INTRODUCTION

Fredrick Taylor's scientific

management principles & many other

management thinkers contributed

through many theories and practices.

While these principles were

considered to be valid and valuable

and gained a considerable attention

by the industrial world at the time,

the Howthorne experiments of the

late 1920s shifted focus from

productivity to people and it was

recognized that productivity, as a

byproduct, automatically increased

when workers were truly happy with

their jobs. Today one finds a number

of empirical experts tike Tom peters,

Waterman, Gary Hamel &

C.K.Prahalad contributing to

management theories and practices.

Thus the field of organizational

behaviour took roots and

considerable research and study

focussed on the human behaviour in

the work environment.

We are fast becoming a part of a

new area of management. No longer

does a manager sit in an ivory tower

and issue directives from a distance.

The traditional authority structure is

giving way to employee involvement,

work teams, group spirit,

participative decision-making, lateral

relations, flexible work structures

and more. High productivity and high

quality-of-work-life are going hand in

hand. The management is becoming

more and more aware that an

organization has no life but for the

people in it. Accordingly, it is

becoming more and more people

oriented as against task oriented of

the previous years.

Principles of Management grately

focuses on the foundation of

management theories, concepts and

principles. The universal priciples of

planning, organising. Staffing,

Leading, Communicating and

Controlling are discussed in this

study material. Management

practices today has acquired new

dimensions with the dynamic social

and technological changes of the past

two decades. Changing

demographics, cultural diversity,

more educated work force and

awareness of rights and privileges

has prompted a new look at the

entire organizational structures and

systems.

This book has been painstakingly and

thoroughly prepared to cover

extensively various facets-both micro

as well as macro-of the field of

Principles of Management. Its

coverage is broad and up to date and

it is balanced in terms of concept

and application. The language of

presentation is highly communicative

so that it becomes interesting and

comprehensible.
The book is intended for a wide

readership of MBA participants. It will

be useful to not only all the students

of MBA, human resources

management, organizational

behaviour and behavioural sciences

but also to management practitioners

who want to understand and enrich

their understanding of human

behaviour to effectively manage their

work force.
 SYLLABUS:

PRINCIPLES OF MANAGEMENT

Objective : The subject Principles of

Management will provide a

fundamental exposure to the theories

in management and practice by

contemporary executives with

international perspective.

Levels of understanding :

Application of theories of

management to practical

management decisions. Formulating

problems from situations and

recommending effective solutions will

be the focal point in understanding

the subject. Ethical dilemma's will be

the corner stones in understanding

the subject.

Management : Science, Theory

Practice - Evolution of Management

Thought and the patterns of

Management Analysis. The External

Environment, Social Responsibility

and Ethics.

Planning : Nature and Purpose of

Planning, Objectives, strategies,

Policies, Planning Premises,

Decisionmaking.

Organizing : Nature of Organizing

and Enterpreneuring, Organizational

structure, Line/Staff Authority,

Decentralization, Effective
organizating and Organizational

culture.

Staffing : Human Resource

Management and Selection,

Performance Appraisal, Career

Strategy, managing change through

Manager and Organization

Development.

Leading and Motivation : Human

factors and Motivation, Leadership,

Committees and Group Decision-

making, Communication.

Controlling : The system and

Process of Controlling, Control

Techniques and information

technology, Productivity and

Operations Management, Overall

control and towards the Future

through Preventive Control.

Global aspects in Planning,

Organizing, Staffing, Leading,

Controlling, Case Studies of Indian

Companies in various aspects of

management.
 CONTENTS

INTRODUCTION

UNIT 1 NATURE AND SCOPE OF

MANAGEMENT

1.0 Introduction;

1.1 Unit Objectives;

1.2 Nature and Scope of Management

1.3 Definitions of Management;

1.4 Managerial Functions and Roles

1.5 Managerial Skills;

Is management an art are

1.6
science?

1.7 Social responsibilities of business;

1.8 The Indian Scenario

Managerial attitudes towards

1.9
SRB;

Social dysfunction - Business

1.10
Opportunities

1.11 Summary;

1.12 Answers to Check Your Progress;

1.13 Exercises and Questions

1.14 Further Readings

UNIT 2 THE EVOLUATION OF

MANAGEMENT THEORY

2.0 Introduction;

2.1 Unit Objectives;

 The evolution of Management
2.2
theory;

2.3 Prescientific Management School

2.4 The Era of Scientific Management;

2.5 Management Process School

2.6 The Human Relations School;

Other Schools of Management

2.7
Thought

Peter F. Drucker and his

2.8
contributions to Management;

2.9 Summary

2.10 Answers to Check Your Progress;

2.11 Exercises and Questions.

2.12 Further Readings

UNIT 3 PLANNING AND DECISION-

MAKING

3.0 Introduction;

3.1 Unit Objectives;

3.2 Planning an Overview

3.3 Nature of Planning;

3.4 Types of Plans;

3.5 Steps in Planning

3.6 Principles of Planning;

3.7 Forecasting and Planning;

3.8 Strategic Planning

3.9 Advantages of Planning;

3.10 Disadvantages of Planning

3.11 How to make Planning Effective?;

3.12 Decision-Making an Overview

3.13 Nature of decision-making;

3.14 The Decision-Making Process

3.15 Methods of Decision-Making;

3.16 Types of Decisions

How to snake Effective

3.17
Decisions?;

3.18 Summary

3.19 Answers to Check Your Progress;

3.20 Exercises and Questions

3.21 Further Reading

UNIT 4 ORGANIZING

4.0 Introduction;

4.1 Unit Objectives;

4.2 Organization an Overview

4.3 Importance of Organizing;

Guidelines for Effective

4.4
Organizing

4.5 Organizational Objectives;

4.6 The Organizational Process

 Formal and Informal
4.7
Organization;

4.8 Summary

4.9 Answers to Check Your Progress;

4.10 Exercises and Questions

4.11 Further Readings

UNIT 5 DELEGATION

5.0 Introduction;

5.1 Unit Objectives;

5.2 Delegation of Authority

Centralisation and
5.3
Decentralisation;
5.4 Departmentation

5.5 Span of Management;

5.6 Line and Staff;

5.7 Summary

5.8 Answers to Check Your Progress,

5.9 Exercises and Questions

5.10 Further Readings

UNIT 6 STAFFING

6.0 Introduction;

6.1 Unit Objectives;

6.2 Objectives of Staffing

 Functions of Human Resource
6.3
Management;

6.4 Job evaluion and job analysis

Recruitment and selection

6.5
procedure;

6.6 Sources of Recruitment

6.7 Selection;

6.8 Interview;

6.9 Advantages of Interview

6.10 Interviewing Techniques;

6.11 Performance Appraisal

6.12 Sample appraisal summary;

 Problems of performance
6.13
appraisal

6.14 Summary;

6.15 Answer to Check Your Progress

6.16 Exercises and Questions;

6.17 Further Readings

UNIT 7 MOTIVATION

7.0 Introduction;

7.1 Unit Objectives;

7.2 The Process of Motivation

7.3 Theories of Motivation;

 Modern attribution theory of
7.4
Motivation

7.5 Summary;

7.6 Answers to Check Your Progress

7.7 Exercises and Questions;

7.8 Further Readings

UNIT 8 LEADERSHIP

8.0 Introduction;

8.1 Unit Objectives;

8.2 Leadership;

8.3 Theories of Leadership;

8.4 Leadership styles

8.5 Modern Theories of Leadership;

8.6 Summary;

8.7 Answers to Check Your Progress

8.8 Exercises and Questions;

8.9 Further Readings

UNIT 9 COMMUNICATION

9.0 Introduction;

9.1 Unit Objectives;

9.2 Communication

9.3 Types of Communication;

9.4 Barriers in Communication

9.5 Summary;

9.6 Answers to Check Your Progress

9.7 Exercises and Questions;

9.8 Further Readings

UNIT 10 CONTROLLING

10.0 Introduction;

10.1 Unit Objectives;

10.2 Control

10.3 The Controlling Process;

Essentials of Effective Control

10.4
Systems
 Behavioural Implications of
10.5
Control

Behavioural Guidelines for

10.6
Effective Control

10.7 Challenges Created by IT;

10.8 Summary;

10.9 Answers to Check Your Progress

10.10 Exercises and Questions;

10.11 Further Reading

 UNIT 1

NATURE AND SCOPE OF

MANAGEMENT

STRUCTURE

1.0 Introduction

1.1 Unit Objectives

1.2 Nature and Scope of Management

1.3 Definitions of Management

1.4 Managerial Functions and Roles

1.5 Managerial Skills

1.6 Is management an art or science?

1.7 Social responsibilities of business

 1.8 The Indian Scenario

1.9 Managerial attitudes towards SRB

Social dysfunctions - Business

1.10
Opportunities

1.11 Summary

1.12 Answers for Check Your Progress

1.13 Exercises and Questions

1.14 Further Readings

1.0. INTRODUCTION

Management is an important element

in the growth of a country. It brings

together men, money, materials and

machines. Peter Drucker observes

that because of poor managerial

skills many underdeveloped countries

are not able to fully utilise the other

resources. Management, is

essentially an organised effort,

whether it is a business activity or

a non-business acitvity. Management

determines the very existence, or

survival of the organisation. It is the

dynamic, life giving element of the

organisation.

1.1. UNIT OBJECTIVES

1. To understand the nature &

Scope Management.

2. Define Management.

3. To understand the managerial

functions and roles and skills.

 4. To explore whether management

is an art science.

5. To understand the social

responsibility of business.

1.2 NATURE AND SCOPE OF

MANAGEMENT

Generally, management concepts are

applied in both business and non-

business organisations. In USA,

management consultants have more

clients from government, hospitals,

universities, schools, professional

associations, community agencies

etc. According to Peter F. Drucker

Management is a ‘Universal’ concept.

It is applied to all the organisations

of the society. According to Drucker
“In a society of organisations,

managing is a key social function and

management is the effective,

integrative, constitutive,

determining, and differential organ of

the society.

Further Drucker says “Management

is the organ of leadership, direction,

and decision in our social institutions,

and especially in business enterprise,

is a generic function which faces the

same basic tasks in every

country....................Above all, it is

responsible for producing the results

- whether economic performance,

student learning, or patient care-for

the sake of which each institution

exists”.
 1.3 DEFINITIONS OF
MANAGEMENT

A plethora of definitions exist and

every definition tries to focus

management in different perspective.

According to Koontz and Weihrich,

“Management is the process of

designing and maintaining an

environment in which individuals,

working together in groups,

efficiently accomplish selected aims”.

“Management is the art of knowing

what you want to do and then seeing

that it is done in the best and

cheapest way” -F.W. Taylor

“Management is to forecast, plan,

organize, command, coordinate and

control” Henri Fayol

“Management is a distinct process

consisting of planning, organising,

actuating and controlling to

determine and accomplish the

objectives by the use of people and

resources” -George R. Terry

“Management is the effective

utilisation of human and material

resources to achieve the enterprise

objectives” -William F. Glueck.

Management is connected with the

development of people directing the

efforts of the people towards

achievement of the goals and

integration of men, materials and
machines.
 1.4 MANAGERIAL FUNCTIONS AND
ROLES

Functions relating to

environment: The society has

various facets like government,

suppliers, local community,

competitors, unions, stock-holders,

customers etc. The manager is a

spokesperson and negotiator

spending much of his time trying to

predict and influence the future

environment.

Setting objectives and planning;

Managerial activity helps to select

objectives, examine and forecast

changes, develop policies,

procedures, and choose future

courses of action from among

alternatives.

Organizing: It is a process by which

people and tasks they perform are

related together. People have

different roles to play. Role implies

that people know their objectives, or

tasks clearly, and in order to achieve

their tasks they are given sufficient

authority, tools and information. It

consists of dividing up work among

groups and individuals and linking

the efforts of those groups and

individuals.
Staffing: Human resources

management involves selection of

the right person, training,

compensating, promoting, evaluating

and rewarding the people to achieve

enterprise objectives. It also includes

providing a good working climate so

that employees get total satisfaction.

Leading: Leadership is the set of

interpersonal behaviours that

influence people so that they will

contribute to organisation and group

goals.

Controlling: It involves three

elements

a. Establishing standards of

measurement
 b. Identification of deviations

c. Correction of deviations.

Co-ordination: It is regarded as

important function of a manager as it

achieves harmony among individuals

effort towards accomplishment of

objectives. Several concepts and

approaches have been developed in

the field of decision- making. For

example, die concept of sub-

optimization, marginal decision-

making are some of the

developments.

Mintzberg's Research on

Management Functions: Henry

Mintzberg observed a few managers,

analysed their behaviours and

identified the percentages of time

spent by managers on management

functions, which are as follows.

No Management Functions Percent

1. Relating to environment 1.8

Setting objectives and

2. 19.5
planning

Decision making and problem

3. 6.0
solving

Organisation and Co-

4. 15.0
ordination

Leadership and Interpersonal

5. 28.4
influence

6. Communication 12.6

7. Control 12.7

8. Staffing 4.1
Later Mintzberg identified the

following ten managerial roles which

correlate with the above managerial

functions.

Managerial roles

Interpersonal roles

Figurehead role The manager

performs symbolic duties as head of

the organization (such as ceremonial

duties of the President of India). Here

the manager greets the visitors,

attends the functions in the families

of employees and performs such

duties of ‘ceremonial nature'.

Leader The manager plans the

Human Resource requirements and

motivates his employees.

Liaison The manager cultivates

contacts with the objective of image

and rapport building with external

environment.

Informational roles

Monitor As a monitor, the manager

scans the environment and collects

information and organizes it for use

in decision-making.

Disseminator As a disseminator, the

manager distributes information to

his subordinates in order to achieve

the objectives.
Spokesperson Communicates the

company's policies to outsiders.

Decisional roles

Entrepreneur As an entrepreneur,

the manager adapts to changing the

environment by applying innovative

ideas.

Disturbance handier The manager

seeks solutions to various problems

Re-source-allocator Besides

delegating authority to his

subordinates the manager allocates

resources.

Negotiator The manager negotiates

the resources outside the

organisation and also negotiates to

settle internal conflicts.

1.5 MANAGERIAL SKILLS

Skill is the ability of the individual to

perform an action which is revealed

in his performance, it is the resultant

effect of knowledge, experience and

attitude. There are three major skills

that a manager should possess. They

are, conceptual skills, technical skills

and human relation skills.

Top Conceptual

Management Skills

Human
Middle
relations
Management
Skills

Supervisory Technical

Level Skills
The conceptual skill is the ability of

the manager to think in abstract, his

ability to analyse the forces working

in a situation, and assess the

situation. This skill seems to increase

in importance as the manager raises

up to higher positions.

The Technical skill is the

individual's knowledge and

proficiency. This skill is required at

the lower level of management.

The Human relations skill is the

ability to interact effectively with

people. This skill is all pervasive, as
it is required at all levels.
 1.6 IS MANAGEMENT AN ART OR
SCIENCE?

Management is the art of getting

things done through others in a

dynamic situation. The situations

change from time to time and the

manager has to face the complexities

of the realities of the situation. The

famous best seller “In search of

excellence”, (Tom Peters and

Waterman) reveals many factors

contributing to effectiveness of

successful companies of USA.

Peter Drucker says that every

manager should practice

management. For practicing he

requires the knowledge of

management which he acquires and

then practices the knowledge. Hence

management can be called as an

‘art'. Art means the sum total of the

applications of skills and knowledge

developed by managers to achieve

company's objectives. It is possible

to improve the art by continual

practice.

In the book “What they don't teach

at Harvard Business School”, Mark

H. McCormack says “What HBS can't

teach you is how to read people and

how to get that knowledge to get

what you want”. Reading people is an

art and is predominantly not taught

anywhere, but should be practised

and acquired.
Management is Science as it seeks

new knowledge through the use of

rigorous methods of collecting data,

classifying and measuring them, and

setting up hypothesis and lastly

testing them. If the tested

Hypothesis are found to be true, they

are called “principles”. These

concepts and principles are arrived

by systematic and empirical methods

of enquiry, by which information can

be ordered, analysed, resulting in

cumulative and communicable

results. In short, art is doing and

science is knowing what and how to

do. Hence management can be called

as both science and art.

“ Management as a profession”

Joseph Maasie and John Douglas,

recognise the criteria for any

profession which are as follows:

1. A systematic body of knowledge.

2. A profession maintains an

experimental attitude toward

information and thus requires a

search for new ideas.

3. A profession requires intellectual

training.

Management satisfies these criteria

and can be called a profession.

According to Peter F. Drucker, “It is

(professional-Management) is a

function, a discipline, a task to be

done, and managers are

professionals who practice this

discipline, carry out the functions and

discharge these tasks”.

1.7 SOCIAL RESPONSIBILITIES OF

BUSINESS

The concept of social responsibility

has been widely discussed by

economists, business executives,

psychologists, sociologists and

political scientists, during the past

decades.

Social responsibility is defined as an

obligation on business to take into

account of the interests of several

different groups that constitute

society, beyond the considerations of

profit. A corporation is accountable

to not only the shareholders and

employees but also to the customers,

the suppliers, the community and the

society in general.

The nature of social responsibility of

business is, on the part of the

individual, an attitude, and on the

part of the company, a policy,

directed towards the needs and

interests of the wider society.

Social responsibilities of business towards

consumers

1. Production of good quality goods

and services.
 2. Following of honest trade

practices.

3. By applying new methods of

production and by rationalizing

the use of capital and labour.

4. Avoiding wrong advertisements.

5. Providing good after-sales

service.

6. Preventing monopoly.

7. Maintain good public relations.

Social responsibilities of business towards

community

1. Avoid air pollution.

2. Provide good employment

opportunities.

3. Give the community proper

information.
 4. Provide educational facilities to

the people around the area of

operation.

5. Avoid ostentation.

Social responsibilities of business towards

shareholders

1. Provide fair dividend.

2. Give proper information.

3. Provide good treatment to the

shareholders.

4. Prevent suppression of minority

shareholders.

5. Give sufficient information to the

shareholders so that enough

profits may be ploughed back

into the business.

Social responsibilities of business towards

government

1. Follow the rules of company law,

income tax and sales tax laws.

2. Follow the rules and regulations

of the body of industrial and

labour laws like, Factories act,

Industrial disputes act, Payment

of wages act, Workmen's

compensation act, Minimum

wages and the shop and

Establishment act.

3. Be impartial towards political

affairs.

4. Observe the laws of the land

concerning production of

essential goods.
 5. Follow the rules connected with

balanced development of the

economy.

Social responsibilities of business towards

employees

1. Recognition of employees’

efficiency by proper recognition.

2. Fair selection of employees,

giving equal opportunities to all.

3. Provide proper training to all

suitable employees.

4. Give fair wages and provide-

sufficient welfare measures.

5. Create conditions for collective

bargaining and participative

management.
Social responsibilities of business towards

suppliers

1. Give sufficient lead time to the

suppliers for supply of goods.

2. Co-operate with the suppliers in

giving sufficient information

(specifications) about the

requirements.

3. Ensure prompt payment of

money in time.

1.8 THE INDIAN SCENARIO

The Tata Iron and Steel company was

the first to respond to the social

problems of our country. It

formulated a committee to conduct a

social audit of its performance. The

committee gave a number of

suggestions to improve the social

Welfare programmes. BHEL is also

playing an important role in social

responsibility of business. BHEL has

constructed external water sewers,

roads,provided drinking water

facilities, health facilities and

educational facilities for the benefit

of the employees. Large

organisations like Associated Cement

Companies(ACC), Bharathiya Agiro

Industrial foundations, Glaxo,

Cadbury, Pond's are participating in

social problems of India, besides

many other companies.

 1.9 “MANAGERIAL ATTITUDES
TOWARDS SRB”

In a survey conducted amongst 400

managers of our country to study

managerial attitudes, A. Farrooq

Khan says that corporate social

responsibilities was regarded as a

vital and relevant contributing factor

to business. Although there was no

specific budget for SRB, many

executives were actively involved in

some form of SRB - decisions. This

study also indicates that the

governmental interference should be

minimum. By and large, India is

wedded to democratic socialism, and

Indian corporations must practice

SRB to improve the quality of life of
our country.
 1.10 SOCIAL DYSFUNCTIONS-
BUSINESS OPPORTUNITIES” PETER F.
DRUCKER

“Convert the social problems into

business opportunities” quips Peter

F.Drucker, the doyen of

management. He further goes to the

extent of saying that ‘successful

companies cannot exist in a sick

society. Large operations should

therefore come forward to take up

social problems and convert them as

business opportunities. Sears and

Roubuck, General motors responded

to many of the social dysfunctions. A

healthy Business requires a healthy

Society. The health of the Community

is a pre-requisite for successful and

growing business.

1.11 SUMMARY

Management determines the very

existence or survival of the

organization. It is the dynamic, life

giving element of organisation.

Management is essentially an

organised effort.

Generally, all management concepts

are used in business and non-

business organisations.

Management is the art of getting

things done through others in a

dynamic situation. The situation

changes rapidly and henceforth the

managers come to face the realities

of the situation. Peter Drucker say

that every manager should practise

management.

The concept of social responsibility of

business has been widly discussed.

Check Your Progress

1. What are the various functions

of Management?

2. What are the various roles of a

Manager?

3. List the various Social

responsibilities of Business.
1.12 ANSWERS FOR CHECK YOUR
PROGRESS

1. Functions : Functions, relating to

environment, setting objectives

and Planning, Organizing

Staffing, Leading, Co-ordination.

2. Roles : Interpersonal roles,

Decisional roles, and Information

roles

3. Social responsibilities of business

towards, consumers, community,

shareholders, Government,

employee, suppliers.

1.13 EXERCISES AND QUESTIONS

1. Explain the scope of

Management.
2. What are the Social

Responsibilies of Business

towards Consumers,

Shareholders, Community,

Government, & Employees.

3. Social diseases are business

opportunities - comment.

1.14 FURTHER READINGS

1. Peter F.Druker, The Practice of

Management.

2. Management, Koontze and

Odonnel

3. Principles of Management,

Stephen P.Robbins Prentice Hall,

1991.
 UNIT 2

THE EVOLUTION OF
MANAGEMENT THEORY AND
THOUGHT

STRUCTURE

2.0 Introduction

2.1 Unit Objectives

The evolution of Management

2.2
Theory

2.3 Prescientific Management School

2.4 The Era of Scientific Management

2.5 Management Process School

2.6 The Human Relations School

 Other Schools of Management
2.7
Thought

Peter. F. Drucker and his

2.8
contributions to Management

2.9 Summary

2.10 Answers for Check Your Progress

2.11 Exercises and Questions

2.12 Further Readings

2.0 INTRODUCTION

It is indeed an indisputable fact that

management is as old as civilization.

The recorded civilizations have left a

legacy of rules and regulations that

are an evidence of their managerial

practices, (refer table titled

milestones in development of

management thought). It was around

5000 B.C., on the Euphrates river,

the Sumerians used written records

to administer the governmental and

commerical activities.

2.1 UNIT OBJECTIVES

1. To understand the various

management theories and

process schools.

2. To rediscover the human

relations schools.

3. To understand the contributions

of Peter F.Drucker.
 2.2 THE EVOLUTION OF
MANAGEMENT THEORY

Koutilya's Arthashashthra’ and

Thiruvalluvar's “Thirukkural” have

spelt out management principles in

a lucid style, quite suitable to the

situations of that period. However, it

all began in 1776 with the Scottish

economist “Adam. Smith”, who

lashed out against the abuses of

monopoly. In his famous work, “An

enquiry in to the nature and causes

of the wealth of nations, Smith high-

lighted that productivity is a result

of specialization, division of work and

exchange. Later, in 1800 Eli Whitney

identified that mass production can

be possible by the availability of

standardized parts.
Milestones in developmentent of
management though

Ideas that are

even relevant to
Dates Sources
today's

management

Emphasized record
5000
Sumerians keeping as a
B.C
control technique

Recognized

4000 planning,
Egyptians
B.C organizing and

controlling

2000 Standards and

Babylonians
B.C responsibility are

necessary for

control

Principles of

organization are
600 B.C Hebrews
basic data even

today
500 Specialization and
Greeks
B.C. scientific method

Discusses the

400 B.C Socrates universality of

management

Makes extensive

use of a staff
336-323 Alexander
organization during
B.C the great
his military

campaigns

lists the traits of an

900 B.C Alferabi
effective leader

specified Double-

1400 entry bookkeeping

Pacioli
A.D that systematizes

record keeping.

identified

pragmatic use of

1500 Machiavelli power 1770 Adam

Smith advocated

division of labour
 made mass

production possible
1800 Eli Whitney
by availability of

standard parts.

produced his

“difference
Charles
1822 machine” a
Babbage
forerunner of

today's computer

A pioneer in Human

Robert resource
1834
Owen management,

directed the British

trade Union

Movement

formed the Bureau

Captain
Of Personnel
1881 Henry
Administration in
Metcalfe
New York
 discovered the

Mary Parker benefits of group

1898
Follet thinking and group

participation

published his
Frederick
principles of
1911 Winslow
scientific
Taylor
management

the father of

industrial
Hugo
1913 psychology-
Munsterberg
published his

masterpiece

identified

management

1916 Henri Fayol functions as a

separate group of

activities

Henry
developed Gantt
1917 Lawrance
chart
Gantt
 - used modern

management

Alfred P. techniques to build

1923
Sloan General Motors in

to an industrial

giant

began their studies

Elton Mayo
of the Hawthorne
1927 and his
works of Western
associates
Electric Company

- published his
Chester I
1938 classic book, on
Barnard
organizations

used operations
Allied
1938-45 research
Forces
techniques in war

- proposed a model
Abraham
1943 of individual
Maslow
change
 - proposed a model

1947 KurtLewin of individual

change

Lester Coch - conducted their

and John classic study on

1948
R.P. French resistance to

Jr. change

- conducted his
Herbert A.
1950 pioneering work on
Simon
decision-theory

- emphasised

1951 KurtLewin environmental

factors as

determinants of

behaviour

- introduced first

EDP (Electronic
1952 IBM
Data Processing)

system
 - described the

importance of the

informal
1953 Keith DAVIS
organization and

coinsed the term

‘grapevine’

- popularized MBO
Peter
1954 (Management By
Drucker
Objectives)

- PERT and CPM

1956-58
were developed

- published two-
Frederic
1959 factor theory of
Herberg
motivation

- describes theory
Douglas
1960 X and theory Y
McGregar
managers

- developed a
Rensis
1961 contigency
Likert
leadership
 Robert - developed

1964 Blake and managerial grid of

Jane Mouton leadership styles

Victor
- developed a
Vroom
1973 normative model of
Yetton
decision-making.
Philip

Robert J.
- proposed Path-
House and
1974 goal theory of
Terence
leaderships
Mitchell

William
1981 - Theory Z
G.Ouchi
 2.3PRESCIENTIFIC MANAGEMENT
SCHOOL

The industrial revolution beginning in

th
the late 18 century called for larger

organizational size and focussed on

refinements. With the development

of the economic discipline and the

technologies of manufacturing and

distribution, both commerce and

organizations grew rapidly, which

inturn facilitated the development of

better management practices.

Machiavelli, the prince developed the

thesis that man is bad and must be

managed deceitfully and

manipulatively. Adam Smith's "The

wealth of nations” formulated

scientific management principles

regarding division and specialisation

of labour. Smith's concepts of job

specialisation along with the work of

Eli whitney, who developed the

concept of interchangeable parts, led

to the development of modern day

mass production.

Robert owen (1771-1858)

“Workers the vital machines": A

British industrialist cum reformist,

Robert Owen felt that the best way to

improve productivity was to improve

the lives of the employees, by labour

welfare measure. In his cotton

textiles mills at New Lanark,

Scotland, he improved the working

conditions of the workers. He also

provided housing facilities and

increased the purchasing power of

workers. He also, encouraged the

employees to evaluate their own

performance.

He criticized industrialists who spent

huge sums of money repairing and

fine-tuning their production

machines, but did little to improve

the lot of their “ human machines”

Robert Owen introduced a system of

open rating of workers work on a

daily basis. He introduced a system

of motivation and believed that the

workers can do much better. He

strongly felt that employees wants,

needs, aspirations and motivations

affect the productive capacity. It can

be rightly said that his concepts were

later proved in the Hawthorne

experiments of Elton Mayo. Indeed

Robert Owen can be called as the

forerunner of behavioural school of

thought.

Charles babbage (1792-1871);

Babbage was a visionary who could

foresee scientific management. Two

works of Babbage are regarded to be

pioneering works - “The Difference

Engine” and “On the Economy of

Machinery and Manufacturers”.

According to Babbage, “specialization

is the approach to jobs design which

breaks task in to simplified parts”. He

believed that division of labour was

a necessary aspect of all developed

economic systems. He advocated the

use of profit sharing and employee

suggestion plans.

Charles Babbage stressed the means

of determining the feasibility of

replacing manual operations with

machines.

He expressed his opinion on various

facets of management -mutuality of

interest between employees and

employer, production control,

incentive pay, quality, control, wage

and salary administration, profit

sharing, preventive maintainance

and research and development,

Infact Charles Babbage laid the

foundation for scientific

management.
Henry Robinson Towne

(1844-1924): Towne was the

pioneer in providing the necessary

background for the development of

scientific management. He strongly

recommended that the Americal

Society for Mechanical Engineers

(ASME) should be a common platform

where experiences of managers are

shared and data are collected. These

empirical data, he felt would be used

in future as a strong base for

scientific management. He insisted

ASME to recongnise ‘Management’ as

a separate field of study.Towne said

“There are many good engineers and

there are also many good

businessmen. But the two are rarely

combined in one person. This is

essential for successful

management”. He also insisted that

‘management’ must be recognised as

a separate important field of study.

Infact only with his efforts, Taylor's

contributions were made known to

the public. Slowly the American

society for Mechanical Engineers

started accepting and recognising

‘management’ as a separate vital

field of study.

Captain Henry Metcalfe

(1847-1917): Captain Metcalfe

formed the Bureau of Personal

Administration in New York. He

propounded a new system of control

in 1881, which used time cards and

material cards. He felt that

Management science be founded on

the comparison of accumulated

observations, like any other physical

science. Metcalfe's system of cost

estimates are in use even today.

His pioneering book “The cost of

manufacturers and the

administration of workshops: Public

and private” was appreciated and

recognised as a pioneering work on

management. Matcalfe visualised

that there is a “Science of

Administration” which was on

principles having application to

various cases. He suggested that

these principles could be evolved by

recording observations and

experiences and comparing them.

Matcalfe said that the Art of

Management should be founded on

“accumulated observations which

could be builtup to check

performance and would be more

trustworthy than individual

impressions”.

F.W. Taylor has acknowledged his

debt to Matcalfe for some of his

ideas. The American Management

Association has placed on record its

appreciation for the system evolved

by Matcalfe and has recommended its

use even today.

 2.4 THE ERA OF SCIENTIFIC
MANAGEMENT

By the close of the nineteenth

century the scientific and

technological advancement had

brought a revolutionary change. The

world was indeed witnessing

commercial revolution. The

corporations started increasing in

size, but the process of management

remained traditional leading to a high

degree of inefficiency. The

industrialists wanted to increase the

degree of efficiency by a number of

experiments and experiences. Infact

the slogan at that age was “Increase

efficiency”.
According to Antony Tillete, “During

the period, labour was the main

source of efficiency - the workshop

was the main unit, work

measurement was the major tool for

improvement.”

Several thinkers studied the problem

of efficiency of labour and made a

number of contributions. Fredrick

Winslow Taylor was the first person

to insist on scientific management.

Frederick Winslow Taylor (1856-1915)

Taylor was the main founder of the

scientific management movement

and hence he is called the Father of

Scientific management. Taylor served

in three companies: Midvale Steel,

Simonds Rolling Machine and

Bethleham Steel.

At the Midvale Steel, Taylor

introduced ‘time study’ and

‘differential rate system'.

At Simonds Rolling Machine

company, he decreased the working

1 1
hours from 10 / 2 to 8 / 2 hours and

introduced rest periods. Wages were

also increased from 80 to 100 per

cent. The work which was done by

120 workers were now done by 35

workers.

He became a consultant of Bethlaham

steel company in 1898. Workers

adopted Taylor's work methods and

as a result efficiency improved and

wages too.
Taylor's scientific management

His major works, ‘shop management’

and principles and methods of

scientific management were based on

experiences and experiments. He

said, “Now in its essence”, Scientific

management involves complete

mental revolution on the part of the

management side”. Thus he urged for

change of attitudes of management

and workers against each other.

Taylor emphasized the identification

of the management planning work,

which necessitated complete

information with regard to the

working capacity of men, machine

and the exact time the job will take.

Taylor was one of the founders of

'time and motion study'. He also

emphasized on standardization of

tools and materials. Taylor

introduced the concept of “Functional

Foremanship” i.e., Foremen should

not be selected on the basis of the

number of work, but according to the

functions.

Taylor's scientific management was

based on the following:

a. There is always one best method

for performing every task, which

replaces rule of thumb-method.

 b. The scientific selection of

workers, so that each worker

would be given responsibility.

c. Training and development of

workers in a scientific way.

d. Intimate, friendly co-operation

between management and

labour. Later the" Taylor's

society propounded the following

thirteen objectives of scientific

management.

Objectives of Scientific management:

1. To gauge the industrial

tendencies and the market which

will save money.

2. To ensure employees continuous

employment and give a

continuous earning opportunity.

3. To earn through a waste - saving

management and processing

management.

4. To render possible a higher

standard of living for workers.

5. To assure a happier home and

social life to workers by

increasing the income.

6. To assure a socially agreeable

condition of working

environment.

7. To assure the highest

opportunity for individual

capacity through scientific

methods for work analysis and of

 selection, training, assignment,

transfer and promotion of

workers.

8. To assure by training and

instructional foremanship the

opportunity afforded for

understanding of one's work

specifically and of plans and

methods of work generally.

9. To develop self-confidence and

self-respect among workers

through opportunity.

10. By way of freedom of horizontal

and vertical contacts afforded by

functional organisations, the

workers should be given

opportunities for self-expression

and self-realisation.
11. To build character through the

proper conduct of work.

12. To promote justice through the

elimination of discrimination in

wage-rates.

13. To eliminate factors of the

environment which are irritating

and the causes of friction, and to

promote common understanding,

tolerance and the spirit of team

work.

Taylor's principles can be summarized as

follows:

a. Production planning and control

is the pivotal function of an

organization.
 b. Functional or divided formanship

and its superiority to the

traditional foreman.

c. Time study as the basis for

arriving standard time.

d. The standardization of all tools

and implements.

e. The use of slide-rules and similar

time-saving implements.

f. Introduction cards for workmen.

g. The differential rate system of

wages.

h. A routing system.

i. Modern cost system.

Taylor's scientific management

invited opposition not only from

workers and management but also

from the general public. He defended

his concept before a congressional

committee in 1912. Thus the

foundations were well laid by Taylor,

for the study of management as a

distinct and separate group of

activities.

Henry Lawrance Gantt (1861-1919)

As U.S born mechanical engineer,

Henry L. Gantt is famous for his

‘Gantt Chart'. He was a close

associate of F.W. Taylor, the Gantt

chart referred to the process of work

and his system of the wage payment

was based on scientific investigation.

The Gantt Chart which plotted

planned and actual performance

against time is even now regarded as

a useful tool of production control.

His task and bonus system was

definitely an improvement over

differential piece rate system of F.W.

Taylor. He considered the

psychological and social needs of

workers. Taylor's emphasis was on

the analysis and organization of work

where as Gantt paid attention to

human element in productivity.

Gantt chart

This chart is a visual method of

comparing production output with the

time it took to complete a task. His

charting procedures were the

forerunners of today's PERT

(Programme Evaluation and Review

Techniques).
Gantt also developed work quota

systems, complete with bonus

systems for workers or managers

who met or exceeded quotas. His

bonus systems were similar to the

modern ‘gain-sharing’ techniques

where employees were motivated to

higher levels of performance by the

potential of sharing in the profits

generated.

Frank Bunker Gilberth (1868-1924)

“Time and Motion study

proponents” Motion study

determines the best sequence

number of motions to accomplish the

specified task. Gilbreth and his wife,

spent their entire life-time in the

search for doing a job in the best

possible way. They discovered

methods for using worker's fair day's

work in the most efficient way by

demonstrating the best way of doing

a job.

Mrs. Lillian Moller Gilbreth, was an

outstanding psychologist with a vast

knowledge on management. She,

although worked closely with

Gilberth, was renowned for her

famous work. “The psychology of

management” laid the foundation for

Human relations. She was known as

first lady of management.

Frank Bunker Gilbreth, by using flow

process charts, broke down work in

to five basic elements - Operations,

Transportation, Inspection, Storage

and Delay. He further broke down

manual work into 17 basic elements.

These elements were called therbligs

(GILBERTH... when spelt backward

gives Therbligs) which are, as

follows:

1. Search

2. Find

3. Select

4. Grasp

5. Position

6. Assemble
 7. Use

8. Disassemble

9. Inspect

10. Transport

11. Preposition

12. Release load

13. Transport empty

14. Wait-unavoidable

15. Wait- avoidable

16. Rest-necessary for overcoming

fatigue and

17. Plan

The Gilbreths spent their whole lives

in their search for better work

methods. They invented and tried

several devices and techniques. They

developed a micro chronometer, a

cycle-graph, the process chart, flow

diagram and merit-rating system for

employees. They devised and

developed several methods of work

analysis, which was broken into

different elements. By using flow

process charts, they broke down into

five basic elements which were,

Operations, Transportation,

Inspection, Storage and Delay.

Harrington emerson (1863-1931):

Harrington Emerson thought of

Efficiency engineering from a

different angle, when he propounded

his 12 famous principles of Efficiency.

According to Emerson, Efficiency

means, that the ‘Right thing’ is done

in the ‘Right Manner’ by the ‘Right

place’ in the ‘Right time'. His 12

principles of Efficiency were:

1. Clearly defined ideals

2. Common Sense

3. Competent counsel

4. Discipline

5. Fair dealings

6. Reliable and Immediate records

7. Despatching

8. Standards and Schedules

9. Standards

10. Standardized conditions and

operations

11. Standard practice

12. Efficiency rewards instructions

Emerson emphasised that every

manager should strongly stick to his

own ideals and percolate the same

throughout his plan and should not

compromise. He should accept the

principles of efficiency and create

high ideals.

2.5 MANAGEMENT PROCESS

SCHOOL

Henry Fayol (1841-1925): Fayol,

worked in Commentry-fourchmboult

Decaziville, which was a french

mining and metallurgical combine

from 1888 to 1918. After his

retirement he composed his thoughts

on management and devoted the rest

of his life in propagating the

principles of management. Fayol

formulated 14 principles which are as

follows.

1. Division of labour: A high

degree of specialization should

result in efficiency. Both

managerial and technical works

are amenable to specialization.

Which leads to better work with

the same effort.

2. Authority and responsibility:

Authority is needed to carry out

managerial responsibilities. This

includes the. formal authority to

command and also the personal

authority- derived. The .manager

 should have the right to order

and the power to exact

obedience from his subordinates.

Fayol made a distinction between

official authority and personal

authority, the latter emanating

from the manager's own

intelligence, integrity,

experience, personality,

knowledge and skills.

Responsibility is closely related

to authority. An individual who

wants authority should be willing

to take up and accept total

responsibility.

3. Discipline: The essence of

discipline is obedience, diligence,

correct attitude and outward

 mark of respect, with in the

limits fixed by the agreement

between management and its

employees.

4. Unity of command: A

subordinate should receive

orders and instructions from one

superior only.

5. Unity of direction: Similar

activities should be grouped

together under one manager as

all efforts could be directed

towards the common goal.

6. Sub-ordination of individual's

interest to the common goal:

It is the tendency of any

individual to maximize his own

satisfaction through more

 money, recognition etc. But this

interest of the individual should

not be placed before the goals

of the organization, which is

‘maximizing production'.

7. Remuneration: Fair and

equitable remuneration should

be provided to employees to

ensure better production and

satisfaction.

8. Centralization: There must be

balance between concentration

and dispersal of authority in the

organization.

9. Scalar chain: A chain of

authority should extend from the

top to the bottom of the

organization and should be

 followed at all times, for the

purpose of effective

communication.

10. Order: It is the rational

arrangement and placement of

things and people. "A place for

everything and everything in its

place”. Human and material

resources should be co-ordinated

so as to be in the required place

at the required time.

11. Equity: A sense of fairplay and

justice combined with

friendliness should permeate the

entire-organization.

12. Stability of tenure of

personnel: Too much of

turnover of staff and too much

 job rotation, transfer etc.,

interfere with the stability of the

work unit and of the

organization.

13. Initiative: Subordinates should

be provided with an opportunity

to show their initiatives as a way

of increasing their skills and

sense of participation.

14. Espirit de crops: ‘In union there

is strength and so team work’

Team spirit and a sense of unity

and togetherness should be

fostered and administrated in

organisations for effectiveness.

Fayol cautioned that his principles

are flexible and capable of adaptation

to every need.

James D. mooney and Allen c.

Reiley: Mooney and Reiley were

executives of General Motors

Corporation USA. They set forth

some fundamental principles of

management in their book “Onward

industry in 1931” which are as

follows.

The co-ordination principle: Co-

ordination is the orderly arrangement

of group effort to provide unity of

action to achieve the objectives. It is

the mother - principle of organization

from which all other principles flow.

The scalar principle: This indicates

the form of organization. The

structure is pyramidal and

hierarchical where the chain of

authority runs from top to bottom.

The functional principle: This

represents more or less

specialization. The authors say,’ ‘'The

difference between generals and

colonels is one of the relations in

authority and is therefore scalar. The

difference between an officer of

infantry or an office of artillery,

however is functional because, here

we have a distinct difference in the

nature of these duties”.

The line and staff principle: This

principle grants authority to line

management to get things done but

recognizes the role of staff specialists

in providing advice and guidance.

In essence, Mooney and Reiley made

an attempt to offer a rigid framework

of management theory with emphasis

on hierarchical structure, clear

decision and division of authority and

responsibility, specialization of tasks,

co- ordination of activities and

utilization of staff experts.

Lyndall fowners urwick

L.F. Urwick propounded six principles

of management which are as follows:

i. Principle of investigation

ii. Principle of objectives

 iii. Principle of organization

iv. Principle of direction

v. Principle of experiment

vi. Principle of control

Later, in his book, The Elements of

Administration, he listed 29

principles of management which are

as follows:

1. Investigation

2. Forecasting

3. Planning

4. Appropriateness

5. Organization

6. Co-ordination

7. Order

8. Command
 9. Control

10. The co-ordination principle

11. Authority

12. Scalar process

13. Assignment of function

14. Leadership

15. Delegation

16. Functional definition

17. Determination

18. Application

19. Interpretation

20. The general interest

21. Centralization

22. Staffing

23. Espirit

24. Selection and placement

25. Rewards and sanctions

26. Initiative

27. Equity

28. Discipline and

29. Stability

Jamer D.Mooney and Alan C.Reiley

Both of them were executives of

genera! motors and wrote the famous

book ‘onward industry’ which was

later revised under the title “The

principles of organisation”. They

proposed four major principles.

i. The co-ordination principle

ii. The scalar principle

iii. The functional principle

iv. The staff phase of functionalism

i. The co-ordination principle:

This principle provides unity of

action in persuance of a common

objective. It indicates the

necessity for authority and

leadership. Right from the top

management to the bottom line

every one should be conscious of

company's objective.

ii. The scalar principle: This

denotes the hierarchial form of

organisation structure where

there is a free flow of authority

from top to bottom. This scalar

principle refers to the vertical

division of authority and defines

duties assigned to different units

of the organisation.
iii. The functional principle: This

refers to more or less

specialisation. An officer of

infantry and an officer of

artilliary are different in the

nature of their duties.

iv. The staff phase of

functionalism: Staff means

advisory and line represents

authority. This dichotomy should

not represent a double track

concept of organisation. Staff

and line should act in union.

Mooney and Reiley were more

concerned with the internal

working of the organisation.

 They have expressed their views

on the structure of organisation.

Their work was an extension of

Henri Fayol's contribution.

Chester I Barnard (1886-1961)

Chester I Barnard, a psychologist

cum sociologist was the first to

recognise the human element in

organisation. He was the first to look

at the organisation as a social

system. Barnard started his career in

Harvard university in 1906. He left

the university and joined the

statistical department of Americal

Telephone and telegraph system. He

became the president of New Jesey

Belt in 1927 and served till
retirement.
His famous work, “The functions of

the Executive” is a classic in

organisational theory, Barnard

defines an organisation as a system

of consciously co-ordinated activities

or courses of two or more persons.

Barnard thought a person working in

an organisation has two - the

personal role and the organisational

role. The organization must establish

a balance between these two roles.

Barnard attached more importance to

factors such as opportunity of

distinction and power, pride of

workmanship, pleasant organisation,

participation, neutral supporting

personal attitudes and the feeling of

belonging. In his view, man should

be motivated by a combination of the

both financial and non- financial

incentives.

Bernard's famous work - Functions of the

executive:

There are three basic functions of the

executive

a. Providing a system of

communication.

b. Promoting the acquisition of

essential effort.

c. Formulating and defining the

purposes and objectives of the

organisation.
To achieve the above functions, the

executive should strengthen the

efforts of the system for effective

communication. This makes an

organisation a dynamic cooperative

system.

Chester Barnard believed that the

differences of opinions must be cast

away by informal meetings and he

further emphasised that the formal

decisions should be kept at the

minimum level.

Barnard strongly felt that the

purpose and the objective must be

clearly made known to all levels by

proper communication.
Bernard's theory of authority:

According to him “Authority is the

character of a communication in a

formal organisation by virtue of

which is accepted by a contributor to

or ‘member’ of the organisation as

governing the action he contributes;

that is, as governing or determining

what he does or is not to do so far as

the organisation is concerned”.

Barnard has made significant

contribution to management theory.

Barnard advanced the pioneering

work of Fayol, Mooney and Reiley by

expressing his ideas about

psychological and sociological

aspects of management. His thoughts

on motivation, executive leadership,

decision-making, communication,

authority objectives and

organisational relationships are very

much significant.

2.6 THE HUMAN RELATIONS

SCHOOL

The human behaviourists believe that

good management rests on the

ability of the managers to develop

interpersonal competence among

members and to support

collaborative effort at all levels of

the organization. The human

behaviourists drew support heavily

from psychology and social

psychology. Motivation, Leadership,

communication, training,
participative management, group

dynamics arc assigned importance in

the study of the pioneers and

contributors like Elton Mayo,

Roethlisberger, Mary Parkar Follet,

Chester I Barnard, Abraham Maslow

and Douglas McGregar.

George elton mayo: Elton Mayo is

well known for his famous Hawthorne

studies. These studies were

conducted at the Hawthorne plant of

the Western Electric Company

between 1927 and 1932.The

objective of Hawthome studies was

to discover the relationship between

improved working condition aad

productivity. The findings revealed

that there was practically now

relationship between productivity and

improved working conditions,

because when the improvements

were withdrawn productivity

remained above the original level,

which was attributed to changes in

human relationships.

Hawthorne studies This research

project was sponsored by the

National Research Council and was

conducted at the Hawthorne works of

the Western Electric Company near

Cicero, Illinois. There were 4 major

phases of the study.

1. Illumination Experiments,

2. Relay Assembly test Room,

 3. Massive Interviewing Programme

and

4. Bank Wiring Observation Room.

Illumination experiments The

objective was to find out the relation

between illumination and worker's

productivity. Two groups, a test

group and a control group were

identified and were located in

different places. The test group was

exposed to different intensities of

illumination while the control group

worked under constant intensity of

illumination. Surprisingly, the

productivity of both the groups

appreciably increased together.

Hence illumination only had a

marginal effect on productivity.

The Relay Assembly Test-Room

Experiments

The first relay-assembly test

room This phase of experiment

started from April 1927 to August

1932. Six women operators were

placed in a separate test room.

During the first two years, the

conditions of work were gradually

changed. Initially group-bonus

incentive scheme was introduced and

later, rest pauses of varying

duration, shorter hours of work,

shorter working week, free snacks

and other changes were introduced.

Suddenly during one period i.e.,

twelfth period all the privileges were

withdrawn. During all these periods

productivity increased by 30%. The

output recorded increased

productivity dining the twelfth period

although the privileges were

withdrawn.

The second relay-assembly

group: This research was devised to

retest some factors in another group.

For testing effects of the incentives,

five experienced relay-assembly men

were selected and were allowed to

work where-they were working, but

were paid the group-bonus

incentives, similar to that of the first

experiment.
There was an increase of 13% in

productivity. Their higher earnings

caused envy in the department.

The mica splitting group Five girls

were chosen from different groups

and were different from each other

temperamentally and socially. They

were exposed to changes in working

conditions. Over a period of two

years changes were introduced five

times although the method of

payment was not changed. The

output increased by 15% on an

average.

The researchers concluded that the

workers had become a social group

with their own expectations and

standards. There was ‘a complete

communication between workers and

researchers. There was a sense of

participation amongst the workers

and group cohesion was high. Elton

Mayo concluded that “work

satisfaction depends to a larger

extent on the informal social pattern

of the work group, where norms of

co-operativeness and high output are

established because of a feeling of

importance, physical conditions have

a little impact”.

Massive interviewing programme

The objective of this interviewing

programme was to improve the

quality of supervision. Massive

interviews were conducted amongst

the workers and supervisors and the

replies were analyzed, which

reflected the nature of attitudes of

the respondents towards eighty

topics. Respondents were asked to

freely discuss the issues. Important

discoveries were made about the

attitudes of various employees. An

important finding was that many

problems of worker-management

relation were the result of

emotionally based attitudes of the

workers rather than the objective

difficulties of the situations.

Bank-wiring observation group

(November 1931 to July 1932)

This group started showing their

group cohesivehess clearly. There

were nine wiremen, three soldermen

and two inspectors, who were paid

on group basis. They established

standards for output of their own and

had stuck to their standards. A very

vital finding was that the members

did not respond to the financial

incentives. The informal social

grouping determined the levels of

output.

The basic findings of Hawthorne studies

are:

1. The informal group and not the

individual is the dominant unit of

analysis in organization.

2. The employee is motivated not

merely by economic incentives

but also by non-economic

 psychological and social

interests, needs and aspirations.

3. Employee centered find

participative style of supervision

as more effective than task-

oriented leadership. Also,

employees are capable of self-

direction and control.

4. The business organization is a

social system as well as techno-

economic system. The social

system defines individual roles

and establishes norms which

may be at variance with those of

the formal organization.

5. Management needs social skills

as well as technical skills. Social

skills should be used to inject

 a feeling among employees that

they are a part of the

organization.

6. People need to be liked and

respected. They seek affiliation

with groups. This can be done by

enthusing people to participate

and communicate in the

concerned areas of decision-

making.

7. The basic mission of

management is. to secure willing

and co-operative effort of the

employees by meeting their

needs and satisfactions.

However Hawthorne Studies and

Human Relations Approach is

criticised on the following lines:

a. It is undertaken to confirm

certain pre-conceived ideas and

hypothesis and not to test them

in a true research spirit

b. The major human problems on

organizational situation were not

properly conceptualized.

c. The experimental design, the

data collected and the evidence

gathered to arrive at conclusion

on human behaviour are flimsy.

d. Only superficial, simplistic and

trivial phenomena were

examined, and in a loose
manner.
Elton Mayo has been rightly called

the Father of Industrial Sociology as

well as Human Relations Movement.

F.J.Roethlisberger Roethlisberger

was also connected with Hawthorne

experiments. He was against making

sweeping generalizations.'He

strongly believed in the method of

case study as the situations vary

from each other and each one is

unique. He recognized, the

importance of informal organizations,

which he renamed as ‘social

structure'. In his own words, “It

refers to practices, values, norms,

beliefs, unofficial rules as well as the

complete network of social relations,

membership patterns, centers of

influence and communication”.

Mary Parker Follet (1868-1933):

Mary Parker Follet was born in Boston

and educated in Harvard and

Cambridge. She postulated four

fundamental principles of

organization. They were,

a. Co-ordination by direct contact

b. Co-ordination in the early stages

c. Co-ordination as the reciprocal

relation of all factors in a

situation.

d. Co-ordination as a continuous

process.
Follet's contribution to management

are like a bridge connecting the

classical movement and social

system movement. Follet was of the

view that conflict is not necessarily

destructive. It may be constructive

also. The most effective way of

resolving a conflict is integration in

which the concerned parties thrash

out the ways of achieving the goals

of conflicting desires.

Follet advocated the law of the

situation. According to her “One

person should not give order to

another person, but both should

agree to take their orders from the

situation.”
She stressed on both the

understanding of human behaviours

and the co-ordination between

human efforts and organizational

goals. These are the two fundamental

premises of her concept of human

relations.

She was also one of the few who

advocated the study of group

dynamics. Management must attempt

to understand how these groups are

formed, why, and how to hold them

together, so that the general purpose

of the group is the common purpose

of all its members. Further the leader

must become aware of the group in

which he works and must regard his

job as being concerned with drawing

out the abilities and contributions of

individual member. He must know

how to create a group power rather

than express a personal power.

2.7 OTHER SCHOOLS OF

MANAGEMENT THOUGHT

• Empirical School

• Decision Theory School

• Systems School

• Contingency School

The empirical school

Management is the study of the

experiences of the managers, which

are transferred to the practitioners

of management profession. According

to this school, the case method of

study and analysis is the best method

of imparting management education.

The success and mistakes made by

other managers in the process of

decision making can be true in case

of similar problems. The contributors

to this school of thought arc

‘American Management Association,

Harvard Business School,

Management associations of different

countries, and Ernest Dale. Critics

feel that Management is not like law

where law is based on precedent and

situations of future which can be

exactly comparable. What was found

as the best and the right decision

need not be right now or in the

future. The advocates of empirical

school strongly feel that case study

reveals the complexity of the

dynamic situation which enables the

managers to acquire necessary skills

in decisionmaking. However it is

strongly felt by the critics that case-

method is not the best method of

imparting training for decision-

making.

Ernest dale

Ernest Dale was the president of

Ernest Dale Associates in New York

and faculty member of the wharton

school of finance and commerce,

university of Pennsylvania. His book

titled ‘The Great Organisers’ is a

master piece and his principles are

based on the experiences of different

organizations. He undertook an

intensive study of 20 American

companies with number of employees

raning from 4000 to 20,000 over a

period of time. Dale propounded nine

principles of organization, which are

follows.

1. Effectiveness: emphasizes the

fulfillment of the goals of the

organisation.

2. Efficiency, is fulfillment of

objectives of individuals

connected with the organization.

3. Division of work, involves

provision of ground work for

specialization of activities.
4. Functional definition reveals that

the authority and responsibility

relationship is in equal and there

is parity.

5. The chain of command reveals

that the authority and

responsibility relationship is a

hierarchy.

6. The channel of contact means

without taking recourse to going

up and down the vertical levels

there should be provision in the

intermediate levels of lateral and

similar contact.

7. Balance denotes the equal

apportioning of strength of the

departments.
 8. Control involves comparison of

actual performance with the

standards.

9. Perpetuation is provision of a

ladder of positions of increasing

the authority and responsibility

in order to ensure perpetual

succession. His views on line and

staff conflicts, committees,

decentralization are still

considered to be most pragmatic

for management practitioners.

Decision theory school

The major pioneers are Herbert A.

Simon, James G. March, Jay. W.

Forrester and Richard M, Cyert. “All

the managerial functions boil down

to one point i.e., decision-making”

which is the nucleus of the

contribution of this school of thought.

The school focusses on Management

information system, process and

techniques of decision-making. This

school is heavily oriented to model

building and use different

mathematical tools and techniques.

A wide range of mathematical and

rational research tools and

techniques have been used for taking

decisions. Several concepts and

approaches have been developed in

the field of decision- making. For

example, the concept of sub-

optimization, marginal decision-

making are some of the
developments.
The System school

The organization is an open- system

that operates with in and interacts

with the environment.

The systems approach to

management includes

a. Inputs from external

environment,

b. The transformation process,

c. The system of communication,

d. External Variables,

e. Output and

f. Revitalizing the system.

a. Inputs

The inputs of the organization

include, technical skills and

managerial skills and capital. The

customers, suppliers,

shareholders, government,

labour unions, financial

institutions are some of the

variables of the external

environment that affect the

inputs, over and above the

inputs like people and capital.

b. The transformation process

The managers apply planning,

organizing. Staffing, leading,

controlling, coordinating, and

then transform the inputs in an

effective and efficient way.

c. The communication system

Communication integrates all

managerial functions. It also

links all the elements of thr

external environment with the

organization. For e.g., the

organization is aaire of

competition by an effective

communication system.
d. External variables

An organization must operate in

and be responsive to a number of

different external environments

like technological, social,

economic, ethical, political and

legal environments. The

managers must effectively

respond to the various forces

 acting in the external

environment

The outputs include, products,

services, profits, satisfaction and

goal integration. The managers

must see that these outputs are

properly rendered.
e. Revitalizing the system

Some of the outputs become

inputs again. Satisfaction, profits

are the inputs that revitalize the

system, for e.g., a satisfied

customer, satisfied employees

become human inputs.

‘Contingency school’

The contigency approach theorizes

that different situations and

conditions require different

management approaches.- The

techniques that look perfectly in one

setting or situation may not be

appropriate under different

circumstances, Contigency theories

have been developed in areas such

as decision-making, organizational

design, leadership, planning and

group behaviour. Managerial practice

depends on circumstances and the

theory recognizes the influence of

given solutions on organizational

behaviour patterns.

The critics view that managers have

long realized that there is no one

best way to do things. It is very

difficult to identify the contigency

factors and even more difficult to

show their relationships.

The contingency approach to

organization emanated as a result of

contributions made by Joan Wood

Ward, and research team of Aston

university, England. The other

researchers were Fiedler (contigency

leadership theory), Woodward (found

that the organization structure

depends upon Technology), and

Lawrence and Losch (contingent

management depends upon market

demand and rate of technological

development).
 2.8 PETER F. DRUCKER AND HIS
CONTRIBUTIONS TO MANAGEMENT

The living tegand of management,

the Bheeshma, the- Doyan, the

Wizard, and the Super Guru of

management - all these names, are

not sufficient enough to describe the

qualities of the great personality

Peter F. Drucker. Born in Vienna in

1909, Peter F. Dracker started his

career as a newspaper correspondent

and was also serving as-an economist

for an International Bank in London.

Later he was working as a consultant

for many Americal corporations. He is

a professor of management, leading

management consultant and a great

management thinker.
His writings are sharp, incisive and

thought - provoking. His major books

are:

1. The end of 2. The future of

economic man industrial man

3. Concept of the
4. The new society
corporation

5. The practice of 6. American's next

management twenty years

7. The landmarks of
8. Managing for results
tomorrow

9. The effective 10. The age of

executive discontinuity

11. Preparing 12. Technology,

tomorrows business management and

leaders today society

 14. Management:
13. Men, ideas, and
tasks, responsibilities -
politics
practices

15. The unseen 16. People and

revolutions performance

17. Management 18. Adventures of a

cases Bystander

19. Managing in

turbulant times

Peter Drucker on Management

Peter Drucker is against bureaucratic

management. He wrote “Managing a

business cannot be a bureaucratic,

an administrative or even a policy

making job, (it) must be a creative

rather an adaptive task.” A manager

must innovate, ie., it means

development of new ideas, adoption

of new ideas from other fields and

encourage others to carry out

innovations. Drucker treats tasks as

management. He also treats

management as a discipline.
According to him people are

important. He emphasises

performances and practice. In his

words in the last analysis,

management is practice, its essence

is not knowing but doing. Ultiarately

it is not logic but results. It's only

authority is performance”. Drucker

feels that management is a practice

rather than a science. As a discipline,

it has its own tools, skills, techniques

and approaches.
Drucker belongs to empirical school

of management. He feels that

management is universal, whether it

is business or non-business

activities.

The philosophy of management is

designed not only for businessmen,

but for ordinary citizens also. The

ignorance about the knowledge of

management in his view, is one of

the most serious weaknesses of an

industrial society.

According to Drucker, Managers must

not be equipped only with skills, tools

and techniques. The manager must

be more than a technocrat.

Management is not culture-free. It is

a social function. It is therefore, both

socially accountable and culturally

embedded.

Drucker on Organisation

The modern society is a pluralistic

society in which all major social tasks

are performed by organisations. He

has emphasised the role of

autonomous institutions. He states “

the alternative to autonomous

institutions that function and perform

is not freedom, it is totalitarian

tyranny. The large organisations

make a living possible through

knowledge. Knowledge is the very

foundation of the modern

organisation. Drucker has derived

bureaucracy and emphasized

bureacratic dysfunctions.

Drucker on Federalism

Peter F. Drucker has advocated the

sloan type of decentralisation. He has

pointed out the following advantages

inherent in sloan type of

decentralisation.

1. The speed and lack of confidence

with which a decision can be

made.

2. The absence of conflict of

interest between corporate

management and the divisions.

3. The democracy and informality in

management where everyone is

free to criticize but no one tries
to.
 4. The absence of a gap between

the “previleged few” top

managers and the "great many”

subordinates managers of the

organisation.

5. The availability of large supply

of good, experienced leaders

capable to take top

responsibility.

Drucker calls decentralisation as

‘Federal principle'. It creates new

“constitution” and a new “ordering

principle”. In fact Drucker

decentralised General Motors

Corporation into various divisions

and gave full and complete

operational autonomy. He states “In

a federal organisation, local

managements must also participate

in the decisions that establish their

own local business and that set the

limits of their own authority.” In his

view federalism isone that

i. sets the top management team

to devote itself to its proper

functions.

ii. defines the functions and

responsibilities of the operating

people.

iii. creates yardsticks to measure its

success and effectiveness in the

operating jobs.
Drucker on Manager

A manager has look after the

following functions.

a. the specific purpose and mission

of institution.

b. making work productive and the

worker achieving.

c. managing social impacts and

social responsibilities.

The manager of Peter Drucker must

be an able administrator and an

entrepreneur. Drucker has attached

great importance to the formulation

of objectives by the management. In

“his opinion, objectives of

performance must be set in eight

important areas.
These areas are

i. Market standing

ii. innovation

iii. Productivity

iv. Physical and financial resources

v. Profitability.

vi. Manager performance and

development

vii. Worker performance and attitude

viii. Public responsibility

Drucker on MBO

The concept of management by

objective is regarded to be one of

the major contributions of Peter F.

Drucker to the management

discipline. Drucker's MBO emphasises

motivational and self-control aspects.

MBO has revolutionised the process

of management. Drucker's MBO, in

his opinion, is a Philosophy. “It rests

on a concept of human action, human

behaviour and human motivation'. It

ensures performance by converting

objective needs into personal goals.

Drucker's sharp and Incisive comments

“Business has only two basic

functions-marketing and innovation”.

“We know nothing about motivation.

All we cant do is write books about

it”.
“Management by objectives works if

you know the objectives. Ninety

percent of the time you dont”

“Production is not the application of

tools to materials but logic to work”.

2.9 SUMMARY

F.W.Taylor's scientific management

is based on experiences and

experiments. Taylor introduced the

concept of Functional Foremanship.

Also Henry laurance Gantt, Frank

Bunker Gilberth and many more have

formulated theories and studies with

reference to management. The

various other schools of management

thought have been discussed.

 Check Your Progress

1. Name the various Principles of

Henry Fayol

2. Who were the pioneers of

human relations school?

2.10 ANSWERS FOR CHECK YOUR

PROGRESS

1. Principles : (1). Division of

Labour, (2) Authority and

responsibility, (3) Discipline (4)

Unity of Command, (5) Unity of

direction (6) Sub-ordination of

individuals interest to the

common goal, (7) Remuneration,

(8) Centralization, (9) Scalar

chain (10) Order, (11) Equity,

(12) Stability of tenure of

 personal (13) initiative (14)

Espirit de corps.

2. Elton Mays Rocthlisberger, Mary

Parker Follet Chester I Barnard

Abraham Maslow Douglas

McGregor.

2.11 EXERCISES AND QUESTIONS

1. Who recommended

“management” to be recognised

as a separate entity? Discuss his

contributions to management.

2. Who can be called as pioneer in

Behavioural school of thought?

3. Who was the father of scientific

management?

4. Who was known as the first lady

of management?
 5. Define

a. Unity of command

b. Scalar chain

c. Espirit de corps

6. Discuss the principles of Mary

Parker Follet.

7. What is the central idea of

contingency school of thought?

8. What arc the elements of the

systems approach school of

Management thought?

9. Discuss Drucker's contribution

towards federalism.

10. What is Drucker's contribution on

a manager's task.
11. What are the important

milestones in the development of

management thought.

12. Discuss the contribution of Frank

Bunker Gilbreths.

13. Discuss the contributions of

Chester I Barnard.

14. What are important principles of

Lyndall F. Urwick.

15. What are the essential findings of

Hawthorne studies.

16. Discuss the contingutious of

Earnest Dale towards Empirical

School of Management thought?

17. Discuss Peter Drucker's

contributions to the management

philosophy.
18. Trace the history of management

thought and thinkers.

19. What are the contributions of

a) Robert Owen b) Charles

Babbage

20. Discuss the contributions of

Fredrick Winslow Taylor.

21. Discuss the contributions of

Henri Fayol.

2.12 FURTHER READINGS

1. Peter F.Druker, The Practice of
Management.

2. Management, Koontze and

Odonnel

3. Principles of Management,

Stephen P.Robbins Prentice Hall,

1991.
 UNIT 3

PLANNING AND DECISION-

MAKING

STRUCTURE

3.0 Introduction

3.1 Unit Objectives

3.2 Planning an Overview

3.3 Nature of Planning

3.4 Types of Plans

3.5 Steps in Planning

3.6 Principles of Planning

3.7 Forecasting and Planning

3.8 Strategic Planning

3.9 Advantages of Planning

3.10 Disadvantages of Planning

3.11 How to make Planning Effective?

3.12 Decision-Making an Overview

3.13 Nature of decision-making

3.14 The Decision-Making Process

3.15 Methods of Decision-Making

3.16 Types of Decisions

3.17 How to make Effective Decisions?

3.18 Summary
 3.19 Answers to Check Your Progress

3.20 Exercises and Questions

3.21 Further Reading

3.0 INTRODUCTION

Planning is the prime function

amongst all other functions. It

involves a set of decision that eater

to the needs of all levels of the

organization. Because of its all-

pervasive nature, at every level plans

are called by different names like

strategies, polices, procedures etc. It

involves a systematic step-by-step

approach that ultimately ends up

with decision-making process. A

manager should take into

consideration, the various

advantages and disadvantages and

take effective decisions.

3.1 UNIT OBJECTIVES

• Understand nature, types and

steps of planning

• Learn the various principles of

planning

• Understand the close

implications of planning and

forecasting

• Learn the characteristics of

strategic planning

• Clearly understand the

advantages and disadvantages of

 planning and learn how best to

make effective plans

• Understand the nature, steps

and methods of decision-making

• Learn effective decision are

being made.

3.2 PLANNING AN OVERVIEW

Planning is the most basic of all

functions. In an organization, the

group objectives are determined, and

every individual must know clearly

what he is expected to do. Planning

bridges the gap from where we are to

and where we want to go. Planning

involves selecting the objectives and

decides the best course of action

from among the alternative courses
of action.
Planning and control are inseparable-

two sides of coin. Without planning

there is no control and without

control planning is meaningless.

Planning furnishes standards of

control.

3.2.1 Definition :

“Planning is an intellectal process,

the conscious determination of

courses of action, and is continuous

process of decision making with built

in flexibility”.

- Herold koonz and weihrich

3.3 NATURE OF PLANNING
3.3.1. Prime function Planning is the

first function that proceeds all

other functions like organising,

staffing, communicating,

directing and controlling.

3.3.2. Planning is a continuous

process Some authors say that it

is an ever continuing process that

has no end at all.

3.3.3. Planning is an intellectual

process Managers think about

when is to be done, what is to be

done, how it is to be done and

who is to do it?

3.3.4. Planning is all pervasive It

covers all levels of management

like top management, middle

management and lower

Management. But managers of

top management spend more

 time in planning than the other

levels of management.

3.3.5. Planning is flexible, but

flexibility is possible only within

limits. In most cases irretrievable

costs already incurred in fixed

assets, training, advertising etc

may prevent flexibility.

3.3.6. Planning is goal oriented

Planning starts with setting the

objectives and completely

objective oriented.

3.4 TYPES OF PLANS

3.4.1. Purpose or missions It is the

basic function or task of an

organization. The purpose of a

business is to produce goods,

distribute them and make a

surplus. The purpose of an

 educational institution is

teaching and research.

3.4.2. Objectives Objectives are goals

or the end points or the results

that are to be achieved. The

objective of a sales dept. is to

sell a given line of furniture

equipment in a given region with

in a particular period of time.

3.4.3. Strategies Strategies are

defined as a course of action to

attain the objectives. The general

programmes of action plans are

called strategies. Strategies are

the directions in which resources

are channalised to reach goals.

3.4.4. Policies Policies are guide posts

of what to do and what not to do.

These are simply statements that

guide or channalise the thinking

in decision making. They ensure

that the decisions fall within

 certain boundaries. For example,

promotion from within the

organization.

3.4.5. Procedures They establish a

required method of handling

future activities. They detail the

exact manner in which activities

must be accomplished. For e.g.

the procedures for placing a

purchase order.

3.4.6. Rules A simple type of plan is

rule. Rules clearly spell out what

action one should do and one

should not.

3.4.7. Programmes A programme is a

sum total of goals, polices,

procedures, rules, task etc.

which is designed to carry out a

course of action. It could be a

major programme or a supporting

programme. A major programme

may be to bring out a new

 product in the research and

development department which

may take atleast three years. A

supporting programme may be a

promotion campaign for an

existing product line.

3.4.8. Budget: A budget is a

numberised programme. It is

often referred in financial terms.

A plan always has a budget which

is essentially a control device. A

budget is defined as a statement

of anticipated results.

The purpose of budget is

planning and indicates the extent

of authority to be

allowed(delegated) with out loss

of control. Budget may vary in

nature and they are (a) revenue

and expenses budgets (b) time,

space, Material and product

budgets (c) capital expenditure

budgets and cash budgets.

 3.4.9. Zero base budget is yet another

type of budget which divides

enterprises programmes into

packages composed of goals,

activities and need resources and

then to calculate costs for each

package from the ground up.

Normally in any other types of

budgets the cost is arrived out of

previous experience. But in zero

base budget, the costs are

arrived afresh.

3.5 STEPS IN PLANNING

3.5.1. Opportunity analysis An

awareness of the factors in the

external environment and the

strength and weaknesses is the

first step of planning. What is our

market, what is our competition,

what are our customers'

preferences, taste, what are our

strengths and weaknesses are

some of the pertinent questions

asked.
3.5.2. Establishing objectives “Where

we want to be, and what we want

to accomplish and when” are

answered in this step. Objectives

are set for the organization and

each subordinate is also

entrusted with it. Objectives give

us the expected results and

where the primary emphasis is

to be placed, for example if an

enterprise wants to have its

objective as Rs.400 crores the

next year from now, then the

departmental objectives are fixed

and they are further divided into

subordinate manager's goals.

The goal setting normally

emanates from the top, but it

may also originate from the

bottom.

3.5.3. Developing premises: Premises

are ‘Assumptions’ about the

 ‘environment'. It involves

identification of critical factors of

the environment that affect the

planning. Examples of critical

factors are govt. policies, tax

rates, business cycle

developments, economic

indicators, economic forecasts

etc. No body can precisely

predict the environmental factors

accurately and can make an

accurate forecast However one

can fairly predict the critical

factors required for the plan.

3.5.4. Identifying alternatives Every

plan has got a set of alternative

courses of action. A reasonable

number of alternatives can be

developed for a plan.

3.5.5. Evaluating alternatives and

selecting the best A reasonable

number of alternatives can be

evaluated on the basis of the

principle of limiting factor. The

 limiting factors may be costs,

time, manpower, and other

resources. By applying

techniques of operations

research, every alternative can

be evaluated. For e.g. alternative

‘A’ may benefit the organization

in the short term but may be

more expensive and alternative

‘B’ may benefit in the long run

but may be less expensive. If one

wants to earn immediate profit

by spending more money he can

choose alternative ‘A', If the

limiting factor is cost, he is

forced to choose alternative ‘B'.

3.5.6. Formulating supportive plans

Planning is not complete with

selecting the best alternative, A

set of derivative plans are

developed to support the basic

plan, for e.g. An educational

institution might like to own a

fleet of buses, for which

derivative plans for selection,

 training of Drivers and

maintenance staff are supportive

plans for the main plan-

procurement of buses.

3.5.7. Developing budgets A

numberised plan is a budget.

Budget is referred in financial

terms and they are required to

control the plans.

3.6 PRINCIPLES OF PLANNING

The essential guiding principles of

planning are given below:

3.6.1. Principle of primacy of

planning Planning is the prime

function of all as it precedes all

functions.

3.6.2. Principle of verifiable

objective The objectives must

be clear, verifiable and

attainable.
3.6.3. Principle of planning

premises: Planning premises are

vital to the success of planning

as they supply information

related to future like probable

competitors, behaviour, general

economic conditions, capital and

material availability, government

control etc. Premises are

assumptions about the

environment. When all the

critical factors are clearly and

thoroughly analyzed and taken

into consideration, planning

becomes effective. Premises may

be internal, external, tangible,

intangible, controllable and

uncontrollable.

3.6.4. Principle of limiting factor One

should be able to identify clearly

the critical factors that limit the

attainment of the goal It could

 be costs, time, manpower or any

other resources. In a practical

business situation, one should be

more clear in identifying these

factors, only then the selection of

the best alternative is possible.

Herbert A Simon, takes into

account the limiting factors and

arrives at Decision-making based

on “bounded- rationality”.

Bounded-rationality is otherwise

called as SATISFACING principle

take into cognizance of limitting

variables of the situation.

3.6.5. The commitment principle Any

decision taken in a plan is valid

for a particular period i.e., the

plan may be short term or long-

term, the commitment principle

implies that long-range planning

is not really planning for future

decisions but, rather, planning

for the future impact of today's

decisions. For example, the

impact of a decision connected

 with commencing a newproduct

line may be for 20 years, where

as a plan meant for promotion of

people from within the company

may have its future impact, for 2

years only.

3.6.6. Principle of flexibility: A plan

should be flexible so that it

lessons the danger of losses

incurred through unexpected

events.

3.6.7. Principle of navigational

change: The more that planning

decisions commit the individuals

to a future path, the more

important it is to check on events

and expectations periodically.

The principle of flexibility means

that there is in-built flexibility in

the plans. But the principle of

navigational change means that

there is a chance and likelihood

for redrawing the plan after

review. This is applicable to plan

 which commit individuals to a

long-term. Unless plans having

in-built flexibility navigational

change may be difficult or costly.

3.7 FORECASTING AND PLANNING

Forecasting is a technique that uses

both past experiences and present

assumptions about the future to

predict what will occur. The result

of the forecast becomes a premise

in planning. Every manager must

identify how future conditions will

affect the organization. The

conditions of external environment

are outside one's control, but if

properly estimated, the organization

can quickly adapt to changes that are

occurring rapidly.
3.7.1. Types of forecasts

3.7.1.1. Economic forecasts are made to

predict general economic

conditions and its effect on

sales.

3.7.1.2. Technological forecasts predict

what new technologies can be

developed, when they can be

developed, and how

economically feasible they can

be.

3.7.1.3. Competitors forecast predict

the strategy and tactics of one's

competition.

3.7.1.4. Social forecasts predict changes

in people’ attitudes and societal

conditions.

3.7.1.5. Supplier's forecast reveal the

response of the suppliers.

3.7.2 Forecasting techniques

3.7.2.1. Quantitative time-series

analysis A study of past data

such as monthly sales is made

and the data are plotted on a

chart. The data are examined

to find the trends and

periodical fluctuations. The

assumption is that, the future

will reflect the past and

present trend and hence can be

projected.

3.7.2.2. Derived forecast The forecast

used for a specific purpose can

be reused for a different

purpose. A company selling

furnitures can use the data on

housing construction to help

predict demand for furnitures.

3.7.2.3. Causal methods If the

underlying cause for the

variable can be determined,

the forecast can be arrived

mathematically and produce

quite accurate results. For

e.g., sales of a product is

increasing by personal

contacts, their relationship can

be found out and predicted i.e.,

for every five contacts one sale

will result.

3.7.2.4. Brain storming Two heads are

better than one is the core

philosophy of brainstorming.

Here a group of people with

knowledge and interest in a

specific problem assemble and

free flow of creative comments

are encouraged leading to a

thorough analysis of the

problem and provide an

effective solution.
3.7.2.5. Delphi method The judgment

of experts is sometimes the

best and most feasible method

of forecasting. The Rand

Corporation developed the

expert opinions. Every expert

is contacted independently and

opinions are drawn, without

the knowledge of the responses

of the other experts. After

collecting all the responses,

once again each participant

considers the comments of the

other experts in the succeeding

rounds. Now the experts tend

to revise their views in the

light of the others responses.

Three or four cycles of this

process result in a consensus

by all experts without direct

debate or discussions. This

technique is very useful in

complex situations.
 3.8 STRATEGIC PLANNING

Strategy can be defined from

atleast two perspectives First,

strategy is the “broad programme for

defining and achieving an

organizations objectives and

implementing its mission”. Second,

“Strategy is the pattern of the

organizations responses over a

period of time”. A strategy that takes

a broad and usually long range focus

is called strategic planning. Strategic

planning is the process that identifies

the organizations, long range goals,

selects the means (strategies and

policies) for achieving these goals,

allocates resources, and develops

long range plans far achieving the
goals.
3.8.1. Characteristics of strategic
planning

3.8.1.1. Time horizon: Strategic

planning takes into account the

extended time horizon-long

term.

3.8.1.2. Impact: There may not be any

immediate impact out. of

strategic planning, but the

consequences in the long-run

would be significant.

3.8.1.3. Concentration of effort:

Strategic planning gives effort

on vital areas. It takes into

consideration of the

environmental changes and

adapts to it. When

organizations are too large,

they are broken down into

 strategic business units

(SBUS). These units are

expected to operate as if they

were relatively independent

businesses.

3.8.1.4. Tailor made approach: The

strategic planning developed by

relating the organizations

resources to its external

environment is a tailor made

approach by the organization

for meeting changes in the

future.

3.8.2. Implications of strategic

planning

To meet the challenges of modern

society, more and more organizations

are concentrating on formal

approaches and concepts for

planning their long range process.
Specifically these challenges result

from increasing rate of change, the

complexity of manager's jobs, the

increasing importance of fitting the

organization into external

environment, and the increasing lag

between the preparation of plans and

their implementation in future.

3.8.3. How to make strategic

planning effective?

1. Managers must be adequately by

prepared for strategic planning

2. The goals of the organization

must, be made clear and not

vague.

3. The business units must be

deariy identified.
4. As the link between strategic

planning and control is

insufficient, the link should be

made dear.

5. The reviews of strategic plans of

the business units most be made

effectively.

3.9 ADVANTAGES OF PLANNING

1. If analyses the opportunities and

gives an awareness of the

external environment.

2. Economy: Planning involves a lot

of paper work, and executive

time initially, but the outcome

of effective planning it minimises

the overall costs.

3. Planning increases the efficiency

4. The culture of the organization is

refined.

5. Planning provides a good

direction.

6. Planning is the first step for

control as if provides several

standards and yardsticks of

control.

7. Planning elicits commitment.

3.10 DISADVANTAGES OF
PLANNING

1. Planning is time consuming

2. Planning involves excesssive

paper work

3. Some times planning over-

emphasises the objectives only.

4. Planning primises may not be

fully reliable.

5. Planning depends upon the

mental attitude and mindset of

the individuals concerned.

6. Sometimes planning may be

short term.

3.11 HOW TO MAKE PLANNING

EFFECTIVE?

1. Teach the nature and philosophy

of planning process to the entire

system.

2. i.e., planning should be bought

to be practised at all levels.

3. Setup a seperate corporate

planning department. It has

become a practice now-a-days

 that every multi-national

company has a seperate

corporate planning department.

4. Make the planning process

flexible. The element of flexibility

should be inbuilt in the planning

process.

5. Make goals realistic and

attainable

6. Give managers adequate tools.

7. Insist for verfiable goals.

8. Combine long-tern goals and

short-term goals. The goals

should be seen as inter-locked

system and hence recognise the

network nature.
 9. Participation must be made

compulsory - practice joint goal

setting rather than individual

goal-setting.

3.12 DECISION-MAKING AN
OVERVIEW

Decision is a course of action

consciously chosen from available

alternatives for the purpose of

achieving a desired result. Thus, a

decision is a choice, the result of

conscious mental activity and is

directed toward a purpose. For e.g. if

you have decided to read this book,

you always have a choice, of stopping

immediately or continuing to read.

And this is also a conscious mental
activity. Besides this, you also have

a definite purpose of passing your

exams.

3.13 NATURE OF DECISION-

MAKING

1. Decision - making is closely

related with all management

functions like planning,

organising and controlling.

2. Decision - making is closely

related to solving problems.

3. Classical theorists such as Fayol

and Urwick say that decision -

making is a process that is

concerned only to the extent that

it affects delegation and

authority.
 4. Chester I Barnard in his famous

book “The functions of the

Executive”says that “The

processes of decision ..... are

largely techniques for narrowing

choice”.

5. Herbert A Simon considers

decision - making as a process of

Intelligence, Design and choice

activities.

6. Decision - making according to

Peter Drucker, “is a central part

of the management process”.

3.14 THE DECISION-MAKING

PROCESS

The following steps are involved in

the process of decision-making.

1. .Recognizing the problem

2. .Deciding priorities among

problems

3. .Diagnosing the problem

4. .Developing alternative courses

of action

5. .Evaluating alternatives

6. .Selecting the best alternative

7. .Effective implementation and

follow-up action

3.14.1. Recognizing the problem

Heibert A Simon calls this step

as an “intelligence activity”, it
is important to find out whether

there is any deviation from the

past experience. For e.g; Sales

might decrease, expenses might

decrease, sometimes there

might be deviations from the

plan, sales budget, and

 competitors may outperform by

improved processes and

systems.

3.14.2. Deciding priorities among

the problems A manager would

face many problems at the

same time. He should not be

bogged down with small and

unimportant problems. Some

problems can be easily solved

by the sub-ordinates. Some

may not be important. A

manager must see that - he

selects carefully the most

important problem. Peter

Drucker says that "once the

right problem is perceived then

half of the problem is solved”.

A manager must diagnose

carefully by asking the following

questions.

What is the real problem?

What are the causes and effects

of the problem?
 Is this problem very important?

Can they be solved by

subordinates?

Which is the right and most

important problem to be

solved?

3.14.3. Diagnosing the problem After

choosing the right problem the

manager must now start

diagnosing the problem. There

is no simple answer to the

question of how to diagnose the

problem, because every

individual differs in his or her

own way of diagnosing the

problem depending on the

different background

orientations and training.

A manager must systematically

analyse the problem for

identifying the alternative

causes of action.
 3.14.4. Developing alternative

courses of action This step is

a creative and innovative

activity where a manager thinks

in all directions innovatively.

Sometimes a manager can also

use a technique called “brain-

storming" where a few

individuals discuss at length the

various possible available

alternatives.

First of all, a manager must be

thoroughly familiar with the problem.

This is called saturation. Later, he

must think about the problem from,

several view-points which is called

deliberation. Sometimes the manager

may not get into the crux of the

problem, ie, there may not be any

fruitful result of deliberation, then

the-manager might temporarily

switch off his conscious search and

relax. This process of realisation is

called incubation. Then after

sometime, a flash of light may occur,

and the manager may get some

insights and ideas. This stage is

called illumination. In the last stage,

which is called accommodation, the

manager puts his ideas into a usable

proposal.
3.14.5. Evaluating the Alternatives

The manager must now give

proper weightage to the

positive and negative aspects of

the alternatives and evaluate by

using some criteria like a) time

b) cost c) risk d) results

expected e) deviations

anticipated f) resources

available for implementation.

3.14.6. Selecting the best

alternative This is the most

important step where the

manager selects the best

alternative that will yield

maximum profits or results with

minimum cost or input or

resources. To put it in simple

terms the solution should be

able to solve the problem in the

best possible manner possible.

3.14.7. Effective Implementation

and follow-up action Any

decision without proper

 implementation becomes futile

and hence proper care must be

taken by the manager to

communicate, poor resources

“and start implementing the

decision taken. In large

organizations, follow-up

procedures are available in the

system itself in order to pave

way for effectiveness in the

implementation of the

decisions. Proper follow-up

enhances the effectiveness of

the decisions taken.

3.15 METHODS OF DECISION-

MAKING

Managers use different methods for

evaluation of data relevant to various

alternatives. The following methods

are applicable depending upon the

appropriateness of the situation.
3.15.1. Marginal Income or cost

analysis According to

elementary economics,

additional revenues must be

equal to additional costs.

Marginal analysis -is used to

compare additional revenues

arising from additional costs.

This technique can be used only

when the manager has all the

information relating to various

components of the total cost

and is able to differentiate

between variable costs and

fixed costs.

3.15.2. Cost-effective analysis This is

also called as cost - benefit

analysis. It tries to find the

cheapest way of reaching the

objective or in otherwords

getting the greatest value for

expenditures. In this method,

the objectives are normally

oriented towards output. Where

the. objectives are now

 quantifiable, this method

requires some changes so as to

give some specific measures to

quantify the objectives fairly.

3.15.3. Experience The mistakes,

made by managers for a long

period of time is in a way the

greatest investment for human

resources, they are infallible

guides to the future. Experience

is indeed a great teacher, but

good decisions must be

evaluated against future events

only, as the future is highly

uncertain. In the past, a

manager might have taken a

decision on the basis of a

different situation, but the

present situation may be totally

new. Therefore, sometimes the

lessons of experience may not

be applicable to new problems.

3.15.4. Experimentation Many of us

try one alternative to see what

 happens and learn out of it.

Where the factors ate

intangible, experts recommend

that every alternative should be

experimental. In real marketing

situation, test-marketing is

applied to new products to find

out the attitudes of consumers

towards new products.

Similarly, trying a new branch

office, with a lean staff in a new

location to see the response, is

yet another example.

3.15.5. Research and analysis It is

a paper and pencil approach to

decisionmaking. This is cheaper

than experimentation as it

involves time and paper work

only. It involves application of

operation research tools for

conceptualizing a problem and

identifying the relationship

between variables. This method

is cheaper than

experimentation.
Some modern approaches to

decision-making are risk analysis -

which assigns mathematical

probabilities to the outcomes of

decisions, decision-trees-which

illustrate decision points, chance

events, and probabilities of each

possible course of action, and

preference theory-which takes into

account manager's willingness to

take certain risks.

3.16 TYPES OF DECISIONS

3.16.1. Routine and Strategic

decisions Provision for air

conditioning, better lighting,

washing facilities, canteen

services, deputing employees

to attend conferences etc. are

regular, routine decisions

 that a manager must

regularly take decisions that

are supportive in nature. But

the decisions that are central

to the company operations,

which are very important are

called strategic decisions. For

eg; reducing the price of the

product, product

diversification, product

improvement, product

elimination are major and

strategic decisions.

3.16.2. Individual and Group

Decisions Some important

decisions are taken by

individuals and some may be

taken be group. Important

interdepartmental decisions

may be taken up by members

of various departments as a

group.

3.16.2.1. Advantages of group

decision

a) Increased acceptance by

all members concerned.

 b) Better co-ordination

c) Effective communication

d) More information is

processed

e) Effective decision-making

3.16.2.2. Disadvantages of group

decision-making

a) Delay in making decisions.

b) Group can be indecisive.

c) Group can compromise to

the lowest common

denominator, (diluted quality

of decision-malting).

D) Groups can be dominated

by one or two members.

e) Groups can be led to a

negative decision by a

negative-minded leader.
3.16.3. Programmed and non-

programmed decisions

Normally the lower level

personnel take regular

repetitive decisions which are

called programmed decisions.

In these cases rules and

regulations must be clearly

laid down. Rules related to

late attendance, leave,

medical compensation for

accidents are regular

programmed decisions. On

the contrary, the non-

programmed decisions are

those that are non-repetitive,

unusual in nature.

3.16.4. Simple and complex

decisions Decisions where

the problem is simple but the

outcome has a high degree

of certainty are called

mechanistic or routine

decisions.
Decisions in which the problem is

simple but the outcome has a low

degree of certainty are called

judgemental decisions. Decisions in

which the problem is complex but the

outcome has a high degree of

certainty are called analytical

decisions. Eg. Production decisions

Decisions in which the problem is

complex and the outcome has a low

degree of certainty are called

adaptive decisions.
3.17 HOW TO MAKE EFFECTIVE
DECISIONS?

3.17.1. Timing of decisions A

manager should select the

appropriate time for taking the

decision. The manager should

decide to introduce the new

product at the right time in the

market, otherwise it may

become a failure.

3.17.2. Complete information and

effective communication

Many decisions involve complex

variables and a manager must

receive maximum possible

information and at the same

time take enough care to

communicate the decision taken

down below the line.

3.17.3. Top management support If

the top management supports

effective decision-making by

providing, good physical

 environment, there will be

alround goodwill and trust. This

will enable effective decision-

making.

3.17.4. Certainty of goals and

premises Decision making is

goal oriented and clear and

definite goal leads to effective

decisions. The premises

connected with the decision

must be clearly perceived so as

to enable effective decisions.

3.17.5. Principle of flexibility The

provision must be made for

revision of decisions flexibility

should be in-built in many plans

that it leads to revision of

decisions.

3.17.6. The size of committment and

its impact on people Enough

care and attention must be

given to those decision where

 the size of the project is high

and its impact on people is high.

3.18 SUMMARY

1. Planning is an intellectual,

continuous, all-pervasive goal

oriented process.

2. There are several types of plans.

3. The planning process involves

careful step-by-step approach

applying several principles of

planning.

4. Planning has both advantage and

disadvantages and a Manager

should adopt several principles in

effective planning.
5. Planning and forecasting are

inseparable and there are a few

technique of forecasting like

quantitative and not non-

quantitative methods.

6. The top level planning is called

strategic planning.

7. Decision-making is the core

function of any business. This

also like planning involves

careful sequential steps.

8. There are several types of

decisions like, routine and

strategic decisions, individual

and group decisions,

programmed and non-

programmed decisions and

simple and complex decisions.

 Check Your Progress

1. Planning involves conscious

determination of course of

action, comment.

2. Why is planning so important?

3. All plans must be flexible. How

will you differentiate between

the principle of flexibility and

the principle of navi gational

change.

4. Decision-making is in between

‘Almost correct’ and ‘Probably

wrong'. Comment.

5. Group decisions lead to

dilution of quality of decisions

Comment.
3.19 ANSWERS TO CHECK YOUR
PROGRESS

1. Planning is of course a deliberate

and conscious determination of a

clear course of action. It involves

scientific and systematic step-

by-step analysis of the situation

and a careful selection of the

best course of action from

amongst the various alternative

choices.

2. Planning gives life to an

organization, as it creates a unity

of purpose, gets people involved

in implementing the plans,

reduces the elements of risk and

uncertainty, utilises the

resources of the organization

 effectively without any wastage

and improves the competitive

strength of the company.

3. Planning provides ample steps

for flexibility to lesson the

danger of losses through

unexpected events. Principle of

flexibility is making minor

corrections (which are in built)

from deviation of the plans;

whereas navigational change

involves withdrawing from the

original goals and redrawing the

entire plan once again.

4. Decision-making is in between

the two variables, “Almost

correct” and "Probably wrong”.

This means there is always an

 element of uncertainly and risk

and the process of narrowing

down the gap between the above

said variables is called as

Decision-making. Herbert A

Simon brings the concept of

‘satisfieing’ or ‘bounded

rationality’ that considers all the

limiting resources possible and

take a rational decision.

5. Yes, there is a possible danger

of group decisions leading to

dilution of quality by a single

dominating person or a few

dominting group. Although there

are many disadvantages, an

ideal group decision leads to

analysis of a good number of

 facts & ideas from all the

members of the group and

ultimately arrives at the best

decision.

3.20 EXERCISES AND QUESTIONS

1. Define Planning.

2. Explain the following principles.

a)Principle of navigational

change.

b)Principle of limiting factor.

c)The Principle of Primacy.

3. What is Strategic Planning?

Explain Delphi method and

Brainstorming.

4. Discuss the nature and scope of

planning.
 5. What are the components and

characteristics of strategic

planning?

6. What are the types of plans?

7. Discuss the various forecasting

techniques.

8. Discuss the various steps in

planning along with the

principles involved in planning.

9. Considering the advantages and

limitations of planning how will

you make planning effective?

10. Define decision-making.

11. Decision-making is process of

“intelligence, design and choice

activities” -explain.
12. What are the advantages and

disadvantages of group-decision-

making?

13. Distinguish between adaptive

and analytical decisions.

14. What is experimentation?

15. Decision-making is rudimental to

management” - discuss.

16. What are the various methods of

decision-making?

17. How will you make effective

decisions?

18. What psychological steps you

would take to mentally prepare

yourself for developing

alternatives in decision-making.
19. To-day's decisions affect the

futurity of its results” - discuss.

20. Explain the process of decision-

making.

21. Discuss the various types of

decisions.

3.21 FURTHER READINGS

1. Holt David, Management,

Principles and Practices :

Prentice Hall, 1995.

2. Griffin Ricky W. Management,

Houghton Mifflin Company, 1993.

3. Certo Samuel, Allyn and Bacon,

Modern Management, 1994.

4. Schermerhorn John,

Management, John Wiley & Sons,

2006.
 UNIT 4

ORGANIZING

STRUCTURE

4.0 Introduction

4.1 Unit Objectives

4.2 Organization an Overview

4.3 Importance of Organizing

4.4 Guidelines for Effective Organizing

4.5 Organizational Objectives

4.6 The Organizational Process

4.7 Formal and Informal Organization

 4.8 Summary

4.9 Answers to Check Your Progress

4.10 Exercises and Questions

4.11 Further Readings

4.0 INTRODUCTION

Organizing is the second function of

management and involves primarily

creating of activities and assigning

suitable workers to complete these

activities successfully, efficiently and

effectively. Organizational objectives

are well defined and the activities

are primarily undertaken to achieve

these objectives. Activities that are

well organised and coordinated,

result in making optimal use of

resources and reduce or eliminate

waste and idle times of both the

machines and the workers. There is

a well-structured chain of command

and authority that either flows from

top to bottom or is properly

delegated to the lower levels of the

managerial hierarchy. The

organizational structure also

determines the levels of management

and the tendency today is towards

fewer levels of management and such

organizations are known as lean

organizations.
 4.1 UNIT OBJECTIVES
• To understand important of

organization

• To explore the process of

organization

• To identify the difference

between formal and informal

organizations

• To learn the effective guidelines

in organizating departments
•

4.2 ORGANIZATION AN OVERVIEW

The word organization is used and

understood widely in our daily lives.

It has been defined in a number of

ways by psychologists, sociologists,

management theorists as well as

practitioners. A definition of

organization suggested by Chester

Barnard, a well-known management

practitioner, nearly sixty years ago

still remains popular among

organization and management

theorists. According to him, an

organization is, “a system of

consciously coordinated activities or

efforts of two or more persons”. In

other words, a formal organization is

a cooperative system in which people

gather together and formally agree to

combine their efforts for a common

purpose. It is important to note that

the key element in this rather

simplistic definition is ‘conscious

coordination’ and it implies a degree

of formal planning, division of labour,

leadership etc. For example, if two

individuals agree to push a car out

of a ditch, as a one time effort, then

these individuals would not be

considered as an organization.
However, if these two individuals

start a business of pushing cars out

of ditches.

More recently, Bedeian and Zamnuto

have defined organizations as ‘social

entities that are goal directed,

deliberately structured activity

systems with a permeable boundary.’

There are four key elements in this

definition.
4.2.1. Social entities The word ‘social’

as a derivative of society,

basically means gathering of

people as against plants,

machines, buildings are -

necessary contributors to the

existence of the organization.

Organizations will cease to exist

if there were no people to run

them, even if other things

remain. For example, if

everybody resigns from a

company and no one is replaced,

then it is no longer an

organization even though all

material assets of the company

remain until disposed off. On the

other hand, there are

organizations such as

neighbourhood associations

which have only people in it and

without any physical assets.

Accordingly, it is the people and

their roles that are the building

blocks of an organization.
4.2.2 Goal directed All efforts of an

organization are directed towards

a common goal. A common goal

or purpose gives organization

members a rallying point. For

example, Ross Perot, Chief

Executive Officer (CEO) of

Electronic Data Systems (EDS),

recommended when he joined

General Motors, that ‘GM should

strive to become the finest car

manufacturer in the world. This

became the common goal of all

GM employees. While the primary

goal of any commercial

organization is to generate

financial gains for its owners, this

goal is interrelated with many

other goals, including the goals

of individual members. For

example, General Motors may

have the commercial goal of

producing and selling more cars

every year, community goal of

reducing air pollution created by

its products and the employee

goals of earning and success

achievement.’
4.2.3. Deliberately structured

activity systems By

systematically dividing complex

tasks into specialised jobs and

categories of activities into

separate departments, an

organization can use its

resources more efficiently.

Subdivision of activities achieves

efficiencies in the workplace. The

organizations are deliberately

structured in such a manner so

as to coordinate the activities of

separate groups and departments

for the achievement of common

purpose.

4.2.4. Permeable boundary All

organizations have boundaries

that separate them from other

organizations. These boundaries

determine as to who and what

is inside or outside the

 organization. Sometimes, these

boundaries are vigorously

protected. However, the

dynamics of the changing world

has made then less rigid and

more permeable in terms of

sharing information and

technology for mutual benefit.

For example, IBM joined with

both Motorola and Apple

Computers in 1993 to bring out a

new Power PC chip in the market.

4.3 IMPORTANCE OF ORGANIZING

Organizing is the second major

function of management. If planning

involves the determination and

achievement of objectives, then

organizing is the process of selecting

and structuring the means by which

those objectives are to be achieved.

The organising process deals with

how the work is to be divided and

how coordination of different aspects

is to be achieved and so on. We are

truly a society of organizations. All

work has to be organised efficiently

in order to use the resources

available to us in the most efficient

manner.

One reason for organizing is to

establish lines of authority. This

creates order within the organization.

Absence of authority almost always

creates chaotic situations and chaotic

situations are seldom productive.

Hence, the importance of organising

well. Effective organizations include

coordination of efforts and such

coordination results in synergy.

Synergy occurs when individual or

separate units work together to

produce a whole greater than the

sum of parts. This means that 2+2

= 5. Furthermore, organising is
important to improve communication

among the members. A good

organizational structure clearly

defines channels of communication

among the members of the

organization. Proper and correct

communication is one of the keys to

success.

Most people believe that

organizations are social entities and

that social forces such as politics,

economics, and religion shape

organizations. Some organizational

theorists suggest the opposite. They

say that it is the large organizations

which influence politics and

economics. Social class is determined

by rank and position within the

organization. Organistaion is the life

of living. An organized family is more

productive than a disorganised

family. All families depend on

business organizations for their

livelihood.

Organizations shape our lives, and

better managers can shape effective

organizations.

However, it is not just the presence

of organizations that is important but

the knowledge of organizing.

Consider how Olympic Games are

organised or how large airports are

built. Without proper organization of

people and resources the project

could not be successful. Consider the

organization of forces and resources

during the Gulf War of 1991. All air

assets reported to a single army

General. This enabled the

extraordinary coordination of up to

three thousand flights a day. A new

problem arose somewhere in the Gulf

every minute but efficient

organization of resources could solve

all these problems.

 4.4 GUIDELINES FOR EFFECTIVE
ORGANIZATION

There are some established

guidelines that are common to all

organizations that are structured in

a classical form. The classical form

means a bureaucratic structure

where there is a hierarchy of power

and responsibility and the directions

primarily flow from the top

management to the lower levels of

workers through its hierarchical

ranks. These guidelines are :

4.4.1. The lines of authority should

be clearly stated and should

run from top to bottom of the

organization This principle

principle is known as the scalar

 principle and the line of

authority is referred to as chain

of command. The major

decisions are made and policies

are formulated at the top

management level and they

filter down through the various

management levels to the

workers. The line of authority

should be clearly established so

that each person in this chain

of command knows his authority

and its boundaries.

4.4.2. Each person in the

organization should report to

only one boss This is known

as the principle of ‘unity of

command’ and each person

knows who he has to report to

and who reports to him. This

process eliminates ambiguity

and confusion that can result

when a person has to report to

more than one superior.

4.4.3. The responsibility and

authority of each supervisor

should be established clearly

and in writing This will clarify

the exact role of the supervisor

as to the limits to his authority.

Authority is defined as ‘the

formal right to require action

from others', and responsibility

is the accountability of that

authority. With clearly defined

authority and responsibility, it

will be easier for the supervisor

to trace and handle problems

and make quick decisions when

necessary.

4.4.4. Managers are responsible for

the acts of their

subordinates The manager or

the supervisor cannot dissociate

himself from the acts of his

subordinates. Hence, he must

be accountable for the acts of

his subordinates.
4.4.5. Authority and Responsibility

should be delegated as far

down the hierarchical line as

possible This will place the

decision making power near the

actual operations. This would

give the top management more

free time to devote to strategic

planning and overall policy

making. This is speaciatly

necessary in large complex

organizations. This principle is

known as ‘decentralisation of

power’ as against centralised

power where all decisions are

made at the top.

4.4.6. The number of levels of

authority should be as few as

possible This would make the

communication easier and clear

and the decision making faster.

A longer chain of command

generally results in ‘run-

arounds', because the

responsibilities are not clearly

 assigned and hence become

ambiguous. According to

Gilmore, most organizations do

not need more than six levels of

supervision including the level

of the president.

4.4.7. The principle of

specialisation should be

applied wherever possible

Precise division of work

facilitates specialisation. Every

person should be assigned a

single function wherever

possible. This rule applies to

individuals as well as

departments. The specialised

operations will lead to efficiency

and quality. However, each area

of specialisation must be

interrelated to the total

integrated system by means of

coordination of all activities of

all departments.
4.4.8. The line function and the

staff function should be kept

separate The overlapping of

these functions will result in

ambiguity. Line functions are

those that are directly involved

with the operations that result

in the achievement of the

company objectives. Staff

functions are auxiliary to the

line function and offer

assistance and advice. For

example, legal, public relations

and promotional functions are

all staff functions. The activities

of line managers and staff

managers should be

coordinated so as to achieve

synergetic results.

4.4.9. The span of control should

be reasonable and well

established The‘ span of

control’ determines the number

of positions that can be

coordinated by a single
 executive. It could be narrow

where are relatively few

individuals who report to the

same manager or it could be

wide where many individuals

are under the supervision of the

same manager. However, such

a span of control would depend

upon the similarity or

dissimilarity of the subordinate

positions and how

interdependent these positions

are. The more interdependent,

the more difficult is the

coordination. In such

interlocking positions, it is

advisable to have no more than

five or six subordinates working

under any one executive'.

4.4.10. The organization should be

simple and flexible It should

be simple because it is easier to

manage and it should be flexible

because it can quickly adopt to

changing conditions. It should

be such that it can easily be

expanded or reduced as the

times demand. Furthermore,

simplicity would make the

communication much easier,

faster and more accurate, which

is necessary for successful

organizations.

While these principles, in

general, apply to classical

organizations as proposed by

Frederick Taylor and Henry

Fayol, and have been adopted

to facilitate administration,

some more recent principles

have evolved which have

become an integral part of most

modern organizations. These

new principles of participative

decision making, challenging

work assignments, management

by objectives, decentralization

of authority and so on have

been integrated with the

traditional ones. The idea is to

stimulate creativity, encourage

 growth and optimise the utility

of all resources in reaching the

goals of the organization.

4.5 ORGANIZATIONAL OBJECTIVES

The planning process for all

organizations is built on the

framework of the statement of formal

mission, specific objectives that are

established on the basis of the

mission statement and the plans that

can be developed to achieve these

objectives, as shown below:

The need for planning exists at all

levels of organizational hierarchy,

but is extremely important at higher

levels where the potential for impact

on organizational success is greater.

Once the upper level strategies are

well defined and understood, then

the lower level managers can plan

to accomplish the objectives of their

units.

4.5.1. The mission

The mission of an organization is the

very reason for its existence. It sets

out why the organization exists and

what it should be doing. For example,

the mission of a national airline might

be defined as ‘satisfying the needs

of individual and business travelers

for high-speed transportation at a

reasonable price to all the major

domestic population centres.’

The purpose of the mission statement

is to guide managers, work units and

individual employees throughout the

organization. A clear mission

statement is concise, focused,

worthy, imaginative and realistic.

In addition to the mission statement,

managers today are increasingly

recognizing the need to have ‘vision’

of what the organization is to

become. Most leaders are expected

to be ‘visionary', who can ‘see’

beyond the obvious. Vision is general

directional and motivational guidance

for the entire organization. It should

have an emotional element in it. For

example, Steven Job's vision for

Apple Computer was 'to make a

contribution to the world by making

tools for the mind that advance

mankind.’ This was a compelling

statement of direction which was

emotionally charged. The mission of

the organization adds specificity to

vision.

The goals of an organization are

refinements of its mission. They are

open-ended statements of purpose

which help describe an organization's

philosophy. Goals are more specific

than mission but address, in general,

such key issues as market share,

productivity, profitability, efficiency,

growth, physical and financial

resources and so on. Objectives are

specific statements about anticipated

end-results of any activity. They

further define the organizational

goals. For example, the goal of a

college may be to increase the

number of students. The objective

would be to increase the number of

incoming students by 5 per cent per

year. Similarly, if the goal is to

increase sales, then the specific

objective might be to increase sales

by 10 per cent in the first year.

4.5.2. Characteristics of sound

objectives

Sound objectives should have five

basic characteristics. These are :

1.In 3.
2. Time bound
writing Measurable
 4. 5. Mutually
Attainable supportive

Fig. Characteristics of Sound Objectives

Organizational objectives should be

stated in writing. They should be

specific and communicated clearly to

all so that all members of the

organization are aware of what is

expected of them. This eliminates

ambiguity and confusion. Placing

objectives in written form increases

people's understanding of them and

thus leads to commitment.

Objective should be time bound. A

time limit must be set for

achievement of given objectives.

They cannot be open-ended.

Employees need to know the time

frame in which an objective should be

accomplished. Also, putting deadlines

gives workers a sense of challenge

and they take pride in meeting these

challenges. However, this time frame

must be realistically established.

Objectives should be realistic and

attainable. Overly optimistic but

unrealistic objectives serve as moral

deflators and hence are ineffective.

On the other hand, they should not

be too easily achievable, for this

would provide little challenge to

workers. They should be attainable

but challenging.

Multi-objectives should be mutually

supportive. One objective should not

be achieved at the cost of the other.

Objectives should be prioritized so

that those that with top priority are

achieved first. However all objectives

should be set in a manner so that no

objective is to be given up in order to

achieve another.

For objectives to be realistic and

attainable, they should be

established with the following

considerations.

a. Environmental conditions.

These conditions include the

availability of raw materials,

skilled labour, energy and other

resources. Long-range objectives

must ensure that these resources

will not become scarce.

Additionally, objectives must be

revised, if necessary, in the light

of new technological

developments.

b. Economic conditions. The

current economic conditions and

economic trends must be

seriously considered while

setting objectives. For example,

 the objective of expanding

during a period of recession may

not be advisable. The economic

fluctuations must be assessed

and predicted accurately.

c. Internal resources. There is no

point in establishing an objective

if we do not have the means to

achieve it. Accordingly,

objectives should be set relative

to the company's resources of

capital, skilled personnel,

physical equipment and so on.

d. Anticipation of future events.

Future events, being most

unpredictable, have a major

impact on the realization of

objectives. Future opportunities

 and threats must be identified as

far as possible and these must

be incorporated in organizational

objectives plans.

4.5.3. Hierarchy of objectives

While the central management is

primarily concerned with the

organizational mission and

establishing general goals and

strategies, establishment of

objectives exist at all levels of

organizational hierarchy. The broader

aims of the company are broken

down into hierarchical segments of

divisional objectives, departmental

objectives, work group objectives

and individual employee objectives.

Each higher level objective is

supported by one or more lower level

objectives. This identification enables

each member of the organization to

relate his contribution to the overall

objectives. This helps in the proper

alignment of objectives at all levels

of the organization with the central

aim of the organization.

4.6 THE ORGANIZATION PROCESS

The organizing function is extremely

important, because once the

objectives of the organization and

the plans have been established,

they become the primary

mechanisms with which managers

activate such plans. ‘Organizing’ is
the function of gathering resources,

establishing orderly uses for such

resources and structuring tasks to

fulfill organizational plans: It

includes the determination of what

tasks are to be done, how they are

to be grouped, who is going to be

responsible to do these tasks and

who will make decisions about them.

The process of organizing consists of

the following five steps.

Fig. Five steps in the organizing process

1. Reviewing plans and

objectives. The first step for the

management is to reflect on the

organizational goals and

objectives and its plans to

achieve them so that proper

activities can be determined. For

example, if a high class

restaurant is to be opened in an

elite area, then the management

must establish objectives and

review then so that these are

consistent with the location of

the restaurant and the type of

customers to be served.

2. Determining activities. In the

second step, managers prepare

and analyze the activities needed

 to accomplish the objectives. In

addition to general activities

such as hiring, training, keeping

records and so on, there are

specific activities which are

unique to the type of business

that an organization is in. For

example, in the case of the

restaurant, the two major

activities or tasks are cooking

food and serving customers.

3. Classifying and grouping

activities. Once the tasks have

been determined, these tasks

must be classified into

manageable work units. This is

usually done on the basis of

similarity of activities. For

example, in a manufacturing

organization, the activities may

be classified into production,

marketing, finance, research and

development and so on.

These major categories of tasks

can be subdivided into smaller

units to facilitate operations and

supervision. For example, in the

area of serving customers in the

restaurant, there may be

different persons for taking

cocktail orders, for food orders

and for clearing the tables. For

cooking food, there may by

different cooks for different

varieties of food.
4. Assigning work and

resources. This step is critical

to organizing because the right

person must be matched with the

right job and the person must

be provided with the resources to

accomplish the tasks assigned.

The management of the

restaurant must determine as to

who will take the orders and who

will set as well as clear the tables

and what the relationship

between these individuals will

be. Management must also make

sure that adequate resources of

food items, utensils and cutlery

are provided as necessary.

5. Evaluating results. In this final

step, feedback about the

outcomes would determine as to

how well the implemented

organizational strategy is

working. This feedback would

also determine if any changes

are necessary or desirable in the

organizational set-up. For

example, in the case of the

restaurant, complaints and

suggestions from customers

would assist the manager in

making any necessary changes in

the preparation of food, internal

decor of the restaurant or

efficiency in service.
 4.7 FORMAL AND INFORMAL
ORGANIZATION

Organizations are classified on formal

and informal basis. In the case of

a formal organization, the position,

authority, responsibility and

accountability of each level are

clearly defined. The relationship

among the people in the organization

is defined by rules, polices and other

regulations. The informal

organization arises from the social

interaction of people in the

organization. The people cut across

forma! channels and communicate

amongst each other. It is formed to

meet the personal needs of the

individuals in the group. It arises
spontaneously and naturally and is

not established by managers

formally. The informal relationships

not appearing on an organization

chart-might include the ‘coffee

regulars', 'Smokers', first floor

crowd, ‘welding-shop crowd', etc.

Informal organization is all-pervasive

and is found in every Organization.

In any organization there are two

types of groups which are classified

on the basis of the structuring. These

are formal and informal. Formal

groups are created and maintained to

fulfill specific needs or tasks which

are related to the total organizational

mission. The formal groups are

consciously and deliberately created.

Such groups may be either

permanent in the form of top

management team such as board of

directors of management

committees, work units in the various

departments of the company, staff

groups providing, specialised

services to the organization and so

on. Some times the formal groups

may.be constituted on temporary

basis for fulfilling certain specified

objectives. When such objectives are

fulfilled they disappear. For example,

temporary committees, commission,

task force groups etc. Informal

groups on the other hand are created

in the organization because of

operation of social and psychological

forces operating at the work place.

Members create such groups for their

own satisfaction and their working is

not regulated by the general frame-

work organizational rules and

regulations. The differences between

formal and informal organizations are

as follows:

Nature of Formal & informal organizations

Formal Informal

Created

Created because of
consciously psychological
Origin
and forces existing

deliberately at the work

place.

Legitimate
Created for
objectives of
Purpose personal
the
benefits.
organization
 Always small
May be quite
Size in size
large in size
(overlapping)

This depends

upon People give

organizational authority to
patterns. leaders

Authority Members because they

derive derive the
authority maximum

through formal benefits.

delegation.

Maintain group
Stable, exist
cohesiveness,
for a long
quite unstable
Nature of period,
in nature.
groups membership is
Formation and
specified
functioning
through
depends upon

the value

systems and

general liking,

and disliking
organizational
and other
process.
personality

features of

members

concerned.
 Members may
Many form
subgroups in a alternative
singe groups. But
Number of
organization, the individuals
groups
eg. Depts. may be
Committees, members of
etc. many informal

groups i.e;

All The

communcations communication

in the fomal pass through

Communications
groups are informal

expected to channels, -

pass through oral only.

these specified
channel ie.,

through the

chain of
command, eg.
Oral and

written.
 The formal
group can be

abolished at

any time. The informal

When the groups are

purpose of the difficult to

formal-group is abolish by

over these can organizational

Abolition
be abolished by process. The

organisational management

process. The cannot abolish

management informal

has the groups.

authority to
abolish the

formal groups.

Behaviour is
governed by

formal rules
Behaviour of
and
members
regulations.
Behaviour of governed by
The rules are
members norms, beliefs
normally
and values of
directed
the groups.
towards
rationality and
efficiency.
Committee organization (Formal

groups) : Theo Haiman and William

G. Scott, define a committee, as “A

group of people who function

collectively”. According to Koontz and

Odonnel, “A committee is a group of

persons to whom, as a group, some

matter is committed”. Committees

may also be referred to as team,

commissions, boards, groups or task-

forces. They perform many functions:

viz, service, advisory, co-ordinating,

informational or final decision-

making.
Advantages:

1. Combined and integrated

judgment of various personalities

of eminent experience and

knowledge leads to effective

decision- making.

2. Committees reduce conflict and

promote co-ordination: It is a

formal tool for horizontal

communication. In an inter-

departmental meeting,

production department knows

the problem of sales department

and viceversa.
 3. Participation and motivation:

More and more participation

leads to motivation amongst

members and provides room for

individual development besides

over all improvement.

Disadvantages:

1. Delayed decisions: Committees

are indeed time-consuming and

costly, Decisions are

unnecessarily delayed.

2. Divided responsibility: Group

decisions make no single

individual responsible or

accountable.
 3. Biased decisions: Sometimes the

decisions are one-man

dominated, or minority

dominated, and there is a chance

of baised decision.

Associated problems of informal

organization : Informal groups arise

and persist because they perform

useful services for their members.

1. It maintains the ‘cultural

values and life-style’ of the

group. But the problem

associated with this is there is

increasing tendency for the

group to become overly

protective of its lifestyle and

there is resistance to change.

2. It provides ‘recognition,

status’ and satisfies the

affiliation needs of the people

and there is a social satisfaction.

The problem arising out of this

function is “Role Conflict”. For

e.g. during coffee breaks, if the

employees spend extra fifteen

minutes in socialising, the

employer may be unhappy and

role conflict arises between the

management and employees.

3. Informal communication paves

way for excellent and ‘complete

communication system'. But

the problem associated is that

there will be too much of

communication, i.e. RUMOUR.

 4. There is a ‘social control’ i.e.,

the behaviour of others is

regulated and controlled. But the

problem would be ‘conformity to

group norms'. They apply power

either ‘for’ or against the

organization or the Union.

Benefits of informal organization

1. It makes a more effective total

system.

2. It lightens work load on

Management.

3. It helps to get the work done

effectively.

4. It encourages co-operation.

5. It gives stability and satisfaction

to work groups.
 6. It provides a useful channel of

communication.

7. It provides a safety valve for

employees emotions.

8. It encourages managers to plan

and act more carefully.

9. The communication system is

complete.

10. There is better social control.

Making organising effective : In

order to make organizing effective,

one should embark upon the common

mistakes that occur in the process of

organising.

Common mistakes in organising :

Faulty planning : A manager must

always plan for the right kind of

organization structure that will serve

the future needs and what kinds of

people will best serve an

organization. Planning is a

prerequisite in the case of building

the organization.

Lack of clarification of

relationships : The authority

responsibility relationships must be

clearly defined. Lack of clarification

leads to a mere group of individuals

who are jealous, insecure and who

are jockeying for position and favour.

Failure to delegate authority :

This is common complaint which is

prevailing in most of the

organizations. This leads to decision-

making with many bottlenecks,

overburdening of top executives with

many trivial issues, and under

nourishment of lower level managers.

Too much delegation : Excessive

delegation leads to development of

independent organizational satellites

causing organizational failures. This

is done by some managers with

excessive zeal to delegate their

powers. Too much of delegation is

also dangerous.

Holding people responsible who

do not have authority : Superiors

hold their subordinates responsible

for results without giving them the

authority to accomplish them. For

this purpose, the superiors must

clearly clarify the roles of their

subordinates and give them sufficient

authority.

Granting authority without

exacting responsibility : A

significant cause of -mismanagement

is the assignment of authority

without holding a person responsible.

When once authority is delegated to

a subordinate, responsibility cannot

be delegated. The superior is

responsible for all the activities of

the subordinates. However, all the

subordinates to whom authority has

been delegated must be willing to be

held responsible for their actions.

4.8 SUMMARY
1. Organizing is the second function

of management and involves

primarily creating of activities

and assigning suitable workers to

complete these activities

successfully, efficiently and

effectively.

2. There are ten guidelines that are

common to all organizations that

are structured in a classical form.

The classical form means a

bureaucratic structure where

there is a hierarchy of power and

responsibility and directions

primarily flow from the top

management to the lower levels

 of workers through its

hierarchical ranks.

3. The planning process of all

organizations is built on the

framework of the mission,

objectives and plans.

4. The organizations process

consists of sequential steps of

reviewing plans and objectives,

determining relevant activities,

grouping these activities,

assigning personnel to these

activities and evaluating the

results of the efforts. Feedback

would determine as to how well

activities have been performed.

5. Informal organizations after

develop within the formal

 organization. These assist in

implementing the policies,

procedures and rules established

by the formal organizational

structure,

6. For any formal organization to

be effective, these should be no

more than five or six

subordinates under any

supervisor, known as span of

management.

Check Your Progress

1. Define an organization can you

call a group an organization?

2. What are the guide lines of an

effective organisation?
 3. Differentiate the Mission of a

University and a pharone

company.

4. Can you achieve all objectives

in life?

5. Distinguish formal andinformal

organization.

4.9 ANSWERS TO CHECK YOUR

PROGRESS

1. An organization is a system of

consciously coordinated

activities or efforts of two or

more persons. These activities

have to result in the achievement

of a common organizational goal.

They are goal-directed social

entities and involve some degree

of formal planning, division of

labour, leadership and so on.

A group of people simply being

together does not constitute an

organization. For example, a

group of friends going together

for shopping would not constitute

an organization even if the goal

of this group is the same, which

is shopping but is not the

common goal. Similarly, a

busload of people going for a

picnic would not be an

organization, because they only

have the individual goals of

enjoying themselves.

A kitty party is not an

organization, but simply a group

 of members known to each

other, getting together to play

games and enjoy themselves.

2. An effective organization is one

which arranges its activities in

such a manner that the resources

at its disposal are optimally

utilized. The waste is reduced

and the idle times for machines

and people are minimized. To

make organizations more

effective, the following

guidelines may be adopted.

a. Lines of authority should be

clearly stated and should run

from top to bottom,

b. Each person in the

organization should report

only to one boss.

c. The responsibility and

authority of each person

should be defined and

communicated very clearly.

d. The authority and

responsibility should be

delegated as far down the

hierarchy as possible.

e. The organization should be

as flat or lean as possible.

f. The line and staff functions

should not be mixed.

g. The principle of

specialization should be

applied as far as possible.

3. A mission is the reason for an

organization to exist. It defines

the organization in terms of what

it is and what it does. The

mission of a pharmaceutical

company would be to provide

medicines for health purposes.

The mission of a university would

be to provide education to

students. Some people have a

specific mission in life. Mother

Teresa's mission in life was to

help the sick and the poor. Your

mission in life may be to serve

your country.

4. In an organizational sense all

objectives should be sound and

achievable. For example, a

 college cannot have one of its

objectives as increasing the

number of incoming students

each year by 50 per cent. Such

an objective is neither sound nor

achievable. At a personal level,

day-dreaming is quite common

among people. People dream of

bigger things in life and

sometimes make their objectives

much higher than their

resources. Even though some

people have achieved the

unachievable, most often such

objectives do not come to

fruition.

5. A formal organization typically

consists of a classical
hierarchical structure where the

position, responsibility, authority

accountability and the lines of

command are clearly defined and

established. It is a system of

well-defined jobs with a

prescribed pattern of

communication, coordination and

delegation of authority.

The informal organization comes

into existence due to social

interactions and interpersonal

relationships and exists outside

the formal authority system

without any set rigid rules. These

interpersonal relationships

create a bond of friendship and

this togetherness can have a

 powerful influence on

productivity and job satisfaction.

Members help each other and

protect others interests.

4.10 EXERCISES AND QUESTIONS

1. How would you define an

organization?

2. How do you define an effective

organization?

3. A mission is defined as ‘the

reason for existence'. Do you

agree with it? Is this definition

consistent with your own mission

in life?

4. What do your understand by

hierarchy of objectives? Explain.

5. Define committee.
6. Distinguish between formal and

informal organization,

4.11 FURTHER READINGS

1. . Robbins Stephen P.,

Management, Prentice Hall,

1991.

2. Kreitner Robert, Management,

Houghton Mifflin Company, 1995.

3. Bedeian Arthur and Raymond

Zamnuto, Organization: Theory

and Design; Dryden Press, 1991.

4. Daft Richard L., Organization

Theory and Design; West

Publishing Company, 1995.

5. Griffin Ricky W. Management;

Houghton Mifflin Company, 1993.

 UNIT 5

DELEGATION

STRUCTURE

5.0 Introduction

5.1 Unit Objectives

5.2 Delegation of Authority

5.3 Centralisation and Decentralisation

5.4 Departmentation

5.5 Span of Management

5.6 Line and Staff

5.7 Summary
 5.8 Answers to Check Your Progress

5.9 Exercises and Questions

5.10 Further Readings

5.0 INTRODUCTION

The concept of power and authority is

the beginning of proper organization.

This unit discusses about the various

principles of effective delegation of

authority, centralization,
decentralization and the various

types of departments. How many

subordinates a manager can control

is a vital question, which is discussed

in this unit. The various factors

governing the line and staff conflict

are also discuss.

 5.1 UNIT OBJECTIVES

• Understand the process of

delegation of authority.

• Understand the factors

determining centralisation,

decentralisation and department.

• Learn the nuances of Line & Staff

conflict.

5.2 DELEGATION OF AUTHORITY

Power and authority : Before

embarking upon the concept of

Delegation of Authority, it will be

useful to distinguish between

authority and Power.

Power is basically much broader

concept than ‘Authority', ‘Power’

means the ability of the individual

to inculcate drive and zeal in the

members of the group so that they

strive hard to achieve the

organizational goal. The individual is

also able to influence the beliefs of

other persons in a groups, but

authority is the right to exercise

discretion in decision making

affecting the other members of a

group. It is rather used in a narrow

sense and can also be treated as one

type of power.
Types of power :

Legitimate power : It normally

arises from position which is

legitimate. For e.g; The son of a big

private owner automatically becomes

the legal heir of the property and

after his father he becomes the

owner of the private business.

Expert power : The power derived

from the power of knowledge or

power of expertness. Doctors,

Advocates and Professionals enjoy

such powers.

Referent power : It is the influence

which people or groups may exercise

because people believe in them and

their ideas. A movie star or a military

hero might possess such powers.

Reward power : This power arises

from the ability of the people to grant

rewards. For e.g. professors or

purchasing agents.

Co-ercive power : It is the power

to punish a subordinate. It normally

arises out of legitimate power or

reward power.

Delegation: A manager cannot do all

the jobs by himself alone. Therefore

he assigns some jobs to his

subordinates and also gives them

necessary authority to make

decisions within the area of their

assigned duties. This downward

pushing of authority is called

delegation of authority.
Delegation takes place when one

person gives another person the right

to perform work on his behalf and in

his name. Delegation is the process

of entrusting part of the work by the

superior to his subordinates.

Process of Delegation :

Step 1: Assigning responsibility: In

this step the subordinate is given the

responsibility of doing a task with

an obligation to perform as directed

by the superior. Ofcourse the

subordinate will be given the

necessary assistance and training for

the new assignment.

Step 2 : Granting authority: After

getting the responsibility to do a job,

he must have some authority to get

resource from the organization, eg.,

materials, equipment, labour etc.

Hence the subordinate is given the

authority.
Step 3 : Creating accountability:

Here the manager creates

“subordinate -accountability” to the

proper accomplishment of the task.

Advantages of Delegation :

1. It relieves the manager from his

heavy workload.

2. It leads to better decisions.

3. It speeds up decision-making.

4. It helps train subordinates and

builds morale.

5. It helps create a formal

organization structure.
Barriers to effective delegation :

1. Fear of being exposed - some

inefficient managers feel that

their weaknesses would be

revealed.

2. Difficulty in briefing the actual

requirement.

3. Lack of confidence in

subordinates.

Fear of loss of power.

4. 'I am ok, you are ok’ attitude of

the superiors.

5.2.1. Principles of delegation of

authority

Principle of delegation by results

expected: There is no meaning in

holding a person responsible without

giving him adequate authority. The

authority should be adequate enough

to ensure their ability to accomplish

the results expected.

Principle of absoluteness of
responsibility: Here the superiors

can only delegate authority but

ultimately he cannot delegate

responsibility. Authority can be

delegated but RESPONSIBILITY

can NEVER be delegated. The

responsibility of subordinates to their

superiors for performance is

absolute, and superiors cannot

escape from responsibility for. the

activities of their subordinates.

Principle of ‘parity’ of authority

and responsibility: This principle

implies that there must be a balance

-of authority and responsibility. One

cannot be held responsible for a task

where he has limited authority. At

the same time too much activity with

too little responsibility is also

dangerous. The responsibility for

action cannot be greater than that

implied by the authority delegated

nor should it be less.

Principle of unity of command: If

there is a single superior to listen

to, the conflicting instructions will be

less. The subordinate will also have

a greater feeling of personal

responsibility for results.

Authority-level principle: A

manager who has the authority lo

take certain decisions must

necessarily use his discretion to take

those decisions and should not

always refer upward in the

organization structure.

Principle of functional definition:

The more an individual or a

department knows the objectives,

tasks, authority and responsibility,

the ‘ more adequately an individual

or a department can contribute

toward accomplishing enterprise

objectives.
 5.2.2. The art of delegation

Managers fail because of poor

delegation. Researchers attribute to

the personal attitude of superiors in

delegating authority as the major

cause of managerial failures. Some

of the personal attitudes towards

delegation are

Lack of receptiveness: Some

manager always want their ideas,

thoughts and feelings to be respected

and would not like or digest other

people's ideas or suggestions. The

manager should have an open mind

to give other people's ideas a chance.

Willingness to let go: A small

entrepreneur who started his career

from a small mechanic might like to

take all the decisions even though

he has reached the top position. He

must be willing to release the right

to make decisions to subordinates.

A person who has reached the top

position in the ladder or growth

should not continue to take decisions

for the positions he had left long ago.

Willingness to let others make

mistakes: If a person makes

mistakes, the cost of making a

mistake or the loss incurred by the

mistake is a personnel investment. A

superior should not bluntly criticise

the subordinates but he should

carefully counsel the subordinates,

explain the objectives, polices,

guidelines and give sufficient

authority so that he does not make

mistakes any more.

Willingness to trust subordinates:

A manager should develop a trustful

attitude with the subordinates.

Willingness to establish and use

broad controls: After assignment of

tasks, the authority must be

delegated to the subordinates. But

they must always give a feedback

about their performance. There

should be objective standards, for

evaluating their performance. The

superiors should establish broad

standards of control to evaluate the
subordinates.
How to make delegation effective?

1. Right person for the right job:

The selection of the right person

from the light of the tasks to

be accomplished is very vital for

effective delegation.

2. Give sufficient authority to:

Make possible the

accomplishment of goals

established. Delegate authority

in the light of the results

expected.

3. Free flow of information:

There must be open lines of

communication, in order to make

 a free flow of information

between superior and

subordinates.

4. Establish proper controls:

Delegation should be

accomplished by techniques for

ensuring that the authority is

properly used.

5. Reward the subordinates: The

subordinates should be rewarded

properly for effective delegation

and successful assumption of

authority. Both -financial and

non-financial rewards must be

granted.

6. Before delegating authority,

make the nature and scope of the

task clear.
 7. Make the sub-ordinate clearly

understand the limits of his

authority.

8. Train the subordinates properly.

9. Create a climate of mutual trust

and goodwill.

10. Let there be no overlaps or splits

in delegation.

5.3 CENTRALISATION AND

DECENTRALISATION

The concepts of centralisation and

decentralisation deal with the

distribution of overall organizational

authority.

Centralisation : It is that condition

where in much of the decision-

making authority is retained at the

top of the managerial hierarchy.

Every organization must decide as to

how much decision-making authority

should be centralised in the hands

of the chief executive and how much

should be distributed among the

managers at the lower levels.

Centralisation, in short refers to

concentration of power at the top

level.

Advantages of Centralisation:

1. Centralisation is required for

family organizations.

2. It acts as a bondage between all

the departments.
 3. It enables quick decision-

making.

4. During periods of emergency,

centralisation helps an orgn. to

keep pace with the pace of the

situation.

5. The chief-executive is in touch

with almost all the departments

as he knows all the activities.

Decentralisation of authority :

This is a systemmatic effort to

delegate authority at the lower

levels. The terms delegation and

decentralisation might appear to be

the same thing. But there are some

differences.
1. Delegation is a process while

decentralisation is the end result

of delegation and dispersal of

authority.

2. Delegation refers to granting of

authority to individuals while

decentralisation refers to the

situation of the entire

organization.

3. Delegation is . vital and essential

to the management process.

Decentralisation is optional, in

the sense that it may or may

not be practised as a systematic

policy.

4. In delegation, a superior

continues to be responsible for

the work delegated to his sub-

 ordinates. In Decentralisation

the superior is relieved from his

responsibility for the work

decentralised and the

subordinate becomes liable for

that.

Earnest Dale mentions four criteria

to measure the extent of

decentralisation. He states that

decentralisation is greater, where

1. the number of decisions made at

the lower levels is greater.

2. the more important are the

decisions made at the tower

levels.
 3. the more is the number of areas

in which decisions can be made

at lower levels and

4. the fewer are the people to be

consulted and less is the

checking required on the

decisions made at the lower

levels.

Advantages of Decentralisation:

1. Decentralisation reduces

problem of communication and

red tape.

2. Decentralisation permits quicker

and better decision- making.

3. Managers are able to exercise

autonomy.
 4. Decentralisation leads to

competitive climate within the or

ganisation.

5. Decentralisation develops

capable managers.

6. Decentralisation facilitates
diversification of products.

7. Decentralisation improves

motivation.

8. It ensures control.

9. It relives managers from

information and work overload.

10. It enables managers to react

quickly to changes in the

external environment.
11. Decentralisation deals with

complex combinations of work

activities.

12. Decentralisation copes with

organizational change and

development.

Factors determining the extent of

decentralisation :

1. Decentralisation is suitable for

dynamic external environment

2. When the degree of maturity

level of employees, effective

decentralisation can be made

possible.

3. For larger organization

decentralisation speedens up

efficiency.
4. If the organization is old, the

degree of decentralisation is

more.

5. Philosophy of Top Management:

Some managers take’ pride is

taking decisions themselves.

Some take equal pride in

delegating. In some

organizations the top

managements philosophy is to

delegate.

6. Strategy and the organization's

environment. The strategy of an

organization influences the types

of its its environment and its

competition. These factors

determine the degree of

decentralisation.
 7. Control techniques: With higher

order techniques available for

control, more decentralisation is

possible.

5.4 DEPARTMENTATION

“A department is. a distinct area,

division or branch of an enterprise

over which a manager has authority

for the performance of specific

activitfes” - Koontzad Odonnel

There is no single one bestway to

organise. The appropriate type of

department depends up on the

situational factors like competition,

technology, business cycles, internal

environmental factors etc,

Departmentation :

Departmentation means grouping of

activities and people. The grouping

of activities and people into

departments facilitates organization

to expand further. There are so many

bases of departmentation. They are

based on 1) Function 2) Product 3)

Territory 4) Customer 5) Process 6)

Sequence

Departmentation by function :

‘Functional departmentation is the

most widely used basis for organising

activities and is now adopted in

almost every organization. Activities

are grouped under functions such as

production, finance marketing and

personnel.
Advantages :

a. This system of organization is a

logical reflection of functions

b. It follows the principle of

occupational specialisation which

facilitates efficiency in the

utilisation of people.

c. The power and prestige of major

functions are defended and

maintained by top managers.

d. It. also simplifies training, and

furnishes means of tight control

at the top.

Disadvantages :

a. Functional departmentation de-

emphasizes the overall

objectives. As every department

 manager aims or emphasizes on

his own department objectives

which is short sighted. This

narrows down the view point of

key personnel.

b. Limits development of general

managers.

c. It reduces co-ordination between

functions,

d. The responsibility for profits lies

at the top.

e. This kind of departmentation

makes it difficult to adapt quickly

to environmental changes.

Departmentation by product:

Large companies with many product

lines create managerial units based

upon the product. This is sometimes

called divisionalisation. For e.g.,

Hindustan Motors Ltd., has at its

Utterpara, Calcutta divisions two

divisions, one-Heavy Engineering,

the other Automobile division. It also

has at Trivellor, Tamilnadu; the Earth

moving equipment division.

Advantages :

1. It places attention on product

lines

2. It facilitates use of special study

of knowledge
 3. It improves co-ordination of

functional activities

4. It places responsibility for profits

at the division level

5. It permits growth of diversity of

products and services

6. Furnishes measurable training

ground for general managers

Disadvantages :

1. Requires more persons with the

General Manager qualities

2. Services like purchasing,

personnel, accounting etc., are

duplicated in each division thus

making such services

uneconomical
 3. Presents increased problems of

Top management control.

Territorial departmentation :

Departmentation based on territory

is rather common in enterprises that

operate over wide geographic areas.

Advantages :

1. It places responsibility at a lower

level and improves co-ordination

of activities at a regional level.

2. It places emphasis on local

markets and problems.

3. The local economies of operation

can be utilised.

4. Geographic departmentation

improves face-to-face

communication.

5. Since the manager of the

territory, although hails from a

lower level, carries out many

different functional and

managerial activities, this type of

organization provides a

measurable training ground for

general managers.
Departmentation by customer :

The concentration of efforts of the

company is sometimes focused on

customers and this results in

grouping of activities on the basis

of customers. This type of

departmentation is followed in

General Electric Company where

concentration of efforts on various

customers are made. These include

a) Aerospace, b) Consumption c)

Consumer products, d) Power

generation.
Advantages :

1. This type of departmentation

encourages concentration on

customers needs.

2. Develops expertness in the

concerned customer area.

Disadvantages :

1. It requires managers and staff

expert in customers’ problems

 2. Sometimes grouping of

customers and their definition

become diffcult. During periods

of development some groups of

customers may expand and

flourish but some customers may

disappear from the market.

Departmentation by process :

At the plant level, departments are

based on the process e.g.

department for milling, painting,

drilling etc.

Advantages :

1. This type of departmentation

uses specialised technology.

2. This utilizes special skills.

Disadvantages :

1. Co-ordination of departments is

difficult.

2. As the responsibility for profits is

at the top, the departments do

not focus their efforts on costs

and its reduction.

3. This type of departmentation is

unsuitable for developing general

managers.

Departmentation by number of sequence :

Sometimes alpha- numeric or time

sequence may act as basis for

departmentation. For e.g. Two book-

keeping sections, one, customers

starting from alphabets A to M and

the other from N to Z. This method of

departmentation is followed only at

the lowest level.

To conclude, there is no single best

way to organize, the appropriate type

of departmentation depends upon the

situation. The situational factors like

the companies’ objectives, people

involved, technology, the target

audience, internal and external

factors, affect the type of

departments. However,

accomplishment of company's goal

requires mixing the various forms of

departmentation. Which is other wise

called as ‘MATRIX’ - type of

departmentation.
 5.5 SPAN OF MANAGEMENT

Span of management : How many

subordinates can a manager

supervise or control directly? What

should be the range of control or

span of supervisor? Any manager has

limited time and energy and cannot

give attention and concentrate on a

large number of subordinates.

According to L.F. Urwick, “No

supervisor can supervise directly the

work or more than five, or at the

most six sub-ordinates "whose work

interlocks”. Some organizations have

wide span of management and some

have narrow span.

Narrow span of management :

Narrow span of management would

mean that there are more levels in

the organization structure vertically

and the superior has less number of

subordinates.

Advantages :

1. Close control. The manager has

a good control over the

subordinates as he may have

sufficient time available with
him.
2. Close supervision. By virtue of

the closeness or nearness with

the subordinates the superiors

can supervise them at every

point of time. The subordinate

can be closely monitored and

even trained.

3. Fast communication with

subordinates and superiors.

The communication will be

complete in all aspects as it

tends to move faster. Fast

communication leads to easy

flow of information which enables

quick decision-making.

4. Managers have more time to

devote for their future plans

Disadvantages :

1. Higher executive pay-role. As

the levels in the organizational

hierarchy increases, the

organization is forced to spend

heavily on managers.

2. Many levels of management.

The narrow span increases the

number of levels.

3. Supervisors tend to get more

involved in subordinates’

work. There is a possible danger

of the superiors doing

subordinates’ work.
 4. Excessive distance between

lowest level and top level. The

excessive distance makes it

difficult for the top management

to know the pulse of the

employees at the lowest level.

Wide span of management : Wide

span of management means that

there would be less levels in the

organizational hierarchy, more

number of subordinates for a

superior. This type of wide span of

management would suit to

organizations where the subordinates

take only regular, routine,

programmed decisions. The

subordinates would be guided more

by polices, procedures and standing

plans. The direct contact with the

subordinates is less.

Advantages of wide span of management :

Superiors are forced to delegate:

Due to lack of time the superiors are

forced to delegate authority to the

subordinates.

Clear policies must be made: As

the number of subordinates are more

they are to be guided by polices and

procedures only. The superiors are

thus forced to create clear polices.

Subordinates must be carefully

selected: As the superiors have no

time to be with the subordinates, the

subordinates will have to be efficient,

take initiative and work. Hence the

selection of the subordinates must be

carefully made.

Disadvantages :

1. Requires exceptional quality of

managers.

2. The superiors may not have

sufficient control.

3. Due to paucity of time, the

superiors may become decision

bottlenecks.
4.
 5.5.1. Factors determining
effective span

The number of subordinates a

manager can effectively manage

depends upon a number of factors. A

manager must be efficient to manage

the subordinates. He should be in a

position to command respect with his

subordinates. The time he spends

with his subordinates should be

minimum and the frequency of

contacts i.e., the number of times

the superior meets his subordinates

per day should be also minimum. The

following factors certainly influence

the time, the number and frequency

of such contacts.
1. Training : The more the

subordinates are trained, the

better they are equipped. This

results in increase in efficiency

of subordinates and naturally the

time that they spend with their

superiors is less. Where there is

wide span of management the

subordinates must be thoroughly

trained.

2. Delegation of authority : If the

superior is clear in delegating his

authority to undertake well

defined task and if the

subordinate is well trained, the

superior need not pay much

attention and time to the

subordinates. Where there is

 wide span, the superiors are

forced to delegate.

3. Planning is made essential :

In the case of wide span of

management, clear-cut plans

must be made. For example in

the c;isc of repetitive operations

a superior can (if plans are

clearly drafted) manage as many

as thirty subordinates.

4. Use of objective standards :

Where there is narrow span of

management, non-verifiable

objectives and standards can be

used. In the case of wide span

of management verifiable

objectives are used as standards.

5. Rate of change : Any change

in external environment is

immediately responded in the

case of narrow span of

management. Where as in the

case of wide span of

management policies and

guidelines are already fixed and

determined and it takes some

time to respond to the changes

in the environment and suitably

modify the policies.

6. Amount of personal contact

needed : Personal contact of the

superior with the subordinate is

indeed an essential aspect of

managing people.Meetings and

committees take a substantial

 portion of the executive time. In

the case of narrow span of

management where the

subordinates are less in number,

the superior has sufficient time.

But in the case of wide span of

management, the manager must

necessarily interact with the

subordinates, for the minimum

required period of time.

7. Communication techniques :

Wide span of management

necessarily warrants the use of

appropriate techniques such as

proper organization structure,

clear written and oral

communication.
 8. Quality of superiors : The

intelligence of the superiors in

the case of wide span of

management must be necessarily

high. He must be a competent

and trained manager.

9. Subordinates : The willingness

of the subordinate, to accept

more responsibility and

reasonable risks should be

substantially high in the case of

wide span of management. It

may be the vice-versa in the

case of narrow span of

management.

To conclude, in a given situation wide

span may be inappropriate, in some

other cases narrow, may not be

required. However one must balance

all the costs and the above said

factors to arrive at the required span

of management.

5.6LINE AND STAFF

Line and Staff : Universally, all

organizations spend a considerable

amount of time to solve friction,

conflict among Line and Staff. Line

functions are those that have direct

impact on the accomplishment of

objectives of the enterprise. Staff

functions are those that help the line

persons work more effectively in

accomplishing the objectives.

The above definition of line of staff

is subjected to criticism that although

personal dept. is not directly

connected with production of

products, is it a line dept. or a staff

dept.? If the above definition holds

good, then human resources dept.

becomes a staff dept.

A valid concept of line and staff is

that they are simply a matter of

relationship. Line authority is that

relationship in which a superior

exercises direct supervision over a

subordinate. The nature of staff

relationship is advisory. The

functions of staff person is to

investigate, conduct research and

give advice to line managers.

The above definition of line and staff

‘concept as purely ‘relationship’ holds

good rather than departmentation.

The human resources manager is

drawing the staff relationships with

the top management in advising the

future requirements of manpower

etc. At the same time, the human

resources manager has a line

relationship with his subordinates.

Advantages of staff :

1. Well qualified specialists can be

used in staff department

2. These specialists may be allowed

the required time to think, to

gather data, and analyse the

data where as the line men are
very busy.
 3. Complex problems of line people

require advice of staff men

4. Operating managers are faced

with a number of decisions

connected with technical,

economic, political, legal and

social areas. For this purpose

staff advice is necessary.

Limitations of staff:

Thinking in vacuum. The

recommendations of staff are highly

impractical sometimes due to the fact

that the staff do not have any

experience in implementing the

recommendation
Lack of staff responsibility. Staff

department is only responsible to

make advice and they can easily

blame the operating manager for not

property implementing die plans.

Danger of undermining line

authority. In some companies the

top management gives too much

importance and support to staff

department that the line managers

are looked down upon.

Problems of unity of command.

Sometimes the lower level line

people may be getting advice from

staff manager and at the same tune

get orders from his own line

manager.
How to Make Staff Work Effectively?

1. Line people ‘tell’ but staff

men must ‘sell'. One must not

misunderstand "Lineman” or

“Staffman” as mere group of

people or groupings of activities

because if they do so, confusion

will result. Line and Staff are

authorit relationships and many

jobs have elements of both. Line

means making decisions and

acting on them. Staff

relationships on the other hand

implies the right to assist and

counsel.

2. Making line ‘listen to staff'.

Line men must be made to

understand that expert staff are

 appointed to advise the line men

and not to undermine or criticize

them. Companies do extremely

well where “compulsory staff

assistance” is practiced i.e., the

line must listen to staff.

3. Keep the staff informed. Many

criticisms arise because staff

assistants are not kept informed

on vital matters, which makes it

difficult for the staff to advice.

The staff assistants must be

informed fully and completely.

4. Requiring completed staff work

Koontz says that it means

presentation of a clear

recommendation based upon full

consideration of a problem,
 clearance with persons

importantly affected, suggestion

about avoiding any difficulties

involved and often, preparation

of the paper work-letters,

directions, job descriptions and

specifications, so that a manager

can accept or reject the proposal

without further study, long

conferences or unnecessary

work.

5.7 SUMMARY

The various types of power leads to

the effective delegation of authority

and further gives several principles

of the art of delegation. In a few

companies centralization is effective

while in many organizations

decentralization is the only penacea.

Many organization follow a

combination of various types called

'MATRIX’ type of departmentation.

The various factors that determine

effective span of management are

discuss and finally several tips are

given for making line and staff work

effectively.

Check Your Progress

1. Define line and staff concepts.

2. What are limitations of staff

members?
5.8ANSWERS TO CHECK YOUR
PROGRESS

1. A shorter span of management

means fewer people to

supervise, which means better

supervision. However, a shorter

span of management is more

suitable when :

a. The functions and jobs being

performed by subordinates

are similar in nature and not

complex.

b. The employees are close to

each other geographically.

c. The units are well-trained,

self-directed and do not

need much supervision and

guidance.
 d. The manager does not have

enough of working staff who

can share his supervisory

duties.

Lean organizations are more

effective because there are fewer

layers of management and the

management is more skilled in

handling the organizational

affairs. The process is also cost

effective and communication is

faster and less diluted during

transference of information.

There is greater bond of respect

and understanding when there

are fewer layers of management.

2. Line functions are those that

have direct impact on the

 accomplishment of objectives of

the enterprise. Staff functions

are those that help the line

persons work more effectively in

accomplishing the objectives.

3. Thinking in vacuum. The

recommendations of staff are

highly impractical sometimes due

to the fact that the staff do not

have any experience in

implementing the

recommendation

Lack of staff responsibility.

Staff department is only

responsible to make advice and

they can easily blame the

operating manager for not

property implementing die plans.

 Danger of undermining line

authority. In some companies

the top management gives too

much importance and support to

staff department that the line

managers are looked down upon.

Problems of unity of

command. Sometimes the lower

level line people may be getting

advice from staff manager and at

the same tune get orders from

his own line manager.

5.9 EXERCISES AND QUESTIONS

1. Distinguish between power and

authority.

2. What is reward power?

 3. What is the principle of parity of

authority and responsibility?

4. Define centralisation and

decentralisation.

5. Distinguish between delegation

and decentralisation.

6. What are the criteria where

decentralisation is greater

according to Earnes Dale?

7. What is departmentation?

8. What is departmentation by

customer?

9. Define span of management?

10. What are the advantages of

narrow span of management?

11. Define Line & Staff relationship.

12. What are the various guidelines

for making the organizations

more effective?

13. What are the various

characteristics of sound

objectives?

14. Differentiate between formal and

informal organizations. What

purpose do the informal

organizations serve?

15. What factors are taken into

consideration when establishing

the span of management?

16. Discuss the process of

delegation.

17. What are the barriers to

delegation and how will you

delegate authority effectively?

18. Discuss the principles of

delegation of authority.

19. What are the problems of

delegation of authority? How will

you eradicate them for effective

delegation.

20. What are the advantages of

decentralisation.

21. What factors determine the

extent of decentralisation.

22. Explain the advantages and

disadvantages of

a. Departmentation by function

b. Departmentation by product

c. Departmentation by territory

Discuss the various bases for

departmentation.
23. What factors determine span of

management?

24. What are the advantages and

disadvantages of wide span of

management?

25. Compare narrow and wide span

of management.

26. If you are a manager of a

company, what criteria would

you adopt most in determining

the span of management.

27. What are the reasons for Line &

Staff conflict? Suggest ways to

resolve conflicts.
5.10 FURTHER READINGS
1. Robbins Stephen P.,

Management, Prentice Hall,

1991.

2. Kreitner Robert, Management,

Houghton Mifflin Company, 1995.

3. Bedeian Arthur and Raymond

Zamnuto, Organization: Theory

and Design; Dryden Press, 1991.

4. Daft Richard L., Organization

Theory and Design; West

Publishing Company, 1995.

5. Griffin Ricky W. Management;

Houghton Mifflin Company, 1993.

 UNIT 6

STAFFING

STRUCTURE

6.0 Introduction

6.1 Unit Objectives

6.2 Objectives of Staffing

Functions of Human Resource

6.3
Management

6.4 Job evaluion and job analysis

Recruitment and selection

6.5
procedure

6.6 Sources of Recruitment

6.7 Selection
6.8 Interview

6.9 Advantages of Interview

6.10 Interviewing Techniques

6.11 Performance Appraisal

6.12 Sample appraisal summary

6.13 Problems of performance appraisal

6.14 Summary

6.15 Answer for Check Your Progress

6.16 Exercises and Questions

6.17 Further Readings

 6.0 INTRODUCTION

Introduction The management of

men is a very important and

challenging job, important because it

is a job not of managing men, but

of administering a social system. The

management of men is a challenging

task because of the dynamic nature

of the people. People are not just

machines, they can think, feel and

act.

Management of Personnel, if done

properly, enhances the dignity of the

people by satisfying their social

needs. It also creates a healthy

working environment, where it

promotes teamwork. It helps the
organization to achieve its goals by

creating right attitude and willing co-

operation among employees, through

effective motivation.

According to Dale Yoder “Manpower

management is the function or

activity aiding and directing working

men and women in maximizing their

contributions and satisfaction in

employment”.

6.1 UNIT OBJECTIVES

To understand various functions of

Human Resource.

To understand job evalution, job

analysis, and various process of

recruitment and selection.

To know the interview and process of

interview techniques.

To understand performance appraisal

and problems of performance

appraisal.

6.2 OBJECTIVES OF STAFFING

The Objectives of staffing are given

below:

1. Social objectives

a. Maximizing the employment

opportunities is a vital social

objective for a country like

ours as the problem of

unemployment is mounting.

b. The personnel performing

the work must derive the

maximum satisfaction from

the work.
 c. The entire exercise should

seek to promote harmony

and co-operative endeavour

on the part of everyone.

2. Personnel objectives It aims at

providing maximum material and

mental satisfaction to each

individual employee. This can be

achieved by providing adequate

remuneration, opportunities for

advancement, facilities, for

training and development, job

security and proper work.

3. Enterprise objectives To attain

the enterprise objectives,

Personnel management should

 try to recruit and select

competent, loyal and mentally

well adjusted team of workers.

It should, also seek to create a

sense of belonging among the

employees so that they are

willing to sacrifice their

individual interests for the sake

of group interests.

6.3 FUNCTIONS OF HUMAN

RESOURCE MANAGEMENT

Human Resource management

performs four important managerial

functions, e.g., Planning, Organising,

directing and controlling of those

employed in the enterprise.

Planning Planning involves man

power planning which means looking

forward to future requirement of

suitable persons. Planning also

means determination of human

resource objectives, policies and

programmes. After making the exact

assessment of the future

requirement, the human resource

manager must plan for recruitment

which involves the correct description

of the context of the job, laying down

specifications of the qualities and

skills required by workers, and

determining sources from where

workers are to be recruited. Later,

‘Selection’ of the right workers for

the right job commences by means of

written test, personal interview, etc.

Planning function also denotes

formulation of policies and

programmes for training and

development, performance appraisal,

promotion and maintenance of

workforce.

Organising The structure of the

organization clearly lays down the

interrelationships between persons,

jobs and physical factors. For an

effective and complete contribution

of working group, it is essential that

the individual knows clearly what his

jobs are, how his jobs are related to

other jobs, what kind of relationships

he is to have with his immediate

superiors and subordinates, and what

channels of communication are to be

followed by him. The assignment of

authority, responsibility,

accountability, establishment of line

and staff relationships, various kinds

of departmentation are some of the

significant activities.

Directing Directing involves passing

orders and instructions for effective

functioning of the organization. But

mere passing of orders will not do,

the workers must be properly

motivated to carryout the work. It is

essential on the part of management

to give positive motivation which

involves financial, non-financial

incentives and also to provide a good

working environment.

Controlling The basic function of

control is to ensure that performance

of each worker coincides with the

plans or standards. This involves

establishment of standards.

Besides the above managerial

functions, personnel management

also discharges the operatives

functions like recruitment and

selection Development and

maintenance of personnel.

Man power planning Man power

planning involves an accurate

determination of the present and

future man power needs of the

enterprise. This also involves an

assessment of the right kind of

organization structure both present

and projected which determines the

number and kinds of managers and

workers required.

Elements of man power planning

An assessment and evaluation of

present manpower position is the

first requirement of manpower

planning. This involves a collection of

data such as names, age, educational

qualifications, training experience,

specialised skills of the employees.

This is also done with the help of

Manpower inventory chart which is as

follows
Manpower inventory chart

The manpower inventory chart has

the following advantages:

1. The chart gives as overview of

the staffing situation of an

organization.

2. People who are ready for

promotion can be found out and

promoted
3. The chart also shows the future

internal supply of human

resources

4. People who do not perform well

are identified and if possible

trained or replaced.

5. People who are close to

retirement can be identified and

preparations can be made for

their retirement.

6. Some supervisors have the habit

of hoarding their subordinates

who are promotable. They may

not allow their able and efficient

subordinates to be transferred to

some other department. This can

be identified and prevented.

 7. Managers can counsel their

subordinates about their career

paths and relate them to

employment opportunities with

in the company.

6.4 JOB EVALUATION AND JOB

ANALYSIS

This would high light the following

informations

a. The nature of work done by each

other.

b. The method employed by him to

do it.

c. The skills, education and training

required to perform the work.

 d. how this particular job is related

to other jobs.

e. What physical environmental

conditions need to be created for

effective performance of the job.

After a careful analysis of each job,

job descriptions may be written out.

These will give precise details of each

job along with the qualities and

qualifications required to do it well.

Generally, a job description would

give the following details:

a. Name or title of the job.

b. Nature of duties and operations

to be performed

c. Authority, responsibilities and

accountability.
 d. Necessary qualifications i.e.,

education, skills, training,

experience etc.

A job-description may not always

include the qualification necessary

for the job holder. Where it does not,

they are separately indicated in job

specification.

Assessment of long-torn and

short-term goals Any organization

must know clearly the direction

where it is headed for. An

assessment of short term and tong

term goals would certainly give a

broad idea about the number and

kinds of personnel required to

accomplish the objectives. The short

term and long term goals are

determined by market demand, and

sales forecasts.

Demand and supply of personnel

Balancing the demand and supply of

personnel becomes a vital step. If the

organization anticipates a shortage of

an adequate number of and kinds of

personnel, it can take steps to recruit

suitable persons whether to meet its

current or future needs. Also an

interdepartmental transfer can be

planned if the right kind and number

of personnel are not readily

available. The ultimate objective of

man power planning is obviously to

fill the demand and supply gap. It is

also to ensure that there is always

proper balance between the

numbers, skills, kinds and quality of

personnel employed by it.

6.5 RECRUITMENT AND

SELECTION PROCEDURE

Definition Recruiting refers to those

sets of activities an organization uses

to attract job candidates possessing

the appropriate characteristics to

help the organization reach its

objectives. According to Byars and

Rue, recruitment involves seeking

and attracting a pool of people from

which qualified candidates for job

vacancies can be chosen. The basic

purpose is to develop a database of

potentially qualified people.
Recruitment policy Recruitment

policy of any organization is derived

from the human resource policy of

the same organization. In other

words, the former is a part of the

latter. However, recruitment policy

by itself should take into

consideration the government's

reservation policy, policy regarding

sons of soil etc., human resource

policies of other organizations

regarding merit, internal sources,

social responsibility in absorbing

minority sections, women etc.

Recruitment policy should commit

itself to the organization's human

resource policy like enriching the

organization's human resources or

serving the community by absorbing

the weaker sections and

disadvantaged people of the society,

motivating the employees through

internal promotions, improving the

employee loyalty to the organization

by absorbing the retrenched or laid

off employees or casual temporary

employees or dependents of present/

former employees etc.

6.6 SOURCES OF RECRUITMENT

Sources are distinct from

techniques Where are suitable

candidates available in required

number? How can they be informed

about the availability of jobs and

about the jobs and organization? The
first question deals with the sources

of recruitment and the second

question deals with the techniques

of stimulating the prospective

candidates (or techniques of

recruitment). Generally, the learners

of human resource management may

feel that sources and techniques of

recruitment are one and the same.

But they are different. Sources are.

those where prospective employees

are available, for e.g. from

employment exchanges, while

techniques are those which stimulate

the prospective employees to apply

for jobs, nomination by employees,

advertising, promotion etc.

When a person is needed to fill a

vacant organizational position, this

individual may come from inside or

outside the company. Some

companies prefer to recruit from

within, since this adds employee

morale, loyalty and motivation. Other

companies prefer to recruit

externally to encourage new ways of

thinking. Although recruitment

policies vary significantly from

company, to company, some

authorities feel it is a good practice

to promote from within whenever

anyone in the company has the

requisite qualifications needed to fill

a vacancy.
Internal Sources

Internal sources include

a. present permanent employees.

b. present temporary/casual

employees.

c. retrenched or retired employees.

d. dependents of deceased,

disabled, retired and present

employees.

Why do organizations prefer internal

source?

Organization prefer this source to

external source, to some extent, for

the following reasons.

i. Internal recruitment can be used

as a technique of motivation
ii. Morale of the employees can be

improved.

iii. Suitability of the internal

candidates can be judged better

than the external candidates as’

‘known devils arc better than

unknown angels'.

iv. Loyalty, commitment, a sense of

belongingness, and security of

the present employees can be

enhanced.

v. Employee's psychological needs

can be met by providing an

opportunity for advancement.

vi. Employee's economic needs for

promotion, higher income can be

satisfied.
vii. Cost of selection can be

minimised.

viii. Cost of training, induction,

orientation, period of

adaptability to the organization

can be minimised.

ix. Trade unions can be satisfied.

x. Social responsibility towards

employees may be discharged,

xi. Stability of employment can be

ensured.

External Sources

Organizations have at their disposal

a wide range of external sources for

recruiting personnel. External

sources provide a larger pool of

talent, and they prove to be cheaper,

especially when dealing with

technical or skilled personnel who

need not be offered any training in

the organization, in the long run.

Organizations usually try to dig up

external sources of recruitment for

the following reasons.

i. The suitable candidates with

skill, knowledge, talent etc., are

generally available.

ii. Candidates can be selected

without any pre-conceived notion

or reservations.

iii. Cost of employees can be

minimised because employees

selected from this source are

 generally placed in minimum pay

scale.

iv. Expertise, excellence and

experience in other organizations

can be easily brought into the

organization.

v. Human resources mix can be

balanced with different

background, experience, skill

etc.

vi. Latest knowledge, skill,

innovations or creative talent can

also be followed in the

organization.

vii. Existing personnel will also

improve and broaden their views

and attitudes.
viii. Long-run benefit to the

organization in the sense that

qualitative human resources can

be brought in.

The external sources are

a. Educational and Training

Institutes,

b. Private Employment Agencies/

Consultants,

c. Public Employment Exchanges,

d. Professional Associations,

e. Data Banks,

f. Casual Applicants,

g. Similar Organizations,

h. Trade Unions,
Recruitment Techniques

Recruitment techniques are the

means or media by which

management contacts prospective,

employees or provides necessary

information or exchanges ideas or

stimulates them to apply for jobs.

Management uses different types of

techniques to stimulate internal and

external candidates. Techniques

useful to stimulate internal

candidates are:

1. Promotions Most of the internal

candidates would be stimulated

to take up higher responsibilities

and express their willingness to

be engaged in the higher level

jobs, if management gives them

the assurance that they will be

 promoted to the next higher

level.

2. Transfers Employees will be

stimulated to work in the new

sections or places, if

management wishes to transfer

them to the places of their

choice.

3. Recommendations of the

present employees

Management can contact,

persuade the outsiders to apply

for job in the organization

through the recommendations to

the candidates by the present

employees, trade union leaders

etc.
4. Scouting Scouting means

sending the representatives of

the organizations to various

sources of recruitment with a

view to persuading or stimulating

the candidates to apply for jobs.

The representatives provide

information about the company

and exchange information and

ideas and clarify the doubts of

the candidates.

5. Advertising Advertising is a

widely accepted technique of

recruitment, though it mostly

provides one way

communication. It provides the

candidates in different sources,

the information about the job

 and company and stimulates

them to apply for jobs. It

includes advertising through

different media like newspapers,

magazines of all kinds, ratio,

television etc.

The technique of advertising should

aim at (a) attracting attention of the

prospective candidates, (b) creating

and maintaining interest, (c)

stimulating action by the candidates.

Recruitment Practices

Industries in India depend on the

following sources:

1. Internal sources
2. Badli lists or a central pool of

candidates from which vacancies

are filled.

3. Public employment exchanges.

4. Casual labourers.

5. Labour contractors.

6. Candidates introduced by friends

and relatives.

7. Private employment agencies/

consultants.

8. Campus recruitment from

reputed institution like Indian

Institutes of Management, Indian

Institutes of Technology, Indian

Institute of Science and National

Institute for Training Industrial

Engineers.
 6.7 SELECTION

Meaning and Definition After

identifying the sources of manpower,

searching for prospective employees

and stimulating them to apply for

jobs in an organization, the

management has to perform the

function of selecting the fight

employees at the right time. The

obvious guiding policy in selection is

the intention to choose the best

qualified and suitable candidate for

each unfilled spot and to avoid

commitments to those who will not

work welL The objective of the

selection decision is to choose the

individual who can most successfully

perform the job from pool of qualified

candidates. The selection procedure

is the system of functions and

devices adopted in a given company

to match the candidates’

specifications with the job

specifications and requirements.

Selection Procedure There is no

standard selection process that can

be followed by all the companies in

all the areas. Companies may follow

different selection techniques or

methods depending upon the size of

the company, nature of the business,

kind and number of persons to be

employed, government regulations to

be followed etc. Thus, each company

may follow any one of the possible

combination of methods of selection

in the order convenient or suitable to

it.

Selection procedure employs

methods of collecting information

about the candidate's qualifications,

experience, physical and mental

ability, nature and behaviour,

knowledge, aptitude and the like for

judging whether a given applicant is

or is not suitable for the job.

Therefore, the selection procedure is

not a single act but is essentially a

series of methods or stages by which

different types of information can be

secured through various selection

techniques. At each step, facts may

come to light which are useful for

comparison with the job requirement

and employee specifications.

Steps in Scientific Selection Process

1. Job analysis Job analysis is the

basis for selecting the right

candidate. Every organization

should finalise the Job analysis;

Job description, Job specification

and employee specifications

before proceeding to the next

step of selection.

2. Recruitment Recruitment refers

to the process of searching for

prospective employees and

stimulating them to apply for

jobs in an organization.
3. Application form Application

form is also known as application

blank. The technique of

application blank is traditional

and widely accepted for securing

information from the prospective

candidates. It can also be used

as device to screen the

candidates at the preliminary

level.

4. Written examination The

organization has to conduct

written examination for the

qualified candidates after they

are screened on the basis of the

application blanks so as to

measure the candidate's ability

in arithmetical calculations, to
 know the candidate's attitude

towards the job, to measure the

candidates aptitude, reasoning,

knowledge in various disciplines,

general knowledge and English

language.

5. Preliminary interview The

preliminary interview is to solicit

necessary information from the

prospective applicants and to

assess the applicant's suitability

to the job. Preliminary interview

is useful as a vital process of

eliminating the undesirable and

unsuitable candidates. If a

candidate satisfies the job

requirements regarding most of

 the areas, he may be selected for

further process.

6. Group discussion The

technique of a group discussion

is used in order to secure further

information regarding the

suitability of the candidate for

the job. Group discussion is

method where groups of are

asked to discuss either a case

study or a subject matter. The

candidates in the group are

required to analyse, discuss, find

alternative solutions and select

the sound solution.

The selection panel, basing on

its observation, judges the

candidates skill and ability and

 ranks them according to their

merit. In some cases, the

selection panel may also ask the

candidates to write the summary

of the group discussion, in order

to know the candidates written

presentation skills as well.

7. Tests The next stage in the

selection process is conducting

difference tests to solicit further

information to assess the

employees suitability to the job.

8. Final interview Final interview

is usually followed by testing.

This is the most essential steps

in the process of selection. In

this step the interviewer matches

the information obtained about

 the candidate through various

means to the job requirements

and to the information obtained

through his own observation

during interview.

Types of interview The types

of interviews are: (i) Informal

Interview, (ii) Formal Interview,

(iii) Planned Interview, (iv)

Patterned Interview, (v) Non-

directive Interview, (vi) Depth

Interview, (vii) Stress Interview,

(viii) Group Interview, (ix) Panel

Interview.

9. Medical examination Certain,

jobs require certain physical

qualities like clear vision, perfect

hearing, unusual stamina,

 tolerance of hard working

conditions, dear tone, etc.

10. Reference checks After

completion of the final interview

and medical examination, the

personnel department will

engage in checking references.

Candidates are required to give

the names of reference in their

application forms.

6.8 INTERVIEW

Introduction People differ in the

their ability to perform different

types of activities. Because of these

differences it becomes difficult for an

organization to select a right person

for the right job. The company

spends a lot of money in selection of

employees. Selection is made by the

following steps.

1. Release of an appointment

advertisement in the Regional

Newspapers and Magazines.

2. Collection of personal bio-data

from the applicants through

application forms,

3. Psychological written tests are

given to the candidates.

4. Final selection b made by means

of an interview.

In one survey of 325 companies,

about 98% of the companies

used the interview method for

 selecting the employees. method

for selecting the employees.

Definition The Interview is a

conversation with a purpose'. There

are three purposes. Obtaining

Information. 2. Giving Information 3.

Motivation

1. Obtaining Information

Obtaining Information means

getting the relevant data about

the candidate's background, his

training, work history, education

and interests.

2. Giving Information Giving

Information would mean that

giving all the information about

the present position of the

 company, the future plans, the

specific job and the personnel.

3. Motivation Motivation would

mean instigating the candidate

to join the company.

6.9 ADVANTAGES OF INTERVIEW

Often ability and traits which is

important to the employer cannot be

adequately measured by tests and

other techniques. Many psychologists

are of the opinion that interview can

be a better means of appraising a

personality rather than a written

test. Therefore the appraisal of the

personality becomes the main

purpose of the interview.

It is possible to determine from an

Interview whether or not the

candidntc is good looking and how he

reacts in a conversation.

The individual is the combination of

many abilities and traits. What the

Inter-viewer should evaluate is the

applicant's motivation, personality

make up and the influence of

environmental and emotional

problems upon him.

Limitations

The interviewer cannot judge from a

man's face whether he will be honest

to the company or not. Interviewers

unnecessarily make impressions of

the candidate on the basis of

similarity to some other person who

is liked or disliked.

Halo Effect

Halo effect is very dangerous

because the candidate is judged on

the basis of a very few specific

characteristics, and is over

estimated. The Interviewers should

be given good training in order to

avoid such mistakes.

Finding Interests

The Interviewers usually ‘want to

determine the vocational interest by

means of asking questions like what

he wants to do and what he is

interested in getting out of the job.

His responses in and enthusiasm

often reveals his intersts. The

strength of the applicant's intersts

can be tested to. some extent by

explaining the disagreeable features

of the job, ‘ for example, a company

selected 50 sales representatives.

During the interview the

management did not communicate

that the job includes loading and

unloading of goods at the various

distribution points. After the

selection, out of 50 representatives

about 45 representatives left the

company because they did not like

loading and unloading, hence the

management must find out the

interests of the candidates, whether

the candidate may like such job or
not.
Reliability

There was a study conducted where

in 12 sales managers rated 57 sales

Representatives for sales job. At the

end of the Interview every sales

manager rated the applicants

according to the overall suitability.

The ranks were given from 1 to 57.

The following table illustrates the

wide difference between the

assessment of various sales

manager.

Mr. 1 2 3 4 5 6 7 8 9 10 11 12 Range

G 33 46 6 56 26 32 12 38 23 22 22 9 6-56

X 36 50 43 17 51 47 38 20 38 55 39 9 9-55

Y 53 10 6 21 16 9 20 2 57 28 1 26 1-57
6.10 INTERVIEWING TECHNIQUES
1. Patterned interview This was

developed by Mc Murry.

According to him the interview

should be systematic end should

have definite plan. It should look

like an application form

containing several questions and

answers. The patterned interview

contains no questions relating to

job skills, but it is designed to

measure personality, motivation

and interests. According to Me

 Murry the following personality

traits should be measured.

1. Stability; 2. Industry; 3.

Ability to get along with others,

4. Self-Reliance; 5. Willingness

to accept responsibility, 6.
Freedom from emotional

immaturity, 7. Motivation

2. Non-directive interview

Instead of asking direct

questions broad general

questions are asked. In this

interview the applicant is given

freedom to talk about himselves

and he reveals his personality.

3. Stress interview For jobs'where

emotional balance is a key

requirement, stress interview

 method is used. Here a group

of people start firing questions

in an unfriendly manner and

measure his capacity to

withstand the emotional strain.

Group interview This is a new

procedure which often an opportunity

to measure the leadership skills. This

type of interview is followed in the

MBA. Eatnace Examination. Has

facilitates the Interviewer to measure

the co-ordination skills besides

leadership skills.

6.11 PERFORMANCE APPRAISAL

A performance appraisal is a process

of evaluating an employee's
performance of a job in terms of its

requirements. It is the process

employed for the purpose of

placement, selection for promotions,

providing financial rewards and other

actions which require differential

treatment among the members of a

group. The term performance

appraisal has been described as merit

rating, behavioural assessment,

employee evaluation, personnel

review, progress report, staff

assessment and service rating.

Performance appraisal has been

considered as a most significant and

indispensable tool for an

organization. It is useful in making

decision regarding various personnel

aspects such as promotions and merit

increases. They also help to pin point

weak areas in the primary systems

e.g. Marketing, Finance & Production.

It is easier for managers to identify

the group of employees who require

training. Douglas McGregor says

“Formal performance appraisal plans

are desired to meet three needs, one

of the organizations and the other

two of the individual, namely:

i. They provide systematic

judgments to back up salary

increases, transfers, demolitions

or terminations.

They are means of telling a

subordinate how he is doing and

suggesting needed changes in

 his behaviour, attitudes, skills,

or job knowledge. They let him

know “Where he stands” with the

boss.

ii. They are used as a basis for

coaching and counseling the

individual by the superior.

According to Levinson, it seeks to

provide an adequate feed back to

each individual for his performance.

It also serves as a means for

changing behaviour.

The main objectives of performance

appraisal are

i. To enable an organization to

maintain an inventory of the

number and quality of all
 managers and to identify and

meet their training needs and

aspirations;

ii. To determine increments and

provide a reliable index for

promotions and transfers to

positions of greater

responsibility.

iii. To maintain individual and group

development by informing the

employee of his performance

standard;

iv. To suggest ways of improving

the employee's performance

when he is not found to be up

to the mark during die review

period.
The process of evaluation: It begins

with die establishment of

performance standards to the

employees and it should be

communicated to die employee

properly. It is necessary to acquire

information in order to evaluate

performance. For measuring actual

performance personal observation,

statistical reports are used. The

employees are now appraised and

judged for future potential grown and

advancement The deviation between

the standard performance and actual

performance is observed. Later the

appraisal is discussed with

employees for subsequent

improvement and corrective action.

 6.12 SAMPLE APPRAISAL
SUMMARY

Personnal background Age, Family

background, Marital status, No. of

Children, Education level,

Specialisation and degrees, Extra-

curricular activities and office held,

work history, Position, tiles and

duties, Social accomplishments,

Honour and awards, Professional or

trade organization membership,

Publications, (if any,) Special

limitations, Health, Family problems,

Hobbies and recreational activities.

Nature of work

Job performance and personal

qualification:

i. Technical performance
 ii. Motivation in current position

iii. Intelligence as manifested on the

job

iv. Emotional stability

v. Leadership skills

verall performance rating

Recommended action

1) Knowledge; ii) Skills; iii) Attitude

Methods of performance appraisal

There are two types of performance

appraisal

1) Traditional methods 2) Modern

methods
The Traditional methods give

importance, to the evaluation of

individual's personality traits such as

creativity, intelligence, drive,

dependability, leadership-potential,

initiative and organising ability. On

die other hand modem methods lay

emphasis on the evaluation of the

job performance of people, in other

words job achievements. The

traditional methods include ranking

method, graphic rating scales, forced

choice description method, critical

incidents method etc. The modem

methods include, Appraisal by results

or management by objectives,

Human asset accounting methods

etc.
 6.13 PROBLEMS OF
PERFORMANCE APPRAISAL

Halo effect “It is a tendency to let

the assessment of an individual's any

one trait to influence the evaluation

of that person on other specific

traits” The ‘halo’ effect refers to the

tendency to rate an individual

consistently high or low or average

on the various traits, depending upon

whether the rater's over-all

impression of the individual is

favourable or not.‘The central’

tendency problem: It assigns

‘average ratings’ to all the employees

with a view to avoiding commitment

or involvement
Similarity error

This type of error occurs when the

evaluator rates other people in the

same way be perceives himself. For

example, the evaluator who

perceives himself as aggressive may

evaluate others by looking for

aggressiveness.

How to make appraisal successful?

1. The management must be

responsible to create an
atmosphere of confidence or /

and trust.

2. The superior must very

thoroughly evaluate the

employee's performance.
 3. The results of performance

rather than personality traits

should be given due weightage.

4. The results of evaluation should

be immediately communicated to

the employees.

5. A post-appraisal interview should

be arranged.

6.14 SUMMARY

The management of men is a very

important and challenging job,

important because it is a job not of

managing men but administering a

social system. It helps the

organisation to achive goals.

Maximizing the employment

opportunities is a vital social

objective. Human Resource

management performs four

important function, (1) Planning, (2)

Organizing, (3) Directing and (4)

Controlling, Job evaluation would

high light information in relation of

the job(s) work done by each other,

skill, education and training required

to perform the work. There are

various sources of recruitment, but

in selection there is no standard

selection process that can be

followed by all the companies in all

areas. The steps in scientific

selection process are analysis,

Recruitment, Application form,

written examination. Preliminary

interview, G.D. Test and Final

interview. An interview is a

conversation with a purpose, there

are three purposes (i) obtaining

information (ii) giving information

and motivation.

There are two types of appraisal-

traditional and modern methods are

followed in performance appraisal.

The problems of performance

appriasal rea Halo effect and similaity

error.

Check Your Progress

1. Name the functions of Human

Resources?

2. What is meant by job

evaluation and job analysis?

 3. What are the various sources

for recruitment?

4. What is the purpose of

Interview?

5. What are various techniques in

interviewing?

6. Mention the types of

performance appraisal.

7. What are the problems of

performance appraisal?

6.15 ANSWER TO CHECK YOUR

PROGRESS

1. There are four important function

in Human Resources (a) Planning

(b) Organising (c) Directing and

(d) Controlling of employees.

2. Job Evalution - Nature of work

done by each other - Skill,

education and having required to

perform the work. - Job related

to other job.

Job analysis - Name (or) little of

job - Natureof duties, authority

responsibilities.

3. Sources for Recruitment -

Internal and External.

4. Purpose of interview - obtaining

information, giving information

motivation.

5. Interview techniques - patterned

interview - Non directive

interview, stress interview -

group.
6. Types of performance appraisal

- traditional methods - modern

methods.

7. Problem of performance

appraisal - Halo effect - similarily

error.

6.16 EXERCISES AND QUESTIONS

1. What are the objectives of

Human Resource Management?

2. What is job evaluation?

3. Define Recruitment

4. What are the objectives of

Interview?

5. What is halo effect?

6. Will you evaluate your

subordinate on the basis of his

 traits or on the basis of his

performance? substantiate

7. What are the functions of Human

Resource Management?

8. What are the Internal & external

sources of recruitment?

9. What are the various techniques

of Interview?

10. What are the problems of

performance approisal.

11. Discuss the features of scientific

selection of employees.

12. What are the elements of

manpower planning?
6.17 FURTHER READINGS
1. Holt David, Management,

Principles and Practices :

Prentice Hall, 1995.

2. Certo Samuel, Allyn and Bacon,

Modern Management, 1994.

3. Robbins Stephen P.,

Management, Prentice Hall,

1991.

4. Kreitner Robert, Management,

Houghton Mifflin Company, 1995.

5. Bedeian Arthur and Raymond

Zamnuto, Organization: Theory

and Design; Dryden Press, 1991.

6. Griffin Ricky W. Management;

Houghton Mifflin Company, 1993.

 UNIT 7

MOTIVATION

STRUCTURE

7.0 Introduction

7.1 Unit Objectives

7.2 The Process of Motivation

7.3 Theories of Motivation

Modern attribution theory of

7.4
Motivation

7.5 Summary

7.6 Answers for Check Your Progress

7.7 Exercises and Questions

7.8 Further Readings

 7.0 INTRODUCTION

Managing requires the creation and

maintenance of an environment in

which individuals work together in

groups towards the accomplishment

of a common objective. A manager

cannot do this job without knowing

what motivates people. Why do

people do certain activities at a

particular point of time? Why does

it take a certain, direction and not

the other? Some individuals perform

well in their jobs while some don't.

Why? the answer to these questions

is ‘Motives'. Motive is the inner state

that energy a person. This activates

and channels his behaviour towards

goals. Koontz and Odonnel say that

“Motivation is the drive and effort

to satisfy a want or goal”. According

to Stephen P. Robbins, “Motivation is

the willingness to exert high levels

of effort’ toward organizational goals,

conditioned by the efforts ability to

satisfy some individual need”.

7.1 UNIT OBJECTIVES

1. To understand various content

and process theories of

Motivation.

2. To learn the modern attribution

theories of Motivation.
 3. To understand the various areas

of application of Motivation.

7.2 THE PROCESS OF MOTIVATION

Process of motivation An

unsatisfied need creates tension

which stimulates drives with in the

individual. These drives generate a

search behaviour to find particular

goals that if attained, will satisfy the

need and lead to reduction of

tension. The process of motivation

begins with an unsatisfied need.

Needs initiate and sustain certain

behaviour. Need is a state of

deprivation/deficiency which has to

be fulfilled.
 7.2.1. Motivation and Motivators

The motives may be classified into

primary and secondary motives.

Primary motives are physiological

requirements such as water, air,

food, sleep and shelter. The

secondary motives are self-esteem,

status, affiliation with others,

accomplishment etc. Human motives

are generally dependent on needs

whether physiological or secondary

motives.
According to Koontz and Odonnel,

“Motivation is a general term,

applying to the entire class of drives,

desires, needs, wishes and similar

forces. To say that managers

motivate their subordinates is to say

that they do things which they hope

will satisfy these drives and desires,

and induce the subordinates to act in

a desired manner”

7.2.2. Characteristics of
motivation

Motivation is latent in nature

Man's desires and needs are hidden

and these are reflected in his

behaviour which is an index of

motivation. For instance hunger is

hidden and the act of searching for

food is behaviour.

People are not aware Human

beings don't know as to why they

behave in a particular fashion.

According to Sigmund Freud, the

hidden urges like the ‘urge to

dominate’ and the ‘sexual instincts’

are the important hedonistic motives

of people. In the area of motivations

research much research has been

done, and the researchers believe

that a product is being perceived in

terms of product attributes, i.e.,

qualities of the product, then, it is

perceived in terms of benefits, i.e.,

psychological and sociological

benefits and finally the same product

is perceived in terms of values i.e.,

self-esteem, pride, honesty,

adventure, etc.

Relationship between behaviour

and motivation is complex It is

very difficult to precisely pinpoint the

cause of human behaviour, because

motivation is a complex

phenomenon. A supervisor may shout

at his subordinates, not because of

the mistake of the subordinate, but

may be because of his hidden power

motive,
7.3 THEORIES OF MOTIVATION

Maslow's Vroom's

1) hierarchy of 1) expectancy-

needs model

Porter-
Herzberg's two
2) 2) lawler's
factor theory
model

Adam's
Theory ‘ X’ and
3) 3) equity
theory ‘ Y’
theory

Mc. Clelland's

achivement
4)
motivation

theory
 Clayton

5) Alderfer's ERG

Theory

7.3.1 CONTENT THEORIES

These attempt to determine what it

is that motivates people at work. It

identifies the needs/drives that

people have and how these needs/

drives are prioritised. They are

concerned with types of incentives or

goals. The content theories include

Maslow's hierarchy of needs,

Herzberg's two factor theory,

McClellands Achievement Motivation

theory, Clayton AMerfer's ERG

theory.
1. Maslow's need hierarchy theory

Maslow examines the question

why people work interms of their

need satisfaction or need

deprivation. His theory

postulates that human needs can

be organized into a hierarchy of

prepotency, with the

physiological needs at the

bottom and self-actualisation at

the top. He presents five need

categories.
a. Physiological needs These

refer to the basic needs for

the maintenance of body,

such as hunger, thirst, sex

and sleep. When these needs

are satisfied, the higher

order needs emerge, which

dominate a person's

behaviour.

b. Safety needs These refer to

needs like freedom from

physical harm, need for

orderly life, and economic

security.

c. Social needs Social needs

emerge when the

psychological and safety

needs are satisfied. They

 refer to love, affection and

belongingness. In industries,

workers often go along with

their groups on issues like

strike and get slow even

when they do not believe in

them because going against

the wishes of the group

might lead to rejection and

hence the deprivation of the

satisfaction of social needs.

d. Esteem needs These can be

classified into two

categories-in the first group,

we find needs referring to

strength, achievement,

adequacy and in the second

group, these needs relate to

 such things as recognition,

appreciation and reputation.

Man values self-esteem

based on one's own abilities

from his point of view, and

recognition’ and reputation

and from the other's points

of view.

e. Need for self-

actualisation When all the

needs are satisfied, the need

for self- actualisation arises.

This need is described ‘as

the need to become

everything that one is

capable of becoming.’

As each need becomes satisfied,

the person steps up into the next

higher need, i.e., the person

moves up the hierarchy. As

wants and needs are unlimited,

one can say that not every need

is ever fully gratified. Maslow

estimated that, the lower level

needs which are satisfied

externally, generally are

satisfied to the tune of 85% of

basic needs and 70% of security

needs. But the higher order

needs, which are satisfied

internally, are satisfied to the

tune of 50% of the

belongingness needs, 40% of

esteem needs, and a mere 10%

of the self-actualisation needs.

In a nutshell, Maslow saw Human

needs in the form of a hierarchy,

ascending from the lowest to the

highest, and he concluded that

when one set of needs was

satisfied, they cease to be a

motivator.
Critical appraisal of maslow's theory

There is little empirical evidence

in support of this theory. Maslow

himself asserts that the theory

is, primarily, a frame work for

future research.

Lawler and J. Suttle collected

data on 187 managers in two

different organizations over a

period of 6 months to one year.

They found little evidence to

support Maslow's theory that

human needs form a hierarchy.

D.T. Hall and K. Nougaim did not

find a strong evidence of

hierarchy in their studies

involving a group of managers

over a period of 5 years.

There was obviously, an upward

movement of need prominence

as a result of upward career

changes and NOT from the

satisfaction of lower order needs.

Another criticism raised against

Maslow's theory is that this

model of motivation doesn't

handle the problem of linkage

between individual need

satisfaction and the achievement

of organizational objectives. For

e.g.: the objective of an

organization is “increased-

productivity”. At the same time

the workers are asked to produce

high quality products in order to

cut down the final ‘rejection rate.

In this case the workers might be

deriving more need satisfaction

from making higher quality

product at the cost of quantity.

Yet another criticism leveled

against Maslow's theory is non-

accountability of individual

differences in motivation. Maslow

himself explained that his model

may not hold good for persons

with particular experiences. His

theory thus becomes non-

predictive because data that do

not support it can be interpreted

in terms of individual

differences.

Despite these criticisms this

theory has some implications for

management practices. It implies

that in order to get the maximum

‘from the worker, the

organization, has to attempt to

satisfy higher order needs and

that the organizations’ concern

for the satisfaction of lower order

needs need not be overtly

stretched because a satisfied

lower order need doesn't fully

motivateto productivity.
2. Herzberg's two factor theory of

motivation :

This theory of motivation-

hygiene was proposed by

psychologist Frederick Herzberg

who asked a basic question to

200 accountants and engineers

in firms in and around

Pittsburgh- “What do people

want from their jobs"? He used

the

‘Critical incident method’ of

obtaining data for analysis. The

critical incident was described

as,

“Think of a time when you felt

exceptionally good or

exceptionally bad about your job,

about your job, either your

present job or any other job you

have had”,

The responses obtained were

interesting and fairly consistent.

Generally good feelings were

associated with job content The

bad feelings on the contrary were

associated with job context.

Herzberg concluded that job

satisfies are related to job

content and job dissatisfaction

were related to job context.

As seen in figure certain

characteristics tend to be

consistently related to job

satisfaction (factors on the right

side of the figures), and others

to job dissatisfaction (the left

side of the figure). Intrinsic

factois, such as achievement,

recognition, the work itself,

responsibility, advancement, and

growth seem to be related to job

satisfaction. When those

questioned felt good about their

work, they tended to attribute

these characteristics to

themselves. On the other hand,

when they were dissatified, they

tended to cite extrinsic factors,

such as company policy and

administration, supervision,

interpersonal relations and

working conditions.

According to Herzberg, the

factors leading to job satisfaction

are separate and distinct from

those that lead to job

dissatisfaction. Therefore,

managers must try to eliminate

factors that create job

dissatisfaction and bring peace.

But he cannot motivate them. As

a result, such factors such as

company policy and

administration, supervision,

interpersonal relations, working

conditions and salary have been

called’ Hygiene factors. Whey

they are adequate, people will

not be dissatisfied.

Therefore if we want to motivate

people, the real motivators are,

achievement, recognition,

responsibility and growth. We

must change the job design in

such a way that the work arising

out of the job should be

challenging, exciting, and should

ofter them a sense of

achievement, recognition and

growth.
Criticism

Generally, when people are

asked about their satisfying

events, (motivation) they tend to

take credit of their events due

to their own efforts and,

interactions with the work. It is

also the tendency of the people

to identify dissatisfying events

(Hygiene factors) as factors of

environment which are beyond

their control such as company

 policy etc. Herzberg has been

criticised for using the ‘critical

incidents technique'.
3. Mc Clelland's achievement motivation
(Three Needs Theory)

David Mc. Clelland classified

needs as Achievement, Power

and Affiliation and defined them

as follows.

a. Need for Achievement (n.

Ach) The drive to excel, to

achieve in relation to a set

of standards, to strive to

succeed.

b. Need for Power. The need

to make others behave in a

way that they would not

have behave otherwise.

 c. Need for affiliation. The

desire for friendly and close

interpersonal relationships.

According to Mc. Clelland, people

can be classified into two groups,

one small and the other large:

Those falling in the small groups

are challenged by opportunities

and the other is not so

challenged by opportunities.

Mc. Clelland arrived at this

conclusion by asking a number of

people to write stories about and

around a number of relatively

unclear pictures. Everyone gave

his own story, projecting the

inner feelings, hopes, likes,

aspirations, likes and dislikes.

These stories were evaluated on

the basis of success,

competitiveness and excellence.

The high achievers projected the

following traits.

Finding

1. High achievers are

successful as entrepreneurs

because managing their own

business, gives the

satisfaction of personal

achievement.
2. People with high

achievement need may or

may not be good managers

because in large companies,

managing is a question of

making others’ achieve their

targets rather than personal

goal achievement.

3. People with high power need

are successful as managers,

because the desire for power

drives others to work.

4. Employees can be

successfully trained for high

achievement where the jobs

actually require high

achievers. But people with

high aptitude for

achievement need alone can
be trained.
4. Mc. Gregor‘s theory ‘x’ and theory ‘y’

Mc. Gregor (1960) made two sets

of opposite assumptions

underlying theory ‘X’ and theory

‘Y'. These assumptions reflect

the basic contradiction in human

nature.

Theory ‘X’ states that the role

of managers and organizations is

to control human behaviour to

attain organizational goals.

Theory, ‘ Y’ indicates that the

goals of the organization could

be attained if it provides

opportunities for self

actualisation.
 ASSUMPTIONS

Theory X Theory Y

Work is as
Work is
natural as
inherently
1. play if the
distasteful to
conditions are
most people.
favourable.

Most people

are not Self-control is

ambitious, often
have little indispensible
2.
desire for in acheiving

responsiblity organizational

and prefer to goods

be directed.
 The Capacity
for creativity
Most people
in solving
have little
organizational
creativity in
3. problems is
solving
widely
organizational
distributed
problems
among
people.

Motivation
Motivation
occurs at the
occurs only at
social esteem
the
4. and self
physiological
actualisation
and safety
levels as well
levels
as
 physiological

and security
levels.

Most people
have to be People can be

closely self directed

controlled and be

5. and often co- creative at

erced to work if

achieve properly

organizational motivated

goals

Briefly, theory X assumes that

most-people, in general, dislike

work and need to the co-erced

and controlled to make sure that

they bring out sufficient efforts

to achieve the organizational

goals. Mc. Gregor feels that it

is not inherent in Man to dislike

work. It is a product of the

nature of the organization,

management philosophy, policies

and practices.

So for managing people Me

Gregor suggested his theory ‘Y'.

The broad dimensions of this

theory areas follows:

1. Management is responsible

for organising the elements

of productive enterprise in

the interest of economic

ends.
2. People are not by nature

passive. They become so as

a result of experience in

organization.

3. The motivation, the potential

for development, the

capacity for assuming

responsibility are present in

people. It is the

responsibility of the

management to make it

possible for people to

recognise and develop these

characteristics.

4. The essential task of

management is to arrange

organizational conditions

and methods of operation so

 that people can achieve their

goals by directing their own

efforts towards

organizational objectives.

But McGregor says that though

its application would be slow, it

would bring about progress in

both personal performance and I

improvement in the effectiveness

of industrial organizations.

Participative management and

management by objectives are

two modern methods of

management which to a large

extent are based on Me Gregor's

theory.
5. Clayton Alderfer's ‘E R G’ theory :

Alderfer of Yale University has

reworked Maslow's hierarchy of

needs. Alderfer identified three

groups of core needs.

1. Existence Needs → E

2. Relatedness Needs → R

3. Growth Needs → G

The Existence Needs are

concerned with survival needs,

(i.e., physiological and safety

needs of Maslow)

The Relatedness Needs stress

the importance of interpersonal,

social relationships, (i.e., love

need and esteem need of

Maslow)
According to Alderfer, more than

one need may be operative at

the same time and if a higher

level need is not satisfied, the

desire to satisfy a lower-level

need increases.

Maslow said that there is a

hierarchy, (a step by step

increase) of needs and only if

the lower level need is satisfied,

the higher level need satisfaction

occurs. But Alderfer said that all

the three need categories work,

at the same time. He further

says that a person who cannot

achieve a higher need, or when

he is frustrated, comes back to

achieve a lower need.

 7.3.2. PROCESS THEORIES

Process theories are concerned with

the cognitive elements that go into

motivation.

1. Victor H. Vroom's expectancy model

Vroom explained that a person's

motivation towards an action at a

particular time is determined by

the anticipated values of all the

outcomes (positive and negative)

of the action, multiplied by the

strength of a person's

expectation that the action will

lead to the outcome sought. In

other words, motivation is the

product of the anticipated values

from an action and the perceived

probability that these values will

be achieved by the action. The

anticipated value is called the

“valance” and it is defined as the

strength of a person's preference

for one outcome in relation to

others outcome. The perceived

probability is called “expectance”

and it is defined as the strength

of belief that a particular act will

be followed by a particular

outcome. Motivation is defined

as the strength of drive towards

action.

The motivational relationship is

expressed in the formula:

Valence x Expectancy =

Motivation
In order to motivate a person

to work the management can do

only two things. First, it can

increase the positive value of the

outcomes through such means as

better communication about the

outcomes’ values and actually

increasing them, (i.e., increasing

rewards). Second, it can increase

 his expectancy that the work will

really lead him to the desired

outcome; that is, we to

strengthen the connection

between the work and the

outcome. One can also do this

by improved communications or

one may increase the actual

probabilities of the outcome.

Vroom's model is only a broad

treatment of motivation, as it

does not consider the individual's

personality.
2. Porter-Lawler model of motivation

The various elements of this

model arc.

a. Effort : If refers to the

amount of energy extended

by an employer on a given

task. Perceived reward

probability refers to the

individual's perception of the

probability that differential

rewards depend upon

differential amounts of

effort. These two factors-

'value for reward’ and

“perception of effort-reward

probability'- determine the

amount of effort that the

employee will put in.

b. Performance Effort leads to

performance but both of

these may not be equal,

rather, performance is

determined by the amount of

effort and the ability and

role perception of the

individual. Thus if an

individual has little ability

and of inaccurate role

perceptions, his performance

 may be ineffective inspite of

his putting great efforts.

c. Rewards Performance is

seen as leading to intrinsic

rewards (such as a sense of

accomplishment and
actualisation) and extrinsic’

rewards (such as working

conditions and status).

However, the intrinsic

rewards are much more

likely to produce attitudes

about satisfaction that are

related to performance. In

addition, the perceived

equitable rewards vitally

affect the performance-

satisfaction relationship.’
 They reflect the fair level of

rewards that the individual

feels should be given for a

given level of performance.

d. Satisfaction Satisfaction is

derived, from the extent to

which actual rewards fall

short, meet or exceed the

individual's perceived level

of equitable rewards. If

actual rewards meet or

exceed perceived equitable

rewards, the individual will

feel satisfied. If these are

less than equitable rewards,

he will be dissatisfied. Thus

this provides two

implications. First,
 satisfaction is only in part

determined by actual

rewards. Second,

satisfaction is more

dependent on performance

than performance is on
satisfaction. This is a marked

departure from the

traditional analysis of the

satisfaction-performance

relationship.
Importance of Porter-Lawler model

The manager,

a. matches the abilities of the

individual to the requirement

of the job.

b. explains the roles of

employees.
 c. explains the expected level

of performance to the

employees

d. makes sure that the rewards

are valued by the employee

3. Equity theory

Stacy Adams propounded that,

Inequity, in simple terms, is the

injustice perceived by person

when he compares his outcomes

(rewards) to his inputs (effort),

with the ratio of another person's

outcomes to input and finds that

they are not equal. A person

working in Lakshmi Machine

Tool, compares his counterpart

at Praga Machine Tool, both

situated at Coimbatore. If he
perceives that his rewards,

inputs ratio is higher than that of

his counterpart, then it is know

as positive inequity.

The LMW Welder asks the

question, “Am I being rewarded

fairly for my efforts, when I

compare myself with another in

a similar position in the

organization?”.

The following consequences

occur, if there is inequity,

a. The person can alter inputs

(efforts) i.e., If the worker

 feels under paid, he may

reduce the effort and if he

feels over paid may increase

the effort.

b. The person might try to

change the rewards of his

company through 'unions’ or

individually.

c. Sometimes the person might

quit the job.

d. The person may try to

reduce the inputs of the

other person

e. He might altogether change

the level of comparisons.

Managers of organizations should be

sensitive to such inequities perceived

by the subordinates. When the

subordinates visibly or openly react

arid show their dissatisfaction,

managers mustt think of promotions

or pay increases. At the same time,

managers must give a continuous

feedback on the appraisal of the

subordinates. Felt inequities are

common in organizations and hence

it is important for managers to

handle the situations.

7.4 MODERN ATTRIBUTION

THEORY OF MOTIVATION

Perhaps this theory recognizes the

complexity of human behaviour,

overcoming the limitations of all

other theories, and helps one to
attain the goals of prediction and

control. Attribution means how a

person explains the cause of

another's behaviour, or of his own

behaviour. A man searches for

causes in making interpretations of

others or of oneself. For eg. consider

a person (subordinate) working on

a computerised Lathe machine is

evaluated. If the superior has a good

impression (set of attributes) about

his subordinate, his behaviour

towards subordinate will be “more

increments” or “promotion”. (Internal

Attibution) On the other band if the

boss attributes the reason for better

performance to the latest machine,

then the subordinate will not be

rewarded, (external attribution)

Internal attribution is under the

personal control of the individual.

Externally caused behaviour is seen

as resulting from outside causes.

The Attribution depends upon three

factors:

a. Distinctiveness

b. Consensus

c. Consistency

a. Distinctiveness means whether

the individual behaves in an

unusually different way. For e.g.:

A worker is found coming late

to the office Is he late today
 unusually? If it is usual then ‘he’

(the worker) is to be blamed

(Internal attribution). If he is not

a regular late comer, then the

superior should attribute the

reason for being late as

something external say a road

traffic jam, (External attribution)

b. Consensus : If everyone who is

faced With the similar situation

responds in the same way, one

can say the behaviour shows

consensus. In the previous

example, if all the employees

come late, ie., the consensus is

high, the supervisor takes as

external attribution. In the case

of employees’ who take the same

 route, but only one employee

comes late, then, the supervisor

takes internal attribution Here

the consensus is low.

c. Consistency : Does the

individual employ, repeat his

behaviour all the time? If so the

attribution may be internal.

To conclude, Motivation is a

psychological process. The

content theories involve needs

which set drives in motion to

accomplish goals. Although,

these models are simple, provide

content factors, there is little

research support for its

application. The process theories

 provide much sounder

application of work motivation.

Application of motivation :

There are many areas where

motivation can be applied, in human

resources management. The first

area of HRM is job design, in which

traditional concepts like job

engineering, job enlargement, and

job rotation are now replaced by job

enrichment approach, thanks to

Herzberg's two factor hygiene

motivation model. Today, the job

should be so designed that,

psychological and motivational facton

are included. This enables the

employee to be highly motivated, as

the quality of work life, is improved

by means of more importance of the

task, and operational autonomy.

The next area of application of

motivation is performance appraisal.

The three appraisal systems are

judgmental techniques, behavioural

techniques and assessment centers.

The third area of application is MBO

which is widely used in many

organizations successfully and this is

a successful motivating technique.

Yet another tool of motivation is

Quality circles which helps

participative management where a

subordinate shares decision-making

power. This supports the theory of

motivation-hygiene model of
Herzberg, where the employees

needs of achievement, ‘recognition,

growth, and self-esteem are

satisfied. In participative style of

management theory Y is adopted (Mc

Gregor), The other areas of

application are performance based

compensation, two-tier pay systems,

flexible benefits, and alternative

work schedules.

7. 5 SUMMARY

The primary condition of an

motivation at any job is that the

employee must like and enjoy his

job. If the employees are not

satisfied their morale will be low

which reflects job dissatisfaction. The
theories of motivation put forth

hypothesis as to how attitude

develops and identify some of the

variable that induce motivation.

Check Your Progress

i. What are the factors that are

involved in the process of

Motivation?

ii. Name the theories of

Motivation?

iii. What are the factors that

influence attribution?

7.6 ANSWERS TO CHECK YOUR

PROGRESS

1. Unsatisfied need - Tension -

Drives - Search Behaviour -

 Satisfied need -Reduction of

tension are the factors that

involved in the process of

motivation.

2. There are two types of theories.

(1) Content Theories. (2) Process

Theories.

3. The factors that influence

attribution are Distinctiveness,

consensus, consistency.

7.7 EXERCISES AND QUESTIONS

1. What is Motivation? How does

effective managing take

advantage of, and contribute to,

motivation?

2. Compare and contrast the

Maslow and Herzberg theories of

 motivation. On what grounds has

the Herzberg theory been

criticised.

3. You cannot motivate managers.

They are self-propelled.

Comment.

4. Explain Vroom's expectancy

theory of motivation. How it is

different from Porter, Lawler's

approach?

5. To what extent, and how, is

money an effective motivator?

7.8 FURTHER READINGS

1. Business communication - Dr.

Rajendraprasad.

2. Principle of management -

Koontz and Odonnel

3. Business communication -

Nagamia and Bahl

 UNIT 8

LEADERSHIP

STRUCTURE

8.0 Introduction

8.1 Unit Objectives

8.2 Leadership

8.3 Theories of Leadership

8.4 Leadership styles

8.5 Modern Theories of Leadership

8.6 Summary

8.7 Answers for Check Your Progress

8.8 Exercises and Questions

8.9 Further Readings

 8.0. INTRODUCTION

Leaders are the back bones of an

organization. Better leaders develop

better employees. Many countries

have grown because of effective

leaders. This unit discusses about the

various theories, of leadership and

the various skills and styles of

leaders. It also discusses about the

modern theories of leadership.

8.1 UNIT OBJECTIVES

1. To understand Leadership Skills,

Styles & Theories.

2. To discuss the modern theories

of leadership.
 8.2 LEADERSHIP

Definition “Leadership is generally

defined as the influence, or art or

process of influencing people, so that

they will strive willingly towards the

achievement of group objectives”.

“Leadership is the ability to.

persuade others to seek defined

objectives enthusiastically”. This

concept may be enlarged to imply

that the members of the group work

with confidence and zeal. Zeal

usually reflects the sincere

earnestness, the grit, the intensity

in the execution of work. Confidence

reflects the technical competence.

“Leadership is interpersonal influence

exercised in a situation and directed

through a communication process

towards the attainment of a

specialised goal or goals”. The

following facts are revealed through

analysis of leadership.

1. Leadership is basically a personal

quality, this quality motivates

the individuals to be with

leaders.

2. Leaders influence the behaviour

of others.

3. There is relationship between

leader and individuals.

 4. Leadership is a continuous

process of influencing behaviour.

5. Leadership is exercised in a

particular situation.

The nature of leadership

Leaders are a key human resource in

any. organization. We usually think

of companies competing by means

of their products, but they probably

compete more by means of their

leaders than by their products. Better

leaders develop better employees

and two together develop better

products, therefore an employer who

develops better leaders contributes

more to the society and gains a

competitive advantage. Even

countries develop faster due to

development of latter leaders.

Formerly it was thought that personal

traits were the major source of

successful leadership, but more

recent emphasis is on the leaders’

behaviour with the group That is,

successful leadership depends on the

acts and not on personal traits

Successful leadership requires

effective behaviour that unites and

stimulates followers towards defined

objectives in specific situation.

Leaders use three different types of skills

1. Technical skill. Technical skills

refer to a person's knowledge

and ability in any type of process
or technique.
 2. Human skills. Human skills is

the ability to think in terms

relationship with people. It

becomes increasingly important

in higher managerial jobs.

3. Conceptual skill. It is the

ability of the leader to think in

abstract, assess the environment

and make decisions.

Essential qualities of a good leader

1. Intelligence : For effective

leadership high level of

intelligence is needed.

Intelligence can also be

improved by the environment as

well as by training.
2. Although intelligence is a natural

factor, research findings have

proved that intelligence can be

improved by means of effective

training.

Basic intelligence is required for

keen observations, problem

solving, logical reasoning,

decision making etc.

3. Emotional stability A leader

should be highly balanced, well-

adjusted and free from bias. A

leader should be free from anger,

should not have any anti-social

altitude.
4. Human relations A successful

leader should have adequate

knowledge of human relations,

i.e., how he should deal with

human beings. Human relations

is very vital for understanding

and comprehending the

members, in order to get their

voluntary co-operation. A good

leader has intimate knowledge of

the people and their

relationships to each other.

5. Empathy Empathy means

understanding the situations

from other man's point of view.

A good leader should be more

empathetic so that he knows,

what the other fellow would

 think. A good leader should give

respect to other persons, their

rights, beliefs, values and

feelings.

6. Technical skills The leading of

people requires the connected to

the technical soundness in the

job.

7. Motivating skills Not only a

leader is self motivated but he

has the quality to motivate his

followers. The leader can play a

very vital role in stimulating the

inner drives of his followers, so

that they are highly motivated.

8. Communication skills

Communication should be

skillfully used by a leader for

 persuasive, informative and

stimulative purposes. A good

leader should communicate

clearly, precisely and completely.

9. Decision making skills

Leadership is a process of
decision making quality,

acceptance and effectiveness of

the decision are three important

needs dimensions of decision-

making. If the decision involves

welfare of subordinates,

leadership based on participation

yields the highest level of quality

and acceptance. If an effective

decision can only be made by the

leader, he should make it

himself. Leader must involve

 himself in the decision making

process in order to have effective

decision and to protect against

inferior decision.

8.3THEORIES OF LEADERSHIP
1. Trait theory.

Trait means ‘characteristics', and

one can list a number of such

qualities endlessly. In a study

conducted on leadership, five

Qualities were considered to be

the common qualities like

intelligence, dominance, self-

confidence, high-energy level,

and task-relevant knowledge.

Keith Davis summarises four of

the major traits which seem to

have an impact on successful

organizational leadership.

a. Intelligence: Research

generally shows that the

leader has higher

intelligence than the average

intelligence of his followers.

b. Social maturity and breadth:

Leaders tend to be

emotionally stable and

mature and tend to have

broad interests and

activities.

c. Inner motivation and

achievement drives: Leaders

have relatively intense

motivational drives of the

achievement type. They

 strive for intrinsic rather

than extrinsic rewards.

d. Human relations attitude:

They always look at their

subordinates from their

point of view i.e., with

empathy. They posses

consideration and are

employee-oriented rather

than production-oriented.

2. Behavioural theories.

Researchers were curious to find

out how leaders behave? For e.g.

are they democratic or

autocratic? In the words of

Stephen P. Robbins,

“The difference between trait and

behavioural theories, in terms of

application, lies in their

underlying assumptions. If trait

theories were valid, then leaders

are basically born. You either

have it or you don't. On the other

hand, if there were specific

behaviours that identified

leaders, then we could teach

leadership, and we could design

programmes for implanting these

behavioural styles”.

a. Iowa’ leadership studies :

Ronald Lippitt and Ralph K.

White, under the guidance of

Kurt Lewin at the University

of ‘Iowa’ found-that a group

of boys preferred democratic

leadership rather than

 autocratic or Laissez fair

leadership style. Iowa

studies were the first to

analyse leadership from the

standpoint of scientific

methodology and they

revealed that different styles

of Leadership can produce

that complex reaction from

the same or similar groups.

b. 'Ohio’ state leadership

studies : In 1945, the

Bureau of Business Research

at Ohio state University

initiated a series of studies

on leadership. A

questionnaire was prepared

and a number of members

of Airforce were interviewed.

(Leadership Behaviour

Description

Questionnaire),the findings

were quite amazing, i.e., the

same two dimensions of

leadership continually

emerged," and they were in

82.2% of the studies. They

are,

* Consideration and *

Initiating structure

Consideration : A person

who considers employees

with empathy, is friendly and

approachable, and who

shows concern for his

followers comfort, well

being, status and

satisfaction.
 Initiating structure : It is

the ability of a leader to

define and structure his or

her role and the purpose of

goal attainment. The Leader

defines patterns of

organization, channels of

communication, and ways of

getting, jobs done. It

emphasizes the importance

of task direction.

c. 'Michigan’ studies : In

1947, the office of the Naval

research requested the

University of Michigan

Survey Research Center to

 study the principles which

contribute directly to

productivity at the home

office of the Prudential

Insurance Company in New

Jersey. The Michigan group

came up with two

‘dimensions of leadership

behaviour,

i. Employee oriented

behaviour

ii. Production oriented

behaviour

i. Employee-oriented

behaviour : Leaders of this

type, emphasized

interpersonal relations, took

personal interest in their

 sub- ordinates and accepted

individual differences among

members.

ii. Production oriented

behaviour : ‘Leaders of this

type emphasized technical or

task aspects of the job and

their main concern was in

accomplishing their group

tasks and the group

members were only the

means of achieving end

results.

3. Situational Theories : Hersey-

blanchard's situational theory.

An important dimension that is

neglected in most leadership

theories, is that of the Maturity-

dimension of the followers. Paul

Hersey and Ken Blanchard

advocate that the leadership

style must be suitably modified

according to the maturity level

of workers. Maturity may be

classified as lob- maturity and

Psychological Maturity. The first

reveals ones knowledge and

skills. Psychological maturity

relates to willingness or

motivation to do something.
According to this theory two

dimensions are used.

a. Relationship Behaviour

b. Task Behaviour.

Hersey and Blanchard suggest 4

leadership styles: Telling,

Selling, Participating and

Delegating.
Leadership styles

Telling (High task low

relationship) : The leader

defines roles and tells people

what, how when, and where to

do various tasks. It emphasizes

directive behaviour.

Selling (High task high

relationship) : The leader

provides both directive

behaviour and supportive

behaviour.
Participating (Low task high

relationship) : The leader and

followers share in decision-

making’ with the main role of the

leader being facilitator and

communicator.

Delegating (Low task low

relationship) : The leader

provides little direction or

support.
Four states of maturity i.e., Ml, M2,

M3, M4

Ml : People are not willing and

not able to take responsibility.

They are incompetent and

incapable. Such people require,

clear and specific directions.

M2 : People are unable but

willing to do necessary job tasks.

They are motivated but currently

lack the appropriate skills. Such

people require high task and high

relationship behaviour.

M3 : People are not willing to

do what the leader wants and of

course they are capable of doing

jobs. Here the best style required

is participating style i.e., low

task and high relationship style

is requited.

M4 : People are both able and

willing to do what is asked of

 them. Here only low task and low

relationship style is required.

4. Fiedler's contigency model of

leadership

(Research techniques: ASO and

LPC)

Fiedler's model relies on a

questionnaire that actually does

not measure the Leadership style

properly.

ASO means Assumed Similarly

between Opposites and LPC

means Least Preferred Co-

workers. ASO calculates the

degree of similarity between

Leader's perceptions of his most

and least preferred co-workers.

LPC measures the degree to

which leaders favourably

perceive their co-workers.

A questionnaire was given to a

number of leaders and their

personality and leadership styles

were identified. The leaders were

classified into two styles.

Type 1 leader : human relations

expert

This leader does not tell many

differences between the best

worker and least preferred co-

worker, because he treats all

individuals very well and has

high values on them. Even the

least liked co-workers are given

favourable description by the

leader
Type 2 leader: task direced style

This leader gives many

differences between the best

worker and least preferred co-

worker. He gives unfavourable

description of the least preferred

co-worker.

Contingency model: Fiedler

brings two aspects together i.e.,

leadership style-and the

situational factors.

According to fiedler, the situation

has three dimensions,

1. The leader-member

relations. If the relationship

is good there is a favourable

situation and if it is bad,

then it is unfavourable

situaton.
 2. Task-structure. If every

job is clearly written with

specifications then there is

a favourable situation and if

there is no clear procedures,

it is unstructured, and the

situation is unfavourable.

3. Position power. If the

leader has high powers to

dismiss, appoint, promote or

increase the salaries, then it

is called favourable situation

and if he has no powers,

then it is clearly an

unfavourable situation to the

leaders.

Favourable situation means, all

the above three dimensions are

HIGH. Unfavourable situation

means, all the above three

dimesions are LOW.

Findings : A good leader should

use a particular leadership style

in a specific situation for

‘effectiveness'.

1. During very unfavourable

and very favourable

situations, the Task-directed

leader was most effective.

2. During moderately

favourable and moderately

unfavourable situations, the

human relations expert

leader was more effective.

According to Fred Fiedler, the

leader effectiveness depends on

whether the person's natural

leadership style is appropriately

matched to the situation.

Favourableness of the situation :

Why task directed leadership is

successful in very Favourable

situations? In very favourable

conditions, where the leader has

power, informal backing, and a

relatively well-structured task,

the group is ready to be directed,

and the group expects to be told

 what to do. Ex: The Captain of an

Airliner and his crew.

Why task directed leadership is

successful in very Unfavourable

situations? If the disliked

chairman of a committee asks for

option and ideas on planning for

a picnic on a sunday, they would

definitely say “we would like to

go home”. Here only task

directed style is required.

5. Path-goal theory :

The Path-goal theory is a

contingency model of, leadership

that builds on the Ohio state

leadership research dealing with

initiating structure and

consideration. Martin Evans

(1970) and Robert House (1971)

who developed this’ theory say

that leaders exercise four

different kinds of styles:

a. Directive leadership (giving

directions to the subordinate

rather than seeking their

participation)

b. Supportive leadership (being

friendly and approachable to

subordinate)

c. Participative leadership

(asking for suggestions from

subordinates before making

a decision)

d. Achievement oriented

leadership (setting

challenging goals and

 assignments for

subordinates)

As a contingency theory, path-

goal theory states that each of

these four leadership styles will

be effective in some situation but

not in others. They are 1)

Employee contingencies and

Environmental

contingencies.Selected

contingencies of path-goal

theory.
 Achievement
Directive Supportive Participative
Orietned

1. Employee

Contingencies

a) Skill and
Experience
Low Low High High

b) Locus of
Control
External External Internal Internal

2. Environmental
Contingencies

Non- Non-
a) Task Structure Routine ?
routine routine

b) Team Negative Low Positive

Dynamics
?
Norms cohesion Norms
Depending upon the

environmental factors and

subordinates characteristics any

of the above four styles can be

used. If the Leader changes his

style suitably, then, subordinates

will experience job satisfaction

and work with zeal and

enthusiasm. There is some

empirical support that the

derived outcomes such as

motivated behaviour and job

satisfaction do indeed occur

when the leader provides the

subordinates with what ever is

missing in the situation-

challenge, support, direction etc.

6. Leader-member exchange theory

In our day to day operations we

see many managers having their

own favourite subordinates. And

they behave in a different way to

their leader and their goals. Why

this peculiarity? George Graen

and his associates say that due

to time pressures and leader's

personality, the leader establish

a special relationship with a few

subordinates whom he likes

most. The leader-member

exchange theory argues that

these few subordinates make up

the “in-group” and get special

treatment. Because of the

special treatment, the employees

also will have higher

 performance ratings, less

turnover and greater satisfaction

with their superior.

8.4 LEADERSHIP STYLES

The classical studies of leadership

discussed the various theories which

have direct influence of ‘Style'.

‘Style’ means, the way in which the

leader influences followers.

1. Robert r. Blake and jane s.

Mounton's leadership grid :

The grid has two

dimensions-concern for people

and concern for production.

Concern for production is

composed of the attitudes of a

supervisor toward a wide variety

of things such as creativeness of

research, quality of staff service,

work efficiency and volume of

output.

Concern for people is

interpreted in a broad way. It

includes such things as degree

of personal commitment towards

goal achievement, maintenance

of self esteem of workers,

provisions of good working

conditions etc.

1.1 : Under 1.1 style of

management, (impoverished

management) managers concern

themselves very little with either

people or production and have

minimum involvement in their

jobs, for all purposes they just

act as messengers

communicating information from

superiors to subordinates.

9.9 : On the other hand, the 9.9

managers display in their actions

the highest possible dedication

both to people and to production.

They are the real ‘team

managers’ who combine the

production needs of the company

with the needs of the individuals.

1.9 : Country Club Management:

Managers have little or no

concern for production but are

concerned only for people. No

One is worried about company's

objectives and the atmosphere is

friendly, happy and relaxed:

9.1 : The managers are called

autocratic task managers who

are concerned only with

developing an efficient operation

who have little or no concern for

 people and who are autocratic in

their style of leadership.

5.5 : Managers have medium

concern for people and

production. They do not set goals

too high, and have a rather

benevolent autocratic styles of

leadership.

The managerial grid is a useful

device for identifying and

classifying managerial styles.

But it doesnot tell, why a

manager fails in one part or

another of the grid.

2. Reddin's three dimensional model

Blake and Mouton's grid

identifies the style of a manager

but doesn't directly relate to its

effectiveness. William J. Reddin,

a Canadian professor and

consultant, has added a third

dimension to the model called

“Effectiveness”.

The center grid in this figure,

represents the four basic

leadership styles. Reddin says

that each of the four styles can

be effective ineffective,

depending upon the situation.

The four styles on the upper right

are effective and the four styles

on the lower left are ineffective.

Briefly these eight styles are

as follows

Effective styles

Executive: This style gives a

great deal of concern to both

(TO) task oriented and

relationship oriented (RO). A

manager is a good motivator,

sets high standards, recognizes

individual differences, and

utilises team management.

Developer. This style gives

maximum concern to (RO)

relationship and minimum

concern to task (TO). He just

develops people as individuals.

Benevolent autocrat. He gives

maximum concern to task (TO)

and minimum concern for

relationship (RO). He knows

exactly what he wants and how

to get it without resentment.

Bureaucrat. He gives

maximum-concern to both (TO)

and relationship (RO). He is

interested in the rules and wants

to maintain and control the

situation by their use.

Ineffective styles

Compromiser. This style gives

a great deal of concern for both

task and relationship (TO & RO)

in a situation that requires only

emphasis on one or another. This

style of manager is a poor

decision-maker, the pressure

affect him rather too much.

Missionary. This style gives

maximum concern to people and

relationships (RO) and minimum

concern to the task (TO) where

such behaviour is inappropriate.

This manager has no confidence

in others and interested only in

the immediate jobs.

Autocrat. This style gives

maximum concern to the task

(TO) and minimum concern for

relationship (RO) where such

behaviour is inappropriate. This

manager has no confidence in

others and interested only in the.

immediate job.

Deserter. This style gives

minimum concern to task (TO)

and relationship (RO) in the

situation where such behaviour

is inappropriate. This manager is

uninvolved and passive.

Reddin's 3D approach

emphasizes that manager can be

effective or ineffective depending

up on the situation.
3. Likert's system of management

SYSTEM 1 SYSTEM 2 SYSTEM 3 SYSTEM 4

Leadership Exploitative Benevolent

participative Democratic
variables Autocratic Autocratic

substantial,
but not
complete
1) Has no Has Complete
confidence
Confidence confidence condescendig confidence
and trust;
and Trust in and trust in confidence and trust in
still wishes
Subordinates subordinates and trust all matters.
to keep
control of
the decisions

Subordinates Subordinates Subordinates Subordinates

2)
do not feel do not feel feel rather feel
Subordinates
free at all to very free to free to completely
feeling of
discuss discuss discuss free to
freedom.
things about things about things about discuss

things about
the job with the job with the job with
the job with
their their their
their
superior superiors superior
superior

Always
Usually gets
Seldom gets Sometimes askssubordin
3) Superior ideas and
ideas and get ideas and tes for ideas
seeking opnions and
opinions of opnions of and opnions.
involvement usally tries
subordinate subordinates Always tries
with their to make
in solving in solving job to make
subordinates constructive
job problems problems. constructive
use of them
use of them.
Leadership styles in a nutshell Autocratic

leadership

Features

• A manager centralises Power in

himself

• He structures the complete work

situation for his employees

• He wants all his employees to

listen to him

• Here the leadership is negative

as the followers are uniformed,

insecure, and afraid of leaders

authority.

Categories of autocratic leadership

Strict autocratic leadership. He

follows autocratic styles in a very

strict sense. He exercises negative

motivation by imposing penalty.

Benevolent autocratic leadership. He

also centralises decision-making

power in him but his motivation style

is positive. He can be effective in

getting efficiency in many situations,

some people like to work under

strong authority structure and they

derive satisfaction by his leadership.

Incompetent autocratic leadership.

Sometimes superiors adopt

autocratic leadership style just to

hide their incompetency, because in

other styles they may be exposed

before their subordinates,. However

this cannot be used for a long time.

Advantages of autocratic leadership styles

a. There are many subordinates in

organization, who prefer to work

under centralised authority

structure and strict discipline.

They get satisfaction from this

style.

b. It provides a strong motivation

and reward to a manager

exercising this style.

c. It permits very quick decisions

as they are taken by a single

person.

d. Less competent subordinates

also have scope to work in the

organization under this

leadership styles as they do

negligible planning, organization'

and decision-making.
Disadvantages

a. The people in the organization

dislike it specially when it is

strict and motivational style in

negative.

b. Employees lack motivation,

frustration, low morale and

conflicts develop in the

organization decreasing the

organizational efficiency.

Participative leadership style

• It is also called as democratic,

consultative or ideographic.

• Participation is mental. The

emotional involvement of a

person in a group situation,

which encourages him to
contribute to group goals.
 • A manager decentralises his

decision-making process instead

of taking unilateral decision.

• * He emphasises consultation

and participation.

• The decisions are made on the

basis of the suggestions and

ideas of the subordinates.

• Finally, the superior gives credit

to his sub-ordinates.

Merits

a. It is a highly motivating

technique because the

employees feel elated because

their ideas and suggestions are

given weightage in

decisionmaking.
 b. The productivity is high.

c. The subordinates share the

responsibility with superior and

try to safeguard him also. It is

said that the fellow in the boat

never tries to make a hole.

d. The subordinates’ gain

confidence as they grow up on

the ladder of growth.

Demerits

a. Complex nature of organization

requires a through

understanding of its problem

which lower level employees may

not be able to do so. As such,

participation doesn't remain

meaningful.
 b. Some people in the organization

want minimum interaction with

their superiors. For them

participation technique is highly

dangerous.

c. Participation is sometimes

misused by employers.

Employees prefer only autocratic

leadership.

Free-rein leadership

• This type of leadership gives

complete freedom to

subordinates

• In this style, manager once

determines the policy,

 programmes, the entire process

of achievement of action is left

with subordinates.

• Group members perform

everything and the manager

usually contacts outside persons

to bring the information to match

with the group needs.

Advantages

a. This helps the subordinates to

develop independent personality.

b. It is useful only in very few

situations.

Limitations

a. The contributions of the manager

is nil.

b. Generally productivity is low.

 c. Individual freedom to the

subordinates makes them

relaxed towards organizational

goals.

8.5 MODERN THEORIES OF

LEADERSHIP

Implicit theories : Although the

early section discussed at length

about the sophisticated theories of

contingency leadership, experts still

go back to the trait aspects of

leaders, but give a different name-

Implicit theories, to give us the

effectiveness of leaders. Like a

common man, experts say that

personalities like Gandhi, M.G.

Ramachandran, Kennedy, Mandela,

have some unique qualities of

leadership. Two implicit theories

explain the leadership effectiveness.

Attribution theory of leadership :

People try to understand the events

by cause-effect relationships. When

some thing happens, they want to

blame it to something, Attribution

theory says that leadership is merely

an attribution that people make

about other individuals. Hence people

come to a general conclusion that

traits such as intelligence, outgoing

personality, strong verbal skills, etc.,

are found in leaders. For e.g.: Lee

lococca and Ronald Reagan have

been committed, stead fast and

consistent in goals and decisions.

Attribution theory proposes that

people perceive certain traits to be

present in leaders.

Charishmatic leadership theory

Gandhi, Mandela, M.G.

Ramachandran are considered as

Charismatic leaders., This is also an

extension of attibution theory. After

a series of exposures of films of M.G.

Ramachandran, the laymen of Tamil

Nadu have attributed some

consistant characters to be present

in the personality of MGR. There are

two types of leaders. The

Transactional Leaders are those who

guide or motivate their followers in

the direction of established goals by

clarifying role and task requirements.

The other type of leaders are

Transformational leaders who provide

individualised consideration,

intellectual stimulation and posses

charisma. The Transactional leaders

are non-charismatic and

Transformational leaders are

Charismatic.

According to J.A. Conger and R.N.

Kanungo, the key characteristics of

Charismatic leaders are a) Self-

Confidence b) Vision and ability to

articulate the vision c) Behaviour

that is out of the ordinary d) are

perceived as being change agents e)

Environment sensitivity.
As one learns more about the

personal characteristics of

Charismatic leaders one should be

able to predict situations- when

followers will show commitment and

loyalty to his leaders and to his

leader's goals.

8.6 SUMMARY

Leadership is basically a personal

quality which influences the

behaviour of the others leadership

requires different skills, styles to

succeed in any favourable or

unfavourable situations.

Certainly a plethora of theories were

discussed and what are the

commonalties among the Leadership

theories?

Leadership behaviour can be divided

into two dimensions-task and people.

Fiedler says that Leadership styles

can be fixed, while Vroom and Yelton

argue that it is flexible. But

ultimately it all depends on the

personality.

The trait theories may claim that

those people who posses intelligence,

self-confidence, dominance can be

good leaders. But the question is can

the leaders stimulate the

subordinates to produce more or can

they infuse the job satisfaction in the

minds of employees? Only then he

can be called a successful leader.

What is the effect of task-oriented

leader on productivity and employee-

satisfaction? Are the leaders who rate

high in people orientation end up

with satisfied employees? Mersey

Blanchards situational theory

considers subordinates ability and

motivation as important element

contributing to a leader's success.

Leader-member exchange theory

focuses on in-groups and out-groups,

and that the in-group employees

have higher performance and

satisfaction than out-group

members. Fiedler's model focuses on

the three dimensions of the situation,

i.e., Leader-member relations, Task-

structure, and Position-power. Path-

goal theory says that a leader's

success depends upon adjusting his

style to the environment and the

characteristics of the followers.

Check Your Progress

1. List down the different types of

leadership skills?

2. What are the Modern theories

of leadership?

8.7 ANSWERS TO CHECK YOUR

PROGRESS

1. The different types of leadership

skills are Technical, Human,

conceptual.
2. The modern theories of

leadership are implicit,

attribution theory of leadership,

charishmatic leadership theory.

8.8 EXERCISES AND QUESTIONS

1. Is leadership necessary?

Comment.

2. Leaders make a significant

difference. Give reasons.

3. Discuss the Modern Implicit

theories of leadership.

4. What are the essential qualities

of a leader?

5. Discuss the trait and Behavioural

theories of leadership.
6. Define the psychological

maturity of Hersey-Blanchard's

situational theory.

7. Discuss Fiedler's contingency

model of leadership and Path-

goal theory.

8. What is Leadership style?

Discuss the various leadership

styles of Blake and Mouton.

8.9 FURTHER READINGS

1. Business communication - Dr.
Rajendraprasad.

2. Principle of management -

Koontz and Odonnel

3. Business communication -

Nagamia and Bahl

 UNIT 9

COMMUNICATION

STRUCTURE

9.0 Introduction

9.1 Unit Objectives

9.2 Communication

9.3 Types of Communication

9.4 Barriers in Communication

9.5 Summary

9.6 Answers for Check Your Progress

9.7 Exercises and Questions

9.8 Further Readings

 9.0. INTRODUCTION

Every business house is connected

by a set up communication patterns.

A number of problems arise due to

very trivial issues connected to

communication. This unit aims to

discuss the various types of

communication, the barriers of

communication, and how

communication can be made

effective.

9.1 UNIT OBJECTIVES

1. To understand the

communication process.

2. To learn the various types of

communication.
 3. To decepher their barriers of

communication.

4. To inculcate the various steps of

making communication effective.

9.2 COMMUNICATION

The word communication has been

derived from the latin word

‘communis’which can be translated

as common. Communication can be

defined as the process through which

two ot more persons come to

exchange ideas and understanding

among themselves.
Communication process

Communication process may involve

the various elements as shown in

figure:

The above figure shows the following

elements in this process.

Sender : The person who intends to

make contact with the-objective of

passing information, ideas to other

persons is known as sender.

Ideas : This is the subject-matter

of communication. This might be

opinion, attitude, feelings, views

suggestions, orders etc.

Encoding : Since the subject-matter

of communication is abstract and

intangible., its transmission requires

the use of certain symbols such as

words, actions, pictures, etc.

Conversion of the subject matter into

these symbols is the process of

encoding.

Channel : These symbols are

transmitted through certain

channels, e.g. radio, telephone, air

etc., depending upon the situation of

the two parties, viz., sender and

receiver,

Receiver : Receiver is the person to

whom message is meant for.

Decoding : Receiver converts the

symbols received from the sender to

give him the meaning of the

message.

Feedback : Feedback is necessary to

ensure that the receiver has received

the message and understands it in

the same sense as sender wants.

Further, it also acts as an energising

factor, thereby changing the course

of action in the communication.

9.3 TYPES OF COMMUNICATION

Each business house is connected

with two types of communication:

External and internal, Externally, it

has to communicate with the other

business houses.
Internally communication may again

be of two types: Formal or official

and Informal. Formal communication

flows along prescribed channels

which all members desirous of

communicating with one another are

obliged to follow. If a supervisor

working in the sales department

wants to get formally in touch with

an accounts clerk, his communication

will have to pass through the hands

of the sales manager, the accounts

officer, and a supervisor in the

accounts department. Formal

communication may move vertically

or horizontally. Vertical
communication can flow downward

(from superiors to subordinates) or

upward (from subordinates to

superiors). Horizontal communication

flows between employees of equal or

comparable status. When a number

of people, irrespective of their status,

sit down and confer with one another

to arrive at a decision acceptable to

all, it is called consensus.

In addition to these formal channels

of communication, there exists in

every organization an informal

channel, often called the grapevine.

Rumours that are all the time

spreading in any organization follow

the grapevine.
1. Downward communication

That is communication flows

from a superior to a subordinate.

Orders, individual instructions,

policy statements, jobsheets,

circulars etc., fall under

downward communication.

Downward communication is

eminently suited to an

organization in which the line of

authority runs distinctly

downwards, with each rank

clearly below another, to which it

is directly related.
Main objectives of downward

communication

1. To gain specific directives

about the job being

entrusted to a subordinate.

The decisions taken at the

managerial level are

transmitted to the

subordinate staff in the form

of directives so that action

may be initiated.

2. To explain policies and

organizational procedures: A

clear understanding of the

policies gives the lower staff

a wider, perspective so that

they can grasp and play their

role more meaningfully.

3. To appraise the subordinates

of their performance. If the

performance of a

subordinate is objectively

assessed and the

assessment communicated

to him in a considerate tone,

it will definitely promote his

efficiency.

4. To give information about

the rationale of the job, i.e.,

to explain to a subordinate

the significance of the job

assigned to him and why he

has been entrusted with it.

Limitations of downward

communication

1. Under-communication and

over-communication :

Downward communication is

often married by either by

under-communication or

over-communication, i.e., a

superior may either talk too

little or too much about a

job.

2. Delay : The lines of

communication in downward

communication being very

long, transmitting

information to the lowest

worker is a time-consuming

process. By the time

information reaches him, it

may have lost much of its

 significance, or it may have

caused damaging delay.

3. Loss of Information : Unless

the communication is fully

written, it is not likely to be

transmitted downwards
fully. A part of it almost

certain to be lost. In fact,

it has been experimentally

verified that only 20 per cent

of the communication sent

downward through five

levels of management finally

gets to the worker's level.

4. Distortion : In long lines of

communication, information

is not only lost but even

distorted.
 5. Built in resistance : The

subordinates do not get any

opportunity of participating

in the decision-making

process. They are expected

to receive the policy

decisions and directives

without questioning their

appropriateness, utility or

validly which they resent.

2. Upward communication

The communication channel

which pushes the flow of

information upwards is known as

the upward channel of

communication. Managers have

only recently come to recognise

the importance of upward

communication.
Importance of upward

communication

1. Providing feedback Upward

communication provides the

Management with necessary

feedback.

2. Outlet for the pent-up

emotion: Upward

communication gives the

employees an opportunity to

vent their problems and

grievances.

3. Constructive suggestions:

Often employees offer

constructive suggestions to

promote the welfare of the

 organization. Some of these

suggestions, when

implanted, definitely prove

beneficial.

4. Easier introduction of new

schemes: Since the

employees feel themselves

to be a party to the decision-

making process, it helps the

organization to introduce

new schemes without unduly

antagonizing the employees.

5. Greater harmony and

cohesion: Upward

communication acts as a

kind of lubricant. It makes

the atmosphere in the

company congenial and

 creates greater harmony and

cohesion between the

management and the

employees.
Methods of upward communication

1. Open door policy : The

employees are given a

feeling that the manager's

doors are always open to

them. Whenever they like,

they can walk into his room

without any hesitation

whatsoever, and talk to him

about their problems.

2. Complaints and suggestion

boxes : At some convenient

places in the office of the

factory, complaints and

suggestion boxes are

installed.
3. Social gatherings : Social

gatherings are frequently

arranged in different

departments. These

gatherings offer a very

informal atmosphere in

which the employees shed

their inhibitions and talk

about their problems.

4. Direct correspondence :

Sometimes the manager

may directly write to an

employee and ask him to

communicate with him.

5. Reports : Employees may be

required to submit reports

 about the progress of their

work at regular intervals.

6. Counseling : In some

organizations, workers are

encouraged to seek the

counsel of their superiors on

their personal problems.
Limitations of upward communication

1. Employees are usually

reluctant to initiate upward

communication. The

managers might keep their

doors open. But they cannot

force the employees to walk

in to their rooms.

2. Employees often feel that if

they communicate their

problems to their superiors,

 it may adversely reflect on

their own efficiency.

3. Upward flow of

communication is more

prone to distortion than

downward communication.
In downward

communication, distortion is

often unconscious. But

upward communication is

deliberately distorted. Some

managers lose their temper

if they are confronted with

unpleasant facts. So

information is suitably

‘edited’ before it is passed

on to them. While

transmitting communication
 upwards, the transmitter is

always conscious of how it

will be received and he

cannot resist the temptation

of sugar-coating the

information.

4. Sometimes, in the process of

upward communication,

workers become too bold,

ignore their immediate

superiors and suggestions or

complaints. This proves

harmful in two ways. Hie

officers who have been by-

passed feel hurt, while the

high-ups get suspicious of

the workers’ intentions. The

relations between the

 workers and their immediate

superiors get strained and

work suffers.

5. 5. Any negligence shown

towards upward

communication makes the

workers cynical. They carry

the impression that the

opportunity to communicate

upwards is only an eye-

wash. This acts as a barrier

to upward communication in

future.
3. Horizontal communication

Communication between

departments of people on the

same level in the managerial

hierarchy of an organization may

be termed as Horizontal or

lateral communication.

Horizontal communication is

extremely important for

promoting understanding and co-

ordination among various

departments.

The purchase department might

keep on purchasing material

which is neither immediately

needed nor can be adequately

stored. The stores may report

shortage of material when

production is fully geared up.

Scarcity of raw material may

cause production to slow down

but the sales department may

continue booking orders. Free

 flow of horizontal communication

among various departments can

easily avert the incidence of such

situations.
4. Grapevine

In every organization an informal

channel of communication called

the grapevine is in operation.

It is quite natural for a group

of people working together to be

interested in one another and

talk about appointments,

promotions, retrenchments, or

even domestic affairs. Some

people derive great pleasure

from gathering such ‘secret'

information and transmitting it to

others. They are the leaders who

control the grapevine. Soon this

top secret reaches everybody.

Keith Davis rightly points out

that the grapevine is more a

product of the situation than it is

of the person. Certain situations

Wot insecurity of service,

uncertainty over promotions,

special increments to a particular

employee, certain innovations in

the organization likely to affect

the job prospects of the

employees, are sure to activate

the leaders of the grapevine that

very soon all kinds of rumours

spread in the organization.

The grapevine in basically a

channel of horizontal
communication, for it is only

between people working at the

same level of hierarchy who can

informally communicate with one

another with perfect ease.

Importance of the grapevine

1. A Safety valve :

Apprehensions experienced

by workers on matteis tike

promotions and

retrenchments become an

obsession with them. Talking

about them may not

alleviate their fears, but it

certainly provides them

emotional relief.

2. Organizational solidarity and

cohesion : The existence of

 the grapevine proves that

the workers are interested in

their associates. The very

fact that they talk among

themselves helps to promote

organizational solidarity and

cohesion.

3. Supplement to other channel

: All information cannot be

transmitted to the

employees through the

official channels. If there is

some useful information

unsuitable for being

transmitted through official

channels, it can be

transmitted through

grapevine.
 4. Quick transmission : The

speed with which

information is transmitted

through the grapevine is just

remarkable.

5. Feedback : The grapevine

provides feedback to the

management.

Demerits of the grapevine

1. Distortion : One of the major

drawbacks of the grapevine

is that it may spread

baseless or distorted news

which may sometimes prove

harmful even to the

employees.
 2. Incomplete information :

The grapevine information is

usually incomplete.

3. Damaging swiftness : The

swiftness with which the

grapevine transmits
information may even be

damaging. A rumour may

have spread and caused

serious damage before the

management becomes aware

of it and can take any

rectifying steps.

How to use grapevine

effectively?

1. The managers should try to

spot the leaders. They

should try to find out the

 people who are more active

on the grapevine and keep

them well informed so that

harmful rumours do not

reach the employees.

2. The grapevine should be

used to feel the pulse of the

employees.

3. If there is any false tumour,

the management should

immediately use the official

channels to contradict and to

dispel the fean of the

employees.

4. If the workers are associated

with decision-making, the

rumour-mongers will be

automatically frustrated: If
 the workers are already

aware that the plant is to

be modernised but that the

modernisation process is not

going to involve any

retrenchments, the arrival of

the new machinery and

engineers will not cause any

undue apprehensions among

them. Thus the harmful

effects of the grapevine will

be successfully

counteracted.
5. Consensus

In the commercial field, it is felt

desirable that when the board

meeting is held, decision should

be arrived at through consensus.

Unanimous decisions help to

project a good image of the

organization among the

employees as well as share

holders.

Consensus does not imply

unanimity, for perfect unanimity

is just impossible. It simply

means that the majority of

people subscribe to a particular

view, which all the members are

willing’ to accept in the larger

interest of the organization. The

dissent is there, but the dissent

is not expressed and it is

minimum.
Communication media

The subject-matter of

communication, i.e., message, ideas,

suggestions etc., being abstract and

intangible, their transmission and

receipt require use of certain

symbols, which’ become the media of

communication. These symbols may

be (i) word either oral or written,

(ii) Pictures including graphs and

diagrams; and (iii) actions or

gestures including facial expressions.

Each of these media may be either

used exclusively, that is, to the

complete exclusion of others, or, as

is very commonly the case, two or

more of these may be used to

supplement each other. For example,

in face-to-face communication,
diagrams and charts may be used

to clarify what one is talking about.

Of these, oral and written methods

of communication are the most

important.

9.4 BARRIERS IN
COMMUNICATION

There might be a number of such

barriers undoing the flow of

communication in the organization.

These may be classified us (i)

Semantic (ii) Emotional or

psychological Barriers (iii)

Organizational and (iv) Personal

factors.
1. Semantic barriers

Semantic barriers are

obstructions caused in the

process of receiving or

understanding of the message

during the process of encoding

and decoding ideas and words.

These, barriers arise from the

linguistic capacity of the parties

involved. The following are some

semantic barriers.

a. Badly expressed message :

Lack of clarity and precision

in a message makes it badly

expressed. Poorly chosen

and empty words and

phrases, careless omission,

lack of coherence, bad

organization of ideas,
 awkward sentence structure,

inadequate vocabulary,

platitudes, numbing

repetition, jargon, failure to

clarify implications are some

common faults in this case.

b. Faulty translations : Every

manager receives various

types of communication from

superiors, peers,

subordinates and he must

translate information

destined for subordinates,

peers and superiors into

language suitable to each.

Hence the message has to be

put into words appropriate to

 the frame work in which the

receiver operates.

c. Unclarified assumptions :

There are certain

uncommunicated

assumptions which underlie

practically all messages.

Though a message appears

to be specific its underlying

assumptions may not be

clear to the receiver.

d. Specialist's language: It is

often found that technical

personnel and special groups

tend to develop a special,

peculiar, and technical

language of their own. This

increases their isolation from

 others and builds a

communication barrier.
2. Emotional or psychological barriers

The following are some

emotional barriers:

a. Premature evaluation :
Rogers and Roethlisberger in

1952 first pointed out this

barrier. Premature

evaluation is the tendency of

prematurely evaluating

communications, rather than

to keep an uncompromised

position during the

interchange. This barrier can

be remedied by "empathy”

and non-evaluative listening.

b. Inattention : The

preoccupied mind of a

receiver and the resultant

non-listening is one of the

major chrome psychological

barriers. It is a common
phenomenon that people

simply fail to react to

bulletins, notices, minutes

and reports.

c. Loss by transmission and

poor retention: When

communication passes

through various levels in the

organization, successive

transmission of the same

message are decreasingly

accurate. It is said that in

 case of oral communication

about 30% of the

information is lost in each

transmission.

d. Distrust of communication:

It arises out of ill-considered

judgements or illogical

decisions or frequent

countermanding of the

original communication by

the communicator. Repeated

experience of this kind

gradually conditions the

receiver to delay action or

act unenthusiastically hence

making the communication

unsuccessful, though

apparently it is complete.
 e. Failure to communicate: It is

quite an accepted tact that

managers often fail to

transmit the needed

messages. This might be

because of laziness on the

part of the communicator, or

assuming that “everybody

knows”, or procrastination or

“hogging” information or

deliberately to embarrass

others.
3. Organizational barriers

a. Organizational policy : The

general organizational policy

regarding communication act

as an overall guideline to

everyone in the organization

 regarding how he is normally

expected to behave in this

matter.

b. Organizational rules and

regulations : Organizational

rules and regulations affect

the flow of communication

by prescribing the subject

matter to be communicated

and also the manner through

which these are to be

communicated. The rates

may restrict the flow of

certain messages and may

leave many important ones.

On the other hand,

communication through

proper channel in a specified

 way prescribed by these

rules delays it and works

against the willingness of

persons to convey the

message. This barrier is

strongly operative in Indian

Public Sector enterprises

where observance of rules

and regulations are more

rigid.

c. Status relationships : The

placing of people in superior

subordinate placing of

people in superior

subordinate capacity in the

formal organization

structure also blocks the

flow of communication and

 more particularly in upward

direction. Greater the

difference between

hieraichial positions in terms

of their status, greater

would be the possibility of

communication breakdown.

d. Complexity in organization

structure : In an

organization where there are

a number of managerial

levels, communication gets

delayed. Chances of

communication getting

distorted are more in case

of upward communication,

because people generally do

not like to pass up the

 adverse or criticism either of

themselves or of their

superiors.

e. Organizational facilities :

Organizational facilities

provided for smooth,

adequate, clear and timely

flow of communication may

take a number of forms.

Some of these have been

mentioned earlier in the

communication media such

as meetings, conferences,

complaint box, suggestion

box, open door system,

social and cultural

gatherings etc. If these are

not properly emphasised

 generally people fail to make

effective communication.

A plethora of factors internal to

the two parties sender and

receiver to this process also

exert important influences on its

operation, as communication is

basically an inter-personal

process.
4. Personal barriers

a. Barriers in superiors

i. Attitude of superiors:

The attitude of superiors

towards communication

in general or in any

particular direction

affect the flow of

message in different
 directions. For example,

if this attitude is

unfavourable, there is

greater possibility that

messages would not flow

adequately from and or

to supeuors.

ii. Fear of challenge to

authority : A person in

the organization always

tries to get a higher

positions and prestige to

satisfy his needs. As

such managers in

general try to withhold

the information coming

down the line or going

up as frequent passing
 or information may

disclose their weakness.

iii. Insistence on proper

channel : One of the

basic features of

superior's exercising of
the authority is that

they wish to remain in

communication links and

they do not like any type

of by-passing in

communication.

iv. Lack of confidence in

subordinates : Superiors

generally perceive, that

their subordinates are

less competent and

capable, they are not

 able to advise superiors

or they may not have

some information

coming downwards.

v. Ignoring communication

: Sometimes superiors
consciously and

deliberately ignore the

communication from

their subordinates to

maintain their

importance.

vi. Lack of time: Superiors

feel, whether correct or

otherwise, that they are

overburdened with the

work and they have little

 time to talk to their

subordinates.’

vii. Lack of awareness:

Sometimes superiors

may lack awareness

about the significance

and usefulness of

communication in

different directions in

general or of a particular

subject- matter. In such

a case, communication

flow is blocked.
Barriers in subordinates

Vertical communication in

either direction can take

place only when

subordinates also actively

participate in this process.

There are various factors in

the subordinates that

adversely affect such active

participation on their part.

Some factors which have

been traced-in the case of

superiors are also applicable

here, such as attitude, time

availability, awareness about

the significance, etc.

Lack of proper incentive.

Lade of motivation to

communicate also prevents

subordinates to

communicate upwards. The

reward and punishment

system of the organization is

more responsible for this. If

a novel suggestion by a

subordinate does not evoke

any attention from the

organization, he would not

convey it.

How to make

communication effective?

There are various guidelines

for making effective

communication. American

Management Association has

suggested ten

commandments of good

communication.

1. Clarity in idea : The

communicator should be

quite dear about what

 he wants to

communicate.

Communication is a

process starting with

ideation which includes

generation of ideas
which are meant for

communication. This is

the subject-matter of

communication and may

include opinions,

attitudes, feelings,

views, suggestions,

orders etc.

2. Purpose of

communication : Every

communication has

some purpose, the basic

 purpose, of any

communication being to

get behavioural

response from the

receiver of the

communication.
However the ultimate

objective may be

extended further, for

example, getting an

order accepted by the

subordinate. The

communication should

be directed towards this

objective by the efforts

of communicator.

3. Empathy In

communication : The
 way for effective

communication is to be

sensitive towards

receiver's needs,

feelings, and

perceptions. This is what

psychologists call

empathy in
communication,

implying putting lase in

other's shoes.

4. Two-way communication

: Communication is a

two-way traffic and this

fact must be realised in

communication. Two-

way communication

brings two minds

 together which is the

basic core of any

communication. It

involves a continuous

dialogue between

sender and receiver of

the message.

5. Appropriate language :

The subject-matter of

communication is

transmitted by decoding

it into some symbols.

Such symbols may be in

the form of words, either

spoken or written, and

gestures, if words are

used, the language used

for communication
 should be such, which is

understandable by the

receiver. Technical

terminology and multi-

syllable words may be

impressive looking, but

they can also be

troublesome to the

listener. One way of

making the

communication simple is

to use repetitive

language with which

receiver is quite

familiar.

6. Supporting words with

action: Often it is said

that action speaks

 louder than words. While

communicating, the

sender may use the

actions to emphasise a

point. This will ensure

seriousness in
communication.

7. Credibility in

communication : One

criterion for effective

management

communication is that it

has demonstrated

through his competence

that he is worthy for

trust. He must also

maintain bis trust and

credibility. Thus any

 communication which is

based on this trust and

creditability will be

followed by

subordinates.

8. Good listening : A
communicator must be a

good listener too. By

this process, he is not

only giving chance to

others to speak but he

gathers useful

information for further

communication. By

concentrating on the

speaker's explicit and

implicit meanings, the

manager can obtain a

much better

understanding of what is

being said. Nicholas has

identified that managers

suffer from some

common habits of bad

listening. Davis has

suggested ten points

which may be observed

in listening. These are:

Stop talking, put the

talker at ease, show the

talker that you want to

listen to, remove

distractions, empathise

with the talker, be

patient, hold your

temper, go easy on
 arguments and criticism,

ask questions, stop

talking. He has

emphasized stop talking

because without

stopping talking, one

cannot listen to.

Key concepts for review

Process of communication

Encoding

Grapevine

Semantic Barriers

Psychological Barriers

Organizational Barriers

Personal Barriers

Art of listening
 9.5 SUMMARY

Communication is a process where

both sender and receiver should

understand the message in same

sense. The channels of

communication used should be

appropriate to the situation. In order

to have an effective communication

the barriers in communication has to

be sorted out through certain

guideliness for communication.

Check Your Progress

1. What are the key elements

involved in communication

process?
 2. Name the various types of

communication.

3. What are the barriers of

communication?

9.6 ANSWERS TO CHECK YOUR

PROGRESS

1. The key elements involved in

communication process are

sender, ideas, encoding,

channel, receiver, decoding &

Feedback.

2. The various types of

communication are upward,

downward, vertical, horizontal,

grapevine, consensus.
3. The barriers of communication

are. semantic, emotional,

organisational, personal.

9.7EXERCISES AND QUESTIONS

1. Describe the model of

communication and select a

problem and apply the model.

2. What are the types of

communication? Is downward

advantageous to an

organization?

3. Discuss the ways of making

communication effective.

4. How can you eradicate the

internal (personal) barriers of

the employees of an

organization?
5. What are the problems of upward

communication? How would you

overcome the difficulties?

What are the major barriers to

communication?

9.8 FURTHER READINGS

1. Business communication - Dr.

Rajendraprasad.

2. Principle of management -

Koontz and Odonnel

3. Business communication -
Naaamia and Bahl
 UNIT 10

CONTROLLING

STRUCTURE

10.0 Introduction

10.1 Unit Objectives

10.2 Control

10.3 The Controlling Process

Essentials of Effective Control

10.4
Systems

Behavioural Implications of
10.5
Control

Behavioural Guidelines for

10.6
Effective Control
 10.7 Challenges Created by IT

10.8 Summary

10.9 Answers to Check Your Progress

10.10 Exercises and Questions .

10.11 Further Reading

10.0 INTRODUCTION

Control is one of the most important

functions of management, second

perhaps, only to the function of

decision-making. There is more to

control than mere measuring and

reporting of activities. Control has

very broad applications both in the

personal as well as in the industrial

world. The purpose of controls is to

ensure that events turn out the way

they are intended to. Control is a

powerful force if applied properly.

Controlling your emotions sometimes

can save your life. Nuclear power is

both useful as well as destructive. Its

usefulness will depend upon our skill

in controlling it. Controlled air and

controlled water run machines and

industries.

Control involves a set of mechanisms

for evaluating organizational

performance against the set

standards and where deviations

occur, appropriate steps are taken

to correct these deviations to ensure

that the organization stays on

course. Some controls are built in

the system, so that deviations are

automatically corrected. For

example, an aero plane can be put

on automatic pilot. Exact information

on its route is fed into computers

and if there is any deviation from

its prescribed path, it is corrected

automatically. Similarly, in some of

the new models of cars, a

photographic sensor automatically

puts the car back in the right lane

automatically, should it move

unexpectedly to a different lane.

10.1 UNIT OBJECTIVES

• Defining what we mean by

control and how control is

 necessary to ensure that the

results of operations are

consistent with the planned

predictions.

• Understanding how standards

are established and against

which the performance is

measured.

• Describing the various types of

performance evaluations

• Explaining some of the devices

used in measuring performance

• Explaining some of the

characteristics of effective

controls

• Understanding the behavioural

implications of control

• Describing some guidelines for

effective behavioural control

 10.2 CONTROL

Control is very important both in

organized living as well as ‘living’

organizations. When things go

smoothly as planned, they are

considered to be under control. ‘Self-

control’ is a word we are all familiar

with and which simply means that we

discipline ourselves in such a manner

that we strictly adhere to our plans

for our lives and generally do not

deviate from these plans. Controls

are there to ensure that events turn

out the way they are intended to.

It is a dynamic process, requiring

deliberate and purposeful actions in

order to ensure compliance with the

plans and policies previously

developed. This means that the

managerial functions of planning and

controlling are very closely related.

Without proper controls planning

itself has little meaning. According to

Robert L. Dewelt:

The importance of the planning

process is quite obvious. Unless we

have a soundly chartered course of

action, we will never quite know what

actions are necessary to meet our

objectives. We need a map to identify

the timing and scope of all intended

actions. This map is provided through

the planning process.

But simply making a map is not

enough. If we do not follow it or if

we make a wrong turn along the way,

chances are we will never achieve

the desired results. A plan is only

as good as our ability to make it

happen. We must develop methods

of measurement and control to signal

when deviations from the plans are

occurring so that corrective action

can be taken.’

The interrelationship between the

functions of planning and controlling

is clearly evident. Planning involves

formulating organizational objectives

and developing strategies, while

controlling involves establishing

standards of performance and

comparing actual results with the

planned results to determine whether

operations are being performed

according to plans.

10.3 THE CONTROLLING PROCESS

According to Robert J. Mockler:

‘Management control is a systematic

effort to set performance standards

with planning objectives, to design

information feedback systems, to

compare actual performance with

these pre-determined standards, to

determine whether there are any

deviations and to measure their

significance, and to take any action

required to assure that all corporate

resources are being used in the most

effective and efficient way possible in

achieving corporate objectives.’

Mockler's definition divides the

process of control into four steps.

These steps are:

10.3.1 Establishing standards

The control process begins with the

establishment of standards of

performance against which

organizational activities can be

compared. These are levels of

activities established by management

for evaluating performance. These

standards must be clearly specified

and understood by all organizational

members without ambiguity. They

should be defined in measurable

terms, wherever possible, such as

physical units produced over a period

of time, profit to be made per unit

and so on. Vaguely worded standards

or general goals such as ‘better skills’

or ‘high profits’ are difficult to

interpret and hence lead to confusion

and conflict. For example, the goal

of a real estate broker may be to

sell four houses per month. He can

then plan the month and monitor his

performance. Similarly, a vice-

president in charge of production

may have a goal of keeping the

production cost within the assigned

budget over a period of time. In

attaining such a goal, he will be able

to monitor the costs and take

corrective actions wherever it is

necessary. As another example, a

college professor may have set a goal

of covering ten units from a book

over a period of one semester. He

can plan his schedule of teaching

accordingly to meet that goal. These

precisely-stated standards, goals and

objectives facilitate communication

with all persons making the control

process easier to monitor.

There are situations where it is not

possible to quantify standards such

as in the case of high morale,

community relations, discipline or

creativity. In such cases, all efforts

should be made to fully understand

these qualitative goals and design

control mechanisms that would be

useful in measuring performance in

these situations. Most of these

control mechanisms would be

subjective in nature and decisions

would be made on the basis of

experience, analytical observations

and intuitive judgments. Some of the

quantitative standards against which

performance can be measured are:

A. Time standards : The goal will

be set on the basis of time lapse

in performing a particular task.

It could be units produced per

hour, number of pages typed per

hour or number of telephone

 calls made per day. Managers

utilize time standards to forecast

work flow and employee output.

Standard employee output also

determines the extent of

financial incentive plans.

B. Cost standards : These

standards indicate the financial

expenditure involved per unit of

activity. These could be material

cost per unit, cost per person,

cost of distribution per unit and

so on. Budgets are established

to reflect these costs and they

provide monetary check-points

for comparing actual costs with

budgeted costs.
C. Income standards : These

relate to financial rewards

received for a particular activity.

Examples would be sales

volumes per month, sales

generated by a sales person per

year and so on.

D. Market share standards : This

goal would be oriented towards

the percentage of the total

market that a company wants to

retain or further acquire. For

example, a company may want

to increase its share of the

market by four percentage points

per year for the next five years.

E. Quality standards : These

standards express levels of

 quality expected of a product or

service. There are quality control

programs which monitor the level

of quality of a product. These

may be tolerances within which

the quality may be accepted. For

example, the space shuttle and

aircraft manufacturers have

zero-defect production

requirement while other products

may have less stringent quality

standards.

F. Productivity : Productivity or

quantity standards are expressed

in numerical terms as the

expected number of items

produced per man hour or per

given activity. These goals are

 the key to operational efficiency

and are set on the basis of past

performance, degree of

mechanization employee skills

and training required and

motivation of employees.

G. Return on investment (ROI)

: Return on investment is

comprehensive and useful

standard as it involves all facets

of the business such as turnover,

sales, working capital, invested

capital, inventory levels at given

times, production costs,

marketing costs and so on. It is

a ratio of net income to invested

capital. It is superior to market

share as a standard because a

 large market share does not

necessarily mean higher profits.

H. Quantitative personnel

standards : The worker morale

and dedication can be measured

to some degree by some

quantitative standards These

standards may be the extent of

employee turnover, number of

work-related accidents,
absenteeism, number of

grievances, quality of
performance and so on.

10.3.2 Measuring performance

Once the standards have been

established, the second step in the

controlling process is to monitor and

measure the actual performance.

Monitoring and measuring is a

continuous activity and involves

collection of relevant data that

represents the actual performance of

the activity so that a comparison can

be made between what is

accomplished and what was intended

to be accomplished. The

measurement of actual performance

must be in the units similar to those

of predetermined criterion. The unit

or the yardstick thus chosen should

be clear, well defined and easily

identified and should be uniform and

homogeneous throughout the

measurement process.
According to Suchman, there are five

types of evaluations. These are:

a. Effort : Effort reveals the extent

of input and the idea is to

measure such input to see if it

is adequate in meeting the set

objectives. For example, the

number of courses offered in the

Business Department at the

university would indicate the

extent of the business

programme. Similarly, the

number of patient beds in a

hospital would be a measure of

input for providing health care. A

salesperson's performance may

be measured by the number of

calls he makes per day. Peter

 Blau gives an example of an

employment agency where effort

was evaluated by the number of

applicants interviewed and

counselled. However, the

measurement of input was a poor

indicator of results since simply

counseling applicants did not

mean that they all got jobs.

Similarly, the number of beds in

a hospital does not necessarily

mean quality health care which is

the ultimate goal.

b. Effectiveness : As indicated

above, the evaluation of input

elements does not adequately

convey the degree of

effectiveness and results. This

 problem can be eliminated by

measuring outputs such as the

number of clients placed in jobs,

in the case of the employment

agency or the number of patients

cured in a given period of time in

the ease of a hospital.

c. Adequacy : Adequacy is the

ratio of output to need and is a

useful measure if the need and

the output can be clearly

identified and related. If the

needs are satisfied then the

performance can be considered

as adequate.

d. Efficiency : Efficiency relates

output to input. According to

Euske, in terms of efficiency, it

 is better if more can be done

with the same amount of input

or same output can be generated

with less input. Efficiency

measures are useful for

comparing the same process at

two points in time or two

different processes with the

same output.

e. Process : It relates to

underlying processes which

convert effort into outcome or

input into output. It treats

output as a function of input so

that the focus is on evaluation of

mechanisms that convert efforts

into results, rather than the

effort itself. This understanding

 of mechanism with assist in

predicting the output of the

organization for a given input.

However, the process must be

mechanistic in nature and clearly

understood in order to be
effective. For example, a sales

person cannot know if his

presentation will result in a sale

even when such a presentation is

done well and is well received.

10.3.3 Measuring devices

One of the most difficult tasks in

measuring actual performance is the

selection of an appropriate measure.

It is very important that all

performance measures used in

controlling organizational and

individual performances be both valid

as well as reliable, Validity reflects

as to how good the performance

‘measure is and reliability describes

as to how consistent such

performance measure is in obtaining

results. The methods of

measurement established would

answer the question, 'what, how and

when to measure?’

The organizational objectives would

determine as to ‘what’ is to be

measured. ‘How’ to measure the

outcome of an activity would depend

upon the type of activity and whether

continuous measurement or only spot

checks are required. The type of

activity would also determine as to

‘when’ measurement would take

place. For example, some professors

measure the performance of students

only by one final examination while

other professors give frequent

quizzes during the semester of

studies.

Some of the measuring devices used

are as follows:

A. Mechanized measuring
devices : This involves a wide

variety of technical instruments

used for measurement of

machine operations, product

quality for size and ingredients

and for production processes.

These instruments may be

mechanical, electronic or

chemical in nature. Some

electronic devices are used to

check passengers at the airport

for carrying prohibited items,

while some are used to detect

shoplifting and unchecked books

from the library. Polygraph tests

are used to check people's

explanations for certain acts.

Computers are becoming

increasingly important as

measuring devices. They can

monitor operations as they occur

and simultaneously analyze data

so collected. Many retail stores

use computerized scanning

 equipment that simultaneously

monitors sales and prices of

various items and tracks

inventory by department, vendor

and branch store.

B. Ratio Analysis : Ratio analysis

is a powerful management tool

for measuring various aspects of

business operations. It describes

the relationship of one business

variable to another. The

following are some of the more

important ratios.

i. Net sales to working capital

: The working capital must

be utilized adequately. If the

inventory turnover is rapid,

then the same working

 capital can be reused.

Hence, for perishable goods,

this ratio is high. Any change

in this ratio will signal a

deviation from the norm.

ii. Net sales to inventory : The

greater the turnover of

inventory, generally, the

higher the profit on

investment.

iii. Current ratio: This is the

ratio of current assets (cash,

accounts receivables) to

current liabilities and is used

to determine a company's

ability to pay its short term

debts.
iv. Net profit to net sales : This

ratio measures the short run

profitability of a business.

v. Net profit to tangible net

worth : Net worth is the

difference between tangible

assets and total liabilities.

This ratio of net profit to net

worth is used to measure

profitability over a long

period of time.

vi. Net profit to net working

capital : The net working

capital is the operating

capital on hand. This ratio

would determine the ability

of the business to finance

day-to-day operations.
 vii. Collection period on credit

sales : The collection period

should be as short as

possible. Any deviation from

established collection

periods should be promptly

investigated.

C. Comparative Statistical

Analysis : The operations of one

company can be usefully

compared with similar operations

of another company or with

industry averages. It is a very

useful and practical performance

measuring methodology. For

example, farmers can compare

output per acre with farmers at

other locations. Any differences

 can be investigated and the

reasons for such differences can

be ascertained. Similarly,

hospitals al one location can

measure their medical costs

against those of other hospitals,

and the performance of police

departments can be measured by

comparing crime rates in their

locality with those in other

localities. Statistical models can

be used for such measurements

and such comparisons.

D. Personal Observation :

Personal observation, both

formal as well as informal can

be used in certain situations as

a measuring device for

performances, especially the

performances of personnel. The

informal observation is generally

day-to-day routine type. A

manager may walk through a

store to get a general idea about

how people are working. An

airline officer may fly incognito

to evaluate the performance of in

flight attendants.

Formal observation is properly

planned and requires

preparation. For example,

professors are periodically

evaluated by their peers and

their students. The inflight

performance of commercial

airline pilots is regularly

 measured by representatives of

Federal Aviation Agency (FAA).

10.3.4. Comparing measured

performance with performance
standards

The next step in the control process

is to compare actual performance to

the standards set for such

performance. This comparison is less

complicated if the measurement units

for the standards set and for the

performance measured are the same

and are quantitative in nature. Such

comparison becomes more difficult

when they require subjective

evaluations.
The comparison shows us if anything

has gone wrong in the process or

operations; if there is any deviation,

negative or positive and what must

be done as a restorative process for

correcting such a deviation.

Furthermore, this comparison not

only results in the correction of the

divergence, but also ensures the

application of the preventive steps

which could guide the conduct of

operations in the future.

Evaluation of deviation. Before a

deviation is corrected, a; thorough

investigation should be undertaken

regarding the reasons for such a

deviation. The management should

look not for symptoms but for the

root cause of the problem. Some of

the questions to be looked into are:

— Were these deviations due to

unrealistic standards?

— Could the suppliers have shipped

faulty materials?

— Are the operators less efficient,

dishonest about results or

misinformed about applicable

standards?

— Is the equipment in poor

condition?

— Is the quality control department

doing an adequate job?

There are many instances where

projects have gone over the budget

and have been delayed. In such

cases, these projects should be

examined in their entriety and from

all angles in order to determine the

root cause of such a discrepancy.

Deviations can be of two types,

namely negative and positive.

a. Negative deviations : Negative

deviations are those that have

negative repercussions and may

be in the form of cost overruns

or the project being behind

schedule or the quality or

quantity of the product being

below the expected standards.

This under-performance must be

evaluated to determine whether

goals should be changed or if any

other corrective action is needed.

For example, if there has been a

delay in completing the project,

the reason may be low morale

of workers which may be evident

by excessive absenteeism or

inefficient performance or the

persons may nqt have been well

trained for the job. A cost

overrun could be due to price

increases initiated by outside

vendors or it could be due to

excessive machinery breakdown.

These deviations must be

detected and properly evaluated.

 b. Positive deviations : Positive

deviations indicate that the

performance was better than

expected and the goals achieved

were either earlier than

anticipated or less costly than

planned. These positive

deviations should also be fully

investigated as to why

underestimation? were made so

that new revised estimates can

he established.

10.3.5 Taking corrective action

Once the deviations have been

detected and presented to the

management for consideration, the

decision must be taken as to what

corrective actions are needed to

remedy the situation. However, these

corrective actions must be taken

within the constraints of acceptable

tolerance levels, outside

environmental constraints such as

those imposed by organizational

culture or guidelines, labour unions,

political and economic considerations

and internal constraint of cost and

personnel.

Since the actual results do not always

conform to the desired results, some

deviations may be expected for which

no corrective action may be needed.

However, when deviations are of a

sufficiently serious nature, the

following actions may be taken.

— Management must deal with the

root causes of the problems and not

the symptoms.

— Any corrective action should be

taken promptly in order to make it

most effective.

— Whenever and wherever possible,

the corrective action should be built

into the existing operations and these

controls should be self-monitoring i

e the actions should be automatic

such as in the case of a thermostat

in controlling the heat. (This field is

known as ‘cybernetics').
— It must be understood that the

goal itself is not a static

phenomenon, but is a function of the

dynamics of the environment. Hence

a look into the need for altering the

target itself caused by shifts in the

environment may be necessary.

10.4 ESSENTIALS OF EFFECTIVE

CONTROL SYSTEMS

Controls ax every level focus on

inputs, processes and outputs. It is

very important to have effective

controls at each of these three

stages. Effective control systems

tend to have certain common

characteristics. The importance of

these characteristics varies with the
situation.
Characteristics of an effective

control system

10.4.1 : Accuracy

Effective controls generate accurate

data and information. Accurate

information is essential for effective

managerial decisions. Inaccurate

controls would divert management

efforts and energies on problems that

do not exist or have a low priority

and would fail to alert managers to

serious problems that do require

attention.
 10.4.2 Timeliness :

There are many problems that

require immediate attention. If

information about such problems

does not reach management in a

timely manner, then such information

may become useless and cause

damages. Accordingly, controls must

ensure that information reaches the

decision makers when they need it

so that a meaningful response can

follow.

10.4.3 Flexibility :

The business and economic

environment is highly dynamic in

nature. Technological changes occur

very fast. A rigid control system

would not be suitable for a changing

environment. These changes

highlight the need for flexibility in

planning as well as in control.

Strategic planning must allow for

adjustments for unanticipated

threats and opportunities. Similarly,

managers must make modifications

in controlling methods, techniques

and systems as they become

necessary. An effective control

system is one that can be updated

quickly as the need arises.

10.4.4 Acceptability :

Controls should be such that all

people who are affected by it are

able to understand them fully and

accept them. A control system that

is difficult to understand can cause

unnecessary mistakes and frustration

and may be resented by workers.

Accordingly, employees must agree

that such controls are necessary and

appropriate and will not have any

negative effects on their efforts to

achieve their personal as well as

organizational goals.

10.4.5 Integration :

When the controls are consistent with

corporate values and culture, they

work in harmony with organizational

policies and hence are easier to

enforce. These controls become an

integrated part of the organizational

environment and thus become

effective.

10.4.6 Economic feasibility :

The cost of a control system must

be balanced against its benefits. The

system must be economically feasible

and reasonable to operate. For

example, a high security system to

safeguard nuclear secrets may be

justified but the same system to

safeguard office supplies in a store

would not be warranted. Accordingly,

the benefits received must outweigh

the cost of implementing a control

system.
 10.4.7 Strategic placement :

Effective controls should be placed

and emphasized at such critical and

strategic control points where

failures cannot be tolerated and

where time and money costs of

failures are the greatest. The

objective is to apply controls to the

essential aspect of a business where

a deviation from the expected

standards will do the greatest harm.

These control areas include

production, sales, finance and

customer service.
 10.4.8 Corrective action :

An effective control system not only

checks for and identifies deviation

but is also programmed to suggest

solutions to correct such a deviation.

For example, a computer that keeps

a record of inventories can be

programmed to establish “if-then”

guidelines. For example, if inventory

of a particular item drops below five

percent of maximum inventory at

hand, then the computer will signal

for replenishment for such items.

10.4.9 Emphasis on exception :

A good system of control should work

on the exception principle, so that

only important deviations are

brought to the attention of

management. In other words,

management does not have to bother

with activities that are running

smoothly. This will ensure that

managerial attention is directed

towards error and not towards

conformity. This would eliminate

unnecessary and uneconomic

supervision, marginally beneficial

reporting and a waste of managerial

time.

10.5 BEHAVIOURAL
IMPLICATIONS OF CONTROL

Managers must recognize several

behavioural implications in the
process of control and its

implementation. Although an

effective control system should aid

in employee motivation, it can also

have negative effects on employee

morale and performance. These

negative effects can be seen in

situations where managers exert

excessive control over others and

their activities. This can be

considered as a misuse of power by

the employees and could in turn

negatively affect their morale.

Accordingly, control system should

be made as fair and as meaningful

as possible and must be clearly

communicated to all employees. It

will be easier for the employees to

accept control if they have

participated in the formulation of the

control system and process of

implementation. In addition, timely

feedback and objective and realistic

appraisal will get positive worker

response. The control system and

performance evaluation must be

consistent with organizational goals,

policies and culture. A performance

appraisal based only upon

departmental variables, such as

output or percentage of waste may

induce workers to give less

importance to such organizational

goals as safety and equipment

maintenance. Hence, a cohesion of

all aspects is necessary for an

effective control system.

Some behavioural implications of control :

1. Control affects individual

freedom. Hence, it is common for

individuals to resist such controls

that put constraints on their

freedom.

2. Control carries certain status and

power implications. For example,

a quality control inspector may

carry more power than a line

supervisor and this may be

resented.

3. When controls are based upon

subjective and personal

judgments as against quantified
 performance, standards and

appraisals, these may create

interpersonal or inter group

conflicts within the organization.

4. Excessive number of controls

may limit flexibility and

creativity. This may lead to low

levels of employee satisfaction

and personal development.

5. Controls may influence the

generation of invalid and

inaccurate information. For

example, if the top management

habitually reduces budget

requests when reviewing them (a

control activity), then the lower

management, when proposing a

new budget or a new project may

 overstate the cost of resources

needed. Similarly, managers

may set objectives lower than

what are attainable so that a

higher output will look better at

performance appraisal time.

6. Controls can be resented by

employees if they have no

control over the situation. For

example, if a professor's

performance is appraised over

the number of publication of

books and research articles, but

he is not afforded the freedom of

time to do so because of a heavy

teaching load and excessive

committee work, then it can

result in frustration which may

 be detrimental to the entire

control system. Similarly, a

manager will become highly

frustrated if his performance

evaluation is based upon profits

achieved by his department but

he does not have the authority

or control to make operational

changes, such as hiring and

firing of workers.

7. The control system must be

synchronized to create a balance

among all affecting and

interconnected variables. The

standards should compliment

and not contradict each other.

For example, a control system

which emphasizes increased

 sales as well as reduction in

advertising expenditure at the

same time may seem

contradictory to the marketing

manager and thus may be

frustrating to him.

10.6 BEHAVIOURAL GUIDELINES

FOR EFFECTIVE CONTROL

Some of the basic guidelines to make

the control process more effective

and acceptable by employees are:

10.6.1 Set meaningful and

Attainable standards :

The standards should be realistically

set and the control system would

work more effectively if workers have

given an appropriate inputs as they

are expected to meet these

standards. Also, the control

standards should be relevant to the

job and the reasons for a particular

control system should appear

justifiable to those who must

implement and to those who must

comply. The workers work harder, for

example, to produce a better quality

unit (a control process), if such

improvement would get future

contracts for the company which

would mean more profits for all.

Furthermore, while administering

controls, management should

recognize and take into account

feelings and attitudes of individual

employees. In other words,

management should humanize

administration of control.

10.6.2 Establish an effective,

accurate and timely two-way
communication :

For any control system to be

effective, information regarding any

deviations must be communicated to

management and workers as quickly

as possible. This information and

feedback must be accurate because

the outcome is dependent upon the

accuracy of informational input. It is

equally important that the

information about the deviatior be

gathered quickly because some time

elapses between the occurrence of

the deviation and taking of a

corrective action. This time lapse is

because managers have to gather

control-related information; make an

investigative analysis; develop and

prepare necessary reports; choose a

course of corrective action and

actually employ this corrective

decision. This entire time period

should be minimized as much as

possible.

10.6.3 Reward attainment of

standards :

The control system would work much

better if the employees directly

responsible for attaining the set

standards are recognized for their
contribution. Such a recognition

would boost their morale and induce

them to work more positively towards

attainment of higher goals. This

recognition could be in the form of

financial rewards or in the form of

status improvement.

10.6.4 Get the workers involved

:

The best means of effective

managerial controls are the

development of voluntary

cooperation, participation, sense of

responsibility, self-control and self-

discipline. Self-control adds higher

value to a person's self, resulting in

higher internal satisfaction and self-
actualization which further induces

personal involvement in work and the

employees take personal pride in

effective work performance.

10.7 CHALLENGES CREATED BY

IT

Two decades ago, organizations

would store important data on paper

files which were then stowed away

in boxes for future use and for the

flow of information among different

members of the organization. Today,

the data storage methods have

changed considerably, due to the

advent of Information Technology

and its application in various fields.

However, with the use of Internet
and web-based applications in the

organizational functions, the amount’

of data has increased manifold

because, huge amounts of

information are available for

reference and use that can be shared

among various employees and

branches of an organization. Till two

decades ago the management of data

was considered to be the easy part

of the organization's functioning but

today it has become one of the most

complicated and crucial tasks for any

organization. Also, the rules and

regulations that were applicable two

decades ago, are no longer

applicable. New rules and regulations

have been formulated, keeping in

mind the security of data during its

access and transfer. Today, data

management is not only confined to

managing legal and important data,

it also includes data pertaining to the

information that flows in a working

unit, data related to the customers,

vendors and business partners. All

this data is known as structured data

it is less in quantity, is duly approved

and continuously monitored. To meet

the compliance needs, this structured

data needs to be converted into a

digitized form and has to be secured

to make it readily available along

with original documents.

Besides this structured data, there is

lot of unstructured data in the form

of emails, graphics, audio and video

files that flows freely in an

organization. And this unstructured

data is hard to manage as it is

transferred and received on a daily

basis. Without strict monitoring and

approval it becomes difficult to keep

track of the daily transactions of all

the employees. However, the

authenticity and security of

unstructured data also has to comply

with the rules and regulations.

Organizations are now working upon

improving the business performance

while working under strict security

compliance requirements. Continuous

updating and secured management of

data helps the organization to

conform to the rigid security

compliances and enables them to

increase productivity, enhance

customer service and improve the

return on technology investment.

In today's competitive scenario,

circumstances have totally changed

in terms of technology. Every

organization aims at accomplishing

its business mission of providing

quality goods to customers at low

cost. Every organization also wants

a good response from its customers

for surviving in this cut-throat

competitive economic. With the

advent of Information Technology

(IT), the management has been

characterised as a transaction-
oriented and information-intense

business function. This is a reason

for corporate organizations to invest

heavily in the techniques of EDI

(Electronic Data Interchange), BCS

(Bar Coding System) and ERP

(Enterprise Resource Planning). The

extensive application of these

techniques have created lot of

challenges for the organizations,

which are as follows:

• To design, implement and

develop the database (collection

of data)

• To secure the available data in

the organization
 • To provide best customer

services

• To survive in competitive market

conditions

• To make monopoly in terms of

goods and services in an

economy

• To increase the productivity ratio

of the organization

• To maintain the logistics cost and

enhance supply-chain

relationships with vendors,

transporters and customers.

In other words, information

technology creates challenges in

productivity, distribution and

financial aspects of the

organizations. These challenges are

emerging due to rapid changes in the

field of IT. It is very difficult for a

manager to cope up with remarkable

innovations in the field of information

technology. Due to this,

organizations are stirring to update

the available data. Thus, it becomes

necessary for the organization to

manage information technology in

order to meet the above-mentioned

challenges.

10.8 SUMMARY
1. Control is necessary to make

sure that actual results of an

activity do not deviate from the

expected results of the same

 activity. Control also includes

correction devices, should such

deviation takes place. The

function of control is to

accomplish organizational goals

by implementing previously
determined strategies and

policies so that whatever needs

to be done is done properly. In

other words, control maintains

an equilibrium between means

and ends or between efforts and

output.

2. The process of control involves

establishing standards for

outcomes of activities,

measuring performance of

workers in relation to such

 activities by employing such

measuring devices as previously

determined to be suitable and

relevant to measuring such

performance, comparing such

measured performance with

performance standards

previously set, noting any

deviations - positive or negative

- and taking corrective actions

for any negative deviations.

Positive deviations should also

be investigated to determine as

to why underestimations were

made so that new revised

estimates can be established.

3. Controls at every level focus on

inputs, processes and outputs. It

 is very important to have

effective controls at each of

these three stages. Effective

control systems tend to have

some common characteristics.

4. Control can have some

behavioural implications.

Wherever managers exert

excessive control, it can be

considered as misuse of power

by the employees and this in turn

would negatively impact their

morale. Accordingly, it is

recommended to involve the

workers in establishing

standards and in determining

performance evaluation

methods. This would improve

affiliation of the workers to the
company.
10.9 ANSWERS TO CHECK YOUR
PROGRESS

1. We ask our friends to control

themselves when they behave in

a manner unbecoming of them

just as mothers tell their children

to control themselves when they

misbehave. Control comes into

play when things happen which

are not normal as we define

normal in our own and in our

societal ways. During a riot,

things are out of control. When

there is a fire, it may get out of

control. Things get out of control

when they do not go the way

 they were planned to go.

Accordingly, asking someone to

control himself is not so unusual.

When someone is overly angry

we always say he has gone

berserk and is out of control.

2. Some standards are set by the

management which are used to

measure the activities and

operations to make sure that

such activities and operations

are in accordance with set

standards. Some of the

standards can be:

a. Time standards. A particular

task must be performed and

finished in the prescribed

time.
b. Cost standards. There should

be no over-run on costs:

Many projects end up costing

more than planned.

c. Income standards. The

income earned per unit of

time should not deviate from

expectation.

d. Market share standards. If

market share is reduced, it

means that the process is

not under control.

e. Quality standards. Output of

lesser quality indicates that

something is wrong with the

production system,
 f. Productivity. Items produced

per unit of time should not

vary.

g. Return on investment (ROI).

This return should be as

expected.

h. Personnel standards. Things

are not under control if there

are changes in turnover,

there is absenteeism,,

increase in work-related

accidents, etc.

3. Ratio analysis is a powerful

management tool for measuring

various aspects of business

operations. It describes a

relationship between one

business variable and another.

 For example, net sales to

working capital ratio determines

whether working capital is being

utilized adequately. The current

ratio determines the company's

ability to pay its short-term

debts. Similarly, the ratio of net

profit to net working capital

determines the company's ability

to finance day-to-day

operations. There are many

other financial ratios which

determine various aspects of

business viability.

4. Some of the essentials of

effective control systems are:

a. Accuracy. Effective controls

generate accurate data and

information.

b. Timeliness. Controls must

ensure that the information

reaches the management in

a timely manner so that

even the emergency

decisions can be made

without delay.

c. Flexibility. A rigid control

system would not be

adequate in the fast

changing environment.

Accordingly, the system

muslallow for adjustments

for unanticipated threats and

opportunities.
d. Acceptability. The control

system should be

understood and accepted by

all. Employees must be fully

trained to oversee and

monitor control system.

e. Integration. All control

systems should become an

integral part of the

management philosophy so

that they are all realistic and

within the cultural

constraints of the

organization.

f. Economic feasibility. The

cost of control system must

be balanced against its

benefits. For example, a high

 security system to safeguard

pencils in the office would

not be economically

justified.

g. Strategic placement.

Controls should be applied to

strategic points and

strategic parts of business.

Controls in a nuclear power

plant are necessary and

strategically placed. Controls

should be placed where lack

of these could produce the

greatest harm.

h. Corrective action. Wherever

possible, corrective

measures should be

incorporated and built in the

 system. Any deviation would

trigger the corrective action.

i. Emphasis on exception. Only

deviations of the highest

importance should be

brought to the attention of

the top management.

5. Behavioural control is much more

difficult to maintain than

machine control. Human beings

are very complex entities and

their emotions are unpredictable.

Some of the implications of

behavioural control are:

a. Effective controls should not

suppress the freedom of

workers which is within the

 acceptable limits of

managerial rules.

b. Persons who have the power

to control consider

themselves powerful with a

position of higher status. A

quality control inspector has

more control than the line

manager on the quality of

the product.

c. When controls are based on

subjective judgments they

can cause more conflict and

hostility. Hence behavioural

controls should also be as

quantitative as possible.
d. Excessive number of controls

limit flexibility and

creativity.

e. Controls must be fair,

otherwise they are prone to

misuse. For example,

managers may set standards

of productivity lower than

they can produce because a

higher productivity would

look better in the eyes of top

management.

f. Employees must have a say

over control mechanisms,

otherwise such controls

could be resented by the

employees with negative

consequences.
 g. All control standards should

complement each other.

6. The behavioural guidelines for

effective control are:

a. Set meaningful and

attainable standards.

Controls should be

realistically set and with the

participation of those who

would use such control

methods.

b. Establish an effective,

accurate and timely two-way

communication. Information

must flow both ways and fast

when anything goes out of

control. Workers should

have easy access to

superiors.
c. Reward attainment of

standards. Workers expect

rewards in cash or kind for

any job that is well done.

They should be properly

rewarded when things are

under control.

d. Involve the workers. Nothing

is more effective than the

workers being a part of the

control system. Workers

become highly motivated

when they perceive that

management has put its

trust in them, to include

them in an important

decision-making processes.
 10.10 EXERCISES AND
QUESTIONS

Short answer questions

1. Have you ever said to anyone,

“Control yourself? If so, under

what circumstances would such

a charge be justified? Give

examples.

2. What is the inter-relationship

between the functions of

planning and controlling?

3. What are the various behavioural

guidelines of control? When

would it be necessary to follow

these guidelines?

4. Is “self control” the best form of

control? Explain.
Long answer questions

1. Define the management function

of control and explain the

necessity of control.

2. Describe some of the

quantitative standards against

which performance can be

measured. Which of these

standards would be more

appropriate for a medium-size

industry.

3. Describe the different methods’

of comparing the actual results

with expected results for the

 purpose of evaluating the

effectiveness of control systems.

4. Explain some of the

characteristics of effective

controls.

5. What are some of the

behavioural implications of

control? What type of control

would the workers resent the

most? What steps can be taken

to reduce or eliminate such

resentment?

6. What guidelines can the

management set and follow for

behavioural control?
10 .11 FURTHER READING
1. Boone Louis and David Kurtz,

Management; McGraw Hill, 1992.

2. Sathe Vijay, Organizational

Dynamics; Vol. 11, No. 3 (Winter

1983).

3. Dubrin Andrew and Duane

Ireland, Management and

Organization; South Western

Publishing, 1993.

4. Certo Samuel, Allyn and Bacon,

Modern Management; 1994.

5. Curley John R., “A Tool for

Management Control”, Harvard

Business Review (March 1951).

6. Robbins Stephen P.,

Management; Prentice Hall,

1991.