VTU notes on principles of organization

UNIT - 3
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VTU - Notes - Question Papers
Organizing and Staffing :

Nature & Purpose of Organization :
Some Definitions on Organization :

One Definition being Including all the
Behavior of Participants in a Group.
The other definition being Describe the

Total System of Social & Cultural Relations.
According to Amitai Etzioni An

Organization is a Social Unit or Human
Grouping, deliberately structured for the
purpose of attaining Specific Goals.

Egs: Corporations, Schools, Colleges, Hospitals,

Temples etc are all Organizations.
Note: But, friendship groups & families are not
Organizations because they do not involve any
significant amount of Conscious Planning or
deliberate structuring. But for Practicing Managers,
the term Organization implies a formalized
intentional structure of Roles or Positions.
By Intentional Structure of Roles we say,
People working together must fill certain Roles. The
Roles that the people are asked to fill should be
intentionally designed to ensure that required
activities are done & that activities fit together so
that people work smoothly, effectively, & efficiently in
Groups.
For an Organizational Role to exist &

be meaningful to people, it must incorporate,
1) Verifiable Objectives, which are Major
part of the Planning Process.
2) A clear idea of the Major duties or
Activities involved &
3) An understood area of discretion or
authority so that the person filling the Role
knows what he can do to accomplish Goals.

To make a Role work out more effectively, provision

should be made for supplying needed information &
other tools necessary for performance in that Role.
Organizing is considered as :
1) The identification & classification of reqd
activities.
2) The grouping of Activities necessary to attain
Objectives.
3) The assignment of each Grouping to a Manager
with the delegation of Authority necessary to
supervise it &
4) The Provision for Co-ordination horizontally on
the same or similar organizational level & vertically
with corporate head quarters, division & dept etc., in
the Organizational Structure.

This should be designed to clarify who is to do what

tasks & who is responsible for what results to remove
hindrances caused by confusion & uncertainty of
assignment & to furnish Decision Making & Communications
Networks reflecting & supporting enterprise Objectives.
Purpose of Planning :
This is to aid in making Objectives meaningful & to
contribute to enterprise Objectives :
1) Principle of Unity of Objectives : An Organization
Structure is effective if it enables individuals to contribute to
Enterprise Objectives.
2) Principle of Organizational Efficiency : An
Organization is efficient if it is structured to aid the
accomplishment of Enterprise Objectives with a minimum of
unsought consequences for Costs.
Principles of
Organization :
This is the strength & basis of Organization

Structure, the thread that makes it
possible, the means by which groups of
activities can be placed under a Manager &
Co-ordination of Organizational Units can be
promoted. It is the tool by which a Manager is
able to exercise discretion & to create an
environment for individual performance.
Therefore, some of the most useful
principles of Organizing are related to
Authority. They are highlighted as follows :

1) Scalar Principle : The clearer the line of

authority from the topmost management position
in an enterprise to every subordinate position, the
clearer will be the responsibility for Decision
Making & more effective will be the Organization
Communication.
2) Principle of Delegation by Results
expected :
The responsibility of subordinates to
their superiors for performance is absolute, & the
superiors cannot escape responsibility for the
Organizational activities of their subordinates.

3)
Principle of parity of Authority & Responsibility :

The responsibility for actions cannot be greater than
that implied by the authority delegated, nor should it be less.
4) Principle of Unity of Command :
The more complete an individuals reporting
relationships to a single superior, the smaller the problem of
conflicting instructions & greater the feeling of personal
responsibility for results.
5) Authority level principle :
Maintenance of intended delegation requires that
decisions within the authority of individual managers should
be made by them & not be referred upward in the
Organization Structure.
Other principles of Organization related to
achievement of Objectives are as under :

6) Principle of Unity of Objectives :

An Organization Structure is
effective if it enables individuals to
contribute to Enterprise Objectives.
7) Principle of Organizational
Efficiency :
An Organization is efficient if it
is structured to aid the accomplishment
of enterprise objectives with a minimum
of unsought consequences or Costs.
8) Specialization :
Effective Organization must promote
specialization. The activities of the enterprise should
be divided according to functions & assigned to
persons according to their specialization.
9) Span of Management Principle :
In each Managerial Position, there is a limit
to the number of persons & individual can effectively
manage but the exact number will depend on the
impact of underlying variables. As far as possible,
the span of control should be the minimum. That
means, a Manager should be asked to supervise a
reasonable number of subordinates only, say six.
10) Simplicity :
The Organization Structure should
be as simple as possible & the Organization
levels should, as far as possible, be
minimum. A large number of levels of
Organization means difficulty of effective
communication & coordination.
11) Flexibility :
The Organization should be flexible,
should be adaptable to changing
circumstances & permit expansion &
replacement without dislocation & disruption
of the basic structure.
12) Balance :
There should be reasonable balance in
the size of various depts, between
Centralization & Decentralization, between
the principle of span of control & short chain
of command, & among all types of factors
such as Human, Technical & Financial.
13) Unity of Direction :
There should be one Objective & one
plan for a group of activities having the same
Objective. Unity of Direction facilitates
unification & co-ordination of activities at
various levels.
14) Personal Ability :

As people constitute an Organization,
there is a need for proper selection,
placement & training of Staff. Further, the
Organization Structure must ensure Optimum
use of Human Resources & encourage
Management Development Programmes.

Process of Organizing :
The various principles of Authority Delegation
& of Departmentation or Segmentation of the
activities on the basis of some Homogeneity &
Integration are fundamental truths about the
process of Organizing.
They deal with phases of the three primary

aspects of Organizing a) Authority b)
Delegation
c) Activity Groupings & Integration.
Integration is the process of achieving unity

of effort among the various Departments or
Subsystems to achieve the Objectives of the
Enterprise.

The Process of Organizing involves the

following Six Steps :
1)Consideration of Objectives :
The first step in Organizing is to know the

Objectives of the Enterprise.
They determine the various activities which need

to be performed & the type of Organization which
needs to be built for this purpose, i.e., the Strategy of
the Organization determines its Structure.
For Eg: The Structure of an Educational

Institution is not the same as that for a Business
Enterprise. Therefore, Consideration of Objectives has
the First & Foremost Role to play in the Process of
Organizing.

2) Grouping of Activities into Depts / Divisions/

Segments/ Subsystems :
The Second Step is to identify the activities necessary

to achieve them & to group the closely related & similar
activities into divisions & depts or Subsystems.
For Eg: The activities of a graded Cast Iron Castings

Manufacturing Enterprise may be grouped into such
Depts as Pattern Shop, Moulding Shop, Core Shop, Sand
Plant, Melting Shop, QA Dept, Personnel Dept, etc.
In addition, the activities of each Dept can be further

classified & placed under the charge of different sections
of that Dept. For Eg: In the Moulding Shop, separate
sections may be created for Machine Moulding, Hand
Moulding etc.
3) Identification of Key Depts :
They are activities essential for the fulfillment of

the Goals. Such Key Depts demand utmost
importance.
Other Depts exist merely to serve them.
If Key Depts are not identified, Top Management

very often tends to focus its attention on Minor
Issues leading to wastage of Time & Resources.
Thus Key Depts have to be identified & placed

directly under the Top Management.
For Eg: An enterprise manufacturing Soaps &

Detergents can identify advertising & sales
promotion Depts as Key Depts which report directly
to the MD of the enterprise.
4) Determining Levels at which Various

Types of Decisions are to be made :
After deciding the relative importance of various
depts, the levels at which various Major & Minor Decisions
have to be taken, have to be determined.
Each enterprise must decide on the degree of

Centralization & Decentralization of authority &
responsibility it wants to have.
Extreme Decentralization may lead to loss of

Control, on the other hand, Extreme Centralization
may lead to improper decisions, failure to take
decisions at the right time, delays & complete breakdown
of the morale of the employees.
Therefore, Top Management must very carefully

decide the levels of the enterprise at which various types
of decisions can be taken in order to achieve overall
Objectives of the enterprise most effectively & efficiently.

5) Deciding the Span of Management :
One has to decide on the Span of Management.

i.e., the Number of Subordinates who should
report directly to each Executive.
The Narrower the Span, the taller would be the

Structure with several levels of Management. This
will complicate Communication & increase
financial burden of Salaries.
For these reasons, a Flat Structure is generally

desirable. However, the Span of Management, of
each Executive Position must be tailored to meet
the satisfactory working environment of the
enterprise.

6) Setting up a Coordination Mechanism :
Proper Coordination among various depts & its

individuals is very important for the successful &
smooth running of the enterprise.
As individuals & depts carry out their

specialized activities, the overall goals of the
Organization may become submerged or conflicts
among Organization members may develop.
Therefore, effective Coordination Mechanisms

are reqd to enable members of the Organization
to keep sight of the Organization Goals & reduce
inefficiencies & conflicts.

Peter F Druckers Process of

Organizing :
Activities Analysis :
A thorough & careful activities

analysis clarifies as to what work has to be
performed, what kinds of work belong
together, & what emphasis each activity is
to be given in the Organization Structure.

Decision Analysis :
Second Step involves Decision Analysis.
Although, it is important for any one to
anticipate the contents of the future decisions,
one can predict their kind & decide their
places so that when they arise in future, they
need no go looking for a Home.

Relations Analysis :
In the final step, an analysis should

be made of various relationships between
the tasks of a Manager & those of his
subordinates, peers & superiors.
Traditionally, only downward
relationships of a Manager are analyzed.
But, this done not give a complete picture
of his contribution to the total
Organization. This can be obtained only
by analyzing his Horizontal & upward
relations also.
Types of Organization :
Organizations can be of 2 Types as given

below :
1)
2)
Formal Organization.
Informal Organization.
Both types are found in the

Organization shown below :


1) Formal Organization :
There are various Levels in any Organization, right from
President or Chairman or Managing Director or Chief
Executive Officer at the top to Foremen/Supervisors down the
line.
Formal means the Intentional Structure of Roles in a

Formally Organized Enterprise.
This doesnt mean there is anything inherently

inflexible. If a Manager is to organize well, the structure must
furnish an environment in which individual performance, both
present & future contributes most effectively to Group Goals.
Formal Organizations should be flexible, there should be

room for advantageous utilization of creative talents for
recognition of individual likes & capacities in the most formal
of Organizations. Yet, individual efforts in a Group situation
should be directed towards Group & Organization Goals.

2)
Informal Organization :
Such an Organization is a Joint Personal Activity without

conscious joint purpose, even though contributing to joint
results.
Thus, the Informal Relationships established in the Group

of people during morning Tea Break or Playing Cricket in the
Evening etc., may aid in the achievement of Organization
Goals.
It may be easier to ask for help in an Organization Problem

from someone you know personally, even if he may be in a
different section, than by passing thro the Organization
Structure.
Definition : A Network of Personal & Social Relations not

established or required by the formal organization but arising
spontaneously as people associate with one another. Thus,
relationships not appearing on the Organization Chart might
include Evening Cricket Team & Morning Tea Regulars.

Organizational Division The

Department.
The Word Dept indicates a distinct area,
division or branch of an Organization over
which a Manager has authority for the
performance of specified activities.
Dept could be the Manufacturing

Division, Sales Division, R&D division etc.
Each Division is generally headed by a

VP or a Manager. These designations may
change from one Organization to the other.

Organization levels & Span of

Management :
Span Of Control :
Meaning of Span of Control & its
importance :
The term Span of Management is also
referred to as Span of Control, Span of
Supervision, Span of Authority, Span of
Responsibility.
This indicates the Number of
Subordinates who report directly to a
Manager.
While the purpose of Management is to

make Human Cooperation more effective, the
Reasons for levels of Management is the
Limitations of the Span of Management.
In other words, the Organization Levels

exist because there is a limit to the number
of persons a Manager can supervise
effectively.
This limit to the Number of Persons

a Manager can supervise effectively
varies depending on the Situations &
Types of Organization. This is called as
Span of Control or Span of Management.

Reasons for deciding an

Appropriate Span of Control in an
Organization
:
There are 2 Possible Reasons :

1) This affects the efficient utilization of
Managers & the effective performance of
their Subordinates. When the Span of
Control is too Wide, Managers are
overstraining themselves & also, their
Subordinates are receiving very little
guidance from their Managers.
This also means Managers have
very little Control on their Subordinates.

2) There is a Relationship between Span of Control

& Organizational Structure.
A Narrow Span of Control results in a Tall
Organization with many Levels of Supervision
between Top Level Management & Lowest
Organizational Level.
This creates Ineffective Communication
Problems & also increases the Financial Burden on the
Organization.
There is also a Burden of finding suitable
experienced personnel at different levels.
On the other hand, a Wide Span of Control
for the same number of Employees, means a
Flat Organization with fewer Management
Levels between Top & Bottom Levels.
Relationships between Span of Control &

Organizational Levels :

In the figure shown above, the Relationships

between Span of Control & Organization Levels are
shown. A Wide Span of Control is associated
with Few Organization Levels; a Narrow Span
contains Many Levels.
Advantages & Disadvantages of Narrow &
Wide Spans of Control :
Advantages of Organizations with Narrow
Spans :
1) Managers have Close Supervision on their
Subordinates.
2) Therefore, Close & effective Control on them.
3) There is a Clear Cut Fast Communication
between Subordinates & their Superiors & therefore
Communication is not diluted.
Disadvantages of Narrow
Organization Spans :
1) Superiors tend to get too involved in
Subordinates Work.
2) There are many Levels of Management.
3) Financial Burden of the
Organization increases due to high costs
because of many levels in the Organization.
4) There is an Excessive Distance
between Lowest Level & Top Level.

Advantages of Organizations with

Wide Spans
Superiors are forced to delegate

authority & responsibility to their
Subordinates.
Organization makes clear policies.
Subordinates are very carefully
selected.

Disadvantages of Wide Span

Organizations
There is a tendency of Overloaded

& Stressed Superiors to become
Decision Bottlenecks.
There is a tendency of Superiors

loss of Control on his Subordinates.
This requires Managers with

Superior & Exceptional Qualities.

Deciding on the Span :

In every Organization, it must be decided how many
subordinates a Superior can manage effectively &
efficiently.
According to Research, the Number is usually about,

4 to 8 Subordinates at the Upper levels, & 8 to 15 or
more at the Lower Levels.
According to another Study, the ideal number of

Subordinates for all Superior Authorities is to be 4, while
at Lowest Levels in the Organization, what is delegated is
Responsibility for the Performance of Specific Tasks & not
for the Supervision of Others, the Max Number being 8 to
12. Other Management Experts find that Manager may
be able to manage as many as 20 to 30 Subordinates.

Summary :
Studies on several Well Managed Companies

have shown widely varying Spans & that merely
counting the Numbers in the existing Spans is not
enough to establish what a Span ought to be.
This is true even if it could be assumed that

each Company has reached the best Number thro
Trial & Error.
That might prove only that underlying

conditions vary for different Companies.

Factors Governing Effective

Span of Control :
The Number of Subordinates a Manager can
effectively depends on Various factors discussed below :
Apart from such personal capacities as Comprehending

Quickly, getting along with people & commanding Loyalty
& Respect, the most important determinant is a Managers
ability to reduce the time he spends with his Subordinates.
This ability naturally varies with Managers & their jobs,

but several factors materially influence the number &
frequency of such contacts & therefore the Span of
Control.
The appropriate Span of Control, therefore, must

be determined by the Specifics of the Managers
particular situation. They are given below :

1) Subordinate Training.
2) Competency of the Manager.
3) Competency of the employees.
4) Nature of Work.
5) Delegation of Authority &
Responsibility.
6) Communication Technique.
7) Clarity of Plans.
8) Use of Objective Standards.
9) Geographic Location.
10) Levels of Management.
11) Economic Considerations &
12) Other Factors.
1) Subordinate Training :
Proper Training of Subordinates for their
job leads to the fewer number of necessary
Superior Subordinate Relationships.
Also, well trained Subordinates require

not only less of Managers time but also
less contact with their Managers , thus
allowing a Larger Span of Control.

2) Competency of the
Manager :
A Manager who is Competent & Well

trained can effectively Supervise more
Subordinates than one who is not !
Therefore, in Planning an Organization,

the Span of Control should be based on
Managers Average Competency Level.

3) Competency of the
Employees :
If the Employees are Competent, & possess

necessary skill & Motivation to perform the
Task assigned, Less Control & Supervision
from the Manager is reqd & a wider
Span of Control can be employed.
If, Incompetent Employees are there,

they demand more of the Managers
time in Supervision & Control, a Narrow
Span of Control will have to be forced in.

4) Nature of Work :
If Employees are carrying out, similar
repetitive jobs, the Span of Control can be
widened.
However, if their Jobs keep changing

frequently, more of Managers time is reqd
in Supervision & Control, & hence again
forcing Narrow Span of Control.

5) Delegation of Authority &

Responsibility :
If the Authority & Responsibility of each
employee are properly defined &
delegated, they need not meet their
Superiors very often for guidance &
Instructions.
This helps the Superior to manage a

large number of Subordinates.

6) Communication
Techniques :
The effectiveness with which communication

Techniques are used also influences the Span of
Control.
An Ability to communicate plans & instructions

clearly & concisely tends to increase a Managers
Span.
The Subordinates Job is greatly facilitated

by Superiors who can express themselves.
On the Other Hand, if clarity is lacking in

Communication about what is reqd to be carried out,
Subordinates will make frequent visits to the
Superiors for seeking Clarifications, therefore a
Narrow Span of Control becomes necessary.

7) Clarity of Plans :
Much of the Character of a Subordinates Job is
defined by the plans to be put into effect.
If Plans are well defined & if the Authority to

undertake them has been delegated, & if the
Subordinate understands what is expected of him, little
of Supervisors time is reqd & hence, Span of Control is
much larger. Such is the case with a Production
Supervisor responsible for largely Repetitive
Jobs.
On the other hand, if plans cannot be accurately

drawn, & subordinates do much of their own Planning,
they may require considerable guidance from their
Superiors, thereby, requiring a Narrow Span of Control.

8) Use of Objective
Standards :
A Manager must find out, either by personal

observation or thro use of Objective Standards,
whether, Subordinates are following Plans.
Obviously, good Objective Standards, revealing
with ease, any deviations from Plans, enables
Managers to avoid many time consuming
contacts.
But, Direct Attention under exceptional cases
will be reqd, which may be Critical to the
Organizations Success.

9) Geographic Location :
An Office Manager who has 30
Employees, all located in One Place ,may
be able to Supervise them very well.
On the Other Hand, a VP Marketing

who has 30 Marketing Managers located at
different places in the Country would find
direct supervision difficult.

10) Levels of
Management :
Span of Management also varies with each level

in the Organization.
Gerald G. Fisch has divided the Management
Hierarchy for this purpose into 4 Basic Groups : 1)
Super Managers 2) General Managers 3) Middle
Managers 4) Supervisors.
The Max Span of Management of Super Managers,
whose functions involve only Broad Policy Control
rather than Direct Supervision, can be 50
Subordinates.
Contd
But, for General Managers who are more

closely involved with their Subordinates, than
Super Managers, the Span of Control has to be
comparatively narrow, say 9 to 10 Subordinates
only.
For Middle Level Managers, the appropriate

Span of Control depends on the precise mix of
Executive & Operative Supervision than their
specific Jobs require. It can be 40 to 50
Subordinates.
For Supervisory Level whose Job is of a

Routine Nature, the Span of Control is normally
quite Wide, say up to 100 Subordinates.

11) Economic
Considerations :
Economic Considerations also affect choice

of Span. Smaller Spans means a Large No of
Managers with added Salaries & other Costs
they entail.
But Wide Spans also involve extra costs due

to inefficiencies that result from decreased
Managerial Leadership.
Hence, an Economic Balance has to be

struck between Costs Saving that result from
the largest possible Span & the added Costs
that an Organization begins to incur as the Span
grows too Wide.

12) Other Factors :

Simple Tasks may allow for a Wider Span
than Tasks which are Complex & include a
Great Variety of Activities.
A Wider Span of Control can also result

from the +ve attitude of Subordinates
toward assumption of responsibility, as well
as their willingness to take reasonable risks.
Similarly, with more mature Subordinates,

the Superior may delegate more Authority
thus Widening the Span.

Departmentation :
The Horizontal Differentiation of Tasks or
Activities into discrete segments is called
Departmentation.
The limitation on the Number of Subordinates that can

be directly managed would restrict the size of the
enterprises if it were not for the tool of
Departmentation.
Grouping of activities & people into depts makes it

possible to expand Organization & to manage it effectively
& efficiently.
Departmentation is thus the Key in building up an

effective & efficient Organization.
The basic aim is to take advantage of the

division of Labor & Specialization .

Depts however differ with respect to the basic

patterns used to group the activities.
There are several bases for Departmentation,

each of which is suitable for particular
Organizations, strategies & purposes.
It can be emphasized there is no single

best way of Departmentizing that is applicable
to all Organizations or to all situations.
The pattern used will depend on given

situations & on what Managers believe will give the
best results for them in the situation they face.
The various bases of

Departmentation :
1) Departmentation by Enterprise
Functions :
Functional Departmentation is the most widely
employed basis for Organizing Activities & is present in
almost every Enterprise at some level in the
Organization Structure.
Each Major function of the enterprise is grouped
into a Dept.
For Eg : A typical Manufacturing Company will
have Production, Engineering, Marketing, Finance &
Personnel Depts. A typical Manufacturing Unit
representing such Functional Depts is shown below :

Advantages : ( Function based

Departmentation)
It is logical & time
proven.
The Power & prestige of the basic activities of

the enterprise are maintained by the Top
Managers. The identity of various functions is
maintained.
Functional Departmentation follows the

principle of Occupational Specialization &
thereby facilitates efficiency in utilization of people.
It simplifies training.
It furnishes a means of tight control at the Top,

as the Top Managers are responsible for end
results.
Disadvantages :
This may tend to de-emphasize over all Enterprise

Objectives.
Over specializes & narrows view points of Key Personnel.
People develop attitudes & other behavioral patterns

involving loyalty to their Functional Depts & not to the
enterprise as a whole & this tends to reduce Co-ordination
between Functions.
Responsibility for profits is at the Top only. In small

Enterprises, this may be acceptable, but in large Enterprises
the burden becomes too heavy for the person to bear.
Functional Departmentation makes it difficult to adapt

quickly to environmental changes.
It limits development of General Managers.

2) Departmentation by
Products :
This method is ideally suited for Large

Organizations manufacturing various
different Products.
In this method, a separate Semi

Autonomous Dept is created for each
Product & is put under the Charge of a VP
or, a Manager is made responsible for
achieving Set Goals.

Within each Dept, all the needed

Production, Engineering, Personnel, Marketing
& other facilities are grouped.
This method is ideal when an

Organization grows to a very Large Size & the
usual method of Functional Departmentation
creates Operational Problems.
For Eg: An Automobiles Manufacturing

Company has 3 Products say : 1) Tractors 2)
LCV & 3) Luxury Cars etc. The Company
may create 3 Different for these Products,
each headed by a VP for efficient & effective
running of the Organization.

Advantages :
It facilitates use of specialized Capital (eg : A
person may be extremely good in Marketing Luxury
Cars or LCV & his Services may be used in these
areas.)
Relieves Top Management of Operating Task

Responsibility, therefore it can better concentrate
on such centralized activities like Finance, R & D, &
Control.
This enables the Top Management to

Compare the performance of different
Products & take the Policy Decisions about
those Products which are not performing at
expected levels.

In this form, since Responsibility for

Performance of each Product is entrusted to a
particular Dept Head, he is well stimulated
for improving his performance.
Here, those who Work within the Dept

derive greater satisfaction from
identification with a recognizable Goal.

Disadvantages :
This form results in Duplication of
Facilities & Staff.
Extra expenditure is incurred in

maintaining a Sales Force for each Product
Line.
Employment of a Large No of
Management Personnel is reqd.
Plant & Machineries in each Dept may

not be used fully.

3) Customer
Departmentation :
An enterprise may be divided into a

Number of Depts on the basis of the
Customer that it serves.
In this form, the Customers are the
Key to the way the activities are
grouped when each of the different
things an enterprise does for them is
managed by one Dept Head for that
particular activity/thing.


Advantages :
Encourages Concentration on Customer
Needs.
Gives Customers feeling that they have

an understanding Supplier.
This form helps to develop Expertise in

Customer Area.

Disadvantages :
It may result in Under Utilization of

resources & facilities in some Depts.
There may be duplication of Services.
Requires Managers & Staff Experts in
Customers Problems.

4)
Departmentation by Territory or
Geography or Regions :
It is based on Territory or Region which is
Very Common in Enterprises that operate over
Wide Geographic Areas.
For Eg: Used widely in Automobile

Assembling, Chain Retailing, Wholesaling & Oil
Retailing. i.e., Big Bazaar, Wal Mart in USA,
departments based on Region Western
Railways, Southern Railways etc.
Here, it is important that activities in a

given area or region be grouped &
assigned to a GM, when this type of
Departmentation is adapted.

Advantages :
It motivates each regional head to achieve high
performance.
Places responsibility at a Lower Level.
Places emphasis on Local Markets & problems.
It improves Coordination in a Region.
It enables better face to face communication with the

local interests. Takes advantage of economics of Local
Operations such as Raw Materials availability, Cheap
Labor, Market etc.
It enables Organization to compare Regional

Performances & invest more in Profitable Areas &
withdraw Resources from Unprofitable Ones. This
promotes spirit of healthy competition between the
Regions.

Disadvantages :
It requires more people with GM
capabilities.
It increases problem of Top Management
Control.

5) Departmentation by
Time :
One of the Oldest form of Departmentation

generally used at Lower Levels of
Organization, i.e., Grouping based on Time. The
use of Shifts is Common in many enterprises where
for Economic, Technological or other reasons, the
normal day will not suffice.
Egs: Hospitals, Machine Shops, Forging

Shops, Press Shops working in 3 Shifts for Economic
Reasons. This is also true for Chemical Industries,
Blast Furnaces, Steel Melting Furnaces etc where
processes cannot be interrupted. These industries
work in 3 Shifts.
Advantages :
Services may be rendered that go beyond
the typical 8 Hours a Day, often extending
to 24 Hours a Day.
It is possible to use processes that cannot
be interrupted, those that require a
Continuous Cycle.
Expensive Capital Investment on Plant &
Machinery can be used more than 8 Hours a
Day when Workers in all the 3 Shifts use the
same Machines. This is a very important
Economic Consideration.

Disadvantages :
Supervision may lack during Night Shift.
There is a fatigue factor ; it is difficult for most
people to switch, for instance, from a Day Shift to
a Night Shift & Vice Versa.
Having Several Shifts may cause problems in
Communication & Coordination.
In a factory, the night shift people may not
clean up the machines to be used by the day
shift people.
Efficiency of the people have generally been

found to be quite low between 12:00 AM to 8:00
AM.

6) Process or Equipment
Departmentation :
This is done on the basis of several discrete

processes or technologies involved in the
manufacture of a Product.
In this kind of Departmentation, the necessary

Resources are brought in to do the particular Job.
Eg: This can be explained by means of a Cast

Iron Foundry manufacturing Graded cast Iron
Castings. There are so many processes involved
such as Moulding, Core Making, Melting, Sand
Preparation, Fettling etc. The Block Diagram of
a Typical Enterprise is shown below :


Advantages :
It achieves Economic Advantages.
Follows principle of Specialization each
Dept is engaged in doing a special type of
work, therefore utilizing special skills of the
people & increases Operational Efficiency.
Ideally suited for manufacturing
enterprises using a Number of Intermediate
Processes to manufacture their Products.

Disadvantages :
It does not provide a good training
ground for overall development of
Managerial Talent.
Coordination of different Depts is

difficult & some times, it may lead to
Production Bottle Necks.
Responsibility for Profit is at the Top.

7) Matrix Organization
or
Combined Base :
It is quite typical to find an enterprise
having a different base of Departmentation at
different levels.
For Eg: An enterprise Manufacturing
Consumer Durables viz., Refrigerators,
Washing Machines & TV s may follow
Product as the Base at the Top level,
Region as the base at the Intermediate level
& Function as the base at the Bottom Level.
This is represented in Block Diagram
given below :


Matrix Organization in an
Engineering Dept :
Another kind of Departmentation is Matrix

or Grid Organization or Project or Product
Management.
The essence of Matrix Organization
normally is the combining of Functional &
Product Patterns of Departmentation in the
same Organization Structure.
In the figure given below, there are
Functional Managers In Charge of
Engineering Functions & an Overlay of Project
Managers responsible for the end products.


Functional Depts are a permanent

feature of the Matrix Organization.
They retain Authority for Overall Operation

of their Respective Depts.
Product Depts or Project Teams, on the

other hand, are created as the need for them
arises.
Members of a Project Team are grouped
from the various functional depts & are placed
under the direction of a Project Manager.

The Manager for each Project is responsible &

accountable for its success; thus, he has the
authority over the other team members for the
duration of the Project.
This temporary authority is shown by the

dotted lines as shown in fig. above.
On Completion of the Project, the members of

the Team including the Project Manager revert
back to their respective Depts until the next
assignment to a New Project.
This type of Organization is frequently found in

Construction Projects, Designing & Launching
Weather Satellites, in Management Consulting
Firms, where Experts work together on a
Specific Project for a fixed period.

Advantages
Oriented towards End Result.
In this Organization, Professional

Identification of the Individuals are
maintained.
It pinpoints Product Profit Responsibility.

Disadvantages :
Conflict in Organization Authority exists.
Possibility of disunity of Command

exists.
Requires Manager to be good at Human

Relations.
Matrix Organization requires many Time

Consuming Meetings.

Useful Tips for making Matrix

Organization Effective :
1) Define clearly the Objectives of the Project or
Task.
2) Clarify the Roles, Authorities & Responsibilities
of Managers & Team Members.
3) Ensure that influence is based on
Knowledge & Information than on Rank.
4) Balance Power of Functional & Project
Managers.
5) Select experienced Manager for the Project
who can provide leadership.
6) Reward Project Managers & Team
Members fairly etc.
Choosing Pattern of
Departmentation :
Departmentation is not an End in Itself, but it
is simply a Method of arranging activities to facilitate
the accomplishment of Organization Objectives.
There is no one best way of Departmentising
applicable to all Organizations & all situations.
They must decide what is Best Looking at the
situation they face - Jobs to be done, the way they
should be done, the people involved & their
personalities, the Technology employed in the Dept,
whether the Users are being served, the other Internal
& External Factors in the situation. However, some
factors are given below :

1)
Specialization :
The base of Departmentation should

ensure Maximum Specialization of Skill & Effort.
The points to be considered for this purpose are :
a) Which approach permits the max use of
Special Technical Knowledge.
b) How will the Choice affect the differentiation
among Specialists.
c) Will it allow necessary differences in View
Points to develop so that specialized Tasks can
be performed effectively.

2)
Coordination
The base of Departmentation should ensure

Proper Coordination & Control of the Activities of
Different Depts. The Points to be considered for
this purpose are :
a) Which base provides the best hope of
achieving reqd Control & Coordination.
b) Will a particular base increase problems of
achieving integration or reduce them.
c) How will the Decision affect the ability of
Organization Members to communicate with each
other, resolve conflicts & reach necessary Joint
Decisions.
3)
Economy :
The expenditure involved in introducing

Departmentation is also an important point to
be considered. Benefits of Departmentation
should always be higher than the Costs. Points
to be considered here are :
a) Which base provides the most efficient
utilization of Plant & Machinery.
b) What is the financial burden involved in
following a particular base etc.

4)
Whole Task :
The Organization should be so divided

that each Dept has a Whole Task, this
Wholeness may be achieved either by
Technological Departmentation or by
Regional Departmentation or by Time
Departmentation or by Combination of these.
Thus, in each Case, Managers of
Different Depts have a realistic accountability
& those who work within the Depts
derive satisfaction from identification
with a Recognizable Goal.
Committees :
It is a Group of People who have
been formally assigned some specific
task or some problem for their decision &
or implementation.
In Modern Business Enterprises, use of

Committees is very common in all areas of
Management & Administration.
The use of Committees is due not only to

the Democratic Tradition but also to a
growing emphasis on Group Management &
Group Participation in Organizations.

Committees are broadly classified into 2

Groups as under :
1) Advisory Committees &
2) Executive Committees.

Advisory
Committees :
1)
When Committees are vested with

Staff Authority, they are known as
Advisory Committee.
They have only a Recommendatory Role &

cannot enforce implementation of their advice.
Some of the usual advisory committees

formed in Business Enterprises are : a) Works
Committees b) Sales Committees c)
Finance Committees
d) Workers
Welfare Committees etc.

Executive
Committees
:
Whenever Committees are
2)
vested with Line Authority,

they are called as Executive Committees.
These Committees not only take
Decisions but also enforce Decisions &

thus perform a Double Role of taking a
Decision & its implementation. The
Board of Directors of a Company is
an Example of an Executive
Committee.
Advantages of a
Committee :
When Committees consist of all Departmental

Heads as Members, people get an Opportunity to
have a better understanding of the Problems of each
other & Coordinate effectively to achieve
Organizational Goals.
It is a forum for the Pooling of Knowledge &

experience of many persons of different skills, ages, &
backgrounds. This leads to taking improved Quality
Decisions.
Committees provide an Opportunity for many

persons to participate in the Decision Making Process.
Contd .
More appropriate decisions or solutions

are likely to emerge for a given problem by
a group of people, (group decision making)
rather than individuals.
They are an excellent means of

transmitting information & ideas, both
Upward & Downward.
By exposing members to different issues

& view points. They contribute indirectly to
their Training & Development.
They are impersonal in action & hence

their decisions are generally unbiased & are
based on facts.

Drawbacks of Committees
:
One of the best administrative procedures
to delay action is to refer the matter to a
Committee. Almost without exception, it takes
longer time to get action from a Committee than
from an individual Manager.
For wrong Decisions, no members of the
Committee can be individually held responsible &
members therefore may no apply their mind
seriously.
A huge amount of time & money is spent in
convening such meetings & giving allowance to the
members. Therefore, Committees increase the
Financial Burden on the Organization.

Members of Coordinating
Committees frequently regard
themselves as appointed to protect the
interests of their Depts rather than to find
the most appropriate solution to the problem
in Question.
Decisions are generally arrived at on the

Basis of some Compromise among members.
Hence, not always the Best Decisions.
As Committees consist of a large number

of persons, it is difficult to maintain secrecy
regarding the Decisions taken at the
Committee Meetings.

Guidelines for making Committees

more effective :
Some of the disadvantages of Committees can be
overcome by applying the following guidelines for more
effective working of the Committee. They are as given
below :
a) Authority.
b) Size.
c) Membership.
d) Subject Matters.
e) Chairperson.
f) Minutes &
g) Cost effectiveness.

They are as explained below :

1) Authority : The Committees
Authority should be spelled out so that
members know whether their
responsibility is to make decisions, make
recommendations, or merely deliberate
& give the Chairperson some insights
into the problem under discussion.
2)
Size :
Size of the Committee is very

important. As a general rule, a Committee
should be large enough to promote
deliberation & include the breadth of expertise
reqd for the Job.
It should not be too large so as to waste
time or foster indecision. The Optimum Size is
5 to 6 members & the members chosen
should possess adequate skills & knowledge
to deal with the problem referred to the
Committee.
3)
Membership :
It must be selected carefully. If a

Committee is to be successful, the members
must be representative of the interests they
are intended to serve.
They must also possess the reqd
authority & be able to perform well in a Group.
Finally, members should have the

capacity to communicate well &
reach Group Decisions by integrated
Group Thinking rather than
inappropriate Compromise.
4)
Subject Matter :
This should be carefully selected.

Committee work should be limited to Subject
Matter than can be handled in a GD.
It could be more effective if an Agenda &
relevant information are circulated well in
Advance so that the members can study the
Subject & come prepared for the Meeting.

5)
Chairperson :
The selection of this person is extremely

important for Effective Communication.
Such a person can avoid the Wastes &
Drawbacks of Committees by planning the
Meeting, preparing the Agenda, seeing the
results of Research are made available to the
members in Advance, formulating definite
proposals for discussion or action &
conducting the meeting efficiently.
He sets the tone of the Meeting,
integrates the ideas & keeps the discussion
from Wandering.
6)
Minutes :
Sometimes, individuals leave the

meeting with varying interpretations as to
what was discussed & agreed upon.
This can be avoided by taking careful
minutes of the meeting & circulating them in
Draft form for correction or modification
before the final copy is approved by the
Committee.

7)
Cost Effectiveness :
The Committee must be worth its

Costs. It may be difficult to count the
benefits, especially such Intangible Factors
such as Morale, enhanced status of
Committee members, & the Committees
value as a training device to enhance Team
Work.
But the Committee can be justified only
if the Costs are Offset by Tangible & Intangible
Benefits.

Centralization versus
Decentralization of Authority &
Responsibility
:
Meaning of Decentralization :
Organization Authority is merely the
discretion conferred on people to use their
judgement to make decisions & issue
instructions.
It is the tendency to disperse decision
making authority in an Organized
Structure.
It is a fundamental aspect of delegation, to
the extent the authority is not delegated ; it is
Centralized.
Delegation of Authority & hence

Decentralization is necessary for an
Organization to exist.
Just as no one person in an enterprise,

can do all the tasks necessary for
accomplishing a group purpose, so it is
impossible, as an enterprise grows, for
one person to exercise all the authority
for making decisions.
There is a limit to the No of Persons

Managers can effectively supervise & make
decisions for.

Once this limit exceeds, Authority must be

delegated to Subordinates, who will take
decisions within the area of the assigned
duties.
Decentralization implies more than

delegation. It reflects the philosophy of the
Organization & Management.
It requires careful selection of which
decisions to be taken at lower levels of
the Organization Structure & which to be
taken at the Top levels.

It also requires specific policy making to guide

the decision making, proper selection & training of
people & adequate control.
A policy of Decentralization affects all areas of
Management & can be seen as an essential
element of a Managerial System. In fact, without it,
Managers wouldnt be able to use their discretion
to handle the ever - changing situations they face.
Every enterprise has to decide as to how
much decision making authority should be
centralized in the hands of the President &
the VP (Top Levels) & how much should be
delegated to the Managers at the Lower
Levels.

In a Centralized set up, the Decision

making Authority is concentrated in a few
people at the Top, in a Decentralized Set
up, it is delegated to the Lower Levels
where the actual work is performed.
Following are the criteria to measure

the extent of Decentralization in an Enterprise.
Decentralization is greater :
1) When, the greater is the number of
decisions made at Lower Levels.
2) When the more important are the
decisions made at Lower Levels.
3) When more is the number of areas in
which decisions can be made at Lower Levels &

4) When fewer are the people to be consulted &

less is the checking reqd from the Top Levels on
the Decisions made at the Lower Levels.
Definition on Decentralization :
Everything that goes to increase the
importance of the Subordinates Role is
Decentralization & everything that goes to
reduce it is Centralization.
The terms Centralization &
Decentralization are not absolute but are
relative. Absolute Centralization is not possible,
except in a One Man Enterprise. Consequently,
we can say that Decentralization Characterizes all
Organizations.
Similarly, there cannot be absolute

Decentralization of Authority because the
Manager cannot delegate all his
authority without surrendering his
position as a Manager.
Meaning of Centralization :
It has several meanings :
1) Centralization of Performance :
Pertains to Geographic
Concentration ; it characterizes, for Eg : a
Company operating in a single location.
2) Departmental Centralization :
Refers to Concentration of specalized activities

in one Dept. For Eg : Repairs & Maintenance for an
entire plant may be carried out by a Single Dept.
3) Centralization as an aspect of
Management :
It is the tendency to Restrict Delegation
of decision making. A high degree of authority is
held at or near the Top by Managers in the
Organizational Hierarchy. We are concerned with
this aspect of Centralization & Decentralization of
Authority & Responsibility.

Delegation of Authority :
Authority is delegated when a Superior
gives a Subordinate discretion to make
Decisions. The process of delegation involves :
1) Determining the results expected from a
position.
2) Assigning Tasks to a position.
3) Delegating Authority for accomplishing
these tasks.
4) holding the person in that position
responsible for the accomplishment of tasks.

In practice, it is impossible to split this

process, since expecting a person to
accomplish goals without giving him the
Authority to achieve them is unfair, as is
delegating authority without knowing the end
results for which it is used.
Moreover, since the superiors

responsibility cannot be delegated, a Superior
has no practical alternative but to hold
subordinates responsible for completing their
tasks.

Distinction between Delegation &

Decentralization :
They appear to be the same, but in
reality they mean different things. The Major
differences are given below :
1)
Delegation is a process, while
Decentralization is the end result (Outcome) of
the Delegation & Dispersal of Authority.
Delegation mainly refers to granting of
Authority & the creation of responsibility as
between one individual & another;
Decentralization is the situation which exists as
a result of the systematic delegation of
Authority throughout the Organization.
2)
In Delegation, a Superior continues to
be responsible for the work delegated to
his Subordinates, while in Decentralization,
the Superior is relieved from his
responsibility for the work Decentralized &
Subordinate becomes liable (responsible)
for that.
3) Delegation is Vital & essential to the
Management Process. Only thro Delegation,
Subordinates can be involved in the Organization
& the Management can get things done.
Decentralization is Optional, in the sense, that it
may or may not be done as a Systematic policy.
Advantages of
Decentralization :
Relieves Top Management of some burden of

Decision Making & forces upper level managers
to let go. (giving freedom to the Lower Level
Mgrs to take independent Decisions.)
Reduces problems of Communication & hence

enables Top Managers to take timely decisions on
all important issues, thus, enhancing the efficiency
of the Organization.
Encourages Decision Making & assumption of

Authority & responsibility.
Gives Managers more freedom &

independence in Decision Making.

Promotes establishment & use of broad

controls which may increase Motivation.
Makes comparison of performance of

different Organizational units possible.
Facilitates setting up of Profit Centers.
Facilitates Product Diversification.
Promotes development of more capable

Managers. Because, Managers in a
Decentralized structure often have to adapt to
& deal with difficult situations, they are
assumed to be excellently trained for
Promotions into positions of greater authority &
responsibility. Decentralization aids in
adaptation to fast changing environment.

Limitations of
Decentralization :
Makes it more difficult to have a Uniform Policy.
Increases Complexity of Coordination of Decentralized

Organizational Units.
May result in loss of some control by UpperLevel Managers.
May be limited by inadequate Control Techniques.
May be constrained by inadequate Planning & control

systems.
Can be limited by the availability of qualified &

capable Managers.
Involves considerable expenses for Training Managers.
May not be favored by Economics of Scale of some

Operations.

The Extent of
Decentralization :
To avoid problems, any program for

decentralization of Authority & Responsibility must
consider thoroughly the Advantages & the
Limitations of Decentralization.
Strong forces in the Organization favor the

practice of Decentralization. But, at the same
time, extensive Decentralization is not to be
blindly undertaken.
Perhaps, One Major Problem of Decentralization

is loss of Control. No enterprise can
Decentralize to the extent that its very
existence is threatened & the achievement of
its Goals is frustrated.

If Organizational Disintegration is to be avoided,

Decentralization must be tempered with
selective Centralization in certain major policy
areas.
An enterprise with well balanced Decentralization

will probably centralize decisions at the Top on such
things as given below :
1) Financing.
2) Overall Profit Goals & Budgeting.
3) Major Facilities & other Capital Expenditures.
4) Important New Product Programs.
5) Major Marketing Strategies.
6) Basic Personnel Policies.
7) Development & Compensation of Managerial
Personnel.

A Well Organized enterprise always tries to

balance between Centralization &
Decentralization. In, such an Organization,
Authority is retained at the very Top for
Major Policy & Program Decisions on
matters affecting the Soundness &
Success of the entire Company.
Thro Decentralization, however, once the

Major Programs & Policy Decisions have
been made at the Top, many Decisions
involving their execution are made at the
Lower Levels in Various Depts of the
Organization.

Management by Objectives
(MBO) :
Introduction :
They are the End Points, towards which
enterprises activities are aimed. MBO is the philosophy of
Management that emphasizes the Development of
Mutual Objectives by Managers & their
Subordinates & the use of these Objectives as the
primary bases of Motivation, Evaluation & Control
Efforts.
The Management process begins with a
Mission Statement & Setting up of Organizational
Objectives. Objectives give meaning & purpose to the
Organization. Without Objectives, without
something to achieve, Organization would be

Purposeless & Chaotic.
Good Management, therefore, is

always Management by Objectives.
Objectives determine the Scope of Future
Events.
They provide the Spotlight on the
Routes over which activities, are
Organized. They serve as Reference
Points to Concentrate Resources &
Efforts. They determine what Action to
take today to obtain Results Tomorrow.

Mission :
Very Reason & Justification for the
existence of the enterprise.
It is usually expressed in terms of the

benefits the Firm provides to its
Customers.
An Organizations Mission Statement

states what it is, why it exists, & the
unique contribution it can make.
Mission Statements are characterized

by the following (given below) :

1) Customer Oriented :
The purpose of a Business according to
Peter F Drucker is to create a Customer .
Mission Statements, therefore, are directed at
serving the Customers in useful way.
2) Future Oriented :
Mission Statements must be indicative
of what the Business is going to be in the
years to come. The Statement must be Valid
for at least some years to come.

3)
Dynamic
The Concept of Mission is Dynamic & not

a Static One. It must strike a Happy
Balance between the Narrow & Broad Ways
of doing things in the Years ahead ; between
the present requirements & future
expectations.
It is worth remembering that the future
of a Business is usually determined by the
way it defines its Business Today.
Example of a Mission
Statement :
Name of the Company :
The Tata Group
Mission Statement : At the Tata

Group, our purpose is to improve the quality
of life of the communities we serve. We do
this thro Leadership, in Sectors of Leadership,
in Sectors of National Economic Significance
to which the Group brings in a Unique Set of
Capabilities. This requires us to grow
aggressively in focused areas of Business.

Our Heritage of returning to Society what we

earn, evokes confidence & trust among Consumers,
Employees, Shareholders & the Community. This
heritage will be continuously enriched by
formalizing the high standards of behavior
expected from employees & the company etc.
Objectives & Goals :
The terms Objective & Goal indicate end
results to be sought & accomplished. Both of
them have Value Orientations & indicate
conditions considered necessary to improve the
Overall Performance of the Organization. Three
important definitions of Objectives are given
below :
1) Objectives are Goals established to guide

the efforts of the Company & each of its
Components.
2) An Organizational Goal is a desired state
of affairs which the Organization attempts to
realize.
3) They indicate the End Point of a
Management Programme.

MBO
MBO also called Appraisal by Result,
Planning by Objectives, Goal
Management, Work Planning & Review,
Joint Target Setting etc is an overall
philosophy of management that
concentrates on measurable goals & end
results.
It provides Systematic & Rational

Approach to Management & helps
prevent Management by Crisis.

MBO is based on the assumption that people

perform better when they know what is expected
of them & can relate their Personal Goals to the
Organizational Objectives.
It also assumes that people are interested in

the Goal Setting Process & in evaluating
their own performance against the Target.
MBO is a Process where the Superior &

Subordinate Managers of an Organization
jointly identify its Common Goals, define
each Individuals Major areas of Responsibility in
terms of results expected of him, & use these
measures as Guides for operating the Unit &
assessing the Contribution of each of its
Members.

Features of MBO :
It emphasizes participation in Setting Goals

that are Tangible, Verifiable & Measurable.
It focuses attention on what must be accomplished

(Goals) rather than how to accomplish it !
MBO, by concentrating on Key Result Areas

translates the abstract philosophy of Management in
an attempt to concretize it. Further, it is A Dynamic
System which seeks to integrate the Companys need
to achieve its Profit & Sales Growth with the
Managers need to contribute & develop himself.

MBO is a Systematic & Rational

Technique that allows Management to attain
Maximum Results from available Resources by
focusing on Achievable Goals. It allows the
Subordinates with plenty of room to be more
creative in their Decision Making.

Management by
Exception (MBE):
Introduction :
Control is an essential part of every Organization. It is
a Process of Comparing Actual Performance with established
Standards, for the purpose of taking Action to Correct
Deviations.
It is only thro this Process of Control, that
Management is able to maintain the Equilibrium between
Ends & Means, Output & Effort. In a Large, Multi Product, Multi -Plant & Multi Location Organization,
it is impossible to check everything & initiate timely, remedial
steps whenever things go off the track. Managers therefore,
focus attention on Key or Critical Areas which have a
Significant Bearing on the performance of Various Depts in
an Organization. One of the Ways that have been found to be
relevant in this regard is Management by Exception (MBE).

MBE
MBE tries to focus attention on
exceptionally serious deviations from
the Plans & Standards.
According to this principle, a Manager
should give more attention to unusual or
exceptional items only.
Only very important deviations from
Established Standards should be brought to
the Notice of Management.

If the Actual Performance is within an

acceptable range of deviation from the Standard (Say
5%), it need not be reported to Management, as no
Remedial Action is reqd.
However, in Case of Major Deviation from the
Standard, the Matter has to receive the immediate
attention of the Management on priority basis. The
principle highlights the importance of the
Statement that, if you want to Control
everything, you will end up Controlling
Nothing.
So better focus on Key Deviations & leave the
minor ones to be taken care of by the Lower Levels.
That is, the Top Management must focus on
Important issues & leave the routine things to people
at Lower Levels.
The importance of MBE stems from the

enormous size of Business & the
Consequences of Complexity in Operations. It
is a Very Effective Approach in Controlling
Modern Organizations.
1)
2)
3)
4)
MBE offers the Following Benefits :

It saves Time.
It identifies Critical Problem Areas.
It stimulates Communication.
Reduces Frequency of Decision Making.

5) It leads to Concentration of efforts on

Important things.
6)
Makes use of more Knowledge & Data.
7)
It is necessary in Big Organizations.

Nature & Importance of

Staffing :
Introduction :
People are very Vital for the effective Operation of an
Enterprise.
All managers often say, Our people are our most
important Asset.
The Managerial function of Staffing is defined as filling
& keeping filled, various positions, in the Organization
Structure. This includes identifying Work Force requirements,
inventorying the People available, & Recruiting, Selecting,
Placing, Promoting, Appraising, Planning the Careers of,
Compensating & Training or otherwise developing both
Candidates & Current Job Holders to accomplish their tasks
effectively & efficiently etc.

It is therefore, clear that Staffing must be

closely linked to Organizing, that is, to the
setting up of Intentional Structures of Roles
& Positions.
All Managers have a Responsibility for
Staffing. The board of Directors performs the
Staffing Function by selecting the Chief
Executive. The Chief Executive in turn,
discharges this Function by selecting Managers
for different Depts, viz; Production, Marketing,
Finance etc. The Managers do likewise when they
select their Subordinates. Even the Foremen
or Supervisors have a Staffing
Responsibility when they Recruit & Select
Workers.
Importance & Need for

Proper Staffing :
Direct Labor Costs account for nearly 15

to 20 % Cost of Production in a
Manufacturing Enterprise. Therefore, a
Business Enterprise needs Right Kind of
People at Various Important Positions in the
Organization Structure to manage the affairs
of the enterprise efficiently & successfully.
There are a Number of Advantages of

Proper & efficient Staffing. They are
described below :

Advantages of Staffing :
Helps in choosing the right kind of
Personnel for different important positions in
the Organizational Structure.
Helps in identifying Talented &

Competent People, grooming them, develop
them to help move up the Organization
Ladder.
Ensures higher Productivity by placing

the Right Man in the Right Job.

Helps to avoid disruption of Production

Schedules due to shortage of personnel by
proper indication in Advance.
Helps to prevent Under Utilization of

personnel thro Over manning & the Resultant
High Labor Costs & Low Profit Margins.
It provides Information to
Management for the Internal Promotion
of Managerial Personnel in the event of
an Unanticipated Staff Turn over.

The Function of Staffing :

The Function of Staffing involves Proper
Manpower Planning .
Manpower Planning includes Forecasting,
Developing & Controlling is the Process by
which an Enterprise ensures that it has the
Right Number of People & the Right Kind
of People at the Right Time doing work for
which they are Economically most useful.
The Managerial Function of Staffing & in
turn Manpower Planning relates to the Total
Management System as depicted in Figure
Given Below :

As Shown in the Figure, Enterprise Plans become

the basis for Organization Plans.
The Present & Projected Organization Structure
determines the Number & Kinds of Managers reqd.
These demand for Managers are compared with
the available talent thro the Management Inventory.
On the basis of this Analysis, External & Internal
Sources are utilized in the process of Recruitment,
Selection, Placement, Promotion & Separation.
Other essential aspects of Staffing are
Appraisal, Career Strategy & Training & Development
of Managers.
Important Points in
Staffing :
1)
Staffing affects Leading & Controlling.
2) Well trained Managers creates an

environment in which people, working together in
Groups, can Achieve enterprise Objectives, at the
same time accomplish Personal Goals. It
facilitates Leading.
3)
Similarly selecting Quality Managers affects
Controlling ( it assists Controlling ) by preventing
any undesirable deviation from becoming Major
Problems.
4) Staffing requires an Open System Approach. It is

carried within the Enterprise, which in turn is linked to
the External Environment.
5)
Therefore, Internal Factors of the
Enterprise, such as Personnel Policies, the
Organizational Climate, & the Reward System
must be taken into Account.
6)
It is certain that without adequate Rewards,
it is not possible to attract & keep Quality Managers.
7)
The External Fast Changing Environment
is also equally important. High Technology
demands Well Trained, Well Educated & Highly Skilled
Managers. Inability to meet this Demand for such
Managers may prevent an Enterprise from
growing at the Desired Rate.
Process of Selection &

Recruitment :
What is Recruitment :
The Process of Recruitment starts after
Estimating the Manpower Requirements for
Various Positions in the Organization Structure.
It can be defined as the Process of
Identifying the Sources for Prospective
Candidates & to Stimulate them to Apply for
the Jobs.
In other words, Recruitment is the Process
of Attracting Potential Employees to the Company.

The Management should have a Proper

Plan of Recruiting the Number & Qualification
of Personnel required & also the Time Frame
when it is needed.
The Process of Recruitment & the Cost

involved in it depends on the Size of the
Enterprise & the Type of the Persons to be
recruited.

Sources of Recruitment :
They can be both Internal & External.
Internal Sources refer to Present
Working Force of the Company.
Vacancies other than at the Lowest Level
may be filled by selecting Competent
Individuals from amongst the Existing
Employees of the Organization.
External Sources of Recruitment
are as Follows :
Re-Employing Former Employees.
Friends & Relatives of Present Employees.
Applicants at the Gate.
Educational Institutions Tech, Management

& the Others.
Employment Exchanges.
Advertising for Vacancies in Leading
Newspapers.
1)
Re-Employing Former Employees :

Those Employees who have been laid
off or have left for Personal Reasons may be
employed. Such Employees may require
very Less Training compared to the New
People to the Company.
2) Friends & Relatives of Present
Employees :
Some Companies encourage their
Existing Employees to recommend their
Friends & Relatives for appointment to fill
the Existing Vacancies.
3)
Applicants at the Gate :

Unemployed Persons who call at the
Gate of the Enterprise are considered, after
Proper Selection Process, for filling up
different Vacancies in the Organization.
4) Educational Institutions
Technical, Management & Others :
Many Big Enterprises remain in touch
with Leading Technical, Management, &
Other Colleges & Young, Talented Candidates
are Recruited from Campus Selection
Process.
5) Employment Exchanges :
They also serve as an Important Source
of Recruitment for a Number of Business
Enterprises.
6) Advertising for Vacancies in Leading
News Papers :
This is a Very Important Source for many
of the Bigger Enterprises requiring the
Services of Persons possessing Certain Special
Skills & Qualifications. Small Enterprises
generally resort to Advertising for Vacancies in
Classified Columns in Leading Newspapers.
SELECTION :
Under Recruitment, the enterprise
identifies the Sources for prospective
candidates & encourages them to apply for
Various Openings in the Organization
Structure.
Under Selection, Candidates are
evaluated with respect to their
qualifications & the Job requirements &
those who do not satisfy the requirements
are Rejected.
There are some Variations of the Specific

Steps in the Selection Process. For Eg : The
Interview of a Candidate for a First Level
Supervisory Position may be relatively simple
when compared with the Rigorous Interviews
for Top Level Managers. However, the
Following Steps are indicative of the
Typical Selection Process :
1) The Selection Criteria : They are usually
established on the Basis of Current &
Sometimes Future Job Requirements. These
Criteria include Educational Qualification,
Knowledge, Skills & Experience.
2)
Application Form :
Candidates are reqd to complete an

Application Form. In this form, the Applicant
gives relevant Personal Data such as his
Qualification, Specialization, Experience, Firms
in which they have worked etc. The
Application Forms are carefully scrutinized to
decide the suitable applicants to be called for
Interview.

3) Screening Interview :
Those who are selected for Interview
on the basis of particulars furnished in the
application form are called for initial screening
interview to identify the more promising
candidates. The Interview is the most
important means of evaluating the poise
or appearance of the Candidate.
It is also used for obtaining
additional information or clarification
given in the Application Form & also to Check
References.
4)
Employment Tests :
For Further Assessment of Candidates

Nature & Abilities, some Tests are conducted in
the Selection Process.
The Primary aim of Testing is to obtain
Data about Applicants that help predict their
Probable Success as Managers.
Some of the Advantages from Testing
include finding the Best Person for the Job,
obtaining a High Degree of Job Satisfaction
for the Applicant & reducing Staff Turnover.
The most Commonly used Tests can be classified
as follows :
i) Intelligence Tests : They are

designed to measure Mental Capacity & to
Test Memory, Speed of Thought, & Ability to
see Relationships in Complex Problem
Situations.
ii) Proficiency & Aptitude Tests : They
are designed to Discover interests, Existing
Skills & Potential for Acquiring Skills.
iii) Vocational Tests : They are designed
to show a Candidates most suitable
Occupation or the areas in which the
Candidates Interests match the interests of
the People working in that Occupation.
iv) Personality Tests :

They are designed to reveal
Candidates Personal Characteristics & the way
Candidates may interact with others, thereby
giving a measure of Leadership Potential.
5) Group Discussion : Candidates found
satisfactory in the Screening Interview &
Employment Tests are further short listed for GD
Test. Many Companies conduct this test to
assess the Candidates Communication &
Presentation Skills, Interpersonal Skills,
Leadership Qualities & ability to pull on in Team
Work.
6)
Checking References :
If a Candidate has been found satisfactory in the GD,
the Employer would like to get some important Personal Data
about the Candidate, such as his Character, Past History,
Background etc., verified from the people referred to in the
Application Form.
7) Physical or Medical Examination : A Physical
Examination of the Candidate is carried out to check the
Physical Fitness of the Applicant for the Position/Job applied
for.
8) Final Interview : This is conducted for those who are
ultimately selected for Employment. In this Interview, the
selected candidates are given idea about their future
prospects within the Organization.
9) Appointment Order : Appointment Orders are given to
the finally Selected Candidates giving the Position Offered,
Scale of Pay and, Terms & Conditions of Employment.

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UNIT - 3

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Organizing and Staffing :

Some Definitions on Organization :

The other definition being Describe the

According to Amitai Etzioni An

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Egs: Corporations, Schools, Colleges, Hospitals,

For an Organizational Role to exist &

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To make a Role work out more effectively, provision

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This should be designed to clarify who is to do what

This is the strength & basis of Organization

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1) Scalar Principle : The clearer the line of

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Principle of parity of Authority & Responsibility :

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6) Principle of Unity of Objectives :

14) Personal Ability :

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They deal with phases of the three primary

Integration is the process of achieving unity

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The Process of Organizing involves the

The first step in Organizing is to know the

They determine the various activities which need

For Eg: The Structure of an Educational

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2) Grouping of Activities into Depts / Divisions/

The Second Step is to identify the activities necessary

For Eg: The activities of a graded Cast Iron Castings

In addition, the activities of each Dept can be further

3) Identification of Key Depts :

They are activities essential for the fulfillment of

Other Depts exist merely to serve them.

If Key Depts are not identified, Top Management

Thus Key Depts have to be identified & placed

For Eg: An enterprise manufacturing Soaps &

4) Determining Levels at which Various

Each enterprise must decide on the degree of

Extreme Decentralization may lead to loss of

Therefore, Top Management must very carefully

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5) Deciding the Span of Management :

One has to decide on the Span of Management.

The Narrower the Span, the taller would be the

For these reasons, a Flat Structure is generally

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6) Setting up a Coordination Mechanism :

Proper Coordination among various depts & its

As individuals & depts carry out their

Therefore, effective Coordination Mechanisms

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Peter F Druckers Process of

A thorough & careful activities

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In the final step, an analysis should

Organizations can be of 2 Types as given

Both types are found in the