UNIT-I

INTRODUCTION TO MANAGEMENT

A business develops in course of time with complexities. With increasing complexities managing
the business has become a difficult task. The need of existence of management has increased
tremendously. Management is essential not only for business concerns but also for banks, schools,
colleges, hospitals, hotels, religious bodies, charitable trusts etc. Every business unit has some
objectives of its own. These objectives can be achieved with the coordinated efforts of several
personnel. The work of a number of persons are properly coordinated to achieve the objectives
through the process of management is not a matter of pressing a button, pulling a lever, issuing
orders, scanning profit and loss statements, promulgating rules and regulations. " Peter F. Drucker
has stated in his famous book "The Practice of Management" that, "the emergence of management
as an essential, a distinct and leading social institution is a pivotal event in social history.

Management is a vital aspect of the economic life of man, which is an organized group activity. It
is considered as the indispensable institution in the modern social organization marked by
scientific thought and technological innovations. One or the other form of management is essential
wherever human efforts are to be undertaken collectively to satisfy wants through some productive
activity, occupation or profession. It is management that regulates man's productive activities
through coordinated use of material resources. Without the leadership provided by management,
the resources of production remain resources and never become production. Management is the
integrating force in all organized activity. Whenever two or more people work together to attain a
common objective, they have to coordinate their activities. They also have to organize and utilize
their resources in such a way as to optimize the results. Not only in business enterprises where
costs and revenues can be ascertained accurately and objectively but also in service organizations
such as government, hospitals, schools, clubs, etc., scarce resources including men, machines,
materials and money have to be integrated in a productive relationship, and utilized efficiently
towards the achievement of their gals. Thus, management is not unique to business organizations
but common to all kinds of social organizations. Management has achieved an enviable importance
in recent times.
 DEFINITIONS OF MANAGEMENT

Henry Fayol, "To mange is to forecast and plan, to organize, to compound, to co-ordinate and to
control."

Harold Koontz says, "Management is the art of getting things done through and within formally
organized group."

Peter F. Drucker defines, "management is an organ; organs can be described and defined only
through their functions".

NATURE OF MANAGEMENT
OR
FEATURES OF MANAGEMENT

1) Management is a social process:- Social process refers to the series of activities that are
performed in the society. These activities are carried out by administrators, politicians,
economists, house wives, businessmen and so on. Management helps everyone to carry out the
activities in the society effectively.

2) Body of people:- Management also denotes a ‗body of people‘ involved in decision-making.

3) Management is omnipresent:- Management principles are applied to every kind of

organization and also to every level in it.

4) It is an inexact science:- Management principles are not like those in sciences or maths where
things are fairly clear or exact. Management deals with people ad it is difficult to predict their
behavior accurately. It falls in area of social science. Its principles are situation bound, so their
applicability does not give same result every time.
5) It is complex:- Management functions call for a fairly professional approach to manage a given
situation. Businesses are operating in complex environments.

6) Management is situational in nature:- The same style of management cannot work for the
same situation every time.

7) Management is an art and also a science:- An art is personal skill. The management skills
are highly individual oriented and can be sharpened with more training and practice. It is a
systematic body of knowledge, its principles are universally acceptable. Science establishes
cause and effect relationship between variables. It also establishes cause-and-effect
relationship between the given factors. It explains what happens if the employees are not paid
salaries on time.

8) Management is a profession:- Profession refers to vocation or a branch of advanced learning

such as engineering or medicine. Managers are professional in their approach.

9) Management is inter-disciplinary:- The subject of management is heavily dependent on other

disciplines such as economics, operations research, statistics, sociology, Psychology and
mathematics etc.

10) Manager has 4 types of resources:- The 4 M‘s Men, Money, Materials and Machines to
manage.

SCOPE OF MANAGEMENT

Management is an all pervasive function since it is required in all types of organized Endeavour,
Thus, its scope is very large. The following activities are covered under the scope of
management:

1. Production Management:
Production means creation of utilities. This creation of utilities takes place when raw materials are
converted into finished products. Production management, then, is that branch of management
‗which by scientific planning and regulation sets into motion that part of enterprise to which has
been entrusted the task of actual translation of raw material into finished product.‘
Plant location and layout, production policy, type of production, plant facilities, material handling,
production planning and control, repair and maintenance, research and development,
simplification and standardization, quality control and value analysis, etc., are the main problems
involved in production management.

2. Marketing Management:
Marketing management refers to the planning, organizing, directing and controlling the activities
of the persons working in the market division of a business enterprise with the aim of achieving
the organization objectives. Market analysis, marketing policy, brand name, pricing, channels of
distribution, sales promotion, sale-mix, after sales service, market research, etc. are the problems
of marketing management.

3. Financial Management:
Finance is viewed as one of the most important factors in every enterprise. Financial management
is concerned with the managerial activities pertaining to the procurement and utilization of funds
or finance for business purposes.

The main functions of financial management include:

a. Estimation of capital requirements.

b. Ensuring a fair return to investors.
c. Determining the suitable sources of funds.
d. Laying down the optimum and suitable capital.

4. Personnel Management:
Personnel Management is that phase of management which deals with the effective control and
use of manpower. Effective management of human resources is one of the most crucial factors
associated with the success of an enterprise. Personnel management is concerned with managerial
and operative functions.

Functions of personnel management include:

a) Personnel planning.
b) Organizing by setting up the structure of relationship among jobs, personnel.
 c) Directing and controlling the employees
d) Procurement of right kind and number of persons
e) Training and development of employees
f) Determination of adequate and equitable compensation of employees
g) Integration of the interests of the personnel with that of the enterprise
h) Providing good working conditions and welfare services to the employees.

5. Office Management:
The concept of management when applied to office is called ‗office management‘. Office
management is the technique of planning, coordinating and controlling office activities with a view
to achieve common business objectives. One of the functions of management is to organize the
office work in such a way that it helps the management in attaining its goals. It works as a service
department for other departments. The success of a business depends upon the efficiency of its
administration. The efficiency of the administration depends upon the information supplied to it
by the office.

Harry H. Wylie defines office management as ―the manipulation and control of men, methods,
machines and material to achieve the best possible results—results of the highest possible quality
with the expenditure of least possible effect and expense, in the shortest practicable time, and in a
manner acceptable to the top management.‖

FUNCTIONS OF MANAGEMENT

According to Henry Fayol, ―To manage is to forecast and plan, to organize, to command, & to
control‖. Whereas Luther Gullick has given a keyword ‘POSDCORB‘ where P stands for
Planning, O for Organizing, S for Staffing, D for Directing, Co for Co-ordination, R for reporting
& B for Budgeting. But the most widely accepted are functions of management given by KOONTZ
and O‘DONNEL i.e. Planning, Organizing, Staffing, Directing and Controlling.

1) Planning: Planning is the conscious determination of future course of action. This involves
why an action, what action, how to take action, and when to take action. Thus, planning
includes determination of specific objectives, determining projects and programs, setting
policies and strategies, setting rules and procedures and preparing budgets. Planning involves
 essentially four stages: 1. Identifying the goal to be achieved 2. Exploring the courses of action
available to reach this goal 3. Evaluating each course of action 4. Selecting the best course of
action for implementation.

2) Organizing: Organizing is the process of dividing work into convenient tasks or duties,
grouping of such duties in the form of positions, grouping of various positions into departments
and sections, assigning duties to individual positions, and delegating authority to each positions
so that the work is carried out as planned. It is viewed as a bridge connecting the conceptual
idea developed in creating and planning to the specific means for accomplishment these ideas.

3) Staffing: Ascertain how many positions are there in the organization and at what level. Once
this information is available, the next task is to collect details such as what type of candidates
are required for each level and accordingly fill these positions with right people. Staffing is
process which includes recruitment, selection, training, placement, appraisal, promotion and
career planning.

4) Directing: when people are available in the organization, they must know what they are
expected to do in the organization. Superior managers fulfill this requirement by
communicating to subordinates about their expected behavior. Once subordinates are oriented,
the superiors have continuous responsibility of guiding and leading them for better work
performance and motivating them to work with zeal and enthusiasm. Thus, directing includes
communicating, motivating and leading. Organizing as a process involves: a) Identification of
activities. b) Classification of grouping of activities. c) Assignment of duties.
d) Delegation of authority and creation of responsibility. e) Coordinating authority and
responsibility relationships.

5) Controlling: Controlling involves identification of actual results, comparison of actual results

with expected results as set by planning process, identification of deviations between the two,
if any, and taking of corrective action so that actual results match with expected results.
6) Reporting: The Managers are the coordinators and leaders of the organization. And the
coordinators hold the responsibility of reporting status and position of the organization before
the interested groups of people, such as shareholders, stakeholders, Top Management,
Administrators, Board of Directors, Employees, Trade unions, Customers, Financiers and so
forth. So, the management informs and inspires the relevant groups about their objectives,
status and reputation.

7) Budgeting: A budget is a financial plan for a defined period of time, usually a year. It may
also include planned sales volume and revenues, resource quantities, costs and expenses,
assets, liabilities and cash flows. Budgeting is a process of preparing estimates of future sales,
expenses, revenues, cash flows, etc. Some authors say the budgeting is include in planning
function, but Luther Gullick considered this as a separate function.

MANAGERIAL ROLES

Like we perform different roles in our family (such as father, son, brother, mother, sister, daughter
and so on), the manager also performs several roles though officially they are given one job title
(such as trainer, monitor, leader, counselor, mentor, coach, advisor, controller etc.). Dr. Henry
Mintzberg has explained ten roles of manager in his report ―Managerial work: Analysis From
Observation‖.

1. Interpersonal Roles

a) Figurehead: Manager as a figurehead, performs all symbolic legal and social duties and
discharges all social, legal and ceremonial obligations. He inspires the employees and
shareholders with vision, mission and action plans. He plans, organizes and controls the
business.
b) Leader : As a leader, every manager must motivate and encourage his employees. He must
also try to reconcile their individual needs with the goals of the organization.
c) Liaison : He forms relationship with outside the department or organization to obtain
information useful for his organization.

2. Informational Roles
 a) Monitor : As a monitor, the manager has to perpetually scan his environment for
information, interrogate his liaison contacts and his subordinates, and receive unsolicited
information, much of it as result of the network of personal contacts he has developed.
b) Disseminator: In the role of a disseminator, the manager passes some of his privileged
information directly to his subordinates who would otherwise have no access to it.
c) Spokesman : In this role, the manager informs and satisfies various groups and people
who influence his organization. Thus, he advises shareholders about financial performance,
assures consumer groups that the organization is fulfilling its social responsibilities and
satisfies government that the origination is abiding by the law.

3. Decisional Roles

a) Entrepreneur : In this role, the manager constantly looks up for new ideas and seeks to
improve his unit by adapting it to changing conditions in the environment.
b) Disturbance Handler (Trouble Shooter) : In this role, the manager has to work like a fire
fighter. He must seek solutions of various unanticipated problems – a strike may loom
large a major customer may go bankrupt; a supplier may renege on his contract, and so on.
c) Resource Allocator : In this role, the manager must divide work and delegate authority
among his subordinates. He must decide who will get what.
d) Negotiator : The manager has to spend considerable time in negotiations. Thus, the
chairman of a company may negotiate with the union leaders a new strike issue, the
foreman may negotiate with the workers a grievance problem, and so on. In addition,
managers in any organization work with each other to establish the organization‘s long-
range goals and to plan how to achieve them. They also work together to provide one
another with the accurate information needed to perform tasks. Thus, managers act as
channels of communication with the organization.

LEVELS OF MANAGEMENT

An enterprise may have different levels of management. Levels of management refer to a line of
demarcation between various managerial positions in an enterprise. The levels of management
depend upon its size, technical facilities, and the range of production. The real significance of
levels is that they explain authority relationships in an organization. Considering the hierarchy of
authority and responsibility, one can identify three levels of management namely:

1. Top level management: Top level management of a company consists of

owners/shareholders, Board of Directors, its Chairman, Managing Director, or the Chief
Executive, or the General Manager or Executive Committee having key officers.

Top management is the ultimate source of authority and it lays down goals, policies and plans for
the enterprise. It devotes more time on planning and coordinating functions. It is accountable to
the owners of the business of the overall management. It is also described as the policy making
group responsible for the overall direction and success of all company activities. The important
functions of top management include:

a) To establish the objectives or goals of the enterprise.

b) To make policies and frame plans to attain the objectives laid.
c) To set up an organizational frame work to conduct the operations as per plans.
d) To assemble the resources of money, men, materials, machines and methods to put the
plans into action.
e) To exercise effective control of the operations.
f) To provide overall leadership to the enterprise.

2. Middle level management : Middle level management of a company consists of heads of

functional departments viz. Purchase Manager, Production Manager, Marketing Manager,
Financial controller, etc. and Divisional and Sectional Officers working under these Functional
Heads.

The job of middle management is to implement the policies and plans framed by the top
management. It serves as an essential link between the top management and the lower level or
operative management. They are responsible to the top management for the functioning of their
departments. They devote more time on the organization and motivation functions of management.
Without them the top management's plans and ambitious expectations will not be fruitfully
realized. The following are the main functions of middle management:

a) To interpret the policies chalked out by top management.

 b) To prepare the organizational set up in their own departments.
c) To recruit and select suitable operative and supervisory staff.
d) To assign activities, duties and responsibilities for timely implementation of the plans.
e) To compile all the instructions and issue them to supervisor under their control.
f) To motivate personnel to attain higher productivity and to reward them properly.
g) To cooperate with the other departments for ensuring a smooth functioning of the entire
organization.
h) To collect reports and information on performance in their departments.
i) To report to top management
j) To make suitable recommendations to the top management for the better execution of
plans and policies.

3. Lower level management: It is placed at the bottom of the hierarchy of management, and
actual operations are the responsibility of this level of management. It consists of foreman,
supervisors, sales officers, accounts officers and so on. They are in direct touch with the rank and
file or workers. Their authority and responsibility is limited. They pass on the instructions of the
middle management to workers.

They interpret and divide the plans of the management into short-range operating plans. They are
also involved in the process of decisions-making. They have to get the work done through the
workers. They allot various jobs to the workers, evaluate their performance and report to the
middle level management. They are more concerned with direction and control functions of
management. They devote more time in the supervision of the workers.
 MANAGERIAL SKILLS

A skill is an individual's ability to translate knowledge into action. Hence, it is manifested in an

individual's performance. Skill is not necessarily inborn. It can be developed through practice and
through relating learning to one's own personal experience and background. In order to be able to
successfully discharge his roles, a manager should possess three major skills. These are conceptual
skill, human relations skill and technical skill.

1. Conceptual skill: The Conceptual Skill which deals with ideas refers to the ability of a manager
to take a broad and farsighted view of the organization and its future, his ability to think in abstract,
his ability to analyze the forces working in a situation, his creative and innovative ability and his
ability to assess the environment and the changes taking place in it. In short, it is his ability to
conceptualize the environment, the organization, and his own job, so that he can set appropriate
goals for his organization, for himself and for his team. This skill seems to increase in importance
as manager moves up to higher positions of responsibility in the organization.

2. Technical Skill: The technical skill which deals with things is the manager's understanding of
the nature of job that people under him have to perform. It refers to a person's knowledge and
proficiency in any type of process or technique. In a production department this would mean an
understanding of the technicalities of the process of production. Whereas this type of skill and
competence seems to be more important at the lower levels of management, its relative importance
as a part of the managerial role diminishes as the manager moves to higher positions.

3. Human relations skill: The Human Relations Skill which deals with people is the ability to
interact effectively with people at all levels. This skill develops in the manager sufficient ability
(a) to recognize the feelings and sentiments of others; (b) to judge the possible actions to, and
outcomes of various courses of action he may undertake; and (c) to examine his own concepts and
values which may enable him to develop more useful attitudes about himself.
 CHALLENGES OF MANAGEMENT

In the present scenario it is difficult for the organizations to survive. The challenges and the
competition bring organizations more opportunities.

1. Economic Pressure: During difficult economic times, effective management is often at a

premium. Anybody can run a company when business is booming. The difference between a bad
management and a good management reflects the difference between making a lot of money and
making a lot more money. In tough times the difference between a good and a bad management
can be the difference between profit or loss or ultimately between survival and failure.

2. Globalization: Globalization refers to the free movement of goods, services and people across
the world. Today we are living in a global village. We are now not just national citizens but we
have become a global citizen. Globalization in its literal sense is the process or transformation of
local or regional phenomena into global ones. Globalization is often used to refer to economic
globalization, that is, integration of national economies into the international economy through
trade, foreign direct investment, capital flows, migration, and the spread of technology.

Globalization makes it possible for companies to find economies with cheaper costs and buy
component parts at a reduced price. Companies can benefit through outsourcing and off-shoring.
It also means firms would have a global reach thus increasing the potential customers.

3. Change: Businesses should embrace change. Change is important for any organization
because, without change, businesses would likely lose their competitive edge and fail to meet the
needs of what most hope to be a growing base of loyal customers. Today the organizations have
to adapt themselves to the changing business environment. If the organization continues with its
old business methods and do not adopt the new strategies then it is likely that the business might
come to an end. Change can be in view of technology, culture, growth opportunities etc.

4. Innovation: Innovation refers to the process of translating an idea into a good or service tha
creates value for which customer pay money. Innovation differs from invention in that innovation
refers to the use of a better and, as a result, novel idea or method, whereas invention refers more
directly to the creation of the idea or method itself. Organizations are finding
innovative ways of making their existence in the world, be it the advertisement of their product,
their services, their social message etc.

5. Customer Service: Organizations can‘t exist without customers. Meeting the required needs
and demands of the customers has become a challenge for the organization. In the Internet era, a
challenge has been to maintain and/or enhance the personal experience while making use of the
efficiencies of online commerce. Many organizations are trying to target their customers through
web portals and allowing them a convenient approach to their services at their homes only.

6. Employee Satisfaction: Employee satisfaction is a measure of how happy workers are with
their job and working environment. Keeping morale high among workers can be of tremendous
benefit to any company, as happy workers will be more likely to produce more, take fewer days
off, and stay loyal to the company. Companies are trying new management techniques to keep
their employees satisfied in order to derive maximum productivity from them. Keeping employees
motivated, help improving their skills, providing assistance in case of crisis, are some of the
practices followed by the organizations.

7. Organization Ethics: Simply speaking, ethics means being good and doing good.
Organizational Ethics is the ethics of an organization, and it is how an organization ethically
responds to an internal or external stimulus. Behaving ethically in business is widely regarded as
good business practice.

8. Social Responsibility: Social responsibility includes accountability, transparency, ethical

behavior, respect to stakeholders interest, respect for human rights and respect to law. Social
responsibility is a duty of every individual or organization which has to perform so as to maintain
a balance between the economy and the ecosystem. Businesses can use decision making to secure
their businesses by making decisions that allow for government agencies to minimize their
involvement with the corporation.

9. Pressure from World Organizations: Many world organizations such as WTO, GATT, IMP,
World Bank etc. has a great influence on the working of the multinational organizations as well as
on national organizations. The organizations have to follow the rules, principles and various
articles laid down by these World organizations.
 EVOLUTION OF MANAGEMENT

The origin of management can be traced back to the days when man started living in groups.
History reveals that strong men organized the masses into groups according to their intelligence,
physical and mental capabilities. Evidence of the use of the well recognized principles of
management is to be found in the organization of public life in ancient Greece, the organization of
the Roman Catholic Church and the organization of military forces. Thus management in some
form or the other has been practiced in the various parts of the world since the dawn of civilization.
With the onset of Industrial Revolution, however, the position underwent a radical change. The
structure of industry became extremely complex. At this stage, the development of a formal theory
of management became absolutely necessary. It was against this background that the pioneers of
modern management thought laid the foundations of modern management theory and practice.

The classical development of management thoughts can be divided into- the scientific
management, the administration/organizational management, the behavioral management and
the quantitative management. The first two (scientific management school and organizational)
emerged in late 1800s and early 1900s were based on the management belief that people were
rational, economic creatures choose a course of action that provide the greatest economic gain.
These schools of management thoughts are explained as below:

1. The Scientific Management:

F.W.Taylor (1856-1915): Frederick Winslow Taylor well-known as the founder of scientific
management was the first to recognize and emphasis the need for adopting a scientific approach
to the task of managing an enterprise. He tried to diagnose the causes of low efficiency in industry
and came to the conclusion that much of waste and inefficiency is due to the lack of order and
system in the methods of management. He therefore, suggested that those responsible for
management should adopt a scientific approach in their work, and make use of "scientific
method" for achieving higher efficiency. The scientific method consists essentially of (a)
Observation (b) Measurement (c) Experimentation and (d) Inference.
Characteristics of Scientific Management
i. Science, not a rule of thumb
 ii. Harmony between management and workers
iii. Monitor workers performance
iv. Wages are paid according to piece rate
v. Division of work

Elements of Scientific Management:

The techniques which Taylor regarded as its essential elements or features may be
classified as under:

1. Work Study: Work study may be defined as the systematic, objective and critical

examination of all the factors governing the operational efficiency of any specified activity
in order to effect improvement. Work study includes.

a) Methods Study: It is the systematic investigation of the existing method of doing

a job. The management should try to ensure that the plant is laid out in the best
manner and is equipped with the best tools and machinery. The possibilities of
eliminating or combining certain operations may be studied.
b) Motion Study: It is a study of the movement, of an operator (or even of a machine)
in performing an operation with the purpose of eliminating useless motions. It
means examining the necessary time to perform a job.
c) Time Study (work measurement): The basic purpose of time study is to determine
the proper time for performing the operation. Such study may be conducted after
the motion study. Both time study and motion study help in determining the best
method of doing a job and the standard time allowed for it.
d) Fatigue Study: If, a standard task is set without providing for measures to eliminate
fatigue, it may either be beyond the workers or the workers may over strain
themselves to attain it. It is necessary, therefore, to regulate the working hours and
provide for rest pauses at scientifically determined intervals.
e) Rate-setting: Taylor recommended the differential piece wage system, under
which workers performing the standard task within prescribed time are paid a much
higher rate per unit than inefficient workers who are not able to come up to the
standard set.
2. Planning the Task: Having set the task which an average worker must strive to perform

to get wages at the higher piece-rate, necessary steps have to be taken to plan the production
thoroughly so that there is no bottle neck and the work goes on systematically.
3. Selection and Training: Scientific Management requires a radical change in the

methods and procedures of selecting workers. It is therefore necessary to entrust the task
of selection to a central personnel department. The procedure of selection will also have
to be systematized. Proper attention has also to be devoted to the training of the workers in
the correct methods of work.
4. Standardization: Standardization may be introduced in respect of the following.

a) Tools and equipment: By standardization is meant the process of bringing about

uniformity. The management must select and store standard tools and implements
which will be nearly the best or the best of their kind.
b) Speed: There is usually an optimum speed for every machine. If it is exceeded, it
is likely to result in damage to machinery.
c) Conditions of Work: To attain standard performance, the maintenance of standard
conditions of ventilation, heating, cooling, humidity, floor space, safety etc., is very
essential.
d) Materials: The efficiency of a worker depends on the quality of materials and the
method of handling materials.
5. Specialization: Scientific management will not be complete without the introduction of

specialization. Under this plan, the two functions of 'planning' and 'doing' are separated in
the organization of the plant. The `functional foremen' are specialists who join their heads
to give thought to the planning of the performance of operations in the workshop. Taylor
suggested eight functional foremen under his scheme of functional foremanship.
a) The Route Clerk: To lay down the sequence of operations and instruct the
workers concerned about it.
b) The Instruction Card Clerk: To prepare detailed instructions regarding different
aspects of work.
c) The Time and Cost Clerk: To send all information relating to their pay to the
workers and to secure proper returns of work from them.
 d) The Shop Disciplinarian: To deal with cases of breach of discipline and
absenteeism.
e) The Gang Boss: To assemble and set up tools and machines and to teach the
workers to make all their personal motions in the quickest and best way.
f) The Speed Boss: To ensure that machines are run at their best speeds and proper
tools are used by the workers.
g) The Repair Boss: To ensure that each worker keeps his machine in good order
and maintains cleanliness around him and his machines.
h) The Inspector: To show to the worker how to do the work.

6. Mental Revolution: At present, industry is divided into two groups – management and

labour. The major problem between these two groups is the division of surplus. The
management wants the maximum possible share of the surplus as profit; the workers want,
as large share in the form of wages. Taylor has in mind the enormous gain that arises from
higher productivity. Such gains can be shared both by the management and workers in the
form of increased profits and increased wages.

2. The Administrative Management:

Henry Fayol is generally regarded as the founder of administrative management and he
provided the bases for art of management. Fayol found that industrial activities could be
divided into six groups as shown in figure.
1. Technical (Production)
2. Commercial (buying, Selling and exchanging).
3. Financial (Search for, and optimum use of capital).
4. Security (Protection of property and persons).
5. Accounting (including Statistics).
6. Managerial (Planning, organization, command, contribution and control).
Henri Fayol pointed out that these activities exist in every size of business.
 Also, Fayol identified 14 principles of managemnet. They are:
Principles of Management (DAD U SEE USSR ?. O I SEE…)
1. Division of Work: According to this principle, work should be divided into small tasks
and each task is performed by a person who is specialist in that area. This will save the
time and energy needed to complete a task and also increase the speed, accuracy and
efficiency of work. According to Fayol, this principle is applicable to both technical and
managerial work.
2. Authority and Responsibility: Authority is the power or right to give orders. Fayol
proposed that for every authority there should be a corresponding responsibility. Then only,
a person can work effectively and get efficient results. In the same way, if a person is given
a responsibility without an adequate authority, he will not be effective in getting the
required results.
3. Discipline: A good discipline is required at all levels for he smooth functioning of an
organization. It includes respect of authority, obedience, proper conduct, fair clear rules
and regulations careful use of penalties. According to Fayol, a good supervision at all levels
helps to maintain discipline in an organization.
4. Unity of Command: Unity of Command employs that there should only one boss for an
employee i.e., an employee should be answerable to only one superior and receive orders
only from him. This helps to avoid confusion regarding what task is to be done, when it is
to be done how it is to be done.
5. Centralization: It means the extent to which authority should be concentrated in the hands
of top level management. It may be centralized or decentralized. There are limitations of
complete centralization & complete decentralization. Therefore, there should be proper
balance between this two.
6. Unity of Direction: This principle says that there should be one head and one plan. All
similar activities should be grouped together, be supervised by one and have one plan of
action. The efforts of all the members of a group must be directed towards the achievement
of common goals.
7. Subordination: In an organization individual interest should not be given any importance.
The manager should always keep organizational interest before him & should determine
such policies which will be beneficial to entire group & not just few personnel. It is
responsibility to management to create common understanding between all. Individual
interest is subordinated to organizational interest.
8. Scalar Chain: Under this principle, Fayol emphasized on having a formal chain of
command and communication from the top level management to lower level. The chain
should be strictly followed by all managers and subordinators except in situations of
emergency. Such emergency is referred to by Fayol as Gang Plank. Under Gang Plank ,
Same level managers can talk to each other without following the regular chain of
sequences for any decision making in order to avoid any delay in communication . It shows
the straight line of authority from highest level to lower level for communication.
9. Remuneration: According to this principle, employees should be fairly compensated for
their efforts in achieving organizational objectives. The remuneration should be just and
equitable for both the employees and employer, it should be determined based on the work
allocated, cost of living, market wage rate for similar work and financial position of an
organisation.
10. Order: This principle stresses on the orderliness of everything and everyone. This means
that every one working in an organization should be allocated a particular place of work
and he should be at that place during working hours. It means keeping the right man or
right thing at the right time in the right place.
11. Initiative: Fayol suggested that employees should be allowed to take initiative in work
related matters without being undisciplined.
12. Stability of Tenure of Personnel: Retaining productive employees should always be a
high priority of management. This indicates avoiding frequent transfers of the employees
much before they settle in their jobs.
 13. Equity: According to this principle, everyone in an organization should be equal in the
eyes of management. The managers should neither favour any subordinate nor neglect
them; they should give them a fair treatment without discriminating on the basis of gender,
religion, nationality and language. This will make employees more devoted to work.
14. Esprit De Corps (Unity is strength): This is a French term. It means manager is like a
captain of a team who is responsible to maintain high moral in all workers. It may be
possible by effective communication among all persons in organization. His understanding
& differences in opinions should not be harmful. The best way of taking such situation is
to establish dialogue between parties. Participation of workers in the process of decision
making is important. The principle states that an organization must make every effort to
maintain group cohesion in the organization. This principle emphasizes on team work.
Unity of staff is the foundation of success.

3. Behavioral Approach
Elton Mayo’s Human Relations Approach: Scientific management theory focused on
physical resources rather than human resources. This theory concentrated on economic needs
of workers but not social needs because it concentrated on improvement of the working
methods but not on the working men. The human relations approach is often called the
behavioral management theory. The criticism of the Scientific and Administrative
Management as advocated by Taylor and Fayol, respectively, gave birth to Human Relation
Approach. The behavioural scientists criticized the early management approaches for their
insensitiveness to the human side of organization. The behavioural scientists did not view
the employees mechanically in work situation, but tried to show that the employees not only
have economic needs but also social and psychological needs like need for recognition,
achievement, social contact, freedom, and respect. Human relations school regards business
organization as a psycho-social system.
Professor George Elton Mayo (1880-1949) and his associates conducted a famous study on
human behaviour at the Hawthorne plant of the Western Electric Company from 1924 to
1932 and this study formed the foundation of this school of management thoughts.
Hawthorne Experiments:
 1. Lighting Experiments
These experiments were performed to find out the effect of different levels of lighting on
productivity of labour. The brightness of the light was increased and decreased to find out
the effect on the productivity of the test group. Surprisingly, the productivity increased even
when the level of lighting was decreased. It was concluded that factors other than light were
also important.
2. Relay Assembly Test Room Study
Under this test, two small groups of six female telephone relay assemblers were selected.
Each group was kept in separate rooms. From time to time, changes were made in working
hours, rest periods, lunch breaks, etc. They were allowed to choose their own rest periods
and to give suggestions. Output increased in both the control rooms. It was concluded that
social relationship among workers, participation in decision-making, etc. had a greater effect
on productivity than working conditions.
3. Mass Interviewing Programme
21,000 employees were interviewed over a period of three years to find out reasons for
increased productivity. It was concluded that productivity can be increased if workers are
allowed to talk freely about matters that are important to them.

The basic hypotheses of this study as well as the basic propositions of the Human Relation
Approach are the following:

1. The social and psychological factors are responsible for workers' productivity and job
satisfaction. Only good physical working conditions are not enough to increase productivity.
2. The informal relations among workers influence the workers' behaviour and performance
more than the formal relations in the organisation.
3. Employees will perform better if they are allowed to participate in decision-making
affecting their interests.
4. Employees will also work more efficiently, when they believe that the management is
interested in their welfare.
5. When employees are treated with respect and dignity, their performance will improve.
6. Financial incentives alone cannot increase the performance. Social and Psychological needs
must also be satisfied in order to increase productivity.
7. Good communication between the superiors and subordinates can improve the relations and
the productivity of the subordinates.
8. Special attention and freedom to express their views will improve the performance of the
workers.

The human relations approach is concerned with recognition of the importance of human
element in organizations. It revealed the importance of social and psychological factors in
determining worker‘s productivity and satisfaction. It is instrumental in creating a new image
of man and the work place. However, this approach also did not go without criticism. It was
criticized that the approach laid heavy emphasis on the human side as against the
organizational needs. However, the contribution of this approach lies in the fact that it advises
managers to attach importance to the human side of an organization.
McGregor’s Theory X and Theory Y:- McGregor classified the people into two categories as
Theory-X type (work avoiders) and Theory –Y type (work acceptors). The essence of management
according to his theory is that the leader should identify the type of behavior of his subordinate
and accordingly. A manager has to use a carrot approach (pat the employees) for theory Y people
while a stick (punish the employees) for theory X people.

4. The Quantitative Approach:

The quantitative approach to management, sometimes known as operations research or

management science, uses quantitative techniques to improve decision making. This approach
includes applications of statistics, optimization models, information models, and computer
simulations. The quantitative approach originated during World War II as mathematical and
statistical solutions to military problems were developed for wartime use. The relevance of
quantitative approach today is that it has contributed most directly to managerial decision
making, particularly in planning and controlling. The availability of sophisticated computer
software programs has made the use of quantitative techniques more feasible for managers.
Techniques such as linear programming, simulation, queuing theory, network analysis, etc. are
extensively use mathematical symbols, relationships and models in analyzing the management
problems such as cost minimization, profit maximization, resource optimization, etc. This
approach focuses attention on the fundamentals of analysis and decision making. The
Quantitative School quantifies the problem; generate solution, tests the solution for their
optimality and then it recommends. The decisions are optimum and perfect as distinguished from
the human behavioral approach, in which decisions are ‗satisfying‘. This approach is devoid of
any personal bias, emotions, sentiments, and intuitiveness. The main postulates of the
quantitative approach are as follows:

a) Management is a series of decision making. The job of a manager is to secure the best
solution out of a series of interrelated variables.
b) These variables can be presented in the form of a mathematical model. It consists of a
set of functional equation which set out the quantitative interrelationship of the variable.
c) If the model is properly formulated and the equations are correctly solved, one can
secure the best solution to the model.
 d) Organizations exist for the achievement of specific and measurable economic goals.
e) In order to achieve these goals, optimal decisions must be made through scientific
formal reasoning backed by quantification.
f) Decision making models should be evaluated in the light of set criteria like cost
reduction, return on investment, meeting time schedules etc.
g) The quality of management is judged by the quality of decisions made in diverse
situations.

As Harold Koontz observed, mathematics is just a tool and it cannot be viewed as school
or a separate approach to management theory.

4. The Systems Approach: A system is a set of interrelated but separate parts working towards
a common purpose. In the 1960s, a new approach to management appeared which attempted
to unify the earlier school of thoughts. This approach is commonly referred to as
‗System Approach‘. This system is one of the modern approaches to understand
management. The system approach is based on the generalization that an organization is a
system and its components (departments) are inter-related and inter-dependent. ―A system
is composed of related and dependent elements (departments) which, when in interactions,
form a unitary whole. On other words, a system may be defined as an organized and
purposeful entity of inter-related, inter-dependent and inter-acting elements. Our human body
is system. In human body, each part of the body is viewed as a sub-system. These sub-
systems are functionally related to each other and to the total system.
The managers must intertwine their department with the total organization and communicate
with all other departments, employees and with each other.

The features of Systems Approach

a. An organization is a system consisting of several subsystems. For example, in a
business enterprise production, sales and other departments are the subsystem.
 b. A system consists of interacting elements. It is set of inter-related and inter-dependent
parts arranged in a manner that produces a unified whole.
c. The various sub-systems should be studied in their inter-relationships rather, than in
isolation from each other.
d. An organizational system has a boundary that determines which parts are internal and
which are external.
e. A system does not exist in a vacuum. It receives information, material and energy from
other systems as inputs. These inputs undergo a transformation process within a system
and leave the system as output to other systems.
f. An organization is a dynamic system as it is responsive to its environment. It is
vulnerable to change in its environment.

Systems can be open or closed. A closed system is not affected by its environment. For
example, a chuck of iron ore is not substantially affected by its environment. An open system
is a system that is affected by its environment. A simple example is a living organism, such
as an animal. Most theorists treat an organization as an open system.

The open system consisting of four basic elements

1. Inputs: These are ingredients required to initiate the transformation process. They
include human, financial, material and information resources.
2. Transformation Process: The inputs are put through a transformation process that
applies technology, operating methodologies, administrative practices and control
techniques in order to produce the output.
3. Outputs: The output may be products and/or services, the sale of which creates profits
or losses. This process also has by-product outputs such as worker behaviour,
information, environmental pollution, community services and so on.
4. Feedback: A feedback loop is used to return the resultant environmental (public or
customers) feedback to the system as inputs. A negative feedback loop indicates a
problem that should be corrected. For example, the failure of product design indicated
by the need to recall the product. A positive feedback loop can identify outputs that
have worked well. For example, a successful marketing campaign that yields high sales.
 If the environment is satisfied with the output, business operations continue. If it is not,
changes are initiated within the business systems so that requirements of the customers are
fully met. This is how an open system responds to the forces of change in the environment.

5. The Contingency or Situational Approach:

Another important approach which has arisen because of the inadequacy of the Quantitative,
Behavioural and System Approach to management is the Contingency Approach. Pigors and
Myers propagated this approach in 1950. Other contributors include Joan Woodward, Tom
Burns, G.W.Stalker, Paul Lawrence, Jay Lorsch and James Thompson. They analyzed the
relationship between organization and environment. They concluded that managers must
keep the functioning of an organization in harmony with the needs of its members and the
external forces. Management is situational and lies in identifying the important variables in
a situation.
The basic theme of contingency approach is that organizations have to cope with different
situations in different ways. Organizations behave as situation demands. In other words,
decision making is contingent on situations. As situation changes, the solutions also differ.
Management problems vary with situation and require to be handled differently as situation
demands. No two situations are absolutely identical. Therefore, each situation requires its
own unique situation. For example, you may have chosen to construct building in a certain
way with certain strategies, but that same approach may not work for different buildings
because they require a completely different approach. The functioning of managers is not a
manager‘s choice. It is contingent on external or internal environment or both. There cannot
be particular management action which will be suitable for all situations. The management
must keep the functioning of an organization in harmony with the needs of its members and
the external forces.
 According to Kast and Rosenzweig, ―The contingency view seeks to understand the
interrelationships within and among sub-system as well as between the organization and its
environment and to define patterns of relationships or configurations of variables.
Contingency views are ultimately directed towards suggesting organizational designs and
managerial actions most appropriate for specific situations‖. The approach has been used in
important sub systems of management like organization, design, leadership, behaviour
change and operation.

Features of contingency approach

a) Management is entirely situational. The application and effectiveness of any techniques

is contingent on the situation.
b) Management action is contingent on certain action outside the system or subsystem as
the case may be.
c) Management should, therefore, match or fit its approach to the requirements of the
particular situation. To be effective management policies and practices must respond
to environmental changes.
d) Organizational action should be based on the behaviour of action outside the system so
that organization should be integrated with the environment.
e) Management should understand that there is no one hard way to manage. They must
not consider management principles and techniques universal.

In order to operationalise the contingency approach, managers need to know the alternatives
for different situations. It may be operationalized as a ‗if then‘ approach to management. The
environment (If) is an independent variable where as management (when) is a dependent
variable. In this model, a manager has to take four sequential steps:

a) Analyze and understand the situation,

b) Examine the applicability or validity of different principles and techniques to the
situation at hand,
c) Make the right choice by matching the techniques to the situations,
d) Implement the choice.
 6. The IT Management Approach:

IT managers focuses on the information technology resources in accordance with its needs and
priorities. The resources include tangible investments like computer hardware, or intangible
software, data, networks and data centre facilities, as well as the staff hired to maintain them.

Moreover, the IT manager use the important terminology, facts, concepts, principles, analytic
techniques, and theories to apply when analyzing complex actual situations and integrates when
developing solutions to IT management multifaceted problems of these complex situations.

Of course, the basic management functions, like budgeting, staffing, change management,
organizing and controlling are inherently embedded in this style of management, but the beauty
of this style is that the management uses software design, network, planning, tech support, etc.
that requires little manpower.

Examples:

 Business/IT alignment: The businesses maintain the data base of their customers to alert them as
and when a service is required for them.
 E-Governance: The government can perform registrations and issue certificates. The services of
government to the people can be made available at their doorsteps.
 IT financial management and service management: The tax management, complaint resolutions,
property dealings, financial services, banking activities are some examples.
 Sourcing and IT enabled services: Transport services, insurance services, health services can be
managed easily by coupling the source and destination points with IT enabled services.

Features of IT Management Approach

1. To generate value to the through technology.

2. To generate value, business strategies and technology are aligned.
3. The organizational relationship between internal and external environments is networked through
technology to improving the overall value chain of an organization.
4. The technology providers build product-centric infrastructure and management offerings with
converged infrastructure environments.
 INTRODUCTION TO PLANNING

Planning is the most fundamental function of management. An organization can succeed in

effective utilization of its human, financial and material resources. Planning involves
determination of objectives of the business, formation of programs and courses of action for their
attainment, development of schedules and timings of action and assignment of responsibilities for
their implementation. Planning thus precedes all efforts and action, as it is the plans and programs
that determine the kind of decisions and activities required for the attainment of the desired goals.
In the absence of planning, it will be impossible to decide what activities are required, how they
should be combined into jobs and departments, who will be responsible for what kind of decisions
and actions, and how various decisions and activities are to be coordinated.

Definition of Planning

Planning is the process of deciding in advance what is to be done, who is to do it, how it is to be
done and when it is to be done. It is the process of determining a course of action, so as to achieve
the desired results. It helps to bridge the gap from where we are, to where we want to go. It makes
it possible for things to occur which would not otherwise happen. Planning is a higher order mental
process requiring the use of intellectual faculties, imagination, foresight and sound judgment.

According to Koontz O‟Donnell - "Planning is an intellectual process, the conscious determination

of courses of action, the basing of decisions on purpose, acts and considered estimates".

Planning Elements

1. What will be done – what are the objectives of business in the short and in the long run?
2. What resources will be required – This involves estimation of the available and potential
resources, estimation of resources required for the achievement of objectives, and filling the
gap between the two, if any.
3. How it will be done – This involves two things : (i) determination of tasks, activities, projects,
programs, etc., required for the attainment of objectives, and (ii) formulation of strategies,
policies, procedures, methods, standard and budgets for the above purpose.
4. Who will do it – It involves assignment of responsibilities to various managers relating to
contributions they are expected to make for the attainment of enterprise objectives. This is
preceded by the breaking down of the total enterprise objectives into segmental objectives,
resulting into divisional, departmental, sectional and individual objectives.
5. When it will be done – It involves determination of the timing and sequence, if any, for the
performance of various activities and execution of various projects and their parts.

NATURE/CHARACTERISTICS OF PLANNING

1. Goal oriented: Planning centers around the corporate mission and goals. So planning is said
to be goal oriented. It contributes positively to achievement of mission and goals. It identifies
the measures to be taken to achieve the targeted results efficiently and economically.

2. Intellectual process: Not everybody can be good at planning. Planning is not guessing. One
should be capable of thinking in a systematic manner. It is so because planning demands
intellectual skills such as vision, farsighted outlook, imagination and analytical skills to take
rational decisions.

3. Involves choice: There are alternatives available to achieve a particular target. The manager
has to select the best alternative based on the merits and demerits of each alternative.

4. Basis for other functions: Since planning is first function of the manager, the results of
planning form the basis for all other managerial functions.

5. Pervasive in nature: Planning is essential for all organizations – small or big, domestic or
foreign, profit-making or non-profit making oriented. Managers at the top, middle an d lower
levels in any organization have to systematically plan for the future. Thus, planning is said to
be all pervasive.

6. Continuous and dynamic: Business environment is complex and keeps changing.

Consequently, plans also need to be dynamic. They have to be worked out for a given
 timeframe at the end of which they must be reviewed and new plans prepared for the next
year. Thus, planning is a continuous process.

7. Flexible in nature: Plans should not be rigid. They should be flexible in nature and
accommodate a change in circumstances.

8. Intends to enhance efficiency: the aim of planning is to achieve the maximum targets at
minimum cost and quickly. So all plans should be cost effective and worth their investments.
The benefits from a plan should be more than its costs.
PLANNING PROCESS

The following eight main steps are involved in the planning process of an organization.

1. Identifying Opportunities: Real planning starts with knowing the availability of different
opportunities. For each opportunity, assess carefully the size of markets, type of markets, type of
customers, degree of competition, needs of customers, finances required and the strengths and
weaknesses of the firm. Then, identify the right opportunity.

2. Defining goals: Once the opportunity is identified, define the goals you want to achieve for the
entire organization. Goals, in turn, will throw light on what objectives, strategies, policies,
procedures, rules, budgets and programs you should follow. This is to be done for the long term as
well as for the short range. Goals specify the expected results and indicate the end points of what
is to be done, where the primary emphasis is to be placed and what is to be accomplished by the
various types of plans.

3. Considering Planning Premises: After determination of organizational goals, the next step is
establishing planning premises that is the conditions under which planning activities will be
undertaken. Planning premises refers to the assumptions about the environment in which plans
have to be carried out. Correct assumptions about markets, completion, product technology, prices,
volume of sales, costs, tax rates etc. are essential for business planning. Government policies,
annual budgets, economic indicators, survey of specific industries etc. provide valuable insights
on the basis of which „premises‟ can be worked out.
Thus planning premises are external and internal. External premises include total factors in task
environment like political, social, technological, competitors, plans and actions, government
policies. Internal premises include organization‟s policies, resources of various types, and the
ability of the organization to withstand the environmental pressure. The plans are formulated in
the light of both external and internal factors.

4. Identifying Alternatives: The fourth step in planning is to identify the alternatives. Various
alternatives can be identified based on the organizational goals and planning premises. The concept
of various alternatives suggests that a particular goals can be achieved through various actions.

For example, if an organization has set its goals to grow further, it can be achieved in several ways
like expanding in the same Field of business or product line diversifying in other areas, joining
hands with other organizations, or taking over another organization and so on. Within each
category, there may be several alternatives.

5. Evaluating Alternatives: The various alternative courses of action should be analyzed in the
light of premises and goals. There are various techniques available to evaluate alternatives. The
evaluation is to be done in the light of various factors. Example, cash inflow and outflow, risks,
limited resources, expected pay back etc., the alternatives should give us the best chance of meeting
our goals at the lowest cost and highest profit.

6. Choosing the Best Alternative: The best alternative is chosen on the given situation.
Normally, it involves optimum utilization of resources. At times, an analysis and evaluation of
alternative courses will disclose that two or more alternatives are advisable and beneficial. The fit
one is selected.

7. Formulating Supporting Plans: After formulating the basic plan, various plan are derived so
as to support the main plan. In an organization there can be various derivative plans like planning
for buying equipment, buying raw materials, recruiting and training personnel, developing new
product etc. These derivative plans are formulated out of the basic or main plan and almost
invariably required to support the basic plan.
8. Making Budgets: After formulating basic and derivative plans, the sequence of activities is
determined so those plans are put into action. After decisions are made and plans are set, budgets
for various periods and divisions can be prepared to give plans more concrete meaning for
implementation.

Budget is “numerical expression” of a plan. The overall budgets of an enterprise represent the sum
total of income and expenses, with resultant profit or surplus, and budgets of major balance sheet
items such as cash and capital expenditures. Each department or program of a business or other
enterprise can have its own budgets, usually of expenses and capital expenditures, which tie into
the overall budget.

TYPES OF PLANS

Plans commit individuals, departments, organizations, and the resources of each to specific actions
for the future. Effectively designed organizational goals fit into a hierarchy so that the achievement
of goals at low levels permits the attainment of high‐level goals.

Three major types of plans can help managers achieve their organization's goals: strategic, tactical,
and operational. Operational plans lead to the achievement of tactical plans, which in turn lead to
the attainment of strategic plans. In addition to these three types of plans, managers should also
develop a contingency plan in case their original plans fail.

1. Operational plan: Operational plan covers the day-to-day operations of business such as
facilities, inventory management, production plan, supply and distribution etc. An operational plan
is like a map that can help to navigate your business towards specific goals. Operational plan is
one that a manager uses to accomplish his or her job responsibilities. Supervisors, team leaders
develop operational plans to support tactical plans. Operational plans can be a single‐use plan or
an ongoing plan.

a) Single‐use plans apply to activities that do not recur or repeat. A one‐time occurrence,
such as a special sales program, is a single‐use plan because it deals with the who, what,
where, how, and how much of an activity. A budget is also a single‐use plan because it
 predicts sources and amounts of income and how much they are used for a specific project.
b) Continuing or ongoing plans are usually made once and retain their value over a period
of years while undergoing periodic revisions and updates. The following are examples of
ongoing plans:
 Policies: Policies are statements of understanding that specify „what can be done or
what cannot be done‟ to achieve the given objectives. Policies guide the behavior or
thinking of people in an organization. They define the framework within which a
decision is to be made. Policies provide a broad guideline for managers to follow when
dealing with important areas of decision making. For example, address such matters as
employee hiring, terminations, performance appraisals, pay increases, and discipline.
 Procedures: Procedures outline in detail the method of carrying out a task. A
procedure is a set of step‐by‐step directions that explains how activities or tasks are to
be carried out in a given sequence. The employees are trained in organizational
procedures. The top management is concerned with the laying down of procedures and
the middle and the lower levels with their implementation.
Policies and programs are closely related to each other. A company may have a policy
of expansion by 10% every year. To attain this, it has to carefully develop procedures
to raise finances, manpower and production.
 Rules: A rule is an explicit statement that tells an employee what he or she can and
cannot do. Rules are “do” and “don't” statements put into place to promote the safety
of employees and the uniform treatment and behavior of employees. Observe these
rules: No credit, No smoking, Come in queue etc.
 Programs: These specify what is to be done. They reflect goals, policies, procedures
and rules to be followed, steps to be taken, resources to be employed and even minor
details necessary to execute a task. Every program is supported by budget. Programs
may be major or minor based on their purpose, scope and time duration.
 Budgets: When plans are expressed in numbers, they become budgets. A budget may
be expressed in financial terms or any other measurable form such as machine hours.,
labor hours, or units of production. It can also be expressed in terms of enterprise
 activities such as sales budget, advertisement budget, purchases budget, cash budget
etc.
A budget provides means of controlling the organization‟s performance. While making
budget is a part of planning, controlling employee performance is part of the controlling
function of manager. Budgets are prepared for a clearly defined period, say a week,
month or year.

2. Tactical plan: A tactical plan is concerned with what the lower level units within each division
must do, how they must do it, and who is in charge at each level. Tactics are the means needed to
activate a strategy and make it work. Tactical plans are concerned with shorter time frames and
narrower scopes than are strategic plans. These plans usually span one year or less because they
are considered short‐term goals. The tactics needed to achieve the goals defined in a strategic plan.
For example, if a company‟s strategic plan is to become a market leader, its tactical plan might be
to double the amount spent on advertisement and marketing. 8/Tactical planning involves:

 Products or services to be added or deleted.

 Size of capital investments required.
 Pricing the products and services to be provided.
 Withdrawing investments from projects. etc.

3. Strategic plan: Strategic planning includes plans made by the top management to pursue long
term goals with the resources with likely to be available. Strategic plan is an outline of steps
designed with the goals of the entire organization as a whole in mind, rather than with the goals of
specific divisions or departments. Strategic planning begins with an organization's mission.
Strategic plans look ahead over the next two, three, five, or even more years to move the
organization from where it currently is to where it wants to be. Top management's strategic plan
for the entire organization becomes the framework and sets dimensions for the lower level
planning. Strategic planning involves:

 Formulating a mission for the entire organization.

 Identifying the business that helps to meet a mission.
 Determination of financial requirements.
  Allocating resources effectively. etc.

4. Contingency plan: Contingency planning involves identifying alternative courses of action that
can be implemented if and when the original plan proves inadequate because of changing
circumstances. Keep in mind that events beyond a manager's control may cause even the most
carefully prepared alternative future scenarios to go awry. Unexpected problems and events
frequently occur. When they do, managers may need to change their plans. Anticipating change
during the planning process is best in case things don't go as expected. Management can then
develop alternatives to the existing plan and ready them for use when and if circumstances make
these alternatives appropriate.
1) n be used as project control method.

MANAGEMENT BY OBJECTIVES (MBO)

The term Management By Objectives (MBO) has been popularized by Peter Drucker in his 1954
book “The Practice of Management” and George S. Odiorne gave depth to the meaning and usage
of MBO through his book “Management By Objectives: A System of Managerial Leadership”.
It is the process of defining objectives within an organization so that management and employees
agree collectively to the objectives and understand what they need to do in the organization. It
suggests that objectives should not be imposed on subordinates but should be decided collectively
by a concerned with the management. This provides not only supports but eases and quickness the
achievement of such objectives.

It concentrates on the achievement of objectives through participation of all concerned through

team spirit and trust on one another. This not only supports but also eases and speeds up reaching
 the goals. Thus, MBO has become the most widely accepted philosophy of management today due
to its demanding and rewarding style.

The principle behind Management by Objectives (MBO) is to make sure that everybody within
the organization has a clear understanding of the aims, or objectives of that organization, as well
as awareness of their own roles and responsibilities in achieving those aims.

Definition of MBO

George S. Odiorne defines “MBO is a process whereby superior and subordinate managers of an
organization jointly define its common goals, define each individual‟s major areas of responsibility
in terms of results expected of him and use these measures as guides for operating the unit and
assessing the contribution of each of its members”.

Features of MBO

1. Management by Objectives is a philosophy or a system, and not merely technique.

2. It emphasizes participative goal setting.
3. It clearly defines each individual responsibility in terms of results.
4. It focuses attention on what must be accomplished goals rather than on how it is to be
accomplished.
5. It converts objective needs into personal goals at every level in the organization.
6. It establishes standards or yardsticks (goals) as operation guides and also as basis of
performance evaluation.
7. It is a system intentionally directed toward effective and efficient attainment of organizational
and personal goals.

The Six Steps in MBO Process

1. Define Organizational Goals: Goals are critical issues to organizational effectiveness, and
they serve a number of purposes. Organizations can also have several different kinds of goals, all
of which must be appropriately managed.

And a number of different kinds of managers must be involved in setting goals. The goals set by
the superiors are preliminary, based on an analysis and judgment as to what can and what should
be accomplished by the organization within a certain period.

2. Define Employees Objectives: After determining the organizational goals, the next thing to do
is to know the individual‟s goals or more clearly employees‟ goals. It is the responsibility of the
manager to ask employees about what goals they can accomplish within a specific time period and
what resources will they use to achieve the goal. Get specific and clear about what you wan to
achieve (I want to be a rich), make your goal measureable-quantify what you want (I want to have
Rs. 10 lakh), Make your goal achievable within your resources (I work hard as hell), make your
goal relevant-is it worthwhile (I want to keep her happy), your goal needs to be timed-set a start
and finish date (One year time)> Also, if needed, then managers and employees can classify the
goals from the most important to the least one in order to make the goal achieving process more
easily and in favor of the organization.
3. Continuous Monitoring Performance and Progress: The process of MBO is not just set for
providing additional effectiveness to managers across the organization, but it is also equally
important for constantly monitoring the progress and performance of the employees. There are
certain things stated below that can help managers to monitor performance and progress.

 Checking less-effective or ineffective programs by performing a comparison of

performance with already prepared objectives.
 Using ZBB (Zero Based Budgeting)
 Defining short and long term plans and objectives
 Installing efficient and effective controls
 Eventually, composing completely sound structure of the organization with all things at
appropriate places such as responsibilities, decision making and so on.

4. Performance Evaluation: MBO is designed to improve performance at all levels of the

organization. To ensure this happens, you need to put a comprehensive evaluation system in place.
As goals have been defined in a specific, measurable and time-based way, the evaluation aspect of
MBO is relatively straightforward. Employees are evaluated on their performance with respect to
goal achievement (allowing appropriately for changes in the environment.)

5. Providing Feedback: The psychologically influential factor of MBO is constantly providing

feedback to employees regarding their performance and individual goals, so that they can monitor,
correct and extra improve their skills and mistakes. Mostly, the feedback is provided in periodic
meetings where supervisors and their subordinates review the performance and progress towards
achievement of goals. At one point, feedback helps individuals know their weakness. While on the
other hand, it also motivates already potential individuals to enhance and develop their
performance additionally. This continuous feedback is supplemented by periodic formal appraisal
meetings which superiors and subordinates can review progress toward goals, which lead to further
feedback.

6. Performance Appraisal: In this step, the worth of employee is examined and judged.
Performance appraisals are a regular review of employee performance within organizations. When
you reward goal achievers you send a clear message to everyone that goal attainment is valued and
that the MBO process is not just an exercise but an essential aspect of performance
appraisal. The importance of fair and accurate assessment of performance highlights why setting
measurable goals and clear performance indicators are essential to the MBO system.

Merits/Benefits of MBO

1. Goals set up the motivation levels: If achievable, albeit higher, goals are set in
consultation with the subordinates and keeping to mind their strengths and weaknesses,
employees get highly motivated to put in their best.

2. Result oriented management: The management focuses the attention of mangers on the
results to be achieved rather than on activities.

3. Clarity in organizational structures: Everyone in an organization knows the purpose and

mission of the company and is aware of its objectives. This helps managers to perform
better with greater commitment and accountability.

4. Superior subordinates relationships are reinforced: Since mangers at different levels

are consulted and senior mangers counsel the juniors, there is greater understanding
between them. Communication gaps are eliminated and subordinates develop a sense of
involvement which enhances their productivity.

5. Monitoring is made easy: It facilitates self evaluation and feedback which improves the
efficiency of mangers. There is less need for monitoring from above.

6. Improved planning: managers at all levels are compelled to think ahead. Interaction
among managers results in better ideas and , consequently there will be improved planning
and control.

7. More objective appraisal: The element of subjectivity can be minimized. There is no

scope for personal bias, feeling, sentiments and emotions.

8. Self check: MBO is a tool for self control and self direction that helps mangers to turn into
professionals. There is no need for any advice or memo to an employee from the top
management on whether or not he has completed his targets. He can push himself in areas
he lags behind by figuring out the possible correcting measures.
 9. Review of objectives: Business environment is very dynamic. There may be changes in it
which may call for review and resetting of objectives, if necessary.

Demerits/Limitations of MBO

1. Inadequate commitment from top management: MBO could not take off in many
organizations for want of a clear cut policy from the top management. MBO requires a
great deal of appreciation and commitment on the part of mangers who implement it. They
should explain to their subordinates about its operational details and utility. Otherwise, they
cannot win them over and that is vital for the successful implementation of MBO.

2. Goal setters are not given any orientation: Goal setting is the primary task in MBO.
Goal setter should be given a total orientation about corporate goals, planning premises,
broad policies of the company and how these, in turn, are likely to affect their own
objectives. Any failure to give such guidelines may limit the utility of MBO.

3. Setting goals is complex process: Setting realistic and achievable goals for subordinates
is not an easy task. If the objectives are not reasonable, behavioural implications are not
clearly stated, and ethical bevariour is not given high priority, people will use unethical
means to achieve goals.

4. Emphasis on short-term goals: MBO centers the accomplishment of mutual set objectives
which are more short-term in nature. In a majority of the cases, short-term goals are not
well integrated into long-term objectives and consequently, undue emphasis on short-term
goals marginalizes the long-term goals.

5. Inflexibility: Objectives for every manger or subordinate are set after much interaction,
debate, discussion and understanding of individual aspirations. Managers tend to hesitate
in changing the objectives worked out in such a detailed effort even when there is a change
in corporate goals and planning premises.

6. Problems of status and authority: MBO focuses on personal interaction among mangers.
In reality, organizations are characterized more by people conscious of their
 authority and status. They seldom like to interact freely with their subordinates, leave
alone assessing the latter‟s strengths and weaknesses.

7. Lower levels are deprived of freedom and interaction: If MBO philosophy does not
spread right down, it will not be successful. But mangers at lower level have little freedom
to react to even organizational goals, to speak nothing of the freedom to set their own
objectives. In such an environment, setting of objectives jointly is merely a dream.

8. Limited time horizon: MBO may be useful in a limited time horizon. In reality, business
environment is not so stable that objectives once set will hold good till they are achieved.
Objective get revised frequently in view of hostile and volatile environment.