goals
What should be the time frame for setting long-range objectives, depends on the
commitment principle i.e long-range should be planned for a period during which their
attainment is possible.
For example: A new school or college teacher who sets an objective of becoming the
Head of an institution (principal) must set a long-range personal goal of at least 10 to 15
years a minimum period necessary for acquiring experience to be eligible for headship
or principalship.
3.Development of strategic career alternatives
Career strategy formulation would be to develop strategic career alternatives, again in the
light of the findings of the SWOT analysis.
For example: a teacher who is excellent in academics but poor in administrative abilities,
may have a strategic career alternative of being a professor rather than a principal, in a
educational institutions.
During the process of developing strategic career alternatives, the following considerations
require special focus and attention:
i. Consistency Test
o Consistency testing implies that the Strategic career alternatives are consistent with
the personal values or interests of the individual.
o Example: a person who has necessary skills for being a computer programmer may
take more interest in dealing with people i.e he/she may have a better career in being
a public relations officer, somewhere.
ii. Development of Contingency plans
Contingency career plans based on alternative assumptions should be prepared, to keep
oneself on the safe side.
4. Development at short-range career objectives and action plans:
88
The strategic career alternative finally selected by an individual should be translated into
short-range career objectives and action plans.
For example, an average employee (say a clerk) who plans to be a manager after earning
a master of business degree must complete a number of courses necessary to qualify for
that degree. This amount to setting short-term career objectives.
5. Implementation of the career plan.
The best career plan is useless; if it is not carried out.
For the implementation at the career plan, one can request a promotion or a transfer or
find another job outside the organisation.
Intelligent management considers career goals and personal ambitions of people, while
selecting or promoting employees.
6.Monitoring progress
Monitoring is the process of evaluating ones progress towards career goals; which is best
undertaken at the time of performance appraisal.
7. Charting ones progress
A person, who is highly ambitious and also practical, will always keep planning of better
and better career opportunities.
Process of formulating careers strategy
Strengths
SWOT
opportunities
Long-range personal goals

Consistency testing
Development of strategic career

Alternatives
contingency plans
With focus on
Short range career objectives and
Action plans
Monitoring progress
Implementation of career plan

Charting ones progress
With focus on
89

MANAGER AND ORGANISATION
DEVELOPMENT
Manager and organisation development is a twin concept

Manager development refers to the development of managers as individual.
Organizational development refers to development of groups of individuals or the
development of organisation as a whole
MANAGER DEVELOPMENT:
It refers to an all-round development in the personality of a manager; that enables the
manager to perform a wide variety of managerial jobs, in a most effective manner.
The emphasis is laid on increasing the human and conceptual skills of managerial
personnel.
Significance of Managerial Development:
Managers while taking work out of subordinates motive and lead them.
In fact, managers personality and caliber leaves a direct and permanent impression on
the behavior and performance of subordinates.
It leads to the development of the subordinate staff-ensuring more of success for the
organisation.
Manager Development Process
Present Job
Next Job
Future Job
Performance appraisal
Identification of development
Needs
Formulation of
Development
Programmes
performance appraisal (PA)
development programmes to cope with changing

technology and other challenging environmental
factors
1. Present Job:
A managers performance on his present job is evaluated, through a systematic

performance appraisal process.
From the findings of PA, the needs for managerial development are identified and
suitable development programmes are designed and put into practice.
2.Next Job
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In the view of the competence of managers as revealed by the progress, a manager proves
at development programmes; the next suitable job is assigned to him. Again, there is
performance appraisal on the next job.
3. Future Job
Progressive organizations always prepare managers to take up future jobs of a
challenging nature-created by future technology and other environment factors like
competition, social values, governments likely policies and so on.
Approach to (or methods of) Manager Development
i. Experience it is a trial and error one i.e he commits mistakes and later on improves on his
subsequent performance.
ii. Coaching a new manager is taught the art of managing by a senior experienced manager.
iii. Understudy a junior managers (under study) under the instructions and guidance of some
senior manager with the intention that after the period of training, the junior manager will take
over the position of the senior manager.
iv. Position rotation- one manager is rotated among several managerial positions at the
horizontal-level. (in different depts.)
v. Special projects- a special project might be assigned to a manager which is a piece of task
falling outside the scope of his normal functions.
vi. Placement on committees when a manager is placed on a committee as a special member of
that committee; he not only develops conversational powers, but also comes to learn interacting
with others.
vii. Special courses- several progressive organizations send their selected-executives to
management institutes, for undertaking a study of any of the specialized management courses.
viii. Case study (or problem solving method)- this method of executive development aims at the
development of decision-making skills among managers. Here, a manager is provided with a case
from a real-life organisation situation; pertaining to a specific managerial area e.g motivation of
employees, deteriorating Human Relations etc.
ix. Role playing an artificial managerial situation is created, in contemplation of some real-life
situation. One sample, attending to employee grievances, handling compliant made by a customer
x. Sensitivity-training (or T-group training) there is a group of 10 to 15 participants called the
T-group. Maintaining emotional stability through appreciating viewpoints of others and
tolerating criticism of ones own valuable ideas, by other members of the group.
xi. Brain storming when a problem is posed before trainees for giving a solution to it; there is a
sort of storm in their minds and each one under brain-in-storm, offers his own ideas for solving
the problem.
ORGANISATION DEVELOPMENT
Concept:
OD is a systematic, comprehensive and dynamic process which seeks to improve the

organizational efficiency by modifying human behaviour, so that the organisation is
better equipped to solve its problems and achieve its objectives, most effectively.
91
OD is an effort planned, organisation-wide, and managed from the top, to increase the
organisation effectiveness and health through planned intervention in the organizations
processes, using behaviour science knowledge.
Features of OD:
1. Long-term approach
OD is basically a long-term approach to increasing organisation efficiency as in the

short-run it is not much possible to bring about improvements, specially in
organizational culture and value system.
2. Human-behaviour oriented
OD aim at modifying human behaviour, without which technology innovations have

a limited meaning
3. Comprehensive
OD is broad-based. It is a comprehensive strategy intended to change the

environment of the whole organisation, rather than concentrating only on a
particular group of persons or particular types of job.
4. Systems oriented
OD utilizes the open-adaptive systems approach. It believes that no part of the

organisation can be changed without affecting other parts.
5. Research-based
OD involves data collection, evaluation and then decision-making. Most of the OD

interventions are research-based.
6. Dynamic process
OD recognizes that organizational objectives change because of the dynamic nature

of the economy. Hence, means for attaining objectives should be also change.
7. Normative re-educative strategy
OD Programmes call for changes in managerial leadership style.
Process of OD
92

Evaluation and feedback
step 7
Implementation of OD
Intervention
step 6
Planning OD intervention
step 5
Diagnosis of the problem
step 4
Data feedback
step 3
Collection of data
step 2
Initial consultation with

OD expert
step 1
1. Initial consultation with OD expert

Whenever an enterprise experiences a problem like e.g low morale, customer complaints,
declining market share etc. the CEO may contact on OD expert to discuss the situation.
2. Collection of data
The OD consultant collects information through-personal interviews, questionnaires,
personal observations etc.
Collection of data must relate to nature of the problem.
3. Data feedback
The work groups go through the data and locate the points of disagreement and discuss
such points with the OD expert.
4.Diagnosis of the problem
Diagnosis involves understanding the causes of the problem.
Experience and judgment of the OD expert, at this stage, may help him in accurately
diagnosing the real causes leading to the end result problem.
5. Planning OD intervention technique
The OD expert should determine a strategy having the highest probability of success.
6. Implementation of OD intervention
Most of the OD programmes begin with training to people, in the light of the proposed
organizational change.
Gradually intervention may be attempted at all the three levels individual, group and
organisation.
7. Evaluation and feedback
93
Evaluation means judging the success of the OD programme so that suitable action may
be taken to modify further programmes.
Techniques of OD/ OD interventions

1. Sensitivity Training ( T-group training)
2. Management By Objectives (MBO)
3. Process consultation
4. Likerts 4-system management (leadership)
5. Survey feedback
According to French and Bell, survey feedback consists of 5 steps:
Step 1.Organisation members at the top of the hierarchy are involved in preliminary
planning
Step 2. Data are collected from all organizational members.
Step 3. Date are feedback to the top executive team and then down through the hierarchy
in functional teams.
Step 4. Each superior preside at a meeting with his/her subordinates in which data are
discussed and plans are made for constructive changes.
Step 5. Most feedback meeting includes a consultant who has helped prepare the superior
for the meeting and who serves as a resource person.
6. Team building
One type of group is a family group, consisting of a manager and his/her subordinates.
A second type of group is a special group formed to solve a specific problem.
The essence of team building is to increase trust among members because people work
better together, when there is open and honest sharing about problems and difficulties.
DIRECTING
UNIT - IV
Managing and the Human Factor- Motivation Leadership- Communication.
Concept of directing:
Directing function of management involves guiding, inspiring, overseeing and leading
people for the accomplishment of predetermined objectives.
Directing constitutes the all-important actuating link between the other managerial
functions, namely, planning, organizing, staffing, coordinating and controlling.
Directing implies moving into action.
Directing involves issuing orders and instructions and taking steps to get them carried out
properly.
Definition:
Directing consists of the process and techniques utilized in issuing instructions and
making certain that operations are carried out as originally planned.
94
Direction is the interpersonal aspect of managing by which subordinates are led to

understand and contribute effectively to the attainment of enterprise objectives.
Process of Directing
1. Issuing orders and instructions to subordinates
2. Continuous guidance and supervision of employees to ensure that they carry out
their assignments in the proper manner
3. Motivating subordinates to work efficiently for the achievement of organizational
objectives
4. Communicating with employees to understand their needs, aspirations, problems
and suggestions
5. Maintaining discipline and rewarding those who perform efficiently and
6. Providing leadership to the subordinates so that they work with real and
confidence.
Planning
Performance
Directing as a bridge
Principles of Directing
1. Harmony of objectives
The management should bring about co-ordination of individual objectives of the
subordinates working in the organisation with those the enterprise.
2. Maximum individual contribution
It should be in a position to inspire the employees to contribute their maximum for the
achievement of the enterprise objectives.
3. Unity of command
A subordinate should at a time receive orders from and be accountable to only one
superior.
4. Direct supervision
Personal supervision improves the motivation and morale of subordinates and improves
their loyalty to the organisation.
5. Flow of information
Effective direction is largely dependent upon the flow of information and the efficiency
with which it is disseminated among the subordinates.
6. Appropriate Techniques
The techniques of direction should be efficient and appropriate to the people, the tasks
and the situation.
7. Comprehension
The manager should take action to ensure that orders and instructions are well understood
and properly carried out by the subordinates.
8. Strategic use of informal organisation
Managers should accept and use the informal organisation to supplement and support the
formal channels of communication
9. Effectove Leadership
95
An effective leader guides and counsels his subordinates on work problems as well as on
their personal problems. A good leader can win the trust and confidence of subordinates
to make direction effective.
ELEMENTS OF DIRECTING
The directing function includes the following,
1. Supervision
motivation
2. Motivation
3. Leadership
supervision
directing
leadership
4. Communication.
Communication
1. SUPERVISION
SPAN OF SUPERVISION OR
SPAN OF CONTROL OR
SPAN OF AUTHORITY
It refers to the number of subordinates a manager can effectively manage.

If the number of subordinates is too large, effective control may become difficult control
over them.
The concept of span of a management has a significant influence on the overall
performance of an enterprise and hence modern management experts have recognized its
importance.
Graicunas Theory of Span of Management

V.A Graicunas, a French Management consultant, has made an important contribution to
the span of management theory. He has identified three types of subordinate-superior
relationship.
I. Direct single relationships
Direct single relationships are created when an executive is directly and individually
related to his immediate subordinates.
A ---- Superior
X
Y ---- Subordinates
96
1.Relationship between A and X -----1

2.Relationship between A and Y----- 1
2 meetings
Depending on the needs of a situation, A might consult with X or Y
II. Direct group relationships
If an executive speaks to each possible combination of subordinates under him, it is
called direct group relationship.
A ---- Superior
X
(XY)
Y ---- Subordinates
(YX)
1.Relationship between A and XY -----1

2.Relationship between A and YX----- 1
2 meetings
A might consult with X, while Y is in attendance. Or, he might consult with Y, with X in
attendance.
III. Cross relationships.
It comes into existence when subordinates find it necessary to consult with one another.
In the example given above, two cross relationships can take place between X and Y viz.,
Y with X and X and Y.
A ---- Superior
X
(XY)
Y ---- Subordinates
(YX)
1.Relationship between A and XY -----1

2.Relationship between A and YX----- 1
2 meetings
I+II+III = 2+2+2= 6 Meetings
The formula: Graicunas has prescribed the following formula to ascertain the number of
subordinate-superior relationships.
2n
Number of relationships = n
+n-1
n = number of subordinates
97

graicunass formula showing the number of Relationships Corresponding to the Number of
Subordinates.
No.of subordinates
No.of Relationships
1
1
2
6
3
18
4
44
5
100
6
222
7
490
8
1080
9
2376
10
5210
For example
If we take a superior supervises 5 subordinates.
N =5
25
Number of relationships = 5
+ 5-1
2
Number of relationships = 5 16 + 4
n = number of subordinates
, = 5 x20
= 100 Relationships
Factors determining Span of Management
1. Capacity of supervision
2. Time for supervision
3. Nature of work
4. Nature of planning
5. Capacity of subordinates
6. Degree of decentralization
7. Staff assistance
8. Controlling Techniques
9. Communication Technique
MOTIVATION
The basic objective of a manager is to secure from his subordinates an optimum
performance toward accomplishment of the predetermined objectives.
Performance = Ability x Effort x Opportunity.
98
Motives may be defined as drives or impulses without an individual. It implies something

within a person which prompts him into action.
Motivation is a general term applying to the entire class of drives, desires, needs, wishes
and similar forces that induce an individual or a group of people to work. koontz and
ODonnell.
Motivation means a process of stimulating people to action to accomplish goals.
William G.Scott
Process of Motivation
Individual needs (or)
Unfulfilled needs
incentives (or)
environment incentives
And disincentives
action (or) wants

(Tension)
Best attainment
Of common
Objectives
Motivation (or)
Fulfillment of
Unfulfilled needs
(Or )
----------------------------Awareness
Of
Needs
search
of
action
-------------------------------------------
Discovery of new need

fulfillment of need
non-fulfillment of need
Revaluation and new action
Elements of Motivation
Individual Characteristics
The individual
The job
The work situation
Job Characteristics
Work Situation Characteristics
Employees Motivation
99

Nature / characteristics of Motivation
1.Psychological concept
Even workers with extraordinary abilities will not be able to perform as desired until they
are effectively motivated.
Effective performance on the part of workers can be said to be the result of their abilities
backed by proper motivation.
Performance = abilities x opportunity x Motivation
2. Motivational is total, not piecemeal
A worker cannot be motivated in parts. For successful motivation, he should be treated as
an indivisible unit, taking into account all his urges and aspirations.
3. Motivation is determined by human needs
Human needs are of various kinds and may be classified in many ways.
I.
Basic, Primary or Physiological Needs: it needs food, water, and shelter,
which are vital to its existence.
II.
Secondary, Social, Psychological or Acquired Needs: Besides basis needs.
Secondary needs are often vague because they are the needs of the mind and
spirit, rather than of the body.
4.Motivation may be financial or non-financial
Financial motivation seeks to satisfy physiological and security needs. It is by way of
wages, allowance, bonus, etc.
Non-financial motivation which seeks to satisfy social, recognition needs may be by way
of appreciation for the work done, higher status etc.
INCENTIVES
FINANCIAL INCENTIVES
A) INDIVIDUAL
B) COLLECTIVE
1.Various Premium
2.plan by Taylor,
halsey, rowan, etc
NON-FINANCIAL INCENTIVES
B) COLLECTIVE A) INDIVIDUAL
C) INSTITUTIONAL
1.equal wage rates
1.Status
1.social importance
1.human Relation
2.wage increased based
2.promotion
2.team spirit
2.participation
on ability
3.responsbility
3.competition
3.communication
3.pension plan
4.plesent&interesting
4.informal groups
4.building morale
4.production bonus
Job
5.discipline
5.profit-sharing
5.recongnition of
work
6.co-partnership
100
6.Job security
I. Individual Incentives:
These incentives motivate people on an individual basis, i.e., only certain individuals may
get them e.g., giving promotion to certain individual.
ii. Collective Incentives:
Employees perform their duties in groups and the management tries to motivate them in
groups e.g. encouraging team spirit among employees.
ii. Institutional Incentives
These incentives relate to conducive and congenial atmosphere of the organisation. It
includes better human relations in industry, workers participation in management.
5. Motivation is constant process
Human needs are infinite. Man is a wanting animal as soon as one of his needs is
satisfied, another appears in its place.
THEORIES OF MOTIVATION
1.
2.
3.
4.
An overview of major theories of motivation

Maslows Need Hierarchy Theories
Herzberg,s motivation Hygiene Theories
McGregors X and Y Theories
V.H. Vroom Expectancy Theory
1.Maslows Need Hierarchy Theories

A.H.Maslow, an eminent American psychologist, has advanced a comprehensive
structure of human needs known as Maslows Need hierarchy.
Maslows theory which is based on the needs of the people states that an individual is
motivated to satisfy certain unsatisfied needs. His theory is based on certain assumptions.
They are:
1. Physiological (or basic or survival) needs
2. Security (or safety) needs
3. Social (or affiliation) needs
4. Ego (or esteem) needs
5. Self-realization (or self-actualization) needs
Following is a brief account of the above-mentioned human needs
SELF
----------------------------------5
ACTUALIZATION NEEDS
-----------------------4
ESTEEM (EGO) NEEDS
SOCIAL NEEDS
SAFETY NEEDS
101
-----------------3
-----------2
PHYSIOLOGICAL NEEDS
------1
1.Physiological Needs:
Physiological needs include, needs for food, drink, clothing, shelter, rest and other similar
basic requirements.
Once an individual is satisfied reasonably well these needs, he thinks in terms of higher
level needs
2. Safety needs
These are the needs for protection against danger, threat, deprivation and the need for job
security.
Economic security needs: a man wants economic security i.e fulfillment of basic needs.
Physical security needs: these needs include protection against- fire, accidents and other
types of physical dangers.
Social security needs: these include a need for state of illness or permanent incapacity to
work caused by some disablement.
3. Social (or affiliation) needs
These needs include those of belonging, association, acceptance, friendship and love.
Social needs become important for all those who live in societies and work in the
company of others.
4. Ego (or esteem) needs
These needs include those of self-confidence, independence, achievement, status and
recognition.
These needs dominate only when an individual is reasonably satisfied with the first three
needs.
5. Self-Actualization (self-fulfillment) Needs
In simple words, these needs reflect a desire to become what one is capable of becoming
These needs are concerned with the need to realize ones capacities and potentialities by
achieving specific goals.
He accepts such work which is challenging and creative and also provides opportunities
for self-development
Merits and Demerits of Maslows theory
Merits:
1. Comprehensive It possibly covers all human needs from birth till demise.
2. Logical this system arranges human needs into a hierarchical manner which is quite
logical.
3. Guide to management- for launching motivational schemes.
4. Simple to comprehend- not only students but also a layman, this is quite understandable.
Demerits:
1. It is not universal it is not universally applicable to all individual i.e labour,
professionals etc.
2. Not comprehensive excludes several important human needs such as need for mental
peace, need for happiness in life, personal needs like for piety (devotion to God)
3. Global differences the same human needs have different implication for different people
in various countries (poor or rich).
102

4. An element of overlapping human needs cannot be placed in watertight compartments
things maslow has done.
5. Simultaneous operation of needs- this theory does not recognize the simultaneous
emergence of two or more needs, at the same time.
2. Herzbergs Two-Factor Theory of Motivation
Frederick Herzbergs two factor theory motivation is based on his research conducted
among 200 accountants and engineers of Pittsburgh area, U.S.A who were asked the
following questions:
i.
What is about your job that you like?
ii.
What is about your job that you dislike?
Accordingly, he put the responses into two categories
o Factors that present dissatisfaction, known as Hygiene factor
o Factors that have positive effect on job satisfaction, known as motivators.
a) Hygiene factors (or Maintenance factors or dissatisfiers)

Hygiene (medical term) it means taking steps to maintain ones health but not
necessarily improve it.
For example: brushing teeth regularly helps prevent dental diseases but not improve the
condition of teeth.
Herzberg mentions the following factors as hygiene factors;
Salary
Job security
Working conditions
Company policy and administration
Technical supervision
Interpersonal relationship with peers
Interpersonal relationship with supervisors, subordinates.
Status
Personal life
b) Motivational Factors or Satisfiers
An increase in these factors will motivate people while a decrease in these factors will
have no effect on motivation.
Herzberg mentions the following factors as motivators:
Achievement
Recognition
Responsibility
Advancement
Opportunities for growth
Work itself
Merits of Herzbergs Theory:
1. Money is not a motivator. It is rather a hygiene factor
2. Dissatisfiers are an eye opener to management
3. Management must provide for motivators within the job-contents.
103
Demerits
1. This Theory is based on a small sample
2. There is an element of overlapping.
Social
Safety
Physiological
-Pay
-job security
-Working
Conditions
Motivational factors
Self-actualization
-Work itself
Esteem
-achievements
-Growth prospects
-advancement -responsibility
-Recognition
-status
-relations
With
superiors,
Subordinates,
Peers.
Maintenance factors
Comparison of Herzbers theory and Maslows theory
3.McGregors Theory X and Theory Y
Apparently, Theory X contains a set of negative assumptions about human behaviour
and Theory Y contains a set of positive assumptions about human behaviour.
Theory Y can be said to be positive and optimistic whereas Theory X is negative and
pessimistic.
A comparative account of assumptions contained in Theory X and Theory Y
Theory X
Theory Y
1.People have a dislike for work and like 1. People like work, in fact,
to avoid work, if they can do so.
expenditure of physical and mental
efforts involved in work is as natural as
involved in play or rest.
2. People wish to avoid responsibility
2. People like not only to accept
responsibility
but
also
seek
responsibility
3. People prefer to be directed by or led 3. People prefer to lead and exercise
by others.
self-direction and self control
4.People
lack
creativity
and 4. People possess creativity and
imagination.(in fact, creativity is imagination (creativity is widely
narrowly distributed among population)
distributed among population)
5. Commitment to objectives is a 5. Commitment to objectives is a
function of punishments associated with function of a rewards associated with
their non-achievement
their achievement
6. People are self-centred and indifferent 6. People are not much self-centred
to organizational goals.
and are interested in organizational
104

goals.
7. People have limited potential of 7. People have unlimited potential of
capabilities.
capabilities. Under modern industrial
conditions, potential of men is only
partially utilized.
Theory Z
The Z theory, proposed by William Ouchi, is an integrated motivational model, based on
the Japanese management practices.
It provides an example of how management can transform the organizational environment
and bring about close, co-operative and trusting relationships between workers, managers
and other groups.
Features of Z theory:
1. Life-time employment
2. Restricted promotion (horizontal mobility possible)
3. Greater workers involvements (short-term motivational device)
4. Participative decision-making
5. Informal control system
6. Stable and cohesive work environment
4.V.H.Vrooms Expectancy Theory:
People must believe that by working, they will receive rewards that are important to
them. Peoples actions are based on their expectations as well as their needs.
Unless there is positive expectation of a reward that will satisfy a need, an individual will
not take action.
Assumption:
Individuals make conscious decisions in a work-situation to behave in certain ways and
not any others.
Outcomes desired by different individuals are determined by their value-system.
Different individuals have different expectations as regards the amount of effort which is
required to achieve particular outcomes.
There are also different expectations among them as regards the probability of success in
achieving outcomes.
The key elements:
Effort:
A person will be motivated to expend effort if he believes that there is a reasonable
likelihood that his effort will produce the desired outcome, and that such outcome will
result in extrinsic or intrinsic rewards to satisfy his felt need.
Performance:
In a situation where only improved team work can accomplish a task, even extraordinary
effort on the part of a lone individual may not be of any avail and it is more likely to go
unrewarded.
Outcome:
It signifies the desired result of ones effort.
105
It may lead to extrinsic rewards such as wages, appreciation and recognition by others, or
intrinsic rewards, such as, increased responsibility, more enjoyable and /or challenging
work.
Importance of Motivation:
For performing any job, two important things are necessary, viz., will to work and
ability to work.
The importance of motivations lies in converting this ability to work into the will to
work. Without willingness, ability to work is of no use.
Performance depends on ability and willingness and in turn, willingness depends on
motivation.
Performance = Ability x Motivation
1. Maximum utilization of factors of production
Motivation makes workers work sincerely for completing the task assigned to them.
Effective utilization of the enterprise resources, viz., human, physical and financial, to the
maximum.
2. Reduced employee turnover and absenteeism
Attractive motivational schemes bring about satisfaction to employees and by this, their
commitment organisation increases and they are not easily tempted by offers from
competitors.
3. Increase in efficiency and output
As motivation brings about satisfaction to employees, they work wholeheartedly. Because
of this, there will be an increase in their efficiency and output.
4. Sense of belonging
A proper system of motivational schemes promotes closer identification between
enterprise and workers.
This results in better relations between management and workers.
5. Easy availability of right personnel
Because of the proper motivational schemes, the enterprise is in a position to attract
highly talented and competent persons from external sources to serve in its organisation.
6. Best attainment of common objectives
Motivated employees put in their best efforts towards the attainment of common
objectives of the enterprise.
7. Stability of work force
Motivation, directly and indirectly, results in the stability of work force, necessitating
only minimum inevitable labour-turnover.
8. Minimum resistance to change
Motivated employees better appreciate the management viewpoint as to the introduction
of organizational changes.
LEADERSHIP
Concept:
A manager for directing the people working under him has to be a leader. When a
manager is a leader, he is in a position to lead his subordinates and also inspire them to
accomplish the objectives of the enterprise.
A leader may or may not be a manager but a manager must be a leader.
106

Definition:
Leadership is the ability of a manager to induce subordinates (followers) to work with
confidence and zeal. - Koontz and ODonnell
A leader is one who guides and directs other people. A leader gives the efforts of his
followers a direction and purpose by influencing their behaviour. - Louis A. Allen.
Importance of (or function) of leadership:
a) Primary significance of leadership:
The primary significance of leadership lies in leading people to give their superb
performance towards the attainment of common objectives- through zeal, enthusiasm and
dedication.
Performance inspired by
Leadership (35% to 40%)
Performance caused
Out of Org. and other
Pressures (60% to65%)
b) Others points of significance
1. Leading people to give their superb performance towards the attainment of common
objectives.
2. Achieving co-operation through team-work
3. Emphasizing on unity of objectives
4. Arousing self-confidence through direction of followers talents.
5. Encouraging initiative
6. Best utilization of manpower through motivation
7. Developing good human relations
8. Building and raising morale
9. Overcoming resistance to changes
107

Point of
Distinction
1. Concept
AN
2. Applicability
Managership
Managership is a wider concept Leadership is a narrow

includes leadership i.e every concept as every leader may
manager is leader.
or may not be a manager.
E.g Gandhiji was a leader
but not a manager.
Managership is applicable to
Leadership is found in both
only formal groups.
3. Authority Vs
power
A manager operates on the basis

of his formal authority.
4. Context
Managership is more significant
to business concern.
5. Appeal
A manager makes a formal
appeal to subordinates.
6. Approach
7. Organisation
Leadership
A manager is a boss and pusher

of people
A manager deals with an
organisation which is bothtechnical and human
formal and informal groups.
A leader operates basically,

by virtue of, his power
possessed
through
his
chairman and personal
qualities
Leadership is specially
required
in
politically
organization.
A
leader
makes
an
emotional
appeal
to
followers.
A leader is a friend and a
puller of his followers
A leader deals primarily
with human organization.
8. Role
A manager is primarily
concerned with shaping or
moulding
behavior
of
subordinates
towards
the
attainment
of
common
objectives.
A leader is concerned with

inspiring followers through
creating
zeal
and
enthusiasm in them towards
the attainment of common
goal.
OVERVIEW OF LEADERSHIP STYLES
Or
TYPES OF LEADER
Depending on the attitude of a leader towards his followers and their work, the following major
styles of leadership could be identified.
1.
2.
3.
4.
Autocratic leadership style

Democratic leadership style
Laissez-faire or free-rein leadership style
Paternalistic leadership style
108
1. Autocratic leadership style:

An autocratic leader is one who takes all the decisions himself without consulting his
subordinates.
He decides policies for the group without consulting the group and also asks the group to
take steps as per policies determined by him
An autocratic leader may be of two types.
i.
Strict Autocrat: a strict autocrat is one who relies on negative influences
and gives order which must be obeyed by the subordinates without
question. (Imposing penalty, criticizing subordinates)
ii.
Benevolent autocrat: a benevolent autocrat is one who uses a positive
motivation style. He disperses rewards to his group.( higher productivity).
Merits:
1. This style leads to quick-decision making.
2. It suitable at lower levels in an organization
3. It is suitable in emergency situation
4. It may provide strong leadership to the group
Demerits
1. It leads to development of frustration in subordinates
2. Subordinates shirk work and avoid responsibility
3. This phenomenon retards human development
4. It may yield fruit but only in the short-run.
2.Democratic or Participative Leadership Style.
A democratic leader is one who takes decisions in consultation with his subordinates.
Decentralization of authority, participative planning, two-way communication, etc., is the
main features of democratic leadership.
This style of leadership is usually adopted by the chief executive of a business enterprise
while discussing major organizational objective, strategies and policies with departmental
managers.
Merits:
1. It invites commitment to decisions on the part of subordinates.
2. Potential of subordinates is utilize under this style.
3. It helps to increase-motivation, morale and job-satisfaction for subordinates.
4. It leads to the emergence of good human relation, in the enterprise.
Demerits:
1. There is usually delayed decision-making
2. It may disclose as a sign of managerial incompetence
3. In the long run, it leads to loss of leaders control over the subordinates.
4. There is usually witnessed, the phenomenon of passing the buck.
3. Laissez faire or free-rein style:
The leader leaves it to the subordinates to decide and control themselves believing that
they are competent and motivated.
He does not interfere in the activities of his subordinates. He believes that people will
perform better if they are left free to make and enforce their own decisions.
Using Fields: sports, educational institution
Merits:
109

1. It leads to a highest sense of job-satisfaction for subordinates
2. It encourages the fullest exploitation of potential of subordinates.
3. It is a way or technique of training and developing subordinates for higher managerial
position.
Demerits:
1. It minimizes the role of the leader
2. Performance of subordinates is rather poor loss of control of leader
3. Subordinates may work at cross-purpose
4. It is not suitable when subordinates are uneducated.
4. Paternalistic leadership style:
A paternalistic leadership is characterized primarily by loyalty of followers in a warm and
cohesive setting. The leader is much concerned with the well being of his followers and
comes to their rescue ever so often.
The leader plays a father-like role towards his followers and takes care of their
problems, the way a father does for his family.
He believes in the philosophy work hard and I will take care of you.
It is one of the fundamental characteristics of the Japanese management system.
Merits:
1. Subordinates are loyal to the leader and the organisation both (because of a father-like)
2. There are good human relations in the organisation
3. It implies a balanced leadership approach.
Demerits:
1. Subordinates might take undue advantage of the leniency of the leader
2. Leader might be more involved in personal problems of subordinates than organizational
issues.
3. It is unsuitable when there is a lack of mutual trust between the leader and the followers.
THEORIES OF LEADERSHIP
1. Personality theories
2. Behavioral theories
3. Situational theories
1.Personality theories of leadership:
Some important theories of leadership under this category are:
i. Great man theory
ii. Trait theory
iii. Role theory
i. Great man theory:
Some people believe that leaders are born and not made.
It assumes that leadership qualities are in-born or god-given
Example: great leaders like Mahatma Gandhi, Churchill, and Nelson Mandela. (Ambani
brothers)
It was presumed that he had inherited the qualities of his father i.e leadership qualities
were carried in the genes.
110

ii. Trait Theory
According to this theory, successful leadership depends on certain traits or qualities
possessed by a leader some of such traits are inborn and some traits could be acquired by
a person by education, training and experience.
Various leadership traits: General qualities, technical qualities, managerial qualities and
psychological qualities.
iii. Role Theory:
Role theory is a refinement of trait theory. According to role theory, a leaders traits are
reflected in his roles
A leader stimulates followers superb performance, by inspiring them through his
charisma and outstanding personal traits.
Example:M.G.R++++
i. Stimulate
ii. Representative- outside world
iii. Integrator personal objective with organizational objectives
iv. Co-coordinator- like music director
v. Fatherly-figure as a friend and guider
vi. Exemplar outstanding devotion, courage and integrity
vii. Expert the techniques of work performance
viii. Philosopher- acts as an ideologist for his followers.
2. Behaviour theories:
i. Rensis Likerts 4- system management
ii. Managerial grid or leadership grid
i. Rensis Likerts 4- system management
Likert has postulated four systems of management.
System 1: Exploitative-authoritative
It is highly autocratic
Decision-making is centralized in the hands of the leader.
There is downward communication system only i.e from the leader to the subordinates.
System 2: Benevolent authoritative
The leader is a bit lenient autocrat.
He solicits some ideas and opinions from subordinates.
He motivates subordinates with some rewards and some fears and punishments.
He permits some upward communication also ie from subordinates to the leader.
System 3: consultive
He makes constructive use of subordinates ideas and opinions.
The system of motivation consists of rewards with occasional punishment.
Communication system is two-way i.e downwards and upwards.
System 4: participative-group or democratic:
He has complete confidence and trust in subordinates, in all matters.
He always gets ideas of subordinates and constructively uses them.
There is much emphasis on communication downwards and upwards
The leader always encourages group approach to decision making, throughout the
organisation.
In likerts view, system 4 is the best; system 1, is the poorest.
111
ii. Managerial grid / Leadership style:

Intensive research studies undertaken regarding the behavior of leaders, at the Ohio-State
University and the University of Michigan (U.S.A) revealed that there were two broad
dimensions of leadership behaviour viz.
o Initiating structure or task oriented behaviour: the leader closely supervises
subordinates to ensure that the task is performed in a satisfactory manner and
behaves like and autocratic leader.
o Consideration or employee-oriented behaviour: the leader adopts an attitude of
friendship and trust towards subordinates and behaves like a democratic
leader.
Theory of leadership is Managerial grid concept developed by Robert Blake and Jane
Mouton.
It identifies various alternative combinations of both basic styles i.e., concern for
production and concern for people.
These combinations are put in the horizontal and vertical dimensions of the grid, have a
scale from 1 to 9. Thus the grid has 81 possible combinations.
(1,9)
(9,9)
Con- 8
7
cern
6
for
5
Peo
(5,5)
4
3
ple
2
1
(1,1)
1
(9,1)
2
Concern for production

Note: in this gird, concern for production is shown on horizontal axis, and concern for people on
vertical axis.
Five major leadership behaviour styles:
a) Impoverished leadership style (1,1):
Managers have very little concern for either people or production
They act as messengers- communicating information from subordinate to subordinate.
112
This style of leadership behaviour is also called laissez-fair style as everything is left to
situation.
b) Team leadership style (9,9)
The leader has highest dedication to both people and production.
The leader tries mesh production needs with needs of individual.
Research found that experienced managers preferred, (9,9) style of leadership, regardless
of variations in situations.
c) Middle of the road leadership style (5,5)
The leader has little concern for production and maximum concern for people.
The philosophy behind this style is that thoughtful attention to the needs of people leads a
friendly and comfortable organizational atmosphere and work tempo.
d) Task leadership style (9,1)
The leader is concerned only with development of efficient production operations with
little or no concern for people.
The leader behaves as an autocrat.
The philosophy behind this approach is that efficiency results from arranging work in
such a way that human elements have little effect.
3. Situational (or contingency) theories of leadership
There are 4 factors which affect leadership style and also determine leaders effectiveness
i.
Leader his traits
ii.
Followers their knowledge, experience and involvement in work
iii.
Organisation task and technology forces
iv.
Situation i.e., internal and external environmental factors.
Under the situational theories, we basically consider the following three theories:
a) Leader continuum theory
It is situational and contingent nature.
It suggests a variety of 7 leadership styles, ranging from the one which is highly boss
centred to the one which is lightly subordinate centered.
Freedom area for the leader
Freedom area for followers
2
3
4
5
6
7
Leadership continuum
1. Manager makes decisions (this is fully boss-centred or autocratic style)
2. Manager sells the decisions transferring the decisions to subordinates
3. Manager takes decisions and just responds to question from subordinates or followers.
4. Manager takes a tentative decision subject to change- feedback from subordinates
5. Manager presents problem gets suggestion of subordinates and then take a decisions.
6. Manager defines limits within which followers take decisions
113

7. Manager and followers jointly make decisions.
Point: No one style is the best. It all depends on the situation as to which style will yield best
overall results for the organisation.
b) Fielders contingency theory:
By combining the trait and situational approach.
There is nothing extra-ordinary in Fielders contingency approach. Experience managers
themselves realize that style of leadership depends on the situation.
c) Path-Goal theory
The central idea behind path-goal theory is that most effective leaders are those who help
subordinates to achieve both-enterprise goals and their personal goals by defining task
roles clearly and by removing obstacles to performance.
This is especially valid for upper level positions, where the behaviour of leaders can have
considerable influence on designing an environment for performance.
Leadership Roles:
Group task roles
Initiator-contributor
Information seeker
Opinion seeker
Information giver
Opinion giver
Elaborator
Coordinator
Orienter
Evaluator-critic
Energizer
Procedural technician
Recorder
Group
building
and
maintenance roles
Encourager
Harmoniser
Compromiser
Gate keeper and expediter
Standard setter and ego ideal
Group observer/ commentator
Follower
Individual roles.
Aggressor
Blocker
Recognition seeker
Self-confessor
Playboy
Dominator
Help seeker
Special interest pleader
Function of a leader:
Leadership functions
a) Primary
1.executive
2.planner
3.policy maker
4.expert
5.external group representative
6.controller of internal relations
7. Purveyor of rewards and punishments
8. Arbitrator and mediator
114
b) Accessory
1.expemplar
2.symbol of the group
3.substitute for individual responsibility
4.ideologist
5.father figure
6.scapegoat
4.COMMUNICATION
Concept:
Communication means sharing ideas in common.
Communication is the process of passing information and understanding from one person
to another to bring about commonness of interest, purpose and efforts.
The five basic aspects of communication, i.e., speaking, listening, writing, reading, and
observing are the important for success in communication.
Definition:
Communication is the process of passing information and understanding from one
person to another. - Keith Davis
Communication is an exchange of facts, ideas, opinions or emotions by two or more
persons. Newman and Summer.
Process of Communication:
1. Sender the person who wishes to speak out or send or transmit a written message.
2. Message- the subject matter of communication (opinion, order, appeal, suggestions etc.)
3. Encoding the act of putting the message is suitable words, charts or other symbols of
transmission.
4. Transmission -the act of saying, sending or issuing the message.
5. Medium-the medium (channel) used to transmit the message.
6. Receiver-the person for whom the message is sent.
7. Decoding- the act of understanding the message exactly as it has been sent.
8. Feedback (response)-the reaction, reply or response which the receiver of the message sends
to the sender.
Sender
message
encoding
transmission
medium
Feedback
Decoding
115
receiver
Types of Communication
On the basis of relations

Formal
On the basis of flow direction
informal
downward
upward
sideward
According to expression
Oral
written
gesture
I. On the basis of relation:

1. Formal communication:
It follows the course laid down in the organisation structure of the enterprise.
Members of the enterprise are supposed to communicate with each other strictly as per
the channels laid down in the structure.
Generally, orders, instructions, decisions of the superior officer, etc. are communicated
through this channel
2.Informal Communication (or grapevine communication)

This communication has no formal manner of routing.
It might spread from any person to any person, in any manner and in any direction, like
the structuring of a grapevine.
Jumping of communication channels takes place because of informal relations between
members of the organisation.
It may be conveyed by a gesture, nod, smile etc.
116
A comparison between formal and informal communications
117

Basis of
Distinction
1. Speed
2. Authenticity
3. Nature
4. Planning
5. Feedback
6. Control
7. Distortion
Formal communications
Informal communications
It is slow. The rate of slowness

of this type of communication
depends on the length of the
scalar chain. It is not suitable in
emergency situations.
It is very fast. It spreads like

an epidemic as it might
proceed from any person to
any person, in any manner. It
is suitable for transmitting
useful
information,
in
emergency situations.
It is most authentic, as it takes It is least authentic as it
place via the official scalar it spreads in a grapevine
chain.
manner. (Rumors)
It is impersonal and official. It It is personal and unofficial. It
is a source of tension to relieves individual of tension,
individuals in, many cases.
in many cases.
It is preplanned. It helps people It is wholly unplanned. It is
understand their jobs and is the contingent in nature.
basis
of
smooth.
no
communication; no functioning
of organisation.
Feedback to communication Immediate feedback is there.
may or may not be there. In People can freely express
fact, people at lower levels their opinions about informal
might not be able to express communication, without fear
themselves freely on many or favour.
organizational issues.
It
is
controllable
by It is wholly uncontrollable.
management. It could be Not possible to modify as the
subject
to
modification, source of communication may
subsequently.
not be known at all.
Distortions in communications There are distortions in

are not possible, especially informal
communication
when it is in writing.
according to the whims and
prejudices of individuals.
8. Record-keeping
It is mostly written. Records of It is mostly oral. No records
communication could be easily of it could be kept.
kept, for future reference.
9.
Fixation
of As
the
source
of It is not easily traceable.
responsibility
communication
is
known Responsibility
for
responsibility
for communication could not be
communication could be easily fixed on any individual.
fixed on individual.
10. Resistance
It being official, usually meets Question of resistance to this
with resistance, on the part of type communication does not
employees.
arise, as it is social and
personal in nature.
11.
Secrecy
of Confidential information does Confidential
information
confidential matters
not leak. It could be kept could not be confidential like
restricted.
an epidemic.
12.
Rigidity
or It is based on the plans, rules It is quite flexible and
flexibility
and policies of the organisation, depends on personal likes and
which are quite fixed.118
dislikes. (ever changing)
13. Mutual support.
It does not support informal It supports the formal
communication
communication.

III. According to Expression
1. Oral communications or verbal communication:
It is a way of transmitting messages etc. through words spoken by the sender of
communication to the recipient of it.
Communication is made direct face to face or through telephone or intercom system.
Modes:
o Communicating through a face-to-face contact (sender-recipient)
o Communicating through mechanical devices (speaker, telephone, intercom)
o Sending oral messages through peons, agents, servants
o Speaking to people through delivering lectures.
o An exchange of views at meeting, conferences, etc.
o Holding group discussions.
2. Written communication
It is way of transmitting messages etc. through words reproduced in writing by the sender
of communication for the information of the recipient of it.
It includes statements, circulars, letters, reports, memos, manuals etc.
Modes:
o Sending letters by the sender to the recipient
o Communicating through publications in house journal, magazines, bulletins et.
o Communicating messages, news, etc. through notices displayed on notice boards.
3. Gesture communication
Communication through gestures is often used as a means to make the verbal or written
communications more effective.
One has only attend a meeting addressed by a trade union leader to see how he used the
different gestures wave of hand pouting of lips, movement of eyes---to make his point.
Gestures can be used to express ones feelings, ideas or sentiments.
For a subordinate in an enterprise, a handshake with the boss is enough to turn his head
for days, if not month.
III. On the basis of Direction
1.downward communication
It moves downwards in an organisaiton, from the top management to middle and lower
level managements traveling via various links in the scalar chain.
The communication flows from the superiors to the subordinates.
Essentially, the purpose here is to communicate the policies, procedures, programmes,
orders, instructions, etc. to subordinates.
Issuance of orders and instructions is the heart of downward communication i..e
following suggestions:-It must be complete, in all respect
-It must be issued in clear language
-It must be timely
-It must be rational
-It must be capable of implementation
-It must preferably be in writing.
-It must be brief and to the point.
119
-----Top
-Orders
-Instruction
-Policies
-Procedures
-Programmes.
----Lower
2. Upward communication
it proceeds upwards in an organisation from the lower level management to middle and
upper levels management, traveling via various links, in the scalar chains.
This type of formal communication is really a feedback to downward communication.
It includes reports, suggestions, reactions of workers, proposals, inquiries, complaints,
grievances, etc.
Following forms:-Reports by subordinates, to superiors on work place.
-Grievances, problems or difficulties of subordinates forwarded to superiors, at
appropriate levels.
-Suggestions and ideas of subordinates to upper management, for kind
considerations and appropriate implementation.
-Clarifications sought by subordinates form superiors as to the orders and
instructions issued by the latter i.e superiors.
-----Top
-Suggestions
-Grievances
-Reports
-Proposals
-Complaints
-Ideas.
----Lower
3. Sideward (horizontal) communication

It takes place among managers, placed at the same rank, in the organisation.
It is necessary for achieving co-ordination of actions of individuals, doing the similar
type of work, under managers of equal ranks.
For example, a communication between two assistant production managers is an instance
of horizontal communication.
It used to improve. Understanding, coordinate efforts for achieving organisation
objectives.
120
It related to task coordination/ understanding, problem solution/conflict resolution,

information sharing.
Supervisor
Upward communication
downward communication
Subordinate
Subordinate
Vertical communication
BARRIERS OF COMMUNICATION AND MEASURES TO OVERCOME THEM:

(R) Means Remedies
I. Organizational barriers:
1. Lengthy scalar chain:
When the scalar chain, which is the basic route of travelling for all formal
communications, is too lengthy.
(R) Cut short the scalar chain, in emergency situations.
(R) Make use of and authorize the building of gang planks, as suggested by Henry
Fayol.
2. Vaguely clarified authority-responsibility relationships
When authority relationships among superiors and subordinates are not clearly defined;
superiors and subordinates, both might find confused as to whom to contact and convey
their problems, suggestion, etc.
(R) Management must design a compact and well-defined organizational structure by
means of an organizational chart displayed at various organizational points.
3. Too wide a span of management
Where, in an organisation, span of management is too wide the superior might not be able
to effectively communicate, with an unduly large number of subordinates.
(R) The span of management must be reduced to the optimum level by the top
management.
4. One-way communication system.
The communication system is only a one-way track i.e only from the top management to
downwards at lower levels. (Lack of feedback)
(R) Design and maintain a two-way communication network so as to allow upward
communication.
5. Irrelevant and out of context communication.
The situation accounting for irrelevant and out of context communication, usually
emerges when organizational objectives are not clearly defined and organizational
policies are imperfect.
(R) Organizational policies must be perfected by concerned higher authority so as not to
let subordinates exercise unnecessary discretion, while implementing those policies.
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6. Lack of adequate communication facilities

Adequate communication facilities like-telephone, intercom, peons, messengers,
Photostat or typing facilities are not available.
As a result, communication delays or bottlenecks arise, impairing with a free-flow of
communication.
(R) Management must see to it that requisite facilities for communication are provided to
needy personnel in the organisation.
II. Linguistic Barriers
i.e relating to language of communication,
1. Poor or harsh language
When the communication whether oral or written is expressed in a poor or harsh
language the sentiments of the recipient are emotionally affected and resistance (or
reaction) to such communication is invited on his part.
(R) The sender must use polite and dignified language so as to touch the sentiments of the
recipient.
2. Vague language
When language used in drafting a communication is vague (i.e the same word meaning
differently to different individuals)
(R) Use of technical language must be avoided, as far as possible. The technical terms
must be explained or translated into the laymens language.
3. Faulty or misleading (Distortion)
Sometimes managers, especially at middle levels, receive communications from the
upper levels which have to translated by them into some other simpler language for use
of subordinates and operators.
Managers-poor translation art-might distort the original communication.
(R) Only such managers as an adept in transaction work must be permitted to translate
messages into required languages.
Manager as a communication filter

III. Barriers on the part of the sender of communication
1. Badly expressed messages
Poor organisation of ideas
Lack of co-ordination
122
Inadequate vocabulary
Repetition
Awkward sentences
Careless omissions etc.
(R) The sender must be an adept at drafting. The drafted message must look like an
integrated and compact piece to communication.
2.Distrust of the communication
Many superiors, sending communications are distrusted by subordinates because the
former might be alleged for countermanding (i.e canceling) or modifying an original
communication, according to their own whims and prejudices.
In such situations, even the genuine and honest communications, by such superiors are
not taken serious note of by subordinates who might throw such communications, in the
waste-paper basket.
(R) Superiors gradually try to build their image of trust and confidence in the minds of
subordinates.
3. Superiority complex
Many superiors suffer from superiority complex and would not like to talk to
subordinates or otherwise communicate with them.
In such situations, not only does the work of the organisation suffer but also the
subordinates feel frustrated and degraded.
(R) The superiors must give up their superiority complex as a sign of psychological
health and communicate with subordinates freely and in a friendly manner.
4. Egoistic communications
Some superiors make egoistic communications to subordinates just to satisfy their false
ego and impress subordinates with their power, status and authority, in doing so.
Such communications merely waste the time of both the sender and the recipients and it
makes no meaningful.
(R) Superiors must desist themselves from making egoistic communications bearing in
mind the old adage the pride hath (has) a fall.
5. Failure to communicate
Communication-gap sometimes, superiors fail to communicate, even important
messages or news with subordinates either because of information overload or assuming
that people already know that which they intended to communicate to them.
(R) Despite information overload, they must spare time for making relevant and
required communications.
6. Fear of challenge to authority
Some superiors might be reluctant (or hesitant) to make even important communications
to subordinates fearing that any feedback or reaction to their communication might
challenge their authority.
(R) They must gradually acquire self-confidence and make better communications, in
future.
7. Untimely communications
Sometimes, communications by superiors may be untimely much in advance of time
required for their making them or making communications, just in the nick of time.
(R) Superiors must only make timely communications neither before time nor unduly
delayed.
IV. Barriers on the part of the recipient of communication
1.No attention
123
So many recipients of communications pay no attention to it either because of tension

created by personal and family problems, or because of being overburdened with other
emergency issues.
(R) Communication must be made short, simple and attractive to gain the immediate
attentions of the recipient.
2. Premature evaluation
Many recipients, especially subordinates, go in for a pre-mature evaluation of the
communication even before the communication is fully communicated to them.
(R) They must wait for the sender to complete the communication. This only requires
patience on the part of the recipients.
3. Individual perception
Many recipients have their own perceptions and interpret messages in their own way of
thinking and to their own advantages. (Frustration)
(R) Recipients must have a broad outlook and appreciate the viewpoint of the sender in
making the communication.
4. Fear of superiors
Some recipients, especially subordinates, give a wrong or misleading feedback to
communication owing to fear of superiors or out of their sheer inferiority complex.
(R) Subordinates must impart a free and impartial feedback to communicate.
V. Miscellaneous barriers to communication
1. Mechanical barriers
In some cases, mechanical appliances, used in the communication process, might suffer
from mechanical defects leading to e.g distortion of messages owning to technical faults
in telephone lines or sudden disconnection to telephone link rendering communication
incomplete etc.
(R) For mechanical devices used in communication process, the management must care
for their maintenance and due repairs. It should be kept up-to-date.
2. Loss of transmission and poor retention
There is usually a loss of contents of the message when it is in a course of transmission
via various links in the scalar chain especially when the communication is made verbally.
(R) Emphasis of the sender must be on making written communication repeated
reasonably frequently to overcome these barriers.
3. Insuffiecinet period allowed
It relates to
o Change of work i.e nature or type of work
o Change of place
o Change of shift
o Changeover to new methods of operation etc.
o (R) Management i.e sender of communication must provide for (or allow for)
necessary adjustment period to people to realize the intentions involved in
making such communications.
124
CONTROLLING
UNIT-V: The System and Process of Controlling, Control Techniques and Information
Technology- Productivity and Operations Management-Overall and Preventive Control-Towards
a Unified, Global Management Theory.
Control is the last phase in the management process.

o Once the plans are formulated,
o The organisation structure designed,
o Competent personnel (staffing) secured,
o Management in action (directing), ie implementing of plans and controlling of
performance, communications begin to flow, efforts co-ordinate, leading and
motivating get things done through others.
o Controlling assures the accomplishment of goals and objectives.
Twins of management:
1. In the planning stage, managers decide how the resources would be utilized to achieve
organizational objectives
2. At the controlling stage, managers try to visualize whether resources are utilized in the
same way as planned.
o Control completes the whole sequence of management process.
Control:
1. Setting standards
2. Measuring performance against these standards and
3. Correcting or adjusting for deviation from the standards.
Controlling
o In terms of process of control.
o The managerial function of controlling involves the measurement of actual performance,
comparing it with the planned standards and correcting deviations to ensure attainment of
predetermined objectives.
o Controlling is determining what is being accomplished, that is evaluating performance
and, if necessary, applying corrective measures so that the performance take place
according to plan, that is, in conformity with the standard.
The process of control
--------------------
1. Objectives
2.Standard
Corrected
Performance
No normal
deviation
comparison
3.Performance
125
5.Corrective action
If necessary
-------------------------------------4.Measurement
Determination of standards:
Standards
Tangible standards
Intangible standards (not measured)
Physical (mhr, color of goods)

Employee morale(absence from duty)
Cost (direct& indirect)
Consumer satisfaction (after-sales service)
Revenue (average sales per customer)
Corporate image(goodwill)
Capital (rate of return)
Product leadership (quality of goods)
Programme (improving the cost control)
Benchmarking:
Benchmarking is a concept that is now widely accepted in the U.S.A
It is an approach for setting goals and productivity measures based on best industry
practice.
Example: a company needs six days to fill a customers order and the competitor in the
same industry needs only five days, then five days does not become the standard if a firm
in an unrelated industry can fill the orders in four days. The four-day criterion becomes
the benchmark even when at first this seems to be an unachievable goal.
The process involved in filling the order is then carefully analyzed and creative ways are
encouraged to achieve the benchmark.
Three types of benchmark:
1. Strategic benchmark: it compares various strategies and identifies the key strategic
elements of success.
2. Operational benchmark: it compares relative costs or possibilities for product
differentiation.
3. Management benchmark: it focuses on support functions such as market planning and
information systems, logistics, human resources management, and so on.
Characteristics/features/nature of controlling or control:
1. Controlling makes for a bridge:
Controlling makes for a bridge between the standards of performance and their realistic
attainment.
Standards
controlling as a bridge
Attainment of standards
2. Planning is the basis of controlling

The standards of performance (which are starting point of the controlling process) are
laid down in plans.
3. Controlling is pervasive managerial exercise
All managers, at different levels in the management hierarchy, perform this function, in
relation to the work done by subordinates under their inchargeship.
126
It could be generalized that delegation is the key to controlling.
4. Control is a continuous process

It involves continuous review of performance and revision of standards of operations.
Control is a process of regular measurement, comparison and verification.
5. Action is the essence of control
An effective control system facilitates timely action to adjust performance to
predetermined standards so that there is minimum wastage of resources.
Action also includes modification or improvement of existing plans.
6. Controlling is based on information feedback
On the reports on actual performance done by operators.
Information or feedback enables the manager to determine how far the actual operations
is proceeding according to plans or standards and where remedial actions are needed.
7. Control aims at future
Control involves a post-mortem of what has happened and is in that sense looking back.
But the control action seeks to regulate events in future as past is uncontrollable.
Control is thus both backward-looking and forward-looking.
Past is the basis for regulating action in future. It is looking at future through the eyes of
past.
Control mechanism:
Control falls, plan also fail and plans succeed, control also succeeds.
Four elements:
1. Setting of standards of performance at strategic points
2. Leading, motivating and supervising employees
3. Measurement of actual performance and its comparison with the stated standards of
performance- monitoring and reviewing activities of the supervisor.
4. Corrective action, when necessary.
So, control standards are derived directly from the objectives, specifications, and other goals
established in the process of planning.
Standard is a rule of measuring.
Effective control of operation function
Quantity
i. Quantity of output
ii. Quantity of sale
iii. Quantity of
Inventory
quality
time use
i. quality control
over raw materials
finished goods
ii. Quality control
Over non-physical
Goods and services
Of an organisation
e.g customer service
Morale, leadership etc.
127
cost
i.Gantt chart
i. direct cost:
ii.PERT/CPM
materials
(these are tools oflabour
time use control and
expenses
Save money)
ii. Indirect cost:
O.H
BEP
Managerial control:
Manager
Information for aiming
And planning
Information for controlling

Managing
Aiming and plan

1. Establishing standards by setting
Objectives approving plans
2. Stating policy.
3. Delegating authority
4. Approving procedures etc.
controlling
1.supervision
2.measurement
3. Comparision
4.evaluation
5.corrective action to
Adjust performance to
Standards
Framework of management
Information evaluating adequacy

Of standards performance with standards
information comparing
Steps in controlling or control process

1. Desired
Performance
8.implementation
of correction
2. Actual
Performance
3.measurement
of performance
7.corrective action
plan
6.analysis of
causes of
Deviations
4. Comparison of
5.identification of
actual and standard
deviation
128
1. Establishment of standards
The process of controlling commences with the determination of standards of

performance, for all phases of the organizational activity.
Standards may be stated in physical terms such as units of output, man-hours worked,
etc., or in monetary terms such as sales, costs, profits, etc.
Standards may also be of a qualitative nature e.g company image.
Time standards: machine hours, man-hours
Capital standards: current ratio
Monetary standards: income, sales, profits, costs etc.
Quantitative standards: units of production, unit of sales
Intangible standards: morale of employees, competence of managers etc.

Requirements of ideal standards:
i.
Standard must be practical
ii.
Standards must be scientific
iii.
Standards must be simple to understand
iv.
Standards must be expressed in numerical terms
v.
Standards must concentrated on results
vi.
Standards must be flexible
2. Measurement of actual performance
The results of operation are measured and evaluated in comparison with the standards.
Ideally, measurement should be such that deviations may be detected in advance of
occurrence and avoided by appropriate action.
Effective methods of observation, inspection and reporting are required.
Measurement must be:
i. Clear, simple and rational
ii. Relevant
iii. Direct attention and efforts and
iv. Reliable, self-announcing and understandable without complicated
interpretation.
3. Comparison of actual performance against standard and locating deviation
It involves two steps
i. Finding out the extent of deviations and
ii. Identifying the causes of such deviations
Management may have information relating to work performance, data, charts, graphs
and written reports, besides personal observation to keep itself informed about
performance in different segments of the organisation.
When the standards are achieved, no further managerial action is necessary and control
process is complete.
4. Analysis of variances
Comparison of actual performance with standards will reveal deviations.
Critical deviations are analyzed to diagnose their cause and their impact on the
organization
129
Remedial action can be possible only when the causes of the trouble spots have been
identified.
Find causes of deviations:
i. External environment factors
ii. Internal environment factors
iii. Organizational defects
iv. Imperfections in planning
v. Staffing defects
vi. Flaws in directing techniques
5. Corrective of deviations
This is the last steps in the control process which required that actions should be taken to
maintain the desired of control in the system or operation.
Control action may be
i. Review of plans and goals and change therein on the basis of such
review.
ii. Change in the assignment task
iii. Change in existing techniques of direction and
iv. Change in organisation structure provisions for new facilities.
Types of control:
Control
Based on elements
Strategic control
Based on stages
Operational control
Feedback
Control
Feed forward
Control Control
Concurrent
I. Based on elements:
1. Strategic control
It is the process of taking into account the changing planning premises, both external and
internal to the organisation on which the strategy is based continuously evaluating the
strategy as it is being implemented, taking corrective action to adjust the strategy to the
new requirements.
Aim: proactive continuous questioning of the basic direction of the strategy.
Basic question: are we moving in right direction
Focus: external environment
Time horizon: long-term
Main techniques: environmental scanning, information gathering questioning and review.
2. Operational control
130
It is concerned with action or performance and is aimed at evaluating the performance of

the organisation as the whole or its different components- strategic business units,
deviations and departments.
It can be exercised at different stages of work performance
Basic question: how are we performing
Aim: internal environment
Time horizon: short term
Main techniques: budgets, schedules and MBO.
II. Based on stages:

Feed forward
Control
Concurrent
Control
Inputs
Processing
--------------------------------------------------------------
----
Outputs
Feedback
Control
Flow of information
Corrective action
a) Feed forward (predictive) control

Control monitors critical inputs and suggests preventive measures in the form of
corrective action
Correcting inputs budgets
b) Feedback control
Feedback monitors or evaluates output variables and suggests remedial or corrective
action.
Correcting inputs morale of employees, reducing cost etc
c) Concurrent control
It measures enable us to take timely action before larger damage take place.
Example: quality control used in production operations enable us to take immediate
corrective action before additional products are produced.
Control areas:
1. Control over polices formulating policy
2. Control over organisation structure organisation chart and manuals are used
3. Control over personnel morale, synergy
131

4.
5.
6.
7.
8.
9.
10.
11.
Control over cost actual cost > standard cost =unfavorable, vice versa
Control over wages and salary programme of job evaluation
Control over method and manpower individual performance, working time
Control over line of product rationalize the line of products
Control over capital expenditure capital budgeting
Control over R &D technical, monetary, personnel
Control over external relation these are regulated by public relations department
Over all control control over each segment of the organisation.
Essential of effective control system:

1. Suitability
A good control system must be tailor-made to suit the nature and requirements of the
activity controlled.
The system of control should be geared to the objectives of the organisation and must be
consistent with the companys total operating system
2. Promptness
An ideal control system should detect and report deviations as soon as, if not before, they
occur.
Timely corrective action is possible only through prompt reporting of deviations and their
causes.
3. Forward looking
A good control system should take into account the possibilities of the recurrence of
deviations.
Example: the need for cash may be forecast in advance to avoid shortage of cash at the
time of payment.
4. Control by exception
It should focus attention on the strategic points or key areas where control action is most
urgent.
5. Objectivity
Standards and measurement of performance should as far as possible be objective,
verifiable and specific.
Control should not be influenced unduly by the personality of the superior and the
subordinates.
6. Flexibility
The system of control should be flexible enough to be adjusted according to changes in
needs and circumstances.
Flexible control can be possible through flexible plans. Flexible budgets, for example,
keep the control system elastic and responsive to changes.
7. Organizational pattern
Organisation structure is a means of control.
Control system should reflect the efficiency and effectiveness of the organisation.
8. Economy.
The cost of installation and maintenance of the control system should be justified by its
benefits.
9. Simplicity
It should be simple to administer. A control system can work effectively when it is
understood by all
132

10.Suggestive
A good system should suggest the necessary remedial action.
Objectives of controlling:
1. To bring actual operational performance on the right track
2. Locating deviations
3. Analyzing deviations
4. Undertaking remedial action
5. Preventing occurrence of deviations
6. Cost control and profit maximization
7. Helping achieve co-coordinated action
8. Maintaining discipline.
Controlling techniques: (control tools or control aids)

Control techniques
Operational control techniques
(It is exercised at the level of various
Operating units by the concerned
Operating manager)
Overall control techniques

(it is exercised by top level
management)
Financial control
(Budgetary control)
Operating control
(Non-budgetary control)
I. BUDGETARY CONTROL:
Definition: budgetary control involves the use of budgets and budgetary reports
throughout the period to coordinate, evaluate and control day to day operations in
accordance with the goals specified in the budget
It is the process of defining desired performance through the preparation of budgets,
measuring and comparing actual results with the corresponding budget data and taking of
appropriate action to correct deviations, if any.
A budget is a recorded plan of action expressed in quantities terms
A budget is prepared to act as a means of controlling operations
Budgetary control naturally involves preparation of budgets and later comparison of
actual with planned expenditure or comparison of actual performance with the budget and
taking corrective actions, if necessary.
A) Budgets
1. Master budget: it is the budget for the enterprise as a whole. It is a coordinated summary
of departmental budgets.
133

2. Production budget: it lays down the quantity of goods to be produced during the budget
period. It lays down the production programme and schedule for enterprise.
i.
Man-hours
ii.
Machine-hours
3. Labour budget: it lays down the estimates of direct and indirect labour requirements for
a given period of time. It is based on production and sales budget.
4. Material budget: it lays down the quantity and quality of raw materials required for
achieving the desired output during the budget period.
5. Cash budget: it contains detailed estimates of cash receipts and cash payments for the
budget for the budget period.
6. Capital expenditure budget: it consists of the estimates of capital investment in plant,
machinery, furniture and other fixed assets.
7. Overhead budget: it contains estimates of overhead costs.
i.
Factory overheads
ii.
Administration overheads
iii.
Distribution overheads
8. Sales budget: it is a forecast of the total volume of sales and also its breakup product
wise and area wise.
9. Fixed and flexible budget: i. A fixed budget is based on a specified level of operations
and it does not show changes in expenditures according to changes in the scale of
operations. ii. Flexible budget shows changes in costs according to varying levels of
operations.
10. Zero-Base Budget:
i.
ZBB is based on a system where each function, irrespective of the fact
whether it old or new, must be justified in its entirety each time a new budget
is formulated.
ii.
It requires each manager to justify his entire budget in detail from scratch
that is zero bases.
iii.
Each manager states why he should spend any money at all. The process of
ZBB involves the four basic steps:
Identification of decision units, that is, clusters of activities or
assignments within a managers operations for which he is
accountable.
Analysis of each decision unit in the context of total decision package.
Evaluation and ranking of all decision units to develop the budget
request and
Allocation of resources to each unit based upon ranking
B) Control through costing
Standard costing a method of ascertain cost.
Standard cost- pre-determined cost (material cost, labor cost, and over heads cost)
Variance = standard > actual - favourable
Variance = standard < actual unfavourable
Standard costs are predetermined costs which are used as standards for measuring actual
performance. It distinguishes between controllable and uncontrollable costs. Standard
costing and marginal costing are useful means of cost reduction and cost control.
Cost, Volume and Profit analysis (CVP) It discloses the relationship between cost,
volume and profit.
134
Break Even Point: the point where is intersect the total sales curve and the total cost
curve i.e No Profit and No Loss.
C) Responsibility Accounting
A management accounting system consist of two principal parts: one is called product
cost accounting; the other is called responsibility accounting.
It focuses attention on MBO rather than MBD(domination)
It cost are assigned to responsibility center rather than to products.
A responsibility center is an organisation unit, such as division, department or section,
head by responsible person.
Head is made responsible for the controllable cost.
It is a system of controlling, whereby the performance of managers is judged by assessing
how for they have achieved the targets set for their departments or sections for whose
performance they are responsible.
There are three types of responsibility centers:
In the Cost centers, the control system measures only the costs incurred
by responsibility centers; no attempt is made to measure the value of
their outputs. Thus, most individual departments and staff departments
are cost centers.
In profit centers, the targets are fixed in terms of profit which is
measured by the amount of input and output.
In the investment centers, managers are held responsible for the
effective use of assets as well as for revenue and costs.
D) Internal Audit
It is an effective tool of managerial control
Internal audit is carried out by managers themselves or by special staff appointed for this
purpose.
It is appraises policies, procedure, quality of management, effectiveness of method etc.
Internal audit is vouching and verification of accounting by a staff of internal auditors
and is also concerned with examining the overall operational efficiency of the enterprise.
Scope: appraisal of financial controls, compliance with polices and procedures,

efficiency in utilizing resources and appraising quality of management performance etc.
Advantages of the Budgetary Control System:
1. Expression of planning in definite terms
Since budgets are a numerical expression of business plan the budgetary control systembuilt around the concept of budgeting expresses plans in definite terms.
2. Comprehensive managerial technique
Planning and controlling are two extremes of budgetary control and other managerial
function viz. organizing, staffing, direction naturally fit into the budgetary control
structure at their appropriate places
3. Communication of jobs (or duties) though budgets
135
The budgetary control system is the mouthpiece of management as budgets convey to

people what jobs are assigned to them or what role they are supposed to play, in the
organizational life.
4. Instrument of co-ordinations
Through budgets, the functioning of functional departments, management level and
actions of individuals throughout the enterprises are all endeavoured to be cocoordinated.
5. Profit-maximization attempted through cost-control
The budgetary control system helps management to strive for the profit-maximization
goals in a legitimate manner
6. Fixation of responsibility facilitated
Responsibility for weaknesses or shortfalls in performance can be easily fixed through
the budgetary control system.
Limitation of budgetary control system
1. Difficulty in setting rational standards
Despite the adoption of the best scientific approaches to setting rational standards:
prejudices, bias and personal opinions of manger enter the budgetary control system,
through the back door.
2. Danger of over-budgeting
Regulating the organizational operational life through the budgetary control system might
carry a danger of over-budgeting.
3. Lack of department co-operation and co-ordination
There might be a lack of departmental co-operation and co-ordinations, while designing
and implementing the budgetary control system
4. Umbrella for inefficiency
It may become an umbrella for hiding organizational inefficiency as many people might
act within budgets though remaining highly inefficient otherwise.
II. NON-BUDGETARY CONTROL
1. Quality control
Quality is sense of appreciation that something is better than something else.
The concept of quality is fitness for use and the methodology adopted is defect
prevention rather than inspection and rejection.
Quality of an item refers to the ability of a product to satisfy its intended purpose in
relationship to the price.
The function of quality control is an integral part of management control. Quality control,
if it is effectively done, results in many benefits.
They are: i.it minimizes waste, ii. Reduces costs, iii. Builds up goodwill of the product in
the market, iv. Facilitates advertising and v. increases sales
2. Total quality management (TQM)
There is very high emphasis on quality both for products and service.
Create customers and retain customers
3. Quality control through Quality Circle.
QC Japanese- JIT, KANPAN, KAIZEN, SIC SIGMA etc,
136
QC is a group of employees that meet regularly to solve problem affecting its working
area.
This group carries on continuously as a part of organisation-wide control activities, selfdevelopment and mutual development and control and improvement within the
workplace utilizing control with all members participating.
Generally six to twelve volunteers from same work area make up the circle.
4. Inventory control
Inventory consists of raw material, work-in-progress and finished goods.
Inventory is kept at a particular level.
i. ABC Analysis
- Technique for classifying different items
- This technique use the values of different types of inventory for their
classification
- A A group consists of those items which have high value though their number
may be low
- B B group items fall in between with average value and number.
- C- C group items have very low value but their number may be more.
Inventory classification
Group
A
B
C
no: of items (%)

15
30
55
100
value of inventory (%)

70
20
10
100
ii. Economic Order Quantity (EOQ)

- EOQ is a mathematical formula employed in the determination of base stock
- It guides efficient inventory management
- It explains how to maintain the stock economically.
4. Time Even Network Analysis
This is undertaken to ensure that the programme or project is completed within the
stipulated time
i. Gantt Chart
Henry Gantt identified the relationship among different activities required to complete a
programme.
A- task
B-task
C- task
ii. PERT/CPM
137
PERT (Programme Evaluation Review Technique) uncertainty in the duration of activities

is allowed and is measured by three parameters.
- Most optimistic duration
- More likely duration
- Most pessimistic duration.
CPM (Critical Path Method) assumes the duration of every activity to be constant
therefore, every activity is either critical or not
Uses: i. Minimize total time for a given cost, ii. Minimize total cost for a given total time.
II. OVERALL CONTROL TECHNIQUES (PREVENTIVE CONTROL)

1. Financial Ratio Analysis
i. Control through Return On Investment
ii. Management Audit
iii. Social Audit
2. Human Resource Accounting
3. Management Information System
1. Financial Ratio Analysis
The relationship between two financial variables in order to derive meaningful
conclusion about their behaviour.
Financial statement analysis helps in diagnosing the health of a business concern.
Analysis of profitability, liquidity and solvency ratios an important of control of overall
performance.
Ratio analysis helps in making inter-firm and intra-firm comparison.
i. Return on Investment (ROI)
ROI or rate of return is the ratio total profit and total investment.
It can be used to appraise the overall profit performance of company and of its various
segments.
It may be used for both planning and control purposes.
The rate of return criterion is most useful in long-term investment decisions.
ROI can also be used to compare the relative contributions of different products to overall
profitability of the firm.
ROI
TURNOVER-----------------Multiplied by---------------------------SALES
--divided by-----
TOTAL
INVESTMENT
EARNINGS
WORKING +
CAPITAL
EARNINGS AS %
OF SALES
PERMANENT
INVESTMENT
138
---divided by----
SALES

SALES
INVENTORY
ACCOUNT
RECEIVABLES
----mins-------
COST OF
SALES
+ CASH
FACTORY
COST
OFFICE
COST
SELLING
COST
2. Management Audit
Management audit is an evaluating of management as a whole
It examines the total management process of planning, organizing, staffing, directing and
controlling.
A periodically done critical analysis of various components of organizations as a whole;
its end-results; deviation and degree of impact of various factors resulting in deviations in
the principles and practices of managerial functions at different levels in the organisation
may be called MA.
It is a periodic evaluation of the past and present managerial practices to identify the
adjustments necessary to make the organisation more effective.
Areas:
- An appraisal of managers
- Economic functioning of the enterprise
- Fulfillment of major social responsibilities
- Functioning of the Board of Directors
- Soundness of organizational structure.
- Emphasis of research and development etc.
3. Social Audit
Social audit is concerned with the measurement of social performance of an organisation
in contrast to its economic performance.
The application of the concept of social may be attributed to an increasing awareness of
social responsibility by business enterprise.
It is designed to measure the value of productivity capability of organizations human
resources and value of the various parties external to the organisation but interacting with
the organisation.
4. Human Resources Accounting ( HRA)
To measure the performance in the use of human resources, Likert has developed the
technique of HRA.
HRA is accounting for people as an organizational resource. It involves measuring the
cost incurred by business firms and other organisation to recruit, select, and hire, train
and development human assets. It also involves measuring the economic value of the
people to the organisation.
Its basic purpose is to facilitate the effective management of human resource by
providing information to acquire, develop, retain, utilize, and evaluate human resource.
5.Management Information System
Though MIS is not a control technique it is quite helpful in planning, controlling and
other organizational processes.
The flow of information is made regular by information by system.
139
MIS the system of providing needed information to each manager at the right time, in
right form, and relevant one which aids his understanding and stimulates his action.
MIS is an assemblage of personnel and facilities organized into an integrated system by
which-relevant, adequate and timely information is supplied to executives.
MIS consists of following steps:
i.
Assembly collection of data
ii.
Processing editing of data, their classification, and summation
iii.
Storage and retrieval indexing, coding, filing of information and
getting back information.
iv.
Evaluation- determination of accuracy and relevance of data
v.
Dissemination supplying the relevant information in the proper
form and at the right time.
MIS a blue print
Information with increasing use of electronic devices computer.
Principle of preventive control system:

The principle of preventive control, thus, is that the higher the quality and caliber of
managers; the lesser will be the need for direct controls.
Assumptions underlying preventive control system
1. Assumption that qualified manager makes a minimum of errors.
2. Assumption that management fundamental can be used to measured performance
3. Assumption that the application of management fundamentals can be evaluated.
Advantages of Preventive Control
1. A basic for managerial training/development
2. Encouragement to self-concept
3. Managerial burden lightened
4. Better superior-subordinate relationships.
Developing excellent managers- the key to preventive control
1. Willingness to learn
2. Planning for innovations and inventions
3. Tailoring information
4. Acceleration of management development programme
5. Measuring managerial performance and rewarding it
6. Need for management research and development
7. Need for intellectual leadership
PRODUCTIVITY
It may be defined as the output- inputs ratio, within a given time period and with due
consideration for quality of performance.
Productivity is the ratio of the inputs facilities to the output of goods and services.
140
In general sense, productivity is some relationship between inputs and outputs of an

enterprise. It is the quantitative relationship between that we produce and what resources
used.
Productivity means a balance between all factors of production that will give the
maximum output with the smallest effort.
Measure of Output
output
Productivity = ------------------------(or) ------------Measure of Input
input
QT
Pt = -----------------L+C+R+M
R = Raw Material
M= miscellaneous
Pt = Total Productivity
L = Labour
C = Capital
Importance:
The aim should be optimum use of resources so as to provide maximum satisfaction with
minimum efforts and expenditure.
Productivity analysis and measures indicate the stages and situations where improvement
in the working of inputs is possible to increase the output.
It can be used different purpose:
- Comparison of performance for various organizations
- Contributions of different input factors
- Bargaining with trade union etc.
Factors affecting productivity:
Category I:
1. Primary factors are efforts and working capacity of an individual
2. Organizational factors the design, transformation process, nature of training, skills of
workers etc.
3. Conventions and traditions of the organisation. E.g. activity of labour union, medical
facilities, executives
Category II
a) Factors related to output
R&D techniques, improvement of technology, efficient sales strategy of the organisation
will lead to improvement in output
b) Efficient use of input resources better stores control, production policy, maintenance of
machines etc. will minimize the cost of production.
Category II & I can be classified into four major classes

1. Technological: it can increase the output per unit of input substantially.
2. Managerial factors: organizational structure, scheduling work, financial management
layout, innovation, personnel policies, material management etc.
3. Labour: skills of the workforce, health, attitude towards management, training, discipline
etc.
141

4. External factors: power, transport facilities, tariffs and taxes etc.
Ways of Increasing Productivity:
It can be increased wither by reducing the input for the same level of output or by
increasing the output with the same level of input or by combinations of both.
This can be achieved by elimination of waste by using improved technology, better
production design and management efforts.
Techniques of improve productivity
1. Better planning and training of employees, improved job and communication and
effective management CPM/PERT method.
2. Use of time and motion studies to study and improve performance
3. Better transportation and material handling system
4. Value engineering to reduce material content by good design.
Measurement of productivity (mainly two)
1. In terms of input performance by calculating in output per unit of unit of input.
2. On the basis of output performance by calculating change in input per unit of
output.
Measures:
Amount of output
1. Labour productivity: ----------------------------Amount of labour
(Total man hour x rate)
2. Capital Productivity =
Turnover
------------------------Capital employed
Profit
3. Profit Productivity = -----------------Investment
Output
A general measures of productivity:---------------------------------------Labour +capital+ other inputs
In fact, the measures of productivity indicate the performance of inputs namely labour,
capital and other inputs in an organisation.
OPERATIONS MANAGEMENT
OR
PRODUCTION PLANNING AND CONTROL
Production management and operations management is one and the same thing. In fact,
operation management is a new name for production management.
Operations management is the designing, operating and controlling of production systems
whereby, products/services are produced/delivered, through a process of conversion from
inputs to output.
It coordinates supply and movement of materials and labour ensure economic and
balanced utilization of machines and equipment as well as other activities related with
production to achieve the desired manufacturing results in terms of quantity, quality, time
and place.
142

Objectives of operations management
1. Determining the nature and magnitude of various inputs factors to manufacture
the desired output.
2. To coordinate labour machines and equipment in the most effective and
economic manner
3. Establishing targets and checking these against performance
4. Ensuring smooth flow of material by eliminating bottlenecks, if any, in
production.
5. Utilization of under employed resources.
6. To manufacture the desired output of right quality and quantity at right time.
Structure
Works Manager
Production planning and control manager
Production engineering
Section
material
manager
inventory
controlshipping
Section
receiving and
section
Production planning categories

Routing
Scheduling
loading
Routing: it means determines of path or route over which each piece is to travel in being
transformed from raw material into finished goods.
Scheduling: the determination of time that is required to perform each operation and also the
time to perform the entire series as routed is scheduling.
Loading: the study of the relationship between load and capacity at the places where work is
done.
Process of operation management
External Environment
Inputs
1.
2.
3.
4.
5.
6.
Information
Technology
Raw-materials
Manpower
Management
Physical factors
(land, buildings etc)
transformation or
Conversion process
planning, operating
and controlling the
production system
143
output
products
services

7. Other necessary inputs
Feedback
External Environment
Steps involved in operation management

1. Planning the system
i. Search for selection of the product or service
ii. Production design
iii. Determination of production layout
2. Operating the system
i. Setting up an organisation structure
ii. Staffing positions and training people
iii. Supervising workers, so that theory produce desired goods/services
iv. Motivating and leading people, to get best performance output of them.
3. Control the system
i. Quantity and quality of output
ii. Utilization of raw material and wastages,
iii. Price and quality of raw material purchased.
iv. Inventory levels of raw materials and finished goods etc.
Tools of operations management:
Operations Research: OR might be defined as quantitative common sense for obtaining
optimum solutions to business problems.
OR includes: i. Liner programming, ii. Just-in-Time (JIT) inventory system etc.
GLOBAL MANAGEMENT THEORY
Proverb = Merchant has no Nation
International Management is the process of planning, organizing, leading and controlling

in organizations engaged in international business.
A multinational corporation (MNC) is an organisation that is engaged in production or
services through its own association in several countries, manages and control the overall
activities from a global perspective
Multinational companies are large in size and are engaged in substantial amount of
business throughout the world
The shift towards a more integrated and interdependent world economy. Globalization
ha two main components the globalization of markets and the globalization of
production. charles
Interdependency and integration of individual countries of the world may be called the
globalization.
Features of globalization:
144
Operating and planning to expand business throughout the world.

There must be a global approach to market, a free market or a competitive market.
Products, process and methods must fit in with the global quality standards.
Management must have a global perspective.
There must be a global acceptability of products and policies
Erasing the difference between domestic market and foreign market
Sourcing of factors of production and inputs like raw material, machinery, finance,
technology, human resource, managerial skills from the entire global.
Global orientation in strategies, organizational structure, organizational culture,
managerial expertise.
Example:
Mazdas sports car MX 5 Maita,

Designed California
Prototype England
Assembled-Michigan and Mexico
Using electronic components New jersey
Fabricated Japan
Sources of Finance Tokyo and New York
Marketed - world wide
Components of Globalisation
Globalization is tending toward a more integrated global economic system.
Components of Globalisation
Globalisation of
Markets
Globalization
Production Investment
1.
2.
3.
Globalization
Technology
Globalization
Globalisation of markets:
Global acceptance: Coca-Cola, Pepsi, McDonalds burgers, Indian Masla Dosa
Globalization Production
Labour cost: china low, India low, USA high, German high.
Globalization investment
Foreign Direct Investment, Coca-Cola acquired a number of bottling companies
throughout India by investing the capital directly.
4. Globalization of Technology
B2B, B2C, Joint Venture
Advantages:
1. Free flow of capital
2. Free flow of technology
145

3. Increasing in industrialization
4. Balanced development of world economy
5. Increase in production and consumption
6. Increase employment and income
7. Higher standard of living
8. Culture exchange
Disadvantages:
1. Kill domestic business.
2. Leads to unemployment and under employment
3. Decline in demand for domestic products (home country)
4. Widening gap between Rich and Poor
5. Transfer of Natural Resources
6. Leads to commercial and political colonialism.
UNIT V
Evolution of Indian management
146
Innovation Process Management

Challenge contemporary
The primary challenges associated with innovation process management

include difficulty identifying and investing in the best ideas for the correct
market with the right resources, a lack of coordination, and challenges
measuring innovation. Organizations often do not have structured innovation
processes in place to drive transparency, metrics development, or crossfunctional collaboration.
Employees are faced with limited opportunities to contribute and often
struggle to socialize ideas within the organization.
Within many
organizations a lack of coordination and long development times lead to
limited customer insight. As speed and coordination are critical to many
organizations success, an effective collaboration process is essential to turn
insights into ideas and action.
Solution
147

The Microsoft Innovation Process Management (IPM) Solution is built on the
Microsoft Office SharePoint Server 2007, and the Microsoft Enterprise
Project Management (EPM) Solution, enabling organizations to facilitate the
six stages of innovation process management.
Strategize and Capture Ideas
In order to foster innovation, an organization must first establish and
prioritize business drivers and metrics. Microsoft Office SharePoint Server
2007 (MOSS) provides a flexible, customizable management system for ideas
and their associated content. Employees can capture their thoughts and
collaborate with others on idea definition.
With Office SharePoint Server 2007, an integral part of the Microsoft
Enterprise Project Management Solution, ideas are captured and centralized
in a collaborative portal. Employees can search to find internal and external
expertise, and gather sales history data to develop a business case for
innovation. Workflow and collaboration technology can then be used to help
create a cross-functional team and collaborative workspace for idea
submission. In addition, Microsoft Office SharePoint Server 2007 provides a
collaborative atmosphere that facilitates team involvement in an ad-hoc or
structured environment.
Formulate and Objectively Evaluate Initiatives
Ideas are formulated according to business cases that include strategic
impact, market potential, financial analysis, and SWOT analysis. Ideas can
then be published for review using Microsoft Office SharePoint Sever 2007
and Microsoft Office InfoPath 2007. Team members can provide ratings,
reviews, and feedback to help determine the ideas importance.
Microsoft Windows Rights Management Services enables team members to
set permissions for classified documents and e-mail so that intellectual
capital is secure from its inception, preventing loss due to ideas being leaked
to competitors or being used to create a new competitive business.
Managers can establish and prioritize business drivers and metrics to
facilitate the innovation process with Microsoft Office Project Portfolio Server
2007, a part of the Microsoft Enterprise Project Management Solution.
Submitted ideas can be selected according to business drivers, analyzed
within the portfolio, objectively evaluated, and high-rated ideas approved.
Define and Select Projects
148

Microsoft Office Project Server 2007 is used to manage the selected ideas
throughout the project life cycle. Managers can build project teams and
execute the project while taking into consideration design, market potential,
and legal evaluation. After the review is finalized, a design document is
prepared that provides a project workspace for team collaboration. Project
managers can create workspaces for innovation team collaboration, assign
resources and skills to projects, and track project progress using the
SharePoint Server 2007 portion of the Microsoft EPM Solution.
Managers can provide final funding approval to selected innovation projects
with Microsoft Office Project Server 2007 and proceed to delivery processes
such as New Product Development (NPD), enabling end-to-end project
management and tracking, from idea to conclusion. Executives can align
ideas and select proposals that align with the organizations overall business
strategy.
Diversity and Diversity Management
Introduction
Diversity refers to any perceived difference among people: age, race,
religion, functional specially, profession, sexual orientation, geographic origin,
and lifestyle, tenure with the organization or position and any other
perceived difference. Diversity is more than equal employment and
affirmative
action.
Diversity management is ensuring that factors are in place to provide for and
encourage the continued development of a diverse workforce by melding
these actual and perceived differences among workers to achieve maximum
productivity. Diversity management involves creating a supportive culture
where all employees can be effective. In creating this culture it is important
that top management strongly support workplace diversity as a company
goal and include diversity initiatives in their companies' business strategies.
It has grown out of the need for organization to recognize the changing
workforce and other social pressures that often result. Diversity is more than
being politically correct; it is about fostering a culture that values individuals
and
their
wide
array
of
needs
and
contributions.
Why
Diversity
Management?
Employees of organizations are becoming increasingly heterogeneous. With

the passing of days, diversity is going to be an important issue for the HR
manager
for
the
following
reasons:
*
*
large
number
Work-force
of
women
mobility
149
are
joining
is
the
work-force.
increasing.
Young
workers
in
the
work-force
are
increasing.
* Ethnic minorities' proportion constantly in the total work-force is

increasing.
*
International
careers
and
expatriates
are
becoming
common.
* Necessity of international experience is felt for career progression to many

top-level
managerial
positions.
Benefits
of
Diversity
Management
More specially, diversity when built into organization at different levels, offers
the
following
benefits:
*
Easy
entrance
Large
High
To
to
changing
scale
give
market
business
quality
transformation.
to
*
Guidelines
with
quality
suppliers
Uninterrupted
learning
for
service.
work-force.
Total
Alliances
situation.
customer
power
*
*
Diversity
and
customers.
process.
Management
The following are some important guidelines to manage diversity effectively:

* To consider female employee needs, such as child care and job sharing, to
prevent
their
turnover.
* Commitment from top management towards value diversity is a prerequisite.
* To arrange mentoring programme by senior managers to identify
promising women and minority employees and play an important role in
nurturing
their
career
progress.
* To arrange diversity training programmes to bring diversity awareness and
educate employees on cultural and sex differences and how to respond to
these
in
the
workplace.
150

* There should be an apprenticeship programme to trained promising
prospective employees properly before they are actually hired on a
permanent
basis.
* Employer should set up a support group to provide a nurturing climate for
employees
who
would
otherwise
feel
isolated
or
alienated.
* To conduct diversity audit to review the effectiveness of an organization's
diversity
management
programmes.
* There should be a proper communication which includes speeches by
senior executives, inclusion of diversity in corporate vision statements, the
publication of diversity brochure and inclusion of diversity as a topic in new
employee
orientation.
* Managers need to be sensitive to the needs of working parents.
Global Adaptation of Japanese Management Practices: What You May Be

Able To Adopt
Professor Mayumi Otsubo
Professor Otsubo lead a seminar at UNUM Corp., Portland, Maine on May 7, 1993. He
began his seminar with 10 items that distinguish Japanese Management Practices, and
then went into some detail about each of them. He speaks almost entirely from a
manufacturing perspective, but it is not hard to see how many of his points apply just as
well to service. His address: Mayumi Otsubo, Professor of Management, University of
Shizuoka, 395 Yata, Shizuoka City, Shizuoka, Japan 422.
1.
Market
First
- Products are made for the U.S. market, not the Japanese market. Usually a product is
made for the factory, that is, it is easiest for the factory to make. While this happens in
Japan, it is a sure way to loose the competitive edge.
- From the beginning, the Japanese are export minded.
- They learn from their markets and their customer, and how the market is changing.
- As Romans do in Romelocalize products. An example is Ford built a single car for
world export, the so called world car. It didnt work. McDonalds and Coke, however,
taste slightly different in Japan than in the U.S. They succeeded; with localization comes
a loss of your identity. It is also necessary to learn how to manage people in different
cultures. He suggests that the Japanese are struggling with how to manage white collar,
information workers.
2.
Long
Term
151
Commitment

- Relationships are critical to good business. Trust is more important than contracts,
receipts and law courts. Trust takes time and patience, but so does legal wrangling.
- Learninginformation and know-how accumulation.
- Stability and Flexibility especially with customers, suppliers, employees and investors.
In down times Japanese companies avoid layoffs and contract terminations. They use
this time to send employees out to talk to customers, train or re-train them, clean the
physical plant, and so on. The government supplies funds for training during slow
economic times.
- The Japanese spend much more time up front with a potential customer or supplier
before making a commitment.
3.
Training
- On the Job Training.
and
Education
- Communication Plaza Conceptwhile this is fading in Japan, employees meet with the
executive informally over lunch or dinner to listen to each other.
4.
Get-in-Touch,
Learning
From
Facts
- Mix with employees and customers. Japanese engineers, e.g., go to the factories, and
dont wear distinguishing jackets or hard-hats. An insight in Japanese cultureJapanese
neighborhoods are less stratified in terms of economic class. CEOs may live next door to
engineers and factory workers.
- Genbutso Genba (facts, figures and check)Develop theories and check with the facts,
learn from facts, see it and touch it.
- Learn from competitorsAmericans are creative, but would be smart to do more
copying. Japanese are world class at copying and improving upon an idea, but would be
smart to develop their creativity.
5. Effort Evaluation
- Process versus Resultsthis seems to be the key difference between Americans and
Japanese. Americans are more results oriented, Japans focus on process improvements.
Once they learn how to do something, they work on small improvementsthey evaluate
effort not results. Because Americans are process averse, they depend on manuals to tell
what the results should be.
- Blue collar workers like the rewards in a process environment, i.e., for their effort not
the result, especially in a service environment.
- The down side of the process focus is to squelch creativity. Overall, the two cultures
should learn from each other, and become more like each other. Neither completely
process nor completely results focused.
152

6.
Customer
First
and
Shareholder
Last
- The priority order of customers and suppliers is different for U.S. and Japanese
businesses:
Japan
America
1. Customer
1. Shareholder
2. Employee
2. Customer
3. Supplier
3. Employee*
4. Community
5. Country
6. Shareholder
* but the employee is told the customer is number 1

- American entrepreneurs follow more closely the Japanese ranking.
- The Japanese firm is organized for the employee. It is a more human orientation. Here
we build an organization, and find employees to fill it. [I heard from another source, the
right hand person to the CEO is the CFO in American firms. In Japanese firms the right
hand person is the VP of Human Resourcesed.]
7. Team Work
- The Japanese and Americans see two different meanings behind these words. In Japan
team work means to help others, here it means functional maximization, that is to
improve results.
- This leads to a difference in the roles on the team. In Japan the team leader is always
asking team members to help more, here the team leader is responsible for results.
8. Flexibility
- General management transfers to any department, it is fuzzy and easy to adopt.
Americans tend to specialize, which leads to rigidity and difficulty in changing.
- Japanese take the long range view, and ask How long can you wait? This can also lead
to a lack of decisiveness.
9. Quality First, Cost Last
- This is the proper ranking of quality in the organization:
153

1.
2.
3.
4. Cost
Quality
Quality
Quality
- Profit is the result of the pursuit of qualityas quality improves, costs go down.
- Quality includes products, services, machines, layout, policy, planning and
organization.
10. Learn From the Best
- Always look at someone better. The problem is when you get to the top, you have to
become more creativethis is Japans challenge.
- Short comings of Japans practices are:
- Lack of Decisiveness: they are not transparent. Decisions sometimes take too long and
they loose their timing.
- Individual Ability Ignored: miss creative opportunities.
- Miss Strategic Opportunities: too much delay and time.
[Following this presentation, Professor Otsubo took questions from the
audience:]
More on Process and Results. Must have a good mix of process and results. In an
organization, some departments must focus on process and others on results. Example,
accounting must be process focused, while finance is results focused. Quality can save
costs because you dont need as many supervisors, and less people to fix problems.
America and Japan are Closing the Quality Gap. One insight into Japanese
thinkingIf the Yen is trading at 110 to the Dollar, Americans will focus on being
profitable at that rate. The Japanese will look ahead, can we still be profitable at 80?
Long Term Changes in Japanese Management. Japan will become more results
focused, and more creative. They will not change the focus on a human organization.
After all, the organization must provide for human welfare and happiness.
Demographics. Japanese population over the age 65 is growing twice as fast as the
group under 15. The shrinking population will drive more women into management after
the year 2006. Japanese industry will focus on more automation and high value added.
Maybe more foreign labor, but more likely to do more work in China and Russia.
Training. Like the U.S., many Japans workers are not well educatedtheir focus is on
practical training such as reading, machine operation, and problem solving methods.
Japan will focus on teaching their workers how to changecross training and so on. A
key difference in education between the U.S. and Japan is that here we get our education,
and then go to a corporation to work. In Japan, one gets a job, and then gets their
154

education. He thinks Japan ought to have more business schools given the new global
focus.
Managing Knowledge Workers and Professionals. This is something he has been
struggling with, but some of his thoughts are to eliminate controlsprovide targets and a
framework and ask them to put forward their best efforts. Management by results not
process. [Sounds like the American paradigm is actually a plus hereEd.]
Success in Japan. Focus on niche marketing. Take the time to build long term
relationships.
Hoshin Kanri (process management). Improvement of management quality means
corporate policies must be:
1.
Written
2.
3.
4.
5.
6.
7.
8.
Report
and
9.
10. Suggestions and Recommendations
and
Review
Formalized
Integrated
Implemented
Flexible
Participation
Coordinated
Communication
Periodically
Feedback
[Our sincere thanks to Professor Otsubo for providing us with his insights and
observations. While one culture cannot simply adopt another culture, there is a great
deal we can learn from one anotherEd.]
Management practices in the United States, Japan, and the People's Republic of China.
Management Practices in the United States, Japan, and the People's Republic of China
Productivity levels are of great concern to every country on the face of the earth. In
recent years, many U.S. businesses have looked to Japan to find the answer to the
productivity crisis in the United States,
while many Japanese scholars attend universities in the United States to learn
about management. Japan's phenomenal success in increasing productivity is often
attributed to its managerial approach and low wage rates. But with the rise of the
Japanese yen and the fact that the labor cost component of products becomes
increasingly less important, managerial competence becomes even more crucial.
There is an abundance of literature on both U.S. and Japanese management; one such
book even made the best-seller list. But the literature on Chinese management is very
155

sparse. Since Japan and the United States present contrasting managerial approaches,
Chinese managers probably could adopt aspects from either approach. But which
country uses managerial practices that would be appropriate for making Chinese
businesses more effective and efficient? The first step should be to identify Chinese
managerial practices and to analyze whether they are closer to the U.S. or the Japanese
model. Then they should be compared and contrasted with current practices used by
large, state-owned businesses in China.
There is general agreement on the basic characteristics of Japanese and U.S.
management, but there is less agreement--and certainty--about the transferability of the
practices (not the science) of management to other cultures. In the 1960s, scholars and
practitioners were very much concerned about the universality and transferability of
management. A great deal of controversy centered on the question of whether
management is culture-bound. Some suggest it is, while others point to the universality
of management. Harold Koontz, who developed one of the most comprehensive models
of comparative management, concluded that the opinion differences about the
universality of management can probably be attributed to the fact that management as
science--organized
knowledge--has
universal
application,
but
the
practice
of
management is an art and as such must be adapted to the situation.

we have To understand what management is, we have to ask "What do managers really
do?" One of the most widely used frameworks for structuring managerial knowledge is to
take the managerial process and divide it, as a first order classification, into the functions
of planning, organizing, staffing, leading, and controlling. Key managerial activities are
then grouped within these functions. We will first discuss these functions and then point
out the differences of managing in the United States and Japan.
The managerial functions will serve as a framework for comparing and contrasting the
managerial approaches in these three countries (see sidebar). At the outset, a word of
caution is in order. It is obvious that not all companies are managed the same way as
discussed here. We must also realize that very few empirical studies exist, especially for
Chinese management, and that most of the available literature is descriptive. Many
writers point out the differences in the managerial practices in Japan and the United
States, or in the West in general. But others report that, for example, no differences have
156

been found in participation in the decision-making process or in job satisfaction in Japan
and elsewhere. Therefore, the contrasting managerial approaches are suggestive.
In Japan, planning is greatly aided by cooperation between government and business.
After World War II, Japan developed policies for economic growth and strength as well
as international competitiveness. These policies harmonized monetary and fiscal policies
within the industrial structure. In this kind of relative economic predictability, environment
planning is less risky. Planning is choosing the purpose and objectives of the
organization as a whole or a part of it and selecting the means to achieve those ends. It
requires making decisions. The Japanese, in general, have a longer-term orientation in
planning than U.S. managers. One reason for this is that in Japan banks are the primary
providers of capital and their interest is the long-term health of the businesses.
In contrast, U.S. managers are often under pressure by stockholders to show favorable
financial ratios each time they report them. This, unfortunately, may not encourage
investments that have a payout in the more distant future. Also, Americans usually stay
in their managerial positions only a relatively short time and myopic decisions can
seldom be traced to the manager who had made the decision. Yotaro Kobayashi, the
executive vice president at Fuji Xerox, has admitted that the Japanese learned a great
deal about systematic long-range planning from the Americans
In China, the situation is quite different. Most of the businesses are state-owned, and it is
only more recently that some private companies have come into existence. In our
comparison, however, we focus only on the former. In these businesses, both long- and
short-term plans are prepared. The five-year plan is prepared at the top (the State
Planning Commission) while more detailed plans are made at lower levels. The
orientation is to meet objectives and achieve the assigned plan, rather than to be
successful in the market. There is also the difficulty of integrating organizational and
personal goals because the achievement of organizational objectives has little bearing
on individual benefits.
One of the most interesting aspects of Japanese management is the way decisions are
made. In a typical organization, several levels are involved in making the decision.
Actually, the most important part of the process is understanding and analyzing the
problem and developing various alternate solutions. The final authority for making a
decision still rests with top management, but before a proposal reaches the executive's
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desk, the problem and the possible solutions have been discussed at various levels in
the organizational hierarchy. Top management still has the option to accept or reject a
decision. But more likely a decision is returned to subordinates for further study, rather
than being rejected out-right.
A proposal is confirmed through the "Ringi" process. The "Ringi-Sho" is a proposal
document prepared by a staff member. This paper is circulated among various managers
before it goes to top management for formal approval. The document, which is usually
initialed by those involved in or affected by the decision, elicits cooperation and
participation of many people. This, in turn, assures that the problem or the decision is
examined from different perspectives. That this decision-making process is timeconsuming is obvious. But after a consensus is reached, the implementation of the plan
is rather swift because the understanding of the plan, the clarification of the problem, the
evaluation of the different alternatives, and the involvement of those people who will
implement the decision. But the sharing of the decision power and responsibilities can
also result in a problem so that no one feels individually responsible for the decision.
In U.S. organizations, decisions are made primarily by people and usually only a few
people are involved. Consequently, after the decision has been made, it has to be sold
to others, often to people with different values and different perceptions of what the
problem really is and how it should be solved. In this way, the decision-making is rather
fast, but its implementation is very time-consuming and requires compromises with those
managers holding different viewpoints. The decision that is eventually implemented may
be less than ideal because of the compromises necessary to appease those with
divergent opinions. It is true that decision responsibility can be traced to people, but at
the same time, this may result in a practice of finding "scapegoats" for wrong decisions.
In all, the decision power and the responsibility is vested in certain people in U.S.
companies, while in Japan people share both decision power as well as responsibility.
In China, major decisions are made by people at the top, but many people are involved
in operational decisions. Lower-level managers have very little authority to make
decisions. Decision-making through the central planning bureau is under the direct
control of the state. This, unfortunately, results in a lack of flexibility in the
implementation of the decisions. Although there is a realization of the need to change,
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managers in the upper echelons of the hierarchy resist reforms because it would mean
giving up some of their privileges they have as officials.
Organizing involves setting up a structure to coordinate human efforts so that people can
contribute effectively and efficiently to the aims of the business. This requires
determining roles, responsibilities, and accountability.
In Japanese companies, largely due to the search for consensus in decision-making, the
emphasis is on collective responsibility and accountability. Individual responsibilities,
then, are implied rather than explicitly defined. Although this may discourage placing the
blame for an incorrect decision on people, it also can create a great deal of uncertainty.
In fact, the organization structure is rather ambiguous and the de-emphasis on formal
authority promotes informality and egalitarianism. Another characteristic found in
Japanese companies is a common organizational culture and philosophy that places a
high value on unity and harmony within the organization. At the same time, there is a
competitive spirit toward other businesses. Organizational change is accomplished by
changing processes, with the aim of maintaining harmony among those affected. Also,
the change agent (OD consultant) is virtually always an employee of the company.
Organizations in the United States emphasize individual responsibility, with efforts to
clarify and make explicit who is responsible for what. Job descriptions are perhaps the
best evidence of this. Many organizations, especially those operating in a stable
environment, have been rather successful in using the formal bureaucratic organization
structure. As far as the climate is concerned, not many managers make special efforts to
create a commonly shared organization culture. This may indeed be difficult because
professionals--managers as well as technical people-often have a closer identification
with their profession than with a particular company. In addition, the work force often
consists of people with different values derived from diverse heritages. Many U.S.
companies have a high employee turnover rate, which is partly due to the great mobility
of the people in this country. With a relatively short duration of employment with any one
company, the loyalty toward the company is at times rather low. Organizational change
is often accomplished by changing goals instead of processes. But organizations using
change agents with a behavioral science orientation may focus on interpersonal
processes to reduce conflicts and improve performance. In the United States it is quite
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common to use outside organization development consultants. This is almost never
done in Japan.
Chinese managerial practices are very much influenced by the fact that the businesses
are owned by the state and guided by government officials. This results in a bureaucratic
organization structure that does not respond well to changes in the environment. This
may not have been crucial in the past (although it is ineffective) because managers did
not have to respond to competition. While factory managers, as people, are expected to
achieve the yearly plan, on lower levels the notion of a vague collective responsibility
prevails. Within the formal bureaucratic structure the relationships among people are
rather informal. Recently, attempts have been made through the "factory responsibility
system" to delegate more authority to lower levels. In fact, factories are allowed to make
profits, though these profits are specially taxed. Like in Japan, there are strong
organizational cultures in Chinese businesses. Research indicates that the degree of
identification with the business may vary greatly. Even with a low degree of commitment
to the company, this does not result in frequent organizational changes because it is
very difficult to change jobs among state-owned organizations. And there is a lack of
competitive spirit among Chinese employees.
Staffing requires identifying human resource needs
Staffing requires identifying human resource needs and filling the organization structureand keeping it filled-with competent people. It is in the management of human resources,
in addition to the decision-making process, where the Japanese and Chinese approach
to managing differs greatly from that of the United States.
In Japan, people are hired out of school. For a young man, choosing a place to work is
one of the most important decision he makes after selecting a spouse and a university.
After a person has joined a company, there is hardly any opportunity to find employment
in another company. Promotions are rather slow, and for most young people the first 15
or 20 years with a company are pretty much the same. Still, employees develop a strong
identification with the company, the company takes care of them, and employees repay
with their loyalty. After joining a company, performance is very infrequently evaluated. In
fact, it may take ten years before a formal performance evaluation is made. This does
not mean that the progress is not monitored, but it is monitored on an informal basis.
Working together with others in an office, without walls separating employees and
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superiors, leaves little doubt how well people perform. Furthermore, infrequent
appraisals, encompassing a long period of time, reduce the probability that luck or
misfortune influence the evaluation. What is evaluated is the overall, long-range success
and decision capability of the person. This practice results in linking rewards (such as
promotions) to effective long-term performance. Still, the differences in pay increases are
very small and rewards are essentially based on group and company performance rather
than individual contributions.
Because the employees are an integral part of the corporate community, promotion
practices must be considered by all as being fair and equitable. In Japan, the criteria for
promotion is usually a combination of seniority and merit. Also, educational background
plays a role in promotion decisions. Japanese companies invest heavily in the training
and development of their employees and the practice of job rotation throughout their
working life leads to a broad career path in which employees get exposed to many
different businesses
Perhaps the most pervasive impact on managerial practices is lifetime employment.
Japanese companies make every effort to ensure a stable employment until retirement
age (around 55). At times of economic slowdown, companies usually dismiss part-time
or seasonal employees who are not considered members of the permanent work force,
and rather than laying off permanent employees, they are often transferred to
organizational units that are in need of additional help. But the practice of life-long
employment seems to be on its way out. In an interview, Japanese executives
suggested that life-long employment will have to be slowly modified because it is very
costly and results in a top-heavy organizational structure
.
The management of human resources in the United States is quite
The management of human resources in the United States is quite different from the
same practice in Japan. Like the Japanese, U.S. companies recruit employees from
schools, but they also hire from other companies. High turnover rates among recent
MBAs are quite notorious. Rapid advancement is expected and, if it is not forthcoming,
an employee may change companies. Professionals such as engineers or accountants
often identify more with their profession than with their company, and job-hopping is not
unusual.
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A common practice in U.S. companies is to appraise the performance of new employees
comparatively soon after they are hired. If performance does not meet the company's
expectations, employment may be terminated. But even for those who have been with a
company for many years, performance is evaluated at least once a year and in many
cases their performance gets reviewed periodically during the year. In general, the focus
of performance appraisal is on short-term results and individual contributions to the
company aims. Moreover, differentials in pay increases are often based on individual
performance. These differences in pay may be substantial, especially at upper levels of
management. Promotions in U.S. companies are based primarily on individual
performance. Although progressive companies provide continuous development, training
is often undertaken with hesitation because of the cost and the concern that the trained
person may switch to another company. Thus, employees are often trained in
specialized functions resulting in a rather narrow career path within the company. Finally,
in many U.S. companies, employees feel that they may be laid off during economic hard
times which, naturally, contributes to job insecurity.
The staffing practices in China have aspects similar to those in Japan. Like in Japan,
employees are hired from school. They are expected to stay with the business for a long
time. More recently, however, personnel is also hired from other organizations; but
people are usually assigned to their positions by higher authorities. As in Japan,
employees are promoted slowly through the ranks with regular salary increases.
Lacking in China is the dedication and loyalty to both company (as in Japan) and to the
profession (as in the U.S.). Performance reviews are done infrequently in China (usually
once a year) which is certainly more often than in Japan, and are more like the practice
in the United States. Promotions are supposed to be based primarily on performance,
education, and potential ability. However, family ties and good relations with the superior
greatly influence advancement within an organization. In the past, training programs
were available in China only to the chosen few. Recently, however, training has been
provided for more managers by educational television and professional night schools.
Moreover, some managers now have to pass an exam, sponsored by the State
Economic Commission. Jobs are secure; it implies lifetime employment (known as "iron
rice-bowl") regardless of performance.
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Leading involves the process of influencing people so that they contribute to
organizational aims; it is concerned with leadership, motivation, and communication.
Japanese managers are seen as social integrators who are a part of the work-group.
Using a paternalistic leadership approach, managers show great concern for the welfare
of their subordinates. Common values and a team spirit facilitate cooperation. The role
of managers is to create an environment of esprit de corps, and they are willing to help
out in doing the same work their subordinates do. In an attempt to maintain harmony at
almost any cost, managers avoid face-to-face confrontation. This also means that things
may be purposely left ambiguous. Leadership requires "followership" and managers are
aided by the fact that people are expected to subordinate their self-interest to that of the
group and the organization. While managers may not be very directive, influence is
exerted through peer pressure. In fact, close personal relationships are nurtured not only
by working together on common tasks, but also by meeting and associating outside the
work environment. The result is a confluence of organizational and private life.
Communication patterns parallel decision-making, with an emphasis on bottom-up
communication. In one study it was found that in Japanese companies communication
was initiated much more often at lower levels than in U.S. companies. This
communication pattern is also promoted by Japanese managers, who take a great deal
of time communicating with their subordinates. This puts theemphasis on face-to-face
contact rather than memos.
The managerial function of leading is carried out quite differently in U.S. companies.
Leaders are seen as decision-makers heading the group; they are expected to be
directive, strong, and determined. Their job is to integrate diverse values, but the
emphasis on individualism in the society in general and in organizations in particular
may hinder cooperation. Managers are expected to take decisive actions, and clarify the
direction of the group or the business, even if this requires face-to-face confrontation
with those who may disagree. Although managers work hard, they value their private
lives and separate them from their work. Within the organization, the communication
pattern is to a great extent from the top down the hierarchy, with considerable emphasis
given to written communication.
The managerial function of leading in China has characteristics of Japanese and U.S.
practices. The leader is the head of the group (in committees, for example), but the
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leadership style is generally quite directive. One interviewee described the relationship
between the leaders and followers as "parent-child" in transactional analysis terms. In
other words, it is expected that the leaders' commands are to be obeyed. Leaders, in
turn, are responsible to higher authorities for performance and goals, but not for meeting
customer needs and demands (but this is slowly changing). Like the situation in Japan,
leading is aided by common values and an emphasis on harmony, rather than
confrontation. On the other hand, communication is primarily top-down, as with many
U.S. corporations.
In the view of Western managers, controlling involves setting standards, measuring
performance, and correcting undesirable deviations. To the Japanese, this process is
less direct. The group, its dynamics, and its pressures have a profound impact on the
managerial process. In an office without dividing walls, peers are well aware of the
performance of their colleagues. Moreover, managers are a part of the work group rather
than separated from employees by an office door. Individual performance is not
measured against specific verifiable objectives; rather, emphasis is placed on group
performance. Also, the Japanese approach of letting subordinates "save face" would be
incongruent with fixing the blame for deviations from plans on people. Control
emphasizes process, not numbers. The Japanese reputation for quality is due, in part, to
the success of quality control, which requires grassroots involvement with very active
participation in quality control circles.
Control in the United States often means measuring performance against precise
standards. Management by objectives, widely practiced in this country, requires the
setting of verifiable objectives against which individual performance is measured. This
way the superior can trace deviations to specific people and this frequently results in
fixing the blame. In an attempt to maximize individual results, group performance may
suffer. We all can think of examples in which the self-interest of people was placed
before group or organizational interest. The use of quality control programs is not new.
Hughes Aircraft, for example, had such programs for a long time under the names of
"zero defects" and "value engineering." Many of these programs were developed in this
country and later used by the Japanese in the improvement of their product quality and
productivity.
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In China, control is exercised primarily by group leaders. The control focus is on the
group, but also on the person. Factory managers, for example, are expected to meet
their yearly quotas. Thus, Chinese control practices are a mixture of U.S. and Japanese
managerial practices. In identifying deviations from standards, there is a tendency to let
the persons responsible for poor performance save face (like the Japanese practice).
There is some use of quality circles, but it is not a common practice.
Management, once considered a U.S. challenge to Europeans, has become, in the
minds of many, a Japanese challenge to managers in the United States. Whether the
perception of the superiority of Japanese management practices is correct--and there is
some doubt--remains to be seen. In the meantime, many Chinese managers are at the
threshold of a managerial revolution in which more government-owned organizations
gain greater autonomy. Selectively, competition is encouraged and incentives for private
initiatives are promoted. There is an increasing market orientation, and decision power
for meeting customer needs is decentralized (there have been even some highly
publicized bankruptcies). To adapt to these and other changes, Chinese managers look
at both Japanese and United States managerial practices and compare them with their
past experiences. Some may be transferable, but others are not. The environment,
especially socio-cultural factors, does influence practice, but its impact may have been
overstated.
Heinz Weihrich has written more than 30 books and 80 articles published internationally.
He is active in management consulting and executive and organizational development in
the United States, Europe, Africa, and Asia. He is currently professor of management at
at the University of San Francisco, and has taught at Arizona State University, the
University of California at Los Angeles, and in France and Austria.
Author's note: In researching this article, literature on U.S. and Japanese management
practices was reviewed extensively, and information was gathered during a visit to Japan
and from research conducted with Japanese managers operating in the United States. In
identifying Chinese managerial practices, the limited information available was
supplemented through surveys and interviews with scholars, students, and managers
from mainland China. I would like to acknowledge the contributions and assistance of
many Chinese scholars and managers, especially Ms. Jie Yu and Mr. Zhijian Yang. Mr.
165

Yang, a Chinese reporter, investigated the recent political and economic changes in
China.
166

MCS

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IT T83 Management Concepts and Strategies

2. Management is a universal process:

IT T83 Management Concepts and Strategies

IT T83 Management Concepts and Strategies

IT T83 Management Concepts and Strategies

IT T83 Management Concepts and Strategies

2. Determination of objectives and

3.provides the entire body

6. Involves thinking and planning

IT T83 Management Concepts and Strategies

Management /industrial management has got the following activity levels.

IT T83 Management Concepts and Strategies

IT T83 Management Concepts and Strategies

Dealing with public grievances and complaints for betterment of public

IT T83 Management Concepts and Strategies

A manager assumes the role of an entrepreneur when he initiates any change in

IT T83 Management Concepts and Strategies

IT T83 Management Concepts and Strategies

IT T83 Management Concepts and Strategies

instruction time &

cost clerk disciplinarian

SOCIAL RESPONSIBILITY OF BUSINESS:

IT T83 Management Concepts and Strategies

CONPONENTS OR AREAS OF SOCIAL RESPONSBILITY:

IT T83 Management Concepts and Strategies

IT T83 Management Concepts and Strategies

The notion business ethical affecting social welfare

Overlooking industrial norms in order to get work done

IT T83 Management Concepts and Strategies

Supplying wrong or misleading information to government departments

IT T83 Management Concepts and Strategies

Controlling is the process that measures current performance and

IT T83 Management Concepts and Strategies

Planning is said to be the first and foremost functions of management

IT T83 Management Concepts and Strategies

4. Planning involves choice:

III. Desirable features:

IT T83 Management Concepts and Strategies

1. Planning offsets future uncertainty and change:

IT T83 Management Concepts and Strategies

2. Awareness of opportunities and problems:

3. Collecting and analyzing information:

5. Determining planning premises and constraints:

7. Evaluation of alternatives and selection:

IT T83 Management Concepts and Strategies

8. Selection of the best alternatives:

IT T83 Management Concepts and Strategies

TOP LEVEL MANAGEMENT:

IT T83 Management Concepts and Strategies

The philosophy of management by objectives (MBO) was highlighted in 1954

MBO may be defined as a process in which a manager and his subordinates

Steps in MBO process:

IT T83 Management Concepts and Strategies

Merits and demerits of MBO:

IT T83 Management Concepts and Strategies

IT T83 Management Concepts and Strategies

II. External Environmental analysis:

IT T83 Management Concepts and Strategies

Internal strength (S)

Internal weaknesses (W)

IT T83 Management Concepts and Strategies

IT T83 Management Concepts and Strategies

Decision is the choice of the best course among alternatives.