BBA

GGS Indraprastha University

BBA 101: Principles of Management
L-4 T/P-0 Credits-4
Course contents:
Unit I

lecture: - 14

Introduction: Concept, nature, process and significance of management; Managerial levels,

skills, functions and roles; Management vs. Administration; Coordination as essence of
management; Development of management thought: classical, neo-classical, behavioural,
systems and contingency approaches.
Unit II

lectures: - 14

Planning: Nature, scope and objectives of planning; Types of plans; planning process; Business
forecasting; MBO; Concept, types, process and techniques of decision-making; Bounded
Rationality.
Organising: Concept, nature, process and significance; Principles of an organization; Span of
Control; Departmentation; Types of an organization; Authority-Responsibility; Delegation and
Decentralization; Formal and Informal Organization.
Unit III

lectures: - 14

Staffing: Concept, Nature and Importance of Staffing.

Motivating and Leading: Nature and Importance of motivation; Types of motivation; Theories of
motivation-Maslow, Herzberg, X, Y and Z; Leadership meaning and importance; Traits of a
leader; Leadership Styles Likerts Systems of Management, Tannenbaum & Schmidt Model
and Managerial Grid.
Unit IV

lectures:-6

Controlling: Nature and Scope of control; Types of Control; Control process; Control techniques
traditional and modern; Effective Control System.

UNIT - 1
Concept of Management
Management involves creating an internal environment: - It is the management which puts into
use the various factors of production. Therefore, it is the responsibility of management to create
such conditions which are conducive to maximum efforts so that people are able to perform their
task efficiently and effectively. It includes ensuring availability of raw materials, determination
of wages and salaries, formulation of rules & regulations etc.
Management can be defined in detail in following categories:
1.
2.
3.
4.
5.
6.
7.

Management as a Process
Management as an Activity
Management as a Discipline
Management as a Group
Management as a Science
Management as an Art
Management as a Profession
Management as a Process

As a process, management refers to a series of inter - related functions. It is the process by which
management creates, operates and directs purposive organization through systematic,
coordinated and co-operated human efforts,
According to George R. Terry, Management is a distinct process consisting of planning,
organizing, actuating and controlling, performed to determine and accomplish stated objective by
the use of human beings and other resources. As a process, management consists of three
aspects:
1. Management is a social
2. Management is an integrating
3. Management is a continuous process
Management as an Activity
Like various other activities performed by human beings such as writing, playing, eating,
cooking etc, management is also an activity because a manager is one who accomplishes the
objectives by directing the efforts of others. According to Koontz, Management is what a
manager does. Management as an activity includes 1. Informational activities
2. Decisional activities

3. Inter-personal activities
Management as a Discipline
Management as a discipline refers to that branch of knowledge which is connected to study of
principles & practices of basic administration. It specifies certain code of conduct to be followed
by the manager & also various methods for managing resources efficiently.
Management as a discipline specifies certain code of conduct for managers & indicates various
methods of managing an enterprise. Any branch of knowledge that fulfils following two
requirements is known as discipline:
1. There must be scholars & thinkers who communicate relevant knowledge through
research and publications.
2. The knowledge should be formally imparted by education and training programmes.
Management as a Group
Management as a group refers to all those persons who perform the task of managing an
enterprise. When we say that management of ABC & Co. is good, we are referring to a group of
people those who are managing. Thus as a group technically speaking, management will include
all managers from chief executive to the first - line managers (lower-level managers). But in
common practice management includes only top management i.e. Chief Executive, Chairman,
General Manager, Board of Directors Etc.
Management as a group may be looked upon in 2 different ways:
1. All managers taken together.
2. Only the top management
The interpretation depends upon the context in which these terms are used. Broadly speaking,
there are 3 types of managers 1. Patrimonial / Family Manager: Those who have become managers by virtue of their
being owners or relatives of the owners of company.
2. Professional Managers: Those who have been appointed on account of their specialized
knowledge and degree.
3. Political Managers / Civil Servants: Those who manage public sector undertakings.
Management as a Science
Science is a systematic body of knowledge pertaining to a specific field of study that contains
general facts which explains a phenomenon. It establishes cause and effect relationship between
two or more variables and underlines the principles governing their relationship. These principles

are developed through scientific method of observation and verification through testing.
Science is characterized by following main features:
1. Universally acceptance principles - Scientific principles represents basic truth about a
particular field of enquiry. These principles may be applied in all situations, at all time &
at all places. E.g. - law of gravitation which can be applied in all countries irrespective of
the time.

2. Experimentation & Observation - Scientific principles are derived through scientific

investigation & researching i.e. they are based on logic.
Management principles are also based on scientific enquiry & observation and not only
on the opinion of Henry Fayol. They have been developed through experiments &
practical experiences of large no. of managers.
3. Cause & Effect Relationship - Principles of science lay down cause and effect
relationship between various variables. E.g. when metals are heated, they are expanded.
The cause is heating & result is expansion.
The same is true for management; therefore it also establishes cause and effect
relationship.
4. Test of Validity & Predictability - Validity of scientific principles can be tested at any
time or any number of times i.e. they stand the test of time. Each time these tests will
give same result. Moreover future events can be predicted with reasonable accuracy by
using scientific principles
Management as an Art
Art implies application of knowledge & skill to trying about desired results. An art may be
defined as personalized application of general theoretical principles for achieving best possible
results. Art has the following characters 1. Practical Knowledge: Every art requires practical knowledge therefore learning of
theory is not sufficient. It is very important to know practical application of theoretical
principles.
2. Personal Skill: Although theoretical base may be same for every artist, but each one has
his own style and approach towards his job. That is why the level of success and quality
of performance differs from one person to another.

3. Creativity: Every artist has an element of creativity in line. That is why he aims at
producing something that has never existed before which requires combination of
intelligence & imagination. Management is also creative in nature like any other art. It
combines human and non-human resources in useful way so as to achieve desired results.
4. Perfection through practice: Practice makes a man perfect. Every artist becomes more
and more proficient through constant practice. Similarly managers learn through an art of
trial and error initially but application of management principles over the years makes
them perfect in the job of managing.
5. Goal-Oriented: Every art is result oriented as it seeks to achieve concrete results. In the
same manner, management is also directed towards accomplishment of pre-determined
goals. Managers use various resources like men, money, material, machinery & methods
to promote growth of an organization.
Management as both Science and Art
Management is both an art and a science. It is considered as a science because it has an
organized body of knowledge which contains certain universal truth. It is called an art because
managing requires certain skills which are personal possessions of managers. Science provides
the knowledge & art deals with the application of knowledge and skills.
A manager to be successful in his profession must acquire the knowledge of science & the art of
applying it. Therefore management is a judicious blend of science as well as an art because it
proves the principles and the way these principles are applied is a matter of art
The old saying that Manager are Born has been rejected in favor of Managers are Made. It
has been aptly remarked that management is the oldest of art and youngest of science. To
conclude, we can say that science is the root and art is the fruit.
Management as a Profession
Over a large few decades, factors such as growing size of business unit, separation of ownership
from management, growing competition etc have led to an increased demand for professionally
qualified managers. The task of manager has been quite specialized. As a result of these
developments the management has reached a stage where everything is to be managed
professionally.
A profession may be defined as an occupation that requires specialized knowledge and intensive
academic preparations to which entry is regulated by a representative body. The essentials of a
profession are:
1. Specialized Knowledge - A profession must have a systematic body of knowledge that
can be used for development of professionals. Every professional must make deliberate
efforts to acquire expertise in the principles and techniques.

2. Formal Education & Training - There are no. of institutes and universities to impart
education & training for a profession. No one can practice a profession without going
through a prescribed course.
3. Social Obligations - Profession is a source of livelihood but professionals are primarily
motivated by the desire to serve the society. Their actions are influenced by social norms
and values. Similarly a manager is responsible not only to its owners but also to the
society and therefore he is expected to provide quality goods at reasonable prices to the
society.
4. Code of Conduct - Members of a profession have to abide by a code of conduct which
contains certain rules and regulations, norms of honesty, integrity and special ethics. A
code of conduct is enforced by a representative association to ensure self discipline
among its members. Any member violating the code of conduct can be punished and his
membership can be withdrawn.
5. Representative Association - For the regulation of profession, existence of a
representative body is a must.
Nature of Management
Management is an activity concerned with guiding human and physical resources such that
organizational goals can be achieved. Nature of management can be highlighted as: 1.
2.
3.
4.
5.

Management is Goal-Oriented
Management integrates Human, Physical and Financial Resources
Management is Continuous
Management is all Pervasive
Management is a Group Activity

Process of Management

Elements of Management Process

Planning: Planning is the primary function of management. It involves determination of

a course of action to achieve desired results/objectives. Planning is the key to success, stability
and prosperity in business. It acts as a tool for solving the problems of a business unit.
Planning plays a pivotal role in business management.
2.
Organizing: It means to bring the resources (men, materials, machines, etc.) together and
use them properly for achieving the objectives. Organizing means arranging ways and means
for the execution of a business plan. It provides suitable administrative structure and facilitates
execution of proposed plan.
3.
Staffing: Staffing refers to manpower required for the execution of a business plan.
Staffing, as managerial function, involves recruitment, selection, appraisal, remuneration and
development of managerial personnel. The need of staffing arises in the initial period and also
from time to time for replacement and also along with the expansion and diversification of
business activities.
4.
Directing (Leading): Directing as a managerial function, deals with guiding and
instructing people to do the work in the right manner. Directing/leading is the responsibility of
managers at all levels. They have to work as leaders of their subordinates. Clear plans and sound
organization set the stage but it requires a manager to direct and lead his men for achieving the
objectives.
5.
Coordinating: Effective coordination and also integration of activities of different
departments are essential for orderly working of an Organization.. It may be treated as an
independent function or as a part of organisms function. Coordination is essential at all levels
of management.
6.
Controlling: Controlling is an important function of management. It is necessary in the
case of individuals and departments so as to avoid wrong actions and activities. Controlling
involves three broad aspects: (a) establishing standards of performance, (b) measuring work in
progress and interpreting results achieved, and (c) taking corrective actions, if required.
7.
Motivating: Motivating is one managerial function in which a manager motivates his
men to give their best to the Organization. It means to encourage people to take more interest
and initiative in the work assigned. Motivation is actually inspiring and encouraging people to
work more and contribute more to achieve organizational objectives.
8.
Communicating: Communication (written or oral) is necessary for the exchange of facts,
opinions, ideas and information between individuals and departments. In an organization,
communication is useful for giving information, guidance and instructions. Managers should
be good communicators. According to Louis Allen, "Communication involves a systematic
and continuing process of telling, listening and understanding".
1.

Objectives of Management
1.
2.
3.
4.

Getting Maximum Results with Minimum Efforts

Increasing the Efficiency of factors of Production
Maximum Prosperity for Employer & Employees
Human betterment & Social

Significance of Management
1.
2.
3.
4.
5.

It helps in Achieving Group

Optimum Utilization of Resources
Reduces Costs
Establishes Sound Organization
Establishes Equilibrium - It enables the organization to survive in changing environment.
It keeps in touch with the changing environment. With the change is external
environment, the initial co-ordination of organization must be changed.

Managerial levels / Levels of Management

The term Levels of Management refers to a line of demarcation between various managerial
positions in an organization. The number of levels in management increases when the size of the
business and work force increases and vice versa. The level of management determines a chain
of command, the amount of authority & status enjoyed by any managerial position. The levels of
management can be classified in three broad categories:
1. Top level / Administrative level
2. Middle level
3. Low level / Supervisory / Operative / First-line managers

LEVELS OF MANAGEMENT
1. Top Level of Management
It consists of board of directors, chief executive or managing director. The top
management is the ultimate source of authority and it manages goals and policies for an
enterprise. It devotes more time on planning and coordinating functions.
The role of the top management can be summarized as follows a. Top management lays down the objectives and broad policies of the enterprise.
b. It issues necessary instructions for preparation of department budgets, procedures,
schedules etc.
c. It prepares strategic plans & policies for the enterprise.
d. It appoints the executive for middle level i.e. departmental managers.
2. Middle Level of Management
The branch managers and departmental managers constitute middle level. They are
responsible to the top management for the functioning of their department. They devote
more time to organizational and directional functions. In small organization, there is only
one layer of middle level of management but in big enterprises, there may be senior and
junior middle level management. Their role can be emphasized as a. They execute the plans of the organization in accordance with the policies and
directives of the top management.
b. They make plans for the sub-units of the organization.
c. They participate in employment & training of lower level management.
d. They interpret and explain policies from top level management to lower level.
3. Lower Level of Management
Lower level is also known as supervisory / operative level of management. It consists of
supervisors, foreman, section officers, superintendent etc. According to R.C. Davis,

Supervisory management refers to those executives whose work has to be largely with
personal oversight and direction of operative employees. Their activities include a.
b.
c.
d.

Assigning of jobs and tasks to various workers.

They guide and instruct workers for day to day activities.
They are responsible for the quality as well as quantity of production.
They are also entrusted with the responsibility of maintaining good relation in the
organization.
Management Skills

1. Technical skills involve process or technique knowledge and proficiency in a certain

specialized field, such as engineering, computers, accounting, or manufacturing. These skills are
more important at lower levels of management since these managers are dealing with employees
doing the organizations work.
The technical skill involves the managers understanding of the nature of job that people under
him have to perform. It refers to a persons knowledge and proficiency in any type of process or
technique.
2. Human Skills involve the ability to interact effectively with people. Managers interact and
cooperate with employees. Because managers deal directly with people, this skill is crucial.
Managers with good human skills re bale to get best out of their people. They know how to
communicate, motivate, lead, and inspire enthusiasm and trust.
Human skills are also the ability to interact effectively with people at all levels. This skill
develops in the manager sufficient ability.
a) To recognize the feelings and sentiments of others
b) To judge the possible reactions to, and outcomes of various courses of action he may
undertake and

c) To examine his own concepts and values this may enable him to develop more useful attitudes
about himself.

3. Conceptual Skills- involve the formulation of ideas, conceptualization about abstract and
complex situations. Managers understand abstract relationships, develop ideas and solve
problems creatively. Using these skills, managers must be able to see the organization as a
whole. They have to understand the relationships among various subunits, and visualize how
organization fits into its border environment.
Conceptual skills refer to the ability of a manager to conceptualize the environment, the
organization, and his won job, so that he can set appropriate goals for his organization, for
himself and for his team. This skill seems to increase in importance as a manager move up to
higher positions of responsibility in the organization.
Functions of Management
Management has been described as a social process involving responsibility for economical and
effective planning & regulation of operation of an enterprise in the fulfillment of given purposes.
It is a dynamic process consisting of various elements and activities. These activities are
different from operative functions like marketing, finance, purchase etc.
Different experts have classified functions of management. According to Henry Fayol, To
manage is to forecast and plan, to organize, to command, & to control.
Whereas Luther Gullick has given a keyword POSDCORB where P stands for Planning, O for
Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for reporting & B for
Budgeting. But the most widely accepted are functions of management given by KOONTZ and
ODONNEL i.e. Planning, Organizing, Staffing, Directing and Controlling.

1. Planning
It is the basic function of management. It deals with chalking out a future course of action
& deciding in advance the most appropriate course of actions for achievement of predetermined goals. A plan is a future course of actions. It is an exercise in problem solving
& decision making. Planning is determination of courses of action to achieve desired
goals.
2. Organizing
It is the process of bringing together physical, financial and human resources and
developing productive relationship amongst them for achievement of organizational
goals. According to Henry Fayol, To organize a business is to provide it with everything
useful or its functioning i.e. raw material, tools, capital and personnels.
3. Staffing
It is the function of manning the organization structure and keeping it manned.
According to Kootz & ODonell, Managerial function of staffing involves manning the
organization structure through proper and effective selection, appraisal & development of
personnel to fill the roles designed un the structure.
4. Directing
It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. It is considered life-spark of the
enterprise which sets it in motion the action of people because planning, organizing and
staffing are the mere preparations for doing the work. Direction is that inert-personnel

aspect of management which deals directly with influencing, guiding, supervising,

motivating sub-ordinate for the achievement of organizational goals
5. Controlling
It implies measurement of accomplishment against the standards and correction of
deviation if any to ensure achievement of organizational goals. The purpose of
controlling is to ensure that everything occurs in conformities with the standards. An
efficient system of control helps to predict deviations before they actually occur.
According to Theo Haimann, Controlling is the process of checking whether or not
proper progress is being made towards the objectives and goals and acting if necessary, to
correct any deviation.
Managerial Role
Mintzberg (1973) groups managerial activities and roles as involving:
Managerial activities
Interpersonal roles - arising
from formal authority and status
and supporting the information
and decision activities.

information processing roles

decision roles:
making significant decisions

Associated roles

figurehead

liaison

leader

monitor

disseminator

spokesman

improver/changer

disturbance handler

resource allocator

negotiator

1. Figurehead.
Social, inspirational, legal and ceremonial duties must be carried out. The manager is a
symbol and must be on-hand for people/agencies that will only deal with him/her because
of status and authority.
2. The leader role
This is at the heart of the manager-subordinate relationship and managerial power and
pervasive where subordinates are involved even where perhaps the relationship is not
directly interpersonal. The manager
Defines the structures and environments within which sub-ordinates work and are
motivated.
Oversees and questions activities to keep them alert.
Selects, encourages, promotes and disciplines.
Tries to balance subordinate and organisational needs for efficient operations.

3. Liaison:
This is the manager as an information and communication centre. It is vital to build up
favours. Networking skills to shape maintain internal and external contacts for
information exchange are essential. These contacts give access to "databases"- facts,
requirements, probabilities.
4. As 'monitor'
The manager seeks/receives information from many sources to evaluate the
organizations performance, well-being and situation. Monitoring of internal operations,
external events, ideas, trends, analysis and pressures is vital. Information to detect
changes, problems & opportunities and to construct decision-making scenarios can be
current/historic, tangible (hard) or soft, documented or non-documented.
5. As disseminator
The manager brings external views into his/her organization and facilitates internal
information flows between subordinates (factual or value-based).
The preferences of significant people are received and assimilated. The manager
interprets/disseminates information to subordinates e.g. policies, rules, regulations.
Values are also disseminated via conversations laced with imperatives and signs/icons
about what is regarded as important or what 'we believe in'.
6.

As spokesman

The manager informs and lobbies others (external to his/her own organisational group).
Key influencers and stakeholders are kept informed of performances, plans & policies.
For outsiders, the manager is an expert in the field in which his/her organization operates.
A senior manager is responsible for his/her organizations strategy-making system generating and linking important decisions.
7.

As initiator/changer
He/she designs and initiates much of the controlled change in the organization. Gaps are
identified, improvement programmes defined. The manager initiates a series of related
decisions/activities to achieve actual improvement.

8.

The disturbance handler

It is a generalist role i.e. taking charge when the organization hits an iceberg
unexpectedly and where there is no clear programmed response. Disturbances may arise
from staff, resources, threats or because others make mistakes or innovation has
unexpected consequences. The role involves stepping in to calm matters, evaluate, reallocate, support - removing the thorn - buying time. The metaphors here are
9.

As resource allocator

The manager oversees allocation of all resources (, staff, reputation). This involves:

scheduling own time

programming work

authorizing actions

With an eye to the diary (scheduling) the manager implicitly sets organisational priorities.
Time and access involve opportunity costs. What fails to reach him/her, fails to get
support.
10. Negotiator
He takes charge over important negotiating activities with other organizations. The
spokesman, figurehead and resource allocator roles demand this.
Management V/s Administration
According to Theo Haimann, Administration means overall determination of policies, setting of
major objectives, the identification of general purposes and laying down of broad programmes

and projects. It refers to the activities of higher level. It lays down basic principles of the
enterprise. The difference between Management and Administration can be summarized under 2
categories:
On the Basis of Functions: Basis
Meaning

Nature
Process

Function

Skills
Levels

Management
Management is an art of
getting things done through
others by directing their
efforts towards achievement
of pre-determined goals.
Management
is
an
executing function.
Management decides who
should as it & how should
he do it.
Management is a doing
function because managers
get work done under their
supervision.
Technical and Human skills
Middle &
function

lower

Administration
It is concerned with
formulation
of
broad
objectives, plans & policies.

Administration
is
a
decision-making function.
Administration decides what
is to be done & when it is to
be done
Administration is a thinking
function because plans &
policies are determined
under it.
Conceptual and Human
skills
level Top level function

On the Basis of Usage: Basis

Applicability

Influence

Status

Management
It is applicable to business
concerns i.e. profit-making
organization.
The management decisions
are influenced by the
values, opinions, beliefs &
decisions of the managers.
Management constitutes the
employees
of
the
organization who are paid
remuneration (in the form
of salaries & wages).

Administration
It is applicable to nonbusiness concerns i.e. clubs,
schools, hospitals etc.
The
administration
is
influenced
by
public
opinion, govt. policies,
religious
organizations,
customs etc.
Administration represents
owners of the enterprise
who earn return on their
capital invested & profits in
the form of dividend.

Coordination as essence of management

Coordination
Co-ordination is the unification, integration, synchronization of the efforts of group members so
as to provide unity of action in the pursuit of common goals. It is a hidden force which binds all
the other functions of management.
According to Mooney and Reelay, Co-ordination is orderly arrangement of group efforts to
provide unity of action in the pursuit of common goals.
Management seeks to achieve co-ordination through its basic functions of planning, organizing,
staffing, directing and controlling. Co-ordination is the essence of management and is implicit
and inherent in all functions of management.
Co-ordination is an integral element or ingredient of all the managerial functions as discussed
below: a.
b.
c.
d.
e.

Co-ordination through
Co-ordination through Organizing
Co-ordination through Staffing
Co-ordination through Directing
Co-ordination through Controlling
Coordination and Cooperation

Co-ordination is an orderly arrangement of efforts to provide unity of action in the fulfillment of

common objective whereas co-operation denotes collective efforts of persons working in an
enterprise voluntarily for the achievement of a particular purpose. It is the willingness of
individuals to help each other.
Co-ordination is an effort to integrate effectively energies of different groups whereas cooperation is sort to achieve general objectives of business. Though these two are synonymous but
they are different as below:
Differences between Co-ordination and Co-operation

Basis

Co-ordination

Co-operation

Meaning

It is an orderly arrangement of group

It means mutual help willingly.

efforts in pursuit of common goals.

Scope

It is broader than co-operation which

includes as well because it
harmonizes the group efforts.

It is termed as a part of co-ordination.

Process

The function of co-ordination is

performed by top management.

The functions of co-operation are

prepared by persons at any level.

Requirements

Co-ordination is required by
employees and departments at work
irrespective of their work.

Co-operation is emotional in nature

because it depends on the willingness
of people working together.

Relationship

It establishes formal and informal

relationships.

It establishes informal relationship.

DEVELOPMENT OF MANAGEMENT THOUGHT

Management thought has a long history. It is as old as human civilization itself. Management in
one form or the other has been a significant feature of economic life of mankind throughout ages.
Management thought is an evolutionary concept It has develop along with and in line with the
growth of social, political, economic and scientific institutions. The contributors to management
though are many. They include Management philosophers, management practitioners and
scholars. Modem management is based on the solid foundations laid down by management
thinkers from the early historical period.
Historical Background of Management
The recorded use of organized management dates back to 5000 B.C. when the agricultural
revolution had taken place. These agricultural civilizations existed in India, China and Egypt
According to Peter Drucker these irrigation civilizations "were not only one of the great ages of
technology, but it represented also mankinds most productive age of social and political
innovation". As the villages grew and civilizations evolved, the managers too grew and evolved.
They became the priests, the kings, the ministers holding power and wealth in the society.
In ancient India Kautilya wrote his Arthashastra in about 321 B.C. the major theme of which was
political, social and economic management of the State. The study of administration of the cities

of Mohenjodaro and Harappa of the ancient Aryans in 2000 B. C., Buddha's order and the
Sangha in 530 B. C., provide evidence about the use of the principles of management.
During the 13th and 14th centuries AD the large trading houses of Italy needed a means of
keeping records of their business transactions. To satisfy their needs Luca Pacioli published a
treatise in 1494 describing the Double Entry System of Book-keeping for the first time.
New theories and principles were suggested along with new developments in the business field.
The new thoughts supplemented the existing thoughts and theories. This is how developments
are taking place continuously in regard to management thoughts/theories. Management thinkers
and thinkers from other fields such as economics, psychology, sociology and mathematics have
also made their contribution in the evolution of management thought.
Evolution of Management Thought
This evolution of management thought can be studied in the following broad stages:
1.

The Classical Theory of Management (Classical Approach): 1900 to 1930.

It includes the following three streams of thought:

(i) Bureaucracy,
(ii) Scientific Management; and
(iii)Administrative Management
2. The Neo-classical theory of Management: 1930 to 1960
It includes the following two streams:
(i) Human Relations Approach and
(ii) Behavioral Sciences Approach.
3. The Modern Theory of Management: 1960 onwards.
It includes the following three streams of thought:
(i) Quantitative Approach to Management (Operations Research);
(ii) Systems Approach to Management and
(iii)Contingency Approach to Management.
The Classical Theory of Management (Classical Approach)
1. Bureaucracy
Max Weber contributed the theory of bureaucracy to the management thought. Max
Webers main contribution to management is his theory of authority structure and his

description of organizations based on the nature of authority relations within them. It was
Webers contention that there are three types of legitimate authority which run as
follows:
Rational legal authority- Obedience is owed to a legally established position or rank
within the hierarchy of a business, military unit, government, and so on.
Traditional authority- People obey a person because he belongs to certain class or
occupies a position traditionally recognized as possessing authority, such as a royal
family.
Charismatic authority- Obedience is based on the followers belief that a person has
some special power or appeal.
Characteristics of Bureaucracy
Division of work- There is a high degree of division of work at both the operative and
administrative levels. This leads to specialization of work.
Hierarchy of positions- There is a hierarchy of authority in the organization. Each
lower position is under the control of a higher one. Thus, there is unity of command.
Rules and regulations- The rules, regulations and procedures are clearly laid down by
the top administration. Their benefits are as under:
Impersonal conduct- There is impersonality of relationships among the organizational
members. The decisions are entirely guided by rules and regulations and are totally
impersonal. There is no room for emotions and sentiments in this type of structure.
Staffing- The personal are employed by a construal relationship between the employee
and employer. The employees get salary every month which is based on the job they
handle and also the length of service.
Technical competence- The bureaucrats and neither elected nor inherited, but they are
appointed through selection. Promotions in bureaucracies are also based on technical
qualifications and performance

Official records: The decisions and activities of the organization are formally recorded
and preserved safely for future reference. This is made possible by extensive filing
system. The filing system makes the organization independent of individuals. The official
records serve as the memory of the organization

2. Scientific Management
Fredrick Winslow Taylor (March 20, 1856 - March 21, 1915) commonly known as Father of
Scientific Management started his career as an operator and rose to the position of chief
engineer. He conducted various experiments during this process which forms the basis of

scientific management. It implies application of scientific principles for studying & identifying
management problems.
According to Taylor, Scientific Management is an art of knowing exactly what you want your
men to do and seeing that they do it in the best and cheapest way. In Taylors view, if a work is
analysed scientifically it will be possible to find one best way to do it.
Hence scientific management is a thoughtful, organized, dual approach towards the job of
management against hit or miss or Rule of Thumb.
Principles of Scientific Management
1. Development of Science for each part of mens job (replacement of rule of thumb):
a. This principle suggests that work assigned to any employee should be observed,
analyzed with respect to each and every element and part and time involved in it.
b. This means replacement of odd rule of thumb by the use of method of enquiry,
investigation, data collection, analysis and framing of rules.
c. Under scientific management, decisions are made on the basis of facts and by the
application of scientific decisions.
2. Scientific Selection, Training & Development of Workers:
a. There should be scientifically designed procedure for the selection of workers.
b. Physical, mental & other requirement should be specified for each and every job.
c. Workers should be selected & trained to make them fit for the job.
d. The management has to provide opportunities for development of workers having
better capabilities.
e. According to Taylor efforts should be made to develop each employee to his
greatest level and efficiency & prosperity.
3. Co-operation between Management & workers or Harmony not discord:
a. Taylor believed in co-operation and not individualism.
b. It is only through co-operation that the goals of the enterprise can be achieved
efficiently.
c. There should be no conflict between managers & workers.
d. Taylor believed that interest of employer & employees should be fully
harmonized so as to secure mutually understanding relations between them.
4. Division of Responsibility:
a. This principle determines the concrete nature of roles to be played by different
level of managers & workers.
b. The management should assume the responsibility of planning the work whereas
workers should be concerned with execution of task.
c. Thus planning is to be separated from execution.
5. Mental Revolution:
a. The workers and managers should have a complete change of outlook towards
their mutual relation and work effort.
b. It requires that management should create suitable working condition and solve
all problems scientifically.

c. Similarly workers should attend their jobs with utmost attention, devotion and
carefulness. They should not waste the resources of enterprise.
d. Handsome remuneration should be provided to workers to boost up their moral.
e. It will create a sense of belongingness among worker.
f. They will be disciplined, loyal and sincere in fulfilling the task assigned to them.
g. There will be more production and economical growth at a faster rate.
6. Maximum Prosperity for Employer & Employees:
a. The aim of scientific management is to see maximum prosperity for employer and
employees.
b. It is important only when there is opportunity for each worker to attain his highest
efficiency.
c. Maximum output & optimum utilization of resources will bring higher profits for
the employer & better wages for the workers.
d. There should be maximum output in place of restricted output.
e. Both managers & workers should be paid handsomely.
Techniques of Scientific Management
1. Time Study
a. It is a technique which enables the manager to ascertain standard time taken for
performing a specified job.
b. Every job or every part of it is studied in detail.
c. This technique is based on the study of an average worker having reasonable skill
and ability.
d. Average worker is selected and assigned the job and then with the help of a stop
watch, time is ascertained for performing that particular job.
e. Taylor maintained that Fair days work should be determined through
observations, experiment and analysis by keeping in view an average worker.
Standard Time Working Hours = Fair Days Work
2. Motion Study
a. In this study, movement of body and limbs required to perform a job are closely
observed.
b. In other words, it refers to the study of movement of an operator on machine
involved in a particular task.
c. The purpose of motion study is to eliminate useless motions and determine the bet
way of doing the job.
d. By undertaking motion study an attempt is made to know whether some elements
of a job can be eliminated combined or their sequence can be changed to achieve
necessary rhythm.
e. Motion study increases the efficiency and productivity of workers by cutting
down all wasteful motions.
3. Functional Foremanship

a. Taylor advocated functional foremanship for achieving ultimate specification.

b. This technique was developed to improve the quality of work as single supervisor
may not be an expert in all the aspects of the work.
c. Therefore workers are to be supervised by specialist foreman.
d. The scheme of functional foremanship is an extension of principle pf
specialization at the supervisory level.
e. Taylor advocated appointment of 8 foramen, 4 at the planning level & other 4 at
implementation level.
f. The names & function of these specialist foremen are:
Instruction card clerk concerned with tagging down of instructions
according to which workers are required to perform their job

Time & cost clerk is concerned with setting a time table for doing a job
& specifying the material and labor cost involved in it.

Route clerk determines the route through which raw materials has to be
passed.

Shop Disciplinarians are concerned with making rules and regulations
to ensure discipline in the organization.

Gang boss makes the arrangement of workers, machines, tools, workers
etc.

Speed boss concerned with maintaining the speed and to remove delays
in the production process.

Repair boss concerned with maintenance of machine, tools and
equipments.

Inspector is concerned with maintaining the quality of product.
4. Standardization
a. It implies the physical attitude of products should be such that it meets the
requirements & needs of customers.
b. Taylor advocated that tools & equipments as well as working conditions should
be standardized to achieve standard output from workers.
c. Standardization is a means of achieving economics of production.
d. It seems to ensure -

The line of product is restricted to predetermined type, form, design,

size, weight, quality. Etc

There is manufacture of identical parts and components.

Quality & standards have been maintained.

Standard of performance are established for workers at all levels.
5. Differential Piece Wage Plan
a. This tech of wage payment is based on efficiency of worker.
b. The efficient workers are paid more wages than inefficient one.
c. On the other hand, those workers who produce less than standard no. of pieces are
paid wages at lower rate than prevailing rate i.e. worker is penalized for his
inefficiency.
d. This system is a source of incentive to workers who improving their efficiency in
order to get more wages.
e. It also encourages inefficient workers to improve their performance and achieve
their standards.
f. It leads to mass production which minimizes cost and maximizes profits.

3. Administrative Management
Fayol was a French mining engineer in his early thirties, but after that he switched over to
general management and was Managing Director from 1888 to 1918. Fayol is known as
the father of management or the founder of the classical management. Not because he
was first to investigate managerial behavior, but because he was the first to systematize it.
He was contemporary to Taylor. Taylor was basically concerned with organizational
functions, whereas Fayol was interested in the total organization. It may be noted that
Taylor is known as the father of scientific management, i.e. supervisory or lower
management, while Fayol is recognized as the father of management, i.e. the higher
management or the general management.
FAYOLS MANAGEMENT PRINCIPLES
1. Division of Work
The specialization of the workforce according to the skills a person, creating specific
personal and professional development within the labour force and therefore increasing
productivity; leads to specialization which increases the efficiency of labour. By
separating a small part of work, the workers speed and accuracy in its performance
increases.
2. Authority and Responsibility
The issue of commands is followed by responsibility for their consequences. Authority
means the right of a superior to give order to his subordinates; responsibility means

obligation for performance. This principle suggests that there must be parity between
authority and responsibility. They are co-existent and go together, and are two sides of
the same coin.
3. Discipline
Discipline refers to obedience, proper conduct in relation to others, respect of authority,
etc. It is essential for the smooth functioning of all organizations.
4. Unity of Command This principle states that every subordinate should receive orders and be accountable to
one and only one superior. If an employee receives orders from more than one superior, it
is likely to create confusion and conflict. Unity of Command also makes it easier to fix
responsibility for mistakes.
5. Unity of Direction All those working in the same line of activity must understand and pursue the same
objectives. All related activities should be put under one group, there should be one plan
of action for them, and they should be under the control of one manager. It seeks to
ensure unity of action, focusing of efforts and coordination of strength.
6. Subordination of Individual Interest
The management must put aside personal considerations and put company objectives
first. Therefore the interests of goals of the organization must prevail over the personal
interests of individuals.
7. Remuneration Workers must be paid sufficiently as this is a chief motivation of employees and therefore
greatly influences productivity. The quantum and methods of remuneration payable
should be fair, reasonable and rewarding of effort.
8. The Degree of Centralization The amount of power wielded with the central management depends on company size.
Centralization implies the concentration of decision making authority at the top
management. Sharing of authority with lower levels is called decentralization. The
organization should strive to achieve a proper balance.
9. Scalar Chain Scalar Chain refers to the chain of superiors ranging from top management to the lowest
rank. The principle suggests that there should be a clear line of authority from top to
bottom linking all managers at all levels. It is considered a chain of command. It involves
a concept called a "gang plank" using which a subordinate may contact a superior or his

superior in case of an emergency, defying the hierarchy of control. However the

immediate superiors must be informed about the matter.
10. Order Social order ensures the fluid operation of a company through authoritative procedure.
Material order ensures safety and efficiency in the workplace.
11. Equity Employees must be treated kindly, and justice must be enacted to ensure a just
workplace. Managers should be fair and impartial when dealing with employees.
12. Stability of Tenure of Personnel The period of service should not be too short and employees should not be moved from
positions frequently. An employee cannot render useful service if he is removed before
he becomes accustomed to the work assigned to him.
13. Initiative Using the initiative of employees can add strength and new ideas to an organization.
Initiative on the part of employees is a source of strength for the organization because it
provides new and better ideas. Employees are likely to take greater interest in the
functioning of the organization.
14. Esprit de Corps - This refers to the need of managers to ensure and develop morale in
the workplace; individually and communally. Team spirit helps develop an atmosphere of
mutual trust and understanding. These can be used to initiate and aid the processes of
change, organization, decision making, skill management and the overall view of the
management function
The Neo-classical theory of Management
1.

Human Relation Approach

Human Relations Approach Historical Perspective

Scientific management remained concerned to the efficiency and productivity of workmen at
the shop floor. Fayols functional approach to management aimed at improving the
managerial activities and performance at top level in the organization. In fact, the technical
approach to work methods in scientific management did not produce durable and desirable
results in all cases. Individual and group relationships in the work place often prevented
maximum benefits to be derived from planning and standardization of work or monetary
rewards offered for efficiency. Elton Mayo is the founder of this theory.
Hawthorne Experiment:
In 1927, a group of researchers led by Elton Mayo and Fritz Roethlisberger of the Harvard
Business School were invited to join in the studies at the Hawthorne Works of Western Electric

Company, Chicago. The experiment lasted up to 1932. The Hawthorne Experiments brought out
that the productivity of the employees is not the function of only physical conditions of work and
money wages paid to them. Productivity of employees depends heavily upon the satisfaction of
the employees in their work situation. Mayos idea was that logical factors were far less
important than emotional factors in determining productivity efficiency. Furthermore, of all the
human factors influencing employee behaviour, the most powerful were those emanating from
the workers participation in social groups. The Hawthorne experiment consists of four parts.
These parts are briefly described below:1.

Illumination Experiment.

2.

Relay Assembly Test Room Experiment.

3.

Interviewing Programme.

4.

Bank Wiring Test Room Experiment.

1. Illumination Experiment:
This experiment was conducted to establish relationship between output and illumination. When
the intensity of light was increased, the output also increased. The output showed an upward
trend even when the illumination was gradually brought down to the normal level. Therefore, it
was concluded that there is no consistent relationship between output of workers and
illumination in the factory. There must be some other factor which affected productivity.
2. Relay Assembly Test Room Experiment:
This phase aimed at knowing not only the impact of illumination on production but also other
factors like length of the working day, rest hours, and other physical conditions. In this
experiment, a small homogeneous work-group of six girls was constituted. These girls were
friendly to each other and were asked to work in a very informal atmosphere under the
supervision of a researcher. Productivity and morale increased considerably during the period of
the experiment. Productivity went on increasing and stabilized at a high level even when all the
improvements were taken away and the pre-test conditions were reintroduced. The researchers
concluded that socio-psychological factors such as feeling of being important, recognition,
attention, participation, cohesive work-group, and non-directive supervision held the key for
higher productivity.
3. Mass Interview Programme:
The objective of this programme was to make a systematic study of the employees attitudes
which would reveal the meaning which their working situation has for them. The researchers
interviewed a large number of workers with regard to their opinions on work, working conditions
and supervision. Initially, a direct approach was used whereby interviews asked questions
considered important by managers and researchers. The researchers observed that the replies of
the workmen were guarded. Therefore, this approach was replaced by an indirect technique,
where the interviewer simply listened to what the workmen had to say. The findings confirmed
the importance of social factors at work in the total work environment.

4. Bank Wiring Test Room Experiment:

This experiment was conducted by Roethlisberger and Dickson with a view to develop a new
method of observation and obtaining more exact information about social groups within a
company and also finding out the causes which restrict output. The experiment was conducted to
study a group of workers under conditions which were as close as possible to normal. This group
comprised of 14 workers. After the experiment, the production records of this group were
compared with their earlier production records. It was observed that the group evolved its own
production norms for each individual worker, which was made lower than those set by the
management. Because of this, workers would produce only that much, thereby defeating the
incentive system. Those workers who tried to produce more than the group norms were isolated,
harassed or punished by the group.
Behavioral Sciences Approach
Historical Perspective
The Behavioral or social science approach developed as a corollary to the human relations
approach.
Social scientists and organization theorists are of the opinion that best results can be obtained by
building theories of management and organization based on findings of the Behavioural sciences,
such as psychology, sociology, psychiatry, economics, cultural anthropology and philosophy.
Elements or Concepts or Features of Behavioural Approach
The Behavioural approach concerns itself with the social and psychological aspects of human
behaviour in organization. The behaviour of members of an organization clearly affects its
structure and its functioning as well as the principles on which it can be managed. Behavioural
researches have provided sufficient evidence that human element is the key factor in the success
are failure of an organization. In several experiments, it has been observed that people prefer to
be consulted rather than receive order or information. Some of the more important elements or
concepts of Behavioural approach may be outlined as follows:
1. Individual Behaviour
Individual behaviour is closely linked with the behaviour of the group to which he belongs. The
group dictates changes in his behaviour. Individuals observe those work standards which are
prescribed by the group.
2. Informal Leadership
Informal leadership, rather than formal authority of managers is more important for setting and
enforcing group standards of performance. As a leader, a manager may be more effective and
acceptable to subordinates, if he adopts the democratic style of leadership.

3. Participation
If the subordinates are encouraged and allowed to participate in establishing goals, there will be
positive effect on their attitude towards work. If employees are involved in planning, designing
the jobs and decision-making, there will be least resistance to changes effected in technology and
work methods.
4. Motivation by Self-Control and Self-Development
Behavioural scientists maintain that by nature most people enjoy work and are motivated by selfcontrol and self-development. Managers should try to identity and provide necessary conditions
conducive to the proper and sufficient use of human potential. The managers attitude towards
human behaviour should positive. They should know that average man is not lazy by nature. But
he is ambition.
5. Informal Organization
Behaviouralists particularly Bernard, consider informer organization as an essential part of the
formal organization. Informer organization must always be taken into account while determining
managerial behaviour.
6. General Supervision Not Close One
As regards supervision of subordinates, Behaviouralists particularly Likert, are not in favour of
close supervision. They advocate general supervision, which tends to be associated with high
productivity.
Basic Assumptions (Are Propositions) Of Behavioural Scientists
1. Organization is socio-technical system involving people and technology as their primary
components.
2. The behaviour of the members of an organization clearly affects its structure and its
functioning, as well as the principles on which it can be managed.
3. Individuals behaviour is closely linked with a greatly influenced by the behaviour of the
group to which he belongs.
4. A wide range of factors influences work and interpersonal behaviour of people in the
organization.
5. Congruence (agreement) between organizational goals and individual goals organizations
members would be established.

6. Several individual differences in perceptions, aspirations, needs, feelings, abilities and values
of people excite in the organization, such difference along with their changing nature over
periods of time have to be recognized.
7. Informal leadership rather than the formal authority of supervisors is more important for
increase in employee performance.
8. Democratic leadership style and participative managerial style encourage positive attitude of
employee towards work and fasters high moral and initiative among them.
THE MODERN THEORY OF MANAGEMENT
1) Quantitative Approach to Management (Operations Research)
1. This approach emphases the use of mathematical models in solving many complex
management problems. The quantitative tools and methodologies, known as Operations
Research Techniques are designed to aid in decision making relating to operations and
production. This generally involves the following four steps:
(a) A mathematical model is constructed with variables reflecting the important factors in
the situation to be analyzed.
(b) The decision rules are established and some standards are set for the purpose of
comparing the relative merits of possible courses of actions.
(c) The empirical data is gathered which would relate to the parameters in the models.
(d) The mathematical calculations are executed so as to find a course of action that will
maximize the criterion function.
2. These operational research techniques are extensively used in many fields. Some of these
are: Capital budgeting, Production scheduling, Planning for manpower development
programmes, Inventory control, Transportation and aircraft scheduling, Resource
allocation, Queuing theory or waiting line and service problems, Preventive control and
replacement problems, Competitive problems and problems of game theory.
There are basically three Quantitative Management approaches:
1.
2.
3.

Management Science Approach

Operations Management
Management Information Systems

a) Management Science Approach

Also called Operations Research.

George B. Dantzig is the father of Operations Research.

Involves the use of mathematical models and statistical methods in decision making
process.
The assumption is that Management can be expressed in terms of mathematical
symbols, relationships and measurement data.
Widely used in the areas of Capital Budgeting and Cash Flow Management, Production
Scheduling, Development of Product Strategies, Planning for Human Resource Development
programs, Maintenance of Optimal Inventory Levels, Aircraft Scheduling

Mathematical tools are: Waiting line theory or Queuing theory, Linear Programming,
Program Evaluation Review Technique, Critical Path Method, Decision Theory, Simulation
Theory, Probability Theory, Sampling, Time Series Analysis

b) Operations Management

Applied form of Management Science

Effective Production Processes and Timely Delivery of products/services.
Concerned with Inventory Management, Work Scheduling, Production Planning,
Facilities Location and Design, Quality Assurance
Tools used here are: Forecasting, Inventory Analysis, Materials Requirement Planning
Systems, and Networking Models. Statistical Quality Control Methods, Project Planning and
Control Techniques
c) Management Information Systems

Computer based information systems

Converts raw data into useful information
Charles Babbage is the pioneer in MIS
SYSTEM APPROACH
A system in simple terms is a set of interrelated parts. It is a group of interrelated but separate
elements working towards a common purpose. The arrangement of elements must be orderly,
there must be proper communication facilitating interaction between the elements and finally the
interaction should lead to achieve a common goal. The organization transforms input into a
variety of outputs and offers the same to the external environment in the form of products good
and services. Sale of the output provides the necessary energy (feedback) to the system cycle.
 INPUT OUTPUT
 FEED BACK
 TRANSFORMATION
 PROCESS

The system approach provides a unified focus to organizational efforts. A major contribution of
the system approach results from its strong emphasis on the interrelatedness or mutuality of the
parts of an organization. A close system imports something from the environment and exports
something into the environment. The system theory of management is characterized by the
following: (a) Dynamic: - Within the organization the process of interaction between subsystems is
dynamic.
(b) Multilevel and Multidimensional: - It is micro within the nations industrial network and it is
macro with respect to its internal units. The modern manager is forced to recognize the
importance of parts as well as the whole.
(c) Multi motivated: - Motivation is an extremely complex process and drawing simplistic
equation is a futile exercise.
(d) Probabilistic: - Modern theory tends to probabilistic. Statement in modern theory tends to be
qualified with phrases such as may be, in general and usually because modern theory
recognizes that few predictive statement can be made with certainty.
(e) Multidisciplinary: - Modern theory of management is enriched by contribution from
disciplines like sociology, psychology, economics, anthropology, ecology mathematics,
operations research and so on.
Contingency Approach
The contingency approach believes that it is impossible to select one way of managing that
works best in all situations like promoted by Taylor. Their approach is to identify the conditions
of a task (scientific management school), managerial job (administrative management school)
and person (human relations school) as parts of a complete management situation and attempt to
integrate them all into a solution which is most appropriate for a specific circumstance.
Contingency refers to the immediate (contingent or touching) circumstances. The manager has to
systematically try to identify which technique or approach will be the best solution for a problem
which exists in a particular circumstance or context.
Managers today are advised to analyze a situation and use ideas from the various schools of
thought to find an appropriate combination of management techniques to meet the needs of the
situation.

UNIT- 2
CONCEPT OF PLANNING
Planning means looking ahead and chalking out future courses of action to be followed. It is a
preparatory step. It is a systematic activity which determines when, how and who is going to
perform a specific job. Planning is a detailed programme regarding future courses of action. It is
rightly said Well plan is half done.
According to Urwick, Planning is a mental predisposition to do things in orderly way, to think
before acting and to act in the light of facts rather than guesses. Planning is deciding best
alternative among others to perform different managerial functions in order to achieve
predetermined goals.
Nature of Planning
1.
2.
3.
4.
5.
6.
7.
8.
9.

Planning is goal-oriented.
Planning is looking ahead.
Planning is an intellectual process
Planning involves choice & decision making.
Planning is the primary function of management / Primacy of Planning.
Planning is a Continuous Process.
Planning is all Pervasive
Planning is designed for efficiency.
Planning is Flexible.
Objective of Planning

1) Reduces uncertainty and risk

2) Provides sense of direction
3) Encourages innovation & creativity
4) Helps in coordination
5) Guides decision making
6) Provides a basis for decentralization
7) Provides efficiency in operation
8) Facilitates control
Planning Process
1. Establishment of objectives
2. Establishment of Planning Premises

3.
4.
5.
6.

Choice of alternative course of action

Formulation of derivative plans
Securing Co-operation.
Follow up/Appraisal of plans
Advantages of Planning

1.
2.
3.
4.
5.
6.
7.

Planning facilitates management by objectives.

Planning minimizes uncertainties.
Planning facilitates co-ordination.
Planning improves employees moral.
Planning helps in achieving economies.
Planning facilitates controlling.
Planning provides competitive edge

Internal Limitations
 Rigidity
 Misdirected Planning
 Time consuming
 Probability in planning
 false sense of security
 Expensive

External Limitations of Planning

1. Political Climate- Change of government from Congress to some other political party,
etc.
2. Labour Union- Strikes, lockouts, agitations.
3. Technological changes- Modern techniques and equipments, computerization.
4. Policies of competitors- Ex. Policies of Coca Cola and Pepsi.
5. Natural Calamities- Earthquakes and floods.
6. Changes in demand and prices- Change in fashion, change in tastes, change in income
level, demand falls, price falls, etc.
TYPES OF PLANS
1. Purposes or Missions
It identifies the basic function or task of an enterprises or agency or any part of it. The purpose
of business generally is the production and distribution of goods and services.

2. Objectives or goals
These are the ends, towards which activity is aimed, they are the results to be achieved. They
represent not only the end point of planning but the end toward which Organising, staffing,
leading and controlling are aimed.
3. Strategies
Strategies are grand plan. The most common usage of the term is general programs of action
and deployment of resources to attain comprehensive objectives. The determination of the basic
long term objectives of an enterprises and the adoption of courses of action and allocation of
resources necessary to achieve these goals.
4. Policies
Policies are general statements or undertakings which guide or channel thinking in decision
making. Not all policies are Statements; they are often merely implied from the actions
of managers.
5. Procedures
These are plans that require method of handling future activities. They are guides to action,
rather than to thinking, and they detail the exact manner in which certain activities must be
accomplished. They are chronological sequences of required actions.
6. Rules
Rules are spell out specific actions or non actions, allowing no discretion.
7. Programs
It is a complex of goals, policies, procedures, rules, tasks assignments, steps to be taken,
resources to be employed and other elements necessary to carry out a given course of action;
they are ordinarily supported by budgets

8. Budgets
It is a statement of expected results expressed in numerical terms. Referred as numberized
program. The financial operating budget is often called a profit plan
BUSINESS FORECASTING
Forecasting is an essential discipline in planning and running a business. Success depends, to a
large extent, on getting those forecasts right. We know, however, that the future is highly
uncertain. Throughout our lives we are confronted with uncertainties. There is, therefore, a fair
chance that we will not make the right decisions.

STEPS IN THE FORECASTING PROCESS

1. Identify the Goal of the Forecast

This indicates the urgency with which the forecast is needed and identifies the amount of
resources that can be justified and the level of accuracy necessary.
2. Establish a Time Horizon
Decide on the period to be covered by the forecast, keeping in mind that accuracy decreases as
the time horizon increases.
3. Select a Forecasting Technique
The selection of a forecasting model will depend on the computer and financial resources
available in an organization, as well as on the complexity of the problem under investigation.
4. Conduct the Forecast
Use the appropriate data, and make appropriate assumptions with the best possible forecasting
model. Health care managers often have to make assumptions based on experience with a given
situation, and sometimes by trial and error. In forecasting, analyzing appropriate data refers to a)
the availability of relevant historical data; and b) recognizing the variability in a given data set.
5. Monitor Accuracy
Since there is an arsenal of techniques available, appropriate for different situations and data
representations, health care managers must examine their data and circumstances carefully to
select the appropriate forecasting approach. Be prepared to use another technique if the one in
use is not providing acceptable results.
MBO (Management by Objective)
MBO is a comprehensive managerial system that integrates many key managerial activities in a
systematic manner and that is consciously directed towards the effective and efficient
achievement of Organization and individual Objectives.- W h e r e s u p e r i o r s a n d
s u b o r d i n a t e s j o i n t l y i d e n t i f y t h e g o a l s o f the Organization
Process of MBO
1. Setting preliminary Objectives
2. Clarifying Organizational roles
3. Setting subordinates Objectives
4. Recycling Objectives

How to set Objectives

1. Quantitative & Qualitative
2. Setting Objectives in Government
3. Guidelines for setting Objectives
Benefits of MBO
Improvement of managing
Clarification of Organization
Encouragement of Personal commitment
Development of Effective control
Weakness of MBO
Failure to teach the philosophy of MBO
Failure to give guidelines to goal setters
Difficulty of setting goals
Emphasis on short run goals
Danger of Inflexibility
DECISION MAKING
It is a fundamental element of the managerial process. In considering the types of decision
making, managers need to look at two aspects: the five kinds of decisions that a manager might
face or produce and the four processes or styles employed in making the decision.
Decision Making is the process of choosing the best alternative for reaching objectives.
TYPES OF DECISIONS
PROGRAMMED DECISIONS:
Programmed decisions are routine and repetitive, and the organization typically develops specific
ways to handle them. A programmed decision might involve determining how products will be
arranged on the shelves of a supermarket. For this kind of routine, repetitive problem, standard
arrangement decisions are typically made according to established management guidelines.

NON PROGRAMMED DECISIONS:

Non programmed decisions are typically one shot decisions that are usually less structured than
programmed decision.
PROCESS OF DECISION MAKING
Decision making steps this model depicts are as follows:
1.
2.
3.
4.
5.

Identify an existing problem

List possible alternatives for solving the problem
Select the most beneficial of these alternatives.
Implement the selected alternative.
Gather feedback to find out if the implemented alternative is solving the identified
problem.
TECHNIQUES OF DECISION MAKING

. Decision making problems are divided into two types deterministic and probabilistic.
Deterministic model of problem solving depends on the relationship between uncontrollable
factors and continuing process of optimizing system performance. A model is developed in under
assumption related to existing business condition. If the variables under assumption do not truly
reflect the current business conditions, the model developed also will not reflect the reality.
A business model for decision making is constructed by analyst based on inputs of a decision
maker. A business model is developed over a period of time using a progressive approach
method.
Optimization Modeling Process
Optimization model is developed in three steps, 1st step is describing the problem, 2nd step is
elaborating the solution and 3rd step is controlling the problem.
The optimized problem of the 1st step can be classified into linear and non-linear depending
upon on nature of variables. Optimization problem has three following aspects:
An objective function to maximize or minimize.

A set of variables which affect the value of the objective function.

A set of uncontrollable factors referred as parameters.
The solution of optimized problem satisfying all parameters and constraints is referred as
feasible solution. The objective of an optimization process is to value of variables, which
minimize or maximize objective giving out an optimal solution.

Linear Programming
Linear programming is a mathematical procedure of determining linear allocation of business
variables. For constructing linear program following factors are essential:
The objective function needs to be linear.

The objective must be to either maximize or minimize a linear function.

The constraints in the program should also be linear.
In formulating a linear program certain variables are integer in nature, such as function with
integer variable is known as integer programming.

Decision Tree
In a certain decision-making process, probability plays an important role. On the decision model
based upon probability is decision trees.
BOUNDED RATIONALITY
Bounded rationality recognizes that it is impossible to comprehend and analyze all of the
potentially relevant information in making choices.
Bounded rationality is the idea that in decision-making, rationality of individuals is limited by
the information they have, the cognitive limitations of their minds, and the finite amount of time
they have to make a decision. It was proposed by Herbert A. Simon as an alternative basis for the
mathematical modeling of decision making, as used in economics and related disciplines; it
complements rationality as optimization, which views decision-making as a fully rational
process of finding an optimal choice given the information available. Another way to look at
bounded rationality is that, because decision-makers lack the ability and resources to arrive at the
optimal solution, they instead apply their rationality only after having greatly simplified the
choices available. Thus the decision-maker is a satisfier, one seeking a satisfactory solution
rather than the optimal one. Simon used the analogy of a pair of scissors, where one blade is the
"cognitive limitations" of actual humans and the other the "structures of the environment"; minds
with limited cognitive resources can thus be successful by exploiting pre-existing structure and
regularity in the environment
CONCEPT OF ORGANIZING
Organizing is the function of management which follows planning. It is a function in which the
synchronization and combination of human, physical and financial resources takes place. All the
three resources are important to get results. Therefore, organizational function helps in
achievement of results which in fact is important for the functioning of a concern.
A manager performs organizing function with the help of following steps:1. Identification of activities - All the activities which have to be performed in a concern

have to be identified first. For example, preparation of accounts, making sales, record
keeping, quality control, inventory control, etc. All these activities have to be grouped
and classified into units.

2. Departmentally organizing the activities - In this step, the manager tries to combine
and group similar and related activities into units or departments. This organization of
dividing the whole concern into independent units and departments is called
departmentation.

3. Classifying the authority - Once the departments are made, the manager likes to classify
the powers and its extent to the managers. This activity of giving a rank in order to the
managerial positions is called hierarchy. The top management is into formulation of
policies, the middle level management into departmental supervision and lower level
management into supervision of foremen. The clarification of authority helps in bringing
efficiency in the running of a concern. This helps in achieving efficiency in the running
of a concern.

4. Co-ordination between authority and responsibility - Relationships are established

among various groups to enable smooth interaction toward the achievement of the
organizational goal. Each individual is made aware of his authority and he/she knows
whom they have to take orders from and to whom they are accountable and to whom they
have to report. A clear organizational structure is drawn and all the employees are made
aware of it.
Process of Organizing

1. Identification of activities:
2. Grouping of activities:
3. Assignment of Responsibilities:
Having completed the exercise of identifying, grouping and classifying all activities into specific
jobs, they can be assigned to individuals to take care of.
4. Granting authority:
On the basis of responsibilities given to specific individuals, they are also to be given the
necessary authority to ensure effective performance.
5. Establishing relationship:

This is a very important job of management as everybody in the organization should know as to
who he/she is to report, thereby establishing a structure of relationships. By doing so,
relationships become clear and delegation is facilitated.
Significance of Organizing Function
1. Specialization - Organizational structure is a network of relationships in which the work
is divided into units and departments. This division of work is helping in bringing
specialization in various activities of concern.
2. Well defined jobs
3. Clarifies authority - Organizational structure helps in clarifying the role positions to
every manager (status quo). This can be done by clarifying the powers to every manager
and the way he has to exercise those powers should be clarified so that misuses of powers
do not take place.

4. Co - ordination - Organization is a means of creating co- ordination among different

departments of the enterprise. It creates clear cut relationships among positions and
ensures mutual co- operation among individuals. Harmony of work is brought by higher
level managers exercising their authority over interconnected activities of lower level
manager.
5. Effective administration
6. Growth and diversification - A companys growth is totally dependent on how
efficiently and smoothly a concern works. Efficiency can be brought about by clarifying
the role positions to the managers, co-ordination between authority and responsibility and
concentrating on specialization. In addition to this, a company can diversify if its
potential grow. This is possible only when the organization structure is well- defined.
This is possible through a set of formal structure.
7. Sense of security - Organizational structure clarifies the job positions. The roles assigned
to every manager are clear. Co- ordination is possible. Therefore, clarity of powers helps
automatically in increasing mental satisfaction and thereby a sense of security in a
concern. This is very important for job- satisfaction.
8. Scope for new changes - Where the roles and activities to be performed are clear and
every person gets independence in his working, this provides enough space to a manager
to develop his talents and flourish his knowledge. This scope for bringing new changes
into the running of an enterprise is possible only through a set of organizational structure.

Principles of Organizing
1. Principle of Specialization
According to the principle, the whole work of a concern should be divided amongst the
subordinates on the basis of qualifications, abilities and skills. It is through division of
work specialization can be achieved which results in effective organization.
2. Principle of Functional Definition
According to this principle, all the functions in a concern should be completely and
clearly defined to the managers and subordinates. This can be done by clearly defining
the duties, responsibilities, authority and relationships of people towards each other.
Clarifications in authority- responsibility relationships help in achieving co- ordination
and thereby organization can take place effectively..
3. Principles of Span of Control/Supervision
According to this principle, span of control is a span of supervision which depicts the
number of employees that can be handled and controlled effectively by a single manager.
According to this principle, a manager should be able to handle what number of
employees under him should be decided. This decision can be taken by choosing either
from a wide or narrow span.
4. Principle of Scalar Chain
Scalar chain is a chain of command or authority which flows from top to bottom. With a
chain of authority available, wastages of resources are minimized, communication is
affected, overlapping of work is avoided and easy organization takes place. A scalar
chain of command facilitates work flow in an organization which helps in achievement of
effective results. As the authority flows from top to bottom, it clarifies the authority
positions to managers at all level and that facilitates effective organization.
5. Principle of Unity of Command
It implies one subordinate-one superior relationship. Every subordinate is answerable and
accountable to one boss at one time. This helps in avoiding communication gaps and
feedback and response is prompt. Unity of command also helps in effective combination
of resources, that is, physical, financial resources which helps in easy co- ordination and,
therefore, effective organization.
Types of Organizations
Organizations are basically classified on the basis of relationships. There are two types of

organizations formed on the basis of relationships in an organization

1. Formal Organization - This is one which refers to a structure of well defined jobs each
bearing a measure of authority and responsibility. It is a conscious determination by
which people accomplish goals by adhering to the norms laid down by the structure.
Formal organization has a formal set up to achieve pre- determined goals.
2. Informal Organization - It refers to a network of personal and social relationships
which spontaneously originates within the formal set up. Informal organizations develop
relationships which are built on likes, dislikes, feelings and emotions. Therefore, the
network of social groups based on friendships can be called as informal organizations.
There is no conscious effort made to have informal organization.
Relationship between formal and informal organizations
For a concerns working both formal and informal organization are important. Formal
organization originates from the set organizational structure and informal organization originates
from formal organization. For an efficient organization, both formal and informal organizations
are required. They are the two phase of a same concern. Formal organization can work
independently. But informal organization depends totally upon the formal organization. Formal
and informal organization helps in bringing efficient working organization and smoothness in a
concern. Within the formal organization, the members undertake the assigned duties in cooperation with each other. They interact and communicate amongst themselves. Therefore, both
formal and informal organizations are important. When several people work together for
achievement of organizational goals, social tie ups tends to built and therefore informal
organization helps to secure co-operation by which goals can be achieved smooth. Therefore, we
can say that informal organization emerges from formal organization.
Line Organization
Line organization is the most oldest and simplest method of administrative organization.
According to this type of organization, the authority flows from top to bottom in a concern. The
line of command is carried out from top to bottom. This is the reason for calling this organization
as scalar organization which means scalar chain of command is a part and parcel of this type of
administrative organization. In this type of organization, the line of command flows on an even
basis without any gaps in communication and co- ordination taking place.
Line and Staff Organization

Line and staff organization is a modification of line organization and it is more complex than line
organization. According to this administrative organization, specialized and supportive activities
are attached to the line of command by appointing staff supervisors and staff specialists who are
attached to the line authority. The power of command always remains with the line executives

and staff supervisors guide, advice and council the line executives. Personal Secretary to the
Managing Director is a staff official.
Functional Organization
Functional organization has been divided to put the specialists in the top position throughout
the enterprise. This is an organization in which we can define as a system in which functional
department are created to deal with the problems of business at various levels. Functional
authority remains confined to functional guidance to different departments. This helps in
maintaining quality and uniformity of performance of different functions throughout the
enterprise.
The concept of Functional organization was suggested by F.W. Taylor who recommended the
appointment of specialists at important positions.
DEPARTMENTATION
The process of grouping of activities into units for the purpose of administration is called
departmentation. It can be defined "as the process by which activities or functions of enterprise
are grouped homogeneously into different groups."
The administrative units are called divisions, units or departments. The followings are the basis
of departmentation:
(a) When departmentation is done on the basis of functions the departments created are
production, marketing, accounting, and finance and personnel departments.
(b) When departmentation is done on the basis of geographical area, the departments are known
as eastern department, western department, northern and southern department.
(c) Departmentation can be done on the basis of customers.
(d) Departmentation can be done on the basis of product handled.
TYPES OF DEPARTMENTATION
1.

Functional Departmentation: - This is the simplest form of Departmentation when

grouping of departments is done on the basis of functions such as production finance
marketing sales purchase and personnel etc, it is known as functional Departmentation.
Further sub divisions of the functions may be formed like marketing can be divided in to
advertisement sales and after sales service. So we can classify functions into two parts.
Basic functions i.e. Production Marketing Finance and Personnel

Secondary Functions: - These are further parts of basic functions according to the
organizational needs or operations like Production: - Product planning, R&D, Quality
control and material handling
Functional departmentation is useful where there is production of single product or
similar kind of product, for example TV Computer monitor or TFT.

CEO

PRODUCTION

2.

FINANCE

MARKETING

PERSONAL

ADVERTISEMENT

SALES

MARKET RESEARCH

Products: - When grouping of activities and departments formed are given name on
the basis of products manufactured in an organization, it is called products
departmentation. It is applied where there is a large range of products are manufactured.
When there are several product lines and each product line consists of a variety of items,
functional classification fails to give balanced emphasis on each product. Apart form this
use; product or services may be made the basis of major divisions by a departmental
store, a banking concern and an insurance company. Again, manufacturing an marketing
departments may subdivide their activities on the basis of products.
CEO

HEAD TV DIVISION

3.

HEAD AC AND REFRIGERATION

HEAD COMPUTER

Territories: - Like the products basis, geographical regions are adopted for main
division as well as for subdivision purposes. When activities of an organization are
physically dispersed in different locations territorial departmentation is adopted. Units

that are located at different areas are made so many self-contained divisions of the
organization. Marketing activities are very often subdivided on the basis of geographical
areas. This form of departmentation can be useful where business is on national or
international level. For ex. Indian railways, insurance company use territorial
departmentation.

CEO

HEAD NORTH ZONE

4.

HEAD EAST ZONE

HEAD WEST ZONE

HEAD SOUTH ZONE

Customers: - When departments are formed to cater different kind of customers it is

known as customer departmentation this basis of classification is widely followed in
subdividing activities of the marketing department. When the products are offered to
market through various channels and outlets, it has the special merit of supplying goods
in accordance with the peculiar needs of customers. Customers may be classified
according to buying capacity or nature like whole sale, retail and export or government or
general public. Most departmental stores may attempt t reach customers preferring low
price or higher price
HEAD MARKETING

HEAD WHOLE SALE

HEAD RETAIL

HEAD EXPORT

RELATIONSHIP BETWEEN AUTHORITY AND RESPONSIBILITY

Authority is the legal right of person or superior to command his subordinates while
accountability is the obligation of individual to carry out his duties as per standards of
performance Authority flows from the superiors to subordinates,in which orders and instructions
are given to subordinates to complete the task. It is only through authority, a manager exercises
control. In a way through exercising the control the superior is demanding accountability from
subordinates.

Differences between Authority and Responsibility

Authority

Responsibility

It is the legal right of a

person or a superior to
command his subordinates.

It is the obligation of subordinate to

perform the work assigned to him.

Authority is attached to the

position of a superior in
concern.

Responsibility arises out of superiorsubordinate

relationship
in
which
subordinate agrees to carry out duty given
to him.

Authority can be delegated

by a superior to a subordinate

Responsibility cannot be shifted and is

absolute

It flows from top to bottom.

It flows from bottom to top.

Delegation of Authority - Meaning, Importance and its Principles

A manager alone cannot perform all the tasks assigned to him. In order to meet the targets, the
manager should delegate authority. Delegation of Authority means division of authority and
powers downwards to the subordinate. Delegation is about entrusting someone else to do parts
of your job. Delegation of authority can be defined as subdivision and sub-allocation of powers
to the subordinates in order to achieve effective results.
Elements of Delegation
1. Authority - in context of a business organization, authority can be defined as the power
and right of a person to use and allocate the resources efficiently, to take decisions and to
give orders so as to achieve the organizational objectives. Authority must be welldefined. Authority is the right to give commands, orders and get the things done. The top
level management has greatest authority. Authority always flows from top to bottom. It
explains how a superior gets work done from his subordinate by clearly explaining what

is expected of him and how he should go about it. Authority should be accompanied with
an equal amount of responsibility.

2. Responsibility - is the duty of the person to complete the task assigned to him.
Responsibility without adequate authority leads to discontent and dissatisfaction among
the person. Responsibility flows from bottom to top. The middle level and lower level
management holds more responsibility. The person held responsible for a job is
answerable for it.
3. Accountability - means giving explanations for any variance in the actual performance
from the expectations set. Accountability can not be delegated. Being accountable means
being innovative as the person will think beyond his scope of job. Accountability, in
short, means being answerable for the end result. Accountability cant be escaped. It
arises from responsibility.
For achieving delegation, a manager has to work in a system and has to perform following steps:
1. Assignment of tasks and duties
2. Granting of authority
3. Creating responsibility and accountability
Delegation of authority is the base of superior-subordinate relationship, it involves following
steps:1. Assignment of Duties
2. Granting of authority - Subdivision of authority takes place when a superior divides and
shares his authority with the subordinate. It is for this reason; every subordinate should be
given enough independence to carry the task given to him by his superiors.
3. Creating Responsibility and Accountability - The delegation process does not end once
powers are granted to the subordinates. They at the same time have to be obligatory
towards the duties assigned to them. Responsibility is said to be the factor or obligation
of an individual to carry out his duties in best of his ability as per the directions of
superior. At the same time, responsibility is absolute and cannot be shifted.
Accountability, on the others hand, is the obligation of the individual to carry out his
duties as per the standards of performance. Therefore, it is said that authority is
delegated, responsibility is created and accountability is imposed. Accountability arises
out of responsibility and responsibility arises out of authority.

Importance of Delegation
1. Through delegation, a manager is able to divide the work and allocate it to the subordinates.
This helps in reducing his work load so that he can work on important areas such as planning, business analysis etc.
2. With the reduction of load on superior, he can concentrate his energy on important and
critical issues of concern. This way he is able to bring effectiveness in his work as well in
the work unit. This effectively helps a manager to prove his ability and skills in the best
manner.

3. Delegation of authority is the ground on which the superior-subordinate relationship

stands. An organization functions as the authority flows from top level to bottom. This in
fact shows that through delegation, the superior-subordinate relationship become
meaningful. The flow of authority is from top to bottom which is a way of achieving
results.
4. Delegation of authority is help to both superior and subordinates. This, in a way, gives
stability to a concerns working. With effective results, a concern can think of creating
more departments and divisions flow working. This will require creation of more
managers which can be fulfilled by shifting the experienced, skilled managers to these
positions. This helps in both virtual as well as horizontal growth which is very important
for a concerns stability.
Principles of Delegation
1. Principle of result excepted- suggests that every manager before delegating the powers
to the subordinate should be able to clearly define the goals as well as results expected
from them. The goals and targets should be completely and clearly defined and the
standards of performance should also be notified clearly.
2. Principle of Parity of Authority and Responsibility- According to this principle, the
manager should keep a balance between authority and responsibility. Both of them
should go hand in hand.

According to this principle, if a subordinate is given a responsibility to perform a task,

then at the same time he should be given enough independence and power to carry out
that task effectively.
3. Principle of absolute responsibility- This says that the authority can be delegated but
responsibility cannot be delegated by managers to his subordinates which means
responsibility is fixed. The manager at every level, no matter what is his authority, is
always responsible to his superior for carrying out his task by delegating the powers.

4. Principle of Authority level- This principle suggests that a manager should exercise his
authority within the jurisdiction / framework given. The manager should be forced to
consult their superiors with those matters of which the authority is not given that means
before a manager takes any important decision, he should make sure that he has the
authority to do that on the other hand, subordinate should also not frequently go with
regards to their complaints as well as suggestions to their superior if they are not asked to
do.
Centralization and Decentralization
like product, finance, marketing, personnel, are carried out by the department heads and they
have to act as per instruction and orders of the two people. Therefore in this case, decision
making power remain in the hands of father & son.
Centralization is said to be a process where the concentration of decision making is in a few
hands. All the important decision and actions at the lower level, all subjects and actions at the
lower level are subject to the approval of top management. According to Allen, Centralization
is the systematic and consistent reservation of authority at central points in the organization. The
implication of centralization can be :1. Reservation of decision making power at top level.
2. Reservation of operating authority with the middle level managers.
3. Reservation of operation at lower level at the directions of the top level.
Under centralization, the important and key decisions are taken by the top management and the
other levels are into implementations as per the directions of top level. For example, in a
business concern, the father & son being the owners decide about the important matters and all
the rest of functions
On the other hand, Decentralization is a systematic delegation of authority at all levels of
management and in all of the organization. In a decentralization concern, authority in retained by
the top management for taking major decisions and framing policies concerning the whole
concern. Rest of the authority may be delegated to the middle level and lower level of
management.
The degree of centralization and decentralization will depend upon the amount of authority
delegated to the lowest level. According to Allen, Decentralization refers to the systematic
effort to delegate to the lowest level of authority except that which can be controlled and
exercised at central points.
Decentralization is not the same as delegation. In fact, decentralization is all extension of
delegation. Decentralization pattern is wider is scope and the authorities are diffused to the
lowest most level of management. Delegation of authority is a complete process and takes place
from one person to another. While decentralization is complete only when fullest possible
delegation has taken place. Decentralization is wider in scope and the subordinates

responsibility increase in this case. On the other hand, in delegation the managers remain
answerable even for the acts of subordinates to their superiors.
Implications of Decentralization
1. There are fewer burdens on the Chief Executive as in the case of centralization.
2. In decentralization, the subordinates get a chance to decide and act independently which
develops skills and capabilities. This way the organization is able to process reserve of
talents in it.
3. In decentralization, diversification and horizontal can be easily implanted.
4. In decentralization, concern diversification of activities can place effectively since there
is more scope for creating new departments. Therefore, diversification growth is of a
degree.
5. In decentralization structure, operations can be coordinated at divisional level which is
not possible in the centralization set up.
6. In the case of decentralization structure, there is greater motivation and morale of the
employees since they get more independence to act and decide.

Delegation and Decentralization

Basis

Delegation

Decentralization

Meaning

Managers delegate some of

their function and authority to
their subordinates.

Right to take decisions is shared by top

management and other level of
management.

Scope

Scope of delegation is limited

as superior delegates the powers
to
the
subordinates
on
individual bases.

Scope is wide as the decision making is

shared by the subordinates also.

Responsibility

Responsibility remains of the

managers and cannot be
delegated

Responsibility is also delegated to

subordinates.

Freedom
Work

Freedom is not given to the

subordinates as they have to
work as per the instructions of
their superiors.

Freedom to work can be maintained by

subordinates as they are free to take
decision and to implement it.

Nature

It is a routine function

It is an important decision of an
enterprise.

Need
purpose

on

Delegation is important in all

concerns whether big or small.
No enterprises can work
without delegation.

Decentralization
becomes
more
important in large concerns and it
depends upon the decision made by the
enterprise, it is not compulsory.

Grant
Authority

of

The authority is granted by one

individual to another.

It is a systematic act which takes place at

all levels and at all functions in a
concern.

Grant
of
Responsibility

Responsibility
delegated

be

Authority with responsibility is delegated

to subordinates.

Degree

Degree of delegation varies

from concern to concern and
department to department.

Decentralization is total by nature. It

spreads throughout the organization i.e.
at all levels and all functions

of

cannot

UNIT 3
Staffing Function of Management
Staffing:
The managerial function of staffing involves manning the organization structure through proper
and effective selection, appraisal and development of the personnel to fill the roles assigned to
the employers/workforce.
According to Theo Haimann, Staffing pertains to recruitment, selection, development and
compensation of subordinates.
Nature of Staffing Function
1.
2.
3.
4.
5.
6.

Staffing is an important managerial function.

Staffing is a pervasive activity.
Staffing is a continuous activity.
The basis of staffing function is efficient management of personnel.
Staffing helps in placing right men at the right job.
Staffing is performed by all managers
Importance of Staffing

Progressive and successful organizations treat all employees as valuable human resources.
Productivity and the resultant financial reward are dependent solely on the quality and skill of
people. Some organizations make up for their lack of natural resources by their dedication to the
maximum possible development of their human resources. Staffing function provides proper
mechanisms for efficient handling of personnel matters, including workers, grievances. Filed
research indicates that employees tend to return the favor when they are treated with dignity and
respect.
Activities
Staffing activities, though all derived from organization strategy and structure, in turn activate
the strategic management and the structure. Strategic orientation in staffing function increases
the chances of organizational success.
Process
Staffing process and policies play a considerable role in acquiring right people at right time on
right positions. Effective staffing function strives to establish cost-benefit relationship while
manning the positions in the organization structure people are acquired at lower outflows for
providing greater efforts, optimal contribution and higher commitment.

Relationship
Staffing is important in its relationship with other managerial functions, because without their
human resources, organizations would remain empty skeletons that cannot move to achieve their
goals. The functions of planning, organizing, directing and controlling become nonstarters
without people n the organization. It is clear that the effectiveness of other managerial functions
depends on the degree of efficiency with which the staffing function is done. An organization is
healthy, strong and successful to the extent that its people are capable, skillful and committed.
Need
Staffing function takes care of the need for building a sound organization. In a sense,
organization widely differs in their quality and competence due to large variations in their human
resources.

Staffing Process - Steps involved in Staffing

1. Manpower requirements
2. Recruitment- Once the requirements are notified, the concern invites and solicits
applications according to the invitations made to the desirable candidates.
3. Selection
4. Orientation and Placement- Once screening takes place, the appointed candidates are
made familiar to the work units and work environment through the orientation
programmes. Placement takes place by putting right man on the right job.

5. Training and Development

6. Remuneration- It is a kind of compensation provided monetarily to the employees for
their work performances. This is given according to the nature of job- skilled or
unskilled, physical or mental, etc.
7. Performance Evaluation- In order to keep a track or record of the behaviour, attitudes
as well as opinions of the workers towards their jobs. For this regular assessment is done
to evaluate and supervise different work units in a concern.
8. Promotion and transfer- Promotion is said to be a non- monetary incentive in which the
worker is shifted from a higher job demanding bigger responsibilities as well as shifting
the workers and transferring them to different work units and branches of the same
organization.

MOTIVATING AND LEADING

Motivation is a goal-oriented characteristic that helps a person achieve his objectives. It pushes
an individual to work hard at achieving his or her goals. An executive must have the right
leadership traits to influence motivation. However, there is no specific blueprint for motivation.
As a leader, one should keep an open perspective on human nature. Knowing different needs of
subordinates will certainly make the decision-making process easier.
Both an employee as well as manager must possess leadership and motivational traits. An
effective leader must have a thorough knowledge of motivational factors for others. He must
understand the basic needs of employees, peers and his superiors. Leadership is used as a means
of motivating others.
Remember, To become an efficient leader, you must be self-motivated. You must know
your identity, your needs and you must have a strong urge to do anything to achieve your goals.
Once you are self-motivated, only then you can motivate others to achieve their goals and to
harmonize their personal goals with the common goals of the organization.

MOTIVATION
Motivation is the word derived from the word motive which means needs, desires, wants or
drives within the individuals. It is the process of stimulating people to actions to accomplish the
goals. In the work goal context the psychological factors stimulating the peoples behaviour can
be

desire for money

success
recognition
job-satisfaction
team work, etc

Importance of Motivation
1. Puts human resources into action
Every concern requires physical, financial and human resources to accomplish the goals.
It is through motivation that the human resources can be utilized by making full use of it.
This can be done by building willingness in employees to work.
2. Improves level of efficiency of employees

The level of a subordinate or a employee does not only depend upon his qualifications
and abilities. For getting best of his work performance, the gap between ability and
willingness has to be filled which helps in improving the level of performance of
subordinates.
3. Leads to achievement of organizational goals
The goals of an enterprise can be achieved only when the following factors take place :a. There is best possible utilization of resources,
b. There is a co-operative work environment,
c. The employees are goal-directed and they act in a purposive manner.
4. Builds friendly relationship
Motivation is an important factor which brings employees satisfaction. This can be done
by keeping into mind and framing an incentive plan for the benefit of the employees.
5. Leads to stability of work force
Stability of workforce is very important from the point of view of reputation and
goodwill of a concern. The employees can remain loyal to the enterprise only when they
have a feeling of participation in the management. The skills and efficiency of employees
will always be of advantage to employees as well as employees.
As it is said, Old is gold which suffices with the role of motivation here, the older the
people, more the experience and their adjustment into a concern which can be of benefit
to the enterprise.
Motivation is important to an individual as:
1.
2.
3.
4.

Motivation will help him achieve his personal goals.

If an individual is motivated, he will have job satisfaction.
Motivation will help in self-development of individual.
An individual would always gain by working with a dynamic team.

Similarly, motivation is important to a business as:

1. The more motivated the employees are, the more empowered the team is.
2. The more is the team work and individual employee contribution, more profitable and
successful is the business.
3. During period of amendments, there will be more adaptability and creativity.
4. Motivation will lead to an optimistic and challenging attitude at work place.

THEORIES OF MOTIVATION
Maslows Need Hierarchy Model
Abraham Maslow is well renowned for proposing the Hierarchy of Needs Theory in 1943. This
theory is a classical depiction of human motivation. This theory is based on the assumption that
there is a hierarchy of five needs within each individual. The urgency of these needs varies.
These five needs are as follows-

1. Physiological needs- These are the basic needs of air, water, food, clothing and shelter.
In other words, physiological needs are the needs for basic amenities of life.
2. Safety needs- Safety needs include physical, environmental and emotional safety and
protection. For instance- Job security, financial security, protection from animals, family
security, health security, etc.
3. Social needs- Social needs include the need for love, affection, care, belongingness, and
friendship.
4. Esteem needs- Esteem needs are of two types: internal esteem needs (self- respect,
confidence, competence, achievement and freedom) and external esteem needs
(recognition, power, status, attention and admiration).
5. Self-actualization need- This include the urge to become what you are capable of
becoming / what you have the potential to become. It includes the need for growth and
self-contentment. The self- actualization needs are never fully satiable. As an individual
grows psychologically, opportunities keep cropping up to continue growing.
According to Maslow, individuals are motivated by unsatisfied needs. As each of these needs is
significantly satisfied, it drives and forces the next need to emerge. Maslow grouped the five
needs into two categories - Higher-order needs and Lower-order needs. The physiological and
the safety needs constituted the lower-order needs. These lower-order needs are mainly satisfied
externally. The social, esteem, and self-actualization needs constituted the higher-order needs.
These higher-order needs are generally satisfied internally.

Herzbergs Two-Factor Theory of Motivation

In 1959, Frederick Herzberg, a behavioral scientist proposed a two-factor theory or the
motivator-hygiene theory. According to Herzberg, there are some job factors that result in
satisfaction while there are other job factors that prevent dissatisfaction. According to Herzberg,
the opposite of Satisfaction is No satisfaction and the opposite of Dissatisfaction is No
Dissatisfaction.

FIGURE: Herzbergs view of satisfaction and dissatisfaction

Herzberg classified these job factors into two categoriesa. Hygiene factors- Hygiene factors are those job factors which are essential for existence
of motivation at workplace. These do not lead to positive satisfaction for long-term. But
if these factors are absent / if these factors are non-existent at workplace, then they lead
to dissatisfaction. These factors are extrinsic to work. Hygiene factors are also called as
dissatisfiers or maintenance factors as they are required to avoid dissatisfaction. These
factors describe the job environment/scenario. Hygiene factors include:

Pay
Company Policies and administrative policies
Fringe benefits
Physical Working conditions
Status
Interpersonal relations
Job Security

b. Motivational factors- According to Herzberg, the hygiene factors cannot be regarded as

motivators. The motivational factors yield positive satisfaction. These factors are inherent
to work. These factors motivate the employees for a superior performance. These factors
are called satisfiers. Motivational factors include:
Recognition
Sense of achievement
Growth and promotional opportunities
Responsibility
Meaningfulness of the work
Mc Gregors Theory X and Theory Y
In 1960, Douglas McGregor formulated Theory X and Theory Y suggesting two aspects of
human behaviour at work, or in other words, two different views of individuals (employees): one
of which is negative, called as Theory X and the other is positive, so called as Theory Y.
According to McGregor, the perception of managers on the nature of individuals is based on
various assumptions.
Assumptions of Theory X

An average employee intrinsically does not like work and tries to escape it whenever
possible.
Since the employee does not want to work, he must be persuaded, compelled, or warned
with punishment so as to achieve organizational goals. A close supervision is required on
part of managers. The managers adopt a more dictatorial style.
Many employees rank job security on top, and they have little or no aspiration/ ambition.

Employees generally dislike responsibilities.

Employees resist change.
An average employee needs formal direction.

Assumptions of Theory Y

Employees can perceive their job as relaxing and normal. They exercise their physical
and mental efforts in an inherent manner in their jobs.
Employees may not require only threat, external control and coercion to work, but they
can use self-direction and self-control if they are dedicated and sincere to achieve the
organizational objectives.
If the job is rewarding and satisfying, then it will result in employees loyalty and
commitment to organization.
An average employee can learn to admit and recognize the responsibility. In fact, he can
even learn to obtain responsibility.
The employees have skills and capabilities. Their logical capabilities should be fully
utilized. In other words, the creativity, resourcefulness and innovative potentiality of the
employees can be utilized to solve organizational problems.

Thus, we can say that Theory X presents a pessimistic view of employees nature and behaviour
at work, while Theory Y presents an optimistic view of the employees nature and behaviour at
work. If correlate it with Maslows theory, we can say that Theory X is based on the assumption
that the employees emphasize on the physiological needs and the safety needs; while Theory X is
based on the assumption that the social needs, esteem needs and the self-actualization needs
dominate the employees.
McGregor views Theory Y to be more valid and reasonable than Theory X. Thus, he encouraged
cordial team relations, responsible and stimulating jobs, and participation of all in decisionmaking process.
Leadership
Leadership is a process by which an executive can direct, guide and influence the behavior and
work of others towards accomplishment of specific goals in a given situation. Leadership is the
ability of a manager to induce the subordinates to work with confidence and zeal.
According to Keith Davis, Leadership is the ability to persuade others to seek defined
objectives enthusiastically. It is the human factor which binds a group together and motivates it
towards goals.

Characteristics of Leadership
1. It is a inter-personal process in which a manager is into influencing and guiding workers
towards attainment of goals.
2. It denotes a few qualities to be present in a person which includes intelligence, maturity
and personality.
3. It is a group process. It involves two or more people interacting with each other.
4. A leader is involved in shaping and moulding the behaviour of the group towards
accomplishment of organizational goals.
5. Leadership is situation bound. There is no best style of leadership. It all depends upon
tackling with the situations.
Importance of Leadership
1. Initiates action- Leader is a person who starts the work by communicating the policies
and plans to the subordinates from where the work actually starts.
2. Motivation.
3. Providing guidance.
4. Creating confidence.
5. Building morale.
6. Builds work environment
7. Co-ordination
Leadership Styles - Important Leadership Styles
All leaders do not possess same attitude or same perspective. As discussed earlier, few leaders
adopt the carrot approach and a few adopt the stick approach. Thus, all of the leaders do not get
the things done in the same manner. Their style varies. The leadership style varies with the kind
of people the leader interacts and deals with. A perfect/standard leadership style is one which
assists a leader in getting the best out of the people who follow him.
Important leadership styles are as follows:
Autocratic leadership style,
Democratic /Participative leadership style
Free Rein leadership

LIKERTS SYSTEMS OF MANAGEMENT

Dr Renesis Likert has studied human behaviour within many organizations. After extensive
research, Dr. Renesis Likert concluded that there are four systems of management. According to
Likert, the efficiency of an organization or its departments is influenced by their system of
management. Likert categorized his four management systems as follows;
Exploitive Authoritative System
In this type of management system the job of employees/subordinates is to abide by the decisions
made by managers and those with a higher status than them in the organization. The subordinates
do not participate in the decision making. The organization is concerned simply about
completing the work. The organization will use fear and threats to make sure employees
complete the work set. There is no teamwork involved.
Benevolent authoritative system
Just as in an exploitive authoritative system, decisions are made by those at the top of the
organization and management. However employees are motivated through rewards (for their
contribution) rather than fear and threats. Information may flow from subordinates to managers
but it is restricted to what management wants to hear.
Consultative System
In this type of management system, subordinates are motivated by rewards and a degree of
involvement in the decision making process. Management will constructively use their
subordinates ideas and opinions. However involvement is incomplete and major decisions are
still made by senior management. There is a greater flow of information (than in a benevolent
authoritative system) from subordinates to management.
Participative/Group System
Management has complete confidence in their subordinates/employees. There is lots of
communication and subordinates are fully involved in the decision making process. Subordinates
comfortably express opinions and there is lots of teamwork. Teams are linked together by
people, who are members of more than one team. Likert calls people in more than one group
linking pins. Employees throughout the organization feel responsible for achieving the
organisations objectives.
Likert's Ideal System
Likert believes that if an organisation is to achieve optimum effectiveness then the ideal
system to adopt is Participative system.

Tannenbaum & Schmidt Model and Managerial

In 1957, Robert Tannenbaum and Warren Schmidt published a model of leadership explaining
the different ways that leaders interact with their followers. The model is a continuum that
showed that, at one end of the spectrum, a leader can have nearly total freedom to decide while,
at the other end of the spectrum, the team can have nearly total freedom to decide. In-between
these two extremes, Tannenbaum and Schmidt identified 7 types of leadership style. Knowing
these style options and being able to apply them to a workplace situation correctly is the secret of
effective leadership
7 approaches on the Tannenbaum and Schmidt Continuum
1. The Leader Tells. This approach is typified when a leader says: "The problem I face is... I
want you to..." This is the autocratic style of leadership. While unfashionable today, it is often
needed when teams are new, inexperienced, or weak. As the team gain in cohesion and
commitment, it becomes less and less appropriate.
2. The Leader Sells. This approach is typified when a leader says: "The problem I face is... I
want you to... because..." In the selling approach, it's still the leader in the driving seat but there
is the need to get others to understand why they are doing what he or she wants.
3. The Leader Tests. This approach is typified when a leader says: "The problem I face is... I
want you to... What do you think...?" Notice now how the leader explains the problem, comes up
with an idea but checks it out with the team. If they're not ready for more responsibility, they'll
go along with what the boss wants; if they are ready, and then he or she leaves the door open for
them to discuss their thoughts.

4. The Leader Consults. This approach is typified when a leader says: "The problem we face
is... What ideas do you have for solving it...?" Notice now how the leader drops the word "I" in
exchange for the word "we". Notice also how he or she no longer feels the need to have an
answer ready. The leader is effectively inviting the team to problem-solve with him or her.
5. The Leader Joins. This approach is typified when a leader says: "What is the problem we
face? How can we solve it? Any ideas?" Now comes a turning-point. The leader no longer owns
the problem and solution alone. By asking the team to consider the problem as well as the
solution, he or she is nudging them into outright ownership themselves.
6. The Leader Delegates. This approach is typified when a leader says: "Problems keep
cropping up... Can you see what's going on, come up with some ideas and get back to me..." Now
the leader knows that there are problems in certain areas of the job but, in moving from the word
"we" to the word "you", gives the team the green light to find answers. The decision may still be
the leaders but the team can have a high level of influence over the final outcome.
7. The Leader Abdicates. This approach is typified when a leader says: "Sort out any problems
that crop up. I'm here if you need me but only if you really need me." Here the language of the
leader is coded. What he or she is really saying to the team is that they have full responsibility
for identifying, analyzing, and resolving the problem but accountability still rests with the leader.
How to Use the Tannenbaum and Schmidt Continuum
Tannenbaum and Schmidt's 7 levels of control and freedom correspond broadly to a team's level
of development. When a team is immature, ie unmotivated and unskilled, the styles will be on
the left-hand side of the spectrum. When a team is motivated and skilled, the styles will be on the
right. Tannenbaum and Schmidt thought that there were two other factors to be taken into
account when selecting a style. One was the demands of the situation. For example, is the
problem urgent or high-risk? Does the organisation's culture allow for delegating styles? The
other issue was whether the leader has the skills and willingness to manage a full range of styles
across the spectrum.

Managerial Grid
The treatment of task orientation and people orientation as two independent dimensions was a
major step in leadership studies. Many of the leadership studies conducted in the 1950s at the
University of Michigan and the Ohio State University focused on these two dimensions.
Building on the work of the researchers at these Universities, Robert Blake and Jane Mouton
(1960s) proposed a graphic portrayal of leadership styles through a managerial grid. The grid
depicted two dimensions of leader behavior, concern for people (accommodating peoples
needs and giving them priority) on y-axis and concern for production (keeping tight schedules)

on x-axis, with each dimension ranging from low (1) to high (9), thus creating 81 different
positions in which the leaders style may fall.

The five resulting leadership styles are as follows:

1. Impoverished Management (1, 1): Managers with this approach are low on both the
dimensions and exercise minimum effort to get the work done from subordinates.
2. Task management (9, 1): Also called dictatorial or perish style. Here leaders are more
concerned about production and have less concern for people. The style is based on
theory X of McGregor.
3. Middle-of-the-Road (5, 5): This is basically a compromising style wherein the leader
tries to maintain a balance between goals of company and the needs of people. The leader
does not push the boundaries of achievement resulting in average performance for
organization. Here neither employee nor production needs are fully met.
4. Country Club (1, 9): This is a collegial style characterized by low task and high people
orientation where the leader gives thoughtful attention to the needs of people thus
providing them with a friendly and comfortable environment.
5. Team Management (9, 9): Characterized by high people and task focus, the style is
based on the theory Y of McGregor and has been termed as most effective style
according to Blake and Mouton. The leader feels that empowerment, commitment, trust,
and respect are the key elements in creating a team atmosphere which will automatically
result in high employee satisfaction and production.

UNIT - 4
Controlling
Controlling consists of verifying whether everything occurs in conformities with the plans
adopted, instructions issued and principles established. Controlling ensures that there is effective
and efficient utilization of organizational resources so as to achieve the planned goals.
Controlling measures the deviation of actual performance from the standard performance,
discovers the causes of such deviations and helps in taking corrective actions
According to Donnell, Just as a navigator continually takes reading to ensure whether he is
relative to a planned action, so should a business manager continually take reading to assure
himself that his enterprise is on right course.
Controlling has got two basic purposes
1. It facilitates co-ordination
2. It helps in planning
Nature of Controlling Function
Following are the characteristics of controlling function of management1. Controlling is an end function- A function which comes once the performances are
made in conformities with plans.
2. Controlling is a pervasive function- which means it is performed by managers at all
levels and in all type of concerns.
3. Controlling is forward looking- because effective control is not possible without past
being controlled. Controlling always looks to future so that follow-up can be made
whenever required.
4. Controlling is a dynamic process- since controlling requires taking reviewal methods;
changes have to be made wherever possible.
5. Controlling is related with planning- Planning and Controlling are two inseparable
functions of management. Without planning, controlling is a meaningless exercise and
without controlling, planning is useless. Planning presupposes controlling and controlling
succeeds planning.
Scope of control
Control scope is there to ensure that it is only the work identified as being in scope that is
delivered, and in this way scope creep is avoided.
The actual results are compared against the scope baseline and the requirements in order to
ensure that all of the approved scope is in fact being delivered. In this way, control scope

prevents scope change requests from overwhelming the project and ensures that they are all
handled properly.
The most important aspect of this is to take consideration of the impact of control scope on
schedule, cost, quality, resources, risk, etc. on any such potential changes to scope. Also
important is to ensure that the underlying causes of scope change requests are fully understood
and managed, and while doing so to prevent any unnecessary change requests for proceeding
further.
Types of Control
1. Strategic control: it deals with resource maximization; the company checks the
overall performance to see whether it is utilizing its opportunities and resources to
the fullest.
2. Operational control management control: it is assessing the efficiency of the plans
and methods used in order to ensure hat the various individual tasks are carried
out effectively and efficiently.
3. Profitability control: this is when the company assesses its profit or losses and it is
very important for a company since the aim of every company is profit
maximization. It seeks to know if the company is loosing money so as to know
the companies loop holes and how to fix it. Profitability control is normally the
responsibility of the marketing department.
4. Annual-plan control: it is the process whereby top management examines the
actual outcomes of its company's effort annually in order to know if the
companies efforts have been productive or not.
5. Management control: it is concerned with the human effort of plan
implementation. It entails ensuring that relevant resources are well utilized and
workers are well motivated
Process of Controlling

1. Establishment of standards- Standards are the plans or the targets which have to be
achieved in the course of business function. They can also be called as the criterions for
judging the performance. Controlling becomes easy through establishment of these
standards because controlling is exercised on the basis of these standards.

2. Measurement of performance- The second major step in controlling is to measure the

performance. Finding out deviations becomes easy through measuring the actual
performance. Performance levels are sometimes easy to measure and sometimes difficult.
Measurement of tangible standards is easy as it can be expressed in units, cost, money

terms, etc. Quantitative measurement becomes difficult when performance of manager

has to be measured. Performance of a manager cannot be measured in quantities.
3. Comparison of actual and standard performance- Comparison of actual performance
with the planned targets is very important. Deviation can be defined as the gap between
actual performance and the planned targets. The manager has to find out two things hereextent of deviation and cause of deviation. Extent of deviation means that the manager
has to find out whether the deviation is positive or negative or whether the actual
performance is in conformity with the planned performance. Minor deviations have to be
ignored. Major deviations like replacement of machinery, appointment of workers,
quality of raw material, rate of profits, etc. should be looked upon consciously.
4. Taking remedial actions- Once the causes and extent of deviations are known, the
manager has to detect those errors and take remedial measures for it.
Relationship between planning and controlling
Planning and controlling are two separate functions of management, yet they are closely related.
In absence of controlling, no purpose can be served by. Therefore, planning and controlling
reinforce each other.
According to Billy Goetz, " Relationship between the two can be summarized in the following
points:
1. Planning precedes controlling and controlling succeeds planning.
2. Planning and controlling are inseparable functions of management.
3. Activities are put on rails by planning and they are kept at right place through
controlling.
4. The process of planning and controlling works on Systems Approach which is as follows
Planning Results Corrective Action
Planning and controlling are integral parts of an organization as both are important for
smooth running of an enterprise.
5. Planning and controlling reinforce each other. Each drives the other function of
management.

In the present dynamic environment which affects the organization, the strong relationship
between the two is very critical and important. There controlling comes to the rescue. Once
controlling is done effectively, it gives us stimulus to make better plans. Therefore, planning and
controlling are inseparable functions of a business enterprise.

Techniques of Control
1. Direct Supervision and Observation
'Direct Supervision and Observation' is the oldest technique of controlling. The supervisor
himself observes the employees and their work. This brings him in direct contact with the
workers. So, many problems are solved during supervision. The supervisor gets first hand
information, and he has better understanding with the workers. This technique is most suitable
for a small-sized business
2. Financial Statements
All business organizations prepare Profit and Loss Account. It gives a summary of the income
and expenses for a specified period. They also prepare Balance Sheet, which shows the financial
position of the organization at the end of the specified period. Financial statements are used to
control the organization. The figures of the current year can be compared with the previous year's
figures. They can also be compared with the figures of other similar organizations.
3. Budgetary Control
A budget is a planning and controlling device. Budgetary control is a technique of managerial
control through budgets. It is the essence of financial control. Budgetary control is done for all
aspects of a business such as income, expenditure, production, capital and revenue. Budgetary
control is done by the budget committee.
4. Break Even Analysis
Break Even Analysis or Break Even Point is the point of no profit, no loss. It means that, any
sale below this point will cause losses and any sale above this point will earn profits. The Breakeven analysis acts as a control device. It helps to find out the company's performance. So the
company can take collective action to improve its performance in the future. Break-even analysis
is a simple control tool.
5. Return on Investment (ROI)
Investment consists of fixed assets and working capital used in business. Profit on the investment
is a reward for risk taking. If the ROI is high then the financial performance of a business is good
and vice-versa.
ROI is a tool to improve financial performance. It helps the business to compare its present
performance with that of previous years' performance. It helps to conduct inter-firm
comparisons. It also shows the areas where corrective actions are needed.
6. Management by Objectives (MBO)
MBO facilitates planning and control. It must fulfill following requirements :

Objectives for individuals are jointly fixed by the superior and the subordinate.

Periodic evaluation and regular feedback to evaluate individual performance.

Achievement of objectives brings rewards to individuals.

7. Management Audit
Management Audit is an evaluation of the management as a whole. It critically examines the full
management process, i.e. planning, organizing, directing, and controlling. It finds out the
efficiency of the management. To check the efficiency of the management, the company's plans,
objectives, policies, procedures, personnel relations and systems of control are examined very
carefully. Management auditing is conducted by a team of experts. They collect data from past
records, members of management, clients and employees. The data is analyzed and conclusions
are drawn about managerial performance and efficiency.
8. Management Information System (MIS)
In order to control the organization properly the management needs accurate information. They
need information about the internal working of the organization and also about the external
environment. Information is collected continuously to identify problems and find out solutions.
MIS collects data, processes it and provides it to the managers. MIS may be manual or
computerized. With MIS, managers can delegate authority to subordinates without losing
control.
9. PERT and CPM Techniques
Programme Evaluation and Review Technique (PERT) and Critical Path Method (CPM)
techniques consists of various activities and sub-activities. Successful completion of any activity
depends upon doing the work in a given sequence and in a given time.
CPM / PERT can be used to minimize the total time or the total cost required to perform the total
operations.
Importance is given to identifying the critical activities. Critical activities are those which have
to be completed on time otherwise the full project will be delayed.
So, in these techniques, the job is divided into various activities / sub-activities. From these
activities, the critical activities are identified. So, by controlling the time of the critical activities,
the total time and cost of the job are minimized.
10. Self-Control
Self-Control means self-directed control. A person is given freedom to set his own targets,
evaluate his own performance and take corrective measures as and when required. Self-control is
especially required for top level managers because they do not like external control.
The subordinates must be encouraged to use self-control because it is not good for the superior to
control each and everything.

Effective Control System

Effective control systems share several common characteristics. These characteristics are as
follows:

A focus on critical points. For example, controls are applied where failure cannot be
tolerated or where costs cannot exceed a certain amount. The critical points include all
the areas of an organization's operations that directly affect the success of its key
operations.

Integration into established processes. Controls must function harmoniously within

these processes and should not bottleneck operations.

Acceptance by employees. Employee involvement in the design of controls can increase

acceptance.

Availability of information when needed. Deadlines, time needed to complete the

project, costs associated with the project, and priority needs are apparent in these criteria.
Costs are frequently attributed to time shortcomings or failures.

Accuracy. Effective control systems provide factual information that's useful, reliable,
valid, and consistent.

Comprehensibility. Controls must be simple and easy to understand.

Effective control system in management are:

(1) Objectives:
A system of control can work more effectively when it is based on the main objectives or
goals of the organisation. It should be related to the persons. It becomes essential that the
standards, which are set by the management, should not be too high or too low. These
should be told to the workers in time so that the standards can be judged with the actual
performance.
(2) Suitability:

A business organisation should adopt such a system of control which suits its
requirement.-There is no hard and fast rule and readymade system of control which give
the correct and most favourable, results in all type of organisations and in all
circumstances.

Suitability of a system of control differs from organisation to organisation and to make it

favourable, it is necessary to know the nature of the business, needs of the workers a
circumstances prevailing inside the organisation.

(3) Forward looking:

The system of control should be forward looking which enables the managers to keep a
control on operations in advance. Each and every deviation from the standards should be
noted in time to take corrective action before the task is completed. This will avoid or
minimise the deviation in future.
(4) Feedback:

The success of a business depends on a system of control and for a systematic control
advance planning is needed. This advance planning should be based on actual accurate
post information collected through investigation.

The control system should be such that it is based on past information and. which would
also adjust if necessary to future actions.
(5) Quick action:

Management gets the information from various line managers or supervisors about the
deviation in standards and these should be suggested to the planner to take a correct and
quick action to avoid future wastage. Actually speaking, the success of control depends
entirely on quick action and its implementation.
(6) Directness:

In order to make the system of control more effective, it is necessary that the relation
between the workers and management should be direct. It is quite obvious that if the
number of line supervisors is less in the organisation then workers would work
effectively and objectives may be achieved in time because they will not take much time
in getting the correct information.
(7) Flexibility:

The system of control should be such that it accommodates all changes or failures in
plans. If plans are to be revised due to change in its objectives, the system of control
should also be adjusted to suit the changed circumstances.

References:
Text Books
1. Stoner, Freeman and Gilbert Jr.; Management, Prentice Hall of India, New Delhi, 2003.
2. Gupta, C.B.; Management Concepts and Practices, Sultan Chand and Sons, New Delhi, 2003.
3. R.K.Chopra-Principles&Pracitices of Management, Sun India Publication.

4. P.C.Tripathi and P.N.Reddy, Principles&Pracitices of Management, 2nd edition,Tata

McGrawHill.
Websites:
1. http://managementinnovations.wordpress.com/2008/12/04/henri-fayols-14-principles-ofmanagement/
2. http://www.citehr.com/137134-14-principles-management-henri-fayol.html
3. http://www.managementstudyguide.com/management_principles.htm
4. http://www.managementstudyguide.com/what_is_management.htm
5. http://upetd.up.ac.za/thesis/submitted/etd-05272005-165835/unrestricted/05chapter5.pdf
6. http://www.managementstudyguide.com/leadership-motivation.htm
7. http://www.preservearticles.com/201106168013/what-is-the-difference-betweencoordination-and-cooperation.html

8. http://www.sgbau.ac.in/mgt-process-and-organisatonal-behavior.pdf
9. http://managementlearningcenter.blogspot.in/2012/08/evolution-of-managementthought.html