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Management Process & Organizational Behaviour
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Management Process & Organizational Behaviour
Unit 1 Introduction to Management and Organisational Behavior 1

Unit 2 Evolution of Management Thoughts 19
Unit 3 Planning 33
Unit 4 Coordinating and Organising 49
Unit 5 Departmentation and Structural Formats 69
Unit 6 Directing and Controlling 87
Unit 7 Individual Behavior 105
Unit 8 Motivation 117
Unit 9 Groups and Decision Making 130
Unit 10 Leadership 146
Unit 11 Organisational Conflict 158
Unit 12 Organisational culture and Change Management 169
Further Reading and
References
UNIT 1 INTRODUCTION TO
MANAGEMENT AND
ORGANISATIONAL BEHAVIOR
Structure
Introduction
Unit Objectives
Management Defined
Nature of Management
Importance of Management
Managerial Roles
Interpersonal Roles
Informational Roles
Decisional Roles
Levels of Management
Top Level Management
Middle Level Management
First Level Management
Managerial Skills
Technical Skills
Human Skills
Conceptual Skills
Diagnostic Skills
Scope of Management
Human Resource Management
Financial Management
Production Management
Marketing Management
Functions of Management
Organizational Behavior
Importance of Organizational Behavior
OB Model
Summary
Key Terms
Questions & Exercises
Introduction to Management and Organization Behavior
NOTES
Management Process
& Organisational
Behaviour : 1
MBA106 unit
Introduction to Management & Organisational Behaviour : 2
and Organization Behavior
NOTES
Management Process
in the family has his or her role for e.g. the mother is expected to manage the home
1.0 Introduction and take care of children while father is supposed to provide financial support to the
family. The family prepares budget for the month and plans it various activities like
Human beings have education, shopping, holidaying, socializing etc .
variety of needs, that can’t Just like family, management activities and organizations have existed for thousands
be satisfied by their of years. Someone in the past always had a plan to accomplish whether it was building
individual efforts alone. up of Egyptian pyramids or Great Wall of China. In order to accomplish objectives the
They need to perform people and material were organized, the workers were directed and controls were
numerous activities to imposed on them.
satisfy their wants. Hence
organizations are formed to We can trace various practices of management that we apply today in ancient
cater to the need of the scriptures and books. “The Great Plan” is a document that combines astrology, moral
society. Individuals join principles, physics, politics and religion. It is a mixture of ideas from various areas. The
organization and text itself mentions the time period 1121 BC. The document includes a passage in it that
contribute their part for the scholars judge it to be older than 2200 BC. One passage of the document discusses
wellbeing of the society. about contingency theory of leadership. Its interpretation reveals the advice given to the
manager to consider characteristics of subordinates and situation in applying the leadership
There is one basic style. We can correlate this passage written in “The Great Plan” to the contingency
organization to which we theory of leadership proposed by Fielder. Written around 1100 BC “The officials of
all belong and that is family. Chou” is book containing a long exhaustive and detailed list of job description for the
Family is the basic unit of huge number officials in the kings service ranging from prime minister to household
the society. It has almost services. According to the book, the prime minister could use rules and regulations (a)
all the characteristics of to classify departments (b) to distribute responsibilities among departments (c) to specify
the organization. coordination links among officials (d) to define standards and procedures for operations
Organization is a group of (e) to assess officials’ performance. The philosophy was that by standardizing operating
two or more people procedure efficiency will improve and formalizing procedure would provide stability to
working together to the organizations. Officials had to behave in accordance with rules; they were punished
achieve a common for not complying with the standard. Ancient bureaucracies are well articulated in the
objective and so is the book “The Officials Of Chou”. Similar kind of bureaucracy was proposed by Max
family. The main aim of the Weber in 1920.
family is to provide mental,
physical and emotional
satisfaction to the
members of the family
along with general survival
goals. Family applies basic
economic concepts such as
division of labour ,
planning, distribution etc.
The family as a unit
decides as to which
member of the family will
do which task. Each person
Management is as old as civilization; it is a life giving element in every organization. Introduction to Management
Management is the most challenging, comprehensive, central of all human activities. and Organization Behavior
Managers not only affect the organizational effectiveness but also accomplish many
special economic goals of the society.
NOTES
The primary function of the management is to satisfy the various stakeholders of
the organization. He has to make sure that organization earn enough profit that satisfies
shareholders. The management also aims at providing valued products at a reasonable
cost to the customer. After all customers is the king. The growth and survival largely
depends upon the demands of the customer. Another important objective is to provide
rewarding employment to the employees so that best talent can be retained and all this
has to be done with efficiency. With the advent of industrial revolution the increase in
size and complexity of organizations lead to the split between owner and manager. This
resulted in emergence of management as a distinct discipline. The 21st century has
brought new challenges before workforce. Everyone must adapt to rapidly changing
society with constantly changing demands and opportunities.
Unit Objective
After studying this unit, you should be able to-
* Introduce and define the concept of management.
* Understand the nature and importance of management.
* Explain the various managerial roles.
* Describe the levels of management.
* Explain the various skills required by managers.
* Identify the scope of management.
* Describe the functions of management.
* Understand organizational behavior and its importance.
* Describe OB Model.
Management Defined
Organizations process human and nonhuman input into valuable outputs. The
input may include men, money, machinery, material, methods and the output consists of
products, services, profitability, customer and employee satisfaction etc. Management
acts as a unifying force. It focuses on the attainment of organizational goal in an effective
and efficient manner through the use of human and non human resources
Managers have a responsibility of ensuring that individuals make their best
contribution to group activities thus enhancing their productivity. All organizations need
good management for growth and survival. The aim of all managers is same i.e.
accomplishment of organizational goals efficiently and effectively.
Management Process & Organisational Behaviour : 3

Introduction to Management Productivity can be measured in terms of output input ratio, within a time period
and Organization Behavior with due consideration for quality. Productivity includes efficiency and effectiveness,
where effectiveness means achievement of objectives and efficiency means achievement
of the output with least amount of resources and efforts.
NOTES
MACHINE PRODUCT
PROFITA CUSTOMER
BILITY SATISFACTION
MATERIAL INPUT MONEY OUTPUT
PLANNING ORGANIZING STAFFING DIRECTING CONTROLLING
SERVICES EMPLOYEE
MEN SATISFACTION
Fig. 1.1 Management Process

The following are some of the definitions given by leading thinkers and practitioners
Management is the art of knowing what you want to do and then seeing that is
done in the best and cheapest way.
- F.W Taylor
Management is the creation and maintenance of an internal environment in an
enterprise where individuals working in groups can perform efficiently and effectively
towards the attainment of group goals. Management is the art of getting things done
through and with people in formally organized group.
- Harold Koontz and Cyrill O Donnell
Management is the coordination of all resources through the process of planning,
organizing , directing and controlling in order to attain stated objectives.
- Henry L. Sisk
Luther Gulik coined the word POSDCORB which tells about the management
process i.e. Planning, Organizing, Staffing, Directing, Coordinating, Reporting and
Budgeting
Nature of Management
& Organisational Behaviour : 4
Management Process
1. Management efficiency in the use of human and non human resources. Management is purposeful
is Universal in and success of the management is measured in terms of magnitude of goal attained.
Nature: it is 3. Management is a group Activity: whenever two or more people work towards
the central force
of every
organized
activity. All
types of
organization for
e.g. university,
government,
hospitals, hotels
, army, club,
cricket or
business
enterprise
require
application of
fundamental
principles of
management.
Management is
a pervasive
activity and is
applicable to
every organized
activity
irrespective of
size or type of
activity.
2. Management
aims at
Attainment of
Predetermined
Goals and
Objectives:
management is
a mean to
achieve
organizational
goals. It ensures
economy and
a common goal management is required to coordinate their efforts .Management Introduction to Management
means group of individuals occupying managerial positions and performing and Organization Behavior
managerial function. All the managers e.g. chief executive officer, departmental
heads foreman, supervisor all are collectively known as management.
NOTES
4. Management is Continuous Process: it is an ongoing process and refers to
series of interrelated functions such as planning, organizing, staffing, leading and
controlling. This cycle is repeated every now and then till the goals of the organization
are achieved.
5. Management is a Social Process: it is also a social process as it concerned with
people. Management is of the people for the people and by the people. It focuses
on interpersonal relationship and team building.
6. Management is a Integrative Process: management brings all human and non

human resources together, unifying them and employing them to achieve goals
7. Management is multi Disciplinary: management is a specialized branch of
knowledge that has received inputs from several other disciplines. The vast body
of knowledge in management draws heavily from other fields of study like
engineering, sociology, psychology, anthropology economics, mathematics,
commerce etc.
8. Management is an Art as well as Science: It is science as it a systematic body
of theoretical knowledge capable of general application. Management is an art
because it involves the application of knowledge and skills to achieve results like
any other art such as painting, music etc. The organized body underlying the practice
of management is a science, while applying the principles and practices is an art.
Science is an organized knowledge having clear concepts, theory and other
accumulated knowledge developed from hypothesis experimentation and analysis.
Principles in management are fundamental truths that explain the relationship
between variables. Principles are descriptive and not prescriptive. They tell us the
outcome of the interaction of variable but do not tell us what to do. Management as
an art require personal skill , creativity and result oriented approach. For e.g. An
individual may have technical knowledge of painting but to produce a good piece of
artwork he should be creative and should be able to practically apply the knowledge.
Importance of Management
* Achievement of goals : Management act as a unifying force and brings limited and
together factors of production both human and non human to achieve the management aims
objectives of the organization. Management is also one of the factors of at utilizing the
production. Without coordinated efforts of management no other factor of resources in best
production can produce the desired results in isolation. possible manner.
* Optimum utilization of resources : The resources of the organization are


Introduction to Management Manager tries to avoid wastage by using the resources efficiently and effectively.
* Integrates various interest : Shareholders are interested in earning profit
from business. Employees expect a decent pay from their employment.
NOTES Government expects tax and compliance with rules and regulations set by
them. The manger tries to balance these diverse goals that may be sometime
conflicting.
* Survival and Growth : The factors in the environment are constantly
changing. The change in Government policies, customer preferences or
technology can sometimes provide opportunity for growth or can act as threat
for survival. Manager is constantly scanning the environment and analyzing
the possible effects of the change on the organization. Manager takes
appropriate steps to eliminate threats and grab opportunity.
* Development of Nation : Peter Drucker has rightly said that developing
nations are not underdeveloped they are undermanaged. The development of
country largely depends on the quality of management of its scarce resources.
The manager produces wealth for the nation by deploying factors of production
to produce output that are needed and desired by the people. This way it
generates wealth and employment and improves standard of living of the people.
Management Roles
A role is a organized set of behavior that is expected from an individual. Roles
throw light on how managers perform their work. Henry Mintzberg, management expert
professor after studying the work performed by executives in 1960 ,proposed that
manager’s work can be put down to ten common roles.. The roles or expectations of
manager’s behavior at work are grouped into three categories. The three roles that
managers usually perform in any organizations are : interpersonal roles, informational
roles and decisional roles
INTERPERSONAL ROLES
FIGURE HEAD LEADERSHIP LIASON
INFORMATIONALROLES
MONITOR DISSEMINATOR SPOKESMAN
DECISIONALROLES
ENTREPRENEUR DISTURBANCEHENDLER RESOURCEALLOCATOR NEGOTIATOR

Management Process
F
i
g
.
1
.
2
M
a
n
a
g
e
m
e
n
t
R
o
l
e
s
Interperso
nal
Roles
This role is
concerned with
interpersonal
relationships and
interaction of
managers
with the people inside and outside the organizations. The three interpersonal roles are as is ever changing.
follows: Change in
technology,
1. Figurehead Role: the manager performs duties that are ceremonial in nature.
political, social and
They represent the organization in all matters of formality for e.g. attending
economic setup
social functions, greeting visitors, making speeches, hosting receptions,
bestowing honors etc. They perform social and legal duties and act as a
symbolic leader.
2. Leadership Role: it includes directing and motivating people towards
organizational objectives. He influences his sub-ordinates to exert high level
of efforts. He builds relationship with employees, coaches them and supports
them so that they meet work related goals that are essential for organization’s
growth and survival.
3. Liaison Role: a manager serves as a link between their organization and
others outside the organization in order to maintain mutually beneficial relations.
They maintain contact with the people outside the organization so as to evaluate
environmental factors effecting the organization. Self developed network of
contacts with government and other organization group can help in obtaining
favor and information.
Informational Roles
Informational roles involve receiving, collecting and disseminating information so
that manager can serve as nerve centers of their organizational units. Three informational
role are as follows:
1. Monitor Role: He seeks internal and external information that are relevant
to the organization through various sources. He usually receives and collects
information about the issues that can affect the organization through reading
magazines, reports and talking to others.
2. Disseminator: Manager transmits valuable and important information to the
members of the organization that would otherwise be inaccessible to them.
The manager transmits factual and value based information to the subordinates
through memorandums and holding informal meetings with them.
3. Spokesperson: Manager represents his unit to the outside world. He
communicates about the performance and policies of his unit to the people
outside his unit. He transmits information regarding organization’s plans, future
actions to the people external to the organization .They do it by holding board
meeting and giving information to the media.
Decisional Roles
The manager has to make important decisions that have a significant impact on
the organization. The four decision roles that the manager adopts are as follows:
1. Entrepreneur: Manager encourages innovation, brings about change in
organization and starts new project to improve the organization. Environment
NOTES

Introduction to Management may change the business definition of the organization. Managers look for
and Organization Behavior the ideas and opportunities in the environment and then design and initiate
change so that the organization is not left behind.
NOTES 2. Disturbance handler: When the organization is threatened with unexpected

difficulties the manager is responsible for formulating organizational strategy.
He has to deal with unexpected operational breakdowns for e.g. strikes by
the workers for higher pay package. Increase in the price of imported raw
material due to increase in customs duty. He has to provide solution to overcome
such unexpected problems.
3. Resource allocator: Manager is responsible for allocation of all types of
resources including funding, equipment, human resources, time etc to various
organizational units. He does it through budgeting and scheduling. Manager
controls and authorizes use of resources.
4. Negotiator: He represents his organizational unit and carries out negotiations
in bargaining process. He may negotiate with people outside the organization
for e.g. negotiating price with the vendor . He may negotiate with other units
in his organization to gain advantage for his own unit for e.g. negotiating for
allocation of limited resources of organization.
1.6 Levels of Management

The levels of management tell about the position of managers in an organization
on the basis of authority and responsibility. Each level has its distinctive functions and
roles. The number of managers at each level reduces as we move towards the top of
the pyramid. The management can be classified on the basis of hierarchy. They perform
different task and roles.
TOP
LEVEL
MIDDLE
LEVEL
FIRST LEVEL
Management Process
F enterprise.
i * They decide about the structure of the organization. They appoint middle
g
.
1
.
3
L
e
v
e
l
s
o
f
M
a
n
a
g
e
m
e
n
t
Top Level
Manage
ment
Top level
management consists
of board of directors,
presidents and CEOs.
They are responsible
for overseeing the
entire organization.
* They
develop
goals,
strategic
plans,
objectives
and broad
policies of
the
level executives and coordinate the activities of all departments. * They act as a line of
communication
* They are answerable to shareholders of the organization and responsible for
between the
the overall performance of the organization.
employees in an
* They should have understanding of competition, world economies, politics organization and
and social trends that affect organizational effectiveness. upper levels of
* They decide about the factors that are vital for survival and growth of the management. They
organization ,like shutting down of an unprofitable plant, entering into a new report grievances
market, introducing a new product in the market, opening new plant etc. and suggestions of
* They maintain liaison with outside world such as government, trade associations
, association of industry etc.
* They make decisions regarding distribution of profit and retained earnings.
Middle Level Management

Middle level management consists of general managers, branch managers and
departmental managers. They control and oversee the departmental activities.
* They are accountable to top management.
* They decide departmental goals in conformance with the company policies
and objective set by top management. They are responsible for preparing
departmental plan covering all the activities related to the department within
the basic framework of the corporate plan set by top management.
* They perform all the management functions related to their department for
smooth functioning of the department.
* They interpret and explain the policies set by the top management to the
lower level managers.
* They provide guidance to lower level managers.
* They monitor group level performance and resolve problem within and among
work group.
First Level Management

First level management consists of supervisors, foreman etc. They are in direct
contact with workers.
* They control and direct them by assigning task to employees, guiding and
supervising them for day to day activities.
* They give performance feedback of the workers working under them.
* They should have technical skills so that standards set for quality and quantity
of production can be met.
* They plan for day to day activities.
* They maintain close personal contacts with workers to ensure discipline in
the organization.
NOTES
Check Your Progress

Management Process & Organisational Behaviour : 9 1. What do you under-
stand by the manage-
ment team
``POSDCORB’’?
2. What are the various
informational roles of
the manager?
Introduction to Management the workers working under them to higher authorities.
* They make sure that workers have all the resources, tools and materials they
need to accomplish their tasks.
NOTES
Managerial Skills
Managers require certain skill or competencies to accomplish their goals. In order
to be effective manager must possess the following skills.
Technical Skills
It is the ability to perform a job by the use of tools, procedures or techniques of a
specialized field. This involves proficiency in the mechanics of a particular job so that
job can be performed effectively. This skill is very important to lower level managers as
they are in charge of the actual operations. For e.g. the success of team leader in the
software company depends on his technical knowledge in software development. As
one moves to the higher level of management the importance of technical skills diminishes.
Human Skills
It is the ability to work with people, understand their needs and motivate them.
Technical skill involves mastery over job while human skills are concerned with mastery
over people. Such skills require leadership qualities, emotional intelligence in the manager
so that he can win cooperation of others and build effective teams. Human relations
skills are required by all managers at all levels of management since all managers have
to interact and get work done through others.
Conceptual Skills
It is the ability of manager to analyze the cause and effect relationship. It is the
ability to visualize the organization as a whole and see the big picture and understand the
interrelationship among organizational parts. It focuses on problem solving ability of the
managers. This skill is mostly required by top management as they are involved in broad
long term decisions that affect large parts of the organization.
Top level
Middle
level
Lower
(Supervisiory)
level
Fig. 1.4 Managerial Skills
Management Process
Diagnostic
Skill
Another
important skill
required by the
management is the
ability to visualize
most appropriate
response to the
situation. Diagnostic
skill is not just the
ability to specify
why the problem has
happened but also
the ability to develop
certain alternatives
to
solve the problem. It requires sound judgment, analytical ability, intelligence and common 10. Industrial
sense. relations : It aims
at avoiding
industrial conflict
Scope of Management or strife and
developing
The scope of management is very wide. Management can be applied to various harmonious
functional areas in the organizations. The main areas are human resource management, relations between
financial management, production management and marketing management. employer,
Human Resource Management employee and
state. It
It is a managerial functions involving planning, organizing and controlling process
related to hiring, developing, compensating and maintaining people in an organization.
The activities included are
1. HR planning : This activity aims at providing the organization the right number
of people with right knowledge, skills and attitude at the right time.
2. . Recruitment and selection : The term applies to the process of
attracting potential employees of the company and choosing the best ones
that suit the requirement of the organization.
3. . Orientation and placement : It refers to welcoming of new employees
and providing him information about organization so that he is able to adjust
well in the organization.
4. Placement : The allocation of people to jobs is known as placement. The
new employees are assigned initial assignment while existing employees are
relocated through transfer , promotion or demotion .
5. . Training and development : The quality of employees is
improved by training them to enhance their skills and developing their
personality.
6. . Remuneration : The employee is compensated for his services
through various financial and nonfinancial resources.
7. Communication and motivation : The managers motivate employees so
that the they work with complete dedication and to the best of their capabilities
and knowledge towards achieving the organization’s goal. Motivating them
helps to build a long term association of the employees with the organization.
8. Performance Appraisal : It is a systematic, periodic and impartial rating of
an employee’s excellence in matters pertaining to his present job so that
performance gap can be identified and corrective actions can be taken. It
also forms as a basis for incentives and promotions.
9. Welfare safety and health : This aspect of HRM is concerned with the
working condition and the amenities at the work place. It makes the
environment worth working by eliminating work place hazards, providing job
safety, medical and health benefits.
NOTES

Introduction to Management & Organisational Behaviour : 12
NOTES
Management Process
aims at to the raising of funds through different sources of funds for investing
eliminating as far activities. The sources of funds can be debt and equity. It deals with raising
as possible and the funds in reasonable proportion of debt and equity capital so that
practicable shareholder’s wealth is maximized.
strikes, lockouts 3. Dividend policy decisions : When the firm earns profit, two alternatives
and gheros. are available to it. It can either distribute the profit or retain some of the profit
for future growth of the organization or for meeting some contingency. It
Financial
includes the decision as to how much profit to retain and how much to distribute.
Management
4. Reporting : Financial accounting relates to record keeping of various financial
Financial transactions, their classification and preparation of financial statements to
management is concerned show the financial position to the various stake holders of the company.
with procurement of funds
5. Planning and controlling : Management accounting deals with analysis
and their effective
and interpretation of financial record so that management can take corrective
utilization. The major
actions in case the standards are not met. It also includes budgeting and
functions of finance are:
forecasting and setting targets for profit and cost.
1. Investment
6. Taxation : This area deals with various direct and indirect taxes which
decisions : It
organization has to pay.
relates to
selection of 7. Costing : Costing deals with recording of costs, their classification, analysis
assets in which and ascertainment of cost and cost control.
the funds will be Production Management
invested. The
Production means creation of utilities by converting raw material in to final product
criteria are
so that right goods are produced in right quantity at the right time and at the right cost.
based on cost,
It is very important field of management. Various sub-areas of the production department
benefit and risk
are as follows.
analysis. Assets
1. Plant lay out and location : This area deals with deciding a suitable location
can be long term
where factory will start functioning, designing of plant layout i.e designing of
or short term.
factory and placing various facilities within the plant.
Decisions
relating to long 2. Production planning and control : It requires forecasting, routing, scheduling,
term assets are dispatching, progress reporting and taking corrective actions if targets are not
known as capital achieved. Managers have to plan about various production policies i.e. deciding
budgeting about how, where and in which sequence the work will be done.
decisions while
relating to short
term assets are
known as
working capital
decisions.
2. Financing
decisions :
Financing
decisions relates
3. Material management : This area deals with procurement, storage, issue Introduction to Management
and control of the raw material required for production department. and Organization Behavior
4. Product, Design planning and development : Product design is done

when new idea is conceived and an attempt is made to develop the product to NOTES
the point that it becomes technically and commercially viable. This area deals
with research and developmental activities of manufacturing department.
Refinement in existing product line or development of a new product are the
major activities.
5. Quality Control : Quality control department works for production of quality
product by inspecting the product on the basis of strength, hardness, dimension,
finish, chemical composition etc. which ensure the customer satisfaction.
Marketing Management
Marketing management involves analysis, planning, implementation and control of
programs designed to bring out desired exchange with customers that satisfies their
needs and wants and build long term relationships. It is the process of creating, delivering
communicating the value of a product or service through positioning to customers and
managing customer relationship for the benefit of organization. The following are its sub
areas.
1. Market research : It involves in collection of data related to product demand,
customer’s needs and wants, advertising effectiveness and price studies.
Marketing research provides an effective sales forecast and promotes sound
marketing strategies
2. Promotional Activities : This area deals with promotion of the product,
introducing new product in market by various means and encouraging the
customers to buy the products. This activities decide upon the promotion mix
i.e what should be the means of approaching the customer, whether it should
be advertising, publicity, personal selling etc.
3. Sales distribution and after sales services : Sales management deals
with handling of inquires and orders from the customer , fixation of prices,
actual transfer of products to the customer after fulfilling certain formalities
and after sales services.
Functions of Management
Manager is required to perform certain basic functions which may be broadly etc for production of
classified into five categories: planning, organizing, directing, staffing and controlling. output. It involves
decisions regarding
Planning: It includes determination of objectives and selection of appropriate course
division of work,
of action. Planning provides direction by deciding in advance what is to be done, how
formulating
it is to be done, when and where it is to be done and by whom it is to be done.
Organising: it is concerned bringing together men, money, material, technology

Introduction to Management structure to ensure co-ordination and assigning authority and responsibility.
Staffing: It aims at providing right kind and right number of human resources at
the right time. It involves activities relating to recruitment, selection, training and
NOTES development, motivation and compensation.
Directing: It is the act of guiding and inspiring people to perform. It involves four
important elements: leadership, motivation, communication and supervision.
Controlling: The objectives of controlling is to ensure that organization is moving
in the desired direction. It involves the following steps:
1. Establishing standards for performance.
2. Measuring actual performance
3. Comparing actual performance with the standards
4. Taking corrective action in case of negative deviations.
The above mentioned functions are discussed in details in the following chapters.
Organisational Behaviour
Organizational behavior is study that relates to individual, working together in group
or teams. Organizational behavior is a field of study that investigates the impact that
individuals, groups and structure have on behavior of the employees within the organization
for the purpose of applying such knowledge towards improving organization effectiveness.
Importance of Organisational Behaviour

Management Process
Consciously or technique.
unconsciously we try All the above generalization do not hold true in every condition. No two individuals
to interpret and are likely to behave in the same manner under similar set of conditions. There are lots of
predict the behavior individual differences.However, there are certain fundamentals consistencies underlying
of others. Our the behavior of all individuals. The consistencies can be identified and modified to explain
prediction about the individual differences.
behavior is based on
These fundamentals consistencies allow predictability. If we replace intuition with
our experience with
the people in the
environment that we
get by observing and
interacting with
them. We also learn
through the
experience of others.
The result is that we
form generalization
about human
behavior which is
based on intuition.
The feeling of
intuition is not
supported by facts
about behavior. Our
generalization is not
always accurate.
For e.g. let is
consider the
following
generalization:
1. Everyone
can be
motivated
by financial
rewards.
2. The most
effective
group is the
one that do
not have
any conflict.
3. Interview
is an
effective
selection
systematic study we are in better position to predict behavior. A systematic study attempts Introduction to Management
to identify relationship between variables, determine the causes and effects of relationship and Organization Behavior
and draw conclusion based on scientific evidence.
The objective of organizational behavior is to predict, explain and control individual NOTES
behavior, group behavior in team and organization in order to attain organizational
effectiveness. Organizational effectiveness is measured in terms of quantity and quality
of work, satisfaction and commitment of employees.
OB Model
A model is a systematic and simplified representation of some real world
phenomenon. OB model identifies its primary dependent and independent variables and
their relationship with each other. The dependent variables are productivity, job satisfaction,
absenteeism and attrition. The independent variables work at three levels. They are as
follows:
1. Individual level: The characteristics related individual like personality
characteristics, attitude, values, perception etc
2. Group level: The behavior of people in groups like group norms, group
cohesiveness etc.
3. Organizational level: The designs of organization structure, organization
culture and human resources policies and practices also have a impact on
dependent variables.
Fig. 1.5 depicts the linkages between the three levels and their — with dependent
variables.
Management Process
& Organisational
Behaviour : 15
Introduction to Management
Organisational Level
* Organisational Culture
* Organisation Structure
NOTES * Work Design
* Human Resource Policies
and Practices
Productivity
Group Level
* Group Norms
Absenteeism
* Group Cohesiveness
Input Output
* Leadership
independent dependent
* Conflict
variables variables Attrition
* Team
* Group Structure
* Group Decision Making
Job
satisfaction
Individual level
* Personality
* Values
* Attitude
* Perception
* Motivation
* Individual decision making
Fig. 1.5 O B Model
Summary
Check Your Progress

activities of Human
Resource Management
2. Briefly explain OB
Model.
Management Process
Management is term strategies for the organizations after scanning the internal and external
a life giving activity environment of the organization and understanding the relationship of variables present
to an organization. in environment. Human skills are required at every level. The managers have to play
All organizations interpersonal roles, informational roles and decisional roles in their day to day
need management functioning. The scope of the management is very wide. The functional areas of
irrespective of size management are human resource management, financial management, production
and activity for management and marketing management.
growth and survival.
Management bring
together human and
nonhuman input to
produce valuable
output by utilizing
the input efficiently.
Management is
universal, goal
oriented, group
activity, the process
of management
includes planning,
organizing, staffing,
directing and
controlling. The
management helps in
achieving
organizational goals.
Managers are
required to posses’
technical, human,
conceptual and
diagnostic skills. The
technical skills are
required by first level
of management as
they are in direct
contact with workers
and are responsible
for day to day
operations.
Conceptual skills are
required by top
management as they
have to make long
Organizational behavior is a systematic study of individual behavior, working in Introduction to Management
group and in organization. It helps in predicting behavior of individuals. OB Model depicts and Organization Behavior
the relationship between independent variable at individual group and organizational
level and dependent variables that are productivity, job satisfaction turnover and
NOTES
absenteeism.
Key Terms
for the purpose of
* Management: It is the coordination of all resources through the process of
applying such
planning, organizing , directing and controlling in order to attain stated
knowledge
objectives.
towards improving
* Management roles: A role is an organized set of behaviour that is expected organization
from an individual. Roles throw light on how managers perform their work. effectiveness.
* Interpersonal roles: This role is concerned with interpersonal relationships
and interaction of managers with the people inside and outside the
organizations.
* Informational role: Informational roles involve receiving, collecting and
disseminating information so that manager can serve as nerve centres of
their organizational units.
* Decisional roles: The manager has to make important decisions that have
a significant impact n the organization.
* Top level management: It consists of board of directors, presidents and
CEOs. They are responsible for overseeing the entire organization.
* Middle level management : It consists of general managers, branch
managers and departmental managers. They control and oversee the
departmental activities.
* First level management: It consists of supervisors, foreman etc. who are
in direct contact with workers.
* Technical skills It is the ability to perform a job by the use of tools, procedures
or techniques of a specialized field.
* Human skills: It is the ability to work with people, understand their needs
and motivate them.
* Conceptual skills: It is the ability of manager to analyze the cause and
effect relationship. It is the ability to visualize the organization as a whole and
see the big picture and understand the interrelationship among different
organizational parts.
* Diagnostic skill: It is the ability to visualize most appropriate response to
the given situation.
* Organization behaviour: It is a field of study that investigates the impact
that individuals, groups and structure have on behaviour within the organization

Introduction to Management
and Organization Behavior Questions and Excercises
Short Answer type questions

NOTES
Q1. What do you understand by diagnostic skills of manager?
Q2. What is the concept of universality of management?
Q4. Why is management both science and art?
Long Answer type questions
Q1. What are the roles and responsibilities of each level of management? What
are the managerial skills required at each level of management?
Q2. What do you understand by organizational behavior? Why is it important?
Q3. Explain briefly the roles of Managers as proposed by Mintzberg.
Q4 . Discuss in brief the scope of management.
Q5 . List and briefly describes the function of management.
Q6. Define management. Explain its nature and importance.
Further Reading and References

(1) Koontz and O Donnell, `Èssentials of Management ”, Tata McGraw Hill,
New Delhi 1990.
(2) Lindoya, P., ``Chinese theories of control by violence”, Newyork University,
published in journal of management inquiry, 1997 , vol 6 : 144-159.
(3) V.S.P Rao, V. Harikrishnan, ``Management Text and cases”, Excel books ,
fourth edition
(4) Robbins Stephens, Judge Timothy A, `Òrganisational Behaviour”, Pearson
Education
Management Process
& Organisational
Behaviour : 18
Evolution of Management
UNIT 2 EVOLUTION OF Thoughts
MANAGEMENT THOUGHTS
NOTES
Structure
Introduction
Unit Objectives
Classical Approach
Scientific Approach (1900)
Administrative Theory- Henry Fayol
Bureaucracy- Max Weber
Neoclassical Approach
Hawthorne Studies- Elton Mayo
Human Relations Approach
Behavioral Approach
Quantitative Approach
System Approach
Contingency Approach
Modern Approach
Contribution of Peter Drucker
Summary
Key Terms
Questions and Exercises
Introduction
Origin of management can be traced to ancient roots. Many books were produced development of classical
during ancient and medieval time that contained advice about how the kings should approach. After classical
administer and govern their territory. “The Prince”, by an Italian author Nicco Machiavelli approach many other
and “Arthashatra” by chanakya are examples of conceptualization of management school of
practices during those times. The ancient monuments and irrigation systems of the
medieval period required organized and coordinated efforts of thousands of workers,
artisans, architects etc, which was not possible without the use of sound management
practices. Industrial revolution marked the beginning of modern management thought.
The driving force in shaping what management is today is the urge of the human being
to improve and flourish. After industrial revolution search began to find better ways to
utilize organizational resources. With the rise in use of machine and large scale
mechanized manufacturing new problems were identified which resulted in the
Management Process &

Organisational Behaviour : 19
Evolution of Management thoughts were developed that added value to the previous school of thought and helped
Thoughts in aligning management practices to the ever changing dynamic environment. The
classical approach was followed by neoclassical approach, quantitative approach,
systems approach, contingency approach and modern approach.
NOTES
Unit Objectives
After studying this unit you should be able to-
* Explain the Scientific Approach and contribution of F.W taylor.
* Explain the characteristics of Bureaucracy proposed by Max Weber.
* Explain Administrative theory and understand the principles of Henry Fayol.
* Understand the importance of human beings in improving organizational
effectiveness through findings of Hawthorne studies done by Elton Mayo.
* Understand Behavioral and Human relations approach.
* Explain Quantitative approach and its importance in decision making.
* Explain Systems approach to management.
* Explain Contingency approach to management.
* Understand the contribution Peter Drucker.
Classical Approach (1900)

The classical approach is the oldest form of management thought also known as
traditional approach, management process or empirical approach. Management principles
and practices were formalized for the first time after careful observation. The aim of
the classical approach was based on experience of practicing managers. Universality
of functions and principles of the management was recognized during this period.
Management is viewed as systematic process of interrelated functions like planning,
organizing, staffing, directing and controlling to attain worker’s efficiency through
economic incentive.
The branches of classical approach:
CLASSICAL APPROACH
SCIENTIFIC ADMINISTRATIVE BUREAUCRACY


The major
contributors of classical
approach were F.W
Taylor, Max Weber and
Henry fayol.
Scientific
Approach
Frederick W.
Taylor known as
the father of
scientific
management is the
most
famous management pioneer. He rose from the position of common laborer to chief He classified
business activities
engineer in just 6 years. The goal of Taylor was to find out “one best” way to perform into six categories:
a task. In order to do so he did time and motion studies. One of his experiments was the
study of workers loading pig iron to rail car. Taylor first tried to break tasks into elementary
movements like walking speed, carrying positions, bending etc. and noted the time of
each elementary movement with a stop watch. After that Taylor tried various
combinations of procedures, tools and technique to arrive at “one best way”. He also
used rest periods of specific duration and interval to improve the output. Taylor also
developed incentive plans for workers to improve their performance. With his efforts
Taylor was able to increase the efficiency of workers from 12 to 47 tons per day.
In 1911, Taylor published his famous book “principles of scientific management”.
Later on Henry Gantt, disciple of Taylor developed charts for use in planning and
controlling. Frank Gilbreths, an associate of Taylor developed micro motion study in
which he identified seventeen micro motions known as herbligs to help analyze any
worker movement. The main principles of scientific management are as follows:
The task should be designed scientifically and not by the old rule of thumb methods.
Selection, training and development of workers should be based on scientific methods.
There should be a proper match between job and worker’s skill. There must be division
of labor thus increasing specialization. There should be equal division of responsibility
between management and workers and close cooperation between them.
Taylor summed up his philosophy in these words:
1. Science, not rule of thumb- People should develop logical and scientific
methods to do a job.
2. Harmony, not discord- People should avoid conflict at work place.
3. Cooperation, not individualism- Teamwork should be given importance.
4. Maximum output, in place of restricted output.- Optimum utilization of
organizational resources.
5. Development of each man to his greatest efficiency.
6. Equitable distribution of work and responsibility between management and
labor.
Limitations
Scientific management did not take psychological aspects of workers. Workers
were treated as economic tools. They had to perform same task over and over again
leading to boredom and monotony.
Administrative Theory
Around the time when F. W. Taylor was developing principles of scientific
management, Henry Fayol, known as the father of modern management was developing
administrative theory based on his own experiences as CEO. Henry Fayol, administrative
theory provides a more general framework of management that emphasis on the process
and principles of management.
Evolution of Management Organisational
Thoughts Behaviour : 21
NOTES

Evolution of Management Organisational Behaviour : 22
Thoughts
NOTES

1. Technical increases the output.
(manufacturing (2) Authority and responsibility: individuals are given responsibility to achieve the
).
goals and right measure of authority should be given to them to achieve the goal.
2. Commercial
(buying and Parity should be maintained between them. Authority and responsibility co- exits,
selling). whenever a person is given authority responsibilities arise.
3. Security (3) Discipline: employees should follow rules and regulations of the organization and
(protection of should respect agreements that are designed to secure obedience. There should
property).
be effective leadership, clear understanding of rules and judicious use of penalties
4. Accounting
(maintaining so that discipline prevails throughout the organization.
financial (4) Unity of command: no employee should have more than one boss. In order to
records).
avoid conflicting orders every employee should receive orders from one boss only.
5. Managerial
6. Financial (5) Unity of direction: there should be one head and one plan for those activities that
(raising and aim at same objective. The same sense of purpose should prevail in the organization.
optimum It helps in unifying and coordinating actions and goals towards the common
utilization of objectives.
funds)
Fayol argued that (6) Subordination of individual interest to general interest: whenever there is
managerial activity conflict between personal interest and organizational interest, the organizational
involves performing interest should be given first priority. The manager should ensure that individual’s
five functions
are ready to sacrifice their personal interest for organizational goal. He can do this
1. Planning by setting his own example.
2. Organizing
(7) Remuneration of personnel: employees should be compensated for their work
3. Commanding
justly and fairly. Moreover the employer and employee should be satisfied about
4. Coordinating
amount of remuneration and method of remuneration.
5. Controlling
(8) Centralization: when authority is concentrated and subordinates have less role
Henry Fayol gave
in decision making it is centralization. When authority is disbursed and subordinates
the following
fourteen
management
principles:
(1) Division of work:
every person should
perform a single
leading function
repeatedly so that
advantage of
specialization can
be achieved.
Specialization
improves the
efficiency of
worker and
also play role in decision making it is said to be decentralization. The proportion of activities of the
centralization to decentralization is a matter of individual circumstances and forces organizations predictable
of environment. The degree of centralization and decentralization should aim at and easy to control. The
achieving twin objective i.e maximum utilization of resources and adaptability main features of
towards changing environment.
(9) Scalar chain: it is the chain of line of authority ranging from highest rank to the
lowest rank. This also represents the chain of communication.
It is usual practice that if A wants to communicate with G then the communication

should flow from A via B, C to D and then from D via E and F to G
But in case of emergency A can communicate with G by the use of gang plank.
But they should also inform their immediate boss about action taken by them.
(10) Order: it relates to the arrangement of things and people in the organization. The
principle emphasis that there should be material as well as social order. It means that
there should be “a place for everything and everything should be in its proper place”
and “a place for everyone and everyone should be in his or her appointed place.
(11) Equity : Manager should be kind, fair and impartial in dealing with subordinates.
(12) Stability of tenure: employee should be given some job security. It takes time by
the worker to understand his new job and become skillful in it. If he is not given
adequate time to learn his job and is removed before he gets accustomed to it, he
cannot render valuable service to organization.
(13) Initiative: the employees should be encouraged to think new ideas and should
also be allowed to implement them independently. It will help them to develop and
grow. Moreover freedom to perform will act as a morale booster. It will lead to job
satisfaction and motivation of the employees.
(14) Espirit de corps: the employees should be encouraged to work in team. Unity is
strength and unity in the employees is the foundation of team spirit. Managers
should avoid the philosophy of divide and rule. Unity among the workers can be
developed through informal communication also.
Bureaucracy
Max Weber, a professor of political economy in Germany propagated the concept
of highly formalized structure. He argued that organizations can reduce variability through
formalization of behavior by introducing bureaucratic organization. This will make the
Evolution of Management Organisational
Thoughts Behaviour : 23
NOTES

Thoughts
NOTES

bureaucracy are given Rules, regulation and procedures: in order to ensure predictability and uniformity
below: of behavior, rules and procedures are established. Employees are expected to follow
the rules and procedures strictly.
Rational legal
authority: the Records: files are maintained to record the actions and decision taken in the
managers do not organization for future reference.
exercise authority Impersonal relationship: the decision should be made strictly according to rules;
according to their there is no room for personal relationships, sentiments or emotions in decision making.
whims and fancies.
Competence of employees: the employees are selected on the basis of
Instead authority is
qualification and competency and promoted according to their ability and skills. Their
exercised through a
competency is improved through regular training and orientation program. The experience
system of rules and
and achievements of the employees are valued. Only those employees form the part of
procedures attached to
management who are able and efficient.
his position. In the
bureaucratic structure Adavntages of Bureaucracy
the rules, decisions and 1. Bureaucratic structure helps in gaining the advantage of specialization;
dictions of the managers specialization improves efficiency by reducing mistakes, increasing speed
are written down so that and quality of work.
they can act as 2. Highly formalized structure based on rules, regulations, specialized task lead
guidelines in future for to predictability. There is no room for uncertainty and chaos. Everyone knows
decision making. what is expected from them and no one crosses his or her boundaries. The
Hierarchy: The problem of role ambiguity is highly reduced.
formal hierarchial 3. Rules and regulations are formed after deliberate discussions. Pros and cons
structure is a firmly of every rule are discussed. The decisions taken are more rational and not
ordered system of subjective.
supervision and 4. Promotion, selection is on the basis of qualification and competence there is
subordination in which no room for biasness or privileged treatment for some. Rules and regulations
each level of operation are uniform for everybody. Such equitable treatment leads to high degree of
follows the direction of democracy.
the level above and
gives the directions to Disadvantages of Bureaucracy
the level below. 1. The bureaucracy is characterized by highly rigid and static structure. There
Division of work:
The total work is divided
into small units of
routine, well defined
task. Each unit takes a
form specialized job.
When the worker does
the same job repeatedly
efficiency is increased
and the worker becomes
an expert in course of
time.
is strict adherence to rules. The rules are not changed frequently. The Evolution of Management
environment in which the organization function is very dynamic, thus making Thoughts
rules redundant sometime. In the name of following rules people may also
avoid their responsibility.
NOTES
2. Too much emphasis on rules gives no space for emotions and needs of people.
This is a highly mechanized structure where innovative ideas of people do
not get much attention.
3. Too much compartmentalization of activities do not allow people to do those
activities that they are capable of performining but are outside their boundaries.
In bureaucratic structure there is a tendency for continuing a job even if it is
not required by the organization.
4. Superiors try to increase their power and status by adding more people and
more resources to their departments, even if they are not necessary for the
organization. Such approach of superiors leads to empire building.
5. Due to rigid hierarchy, vertical line of communication and necessity to record
every action as well as decision on paper makes the files move through
elaborate official channels causing inordinate delays. Due to red tapism
decision cannot be taken promptly.
Classical theory made available a scientific base for management studies. It laid a
foundation for education and training of managers. It was for the first time that universal
nature of management was recognized. But the limitation of this approach is that role of
humans and their contribution towards organizational effectiveness has been discounted.
Neo classical Approach

intensity of light during
This approach is also known as behavioral approach. The founder of behavioral
their work hours. Each
approach is Elton Mayo, who was a professor at the Harvard business school. The
time intensity of light was
importance of human behavior was recognized for the first time after the findings of
increased the
famous Hawthorne studies.
Classical approach treated human beings as economic beings, who could be
motivated through money alone. Neo classical approach argued that human beings can
show better results if they are treated well. Individual behavior as well as group behavior
plays a very crucial role in determining the performance of workers.
Hawthorne studies
A series of experiment were conducted at Hawthorne plant of the Western Electric
company during late 1920s and early 1930’s. Some of the experiments are discussed
below:
(1) Illumination experiment

Two groups were created and the effect of different levels of illumination on
workers’ productivity was studied. One of the group i.e. test group received different

Thoughts
NOTES
Check Your Progress

1. What are the main
features of Bureau-
cracy?
branches of classical
Approach?

productivity increased. In productivity of work group increased consistently during the experiments and it
the second group i.e. continued to be same even when the improvements in working conditions were
control group no withdrawn. The reason for such improvement in performance was later termed as
variation in the light was Hawthorne effect. The study revealed that workers knew that they were part of
done. The intensity of experiment they felt important because they received added attention during the
illumination was kept experiment. The researchers acted as friendly superiors and allowed the workers to
constant. have their say in suggesting changes for e.g. they can choose their own rest periods.
Group cohesiveness and friendly informal supervision was the major factor behind the
However the increased productivity.
productivity of control
group was also The human relations approach was the outcome of Hawthorne studies. It focused
increased though it on individual’s need behavior and their interpersonal relationship.
received no added light. Human Relations Approach
It was felt that some According to Keith Davis: ``Human relation is motivating people in organization in
other factor is also order to develop teamwork which effectively fulfils their needs and achieves
influencing productivity organizational goals”
besides lightening. The
reason for increased The man is not just an economic being but also a social being. The human relations
productivity can be approach focuses on people and believes that every individual is unique. Individuals can
attributed to informal be motivated through varied social and psychological factors. The manager should aim
social relations that were at creating a positive work environment, if worker’s needs are satisfied they will become
developed among the more happy and productive. Human relations approach emphasized that productivity
members of work group can be increased by motivating people.
during the experiment. Behavioral Approach
(2) Relay Human relation approach was succeeded by behavioral approach which focused
assembly test on group dynamics, group behavior, leadership, communication and conflict among other
room issues. Behavioral approach is an improved and wider version of human relations.
experience Behavioral approach considers conflict as unavoidable and sometimes useful while
In this experiment human relations approach consider all conflict avoidable and harmful.
a small homogeneous The major contributors of neo classical approach are A.H. Maslow, McGregor, F
group was created. The Herzberg and Rensis likert.
workers of the group
The neo classical approach emphasized that managers success depends upon his
were placed in separate
rooms during the
experiment. Numbers of
changes were introduced
like shorter working
hours, improved physical
conditions, and rest
periods of verifying
duration and then their
effect on productivity
was studied. The
skill in handling the human element in the organization. The quality of leadership is Evolution of Management
another critical factor in determining the success of organization. The limitation of this Thoughts
approach is that it lacks scientific validity. It is criticized for its simplistic and manipulative
assumptions about relationship between worker’s attitude and productivity.
NOTES
Quantitative Approach
between them. Erroneous
It is also known as operation research, decision theory approach and management
model and inaccurate data
science. This approach gained popularity during world war and was used to develop
may lead to wrong
strategic and tactical military operations by the use of management science and operations
decisions.
management.
Management science aims to improve the effectiveness of decision making through
the use of statistical and mathematical model. Quantitative approach aims at finding
best solutions for the problem. After all managers success depends upon his decisions.
The correct decisions can be made through the use of logical reasoning backed by
quantification.
It aims at formulating mathematical model that represents the decision situation.
The variables present in the decision situation are identified and the interrelationship of
variables is determined to form a model. The best solution can be achieved by solving
the equations in the model.
Some of the quantitative techniques used in decision making are:
Linear programming,
Game theory
Inventory control
Information theory
Linear programming
Probability theory
Queuing theory
Simulation theory
Statistical decision theory
Sampling theory
It helps in finding the best solution with accuracy, precision and factual data. The
drawback of this approach is that it requires quantification of all the variables affecting
the given problem situation. Some of the variables are qualitative in nature for e.g.
human behavior cannot be quantified with precision. A lot of time an effort is required
to model the decision situation and gather input for it. Manager cannot postpone his
decision every time. More over decision quality depends upon the accuracy of model
and data.
Sometimes it is difficult to identify all variables and establish functional relationship

Thoughts
NOTES

time then the overall organizational performance will get hampered . The manager
System should attempt to increase the overall effectiveness of the system rather than
Approach effectiveness of any sub part of the system in isolation.
An organization is viewed as an open system. An open system is one which

All the previous
interacts with the environment. The open system is responsive and adaptive to the
approaches share a
changes in environment. Aclosed system is independent of the environment. Organization
common problem of
is vulnerable to the changes in environment. Any change in customer’s tastes and
viewing things in narrow
preferences may affect the demand of the product of the organization.
perspective. Classical
approach focused on A system is a set of interrelated subsystems. Any change in one system causes a
scientific and change in another system. The sub systems also have their sub parts. Every system is
administrative side of also a part of a super system. The subsystem in the organization can be departments.
doing work. Neo There are basically five subsystems in organization. They are goals, resources, structure,
classical approach management, psychosocial subsystem.
focused on human There exists a system boundary which separates it from the environment. The
behavior at the boundary is rigid in case of closed system while it is flexible in case of open system.
individual and group The boundary determines that which part is internal to the system and which part is
level while quantitative external to the system for e.g. employees are internal to the organization system and
approach was limited to customers are external to the organization system.
optimization of decision
Synergy is said to happen when two plus two becomes five, in other words when
making. In order to
the whole is greater than parts. Synergy can be attained when all the parts of the
overcome this weakness
organization are well coordinated and function properly so that output is optimal.
system theory was
developed to view the The advantage of this approach is that the managers are forced to see the broader
“big picture”. picture, and look at the totality of the situation before arriving at any decision.
The organization The limitation of the system approach is that it does not have specific tools and
should be looked as techniques for the manager to practice. The conceptual framework of this approach is
‘whole’ and as a part of criticized for being too vague.
the larger external The major contributors of the system are Chester Bernard, R.A Johnson, Nesbit
environment. Dealing Wiener and E. L. Trist.
with the various parts of
an organization
separately can be
erroneous for e.g. if the
marketing department
brings huge orders from
the customers through
aggressive campaign
while the production
capacity is not adequate
to meet those orders in
Evolution of Management
Contingency Approach Thoughts
According to this approach there is no single best way of managing organization.

Management entirely depends upon the situation. One principle or practice of management NOTES
may be valid and effective in one situation but it might completely fail in the other
situation. Organization work in a very dynamic environment which is very uncertain
and complex. The choice of a management style depends upon the particular situation
and people involved in the situation. The management principles, practices and techniques
cannot be considered as universal. Hence there is no one best motivation technique,
organization structure, leadership style that will fit into all types of situations. The
characteristics of job, characteristics of employees, the limitation of resources and
environment dynamics etc, determines the situation and every situation is different from
the other and thus no single management practices or principle can provide solutions to
all organizational problems e.g. all employees can not be motivated through money.
Manager should develop diagnostic and problem solving skills. Manager must first try
to comprehend the variables in the situation. After understanding the situation, he should
attempt to match specific concepts and techniques of management with the situation.
The contingency theory is more pragmatic and action oriented and forces the
manager to be more alert and adaptive to environmental variables while choosing their
styles and techniques. This approach makes the work of the manager more challenging
as he is required to think through all possible alternatives to deal with the situation and
then choose the one that best fits the situation. It provides freedom of choice and
opportunity for innovation and creativity.
The drawback of this approach is that it lacks theoretical frame work. Moreover
it is a reactive approach rather than proactive. The managerial actions are reactive to
environmental dynamics. He has to first analyze the environment thoroughly and then
try to find best possible solution.
Modern Approach
manager should adopt
The modern management theory is an integrative theory that has combined the
different methods of
valuable concepts from classical, neo classical, system, contingency and quantitative
motivating
approach. The main characteristics are:
employees. He has to
1. Open system view: Organizations are open system that continuously interacts
strike
with the environment. They receive input from environment, process them and
then sends output to the environment. The change in the environment can affect
their input, process or output.
2. Dynamic and adaptive: in order to survive the organization should change according
to the changes in environment.
3. Multi motivated: managers has to satisfy the interest of various stakeholders i.e.
shareholders, consumer, employees government and community. At the same time
Check Your Progress

1. Distinguish between
open and closed
system.
2. Explain
quantitative
approach towards
management?
Thoughts
NOTES

a judicious balance integrates the valuable concepts, practices and principles from the previous
between financial management approaches to be used in managing the organization.
and non financial 2.7.1 Contribution of Peter Drucker
rewards so that Peter Drucker is the known as the founding father of modern management theory.
employees are His practices revolutionized management thinking in fifties. His famous publications are
motivated. “The End Of Economic Man”, “The Future Of Industrial Man”, “Management For
4. Multi disciplinary: Results” and “The Effective Executive And Management Task, Responsibilities And
management Practices”.
discipline draws its
His main contribution includes
input from various
other disciplines like (1) Nature and Role of Management : He opined that management is a dynamic
life giving element in every organization and is needed everywhere. He stated that
economics,
developing countries are not underdeveloped, they are undermanaged. Management
sociology,
is a distinct discipline and social function.
commerce,
mathematics, (2) Manager’s Job : Manager’s job is to focus on economic performance by making
engineering work productive and worker achieving.
psychology etc. (3) Social Responsibility : Manager should have some social obligation towards society.
In order to flourish it is important that the organization function in healthy society.
5. Probabilistic:
Manager’s actions have a direct impact on the society. He should be concerned
manager’s decision
with human and social environment and not just goods and services the organization
is based on future
deliver.
events. But it is not
possible to predict (4) Customer Orientation : Drucker emphasized that customer is very important for
the business. The organization should produce goods that satisfy needs and wants
future with
of the customer.
certainty since the
variables in the (5) Key Result Areas : Drucker specified the following areas in which management
environment are should stress meaningful objectives they are :
vulnerable to 1. Market Standing
change, thus 2. Innovation
organization is a 3. Productivity
probabilistic 4. Physical and financial resources
system with high
5. Profitability
degree of
6. Manager’s performance and development
uncertainty in it .
Manager can never
be hundred percent
sure of the
consequences of
his action which is
future oriented.
6. Integrative:
modern
management
7. Worker’s performance and social responsibility Evolution of Management
Thoughts
(6) MBO : He proposed management by objectives that involves goals set by
subordinates and supervisors in a participative way for a predetermined period with
regular feedback on goal progress.MBO philosophy is his most important contribution
NOTES
towards management discipline
(7) Decentralization : Drucker has emphasized that manager should create independent
product division rather than division according to function. Departments based
according to product make manager accountable for results. He suggested federal
decentralization where there is centralization in decentralized structure.
Apart from Peter Drucker many management gurus have contributed their part in
the field of management Michael and Porter has given valuable concepts in competitive
strategy and competition advantage. Tom peter became popular by publishing a book “In
search of excellence” in which he has described Mckinsey 7s Model focusing on staff,
system ,structure, strategy, shared value, skill and style. Henry Mintzberg has contributed
towards strategic planning and organization structuring.
Summary
Many Academician and practicing manager have contributed to the discipline of
management with different approaches towards it. Industrial revolution triggered the
search of one best method of doing work . Scientific management aimed at introducing
systematic study of work methods in order to improve efficiency. Bureaucracy advocated
mechanistic structure comprising of legal authority rules, regulation and procedure for
formalizing organization’s behavior. Administrative management proposed process and
principles of management. Neoclassical approach focused on human behavior and group
behavior. They emphasized that a motivated and satisfied work force contribute more to
the organizations objectives. Quantitative approach argued that decision making can be
highly improved through the use of operations research, mathematics and statistics
.Systems approach emphasized that manager should have an eagle view of the situation.
Proper balance should be sought between requirements of various interrelated parts of
the enterprise and the goal of the enterprise as a whole. According to contingency approach
appropriate management action depends upon the situation. Every situation has unique
characteristics and hence there cannot be a universal management practice. Modern
management picks up important valuable concepts from all the previous approaches and
combines them to make it relevant to the present business scenario.
Key Terms
* Scientific Management: It is an approach that aims to find out “one best” management.
way to perform a task through time and motion studies.
* Administrative Theory: It provides a more general framework of
management that emphasis on the activities process and principles of

Evolution of Management * Bureaucracy: It is an organization that reduces variability through highly
Thoughts formalized structure leading to formalization of behaviour so as to make the
activities predictable and easy to control.
* Behavioural Approach: This approach to management argued that human
NOTES
beings are not only economic beings; they can also be motivated if they are
treated well.
* Quantitative Approach: It aims to improve the effectiveness of decision
making through the use of statistical and mathematical model.
* System Approach: A system is a set of interrelated separate parts that are
unified to work towards a common goal. The organization should be looked
as ‘whole’ and as a part of the larger external environment.
* Contingency Approach: According to this, management entirely depends
upon the situation as there is no single best way of managing organization.
Questions and Excercises

Long answers questions
Q1. “Management is contingent upon situation” Discuss.
Q2. What are the essential features of scientific management? Account for the
contribution of F.W Taylor towards management thought.
Q3. What is the contribution of Henry Fayol towards development of management
principles and practices?
Q4. Explain the characteristics of modern management thought.
Q5 Discuss behavioral approach to management and differentiate it from human
relation approach.
Short answers questions
Q1. What were the findings of Hawthorne experiments?
Q2. What are the limitations of quantitative approach?
Q3. Write a note on systems approach?
Q4. Differentiate between classical and neo classical theory of management


(1) ``Principles of
Management: An
Analysis of
Managerial
Functions’’.
By Harold Koontz
and Cyril
O’Donnell. New
York: Mcgraw-Hill
(2) Anil Bhat, Arya
Kumar,
``Management
Principles, Process
and Practices’’,
Oxford University
Press Fourth edition
(3) C.B.Gupta,
``Management
Theory and
Practice’’, Sultan
Chand & Sons ,
eleventh edition
(4) V.S.P Rao, V.
Harikrishnan,
``Management
Text and cases’’,
excel books ,
fourth edition
Planning
UNIT 3 PLANNING
Structure NOTES
Introduction
Unit objectives
Meaning of Planning
Nature of Planning
Importance of Planning
Essentials of a Sound Plan
Planning Premises
Steps in Planning
Limitation of Planning
Types of Plan
Standing Plan
Single use plan
Levels of Planning
Strategic Planning
Tactical Planning
Operational Planning
Contingency Planning
Short Term and Long Term Planning
Management of Objective (MBO)
Concept of Management by Objectives
Process of MBO
Importance of MBO
Limitation of MBO
Summary
Key Terms
Introduction
Planning is the essence of management. It is such a fundamental activity that in view several
almost all human beings are engrossed in planning for their day to day activities. Planning factors/premises.
is the foremost function of management. The importance of planning can be understood
with the statement that well planned job renders half of the work done. Planning being
the primary function of management involves various steps and has to be done keeping

Planning
Unit Objectives
NOTES * Understand the concept and importance of planning.
* Discuss the essential characteristics of a sound plan.
* Describe the steps in planning process.
* Differentiate between various types of plans.
* Understand different levels of planning.
* Understand the concept, importance and limitations of MBO.
* Describe the process of MBO.
Meaning of Planning
Planning is the basic and crucial function of management which provides foundation
to other functions such as staffing, directing, organizing and controlling. To plan is to
forecast about future course of action detailing about what is to be done, how it is to be
done, what timeframe would be required and who will execute it. It necessary has to
fulfill a purpose. Planning in an organization is done to determine its objectives, goals,
programs, policies, procedures and means to achieve them. In the words of Koontz
and O’Donnell, “Planning is deciding in advance what to do, how to do it, when to do it,
and who is to do it.” 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”.
Nature of Planning

(1) Planning is goal- What to do ? When to do? Who will do? and How it should be done?
oriented: Plans Planning is an act of identifying and setting goal and hence the prime
stem from activity.
objectives. (3) Planning is an intellectual process: imagination, creativity, rationality,
Objectives provide farsightedness, sound decision making capacity and many more mental
the basic exercise are necessary to make a sound plan, thus making planning an
guidelines and intellectual process. The planning requires judgment and foresight and forces
direction for
planning process.
Planning which
does not
contribute to the
achievement of
organizational
goal will not have
any meaning. It
acts as a means of
achieving
organizational
goal. Therefore it
is a goal oriented
activity.
(2) Planning is a
primary
function: All other
management
functions owe
their existence to
planning as it is
the foundation of
management
process. The
reason is that
organization works
to achieve some
specified goals.
Organizing,
staffing, directing
and controlling
cannot happen if
the plan does not
provide the
answers to the
questions as to
manager to abandon guess work. Planning
(4) Planning is forward looking: plans are forecast about future course of
action. Proper assessing of future and providing for it is the reason behind
planning. Manager tries to assess future and tries to take advantage of NOTES
favorable developments in future. Manager also tries to guard the organization
against unfavorable developments that he is anticipating in future through
planning. Thus, forecasting for future and making provision for the anticipated
changes makes planning a forward looking activity.
(5) Planning is a continuous process: the process of planning involves
dynamism. When events change the underlying assumption change and the
entire exercise is revised. Business environment keeps on changing and so
the process of revising and modifying the existing plans continues. Also, when
old plans are accomplished, new ones are created thus making it a never
ending activity.
(6) Planning involves choice: planning is deciding among various alternatives.
It assumes existence of various alternatives. Had it been only one way of
doing an activity there would have not been any need for planning.
(7) Planning is directed towards efficiency: to achieve the desired goals
efficiently and economically one does planning. After careful analysis and
evaluation manager chooses that alternative which attains the objective
efficiently and economically. If the economy and efficiency are not achieved
along with goal, planning won’t serve any purpose.
(8) Planning is integrated process: planning is a systematic process. There
is a hierarchical structure in the plans which are integrated. Every minor plan
leads finally to achievement of major plan. Plans are interdependent.
(9) Planning is all pervasive: planning is a function that is needed and practiced
at all levels and in every department. Though the scope of planning may
differ according to the managerial levels and departments.
Importance of Planning
(1) Planning provides direction: planning helps in defining the objectives of
the organization in simple and understandable words. The result of this is that
every employee is aware of one’s role in the accomplishment of the objectives
of the organization. It provides a sense of purpose and reduces aimless
activities.
(2) Planning reduces risk: Future is uncertain hence it is not possible to eliminate
risk altogether, but planning does help in minimizing risk by providing for
future. Planning is a futuristic process where in measures are taken to take
care of any unfavorable situation that may arise in future. This significantly
reduces risk. Organisational
Behaviour : 35
Planning (3) Planning encourages innovation and creativity: for a business to grow
and prosper there is a constant need of development which comes out from
innovation and creativity. Planning involves continuous monitoring of the
environment in which the organization is operating. In doing so it encounters
NOTES
new challenges, developments and ideas that foster creativity. Planning is
futuristic process where the organization is prepared to cope with upcoming
advancement in technology and dynamism in business environment. Thus it
improves creativity and innovation.
(4) Planning guides in decision making: process of taking decision involves
identifying, assortment of alternatives and selecting the best alternative.
Nevertheless it is vital to decide the criteria before identifying alternatives.
These rationales and criteria are determined under the process of planning.
Thus, planning facilitates decision making.
(5) Facilitates control and provides efficiency: by deciding on the objectives
of the organization through planning the employees of organization are
informed about activity to be performed by each of them. A set benchmark
is given to them about their work, time and cost. This helps in controlling
where actual performance is compared with standards and the deviations
are found out at every level. The wastage is minimized and efficiency is
achieved by taking corrective actions.
(6) Planning improves morale and motivation: the objective of the
organization and the role to be performed by every employee is clearly stated
with the help of planning. This makes every employee aware that they will
be given due recognition for the work performed by them. This improves
their morale and motivating them to perform diligently.
(7) Helps in coordination: plan is a unifying force. It integrates the diverse
force of work towards the achievement of common organizational objective.
It serves as the basis of coordinating by interrelating the activities and
resources of different departments divisions and people.
Essentials of a Sound Plan

Behaviour : 36

Organisational
(1) Top management of our forecast about the future.
support: a plan
cannot be
executed if it fails
to get the support
of top
management.
Therefore the
support of top
management is
essential for
making a plan
feasible and
sound.
(2) Clear cut
objectives:
objectives should
be clear and
understandable
and they should be
properly
communicated to
the people. People
should understand
what is expected
from them.
(3) Contribution
towards
objective: every
major and
derivative plans
should have one
unifying purpose
of achieving the
organizational
objective.
(4) Develop accurate
forecast: the
planning is future
oriented and its
success depends
upon the precision
(5) Practicable: a plan can only be implemented if it is realistic in approach and Planning
is practicable.
(6) Adaptable to changing conditions: the business environment keeps on
changing; therefore a rigid plan can never be successful. A plan should have NOTES
flexibility so that it can cope with the changing business environment.
(7) Participation of concerned people: however good a plan is, if it lacks
participation from the people who are going to work upon it, it will fail utterly.
Participation of concerned people during planning process helps in obtaining
their commitment towards plan. They feel comfortable with the plan that
helps them in implementing the plan successfully.
(8) Integration: various sub-plans should be integrated in a hierarchy form so
that they all together lead to the achievement of organizational goal. The
plans should support each other rather than act against each other.
(9) Monitoring: keeping a close look on the subsequent execution of the plan is
important so that deviation if any could be traced and corrected easily.
Planning Premises
They are the basic assumption regarding the business environment, which help
make planning realistic. These are the broad frame work within which plans have to be
formulated. These are of following types:
(1) Controllable, semi-controllable and uncontrollable factors: Controllable
premises are completely under the control of management. The examples
are machines, materials, and funds. Semi-controllable premises are to a certain
extent under the control of management like marketing strategy. Uncontrollable
premises are beyond the control of management. Examples are government
policy, weather conditions, natural calamities, etc
(2) Internal and external factors: Internal Premises are the part of
business itself. These are the internal environment of the business which
includes the expertise of the workers, policies, philosophy of management,
etc. External Premises constitute the external environment in which the
business operates without having any control over it. The economic, political,
social, cultural and technological environments are examples of external
premises.

Organisational
Behaviour : 37
Planning
Steps in Planning
Establishing
NOTES Objectives
5
Securing Develop
Coperation and Planning
Particpation Premises
Determine
Formulate
Alternative
Derivative Plan
course of action
5
Select the Best Evaluate
Course of
Action
* Alternatives

Fig assumption bears a direct relation to the success of planning. The more
ure accurate is the forecasting the more accurate is planning. These assumption
3.1 commonly referred as planning premises and are of two types:
:
Ste Internal premises (factors which are insider to the organization and under
ps the control of it like labor, raw material etc) and external premises (factors
in which are beyond the control of management like Government policies,
Pla
business competition etc.)
nni
ng (3) Determine alternative course of action: based on the objectives of the
(1) Establishing business various alternatives to attain the goal are identified.
objectives: Setting (4) Evaluate alternatives: out of the numerous available alternatives, the choice
objective is the of most appropriate method of doing is selected. This is done by establishing
primary activity in certain criterion and evaluating each alternative on the predetermined criteria.
planning. This is The criterion can be feasibility, cost and benefit analysis for evaluating each
so because once alternative.
the objectives are (5) Select the best course of action: the alternative which best fits the
determined and predetermined criteria is chosen for attaining the organizational goal. Usually
defined all other the second best is kept as a reserve as the future is considered to be uncertain.
activities required
(6) Formulate derivative plan: the implementation of main plan requires
for the
formulation of various secondary plans also. They are called derivative plans.
achievement of
the goals can be
worked upon and
synchronized.
(2) Develop
planning
premises:
identifying
those factors
which can
significantly
influence the
probable outcome
of different
alternatives is
called premise.
Prior to taking
decision on
finalizing an
alternative a
forecast of this
assumption is
made. This
They support the main plan and usually keep track of time schedule and Planning
sequencing of various tasks.
(7) Securing co-operation and participation: once the plan to achieve the
goal is ready with desired course of action, the important aspect related to it NOTES
is to seek cooperation from the employees who are actually going to execute
it. Once the plan is clear the workforce can jointly participate and contribute
towards its achievement with a raised morale level and motivation.
Limitation of Planning
(1) Lack of accurate information: the success of planning depends upon
accuracy of information. However hard managers try future cannot be
predicted with certainty. The longer the period of forecast, the lesser is the
reliability of a plan. In the absence of inaccurate information planning premise
cannot serve significant purpose.
(2) Costly and time consuming: planning process is really hefty. The process
requires collection of plenty of information and its analysis. Further the process
of revision involves much time which makes planning uneconomical and time
consuming.
(3) Psychological barrier: the fear of uncertainty makes people resistant to
change. This attribute affects successful planning. Making people understand
the need for change and implementing the change often becomes challenging.
(4) False sense of security: most of the time managers rely too much on
plans. They believe that once the planning is done everything is safe and
secure. They do not keep updating policies and procedure with respect to
changing environment.
(5) Limited flexibility: a predetermined course of action sometime results in
rigidity in the work place. Besides the limited flexibility and freedom kills
employee’s enthusiasm in the work.
(6) Managerial deficiency: although planning is a crucial aspect of management
some mangers undermine its importance. They lack acumen and
farsightedness required in planning process.
(7) Environmental turbulence: external environment cannot be controlled.
Factors such as government regulation, legal environment, and technological
factors keep on changing making plan of period invalid for subsequent use.
Types of Plan
Generally, there are two types of plan, Standing Plan and Single Use Plan. Standing is for short period and for
Plans are long term plan and are of repetitive nature. This is because their key area only one use. The use of
is organizational situations that occur frequently. A single use plan as the name indicates this kind of plan is just
once, or at

Organisational
Behaviour : 39
Planning Organisational Behaviour : 40
NOTES

most, couple of times, as direct all our organizational efforts at building upon the existing organizational
the key area for such plan strengths and brand recognition to achieve enhanced levels of profitable growth in
is a unique or exceptional the core business, and diversify into new areas that compliment and supplement the
situation.
core business, with the diversification aimed at achieving excellence and industry
Standing leader status in the new areas. The TCS People will however be encouraged to be
Plans open to unconventional ideas and services and recognize new trends at very early
stages”. The statement not only states the purpose of existence but also the future
(1) Mission: Every
strategy and expectation from employees.
enterprise must
mandatorily have The mission expresses the benefits the customers and society at large will derive
a mission from the operations of the organization. Mission is customer oriented as well as future
describing about oriented. The mission statement should hold its validity for a longer period of time. The
its purpose. mission statement is defined in a broader way. It should be dynamic in approach so that
Mission business can grab new opportunities and ward off threats that may emanate from
statement competitive business situation that may arise in future.
describes the
(2) Objectives: The specific purpose to be achieved by the organization is called its
reason for the
objective. In the words of Dalton E, McFarland “Objectives are the goals, aims or
existence of the
purposes that organizations wish to achieve over varying periods of times” ‘it is a
organization. In
wider term of which mission statement is a part. Objectives are predefined, clear,
the words of
plural, realistic and purposeful. They are the end result that organization wants to
Mintzberg, “A
achieve. The objectives are accomplished by channelizing all the resources efforts
mission describes
and energies towards them. Objectives translate mission statement into action.
the organization’s
The significance of objective can be understood with the lines of Drucker, “The
basic function in
search for one objective is essentially a search for a magic formula that will make
society, in terms of
judgment unnecessary. Objectives are needed in every area where performance
the products and
and results directly and vitally affect the survival and prosperity of the
services it
business.” Objectives are framed keeping in mind the present external
produces for its
environmental factors internal resources and constraints, at the same time they
customers”. The
are future oriented. Future growth prospects and risk associated with business
‘mission’ of a
should be anticipated and incorporated in organizational objectives.
business
organization must
carry:
* Purpose
* Standards of
behavior
* Strategic
scope
* Values and
culture
To understand, we
can take the mission
statement of TCS, “To
(A) An organization can have multiple objectives for e.g. providing services and Planning
products to the customers, quality improvement, earning profit, improving
growth rate, survival etc.
(B) Objectives form a hierarchical structure. At the top there are organizational NOTES
objectives that percolate down the level. After the formation of organizational
objectives departmental objectives are formed which are followed by group
objectives. At the bottom of hierarchy individual objectives are set.
(C) Objectives should be result oriented, interconnected and mutually supportive.
Organizational objectives act as integrating force and provides basis for
formulation of policies, strategies, procedures programs and other plans.
(D) Objective should be clear. If they are carefully stated and understood the
chances of achieving them increases manifold
(E) Objective should be quantified and defined in measurable terms. This helps
in eliminating subjectivity and confusion. Increase in market share by 5 % is
specific and sets a clear target for the employees to achieve.
(F) Objective should be realistic and attainable. They should provide some
challenge to stimulate motivation and growth but at the same time they should
be achievable.
(3) Policies: Decision making needs a pre-defined guidelines and directions. Policies
are basic guidelines for decision making. Polices define scope inside which the
employees can take decisions. The statement that provides broad guidelines and
direction for taking action consistent with attaining the objectives of the organization
is termed as policies. These are formal statements that provide framework for
dealing various management day to day problems thus speeding up the decision
making process. These usually help manager with solution to deal with routine
problems that occur frequently, so that manager gets more time to deal with unusual,
crucial and more significant problems of the organization. For e.g. the organization
can formulate policies for purchase, promotion, recruitment and selection, research
and development and so on.
Before formulating policies the areas should be identified that pose problems, are
repetitive in nature and similar in characteristics. Due consideration should be given to
both internal and external factors that affect the organization. After considering all the
contingencies the policy should be presented in black and white.
Policies should be clearly made so that, employees of the organization can
understand and adhere to them and the organization can function more efficiently.
Various policies can be formed for various departments but once formed they should
not be changed frequently. The HR department can have their own recruitment policies;
the sale department can have their own incentive policies to boost sales and so on. A
stable policy in no case means that it should not be flexible, it only implies uniformity.
Due to rapidly changing environment it becomes mandatory to review and appraise
policy from time to time. If the policies are not contributing to organizational objectives, company reputation and
competitive strength then it should be changed. The significance Management Process &
Organisational
Behaviour : 41
Planning of the policy lies with the fact that they throw light on the values and philosophy of the
company.
(4) Procedures: the techniques or means to be used for achieving the objectives set
NOTES in advance is termed as procedure. A procedure is a standing plan detailing about
the succession of associated acts that are required to perform the task. It is the
execution part of policies. These tend to be more specific than the policies.
Procedures are chronologically defined sequential activities or steps that are required
to be performed with little scope for individual discretion. It sets out a standardized
way things should be done. Let’s say, leave procedure. The organization sets out
a procedure how to take leave, any employee has to follow the same process of
filling the form and taking permission and so on for the purpose of availing leave.
They are the acceptable way in which tasks are performed. The establishment of
procedure ensures consistent and uniform actions to do routine job. This saves
time and effort and also helps in delegating work to lower level managers. It
provides order in organization and removes administrative bottlenecks. Procedures
should be standardized and in alignment with organizational objectives. They should
be based on adequate fact and the steps in procedure should be kept as minimum
as possible. They should be relatively stable but at the same time they should be
periodically reviewed and updated to meet the changing conditions.
(5) Rules: these are precise statements on how a situation needs to be tackled.
These are management decision regarding what one needs to do and what one
should refrain from in a certain situation. These are regulatory instructions to
people on their behavior and action. One can identify them as the ‘organization’s
commandments’ to ensure that the environment has discipline and well defined
code of conduct for controlling the behavior of the people of the organization. A
rule is distinct, clear and has no scope of flexibility or discretion, therefore the
infringement of rules carries a penalty.
Check Your Progress

1. What are the
limitations of planning?
2. What are the essential
characteristics of sound
plan?

strategy is to provide competitive advantage by capitalizing on its own strength,
(6) Strategy: The
grabbing opportunities in environment and saving the organization from the
word strategy has
threats posed by the environment. According to john Argenti “strategic
been derived from
planning is a careful, deliberate taking of decisions which affect or are intended to
Greek word
affect the organization as a whole, as opposed to only parts of it, over long periods
‘stratçgia’,
of time”.
meaning the art of
troop leader. The
word has been
more commonly
used in military
environment. In
business
management it
means policy
formulation by top
management
which helps in
interpretation and
understanding the
meaning of other
policies. A
strategy is a
unique plan
devised to cope up
with the actions
and reactions of
the competitors. In
the words of C. T.
Hardwick and B.F.
Landuyt, “The
word strategy is
used to signify the
general concept
and salient aspect
of gamesmanship
as an
administrative
course designed to
bring success.” The
purpose of
formulating
Single Use Plan Planning
(1) Programs: An action based, result-oriented and unique plan to meet a specific
business condition is termed as programs. These are formed to accomplish a
project undertaken. Since the projects are accomplished over a certain period of NOTES
time these programs also are short lived.
(2) Budget: An estimated or forecasted quantifiable statement discussing the
expectation is termed as Budget. It is forecasted statement expressed numerically
of what an organization wants to achieve and what will be the expenses to achieve
it. It is a financial plan for a specified period of time generally illustrating movements
of funds (inflow and outflow).It is designed to allocate resources of an organization
and forms a standard for performance appraisal.
Levels of Planning
company or
Strategic Planning entry of new
This is a futuristic and proactive approach. It is a wholesome planning which competitor can
defines and prioritizes long-term plans that include probing the purpose, mission, reduce the
philosophy and goals of the organization keeping in view external environment that a market share of
business might face. It is detailed planning which includes SWOT analysis, objective the
formulations, communication of objectives, various sub plans for the achievement of
objectives and so on. It involves major involvement of resources and is for a minimum
period of ten years. It reflects the future of the organization.
Steps in strategic planning

(1) Mission and objectives: Strategic planning is concerned with
determination of long term goals and objectives of the organization by top
management.
(2) Environmental scanning and Organizational Appraisal: Both internal
and external environment of the organization is scanned and SWOT(strength,
weakness opportunities and threat) analysis is done.
• The internal factors can be a source of strength or a reason for weakness.
The internal environment consists of availability of financial, material and
human resources. It also includes available technology with the organization,
organization structure and organizational culture for e.g. advanced
technological capabilities and in-house research and development can act as
strength while rising cost of operation and lack of financial resources is a
cause of weakness.
• The external environment constitute economic, social, political-legal,
technological environment. The external factors can either pose a threat to
the organization or can bring new opportunities for growth and expansion to
the organization for e.g. recession can lead to severe loss in sales of the

Planning organization. Government policies aimed at improving infrastructure facilities
of the country can have a positive impact on organization. Construction of
new roads can help the organization in smoothing its operation and improve
and enlarge its distribution channel.
NOTES
(3) Strategic alternatives and choice: various alternatives are generated and
strategic options identified for e.g. diversification, expansion, merger and acquisition
etc. The alternatives that are generated are then compared and evaluated. After
comparing, their effect on the health of the organization is analyzed and the best
option is chosen.

period. These plans add value to strategic plans. They take care to the execution part
(4) Strategy
of the long term plans. It focuses on the existing operations of different departments of
implementation
the organization. Generally, middle management is responsible for formation of such
and control: this
plan; they are in-charge with the responsibility of employing the optimum mix of the
involves resource
resources. It also covers the issue of performance of employees and staff
mobilization and
development.
allocation,
development of Operational Planning
appropriate system These are short run plans made at departmental level or lower level made for the
and procedure and purpose of carrying the day to day activities of the organization. They are generally
designing of divided into various functional departments and range for a period of one week to a
organization year.
structure.
Contingency Planning
Programs,
schedules, tactical These plans can be either reactive or proactive. They are made to counter a
Check Your Progress contingent situation which was not assumed. These situations are special and a business
and operational
1. Distinguish between might confront such situation occasionally.
plans plans and
standing are
developed.
single use plan. Short Term Vs Long Term Plan
Various controls
2. How does policies help Short term plan are often termed as operational plans that are prepared for the
inare developed
decision making?to period of one year. The purpose of these plans is to maximize efficiency in the day to
monitor the day operation of the enterprise. These plans act as base for the long run plan. They also
progress of help in unifying the action of the enterprise. The long range planning also called as
strategy strategic planning generally span over a period of 10-15 years or more. These plans
implementation involve a large period and hence greater uncertainty.
and its
contribution
towards
organizational
goals is evaluated.
If required the
strategy should be
molded to suit the
changes in the
external
environment.
Tactical
Planning
Tactical plans are
also called intermediate
plans. These are neither
for very short period
nor for a very long
Planning
Management of Objective (MBO)
Concept of Management by Objectives

NOTES
In 1954, Peter Drucker coined the term Management By Objective. It is a technique
in which measurable goals are set by joint effort of senior and subordinate and the
contribution of each individual is measured in terms of their accomplishment of the
goals. The goals set in MBO are not unilaterally set by the superior or imposed on the
subordinates. These identified goals are set in close consultation with subordinates.
MBO is an autonomous and participative style of management. The concept has become
popular these days as a rewarding style of management. It focuses concentration on
the achievement of objectives through partaking and involvement of all concerned
persons.
The basic assumption behind such a philosophy is that when people are aware of
the expectation from them they align their personal goal with the organizational goal
and can perform better. Further the joint goal setting, superior-subordinate participation
and support from superior to subordinates are the important characteristics of MBO.
This improves employee morale and motivates them.
Process of Management by Objective
Preliminary Goal Settings
Setting Subordinate Objectives
Action Planning
Periodic Performance review
Final Appraisal
(1) Preliminary goal settings: The initial stage in the process of MBO is to subordinate and
identify the organizational objectives. The top management generally in subordinate accepts
consultation with other managers determines it. The important aspect in it.
determining these is identifying “Key-Result Areas’ (KRA). Once these goals (3) Development of
are identified they must be shared with other members. action plans: after
the goals are set
(2) Setting specific performance objectives: the organization goals can only actions plans are
be achieved if they are divided and every individual performs the given task.
Therefore every individual should be informed about the task that is expected
from them. The subordinate should be consulted before providing with the
resources for performing the task. The resources provided should be
proportionate according to the goals. Goal setting is a two way process it is
not imposed on the subordinate by the superior. Superior suggests a goal to

Planning developed to bring the things into force. Procedures are formed for
achievement of set goals. Under MBO the subordinates and superior jointly
and interactively perform a given task. The superior gives suggestion and the
subordinates perform. The objectives are so formed that every objective
NOTES accomplished at lower level contributes to the fulfillment of the greater goal.
For the evaluation of key areas check points are also established.
(4) Periodic performance review: at specified time interval evaluation of the
work is done with joint participation to identify shortcomings or deviations if any.
Subordinate and superior sit and discuss about the problem areas identified.
Feedbacks and suggestions are made available for the potential development.
The main purpose is to improve the quality instead of focusing on criticism.
(5) Final appraisal: at the end of the year, performance of the individual is
evaluated on the basis of task completed. The standards which are set are
compared with the actuals. The actual work is evaluated based on which the
appraisal or rewards of the subordinate is decided.
Importance of Management by Objective
(1) Helps in reducing wastage of resources as the resources are provided in
proportion to goals set.
(2) Helps in making planning effective with the help of action plans and result
oriented planning.
(3) The subordinate is able to relate his goals with organizational objectives and
feels proud of his contribution towards the organizational objectives
(4) Induces team spirit with democratic and participative style of work.
(5) It gives subordinate valuable feedback through the system of periodic
evaluation. The employee becomes aware of his progress and can take timely
corrective action if he is lacking somewhere.
(6) Induces employee morale as their participation is given due consideration.
Also the rewards are according to the contribution which raises their morale.
(7) It acts as a effective tool of self control as every individual know what is
expected out of him, which help in self regulation.
Limitation of Management by Objective
(1) Rigidity: the problem is that it sometimes fails to incorporate prevailing trends
and the current scenario of the organization.
(2) Goal Setting: which criteria should be given more preference quantity or
quality? The goal should be long term or short term, these are various issues
confronted while setting goals. Sometimes overemphasis on measurable goals
can neglect crucial qualitative goals like job satisfaction.
(3) Time consuming: setting up of goal that are measurable and that too in
participative style requires a lot of time. Instilling confidence, deciding on
task all these require a lot of time. The process of evaluation and performance
appraisal involves considerable paper work and time.
(4) Unhealthy
environment:
sometimes more
emphasis is laid on
work rather than
improving the
quality which
produces lot of
pressure and
unhealthy
competition between work group. Planning
(5) Participation problem: at times to avoid time wastage, superior do not
consult subordinates and set the goals authoritatively which loses the essence
of the process.
NOTES
(6) Managerial skill: some managers may not be very good at human skills.
They may not be effective in motivating and leading people towards the goal.
The subordinate may not get necessary guidance and counselling during the
process.
3.13 Summary
Planning is a primary and crucial function of management which is followed by
other functions such as staffing, directing, organizing and controlling. To plan is to forecast
about what is to be done, how it is to be done, when it is to be done and who will do it.
Planning is goal oriented, continuous, forward looking and intellectual process. It provides
direction, facilitates control, reduces risk, improves morale and aids in coordination. A
sound plan should be realistic, flexible and should contribute towards organizational
objectives. Planning starts with determination of objectives and development of planning
premises. Alternative courses of actions are identified and evaluated. The best course
of action is chosen and implemented. Planning is costly and time consuming. Its strength
depends upon the accuracy of data and manager’s acumen. Planning may sometimes
become redundant because of changing environmental conditions. The plans can be
either standing plans or single use plan. The standing plans include strategy, policies,
rule and procedures. The single use plans are programs and budget. The planning can
be done at the operational level or strategic level. Planning can be classified according
to time frame also; they can be short term or long term.
Management by objective is a management tool in which measurable goals are
set jointly by superior and subordinate and the contribution of the subordinate is measured
in terms of his accomplishment of the goals. The goals set in MBO are not thrust on the
subordinate by supervisor. The superior subordinate then develop actions plan followed
by periodic performance review. MBO is result oriented; it helps in minimizing of wastage
and motivates subordinates. It is very time consuming and requires managerial skills on
part of the supervisor.
Key Terms
* Planning: It is deciding in advance what to do, how to do it, when to do it, and who will called objective.
do it.
* Planning Premises: They are the basic assumptions regarding the business
environment that provide broad frame work within which plans have to be formulated.
* Mission: Amission is a statement describing about the organization’s purpose and the
reason of its existence.
* Objective: The predetermined specific purpose to be achieved by the organization is

Planning * Policies: Policies are basic pre-defined guidelines and directions for decision making.
* Procedure: It is a standing plan detailing about the succession of associated acts that
are required to perform the task.
NOTES * Rule: It is a rigid, distinct, clear statement regarding what one needs to do and what
one should refrain from in a certain situation, therefore the infringement of rules carries
a penalty.
* Strategic planning: It is a careful, deliberate taking of decisions which affect or are
intended to affect the organization as a whole, as opposed to only parts of it, over long
periods of time.
* Programs: An action based, result-oriented and unique plan to meet a specific business
condition is termed as programs.
* Budget: An estimated or forecasted quantifiable statement discussing the expectation
is termed as budget.
* Management by Objective. It is a technique in which measurable goals are set by
joint effort of senior and subordinate and the contribution of each individual is measured
in terms of their accomplishment of the goals.

Short- Answer Questions:
(1) Discuss the steps involved in planning.
(2) What do you understand by planning premises?
(3) Discuss the importance of planning.
(4) Write short notes on
1. SWOT analysis 2. Mission 3. Program
4. Rules 5. Benefits and limitations of MBO
Long Answer type questions:
(1) Differentiate between various types of plan.
(2) What do you understand by MBO? Explain the process of MBO.
(3) Define strategy. Explain the process in formulation of strategy.


(1) Harold Koontz
and O Donnell,
`Èssentials of
Management’’,
Tata McGraw Hill,
New Delhi 1990.
(2) V.S.P Rao, V.
Harikrishnan,
``Management
Text and Cases’’,
excel books ,
fourth edition
(3) L.A Allen ,
``Management
and
Organization’’,
McGraw Hill
Book Company
New York,1990.
(4) Robert Albanese,
``Management
towards
Accountability and
Performance’’,
Richard D. Irwin,
Homewood, Illinois
,1990.
Coordinating and Organizing
UNIT 4 COORDINATING AND
ORGANISING
NOTES
Structure
Introduction
Unit objective
Concept of Coordination
Difference between Coordination and Cooperation
Need and Significance of Coordination
Principles of Coordination
Approaches and Techniques for Achieving Effective Coordination
Concept of Organizing
Steps in Organizing Process
Span of Control
Determinants of Span of Control
Gracunas Theory of Span of Control
Authority
Power
Difference between Authority and Power
Delegation of Authority
Principles of Delegation
Problems in Delegation
Centralization
Decentralization
Difference between Centralization and Decentralization
Factors responsible for Centralization and Decentralization
Summary
Key Terms
Introduction
Coordination is performed at each stage of management. It focuses on integrating of management. After
and synchronizing the efforts of team members to make sure enterprise goals are planning the second
attained efficiently and effectively. It is the embryonic force that unifies all other functions and crucial function of
management is
Management Process
& Organisational
Behaviour : 49
Coordinating and Organizing organizing. It develops the interrelation between the work facilities and employees of
the organization. It helps in designing the organization. The function helps in establishing
authority and responsibility relationship. It helps in enabling the people work in the most
effective manner by developing a structure for it.
NOTES
Unit Objective
* Understand the concept and importance of coordination.
* Explain the principles of coordination.
* Understand the concept of organizing.
* Describe the steps in organizing.
* Explain the concept of span of control.
* Explain the Gracunas theory of span of control.
* Understand the concept of authority and identify its sources.
* Understand the concept of power and identify its sources.
* Differentiate between power and authority.
* Explain the concept of delegation of authority and its principles.
* Identify the obstacles in delegation of authority.
* Differentiate between centralization and decentralization.
* Understand the factors responsible for centralization and decentralization.
Concept of Coordination
The act of pulling together different parts of organization to unify them and to
form a collective group for attaining organization’s predetermined goal is called
coordination. In the words of Mooney and Reelay, “Co-ordination is orderly arrangement
of group efforts to provide unity of action in the pursuit of common goals”. It aims at
establishing harmony between individuals efforts headed for realization of collective
goals which is an input to success of management. According to Henry Fayol “To
coordinate means is to unite and correlate all activities”. Therefore it is called as the
essence of management and is inherent and innate to all other functions of management.
Difference between Coordination and Cooperation

Management Process
Coordination
and cooperation are
often mixed up, but
these two although
sounds alike are
different things.
Cooperation can be
defined as combined
efforts of people who
unite willingly to
attain particular
objectives. It
indicates purely the
eagerness of
individuals to
facilitate each other.
Cooperation is a
voluntary effort;
coordination is a
conscious and
deliberate effort.
It is the effect of voluntary outlook for support of a collective group. Coor-dination is a Coordinating and Organizing
much more wide term necessitating not only the willingness to cooperate but to find
methods to coordinate. Cooperation is automatic while coordination is to be induced. It
inculcates cooperation in itself. In the words of McFarland, “Coordination is a far more
NOTES
inclusive term embracing the idea of cooperation. Cooperation, that is mere willingness
of individuals to help each other, cannot serve as a satisfactory substitute for
coordination.” Coordination has a wider scope.
Need and Significance of Coordination

department are not
(1) Promotes team work: in the absence of coordination, different team member
related to each
may work in different direction for the achievement of same goal. Coordination
other. In a
helps in channelizing energies, efforts and works of different groups, integrates
sequential
them and promotes team work. It reduces duplicity and helps in promoting
interdependence,
team spirit.
(2) Increases efficiency: Coordination improves the effectiveness of operations
by decreasing duplicate work and aiming at optimum use of its resources.
Synchronization of individual efforts yields a harmonious team work. It is a
ingenious force which can produce an output which can be much greater
than the sum of individual accomplishments. In fact, coordination is the
foremost principle of organisation as it imbibes in itself the principle of
organisation in it. In the words of C.I. Barnard , “The quality of coordination
is the crucial factor in the survival of an organization.”
(3) Interdepartmental harmony: besides increasing the efficiency in the
organization it induces harmony in the various departments of the organization.
It creates unity of action in diverse section of organization making a close
knit. In the words of Mary Parker Follett, “the first test of a business
administration should be whether you have a business with all its parts so
coordinated, so moving together in their closely knit and adjusting activities,
so linking, inter-locking, inter-relating, that they make a working unit that is
not a congeries of separate pieces, but a functional whole or integrated unit”.
(4) Harmonising conflicting goals : every department in the organization has
a distinct goal. The individuals working in the department too have a goal.
Coordination helps in integration these varied goals to achieve the
organization’s goal in such a way that the fulfilment of one leads to the
accomplishment of others.
(5) Interdependence : the various departments of a unit cannot work in
isolation. Every department has it dependence on the other. For example
marketing department requires funds for operation thus has dependence on
finance department. The dependence can be pooled, sequential or reciprocal.
In a pooled dependence there is a minimal need of coordination as the

Coordinating and Organizing the subsequent department depends on the former department. For e.g.
dependence on production unit on procurement department. In a reciprocal
interdependence the output of one department is the input of the other
department and vice versa. In these cases the coordination between
NOTES
departments promotes efficiency in operations.
(6) Specialization: specialization promotes efficiency in the department. The
specialist team should work in close coordination so that conflict between
different specialists can be minimised.
(7) Growth in size: the present day organization structure is complex and very
large. Communication in such large department is not easy owing to large
structure. In such an environment coordination becomes vital for smooth
functioning of the organization.
Principles of Coordination
Management Process
Fi motivation and greater confidence among different departments.
gu (3) Reciprocal relationship: an enterprise consist of various department which
re
have direct or indirect relations with other department existing. No department
4.
1: works as a standalone unit. Therefore all action must be taken with due
Pr precision as it affects several other departments directly or indirectly.
in
(4) Continuity: the essence of management is coordination. Therefore managers
ci
pl should never stop making efforts in integrating and establishing coordination
es among different departments. It should be a pervasive function throughout
of
Co
or
di
na
tio
n
(1) Early stage
:
Coordinatio
n should
begin early.
In fact it
should start
right with
planning.
Early
coordination
yields
improvemen
t in the
quality of
work.
(2) Direct
personal
contact: the
best and
simple way
to build
mutual
understandin
g and trust is
direct
interpersonal
contact. It
infuses
the management process. Coordinating and Organizing
(5) Self coordination: the principle emphasis on the effective communication

and coordination of the departments whose action affect each other. In such
case the independent department should take due precision in taking action NOTES
so that the dependent department is affected favourably.
Approaches and Techniques for Achieving Effective

Coordination
(1) Communication : Communication facilitates coordination. Acquisition,
transmission and processing of information is required for coordination. Use
of computers, data processing equipments improves the speed and quality of
communication that in turn facilitates coordination.
(2) Reducing the need for coordination : The need for coordination can be
reduced by reducing interdependence among units through creation of slack
resources and independent units.
(3) Integration of plans : The plans that are made at the departmental levels
should be compiled and integrated into a master plan and various points where
coordination is required should be identified and incorporated in plans.
(4) Special coordinators : Where the executives do not get time for
coordination, he can appoint a specialist for doing the task of coordinator.
The duty of the special coordinator should be to facilitate interchange of
information and suggest various remedial steps if problems is encountered.
(5) Sound leadership : Effective leader can inspire employees to work with
full commitment and enthusiasm. He can inspire the workers to work as a
team and integrate their efforts in order to achieve organizational goals.
Concept of Organizing
The process of determining authority and relationship structure in an organization to whom duty has been
is termed as organizing. It establishes formal relationship so that resources can be put assigned to perform the
to use to achieve the predetermined goals. Authority means the right to make decisions duty.”
and issue orders and determine the use of resources to achieve goals. The term
“responsibility” means the obligation of subordinate to perform duties assigned by their
superior. In the words of Louis Allen, “”Organising is the process of identifying and
grouping the work to be performed, defining and delegating responsibility and authority
and establishing relationships for the purpose of enabling people to work most effectively
together in accomplishing objectives.” In the words of Simon, “Authority may be defined
as the power to take decisions which guide the actions of others”. In the words of
Koont and O’ Donnell, “Responsibility may be defined as the obligation of a subordinate,

Steps in Organizing Process
NOTES
Figure 4.2
(1) Identification of activities: the process starts with fixing the objectives to
be achieved. For the purpose of achievement of objectives various activities
are identified. Unless the work done is identified, goal achievement is not
possible. The total work is then divided and distributed among different
departments. For the proper identification of various activities grouping is
done so that work is not duplicated. It also enables top manager to concentrate
more on important issues.
(2) Grouping of activities: once the work is divided it should be closely
coordinated among different working groups. Groups with similar activity
should be aligned together so that double incidence of work could be reduced.
This also helps in reducing wastage and smooth flow of work. This activity is
generally performed under the supervision of senior managers.
(3) Assignment of duties: the duties and responsibilities of every member or
employee are distinctly defined. This would lead to the selection of appropriate
person for the job. This helps employee to understand precisely what is
expected out of him. Consequently, this enhances efficiency.
(4) Delegation of authority: every employee is delegated authority so that
work could be done. Mere responsibility without authority will lead no purpose.
Authority is the right to assert orders and the power to obtain obedience. The
authority provided to an employee should to be in proportion to the responsibility
given to him.
Check Your Progress
co-operation and Span of Control
coordination.
2. What are the & Organisational Behaviour : 54
principles of
coordination.
Management Process
Often referred
as Span of
Management’ or
‘Span of Attention’,
the concept of Span
of Control owes its
existence to British
Army General Sir Ian
Standish Monteith
Hamilton (1853-
1947) who
introduced and
popularized this
concept through his
book titled “The soul
and body of an army.”
According to Louis
Allen, “Span of
control refers to the
number of people
that a manager can
supervise. The
simplest way to
understand span of
control is the number
of subordinates a
superior can manage.
“Span of control”
comprises two terms, ‘span’ and ‘control’. While the term ‘span’ here means the utmost * Limitation of tall
structure: A tall
limit of supervising number of men, ‘control’ means legitimate authority to order or structure has its
direct them. Span of Control in management therefore means the maximum number of own limitation as
people (to be more precise, subordinates or employees) that a manager can efficiently there is a
direct, control and supervise. Although there is no consensus on the number of
subordinates a supervisor should have.Most management experts hold the opinion that
at the top level of management, it should not exceed 1:6 while at the lower level of
management, it should not go beyond 1:20. This implies that the senior at the top level
can have a maximum of 6 subordinates under his control and that at lower level the
manager can have 20. The span of control can be narrow or wide according to the
organization preference.
Narrow Span of Control

Under a narrow span of management, the number of employees under the manager
is reduced. The control of employees under each manager is limited leading to a tall
structure.
Manager
Subordinate Subordinate
Employee Employee Employee Employee
Figure 4.3: Narrow span of management

From the figure it is evident that each subordinate/ employee holding a position of
authority has to supervise at least two employees. The span of control is maximum two
employees.
Advantages of Narrow span of control
* Effective supervision and control: in a narrow span of management manager
is able to give more time per subordinate under his supervision. This enables
the manager to provide better direction and supervision to his subordinate.
Thus the work is performed under the close supervision and controls which
results in effectiveness in the quality of work.
* Quick communication: owing to small number the communication is quick
and direct which leads to better understanding and coordination.
Disadvantages of Narrow span of control
NOTES

Coordinating and Organizing & Organisational Behaviour : 56
NOTES
Management Process
wide gap between organizational structure. The span of control and the number of levels bear an inverse
top and bottom relation; narrower the span, the more is the number of levels in an organization.
level of
management. Manager
* Increased
manpower cost: Subordinate Subordinate Subordinate Subordinate Subordinate Subordinate
More numbers of
managers are Employee Employee Employee Employee Employee Employee
required to
manage Figure 4.4: Wide span of management
employees which
In the above figure each superior/manager holding a position of authority has to
could have been
supervise at least six employees. The span of control is maximum six employees.
otherwise done
by same Advantages of Wide span of control
managers. Thus All the limitations of narrow span are well taken care in wide span of control, so
hiring puts the limitation of narrow span of control become the advantage of wide span of control.
additional
* Reduces man power cost: as the number of subordinate each manager is
manpower cost.
controlling is fairly large hence there is no need of hiring many managers as
* Limits the in the case of narrow span of control.
potential of
* Frequent communication: since the chain is short, the communication is more
subordinates:
frequent and takes very less time.
Narrow span of
* Autonomous structure: since the span is wider, there is no close supervision
management
of the manager, hence the subordinates get due autonomy in work. It provides
allows closer
more freedom than the narrow span of control.
supervision by
managers which Disadvantages of Wide span of control
limits the skill of * Limitation of flat structure: A flat structure has its own limitation. It tends to
people and they be loose in establishing control and supervision, consequently reducing
are reluctant to efficiency.
take initiative
* Not suitable for geographically distributed organization: Organization which
which also affects
are situated in different location cannot employ wide span of control as the
their morale. This
manager cannot be in touch with subordinates easily.
in turn results in
lower utilization
of their potential.
Wide Span of
Control
Under this span of
control one senior or
manager supervises a large
number of subordinates.
This gives rise to a flat
Determinants of Span of control supervisor.
(1) Nature of work: the nature of work is a crucial factor in determining the
span of control. If the work is complex in nature a narrow span of management
is used and if it is simple a wide span of control is used.
(2) Type of technology: if an organization is employing latest and complex
technology, narrow span of control will be opted while if it is employing
traditional one which is in use for a long time then a wider span of control can
be perferred.
(3) Ability of manager: if the manager is experienced and competent than he
can manage a large number of employees and in that case the span of control
can be wide and vice- versa.
(4) Capacity of subordinates: professionally qualified and skilled subordinate
require less supervision, in this case a wide span of control will be helpful. If
the subordinates are novice and lack proper skill a narrow span of control
will be preferred.
(5) Degree of decentralization: if the organization has more degree of
decentralization wider span of control will be there, while the centralization
leads to tall structure and calls manager to perform several duties therefore
he may opt for narrow span of control.
(6) Planning: clarity in planning also determines the span of control. If the planning
has clarity the wider will be span of control is advocated, as the supervision
tends to decrease with clear laid plans and procedures.
(7) Staff assistance: if the staff assisting bears equal competency in tackling
situation, than the manager can easily go for wider span of control.
(8) Communication technique: if direct contact is to be established using face
to face communication the span of control tends to be narrow. If new and
electronic methods are used communication can be effective at large therefore
wider span of control can be effectively used.
Graicunas Theory of Span of Control

Vytautas Andrius Graicunas (1898-1952) was a French management consultant
who used mathematical calculation to explain the superior subordinate relationship.
According to Graicunas, when the number of subordinates increase arithmetically (let
say 1, 2, 3, 4, 5, 6, and so on) the number of relationships which the manager oversees
or control also increases more or less geometrically (like 1, 6, 18, 44, 100, 244, etc.). As
a result, a manager has a limit to which he can control a number of subordinates, and
when this limit surpasses, it becomes difficult for him to control. Graicunas classified
the superior subordinate relationship into three categories:
(1) Direct Single Relationships: Direct contacts of the superior with
subordinates.
(2) Cross Relationships: The relationship between subordinates under same
NOTES

Coordinating and Organizing (3) Direct Group Relationships: The relationship between subordinates and
supervisor in all possible combinations.
For e.g: David is a boss and Martin and Sheldon are his subordinates. According
NOTES to Graicunas, David has to control following three types of relationships, with or among
Martin (M) and Sheldon (S):-
(a) Direct Single Relationships:-
D with M, and D with S, that forms a total of 2 direct single relationships.
(b) Direct Group Relationship:-
The relationship of D with M in presence of S, and D with S in presence of
M, results in 2 direct group relationships.
(c) Cross Relationship:-
M with S, and S with M, a total of 2 cross relationships.
Consequently, maximum numbers of relationships which David (G) has to control
are: - 2 + 2 + 2 = 6 relationships.
This shows the arithmetic and geometric relationship. Given 2 subordinates, the
number of relationships, which manager has to control is 6. Thus, with every increase
in the number of subordinates, number of relationships to control will increase
geometrically for e.g. for 3 it will be 18.
Graicunas formula:
r = n(2n-1+n-1)
No. of subordinates No. of relationships

2 6
3 18
4 44
5 100
Criticism:
* The theory is not all pervasive. It ignores several critical determinants on
which span of control depend.
* The theory exclusively deals with superior and subordinate relationship.
Authority
Management Process
Management is
concerned with
decision making,
guiding and
instructing employees
of the organization.
Authority is the
formal right given to
the managers to
perform or
command. The
managers can take
actions, allocate
organizational
resources and obtain
obedience from
subordinates to
achieve
organizational
objectives.
Types ofAuthority Coordinating and Organizing
* Line authority- it is the most fundamental authority wherein superior exercises

direct command over subordinates. The superior decides and gives orders to
subordinates concerning production , marketing etc.
NOTES
* Staff authority- staff personnel have the right to advise line personnel and
assist them in their main function. They cannot force obedience from the line
staff.
* Functional authority-It is the limited form of authority given to staff personnel
within a given area of expertise.
Sources of authority
* Formal authority theory
According to this theory all authority originates at the top and flow downwards in
the formal structure of the organization. The authority flows down through the process
of delegation. The ultimate authority in the company lies with the shareholders.
Shareholders delegate most of the authority to the Board of Directors. The Board
delegate the authority to Chief Executive Officer who in turn delegates it to departmental
heads and so on. Every manager has been delegated authority from his or her superior.
* Acceptance theory
According to this theory formal authority exists only when subordinates are willing
to accept it. The basis of authority is the subordinate’s willingness to be directed.. In the
words of Barnard “Formal authority is in effect, nominal authority. It becomes real only
when it is accepted.”
* Competence theory
According to this theory manager derives authority from his technical competence.
Subordinate obey managers and accept his authority because of his seniority, skill,
intelligence and social prestige in the organization. Subordinate seeks guidance from
the manager because of his expertise.
Power
Power is the ability to influence and is a broader concept than authority. It refers Individual derives
to the ability and capacity of influencing the behaviour and attitude of others so that expert power
from possessing
they do those things that they would not do otherwise. expertise, special
Sources of power skills, or
French and Raven identified five sources of power. They are as follows
* Legitimate Power
It is also known as positional power that a person derives from his or her position
in the formal hierarchy of an individual. Job description gives the power to the manager
to assign duties and supervise the work of subordinates.
* Expert Power

Coordinating and Organizing knowledge. Due to his problem solving abilities he may be highly valued by the
organizational members. Dependency is the key to power. If other members are
dependent on the person to perform a critical task then the person becomes indispensable.
His decision and opinion are highly valued and he becomes powerful and influential.
NOTES
* Referent Power
It is derived from possession of certain pleasant personality traits or charisma by
the individual. These traits help in cultivating healthy interpersonal relationships. The
person is admired, respected and followed.
* Coercive Power
It is based on the fear of the negative outcome that the individual perceives if he
fails to obey the orders or decision of the person possessing coercive power. It is
derived from person’s ability to threaten, punish, demote, dismiss etc.
* Reward Power
It arises from the person’s ability to influence others by way of distribution of
rewards that others view as valuable. The rewards include monetary incentives,
favourable appraisal, preferred work shifts etc.
Difference Between Authority and Power
S.No Basis Authority Power
1 Nature Legitimate and formal right Personal ability to influence

given to the managers others. It may not be
legitimate.
2 Flow It flows from top to bottom It can flow in any direction.

by way of delegation.
3 Presence Authority is given to a Cannot be shown in

position. Can be shown in organizational chart.
organizational chart as
subordinate-superior relation.
4. Level of Higher the level of manager Does not depend upon the
Management higher is the authority he level of management
possess. even a subordinate
can have power over
superior due to his expertise.
Delegation of Authority
Management Process Behaviour : 60
& Organisational
Authority is an
important input to
managerial job. It
provides the power to
take decision and
order subordinates to
act on the decisions.
Not every decision
can be
taken by top management as they have several other crucial job to perform therefore duties and
they may assign it among the subordinates so that they can perform their task. The authority under
mechanism of distribution of work among the subordinates is called delegation of authority. special conditions.
Delegation of authority implies allocation of authority among subordinate to do a task.
Delegation of authority includes:
(a) Transmission of duties to subordinates.
(b) Delegating adequate authority to the subordinate for proper discharge of the duties
allocated.
(c) The subordinate assumes the responsibility.
Importance of delegation:
* Improves efficiency and employee morale and motivation.
* More time to executive for strategic decisions.
* Better coordination and cordial relationship.
* Develops team spirit
Principles of Delegation
(1) Principle of Parity of Authority and Responsibility: the principle implies
that authority should always match responsibility. It should be compatible
with the duties assigned and the competency of the individual. The authority
should be well balanced, it should not be too less that the manager is incapable
to perform function neither it should be too much, liable of being misused.
(2) Unity of Command: this principle implies that a subordinate should receive
order and should report to only one boss delegating the authority. This reduces
chances of confusion and conflict.
(3) Clarity: all activities to be performed, result expected, methods to be used
must be clearly stated. The authority delegated must correspond to the
responsibility stated.
(4) Principle of Communication: misunderstood responsibility can be dangerous
and misused power can be disastrous. Therefore communication must be
proper and clear. Also, proper channel must be established so that in case of
any issue either of the persons can confront and get it resolved.
(5) Principle of Exception Principle: it means that the authority delegated to
an employee is with the expectation that he will exercise his own rationale
and the decision taken by him will lie within the perview of his authority.
Within his authority he is given due autonomy even at the cost of mistakes.
The top level management should only interfere if he is not capable to take
decisions. Needless meddling should be avoided by top management as well.
But under exceptional condition the rule can be avoided. The superior can
impede in his subordinate’s work and can at times pull out the delegated
NOTES

Coordinating and Organizing & Organisational Behaviour : 62
NOTES
Management Process
Problems in (2) Fear of competition: Many a times manager feels that if he delegates
Delegation power to his subordinates, the subordinate may perform the task better than
him. This fear of competition also acts as a barrier to delegation.
On the Part of Delegator
(3) Lack of confidence in subordinates: the lack of confidence can be either
(1) Reluctance of
on the capabilities of the subordinate or the fear of losing control. This in
the manager to
turn acts as an obstacle in efficient delegation.
delegate
(4) Lack of ability to direct: Not every manager can identify the critical factors
authority: this is
of a plan. This problem in turns affects his capabilities to direct and
one of the most
communicate the plan of action to his subordinates.
common
problems of (5) Sceptical nature of the manager: most of the managers have conformist
delegator. The and sceptical approach, which acts as a psychological barrier in delegation.
superiors often Managers evade delegation of power if he tends to feel every time that there
tend to think that may be negative outcomes of every action even when every plan of action is
they are more clearly defined.
capable of (6) Tendency to control subordinates: managers are generally desirous to
handling things dominate their subordinates working under them. They avoid delegation so
and the job. The that they do not lose their control over their subordinates. They might also be
approach that ‘I under impression that delegation reveals their managerial deficiencies.
can do it better Therefore to uphold their senior position and to dominate their subordinates,
myself’ by they are reluctant to delegate.
superior acts as
On the Part of Subordinate
hindrance in the
(1) Excessive dependence on the manager for decisions: most of the
process of
subordinates tend to avoid responsibility even if superior is ready to delegate
delegation. For an
authority. They do it so because they do not wish to face problem and take
autocratic
decisions. If the subordinate lacks confidence even though he has been
manager, delegated due power, he may have excessive dependence on the superior.
delegation is
(2) Fear of criticism: subordinates often are unwilling to accept authority if
always viewed
they feel they will be criticized for their mistakes. This further scares them if
negatively as it
they have a feeling of being criticized in front of their peer group. This occurs
tends to reduce
when the superior subordinate relationship is not very healthy.
his power. There
(3) Absence of information: a subordinate may evade accepting delegated
might be
managers who
are afraid that the
subordinate may
outperform a given
task reducing his
value. This entire
attitude acts as an
obstacle in
delegation.
power if he believes that he will underperform because he will not get the Coordinating and Organizing
required information on a given project. A subordinate may be unwilling to
take job because he feels the information resources are not apt to do the job.
(4) Lack of favourable incentives: incentives like recognition of work and NOTES
rewards or any form of monetary incentive help in boosting the confidence
and morale of subordinates. If any such favourable incentive is not present
the subordinate would not be willing to take up the delegated power.
(5) Lack of self-confidence: at times a subordinate may not be willing to accept
delegated power if he is not confident about his capability to take right decision
or tackle a situation. He may not avoid taking up situation where his skills are
required. Consequently, lack of self-confidence is an obstruction in the process
of delegation.
(6) Poor superior-subordinate relations: the most difficult aspect of
delegation is lack of harmony in the relationship of superior- subordinate
relationship. The absence of trust and cordial relationship affect both the
party and they do not develop the required confidence to give and take power.
(7) Unnecessary interference by superior: once the power is delegated the
superior should give the due autonomy to subordinate to perform. He should
only provide his assistance if the subordinate asks for it. But most of the
times the superiors keep on interfering in the work of his subordinate and do
not give them due autonomy. This negatively affects the process of delegation.
(8) Fear of being exposed: the subordinates may often confront with inferiority
complex. Often they feel that they cannot do an activity and they may not
accept delegated power, as they may feel that the management will come to
know about their weaknesses. This often results as a barrier in the process
of delegation.
Centralization
Centralization means the concentration of power, authority and decision making
in limited hands. All the significant decision and actions are taken by top management
and the lower management depend on the approval of top management. In the words
of Louis Allen, “Centralization” is the systematic and consistent reservation of authority
at central points in the organization.” Key elements of centralization are:
1. Concentration of decision making power at top level.
2. Dependence of operation at lower level lies at the discretion and directions
of the top level.
leading to
Merits
extra work is
— Flexible and faster decision: centralization allows flexibility and adaptability
taken care by
of the organisation to the dynamic business environment. Intermittent situation
the existing staff. Moreover decisions
Management Process
& Organisational
Behaviour : 63
Coordinating and Organizing are centralised so they can be quickly taken.
— Uniformity in action : centralized administrative control leads to uniformity
in action.
NOTES — Facilitates Product growth : enhances quality of work because of
standardised procedure which facilitates product growth, better supervision.
Demerits
— Delay in communication : the flow of communication is from and to the
central control room which results in unnecessary delays in decision and
office work.
— Centralized power may be abused : the management at the top may use
the authority for individual benefits rather than organization good. This results
in abuse of power.
— Inhibits the development of lower managers : lack of participation from
the lower level restricts subordinates growth and opportunity to learn. This
seriously affects their development.
— Organization depends upon health and vitality of top management:
since every decision of organization is routed through top management the
soundness of the top management becomes crucial factor for the survival
and growth of the organization.
Decentralization
Decentralization advocates diffusion of power and control at various levels. It

aims at delegation of authority at all levels of management. In decentralization the top
management retains its authority for taking vital decisions and framing policies for the
entire organization and remaining authority is delegated to the middle and lower level of
management. 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.” Often mixed with delegation, Decentralization and delegation are not
the same. Decentralization involves delegation and has wider scope and. In fact when
delegation is extended it becomes decentralization.
Check Your Progress Merits

1. What are the various — To facilitate personal leaders : due autonomy is given to the subordinates
sources of authority which helps in development of their skills and facilitates personal leaders.
and power? — To handle emergencies : every time subordinates do not have to ask top
2. Explain
management for approval. This develops proper management skills and they
Graicunas theory
are prepared enough to handle emergencies.
of span of control.
— Morale and Motivation: it boosts the morale of the subordinate as they
feel management trusts there capability which develops motivation.
Management Process
Demerits
— Duplication
: since
there is no
centralizatio
n of
activities;
possibility
of
duplication of works is increased. Coordinating and Organizing
— Lack of uniformity and control : autonomy given at various level results in

different actions, results in lack of uniformity in action. Further establishing
control is difficult as diffusion of authority occurs at different levels. NOTES
— Lack of coordination : every action varies at different level of management
which makes coordination difficult to achieve.
Difference Between Centralization and Decentralization

According to Fayol—”Everything which goes to increase the importance of the
subordinate’s role is decentralisation and everything which goes to reduce it is
centralisation.”
Centrialization and Decentralization
Figure 4.5: centralization and decentralization
Basis of comparison Centralization Decentralization
Concentration of power Heavily centred, lies with Scattered, authority

the top management diffused at various levels.
Democratic management Authority lies with top Democratic style, lower

management, no level takes participation in
participation of lower level management
Employee morale Lower, as they are treated High, they are given due
more like machines, only importance in performance
task are given to perform of the activities.
Economies of scale It provides advantage of It does not provide

economies of scale. economies of scale. Management Process
& Organisational
Behaviour : 65
Factors Responsible for Centralization and
Decentralization
NOTES
(1) Size and complexity of the organization : When the organization is large
and decisions to be taken are complex in nature it becomes difficult for top
management to handle everything. In such a situation decentralization is
desirable.
(2) Speed of decision making : Due to hierarchical structure in centralization
the decision making is very slow as most of the time is spent on seeking
approval. But if the situation or task calls for a quick decision making then
decentralization is preferred.
(3) Need for coordination : Where high degree of coordination is an essential
factor for attainment of objective centralization is appropriate in such cases.
(4) Effectiveness of the communications system : If the communication
system is adequate coordination becomes easier hence decentralization does
not pose problem. But in absence appropriate communication system
centralization should be advocated.
(5) Attitude of top management : When top management have full faith in
employee’s capability and believe in individual freedom and innovation; it is
very likely that the organization will have a decentralized structure.
(6) Degree of diversification : Decentralization provides flexibility, innovation
and creativity. When the company is involved in diverse business it is advisable
to have decentralised structure. Every product division will get full autonomy
to decide for innovation and creativity. It will also instil competition among
various product lines.
(7) Dispersal of operations : If the manufacturing operations and target
customers are scattered geographically it will become difficult to control
through centralization.
(8) Nature of functions and task : Line functions like production and marketing
are mostly decentralized while staff functions like finance, HR and Research
and development are usually centralized.
(9) Availability of competent Personnel : If the lower level managers are
skilful, mature and experienced to handle a division independently then
decentralization can prove to be effective.
(10) Clear and precise standing plans : Existence of clear cut objectives , well
formulated plans procedures and policies can guide subordinates to make
decision independently. Decentralization in such case does not pose any
problem.
Summary
Management Process
& Organisational
Behaviour : 66 Coordination aims at synchronizing the work performed by organisational member
to ensure that the organisation goals are achieved with efficiency. Coordination is a Coordinating and Organizing
deliberate effort as compared to cooperation which is voluntary. Coordinates promote
team work, efficiency and interdepartmental harmony. Coordination should start at
early stage and should be a continuous process. Effective communication, integration
of plans, appointment of special coordinator, sound leadership and direct personal contact NOTES
is essential for achieving effective coordination.
Organising lay down the formal relationship among employees and resources to
achieve organisational goals. Steps in organising include identification of activities ,
grouping of activities , assignment of duties and delegation of authority. Span of control
refers to the number of subordinates that work under the supervisor. It can be narrow
or wide depending upon nature of work, type of technology, ability of managers and
subordinates, degree of decentralisation, clarity in planning and effective communication
technique. Authority is the right to make decisions and give instructions. The authority
can be line, staff or functional. Power is the ability to influence. The five sources of
power are expert power, referent power and reward power, coercive power and
legitimate power. Authority can be delegated, while delegating certain principles should
be kept in mind such as parity of authority and responsibility, unity of command, exception
principles etc. Problems of delegation are due to reluctance on the part of delegator
and subordinate. In centralisation, power remains concentrated at top level and in
decentralization authority is delegated to lower levels .The appropriate mix of
centralization and decentralization depends upon size and complexity of organization,
speed of decision making, degree of diversification , dispersal of operations attitude of
top management etc.
Key Terms
the top
* Co-ordination: It is an orderly arrangement of group efforts to provide unity of
management.
action in the pursuit of common goals.
* Organizing: The process of determining authority and relationship structure in
an organization is termed as organizing.
* Authority: It is the right to make decisions and issue orders and determine the
use of resources to achieve goals.
* Responsibility: It is the obligation of subordinate to perform duties assigned by
their superior.
* Span of Control: The maximum number of subordinates or employees that a
manager directs, controls and supervises.
* Power: It refers to the ability and capacity of influencing the behavior and attitude
of others so that they do those things that they would not do otherwise.
* Delegation: It implies allocation of authority among subordinate to do a task.
* Centralization: All the significant decision and actions are taken by top management
and even the lower management depend on the approval of top management.
* Decentralization: It is a systematic effort to delegate to the lowest level of
authority, only the authority for taking vital decisions and policies is retained by

Long answer type questions

NOTES
(1) What do you understand coordination? Explain the need and significance of
coordination.
(2) Define organising. Describe the steps of organising process?
(3) What is span of control? Explain the advantages and disadvantages of narrow
span of control. What are the factors that determine span of control?
(4) What are the problems in delegation? Explain the principles of delegation.
(5) What are the factors that determine the degree of centralization or
decentralization? Explain.
Short answer type questions
(1) What is the difference between power and authority?
(2) What are the advantages of centralization?
(3) Write a note on types of authority.

(1) A.J.Melcher, ``Structure and Process of organization,’’ New Jersey,
Prentice Hall, 1976.
(2) Harold Koontz and O Donnell, `Èssentials of Management,’’ Tata McGraw
Hill, New Delhi 1990.
(3) V.S.P Rao, V. Harikrishnan, ``Management Text and Cases,’’ excel books
, fourth edition
(4) C. B. Gupta, ``Management theory and Practice,’’ Sultan Chand & Sons ,
eleventh edition.
Management Process
& Organisational
Behaviour : 68
Departmentation and
UNIT 5 DEPARTMENTATION AND Structural Formats
STRUCTURAL FORMATS
NOTES
Structure
Introduction
Unit objective
Steps in Designing Organization Structure
Factors Effecting Organizational Design
Features of a Good Organization Structure
Departmentation
Basis of Departmentation
Departmentation by Function
Departmentation by Product
Departmentation by Territory
Departmentation by Customer
Departmentation by Process
Types of Organization Structure
Traditional Concept
Modern Concept
Summary
Key Terms
Introduction
Organization structure draws a network of relationships among duties,

responsibilities, authority and lines of communication. It provides a framework for
hierarchical arrangement of jobs and position. It enables the organization in coordination
and carrying various activities by providing a blueprint for it. The outcome of designing
an organization is organization structure which results in determination of various job
profiles and hierarchical relationship between them. Organization structure formalizes
the behaviour of the organization. People with different personalities may join or leave
the organization but it does not significantly affect the ways things are done unless the
structure is changed or modified.
After studying this

Unit Objective unit, you should be
able to-
Management Process
& Organisational
Behaviour : 69
Departmentation and * Understand the concept of organization structure.
Structural Formats
* Describe the steps in designing organization.
* Identify the factors affecting organization structure.
NOTES * Understand the features of good organization structure.
* Understand departmentation and basis of departmentation.
* Explain the various types of organization structure.
Steps in Designing Organization Structure

(1) Activities Analysis: in this step, the management needs to identify all those
activities which would lead to the attainment of organization’s goal. The
activities should be clearly identified and sequentially listed in the order of
performance. The main activities are than classified into various sub-activities
and distributed to the individuals for execution purpose. For instance manager
may allocate work to sales department. The sales manager then categorize
the work into several units like advertising, sales, delivery, so on and appoint
managers to perform these works.
(2) Decision Analysis: the next step is decisions needed to accomplish
objectives. Druker gave four criteria for decision analysis.
Degree of futurity : any decision which is for long term involves greater
uncertainty, should be taken by top level management.
Impact : If the decision affects many department simultaneously than it
should be taken with due care and by top management. If it has a stand alone
value it can be taken by middle management.
Qualitative factor: a crucial decision encompasses several qualitative aspect
like code of conduct, culture etc. This type of decision should be taken by top
level management.
Periodicity: minor decisions are of concurrent nature and can be taken by
middle and lower level management. Crucial decisions are unique and have
long time span therefore should be taken by top level management.
(3) Relational Analysis: every decision taken has a corresponding and sometime
interlocking affect. Manager’s decisions affect horizontal as well as vertical
chain. The relation analysis is done to understand the contribution a manager
is required to do and the supportive assistance that he requires from the
other managers. This support can be from top level, lower level or from his
fellow colleagues. It understands the relation of a manager with the
organization at large. As his individual contribution is in turn part of the larger
whole.

Management Process
Factors
Effecting
Organizati
on Design
Organizational
structures can
tend to be
either organic or
mechanistic
which
represents the two opposite ends of the organizational continuum . factors that
affect
Organic structure is dynamic one and employs free flow of communication. It is
business.
characterised by decentralized decision making and high integration among various
Either the
departments. Integration is mainly achieved through task force and team building. It
environment
has a wider span of control leading to a flat structure. Departmentalization and degree
is static or
of specialization is low.
dynamic. In a
Mechanistic structure has a rigid structure and works in relatively stable
environment. It is characterized by centralized decision making and high degree of
standardization and formalization. Span of control is generally narrow leading to a tall
structure. Departmentalization is rigid and specialization is high.
Following are various important factors affecting organization design.
— Goals : the very existence of organization is for the achievement of certain
predetermined goals. An organization structure should be designed in such a
way that it facilitates the achievement of its goal effectively and efficiently.
— Strategy : the structure of a business organization bears a relationship with
the strategy a business adopts. Strategy is a conditional plan developed by
top managed with precision keeping in mind SWOT analysis of the business.
Strategy also defines the business environment for the operation of
organization. With the changes in business environment an organization may
shift its structure from centralized pattern to decentralized pattern.
— Size : large organization will be more decentralized, formalized, greater
specialization and will emphasis more on documentation. With increase in
sub divisions levels in hierarchy also increase. Thus the size or scale of operation
effects the organization.
— People : the organization structure should reflect the philosophy of the people
who are a part of the organization. What value system management wish to
inculcate should be taken in due consideration while designing organization
structure. Management having faith in theory X will have a mechanistic
structure while those having belief in theory Y will have organic structure.
— Technology : technological advancement has a great impact on the structure
of the organization as the improvement in the technology reduces cost and
enhances efficiency. Technology comprises employment of various tools and
techniques including human know-how that are used for the achievement of
goals. For customized goods, small batch production is used, while uniform
goods are generally produced in mass scale. In small batch production the
organization have more flexible structures while mass production makes
organization structure rigid. Organization structure is also affected by the
type of business. Some process can work well in organic structure while
some are best suited for mechanistic structures.
— Environment : the atmosphere in which a business operates constitutes its
environment. It includes cultural, sub-cultural, political, legal and several other
Departmentation and Structural Formats
NOTES

Departmentation and static environment customers’ needs can be well predicted. In this condition
Structural Formats the organization tends to have a mechanistic structure. In a dynamic
environment the future remains uncertain hence the demand cannot be
predicted, the organization would prefer an organic structure.
NOTES
Features of a Good Organization Structure

Behaviour : 72
Management Process
& Organisational
— Unity of same thing over and over again his performance improves in terms of
Direction : It speed, quality and fewer mistakes.
states that those — Span of control : If the work is complex span of control should be narrow
activities that while if the work is simple span of control can be wide. Likewise if the
are grouped employees are skillful and mature, the span of control can be wide, while if
together for one the employees lack ability and will, the span of control can be narrow.
common — Scalar principle : There should be a clear cut chain of command through
purpose should with orders and instructions are passed from top to bottom and similarly
be managed by reports and feedback are passed from bottom to top. Employees should be
the one person. prohibited to circumvent the official chain. They should not try to bypass any
In other words manager in the chain of command. Only during emergencies or under special
there should be circumstances lateral communication can be permitted.
“one plan one — Functional definition : The duties and responsibilities of the job should be
head”. This is clearly defined so as to avoid confusion and duplication of work. Duplication
true for of work results in wastage of efforts, money and time.
organizational
— Unity of command : No subordinate should have two bosses. The subordinate
objectives too.
should be assigned duties and receive orders from a single superior. Moreover
All the
he should be accountable to only single supervisor. Two bosses for a single
departments and
subordinate may result in conflicting orders which may frustrate the
functions should
subordinates.
ultimately be
— Balance : There should be a proper balance between centralization and
managed by one
decentralization. Those activities that reap benefits in centralized structure
single person
should be centralized for e.g. purchase department. While those activities
and that is Chief
that can be performed efficiently in a decentralized structure should be
Executive
decentralized.
Officer. It
provides — Flexibility : Business environments are dynamic, therefore an organization
integration and structure must be flexible adequately to update itself with the changes
facilitates in
achieving the
overall
objective of the
firm.
— Specialization :
Through
division of
work and its
repetition the
benefits of
specialization
can be
achieved. If one
person does the
whenever needs arise. The structure is designed not only for a time period Departmentation and
but for a distant future also. As such continuity must be maintained in the Structural Formats
organization structure over the period of time.
— Parity of authority and responsibility : If any person is given responsibility NOTES
he should be given adequate authority to discharge his duties efficiently.
Moreover whenever the authority is delegated to the person he should be
held responsible also.
— Coordination and efficiency : The organization structure should be such
that it integrates the efforts of various groups towards achievement of common
objectives at minimal possible cost.
Departmentation
The process of grouping of activities into various departments or groups is termed

as departmentation. In Departmentation process identification of activities and their
simplification is followed by grouping the task into small jobs, formation of work groups
. By combining jobs or homogeneous groups into small administrative units departments
are formed. According to Koontz and O’Donnell , “A department is a distinct area,
division or branch of an enterprise over which a manager has authority for the
performance of specified activities.” In the words of Louis Allen, “Departmentation is
a means of dividing the large and monolithic functional organisation into smaller flexible
administrative units.” Departmentation provides several benefits to the organization
like:
* Benefits of specialization.
* Benefits of better coordination, communication and control.
* Benefits in better decision making that enhances efficiency and efficacy.
Bases of Departmentation
There are different ways in which an organization may form deparments, out of the survival of the
which some important methods are listed below: organization. Every
important function such
– Departmentation by Functions
as production, finance,
– Departmentation by Products
– Departmentation by Territory
– Departmentation by Customer
– Departmentation by Process
Departmentation by Functions
This is one of the simplest form of departmentation wherein formation of groups
of departments is based on the vital functions performed by the department crucial for

Departmentation and marketing sales etc, are referred as separate departments. The focus is on collectively
Structural Formats putting individuals on the basis of resources, skills and action. Each functional units
performs varied and different sets of duties and responsibilities. The simple logic in
grouping makes it most popular form of departmentation.
NOTES
The functional unit can go for further subdivisions of activity like finance department
may divide its activity in accounts department, audit and control and so on. Various
coroporations like Modi Xeror, Bata India, Britania follow functional departmentation.
CEO/Managing
Director
Production Personal Finance Marketing
Sales Market After Sale

Research Service
Figure 5.1: Functional Departmentation

Advantages
Management Process
better utilization of available resources.
1. It is
considered Disadvantages
to be 1. The top manager is burdened with the responsibility of profit generation.
simple, 2. This often leads to excessive centralization.
logical and
3. More focus is on narrow specialization rather than improvement of general
time
management skills.
saving
4. Sometimes coordination across departments is not easy to achieve leading
method. It
too unnecessary delays.
is also a
natural 5. Sometimes functional managers may tend to build their functional empires.
form. This results in growth in their size which may not justify the cost.
2. It provides Departmentation by Products

with the
Every major product or service is organized into a separate department. The entire
benefit of
specializati
on.
3. It
maintains
power and
prestige of
major
functions
and
facilitates
delegation
of
authority.
4. The sub
division of
various
department
s provide
better
training
and
experience
for the
managers.
5. Duplicity
is
significant
ly reduced
leading to
activities associated to every product are grouped individually. To be precise, Departmentation and
every department tends to be autonomous, dealing in a specific product. Let Structural Formats
say for example, an organisation manufacturing a number of products like
detergent, soap, body wash, shaving cream etc. groups all the activities from
NOTES
production to distribution independently for every product. This
departmentation can be used if the organization is into production of more
than one product or a variety of products and the product line is complex and
employs specialised knowledge and skill.
CEO/Managing
Director
ProductManager ProductManager ProductManager Product Manager

(Soap) (Detergent) (BodyWash) (Shaving Cream)
Production Personal Purchase

Finance Manager
Manager Manager Manager
Figure 5.2: Product Departmentation

Advantages
1. It gives greater stress and attention to the individual product line which helps
in its growth and diversification.
2. Individual departments on the basis of specialization basis render better
customer service.
3. It enhances co-ordination of various functional activities.
4. It is especially advantageous when the product line is complex and diverse.
5. It is flexible and adjustable to the changes in the business environment.
6. It relieves top management from the burden of profit generation as various
product managers can be held accountable for profitability of their products
Disadvantages
1. Often leads to duplicity of functions as every product department maintains
its own facility and function. It leads to high operational cost.
2. At times centralization of certain activities has benefits which cannot be
availed in this case.
3. It leads to increased difficulty for the top management to control.
4. It raises man power cost as more managers with general ability are required.
Management Process
& Organisational
Behaviour : 75
Departmentation and Difference between Product and Functional Departmentation:
Structural Formats
Functional Departmentation Product Departmentation
1. Useful for all types of firms. 1. It is only beneficial when the product line
NOTES
is complex and diverse.
2. It divides activities on the basis of 2. It divides activities on the basis of

different functions. different product line.
3. It is economical 3. It is costly and uneconomical.
4. Fixation of responsibility and 4. Fixation of responsibility and

establishing control is not easy. establishing control is easy
Departmentation by Territory
Large organizations are geographically stretched over to different areas.
Geographic departmentation or departmentation by territory aims at taking regional
advantages. The activities of the organization are assembled into various departments
based on the geographical area. The decision regarding pricing, marketability and
several others are left on the discretion of the territory managers. The focus is to
exploit opportunities of growth available in the local market. For instance, a company
divide its area of operation by grouping it into regions or zones like east, west, north,
south and so on. This type of departmentation is suitable for large organisations which
are geographically spread over to different areas
Managing
Director/CEO
North Zone East Zone West Zone South Zone
BranchI Branch II Branch III
Figure 5.3 : Territorial Departmentation

Advantages
Management Process
1. The division on
the basis of
region provides
with regional
expertise which
helps managers
to undertake
competition
better.
2. Avails with
geographical
advantage of
proximity
which reduces
costs of
operation and
administration.
3. It provides
better
opportunity to
explore new
avenues of
growth that are
suited to
particular area.
This can result
in identification
of new products
and services
that are
demanded in a
particular
region which
increases the
sales.
Only territorial departmentation can avail such advantage. Departmentation and
Structural Formats
4. It enables better co-ordination at the regional level.
5. It provides regional managers with adequate autonomy which help them to
train to handle different situation and improves their skills in general NOTES
management.
6. Renders with numerous economies of localised operation.
Disadvantages
1. It increases cost significantly.
2. Geographical segregation makes control and coordination difficult.
3. Difficulty in communication and duplicity of work.
Departmentation by Customer
The department focuses on the philosophy ``customer is king.’’ Under customer
departmentation, organization forms its department based on the various requirement
of customers to cater their demands, expectation more efficiently and properly. The
categorization can be on the basis of different customer groups served, such as industrial
consumers, wholesalers, retailers etc. Banking, book publishing and food industry
generally employ such depatmentation.
CEO/Managing
Director
Marketing Finance Personal Production
Manager for Manager Manager

Industrial good Wholesaling Retailing
Figure 5.4 : Customer Departmention

Advantages
while some
1. Better and specialized customer service.
may not
2. This type of structure is particularly helpful in creating distribution channels require much.
are significantly different for various types of customers.
3. Better understanding of customer needs.
Disadvantages
1. It is almost impossible to cater the need of each and every customer.
2. It is very uneconomical.
3. Underutilization of man power, as some customer may have varied demands

Departmentation and Departmentation by Process
Structural Formats
Departmentation by process employs grouping of the activities into various
departments based on the manufacturing processes involved or steps of activities in
NOTES production. For example, in a Ethanol production, departmentation can be done on the
basis of process i.e. steaming, liquefaction, fermentation, distillation etc.
CEO/ Managing
Director
Steaming Liquefaction Fermentation Distillation
Figure 5.5 : Process Departmentation

Advantages
1. Renders with huge operational effectiveness.
2. Advantages of specialisation.
3. Reduces processing time and redundant movements in the process.
4. Economies in maintenance cost.
Disadvantages
1. Involves huge outlay of cost.
2. Problem in coordinating different process departments
Types of Organization Structure
The primary task of the organization structure is to allocate task and delegate
authority and assign responsibilities to form various jobs and position. The distribution
of work and delegation of authority can be done in several ways giving rise to various
organization structures. The organization structure can be divided into Traditional or
Check Your Progress
Modern structure.
1. What are the advan-
Traditional Concept
tages and disadvan-
tages of
This is the oldest method based on functional division and departments. These
departmentation by
organizations follow hierarchical structure. Kinds of structure under traditional structures
process?
2. What are the benefits are:
of departmentation by & Organisational Behaviour : 78
customer?
Management Process
* Line
structure
* Line and
staff
structure
Line Structure
This is the
primitive type of
organization structure.
It follows top down
flow of authority often
called as scalar or
military type. The
relationships are in the
form of
unbroken vertical levels. The manager had direct authority over the subordinates and Departmentation and
the later are directly accountable to their seniors. In an ideal line type structure there is Structural Formats
no existence of service or support units. These organizations strictly adhere to the
principle of unity of command. In a line structure the manager has a wide span of
NOTES
control. Line structure is generally used in small organization like small accounting
offices, industry with continuous process and law firms. CEO can effortlessly give
information and direction to subordinates and decisions can be made swiftly.
CEO/ Managing
Director
Staff Staff Staff Staff Staff Staff
Figure 5.6: Line Structure

Advantages
1. Quick decision: manager has all the authority to take decision without 4. Rigidity: too
much
consulting other; this avoids unnecessary delay in decisions.
discipline
2. Simple: the structure is simple, direct and easy to establish. It has ease in makes it
operation also. inflexible and
rigid for any
3. Control: the structure strictly adheres to the principle of unity of command. changes.
The superior –subordinate work in close coordination facilitating efficient
supervision and control.
4. Flow of information: communication is orderly in nature following a vertical
line. This makes it easy to track and authentic.
5. Coordination: the activity of a single unit is managed by one person, which
makes coordination easy.
6. Economical: the span of control is large reducing man power cost, thus
making it economical.
Disadvantages
1. Overloading: managers are too engaged with day to day work. They hardly
find time to devote for crucial decision of the firms. It also restricts creativity
and innovation.
2. Domineering approach: the approach is autocratic where subordinates
hardly play any role in decision making. They only perform the task as directed.
There is hardly any autonomy at the end of subordinates.
3. Lack of participation and low morale: the subordinates do not play any
role in decision making; neither are they asked to participate. This makes
their job mundane and they lack motivation.

Departmentation and Line and Staff Structure
Structural Formats
It is an adaptation of line organization and it is more difficult and complex than
line organization. According to this line and staff structure, specific and supportive
NOTES functions are linked to the line of command. This is done by recruiting staff supervisors
and staff specialists who are linked to the line authority. It actually provides authority to
the supervisor and advisory role to the staff. Staff can provide supportive assistance;
expert advises to the supervisor but cannot force them. The authority of charge rests
with the line manager and the role of staff supervisor is to guide the line manager.
Staffs are of two types:
a. Staff Assistants- P.A. to Managing Director, Secretary to Marketing
Manager.
b. Staff Supervisor- Operation Control Manager, Quality Controller, PRO
Figure 1
Line-and-Staff Organization
President Line Authority

Staff Authority
Legal Advisor
Vice President Vice President Vice President

Sales Production Finance
Production Production Department Department

Supervisor Supervisor Head Head
Figure 5.7 : line and staff structure

Advantages
Check Your Progress

1. What are the
advantages and
disadvantages of line
structure?
Management Process
of specialization.
1. Benefits to line
of executives : 4. Training : The specialist staff renders expert advice which provides training
The line to line officials. Further line executive can focus on decision making which
executives gets again provides grounds for learning and development.
the advise and
counselling
from the staff
thus can focus
on several other
critical issues.
2. Specialist
advice : At the
time of need the
line and staff
organization
provides
practical and
specialist
advice to the
line executive.
The planning
and
investigation
which is related
to different
matters can be
done by the
staff specialist
and line officers
can concentrate
on execution of
plans.
3. Benefit of
Specialization :
The authority
structure
divides the
organization
into parts and
functional areas.
The division
renders benefits
Disadvantages Departmentation and
Structural Formats
1. Conflicts between line and staff
a. Grievances of line executive
i. Interference by staff: staffs do not limit themselves to their advisory role. NOTES
They tend to instruct the line managers and at times interfere with their
work.
ii. Impractical suggestion: most of the time staff fails to give sound suggestions.
They have acquired knowledge through learning which are most of the time
not very practical and lack realistic approach
iii. Staff snatches the credit: whatever goes well the staff takes the credit. They
take all the praise and ignore the fact that it was proper execution which led
to the success.
iv. Staffs suffer from superiority complex: line managers are not given due
concern while giving suggestions as staff believes their knowledge is above
the knowledge of line managers.
b. Grievances of staff:
i. No power makes them frustrated: the role of staff is advisory. All the ideas
they suggest, however good depend on the line executive for implementation.
This makes them feel frustrated as the worth of the idea depends on the
choice of line executive.
ii. Services not properly utilised: until and unless the situation goes worst and
the advices of staff are the only resort, they are not consulted. They face
resentment because of the superior knowledge.
iii. Ego problem: the line executives often do not seek advice because of the ego
problem. Sometimes they do not implement a plan because of the same reason.
iv Lack of clear definition of authority: the absence of clarity in relationship
results in breach and overlapping of authority which tends to create conflict
between the two.
Modern Concept
Project structure
This is a recent concept. This type of structure is used when a large project is to
be executed and which is spread for a longer span of time. A semi autonomous project
division is set for each project. A project is complex set of activities to be executed in a
defined period of time. It comprises of various experts from different field. The activities
of team members are coordinated by project manager. This type of structure is typically
beneficial if a new and risky venture is to be undertaken and the time frame is limited.
Usually these projects involve huge outlay and the success of such project becomes
essential for the organization.
Management Process
& Organisational
Behaviour : 81
Departmentation and
Top Level
Structural Formats Management
NOTES
Project Project Project Project
Manager 1 Manager 2 Manager 3 Manager 4
Functional Functional Functional Functional

Area 1 Area 1 Area 1 Area 1


Figure 5.8 : Project Organization

Advantages
Management Process
feel lost and insecure when projects are abandoned.
* Very
useful and * Decision making is not quick and the communication of information is also
beneficial improper due to lack of clarity. Project manager has to obtain cooperation
for new from other department which may involve time.
and risky * Serious problems as a consequence of prejudice in interest and varied
venture. It orientation.
provides * The principle of unity of command is not adhered to leading to conflict between
focused functional managers and project managers
approach
Matrix structure
and expert
services. Matrix structure is a recent concept introduced in USA in 1960. It is a hybrid
* Specialized structure in which two different lines of authority vertical and horizontal are combined
skills and together. It combines functional structure and project structure to cope with the
knowledge requirements of expansion and complexities in a business organization. In a matrix
is available structure, an employee works not only with the teams and projects but also within their
to the
project.
* Better
coordinatio
n of
resources
available
and
flexibility in
operations.
Disadvantages
* Greater
risk as the
project
manager
deals with
different
experts of
different
field with
different
approach
and
interest.
* The
projects
are not
permanent
. People
own department. Departmentation and
Structural Formats
The Functional Manager exerts authority downwards while the Project Manager’s
authority flow horizontal. Consequently, the authority flows downwards and across
making it “Matrix Organisation”. NOTES
Project/Function Production Finance Marketing HR Sales

manager Manager Manager Manager Manager
Project Manager A
Project Manager B
Project Manager C
Project Manager D
Project Manager E
Figure 5.9 : Matrix Structure

Advantages
frequent in
1. Ensures optimum utilization of resources: in a matrix organization
matrix
simultaneously many projects are run ensuring optimum utilization of physical
structure
and human resources available.
which leads
2. Better decision making: in a matrix organization, decisions are taken by
to high
experts who are more capable of taking sound decision.
operational
3. Manager’s burden decreased: the managers at top can delegate day to cost.
day function to project managers and can focus more on strategic decisions.
4. Improvement of skills: cross functional working gives exposure of various
departments to the team members. It brings to their knowledge different
skills. Like the marketing people come to know about finance, finance people
come to know about HR and so on.
5. Enhances motivation: the employees work together as a team which
motivates them to perform better.
6. Higher efficiency: it increase efficiency and provides better results at lower
cost.
7. Flexibility: unlike traditional system where flexibility is difficult to bring, a
matrix structure is quick and prompt to adopt changes
Disadvantages
1. Excessive Work Load: the managers and team members apart from their
regular work have to attend various meetings and discussions. Besides every
team member has other functional responsibilities also which increase work
load.
2. High Operational Cost: the paper work, meetings, report making are more

Departmentation and 3. Nonexistence of Unity of Command: since every subordinate takes order
Structural Formats from two supervisor the principle of unity of command is nonexistent in a
matrix organization.
NOTES 4. Power Conflict: there maybe conflict of power between the project manager
and the functional manager. Both give preference to their own interest which
results in conflict.
5. Low Morale: Because of excessive work burden, the morale of the
employees in matrix structure is very low.
6. Complexity: undoubtedly the hybrid structure such as matrix involves plenty
of complexities and is most difficult structure.
7. Fixation of Responsibility: in case if anything goes wrong with the project
fixation of responsibility cannot be done. The project manager may hold
functional manager liable for this and so on.
Network structure
These are often termed as virtual organizations. In this structure the main firm
outsources most of its functions to other organizations and coordinates their activities.
With the development of business environment, the market place has expanded and the
boundaries have been decreasing. It lays emphasis on decentralization of work and
gaining specialization and economies. These organizations do not have any boundaries
to perform their functions. Digital technology and specialized employees are the core
strength of this structure. However it lacks any formal hierarchy line. The
critical management functions are deciding on what to outsource and whom to outsource.
Distribution
Firm
(Korea)
Logisitc Core Design

Firm Company Company
(Japan) (India) (USA)
Technology
(China)
Figure 5.10: Virtual Organization

Advantages
Management Process
1. Low
operational
cost: the
outsourcing is
done keeping in
mind from
where task can
be done at
cheapest and
best possible
way. This
reduces the
operational cost.
2. No physical
boundary: work
can be done
from any part of
the world.
There is no restriction from where the work will be done. Departmentation and
Structural Formats
3. Specialization: task is allocated to those who have an edge in doing the
things. Specialization is one of the best advantage availed from this structure.
4. Technological advancement: one need not to spend huge amount in getting NOTES
the new technology at domestic land. It can get the advantage by outsourcing
work from the places of new technology.
Disadvantages
1. Too much dependence on technology: the communication is digital which
means you have to employ latest gadgets. If the technology is not proper you
cannot efficiently employ network structure.
2. No direct control: excessive decentralization limits control.
3. Increase work stress: FAO Corporate Document Repository states that
virtual structure makes no clear demarcation on responsibility and jurisdiction
within the company. Employees and managers often fail to identify themselves
with conventionally defined job roles which sometimes results in work-related
stress. On one hand manager fail to exercise authority and on the other hand
employees fail to get proper guidance and direction which increases stress.
Summary
Organization structure describes the relationship between work and people and
among people indicating the flow of work, authority and responsibility. The designing of
organization structure involves; activities analysis, decision analysis and relational
analysis. Organizational structure can be mechanistic or organic depending upon goals,
strategy, technology, size, employees and external environment of the organization. A
good organization structure should have unity of direction and command, parity of
authority and responsibility, balance between centralization and decentralization, division
of work, flexibility etc. Organization is divided into small administrative units known as
departmentation. The departmentation can be done on the basis of certain key factors
like function, process, product, territory, customer etc. The traditional organization
structure were line and line and staff structure. The disadvantage of the line and staff
structure is that it gives rise to line and staff conflict. The three modern alternatives of
organization structure are project, matrix and network structure.
Key Terms
* Organization structure: It provides a framework for hierarchical arrangement
and draws a network of relationships among duties, responsibilities and authority
and lines of communication.
* Organic structure: This organization structure has a dynamic structure
characterised by decentralized decision making, free flow of communication and Management Process
Departmentation and high integration among various departments that is achieved through task force
Structural Formats and team building.
* Mechanistic structure: This organization structure has a rigid structure
characterized by centralized decision making and high degree of standardization
NOTES
and formalization.
* Departmentation :It is the process of dividing the large enterprise into smaller
flexible administrative units over which a manager has authority for the
performance of specified activities.
Long type Questions

(1) Define organization structure. What are the various steps in designing
organization structure?
(2) What are the essential features of a sound organizational structure?
(3) On what factors do the design of organization structure depends?
(4) What is matrix organization? Explain its advantages and disadvantages. How
is it different from project structure?
Short Answer type
(1) Throw light on line and staff conflict.
(2) Differentiate between functional and product departmentation
(3) Differentiate between mechanistic and organic structure
* Network structure
* Advantages of departmentation on the basis of customer

(1) S. P. Robbins, `Òrganization Theory,’’ N.J. Prentice Hall, 1983
(2) A.J.Melcher, ``Structure and Process of organization,’’ New Jersey,
Prentice Hall, 1976.
(4) P. F. Drucker, ``Management,’’ New Delhi, Allied publisher, 1974.
Management Process
& Organisational
Behaviour : 86
Directing and Controlling
UNIT 6 DIRECTING AND CONTROLLING
Structure NOTES
Introduction
Unit objectives
Concept of Directing
Significance of Directing
Principles of Directing
Concept of Controlling
Significance of Controlling
Limitation of Controlling
Controlling Process
Essentials of Effective Control
Techniques of Control
Supervision
Analysis and Interpretation of Financial Statements
Budgetary Control
Breakeven Analysis
Return on Investment
Management by Objectives
PERT /CPM Techniques
Management Information System
Management Audit
Human Resource Accounting
Responsibility Accounting
Human Resistance to Control
Overcoming Resistance to Control
Summary
Key Terms
Introduction
Once planning is complete, organisation structure is designed and the organization relation function in
is manned through staffing the next steps that comes is directing. Directing is a human which the manager
instructs, guide, motivates, leads and supervises
Management Process
& Organisational
Behaviour : 87
Directing and Controlling the employee. In this process the plans are put to action. Once the employee starts
performing the next function of the management is to control. It aims to see that employee
is working according to the planned activities or not. The actual performance is appraised
and it is verified that everything occurs in conformity with the plan. If there are deviations
NOTES
from the targets set, corrective actions are taken. The basic purpose of control is to
make sure that results are achieved according to plan.
Unit Objective
* Understand the concept and importance of directing.
* Explain the principles of directing.
* Understand the concept and importance of control.
* Describe the process of control.
* Identify essentials elements that make control effective.
* Explain the various techniques of control.
* Understand the limitation of controls.
* Identify the reasons for human resistance to control.
* Understand various ways to overcome resistance.
Concept of Directing
Directing in management is a function which aims to instruct, guide, supervise

and inspire people working in the organisation so that the objectives can be achieved. It
is the process of making people understand what to do and observing that it is done in
the most effective way. According to Haimann, “Directing consists of process or technique
by which instruction can be issued and operations can be carried out as originally
planned.” In the words of Earnest Dale, “Directing is what has to be done and in what
manner through dictating the procedures and policies for accomplishing performance
standards”. Therefore directing is said to be the core process of management and, is
the vital point about which achievement of goals take place.
Management Process
The directing
function thus
includes the
following elements
* Leadership –
providing them
guidance,
support and
help to move
towards their
goal.
* Supervising-
overseeing the
progress of
work performed
by subordinate
and ensuring
compliance
with standards
and plans laid
for them.
* Motivating-
Inspiring
subordinates to
give their level
best while
performing
their duties.
* Communication-
giving directions
by issuing orders
and instructions.
Significance of Directing
1. Initiates Action : Managerial functions such as planning, organizing and staffing

NOTES
do not make any sense if they are not put to action and implemented successfully.
Directing function starts the activities of the work performance of subordinates.
In this function the action occur, subordinates realize and understand the jobs they
are expected to perform and they act according to the instructions given to them.
The implementation can only take place when the actual works initiates and it is
there the benefits of direction come to play.
2. Motivates People : It helps in accomplishment of the goals by motivating the
subordinates to improve their performances. The manager acts as a guide and
motivates subordinates. It enhances confidence of the subordinates.
3. Ensures coordination : It unites and integrates the efforts. In the course of
direction, the superiors guide, motivate and coach the subordinates to work which
calls for coordination of the efforts of every individual and of every department
for the achievements of organizational goals. This can be achieved with the help
of convincing leadership and effective communication. Coordination brings efficacy
in the organization.
4. Facilitates change: Every organization faces resistance in adopting change.
Directing function helps in adjusting to changes in environment, be it internal or
external. The manager’s effective communication helps in adjusting with the
changes. The manager should be able to properly communicate the significance
of change to the subordinates. This will help the employee in understanding and
adopting change resulting in smooth functioning of the organization.
5. Maintains stability and growth: Sensible combination of inspiring leadership,
efficient communication, disciplined supervision and motivation can lead to stability
and growth of the organization. These all are basic elements of directing, therefore
it helps in the progress of the concern.
Principles of Directing
1. Unity of command : the principle was propounded by Henry Fayol, who organizational
emphasized that a supervisor should be reporting to only one superior. He should goals to him so that
receive orders from only one boss and in turn should be accountable to only one he feels satisfied
boss. This helps in responsibility fixation and brings clarity in the functions of the and understands
individual. the importance
2. Harmony of objective : every individual joining the organization may have his
own personal goals or purpose which may differ from what the organization has.
It is the role of supervisor to align the goals of subordinates with that of the
organization. The superior must explain the need and importance of achieving

Directing and Controlling of achieving organizational goal. The harmony of objectives is very important for
maintaining the performance of employee or else he will not be able to deliver as
he will not feel his association or betterment with organization goals.
NOTES 3. Direct supervision : directing becomes efficient if there is direct personal contact
of supervisor and subordinate. It removes doubt, enhances confidence and morale
of the subordinates. Thus, wherever possible direct supervision should be employed.
4. Managerial communication and comprehension : effective communication
is the key to successful direction. The system of communication employed should
be such that a two way channel can be established. It is also important that the
employee understand and comprehend what is expected. This will remove
confusion and fewer queries.
5. Maximum individual contribution : the objectives of organization can be
achieved at the level when each and every individual in the organization makes
utmost contribution towards its achievement. Therefore, the managers should make
an effort to bring forth maximum feasible input from each subordinate.
6. Strategic use of informal communication : the various informal groups present
should be utilised in such a way so that it strengthen formal relationships. The
quality of effectiveness of direction improves with better relations.
7. Effective leadership : an effective leader inspires the followers to perform their
activities without any dissatisfaction. Managers should presume the role of effective
leaders to ensure proper direction. They should guide the subordinates not only
professionally but in their personal problems too. It establishes better relations.
8. Appropriate motivation technique : the direction techniques employed by the
manager should be such that it ensures efficiency of direction. The techniques
used should be appropriate according to the need of the subordinates. It can be
financial rewards , praise, promotion or job enrichment. It should be apt according
to the situation.
9. Principle of follow up : directing is a never ending process. It does not end after
the superior issues orders and instructions. In fact the manager has to keep a
track on the activities of the subordinates such as their performance, the problems
they are confronting and so on. In the light of his observation he can make changes
in his orders.
Concept of Controlling
Management Process
Controlling is
the last step in
management
process. It is process
by which
management comes
to know that how
satisfactory work has
been accomplished.
It is evaluation of the
work done against
the set standards. It
tends to find out
deviations if any and
employs for
corrective actions.
Controlling is a
regulatory process of
ensuring that the
activities are in line
to give the desired
results. Controlling
and planning are
often referred as
inter related
functions as what is
decided in planning
is evaluated in
controlling process. Directing and Controlling
Henri Fayol is attributed with the credit of pioneering the definitions of control for
management science. “. In the words of Henry Fayol, (this is often called as the first
definition of controlling), “Management control can be defined as a systematic effort NOTES
by business management to compare performance to predetermined standards and
address deficiencies.” It can also be defined as “that function of the system that adjusts
operations as needed to achieve the plan, or to maintain variations from system objectives
within allowable limits.” In the words of Terry and Franklin “Controlling is determining
what is being accomplished - that is, evaluating performance and, if necessary, applying
corrective measures so that performance takes place according to plans.’’
Characteristics of Controlling
* Control is not a onetime phenomenon instead it is a continuous process.
* Control is one of the crucial management processes.
* Control is all pervasive. It is entrenched in every stage of organizational
hierarchy.
* Control is progressive. It tends to look forward.
* Control is strongly correlated with planning.
* Control is a mechanism for accomplishment of organizational functions.
Significance of Controlling
1. Achievements of goals: with regular control, one can easily trace out what has connects the
to be done and what is being done. If the actual work is not being done on set workers and their
standards, corrective measures can be taken which helps in the achievements of activities and
goals. encourages them
with team spirit to
2. Measurement of progress: it acts as a measure of progress. The time, expense
and resources involved in doing a particular task are estimated before the work
begins. The actual work done is then compared with these standards. This helps
in knowing to what extent the work has been done.
3. Uncover deviations and take corrective actions : it helps to compare and
find out the deviations of the actual and standard. The deviations are then corrected
to bring the performance of the enterprise as expected.
4. Revision of plans: the business environment is no more a static phenomena. It is
ever changing. Therefore the need to revise the plans as per the changing needs
of the business should be given due consideration. Business plans should be
carefully revised for effective control and this is an essential step of controlling
process.
5. Promotes coordination : coordination is an important function of management
and the coordinated function play a crucial role in business activities and work. It

Directing and Controlling move towards the common goal.Control acts as a middleman between the workers
and management to make available the necessary information and input to the
workers.
6. Psychological pressure : an effective control system motivates and inspires
NOTES
employees to give better performance. It acts as an inspiration to them, especially
when they are aware of the fact that there performance is being monitored and
their rewards are linked to better level of work performance.
7. Brings order and discipline : control function keep a check on the mistakes of
the subordinate which usually happen due to laxity and negligence. Due to controlling
process subordinates are aware that they are being monitored and hence they
become cautious while performing their duties. They tend to correct mistakes
before they become serious.
Limitation of Controlling
1. External factors: an organization can control all internal factors, but there are
factors which are external to the organization such as government policy, tax
structure, input rates and so on. These factors cannot be controlled by the
organization.
2. Standards of qualitative nature: standards that are quantitative in nature can
be used to measure the efficiency and can act as a controlling device. But when
these standards are qualitative in nature, they are not easy to understand and
compare. Some measures like morale, motivation level cannot be expressed
monetarily, thus controlling becomes difficult.
3. Expensive process: the entire process of controlling is very expensive. It requires
continuous engagement of managers which increases the need of manpower. The
setting of benchmarks is not an easy affair; it requires a lot of research. Further, at
every step finding deviation consumes much time, and corrective actions, further
involve much time and cost .
Controlling process

Management Process
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A. Setting of standards (a) The standards
should be precise
Establishing the criterion for judging the actual result is termed as standards. and clear.
These standards are the benchmark against which the actual performances are
compared. The standard setting should be realistic. It should be clearly defined.
Standards can be qualitative or quantitative standards. Qualitative standards are non-
measurable or intangible like managers’ decision making skill and human skills, attitude
of workers etc. Quantitative standards are measurable like time standard, cost standard,
income standard, output standard, quality standards, profit, etc. Controlling turns out to
be simple through establishment of these standards. The standards form the basis for
controlling.
Quantitative Standards
• Time standards : It states the duration of time in which a particular activity
or a task should be performed for e.g. a pilot has to make a trip to the
destination in a predetermined time duration. Time standard can also be
expressed in units produced per hour, pages typed per hour etc.
• Cost standards : it expresses the standard for input in terms of financial
expenditure. It includes the expenses incurred in performing a particular task.
It includes material cost per unit, labour cost, overhead cost per hour etc.
Cost standards specify the limits for expenditure.
• Productivity standards : productivity standards set benchmark for output
input ratio. It is a measure of efficiency and can be expressed as output in
units per man hour or service to customers per hour.
• Revenue standards : they set standards for value the organization derives
from its sales. They can take the following form
• Income standards: this would include setting sales generated per
department, sales target per person etc.
• ROI : Return on Investment is a comprehensive way of knowing the
performance of the business. It measures how efficiently capital employed
is being used for generating returns.
• Quality Standards : standards for quality can be based on strength, hardness,
dimension, finish, chemical composition etc. which ensure the customer
satisfaction. Quality standards can set tolerance limit within which the quality
can be acceptable.
Qualitative Standards
There are certain intangible items that cannot be quantified such as goodwill,
employee morale etc. Though qualitative factors pose some difficulty in specifying the
standards as they cannot be easily measured; psychological tests, survey and sampling
techniques are sometimes used to specify limits or benchmark for them.
Important things to be considered while setting standards

NOTES

Directing and Controlling & Organisational Behaviour : 94
NOTES
Management Process
(b) The standards as it can be expressed in units, cost, money terms, etc. The performance can also be
should be measured through mechanical devices. These mechanical devices help in quality
objective and check. Other way is through personal observation of the manager. Statistical reports can
practical. It also be employed to measure performance. It include the use of bar charts, graphs
should be etc. Qualitative measurement becomes difficult when performance of manager has to
within the reach be measured. Performance of a manager cannot be measured in quantities. It can be
of the measured only by their level of motivation and attitude towards work. This can be
enterprise and done by viewing reports of the organization; superior-subordinate interaction can
not something also be used for measurement of their attitude.
hypothetical. C. Comparing Standards and Performance
(c) The standards In this step a manager makes comparison with the actual work done against what
should was determined. It is done to check whether the work is going in the desired direction
essentially be or not. Deviations, if any, are traced and accordingly corrective measures are to be
flexible and decided. The gap between actual performance and the planned targets is defined as
should be able deviation. The manager first identifies the amount and direction of deviation and then
to adopt the tries to find the reason for it. Finding the direction of deviation includes tracing out
changes. whether the deviation is positive or negative and to what extent it is in line with the
(d) The standards actual performance. The step lays major emphasis on finding out deviations which are
should have the significant for business. Slight deviations should not be given much importance. Major
main focus on deviations which include replacement of equipments, quality of input, etc. should be
attainment of given due importance. `Ìf a manager controls everything, he ends up controlling nothing.”
goals and That’s why only major deviations are laid more importance. The various techniques
should be that are used are:
revised
Financial and Accounting techniques are ratio analysis, return on investment, break
periodically
even sales, financial statements, audit, human resource accounting responsibility
according to the
accounting. Other techniques are MBO, budgetary control, PERT/ CPM and MIS.
need of the
Deviations can also be of two types:
organization.
a. Positive deviation: when the performance is better than the standards the
B. Measuring deviations are termed as positive deviations.
Performance b. Negative deviation: when the actual result shows a variance from the standard
The subsequent which is not favourable. For example the actual expenditure can be more
major step in controlling is
to measure and monitor the
performance. Finding out
variation becomes simple
by measuring the real
performance. The levels
of performance may
sometimes be easy to
measure or sometimes
difficult. Measurement of
tangible standards is easy
than estimated cost; the actual time taken is more than the standard time and Directing and Controlling
so on.
The deviation needs to be thoroughly evaluated before making any correction.
For e.g. NOTES
* Whether the deviation occurred due to impractical or hypothetical standards?
* Whether the quality of material was up to mark?
* Whether the equipment and tools being used are of standard quality?
* Whether the labour cost increased due to increase in wages or inefficiency
on the part of labour?
D. Taking Corrective Actions

Once the deviations are found out the corrective steps are taken. It is a managerial
action wherein, efforts are made to bring back the activities to the desired level. It is
done to improve the performance of the organization. Before taking any corrective
actions, the manager however should make sure that the standards set were reasonable
and practical. For taking corrective actions following guidelines must be kept in mind:
a. Finding out the root cause of the problem.
b. Taking prompt actions without much delay.
c. Periodic revision and the impact of the dynamic environment in the revision
of standards.
Essentials of Effective Control

1. Focus on objective: the control system should be such that the central aim
is always to achieve the objectives. It should strictly concentrate and should
be tailored in such a way that they lead to the achievements of organizational
goal.
2. Simple: the control technique employed should be simple and easy to use. It
should refrain itself from any form of complexity so that all those using the
control system should comprehend it clearly and completely. Besides one
must set up standards that are understood by the employees. Simplicity is the
essence of success.
3. Prompt: promptness implies in quickly tracing the deviation. If the deviations
are traced at very latter stage control cannot yield results. Therefore, the
process of tracing deviations should be quick, so that management can also
take timely actions.
4. Flexible: the control system should not be very rigid. It should be flexible
and should adopt changes in programs, policies, plans, environments, etc. A
system which cannot cope with changes is bound to fail. Hence a flexible
control system is must. Management Process
5. Economical: an economical control system implies that the benefits should & Organisational
Behaviour : 95
Directing and Controlling be more than the cost involved in it. In other words the cost incurred should
always be less than the benefits derived from the use of controlling techniques.
6. Forward looking: a forward-looking control system is must for the
NOTES achievements of goals of the enterprise. It should be able to predict the
expected deviations. So that the deviations are traced before they actually
occur. It should also be able to provide corrective measure to rectify these
future deviations.
7. Reasonable: the practical aspect in setting standards and employing
technique should always been given due concern. The reasonability of the
standards is a very crucial element as the entire exercise depends on it. The
controls should be rational and logical.
8. Objectivity: it implies verifiable and quantifiable standards. They should not
be mere assumptions, instead should be backed by facts. Also quantitative
standards remove the scope of biasness, giving full scope of accuracy and
objectivity.
9. Accountability: an effective control system should also indicate that who
should be held responsible for negative deviations or failure.
10. Acceptable: the control system should be such that the subordinates
understand the need and appropriateness of the system. The controls should
be accepted by the people on whom the controls are applied.
Techniques of Control
Behaviour : 96
Check Your Progress

quantitative and
qualitative standards?
characteristics and
limitations of
controlling?
Management Process
& Organisational
position of the organization on a specified date. Financial data can act as a tool to
1. Direct
control the organization. Various analysis tools like common size statement, comparative
Supervision
statement help in comparison of the current year with the previous year’s figures.
and
These figures can also be compared with the industry benchmarks and similar firms.
Observation
Ratio analysis is used to analyse the financial statements. Absolute figures are
This is
unfit for comparison. Ratios express the relationship of one business variable with
considered to be the
other business variable in form of mathematical expression. The ratios can be divided
oldest techniques and
into four categories, they are
is most suitable for
small business • Liquidity Ratios: It aims to identify that whether the firm has enough working
organization. The
technique involves
direct involvement
of supervisor as he
himself keeps a close
check on the
employees and their
work. By this, the
comparison may not
be required, as most
of the problems are
solved during
supervision. The
supervisor gets the
better understanding
of the worker as he
gets first hand
information.
2. Analysis and
Interpretatio
n of
Financial
Statements:
Every business
organizations prepare
final accounts. Profit
and loss account
gives details of the
income and expenses
for a specified period
and Balance Sheet
shows the financial
capital to run day to day operations. Liquidity ratios are the indicators of have been
firm’s ability to pay short term obligation when they become due. Some of prepared. The
the important ratios in this category are current ratio, quick ratio and super estimation,
quick ratio. prediction and the
data expressed in
• Solvency Ratios: These ratio helps in ascertaining long term solvency of
budget requires
the firm and tries to find out whether the firm has adequate resources to
lot of precision
meet its long term financial obligations for e.g. debt equity ratio , Capital
failing to which
gearing ratio etc.
the technique
• Turnover ratios: it indicates the efficiency with which the assets of the
loses its
firm are utilised for e.g. fixed asset turnover ratio, inventory turnover ratio
etc.
• Profitability ratios: It indicates the financial health of the firm in terms of
its earning capacity of the business. It also throws light on the adequacy of
the control over expenses for e.g. net profit ratio, gross profit ratio, return on
capital employed, operating expense ratios etc.
The disadvantage of this technique is that ratios can be used for window
dressing. If the account statements are misleading ratios too can be misleading.
3. Budgetary Control
Budgetary control is often referred as traditional control technique. A budget is an
estimation done for the purpose of planning and controlling. According J.A. Scott “ It is
the system of management control and accounting in which all operations are forecasted
and so far as possible planned ahead , and the actual results are compared with the
forecasted and planned ones”. Budgetary control is a technique of establishing control
with the help of budgets. In fact budgets are most important constituents of financial
control .Budget is a statement of planned events expressed in quantitative and monetary
terms. Budgetary control can be done for every facet of a business ranging from income,
production, and so on. The various budgets are cash budget, sales budget production
budget, purchase budget, master budget etc. A budget committee is established for
budgetary control. Budgetary control has several advantages likes:
a. It makes planning precise and realistic.
b. It saves time and cost and establishes coordination among various
departments.
c. It helps in optimum utilization of resources.
d. It provides useful data that can be employed for filling tenders and quotation.
e. It prevents buck passing as it establishes responsibility.
f. It facilitates management by exception as it enables the management to
consider only those items that do not go according to the budget.
The budgetary control technique suffers from following disadvantages:
a. The efficiency of budgetary technique depends on how well the budgets
NOTES

NOTES
Management Process
significance. Subsequently the company can employ collaborative steps to progress its
performance in the given line.
b. It restricts
creativity and BEP = Fixed Cost/Sale price per unit-Variable cost per unit
innovation and Advantages
people are
(a) Helps in identifying minimum requirement of sales at which cost can be
directed to work
recovered. Helps in analyzing the cost behavior with sales and its effect on
according to the
profit, thus profit can be estimated at various levels.
budgeted
guidelines. (b) The breaking up of cost component into fixed and variable cost helps
management to control cost.
c. Creating budget
is a time taking Disadvantages
process and an
exhaustive one. (a) Classification of cost is not possible every time.
d. The (b) It assumes that cost and revenue function have a linear relationship which
management may not hold true every time. The economies of scale may result in
should disproportionate varying of cost.
understand that (c) It assumes that technology, factor prices and product mix are fixed where as
the technique is in reality this may not hold true.
tool used for
5. Return on Investment
effective
management, a This is also a financial tool. Investment consists of net working capital and fixed
means to an asset employed in the business. The income or the profit generated is the premium that
end, not an end the entrepreneur gets for his risk taking. Higher the ROI better is the performance of
in itself. the business and vice versa. The comparison of current year ROI with that of previous
years’ performance helps to know the progress of the business. It also facilitates inter-
4. Break-even firm comparisons. The area needing rectification can also be traced.
Analysis
Advantages
BEP (break-even
(a) It focuses on most important aspect of business and that is profit.
point) is a state at which
(b) The departmental ROI can be established which help in better control and
the cost is equivalent to
facilitates decentralization.
sales (the state of no
profit and no loss). The (c) It focuses on the efficiency in use of capital.
Break-even analysis is
used as a control device.
It helps to find out the
company’s performance
and the minimum level of
sales the company needs
to attain in order to avoid
loss. If the sales are less
than the minimum level
the company may not be
able to recover cost.
Disadvantages Accurate information is
must for proper control.
(a) With fluctuation in prices, the ROI becomes difficult to estimate. Management requires
(b) The long term investment aspect is ignored. It is a short term phenomena. information
6. Management by Objective (MBO)

MBO is a planning and controlling device and it can only be effective if it has
following features:
(a) The goals are fixed with the joint effort of the subordinates and supervisor.
(b) The performance of employee is periodically evaluated and regular feedback
for improvement is provided to the employee.
(c) Once the task is accomplished, due reward is given to the employee.
The success of this measure depends on the coordinated efforts of superior and
subordinates. Elements of biasness, lack of trust between superior-subordinate
relationships can significantly affect the working of the technique.
7. PERT & CPM Techniques

Program Evaluation and Review Technique (PERT) and Critical Path Method
(CPM) techniques are used to minimize cost and time. Any program has a series of
activities and sub-activities involved in it. The success of any activity depends upon
doing the work in a specified sequence and time. The whole project is divided into
identifiable activities and a logical sequence between these activities is established.
Time estimates are prepared for every activity and the longest path that is critical path
is identified and analyzed. The techniques emphasis on identifying the critical activities
and giving them priority. Critical activities are crucial activities which have to be completed
on time so that the project is not delayed. The techniques divide the job into various sub-
activities. from which, the critical activities are identified and significant importance is attached
to their accomplishment. Therefore, the time and cost of the entire project can be minimised.
Advantages of PERT/CPM
(a) It significantly reduces cost, time and money.
(b) The identification of critical activities leads to optimum utilization of resources.
(c) Helps in proactive management, as managers are made aware that delay in
one operation may lead to delay in other business operation.
(d) Graphical presentation of task ensures proper understanding and
communication.
Disadvantages
(a) Exact estimation of time and cost is a difficult measure. Unrealistic estimation
leads to failure of entire technique.
(b) The technique is a time taking exercise and expensive. The process becomes
expensive and complex when the data is relatively large
8. Management Information System (MIS)

NOTES

NOTES
Management Process
about the entire working and efficiency.
of the organization which Advantages
includes both internal and (a) It is an independent process, which means it has a very less element of
external working. biasness or favouritism. It reflects true picture of business organization.
Information is gathered so
(b) Auditors usually are well qualified professional, there advises and suggestions
that problems could be
can benefit the overall organization.
identified and solution
could be provided. The Disadvantages
task of collecting data and (a) It requires well qualified professional which are not easily available.
processing is done by (b) There is absence of well defined set of principle or procedures for auditing
MIS. It can be done which make audit challenging and difficult.
manually or
10. Human Resource Accounting
computerized. The
managers can delegate While most control technique focus on the concept of cost, profits and several
subordinates with the other financial aspect, human resource accounting focuses on the most important aspect,
help of MIS without recognizing the value of human resource. In the words of Davidson and Weil, “It is the
losing control. dynamics of the organisation. It is the assessment of condition of human resources
within an organisation and the measurement of the changes in the condition through
9. Management
time.” It is the accounting done for the people of the organization. It measure the cost
Audit
invested in acquiring and developing human resource in an enterprise.
It is a process of
Advantages
evaluating performance
* It helps in the determination of the cost of labour turnover.
of entire management. It
reviews and examines the * It helps in the development of human resources.
entire management process * It helps in finding the return on investment on human resources.
and every function of * It helps in enhancing the efficiency of employees.
management i.e planning,
Disadvantages
organizing etc. Audit is
* It becomes complicated in finding the number of years an employee will
done to find out the
work or remain associated with the firm.
efficiency of the
management. Therefore, * It becomes a complex phenomenon to calculate the degree to which an
the company’s plans,
objectives, policies,
procedures, and all related
aspect forming a part of
management are
examined very vigilantly.
This is generally done by
a team of experts. Data
from different sources is
collected and is analyzed.
The findings detail about
managerial performance
employee will be able to make use of the knowledge acquired. Directing and Controlling
* It is complicated to fix a rate of amortization.
* It is not easy to estimate how much an individual contributes in an organization.
11. Responsibility Accounting NOTES
Under responsibility accounting the data relating to the responsibilities of individual

managers are collected, summarized, and reported. It evaluates and reports expenses,
costs, revenues, and other details by the department or unit of responsibility. In this
type of accounting organizational management is classified as responsibility centres.
There are four types of responsibility centres:
* Cost centre- is used for the purpose of measuring financial performance by
measuring planned expense with actual expenses.
* Profit centre- it measures financial performance by comparing the actual
profit with estimated profit.
* Revenue centre- it measure the performance by comparing expected sales
and actual sales and revenue earned by specific departments.
* Investment centre-it is use to check the ROI and proper utilization of invested
capital.
Advantages
(a) It provide managers with due autonomy of their responsibility centres which
helps in attainment of goal promptly.
(b) Every responsibility centres have a realistic target to be achieved which
helps the employees to perform as per the expectations.
(c) Detection of error becomes easy.
(d) It promotes participation of different levels of management thereby resulting
in effective decision making.
Disadvantages
(a) Forming responsibility centres in today’s modern business organization with
a clear cut role is a difficult exercise.
(b) In practical managers do not get the required autonomy in decision making.
(c) It should be understood that responsibility accounting is a tool and not a
substitute for effective management.
Human Resistance to Control

Employees in the organization perceive control in a negative way and try to resist do not give
controls. The main reasons to oppose controls are as follows: space for
creativity and
(1) As an instrument to curb freedom : Employee perceive control as a
innovation.
measure to curtail their freedom. Their performance should confirm to the
standards. They cannot afford laxity and negligence. Moreover tight controls

Directing and Controlling (2) Unrealistic Standards : Sometimes the standards set are too high that it
becomes difficult for employees to achieve them. Employees lose faith in the
control system.
NOTES (3) Over control : Control over too many things concerning employee may
lead to frustration. Too much emphasis on standardization of behavior such
as dress code, parking rules, coffee breaks can be unacceptable to the
employee.
(4) Exposes their limitations : Controls monitor the progress of employee’s
performance and identify the deviations from the standards set for them.
Such deviations may reveal lack of skill and ability of the employee in
performing the task. Employees avoid controls as they expose their weakness.
(5) Uncontrollable variables : Sometimes the standards are not met due to
the factors that are not in control of the employee or the variables for which
he is held responsible are not under his control. In such a situation employees
feel that the controls are not justified.
(6) Penalizing : Some control focus on fault finding rather than evaluating
their efforts. Employees resist such kind of approach in implementation of
controls.
Overcoming Resistance to Control

Check Your Progress

1. What are the main
reasons of employees
to oppose control?
2. How does responsibility
accounting helps in
controlling?
Management Process
In order to reduce be perceived by the employees as beyond their reach. They should be
negative feelings explained the need and value of controls. The employees should perceive
towards controls the standards as justified.
following guidelines (3) Focus on behavior : The controls should aim at bringing improvement in
can be used behavior of the employees rather than concentrating upon the deviations
(1) Participat only. It should also recognize the efforts put by the employee.
ion : (4) Objective and fair : The evaluation process should eliminate subjectivity.
Standards There should be no room for discrimination among the employees.
must be set (5) Timely feedback : The process of controls should be such that it gives
in timely feedback to the employees at periodic intervals so that employees are
consultatio able to take appropriate remedial actions at the right time before the problems
n with the become big.
employees
(6) Positive reinforcement : There should be proper integration between
. If
organizational controls and reward system. Employee should perceive controls
employees
as a source of rewards rather than a source of penalty.
are
involved
in
planning
and
implement
ation of
control
systems
they are
likely to
accept
them and
follow
them
whole
heartedly.
(2) Reasonabl
e and
understan
dable
standards
: The
standards
should be
achievable
. They
should not
Summary
The directing function includes leadership, supervision, motivation and

communication. Directing initiates action motivates people and facilitates coordination. NOTES
In order to make directing effective there should be unity of command, harmony of
objectives, effective leadership, appropriate motivation techniques and direct supervision
wherever possible. Control is a crucial, continuous and forward looking process. It
focuses on the achievement of planned goals of the organization. It helps in coordination
and put psychological pressure on employees to work hard and brings order and discipline.
Control is a process of establishing standards and measuring the actual performance.
The standards can be quantitative or qualitative. The quantitative standards are
measurable and include time standard, cost standard, productivity standard and revenue
standard. Then the actual performance is compared to standards in order to identify
deviations. If the deviations are unfavorable corrective actions are taken. Controlling is
expensive and time consuming. The techniques of controlling are supervision, analysis
and interpretation of financial statements, budgetary control, breakeven analysis, return
on investment, management by objectives, PERT /CPM, management information
system, management audit, human resource accounting, responsibility accounting. In
order to make control effective they should be made simple, flexible, and objective. The
main focus of controls should be on achievement of organizational objectives. They
should be forward looking and acceptable to the employees. The standards should be
reasonably set. Resistance to control can be overcome through participation and positive
reinforcement.
Key Terms
* Directing: It is a function which aims to instruct, guide, supervise and inspire
people working in the organisation so that the objectives can be achieved.
* Controlling: It is a systematic effort by managers to compare actual performance
to predetermined standards to find out deviations if any and address deficiencies.
* Supervising: It means overseeing the progress of work performed by subordinate
and ensuring compliance with standards and plans laid for them.
* Standards: They are the benchmark against which the actual performances are
compared.
* Quantitative standards: These standards are measurable like time standard,
cost standard, income standard, output standard, quality standards, profit, etc.
* Qualitative standards: These standards are non-measurable or intangible like
managers’ decision making skill and human skills, attitude of workers etc.
Questions and Excercises (1) What are the

reasons for
resistance of
Short Answer type questions
control?
Management Process
& Organisational
Behaviour : 103
Directing and Controlling (2) Write short notes on
• Budgetary control
• PERT and CPM
NOTES • Management Audit
(3) Define the term direction. What are the chief elements of directing?
Long Answer type questions
(1) Explain the process of control.
(2) What are the essentials features of a sound control system? How can
employee’s resistance towards control be reduced?
(3) Explain the importance and principles of direction.

(1) J.A. Maciatiello, ``Management control systems,’’ Prentice hall,Engle Wood
Cliffs, N. J.,1984
(2) R.E. Walton, “From control to commitment in the workplace”, Harvard
Business Rewiew, March-April, 1985
(3) V.S.P Rao, V. Harikrishnan, ``Management Text and Cases,’’ excel books,
fourth edition
Management Process
& Organisational
Behaviour : 104
Individual Behavior
UNIT 7 INDIVIDUAL BEHAVIOR
Structure
NOTES
Introduction
Unit Objective
Perception
Factors Affecting Perception
Attribution Theory
Distortions in Perception
Personality
Determinants of Personality
Personality Traits
The Big Five Model
Important Personality Characteristics Relevant to Organisational Behaviour
Attitude
Attitude and Behaviour : Cognitive Dissonance Theory
Major Job Attitude
Emotional Intelligence
Summary
Key Terms
Introduction
Every individual is different from others. They respond to different situation in
different manner. People possess certain unique characteristics that influence their
attitude, behavioral reaction to organizational settings. The study of individual behavior
includes knowing about personality traits, attitude, perception and emotional intelligence
of a person that greatly influence his or her decision making skills, interpersonal relations
and job satisfaction. Knowledge of individual behavior will help in developing appropriate
selection process and proper placement of individuals at work place. It will help in
predicting and controlling human behavior so that goals of organization can be achieved.
Unit Objective
After studying this unit, you should be able to- * List the three
* Explain why people perceive the same thing differently. determinants of
perception.
* Understand the distortions in perception.
Management Process
& Organisational
Behaviour : 105
Individual Behavior * Understand the concept of personality.
* Explain the factors that determine individual personality.
* Describe major personality attributes influencing OB.
NOTES * Explain the relationship between attitude and behavior.
* Understand major job attitudes.
* Explain cognitive dissonance theory.
* Understand major job attitudes.
Perception
Perception is the individual’s own or personal view of the world. It is the intellectual
process by which the individual give meaning to their environment. The raw data that
they receive from the environment are organized and interpreted in order to understand
the environment. Two people may understand the same situation differently. . e.g. one
may interpret the glass having fifty percent water in it as half filled while the other may
interpret it as half empty.
According to S.P. Robbins: “Process by which individuals organize and
interpret their sensory impressions in order to give meaning to their environment”.
Factors Affecting Perception

Perception may be different from reality. The factors that influence perception
depends on the characteristics of perceiver (the one who is trying to interpret the
environment) the target (the object or person for whom perception is made) and the
situation (the context in which the target is seen). Let us understand them one by one.
(1) Perceiver
The personal characteristics of the perceiver play a very important role in his
perception about the reality. The relevant personal characteristics influencing perception
are motives, attitude, past experience and expectations.
A theist may find daily morning ritual of offering prayer as a best way to start the
day, while an atheist may consider it a waste of time. This is because their attitude
towards God is different. Researches have found that motives are also instrumental in
shaping perception. We see what we want to see. Let us see the following picture

Old woman or young
lady?
Fig. 7.1
In the above figure one can see an old woman or a young woman depending upon
his or her interpretation. Young people have a tendency to see young woman while
older people perceive it as a picture of elderly woman. One can switch from one to
another with little effort. If we perceive the image as the picture of young woman we
can see the old woman by focusing on the picture with a different angle. While doing so
the young woman chin becomes the old woman’s nose.
A research that aimed to study the effect of different intensities of hunger drive
on perception demonstrated that hunger influenced the perceptions of the subjects
dramatically. The subjects who had not eaten for 16 hours were shown blurred images.
These respondents perceived the blurred image as pictures of food more frequently
than those subjects who were not hungry. Role expectation can also influence the
perception. We may expect a doctor to be sympathetic, a policeman to be authoritative,
a minister to be power hungry and we may perceive them this way irrespective of their
actual traits. Our experience with events will also influence our perception. If our past
experience about things, events or person was bad we will perceive them negatively
and may continue to hold this perception for long for e.g.: if an individual tried a new
dish that he disliked in a restaurant, there is likelihood he may not try it again in another
restaurant. While the reality may be that cook of the previous restaurant was not having
an expertise in cooking such dish.
(2) Target
Characteristics of the target that is being observed also influence the perception.
Objects that are new or moving or having large size are perceived more than compared
to those that are old, small and not moving. Objects that are in physical proximity tend
to be perceived together, background also play an important role.
Let us see the following figure. At the first look we may perceive it as a vase, if
we see black portion as background. But if we see white as background then the
picture will reveal two people face to face.
Individual Behavior
NOTES

Individual Behavior & Organisational Behaviour : 108
NOTES
Management Process
(3) Situation the individual displays uniformity in behavior in different situation. If he
is scoring poor marks in other subjects also then we tend to view his
The time at
performance being caused by internal factors We may perceive him to be
which the object is
lazy, disinterested or not intelligent.
seen as well as the
work and social (2) Consensus: it considers whether all others who are facing the similar situation
settings influence respond in the same way. If all the students in the class are fairing poor
our perception. If we marks then the performance of the class can be attributed to external causes
see a worker in the like poor ability of instructor and strictness on the part of the examiner.
factory working late (3) Consistency: it considers whether the individual responds the same way
evening we may over time. If jack score is poor in previous classes also then we may attribute
perceive him to be his poor performance to internal factors.
hardworking. A Distortions in Perceptions
student who is
It is a cognitive bias in judgment that occurs in a particular situation. In other word
wearing casual dress
we may perceive others wrongly or unfairly. This happens because we use shortcuts in
in school will catch
judging peoples so that our task of judging becomes more manageable. The distortions
more attention of the
are as follows:
teacher.
(1) Halo effect: it is process of using single personality trait while drawing general
Attribution impressions about others. For e.g. A person who is warm in dealing with
Theory others may be judged as wise, humorous and popular. Aperson who is punctual
When people may be judged as hard working and committed also which may not be true in
observe the behavior reality.
of others they tend to (2) Stereotyping: when we generalize the characteristics of the people based
interpret the cause of on the group to which the individual belong, for e.g. we may generalize “ A
their behavior i.e. particular religious group is very conservative” then we will perceive every
whether the behavior individual belonging to that religious group as conservative. All individuals in
is externally caused that group may not necessarily be conservative.
or internally cause for
(3) Contrast effect: this distortion particularly happens during the selection
e. g. if a student say,
process. We do not evaluate individuals in isolation but in comparison to
Jack scores badly in
others. If we encounter people possessing brilliant qualities just before
thermodynamics
evaluating the person in question, then there is likelihood that this person may
subject, we will try
to find out whether
the cause of bad
score is internal or
external and our
interpretation will be
based on the
following facts:
(1) Distinctiv
eness: it
refers to
whether
be rated poorly and if the same person is evaluated after encountering people Individual Behavior
possessing poor qualities, then we may rate the person fairly better. This is
called contrast effect.
(4) Projection: An individual may perceive others assuming that the others are
NOTES
very much like him for e.g. if the individual is honest and truthful he may
perceive that others are also honest and truthful. Projection is the perception
made by individual about others as he tends to see people as more homogenous
than they really are.
Manager should try to eliminate distortions in perception while selecting and
evaluating employees. Manager should also try to understand the perception of employee
towards work environment. The employee behavior is influenced by his perception
towards his job. Managers should attempt to understand the difference between reality
and perception of employee. If he sees that the difference that exits is affecting the
employee behavior negatively he should try to eliminate such distortions by creating
good impression about oneself and job.
Personality
It is a set of unique psychological and behavioral attributes in a person that are steady an allow
consistent overtime. It is the sum total of ways in which the individual behave, responds prediction of individual
and interacts with others. behavior. They are
follows:
According to Gordon Allport: ``The dynamic organization within the individual of
those psychophysical systems that determine his unique adjustments to his environment.’’
Determinants of Personality
Heredity: It is the transmission of certain qualities that can be physical, mental or
emotional from the ancestor to the descendent. The physical characteristics may include
facial attractiveness, energy level, reflexes etc. The mental characteristics includes
intelligence and emotional state demonstrates traits like temperament, shyness etc. These
traits are determined through the molecular structure of genes located in the chromosomes
at the time of conception.
Environment: The other important determinant of personality is the way we are
nurtured. Our family friends, early conditioning, social groups etc are all part of
environment. Culture establish attitudes and norms that are passed from generation to
generation.
Personality Traits
Personality traits are the enduring characteristics that describe an individual
behavior. There are numerous traits in a person that make up a personality. About
17,953 individual traits were identified in one study. Such large numbers of traits make
it impossible to predict individual behavior. Later on after intensive study the traits
were reduced to 16, which are called the primary traits. These traits are generally

Individual Behavior Descriptors of Low Range Primary Factor Descriptors of High Range
Reserved Warmth Outgoing
Less intelligent, Reasoning More intelligent,

NOTES
Affected by feelings, Emotional Stability Emotionally stable
Submissive Dominance Dominant
Serious Liveliness Lively
Disregards rules, Rule-Consciousness Conscientious
Timid Social Boldness Venturesome
Tough minded Sensitivity Sensitive
Trusting Vigilance Suspicious
Practical Abstractedness Imaginative
Forthright Privateness Nondisclosing
Self-Assured Apprehension Fearful
Conservative, Openness to Change Experimental
Group-oriented, Self-Reliance Independent
Lax and impulsive Perfectionism Organized and self discipline
Relaxed Tension Tense

Behaviour : 110
Check Your Progress

1. Explain how people
interpret the cause of
other’s behaviour with
help of attribution
theory.
Management Process
& Organisational
to be co-operative, trusting, generous and helpful. The people high on agreeableness
The Big Five
show warmth and sensitivity towards the feeling of others. They are empathetic and
Model
are willing to compromise their interest for others. They are compassionate kind
It is a
and good natured.The individual low on agreeableness is unsympathetic and is
comprehensive
unconcerned about the feeling of others. They are selfish and put their own interest
empirical research
above those of others.
finding that provide a
very broad overview (3) Conscientious: It is the tendency to be self disciplined, responsible, reliable
of someone’s
personality. It
proposes five basic
dimensions of
personality these five
dimensions are:
(1) Extraversi
on: it is
characterized by
positive emotions,
enthusiasm and
tendency to interact
with other with ease.
The people high on
extraversion are
sociable, outgoing,
talkative and
assertive and enjoy
the company of
others. They are
comfortable in group
and teams and derive
energy from their
interaction with
others while
introverts
i.e. persons who are
low in extraversion
are quiet, less socially
involved and prefer to
work alone. Introverts
derive energy from
within.
(2) Agreeablen
ess: it is the tendency
and achievement oriented. They are hardworking and well organized. They have a Self monitoring is
an ability of an
drive and sense of direction. While the person low on conscientiousness can easily get individual to
distracted, is unorganized and irresponsible. monitor one’s own
behavior to fit
(4) Openness to experience: the tendency to be imaginative, intellectually
curious and artistic. The people high on openness to experience are creative and are
more likely to hold unconventional beliefs. They have broad range of interest and
appreciate variety of experience. The people low on openness are more conventional
and conservative. They prefer familiarity over novelty and resist change.
(5) Neurotism (emotional stability): The tendency to experience unpleasant
emotions easily, the people high on neurotism experience anger, frustration anxiety or
depression under stress or adverse circumstances. They are emotionally reactive and
their negative emotion tend to persist for long period. They are moody and tense. The
people who are low on neurotism are calm, secure and emotionally stable. They don’t
get irritated or upset easily.
Important Personality Characterstics Relevant to

Organisational Behaviour
Locus of control
Locus is Latin word meaning place or location. Locus of control thus means place
of control and place can be internal or external. Internal locus of control means the
place of control of life is within the individual, in other words the person believes that he
can control his life. External locus of control means the place of control is outside the
individual. The person having external locus of control believes that his life is controlled
by environment over which he has no control. A person with internal locus of control
feels that they have the power to influence events and their outcome. They perceive
that outcome results from their own behavior. People with internal locus of control are
motivated to work, are ready to take more responsibility as they are able to perceive
the direct relationship of their actions and reward.People who have external orientation
feel that outcomes are determined by fate and are independent of their hard work or
the decisions they take. The external are more dissatisfied with their jobs and are also
less involved in their jobs.
Machiavellianism
It is tendency of the person to be selfish, deceptive and manipulative. The person
high on mach does manipulate others for personal gain. The high mach’s demonstrate
pragmatism are more dettached emotionally and believe that ends justify means. They
can inflict greater harm to people directly or indirectly to achieve their own goal. Low
mach’s tend to be truthful, honest and empathetic. They are trusting and agreeable.
High mach’s do well in jobs that require bargaining skills. High mach’s flourish when
there is face to face interaction, minimum rules and regulations and less emotional
involvement.
Self Monitoring
Individual Behavior
NOTES

Individual Behavior & Organisational Behaviour : 112
NOTES
Management Process
different situations. Type A and Type B Personality
Person high on self Mayer Freidman and Ray Rose Man during their research on the impact of job
monitoring change stress on heart disease identified characteristics of two categories of individuals, type A
their behavior to suit and type B.
the situation. They
Characteristics of type A
closely monitor
1. Type A people are excessively competitive and want to achieve more and
themselves in order
more in less and less of time. They feel threatened and challenged by the
to ensure appropriate
success of others.
public image of
themselves. They are 2. They are always in a hurry, they are always moving, walking and eating
highly sensitive to rapidly.
social cues and can 3. They try to do two or more things simultaneously.
easily blend into 4. They feel guilty when they get time to relax as they are not able to cope with
social situations. leisure time.
They may not be true
5. They keep on trying to do faster and feel impatient with the rate at which
to themselves while
most event take place.
modifying their
6. They want to acquire money and personal possessions and measure their
behavior and hence
success in terms of how much of everything they have.
there can be striking
contradiction Characteristics of type B personality
between their public 1. They are calm composed patient and relaxed.
images and their 2. They don’t suffer from sense of time urgency.
private self. While
3. They are wise and not hasty. They are concerned with quality rather than
persons who are low
quantity.
self monitors are less
likely to change their 4. They do not exhibit unnecessary competition and play for fun and recreation.
behavior from one 5. They can enjoy leisure activities without guilt.
situation to another. 6. Don’t feel the need to discuss their achievement unless situation demands.
They tend to display
Types A are productive workers but they are not creative. Type A people can
their true disposition
become excellent salesperson. Inspite of the hardwork of type A, senior executives are
and attitude an hence
usually type B. Type B are the ones who make it to the top. The reason is that they are
they have a greater
creative as they are able to allocate time to develop unique solution to problem. They
consistency between
are tactful unlike type A who are hostile.
their attitude and
behavior. High self
monitors are more
successful in
managerial position
as they are required to
play multiple roles
which are sometimes
contradictory in
nature.
Self Esteem Individual Behavior
It is the individual’s degree to which they like or dislike themselves. People high
on self esteem have confidence in their ability to achieve goal. They are not vulnerable
to external influence. They are more likely to take unconventional jobs than people
NOTES
having low self esteem. They are open minded, outgoing, responsible and optimistic.
They have the ability to inspire others.
The people with low self esteem are pessimistic, close minded, introvert. They do
not come forward to take responsibility. People who are high on self esteems are more
satisfied with their job than the people who are low on self esteem.
Attitude
resolved when the
It is the belief and feeling, the individual have about object, people or events,
rewards are significant
which can be favorable or unfavorable. These beliefs and feelings determine how
enough to offset the
employee will perceive and intend to behave towards the object or a situation. The
dissonance.
attitude has three components: cognitive, affective and behavioral. If I say that “one
should not use abusive language” it is a value statement and such opinion is cognitive
component of attitude. If I say that “I dislike Mr. shyam because he uses abusive
language”, then it is affective component of the attitude. It represents my feeling
towards attitude object. Cognitive and effective component influences the behavior of
the individual towards the attitude object. If they are negative then the behavior towards
the attitude object will also be negative. If I start avoiding interaction with shyam then
it is behavioral component of the attitude.
Attitude and Behaviour : Cognitive Dissonance Theory
Cognitive Dissonance theory was given by Leon Festinger. Whenever there is
incompatibility between two or more attitudes or between attitude and behavior
dissonance is said to have occur. Dissonance causes discomfort in the individual.
Individuals try to reduce this dissonance by reconciling the attitudes in such a manner
that that they appear to be consistent and highly rational. for eg . Mr X is in need of
money as he wants to admit his son who is very bright in studies in a very prestigious
college. He holds a very favorable attitude towards the college in terms of education.
He also feels that taking bribery is a crime. He has been offered a bribe that can help
him in providing better education to his son. Mr. X is experiencing high degree of
cognitive dissonance. Mr X can choose one among many alternatives to reduce cognitive
dissonance. Mr X can change the behavior and start taking bribe. Mr X can change his
attitude towards the prestigious college by telling to himself that there are other colleges
also that can give good placements though not very good education. So he can admit his
son in those colleges and not take bribe .A third alternative would be by concluding that
dissonant behavior is not so important, and that he has a duty as a father also and
almost everyone takes bribe in the present scenario.
Thus when individuals undergo cognitive dissonance because of the incompatibility
between job demands and personal attitude, they will try to modify their attitude or
behavior in order to reduce dissonance. This is easily done when they perceive that the
dissonance is externally imposed and is beyond his or her control. Dissonance is easily

Individual Behavior Major Job Attitude
Job satisfaction: it is individual’s general attitude with job. If the job satisfaction
is high then the person may hold positive attitude towards job satisfaction. Job Satisfaction
refers to the emotional state of the worker about specific job factors. Job factors like
NOTES
mentally challenging work, equitable rewards and pay system, understanding and friendly
supervisor, supportive colleagues, comfortable working conditions etc. lead to favorable
evaluation of the job. Moreover people with personality type matching with the job
requirement get high satisfaction from work. Dissatisfaction results in absenteeism,
low productivity and more complaints. Job satisfaction improves productivity.
Job involvement: it is the degree to which employees identify with their jobs,
actively participate in it. It tells about how much they really care about the kind of work
they do. People high on job involvement consider performance level of job as a source
of fulfillment. Job involvement reduces absenteeism and employee turnover.
Organization commitment: it is the degree to which the employee is able to
identify with the organization and its goal. The more commited they are towards the
organization’s goal the less is the likelihood of leaving the organization.
Emotional Intelligence
Behaviour : 114
Check Your Progress

1. When do individuals
undergo dissonance
and how do they try to
resolve it?
Management Process
& Organisational
Emotions are (1) Perceiving emotions: Identifying and recognizing emotions is the first step
universal and very to understand emotions. It might involve understanding non verbal signals
important to our life. such as facial expressions and body language.
They play a very vital (2) Reasoning with emotions: The next step involves cognitive activity such
role in determining as thinking and problem solving.
our physical and (3) Understanding emotions: If someone is expressing some emotion the ob-
mental wellbeing. server should interpret the cause of emotions. The individual should be able
The ability to to comprehend emotion and understand complicated relations between them.
examine emotions of (4) Managing emotions: The ability to manage emotions include monitoring
self and others and emotions, regulating them and then responding appropriately. It also includes
then responding the ability to manage emotions of others.
appropriately
improves both home Gole man (1998) gave five emotional competencies
and work (1) Self awareness : The ability to recognize one’s emotions i.e. what we are
environment leading
to healthier people.
Peter Salovey
and John D Mayer
leading researcher on
emotional
intelligence defined
emotional
intelligence as “ the
subset of social
intelligence that
involves ability to
monitor one’s own
and other’s feelings
and emotions, to
discriminate among
them and to use this
information to guide
one’s own thinking
and action”.
It is the ability
to recognize and
understand the
feelings of self and
others in order to
manage and act
wisely in human
relations.
Salovey and Mayer
stated four types of
abilities
feeling and why we are feeling? Individual Behavior
(2) Self regulation : The ability to control impulsive behavior, handling distress-
ing emotions in an effective way
(3) Social skill : The ability to network and manage relationship, to move people NOTES
in a particular direction.
(4) Empathy : The ability to know what someone else is feeling and considering
other person’s feeling when making a decision.
(5) Motivation : The ability to pursue goal persistently for non monetary gains(
intrinsic rewards) than just for money or status only.
Goleman emphasized that emotional competencies can be learnt .They must be
worked on and developed to achieve outstanding performance.
Our emotional intelligence determines our success in work, relationship and physical
well being. A person with high emotional quotient can understand other people’s needs
and feelings in a better way. Such understanding helps him satisfy those needs. People
with high EQ experience more positive social and interpersonal interaction. They are in
better position to avoid conflict and fight.
A person with high EQ will find it easier to satisfy other person’s need and make
them feel good. It helps him to handle all kind of people. A person with high EQ can
motivate, instill enthusiasm and courage in others leading to better performance. He
can become an effective leader.
Summary
Individual’s characteristics like personality, perception, attitude and emotional
intelligence greatly influence his or her work place behavior. Personality traits are
enduring characteristics of the individual. The researchers have identified sixteen primary
personality traits. Big five model has proposed five dimensions for assessing individual’s
personality. They are agreeableness, extraversion, openness to experience,
conscientiousness and neurotism. Personality traits relevant to workplace are locus of
control, self monitoring, machiavellianism, type A and type B personality. Perception is
dependent on the characteristics of the perceiver, target and the situation. Manager
should try to avoid distortion in perception like hallo effect, stereotyping, projection etc.
Job attitude like Job satisfaction, Organizational commitment and Job involvement are
relevant to organizational effectiveness. Emotional intelligence is the individual’s ability
to understand, monitor and manage ones own emotions and emotions of others. Person
having high emotional intelligence have better interpersonal relationships and can prove
to be a effective leader.
Key Terms
* Perception: It is the process by which individuals organize and interpret their * Attribution
sensory impressions in order to give meaning to their environment. theory: It is
concerned with
how individuals interpret events and try to determine the cause of people’s
behaviour.
Management Process
& Organisational
Behaviour : 115
Individual Behavior * Distortions in Perceptions: It is a cognitive bias in judgment that occurs in a
particular situation in which the individual may perceive others wrongly or unfairly.
* Personality: It is a set of unique psychological and behavioural attributes in a
person that are consistent overtime. It is the sum total of ways in which the
NOTES
individual behave responds and interacts with others.
* Personality traits: They are the enduring characteristics that describe an
individual behaviour.
* The Big Five Model: It is a comprehensive empirical research finding that
proposes five basic dimensions of personality which provide a very broad overview
of someone’s personality.
* Attitude: It is the belief and feeling, the individual have about object, people or
events, which can be favourable or unfavourable
* Dissonance: Whenever there is incompatibility between two or more attitudes
or between attitude and behaviour dissonance is said to have occur.
* Emotional Intelligence: The ability to examine emotions of self and others and
then responding appropriately and wisely in order to manage human relations.

Long Answer Questions
(1) What are the five personality dimensions of Big Five model? Briefly explain.
(2) Can you list some reasons to explain why do people see the same thing and
interpret differently?
(3) What do you understand by emotional intelligence and why it is important?
(a) Hallo effect
(b) Job satisfaction
(c) Self monitoring
(d) Stereotyping
Short Answer Questions
(1) Differentiate between external locus of control and internal locus of control.
(2) Explain the various components of attitude.
(3) Differentiate between type A and Type B personality.

Management Process
(1) S. P. Robbins,
`Òrganisational
Behaviour,’’
Prentice Hall,
New Delhi, 2000
(2) S. R. Moddi,
``Personality
Theories,’’
Homewood, I,
Dorsey, 1980.
(3) R. A. Boron,
``Behaviour in
Organisation,’’
Allyn and Boran,
Boston, 1986.
Motivation
UNIT 8 MOTIVATION
Structure
NOTES
Introduction
Unit objective
Motivation Defined
Forms of Motivation
Theories of Motivation
Maslow’s Hierarchy of Needs Theory
ERG Theory
McGregor X and Y Theory
Herzberg Motivation Hygiene Theory
McClelland’s Theory of Needs
Vroom Expectancy Theory
Equity Theory
Goal Setting Theory
Summary
Key Terms
Introduction
Organizations need motivated people in workplace. No matter how skilled the
workers are, the goal of the organization will not be achieved if the employee is not
willing and motivated to do their job. Motivated employees help the organization to
survive and grow. Managers expect people in the organization to put their best efforts
in work. Motivation helps achieve this target. Motivation acts as a driving force that
forces the individual to exert high level of efforts. Of all the duties of manager motivating
employees is more complex and challenging. Unsatisfied need inspires the individual to
exert effort in a direction that would satisfy his need The manager should understand
what motivates the employees, what prompts them to initiate a particular action and
why they persist in their action over time. Appropriate incentive scheme, effective
interpersonal communication, smooth relationship with coworkers, status , quality of
supervision, good working conditions, job security and job designs are some of the
variables that will help the manager to develop an environment that motivates people.
After studying this

Unit Objective unit, you should be
able to-
Management Process & Organisational

Behaviour : 117
Motivation * Understanding motivation and its relationship with performance.
* Differentiate between negative and positive motivation.
* Differentiate between extrinsic and intrinsic motivation.
NOTES * Describe Maslow’s theory of needs and its implication to managers.
* Explain ERG theory and compare it with Maslow’s hierarchy of needs.
* Contrast theory X and theory Y of McGregor XY theory.
* Explain McClelland’s theory of needs and its implication to managers.
* Differentiate between motivator and hygiene factors.
* Understand the relation of effort, appraisal and reward in motivating through
Vroom expectancy theory.
* Understand the importance of fair reward system through equity theory.
* Understand the important characteristics of goal in goal setting theory.
Motivation Defined
According to Robbins motivation is “the willingness to exert high levels of effort
towards organizational goals conditioned by the effort’s ability to satisfy some individual’s
need”. In motivation process when an individual perceives an unsatisfied need he exerts
his efforts towards satisfying his needs Unsatisfied needs create tension which stimulates
the drive to search a particular goal that will satisfy his need.
According to Greenberg, motivation is defined as ‘a process of arousing, directing
and maintaining behavior towards a goal.’ Where directing refers to how individual
choose to behave, maintenance refers to consistency in chosen behavior until the desired
goal is achieved. Motivation arises because of unsatisfied needs.. Each person may
have different set of unsatisfied needs. There are several reasons why a person is
motivated to work. For e.g. one person may exert high level of efforts for promotion
because of his or her need for achievement. While the other may do the same because
of the pay raise the promotion will bring along with itself.
There is a positive impact of motivation on job performance. Motivation improves
standards of output both quantitatively as well as qualitatively. Job performance is the
function of person’s ability and his or her motivation level.
Job performance=f (ability, motivation)
Forms of Motivation
Management Process
Positive and
Negative
Motivation
Motivation can
be divided into two
categories: negative
and positive
motivation. Negative
motivation takes
place when an
individual feels a
fear of failure or
other negative
consequences. The
individual expects
being punished if
some performance or
behavior standards
are not met by him.
The punishments at
workplace can be
fear of
being criticized, fired or demoted. The individual works hard in order to escape punishment. Motivation
Positive motivation is said to occur when an employee expects a certain reward

when some performance or behavior standards are met. The rewards can be both
financial and non financial in nature. It can include a pay raise or praise and recognition NOTES
for the work done.
It is advisable that both the forms of motivation should be used by the manager to
get desired result. However overuse of negative motivation in long run can have
unfavorable side effects on the mental and emotional health of employee as well as on
the relationship between the employee and manager.
Extrinsic and Intrinsic Motivation

Extrinsic motivation refers to the influence of external factors like reward or
punishment on the degree of individual’s effort. In extrinsic motivation the activity
performed by the employee should have an instrumental value. It should be instrumental
in escaping some punishment like demotion or criticism or it should be instrumental in
getting reward like pay raise, recognition etc
Intrinsic motivation is within the individual rather than relying on external factors.
The individual derives pleasure and enjoyment from the work due to his interest in task
itself. Individuals who are intrinsically motivated are more likely to engage in the
task willingly and would like to improve their skills so that they are able to master the
task.
Theories of Motivation
In 1950s three specific theories, also known as early theories of motivation were
formulated that contributed to the development of motivation concept. The early theories
of motivation are Maslows hierarchy of needs theory, McGregor X and Y theory and
Herzberg motivation hygiene theory. They were questionable in terms of validity. Later
on contemporary theories were developed, each having valid supporting documents.
The contemporary theories include ERG theory, McClelland’s theory of needs, Vroom
expectancy theory, Equity theory and Goal setting theory.
Maslow Hierarchy of Needs Theory

Maslow has depicted human motivation in form of hierarchy of needs. His theory
is based on assumption that every individual has five fundamental needs and they are
hierarchical in nature. The unsatisfied need is the cause of motivation in an individual.
The hierarchy of needs is often displayed as pyramid. At the bottom of the hierarchy
are lower order needs, these include physiological and safety needs and at the peak of
the hierarchy are higher order needs. The higher order needs includes social, esteem
and self actualization need. As each of the need is significantly satisfied the individual
moves to the next level of the needs in the pyramid. Management Process
& Organisational
Behaviour : 119
Motivation
Self
Actual
isation
NOTES Esteem
Needs
Self-esteem
status
Social Needs
Sense of belonging
Love
Safety Needs
Security
Protection
Physiological Needs
Hunger
Thirst
Figure 8.1 Maslow’s Hierarchy of Needs

The five needs are as follows;
Management Process
(1) Physiologic want to secure themselves in times of sickness and old age.
al needs: The (3) Social need: Social need include the need for affection, love, care and
satisfaction of friendship. They want to be liked and loved by others. Because of this need people
physiological needs form informal groups, join clubs etc. They like to form friendly interpersonal relationship
is essential for with others.
survival for e.g.
(4) Esteem need: Esteem is the human desire to be respected and valued by
water, food, air. This
others. The lower version or extrinsic component of self esteem is the desire to be
need includes basic
respected by others, which one can satisfy though reward, prestige and attention. The
requirement of
higher version or intrinsic component of esteem need focuses on self respect. The
nutrition,
person tries to satisfy it through factors that connect directly with job content. The
temperature, shelter
factors include empowerment, work itself and responsibility associated with it. Intrinsic
and clothing. If these
rewards are mostly qualitative by nature.
requirements are not
met the human body (5) Self actualization: It is the drive to become what one is capable of becoming.
cannot continue to It includes the need for growth, believing in one’s potential and self fulfillment. Since
function. A person
who is hungry for
days will think only
of food and nothing
else. Once this need
is substantially
satisfied the
individual moves to
one level upward in
the pyramid.
(2) Safety /
security needs:
Safety needs
involves financial,
physical and
emotional security.
Individuals require
protection from
physical and
emotional abuse.
Individual wants to
remain free from
worry about being
harmed through
violence,
mistreatment and
exploitation. They
this need is at the peak of the pyramid the individual’s other needs are reasonably need theory.
satisfied. They feel contented and more in command of their lives. They have a realistic
perception of self, other people and environment around them. They desire for continual
growth and creativity so that they can achieve what they are capable of achieving
Implications of Maslow’s hierarchy of need theory for manager
1. In order to satisfy physiological need, manager should provide adequate wages

and incentives to employees so that he can procure the basic amenities of
life. Appropriate breaks for lunch and rest should be given to employees.
2. In order to satisfy safety needs the manger should provide the employees
safe and hygienic work environment, job security, freedom to join unions,
retirement benefits etc.
3. In order to satisfy social needs the management should promote a work
environment that facilitates interpersonal interactions. The manager should
encourage teamwork and organize social events like sports programs, picnics,
social get together etc.
4. In order to satisfy esteem need, the manager should recognize and encourage
high performers. The manager should appreciate and reward employees on
achieving over and above their targets. Manager should give employees
challenging jobs and should allow them to participate in decision making
process. The manager can elevate the status of deserving employees by
promoting them or by giving them special privileges that enhance their status
for e.g. a company car.
5. In order to satisfy self actualization need manager should delegate most of
the work to employee so that employee’s skills and competencies are fully
utilized. He should be encouraged to be innovative and should be given freedom
in the manner he likes to do his job.
Though Maslow’s hierarchy is fairly rigid in its linear nature of progression i.e
from bottom to top of pyramid, but Maslow noted that the needs may not follow in the
same sequence always, for eg some people give more importance to their career than
family and friends. Their need for self esteem is more important than social need. The
limitation of Maslow motivation of hierarchy of need theory is that it lacks empirical
evidence.
ERG Theory
ERG theory was proposed by Alderfer. He worked on Maslow’s need hierarchy
theory to align it closely with empirical research. He reduced the number of levels of
needs from five to three . He stated that there are basically three categories of need.
The letter ERG stands for existence, relatedness and growth representing three levels
of needs.
Existence is similar to physiological and safety need of Maslow’s hierarchy of
Motivation
NOTES

Motivation Relatedness includes social need and extrinsic component of esteem need of
Maslow’s need theory.
Growth is analogous to intrinsic component of esteem need and self actualization
NOTES need of Maslow’s need theory.
Frustration->Regression
Self Growth
Actualization
Intrinsic Esteem
Needs
Extrinsic Esteem Needs

Relat edness
Social Needs
Safety Needs
Existence
Physiological Needs
Management Process
F easy to satisfy. For e.g. an individual who fails to succeed in a competitive
i examination may resort to excessive eating.
g
. McGregor X and Y Theory
8 Professor Douglas McGregor developed a theory on motivation on the basis of
. two distinct assumptions of human nature. One labeled as X theory that held a negative
2
view about human beings and another labeled as Y theory that held a positive view of
:
C human beings. Manager makes assumptions about human beings and they mold their
l behavior about subordinates according to assumptions they make for them. According
a to X theory
y
t 1. Employee dislikes work and will attempt to avoid it whenever they get the
o chance.
n
A 2. Since employees dislike work they should be closely supervised , controlled
l and threatened with punishment
d 3. Most employees lack ambition, self motivation and shirk responsibilities .
e
r They prefer to be led , and directed.
f
e
r
E
R
G
t
h
e
o
r
y
He stated that
more than one need
may be operating
simultaneously in an
individual. If
gratification of
higher level need is
not met then the
person may regress
to lower level need.
This is known as
frustration regression
principle. This
happens because the
individual finds
lower level need
4. Employee need security above all needs. Maslow’s Lower level needs 2. Needs that
leads to
dominate employees. satisfaction
Managers who believe in X theory will be production centric. They will exhibit are known as
motivators.
autocratic and directive behavior towards their employees. They will try to control their These are
employees by way of coercion, threats and punishment. Manager feels that since security those
is their primary need they can be easily motivated by economic gains.
According to theory Y
1. Employee view work as natural. The work is voluntary performed by them .
The efforts put in work are similar to the efforts exerted in work and play.
2. Employee will exercise self control and self direction in service of the
organization goal to which they are committed. Employee can pursue goal
without supervision.
3. Employee will not shirk responsibility. They will be ready to accept and even
seek responsibility.
4. The ability to make innovative decision is widely distributed in the population.
It is not the sole province of those who are in management position.
Manager holding this view tend to be democratic in their leadership style. They
are supportive and employee centric. Theory Y assumes that most of the individuals are
dominated by higher order needs. Hence human beings can be motivated through
appropriate reward system, participative decision making and autonomy. They try to
make the job more enriching and satisfying to the employee by redesigning them.
The form of organization structure reflects management’s attitude towards human
beings. The managers who believe in X theory will form an organization structure that
will be more centralized with highly specialized job. The communication will be mostly
from top to bottom. The managers who believes in Y theory will emphasis on decentralized
organization structure and challenging jobs that provide growth opportunities to the
subordinates. The direction of communication will be two ways i.e from top to bottom
and from bottom to top.
Herzberg Motivation Hygiene Theory

Herzberg developed motivation hygiene theory to show how individuals are
motivated to work. According to Herzberg the opposite of dissatisfaction is no
dissatisfaction and the opposite of satisfaction is no satisfaction. In other words if the
individual is not dissatisfied it does not mean that he is satisfied. He classified the needs
into two categories.
1. Needs that leads to no dissatisfaction are known as hygiene factors. In other
words hygiene factors are those job factors that prevent us from becoming
dissatisfied. There absence leads to dissatisfaction. The hygiene factors are:
supervision, salary working conditions, company policy and an administration
etc. These factors are extrinsic to work.
Motivation
NOTES

Motivation job factors that drive the employees for superior performance. They act as
satisfiers. Motivational factors include recognition, sense of achievement,
growth responsibility, advance etc.
NOTES
Check Your Progress

1. Differentiate between
theory X and theory Y.
negative and positive
motivation.
Management Process
Hygiene factors Motivators
• Wages & Salary • Status
support@easynotes4u.com • Easy ofNotes4U
Quantity www.easynotes4u.com
power. These motives • Recognition
supervisionare found in varying degrees in all workers and manager.
Fig. • Responsibility
McClelland• described
Companythe three needs / motives in the following
Policy ways:
8.3 : • Working • Challenging Job
Herzb (1) NeedConditions
for achievement: The individual who has high need for achievement
erg • Personal
desires to excel
• Quality of and to succeed . Such individuals set challenging and realistic
Motiv achievement
goal interpersonal
for themselves and accept personal responsibility. They have a strong
ation- relations • Personal Growth
desire to obtain feedback on their performance and progress. They have a
hygie • Job Securely
security
ne desire to do things better and more efficiently than others.
Theor
(2) Need for power: The need for power reflects the desire to control the
y
behavior of others. The individual high on need for power wants to be
The implication influential, exercise authority over others in order to make an impact . They
of motivation prefer to be placed in status oriented situation.
hygiene theory to
(3) Need for affiliation: It is the desire to have satisfying interpersonal relationship
manager is that if the
with others.They desire relationship based on co-operation and mutual
manager seeks to
understanding. They tend to adhere to group norms because of their strong
eliminate the factors
that contribute to
dissatisfaction like
poor supervision pay
or working
conditions, he may
bring about peace but
not motivation. To
motivate workers
manager must focus
on factors that lead
to intrinsic rewards
for e.g. increasing
employee’s
autonomy,
responsibility and
opportunities to
develop their skills
and career.
McClelland’s
Theory of
Needs
According to
McClelland people
are driven by three
motives:
achievement,
affiliation and
desire to be accepted by others. They enjoy personal interactions. Motivation
Thematic Apperception test (TAT)

TAT was developed by psychologists as a tool to measure individual needs of the
people. In this test subjects are shown series of ambiguous pictures and are then asked NOTES
to develop a spontaneous story of each picture. Based on their response individual’s
score for each of the three needs are determined.
Managers can make use of TAT in order to identify which need is prominent in
the individual. He will then understand how the individual can be motivated and for
which job the person will be well suited. The individuals who are high on power and low
on affiliation generally perform better as managers than those who are high on affiliation.
Individuals having high affiliation need, want to be in the good books of all. Since they
want to be liked by others, their decisions lack objectivity. They are good team players.
High achievers should be given challenging but attainable goals. They should be provided
feedback at regular interval. High achievers do best in entrepreneurial activities such
as managing their own business or self contained unit in large organization. The implication
of McClelland’s theory of needs to managers is that the manager should understand
which need is dominating the employee’s behavior and should try to structure their jobs
accordingly so that job satisfy them.
Vroom Expectancy Theory

Vroom stresses the intensity of a tendency to act in a particular manner is dependent
on the intensity of an expectation that the act will lead to an outcome and on the appeal
of the outcome to the individual. The motivation is a function of
M=f (E, I, V) ,where E stands for expectancy , I stands for instrumentality and V
stands for valence.
Effort Performance Reward
The employee The employee The employee

believes that effort believes that values the reward
will result in acceptable
acceptable perofrmance will
perofrmance produce the
desired reward
Fig. 8.4 : Expectancy theory well so that he can

negotiate for flexible
Expectancy (Effort- performance relationship): The degree to which the
timing but is promoted
individual believes that exerting a given amount of effort will lead to performance appraisal.
instead will not find the
Instrumentality (performance- reward relationship): the degree to which
the individual believes that a given level of performance will lead to a reward.
Valence (Reward– personal goal relationship): the degree to which the
organization’s rewards satisfy individual’s personal goals. For eg: if an individual performs

Motivation reward attractive.
The theory explains that even after having sound incentive systems employees
are not motivated. The reason is that the existing incentive system may not be satisfying
NOTES their personal needs. The implication of V room expectancy theory to managers is that
they should understand the individual’s needs of the employees. It is emphasized that
reward should be tailored to individual’s need. It is also true that managers have limited
ways of rewarding the employees so it becomes all the more difficult to motivate
employees by personalizing the reward.
Equity Theory
John Stacey Adams, behavioral psychologist, put forward his equity theory on job
motivation in 1963. Equity theory adds an additional perspective of comparison with
referent other than merely assessing input (efforts) and output (reward) relationship of
individual .It states that individuals tend to compare their output input ratio with those of
referent others. Inputs are logically what an individual put into the work i.e. effort,
loyalty, hard work, ability, commitment and skill etc. Outputs are all the financial and
non-financial reward that he get for his work i.e. salary, benefits, pension, commission,
recognition, responsibility, promotion etc. Referent other describes the people with whom
the individual compares his output input ratio.
Equity exists when individual perceives that the ratio of input to output is same for
him as it is for others with whom he compares himself. Inequity exists if the ratios are
not equal. There are two types of inequity under reward and over reward. If a person
perceives that his inputs are more than the input of the referent other but he receives O
the same reward or is putting same effort and getting less reward than he feels under
rewarded.
While for the person who perceives that he is over rewarded the converse is true.
O
The person feels that he is putting less effort than the efforts put in by the referent other
and is getting the same reward or he is putting same effort and is rewarded more than
the other. Inequity creates tension. When under rewarded tension creates anger and
when over rewarded it creates guilt.
Perception Equity Ratio Comparison

Person Referent
Output Output
Input = Input
Under rewarded Output Output
Equity Input < Input
Over rewarded Output Output

Equity Input > Input
Fig. 8.5 : Equity
theory
Individuals attempt to lower inequity in various ways. They may change their Motivation
input, the under rewarded employee is likely to work less hard or he may change the
output for e.g. if the person is compensated by piece rate system, he may produce more
low quality output. Inequalities created by over payment don’t seem to have a very
NOTES
significant effect on behavior.
Manager may think that if he gives pay raise to one employee he will get motivated.
But such a pay raise may de motivate others if they perceive it unfair. In most work
situations for managers equity theory emphasizes the importance of a reward system
that employees perceive as fair. The manager should set up incentive system in such a
way that it does not create any inequities,
Goal Setting Theory

This theory was proposed by Edwin Cocke in 1960. It states that setting specific
realistic and challenging goals results in better performance. The goal should be
measurable and clear. Specific goals are better than those in which the person is told to
``do your best”. Challenging goals are difficult to attain thus requiring greater efforts to
accomplish them. The individual experiences a feeling of pride when they attain
challenging goals. Regular feedback of progress and result contribute to higher and
better performance, as it helps in directing employee behavior towards goal
accomplishment by providing clarification and praise.
Goals
Goal Commitment
• Clear
• Challenging
• Attainable
Motivation Goal Accomplishment
Regular Feedback Self efficacy
Fig. 8.6 : Goal Setting Theory

Some factors like goal commitment and self efficiency may moderate relationship
between specific and challenging goals and high level of motivation.
Goal commitment means the dedication an individual have towards achievement
of goal. The more dedicated they are the more efforts will be put in by them. Employees
participation in goal setting can increase their level of goal commitment.
Self efficiency is the individual belief that he has the potential and required
characteristics to successfully complete a particular task. Higher the level of self
efficiency greater will be the motivation to perform. Management Process
Motivation
Summary
Motivation is the process of inspiring people to exert high level of efforts by
NOTES satisfying their needs. All employees cannot be motivated in the same way. The need
set is different for different people and hence their motivations.
The various need theories of motivation are Maslow’s need hierarchy theory
motivation-hygiene theory, ERG theory and McClelland’s need theory. They suggested
that before motivating any one it is important to know that which need is dominating his
or her behavior. Manager should introduce suitable motivators that satisfy his or her
need. The chapter also discussed goal setting theory that suggests clean, difficult goals
backed by regular feedback lead to higher performance. Equity theory stated that
individuals may feel over rewarded or under rewarded after comparing their input
output ratio with others. Equity theory emphasized fairness of the reward system.
Expectancy theory stated that if there is a direct link between employee effort and
reward that the employee value the employee will be motivated. In general depending
upon the need and expectation of the individual the managers can employ combination
of motivators to motivate employee. The motivators can be job security, working
condition, pay, promotion, challenging job, participative decision making etc.
Key Terms
Behaviour : 128
Management Process
& Organisational
* Motivation: It is punishment on the degree of individual’s effort.
the willingness * Intrinsic motivation: The individual derives pleasure and enjoyment from the
to exert high work due to his interest in task itself rather than being influenced by external
levels of effort factors.
towards * Physiological need: This need includes basic requirement of nutrition, temperature,
organizational shelter and clothing that are essential for survival.
goals * Safety need: It refers to individual’s need of protection from physical and
conditioned by emotional abuse.
the effort’s
* Social need: It includes the need for affection, love, care and friendship.
ability to satisfy
* Esteem need: It is the human desire to be respected and valued by others.
some
individual’s * Self actualization need: It includes the need for growth, believing in one’s potential
need. and self fulfilment.
* Positive
motivation: It
is said to occur
when an
employee
expects a
certain reward
when some
performance or
behaviour
standards are
met.
* Negative
motivation: It
takes place
when an
individual feels
a fear of failure
or other
negative
consequences if
the goal is not
attained.
* Extrinsic
motivation: It
refers to the
influence of
external factors
like reward or
* Hygiene factors They are those job factors that prevent employees from Motivation
becoming dissatisfied like supervision, salary working conditions, company policy
and administration etc.
* Equity: When the ratio of input(effort) to output(reward) is same for individual NOTES
as it is for others with whom he compares himself then equity is said to exists.
Inequity exists if the ratios are not equal.
Long answer questions

(1) Compare and contrast Abraham Maslow’s motivation theory based on
hierarchy of needs and Aldefer’s ERG theory.
(2) What are the important variables that affect motivation at workplace?
(3) What do you understand by motivation? According to herzberg theory, what
are the factors that affect motivation?
(4) Explain briefly vroom expectancy theory.
(5) What is the role of self efficacy and good commitment in goal setting theory?
Short answer questions.
(1) How can manager satisfy the higher order needs of Maslow’s theory of
hierarchy of needs?
(2) Discuss the need for achievement as proposed by Mc.Clelland.
(3) How do people react when they recognize inequity in their reward based
system?

(1) Anil Bhat, Arya Kumar, ``Management Principles, Process and Practices,’’
Oxford University Press Fourth edition.
(2) C.B.Gupta, ``Management theory and Practice,’’ Sultan Chand & Sons , eleventh
edition.
(3) V.S.P Rao, V. Harikrishnan, ``Management Text and cases,’’ excel books , fourth
edition
(4) Robbins Stephens, Judge Timothy A, “Organizational Behavior”, Pearson
Education
(5) Douglas McGregor “Human side of Enterprise”, McGraw Hill 1960
(6) Abraham Maslow “A theory of human motivation” Psychological review
Vol.80,1943.
Management Process
& Organisational
Behaviour : 129
Groups and Decision Making
UNIT 9 GROUPS AND DECISION
MAKING
NOTES
Structure
Introduction
Unit objectives
Group Defined
Formal Group
Informal Group
Stages in Group Development
Group Properties
Group Norms
Roles
Status
Group size
Group Cohesiveness
Relationship between Group Productivity, Norms and Cohesiveness
Understanding Difference between Work Groups and Teams
Creating effective Teams
Decision Making
Types of decisions
Steps in Scientific Decision Making
Alternative Models in Decision Making
Techniques of Group Decision Making
Difference between Individual and Group Decision Making
Committee
Summary
Key Terms
Introduction
Management Process
Organization is
a group of two or
more people working
together for common
objectives.
Individuals actually
work in a group in
organization. The
behavior of person
may be different
when working
individually than
when he works as a
group member in a
group. Group
dynamics play a very
important role in
determining the
performance.
Groups form the basic building blocks of the organization hence it becomes imperative Groups and Decision Making
for the manager to understand group behavior and group properties. Most of the decisions
about the organizations are taken in meetings. Meetings are actually a platform for
interaction of group members. The individual decision making is different from group
NOTES
decision making. Most of the important decisions taken by the organization are taken
by group.
Unit Objectives
* Understand the concept of group.
* Know the difference between formal and informal group.
* Describe group development process.
* Explain the variables /properties that define group.
* Explain the effect of cohesiveness and norms on group productivity.
* Understand the difference between team and work group.
* Identify the ways to build effective teams.
* Understand decision making and types of decision.
* Describe the scientific decision making process.
* Differentiate between rational and administrative model of decision making.
* Understand the various techniques of decision making.
* Differentiate between individual and group decision making.
Group Defined
A group is defined as two or more individuals interacting and interdependent who

have come together to achieve a particular goal. A group can be a formal and informal
for e.g. Team of doctors performing a surgery on a patient make up a formal group
while friends going to picnic are an informal group. Formal groups are organizationally
determined while informal groups are determined through social contracts.
Formal Group
A group is formal when it is purposefully formed to achieve organizational behaviour of the

objectives. Formal group has a formal structure having hierarchy and structure that formal group depends
defines duties, responsibilities, authority of the individuals in the group. The members of upon the following
the organization are divided into small workgroups by deliberate and systematic efforts. factors imposed by
Each workgroup is given a responsibility to perform a task that contributes to the overall
organizational objectives. Formal groups form a subset of organization structure. The

Groups and Decision Making organizational forces.
(1) Authority and structure : The authority structure determines the right to
take decision of the individual in the work group. It defines who among the
NOTES work group will take decision and who will report whom.
(2) Formal regulations : The workgroup has to abide by the rules and regulations
laid down by the organization to standardize the behaviour of employees.
These regulation lead to consistent and predictable behaviour of employees.
(3) Organizational Resources : Some organization that are profitable have
abundance of resources in terms of fund, equipment, facilities etc. while
other organization may not be that fortunate. The abundance and lack of
resources influence group behaviour.
(4) Performance evaluation and reward system : Whether the system reward
individual performance or group performance? Such decisions greatly
influence the group behaviour.
(5) Physical work settings : The work settings and physical layout like
arrangement of machines, proximity, illumination, acoustic system, can create
obstacles or opportunities for work group interaction.
(6) Organization strategy : The type of strategy the organization is pursuing
for e.g. expansion or retrenchment, greatly influence the amount of resources
that are made available to the groups, work environment, emotional well
being etc. During retrenchment the group experience shrinkage in resources
and the employees will be under stress and anxiety.
(7) Organization culture : Every organization has a culture which is a unique
set of relatively stable characteristics. Organization culture is a set of shared
values, understanding, assumptions that controls the behavior of organizational
members.
Informal Group
Informal groups do not have any formal structure and are made by the members
voluntarily. Such relations are formed between people at their own discretion. Informal
groups are formed due to personal bonding between people. Personal bonding develops
due to similar likes and dislikes. Even while working in a formal group people tend to
form informal group depending upon their personal liking. Informal organization not
only benefits the employees but benefits the management as well, the benefits are as
follows:
Management Process
Advantages to
employees
(1) Sense of
Belonging
: A formal
group has
a rigid
structure
having
formal
authority
and
predetermi
ned duties
where the
employee
does not
feel the
sense of
belonging
ness and
does not
derive
personal
satisfactio
n. This gap
is filled by
joining an
informal
group.
People
join group
because of
their need
for affiliation and security. Group provides warmth and support to its group Groups and Decision Making
members. Group also provides people with the feeling of self worth.
(2) Emotional support : Work life involves various frustration and tensions.
As in an informal group people might share the same problem, they collectively NOTES
deal with situation At times employee may need a person as friend to hear
his problem and support him emotionally. In the informal group people can
easily share their feelings.
(3) Aid on the Job : The informal group members share a close relation. They
may help each other in case accident or illness. Often, the group members
exchange work assignments on the basis of specialization of group members
rendering better performance which at times is more than what is expected
from them.
(4) Power : People feel strong and powerful when they join group as there is
power in number. A goal that cannot be achieved by an individual alone
becomes possible through group actions. They are able to pool knowledge,
power, and talents in order to achieve their goal.
Advantage to the management
(1) Less supervision : Informal group has its own policies and favorable group
norms for organization that act as a check on the behavior of the employees.
It substantially reduces the supervision load of the management.
(2) An aid to management : The informal group helps in bridging the short
coming in a manager’s abilities. The group members may help the manager
without making others to know about his weaknesses.
(3) Feedback : The informal group provides the manager much valued feedback
about employees and experiences which helps them better understanding of
their expectation from the management. It also helps in developing employees’
trust in management.
Disadvantages
(1) Resistance to change: An informal organization is bound by customs,
conventions and culture. They are so much habituated that they resist change.
(2) Sub-objectives: The group gives more preference to group objectives than
to organization’s objective.
(3) Rumour: An informal group often create information which does not have
any strong base. They create rumour. This type of grapevine can be
unfavourable for management.
(4) Displaced loyalty: Workers are more influenced by the informal group and
become more loyal to them than to the organization.
In the process of
Stages in Group Development evolution group
undergoes
through five stages model of group
Management Process
& Organisational
Behaviour : 133
Groups and Decision Making development: forming, storming, norming, performing and adjourning.
(1) Forming : In the first stage the group members try to gather information
and impression about each other. The members want to be accepted by
NOTES others and hence are usually polite and positive in their behavior. Group
members try to acquaint themselves about the task. The leader behavior is
directive and informative.
(2) Storming : The second stage is characterized by confrontation, disagreement.
As the group members attempt to organize for the task different ideas compete
for consideration. Conflict is inevitable part of this stage. They address issues
about what and how the task is to performed, who will be responsible for
what etc. Conflicts will arise over leadership, power and structure too.
(3) Norming : Rules of behavior are set and hierarchy is established. Individuals
try to resolve interpersonal conflict and begin to experience a sense of
belongingness towards group. Now the group members are ready to take
responsibility for one goal and a plan set by the group.
(4) Performing : By this time group members are well informed and motivational
to function. At this stage group members are most productive. They progress
towards the common goal supported by structures and process that have
been set up by them at the norming stage. This stage is marked by
interdependence in problem solving and personal relations.
(5) Adjourning : This stage involves completion of task and breaking of the
group. Separation issues are addressed and group members may express
appreciation of each other and group experience.
Group Properties
Behaviour : 134
Management Process
& Organisational
from employee’s ability or level of motivation.
Group
Norms • Appearance norm : They set standards for appropriate dress code, arrival
and departure time as well as their leisure periods (when to look busy).
They are the
• Informal social arrangements : These norms regulate social interactions
acceptable standard
for e.g. friendship. They influence social gathering like lunch, party, picnic
of behavior that are
etc.
established and
shared by group According to Feldman “the group norms that are enforced by group ensure group
members. Norms are
the rule of conduct
that ensures
uniformity in action.
The group norms
may include
performance norm,
appearance norm,
social arrangement
norms etc.
• Performa
nce norms
: These
norms set
standards
for the
level of the
output,
method of
doing job,
quality of
efforts to
be put in
etc.
Performan
ce norms
are one of
the major
contributin
g factors
in
employee’
s
productivit
y apart
survival facilitate task accomplishment, contribute to morale, or express group central time together they
value. The group norms ensure predictability and group members become aware of get closer to each
each other’s action and reactions. They take appropriate measures while responding to other. It helps them
their group members. Group norms are generally those norms that majority of group to know each other
members promote. These norms must have either improved the chances of success or
must have protected the group from outside threat in the past.
Roles
They are the expectation of behavior from group member occupying a given
position in the group for e.g. manager in the organization is expected to play role of
spokesperson, resource allocator, disturbance handler etc. In private life he may also
be a chairman of a golf club. The goals can be either compatible or contradicting. In
group every member is supposed to play a role. The degree of success of any group
member in a group depends upon the extent to which group member’s role perception
fulfills the expectation of other group member about his role. In other words when
individual is able to act in a way that others expect him to act in a given situation, he will
be evaluated positively by group members.
Status
A formally or informally defined position or rank given to a group member by
other in a group is called status. For eg in formal context principal has a higher status
than the teacher. In informal context variables like education, age, sex , experience etc
play an important in determining the status of individual in a group. Studies have shown
that high status group members enjoy more freedom to deviate from norms than low
status group members. Status also influences interaction among members of the group.
The lower status member tends to be less vocal in group discussion as compared to
high status group members.
Group size
The size of the group also influences group behavior. The research indicates that
smaller groups are more effective at completing task than larger ones. On the other
hand larger groups have advantage of diverse input and variety of talents. When the
goal of the group is fact finding or information gathering then larger group is effective.
Social loafing increases with the increase in size of the group. Social loafing is the
tendency of an individual to exert less effort when working collectively than when
working individually. In order to avoid social loafing in a manager should build individual
accountability while assigning task to the group. The performance appraisal and reward
system should include peer evaluation and group reward based on individual efforts.
Group cohesiveness
It is the measure of bond among group member that holds the group together. It is
the degree to which members are attracted to each other. The factors that are responsible
for group cohesiveness are
• Time spent together : If the group members get enough time to spend
NOTES

Groups and Decision Making well which facilitates friendship. Physical proximity also plays a very important
role.
• Group size : As the number of members in the group increases it becomes
NOTES very difficult to interact and communicate with each other. Continuous
interaction is important factor that improves cohesiveness. Due to lack of
time for interaction group cohesiveness decreases with increase in size. But
at the same time small groups emerge within the large group. This results in
dilution of common objectives of the group as well as group cohesiveness.
• Barrier at the entry level : Sometimes the group is characterized by special
qualities or status each member enjoys. The selection of the member is based
on the exclusive qualification or status that he posses. If the individual do not
posses that special quality he is not included in the group for e.g. students
who join prestigious college because of their merit feel a sense of pride in it.
They form group because they have a common characteristics that results in
liking towards each other which in turn increases cohesiveness.
• Gender of member : It has been found through research studies that women
form much cohesive group as compared to males. The reason can be attributed
to the fact that the women are less competitive and more cooperative than
their male counterparts.
• Outside pressure : External threats facilitate group cohesiveness. As the
group perceives that their common objective is in danger due to outside pressure
they forget their differences and unite to ward of threats. The philosophy
“United with stand and divided we fall” comes into play.
• Similar Interest and personalities : Compatible goals, similar likes and
dislikes and similar value systems of the members also increase group
cohesiveness.
Relationship between Group Productivity, Norms and Cohesiveness

Studies have found that cohesiveness is related to group productivity. Most of the
research has indicated that there is a positive relationship between group productivity
and group cohesiveness. In cohesive group, group members act as stress busters by
Check Your Progress providing emotional support and helping hand. The second important thing that influences
group productivity are the group norms, specially performance related norms. Group
formal and informal
norms act as a moderating variable. It has been found if performance related norms
group.
are high, then a cohesive group will be more productive than a less cohesive group. If
2. What are the
performance related norms are low then a cohesive group will perform very low than a
advantages and
disadvantages less cohesiveness group. The following figure explain the relationship
of informal
group? Process
Management
& Organisational
Behaviour : 136
Moderate
High
to low NOTES
Productivity
W productivity
High
o
r
k
N Moderate
Low
o to low
r Low Productivity
productivity
m
High Low
Group Cohesiveness
Figure 9.1 Relationship between productivity, cohesiveness and
group norms
Understanding Difference Between Work Group and

Teams
A work team is a group of individuals that generates positive synergy through co-
ordinate efforts and complementary skills. The members of the group primarily interact
to share information so as to aid group members in making decision. The need for
significant improvement in performance necessitates collective performance and joint
efforts of the team members. Team has greater performance potential as compared to
work groups. Team requires more deliberate efforts and monitoring as compared to
work groups. Group of clerks in departmental store is an example of work group. They
have similar individual objectives and there is some level of coordination between them.
They are neither interdependent or have shared accountability. Team is characterized
by true interdependency and shared accountability. If during cricket match the fielder
misses a catch the whole team faces failure. The players have to play according to the
strategy laid down by the captain necessitating high degree of coordination and joint
effort. There is individual accountability in work group but in teams there is both individual
and mutual accountability. Team demonstrates the old saying. The whole is greater
than the sum of its part. The differences between work group and work team can be
best understood through the following figure. Management Process
Groups and Decision Making GROUP Basis TEAM
• Share • Purpose to form • Collective

Information group Performance
NOTES • Neutral • Synergy • Positive
• Individual • Accountability • Individual and

mutual
• Random and • Composition of • Complementary

varied Skills
Fig. 9.2 : Difference between work group and team
9.10 Creating Effective Teams

Management Process
• Clarify and specialist role provide information, opinion and relate various ideas to the
establish problem in hand. While people who play socio emotional role encourage
specific goals : members of the group , harmonious interpersonal relations and reduce tension
Articulate in the group. Effective team requires three types of skills: decision making
team’s purpose skills, technical skills and interpersonal skills. The right mix of the skills is
into specific crucial to the success of the team. Too much of one at the expense of others
measurable and may hamper the effective performance of the team.
realistic • Rewards : The team leader should acknowledge important milestone and
performance plan celebrations for incremental success. He should appraise and reward
goals. Also the team as a whole and each employee individually, including a review of his
communicate or her teamwork.
how the team • Size : The high performing team tends to be small. Large teams do not give
contributes to adequate opportunity to its member to interact and understand each other
the company’s which is very important to build trust and rapport. Group cohesiveness is
success. instrumental in achieving high performance.
• Skills and role • Trust and commitment : The leader should develop trust in the minds of
of the the members. The members should have a belief in the integrity, character
members : It is and ability of others. High – performance teams are characterized by high
important for mutual trust among members. The effective team has common meaningful
the team leader purpose that provides direction and commitment for members.
to identify
strength and
weakness of its
team member
and assign them
the jobs that
best fit their
skills. There are
two types of
role worth
mentioning:
task specialist
role and socio
emotional role.
For a team to be
effective it must
have people in
both task
specialist role
and socio role.
People who
play task
• Leadership and structure : The leader should be able to encourage Groups and Decision Making
members build trust and confidence, resolve conflict and provide direction.
Member should agree on what is to be done, who is to do what and ensure
that all group members contribute towards the goal.
NOTES
Decision Making
Decision making is a process that aims at choosing the best alternative among
various alternative to achieve desired objective. According to Haynes and Massie,
“Decision making is a process of selection from a set of alternative courses of action
which is thought to fulfill objective of the decision problem more satisfactorily than
others.”
Types of Decisions
Programmed Vs. Non programmed decision

Programmed decisions are related to routine matters. Guidelines for decision are
already available to decide maker. He has to just identify the problem and implement
the predetermined solution given in guidelines. It saves his time and efforts .Non
programmed decisions are unique in nature, hence readymade solution are not available
for them. High degree of deliberation and decision making skills are required to solve
such problems.
Operational Vs. Strategic decisions

Operational decisions are made at the lower level of management and are mostly
concerned with short term decisions, while strategic decisions are made at higher level
of management hierarchy. They are usually long term decisions that demand conceptual,
diagnostic skills and creativity on part of management.
Steps in Scientific Decision Making
In order to optimize the outcome some systematic steps are to be taken

(1) Identify the problem : Whenever a disparity between desired and actual
state is encountered the problem is recognized. The problem can be due to
environmental factor; both internal and external to the organization for e.g.
threats and opportunities in external environment.
(2) Diagnose the problem : The manger should be able to differentiate
symptoms from the real causes of the problem. The source of the problem
should be identified accurately. The problem should be identified on the basis
of magnitude , urgency and impact on various others factors. It also involves
Management Process
generating the decision criteria.
Groups and Decision Making (3) Develop alternatives : The next step is to make a list of various options
that can be used to resolve the problem. For eg. if the person wants to buy a
car he should make a list of various model of car of different companies
available in the market.
NOTES
(4) Evaluation of alternatives : The manager should be able to identify strength
and weakness of each alternative. The decision criteria should be prioritized
and assigned weights accordingly. Various criterion of each alternative should
be given score. Peter Druker has suggested few criteria to evaluate
alternatives which are risk, economy, timing and limitation of resources. If
we refer to the above example of buying car the decision criteria can be
capital outlay, mileage, safety, power, aesthetic, space etc. The weights should
be assigned to these criteria depending on the priority. If budget is the main
limitation then mileage and capital outlay should be given highest weight.
Then various models should be given scores for every criterion say at a
rating scale of ten. These scores should be multiplied by weights and total
should be obtained.
(5) Select best alternative : Once the alternatives are evaluated the best course
of action that maximize results under conditions are chosen. In the above
example the model for which total score is the highest should be chosen.
(6) Implementation : The decision should be communicated and people should
be identified who will execute the decision. Adequate authority should be
delegated and necessary support and resources should be allocated to them.
They should be held responsible for results.
Alternative Models in Decision Making

Management Process
problem, nor does he know their consequences perfectly. The power of decision maker
Rational
is limited by his cognitive abilities and knowledge. Moreover the constraints of
Economic
resources in terms of time and cost do not allow him to go for comprehensive
model
analysis of situation and alternatives. Decision maker operates under the condition of
According to bounded rationality. Instead of going for exhaustive search he simplifies the decision
this model the making model by limiting the number of alternatives and the consequence is, that he
decision maker has chooses good enough solution
clear and well
defined goals. He can
identify and diagnose
the problem correctly.
He knows all possible
alternative courses of
action and can rank
them perfectly
according to the
decision criteria. He
can choose the best
alternative and
maximize his
satisfaction. He has
all the information
required with him
that is relevant to
decision making and
is able to analyze and
use it perfectly.
Administrative
Model
According to
this model it is not
possible for decision
maker to be
completely rational.
To identify and
diagnose a given
problem accurately is
a difficult task.
Decision maker does
not have perfect
knowledge regarding
all alternative
solution to the
rather than best solution as propagated by rational model. Groups and Decision Making
Techniques of Group Decision Making

NOTES
(1) Brainstorming
This technique was developed by A.F. Hosborn. This technique aims at encouraging
group members to generate ideas for alternatives of solutions to the problem given by
way of interaction, withholding criticism. In this technique the group leader presents the
problem in a clear manner in front of the group members and encourages them to
produce alternatives. They are permitted to interact freely and criticism is not allowed.
All the alternatives are recorded, analyzed and discussed at a later stage. This technique
fosters creativity as group members are free to think and present their ideas.
(2) Nominal Group Technique

In this technique communication and interpersonal interaction is restricted. The
problem is presented to the group members by the group leader. Every group member
writes his own idea on a paper and each member gives presentation on his idea in front
of the group. No discussion takes place until all members of the group have presented
the ideas. Once presentation of ideas are over the group is permitted to discuss the
ideas freely. After discussing and evaluating every idea, the ideas are ranked. The idea
that gets the best ranking by the group members during the process is selected.
(3) Delphi Technique

It insulates the members from undue influence of other members by eliminating
the need to assemble at one place. The problem is mailed by the group leader to various
experts along with questionnaire that purports to obtain solution for the problem,. The
experts send their solution through mail. The leader compiles the solution of all the
experts into a report and forwards it to them once again to obtain feedback. Each
expert analyzes and evaluates the report, develops new suggestions if required, ranks
the ideas present in the report and resend it to the group leader. The process continues
till a best possible, clear solution emerges from this exercise.
Difference between Individual and Group Decision

Making
Decision making involves selection of a course of action from among two or more 1. A group has
alternatives to arrive at a solution for a given problem. Group decision making happens the potential
when group members collectively make a choice from the alternatives before them of generating
more
through census or consultation. Decision making without the group input or group opinion complete
is individual decision making. information
and
Advantages of Group Decision Making

Groups and Decision Making knowledge as compared to individual decision making.
2. Group offers increased diversity of views since there are many members in
a group and so are many views leading to better decision, while in individual
NOTES decision making approach the person has to rely on his own intution and
views.
3. In group decision making there is increased acceptance of a solution by
group members because the group members are involved in the process of
decision making. Group decision making is effective when the solution directly
affects the group member while in individual decision making person will not
take into consideration the interest of every member.
Disadvantages of Group Decision Making

1 Group decision making is very time consuming while individual can make
prompt decisions in individual decision making. So in terms of speed individual
decision making fairs better than group decision making.
2 In individual decision making the decision maker can be held accountable
for his/her decision, while in a group it is difficult to hold any one person
accountable for a wrong decision.
3 The group makes riskier decision as compared to individual.
Group Think and Group Shift

Group Think
Group think is an extreme form of consensus in which group pressure for conformity
overrides the realistic appraisal of alternative courses of action. There is a tremendous
desire for unanimity thus inhibiting free exchange of ideas .There is illusion of unanimity
as members hesitate to communicate their views in order to avoid being harsh in their
judgment of each other’s ideas. This tendency is more evident in cohesive group.
Group Shift
The shift in the position of the members towards an extreme position that can be
either conservation or risky, depending on the dominant view the members hold during
pre discussion. The group discussion tends to exaggerate the initial position of the group.
The conservative type becomes more cautions and risk averse, while aggressive types
take on more risk. It has been found that more often the shift is towards greater risk.
Committee
Management Process
A committee or
task force is a group
structure in an
organization which
works for certain
committed matter. It
comprises of people
who are put together
for accomplishment
of a specific job task;
it is a temporary set
up which ceases to
exist once the
specified task is
achieved. The
concept of task force
is borrowed from
Navy and other
defence services.
The members of the
committee assemble
to discuss a
particular problem.
They debate on the
available solutions
and then recommend
that solution for the
problem
which the committee members think best. The duration of such a committee can be for expenditure. The
a limited. The member of the committee can be assigned other responsibilities of the executives have to
organization other than the activities of the committee. The basic ideology of setting a spend time in the
meeting and time
committee is to generate an autonomous opinion about any function or activity of the
business. It comprises of people of various departments that are representative of their
department. This is done to render an improved analysis of business operations.
Advantages of committee
(1) Better decision making : It renders a suitable means of exchange of ideas
and information between large groups of people. The intelligence of large
number people helps in better decision making. By pooling the opinion of
people having different background, interest and specialization wider knowledge
base is generated. This helps in analyzing the problem from different angles
leading to more appropriate decision.
(2) Innovativeness and Creativity : It provides access to a wide range of
ideas, expertise and interests of people who belong to various departments,
which brings creativity and innovativeness in doing things. Brainstorming
sessions are conducted during discussion process due to which new ideas
emerge.
(3) Effective coordination : Since people of various departments meet to solve
the problem the committee facilitates integration. After decision is made the
managers of the respective department try to unify the efforts so that
implementation of the decision can be done smoothly.
(4) Consolidation of authority : Some problems cannot be solved due to
splintered authority. So the managers have to meet and pool their authority to
take decision as no manager has adequate authority to implement the decision.
(5) Motivation : The participation in decision making improves the morale and
motivation of committee members. They give their whole hearted support
during implementation of decision. Participation enhances loyalty and
commitment towards organization.
(6) Check against abuse of power : Since the decision has to be made by
committee members jointly the authority gets dispersed among committee
members. No individual member can act according to his or her wish and
fancy. Thus committee keeps a check on misuse of power.
(7) Training Base : Committee provide a strong training ground for the
executives. They understand human relations, group dynamics etc. It also
helps them to visualize the organization as a system. This helps them in
understanding the various facets of the organization and their relationship with
each other as well as their impact on the overall objective of the organization. It
widens their knowledge and facilitate general management ability.
Disadvantages of committee
(1) Expensive : Pooling of manpower at a large scale requires considerable
NOTES
Check Your Progress

Management Process & Organisational Behaviour : 143 types of decisions?
2. What is a committee?
How does it help in
problem solving?
Groups and Decision Making involves cost. Other expenses are travelling allowance, preparation of reports,
daily allowances etc.
(2) Delay in decision making : Arriving at consensus is not easy in such a
group which results in delay in decision making. A lot of time is spend on
NOTES
deliberation, discussion and resolving conflict. Sometimes the committee members
lose their focus from the real problem and start discussion on trivial matters.
(3) No clear cut authority : In the absence of any clear cut authority any
group which tends to occupy power becomes decision maker. Dominance of
a particular individual or group can lead to group think that may fail the very
purpose of forming a committee.
(4) Poorly defined accountability : Since the decision is jointly made it becomes
very difficult to hold any one person responsible for the decision. This also
leads to the problem of group shift.
Summary
Manager should understand the group dynamics because group forms the basic
unit of the organization. A group consists of two or more individual interdependent and
interacting with each other for common objective. The groups can be formal or informal.
People join groups because it gives them support, power and a sense of belongingness.
Group members help each other in discharging their duties. The stages in group
development process include; forming, storming, norming performing and adjourning.
Group properties include group norms, group size, group cohesiveness, status and role.
Group properties affect group productivity. Teams are different from groups in terms
of purpose, accountability, synergy and composition of skill. Effective team can be
created through clarifying goals, right mix of skills, appropriate size and reward system,
trust, commitment, leadership and structure. Decision making involves choosing the
best alternatives from the available alternatives to achieve desired goals. The decision
making models are rational/scientific and administrative model. The various techniques
of group decision making are brainstorming, nominal and Delphi techniques. Group
decision making offers better decisions as compared to individual decision making. It
suffers from group think and group shift. Speed of decision and accountability pose a
problem for group decision making.
Key Terms
Management Process
* Group: It is
defined as two
or more
individuals
interacting and
interdependent
who have come
together to
achieve a
particular goal.
* Formal Group:
This type of
group is
purposefully
formed to
achieve
organizational
objectives and
has a formal
structure having
hierarchy and
structure that
defines duties,
responsibilities,
authority of the
individuals in
the group.
* Informal
Groups: They
do not have any
formal structure
and are made
by the members
voluntarily.
* Group norms:
They are the
acceptable
standard of
behaviour that
are established
and shared by
group
members.
* Roles: They are the expectation of behaviour from group member occupying a Groups and Decision Making
given position in the group.
* Group cohesiveness: It is the measure of bond among group member that
holds the group together.
NOTES
* Team: A work team is a group of individuals that generates positive synergy
through coordinate efforts and complementary skills.
* Decision making: It is a process that aims at choosing the best alternative
among various alternative to achieve desired objective
* Group think: It is an extreme form of consensus in which group pressure for
conformity overrides the realistic appraisal of alternative courses of action.
* Group shift: The shift in the position of the members towards an extreme position
that can be either conservation or risky, depending on the dominant view the
members hold during pre discussion.

(1) “Group always makes better decision than individual”. Comment.
(2) Explain the process of scientific decision making.
(3) What do you understand by group cohesiveness? What are the factors that
affect group cohesiveness? What is the impact of group cohesiveness and
group norms on productivity?
(4) What is the difference between team and work group. How to make an
effective team?
(5) Explain the process of group development.
Short answer questions
(1) Differentiate between rational model and administrative model of decision
making.
(2) Differentiate between nominal and delphi technique of decision making.
(a) Group size and social loafing
(b) Roles
(c) Brain storming

(1) Marvin E. Shaw, ``Group dynamics,’’ New York, McGraw Hill, 1981. (4) V. S. P. Rao, V.
(2) H. Owen, ``Creating top flight team,’’ Kogan page ,London 1996. Harikrishnan,
``Management
(3) Robbins Stephens, Judge Timothy A, `Òrganisational Behaviour,’’ Pearson
Text and cases,’’
Education.
excel books,
fourth edition.
Management Process
& Organisational
Behaviour : 145
Leadership
UNIT 10 LEADERSHIP
Structure
NOTES
Introduction
Unit objectives
Leadership Defined
Leadership Theories
Trait Based Approach
Behavioral Approach
Modern Theory of Leadership
Summary
Key Terms
Introduction
If we look into the past, we will find exemplary examples of effective leadership.
Mahatma Gandhi, Karl Marx, Abraham Lincoln, Bill Gates, JRD Tata and many more
have brought revolution, innovation and transformation in different fields of‘ business
and politics through their intellect and personalities. The world that we see today is the
outcome of their courage, ability and power to influence people towards the goal they
pursue. Leadership plays a central role in the organization by influencing and inspiring
people towards goal attainment.
Unit Objectives
Management Process
After studying this
unit, you should be
able to-
* Understand the
concept of
leadership.
* Identify
important traits
suitable for
leadership.
* Explain different
leadership styles.
* Explain
managerial grid.
* Describe Fiedler
contingency
model.
* State Hersey
Blanchard
situational
theory.
* Summarize Path
goal theory.
* Define the
characteristics of
charismatic
leader and
transformational
leader.
Leadership
Leadership Defined
Leadership is defined as a process of influencing people to perform well so that
mission / goal can be accomplished. Leader guides and directs the actions of others NOTES
towards goals.
According to George R. Terry, ``Leadership is the ability to influence people to
work willingly for group objectives.’’ This definition puts direct emphasis on the willingness
on the part of the people led.
Koontz and O’Donnel have defined leadership as ‘influencing people to achieve
common goal. It is the ability to exert interpersonal influence by means of communication
towards the achievement of goal.’
Leadership Theories
The leadership literature is voluminous. There are basically four approaches to 6. Interpersonal
characteristic
explaining what makes an effective leader. They are trait based approach, behavioral s like
approach, contingency approach and modern approach. agreeableness
, extraversion,
Trait Based Approach communicati
Trait theory of leadership emerged from “Great Men Theory” proposed by Thomas on
Carlyle who wrote the book ‘Heroes and hero worship’. He researched the leadership
qualities of men such as Napoleon , Martin Luther etc.
Trait theory
Traits are specific personality, physical or intellectual characteristics in a leader
that differentiate leaders from non leaders .Every individual endures certain traits.
Effective leaders have right combination of traits that are particularly suited to leadership.
The researchers studied the characteristics of many successful and unsuccessful
leaders and tried to identify those characteristics that lead to leader’s effectiveness.
They evaluated leaders based on the following traits:
1. Physiological characteristics like appearance, height , weight ,energy levels
etc.
2. Demographic characteristics like age, education , socio economic background
etc.
3. Personality characteristics like self confidence, conscientiousness, emotional
stability etc.
4. Intellectual characteristics like decisiveness, knowledge, judgment, indulgence,
creativity etc.
5. Task related characteristics like persistence, openness to experience,
achievement orientation, initiative etc.

Leadership & Organisational Behaviour : 148
NOTES
Management Process
skills etc. n, Dominance, Masculinity,
Conservatism
According to
Trait Theory leaders Bass (1990) Adjustment, Adaptability,Aggressiveness,
are born and not Alertness, Dominance, Emotional
made. Below are balance, Control, Independence, Non conformity,
some of the traits Originality, Creativity, Integrity, Self confidence
identified by the Kirk Patrick and Locke(1991) Achievement drive, Ambition, Energy, Initiative, Self
researchers confidence, Honesty, Integrity, Emotional stability
Researcher Traits
Hogan(1994) Extraversion, Agreeableness, Conscience, Emotional
stability
Stogdil(1948) Dependability , Sociability, Initiative, Persistence, Self confidence, Alertness, Cooperativeness, Ad
Research efforts in identifying traits common in effective leaders resulted in failure
Mann
to reach any conclusion. The problem with trait based approach is that researchers
(
have been unable to identify a common agreeable set of leadership attributes. Trait
1
theory was criticized because there were only 5 % of similar traits that were found in
9
100 studies.
5
6 Behavioural Theories
) The behavioral theories focus on the manner and approach of providing direction
and motivation to the people by the leader. Main emphasis of the behavioral approach
Awas to identify different leadership styles.
d
(1) Michigan Studies
j
u The most comprehensive of the behavioral theories resulted from research that
s began at Ohio state university in the late 1940 and Michigan leadership studies in the
t 1950. The studies undertaken by Michigan University came up with two dimensions of
mleader’s behavior. They labeled these two dimensions as employee oriented and
e production oriented.
n Employee oriented leader was described as one who emphasizes good interpersonal
t relationship with the subordinates. They act in friendly and supportive manner towards
, their subordinates. They show trust and confidence in group member.
Production oriented leader tends to emphasize on the task aspect of the job. The
E
leader structures his role or her role as well as the roles of the subordinates towards
x
achieving the goals. They strictly make sure that deadlines are met and target is
t
r
a
v
e
r
s
i
o
achieved.Michigan researchers favored employee oriented behavior. The findings Leadership
revealed that employee oriented behavior has a positive effect on productivity and job
satisfaction.
(2) Managerial Grid NOTES

Blake and Mouton proposed five different leadership style through a managerial
grid. The grid depicted two dimensions of leader behavior with concern for production
as x-axis and concern for people as y-axis, each axis ranges from 1(low) to 9(high).
High (1,9)
(1,9)Country
CountryClub
Club (9,9)
(9,9)Team
Team
Concern for People
(5,5)
(5,5)
Middle of the road
Middle
(1,1)Impoverish
(1,1) Impoverish (9,1)
( 9,1) Task
Task master
master
Low High
Concern for Production
Fig. 10.1 : Blake and mouton’s managerial grid an atmosphere of

empowerment,
(1) Country Club (1,9) : This leadership style has low concern for production
commitment, trust and
and high concern for people . Leaders give due attention to the needs of the
respect. The result
people. The leader feels that if he will provide friendly and comfortable
environment to the people they will feel secure and relaxed. This will lead to
self motivation and people will work hard on their own. But lack of direction
and control can hamper production.
(2) Produce or Perish (Task Master) (9,1) : This leadership style has high
concern for production and low concern for people. The employee needs are
unimportant and are not taken care of. The leader believes that efficiency
can result by putting pressure on employee through strict rules and
punishments. This style can be effective in times of crisis. But it leads to
dissatisfaction of employees and high turnover.
(3) Team (9,9) : This Leadership style show concern for people as well as for
production. Leaders using this style encourage teamwork through creating

NOTES
Check Your Progress

1. Discuss the limitation
of trait theory of
leadership.
autocratic leadership
style and participative
style.
Management Process
is that are mature and show high level of motivation.
employees (5) Middle of the Road (5,5) : This is basically a compromising style where in
feel leader tries to balance the two competing concern by giving away a bit of
satisfied
and are each concern. The leader settles for average performance. The consequence
motivated is neither production nor people needs are fully met.
to perform
better. (3) Leadership Styles Proposed by Kurt Lewin
(4) Impoveris Kurt lewin established three major leadership styles. These styles are as follows:
h (1,1) : (a) Authoritarian (Autocratic)
The leader Leaders have complete control over their people. They make decisions without
shows low seeking advice from their followers. They clearly state what they expect from their
concern followers and how the work is to be accomplished by them. The advantage of autocratic
for both style is that it aids in quick decision making. But the disadvantage is that the followers
people and resent it and feel demotivated and demoralized. However the style can be effective in
production times of crisis when quick decision making is of utmost importance and employees are
. The motivated for e.g. : military organization uses autocratic leadership style.
leader uses
(b) Participative
this style to
protect him Leader involves his group member in decision making process before making a
from final decision. It helps in making better decisions as it utilizes the knowledge and skills
getting into of the employees also. The advantage of this approach is that it increases productivity
trouble. and job satisfaction of the group members. The only drawback is that it slows the
His main decision making process as valuable time is consumed in gathering input from group
focus is to member. This is most effective when quality of decision is more important than speed.
preserve (c) Delegating
job and job Leaders allow their group members to make decision and work on their own. The
security. leader follows the policy of non interference. Their group members have complete
This style freedom to do their work. The leaders provide resources and advice only if needed.
is most This style leads to high job satisfaction and increased productivity of the group members.
ineffective This style gives more room for development to the followers. The downside is that it
and leads can be damaging if the employees are not knowledgeable and do not have willingness
to to work.
disharmon
y and
disorganiz It became increasingly clear to those who were studying leadership that predicting
ation in the effectiveness of a leader on the basis of traits or a particular style is not adequate.
organizati Situational factors also play a very important role. Different situation may call for a
on. This different leadership style. A particular style may be effective in one situation but may
style can
be
successful
only when
followers
not be effective in another situation. Thus it becomes imperative that leadership style Leadership
should change according to the situation in which the leader is leading. The notable
model in this category is Fiedler’s model, Hersey Blanchard situational theory and path
goal theory.
NOTES
(1) Fiedler Contingency Model
Fielder developed an instrument known as the least preferred co- worker
questionnaire that purports to measure whether a person is task or relationship oriented.
In the questionnaire respondents have to rate one person they least enjoyed working
with. Based on the answers to the LPC questionnaire the person’s leadership style is
determined. If the LPC score is high then the person is relationship oriented and if LPC
score is low then the person is task oriented.
Before matching leadership style and situation it becomes necessary to define the
situation.
(1) Leader-Member Relations : The degree of trust respect and confidence
followers have in their leader. It specifies that whether leader have support of their
followers. It indicates how much leader is liked by followers and their willingness to
accept the leader’s behavior. The leader member relation can be good or poor.
(2) Task Structure : It is the extent to which task performed by the subordinates
are clearly defined. If the tasks are routine and standardized, the work to be done
become predictable. The task can be highly structured or lowly structured.
(3) Leader Position Power : It is the degree of power inherent in leader’s
organizational position. It refers to the extent to which leader has authority over group
member and power to reward and punish them. The position power can be weak or
strong.
(4) Matching Leadership Style and Situation : Fiedler constructed eight
combination of group task situation ranging from most favorable to most unfavorable
with help of these three variables. The most favorable situation is one in which the
leader member relationship is good ,task is highly structured and leader position power
is strong. The most unfavorable situation is one in which the leader member relationship
is poor, task is unstructured and leader position power is weak. Based on fielder’s study
of over 1200 groups he tried to match leadership style with situation so that leader
becomes effective. This is well explained in the comprehensive diagram given below;
Management Process
& Organisational
Behaviour : 151
Leadership Situation \ Situations I II III IV V VI VII VIII
Variables
Leader member Good Good Good Good Poor Poor Poor Poor
NOTES Relations
Task Structure High High Low Low High High Low Low
Position Power Strong Weak Strong Weak Strong Weak Strong Weak
Most Favourable Moderate Most Unfavourable

Appropriate † † †
Leader Taskoriented Relationship oriented Task oriented
behaviour
Fig. 10.2 Fiedler Model
Management Process
Source : hens, Judge Timothy A, Organizational Behavior, Pearson
“ Education
F Fiedler concluded that task oriented leader performs best at the extremity i.e.
i when situation are most favorable or unfavorable, while relationship oriented leader
n perform best in situations that are moderate.
d
Fiedler model is based on empirical study. It lacks explanation as it does not have
i
theoretical orientation. The reliability of LPC is also subject to criticism.
n
g (2) Hersay Blanchard Situational Theory
s It is a contingency theory that focuses on follower’s maturity. It states that
leadership effectiveness can be attained by selecting appropriate leadership style which
f depends upon the level of the follower’s maturity. Maturity is the measure of follower’s
r competence and motivation. In other words it is the degree of willingness and ability the
o followers have to perform required task.
m
Hersey and Blanchard proposed four leadership styles each of which is combination
of task and relationship behavior. They are described as follows:
F
i Telling (high task low relationship): It emphases a directive behavior that requires
e leader to tell people exactly what to do and how to do it.
d Selling (high task-high relationship): The leader provides both support and direction
l by giving followers advice and help to gain necessary skills through coaching method.
e
Participating (low task- high relationship): Leader takes the role of a facilitator
r
and motivator by involving followers in decision making. He tries to persuade follower
to cooperate through praise and communication.
m
o Delegating (low task- low relationship): Leader monitors progress from a distance
d and is less involved in decision making. Most of the responsibility is shouldered to the
e followers.
l Hersey Blanchard proposed four levels of maturity of the followers( R1, R2, R3,
” R4) and tried to match them with the four leadership style
R
o
b
b
i
n
s
S
t
e
p
At the stage R1, the followers are neither motivated nor possess necessary skills. Leadership
They require guidance and directions and hence telling leadership style is most
appropriate.
At the stage R2, the followers are motivated but lack skills. They require direction NOTES
and support from their leader selling leadership style is best suited for these kinds of
followers.
At the stage R3, the followers are competent but lack the drive to work. The
participative leadership style can be helpful in this situation as it will try to address the
motivational problems of the followers.
At the stage R4 , the followers can do the job and are motivated too. The followers
need very less support or direction and hence the leader doesn’t have to do much. The
delegating leadership style is appropriate while interacting with followers having high
maturity level.
Participating Selling
High
This style is effective for This style is effective for
followers, who are able and followers, who are unable
Relationship behavior
unwilling (R3). and willing (R2).
Delegating Telling
This style is effective for This style is effective for
followers, who are able and followers, who are unable
willing (R4). and unwilling (R1).
Low
Low High
Task behavior
(Maturity level of subordinates)
High Moderate Low
R4 R3 R2 R1
* Able and * Able and * Unable and * Unable and

Willing unwilling Willing unwilling
Fig. 10.3 : Hersey and Blanchard’s Stuational leadership Model The next
significant theory
(3) Pathgoal Theory to emerge in
contingency category was Robert House’s
Management Process
& Organisational
Behaviour : 153
NOTES
Check Your Progress

1. Mention three major
approaches of
leadership.
Management Process
path goal theory. The by being friendly and helpful. He shows concern to the need of subordinates. This
leader task is to style is similar to employee oriented leadership style.
clarify path by (3) Participative : The leader shares decision making responsibility with the sub-
eliminating ordinates and incorporates their suggestions in the decision.
confusion that the (4) Achievement Oriented : Leader sets challenging goals for sub-ordinates and
subordinate have and shows confidence in them. The followers draw strength from the leader’s belief
by providing the that the individual follower is competent enough to achieve demanding targets.
guidance and support
House’ s theory mentioned four ways of behaving to different situations. The
to reach goals. The
situations in a path goal theory are driven by two contingency variable: follower’s
behavior of the leader
characteristics and workplace characteristics.
should be
instrumental in 1. Follower characteristics are in the control of subordinates. They are a part
attainment of of personality characteristics of the subordinates that includes locus of control,
subordinate’s experience and perceived ability.
immediate or future 2. Workplace characteristics are outside the control of subordinates. They
satisfaction. The include task structure, formal authority system and work group.
theory identifies four The specific leadership style according to house that works best is determined by
leader behaviors: these two situational variables.
(1) Directive : The
Supportive style works best when followers have high ability to perform. Directive
leader gives
style will be acceptable to the sub-ordinates when task is unstructured and complex and
clear directions
sub-ordinates lack requisite skill, experience and posses external locus of control.
sets
Directive leader will bring better results when there is substantive conflict within the
performance
group. Subordinates with internal locus of control will find participative style more
standards and
satisfying. When tasks are ambiguously structured achievement oriented style is best
controls the
suited.
behavior
through Modern Theory of Leadership
judicious use of Charismatic Leaders
rewards and The word “Charisma” comes originally from Greek language which basically
disciplinary means “ A gift given by god”. Followers of charismatic leader are charmed by the extra
action when ordinary leadership qualities that he or she posses like wisdom, heroism, sense of purpose.
performance Charismatic leaders are perceived as agents of change. They demonstrate confidence
standards are in their judgment and ability. They have an idealized goal and vision. They are able to
not met. articulate their vision to their follower very well and hence act as a motivating force.
(2) Supportive : They are unconventional, assertive and have a strong personal commitment towards
The leader
reduces the
efforts of
emotional
obstacles or
stress on the
path to the goal
goal. Charismatic leaders are perceived as larger than organization. People working Leadership
for charismatic leader are motivated to put extra effort because they like and respect
their leader. They are enthusiastic and express greater job satisfaction.
The charismatic leaders lose credibility when they fail to deliver promises that NOTES
they made to their followers. The power of charismatic leader is very much dependent
on perceptions and need of followers.
Transformational leaders
Most of the traditional theories for e.g. Michigan, fielder models, path goal theory
etc are closed to transactional leadership style that guides and motivates their followers
by “telling style” i.e. by clarifying role and task requirement. Transformational leader’s
style on the other hand focuses on “selling” company’s vision which is usually a departure
from established one. A transformational leader inspires followers to achieve their goals
through higher ideals and moral values. They motivate their followers to focus on higher
order intrinsic need. They promote intelligence, rationality and careful problem solving.
They give personal attention to each employee, coaches and advices them.
Transformational leader has much in common with charismatic leader, but while the
latter wants the follower to adopt charismatic’s world view the former attempt to instill
in followers the ability to question not only established views but eventually those
established by the leader.
Summary
Leadership determines the quality of organization by providing vision and direction
, motivation to the employee of the organization. According to Trait theory of Leadership
leaders are born and not made. Successful leaders have certain qualities in them that
make them different from non leaders or unsuccessful leaders. Behavioral approach to
leadership focuses on the manner and the behavior exhibited by the leader during
supervising their employees. The various leadership style proposed by researcher of
behavior theory are autocratic, democratic, participative, lazes’ fair.
Contingency theory of leadership emphasize the fact that situation also plays a
very vital role in determining which leadership style will be effective in a given situation.
It calls for a proper match between leader and situation. Path goal theory proposed that
the effective leadership is a function of leadership style, situational factors and follower’s
characteristics. The modern approaches have included more heroic and visionary
approach to leadership like charismatic leadership and transformational leadership.
Key Terms
* Leadership: It is the ability to exert interpersonal influence on people to work or intellectual
willingly for group objectives. characteristics in a
leader differentiate
* Trait theory : This theory emphasis that traits that are specific to personality, physical,
leaders from non leaders.
Management Process
& Organisational
Behaviour : 155
Leadership * Behavioural Theory: It focuses on the manner, approach and style of providing
direction and motivation to the people by the leader.
* Employee Oriented Leader: He is described as one who emphasizes good
NOTES interpersonal relationship with the subordinates.
* Production Oriented Leader: The leader tends to emphasize on the task aspect
of the job and structures his role or her role as well as the roles of the subordinates
towards achieving the goals.
* Autocratic Leader: Leaders have complete control over their people. They make
decisions without seeking advice from their followers.
* Participative Leader : Leader involves his group member in decision making
process before making a final decision.
* Delegating Leader: Leaders follow the policy of non interference and allow
their group members to make decision and work on their own.
* Contingency Approach to leadership: According to this approach situational
factors also play a very important role in predicting effectiveness of a leader.
Different situation may call for a different leadership style.
* Supportive leader: The leader reduces the efforts of emotional obstacles or
stress on the path to the goal by being friendly and helpful.
* Achievement Oriented Leader: The leader sets challenging goals for sub-
ordinates and shows confidence in them.
* Charismatic leader: Charismatic leaders are perceived by followers as agents
of change that possess extra ordinary leadership qualities like wisdom, heroism,
sense of purpose etc.
* Transformational Leader: They motivate their followers to focus on higher
order intrinsic need and instil in their followers the ability to question not only
established views but eventually those established by the leader.

(1) Explain the trait theory of leadership? What are the major limitations of the
theory?
(2) What are the different styles of leadership? What are the major differences
between autocratic, democratic and free rein style of leadership?
(3) Discuss some of the personality traits that are useful to a leader.
(4) “Leadership style is contingent upon the situation” Discuss.
(5) Explain the five main leadership styles in managerial grid.
Management Process
(1) ”Leadershi
p style
should
vary
according
to maturity
level of
subordinat
es”
Discuss.
(2) What are the characteristics of a charismatic leader? Leadership
1. Transformational Leader
2. Situational variables of fiedler model NOTES

(1) R.M.Stogdill, Handbook of leadership: A survey of literature, New York:
free press 1974.
(2) J.G. Geier, A trait approach to study of leadership in small group, Journal
of communication, December 1967, pp. 316-23.
(3) F. Luthans, Organizational Behavior, Tata McGraw Hill, ninth edition
(4) V. S. P. Rao, V. Harikrishnan, Management Text and cases, excel books ,
fourth edition
(5) Robbins Stephens, Judge Timothy A, Organizational Behavior, Pearson
Education
Management Process
& Organisational
Behaviour : 157
Organizational Conflict
UNIT 11 ORGANISATIONAL CONFLICT
NOTES Structure
Introduction
Unit objective
Conflict Defined
Functional and Dysfunctional Conflict
Process of Conflict
Causes of Conflict
Intra Individual Conflict
Interpersonal Conflict
Group Conflict
Managing Conflict
Conflict Resolution strategies
Conflict Stimulation strategies
Summary
Key Terms
Introduction
Conflict is an inevitable and natural part of any organization. Managers devote

substantial part of their time in resolving workplace conflict. Conflict is a disagreement,
discord arising between two or more parties that result in mutual opposition. One school
of thought i.e traditional approach says that conflict is evil and should be avoided at any
cost, while human relations approach argues that conflict is unavoidable and hence
acceptance of conflict is advocated. The third school of thought i.e Interactionist view
that conflict can sometimes prove to be very healthy for organization’s growth and
hence optimum level of conflict should be encouraged in the organization.
Unit Objective
Management Process
After studying this
unit, you should be
able to-
* Understand and
define conflict.
* Differentiate
between
traditional,
human relations
and
interactionist
view of conflict.
* Discuss the positive and negative aspect of conflict. Organizational Conflict
* Explain the various causes of conflict.
* Outline the conflict process.
* Describe the five conflict handling approaches. NOTES
* Discuss the ways to stimulate conflict at work place.
Conflict Defined
According to Robbins: Conflict is processes that begins when one party perceives
that another party has negatively affected or is about to negatively affect, something
that the first party cares about. It is a process in which an effort is purposefully made by
one person or unit to block another that results in frustrating the attainment of other’s
goals or furthering of his or her interest.
Functional and Dysfunctional Conflict
Conflict is not necessarily bad, conflict can act as a force to improve performance
and decision making by preventing stagnation and group think. People having different
ideas may argue over a decision that aims at solving a problem or meeting a challenge.
This diversity in opinion may lead to critical appraisal of the alternatives brought forward
for solving the problem. Such appraisal contributes to sound decision making process as
it forces the group to analyze the decision from every angle. This improves the quality
of decision and benefits the organization as a whole. When conflict leads to positive
outcome it is known as functional conflict, where as when conflict hinders group
performance it is known as dysfunctional conflict. Dysfunctional conflict creates an
atmosphere of hostility, stress, anxiety and frustration. Conflict may lead to irrational
behavior and parties may indulge in non cooperation. Parties may give priority to their
narrow interest above the organizational interest. If the conflict is personal in nature
then the outcomes is even worse. Personal conflict is hard to resolve.
The following figure depicts conflict intensity continuum.
Management Process
& Organisational
Behaviour : 159
NOTES 6 7 efforts to destroy other party

6 physical attacks
5
conflictIntensity continum 5 threats
4 4 verbal attacks
3 overt questioning
3
7
2 minor desagreement
2 1 no conflict
Fig. 11.1 : Conflict intensity Continum
Conflict intensity increases as we move upward along the continuum. The upper
level of continuum is always dysfunctional while functional conflict usually confine to
lower range of continuum. Till overt questioning conflict can give positive result but if it
moves upward towards the continuum it may lead to hostile environment in the
organization that has a very negative effect on the organizational effectiveness.
Process of Conflict
The conflict process comprise of five stages. These stages are explained below:
Stage I : Probable disagreement or incompatibility

This stage includes potential reasons or conditions that create opportunity of conflicts.
These conditions act as a stimulant for conflict to arise. Important sources of conflict
are personal variables like differences in interest, values, difference in personality. At
group level the reasons are divergent goals, scarce resources, poor coordination and
competition. Semantic barriers, insufficient communication and over communication also
lead to conflict. If the previous conflict was not handled properly then the people tend to
carry ill feelings for each other. In absence of any other substantial reason after effects
of the preceding conflict can also act as a reason to create environment of conflict.
Management Process
& Organisational
Behaviour : 160
NOTES
Causes of conflict
1. IN TERPERSONAL
CONFLICT Perceived
Conflict Conflict handling
Difference in values,
approaches
interest, perceptions,
personality and status AVOIDING
2. GROUP CONFLICT ACCOMODATING
Incompatible goals,
COMPETING
resource allocation and
task interdependence COMPROMISING
Competition COLLABORATING
Felt Conflict
3. COMMUNICATION
4. AFTERMATH OF
PRECEDING CON-
FLICT
sabotage, apathy,
Figure 11.2 process of conflict withdrawal, verbal
Stage II : Cognition and personalization attacks etc.
This stage includes about the awareness about the existence of the conflict and
influence on the parties involved. If the parties involved are conscious about the conditions
that can stimulate conflict it is called perceived conflict. X and Y may perceive conflict
because of some disagreement but it may not affect their emotions or affection for each
other. This means that they have perceived conflict but not felt it. Felt conflict occurs
when the two parties internalize the conflict and becomes emotionally involved. If the
parties feel anxious and tense and become aggressive towards each other then it becomes
a felt conflict.
Stage III : Intentions

Once the conflict is felt the parties may now act in a given way towards each
other. Now the concern is about intentions behind handling conflict. There are two
dimensions of handling conflict: cooperativeness and assertiveness. Assertiveness refers
to the degree of importance the party gives to its own interest and agenda at the cost of
other party’s interest. Cooperativeness refers to the degree to which the party is concerned
about the other party’s interest and is ready to work together. Based on these two
dimensions five conflict handling approaches or resolution styles can be used. These
are avoiding, accommodating, compromising, competing and collaborating.
Stage IV : Manifest Conflict

It relates to open confrontation and overt behaviour. This stage is called a behavioral
stage and includes actions and reactions made by the two parties. It involves aggression,

Organizational Conflict Stage V : Outcome
The outcome of the conflict can be functional or dysfunctional. The outcome of
the conflict depends upon how wisely the conflict was handled by the parties. If it
NOTES improves the group performance by improving quality of decisions, stimulating creativity
it may lead to functional outcome. A dysfunctional conflict leads to lowering of group
performance; reduced communication and cooperation. Personal infighting supersede
group and organizational goals.
Causes of Conflict
Management Process
There are The following are the goal conflict.
certain conditions (1) Approach- approach conflict: such type of conflict arises when the individual
that act as a have to choose between mutually exclusive goals. The goals are equally
stimulant to conflict. attractive and it becomes hard for him to choose one at the expense of other.
These are the For e.g. individual gets two job offers one is giving a higher pay and the other
necessary antecedent is offering a challenging and satisfying job profile. He becomes anxious as he
conditions for is unable to decide which one to choose.
conflict to arise.
(2) Approach- avoidance: in this form of goal conflict individual is faced with
Intrapersonal conflict
an alternative that has both positive and negative aspects. For e.g. an offer
is internal to the
for a highly lucrative job in a bad location.
person, Interpersonal
conflict is a conflict (3) Avoidance- avoidance: in this form of conflict individual is faced with two
between two or more mutually exclusive negative goals. For e.g. A person may dislike his present
individuals and job because of the abusive behavior of boss, but looking for another job may
group conflict arises mean compromising with low pay.
between two or more (B) Role Related Conflict
groups. Conflict
arises due to many Role is behavior expected from the person occupying a position in the organization.
reasons; some of The following are role related conflict :
them are discussed (1) Role ambiguity: when individual is unsure of his duties and responsibilities
below. regarding job he may face problem in enacting the role due to which job
Intra
Individual
Conflict
When an
individual faces
conflict within
himself it is called
intrapersonal
conflict. Divergent
goals and multiple
roles can cause
confusion and
conflict within an
individual.
(A) Goal Conflict
This arises
when the individual
has to choose
between two or more
competing goals.
performance may be adversely affected. He may not know what is expected when they feel
from him. that they have
to compete for
(2) Person role conflict : when a person is expected to do a job which goes
available
against his belief and values he faces a personal conflict for e.g. A judge may
resources in
not be willing to give capital punishment to the criminal on moral grounds
order to
though the law may be supporting it.
(3) Inter role conflict: in this type of conflict the individual is asked to perform
a task for which the individual may lack the ability and knowledge that is
necessary to accomplish it . He may also feel helpless due to lack of resources
and time that is required to do the job.
(4) Inter sender role conflict: when two or more parties put different role
demands in front of an individual then he or she faces inter sender role conflict.
Role conflict seriously effect job satisfaction and productivity. For e.g. an HR
manager may experience a role conflict. He is responsible for motivating the
employees at the same he is accountable to top management also. If the
employees ask for a pay raise while top management is against it then the
manager will be in dilemma.
Inter-Personal Conflict
Interpersonal conflict happens when two or more people have some disagreements
on certain issues. The reasons for interpersonal conflict are as follows :
(1) Personality characteristics: some people are unable to maintain healthy
relationship with others. Individuals who are highly authoritarian, rigid and
who have low self esteem lead to potential conflict.
(2) Perceptions: people come from varied backgrounds. The variables like
experiences, individual’s values, education, training etc all determine
interpretation of situation to be perceived. The difference in variables leads
to different perception of similar realities. Such difference in perception is
also a potential source of conflict.
(3) Differing interest: the clash of interest of different people leads to conflict.
The engineering department may be interested in improved quality and
sophisticated design of the product while manufacturing department may value
simplicity and low cost of production. This difference in interest may develop
conflict between the two departments. This happen when individuals worker
fight for their personal goals, ignoring organizational goals and organizational
well being.
(4) Poor communication: it can lead to misunderstanding between people.
Insufficient exchange of information is potential antecedent condition to
conflict.
(5) Scarce resources: scarcity of resources increases the conflict among people
NOTES

Organizational Conflict do their job. Resources are important for their job performance and
achievement of their group or departmental targets.
Group Conflict
NOTES When there is conflict between two or more groups it is called group conflict. The
potential reasons for the group conflict are
(1) Incompatible goals and interest: high horizontal differentiation and task
specialization often lead to clashes in goals and interest. The groups give
priority to their task rather than giving due attention to the collective outcome
of the groups. For e.g. marketing department may bring huge orders for sales
in order to improve their department’s image and take benefits of incentive
without giving due consideration to the production capacity of the production
department.
(2) Task interdependence: it implies dependence of one unit on another for
inputs like resources or information. For e.g. output of process A is input to
process B, hence performance of process B depends largely on the
performance of A in terms of quality and completion of task in time. This is an
example of serial independence. Reciprocal independence occur when two
or more groups are mutually interdependent in accomplishing goals for eg
group of nursing staff , surgeons,doctors etc. They have to coordinate and
communicate quite frequently.
(3) Scarcity and allocation of resources: departments in the organization
compete for resources. Resources include men, material, machine etc. Groups
draw resources from a common pool and if the common pool is inadequate to
satisfy the demand of all the units then conflict can arise.
(4) Organizational ambiguities : lack of formalization, ambiguous job
responsibilities can create problem and conflict between departments. If proper
system of communication and coordination is not incorporated in the system
frequent clashes can occur among groups.
(5) Resistance to change: Change is inevitable as the environment around is
dynamic. There are a plenty of socio-economic, political, technological and
legal factors which make organizational change unavoidable. Change faces
resistance from the employees who fear being shaken out of their comfort
zone. Change can lead to conflict; people have an inherent tendency to resist
change.
11.6 Managing Conflicts

Management Process
Conflict can
have both negative
and positive
outcomes.
Functional conflict is
desirable while
dysfunctional
conflict should be
resolved. There are
basically two
approaches of
managing conflict.
One is to create and
stimulate
constructive conflict
and other is to
resolve destructive
conflict.
Unmanaged poorly handled dysfunctional conflict can prove to be disastrous to Organizational Conflict
the organization. The disagreement should be managed in such a way that healthy
interpersonal relations are formed that aid in decision making and smooth conduct of
operations. Effective conflict resolution style can lead to personal and professional growth.
NOTES
Conflict Resolution Strategies
Kenneth Thomas and Ralph Kidman has identified five conflict resolution strategies
that vary in their degrees of co- cooperativeness and assertiveness. Which one is the
best in a given situation depends on various factors. There is no one best strategy for
resolving conflict. The five styles are as follows:
The Thomas Kidmann Conflict Mode Instrument is a model for handling conflict:
High
Competing Collaborating
ASSERTIVE
Compromising
Avoiding Accommodating
Low
Low COOPERATIVE High

Fig. 11.3 : Conflict Resolution Strategies
The model recognizes five conflict management styles based on two dimensions: cooperativeness.
assertiveness and cooperativeness. Assertiveness refers to the degree of importance Person tries to win
the party gives to its own interest at the cost of other party’s interest. Cooperativeness at the expense of
refers to the degree to which the party is concerned about the other party’s interest. others. This style
The five conflict resolution styles are as follows: is useful
(1) Accommodating (you win – I lose): this style focus on solving conflicts by allowing
the desire of others prevail at the expense of one’s personal need. The party is
high on cooperativeness and low assertiveness. Accommodating style is appropriate
when the issue is more trivial or the issue matters more to other party. It can help
in preserving future relations with the other party.
(2) Avoiding (lose- lose): people show indifference, apathy towards the conflicting
Check Your Progress
issue and do not take any action to resolve it. It is a state of complete withdrawal.
1. Discuss conflict
Neither the person helps the other party to achieve their goal nor does he pursue
intensity continum.
his. It is best suited when conflict is small and relationships are at stake or when
2. What are the potential
the atmosphere is emotionally charged and the person needs to create some space. reasons for group
This style also works well when the person has no power and the chances of conflict?
winning are dim. The downside of this style is that postponing may make matter
worse.
(3) Competitive (I win you lose): this style is high on assertiveness and low on

Organizational Conflict in times of emergency when speed of decision making becomes very important.
This type of strategy may escalate conflict in future and the losers may try to
retaliate. When goals are important the person can use power to win.
NOTES (4) Compromising (win some-lose some): this style has moderate level of assertive
and cooperation. The parties try to find a middle path which partially satisfies
everyone and everyone gives up something. This style suits best when both sides
have equally important goal and time can be saved by reaching intermediate
settlements due to looming deadline.
(5) Collaborating ( I win you win): This style is both high on cooperation and high on
assertiveness. The parties try to reach a solution which is equally beneficial to both
parties. Collaborative style tries to meet everyone’s need through teamwork and
co-operation. This style works well when there is high level of trust between two
parties. The drawback of this style is that it requires a lot of time and effort to
reach a consensus.
Conflict Stimulation Conflict

Functional conflict should be stimulated to challenge the system and develop fresh
ideas for better decision making.
(1) Manager can stimulate conflict through the use of grapevine by intelligently
planting rumors, ambiguous or threatening messages in the informal channel
of communication. This may force the members to confront their differences
and stimulate new ideas. For e.g. the manager can spread rumors about a
prospective layoff.
(2) A manager may introduce competition among employees by the use of reward
and incentive for excellent performance. Conflict will arise when the employees
will try to win against each other.
(3) Bringing in outsiders who posses different attitude, values, from what the
employees of the organization posses may instill conflict.
(4) Manager can introduce programmed conflict by restructuring the organization
breaking up old work groups and department and reorganizing them. This will
inject life into stagnant organization.
Summary
Behaviour : 166
Management Process
& Organisational
Conflict is a
disagreement
between two or more
parties. It is an
inevitable part of the
organization.
Traditionalist view
conflict as bad and
that it should be
avoided while
modern interactionist
view it as positive if it
exists at a optimum
level . Minimum level
of conflict is essential
to bring about
change, creativity
and to make good
quality decision.
Conflict beyond a
point can be
dangerous can lead to
hostility and
infighting among the
members. It creates
tension and stress.
No one is able to
grow as the parties
try to create
hindrances in the
path of other party.
Such negative and
aggressive behavior
adversely affects
organizational
effectiveness.
Conflict can be created at individual level as well at the group level. Intra individual Organizational Conflict
conflict occurs due to conflict in the goals set by the individuals and the roles he or she
is supposed to act. Conflict between two or more individuals is caused due to difference
in values, interest, perceptions, personality and status inequity. Group conflict arises due
NOTES
to incompatible goals, task interdependence, scarcity and allocation of resources, poor
communication and organizational ambiguities. The conflict process consists of five
stage , they are- potential opposition, cognition and personalization, conflict handling
intentions, overt behavior and outcome. Depending upon the requirement of the situation
the conflict can be handled through any of the five styles: competing, avoiding,
collaborating, compromising and accommodating. Conflict can be stimulated through
strategic use of grapevine, introducing competition and bringing in outsider and
reorganizing the work groups.
Key Terms
Conflict: It is an disagreement, discord arising between two or more parties that result
in mutual opposition.
Functional conflict: When conflict act as a force to improve performance and decision
making by preventing stagnation and group think it is called functional conflict.
Dysfunctional conflict: When conflict creates an atmosphere of hostility, stress, anxiety
and frustration and hinders group performance it is known as dysfunctional conflict.
Intra Individual Conflict: When an individual faces conflict within himself due
divergent goals and multiple roles that cause confusion, it is called intrapersonal
conflict.
Interpersonal conflict: It happens when two or more people have some disagreements
on certain issues due to personality characteristics, perception, interest etc.
Group conflict: It happens when there is disagreement between two or more groups
due to incompatible goals, task interdependence, scarcity of resources etc.
Thomas Kidmann Conflict Mode Instrument: It is a model for handling conflict in
which five conflict resolution strategies have been identified that vary in their
degrees of co- cooperativeness and assertiveness.

Short answer questions (2) Explain
(1) Do you think that conflict is essential? If yes, then why? Kenneth
Thomas and
(2) How could a manager stimulate conflict in the organization? Ralph
(3) Distinguish between functional and dysfunctional conflict. Kidman five
conflict
Long answer questions handling
(1) What are the components of conflict process? Explain strategies.

Organizational Conflict (3) What are the reasons for conflict within the individuals and conflict between
the individuals?
(4) State the reasons of group conflict.
NOTES
(1) S. P. Robbins, `Òrganizational Behavior,’’ Englewood Cliffs, N.J. Prentice
hall 2000.
(2) J. Kelly, `Òrganizational Behavior,’’ Illinois , Richard D. Irwin 1990.
(3) L. R. Pondy, `Òrganizational Conflicts: Concept and Model,’’
Administration Science Quarterly, Vol. 12,1967.
(4) V. S. P. Rao, V. Harikrishnan, ``Management Text and cases,’’ excel books,
fourth edition.
Management Process
& Organisational
Behaviour : 168
Organizational Culture and
UNIT 12 ORGANISATIONAL CULTURE Change Management
AND CHANGE MANAGEMENT

NOTES
Structure
Introduction
Unit objectives
Organization Culture
Determinants of Organization Culture
Creating and Sustaining Culture
Impact of Organization Culture
Organizational Change
Forces of Change
Response to Change
Management of Planned Change
Lewin’s Three Step Model
Managing Resistance to Change
Summary
Key Terms
Introduction
Organizational culture develops over several years and is made of relatively stable
characteristics. The characteristics are a set of shared values that employees hold in
common. Employees are strongly committed to organizational culture. It brings
predictability and uniformity in behavior of the employees. Organizational culture can
become a liability because it is very difficult to change.
Management has always stressed on the importance of change. “Change or die”
is the philosophy to survive. Environment is dynamic and ever changing. There are
various external and internal forces that act as a stimulant to change. Change is mostly
perceived as threat. Employees resist change. Manager should intelligently plan for
introduction and implementation of change. Change process should be dealt with wisely
and appropriate measures should be taken to overcome resistance and implement change.
After studying this

Unit Objectives unit, you should be
able to-
Management Process & Organisational

Behaviour : 169
Organizational Culture and * List the factors that make up organization culture.
Change Management
* Understand the relationship between organization culture and behavior.
* Understand the impact of organization culture on organizations.
NOTES * Identify the forces that stimulate organization change.
* Understand the process of managing planned change.
* Describe lewin’s three step model for introducing change.
* Summarize the various individual and organizational resistances to change.
* List various ways to overcome resistance.
Organisation Culture
Organizations too have personalities just like individuals have. Every organization
has a culture which is a unique set of relatively stable characteristics. Organization
culture is a set of shared values, understanding, assumptions that controls the behavior
of organizational members.
According to Robbins : “Organizational Culture is a common perceptions held

by the organization’s member, a system of shared meaning”.
According to lovis: “a set of understanding or meanings shared by a group of
people that are largely tacit among members and are clearly relevant and distinctive to
a particular group ethic are also passed on to new members”.
Organizational culture leads to high degree of behavior regularity by defining
consistent ways to perform tasks, solve problems, resolve conflicts and deal with
employees and customers. Some of the behaviors that are influenced by organizational
culture are as follows:
(1) Innovation and risk taking: the degree to which organizational employees are
encouraged to be creative and take risk.
(2) Attention to details: the degree to which the organizational members focus on
precision and attention to details.
(3) Outcome orientation: the degree to which organizational members focus on
results and goals rather than methods, techniques process to achieve the goals.
Management Process
(4) Team
orientation:
the degree to
which the
activities are
structured
around team
rather than
individuals.
(5) Customer
orientation:
the degree to
which
managers are
concerned
about customer
satisfaction.
(6) Employee
orientation:
the degree to
which
managers are
concerned
about the effect
of their
decisions on
employees
within
organization.
(7) Basis of
motivation: the
degree to which
the
organizational
members value
different
sources of
motivation like
pay, status,
achievement,
recognition etc.
(8) Aggressiveness: the degree to which people are competitive vs cooperative. (2) Top management
play an important
(9) External orientation: the degree to which organization is responsive and adaptive role in
to changes in its environment. determining the
culture through
(10) Power distance: the degree of difference to authority, the rigidity of chain of
command.
Appraising the organization on these characteristics gives a composite picture of
organization’s culture.
Determinats of Culture
(1) Economic conditions: economic conditions have an impact on organizational
culture. In times of prosperity, innovation and risk taking is encouraged while
when the budgets are tight, caution and conservatism is required.
(2) Organization structure: the organization structure establishes authority and
responsibility relationship. The organization culture is affected by the design
of the organization, whether it is centralized or decentralized, rigid or flexible.
(3) Organization size: as the size of the organization increase, the organization
becomes more vertical. It creates an authoritative management. In small
organization the stress is on horizontal distribution of responsibilities. It is easier
to foster climate of innovation, creativity, participative management in small
organization.
(4) Organization policies: organization policies regarding reward system, job
security etc play a very important role. Organization that rewards creativity
will have innovation orientation.
(5) Managerial values: managerial values have a strong influence over decisions
and actions of the manager. Manager’s values are communicated through
rules regulations and policies. The result is that organization can be perceived
as formal or informal, hostile or friendly.
(6) Leadership style: organizational culture is the product of philosophy and
practices of the prominent persons in the organization. The primary source in
the organizational culture is the leadership style of its founder. Different
leadership styles will lead to different organizational culture.
(7) Characteristics of members: personal characteristics of members also play
a major role in creating a culture. For e.g. an organization with risk taking
younger employees is likely to have a different organizational culture from an
organization with conservative older employees.
Creating and Sustaining Culture

(1) Those candidates are hired who meet the standards of the organization culture.
The applicant is interviewed by people who hold senior position in the
organization. They tend of hire those candidates who think and feel the same
way as they do.
Organizational Culture and Change Management
NOTES

Organizational Culture and & Organisational Behaviour : 172
Change Management
NOTES
Check Your Progress

1. `Òrganisation culture
leads to high degree
of behavior regularily’’
comment.
2. Discuss the organis
ational characteristics
that give a composite
picture of
organisational culture.
Management Process
policies and The organizational culture can have both positive and negative impact on the
leadership style. organizational effectiveness. The organizational culture has three dimensions: direction,
(3) Through pervasiveness and strength.
socialization the The direction of the impact states that whether the organization culture influence
organization the behavior in such a manner that goals of organization are achieved or is acting in a
helps it way that is counterproductive. The pervasiveness of impact is the degree to which the
employees to culture is widespread among the members of the organization. The strength of impact
adopt tells us how strongly the shared values are held by members of the organization
organization irrespective of the direction.
culture. The
people who are (A) Culture as an asset
not able to Culture brings in high degree of behavioral regularity in a system without formal
adjust to the rules and regulations. It tells the employee how problems should be handled and what is
culture face important. This helps in reducing ambiguity. It gives a sense of identity to the members
criticism. and enhances organizational commitment. A 2002, corporate leadership council study
(4) Employee learns found that cultural traits such as flexibility, innovativeness, risk taking have a positive
about culture impact on economic performance of the organization.
through
(B) Culture as a liability
ceremonies
(1) Barrier to diversity: in order to foster creativity diverse work force is
material symbol
desirable. But a strong organization culture limits diversity. The culture
like elegant
eliminates the unique strength that people of different backgrounds bring to
furnishing,
organization. The strong culture gives weight age to conformity rather than
dress, attire etc.
They also learn diversity.
culture through (2) Barrier to merger and acquisition: the objective of merger and acquisition
stories that is to reduce cost and competition and obtain product synergy or financial
contain advantage. But if the cultures of the organizations to be merged do not match
narration of with each other then acquisition can lead to failure.
events such as (3) Barrier to change: organization work in highly dynamic environment and
reaction to past hence organizational change is inevitable. If the shared values and beliefs are
mistakes, rag to in conflict with the change to be introduced then the employee resist change.
richness story The culture becomes a burden to the organization and make it difficult to
of the founder respond to changes in organization.
etc. The moral
of the stories
reaffirm the
shared values
of the culture to
the employees.
Impact of
Organisation
Culture
necessary to
Organizational Change change the present
structure or
Change means modifying the existing system by adopting new ideas, methods or process of the
behavior by an organization. Change in context of an organization can have many forms. organization. The
It can be change in organizational structure, change in level of technology, change in
strategy etc. Change is inevitable as the environment around is dynamic. There are a
plenty of socio-economic, political, technological and legal factors which make
organizational change unavoidable. An organization which does not mould itself according
to the changing external scenarios is left behind. Change might also be forced by internal
factors like expansion, change in employee compositions, incoming of a new leader.
Forces for Change

The factors leading to change can be external that is outside the organization or
internal that is within the organization.
(A) External Forces

(1) Technology: it is the greatest factor that puts pressure on the organization to
change. Products, process and services may become obsolete which may
call for change. In order to adapt to changing technology job specification ,job
description and organization structure may also change for eg. Automation
result in wider span of control for managers and flatter organization
(2) Market situation : Change in market situation may include changing
customer’s tastes and preferences, entry of new product and competitors in
the market.
(3) Political and social change : The organization operates in legal political
environment that is influenced by Government. The government policies, rules
and regulations like liberalization policy, pollution control, tax laws etc varies
from time to time. The change in social structure of the society like wearing
away of joint family and expansion of single households , rise in the number of
working women etc may lead to change in the demand for product and services
as well as marketing strategies.
(4) Economic scenario : The change in the macroeconomic variables for eg
interest rate, foreign currency fluctuations may force the organization to change
exporters of their raw material , customer base and foreign operations.
(B) Internal forces

(1) Increase in the size and growth rate of organization : The greater the
growth rate the more is the generation of resources . There is better expanded
opportunity set for the organization, as it has enough resources to enter into
new market and product line.
(2) Performance Gap : when there are negative deviations from the standards
set for market share, profitability, employee productivity etc then it becomes
NOTES

Change Management
NOTES
Management Process
products, system does not match with the philosophies of the newly appointed chief
services and executive.
methods of Response to Change
doing work
Regardless of the type of change it is very important for an organization to convince
which are not
its employees to accept the change.
capable of
achieving Employees can respond to the change positively as well as negatively, but quite
organization’s often a change faces resistance from the employees who fear being shaken out of their
objective comfort zone. Reasons for resistance can be manifold such as:
should be (A) Individual Resistance
amended. The
(1) Economic Loss : Employees might fear losing jobs as they would no longer
organization
possess the skills which are required to comply with the new technology.
structure may
Automation may reduce their working hours and consequently their monetary
also undergo
benefits may reduce.
transformation
(2) Uncertainty : Any change has uncertainty associated with its consequences.
in order to make
There is a fear of the unknown. As a result there is inertia on part of the
it more
employees which needs to be overcome to accept change and be ready for
responsive to
the results. Employees feel insecure in doing so and this leads to resistance.
the
environment. (3) Misunderstanding and selective information processing : Resistance
might stem from misunderstanding of the oncoming change. There might be
(3) Changes in
contradicting opinions amongst employees about the difference the change
Managerial
would bring about. The employees may selectively process information in
Personnel :
order to keep their perception of the world that they have created, intact.
Many changes
They would hear what they want to hear and might ignore vital information
are brought by
as these facts challenge their already established perception of the world.
chief
executives. (4) Habit : Individuals form habits that are hard to change. Individuals develop
Every manager their routine around the demands of job over time. Change may disturb their
has his own routine causing inconvenience and discomfort.
philosophies (5) Social displacement : A change can dislodge people from their work groups
and styles. and teams thereby disrupting the personal bonding which they may have
Change in chief developed over a period of time. Some people might be opposed to giving up
executive may current linkages and adjusting to relationships in a new setting.
lead to (6) Peer pressure : An individual may resist change just because he belongs to
reevaluation of the group that is resisting change. The group norms play a vital role in
the present influencing the individual.
organization
design,
procedures,
objectives etc.
This may lead to
modification if
the present
(B) Organizational Resistance so as to understand the
problems confronting the
(1) Threat to established power relations : A change can bring about a
company. It should
reshuffle in the organization. As a result a few managers would no longer
subsequently
have the same authority and influence they had before. Hence they interpret
change as a threat to their position and resist it.
(2) Organization Structure : Some organization structure have inbuilt rigidity
that act against change. High degree of formalization, too much emphasis on
specialization, one way communication does not favor innovation and change.
Organizations having bureaucratic and mechanistic structure face more
difficulty in implementing change as compared to organization having organic
structure.
(3) Resource Constraints : In order to bring about effective change financial,
material and human resources may be required. If the resources are available
in abundance then there is no problem in bringing about the change. If the
resources are scarce change cannot be introduced as it requires huge
investment.
(4) Sunk Cost : Sometimes organizations invest a huge amount of money in
procurement of fixed asset, and such investment cannot be recovered without
putting the fixed assets in use for production. The machine may become
obsolete but its cost can be recovered only when the goods produced by it are
sold. Because of this reason machine cannot be replaced or changed.
(5) Inadequate information : Resistance could be formed out of inadequate
information. A failure on part of the managers to communicate the purpose of
change effectively to all the stakeholders could result in suspicion and loss of
trustworthiness.
Management of Planned Change

The change can be first order change or second order change. First order change
happens by itself. There is no need to alter the assumptions of organizational members.
In first order change we are doing more or less the same thing for e.g. the lunch time
has been shifted by half an hour due to rush of customers in the morning. The second
order change is a multidimensional, radical and proactive change. It is intentional and
goal oriented and involves reframing of assumptions about the organization and the
world in which it operates. The second order change is called planned change for e.g.
installing of high-tech machines in the plant.
Management of planned change refers to the process of introducing change and
implementing it effectively. It requires considerable efforts on part of the management.
This process can be summed up as:
Requirement Analysis
The management of the company needs to identify if a change is required. The
management shall do a SWOT (Strengths-Weaknesses-Opportunities-Threats) analysis
NOTES

Change Management
NOTES
Check Your Progress

1. What are the forces
that lead to
organisational changes?
Management Process
conceive changes which completely without addressing the resistance that accompanies it. Hence resistance
are necessary to solve management forms a pivotal and an indispensable part of change management.
those problems. The Feedback System
management should
Feedback must be collected through different channels to understand as to how
answer the question “Is
efficiently have the employees coped up with the change. Deficiencies must be identified
the change justified”. The
and taken care off as they might result in resistance if left unaddressed. Employees
management should also
might be encouraged to share constructive ideas which can further enhance the change.
identify the factors to be
changed, whether it is the Lewin’s Three Step Model
people, technology or Kurt Lewin proposed three steps that the organization should follow in order to
structure that is to be bring about change successfully.
changed.
• Unfreezing
Planning for Change step1
The management step2 • Moving

needs to answer questions
step3
• Refreezing
like: How to introduce the
change? When to
introduce the change? Who Step 1 : Unfreezing
will introduce the change?
What will be the response It involves aggressive approach to discard old ways and established behavior
to change? How to pattern. The objective is that the individual should see change and accept it. Members
overcome resistance to of the organization are made to realize that their old attitude, behavior and methods to
change ? The impact that work are unworthy and require alteration to meet the ever changing demand of the
change would have on dynamic environment. This can be done by
different stakeholders (1) Augmenting driving forces: The factors that are making change essential
should also be assessed. should be identified and communicated to the people concerned.
(2) Reducing restraining forces: The factors that hinder the change movement
Implementation of
change should be reduced for e.g. to deal with resistance from employees the
It refers to making
change a part of day to
day activities of the
organization. The
management needs to
encounter and diffuse the
resistance that follows a
change so as to achieve
desired implementation. It
is natural human tendency
to resist any form of
change. Hence no change
can be brought about
management can promise positive incentives to employees once the change Managers must aim at
managing resistance at
is implemented. initial stages so that it
Step 2 : Moving does not
Once people acknowledge change and accept it, the change should be implemented
in a systematic manner. Various alternatives of behavior should be made available to the
members of the organization. The individual choose the best one out of the alternatives
provided to them.
Step 3 : Refreezing
The changed behavior patterns, methods or procedures need to be made permanent.
They should be refrozen, so that the change can be sustained overtime. If the last step
is not implemented seriously, the change will be short lived. The individuals may attempt
to revert to the old behavior pattern.
Managing Resistance to Changes

(1) Clear and Effective Communication
The rationale behind the need for a change shall be communicated effectively
throughout the organization. The change agents must talk about the change frequently
so that the message for the change remains strong and alive. Managers must demonstrate
change initiatives by incorporating it in day to day decision making. Effective counseling
can be used to change the attitude of the employees . They should be adequately informed
about the various aspects of change. Any misunderstandings should be cleared through
communication. The people in the organizations should be convinced that change is the
need of the hour and it is for the betterment of the organization as a whole.
(2) Participation and involvement
The dimensions of the change might be discussed with the employees and they
must be made to feel that they are very much part of the change and that their contribution
is vital to make it successful. Participation in decision making process will reduce
resistance, obtain commitment and improve quality of decision.
(3) Listening to Employees and providing them support
The managers must listen to the apprehensions that employees possess. The
employees should be helped to identify as to what lies for them in the change. Training
programs and counseling sessions should be arranged for them.
(4) Negotiation
If few powerful individuals are resistant to change then they can be offered specific
reward packages. The resistance can be reduced through negotiations. Benefits in the
form of increased compensation, deployment on challenging projects, recognition from
the boss etc can motivate an employee to undergo the hardship associated with bringing
out the change.
(5) Being Proactive
NOTES

Organizational Culture and attain dangerous proportions later on. It is necessary that the potential points of origination
Change Management of resistance be identified in advance. Plan must be developed to tackle resistance that
might originate from different areas within the company.
NOTES (6) Formation of a powerful group which leads the change

It is necessary that a change is moved strongly through the organization. This can
be achieved using a set of influential people who can assume leadership in communicating
change. These people usually come from within the company but relevant people from
outside can also be approached.
(7) Appropriate selection of resistance managers
A resistance manager is a person who is responsible for managing and abating
resistance so as to move the change smoothly. Selection of resistance managers must
be done meticulously. He shall be the one who has hundred percent belief in the change
he is advocating. He should have an honest and untainted image in the organization. He
should have excellent communication skill and should get along well with the employees.
He should usually come from senior management, middle management as well as from
shop floor managers who interact directly with the employees. He must be committed
enough to back his words with his actions.
(8) Coercion
Managers can force people to accept change by the application of direct threat or
force on the resistors. The various explicit and implicit threats can be, threats of transfer,
negative performance appraisal, pay cuts, demotion, termination etc.
(9) Manipulation and cooptation

Manipulation involves consciously structuring of events by twisting and distorting
facts for example withholding undesirable information about change and presenting a
rosy picture of the change to be introduced. Cooptation includes buying off the leader of
the resistance group and giving him desirable role in the design and implementation of
change. By involving the leader of the resistors an implicit approval is obtained for the
change.
Summary
Management Process
Organizational as it acts as a barrier to diversity, merger and acquisition and change.
culture refers to
common values and
beliefs shared by
members of the
organization. They
are relatively stable
characteristics that
describe an
organization. These
characteristics give a
unique identity to the
organization.
Innovation and risk
taking, attention to
details, outcome
orientation, team
orientation: customer
orientation,
employee orientation,
basis of motivation,
aggressiveness,
external orientation
and power distance
are some of the
characteristics that
gives the
organization its
distinctive
personality. Economic
conditions,
organization structure
and policies,
managerial values,
leadership and
characteristics of
members play a very
important role in
determining the
organization culture.
Organization culture
can become a liability
In order to survive and grow organizations should have a proactive approach to Organizational Culture and
change. The forces of change can be either internal or external. External forces come Change Management
from outside the organization like technology, social and political environment, market
situation etc. Internal forces emanates within the organization like growth opportunities,
NOTES
performance gap and change in chief executive. Employees resist change due to their
adjustments with job demands, habits, fear of unknown economic loss, peer pressure
and social displacement. Organizational dynamics can also make change difficult. This
may be because of rigid organization structure, resource constraints and sunk cost.
According to Kurt Lewin change process involve three steps (1) Unfreezing the old
system (2) Moving towards the new system (3) Refreezing the new system to make it
relatively permanent. The resistance to change can be overcome through effective
communication, providing support to the employee so that they can cope up with change.
Various strategies like manipulation, cooptation, coercion and negotiations can be used
to reduce resistance to change.
Key Terms
* Organization culture: It is a set of shared values, understanding, assumptions
that controls the behaviour of organizational members.
* Power distance: The degree of difference to authority, the rigidity of chain of
command.
* Organizational Change: It means modifying the existing system by adopting
new ideas methods or behaviour by an organization for example organizational
structure, change in level of technology, change in strategy etc.
* Lewin’s Three Step Model: It proposes three steps that the organization should
follow in order to bring about change successfully. They are unfreezing, moving
and refreezing.
* Social displacement: It means dislodging people from their work groups and
teams thereby disrupting the personal bonding which they may have developed
over a period of time.
* Manipulation: It involves consciously structuring of events by twisting and
distorting facts for example withholding undesirable information and presenting
rosy picture of the change.
* Cooptation: It includes buying off the leader of the resistance group and giving
him desirable role in the design and implementation of change.
Long answer questions (3) How will

(1) Discuss the factors that determine organizational culture. you as a
manager
(2) What are the individual’s and organizational resistance to change? overcome
employee’s
resistance to change?
Management Process
& Organisational
Behaviour : 179
Organizational Culture and (4) What are the steps in managing planned change? Describe the process of
Change Management planned change proposed by Kurt Lewin.
NOTES (1) Define organizational culture. What are its various dimensions?
(2) How organizational culture is created and sustained?
(3) How can organizational culture become a liability to the organization?
(4) What is the difference between first order change and second order change?

(1) Gordon, G. G., “Industry determinants of Organizational Culture,”
Academy of management review(April 1991) ,pp 396-415.
(2) Schneider, B., S. k. Gunnarson and K. Niles Jolly, “Creating the climate and
culture of success”, organizational Dynamics, (summer 1994), pp-17-29.
(3) Marshak, R. J., “Managing the Metaphors of Change”, Organizational
Dynamics (Summer 1993), pp 44-56.
(4) Kanter, R. M., “Transcending Business Boundaries: 12000 World
Manager’s view Change,” Harvard Business Review (May-June 1991), pp
44-56.
Management Process
& Organisational
Behaviour : 180

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Management Process & Organizational Behaviour

Unit 1 Introduction to Management and Organisational Behavior 1

Management Process & Organisational Behaviour : 3

Fig. 1.1 Management Process

6. Management is a Integrative Process: management brings all human and non

* Optimum utilization of resources : The resources of the organization are

Management Process & Organisational Behaviour : 5

FIGURE HEAD LEADERSHIP LIASON

MONITOR DISSEMINATOR SPOKESMAN

ENTREPRENEUR DISTURBANCEHENDLER RESOURCEALLOCATOR NEGOTIATOR

Management Process & Organisational Behaviour : 7

NOTES 2. Disturbance handler: When the organization is threatened with unexpected

1.6 Levels of Management

& Organisational Behaviour : 8

Middle Level Management

First Level Management

Check Your Progress

& Organisational Behaviour : 10

Management Process & Organisational Behaviour : 11

4. Product, Design planning and development : Product design is done

Management Process & Organisational Behaviour : 13

Importance of Organisational Behaviour

Fig. 1.5 O B Model

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Management Process & Organisational Behaviour : 17

Short Answer type questions

Further Reading and References

Management Process &

Classical Approach (1900)

SCIENTIFIC ADMINISTRATIVE BUREAUCRACY

Management Process &

Management Process &

Management Process &

It is usual practice that if A wants to communicate with G then the communication

Management Process &

Management Process &

Neo classical Approach

(1) Illumination experiment

Management Process &

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Management Process &

Management Process &

Management Process &

An organization is viewed as an open system. An open system is one which

According to this approach there is no single best way of managing organization.

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Management Process &

Management Process &

Questions and Excercises

Further Reading and References

Management Process &

Management Process &

Management Process &

Essentials of a Sound Plan

Management Process &

Management Process &

Management Process & Organisational Behaviour : 38

Management Process &

Management Process &

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Management Process &

Steps in strategic planning

Management Process &