B.B.A. 1st Sem.

Subject- Fundamentals of Management

SYLLABUS

Class – B.B.A. I Sem.

Subject – Fundamentals of Management

UNIT – I Management concepts & Evolution: Definition - nature - scope

and functions of management. Importance of management,
role of manager, management and administration, functional
areas of management, POSDCORB-Evolution of management
thought - Relevance of management to modern industry, Govt.,
University, hospital & other institutions.
UNIT – II Planning : Meaning, features, nature and importance of
planning. Procedure, types of planning, Techniques. Elements
of planning, principles of planning, planning and control, types
of plans. Objectives, MBO.
UNIT – III Organizing: Nature - purpose - organizational structure -
Theories of organization - span of control - Line & staff
functions. Authority & Responsibility -centralization and
decentralization -delegation of authority.
UNIT – IV Staffing: Staffing nature and purpose, selection, PA and Career
planning
UNIT – V Directing: Nature of directing - leadership qualities - styles -
motivation - morale
and discipline.
UNIT – VI Controlling: The objectives and process of control - Role of
information in
control- Performance standard – Measurement of
performance, remedial act – Integrated
control system in an organization. Control techniques.

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B.B.A. 1st Sem. Subject- Fundamentals of Management

UNIT – I
Introduction of Management
Management is the first of the modern institutions to shape the society. It pays a vital role in modern world.
It regulates man’s productive energies. It organizes factors of production. Peter Drucker observes that
without the leadership of management, a country’s resources of production remain resources and never
becomes production. Management converts a mob into an organization, and human efforts into
performance. ‘Management’ is the catalyst which makes possible rapid economic and social development in
freedom and with human dignity.
Management is getting things done with effectiveness and efficiency. It is designing and maintaining an
environment in which individuals working together accomplish selected aims efficiently.

MEANING OF MANAGEMENT
As the term ‘management’ is used in several contexts, it has different meanings to different people.
Management has three different meanings:
1. As a Noun
When used as a noun, management refers to all those who have both responsibility and authority to
manage an organization and who are responsible for the work of others at all levels. W.J. Reddin states that
“a manager is a person occupying a position in a formal organization who is responsible for the work of at
least one other and who has formal authority over that person. Persons, whose work he is responsible for,
are his subordinates.”
2. As a Process
Management is also tasks, activities and functions. As a process, management refers to what management
does, i.e., the function performed by management ‘Managing’ is considered as a process which may include
a variety of functions, principles, techniques, skills and other measures of accomplishing the work and
activities of organization. Management as a process implies a series of actions or elements. These are
planning, organization, staffing, directing, co-ordination etc.
3. As a Discipline
Sometimes, the word ‘management’ is used to connote the body of knowledge and practice. In this sense, it
becomes a separate subject, a field of learning, and an organized, formal discipline. It is young discipline.

CHARACTERISTICS OF MANAGEMENT
An analysis of the definition of management indicates the following features of management:
1. Management is an Activity
Management is a process of organized activity. It is concerned with the efficient use of resources of
production. This process is made up of some interrelated elements-planning, organizing, leading and
controlling. Terry says, “Management is not people, it is an activity.” Those who perform this activity are
designated as ‘Managers’.
2. Group Activity
It is concerned with the efforts of a group. It works in ‘cooperative group’. Managers are vital to joint
activity. Management is essential wherever people work together for a common cause. Management plans,
organizes, go-ordinates, directs and controls the group efforts, not the individual efforts.
3. Management is Universal
Management is needed in all types of organized activities and in all types of organizations. In fact, it is
present in all walks of life. Fayol writes, “Be it a case of commerce, industry, politics, religion, war or
philanthropy, in every concern there is a management functions to be performed.” Also, the techniques and
tools of management are universally applicable.
4. Separate Identity
Management represents a separate class of managerial personnel who are quite different from the identity
of workers and capitalists. It is a class of administrators and planners. Managers need not to be owners. In
modern industrial society Labour, Management and Capital are different entities.
5. It Involves Decision-making

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B.B.A. 1st Sem. Subject- Fundamentals of Management

Making decision is a real identity of a manager. He is a planner and thinker. He decides the course of action,
strategies, policies and programmes. Drucker states, “Whatever a manager does, he does through making
decisions.” Thus, management is always a decision-making process,
6. It is an Integration Process
It is concerned with the co-ordination of all activities and resources. It integrates men, machines, money
and materials. The essence of management lies in unifying the individual efforts into a team. Koontz and O’
Donnell write, “Co-ordination is the essence of manager ship.”
7. It is Intangible
Management is invisible force. Its presence can be felt by its results-quality and increased output. It is
abstract. It is recognized by its excellent achievements, higher productivity and motivated personnel.
8. It is a Profession
Management is a young and emerging profession. Gradually, it is meeting many criteria of a profession. It
has a well defined body of knowledge, prescribed qualifications to enter the profession the goal of
providing service, and code of conduct for managers.
9. Hierarchical Nature
Management has several positions, ranks, authority and hierarchies flowing from top to bottom across all
levels in the organization. It has top, middle and bottom levels with superiors and subordinates.
Management contains a chain of authority and command with attached responsibility. This is known as the
managerial hierarchical system of authority.
10. Pervasive at all Levels
Managerial activity pervades all levels of the organization. It is required at top, middle and supervisory
levels for getting things done through others. Every manager, whether he works at top or low level,
performs the same managerial tasks to do his role.
11. Management is Multidimensional
A single activity of business includes three main acts.
i. Management of work- planning, organizing, controlling
ii. Management of people- staffing, directing
iii. Management of operations- production, sales, purchase
12. Management is specific discipline
Management is a field of study & learning. It is organized body of knowledge.
13. Management is both a science and an Art
Management has developed certain principles and laws which are applicable to any group work. These are
developed through scientific methods of observation and testing. It is also an art, because it is concerned
with the application of knowledge and personal skills to achieve desired results.
14. It is Dynamic
Management is not a static activity. It adapts itself to the new changes in society. It also introduces
innovation in its style and techniques. It accepts environmental changes.

MANAGERIAL SKILLS
The various skills as abilities required to be possessed by manager may be classified as under.
 Conceptual Skills
It is an ability to visualize the organization as a whole system, form an image and develop vision of it in
the context of future environment manager need these abilities for scanning the changing environment
and discovering various opportunities, spotting problems & threats arising out of a dynamic situation
 Human relations or behavioural skills
The Basic responsibility of every manager is to get things done by others. In this process he needs
behavioral skills. These skills refers to those abilities which are needed by the manager to effectively
deal with subordinates.
 Technical Skills
These skills refer to specialized knowledge and proficiency in handling methods, procedures and
techniques for doing specific jobs. It also includes knowledge about jobs & job contents & logical
sequence of procedures needed for performing it.

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Importance of Management
Management is a must for every enterprise. The existence of management ensures proper functioning and
running of an enterprise. Management can plan the activities to achieve the objectives and utilize the
available resources at minimum cost. Every business needs a direction. This direction is given by the
management. The resources of production are converted into production. The resources will remain as
resources in the absence of management. The conversion process is performed through the coordination of
management. The significance or importance of management is briefly explained below:
1. Management meet the challenge of change: In the modern business world, there are frequent
changes. The changes place the business in a dangerous position. Only an efficient management can
save the business from the dangers brought in by the challenges.
2. Accomplishment of group goals: The achievement of objectives of a business depends upon three
factors. The proper planning of available resources, adjusting possibility of business unit with
existing business environment and the quality of decision taken and control made by the business
unit are the factors responsible for achieving objectives.
3. Effective utilization of business: There are eight M’s in the business. These are said to be man,
money, materials, machines, methods, motivation, markets and management. Management is the
topmost of all other ‘Ms’. Management has control over other remaining ‘Ms’.
4. Effective functioning of business: Ability, experience, mutual understanding, co-ordination,
motivation and supervision are some of the factors responsible for the effective functioning of
business. Management makes sure that the abilities of workers are properly used and co-operation
is obtained with the help of mutual understanding. Besides, management can know the expectation
of workers and the expectation is fulfilled through motivation techniques.
5. Resources development: Efficient management is the life boat of any developed business. The
resources of the business may be identified and developed by the management. The term
‘resources’ includes men, money material and machines.
6. Sound organization structure: Management lays down the foundation for sound organization
structure. Sound organization structure clearly defines the authority and responsibility
relationship-who is responsible to whom, who will command whom and who is responsible for
what. Care is taken in appointing qualified persons to the right job by the management.
7. Management directs the organization: The human mind directs and controls the functioning of
human body. Similarly, the management directs and controls the functioning of an organization.

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8. Integrates various interests: Each person has his own interests these interests are different in
nature. Management takes steps to integrate various interests to achieve the objectives of an
organization.
9. Stability: The fluctuations of business are stabilized by the management. The fluctuations of
business are caused by the changing policy of the government, pressures on the part of
competitors and changing preference of customers. The efficient management can run the business
as per the policy framed y the government, face the competitors in the market and produce the
articles as per the preference of customers.
10. Innovation: New ideas are developed by the management and implements in the organization.
Better performance is achieved through new ideas.
11. Co-ordination and Team-spirit: All the activities of business are grouped department-wise.
Management co-ordinates the activities of different departments and establishes team-spirit to
achieve the objectives.
12. Tackling problems: Good Management acts as a friend or a guide of workers while tackling
problems. When workers get over confidence of solving the problems for effective performance of
a job, they fail in tackling the problems efficiently.
13. A tool for personality development: Management gives direction to workers for effective
performance of a job. Besides, new methods or techniques are taught to workers. The training
facilities are arranged by the management. In this way, management is a tool to develop the
personality of workers to raise their efficiency and productivity ability.

FUNCTIONS
Management functions are the activities that a manager must perform as a result of the position held in the
organization. The best way to analyses the management process is in terms of what a manager does.
Generally the basic functions of management are: planning, organizing, staffing, directing and controlling.
As managing is a dynamic and challenging activity, it includes three kinds of functions and tasks which are
common to all managerial jobs. The list of management functions can be presented as follows:

I. Basic Functions
1. Planning
2. Organizing
3. Staffing
4. Directing
5. Controlling

II. Dynamic Functions

1. Co-ordinating
2. Decision Making
3. Representation
4. Innovation
5. Administration

III. Challenging Functions

1. Managing Work
2. Managing People
3. Managing Operations
4. Managing Change
5. Managing Time
6. Strategy Formulation and Action
7. Economic Performance
8. Making Work Productive and the Worker Achieving
9. Managing Social Impacts and Social Responsibilities

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Basic Functions
1. Planning
Planning is one of the most important functions because it sets the pattern for the other activities to follow.
Planning function for the new era is more broadly described as delivering strategic value. It is a primary
and crucial function which determines how to achieve an objective-deciding what is to be done and when
to do it. It is looking ahead and preparing for the future.
2. Organizing
Organizing is the process by which the structure and allocation of jobs are determined. To organize a
business is to provide it with everything useful to its functioning.
3. Staffing
Staffing is the process of planning, recruiting, developing, compensating and maintaining human resources
in an organization. In staffing, a manager recruits and selects suitable personnel for manning the jobs.
4. Directing
The fourth basic function of management is directing. This is also termed leading or actuating. While
planning tells us what to do and organizing tells us how to do directing tells us why the employees should
want to do it. Directing is concerned with guiding and leading people. It consists of supervising and
motivating the subordinates towards the achievement of set goals.
(i) Communication
(ii) Command
(iii) Motivation
(iv) Leadership
(v) Supervision
(vi) Controlling

5. Controlling
Controlling is evaluating the performance and applying corrective measures so that the performance takes
place according to plans. It is reviewing the performance of the employees in the light of the targets and
goals.

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DYNAMIC FUNCTIONS
1. Co-ordinating: To co-ordinate is to harmonize all the activities, decisions and efforts of an
organization so as to achieve the unity of action. It is blending the efforts of all employees for and
efficient running of an organization.
2. Decision Making: decision making is the process by which a course of action is consciously chosen
from available alternatives. Decision making is inherent in every managerial function.
3. Representation: the manager’s job also includes representing his organization in dealings with
outside group-government officials, unions, civic groups, financial institutions, customers,
suppliers, and the general
4. Innovation: innovation means developing new ideas, new products, new quality or devising new
methods of work. In other words, the real manger is always an innovator. Innovation is the specific
function of entrepreneurial managers, the means by which they exploit change as an opportunity.
5. Administration: this is a new task of manager which is described by peter F. drucker he says, “The
manger has to administer. He has to manage and improve what already exists and is already
known. He has to redirect resources from areas of low or diminishing results to areas of high or
increasing results. He has to slough off yesterday and to render obsolete what already exists. He
has to create tomorrow.

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CHALLENGING FUNCTIONS
1. Management of Work: In an organization, work must be performed. For example, in a factory, the
product must be manufactured; in a retail store, the customer’s need must be satisfied.
2. Management of People: Recently a lot of attention has been given to the ‘human factor’ in managing
the business. Human forces are employed, they need to be unified, coordinated, welded into a team
effort and directed towards a given purpose. In this lies the challenging task of management.
3. Management of Operations: Every organization has some products or service that it must supply in
order to exist. Through operations process, these products are manufactured. To manage these
operations, managers ensure the flow of input materials, labour, technology and equipments
regularly. This is inextricably interwoven with their daily task.
4. Management of Change: Change is an inevitable feature of organizational life every organization
operates under the conditions of continuous change. Good mangers exhibit a rational response to
changing environment. Mangers who undertake appropriate changes at the right time achieve
success.
5. Management of Time: It can be noted that ‘time dimension’ is ever-present is every management
problem, every decision and every action. Thus, mangers must make efforts to administer the
things within time. They must be conscious of the time element.
6. Strategy Formulation and Action: In this age of competitive environment, managers have to take
decisions and actions that determine the long-run performance of a company. To maintain the lead
in fast-paced industry and global markets, strategy formulation and implementation has become
an important function of mangers.
7. Making Work Productive and the Worker Achieving: According to drucker, the next task of
managers is to make work productive and the worker achieving. He says that business enterprise
has only one true resource: man. Manager gets his work done by making human resources
productive.
8 Managing Social Impacts and Social Responsibilities: The another challenging task of
managers, according to drunker, is managing social impacts and the social responsibilities of the
enterprise. Drucker says that none of our institutions exist.

PROCESS OF MANAGEMENT
According to stoner, freeman and Gilbert, “a process is a systematic way of doing things.” In simple words,
it is a step-by-step sequence. We refer to management as ‘process’ to emphasize that all managers engage
in certain interrelated activities in order to achieve their desired goals. David Hampton says, “management
is a common set of processes which, when competently carried out, contribute to organizational
effectiveness and efficiency. The basic parts of this process are planning, organizing, leading, and
controlling.”
Characteristics
The main characteristics of management process are as follows:
1. Carried out by Managers
2. Consists of Functions
3. Parts
4. Logical Flow of Activities
5. Integrated Process
6. Performed at all Levels
7. Iterative Process
8. Social Process
9. Dynamic Process
10. Operational
11. Goal-Oriented
12. Universal
13. Influencing Process
14. Continuous Process

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ROLES OF MANAGER IN AN ORGANIZATION

1. Interpersonal roles: - In the process of management needs to interact with subordinates to get things
done by them, and also communicates with superiors, peers, trade union leaders, customers,
government and other agencies whose interest is involved in the business. Its importance is evident
from that a manager spends nearly 80 percent of his time, in interacting with these parties.
a) Figure head role: The manager works in a line of authority. His position is identified in terms of
formal authority, responsibility, obligations and relationship. As a symbol of formal authority, he
performs various ceremonial duties e.g. receiving visitors, attending weddings of subordinates,
singing various documents, delivering speeches and lectures in important social gathering such as
schools, clubs and other religious places.
b) Leadership role: The most important role of the manager is to lead, guide and motivate
subordinates and get work done properly. A manager is responsible not only for his own acts but
for the activities performed by his subordinates. The leadership qualities of the manager help him
in influencing the working behaviour of subordinates, contributing to a higher level of efficiency.
c) Liaison role: A manager serves as connecting link, vertically with superiors and subordinates, and
horizontally, with other managers at the same level. Outside the organization, the managers have
to undertake liaison to assess the external environment to enable the organization to cope with it.
2. Informal role: - To preserve and protect the identify of an organization and to secure its smooth
functioning, the manager has to scan the external environment on a regular basis and to deal with
outside parties, effectively for which he has to gather a lot relevant information on the various matters
concerning the organizations.
The manager plays three important informational roles while managing the operations of an
organization.
a) Role of monitor: The managers interact and deal with insiders and outsiders and scan the
external environmental constantly to get useful information. He collects information on the various
aspects of the organization and its environment through reports, informal relations dealings and
liaison work. He is the most well-informed member of his work group. While managing, he
monitors every situation closely and minutely, collects information regarding it and finally, solves
it effectively.
b) Role of disseminator: The manager continuously transmits selected information which he has
complied through the role of monitor to his subordinates. He keeps them well-in-formed regarding
any change in the process, structure, policies and other plans of the organization. The needed
information is disseminated among the subordinates by him through formal and informal
meetings, memorandums, orders and instructions issued from time to time.
c) Role of spokesperson: A manager acts as a spokesperson of his group while supplying
information to superiors and peers. Similarly, he keeps outside parties well-informed on behalf of
the organization. He negotiates and enters into comprise with internal and external parties.
3. Decision-making roles: - By interacting with insiders and outsiders, the manager gets important
information, which he can use or taking decisions and solving problems.
a) As an entrepreneur: The managers have a primary responsibility of improving the overall
functioning of their respective work units. They act as an entrepreneur; take bold decisions, seek
better results from subordinates, initiate required changes, implementing them for the betterment
of organization. To initiate and implement changes, managers have to be dynamic, innovative and
creative.
b) As a disturbance or conflict handler: An organization is a collective entity with diversity of
interest and duality of roles for managers. For example, the owners group may be interested in
high profits whereas the employees may seek more benefits in the form of higher wages and better
working conditions. In such situations, it is only by applying managerial knowledge and playing the
role of conflict handlers, thinking analytical and acting practically, that the managers can hope to
effectively integrate the interest of employees with the organization. Similar conflicts may arise

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with outside parties which would have to be resolved through meetings, negotiations and
compromise.
c) As a resource allocator: To manage the organization, physical and human resources are
mobilized and utilized efficiently by managers for the accomplishment of pre-determined
objectives. They have to play the role of resources allocators. And, in the case of multiple
objectives, they set priorities for allocation of resources.
d) As a negotiator: Managers work on behalf of the organization or work unit, and subordinates, not
only as a spokesperson but as negotiator. They enter into an agreement on behalf of the
organization. For example, the personnel manager negotiates with trade unions and
representatives of workers.

Management and Administration

According to Theo Haimann, “Administration means overall determination of policies, setting of major
objectives, the identification of general purposes and laying down of broad programmes and projects”. It
refers to the activities of higher level. It lays down basic principles of the enterprise. According to Newman,
“Administration means guidance, leadership & control of the efforts of the groups towards some common
goals”.

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Whereas, management involves conceiving, initiating and bringing together the various elements;
coordinating, actuating, integrating the diverse organizational components while sustaining the viability of
the organization towards some pre-determined goals. In other words, it is an art of getting things done
through & with the people in formally organized groups.
The difference between Management and Administration can be summarized under 2 categories: -
1. Functions
2. Usage / Applicability

On the Basis of Functions: -

Basis Management Administration

Meaning Management is an art of getting things done It is concerned with formulation of

through others by directing their efforts towards broad objectives, plans & policies.
achievement of pre-determined goals.

Nature Management is an executing function. Administration is a decision-making

function.

Process Management decides who should as it & how should Administration decides what is to be
he dot it. done & when it is to be done.

Function Management is a doing function because managers Administration is a thinking function

get work done under their supervision. because plans & policies are
determined under it.

Skills Technical and Human skills Conceptual and Human skills

Level Middle & lower level function Top level function

On the Basis of Usage: -

Basis Management Administration

Applicability It is applicable to business concerns i.e. It is applicable to non-business concerns i.e.

profit-making organization. clubs, schools, hospitals etc.

Influence The management decisions are influenced The administration is influenced by public
by the values, opinions, beliefs & opinion, govt. policies, religious
decisions of the managers. organizations, customs etc.

Status Management constitutes the employees of Administration represents owners of the

the organization who are paid enterprise who earn return on their capital
remuneration (in the form of salaries & invested & profits in the form of dividend.
wages).
Practically, there is no difference between management & administration. Every manager is concerned
with both - administrative management function and operative management function as shown in the

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figure. However, the managers who are higher up in the hierarchy denote more time on administrative
function & the lower level denote more time on directing and controlling worker’s performance i.e.
management.

AREAS OF MANAGEMENT
Production management:

Production means creation of utilities by converting raw material in to final product by various scientific methods and
regulations. It is very important field of management. Various sub-areas of the production department are as follows.

Plant lay out and location: This area deals with designing of plant layout, decide about the plant location for various
products and providing various plant utilities
Production planning: Managers has to plan about various production policies and production methods.
Material management: This area deals with purchase, storage, issue and control of the material required for production
department.
Research and Development: This area deals with research and developmental activities of manufacturing department.
Refinement in existing product line or develop a new product are the major activities.
Quality Control: Quality control department works for production of quality product by doing various tests which ensure
the customer satisfaction

Marketing management:

Marketing management involves distribution of the product to the buyers. It may need number of steps. Sub areas are
as follows

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Advertising: This area deals with advertising of product, introducing new product in market by various means and
encourage the customer to buy thee products.
Sales management: Sales management deals with fixation of prices, actual transfer of products to the customer after
fulfilling certain formalities and after sales services.
Market research: It involves in collection of data related to product demand and performance by research and analysis
of market.

Finance and accounting management:

Financial and accounting management deals with managerial activities related to procurement and utilization of fund for
business purpose. Its sub areas are as follows

Financial accounting: It relates to record keeping of various financial transactions their classification and preparation of
financial statements to show the financial position of the organization.
Management accounting: It deals with analysis and interpretation of financial record so that management can take
certain decisions on investment plans, return to investors and dividend policy
Taxation: This area deals with various direct and indirect taxes which organization has to pay.
Costing: Costing deals with recording of costs, their classification, analysis and cost control.

Personnel Management:

Personnel management is the phase of management which deals with effective use and control of manpower. Following
are the sub areas of Personnel management

Personnel planning: This deals with preparation inventory of available manpower and actual requirement of workers in
organization.
Recruitment and selection: This deals with hiring and employing human being for various positions as required.
Training and development: Training and development deals with process of making the employees more efficient and
effective by arranging training programmes. It helps in making team of competent employees which work for growth of
organisation.
Wage administration: It deals in job evaluation, merit rating of jobs and making wage and incentive policy for
employees.
Industrial relation: It deals with maintenance of overall employee relation, providing good working conditions and
welfare services to employees.

POSDCORB – PLANNING, ORGANISING, STAFFING,

DIRECTING, CO-ORDINATING, REPORTING AND BUDGETING

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DEVELOPMENT OF MANAGEMENT THOUGHT

The major historical stages or events in the development of management thought can be discussed under
the following heads:
I. Management in ancient civilizations.
II. Management during the medieval period.
III. Management during the period of Industrial Revolution.
IV. Period of systematized management. This period can be sub-divided into the following categories:
1. Era of scientific management.
2. Era of administrative management.
3. Era of behavioural science.
4. The modern era of new approaches to management.

THEORIES OF MANAGEMENT

I. CLASSICAL SCHOOL:

a. Scientific Management
Systematic development of management thought started with the scientific management movement which
is said to have its origin as early as 1830s.
The man who popularised the movement is Fredrick Winslow Taylor. He is known as the father of
scientific management.

Life and works of Taylor (1856-1915): Fredrick Winslow Taylor, who is known as the father of scientific
management, was born in 1856 in Philadelphia, USA. He started his career as an apprentice in a small
machine-making shop in 1875. Thereafter, Taylor served in three companies:

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(i) Midwell Steel Co., (ii) Simonds Rolling Machine Co., and (iii) Bethlehem Steel Co.
Taylor joined Midwell Steel Works in 1878 where he did time study and evolved one best method of doing
each part of a job. He introduced differential rate system of wages.

Philosophy and Principles of Taylor:

1. Develop a science to replace rules of thumb: Taylor wanted to make management as a science. He,
therefore, recommended that every activity of an organisation must rest on well organized, clearly
defined principles, instead of depending on more or less hazy idea.
2. Maximisation of output or production: Taylor believed maximum output instead of restricted
output. It is because the prosperity for both employer and employees could be achieved only through
maximising productivity.
3. Equal division of responsibility: There should be equal division of responsibility between managers
and workers. Managers must fulfill their responsibility of planning and organising effectively. On the
other hand, workers must fulfill their responsibility by executing the work as per the directions of the
‘bosses’.
4. Job specialisation: Taylor believed that each worker should be specialist in his job. At the same time,
each worker must be supervised by different specialist supervisors.
5. Scientific selection, training and development of workers: Taylor realized the importance of right
person for the right job to attain highest efficiency. He therefore, stressed the need for proper selection
and training of the workers.
6. Standardisation: Taylor believed standardisation of methods, tools, time, materials etc. for each
activity is very important. Therefore, standards should be fixed for each of them.
7. Wage incentives: Taylor believed that wage incentives should be integral part of each job. Taylor
suggested the differential wage rate for different job.
8. Mental revolution: Taylor firmly believed that the principles of scientific management could succeed
only when there is a complete mental revolution on the part of management and worker. In other
words, both the parties should change their mental attitudes. For this, he suggested the following three
things:
(i) They must create a sprit of mutual trust and confidence.
(ii) Both must make efforts to increase production and productivity.
(iii) Both must develop a scientific attitude towards the work and should not leave their arbitrary
approach.
The mental revolution requires change in the attitude of both. Management must create congenial working
conditions and develop best method and tools for optimum efficiency of the workers.

Contribution of Taylor
1. Scientific task setting: Taylor suggested that the task of every worker for every day should be
determined through scientific investigation. Taylor called it “a fair day’s work”. Every manager must
know in advance the fair day’s work for each worker.
2. Experimentation or work study: Work study means organised, systematic and objective analysis
and assessment of the operational efficiency of all the elements connected with the work.
(i) Method study: It is a survey of production process. It aims to evolve the best method of doing a
particular job by simplifying the production process, methods, tools etc.
(ii) Motion study: Motion study relates to the study of movements of a worker or a machine in doing
a job. It aims at eliminating unnecessary motions and to find out the best method of doing of
doing a job efficiently.
(iii) Time study:- Time study is the process of recording the exact time taken for doing a job
with a view to find out a standard time for doing the job.
(iv) Fatigue study: Fatigue study is the study of the reduction or diminution of human energy or
capacity in doing in his job. Fatigue is caused by over-work without rest pause, poor working

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conditions, stress, strain etc. The fatigue study is undertaken to know the level and nature of
fatigue and to find out the ways to eliminate or minimize the fatigue on the job.
3. Planning: Taylor advocated that planning function should be separate from the doing function.
Planning department should decided about the type, shape, and quality of the goods to be
produced and the time schedule for delivery of the products.
4. Scientific selection and training of workers: Taylor realsied the importance of the right
person on the right job. Therefore, he advised for proper selection of the workers and their
training.
5. Specialisation: Taylor suggested that scientifically selected and trained workers should be
allocated the tasks according to their specialisation.
6. Standardisation: Taylor advocated for standardisation of materials, tools, equipments, methods
etc. Standardised working environment should also be provided to the workers. Standardisation
will increased efficiency and eliminate or minimise wastage of resource.
7. Incentive wage plan: Taylor considered that incentive wage plan is an integral part of the
scientific management. He, therefore suggested a differential wage payment plan. According to
this plan, worker is to received a bonus in addition to his wages if the completed his job before
the standard time fixed for the job.

b. Administrative Theory:

Henri Fayol (1841-1925):

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Henri Fayol was a French mining engineer and chief executive officer of a coal mine company. He
propounded the administrative or functional theory of management.
1. Administrative management thought era run almost parallel to the scientific management
thought era. Henri Fayol is regarded as the herald of the administrative thought. Other
contributors include Urwick, Mooney and Reiley, Davis etc.
2. Elements of administration or management function: Fayol described five elements of
administration or management functions. They are as follows:
(i) Planning, consisting of activities for making plans to achieve goal of the organisation. This
function includes forecasting and decision-making.
(ii) Organising, consisting of activities necessary for mobilising human and other resources of
the organisation to implement the plans.
(iii) Commanding, which consists a activities relating to directing, leading, motivating and
communicating for getting things done.
(iv) Coordinating, which is concerned with activities necessary for harmonising the efforts of all
in order to achieve a common goal.
(v) Controlling, which is concerned with ensuring performance in accordance with plans.
3. Principle of management: Fayol proposed fourteen principles of management.
4. Flexible and adaptable principles: Fayol made it clear that the principle of management are
flexible and adaptable to every need.
5. Universal principles: He believed that principles of management are universally applicable. The
principles are applicable in all organisations large or small, industrial, commercial, political,
religious, or any other.
6. Management education and training: Fayol realised the need for management education and
training. He strongly pleased for introducing management education and training in schools and
universities. He also suggested for conducting organizational ‘in-house’ training programmes.
Fayol’s Fourteen principle of Manangement

1. Division of Work
To divide work among departments and employees according to requirement & owned activities & skills to
get benefit of specialization & avoid time wastage. It says that every employee should be assigned only one
of type of work else there will be waste of time and effort caused by changes from one work process to
another.

2. Authority and Responsibility

Authority means right to give orders and power to exact obedience.
Responsibility is assignment of tasks and act to be completed in availability of resources accountability
extent to which person can be made liable to answer for acts.Fayol said Authority and Responsibility are co
existence in nature and must go hand in hard with proper parity in between.Authority without
responsibility heads to irresponsible behaviour & responsibility without authority makes manager in
effective.

3. Discipline
Implies compliance with organizational directions and rules, orders and instructions of superior & to co-
operation with fellow workers. He considered discipline as the chief strength of organization and essential
for smooth operation. Discipline generally depends essentially on ability of its leaders.
Fayol said best means of maintaining discipline are
- Goods superiors at all levels
- Clear & fair agreements between employees & employer
- Judicious application of penalties

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4. Unity of command
According To this principle one subordinate should get orders and institutions regarding his work only
from one superior.If a subordinate has more than one superior. It will undermine authority weaken
discipline create divided loyalty and Lead to confusion, delays due to conflict in instructions & most
important it would be difficult to pinpoint responsibility to him.

5. Unity of Direction
Means that the there should be complete identify between individual and organizational goals on one hand
and between departmental goals on the other i.e. one head & one plan for a group of acts having the same
objective. In other words the related acts should be put under one group, these should be one plan of
action for them & they should be under the control of one particular manager.
6. Reading subordinate of individual interest to General interest
This principle emphasises that the interest of one employee or group of employees should not prevail over
that of the concern Fayol suggested these means to protect the general interest. They are

- Firmness and good ex on part of superiors

- Agreement as join as in possible
- Constant supervision

7. Remuneration of personnel
Fayol said that the remuneration & methods of payment should be fair and afford the maximum possible
satisfaction to employees & employer.Time, job, piece rates, bonus, profit saving, welfare work, Non-
financial incentives should be included in best scheme of payment.
8. Centralization
Centralization refers to decreasing role of subordination in decision making Fayol says Centralization is
not a system of management goods or bad of itself. Centralization implies the Centralization of authority at
the top management. Relationship between Centralization & decentralization of authority is a matter of
proportion & optimum balance should be maintained according to needs of organization.
9. Scalar chain
Scalar chain refers to the chain of superiors ranging from the ultimate authority to lowest ranks. There
should be clear line of authority ranging from top to bottom of organization the line of authority is the
route followed via every link in the chain by all communication which start from as go the ultimate
authority Fayol suggested the concept ‘gang plank’ which is used to prevent the scalar chain from bogging
down action.

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10. Order
To run well an organization should have a place of everything and everything should be in its place. These
should be an orderly rationally thought out plan for arranging the things and material in their suitable
places. There are two order material and social

11. Equity
The organizations runs best when there is a feeling of kindliness and justice among managers. Desire for
equity & equality of treatment are the common aspirations of employees.

12. Stability of tenure of personnel

Efficiency is promoted when job security is assured to employees, Time is required for an employee to get
used to new work & succeed in doing it well. An employee cannot render worth while service if he is
removed from the job before he is adjusted.

13. Initiative
Initiative refers to the freedom to thinks out a plan and use discretion in executing. It is a freedom to
propose and to execute.

14. Esprit de corps -

This principle says that “in union there is strength” Harmony, teamwork and union among the employees is
a great strength in a concern the morale of an organization people is an asset Fayol exhorts that the
misguided motto ‘divide and rule and the abuse of written communication should be avoided by manager
rather they should strive to maintain cooperation among employees.

Similarities of Taylor and Fayol:

1. Both devoted to put science into management.
2. Both devoted to the development of management thought.
3. Both were concerned with the improvement of practice of management.
4. Both men favoured the development of theory and principles to improve management
practice.
5. Both emphasised the need for cooperation between labour and management.
6. Both realised the universality of management.

The Dissimilarities between the two are as follows:

1. Taylor’s work is primarily concerned with the operative level at the shop level while Fayol’s work is
concerned with management at top and middle levels.
2. Taylor started from the bottom of the managerial hierarchy and had worker upwards whereas Fayol
started from the top executive position and worked downwards.
3. Taylor was concerned with increasing efficiency of labour whereas Fayol was concerned with with
increasing efficiency of total organisation.
4. Taylor aimed at increasing productivity by eliminating or reducing inefficiency and waste. On the
other hand, Fayol aimed at organisational efficiency through application of management
principles.
5. Taylor described his philosophy as ‘Scientific management’ whereas Fayol called his views as
‘General theory of administration’.
6. Taylor is known as the father of scientific management whereas Fayol is recognised as the father of
modern management theory.
7. Fayol recognised the need of education and training in schools and colleges whereas Taylor did not
so realise.
Fayol was a top executive, and therefore, was in a better position to look at the functions of a manager than
Taylor.

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C. Bureaucratic Management Approach of Max Weber

Max Weber (1864-1920), a German sociologist; he described a theory to operate an organization in effective way
which is known as the Bureaucratic management approach or Weberian bureaucracy. Max Weber's work
was oftentimes interpreted as a caricature of modern bureaucracies with all of their shortcomings.

Features of Bureaucratic Organization

 From the principles of bureaucratic organization we can find these characteristics or features of

Bureaucratic Organization are as follows:-

 High degree of Division of Labor and Specialization.
 There is a well-defined chain of command.

 It follows the principle of Rationality, Objectively and Consistency.

 The relationship among the member of the organization is Formal and Impersonal relations. And

it’s based on positions and not on personalities.

 Rules and Regulations are well defined and it indicates the duties and rights of the employees.

These rules apply to everyone from to bottom of organization and must be strictly followed.
 Selection and Promotion is based on Technical qualifications.
 Only Bureaucratic or legal power is given importance.

Criticism of Bureaucratic Organization

Bureaucratic Management Approach of Max Weber also has some fault-lines and received criticism for it.
 The emphasis only on rules and regulations.
 There will be unnecessary delay in decision-making due to formalities and rules of Bureaucratic
Organization.
 Coordination and communication hampered because of too much formality and rules.

 Bureaucracy involves a lot of paper work and has just too much level of authority which results in
lot of wastage of time, effort and money. Not ideal for efficiency.

 Because of its too much formality, Bureaucratic approach is not suitable for business organizations.
Bureaucratic model may be suitable for government organizations.

 Too much importance is given to the technical qualifications of the employees for promotion and
transfers. Dedication and commitment of the employee is not considered.

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 Limited scope for Human Resource (HR). No importance is given to informal groups and neither

any scope is given to form one.

 Max Weber’s bureaucratic approach worked as a solution to problems of traditional administrative
systems. But it was not the prefect or “close to perfect” solution. The bureaucratic structure gives
all the importance and power to the top level management.

And the rules and levels of authority are just too much. It gives a greater sense of security to the
employees. But bureaucratic management gives window for “red-tapism”.

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II. NEO-CLASSICAL SCHOOL:

A. The Human Relations Approach:
Hawthorne studies (1924-1932) by George Elton Mayo and his team members gave rise to new movement
which is known as the human relations movement. This movement gave rise to a new approach to
management which is known as the human relations approach.
It may be recalled that Hawthorne studies revealed that better physical environment and more economic
benefits were not sufficient to motivate workers for higher productivity. It showed that socio-psychological
needs have a powerful influence on the productivity of workers. Moreover, these studies also revealed that
informal/social relationship, informal supervision at work also play a crucial role in increasing
productivity. These conclusions of the studies gave birth to human relations movement.

Characteristics/Assumptions/ Beliefs: The human relations approach was founded upon the following
beliefs or assumptions:
1. It assumes that an organization is a social system.
2. It regards that this system is composed of many interacting groups.
3. It believes that monetary gains alone cannot motivate workers. Satisfaction of socio-psychological
needs also has a powerful influence on the motivation of workers.
4. It considers that workers participation in planning and decision making can boost both morale and
productivity of workers.
5. It believes that a sound two-way communication system is essential for a healthy working climate
in an organization.

Contribution and limitations: Human relations approach has made significant contribution to
management thought and practice particularly in the following areas:
1. The thoughts and practice of managers began to be human oriented.
2. Management training was revolutionized with the emphasis on development of people-oriented
skills in managers.
3. Managers became sensitive and responsive to the needs and feelings of the workers in the work
place.
4. Selection and placement activities began to be given more importance along with improved
incentive systems.

Criticism: The human relations approach was criticized on the following counts:
1. It over-emphases on keeping workers happy whereas happiness alone cannot make workers more
productive.
2. It emphasizes on manipulation of workers emotions for the organizational purposes.

Hawthorne Experiments
1. Illumination or test room study: The illumination study was conducted to determine the
relationship between light intensity and productivity or efficiency of workers. For this purpose,
three different experiments were conducted in which researchers changed light intensity.
Researchers were surprised to note that productivity of select group of employees tended to
improve in spite of the change in their physical surroundings. Productivity increased even when
the lights were dimmed to moonlight intensity.
2. The relay assembly test room study: The relay assembly test room study was conducted to
ascertain the factors other than the light intensity, affecting the productivity. In this study six
persons (Five girl assemblers put a layout operator) were placed in a room. In addition, the
researchers put an observer with them in the room. The observer was to record everything that
happened in the room and to maintain friendly atmosphere therein. The researchers changed

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working conditions such as rest periods, length of work days, refreshments, temperature, wage
rates etc. during the study. In addition, girls were allowed to talk more freely among themselves.
3. Bank writing observation room study: In order to observe and analyse informal group
behaviour more accurately, bank wiring observation room study was undertaken. This study was
conducted in a room of the bank wiring department. In this room, 14 employees performing three
interrelated jobs of the department were placed.
4. Mass interviewing study: The researchers therefore switched indirect questioning. Under this
approach, the employees were allowed to talk about what they felt important. The interviewers
patiently heard their views.

Conclusions/Contributions of Hawthorne Studies:

The main conclusions or contributions of Hawthorne studies are as follows:
1. Work is a group activity: Mayo concluded that work is a group activity. Workers work better in
groups.
2. Informal groups: Workers form internal informal social cliques/ groups. Such groups may not be
based on their occupation.
3. Influence of social groups: The informal social groups within the workplace greatly affect the
behaviour and productivity of individual worker.
4. Group cooperation is planned: Group cooperation or collaboration does not occur accidentally. It
must be planned and developed.
5. Worker is not only rational economic being: A worker is not only a rational economic being. He is
not motivated solely by monetary means. His social needs have a powerful influence on his
behaviour and productivity.

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6. Role of supervisor’s behaviour: The behaviour of supervisors does affect the behaviour of workers.
When supervisors provide a more relaxed work environment, by paying special attention to the
workers social situation changes.

Criticism of Hawthorne Studies:

Hawthorne Studies are criticized on the following grounds:
1. Pro-management bias: These studies are criticized on the ground that these had a pro-
management bias.
2. Not fully scientific: Some experts allege that the studies were not fully scientific. According to
them, there was no scientific basis in the selection of the work, the employees and the
environment.
3. Clinical bias: Some experts also allege that the studies had a clinical bias. They say that the
research was directed to preconceived ideas and conclusions.
4. Discounted importance of Theory: It is also argued that studies discounted the importance of
theory and overemphasized the importance of observation and collection of facts.

B. Human Resource Approach or Behavioural science Approach:

Neo-classical school or human resource or behavioural approach to management through evolved
gradually over the years from late 1920s to 1940s and continued to develop thereafter. This school of
thought evolved in recognition of the importance of human behaviour in organization.

DISTINCTION BETWEEN HUMAN RELATIONS APPRAOCH AND BEHAVIOURAL SCIENCE APPROACH

Basis of Distinction Human Relations and Approach Behavioural Science Approach
1. Emphasis This approach laid emphasis on This approach emphasizes on studying
studying individual, his needs and groups, group behaviour and individual
behaviour motivation.
2. Similar set of It believes that all workers have It believes that individuals are different
needs similar set of needs. from each other. Their need structure is
dynamic
3. Conflict This approach believes that conflicts in This approach believes that conflicts are
organizations and should be resolved not always harmful. sometimes, they are
inevitable in organizations.
4. Relations It focuses informal interpersonal It focuses on group relationship.
relationships
5. Origin It originated from the conclusions of It emerged in the process of refinement
Hawthorne studies of human relations approach
6. Techniques Its major techniques are informal Its techniques are informal leadership,
supervision, and satisfaction of social communication, motivation,
needs. organization change, conflict resolution.

III. Modern Schools of Management Thought

1. The system approach

2. The contingency appraoch

System Approach to Management

The system approach to management has been evolved out of General System Theory or GST. Ludwing von
Bertalanffy is credited for developing the GST. According to GST, study in any area should be based on the
assumption that everything is a part of a larger interdependent and organized whole system. And in order

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to understand this whole system, the knowledge of its part and the relations between them is an essential.
In other words, a whole system cannot be understood without an understanding of the parts that make-up
the whole.

Definition of System:
According to Bertalanffy, “A system is a set of units with interrelationship among them.”
In the words of John A. Beckeet, “A system is a collection of interacting system.”

Types of Systems:
According to GST, there are two types of systems: (i) closed system, and (ii) open system.
1. Closed system: A closed system is independent of environment. Thus, it is a self-sufficient entity.
Therefore, it does not interact with its outside environment. Its activities are not affected by the
forces outside its boundary.
2. Open system: An open system is one which interacts or interplays with its environment. It
interacts with people, things and forces in its environment. it is an input-output system. It takes
inputs and gives outputs to its external environment.
Environment Boundary

Inputs Transformation Output

Process s

Feedback
s

Environment Boundary

Characteristics/Assumptions/Beliefs
This approach to management is based on the following assumptions/beliefs:
1. It believes that managers manage an organization which is a unified or integrated system.
2. It believes that every organization is an open system to its environment. It affects and is affected
by its environment.
3. It believes that whole organization system cannot be understood without an understanding of the
parts that make-up the whole organization
4. It believes that managers have to manage the organization as the decision in the light of
environmental situations.
5. It regards that organizational system is dynamic in which changes take place regularly.

Contributions:
1. It provides a frame-work within which managers can plan actions and anticipate the expected
results.
2. It also helps in understanding the unexpected consequences of plans and actions.

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3. It helps managers in maintaining a balance between the needs of various parts of the organization
and needs and goals of the organization as a whole. [Stoner and Wankel]
4. It helps in integrating various management theories because it has the concept of other
management approaches.

Criticism/limitations:
1. Some experts argue that the application of this approach requires study of total organizational
system and its sub-systems.
2. It does not lay down principles and techniques of management. It simply suggests the needs for
study and understanding of the total organization system and its parts for better management.
3. It is also alleged that it is an abstract approach. It simply stated that an organization system
consists of many sub-systems.
4. It is also alleged that it is simply an intellectual appeal but fails to provide verifiable facts and
practical advice.
5. It is also criticized for the reason that it prescribed only the way of thinking about organizations
but fails to give final answers about the problems of organizations.

Contingency/Situational Approach
Contingency approach suggests that managers must do what the situation warrants or managers actions
must be contingent upon the organizational situational situation or environment.
In the words of Stoner and Wankel, “According to contingency approach, the task of managers is to identify
which technique will in a particular situation, under particular circumstances, and at a particular time, best
contribute to the attainment of managerial goal.”
Thus, according to consistency approach, actions managers vary with the situation or environment of the
organization. There is no ready-made solution to the problems of every situation. Correct principles or
techniques to be applied depend on the prevailing situation or environment.

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Characteristics/assumptions/beliefs:
1. It assumes that each organizational is unique. The goals, operations, people, resources, technology,
etc. of every organization are unique.
2. It also assumes that external environment of each organization is different and unique from the
others.
3. If further assumes that all sub-systems of the organization are interrelated and affect each other.
4. In view of these facts, it believes that there cannot be one best way of doing a thing which can be
universally prescribed for all situations.
5. It regards that best approach to management is situational or situation-oriented approach.

Contributions:
1. It makes it clear there are no universal, ultimate or absolute principles, techniques, theories of
management which can be applied to every situation.
2. It keeps managers on high alert that next situation may be new and unique. Therefore, they go on
finding and analyzing facts of each situation.
3. It widens freedom of operation of mangers. They are not bound by stereotype principles and
solutions.
4. It encourages managers to innovate and develop new principles, techniques etc. to handle each
new and unique situation.

Criticism/limitations
1. In real-life, managers do not find enough time to analyze and understand every situation and to
apply the principles and techniques accordingly.
2. Mangers are not at all times make decisions on rational basis. Sometimes, their rationality becomes
limited. Hence, this approach serves no purposes.
3. All managers cannot analyze and understand all variables in a situation or environment. In such
case, the approach loses its significance.
4. Sometimes, situations change so rapidly that managers are unable to understand them and make
decisions accordingly.

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UNIT-II
PLANNING

"It you have planned well, half of you work is done"

Management Functions are – planning, organizing, staffing, directing and controlling and all are
required to achieve objectives but without setting objectives there's nothing to organize, direct or
control. Therefore every organization requires to specify what it wants to achieve; Planning is related
with this very aspect.

CONCEPT OF PLANNING
Plan & Planning -
- Planning is process - have sub activities and steps.
- Plan is commitment to particular course of action – For objective.
- Planning is deciding in advance the future course of action.
What is to be done in future?
- When, what, why, where, who how are different aspects of planning
Why - action's objections or rent result
What - activates to be undertaken?
How - generate policies, program, strategies
They all speak about future of action.
- Planning is selecting missions and objectives as well as the actions to achieve them which
required decision making i.e. choosing a course of action among alternatives.

Definitions:
Gorge R. Jerry – "Planning is the selection and relating of fact and making & using of assumptions
regarding the future in the visualization and formalization of proposed activities believed necessary to
achieve deserved result".
Mc. Farland – "Planning may be broadly defined as a concept of executive action that embodies the
skills of anticipating, influencing and controlling the nature and direction of change"
- Anticipating, controlling everything for direction of change, believe that environment of
planning is very dynamic & ever changing.

Characteristics or Nature of Planning :

1. Primary task of management 10. Inter dependent activity
2. Intellectual process 11. Continuous and dynamic activity
3. Future oriented 12. Planning is the basis of control
4. Decision oriented 13. Planning follows a systematic and
5. Goal oriented reutilized procedure.
6. Forecasting is the essence of planning 14. It is participative in nature
7. Pervasive function 15. Planning always has a dimension of time.
8. Planning and action are twins of 16. Planning also implies “managerial
management innovation” (Koontz and Weihrich)
9. Planning is wider than decision making

Need Importance and advantages of Planning

1. Basis of success 4. To offset growing complexity of business
2. Keystone management function 5. Better utilization of resources
3. To manage by objectives 6. To gain economy in operation

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7. Establishes coordinated effort 15. Managing crises

8. Facilitates control 16. Providing motivation
9. Coping with change 17. Promotes growth and improvement
10. Improves competitive strength 18. Encourages creativity
11. Creates forward looking attitude 19. Facilitates decentralization
12. Promotes order 20. It provides alternative courses of action
13. Prevents hasty judgment and haphazard 21. Efficient methods and procedures of action
action can be developed.
14. Stay on track
Components/ Elements of Planning
There are a number of different components of planning. They are also called types of plans.
The major type of management plans along with their components can be classified as follows:
1 Strategic Plans
There are designed to meet the broad objectives of the organization. These are concerned with broad
mother that vitally affect development of an organization. They are prepared at the institutional level.
The include mission or purpose, objectives and strategies.
2 Standing Plans
These plans are used over and over again. Once established, standing plans provide on -going
guidance for performing recurring activities. Similar situations can be handled in a predetermined
way. Thus, they save the time used for making decisions. Examples of such plans are policies,
procedures, methods, rules and regulations.
3 Single-Use Plans
These plans are designed to achieve specific goals. They are developed to meet unique situations
or problems. They are used but once and discarded. Programme, projects. budgets, quotas,
schedules, and standards are example of single-use plans.

Components of Planning

Single-use Plans Standing Plans

(For nonrecurring or short- (For recurring or long-range

run activities) activities

 Programmes  Policies
 Projects  Procedures
 Budgets  Rules and regulations
 Quotas  Methods
 Schedules
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1. Mission or Purpose
Mission or purpose is a primary and overall objective of an organization. It is the basic functions or
task o fan enterprise which is assigned to it, by society. It is organization's reason for existence
determined by its founder, owners, or board of directors. Purpose or mission is the definition of the
organization, its identity.
Mescon and Allbert observe," Without a mission as a guide, managers would have nothing
but their individual values". In brief, the purpose or mission of an organization must convey the
following:
(a) The existence of the firm - it means what business is the firm in ?
(b) The external environment that determines the operating philosophies of the firm.
(c) The organizational culture.
2. Objectives or Goals
Objectives or goals are the ends towards which all organizational activities are aimed. Koontz and
O'Donnell state," They represent not only the end point of planning but the end towards which
organizing, staffing, leading and controlling are aimed." objectives decide where we want to go. They
are the results to be achieved.
'Goals' and 'Objectives' are often used interchangeable but a few written make a distinction
between them. Goals are broad outcomes that managers hope to achieve ultimately. Objectives are
more specific and concrete in nature and often include active schedule for the completion of a task.
For example, profitability may be the goal, but the specific objectives is to earn 20 per cent return on
capital net employed.
3. Strategies
The term 'strategy' was first used in the military to describe the ground plan for winning a war. In
recent times, it is widely applied to business. According to Hicks and Gullett strategy is "the basic
pattern of purpose and policies that define the firm and its business". Andrew szilagyi defines
strategy" as a comprehensive and integrated framework that guides those choices that determine the
nature and direction of the organization's activities towards goal achievement".
4. Policies
General statements or understandings that guide decision-making are called policies. Policies define
the boundaries within which decisions can be made. They direct decision towards the achievement of
objectives. According to Terry," Policies spell out the sanctioned, general direction and areas to be
followed".
Features:
(1) Policies direct the thinking, behaviour and actions of employees.
(2) Policies may be implied even from the actions of managers or from the practice of
enterprise.
(3) They may be interpreted as "standing orders" or standing guidelines for decision-making
(4) Policies allow for some discretion and initiative, but within limits.
(5) Policies define the area in which decisions are to be made, but they do not give the decision.
(6) They flow from strategies. They are narrower in scope than strategies.
5. Procedures: Policies are carried out by means of procedures. A procedure is a detailed set of
instructions for performing a sequence of actions. It is a customary method of handling activities. It
provides the exact manner in which a certain activity must be accomplished. Terry defines a
procedure as “a series of related tasks that make up the chronological sequence and the established
way of performing the work to be accomplished”.

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Characteristics of Procedures
1. A procedure has a chronological sequence of tasks or actions.
2. A procedure is specific and tailor-made to achieve certain tasks.
3. Procedures exist in every part of an organization.
4. They spell out actions in detail.
5. They are truly guides to action, rather than to thinking.
6. Method: Method is the best way the job is to be performed. It deals with a task comprising one step
of a procedure. It specifies how this one step is to be performed.
7. Rules: Rules are standing plans that guide actions. They specify what actions will be taken or not
taken and what behaviour is allowed or prohibited. Rules are a particular way of behaving in a
particular situation. Generally, rules are all restrictive and leave little room for discretion. They are
not guides for thinking or decision-making, rather they are substitutes for them. “No smoking” is an
example of a rule.
8. Programmes: A programme is a comprehensive plan that covers a relatively large set of activities.
It consists of a complex set of goals, policies, procedures, rules, job assignments and resources
required to implement them. Programmes are aggregate of several related action plans (goals,
procedures, rules etc.) that have been designed to accomplish a mission within a specified time
period. Programmes usually include the following steps:
(a) Stating what is to be done into different parts or units of the organization;
(b) Determining the relationships among the parts and developing a sequence of steps required to
reach an objective;
(c) Deciding the responsibility for each step and for each unit;
(d) Determining the financial, physical and human resources to be employed
(e) Determining capital and operating budgets;
(f) Developing the order and time schedules for each step.
9. Projects: A project may be either a component of a general programme or it may be planned
separately on a smaller scale. Each project has its own assignments, time and budget. Sometimes,
individual segments of a general programme can be planned and implemented as distinct projects.
William Glueck defines, “A project is a programme with less significant objectives, generally a
shorter period of time, and usually less detail”. There is a significant difference between
programmes and projects. Programmes can be repeated while projects have one time applications.
A project to build rest rooms or to fence dangerous machines may be part of a larger programme to
improve working conditions.
10. Budgets: A budget is a plan which expresses the anticipated results in numerical terms. It is
merely a collection of figures or estimates that indicate the future in financial terms. According to
Terry, “A budget is an estimate of future needs, arranged according to an orderly basis, covering
some or all of the activities of an enterprise for a definite period of time”. It is a statement of
planned revenue and expenditures. A budget may be stated in time, materials, money, or other
units.
11. Quota: Quota is a set goal for sales or other activities. It is the share one is bound to contribute to
or entitled to receive from a total. A quota is a limit placed on the amount or units of sales,
productions, profit or other activities. Quotas are set in the field of sales, markets or sales
territories. For example, every sales territory carry an assigned quota indicating its contribution
to profit and volume and its sales activity requirements.
12. Schedules: Schedules are important part of operational plans. Schedules are used to plan the
timing and sequencing of the use of resources and for the work to be executed. Schedules are the
basis of an action plan. Scheduling sets the exact time when each activity would start and when it
would end.

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13. Standard: A standard is an important element of plan. It is a norm against which performance is
compared and evaluated. Terry defines it as “a unit of measurement established to serve as a
criterion or level of reference”. A standard forms the basis of controlling and serves as guide for
performance. It brings uniformity in work. Standards assist in settling disputes because they may
serve as base levels. They are essential in planning schedules and determining the proper use of
resources. Qualitative and quantitative standards are set in various areas of business such as cost
standards, quality standards, product standards, material standards, performance standards, etc.

TYPES OF PLANS
On the basis of Managerial Hierachy
1. Strategtic Plans
2. Administrative plans
3. Operating Plans
On the basis Frequency of Use
1. Standing plans
2. Single use plans
On the basis of Time Frame
1. Short range plans
2. Medium or Intermediate plans
3. Long range plans
On the basis of Organizational Scope
1. Business or divisional level plans
2. Unit or functional level plans
On the basis of Specificity
1. Specific plans
2. Directional plans
Other classifications
Contingency plans :The are helpful in emergency situations.

PROCESS OF PLANNING OR STEPS IN PLANNING

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Establishing Goals Premising Forecasting Identifying

Assessing
Formulating Alternatives
Environment
assumptions
Developing
awareness

PLANNING PROCESS
Monitoring Comparing
and Feedback Alternatives

Implementing the Numberizing Formulating

Selecting the
Plan Plan by Supportive Plans
Best
Budgeting
Alternative
Limitations of Planning

1. Ambiguous objectives and plans

2. Lack of reliable facts and information
3. Inaccurate premises
4. Rigid philosophy or lack of pragmatism
5. Resistance to change
6. Inflexibility of existing objectives and plans
7. Lack of planning skills
8. Failure to integrate with other functions
9. Attitudes and conficts among managers
i. Conflict on the goals and priorities of planning.
ii Conflict on the selection of the courses of action and resources.
iii. Conflicts on their roles in the implementation of plans.
iv. Conflict between line and staff managers due to their role in planning.
v. Conflict on the issue of usefulness of the planning itself.
10. Psychological barriers.
i. Some managers feel that present is more important than the future. They regard
present is more desirable and has certainity. Hence, they neglect the significance of
planning.
ii. Some managers feel that certain things are bound to happen in future. Such things
cannot be changed by planning.
iii. Some feel that planning is not successful always. Therefore, it is a waste of time, energy
and money.
iv. Plans serve as standards for evaluating performance. Therefore, many managers fear
that others will know their weaknesses at the time of performance evaluation.
11. Expensive
12. Inadequate resources
13. Delay in actions

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14. Difficulties in implementation

15. Rapid and random changes
Essentials of effective planning
1. Well defined objectives
2. Simple and easy to understand
3. Comprehensive
4. Flexible
5. Balanced
6. Economical
7. Stable
8. Continuity
9. Unity
10. Consistency
11. Participation
12. Practicable
13. Written
14. It should be logical and rational
15. It must be time bound.
Principles of Planning
1. Principle of contributions to objectives
2. Principle of objective
3. Principle of primacy of planning
4. Principle of efficiency of plans : It means that the amount contribution of plans should
exceed the costs involved in their formulation and implementation.
5. Principle of planning premises : Planning premises means the assumptions regarding
environment which are likely to affect the implementation of plans. This Principle
emphasizes the need for consistent planning premises.
6. Principle of strategy and policy framework
7. Principle of limiting factor : A limiting factor is one which creates problems in the way of
achieving predetermined objectives. This Principle states that planner must recognize and
solve the limiting factors in order to formulate effective plans.
8. Principle of commitment
9. Principle of flexibility
10. Principle of navigational change: This principle states that a manager must constantly
monitor and review the conditions affecting the plans and redraw the plans if required by
the changed conditions.
11. Principle of pervasiveness
12. Planning coordination
13. Principle of timing
14. Principle of participation/acceptance
15. Principle of competitive strategies

Tools & Technique of Planning

Different tools and techniques are used in formulating and implementing plans. Some of the most
important are as follow:
1. Forecasting 4. Marginal analysis
2. Budgeting 5. Linear programming
3. Break even analysis 6. Waiting line or Queueing theory

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7. PERT/CPM 12. Sequencing

8. Theory of probability 13. Bench marking
9. Scheduling 14. Environmental Seanaing
10. Games Theory 15. MBO
11. Simulative Model

Planning & Controlling : Relationship

1. Plans are the directions in which managers intend to lead the organization in order to achieve its
objectives. Controls are needed to ensure that results are consistent with plans.
2. Planning prescribes described behaviors and results. Controls can maintain or redirect actual
behaviors and results.
3. Managers cannot effectively plan without information about the past and current status of each
department, etc. Much of this essential information is obtained through the control process. It
provides valuable information derived from past experience and allows managers to plan
effectively in future. It helps managers to learn from past mistakes and plan well.
4. Managers cannot effectively control the organization unless there are plans to indicate the
purpose to be served by the control process. Thus, the planning and control processes
complement and support one another.
5. Costly

Limitations of Planning
6. Rigidity of planning
7. Costly
8. Time consuming
9. Employee resistance
10. Managerial deficiencies
11. External limitations
i. Difficult to predict
ii. Too far in future
iii. Emergency situation

OBJECTIVES AND MANAGEMENT BY OBJECTIVES

Concept & Nature of Objectives:
Objectives are the end results which an organisation wants to achieve.
Mc. Farland – Defines objectives in quite broad term "Objectives are goals, aims or purposes that
organisations wish over varying period of time".
Terry & Franklin -
"A managerial objective is the intended goal that prescribes definite scope & suggests direction to the
planning efforts of a manager".
- So we can define objective as the intended and result that an organisation desires to achieve over
varying period of time.
- On the basis of Time variations Objectives may be classified in different way's in which long term
objectives are supported by short term objectives.
Features of objectives are as follows:-
1. Each organisation or group has some objectives in fact they are created basically for certain
objectives.
2. Objectives may be broad or may be specifically mentioned. Wide or narrow Long term or short
term. General objective are translated into operative objectives to provide definite action.

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3. Objectives have hierarchy

Top level - broad object
Dept level - specific object
Unit level - their own object
4. Organisational objectives have social sanction they are related with social norms.
Organisation is a social unit its objectives must confirm to the needs of society.
Various restrictions on organisation objective are put through social norms, rules & customs
eg: objective- Increase stock but not by hoarding

5. One organisation can have multiple objectives

eg: HLL- Under chairmanship of T. Thomas (1973-80) has following objectives
(i) To expand & diversify in area of chemicals.
(ii) To control cost & improve productivity very rigorously
(iii) To built up mgt skills for future growth.

Role of objectives:-
1. Defining an Organisation:
Every organisation works in environment consisting of several forces.
Forces provide threats & opportunities both, in order to take best from environment –
It must define itself for all.
eg: Modern food industries ltd's objective -"Manufacturing & Marketing of nutritional foods to the
public".
2. Directions for decision making:
Objectives sets limits, prescribe areas in which man can make decision.
No ambiguity about end results, so manager is clear about all expectations.
it promotes unified planning and acts as motivating force.
3. Performance Standards:
It Sets Benchmarks, the Performance of all – organisation –units
Sub-units is measured against objectives.
4. Basis for Decentralization
Decentralization is necessary for large organizations.
Independent decision making may lead to disintegration of organisation
Until and unless clear objectives are set for all contributions.
5. Integrating organisation, group & Individual -
Clearly Specified objectives provide integration to various individuals, groups in organisation.
Organisation cannot exist apart of its related people.
eg: creditors, customers, etc.

TYPES OF OBJECTIVES
1. General Objective
 Survival
 Growth
 Economic Contribution
 Social Obligation
 Profit

2. Specific Objectives
3. Objectives Based on organizational levels

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 Mission Goals
 Strategic objectives
 Tactical Objectives
 Operational Objectives

4. Time based objectives

 Short term
 Intermediate
 Long-term

5. Other Types
 Personal
 Organisational objectives
 Performana goals
 Group Goals

Management by Objective

The term MBO was coined by Peter Drucker -1954, since then many organisation have adopted it
Definitions of MBO –
Heinz & Harold Koontz "MBO is a comprehensive managerial system that integrates many key
managerial activities in a systematic manner continuously directed towards the effective and efficient
achievement of organisational objectives."

S.K. Chakravarty "MBO is result-centered, non-specialist operational managerial process for the
effective utilization of material, physical & human resources the organisation by integrating the
individual with the organisation & organization with environment".
MBO is now used not only as a technique of setting objectives but also used as a planning,
motivation, performance appraisal and control technique.
MBO is a process whereby both superior and subordinate managers jointly identify their
common goals, of their work unit (department) and define each employee’s major areas of
responsibility and goals with his active participation.
Characteristics of MBO :
1. A philosophy of management
2. Goal oriented approach: It focuses on setting goals at every level of the organization. In MBO,
goal setting begins at the top management level and filters down, one level at a time.
3. Common objectives and individual goals : MBO is the process of setting objectives of the
organization as well as the each individual’s goals.
4. Participation and involvement : MBO approach presupposes the participation and involvement
of all people in goal setting.
5. An interactive approach : MBO is an interactive approach to goal setting. Managers and
subordinates both are actively involved in setting goals.
6. A comprehensive approach : It is a comprehensive approach. It considers both the economic and
human aspects of an organization.
7. A systems approach : It takes into account the internal as well as external environmental factors.
8. It applies to total management system : It can be used with an entire organization, a
department or a sub unit having only one subordinate.

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9. Aims at optimum results. This aim, MBO approach provides for interim review of the results and
evaluation of performance at the expiry of the time fixed.
10. Simple universal approach : The MBO approach to managing is logical, appeals to common
sense and enjoys wide spread popularity.
11. Multiple uses : MBO technique is used not only in planning but it is also used in performance
appraisal, motivation, and control.

PROCESS OF MBO

Top Management Support & Commitment

Setting Overall Corporate Objectives

Setting Departmental Objectives

Setting Individual Subordinate’s Goals

Feedback
Matching Objectives and Resources

Recycling Objectives

Developing Action Plans

Implementing Action Plans

Periodic Performance Review

Final Evaluation

ADVANTAGES OF MBO
1. Encourages result oriented philosophy
2. Clearer goals
3. Effective planning
4. Clarification organizational roles
5. Coordination
LIMITATIIONS OF MBO

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1. Failure to teach philosophy of MBO

2. Lack of guidelines
3. Emphases short term and
quantitative goals
4. Inflexibility
5. Time consuming
6. Incomplete understanding
7. Difficulty of setting goals
8. Over use of quantitative goals
9. Dynamic & complex environment
10. Ignores relationship behavior

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