RBI Digest -1

Anuj Jindal
 KEY BENEFITS OF OUR COURSES

Our course structure includes a lot of perks that are otherwise

unavailable elsewhere.
It is a comprehensive guide to help you crack the paper & secure your
dream position.

We provide personal solutions all queries using a Telegram group wherein Anuj Jindal himself
will clarify your doubts.

We curate the learning strategies of past year toppers to help you learn from the success
of the best
 MANAGEMENT CLASS 1- ORGANISATION THEORY

Organisation:
- Characteristics: communication, cooperation, common objectives, rules & regulations
- Open v/s closed system
- Types: Formal v/s informal; traditional (Line, Line & staff, Functional) v/s contemporary (Project,
Matrix)

Management:
- Father of modern management: Peter F. Drucker [Associated with MBO, SMART, Knowledge
Worker, Decentralisation]
- Father of general management: Henri Fayol [Gave 5 functions and 14 principles]
- Father of scientific management: F.W. Taylor

Functions of management: POSDC, POSDCORB (by Luther Gulick), POCCC (by Fayol)
POSDC:

Planning Organising Staffing Directing Controlling

•What to do, when & •Division of functions •Recruit v/s select •Provide leadership •'Looking back'
where & responsibility •Train and develop •Guide •Measure
•'Looking ahead' •Authority & •Appraise •Motivate performance
•Goal; strategy responsibility •Supervise •Compare
•How to coordinate •What activities to do •Take corrective action
•Bridge gap between •Assign them
where we are and
where we want to be

POSDCoRB: Controlling function is divided into Co-ordinate, Reporting and Budgeting.

POCCC: Planning, Organising, Command, Coordinate, Control
Command:
o Knowledge of employees
o Eliminate the incompetent
o Audit
o Unity, energy, initiative to prevail
o Unity of direction & unity in efforts
o Giving orders, instructions

Coordinate:
 o Harmonized environment
o Correct allocation of time and resources
o Synchronization

Managerial roles by Henry Mintzberg (10 roles under 3 heads)

Interpersonal
Informational Decisional
(talk to people)
• Figurehead • Monitor • Entrepreneur
(symbolic duties) (issues affecting the (change, innovate)
• Leader organisation) • Disturbance handler
(communicate, • Disseminator (corrective action
teach, relationship (transmit info.) during difficulties)
with employees • Spokesperson • Resource allocator
• Liaison (transmit info. to (distribute
(networking) outsider) resources)
• Negotiator
(represent in
negotiations)

Mnemonic: “I figured leading and liaisoning is informational but to monitor people, you need to
disseminate and act as a spokesperson or your decisional power to innovate, correct, distribute,
and negotiate will get compromised.”

Management skills by Robert L. Katz

➢ Technical skills – First-line management – specialised knowledge, proficiency

➢ Human skills – Middle management – resolve, motivate, communicate, lead, ensure
synergy
➢ Conceptual skills – Top management – innovate, new ideas, plan, create strategy

ORGANISATION THEORIES

1. Classical/Traditional
- Focus on organisation structure
- Organisations are closed systems – ignore external environment

Theorists:
A. F.W. Taylor
Scientific management – scientific methods in management used for the first
time

a) Science, not rule of thumb: Work to be done scientifically

b) Harmony, not discord: Harmony between workers and management
c) Equal division of work between management and workmen
d) Mental revolution: Increase profits, and don’t fight over division of profits
e) Cooperation, not individualism: Extension of harmony – workers can help
in decision-making, and hence workers and management should work
together.
f) Development of every person to his/her greatest efficiency: provide
training, scientific selection, allocation of work according to capabilities.

Functional foremanship
▪ 1 worker is directed by 8 foremen – violates unity of command
▪ These foremen are divided into 2 departments:
Planning Production
Instruction card clerk Gang boss
Route clerk Repair boss
Time & cost Inspector
Disciplinarian Speed boss

B. Henri Fayol
- ‘Universalist’ school – management principles are universal
- 14 principles, 5 functions of management (POCCC)
- Managerial capability can be taught
- 14 principles:
a) Division of work/labour: specialisation & technical expertise due to repetitive
work
b) Authority & responsibility: balance is required as more authority brings
dictatorship, and more responsibility brings demotivation
c) Discipline: follow guidelines
d) Unity of direction:
- same objectives and single plan
- brings coordination
- integration of sub-unit goals towards organisational goals
e) Unity of command: 1 subordinate to have 1 boss
f) Subordination of individual interest to general interest
g) Remuneration: fair, just, equitable
h) Centralization & decentralization: Balance
i) Scalar chain: Formal line of authority; line of communication
 j) Order: Right people & material at the right place at the right time
k) Equity: no discrimination by managers
l) Stability of personnel: minimize employee turnover
m) Initiative: freedom to employees to innovate – gives motivation and
belongingness
n) Esprit de corps:
- team spirit and unity
- union is strength

C. Max Weber
Bureaucracy is ideal

Characteristics:
a) Division of work
b) Hierarchical authority
c) Rules & regulations
d) Impersonal conduct
e) Technical competence

2. Neo-classical/Human approach

Main theorist: George Elton Mayo

He conducted Hawthorne Experiments:

A. Illumination experiment
- no correlation between productivity and light levels
- Productivity correlated with both physical and psychological conditions
B. Relay assembly room experiment
- To determine change in job conditions on productivity
- Rest pauses were changed to see effect on productivity
- Output increased in response to attention, feeling of being important, and non-
directive supervision
C. Bank wiring
- Impact of payment incentives on productivity
- Cliques/ informal groups determined productivity – “group norms”
D. Mass Interview program
- Non-directed interview were more effective – emotional release
- ‘close associations’ were valued at workplace

Conclusions:
i. Work is correlated also with social capacity
ii. Non-economic rewards are important
 iii. Specialization need not result in efficiency
iv. Workers react in groups, not as individuals
v. Informal communication is necessary
vi. Flat structure

Criticism: “Happiness boys” – work is also important

3. Behavioural Science approach

Predict human behaviour using behavioural sciences (psychology, sociology,
anthropology)

4. Social System approach

‘Acceptance Theory’ by Chester Barnard:
- Employees accept authority if they can understand communication, and if authority is
consistent with organisational & personal interests.
- Employees might/can reject authority

5. Modern Organisation theory

a) Open system view
b) Integrative: both formal and informal organisations are equally important
c) Non-prescriptive (unlike classical and neo-classical theories): unique solutions to
unique problems – no one best way

6. Contingency approach
- situational
- action-oriented: focused on application

Theorists:

A. Burns and Stalker study

- Different structures according to uncertainty in organisation
- Organic organisational structure when dynamic environment, and
Mechanistic organisational structure when stable environment
- PESTEL Analysis to measure level of uncertainty

B. Emery and Trist

- Understanding organisational needs through understanding of environment –
‘causal texture’
- 4 types of environment:

a) Placid randomized
- resources, goals, bads are unchanging and distributed randomly
 - no need to adapt or cope as the environment remains stable
- only tactics work
b) Placid clustered
- resources, goals, bads are unchanging but distributed in clusters to improve
efficiency
- environment is relatively stable
- ability of the organisation to adapt to the cluster defines its success
- control is centralized
- strategies are required to survive in the environment
c) Disturbed reactive
- seen in Oligopoly
- multiple systems co-exist in the same environment
- knowledge of other systems
- control is decentralized
- strategy + operations are required
d) Turbulent field
- no cause & effect relationship between organisational structure and
environment
- constant external fluctuations
- knowledge of changing environment
- organisation needs to be dynamic

ORGANISATION STRUCTURES

1. Work specialisation

2. Chain of command: 1 subordinate responsible to one superior

3. Span of control: No. of subordinates supervised by a senior
4. Centralization v/s decentralization

Types:
 I. Traditional organisational structures

A. Line organisation
- Pros: specialisation, efficiency, stability
- Cons: over-reliance, autocratic leadership
B. Line & Staff
- support staff who are specialists
- HR, audit in finance, market research
C. Functional
- departments are according to functions
- unity of command is absent
- line, staff, functional authorities
- suitable for single product
- specialisation in functions

II. Modern organisational structures

A. Divisional
- suitable for multiple products
- each division is semi-autonomous, and has its own resources

B. Project structure
- structure is based on projects

C. Matrix/ Grid structure

- merging project and functional structures
- violates unity of command
- lack of commitment of line employees in project objectives
- appraisal is difficult

D. Horizontal/Float organisation
- large span of control
- decentralised decision making
- small number of levels

E. Network/Virtual structure
- networking between different organisations
- outsourcing
- face cultural problems when dealing with offshore companies
- quality checks are important

F. Boundaryless organisation
 - term given by GE chairman Jack Welch
- How?:
i. Cross-functional teams
ii. Strategic links with suppliers and customers
iii. Hierarchical boundaries removed by participative decision making

G. Learning organisation
- centred around people’s commitment and capacity to learn
- shared vision
- organisation as a system of relationships
- open communication

ORGANISATIONAL GOALS

Mission: What a company does

Vision: What a company wants to become

Goals: Quantifiable dreams with deadlines

Strategy: How to achieve mission, vision, or goals

Types of goals:
Official Operative
Goal succession:
- Replacement of old goals with new goals
- Intentional

Goal distortion:
- Misapplication of goals
- Meaning of goals is distorted or misinterpreted
Reasons:
~ Distortion as goals flow from top to bottom
~ Over-focus on quantitative aspect of goals

Goal congruence:
- Congruence of management goals and subordinate goals with organisational goals
- Reason: sub-unit goal internalization

Goal displacement:
- Extreme form of goal distortion
- Intentional or unconscious
- Replacement of legitimate goals by some other goals
ORGANISATIONAL EFFECTIVENESS
Ability to achieve the targets

1. Systems Resource Approach (systems level criteria)

- Effectiveness in procurement of inputs
- Effectiveness in processing
- Effectiveness in supply of output

2. Strategic Constituency Approach

- Strategic constituents are the factors in external environment
- Support of these constituents is required

ORGANISATION AND ENVIRONMENT INTERFACE

- Boundary spanning
- How do organisations deal with the environment?
1. Insulation
a) Buffering: warehousing
b) Smoothing/Levelling: smoothen sales through discounts, etc.
c) Anticipate and adapt
d) Rationing: getting maximum benefit out of scarce resources

2. Gain control
Reduce dependency on environment
a) Create prestige: create a favourable public image
b) Enter into contracts: cartel
c) Co-optation: elements in policy making
d) Coalescing: merger or joint venture
e) Procurement of key personnel from other organisations
f) Lobbying: control over political process

Resource Dependency Theory

- Minimize dependency on other organisations and increase influence over them
- Two interdependencies cause uncertainty:
a) Symbiotic: Between organisations and their suppliers. Any variation by supplier destroys the
whole flow of product.
b) Competitive: Among competing organisations. Competition brings uncertainty.

Transaction Cost Theory

- Aim to reduce the cost of transaction, i.e., cost of negotiating and exchanging resources.
Check our website www.anujjindal in for enrolment, Course details and other
updates!

Or

Log on to our mobile application.

“HALL OF FAME”
 RBI

550+ Students cleared RBI Phase 1

300+ Students clear RBI Phase 2
48 Students got selected in RBI
SEBI
NABARD
UGC NET JRF