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Course-MKT 103

Principles of Management

Prepared by

Ahmed Sabbir

EMBA Program, Patuakhali Science & Technology University (PSTU),

Patuakhali, Bangladesh
Principles of Management
Definition of Management
Management is defined as
A set of activities (planning and decision making, organizing, leading, controlling) directed at an
organization’s resources (Human, financial, physical and information) with the aim of achieving
organizational goals in an efficient and effective manner. [Griffin]
Management is an intangible part of production which co-ordinates all other factors and takes
the risks of losses.

Income (Rent, Wage, Interest, Profit)

Factor Flow (Land, Labor, Capital, Management)

Producer/Firm Consumer/House hold

Goods & Service Flow/Output flow

Expenditure flow
Figure-Interrelationship between Industry/firm and Household or Producer and Consumer where
management is a big concern

Basic Purpose of Management

The basic purpose of Management is to ensure/achieve organizational goals in an effective and

efficient manner.

By efficient, we mean using resources wisely and in a cost effective way (i.e., achievement of the
ends with least amount of resources). For example, a company produces high quality products at
relatively low costs is efficient.

By effective we mean making the right decisions and successfully implementing them. A firm
produces products (that may be efficient in terms of producing with low cost) that no one wants
is not effective. The successful organizations are both efficient and effective.

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Examples of resources used by an organization

Organization Human Financial Physical Information

PSTU Faculty Internal Income Teaching Learning Research reports
Administrative Government Grants Materials Journals and
Staff Alumni Campus Facilities Publications
Barishal City Municipal Tax revenue Sanitation Economic forecasts
Corporation employees Government Grants equipment, Crime statistics
Police officers Municipal
Anchor Cement Workers Profits Factory Sales forecasts
Corporate Stockholders Equipment Industry News
Executives Investments Office building

What is a Manager?

- Someone whose primary responsibility is to carry out the management process.

- Someone who plans and makes decisions, organizes, leads, and controls
human, financial, physical, and information resources toward attain the organizational
goals efficiently and effectively.

Types of Managers by level and Area

Kinds of Managers by Level

 Top Managers
- Small group of executives who manage the organization’s overall goals, strategy
and operating policies.
- It consists of board of directors, president, vice-president, CEOs, etc.
- They are responsible for controlling and overseeing the entire organization.
- They develop goals, strategic plans, company policies, and make decisions on the
direction of the business.
- It is also responsible for maintaining a contact with the outside world.
- It provides guidance and direction.
- The top management is also responsible towards the shareholders for the performance
of the enterprise.

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Figure-Kinds of Managers by Level & Area

 Middle Managers
- Largest group of managers in organization who are primarily responsible for
implementing the policies and plans of the top managers.
- They supervise and co-ordinate the activities of lower level managers.
- They interpret and explain policies from top level management to lower level.
- They are responsible for coordinating the activities within the division or department.
- It also sends important reports and other important data to top level management.
- They are also responsible for inspiring lower level managers towards better
- Common middle management titles include plant manager, operations manager and
division head etc.
 First-Line Managers
- Managers who supervise and coordinate the activities of operating employees.
- It consists of supervisor, office manager, section head, in-charge, foreman etc.
- The Lower Level management activities includes-
 Assigning of jobs and tasks to various workers.
 Guiding and supervising employees on day-to-day activities,
 Ensuring quality and quantity production,

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 Making recommendations, suggestions, and up channeling employee
problems, etc.
 They communicate with worker and mid-level management.

Kinds of Managers by area

 Marketing Managers-Work in areas related to getting consumers and clients to buy the
organization’s products or services.
 Financial Managers- Deal primarily with an organization’s financial resources.
 Operations Managers-Concerned with creating and managing the systems that create
organization’s products and services.
 Human Resource Managers-Involved in human resource planning, recruiting and
selection, training and development, designing compensation and benefit systems,
formulating performance appraisal.

Job analysis and Recruitment and Training and Placement on the

job design selection development job

Labor Relations Compensation Performance

and Benefits Appraisal

 Administrative Managers-Generalists who are familiar with all functional areas of

management and who are not associated with any particular management specially.
 Specialized Management-Specialized managerial positions directly related to the needs of
the organization

Management in Organization
The management function in organizations is concerned with the achieving organizational goals
through using the available resources efficiently and effectively.

Essentially, the role of managers is to guide the organizations toward goal accomplishment. All
organizations exist for certain purposes or goals, and managers are responsible for combining
and using organizational resources to ensure that their organizations achieve their purposes.

The role of the Management is to move an organization towards its purposes or goals by
assigning activities that organization members perform.
If Management ensures that all the activities are designed effectively, the production of each
individual worker will contribute to the attainment of the organizational goals.

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Figure-Management in Organization
Management Process
Basically, Process means a series of activities/operations undertaken/conducted for achieving a
specific objective. Process is a systematic way of doing things. Management is described as a
process. In fact, whatever functions are performed by a manager and the sequence in which they
are performed is designated as management process. A manager is someone whose primary
responsibility is to carry out the management process.

Figure-Management Process

Management Process involves-

 Planning and decision making-

- Setting an organization’s goals and selecting a course of action from a set of alternatives to
achieve them.

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Planning is the starting point of management process and all other functions of
management are related to and dependent on planning function.
 Organizing:
- Determining how best group activities and resources.
Organizing can be thought of as assigning the tasks developed in planning stages to
various individuals or groups within the organization.
The process of organizing involves-
- Decide the work into component activities
- Assign people to task
- Define the responsibilities
- Delegate authority
- Establish structural relationship.

 Leading
– Motivating members of the organization to work together to advance the interests
of the organization.
The individual involves in the organization have their own needs and objectives that are
important to them. Through the function of leading, managers help people see that they
can satisfy their own needs and utilize their potentials and at the same time contribute to
the aims of the organization.

 Controlling
– Monitoring and correcting ongoing activities to facilitate goal attainment.
The managerial function controlling is the measurement and correction of the
performance in order to make sure that enterprise objective and the plans devised to attain
them are being accomplished.
- It measures actual performance against the plans
- It sets standards and norms of performance
- It measures the effective and efficiency of execution against these standards and the
- It periodically reviews, evaluates and monitors the performance.
- If the gaps are found between execution levels and the plans, controlling function
involves suitable corrective actions to expedite the execution to match up with the
plans or in certain circumstances deciding to make modifications in the plans.

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Fundamental Management Skills
To carry out the management functions most effectively, managers rely on a number of different
fundamental management skills, of which the most important are-
1. Technical Skill - Skills necessary to accomplish or understand the specific kind
of work being done in an organization.
- These skills are especially important for first line managers.
2. Interpersonal - Ability to communicate with, understand and motivate
individuals and groups.
- As a manager, he or she must be able to get along with
subordinates, peers, and those at higher levels of the
3. Conceptual - The manager’s ability to think in the abstract.
- Managers need the mental capacity to:
- Understand organizational goals and its environment.
- How the organization is structured.
- Viewing the organization as system.
- This ability allows them to think strategically, to see the “big
picture,” and to make broad-based decisions that serve the
overall organization.
4. Diagnostic - The manager’s ability to visualize the most appropriate
response to a situation.
- A physician diagnoses a patient’s illness by analyzing
symptoms and determining their probable cause. Similarly, a
manager can diagnose and analyze a problem in the
organization by studying its symptoms and then developing
a solution.
5. Communication - Communication skills refer to the manager’s abilities both to
convey ideas and information effectively to others and to
receive ideas and information effectively from others.
- These skills enable a manager to transmit ideas to
subordinates so that they know what is expected, to
coordinate work with peers and colleagues so that they work
well together, and to keep higher-level managers informed
about what is going on.
6. Decision-making - The manager’s ability to recognize and define problems and
opportunities correctly and then to select an appropriate
course of action to solve the problems and capitalize on
7. Time management - The manager’s ability to prioritize work, to work efficiently,
skills and to delegate appropriately

Management Skill Mixes at Different Organizational Levels

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It is seen from the diagram that the top level managers should have high conceptual and low
technical skill according to area covered by the skill in the figure. Similarly, they also have high
diagonistic skills and low interpersonal skill.
It is also seen mid level managers have both conceptal, technical skill, diagonistic and
interpersonal skill, as they are the operative management. The first line managers should have
high technical and low conceptual skill. Similary, lower level managers need high interpersonal
skill to perform the job effiently and effectively, but they need low diagonostic skills.

Management is a Science or Art:

The science of Management
Actually science is a systematic body of knowledge based on experimentation and observation of
the facts. It must have following elements-


Science as knowledge Method used in science Tools used in science

 Concepts & Variables  Observation  Microscope/

 Interrelationship  Hypothesis  X-Ray/
between variables  Collection of Data  Periscope/
 Explanation  Verification and re-  Computer
 Prediction verification of results  Questionnaire/Punch
 Conclusion Card/CC camera/Tally
 Establish a theory or Software

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Considering the above, we can clearly say that, management is a science, because it has concepts
like different skill, motivation, leadership etc, it follows methods for drawing conclusion
regarding good management & it has tools Questionnaire/Punch Card/CC camera/Tally Software

Many management problems and issues can be approached in ways that are rational, logical,
objective, and systematic. Managers can gather data, facts, and objective information. They can
use quantitative models and decision-making techniques to arrive at “correct” decisions.

The Art of Management

Management is also an art because it requires a blend of intuition, experience, instinct and
personal insight to solve a problem.

There is obviously some differences between two person while managing a same problem, some
use autocratic leadership style, other may use democratic leadership. Also there may be
differences in the act of expressing the agenda and its solution.

So, Management is a science in the sense that there are some established principles and specific
data associated with managing companies successfully. It is an art in that sense, there is
considerable space for individual style and self-expression.

Contribution of F. W Taylor
- Fredric Winslow Taylor [March 20, 1856 – March 21, 1915] is known as Father of Scientific
Management. Scientific management also called Taylorism.
- He is pioneer in the field of labor efficiency.
- Replace rule-of-thumb work methods with methods based on a scientific study of the tasks.
- Replaced old methods of how to do work with scientifically-based work methods to
eliminate “soldiering,” where employees deliberately worked at a pace slower than their
- Believed in selecting, training, teaching, and developing workers.
- Used time studies of jobs, standards planning, exception rule of management, slide-rules,
instruction cards, and piece-work pay systems to control and motivate employees.

Henri Fayol
- Henri Fayol (29 July 1841 – 19 November 1925) was a French mining engineer, mining
executive, author and director of mines who developed general theory of business
administration that is often called Fayolism.
- Known as father of administrative Management, which focuses on managing the whole
organization rather than individuals.

Fayol’s Principles

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Henri Fayol in his book titled "Industrial and General Administration" published in 1916, gave
following 14 principles of management:
1. Division of Work:
- Division of wok (labor) means dividing the work on the principle that different
workers are best fitted for different jobs depending upon influences arising from
the personal aptitude and skills.
- The division of work is also known as specialization. Specialization allows the
individual to build up experience, and to continuously improve his skills. Thereby
he can be more productive.
2. Authority:
- Authority and responsibility must be related and should go together. The right to
issue commands, along with which must go the balanced responsibility for its
function. i.e., there should always be a balance between the authority and
- Authority without responsibility results in inefficient leadership and irresponsible
behavior, whereas in another case responsibility without authority results in the
ineffective utilization of manpower.
3. Discipline.
- Employees must obey, but this is two-sided: employees will only obey orders if
management play their part by providing good leadership.
4. Unity of Command.
- Each worker should have only one boss with no other conflicting lines of
- The management principle ‘Unity of command’ means that an individual
employee should receive orders from one manager and that the employee is
answerable to that manager. If tasks and related responsibilities are given to the
employee by more than one manager, this may lead to confusion which may lead
to possible conflicts for employees.
5. Subordination of individual interest (to the general interest).
- The interests of one person should not take priority over the interests of the
organization as a whole.
6. Unity of Direction.
- The entire organization should be moving towards a common objective in a
common direction.
- Unity of command does not exist without unity of direction but does not
necessarily flows from it.
7. Remuneration.
- Fair remunerations can keep the employee motivation levels high and it can make
them more efficient, innovative, creative and loyal towards the organization.

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- Remunerations may be monetary or non-monetary, here monetary benefits
include salary, bonus, incentives and other financial benefits, whereas non-
monetary benefits include non-financial benefits such as rewards, gifts,
recognition and promotion.
8. Centralization (or Decentralization).
- Centralization refers to the degree to which subordinates are involved in decision
making. If the decision-making authority is concentrated at the top level
management then it is known as centralized, i.e., retaining power & authority in
the hands of top management, whereas authority is delegated to the middle level
and lower level management, then it is known as decentralization.
9. Scalar chain (Line of Authority).
- Scalar chain refers to the number of levels in the hierarchy from the ultimate
authority to the lowest level in the organization.
- It should not be over-stretched and consist of too-many levels.
- A scalar chain is also known as a chain of command.
- It corresponds to the formal line of authority and communication within an
10. Order.
- Both material order and social order are necessary.
 Material Order: This order specifies that there should be a proper place
for all physical resources. It minimizes lost time and useless handling of
 Social order: This order specifies that there should be a proper place for all
human resources in accordance with their designations. Maintaining order
in the workplace maximizes efficiency and coordination. If a firm does not
work in an orderly manner, then it may be the result of inefficiency and
leads to chaos.
11. Equity.
- The management principle of equity says that all the employees or workers of the
organization must be treated fairly, equally and impartially.
- Maintaining equity in the organizations come from the organization’s culture;
adopting and maintaining equity maximizes employee loyalty and
12. Stability of Tenure of Personnel.
- Employees work better if job security and career progress are assured to them.
- An insecure tenure and a high rate of employee turnover will affect the
organization adversely.
13. Initiative.
- Management should take steps to encourage worker initiative, which is defined as
new or additional work activity undertaken through self-direction. Allowing all
personnel to show their initiative in some way is a source of strength for the
organization. Even though it may well involve a sacrifice of ‘personal vanity’ on
the part of many managers.

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14. Team Spirit (Esprit de Corps).
- Fayol suggests that: “real talent is needed to coordinate effort, encourage
keenness, use each person’s abilities, and reward each one’s merit without
arousing possible jealousies and disturbing harmonious relations.”
- Management must encourage team spirit and unity so that it brings out mutual
loyalty and feeling of pride. Esprit de corps facilitate the union of the employees
and management which creates a feeling of loyalty in the minds of employees and
management also.

Planning & Strategic Management

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Definition of Planning

“Planning is the exercise of intelligence to deal with facts and situation as they are and find a way
to solve problem.”

----Jawaharlal Neheru

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. Planning bridges the gap from where we are to here we want
to go.”

Planning is the systematic process of establishing a need and then working out the best way to
meet the need, within a strategic framework that enables you to identify priorities and determines
your operational principles.

‘Planning is deciding in the present what to do in future. It is the process of thinking, mapping
out and organizing the activities required to achieve a desired goal.

Planning means thinking about the future so that you can do something about it now.

Planning involves in defining the organization goal (what to be done) and establishing strategies
(how to be done) to achieve sited goal. Some time it is also called primary managerial function.

Why Planning is necessary?

1) Provide Direction:
- What the organization want to accomplish (achieve) and how to reach the
establish/sited goals.
- By planning a clear direction comes that to be follow, in order to reach and achieve
2) Reduce Uncertainty:
- Planning reduce uncertainty by forcing the managers to look ahead, anticipate
changes, consider the impact of changes and develop appropriate response to these
3) Minimizes waste and redundancy (idleness):
- When work activities are coordinated around established plans redundancy can be

4) Provide ability in controlling:

- Planning establishes the goals or standards that are used in controlling.
- Planning helps in controlling and monitoring the work that either this works is on its
right path or not.

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- Budget is the economic translation of a plan.
- Budgeting is simply making sure that there is enough money to cover all of the
outgoings that it will take the business to operate.

Decision Making Process

Decision means “Choosing among alternatives”.
“Choosing among alternatives “is done through a proper procedure which is called “decision
making process”.

Decision making and problem solving are ongoing processes of evaluating situations or
problems, considering alternatives, making choices, and following them up with the necessary

Level of Managers and decision Making

Managers are responsible to makes the decisions.
 Top level Managers-Take decision like product type, manufacturing location etc.
 Middle and Lower level manager-Decision include quality problems, pay rising etc.

Kinds of Plan
 Strategic Plan:
 The plans are set by and for top Management.
 A general plan outlining resource allocation, priorities, and action
steps necessary to reach strategic goals
 What is to produce, where it produce etc.
 Tactical Plan
 The plan are set by and for middle management.
 Decision regarding quality and pay rising problem.
 Operational Plan
 The plan are set by and for lower management.
 Plans that have a short term focus.
 Monthly production target etc.

Top Level

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Tactical Manager
Strategic plans are plans that apply to the entire organization, establish the organization’s overall
goals, and seek to position the organization in terms of its environment. Plans that specify the
details of how the overall goals are to be achieved are called operational plans.

How do the two types of plans differ? Strategic plans tend to cover a longer time frame and a broader
view of the organization. Strategic plans also include the formulation of goals, whereas
operational plans define ways to achieve the goals. Also, operational plans tend to cover short
time periods—monthly, weekly, and day-to-day.

Mission, Vision, Goal & Objective

 Vision-A Long term statement, outlines what a company wants to be in the future.
 Mission-A statement of an organization’s fundamental purpose. It describes what you do, for
whom you do it and the benefit, e.g. "To provide consumers with high-quality, price-
competitive widgets to meet their personal, business and recreational needs." It defines the
day-to-day activities of the work they do, and every person who works for the organization
contributes to that mission.
 Goal-Broad, long-term aims that define accomplishment of the mission, e.g. "Grow
profitability. Maximize net income by increasing revenues and controlling costs."
 Objectives: Specific, quantifiable, realistic targets that measure the accomplishment of a goal over a
specified period of time, e.g. "Increase revenues by x% in 2018. Limit increases in overhead costs
to y%. Achieve a z% reduction in management staff through increased automation."

Differences between Goal & Objective

Goal Objective

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Meaning The purpose toward which an Something that one's efforts or actions
endeavor is directed. are intended to attain or accomplish;
purpose; target.
Example I want to achieve success in the field I want to complete this thesis on genetic
of genetic research and do what no research by the end of this month.
one has ever done.
Action Generic action, or better still, an Specific action - the objective supports
outcome towards which we strive. attainment of the associated goal.
Measure Goals may not be strictly measurable Must be measurable and tangible.
or tangible.
Time Longer term Mid to short term

Strategy-A comprehensive plan for accomplishing an organization’s goals.

Strategic Management

- A comprehensive and ongoing management process aimed at formulating and

implementing effective strategies, a way of approaching business opportunities and
- Using SWOT Analysis to formulate strategy

SWOT Analysis

- SWOT stands for 'Strengths, Weaknesses, Opportunities and Threats'.

- SWOT analysis is one of the most important steps in formulating strategy. Using the
organization’s mission as a context, managers assess internal strengths (distinctive
competencies) and weaknesses as well as external opportunities and threats. The goal
is then to develop good strategies that exploit opportunities and strengths, neutralize
threats, and avoid weaknesses.

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- SWOT analysis is the analysis by which we can formulate some effective strategies
that support the organization’s mission by utilizing the strength and opportunities,
avoiding weakness and neutralizing threats.

What are the differences between “Strength” and “opportunity” & “Weakness” and “Threat”
in SWOT analysis?

- Strengths are what separates one company's performance from another.
- A company should analyze its advantages, what it does better than competitors, what
special resources or efficient advantages it has, perceptions from the market, factors
leading to sales and profit and unique selling propositions.
- Organizational Strength is a skill or capability that enables an organization to create
and implement its strategies.
- Strength have its control by the organization.


- An opportunity is any favorable situation in the organization’s environment.

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- Whereas strengths include significant internal exploration, the opportunities section
of SWOT is largely externally driven. i.e., opportunity is not controlled by the
organization itself, it is controlled by the industry, government or others.
- Opportunities are generally in new areas for potential profit and growth. Common
types of opportunities may include customer needs not yet fulfilled, new and
emerging technological opportunities, relaxation of binding regulations and
international trade-barrier removal.


- A weakness is a limitation, fault, or defect in the organisation that will keep it from
achieving its objectives.
- Like Strengths, weakness look inward at the company and focus on resources and
- Organizational weakness is a skill or capability that does not enable an organization
to choose and implement strategies that support its mission.

- A threat is any unfavorable situation in the organization’s environment that is
potentially damaging to its strategy. The threat may be a barrier, a constraint, or
anything external that might cause problems, damage or injury.
- It is not under control of the organization.

Example of SWOT Analysis.

Mission: To make EMBA, as a world class business learning Institute
Formulate Strategies:
1. Updating and modernizing our EMBA syllabus & curriculum.
2. Establishing modern and sophisticated business labs and class rooms.
3. Fully digitalized campus with academic environment.
4. MoU (Memorandum of Understanding) with reputed world class universities and
research organization and introduce exchange program.
5. Development of Human resources through offering MS, PhD, English Language &
providing extra-curricular Knowledge & CSR practice.

1. Young & energetic teachers with foreign academic degrees.
2. Al most digital campus-WIfi facilities.
3. Good academic environment which noise-free.
4. Well stocked library.

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5. Residential facilities.

1. Few experienced teachers with Phd/foreign degree.
2. Traditional and outdated curriculum and syllabus.
3. High turnover of teachers and staffs.
4. Limited laboratory facilities
5. Limited access to online resources.

1. Lebukhali Bridge is under construction.
2. Al most 100% government funded.
3. Moderate communication system.
4. Govt. favors the southern part development.
5. Surrounding environment is good.

1. Far away from district and divisional head quarter.
2. Other universities offer EMBA program in large scale.
3. Roads are not well constructed & still now there is ferry.
4. Conservative attitude of the authorities on business education.
5. Not fully protected from drug addiction and other mishap.

Types of Strategic Alternatives

Most businesses today develop strategies at two distinct levels:
 Business-level Strategy-
- The set of strategic alternatives that an organization chooses from as it conducts
business in a particular industry or a particular market.
- E.g., Single Product & Single Market

 Corporate-level Strategy
- The set of strategic alternatives that an organization chooses from as it manages its
operations simultaneously across several industries and several markets.
- E.g., Single product & different markets
Or, Different product & single market
Or, Different products & different markets.

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Differences between Business level strategy and Corporate Level strategy

1. Business-level strategies deal with a particular business unit while corporate strategies deal
with the entire company, which may consist of several business units.
2. Business-level strategies deal with specific issues, such as determining the price of the
products, increasing sales or introducing a new product.
3. Corporate strategies tend to be very broad and are focused on gaining a competitive
advantage in the industry.
4. Corporate strategies will often affect business-level strategies. This is mainly done by
allocating specific resources to particular business units.
5. Business-level strategies are very useful for solving practical problems while corporate
strategies are useful for developing long-term solutions for problems.
6. The business strategy focuses on competing successfully in the market place with other
firms. On the contrary, corporate strategy stresses on increasing profitability and business
7. Business Strategy is framed by middle-level management which comprises of division, unit
or departmental managers. Conversely, corporate strategy is formulated by top level
managers, i.e. board of directors, CEO, and managing director.

Comparison Chart:

Basis for Business Strategy Corporate Strategy

Meaning Business Strategy is the strategy Corporate Strategy is stated in the
framed by the business managers to mission statement, which explains
strengthen the overall performance of the business type and ultimate goal
the enterprise. of the firm.
Created by Middle level management Top level management
Nature Executive and Governing Decisive and Legislative
Relates to Selection of plan to fulfill the Business selection in which the
objectives of organization. company should compete.
Deals with Particular business unit or division Entire business organization
Term Short term strategy Long term strategy
Focus Competing successfully in the Maximizing profitability and
marketplace. business growth.
Approach Introverted Extroverted
Major Cost Leadership, Focus and Expansion, Stability and
strategies Differentiation Retrenchment.

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Formulate Business Level Strategies:

A number of frameworks have been developed for identifying the major strategic alternatives
that organizations should consider when choosing their business-level strategies.
Three important classification schemes are-
1. Porter’s Generic Strategies
2. Miles and Snow Typology
3. Strategy based on the Product Life Cycle

Porter’s Generic Strategies

According to Michael Porter, organizations may pursue following strategies

 Differentiation Strategy-Distinguish Product & Services, e.g., Rolex, Mercedes-Benz,

Samsung mobile, The uni-ball inkview whiteboard markers, allows to easily see how much
ink remains.
 Overall Cost Leadership strategy- An organization attempts to gain competitive advantage
by reducing its costs below the costs of competing firms. E.g., Timex, Hyundai, Symphony
mobile, Matador introduces new high quality i-teen pen in low price than others.
 Focus Strategy- concentrates on a specific regional market, product line, or group of buyers.
E.g., Tag Heurer (Watch), Tata in India, Apple I-phone, Anchor Cement etc.

Miles and Snow Typology

A second classification of strategic opinions was developed by Ramond Miles and Charles
Snow. They suggest that, business level strategies generally fall into one of four categories,
given in below:

 Protector-A firm that follows a protector strategy is highly innovative firm that is constantly
seeking out new markets, and new opportunities and is oriented to growth and risk taking.
E.g., Symphony, Grameenphone.

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 Defender-A company that concentrates on protecting its current markets, maintaining
stable growth and serving current customers by lowering its costs and improving
performance of its existing products. E.g., Banglalink, BIC

 Analyzer-A business that uses an analyzer strategy, in which it attempts to maintain its
current businesses and to be somewhat innovative in new business, combines the elements of
Protector and defender. E.g., IBM, Robi.

 Reactor-No clear strategy, reacts to changes in the environment, drift with events. E.g.,
International Harvester Company, Kmart.

Strategies based on Product Life Cycle

- The product life cycle is a model that shows how sales volume changes over the life of
- It was developed by Ramond Vermon.

The four main stages of a product's life cycle and the accompanying characteristics are:

1. Market Introduction Stage:

- Cost are very high

- Slow sales Volumes to start.
- Little or no Competition.
- Demand gas to be created.
- Customers have to be prompted to try the product.
- Makes no money /profit in this stage

2. Growth Stage

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- During the growth stage, more firms begin producing the product, and sales
continue to grow.
- Important management issues include ensuring quality and delivery and
beginning to differentiate an organization’s product from competitors’ products.
- Cost reduced due to economies of scale.
- Sales Volume increase significantly.
- Profitability begins to rise.
- Public awareness increases.
- Competitions begins to increase with a few new players in establishing market.
- Increased competition leads to price decreases.

3. Maturity Stage
- During this maturity stage, overall demand growth for a product begins to slow
down, and the number of new firms producing the product begins to decline.
- Costs are lowered as a result of production volumes increasing and experience
curve effects.
- Sales Volume peaks and market saturation reached.
- Prices tend to drop due to the proliferation of competing produts.
- Brand differentiation and feature diversification is emphasized to maintain or
increase market share.
- Industrial profits go down.

4. Saturation and decline stage

- Cost become counter-optimal.
- Sales Volume decline.
- Prices, profitability diminish.
- Profit becomes more challenge of production/distribution efficiency than
increased sales.
- Organizations that fail to anticipate the decline stage in earlier stages of the life
cycle may go out of business. Those that differentiate their product, keep their
costs low, or develop new products or services may do well during this stage.

Formulating Corporate Level Strategy

The most important strategic issue at the corporate level concerns the extent and nature of
organizational diversification.
Diversification describes the number of different businesses that an organization is engaged in
and the extent to which these businesses are related to one another.
Diversification is the process of reducing risk.

Principles of Management Ahmed Sabbir 24

There are three types of diversification strategies:
 Single-product strategy: A strategy in which an organization manufactures just one
product or service and sell it in a single geographical market.
 Related diversification: A strategy in which an organization operates in several different
businesses, industries, or markets that are somehow linked. E.g., Dell have the business
of Laptop, Desktop, Computer accessories, Monitor, etc are related or linked.
 And unrelated diversification: A strategy in which an organization operates multiple
businesses that are not logically associated with one another. E.g.,Akij group is doing
business of manufacture of textile products and beverage product which is not related
each other.

Major tools for managing diversifications:

However an organization implements diversification— whether through internal development,

vertical integration, or mergers and acquisitions— it must monitor and manage its strategy.
Portfolio management techniques are methods that diversified organizations use to determine
in which businesses to engage and how to manage these businesses to maximize corporate
Two important portfolio management techniques are:
 The BCG (Boston Consulting Group) matrix
 The GE Business Screen.

BCG Matrix
- A method of evaluating businesses relative to the growth rate of their market and the
organization’s share of the market.
- These two dimensions reveal likely profitability of the business portfolio in terms of cash
needed to support that unit and cash generated by it.
- The general purpose of the analysis is to help understand, which brands the firm should
invest in and which ones should be divested.

- The matrix classifies the types of businesses that a diversified organization can engage
 “Dogs” have small market shares and no growth prospects.
o Dogs are businesses that have a very small share of a market that is not expected
to grow. Because these businesses do not hold much economic promise, the BCG
matrix suggests that organizations either should not invest in them or should
consider selling them as soon as possible..
 “Cash cows” have large shares of mature markets.

Principles of Management Ahmed Sabbir 25

o Cash cows are businesses that have a large share of a market that is not expected
to grow substantially. These businesses characteristically generate high profits
that the organization should use to support question marks and stars. (Cash cows
are “milked” for cash to support businesses in markets that have greater growth
 “Question marks” have small market shares in quickly growing markets.
o Question marks are businesses that have only a small share of a quickly growing
market. The future performance of these businesses is uncertain. A question mark
that is able to capture increasing amounts of this growing market may be very
profitable. On the other hand, a question mark unable to keep up with market
growth is likely to have low profits. The BCG matrix suggests that organizations
should invest carefully in question marks. If their performance does not live up to
expectations, question marks should be reclassified as dogs and divested.
 “Stars” have large shares of rapidly growing markets.
o Stars are businesses that have the largest share of a rapidly growing market. Cash
generated by cash cows should be invested in stars to ensure their preeminent

- The BCG matrix helps managers develop a better understanding of how different strategic
business units contribute to the overall organization. By assessing each SBU on the basis
of its market growth rate and relative market share, managers can make decisions about
whether to commit further financial resources to the SBU or to sell or liquidate it.

Strategy of BCG Matrix

Firstly we close the “dogs” and money received from “dogs” should be invested to the “Question
mark”. If performance of “Question Mark” improves, it is all right but if does not improve, we
should shut down this “Question mark” and re-invested money received from this “Question
Mark” to “Cash Cow” and “Stars” according to the value judgment, expertise and experience of
the managers taking into consideration the stages of product life cycle and other norms.

Principles of Management Ahmed Sabbir 26

GE Business Screen
- A method of evaluating business in a diversified portfolio along two dimensions, each of
which contains multiple factors:
 Industry attractiveness.
 Competitive position (strength) of each firm in the portfolio.
- In general, the more attractive the industry and the more competitive a business is, the
more resources an organization should invest in that business.

Strategy of GEBS
Firstly we close the “the losers” and money received from “losers” should be invested to the
“Question mark”. If performance of “Question Mark” improves, it is all right but if does not
improve, we are reclassify the question mark as “Loser” and should also shut down this
“Question mark”. Money earned from these should be re-invested among the “Winner”,
“Average business” and “Profit Producer”. according to the value judgment, expertise and
experience of the managers taking into consideration the stages of product life cycle and other
Difference between BCG Matrix and GE Business Screen

Principles of Management Ahmed Sabbir 27

 The points depicted below, elaborate the fundamental differences between BCG and GE
 BCG matrix can be understood as the growth-share model that reflects a growth of
business and the market share possessed by the firm. On the other hand, GE matrix is also
termed as multifactor portfolio matrix, which businesses use in making strategic choices
for product lines or business units based on their position in the grid.
 BCG matrix is simpler in comparison to GE matrix, as the former is easy to draw and
consist of only four cells, while the latter consist of nine cells.
 The two dimensions on which BCG matrix is based are market growth and market share.
In case of BCG Matrix X axis indicated Market share and Y-axis indicates growth rate.
Conversely, industry attractiveness and business strengths are two factors of GE matrix.
In GE Matrix, X axis indicates Competitive Position” which is outcome of six factors,
where Market Share is a vital factors and Y axis represent industry attractiveness, which
is result of 4 factors, where “Market Growth” is an important factors.
 BCG matrix is used by the companies to deploy their resources among various business
units. On the contrary, firms use GE matrix to prioritize investment among various
business units.
 In BCG matrix only a single measure is used, whereas in GE matrix multiple measures are
 BCG matrix represents two degrees of market growth and market share, i.e. high and low.
In contrast, in GE matrix there are three degrees of business strength, i.e. Good, Medium,
Poor, and industry attractiveness, are high, medium and low.
 “Stars” of BCG matrix corresponds to “Winner” in GEBS, “Dogs” corresponds to “Loser”.
Similarly, in BCG Matrix, there is an enterprise named ”Cash Cow” whereas “Profit
Producer” in GEBS is its counterpart.

Comparison Chart:

Basis for
BCG Matrix GE Matrix
BCG Martrix, is a growth share model, GE Matrix implies multifactor portfolio matrix, that
Meaning representing growth of business and the assist firm in making strategic choices for product
market share enjoyed by the firm. lines based on their position in the grid.
Number of
Four Nine
Factors Market share and Market growth Industry attractiveness and Business strengths
To help companies deploy their resources To prioritize investment among various business
among various business units. units.
Single measure is used. Multiple measures are used.
Classification Classified into two degrees Classified into three degrees



Principles of Management Ahmed Sabbir 28

Mission: To establish Islami banking through the introduction of a welfare oriented banking
system and become a world class bank.

Formulate Strategies
1. Establish a strong Shariah supervisory Committee.
2. Establish and maintain the modern banking techniques
3. Development of the financial system based on Islamic principles which is free from
4. Professional development of the employee through training of the human resources.
5. Provide adequate logistics to satisfy customers’ need.
6. Diversifying the investment, particularly in the priority sectors and less developed areas
of the country to ensure balanced development.
7. Adopt newer technology and its implementation to ensure sustainable development.


1. Stable and adequate fund.

2. Strong Liquidity position
3. Committed and Young energetic Manpower
4. Transparency in all activities
5. Innovative and earnest customer service
6. Good working Environment.
7. Largest network among PCBs with online banking facilities.
8. Dedicated Shariah Supervisory Board comprising of world-renowned Shariah scholars
9. Experience in the field of Islami Banking.


1. Increasing awareness about Islamic banking and demand for Shariah compliant products
and services.
2. Positive attitude of government and Bangladesh Bank.
3. Opportunities to develop Islamic investment instruments
4. Policy of Bangladesh Bank for operations of Islamic Bank.
5. Larger customer based bank.
6. National and International recognition of the bank.
7. Many branches can be open in remote location.

1. Lack of adequate Manpower
2. Improper Employee remuneration and Promotion system.
3. Huge rash in Cash counter.
4. The procedure of credit facility is to long compare to other banks.
5. Lack of Product (deposit/investment) innovation.
6. IBBL lacks aggressive advertising
7. The procedure of credit facility is to long compare to other banks.
8. IT and techno-banking status does not match with bank’s overall reputation.
9. Limited opportunities for investment of surplus liquidity.

Principles of Management Ahmed Sabbir 29

1. Increase Non Performing Investment.
2. Increased competition in the market for public deposits.
3. Lots of new banks are coming in the scenario with new service.
4. New Islamic banks introduced their operations
5. Techno-based baking by different banks.
6. Market pressure for lowering the profit/interest rate
7. Volatile global economic scenario.
8. Market distortion in the name of Islami banking
9. Conspiracy of vested corner for barring growth of Islami banking
10. Propaganda of media
11. Change in Policy rapidly.
12. Misconceptions and misunderstandings among the general public about Islamic banking.


Principles of Management Ahmed Sabbir 30
“Some people are born with power.
Others, who might not have as much power, need to come together to build collective power in
order to make things happen.
This is organizing.”

Organizing is deciding how best to group organizational activities and resources.

"Organizing 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."

Importance of Organizing
 Plan Implementation
 Assignment of authority, responsibility and accountability.
 Division of labor
 Coordinates diverse organizational tasks.
 Establish relationship among individuals, groups and departments
 Establish formal lines of authority
 Allocation and deployment of organizational resources.

Components of Organization Structure

The six basic Building Blocks for Organization Structure are given as:

1. Designing Jobs
- Job design is the systematic and purposeful allocation of tasks to individuals and groups
within an organization.
2. Grouping Jobs: Departmentalization/Forming department
- Departmentalization is the process of grouping jobs according to some logical
3. Creating a hierarchy
- Establishing reporting relationships among positions through clarifying the chain of
command and span of Management.
4. Distributing Authority:

Principles of Management Ahmed Sabbir 31

- Distributing authority starts with delegation. Delegation is the process by which the
manager assigns a portion of his or her total workload to others. Authority is the power
that has been legitimized (approved) by the organization.
5. Coordinating Activities
- Coordination is the process of linking the activities of the various departments of the
- Primary reason for coordination is that departments and work groups are interdependent
– they depend on each other for information and resources to perform their respective
6. Differentiating Position
- The last element is distinguishing between line and staff positions.
- A line position is a position in the direct chain of command that is responsible for the
achievement of an organization's goals. In contrast, a staff position provides expertise,
advice, and support for line positions.

Organization Design
- The overall set of structural elements and the relationships among those elements used
to manage the total organization.
- A means to implement strategies and plans to achieve organizational goals.

Job Design
- Job design is the determination of an individual’s work related responsibilities.

Principles of Management Ahmed Sabbir 32

- Job design is the systematic and purposeful allocation of tasks (specifying the contents,
method, and relationships of jobs) to individuals and groups within an organization to
perform the organizational activities in the most efficient and effective manner.

Job Specialization
- The degree to which the overall task of the organization is broken down and divided
into smaller component parts.
- Job specification evolved from the concept of division of labor.

Benefits of Specialization
 Workers can become proficient at a task.
 Transfer time between tasks is decreased./ No time wasted on in moving from one job to
 Specialized equipment can be more easily developed.
 easily trained for a particular task within short time period
 Employee replacement becomes easier.

Limitations of Specialization

 Workers who perform highly specialized jobs may become bored and dissatisfied.
 The job may be so specialized that it offers no challenge or stimulation.
 Anticipated benefits of specialization do not always occur.

Alternatives to Job specialization

1. Job Rotation
- Systematically moving employees from one job to another.
- Most frequent use today is as a training device for skills and flexibility.
2. Job Enlargement
- An increase in the total number of tasks workers perform.
- Job enlargement also known as horizontal loading, expands the number of related task in
a job.
- Designed to allow the worker to perform a variety of tasks to reduce the level of job
boredom or dissatisfaction
3. Job Enrichment
- Increasing both the number of tasks the worker does and the control the worker has over
the job.
- It increases responsibility, autonomy and control.

Principles of Management Ahmed Sabbir 33

- To implement job enrichment, managers remove some controls from the job, delegate
more authority to employees and structure the work in complete, natural units.

4. Work team
- Work Team allows an entire group to design the work system it will use to perform an
interrelated set of tasks.
- The team itself decides how jobs will be allocated and assigns specific tasks to members,
monitors and controls its own performance and has autonomy over work scheduling.


- Departmentalization is the process of grouping jobs according to some logical


Rationale for Departmentalization

 Organizational growth exceeds the owner-manager’s capacity to personally supervise all
of the organization.
 Additional managers are employed and assigned specific employees to supervise.

 Skill Development
 Economies of Scale
 Good Coordination
 Lack of Communication
 Employees Identify with Department
 Slow Response to External Demands
 Narrow Specialists

Common base of departmentalization

i) By function:

Finance Marketing Operations

Principles of Management Ahmed Sabbir 34

ii) By Product:

Computer Printer Software

iii) By Customer:

Home Users Business Users Educational Users

iv) By Location:

Southern Region Northern region Western Region

Functional Departmentalization

- Functional Departmentalization groups jobs involving the same or similar activities

(e.g., organizational functions such as finance, marketing, production etc.)
- It is Most common in smaller organizations;

 Each department can be staffed by experts in that functional area.
 Supervision is facilitated in that managers only need be familiar with a narrow set of
 Coordinating activities inside each department is easier.
 Decision making becomes slow and bureaucratic.
 Employees narrow their focus to the department and lose sight of the total organizational
 Accountability and performance are difficult to monitor.

Principles of Management Ahmed Sabbir 35

Product Departmentalization
- The grouping of activities around products or product groups.
- A good example of product departmentalization is witnessed in an automobile
manufacturing company. In such a company, we generally see departments like a two-
wheeler department, three-wheeler department, four-wheeler department, heavy motors
department, etc.

 The performance of individual products or product groups can be assessed, thereby

improving the accountability of departments for the results of their activities.

 All activities associated with one product or product group can be easily integrated and
 Speed and effectiveness of decision making are enhanced.
 Performance of individual products or product groups can be assessed more easily and
 Managers in each department may focus on their own product or product group to the
exclusion of the rest of the organization.
 Administrative costs may increase due to each department having its own functional-area

Customer Departmentalization
- Grouping activities to respond to and interact with specific customers and customer
- For example, customers can be classified under types such as, international or foreign
customers, inland or domestic customers, bulk purchasing or wholesale customers, retail
customers, etc

 Major advantage is that the organization is able to use skilled specialists to deal with
unique customers or customer groups.

 A large administrative staff is needed to integrate activities of various departments.

Principles of Management Ahmed Sabbir 36

Location Departmentalization
- Location Departmentalization groups jobs on the basis of defined geographic sites or
- Departmentalization based on the division of an area of operation into different zones

- Primary advantage is that it enables the organization to respond easily to unique
customer and/or environmental characteristics in the various regions.
- Large administrative staff may be needed to keep track of units in scattered locations.

Establishing Reporting Relationships

Chain of Command:
- A clear and distinct line of authority among the positions in an organization.
 Unity of Command: Each person within an organization must have a clear
reporting relationship to one and only one boss.
 Scalar Principle: A clear and unbroken line of authority must extend from the
bottom to the top of the organization.
Span of Management
- Another part of establishing reporting relationships is determining how many people
will report to each manager, i.e., the number of people who report to a particular
- Sometimes called the span of control.
- In other words, it is number of people supervise by a Manager.
- There is no ideal or optimal span of management.

Tall versus Flat Organizations

Flat Organizations
- In flat organization, the span of control is wide, there will be fewer management levels.
- Flat structure is an organizational structure with a limited number of levels of hierarchy/Short
chain of command
- Flat structures seem to lead to higher levels of employee morale and productivity.
- Create more administrative responsibility for the relatively few managers.
- Create more supervisory responsibility for managers due to wider spans of control.
- In Flat Organization Structure, there is a loose control because there are many subordinates

Principles of Management Ahmed Sabbir 37

- Flat Organization Structure is less costly because it has less managers.
- In Flat Organization, communication will not be distorted and delayed because there are few
levels of management.

Figure-Tall vs. Flat Organizations

Tall Organization
– In Tall Organization, the span of control is narrow, then there will be many management
– Tall structure is an organizational structure with many levels of hierarchy/Long chain of
– In tall structures, several layers of management come between front-line employees and
upper management.
– Tall Organizations are more expensive because of the number of managers involved.
– In Tall Organization Structure, there is a close control because there are few subordinates.
– In Tall Organization Structure, Decision making is slow because there are many levels of
– Foster more communication problems because of the number of people through whom
information must pass.

Centralization and Decentralization

• Decentralization

Principles of Management Ahmed Sabbir 38

– The process of systematically delegating power and authority throughout the
organization to middle- and lower-level managers.

– Decentralization is the extent to which authority is delegated to lower

management levels.

• Centralization

– The process of systematically retaining power and authority in the hands of

higher-level managers.

– Centralization is the extent to which authority is concentrated at the top

management levels.

Factors Determining the Choice of Centralization

 The complexity and uncertainty of the external environment.
- Usually, the greater the complexity and uncertainty of the environment, the greater is
the tendency to decentralize
 The history of the organization.
 The nature (cost and risk) of the decisions to be made.
- The costlier and riskier the decisions, the more pressure there is to centralize.

Functional Organization

- The functional design is an arrangement based on the functional approach to

- This design has been termed the U-form (for unitary) approach.
- Under the U-form arrangement, the members and units in the organization are grouped into
functional departments such as marketing and production.
- Functionally based designs are most commonly used in small organizations because an
individual CEO can easily oversee and coordinate the entire organization.
- FW Taylor suggested functional organization

 It allows the organization to staff all important positions with functional experts,
 Reduce wastage and ensuring optimum utilization of resources as expertise involved
 Quality of the work improved

 Employees are not aware of overall organization.
 Decision making becomes slow and bureaucratic.

Principles of Management Ahmed Sabbir 39

Figure-Functional Organization

Matrix: Matrix is a rectangular array of number written in the form,

a11 a12 a13…………………….a1n

a21 a22 a23…………………….a2n

a31 a32 a33…………………….a3n


am1 am2 am3………………….amn

it is a mXn matrix

Matrix Organization
- An organizational arrangement based on two overlapping bases of departmentalization
(e.g., functional departments and product categories).
- A set of product groups or temporary departments are superimposed across the
functional departments.
- Employees in the resulting matrix are members of both their departments and a project
team under a project manager.
- The matrix creates a multiple command structure in which an employee reports to both
departmental and project managers.

Principles of Management Ahmed Sabbir 40

Figure-Matrix Organization


- They enhance flexibility because teams can be created, redefined, and dissolved as
- As they assume a major role in decision making, team members are likely to be highly
motivated and committed to the organization
- Employees in a matrix organization have considerable opportunity to learn new skills.
- The matrix design provides an efficient way for the organization to take full advantage
of its human resources.
- The matrix design gives top management a useful vehicle for decentralization.
- It enhance the co-ordination.

- Employees may be uncertain about reporting relationships,
- Sometimes it creates conflicts in the organization.
- In a matrix, more time may also be required for coordinating task-related activities

Principles of Management Ahmed Sabbir 41

Managing Human Resources in Organizations

Human Resource Management (HRM) Definition

- The set of organizational activities directed at attracting, developing, and maintaining an

effective work force.
- Human Resources is also the organizational function that deals with the people and
issues related to people such as recruiting and hiring employees, compensation and
benefits, performance management, training, organization development and culture.
- Human Resource Management is a strategic and comprehensive approach to managing
people and the work place culture and environment. Effective HRM enables employees
to contribute effectively and productively to the overall company direction and the
accomplishment of the organization’s goals and objectives.

The Strategic Importance of HRM

- HRM has become increasingly important as firms have come to realize the value of their
human resources in improving productivity.
- HRM is critical to the bottom-line performance of the firm.
- HR planning has become part of the strategic planning process.

The Legal Environment of HRM

 Equal Employment Opportunity

 Title VII of the Civil Rights Act of 1964
- Forbids discrimination on the basis of sex, race, color, religion, or national origin
in all areas of the employment relationship.
- Employers are not required to seek out and hire minorities but they must treat
fairly all who apply.
- Adverse impact: Occurs when minority group members pass a selection standard
at a rate less than 80% of the rate of the majority group.
 Age Discrimination in Employment Act of 1967
- Outlaws discrimination against people older than 40 years of age.
 Compensation and Benefits
 Fair Labor Standards Act of 1938 (FLSA)
- Sets a minimum wage and requires overtime pay for work in excess of 40 hours per
- Salaried professional, executive, and administrative employees are exempt from
the Act’s minimum wage and overtime provisions.
 Equal Pay Act of 1963

Principles of Management Ahmed Sabbir 42

-Requires men and women to be paid the same amount for doing the same jobs;
exceptions are permitted for seniority and performance pay.
 Employee Retirement Income Security Act of 1974 (ERISA)
- Sets standards for pension plan management and provides federal insurance if
pension plans go bankrupt.
 Family and Medical Leave Act of 1993 (FMLA)
- Requires employers to provide up to 12 weeks of unpaid leave for family and
medical emergencies.
 Labor Relations
 National Labor Relations Act of 1935 (Wagner Act)
- NLRA set up procedures for employees to vote whether to have a union; if they
vote for a union, management is required to bargain collectively with the union.
 Labor Management Relations Act of 1947 (Taft-Hartley Act)
- Amended the NLRA to limit the power of unions and increase management’s
rights during organizing campaigns.
- Allows the U.S. president to prevent or end a strike that endangers national
 Health and Safety
 Occupational Safety and Health Act of 1970 (OSHA)
- Requires that employers:
o Provide a place of employment that is free from hazards that may cause death
or serious physical harm.
o Obey the safety and health standards established by Occupational
Safety and Health Administration (OSHA).

Human Resource Planning

The starting point in attracting qualified human resources is planning. HR planning, in turn,
involves job analysis and forecasting the demand and supply of labor.

Human resource planning is a process that identifies current and future human resources needs
for an organization to achieve its goals.
Human resource planning should serve as a link between human resource management and the
overall strategic plan of an organization.

The human resource planning begins with the enterprise’s estimation for the manpower
requirement and then sources are found from where this need can be fulfilled.
Job Analysis
- A systematic analysis of jobs within an organization.

Principles of Management Ahmed Sabbir 43

- A systematized procedure for collecting and recording information about jobs within an
- A job analysis is made up of two parts.
 Job Description—a listing of the job’s duties; its working conditions; and the tools,
materials, and equipment used to perform the job.
 Job Specification—a listing of the skills, abilities, and other credentials the
incumbent jobholder will need to do a job.
- Job analysis information is used in many human resource activities. For instance,
knowing about job content and job requirements is necessary to develop appropriate
selection methods and job-relevant performance appraisal systems and to set equitable
compensation rates.

Forecasting Human Resource Demand and Supply

After managers fully understand the jobs to be performed within the organization, they can start
planning for the organization’s future human resource needs. The manager starts by assessing
trends in past human resource usage, future organizational plans, and general economic trends.

Forecasting the supply of labor is really two tasks: forecasting the internal supply (the number
and type of employees who will be in the firm at some future date) and forecasting the external
supply (the number and type of people who will be available for hiring in the labor market at

The technique most commonly used is the replacement chart, which lists each important
managerial position, who occupies it, how long he or she will probably stay in it before moving
on, and who is now qualified or soon will be qualified to move into the position.

To facilitate both planning and identifying persons for current transfer or promotion, some
organizations also have an employee information system, or skills inventory, which is usually
computerized and contains information on each employee’s education, skills, work experience,
and career aspirations.

Matching Human Resource Supply and Demand: After comparing future demand and internal
supply, managers can make plans to manage predicted shortfalls or overstaffing. If a shortfall is
predicted, new employees can be hired, present employees can be retrained and transferred into
the understaffed area, individuals approaching retirement can be convinced to stay on, or labor-
saving or productivity-enhancing systems can be installed.

If the organization needs to hire, the external labor supply forecast helps managers plan how to
recruit, based on whether the type of person needed is readily available or scarce in the labor
market. If overstaffing is expected to be a problem, the main options are transferring the extra
employees, not replacing individuals who quit, encouraging early retirement, and laying people

Principles of Management Ahmed Sabbir 44

Assess trends in
• External labor markets
• Current employees
• Future organizational plans
• General economic trends

Predict demand

Forecast internal supply Forecast external supply

Compare future demand

and internal supply

Plan for dealing with

Figure-Human shortfallsPlanning

Recruiting Human Resources

- Recruiting is the process of attracting qualified persons to apply for jobs that are open.
 Internal Recruiting
- Considering present employees as candidates for openings.
o Promotion from within can help build morale and reduce turnover of high-
quality employees.
o Disadvantage of internal recruiting is its “ripple effect” (when one event
produces effects which spread and produce further effects) of having to
successively fill vacated positions.
• External Recruiting
- Attracting persons from outside the organization.
• Advertising in newspapers
• Interviews
• Employment agencies and search firms
• Hiring “walk-ins” and “gate hires”
- Realistic Job Preview (RJP)
• Considered a successful method to ensure person-job fit by providing a
real picture of the job to the applicant.

Principles of Management Ahmed Sabbir 45

Selecting Human Resources

Once the recruiting process has attracted a pool of applicants, the next step is to select whom to
hire. The intent of the selection process is to gather from applicants information that will predict
their job success and then to hire the candidates likely to be most successful. The organization
can gather information only about factors that are predictive of future performance. The process
of determining the predictive value of information is called validation.
Validation is determining the extent to which a selection device is really predictive of future job

Application Blanks
- The first step in selection is usually asking the candidate to fill out an application blank.
- Application blanks are an efficient method of gathering information about the applicant’s
previous work history, educational background, and other job-related demographic data.
- They should not contain questions about areas not related to the job, such as gender,
religion, or national origin.
- Application blank data are generally used informally to decide whether a candidate merits
further evaluation, and interviewers use application blanks to familiarize themselves with
candidates before interviewing them.
- Tests of ability, skill, aptitude, or knowledge that is relevant to the particular job are
usually the best predictors of job success, although tests of general intelligence or
personality are occasionally useful.
- It must be validated, administered, and scored consistently.
- The testing process must be the same for all candidates

- Interviews can be poor predictors of job success due to interviewer biases.
- Interview validity can be improved by training interviewers and using structured
- In a structured interview, questions are written in advance, and all interviewers follow
the same question list with each candidate they interview. This procedure introduces
consistency into the interview procedure and allows the organization to validate the
content of the questions to be asked.

Assessment Centers
- A method for selecting managers; particularly good for selecting current employees for
promotion and content validation of major parts of the managerial job.
- A typical center lasts two to three days, with groups of 6 to 12 persons participating in a
variety of managerial exercises. Centers may also include interviews, public speaking, and
standardized ability tests. Candidates are assessed by several trained observers, usually
managers several levels above the job for which the candidates are being considered.

Principles of Management Ahmed Sabbir 46

Other Techniques
- Employers use physical exams, drug tests, and credit checks to screen prospective
Sample of Selection Process

Police Verification

Regent Board Approval


Principles of Management Ahmed Sabbir 47

Figure-Sample of Selection Process


Regardless of how effective a selection system is, however, most employees need additional
training if they are to grow and develop in their jobs. Evaluating their performance and providing
feedback are also necessary.

Training and Development

- Teaching operational or technical employees how to do the job for which they were
- Teaching managers and professionals the skills needed for both present and future jobs.

- Training & Development refers to a set of programs designed to enhance the Job Performance
of the employees and organizational productivity.
- Most organizations provide regular training and development programs for managers and
- Objective of the Training must be specific and “SMART” (Specific, Measurable, Achievable,
Relevant, Timely and time-bound)

Difference between Training and Development

Basis for Training Development

Definition Teaching operational or technical Teaching managers and professionals
employees how to do the job for the skills needed for both present
which they were hired and future jobs.
Aim Specific job related Conceptual and general knowledge
Orientation Job oriented Career oriented
Term Short Term Long Term
Focus on Present Future
Objective To improve the work performances To prepare employees for future
of the employees. challenges.
For which Training is meant for operatives Development is meant for executives

Training Process
Assessing Training Needs
- The first step in developing a training plan is to determine what needs exist.
- For example, if employees do not know how to operate the machinery necessary to do their
job, a training program on how to operate the machinery is clearly needed.

Principles of Management Ahmed Sabbir 48

- As training programs are being developed, the manager should set specific and measurable
goals specifying what participants are to learn. The manager should also plan to evaluate the
training program after employees complete it.

Fig. The Training Process

Common Training Methods

- Lectures—work well for factual material.
- Role play and case studies—good for improving interpersonal relations skills or group
- On-the-job and vestibule training—facilitates learning physical skills through practice
and actual use of tools.

Evaluation of Training
- Training and development programs should always be evaluated.

Principles of Management Ahmed Sabbir 49

- Typical evaluation approaches include measuring one or more relevant criteria (such as
attitudes or performance) before and after the training, and determining whether the
criteria changed.
- Trainees may say that they enjoyed the training and learned a lot, but the true test is
whether their job performance improves after their training.

Performance Appraisal
- Performance appraisal is a formal assessment of how well employees are doing their
- Reasons for performance appraisal:
 Appraisal validates the selection process and assessing the impact of training programs.
 Appraisal aids in making decisions about pay raises, promotions, and training.
 Provides feedback to employees to improve their performance and plan future careers.

Common Appraisal Methods

Two basic categories of appraisal methods commonly used in organizations are objective
methods and judgmental methods.

Objective measures of performance

 Actual output (units produced), dollar volume of sales, and number of claims
 Special performance tests assess each employee under standardized conditions.
 Performance tests measure ability and not motivation.

Judgmental Methods
 Ranking—compares employees directly with each other.
Ranking has a number of drawbacks.
 Difficult to do with large numbers of employees.
 Difficult to make comparisons across work groups.
 Employees are ranked only on overall performance.
 Do not provide useful information for employee feedback.
 Rating—compares each employee with a fixed standard.
- Graphic rating scales consist of job performance dimensions to be rated on a standard
- Behaviorally-anchored rating scale (BARS) is a sophisticated method in which supervisors
construct a rating scale where each point on the scale is associated with behavioral
360-degree Feedback-A performance appraisal system in which managers are evaluated by
everyone around them—their boss, their peers, and their subordinates.

Performance Appraisal Errors

Principles of Management Ahmed Sabbir 50

 Recency error—the tendency of the evaluator to base judgments on the subordinate’s
most recent performance because it is the most easily recalled.
 Errors of leniency (kindness) and strictness—being too soft, too strict, or tending to rate
all employees as “average.”
 Halo error—allowing the assessment of the employee on one dimension to spread to that
employee’s ratings on other dimensions. For instance, if an employee is outstanding on
quality of output, a rater might tend to give him or her higher marks than deserved on
other dimensions.
 Errors can also occur because of race, sex, or age discrimination, intentionally or

Managing Workforce Diversity

The Meaning of Diversity

- When members of a group differ from one another along dimensions such as age,
gender, or ethnicity.

The Impact of Diversity

 Diversity promotes competitive advantage by:
 Increasing organizational systems’ flexibility.
 Bringing added creativity.
 Increasing the market scope of products.
 Broadening the resources acquisition basis.
 Adding a diversity of viewpoints to problem-solving, decision-making processes.
 Decreasing the cost of doing business.

 Diversity as a Source of Conflict

 Personnel actions (e.g., hiring, firing, and promotion) being attributed to an individual’s
diversity status.
 Misunderstood, misinterpreted, or inappropriate actions between people or groups.
 Cultural differences in work hours, personal styles, interpersonal relations, and conflict
 Fear, distrust, or individual prejudices.

Motivation and Performance
Principles of Management Ahmed Sabbir 51

 Motivation is the set of forces that cause people to behave in certain ways.

 Motivation is the willingness to do something and is conditioned by this action’s ability to

satisfy some need for the individual.

 So, Motivation implies the process of encouraging people to act in order to attain the
desired objectives.

 The goal of managers is to maximize desired behaviors and minimize undesirable


 Motivation is the psychological feature that arouses an organism to action toward a desired
goal and elicits (causes), controls, and sustains certain goal directed behaviors.

The Importance of Motivation in the Workplace

 Determinants of Individual Performance

Usually, performance is determined by;

 Motivation—the desire to do the job.

 Ability—the capability to do the job.
 Work environment—the resources needed to do the job.

If any of these three factors is missing or deficient, effective performance is impossible. A

manager may have the most highly qualified employees under him and provide them with
the best possible environment, but effective performance will not result unless the
subordinates are motivated to perform well.

 Motivation improves performance level of employees

 Motivation helps change negative attitude to positive attitude

 Motivation creates Supportive Work Environment

 Leads to stability of work force

The Motivation Framework

Need or Search for ways Choice of behavior

Principles of Management
deficiencyAhmed Sabbir to satisfy need to satisfy need 52
Figure-The Motivation Framework

The motivation process progresses through a series of discrete steps. Content, process, and
reinforcement perspectives on motivation address different parts of this process.

- The motivation process begins with a need deficiency. Needs are felt deprivations which the
individual experiences at a given time and act as energizers. Needs is difference between
desired situation and expected situation.
- An unsatisfied need creates tension, which stimulates drives within the individual. These
drives generate a search for particular goals that, if attained, will satisfy the need and lead to
the reduction of tension.
- Next step is finding the different alternatives that can be used to satisfy the needs, which were
felt in first stage. These needs lead to thought processes that guide an employee's decision to
satisfy them and to follow a particular course of action. Action to satisfy needs and motives
accomplishes goals. It can be achieved through reward and punishment.
- Then depending on how well the goal is accomplished their needs and motives are modified.
If an employee’s chosen course of action results in the anticipated out come and reward, that
person is likely to be motivated by the prospect of a similar reward to act the same way in the
future. However, if the employee’s action does not result in the expected reward, he or she is
unlikely to repeat the behavior.

For example, when a worker feels that she is underpaid, she experiences a need for more income.
In response, the worker searches for ways to satisfy the need, such as working harder to try to earn
a raise or seeking a new job. Next, she chooses an option to pursue. After carrying out the chosen
option—working harder and putting in more hours for a reasonable period of time, for example—
she then evaluates her success. If her hard work resulted in a pay raise, she probably feels good
about things and will continue to work hard. But, if no raise has been provided, she is likely to try
another option.

Theories of Motivation

Principles of Management Ahmed Sabbir 53

1. Content Perspectives of Motivation
- Focus on needs and deficiencies of individuals.
- Approaches to motivation that try to answer the question, “What factors in the workplace
motivate people?”
- It includes following theories-
i) Maslow’s Hierarchy of Needs
ii) Herzberg’s Two-Factor Theory
iii) McClelland’s Achievement, Power, and Affiliation Needs

2. Process Perspectives
- Focus on why people choose certain behavioral options to satisfy their needs and how they
evaluate their satisfaction after they have attained their goals.
- Process Perspectives of Motivation includes-
i) Expectancy Theory
ii) Porter-Lawler Extension of Expectancy Theory
iii) Equity Theory
iv) Goal-Setting Theory

Maslow’s Hierarchy of Needs Theory

Abraham Maslow proposed the hierarchy of needs theory in 1943. He hypothesized that every
human being has an internal hierarchy of five needs.
These needs are:
 Physiological needs for basic survival and biological function. e.g., hunger, thirst, shelter, sex,
and other bodily needs.
 Security needs for a safe physical and emotional environment. For instance- Job security,
financial security, family security, health security etc.
 Belongingness needs relate to social processes. They include the need for love and affection.
 Esteem needs for positive self-image/self-respect and recognition and respect from others.
 Self-actualization needs for realizing one’s potential for personal growth and development.

Maslow separated the five needs into higher and lower orders. Physiological and safety needs were
lower order and Social, esteem, and self-actualization were categorized as higher-order needs.
Higher order needs are satisfied internally, whereas lower order needs are predominately satisfied

Principles of Management Ahmed Sabbir 54

General Example Needs Organizational Examples

Achievement Self- Challenging Job


Status Job Title

Friends at Work
Security Pension plan

Food Physiological Basic Salary

Figure-2: Abraham Maslow's hierarchy of needs theory

Weakness of Need Hierarchy Approach: Weaknesses of Maslow’s theory are-

 Five levels of need are not always present.

 Ordering or importance of needs is not always the same.
 Cultural differences- people from different cultures are likely to have different need
categories and hierarchies.

Herzberg Two-Factor Theory

 Frederick Herzberg developed his theory by interviewing a group of accountants and
engineers in 1959.
 The interviews focused on satisfactory and dissatisfactory feelings about the job
(experiences). The interviewees were asked two questions:
 When did you feel particular good about your job – what turned you on?
 When did you feel exceptionally bad about your job – what turned you off?
 Two-factor theory of motivation suggests that people’s satisfaction and dissatisfaction
are influenced by two independent sets of factors—motivation factors and hygiene

This theory assumes that job satisfaction and job dissatisfaction are on two distinct continuums:
 Motivational factors (work content) are on a continuum that ranges from satisfaction to
no satisfaction.
 Hygiene factors (work environment) are on a separate continuum that ranges from
dissatisfaction to no dissatisfaction.

Principles of Management Ahmed Sabbir 55

Motivation Factors Hygiene Factors
• Achievement • Supervisors
• Recognition • Working conditions
• The work itself • Interpersonal relations
• Responsibility • Pay and security
• Advancement and growth • Company policies and administration

Satisfaction No satisfaction Dissatisfaction No


Figure-3: The Two-Factor Theory of Motivation

According to this theory, Motivation is a two-stage process:

 Ensuring that the hygiene factors are not deficient and not blocking motivation.
 Providing employees the opportunity to experience increase motivational factors through
the use of job enrichment and the redesign of jobs.

Manager who tries to motivate an employee using only hygiene factors, such as pay and good
working conditions, will likely not succeed. To motivate employees and produce a high level of
satisfaction, managers must also offer factors such as responsibility and the opportunity for
advancement (motivation factors).

Criticisms of the Two-Factor Theory:

 Interview findings are subject to different explanations.

 Sample population was not representative.
 The theory ignores blue-collar workers
 Subsequent research has not upheld theory.

Comparison of Maslow and Herzberg Theory of Motivation

Similarity of Maslow and Herzberg Theory of Motivation

There are several similarities between Maslow and Herzberg’s theories. We can see that motivator
factors and hygiene factors in Herzberg’s theory are a collection of higher and lower order needs
respectively in Maslow’s theory. Lower order needs such as needs for belongingness, security,
water, food, etc. could be seen as hygiene factors. Similarly, needs for recognition, promotion,
responsibility, etc. could be seen as motivators of Herzberg’s two-factor theory. Moreover, both
models assume that specific needs energize behavior.

Principles of Management Ahmed Sabbir 56



Figure-4 Maslow’s Need Theory & Herzberg’s Two Factor theory of motivation

Difference between Maslow and Herzberg’s Theories of Motivation

Basis for Maslow’s Need Hierarchy Theory Herzberg’s Two-factor Theory

Meaning Maslow's Theory is a general theory on Herzberg's Theory on motivation says that
motivation which states that the urge to there are various factors existing at the
satisfy needs is the most important factor workplace that causes job satisfaction or
in motivation. dissatisfaction.
Views on Maslow separated motivation into five Herzberg’s theory states that motivation is
Motivation different levels of needs-Physiological divided into two dimensional (e.g.
needs, Safety needs Love, Esteem and Motivators and hygiene); each dimensional
ego, self-actualization. is consisted of different factors.
Nature Descriptive Prescriptive
Relies on Needs and their satisfaction Reward and Recognition
Order of needs Hierarchical arrangement of needs. No sequence
Core concept Unsatisfied needs stimulate individuals. Gratified needs regulate behavior and
Division Growth and deficiency needs. Hygiene and motivator factors.
Motivator Unsatisfied needs Only higher order needs
Applicability of It has wide applicability. It is mostly Its applicability is narrow. It is applicable to
Theory applicable to poor and developing rich and developed countries where money is
countries where money is still a big less important motivating factor.
motivating factor.
Basis of the Maslow’s hierarchy was written with This theory based on interviews with 200
theory 3,000 unemployed people involved e.g. employees, specially a group of accountant
college students. and engineers.

Principles of Management Ahmed Sabbir 57

Theory X and Theory Y

- Theory X and Theory Y are theories of human motivation created and developed by
Douglas McGregor at the MIT Sloan School of Management in the 1960s that have been
used in human resource management, organizational behavior, organizational
communication and organizational development.
- They describe two contrasting models of workforce motivation. Theory X and Theory Y
has to do with the perceptions Managers hold on their employees, not the way they
generally behave.

Douglas McGregor concluded that a manager’s view of human nature is based on one of two sets
of assumptions about people. The first set of assumptions, basically negative, and McGregor
labeled Theory X; a second, basically positive, labeled Theory Y.

Theory X assumptions-
1. Employees inherently dislike work and, whenever possible, will attempt to avoid it.
2. Since employees dislike work, they must be coerced, controlled, or threatened with punishment
to achieve desired goals.
3. Employees will avoid responsibilities and seek formal direction whenever possible.
4. Most workers place security above all other factors associated with work and will display little

Theory Y has four contrasting assumptions.

1. Employees can view work as being as natural as rest or play.
2. A person who is committed to the objectives will exercise self-direction and self-control.
3. The average person can learn to accept, and even seek responsibility.
4. The ability to make innovative decisions is widely dispersed throughout the population and is
not necessarily the sole province of those in management positions.

Theory X assumes that lower-order needs dominate individuals; Theory Y assumes that higher-
order needs dominate individuals. Unfortunately, no evidence confirms that either set of
assumptions is valid. Mcgregor, himself held the belief that Theory Y assumptions are more valid
than theory X. therefore he proposed ideas like perception in decision making, opportunities for
responsible and challenging jobs and good group relations that would maximize employee’s job
If correlate it with Maslow’s theory, we can say that Theory X is based on the assumption that the
employees emphasize on the physiological needs and the safety needs; while Theory X is based
on the assumption that the social needs, esteem needs and the self-actualization needs dominate
the employees.

Principles of Management Ahmed Sabbir 58

McClelland’s Theory of Needs

Psychologist David McClelland advocated Need theory, also popular as Three Needs Theory. This
motivational theory states that the needs for achievement, power, and affiliation significantly influence
the behavior of an individual.
 The need for achievement (nAch) is the desire to accomplish a goal or task more
effectively than in the past.
 The need for affiliation (nAff) is the desire for human companionship and acceptance.
 The need for power (nPow): The desire to be influential in a group and to be in control of
one’s environment.
McClelland stated that we all have these three types of motivation regardless of age, sex, race or

The need for achievement:

It is the need that drives a person to work and even struggle for the objective that he wants to
The individuals with high achievement needs-
 Has a strong need to set and accomplish challenging goals.
 Takes calculated risks to accomplish their goals.
 Likes to receive regular feedback on their progress and achievements.
 Often likes to work alone.
 Such individuals try to get satisfaction in performing things better.
 Such individuals look for innovative ways of performing job. They perceive achievement of
goals as a reward, and value it more than a financial reward.

The need for affiliation

The need for affiliation is urge of a person to have interpersonal and social relationships with others
or a particular set of people. They seek to work in groups by creating friendly and lasting
relationships and has the urge to be liked by others. They tend to like collaborating with others to
competing with them and usually avoids high risk situations and uncertainty.
The individuals motivated by needs for affiliation-
 Wants to belong to the group.
 Wants to be liked, and will often go along with whatever the rest of the group wants to
 Favors collaboration over competition.
 Doesn't like high risk or uncertainty.

The need for power

The need for power is the desire within a person to hold control and authority over another person
and influence and change their decision in accordance with his own needs or desires. The need to

Principles of Management Ahmed Sabbir 59

enhance their self-esteem and reputation drives these people and they desire their views and ideas
to be accepted and implemented over the views and ideas over others. These people are strong
leaders and can be best suited to leading positions. They either belong to Personal or Institutional
power motivator groups. If they are a personal power motivator they would have the need to
control others and an institutional power motivator seeks to lead and coordinate a team towards an
The individuals motivated by needs for power-
 Wants to control and influence others.
 Likes to win arguments.
 Enjoys competition and winning.
 Enjoys status and recognition.

Compare and Contrast Theories: Maslow, McClelland and Herzberg

 All are theories of motivation – outlines how to best understand and motivate employees.
 They all believe that workers have needs and when these needs are not met, they cause
 All indicate that workers have some form of ego (the need for recognition and respect for
the work they’re doing)
 They suggest specific things that management can do to help their employees become self-
 They believe that there is a reason for human specific behavior.

Summary of Content Theories of Motivation

Maslow McClelland Herzberg

Physiological Hygiene
Safety and security • Supervisors
Belongingness and love Need for Affiliation • Working conditions
• Interpersonal relations
• Pay and security
• Company policies and administration
Self-esteem Need for power Motivators
Self-actualization Need for achievement Achievement
• Recognition
• The work itself
• Responsibility
• Advancement and growth

Process Perspectives on Motivation

Principles of Management Ahmed Sabbir 60

Process perspectives are concerned with how motivation occurs. Rather than attempting to
identify motivational stimuli, process perspectives focus on why people choose certain
behavioral options to satisfy their needs and how they evaluate their satisfaction after they have
attained those goals.
Expectancy Theory
- In 1964, Victor H. Vroom developed the Expectancy theory through his study of the
motivations behind decision making.
- Motivation depends on
 how much we want something and
 how likely we are to get it.

Assumption: Expectancy theory rests on four basic assumptions

i) Behavior is determined by a combination of personal and environmental forces.
ii) People make decisions about their own behavior in organizations.
iii) Different people have different types of needs, desires, and goals.
iv) People choose among alternatives of behaviors in selecting one that leads to a desired

The basic expectancy model.

- Suggests that motivation leads to effort, when combined with ability and environmental
factors, that results in performance which, in turn, leads to various outcomes that have
value (valence) to employees.
- The expectancy model of motivation is a complex but relatively accurate portrayal of how
motivation occurs. According to this model, a manager must understand what employees
want (such as pay, promotions, or status) to begin to motivate them.

Outcome Valence
Outcome Valence

Motivation Effort Performance Outcome Valence

Outcome Valence

Outcome Valence

Figure-The Expectancy Model of Motivation

Principles of Management Ahmed Sabbir 61

Elements of Expectancy Theory
 Effort-to-Performance Expectancy
- The individual’s perception of the probability that effort will lead to a high
- When the individual believes that effort will lead directly to high performance,
expectancy will be quite strong (close to 1.00).
- When the individual believes that effort and performance are unrelated, expectancy
is very weak (close to 0).
- The belief that effort is somewhat but not strongly related to performance carries
with it a moderate expectancy (somewhere between 0 and 1.00).
 Performance-to-Outcome Expectancy
- The individual’s perception of the probability that performance will lead to a
specific outcome, or consequence or reward in an organizational setting.
- Example: if the individual believes that high performance will result in a pay rise,
the performance-to-outcome expectancy is high (approaching 1.00).
- The individual who believes that high performance may lead to a pay raise has a
moderate expectancy (between 1.00 and 0).
- The individual who believes that performance has no relationship to rewards has a
low expectancy (close to 0).
 Outcomes (Consequences) and Valences
- Expectancy theory recognizes that an individual’s behavior results in a variety of
outcomes, or consequences, in an organizational setting.
- Valence is an index of how much an individual values a particular outcome. It is
also the attractiveness of the outcome to the individual.
- Attractive outcomes have positive valences and unattractive outcomes have negative
- Outcomes to which an individual is indifferent have zero valences.

For individual motivated behavior (effort) to occur:

 Effort-to-performance expectancy (the belief that effort will lead to high performance)
must be greater than zero.
 Performance-to-outcome expectancy (performance will result in certain outcomes) must
be greater than zero.
 The sum of the valences must be greater than zero—the outcome/reward must have value
to the individual.

Porter-Lawler Extension of Expectancy Theory


Principles of Management Ahmed Sabbir 62

i) If performance in an organization results in equitable and fair rewards, people will be more
ii) High performance can lead to rewards and high satisfaction.

Types of rewards:
 Extrinsic rewards—outcomes set and awarded by external parties (e.g., pay and
 Intrinsic rewards—outcomes that are internal to the individual (e.g., self-esteem and
feelings of accomplishment).

The Porter–Lawler extension of expectancy theory suggests that if performance results in equitable
rewards, people will be more satisfied. Thus, performance can lead to satisfaction. Managers must
therefore be sure that any system of motivation includes rewards that are fair, or equitable, for all.

Figure: The Porter–Lawler Extension of Expectancy Theory

Equity Theory
- In 1963, John Stacey Adams introduced the idea that fairness and equity are key
components of a motivated individual. Equity theory is based in the idea that individuals
are motivated by fairness, and if they identify inequities in the input or output ratios of
themselves and their referent group, they will seek to adjust their input to reach their
perceived equity.
- Equity theory contends that people are motivated to seek social equity in the rewards they
receive for performance.
- Equity is an individual’s belief that the treatment he or she receives is fair relative to the
treatment received by others.

Principles of Management Ahmed Sabbir 63

- According to equity theory, outcomes from a job include pay, recognition, promotions,
social relationships, and intrinsic rewards. To get these rewards, the individual makes
inputs to the job, such as time, experience, effort, education, and loyalty.
- Individuals view the value of rewards (outcomes) and inputs of effort as ratios and make
subjective comparisons of themselves to other people.

- The individual may feel equitably rewarded, under-rewarded, or over-rewarded. A feeling

of equity will result when the two ratios are equal.

This theory is based on the following two assumptions about human behavior:
1. Individuals make contributions (inputs) for which they expect certain outcomes (rewards).
2. Individuals decide whether or not a particular exchange is satisfactory, by comparing their
inputs and outcomes to those of others, in the form of a ratio. Equity exists when an
individual concludes that his/her own outcome/input ratio is equal to that of other people.

Figure: The Equity Process

Conditions of and reactions to equity comparisons:

 Feeling equitably rewarded.
- Maintain performance and accept comparison as fair estimate.
 Feeling under-rewarded—try to reduce inequity.
- Change inputs by trying harder or slacking off.
- Change outcomes by demanding a raise.
- Distort the ratios by altering perceptions of self or of others.
- Leave situation by quitting the job.

Principles of Management Ahmed Sabbir 64

- Change comparisons by choosing another object person.
 Feeling over-rewarded.
- Increase or decrease inputs.
- Distort ratios by rationalizing.
- Help the object person gain more outcomes.
What is the difference between Expectancy Theory and Equity Theory?

Point of Expectancy Theory Equity Theory

Definition People perform actions in exchange for People derive job satisfaction by
rewards based on their conscious comparing their effort and reward
expectations. If the reward is fair with ratio with others. If the ratio is fair
their expectation, they are motivated. or equitable, they feel satisfied.
Motivation In expectancy theory, motivation is In equity theory, employees
said to occur due to the personal effort compare the effort and reward ratio
and reward system. If the reward is with others (peers, friends,
sufficient as per the perception of the neighbors, etc.). If they feel the ratio
employee, he / she is motivated. is fair in line with others, only they
are motivated. If not, they will face
External In expectancy theory, external forces In equity theory, external forces
Influence: (third party) do not affect motivation. play a crucial role as individuals are
said to compare their rewards with
others in the society.
Components The components of the expectancy The components of the equity theory
theory are valence, expectancy, and are inputs, outcomes, and referents.

Goal-Setting Theory

- This motivation theory was developed primarily by Edwin Locke and Gary
Latham in 1960.
- It emphasizes that setting specific, challenging performance goals and the
commitment to these goals are key determinants of motivation. Goals describe a
desired future, and these established goals can drive the behavior.

i) Behavior is a result of conscious goals and intentions.
ii) Setting goals influences the behavior of people in organizations.

Characteristics of Goals
- Goal difficulty
- Extent to which a goal is challenging and requires effort.

Principles of Management Ahmed Sabbir 65

- People work harder to achieve more difficult goals.
- Goals should be difficult but attainable.
- Goal specificity
- Clarity and precision of the goal.
- Goals vary in their ability to be stated specifically.
- Acceptance
- Goal acceptance is the extent to which a person accepts a goal as his or her own.
- Commitment
- Goal commitment is the extent to which an individual is personally interested in
reaching a goal.

Using Reward Systems to Motivate Performance

An organizational reward system is the formal and informal mechanisms by which employee
performance is defined, evaluated, and rewarded. Rewards that are tied specifically to
performance, of course, have the greatest impact on enhancing both motivation and actual

Rewards are positive outcomes that are earned as a result of an employee's performance. These
rewards are aligned with organizational goals. When an employee helps an organization in the
achievement of one of its goals, a reward often follows. There are two general types of rewards
that motivate people: intrinsic and extrinsic.

Effect of Rewards on Attitudes

- Satisfaction is influenced by how much is received and how much the person thinks should
have been received.
- Satisfaction is affected by comparison with others.
- The rewards of others are often misperceived.
- Overall job satisfaction is affected by employee satisfaction with intrinsic and extrinsic

Effect of Rewards on Behaviors

 Extrinsic rewards affect employee satisfaction and reduce turnover.
 Rewards influence patterns of attendance and absenteeism.
 Employees tend to work harder for rewards based on performance.

Effect of Rewards on Motivation

 Employees will work harder when performance will be measured.
 Employees will work harder if performance is closely followed by rewards.

Principles of Management Ahmed Sabbir 66

Designing Effective Reward Systems
 Reward system must meet an individual’s needs.
 Rewards should compare favorably with other organizations.
 Distribution of rewards must be perceived to be equitable.
 Reward system must recognize different needs.

Popular Approaches to Rewarding Employees

 Traditional systems
- Fixed hourly or monthly rate or an incentive system.
 Merit systems
- Employees get different pay raises at the end of the year depending on their overall
job performance.
- Merit pay generally refers to pay awarded to employees on the basis of the relative
value of their contributions to the organization. Employees who make greater
contributions are given higher pay than those who make lesser contributions.
 Incentive systems
- Employees get different pay amounts at each pay period in proportion to what they do
(e.g., piece-rate pay plans).
 Profit sharing plans
- Provides an annual bonus based to corporate profits.
 Gain sharing
- All group members get bonuses when performance targets are exceeded.
 Lump sum bonuses
- One-time reward, not an increase in base salary.
 Pay-for-knowledge
- Pay the individual rather than the job.

Leadership and Influence Processes

The Meaning of Leadership

Principles of Management Ahmed Sabbir 67

 Leadership as process-
 use non-coercive influence to shape the group’s or organization’s goals,
 motivate others’ behavior toward goals, and
 help to define organizational culture.

 Leadership as a property—the set of characteristics attributed to someone who is perceived

to use influence successfully.

 Leaders are
- People who can influence the behaviors of others without having to rely on force.
- People who are accepted as leaders by others.

Distinction between Leadership and Management

 Leadership is a quality of influencing people, so that the objectives are attained willingly
and enthusiastically.
 Management is a discipline of managing things in the best possible manner. It is the art or
skill of getting the work done through and with others.
 One of the major difference between leadership and management, is management is for
formal and organized group of people only, whereas leadership is for both formal and
informal groups.

Leadership Activity Management

Establishing direction and vision Creating an agenda Planning and budgeting,

for the organization allocating resources

Aligning people through Developing a human Organizing and staffing,

communications and actions that network for achieving structuring and monitoring
provide direction the agenda implementation

Motivating and inspiring by Executing plans Controlling and problem

satisfying needs solving

Produces useful change and new Outcomes Produces predictability and

approaches to challenges order and attains results

“All managers are leaders, but all leaders are not managers.”
- Managers must be from an organizing group. A manager has to perform functions,
Planning, Organizing, Staffing, Directing, and Controlling such as to achieve goals.
Leadership is a part of these functions. In order to direct the subordinates, a manager must
motivate, communicate with, supervise, guide, and lead them.

Principles of Management Ahmed Sabbir 68

- Leaders may not be from an organized group, rather than there must be some leaders who
belongs to some nor-organized group in the name of boss of terrorist group/mastan group.
Leadership doesn’t require any managerial position to act as a leader. A person can be a
leader by virtue of qualities in him. For example: leader of a club, class, welfare
association, social organization, etc.

Power and Leadership

Types of Power in the Organization

Power is the ability to affect the behavior of others.

1. Legitimate power is granted through the organizational hierarchy. it is the power defined
by the organization to be accorded to people occupying a particular position.
2. Reward power is the power to give or withhold rewards, such as salary increases, bonuses,
promotions, praise, recognition, and interesting job assignments etc.
3. Coercive power is the capability to force compliance by means of psychological,
emotional, or physical threat. In most organizations today, however, coercion is limited to
verbal reprimands, written reprimands, disciplinary layoffs, fines, demotion, and
4. Referent power is the personal power that accrues to someone based on identification,
imitation, loyalty, or charisma.
5. Expert power is derived from the possession of information or expertise.

Types of Leadership/ Different Leadership Styles

1. Autocratic or Authoritarian leadership- An autocratic leader centralizes power and

decision-making in himself. He gives orders, assigns tasks and duties without consulting
the employees.
2. Democratic or Participative leadership: Participative or democratic leaders decentralize
authority. It is characterized by consultation with the subordinates and their participation
in the formulation of plans and policies. He encourages participation in decision-making.
3. The Laissez-faire or Free-rein leadership: Free-rein leader use his or her power very little,
if at all, giving subordinates a high degree of independence in their operations. Such leaders
depend largely on subordinates to set their own goals and the means of achieving them

Theories of Leadership
1. Trait Theory of Leadership
- Leadership Ingredient
- Leadership traits as complied by Santa Clara University and Tom Peters group.
2. Behavioral approaches to leadership
- Michigan Studies

Principles of Management Ahmed Sabbir 69

- Ohio State studies
- Leadership Grid.
3. Situational approaches to leadership
- The leadership continuum model or the model of Robert Tannenbum and Warren H.
Schmidt for decision making
- The Least-Preferred Coworker (LPC) Theory of Leadership
- Path goal theory
- Vroom’s Yetten Jago Model (VYJ) for decision making
- The Leader-Member Exchange Approach (LMX Model)
4. Related Approaches to Leadership
- Substitutes for Leadership
- Charismatic Leadership
- Transformational Leadership- as leadership that goes beyond ordinary expectations by
transmitting a sense of mission, stimulating learning experiences, and inspiring new ways
of thinking.
5. Political Behavior in Organizations
- Common Political Behaviors
- Managing Political Behavior

Traits Approach of Leadership

- The trait approach assumed that a basic set of personal traits that differentiated leaders from
non-leaders could be used to identify leaders and predict who would become leaders.
- The trait approach was unsuccessful in establishing empirical relationships between traits
and persons regarded as leaders.
- Researchers thought that leadership traits might include intelligence, assertiveness, above-
average height, good vocabulary, attractiveness, self-confidence, and similar attributes.

Ingredients of leadership:
Four basic ingredients:
i) Leader must know to use power. i.e., Ability to use power effectively and in a
responsible manner.

ii) Leader must know his people/follower.

iii) Leader must create an environment conductive to work.

iv) Leader must know arouse motivation among the people.

Traits of a good Leader

Principles of Management Ahmed Sabbir 70

Compiled by the Santa Clara University and the Tom Peters Group
1. Honest -Display sincerity, integrity, and candor in all your actions. Deceptive behavior
will not inspire trust.
2. Competent - Base your actions on reason and moral principles. Do not make decisions
based on childlike emotional desires or feelings.
3. Forward-looking - Set goals and have a vision of the future. The vision must be owned
throughout the organization. Effective leaders envision what they want and how to get it.
They habitually pick priorities stemming from their basic values.
4. Inspiring - Display confidence in all that you do. By showing endurance in mental,
physical, and spiritual stamina, you will inspire others to reach for new heights. Take
charge when necessary.
5. Intelligent - Read, study, and seek challenging assignments.
6. Fair-minded - Show fair treatment to all people. Prejudice is the enemy of justice. Display
empathy by being sensitive to the feelings, values, interests, and well-being of others.
7. Broad-minded - Seek out diversity.
8. Courageous - Have the perseverance to accomplish a goal, regardless of the seemingly
insurmountable obstacles. Display a confident calmness when under stress.
9. Straightforward - Use sound judgment to make a good decisions at the right time.
10. Imaginative - Make timely and appropriate changes in your thinking, plans, and methods.
Show creativity by thinking of new and better goals, ideas, and solutions to problems. Be

Behavioral approaches to leadership

- Attempts to identify behaviors that differentiate effective leaders from non-leaders

Early Studies in Behavioral

Approaches to Leadership

The The
The Ohio
Michigan Leadership
State Studies
Studies Grid

Michigan Studies
Based on Researchers at the University of Michigan, led by Rensis Likert, in the late 1940s,
identified two forms of leader behavior
 Job-centered behavior—managers who pay close attention to subordinates’ work,
explain work procedures, and are keenly interested in performance.
 Employee-centered behavior—managers who focus on the development of cohesive
work groups and employee satisfaction.

Principles of Management Ahmed Sabbir 71

The two forms of leader behaviors were considered to be at opposite ends of the same continuum.

Ohio State Studies

Ohio State studies also suggested that there are two basic leader behaviors or styles:
 Initiating-structure behavior—the leader clearly defines the leader-subordinate role
expectations, formalizes communications, and sets the working agenda.
 Consideration behavior—the leader shows concern for subordinates and attempts to
establish a friendly and supportive climate.

Initial assumption was that the most effective leaders who exhibit high levels of both behaviors.
Subsequent research indicated that:

 Employees of supervisors ranked high on initiating structure were high performers, yet
they expressed low levels of satisfaction and higher absenteeism.
 Employees of supervisors ranked high on consideration had low- performance ratings,
yet they had high levels of satisfaction and less absenteeism.
 Other situational variables make consistent leader behavior predictions difficult. There is
no universal or “one best way” model of leadership.

Similarities between Leadership Models and Their Contributions

University Task oriented style People oriented style

University of Michigan Job-centered Employee-centered
Ohio State University Initiating structure Consideration

Differences between Leadership Models and Their Contributions

- The Ohio State and University of Michigan leadership models are different in that the
University of Michigan places the two leadership behaviours at opposite ends of the same
continuum, making it one-dimensional. The Ohio State University Model considers the
two behaviours independent of one another, making it two-dimensional.
- University of Michigan’s one dimensional model proposed two leadership styles (1)
employee-centred and (2) job-centred while Ohio State leadership model has four
leadership styles as follows, (1) low initiating structure and high consideration, (2) high
initiating structure and high consideration, (3) low initiating structure and low
consideration, and (4) high initiating structure and low consideration.

The Leadership Grid

The Leadership Grid is a method of evaluating leadership styles. The Grid is used to train managers
so that they are simultaneously more concerned for people and for production.

Principles of Management Ahmed Sabbir 72
1, 9,
9 9

Concern for people



Concern for production

1. Improvised Leadership (1,1): exhibits minimal concern for both production and people. Here
production is very Low and people are not satisfied.
2. Authority-Compliance Leadership (9,1): Highly concerned about production but exhibits little
concern for people;. Here, production is very high but people are not satisfied.
3. Country Club Management (1,9): Thoughtful attention to the needs of people for satisfying
relationships leads to a comfortable, friendly organization atmosphere and work tempo. Here,
production is low but people are enjoying using the space.
4. Team Management (9,9): Maximum concern for both people and production. Work accomplishment
is from committed people. Here, production is very high and people are satisfied and running with good
team spirit.
5. Middle-of-the-Road Management (5,5): maintains adequate concern for both people and production.
Adequate organization performance is possible through balancing the necessity to get out work with
maintaining morale of people at a satisfactory level.

Situational Approaches to Leadership

 Assume that appropriate leader behavior varies from one situation to another situation
 Seek to identify how key situational factors interact to determine appropriate leader behavior

The Leadership Continuum Model

- The model of Robert Tannenbaum and Warren H. Schmidt that underlies research in this field.

Principles of Management Ahmed Sabbir 73

The LPC Theory of Leadership

- Least-Preferred Coworker Theory, developed by Fred Fiedler, was the first truly
situational theory of leadership.
- This theory suggests that, the appropriate style of leadership varies with situational
favorableness (from the leader’s viewpoint).
- Assumes a task or relationship focus for leaders
 High LPC (Least Preferred Coworkers) leaders are more concerned with
interpersonal relationships
 Low LPC leaders are more concerned with task relevant problems
- Contingency variables determining situational favorableness:
 Leader-member relations—the nature of the relationship between the leader and
the work group.
 Task structure—the degree to which the group’s task is defined.
 Position Power—the power vested in the leader’s position.

Variables Situation

Principles of Management Ahmed Sabbir 74

Or, Relationship-oriented


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Definition of Communication

 Communication is the process by which information is transmitted between individuals

and/or organization so that an understanding response results.
 Communication is the sharing of information between two or more individuals or groups
to reach a common understanding.

Communication Process:

In the communication process, information flows from sender to receiver. It is the process by
which a source sends a message to a receiver by means of a channel to produce a response
(effect), in accordance with the intention of the source (feedback).

 Communication consists of two Phases:

1. Transmission Phase: Information is shared by 2 or more people.
2. Feedback phase: a common understanding is assured.

Transmission Phase

Message Encoding Medium Decoding

Sender Noise Receiver

Encoding Message
Decoding Medium

Feedback Phase
Figure-Communication Process

- Sender is the person who initiates a message.
- Communication start with the sender who wants to share information.
- Sender must decide on a message to share
- Sender also puts the message into symbols or language, a process called encoding.

Principles of Management Ahmed Sabbir 76


- The Message is a key idea that the sender wants to communicate.

- Message are transmitted over a medium to a receiver.

- Encoding means converting or translating the idea into perceivable form that can be
communicated to others.
- It is the process of putting thoughts and ideas of the message into symbolic form.

- Encoding of message can be done verbally or non-verbally.

 Verbal: Spoken or written communication
 Non-verbal: facial gestures, body language, dress etc.

- Pathway the message is transmitted on.
- It is means of exchanging/transmitting the message.
- It can be letter, e-mail, telephone etc.

- Decoding allows the receiver to understand the message.
- Decoding is the process by which the receiver interprets the message and translates it into
meaningful information.

- person getting the message.
- Receiver decodes the massage and received.

 Feedback is started by receiver and states that the message is understood or that it must be
 Noise refers distraction and interference in the environment in which communication takes
place, simply anything harming the communication process is called noise.

Relationship between message richness and choice of media.

Information richness:
- The amount of information that a communication medium can carry
- The extent to which the medium enables the sender and receiver to reach a common
Choice of Communication medium is based on Information richness.

Principles of Management Ahmed Sabbir 77

Fig. Information Richness & Media type

1. Face-to-Face: highest information richness.

- Can take advantage of verbal and nonverbal signals.
- Provides for instant feedback.
- Management by wandering around takes advantage of this with informal talks to workers.
- Video conferences provide much of this richness and reduce travel costs and meeting times.

2. Verbal Communication electronically transmitted: has next highest richness.

- Telephone conversations are information rich with tone of voice, sender’s emphasis, and
quick feedback, but provide no visual nonverbal cues.

3. Personally Addressed Written Communication: lower richness than the verbal forms, but
still is directed at a given person.
- Personal addressing helps ensure receiver reads it.
- Letters and e-mail are common forms.
- Cannot provide instant feedback to sender but can get feedback later.
- Excellent for complex messages needing follow-up.
4. Impersonal Written Communication: has lowest richness.
- Good for messages to many receivers. Little feedback is expected.
- Newsletters, reports are examples.

Principles of Management Ahmed Sabbir 78

Communication Networks
- The pathways along which information flows in groups and teams and throughout the
- Type of communication network depends on:
 The nature of the group’s tasks,
 The extent to which group members need to communicate with each other to
achieve group goals.

Communication Networks in Groups & Teams

1. Wheel Information flow to and from one central

Network member.

2. Chain Members communicate with people next to

Network: them in sequence.

Wheel and Chain networks provide for little interaction.

3 Circle members communicate with others close to
Network them in terms of expertise, office location, etc.

4 All- found in teams, with high levels of

Channel communications between each member and all
Network: others.

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Communication Skills for Managers as Senders

 Send clear and complete messages.

 Encode messages in symbols the receiver understands.
 Select a medium appropriate for the message AND monitored by the receiver.
 Avoid filtering (holding back information) and distortion as the message passes through
other workers.
 Ensure a feedback mechanism is included in the message.
 Provide accurate information to avoid rumors.
Communication Skills for Managers as Receivers

 Pay Attention to what is sent as a message.

 Be a good listener: don’t interrupt.
o Ask questions to clarify your understanding.
 Be empathetic: try to understand what the sender feels.
 Understand linguistic styles: different people speak differently.
o Speed, tone, pausing all impact communication.
o This is particularly true across cultures.
o Managers should expect and plan for this.

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