Perspectives of Management

Management is essential in all organised efforts, be it a business activity or any other

activity. Principles of management are now universally used not for managing business
organisation, they are also applied to various other type of organisations, such as educational,
social, military and Government.

Management is a critical element in the economic growth of a country. By bringing

together the four factors of production management men, money, material, and machines
enables a country to experience a level of economic development. Peter Drucker rightly
observes that without management, a country’s resources of production remains resources
and never become production.

Management is the dynamic, life-giving element in every organisation. It is the

element that coordinates current organisational activities and plans future ones. In the words
of Claude S. George, management is “the central core of our national as well as personal
activities, and the way we manage ourselves and our institutions reflects with alarming clarity
what we and our society will become.”

Definition
Management is a wide term. It is described as an “activity”, a “process”, and a
“group of people” vested with the authority to make decisions.
 According to Mary Parker Follett, management is the “art of getting things
done through people.”
 According to George R.Terry,management as a process”consist of planning,
organising, actuating and controlling, performed to determine and
accomplish the objectives by the use of people and resources”.
 According to Louis Allen,”Management is what a manager does”.
 According to Henry Fayol,”to manage is to forecast and plan, to organise, to
command, to coordinate, and to control”.
 According to James D.Mooney and Allan C.Reiley,”management is the art of
directing and inspiring people”.
 According to Harold Koontz, “Management is an art of getting things done
through and with the people in formally organized groups. It is an art of
creating an environment in which people can perform and individuals and
can co-operate towards attainment of group goals”. Management is the
process of reaching organizational goals by working with and through people
and other organizational resources.

Management Functions
The four basic management functions that make up the management process are
described in the following sections:
 Planning
  Organizing
 Influencing
 Controlling.

Planning
Planning involves choosing tasks that must be performed to attain organizational
goals, outlining how the tasks must be performed, and indicating when they should be
performed. Planning activity focuses on attaining goals. Managers outline exactly what
organizations should do to be successful. Planning is concerned with the success of the
organization in the short term as well as in the long term.

Organizing
Organizing can be thought of as assigning the tasks developed in the planning stages,
to various individuals or groups within the organization. Organizing is to create a mechanism
to put plans into action. People within the organization are given work assignments that
contribute to the company’s goals. Tasks are organized so that the output of each individual
contributes to the success of departments, which, in turn, contributes to the success of
divisions, which ultimately contributes to the success of the organization.

Influencing
Influencing is also referred to as motivating, leading or directing. Influencing can be
defined as guiding the activities of organization members in the direction that helps the
organization move towards the fulfilment of the goals.
The purpose of influencing is to increase productivity. Human-oriented work situations
usually generate higher levels of production over the long term than do task oriented work
situations because people find the latter type distasteful.

Controlling
Controlling is the following roles played by the manager:
 Gather information that measures performance
 Compare present performance to pre established performance norms.
 Determine the next action plan and modifications for meeting the desired
performance parameters. Controlling is an ongoing process.
 Role of Managers
To meet the many demands of performing their functions, managers assume multiple
roles. A role is an organized set of behaviours. Henry Mintzberg has identified ten roles
common to the work of all managers. The ten roles are divided into three groups.
 Interpersonal
 Informational
 Decisional
The performance of managerial roles and the requirements of these roles can be
played at different times by the same manager and to different degrees depending on the level
and function of management. The ten roles are described individually, but they form an
integrated whole.

Interpersonal Roles
The interpersonal roles link all managerial work together. The three interpersonal
roles are primarily concerned with interpersonal relationships.
 Figurehead Role: The manager represents the organization in all matters of formality.
The top level manager represents the company legally and socially to those outside of
the organization. The supervisor represents the work group to higher management and
higher management to the work group.
 Liaison Role: The manger interacts with peers and people outside the organization.
The top level manager uses the liaison role to gain favours and information, while the
supervisor uses it to maintain the routine flow of work.
 The leader Role: It defines the relationships between the manger and employees.

Informational Roles
The informational roles ensure that information is provided. The three informational
roles are primarily concerned with the information aspects of managerial work.
 Monitor Role: The manager receives and collects information about the operation of
an enterprise.
 Disseminator Role: The manager transmits special information into the organization.
The top level manager receives and transmits more information from people outside
the organization than the supervisor.
  Spokesperson Role: The manager disseminates the organization’s information into its
environment. Thus, the top level manager is seen as an industry expert, while the
supervisor is seen as a unit or departmental expert.

Decisional Roles
The decisional roles make significant use of the information and there are four
decisional roles.
 Entrepreneur Role: The manager initiates change, new projects; identify new ideas,
delegate idea responsibility to others.
 Disturbance Handler Role: The manager deals with threats to the organization. The
manager takes corrective action during disputes or crises; resolve conflicts among
subordinates; adapt to environmental crisis.
 Resource Allocator Role: The manager decides who gets resources; schedule, budget
set priorities and chooses where the organization will apply its efforts.
 Negotiator Role: The manager negotiates on behalf of the organization. The top level
manager makes the decisions about the organization as a whole, while the supervisor
makes decisions about his or her particular work unit.

Managerical skills
Managers at every level in the management hierarchy must exercise three basic types
of skills: technical, human, and conceptual. All managers must acquire these skills in varying
proportions, although the importance of each category of skill changes at different
management levels.

Technical skills
 Technical skills refer to the ability and knowledge in using the equipment,
techniques and procedure involved in performing specific tasks.
 These skills require specialized knowledge and proficiency in the mechanics
of a particular.
 Technical skills lose relative importance at higher levels of the management
hierarchy, but most top executives started out as technical experts.

Human skills
 Human skills refer to the ability of a manager to work effectively with other
people both as individual and as members of a group.
  Human skills are concerned with understanding of people.
 These are required to win cooperation of others and to build effective work
teams.

Conceptual skills.
 Conceptual skills involve the ability to see the whole organization and the
interrelationships between its parts.
 These skills refer to the ability to visualize the entire picture or to consider a
situation in its totality.
 These skills help the managers to analyze the environment and to identify the
opportunities.
 Conceptual skills are especially important for top-level managers, who must
develop long-range plans for the future direction of their organization.

Evolution of Management Thought

The practice of management is as old as human civilization. The ancient civilizations
of Egypt (the great pyramids), Greece (leadership and war tactics of Alexander the great) and
Rome displayed the marvellous results of good management practices. The origin of
management as a discipline was developed in the late 19th century. Overtime, management
thinkers have sought ways to organize and classify the voluminous information about
management that has been collected and disseminated. The different approaches of
management are
 Classical approach,
 Behavioural approach,
 Quantitative approach,
 Systems approach,
 Contingency approach.

The Classical Approach

The classical approach is the oldest formal approach of management thought. Its
roots pre-date the twentieth century. The classical approach of thought generally concerns
ways to manage work and organizations more efficiently. Three areas of study that can be
grouped under the classical approach are scientific management, administrative management,
and bureaucratic management.

The Behavioural Approach

The behavioural approach of management thought developed, in part, because of
perceived weaknesses in the assumptions of the classical approach. The classical approach
emphasized efficiency, process, and principles. Some felt that this emphasis disregarded
important aspects of organizational life, particularly as it related to human behaviour. Thus,
the behavioural approach focused on trying to understand the factors that affect human
behaviour at work.

The Quantitative Approach

The quantitative approach focuses on improving decision making via the application
of quantitative techniques. Its roots can be traced back to scientific management.

(i) Management Science (Operations Research)

Management science (also called operations research) uses mathematical and
statistical approaches to solve management problems. It developed during World War II as
strategists tried to apply scientific knowledge and methods to the complex problems of war.
Industry began to apply management science after the war.

(ii) Production and Operations Management.

This approach focuses on the operation and control of the production process that
transforms resources into finished goods and services. It has its roots in scientific
management but became an identifiable area of management study after World War II. It uses
many of the tools of management science. Operations management emphasizes productivity
and quality of both manufacturing and service organizations.

Systems Approach
The simplified block diagram of the systems approach is given below. The systems
approach focuses on understanding the organization as an open system that transforms inputs
into outputs. The systems approach began to have a strong impact on management thought in
the 1960s as a way of thinking about managing techniques that would
allow managers to relate different specialties and parts of the company to one another, as well
as to external environmental factors. The systems approach focuses on the organization as a
whole, its interaction with the environment, and its need to achieve equilibrium

Contingency Approach
The contingency approach focuses on applying management principles and processes
as dictated by the unique characteristics of each situation. It emphasizes that there is no one
best way to manage and that it depends on various situational factors, such as the external
environment, technology, organizational characteristics, characteristics of the manager, and
characteristics of the subordinates. Contingency theorists often implicitly or explicitly
criticize the classical approach for its emphasis on the universality of management principles;
however, most classical writers recognized the need to consider aspects of the situation when
applying management principles.

Organization and Environmental Factors

An organization is a group of people intentionally organized to accomplish a common
or set of goals. Types of Business Organizations

Sole Proprietorships
The vast majority of small business starts out as sole proprietorships very dangerous.
These firms are owned by one person, usually the individual who has day-to-day
responsibility for running the business. Sole proprietors own all the assets of the business and
the profits generated by it. They also assume "complete personal" responsibility for all of its
liabilities or debts. In the eyes of the law, you are one in the same with the business.

Partnerships
In a Partnership, two or more people share ownership of a single business. Like
proprietorships, the law does not distinguish between the business and its owners. The
Partners should have a legal agreement that sets forth how decisions will be made, profits will
be shared, disputes will be resolved, how future partners will be admitted to the partnership,
how partners can be bought out, or what steps will be taken to dissolve the partnership when
needed.
 Corporations
A corporation, chartered by the state in which it is headquartered, is considered by
law to be a unique "entity", separate and apart from those who own it. A corporation can be
taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation
are its shareholders. The shareholders elect a board of directors to oversee the major policies
and decisions. The corporation has a life of its own and does not dissolve when ownership
changes.

Joint Stock Company

Limited financial resources & heavy burden of risk involved in both of the previous
forms of organization has led to the formation of joint stock companies these have limited
dilutives. The capital is raised by selling shares of different values. Persons who purchase the
shares are called shareholder. The managing body known as; Board of Directors; is
responsible for policy making important financial & technical decisions. There are two main
types of joint stock Companies Private limited and Public limited company.

 Private limited company-This type company can be formed by two or more

persons. Te maximum number of member ship is limited to 50. In this transfer
of shares is limited to members only. The government also does not interfere
in the working of the company.

 Public Limited Company-It is one whose membership is open to general

public. The minimum number required to form such company is seven, but
there is no upper limit. Such company’s can advertise to offer its share to
genera public through a prospectus. These public limited companies are
subjected to greater control & supervision of control.

Public Corporations
A public corporation is wholly owned by the Government centre to state. It is
established usually by a Special Act of the parliament. Special statute also prescribes its
management pattern power duties & jurisdictions. Though the total capital is provided by the
Government, they have separate entity & enjoy independence in matters related to
appointments, promotions etc.

Government Companies
A state enterprise can also be organized in the form of a Joint stock company; A
government company is any company in which of the share capital is held by the central
government or partly by central government & party by one to more state governments. It is
managed b the elected board of directors which may include private individuals. These are
accountable for its working to the concerned ministry or department & its annual report is
required to be placed ever year on the table of the parliament or state legislatures along with
the comments of the government to concerned department.

Classification of Environmental Factors

On the basis of the extent of intimacy with the firm, the environmental factors may be
classified into different types namely internal and external.
 Internal Environmental Factors
The internal environment is the environment that has a direct impact on the business.
The internal factors are generally controllable because the company has control over these
factors. It can alter or modify these factors. The internal environmental factors are resources,
capabilities and culture.

External Environment Factors

It refers to the environment that has an indirect influence on the business. The factors
are uncontrollable by the business. The two types of external environment are micro
environment and macro environment.

Trends and Challenges of Management in Global Scenario

The management functions are planning and decision making. Organizing, leading,
and controlling are just as relevant to international managers as to domestic managers.
International managers need to have a clear view of where they want their firm to be in the
future; they have to organize to implement their plans: they have to motivate those who work
lot them; and they have to develop appropriate control mechanisms.

Planning and Decision Making

Planning and Decision Making in a Global Scenario To effectively plan and make
decisions in a global economy, managers must have a broad based understanding of both
environmental issues and competitive issues. They need to understand local market
conditions and technological factor that will affect their operations. At the corporate level,
executives need a great deal of information to function effectively. Which markets are
growing? Which markets are shrinking? Which are our domestic and foreign competitors
doing in each market? They must also make a variety of strategic decisions about their
organizations.
 Organizing
Organizing in a Global Scenario Managers in international businesses must also
attend to a variety of organizing issues. For example, General Electric has operations
scattered around the globe. The firm has made the decision to give local managers a great
deal of responsibility for how they run their business. In contrast, many Japanese firms give
managers of their foreign operations relatively little responsibility. As a result, those
managers must frequently travel back to Japan to present problems or get decisions approved.
Managers in an international business must address the basic issues of organization structure
and design, managing change, and dealing with human resources.

Leading
Leading in a Global Scenario We noted earlier some of the cultural factors that affect
international organizations. Individual managers must be prepared to deal with these and
other factors as they interact people from different cultural backgrounds .Supervising a group
of five managers, each of whom is from a different state in the United States, is likely to be
much simpler than supervising a group of five managers, each of whom is from a different
culture. Managers must understand how cultural factors affect individuals. How motivational
processes vary across cultures, how the role of leadership changes in different cultures, how
communication varies across cultures, and how interpersonal and group processes depend on
cultural background.

Controlling
Controlling in a Global Scenario Finally, managers in international organizations must
also be concerned with control. Distances, time zone differences, and cultural factors also
play a role in control. For example, in some cultures, close supervision is seen as being
appropriate, whereas in other cultures, it is not like wise, executives in the United States and
Japan may find it difficult to communicate vital information to one another because of the
time zone differences. Basic control issues for the international manager revolve around
operations management productivity, quality, technology and information systems.
 CHAPTER II
PLANNING
Introduction
Planning is one of the most important project management and time management
techniques. Planning is preparing a sequence of action steps to achieve some specific goal. If
you do it effectively, you can reduce much the necessary time and effort of achieving the
goal.
A plan is like a map. When following a plan, you can always see how much you have
progressed towards your project goal and how far you are from your destination.

One more reason why you need planning is again the 80/20 Rule. It is well established
that for unstructured activities 80 percent of the effort give less than 20 percent of the
valuable outcome. It is much easier to adjust your plan to avoid or smoothen a coming crisis,
rather than to deal with the crisis when it comes unexpected.

Pre Requisite Discussion

The students should be renowned with the expectations of the outcome, the procedure
to be followed, the budget requirements to be analyzed and the discussions on location about
the work to be done.

Definition
According to Koontz O'Donnel - "Planning is an intellectual process, the conscious
determination of courses of action, the basing of decisions on purpose, acts and considered
estimates".

Nature and Purpose of Planning

Nature of Planning
 Planning is goal-oriented: Every plan must contribute in some positive way
towards the accomplishment of group objectives. Planning has no meaning without being
related to goals.
 Primacy of Planning: Planning is the first of the managerial functions. It
precedes all other management functions.
 Pervasiveness of Planning: Planning is found at all levels of management. Top
management looks after strategic planning.
 Middle management is in charge of administrative planning. Lower
management has to concentrate on operational planning.
  Efficiency, Economy and Accuracy: Efficiency of plan is measured by its
contribution to the objectives as economically as possible. Planning also focuses on
accurate forecasts.
 Co-ordination: Planning co-ordinates the what, who, how, where and why of
planning. Without co-ordination of all activities, we cannot have united efforts.
 Limiting Factors: A planner must recognize the limiting factors (money,
manpower etc) and formulate plans in the light of these critical factors.
 Flexibility: The process of planning should be adaptable to changing
environmental conditions.
 Planning is an intellectual process: The quality of planning will vary according
to the quality of the mind of the manager.

Purpose of Planning

 To manage by objectives: All the activities of an organization are designed to

achieve certain specified objectives. However, planning makes the objectives more
concrete by focusingattention on them.
 To offset uncertainty and change: Future is always full of uncertainties and
changes.Planning foresees the future and makes the necessary provisions for it.
 To secure economy in operation: Planning involves, the selection of most
profitable courseof action that would lead to the best result at the minimum costs.
 To help in co-ordination: Co-ordination is, indeed, the essence of
management, the planning is the base of it. Without planning it is not possible to co-
ordinate the different activitiesof an organization.
 To make control effective: The controlling function of management relates to
the comparison of the planned performance with the actual performance. In the absence
of plans, a management will have no standards for controlling other's performance.
 To increase organizational effectiveness: Mere efficiency in the organization
is not important; it should also lead to productivity and effectiveness. Planning enables
the manager to measure the organizational effectiveness in the context of the stated
objectives and take further actions in this direction.

Features of Planning
 It is primary function of management.
 It is an intellectual process
 Focuses on determining the objectives
 Involves choice and decision making
 It is a continuous process
 It is a pervasive function

Planning Process
The various steps involved in planning are given below

` Perception of Opportunities
Although preceding actual planning and therefore not strictly a part of the planning
process, awareness of an opportunity is the real starting point for planning. It includes a
preliminary look at possible future opportunities and the ability to see them clearly and
completely.
 Establishing Objectives
The first step in planning itself is to establish objectives for the entire enterprise and
then for each subordinate unit. Objectives specifying the results expected 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 network of strategies, policies, procedures, rules, budgets and programs.
Enterprise objectives should give direction to the nature of all major plans which, by
reflecting these objectives, define the objectives of major departments. Major department
objectives, in turn, control the objectives of subordinate departments, and so on down the
line.

Considering the Planning Premises

Another logical step in planning is to establish, obtain agreement to utilize and
disseminate critical planning premises. These are forecast data of a factual nature, applicable
basic policies, and existing company plans. Premises, then, are planning assumptions – in
other words, the expected environment of plans in operation. This step leads to one of the
major principles of planning. The more individuals charged with planning understand and
agree to utilize consistent planning premises, the more coordinated enterprise planning will
be. Planning premises include far more than the usual basic forecasts of population, prices,
costs, production, markets, and similar matters. Because the future environment of plans is so
complex, it would not be profitable or realistic to make assumptions about every detail of the
future environment of a plan.

Identification of alternatives
Once the organizational objectives have been clearly stated and the planning premises
have been developed, the manager should list as many available alternatives as possible for
reaching those objectives. The focus of this step is to search for and examine alternative
courses of action, especially those not immediately apparent. There is seldom a plan for
which reasonable alternatives do not exist, and quite often an alternative that is not obvious
proves to be the best. The more common problem is not finding alternatives, but reducing the
number of alternatives so that the most promising may be analyzed. Even with mathematical
techniques and the computer, there is a limit to the number of alternatives that may be
examined. It is therefore usually necessary for the planner to reduce by preliminary
examination the number of alternatives to those promising the most fruitful possibilities or by
mathematically eliminating, through the process of approximation, the least promising ones.

Evaluation of alternatives
Having sought out alternative courses and examined their strong and weak points, the
following step is to evaluate them by weighing the various factors in the light of premises and
goals. One course may appear to be the most profitable but require a large cash outlay and a
slow payback; another may be less profitable but involve less risk; still another may better
suit the company in long–range objectives. If the only objective were to examine profits in a
certain business immediately, if the future were not uncertain, if cash position and capital
availability were not worrisome, and if most factors could be reduced to definite data, this
evaluation should be relatively easy. But typical planning is replete with uncertainties,
problems of capital shortages, and intangible factors, and so evaluation is usually very
difficult, even with relatively simple problems. A company may wish to enter a new product
line primarily for purposes of prestige; the forecast of expected results may show a clear
financial loss, but the question is still open as to whether the loss is worth the gain.
 Choice of alternative plans
An evaluation of alternatives must include an evaluation of the premises on which the
alternatives are based. A manager usually finds that some premises are unreasonable and can
therefore be excluded from further consideration. This elimination process helps the manager
determine which alternative would best accomplish organizational objectives.

2.3.6 Formulating of Supporting Plans

After decisions are made and plans are set, the final step to give them meaning is to
numberize them by converting them to budgets. 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. If this process is done well, budgets
become a means of adding together the various plans and also important standards against
which planning progress can be measured.

Types of Plans / Components of Planning

In the process of planning, several plans are prepared which are known as components
of planning. Plans can be broadly classified as

Strategic plans
A strategic plan is an outline of steps designed with the goals of the entire
organization as awhole in mind, rather than with the goals of specific divisions or
departments.

Tactical plans
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. Long-term goals, on the other hand, can take
several years or more to accomplish. Normally, it is the middle manager's responsibility to
take the broad strategic plan and identify specific tactical actions.

Operational plans
The specific results expected from departments, work groups, and individuals are the
operational goals. These goals are precise and measurable. “Process 150 sales applications
each week” or “Publish 20 books this quarter” are examples of operational goals. An
operational plan is one that a manager uses to accomplish his or her job responsibilities.
Supervisors, team leaders, and facilitators develop operational plans to support tactical plans
(see the next section). Operational plans can be a single-use plan or a standing plan.

Contingency plans
Intelligent and successful management depends upon a constant pursuit of adaptation,
flexibility, and mastery of changing conditions. Strong management requires a “keeping all
options open” approach at all times — that's where contingency planning comes in.
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.

Objectives
Objectives may be defined as the goals which an organisation tries to achieve.
Objectives are described as the end- points of planning. According to Koontz and O'Donnell,
"an objective is a term commonly used to indicate the end point of a management
programme." Objectives constitute the purpose of the enterprise and without them no
intelligent planning can take place. Objectives are, therefore, the ends towards which the
activities of the enterprise are aimed. They are present not only the end-point of planning but
also the end towards which organizing, directing and controlling are aimed. Objectives
provide direction to various activities. They also serve as the benchmark of measuring the
efficiency and effectiveness of the enterprise. Objectives make every human activity
purposeful. Planning has no meaning if it is not related to certain objectives.

Features of Objectives
 The objectives must be predetermined.
 Objectives must be realistic.
 Objectives must be measurable.
 Objectives must have social sanction.
 All objectives are interconnected and mutually supportive.
 Objectives may be short-range, medium-range and long-range.
 Objectives may be constructed into a hierarchy.

Management By Objectives (MBO)

MBO was first popularized by Peter Drucker in 1954 in his book 'The practice of
Management’. It is a process of agreeing within an organization so that management and
employees buy into the objectives and understand what they are. It has a precise and written
description objectives ahead, timelines for their motoring and achievement. The employees
and manager agree to what the employee will attempt to achieve in a period ahead and the
employee will accept and buy into the objectives.

Definition
“MBO is a process whereby the superior and the mangers of an organization jointly
identify its common goals, define each individual’s major area 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
 MBO is concerned with goal setting and planning for individual managers and
their units.
 The essence of MBO is a process of joint goal setting between a supervisor
and a
subordinate.
 Managers work with their subordinates to establish the performance goals that
are
consistent with their higher organizational objectives.
 MBO focuses attention on appropriate goals and plans.
  MBO facilitates control through the periodic development and subsequent
evaluation of individual goals and plans.

Strategies
The term 'Strategy' has been adapted from war and is being increasingly used in
business to reflect broad overall objectives and policies of an enterprise. Literally speaking,
the term 'Strategy' stands for the war-art of the military general, compelling the enemy to
fight as per out chosen terms and conditions. According to Koontz and O' Donnell,
"Strategies must often denote a general programme of action and deployment of emphasis
and resources to attain comprehensive objectives". Strategies are plans made in the light of
the plans of the competitors because a modern business institution operates in a competitive
environment. They are a useful framework for guiding enterprise thinking and action. A
perfect strategy can be built only on perfect knowledge of the plans of others in the industry.
This may be done by the management of a firm putting itself in the place of a rival firm and
trying to estimate their plans. Characteristics of Strategy
 It is the right combination of different factors.
 It relates the business organization to the environment.
 It is an action to meet a particular challenge, to solve particular problems or to
attain desired objectives.
 Strategy is a means to an end and not an end in itself.
 It is formulated at the top management level.
 It involves assumption of certain calculated risks.

Types of Strategies
According to Michel Porter, the strategies can be classified into three types. They are
 Cost leadership strategy
 Differentiation strategy
 Focus strategy

Cost Leadership Strategy

This generic strategy calls for being the low cost producer in an industry for a given
level of quality. The firm sells its products either at average industry prices to earn a profit
higher than that of rivals, or below the average industry prices to gain market share. In the
event of a price war, the firm can maintain some profitability while the competition suffers
losses. Even without a price war, as the industry matures and prices decline, the firms that
can produce more cheaply will remain profitable for a longer period of time. The cost
leadership strategy usually targets a broad market. Some of the ways that firms acquire cost
advantages are by improving process efficiencies, gaining unique access to a large source of
lower cost materials, making optimal outsourcing and vertical integration decisions, or
avoiding some costs altogether. If competing firms are unable to lower their costs by a similar
amount, the firm may be able to sustain a competitive advantage based on cost leadership.

Differentiation Strategy
A differentiation strategy calls for the development of a product or service that offers
unique attributes that are valued by customers and that customers perceive to be better than or
different from the products of the competition. The value added by the uniqueness of the
product may allow the firm to charge a premium price for it. The firm hopes that the higher
price will more than cover the extra costs incurred in offering the unique product. Because of
the product's unique attributes, if suppliers increase their prices the firm may be able to pass
along the costs to its customers who cannot find substitute products easily.
 Focus Strategy
The focus strategy concentrates on a narrow segment and within that segment
attempts to achieve either a cost advantage or differentiation. The premise is that the needs of
the group can be better serviced by focusing entirely on it. A firm using a focus strategy often
enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms
from competing directly. Because of their narrow market focus, firms pursuing a focus
strategy have lower volumes and therefore less bargaining power with their suppliers.

Policies
Policies are general statements or understandings that guide managers’ thinking in
decision making. They usually do not require action but are intended to guide managers in
their commitment to the decision they ultimately make.
The essentials of policy formation may be listed as below.

 A policy should be definite, positive and clear. It should be understood by

everyone in the organization.
 A policy should be translatable into the practices.
 A policy should be flexible and at the same time have a high degree of
permanency.
 A policy should be formulated to cover all reasonable anticipatable
conditions.
 A policy should be founded upon facts and sound judgment.
 A policy should conform to economic principles, statutes and regulations.
 A policy should be a general statement of the established rule.
 Importance of Policies
 Policies are useful for the following reasons:
 They provide guides to thinking and action and provide support to the
subordinates.
 They delimit the area within which a decision is to be made.
 They save time and effort by pre-deciding problems and
 They permit delegation of authority to mangers at the lower levels.

Decision Making
The word decision has been derived from the Latin word "decidere" which means
“cutting off". Thus, decision involves cutting off of alternatives between those that are
desirable and those that are not desirable. In the words of George R. Terry, "Decision-making
is the selection based on some criteria from two or more possible alternatives".
Characteristics of Decision Making
 Decision making implies that there are various alternatives and the most
desirable alternative is chosen to solve the problem or to arrive at expected
results.
 The decision-maker has freedom to choose an alternative.
 Decision-making may not be completely rational but may be judgemental
and emotional.
 Decision-making is goal-oriented.
 Decision-making is a mental or intellectual process because the final
decision is made by the decision-maker.
 A decision may be expressed in words or may be implied from behaviour.
 Choosing from among the alternative courses of operation implies
uncertainty about the final result of each possible course of operation.
  Decision making is rational. It is taken only after a thorough analysis and
reasoning and weighing the consequences of the various alternatives.

Types of Decisions

Programmed decisions: Programmed decisions are routine and repetitive and are made
within the framework of organizational policies and rules. These policies and rules are
established well in advance to solve recurring problems in the organization. Programmed
decisions have short-run impact. They are, generally, taken at the lower level of management.

Non-Programmed Decisions: Non-programmed decisions are decisions taken to meet non-

repetitive problems. Non-programmed decisions are relevant for solving unique/ unusual
problems in which various alternatives cannot be decided in advance. A common feature of
non-programmed decisions is that they are novel and non-recurring and therefore, readymade
solutions are not available. Since these decisions are of high importance and have long-term
consequences, they are made by top level management.

Strategic and Tactical Decisions: Organizational decisions may also be classified as

strategic or tactical.

Decision Making Process

Specific Objective: The need for decision making arises in order to achieve certain
specific objectives. The starting point in any analysis of decision making involves the
determination of whether a decision needs to be made.

Problem Identification: A problem is a felt need, a question which needs a solution.

In the words of Joseph L Massie "A good decision is dependent upon the recognition
of the right problem". The objective of problem identification is that if the problem is
precisely and
specifically identifies, it will provide a clue in finding a possible solution. A problem can be
identified clearly, if managers go through diagnosis and analysis of the problem. Diagnosis:
Diagnosis is the process of identifying a problem from its signs and symptoms.

Search for Alternatives: A problem can be solved in several ways; however, all the
ways cannot be equally satisfying. Therefore, the decision maker must try to find out
the various alternatives available in order to get the most satisfactory result of a
decision. A decision maker

Evaluation of Alternatives: After the various alternatives are identified, the next step
is to evaluate them and select the one that will meet the choice criteria. /the decision
maker must check proposed alternatives against limits, and if an alternative does not
meet them, he can discard it. Having narrowed down the alternatives which require
serious consideration, the decision maker will go for evaluating how each alternative
may contribute towards the objective supposed to be achieved by implementing the
decision.

Choice of Alternative: The evaluation of various alternatives presents a clear picture

as to how each one of them contribute to the objectives under question. A
comparison is made among the likely outcomes of various alternatives and the best
one is chosen.

Action: Once the alternative is selected, it is put into action. The actual process of
decision making ends with the choice of an alternative through which the objectives
can be achieved.

Results: When the decision is put into action, it brings certain results. These results
must correspond with objectives, the starting point of decision process, if good
decision has been made and implemented properly. Thus, results provide indication
whether decision making andits implementation is proper.

Rational Decision Making Model

The Rational Decision Making Model is a model which emerges from Organizational
Behavior. The process is one that is logical and follows the orderly path from problem
identification through solution. It provides a structured and sequenced approach to decision
making. Using such an approach can help to ensure discipline and consistency is built into
your decision making process.

 Defining the problem: This is the initial step of the rational decision making
process. First the problem is identied and then defined to get a clear view of
the situation.

 Identify decision criteria: Once a decision maker has defined the problem, he
or she needs to identify the decision criteria that will be important in
solving the problem. In this step, the decision maker is determining what’s
relevant in making the decision.This step brings the decision maker’s
interests, values, and personal preferences into the process.

 Weight the criteria: The decision-maker weights the previously identified

criteria in order to give them correct priority in the decision.
  Generate alternatives: The decision maker generates possible alternatives that
could succeed in resolving the problem. No attempt is made in this step to
appraise these alternatives, only to list them.

 Rate each alternative on each criterion: The decision maker must critically
analyze and evaluate each one. The strengths and weakness of each
alternative become evident as they compared with the criteria and weights
established in second and third steps.

 Compute the optimal decision: Evaluating each alternative against the

weighted criteria and selecting the alternative with thehighest total score.

Decision Making Under Various Conditions

The conditions for making decisions can be divided into three types. Namely a)
Certainty, b) Uncertainty and c) Risk

a) Certainty: In a situation involving certainty, people are reasonably sure about what will
happen when they make a decision. The information is available and is considered to be
reliable, and the cause and effect relationships are known.

b) Uncertainty: In a situation of uncertainty, on the other hand, people have only a meager
database, they do not know whether or not the data are reliable, and they are very unsure
about whether or not the situation may change. Moreover, they cannot evaluate the
interactions of the different variables. For example, a corporation that decides to expand its
Operation to an unfamiliar country may know little about the country, culture, laws,
economic environment, and politics. The political situation may be volatile that even experts
cannot predict a possible change in government.

c) Risk: In a situation with risks, factual information may exist, but it may be incomplete. 1o
improve decision making One may estimate the objective probability of an outcome by using,
for example, mathematical models On the other hand, subjective probability, based on
judgment and experience may be used All intelligent decision makers dealing with
uncertainty like to know the degree and nature of the risk they are taking in choosing a course
of action. One of the deficiencies in using the traditional approaches of operations research
for problem solving is that many of the data used in model are merely estimates and others
are based on probabilities. The ordinary practice is to have staff specialists conic up with best
estimates.
 UNIT III
ORGANIZING
Introduction
Organizing is the function of management which follows planning. It is a function in
which the synchronization and combination of human, physical and financial resources takes
place. All the three resources are important to get results. Therefore, organizational function
helps in achievement of results which in fact is important for the functioning of a concern.
According to Chester Barnard, “Organizing is a function by which the concern is able
to define the role positions, the jobs related and the co-ordination between authority and
responsibility. Hence, a manager always has to organize in order to get results.

Pre Requisite Discussion

The students should be familiar with the tasks to be considered for organizing every
events that needed to be executed for the development of the organization.

Definition
According to Koontz and O'Donnell, "Organization involves the grouping of activities
necessary to accomplish goals and plans, the assignment of these activities to appropriate
departments and the provision of authority, delegation and co-ordination." Organization
involves division of work among people whose efforts must be co-ordinated to achieve
specific objectives and to implement pre-determined strategies.

Nature or Characteristics of Organizing

From the study of the various definitions given by different management experts we
get the following information about the characteristics or nature of organization,

Division of Work: Division of work is the basis of an organization. In other words,

there can be no organization without division of work. Under division of work the
entire work of business is divided into many departments .The work of every
department is further sub-divided into sub works. In this way each individual has to
do the saran work repeatedly which gradually makesthat person an expert.

Coordination: Under organizing different persons are assigned different works but
the aim of all these persons happens to be the some - the attainment of the objectives
of the enterprise. Organization ensures that the work of all the persons depends on
each other’s work even though it happens to be different.

Plurality of Persons: Organization is a group of many persons who assemble to

fulfill a common purpose. A single individual cannot create an organization.

Common Objectives: There are various parts of an organization with different

functions to perform but all move in the direction of achieving a general objective.

Well-defined Authority and Responsibility: Under organization a chain is

established between different posts right from the top to the bottom. It is clearly
specified as to what will be the authority and responsibility of every post. In other
words, every individual working in the organization is given some authority for the
efficient work performance and it is also decided simultaneously as to what will be
the responsibility of that individual in caseof unsatisfactory work performance.
 Organization is a Structure of Relationship: Relationship between persons working
on different posts in the organization is decided. In other words, it is decided as to
who will be the superior and who will be the subordinate. Leaving the top level post
and the lowest level post everybody is somebody's superior and somebody's
subordinate.

Organization is a Machine of Management: Organization is considered to be a

machine of management because the efficiency of all the functions depends on an
effective organization. In the absence of organization no function can be performed in
a planned manner.

Organization is a Universal Process: Organization is needed both in business and

non businessorganizations. Not only this, organization will be needed where two or
mom than two people work jointly. Therefore, organization has the quality of
universality.

Organization is a Dynamic Process: Organization is related to people and the

knowledge and experience of the people undergo a change. The impact of this change
affects the various functions of the organizations. Thus, organization is not a process
that can be decided for all times to come butit undergoes changes according to the
needs. The example in this case can be the creation or abolition of a new post
according to the need.

Organizing Process
Organization is the process of establishing relationship among the members of the
enterprise. The relationships are created in terms of authority and responsibility. To organize
is to harmonize, coordinate or arrange in a logical and orderly manner. Each member in the
organization is assigned a specific responsibility or duty to perform and is granted the
corresponding authority to perform his duty. The managerial function of organizing consists
in making a rational division of work into groups of activities and tying together the positions
representing grouping of activities so as to achieve a rational, well coordinated and orderly
structure for the accomplishment of work. According to Louis A Allen, "Organizing involves
identification and grouping the activities to be performed and dividing them among the
individuals and creating authority and responsibility relationships among them for the
accomplishment of organizational objectives."

Organization Structure
An organization structure is a framework that allots a particular space for a particular
department or an individual and shows its relationship to the other. An organization structure
shows the authority and responsibility relationships between the various positions in the
organization by showing who reports to whom. It is an established pattern of relationship
among the components of the organization. March and Simon have stated that-"Organization
structure consists simply of those aspects of pattern of behaviour in the organization that are
relatively stable and change only slowly." The structure of an organization is generally shown
on an organization chart. It shows the authority
and responsibility relationships between various positions in the organization while designing
the organization structure, due attention should be given to the principles of sound
organization.
Significance of Organization Structure

 Properly designed organization can help improve teamwork and productivity

by providing a framework within which the people can work together most
effectively.
 Organization structure determines the location of decision-making in the
organization.
 Sound organization structure stimulates creative thinking and initiative among
organizational members by providing well defined patterns of authority.
 A sound organization structure facilitates growth of enterprise by increasing
its capacity to handle increased level of authority.
 Organization structure provides the pattern of communication and
coordination.
 The organization structure helps a member to know what his role is and how it
relates to other roles.

Principles of Organization Structure

Modern organizational structures have evolved from several organizational theories,
which have identified certain principles as basic to any organization structure.

Line and Staff Relationships:

Line authority refers to the scalar chain, or to the superior-subordinate linkages, that
extend throughout the hierarchy (Koontz, O'Donnell and Weihrich). Line employees are
responsible for achieving the basic or strategic objectives of the organization, while staff
plays a supporting role to line employees and provides services. The relationship between
line and staff is crucial in organizational structure, design and efficiency. It is also an
important aid to information processing and coordination.

Departmentalization:
Departmentalization is a process of horizontal clustering of different types of
functions and activities on any one level of the hierarchy. Departmentalization is
conventionally based on purpose, product, process, function, personal things and place.

Span of Control:
This refers to the number of specialized activities or individuals supervised by one
person. Deciding the span of control is important for coordinating different types of activities
effectively.

De-centralization and Centralization:

De-centralization refers to decision making at lower levels in the hierarchy of
authority. In contrast, decision making in a centralized type of organizational structure is at
higher levels. Every organizational structure contains both centralization and de-
centralization, but to varying degrees. The extent of this can be determined by identifying
how much of the decision making is concentrated at the top and how much is delegated to
lower levels. Modern organizational structures show a strong tendency towards de-
centralization.

Formal and Informal Organization

The formal organization refers to the structure of jobs and positions with clearly
defined functions and relationships as prescribed by the top management. This type of
 organization is built by the management to realize objectives of an enterprise and is bound by
rules, systems and procedures. Informal organization, which does not appear on the
organization chart, supplements the formal organization in achieving organizational goals
effectively and efficiently. The working of informal groups and leaders is not as simple as it
may appear to be. Therefore, it is obligatory for every manager to study thoroughly the
working pattern of informal relationships in the organization and to use them for achieving
organizational objectives.

Formal Organization
Chester I Bernard defines formal organization as -"a system of consciously
coordinated activities or forces of two or more persons. It refers to the structure of well-
defined jobs, each bearing a definite measure of authority, responsibility and accountability."

(i) Are able to communicate with each other

(ii) Are willing to act and
(iii) Share a purpose.
The formal organization is built around four key pillars. They are:

 Division of labour
 Scalar and functional processes
 Structure and
 Span of control

3.6.7 Informal Organization

Informal organization refers to the relationship between people in the organization
basedon personal attitudes, emotions, prejudices, likes, dislikes etc. an informal organization
is an organization which is not established by any formal authority, but arises from the
personal and social relations of the people. These relations are not developed according to
procedures and regulations laid down in the formal organization structure; generally large
formal groups give rise to small informal or social groups.
Organisational Structures
Forms of Organisational Structure: Line , Functional, and Line and Staff
Organisation
Forms of Organisational Structure: Line , Functional, and Line and Staff
Organisation (with respective advantages and disadvantages)
The adoption of a particular form of organisational structure largely depends upon
the nature, scale and size of the business. The organisational structure is primarily
concerned with the allocation of activities or tasks and delegation of authority.

1. Line Organisation:
Line organisation is the simplest and the oldest type of organisation. It is also
known as scalar organisation or military type of organisation. In the words of J.M.
Lundy, “It is characterized by direct lines of authority flowing from the top to the
bottom of the organizational hierarchy and lines of responsibility flowing in an
opposite but equally direct manner.”
An important characteristic of such type of organisation is superior-subordinate
relationship. Superior delegates authority to another subordinate and so on,
forming a line from the very top to the bottom of the organisation structure. The
line of authority so established is referred as “line authority.” Under this type of
organisation authority flows downwards, responsibility moves upwards in a
straight line. Scalar principle and unity of command are strictly followed in line
organisation.

This type of organisation resembles with the army administration or military type
of organisation. As in case of military, commander-in-chief holds the top most
position and has the entire control over the army of the country, which in turn is
developed into main area commands under major-generals.

Each area has brigade under brigadier-generals, each brigade is fabricated into
regiments under its colonels, each regiment into battalions under majors, each
battalion into companies under captains, each company sub-divided under its
lieutenants and so on drawn to corporal with his squad.

Types of line organization:

Line organisation is of two type’s viz. (a) Simple or Pure Line Organisation (b)
Departmental Line Organisation

(a) Simple or Pure Line Organisation:In the ‘Pure Line organisation’ the activities
(at any level of management) are the same with each man performing the same
type of work and the divisions primarily exist for the purpose of control and
direction. In practice, such type of organisation rarely exists.

The following diagram shows the pure line organisation:

In this type of organisation all the workers perform the same type of work. The
departmental divisions are made only for the sake of convenience of supervision
and management.
(b) Departmental line organisation:
Under this type of organisation, an organisation is divided into various departments
headed by different departmental heads. All the departments operate under the
ultimate control of general manager. The orders flow directly from the general
manager to all the departmental heads that in turn pass on to their respective
subordinates.

Likewise, the subordinates, intern, communicate the orders to the workers under
them. The various departmental heads will be perfectly independent of each other
and they will enjoy equal status the central idea, in the formation of such
departments is not similarly or dis-similarity of functions or activities, but unity of
control and line authority and responsibility from the top of the organisation to the
bottom.

Suitability of line organization:

The line organisation can be successfully followed where (a) scale of operations is
limited or business is on small scale basis, (b) work is simple and routine in nature,
(c) business is being done in continuous type of industries like oil refining, sugar,
spinning and weaving etc., (d) the labour management problems are not complex
and can be easily resolved, (e) the machinery is automatic, and (J) the workers are
disciplined.

Characteristics of line organization:

The main features of line organisation are as follows:
1. Orders and instructions flow from top to the bottom, whereas requests and
suggestions move from bottom to top.

2. The principle of unity of command is the most salient feature of this type of
organisation. In simple words, the orders are received by the subordinates from one
boss.

3. The subordinates are accountable to their immediate superior.

4. There are limited numbers of subordinates under one superior.

5. This is simple to operate and control.

6. Co-ordination can be easily achieved.

Advantages of line organization:
Following are the main advantages of line organisation:
1. Simplicity:
It is very simple to establish and operate. It can be easily understood by the
employees.

2. Fixed responsibility:
Duties and responsibilities are clearly defined for each individual with reference to
the work assigned to him. As a result everybody knows to whom he is responsible
and who are responsible to him. Nobody can avoid responsibility.

3. Discipline:
This type of organisation ensures better discipline in the enterprise. Singleness of
responsibilities facilitates discipline in the organisation. The workers at the lower
levels will be more loyal and responsible to one single boss rather than to a number
of bosses.

4. Flexibility:
It is flexible in the sense that it is subject to quick adjustments to suit to changing
conditions. In the words of Wheeler, “It permits rapid and orderly decisions in
meeting problems at various levels of organisation”. In simple words, it is more
adaptive to the changed circumstances.

5. Co-ordination:
It helps to achieve effective co- ordination. All the activities pertaining to single
department are controlled by one person.

6. Direct communication:
As there will be direct communication between the superior and the subordinates at
different levels it would be helpful in achieving promptness in performance.
7. Unity of command:
Every worker is accountable to one boss in the department under this type of
organisation. In this manner it is in accordance with the principle of unity of
command.
8. Economical:
It is not complex and expensive. It is simple and economical in operation. It does
not need any expert and specialised personnel.

9. Quick decisions:
On account of its simple operation and unified control and responsibility, decisions
can be taken promptly. The process of decision-making is further quickened as the
decision is taken by one person.

10. Executive development:

Under this organisation, the department head is fully responsible for every activity
in his department. He discharges his responsibilities in an efficient manner. He
comes across many problems and obstacles in performing his duties.

This provides him an ample opportunity to enhance his capabilities and

organisational abilities and is greatly helpful in his overall development and
performance.

Disadvantages of line organization:

Following are the main drawbacks of line organisation:
1. Overloading:
The main disadvantage of this system is that it tends to overload the existing
executive with too many responsibilities. The work may not be performed
effectively on account of innumerable tasks before the single executive.

2. Lack of specialization:
Absence of managerial specialisation is the major drawback of this system. On
account of many functions and complexities it is very difficult for a single
individual to control all the matters effectively.
The executive may not be expert in all aspects of managerial activities. The burden
of responsibilities on the shoulders of the manager can crush him under the heavy
workload.

3. Scope for favoritisms:

There may be a good deal of favouritism and nepotism under this type of
organization. As the concerned officer will judge the performance of the persons at
work according to his own norms, it is possible that efficient people may be left
behind and inefficient or ‘yes men’ may get higher and better posts.

4. Lack of co-ordination:
In reality it is very difficult to achieve proper coordination among various
departments operating in an organisation. This is because each departmental
manager or head carries the functioning of his department in accordance with the
ways and means suitable to him.

This leads to lack of uniformity in operation among various departments which is

detrimental in achieving proper coordination in the overall functioning of the
various departments operating in the organisation.

5. Lack of initiative:
Under line organization, ultimate authority lies in the hands of top management
and departmental managers or heads have little powers. This adversely affects their
initiative and enthusiasm to motivate the subordinates working under them.

6. Lack of communication from lower ranks:

Under line organisation suggestions move from down to upwards the superiors
usually do not pay attention to suggestions sent by lower ranks. This leads to
inadequacy of communication from subordinates to superiors.

2. Functional Organisation:
F.W. Taylor, who is better known as the father of scientific management
developed the concept of ‘Functional Organisation’. As the very name suggests,
functional organisation implies that the organisation should be based on various
functions. Taylor’s functional approach is mainly based on principle of
specialization and tries to bring about organisational balance.

The principle of specialisation embodies the concept that both the workers and the
supervisors can develop a higher degree of proficiency by separating the manual
from the mental requirements. Taylor recommended that there should be
functionalisation even at the shop level where workers have to produce goods. He
felt that the usual practice of putting one foreman incharge of some 40 to 50
workers should be avoided.

Taylor’s concept of Functional Foremanship (as he puts it), is a system comprising

of eight different foremen discharging different functions. Every worker in the
organisation is directly connected with these foremen.
The eight specialist foremen are:
(a) Route Clerk, (b) Instructions Card Clerk, (c) Time and Cost Clerk, (d) Shop
Disciplinarian, (e) Gang Boss, (f) Speed Boss, (g) Repair Boss, and (h) Inspector.
The first four bosses operate from Planning Department, whereas the other four are
known as Executive Functional Bosses. They function in the production
department.

A brief explanation of these eight functional foremen is given below:

(a) Route clerk:
He lays down the exact path or route to be followed by raw material transforming
it into finished product.

(b) Instruction card clerk:

He prepares detailed instructions to be followed in doing the work as per the route
laid down by the route clerk.

(c) Time and cost clerk:

He determines the total time to be taken in the completion of a product and also
works out the cost of production per unit and total cost. He prepares various work
schedules and cost sheets in order to have proper control over time and cost
incurred in producing goods.

(D) Shop disciplinarian:

He is responsible for maintaining proper discipline in the organisation. In fact, he
is the guardian of orderliness in the factory. In the words of Kimball and Kimball
Jr. “The shop disciplinarian is responsible for discipline and good order, fie is also
the peacemaker and assists in adjusting wages.”

He is helpful in resolving minor disputes regarding wages, holidays, working

conditions and hours of work etc. He initiates a proper code of conduct in the
organisation.

(e) Gang boss:

He makes the availability of different machines and tools required by workers to
carry out their work. He also provides various production designs, drawings, raw
materials etc.
(f) Speed boss:
He controls the speed of different machines operating in the organisation. He
sometimes demonstrates the workers the proper speed with which the machines
should operate. He undertakes proper supervision over speed of machines.

(g) Repair boss:

He is concerned with proper maintenance and repairs of machines for keeping
them in working order. In the words of Spriegel, “His job of maintenance includes
cleaning the machine, keeping it free from rust and scratches, oiling it properly and
preserving the standards which have been set up for the auxiliary equipment
connected with the machine such as belts, counter shafts and clutches.” His main
task is to undertake immediate repair of the defective machines so that the work
may not suffer.

(h )Inspector:
He checks and certifies the quality of work i.e., whether or not it is up to pre-
determined standards. Achievement of pre-set standards is confirmed by the
inspector. He develops the feeling of quality consciousness among the workers. In
order to carry out his job effectively, an inspector must possess proper knowledge
and the technicalities involved in quality control.

The following diagram shows Taylor’s Functional Foremanship:

While developing the concept of Functional Foremanship, F.W. Taylor suggested

that it is unscientific to overload a foreman with entire responsibility of running a
department. He advocated that direction of work should be decided by functions
and not be mere authority.He thought that to be successful in performing his duties
a foreman should possess various qualities viz., education, special or technical
knowledge, manual dexterity or strength, tact, energy, honesty, common sense and
good health”.

Spriegel has nicely explained Functional Organization. “Each worker, instead of

coming into contact with one superior, would receive his orders from a group of
specialised supervisors, each of whom performs a particular function.”

Functional organisation also operates at higher level of management. The whole

work in the organisation is divided in various departments. Similar type of work
and transactions are put in one department under the control of a departmental
manager or head. Various departments are also known as functional areas of
management viz., Purchases, Sales, Finance, Production, and Personnel etc. The
respective managers of these departments will be responsible for carrying out
various activities of their departments in the organisation.

For example, marketing manager will be responsible for carrying out marketing
activities and personnel manager will be responsible for looking after the personnel
matters in all the departments of the organisation.

The underlying idea of functional organisation at the top level of management is

that a subordinate anywhere in the organization will be controlled and commanded
directly by number of managers operating in different departments.

Advantages of functional organisation. Following are the main benefits derived

from functional organisation:
1. Specialisation:
This system derives the benefits of specialisation. As every functional incharge is
an expert in his area, he will guide using his specialisation and with the help of the
subordinates, try to attain the specified objectives.

2. Increased efficiency:
This type of organisation ensures enhanced efficiency as the workers operate under
the expert and competent personnel and perform limited operations.

3. Limited duties:
The functional foremen have to carry out the limited number of duties concerning
their area of work. This considerably reduces the burden of work and makes
possible for the foreman to carry out the work in the best possible manner.

4. Scope for expansion:

Functional organisation offers a great scope for expansion of business enterprise
without any dislocation and loss of efficiency as each man grows on account of his
own speciality.

5. Flexibility:
It is flexible pattern of organisation. A change in organisation can be made without
disturbing the whole organisation. In the words of Louis A. Allen, “Function as a
whole can he cut by eliminating positions at the lower levels without seriously
affecting its total performance.”

Disadvantages of Functional Organization:

Despite the above advantages, this type of organization suffers from the following
disadvantages:

1. Conflict in authority:
The authority relationship violates the principle of ‘unity of command’. It creates
several bosses instead of one line authority. It leads to conflict and confusion in the
minds of the workers to whom they should obey and whom they should ignore.

2. Difficulty in pinpointing responsibility:

On account of the non-application of the principle of ‘unity of control’, it is very
difficult for the top management to fix the responsibility of a particular foreman.
There arises a tendency for shirking of responsibility.

3. Expensive:
This pattern of organisation is quite impracticable and expensive. Multiplicity of
experts increases the overhead expenditure. The small organisations cannot afford
to install such a system.

4. Discipline is slackened:Discipline among the workers as well as lower

supervisory staff is difficult to maintain as they are required to work under
different bosses and this may hamper the progress of the organisation.

5. Lack of co-ordination:
Appointment of several experts in the organisation creates the problem of co-
ordination and delay in decision-making especially when a decision requires the
involvement of more than one specialist.

3. Line and Staff Organisation:

The line and staff organisation is an improvement over the above mentioned
two systemsviz, line organisation and functional organisation. The line
organisation concentrates too much on control whereas the functional system
divides the control too much.
The need was, therefore, for a system that will ensure a proper balance between the
two. The need has been fulfilled by line and staff organisation. The system like line
organisation also owes its birth to army.

The commanders in the field who are line officers are assisted by the staff that
helps them in formulating strategies and plans by supplying valuable information.
Similarly in organisation, line officers get the advice of the staff which is very
helpful in carrying on the task in an efficient manner. However, staff’s role is
advisory in nature. Line officers are usually assisted by staff officers in effectively
solving various business problems.

The staff is usually of three types viz:

(a) Personal Staff:
This includes the personal staff attached to Line Officers. For example, personal
assistant to general manager, secretary to manager etc. The personal staff renders
valuable advice and assistance to Line Officers.

(b) Specialized Staff:

This category includes various experts possessing specialised knowledge in
different fields like accounting, personnel, law, marketing, etc. They render
specialised service to the organisation.
For example, a company may engage a lawyer for rendering legal advice on
different legal matters. Similarly, it may engage a chartered accountant and a cost
accountant for tackling accounting problems.

(c) General Staff:

This comprises of various experts in different areas who render valuable advice to
the top management on different matters requiring expert advice.

Advantages of Line and Staff Organization

Important advantages of Line and Staff Organisation are:
1. Specialisation:
This type of organisation is based on planned specialisation and brings about the
expert knowledge for the benefit of the management.

2. Better decisions:
Staff specialists help the line manager in taking better decisions by providing them
adequate information of right type at right time.

3. Lesser Burden on line officers:The work of the line officers is considerably

reduced with the help of staff officers. Technical problems and specialised matters
are handled by the Staff and the routine and administrative matters are the concern
of Line Officers.
4. Advancement of research:
As the work under this type of organisation is carried out by experts, they
constantly undertake the research and experimentation for the improvement of the
product. New and economical means of production are developed with the help of
research and experimentation.

5. Training for line officer:

Staff services have proved to be an excellent training medium for Line Officers.

Disadvantages of Line and Staff Organisation:

1. Conflict between line and staff authorities:
There may be chances of conflict between line and staff authorities. Line Officers
resent the activities of staff members on the plea that they do not always give
correct advice. On other hand staff officials complain that their advice is not
properly carried out.

2. Problems of line and staff authority:

There may be confusion on the relationship of line and staff authorities. Line
Officers consider themselves superior to Staff Officers. The Staff Officers object to
it.

3. Lack of responsibility:
As the staff specialists are not accountable for the results, they may not perform
their duties well.

4. The system is quite expensive:

The appointment of experts involves a heavy expenditure. Small and medium size
organisations cannot afford such a system.

5. More reliance on staff:

Some of the line officers excessively rely on the staff. This may considerably
reduce the line control.
 Line and Staff Authority
In an organization, the line authority flows from top to bottom and the staff authority
is exercised by the specialists over the line managers who advise them on important matters.
These specialists stand ready with their specialty to serve line mangers as and when their
services are called for, to collect information and to give help which will enable the line
officials to carry out their activities better. The staff officers do not have any power of
command in the organization as they are employed to provide expert advice to the line
officers. The 'line' maintains discipline and stability; the 'staff' provides expert information.
The line gets out the production, the staffs carries on the research, planning, scheduling,
establishing of standards and recording of performance. The authority by which the staff
performs these functions is delegated by the line and the performance must be acceptable to
the line before action is taken.

Departmentation by Different Strategies

Departmentation
Departmentation is the process of grouping of work activities into departments,
divisions, and other homogenous units. Key Factors in Departmentation
 It should facilitate control.
  It should ensure proper coordination.
 It should take into consideration the benefits of specialization.
 It should not result in excess cost.
 It should give due consideration to Human Aspects.
Departmentation takes place in various patterns like departmentation by functions,
products,customers, geographic location, process, and its combinations.

Functional Departmentation
Functional departmentation is the process of grouping activities by functions
performed.
Activities can be grouped according to function (work being done) to pursue economies of
scale
by placing employees with shared skills and knowledge into departments for example human
resources, finance, production, and marketing. Functional departmentation can be used in all
types of organizations.

Product Departmentation
Product departmentation is the process of grouping activities by product line. Tasks
can also be grouped according to a specific product or service, thus placing all activities
related to the product or the service under one manager. Each major product area in the
corporation is under the authority of a senior manager who is specialist in, and is responsible
for, everything related to the product line. Dabur India Limited is the India’s largest
Ayurvedic medicine manufacturer is an example of company that uses product
departmentation.

Customer Departmentation
Customer departmentation is the process of grouping activities on the basis of
common customers or types of customers. Jobs may be grouped according to the type of
customer served by the organization. The assumption is that customers in each department
have a common set of problems and needs that can best be met by specialists. UCO is the one
of the largest commercial banks of India is an example of company that uses customer
departmentation. Its structure is based on various services which includes Home loans,
Business loans, Vehicle loans and Educational loans.

Geographic Departmentation
Geographic departmentation is the process of grouping activities on the basis of
territory. If an organization's customers are geographically dispersed, it can group jobs based
on geography. For example, the organization structure of Coca-Cola Ltd has reflected the
company’s operation in various geographic areas such as Central North American group,
Western North American group, Eastern North American group and European group.

Process Departmentation
Geographic departmentation is the process of grouping activities on the basis of
product or service or customer flow. Because each process requires different skills, process
departmentation allows homogenous activities to be categorized. For example, Bowater
Thunder Bay, a Canadian company that harvests trees and processes wood into newsprint and
pulp. Bowater has three divisions namely tree cutting, chemical processing, and finishing
(which makes newsprint).
 Martix Departmentation
In actual practice, no single pattern of grouping activities is applied in the
organization structure with all its levels. Different bases are used in different segments of the
enterprise. Composite or hybrid method forms the common basis for classifying activities
rather than one particular method,. One of the mixed forms of organization is referred to as
matrix or grid organization’s According to the situations, the patterns of Organizing varies
from case to case. The form of structure must reflect the tasks, goals and technology if the
originations the type of people employed and the environmental conditions that it faces. It is
not unusual to see firms that utilize the function and project organization combination. The
same is true for process and project as well as other combinations. For instance, a large
hospital could have an accounting department, surgery department, marketing department,
and a satellite center project team that make up its organizational structure.

Span of Control
Span of Control means the number of subordinates that can be managed efficiently
and effectively by a superior in an organization. It suggests how the relations are designed
between a superior and a subordinate in an organization.Span of control is of two types:
 Narrow span of control: Narrow Span of control means a single manager or
supervisor oversees few subordinates. This gives rise to a tall organizational
structure.
 Wide span of control: Wide span of control means a single manager or
supervisor oversees a large number of subordinates. This gives rise to a flat
organizational structure.

Centralization and Decentralization

Centralization
It is the process of transferring and assigning decision-making authority to higher
levels of an organizational hierarchy. The span of control of top managers is relatively broad,
and there are relatively many tiers in the organization.

Decentralization:
It is the process of transferring and assigning decision-making authority to lower
levels of an organizational hierarchy. The span of control of top managers is relatively small,
and there are relatively few tears in the organization, because there is more autonomy in the
lower ranks.

Delegation of Authority
A manager alone cannot perform all the tasks assigned to him. In order to meet the
targets, the manager should delegate authority. Delegation of Authority means division of
authority and powers downwards to the subordinate. Delegation is about entrusting someone
else to do parts of your job. Delegation of authority can be defined as subdivision and sub
allocation of powers to the subordinates in order to achieve effective results.

Delegation Process
The steps involved in delegation ,
1. Allocation of duties – The delegator first tries to define the task and duties to the
subordinate. He also has to define the result expected from the subordinates. Clarity of duty
as well as result expected has to be the first step in delegation.
 2. Granting of authority – Subdivision of authority takes place when a superior
divides and shares his authority with the subordinate. It is for this reason; every subordinate
should be given enough independence to carry the task given to him by his superiors. The
managers at all levels delegate authority and power which is attached to their job positions.
The subdivision of powers is very important to get effective results.

3. Assigning of Responsibility and Accountability – The delegation process does not

end once powers are granted to the subordinates. They at the same time have to be obligatory
towards the duties assigned to them. Responsibility is said to be the factor or obligation of an
individual to carry out his duties in best of his ability as per the directions of superior.
Therefore, it is that which gives effectiveness to authority. At the same time, responsibility is
absolute and cannot be shifted.

4. Creation of accountability – Accountability, on the others hand, is the obligation of

the individual to carry out his duties as per the standards of performance. Therefore, it is said
that authority is delegated, responsibility is created and accountability is imposed.
Accountability arises out of responsibility and responsibility arises out of authority.
Therefore, it becomes important that with every authority position an equal and opposite
responsibility should be attached. Therefore every manager, i.e., the delegator has to follow a
system to finish up the delegation process. Equally important is the delegatee’s role which
means his responsibility and accountability is attached with the authority over to here.

Staffing
Staffing involves filling the positions needed in the organization structure by
appointing competent and qualified persons for the job. The staffing process encompasses
man power planning, recruitment, selection, and training.

Manpower requirements: Manpower Planning which is also called as Human

Resource Planning consists of putting right number of people, right kind of people at
the right place, right time, doing the right things for which they are suited for the
achievement of goals of the organization. The primary function of man power
planning is to analyze and evaluate the human resources available in the
organization, and to determine how to obtain the kinds of personnel needed to staff
positions ranging from assembly line workers to chief executives.

Recruitment: Recruitment is the process of finding and attempting to attract job

candidates who are capable of effectively filling job vacancies. Job descriptions and
job specifications are important in the recruiting process because they specify the
nature of the job and the qualifications required of job candidates.

Selection: Selecting a suitable candidate can be the biggest challenge for any
organization. The success of an organization largely depends on its staff. Selection of
the right candidate builds the foundation of any organization's success and helps in
reducing turnovers.

Training and Development: Training and Development is a planned effort to

facilitate employee learning of jobrelated behaviors in order to improve employee
performance. Experts sometimes distinguish between the terms “training” and
“development”; “training” denotes efforts to increase employee skills on present jobs,
while “development” refers to efforts oriented toward improvements relevant to
future jobs. In
practice, though, the distinction is often blurred (mainly because upgrading skills in present
jobs usually improves performance in future jobs).

Selection Process
Selecting a suitable candidate can be the biggest challenge for any organisation. The
success of an organization largely depends on its staff. Selection of the right candidate builds
the foundation of any organization's success and helps in reducing turnovers.

Initial Screening
This is generally the starting point of any employee selection process. Initial
Screening eliminates unqualified applicants and helps save time. Applications received from
various sources are scrutinized and irrelevant ones are discarded.

Preliminary Interview
It is used to eliminate those candidates who do not meet the minimum eligibility
criteria laid
down by the organization. The skills, academic and family background, competencies and
interests of the candidate are examined during preliminary interview. Preliminary interviews
are less formalized and planned than the final interviews. The candidates are given a brief up
about the company and the job profile; and it is also examined how much the candidate
knows about the company. Preliminary interviews are also called screening interviews.

Filling Application Form

An candidate who passes the preliminary interview and is found to be eligible for the
job is asked to fill in a formal application form. Such a form is designed in a way that it
records the personal as well professional details of the candidates such as age, qualifications,
reason for leaving previous job, experience, etc.

Personal Interview
Most employers believe that the personal interview is very important. It helps them in
obtaining more information about the prospective employee. It also helps them in interacting
with the candidate and judging his communication abilities, his ease of handling pressure etc.
In some Companies, the selection process comprises only of the Interview.

References check
Most application forms include a section that requires prospective candidates to put
down names of a few references. References can be classified into - former employer, former
customers, business references, reputable persons. Such references are contacted to get a
feedback on the person in question including his behaviour, skills, conduct etc.

Background Verification
A background check is a review of a person's commercial, criminal and (occasionally)
financial records. Employers often perform background checks on employers or candidates
for employment to confirm information given in a job application, verify a person's identity,
or ensure that the individual does not have a history of criminal activity, etc., that could be an
issue upon employment.

Final Interview
Final interview is a process in which a potential employee is evaluated by an
employer for prospective employment in their organization. During this process, the
employer hopes to determine whether or not the applicant is suitable for the job. Different
types of tests are conducted to evaluate the capabilities of an applicant, his behaviour, special
qualities etc. Separate tests are conducted for various types of jobs.

Physical Examination
If all goes well, then at this stage, a physical examination is conducted to make sure
that the candidate has sound health and does not suffer from any serious ailment.

Career Development
Career development not only improves job performance but also brings about the
growth of the personality. Individuals not only mature regarding their potential capacities but
also become better individuals.

Purpose of development
Management development attempts to improve managerial performance by imparting
 Knowledge
 Changing attitudes
 Increasing skills
The major objective of development is managerial effectiveness through a planned
and a deliberate process of learning. This provides for a planned growth of managers to meet
the future organizational needs.

Career Stages
Four distinct career stages have been identified: trial, establishment/advancement,
mid-career, and late career. Each stage represents different career needs and interests of the
individual

Trial stage
The trial stage begins with an individual's exploration of career-related matters and
ends usually at about age 25 with a commitment on the part of the individual to a particular
occupation. Until the decision is made to settle down, the individual may try a number of jobs
and a number of organizations. Unfortunately for many organizations, this trial and
exploration stage results in high level of turnover among new employees. Employees in this
stage need opportunities for self-exploration and a variety of job activities or assignments.

Establishment Stage
The establishment/advancement stage tends to occur between ages 25 and 44. In this
stage, the individual has made his or her career choice and is concerned with achievement,
performance, and advancement. This stage is marked by high employee productivity and
career growth, as the individual is motivated to succeed in the organization and in his or her
chosen occupation. Opportunities for job challenge and use of special competencies are
desired in this stage. The employee strives for creativity and innovation through new job
assignments. Employees also need a certain degree of autonomy in this stage so that they can
experience feelings of individual achievement and personal success.

Mid Career Crisis Sub Stage

The period occurring between the mid-thirties and mid-forties during which people
often make a major reassessment of their progress relative to their original career ambitions
and goals.
 Maintenance stage
The mid-career stage, which occurs roughly between the ages 45 and 64, has also
been referred to as the maintenance stage. This stage is typified by a continuation of
established patterns of work behaviour. The person is no longer trying to establish a place for
him or herself in the organization, but seeks to maintain his or her position. This stage is
viewed as a mid-career plateau in which little new ground is broken. The individual in this
stage may need some technical updating in his or her field. The employee should be
encouraged to develop new job skills in order to avoid early stagnation and decline.

Late-career stage
In this stage the career lessens in importance and the employee plans for retirement
and seeks to develop a sense of identity outside the work environment.

Training
Training is a process of learning a sequence of programmed behaviour. It improves
the employee's performance on the current job and prepares them for an intended job.

Purpose of Training:
 To improve Productivity: Training leads to increased operational
productivity and increased company profit.
 To improve Quality: Better trained workers are less likely to make
operational mistakes.
 To improve Organizational Climate: Training leads to improved production
and product quality which enhances financial incentives. This in turn
increases the overall morale of the organization.
 To increase Health and Safety: Proper training prevents industrial accidents.
 Personal Growth: Training gives employees a wider awareness, an enlarged
skill base and that leads to enhanced personal growth.

Training Methods
Training methods can be broadly classified as on-the-job training and off-the-job
training

a) On-the-job training
On the job training occurs when workers pick up skills whilst working
alongside experienced workers at their place of work. For example this could be the actual
assembly line or offices where the employee works.

b) Off-the-job training
This occurs when workers are taken away from their place of work to be
trained. This may take place at training agency or local college, although many larger firms
also have their own training centres.

Performance Appraisal
Performance appraisal is the process of obtaining, analyzing and recording
information about the relative worth of an employee. The focus of the performance appraisal
is measuring and improving the actual performance of the employee and also the future
potential of the employee. Its aim is to measure what an employee does. Objectives of
Performance appraisal are,
 To review the performance of the employees over a given period of time.
 To judge the gap between the actual and the desired performance.
 To help the management in exercising organizational control.
 Helps to strengthen the relationship and communication between superior
– subordinates and management – employees.
 To diagnose the strengths and weaknesses of the individuals so as to
identify the training and development needs of the future.
 To provide feedback to the employees regarding their past performance.
 UNIT IV
DIRECTING
Introduction
Directing is said to be a process in which the managers instruct, guide and oversee the
performance of the workers to achieve predetermined goals. Directing is said to be the heart
of management process. Planning, organizing, staffing has got no importance if direction
function does not take place.
In simple words, it can be described as providing guidance to workers is doing work.
In field of management, direction is said to be all those activities which are designed to
encourage the subordinates to work effectively and efficiently.

Pre-Requisite Discussion
The student should be familiar with the path to be followed and the hurdles, Merits
and demerits in the ongoing path and evaluation points have to be analyzed.

Definition
"Activating deals with the steps a manager takes to get sub-ordinates and others to
carry out plans" - Newman and Warren. It is the final action of a manager in getting others to
act after all preparations have been completed.

Creativity and Innovation

Often used interchangeably, they should to be considered separate and distinct.
Creativity can be described as problem identification and idea generation and innovation is
considered as idea selection, development and commercialization.

Steps involved in creativity

Preparation
This is the first stage at which the base for creativity and innovation is defined; the
mind is prepared for subsequent use in creative thinking. During preparation the individual is
encouraged to appreciate the fact that every opportunity provides situations that can educate
and experiences from which to learn.

Investigation
This stage of enhancing entrepreneurial creativity and innovation involves the
business owner taking time to study the problem at hand and what its various components
are.

Transformation
The information thus accumulated and acquired should then be subjected to
convergent and divergent thinking which will serve to highlight the inherent similarities and
differences. Convergent thinking will help identify aspects that are similar and connected
while divergent thinking will highlight the differences. This twin manner of thinking is of
particular importance in realizing creativity and innovation for the following reasons:

Verification
This is where the entrepreneur attempts to ascertain whether the creativity of thought
and the action of innovation are truly effective as anticipated. It may involve activities like
simulation, piloting, prototype building, test marketing, and various experiments. While the
tendency to ignore this stage and plunge headlong with the breakthrough may be tempting,
the transformation stage should ensure that the new idea is put to the test.

Motivation
According to Koontz and O'Donnell, "Motivation is a class of drives, needs, wishes
and similar "Motivation" is a Latin word, meaning "to move". Human motives are
internalized goals within individuals. Motivation may be defined as those forces that cause
people to behave in certain ways. Motivation encompasses all those pressures and influences
that trigger, channel, and sustain human behaviour. Most successful managers have learned to
understand the concept of human motivation and are able to use that understanding to achieve
higher standards of subordinate work performance.forces".

Motivation Theories
Some of the motivation theories are discussed below
McGregor’s Theory X and Theory Y

McGregor states that people inside the organization can be managed in two ways. The
first is basically negative, which falls under the category X and the other is basically positive,
which falls under the category Y. After viewing the way in which the manager dealt with
employees, McGregor concluded that a manager’s view of the nature of human beings is
based on a certain grouping of assumptions and that he or she tends to mould his or her
behaviour towards subordinates according to these assumptions.

Under the assumptions of theory X

• Employees inherently do not like work and whenever possible, will attempt to avoid
it.
• Because employees dislike work, they have to be forced, coerced or threatened with
punishment to achieve goals.
• Employees avoid responsibilities and do not work fill formal directions are issued.
• Most workers place a greater importance on security over all other factors and
display little ambition.

In contrast under the assumptions of theory Y

• Physical and mental effort at work is as natural as rest or play.
• People do exercise self-control and self-direction and if they are committed to those
goals.
• Average human beings are willing to take responsibility and exercise imagination,
ingenuity and creativity in solving the problems of the organization.
• That the way the things are organized, the average human being’s brainpower is
only partly used.
On analysis of the assumptions it can be detected that theory X assumes that lower-
order needs dominate individuals and theory Y assumes that higher-order needs dominate
individuals. An organization that is run on Theory X lines tends to be authoritarian in nature,
the word “authoritarian” suggests such ideas as the “power to enforce obedience” and the
“right to command.”
 Leadership

Definition
Leadership is defined as influence, the art or process of influencing people so that
they will strive willingly and enthusiastically toward the achievement of group goals. -
Leaders act to help a group attain objectives through the maximum application of its
capabilities. - Leaders must instill values – whether it be concern for quality, honesty and
calculated risk taking or for employees and customers.

Importance of Leadership
 Aid to authority
 Motive power to group efforts
 Basis for co operation
 Integration of Formal and Informal Organization.
Leadership Styles

The leadership style we will discuss here are:

 Autocratic style
 Democratic Style
 Laissez Faire Style

Autocratic style
Autocratic leadership is a classical leadership style with the following characteristics:
 Manager seeks to make as many decisions as possible
 Manager seeks to have the most authority and control in decision making
 Manager seeks to retain responsibility rather than utilize complete delegation
 Consultation with other colleagues in minimal and decision making becomes a
solitary process.
 Managers are less concerned with investing their own leadership development,
and preferto simply work on the task at hand.

Democratic Style
Democratic Leadership is the leadership style that promotes the sharing of
responsibility, the exercise of delegation and continual consultation.

Laissez-Faire Style
This French phrase means “leave it be” and is used to describe a leader who leaves
his/her colleagues to get on with their work. The style is largely a "hands off" view that tends
to minimize the amount of direction and face time required.

Leadership Theories
The various leadership theories are

Great Man Theory:

Assumptions
• Leaders are born and not made.
• Great leaders will arise when there is a great need.
Description
Gender issues were not on the table when the 'Great Man' theory was proposed. Most
leaders were male and the thought of a Great Woman was generally in areas other than
leadership. Most researchers were also male, and concerns about androcentric bias were a
long way from being realized.

Trait Theory:
Assumptions
• People are born with inherited traits.
• Some traits are particularly suited to leadership.
• People who make good leaders have the right (or sufficient) combination of traits.
Description
Early research on leadership was based on the psychological focus of the day, which
was of people having inherited characteristics or traits. Attention was thus put on discovering
these traits, often by studying successful leaders, but with the underlying assumption that if
other people could also be found with these traits, then they, too, could also become great
leaders. McCall and Lombardo (1983) researched both success and failure identified four
primary traits by which leaders could succeed or 'derail': Emotional stability and composure:
Calm, confident and predictable, particularly when under stress.

Behavioral Theory:
Assumptions
• Leaders can be made, rather than are born.
• Successful leadership is based in definable, learnable behavior.
Description
Behavioral theories of leadership do not seek inborn traits or capabilities. Rather, they
look at what leaders actually do. If success can be defined in terms of describable actions,
then it should be relatively easy for other people to act in the same way. This is easier to
teach and learn then to adopt the more ephemeral 'traits' or 'capabilities'.

Participative Leadership:
Assumptions
• Involvement in decision-making improves the understanding of the issues involved
by those who must carry out the decisions.
• People are more committed to actions where they have involved in the relevant
decision making.
Description
A Participative Leader, rather than taking autocratic decisions, seeks to involve other
people in the process, possibly including subordinates, peers, superiors and other
stakeholders. Often, however, as it is within the managers' whim to give or deny control to
his or her subordinates, most participative activity is within the immediate team. The question
of how much influence others are given thus may vary on the manager's preferences and
beliefs, and a whole spectrum of participation is possible.

Situational Leadership:

Assumptions
• The best action of the leader depends on a range of situational factors.
Description
When a decision is needed, an effective leader does not just fall into a single preferred
style. In practice, as they say, things are not that simple.Factors that affect situational
decisions include motivation and capability of followers. This, inturn, is affected by factors
within the particular situation. The relationship between followers and the leader may be
another factor that affects leader behaviour as much as it does follower
behaviour. The leaders' perception of the follower and the situation will affect what they do
rather than the truth of the situation. The leader's perception of themselves and other factors
such as stress and mood will also modify the leaders' behaviour.

Contingency Theory:
Assumptions
• The leader's ability to lead is contingent upon various situational factors, including
the leader's preferred style, the capabilities and behaviours of followers and also various
other situational factors.

Description
Contingency theories are a class of behavioural theory that contend that there is no
one best way of leading and that a leadership style that is effective in some situations may not
be successful in others. An effect of this is that leaders who are very effective at one place
and time may become unsuccessful either when transplanted to another situation or when the
factors around them change.
Contingency theory is similar to situational theory in that there is an assumption of no
simple one right way. The main difference is that situational theory tends to focus more on
the behaviours that the leader should adopt, given situational factors (often about follower
behaviour), whereas contingency theory takes a broader view that includes contingent factors
about leader capability and other variables within the situation.
 CHAPTER V
CONTROLLING
Introduction
Controlling consists of verifying whether everything occurs in conformities with the
plans adopted, instructions issued and principles established. Controlling ensures that there is
effective and efficient utilization of organizational resources so as to achieve the planned
goals. Controlling measures the deviation of actual performance from the standard
performance, discovers the causes of such deviations and helps in taking corrective actions

Definition
A process of monitoring the performance and taking action to ensure desired results.
It sees to it that the right things happen, in the right ways, and at the right time.

Nature & Purpose of Control

 Control is an essential function of management
 Control is an ongoing process
 Control is forward – working because pas cannot be controlled
 Control involves measurement
 The essence of control is action
 Control is an integrated system

Control Process
The basic control process involves mainly these steps as shown in Figure

The Establishment of Standards:

Because plans are the yardsticks against which controls must be revised, it follows
logically that the first step in the control process would be to accomplish plans. Plans can be
considered as the criterion or the standards against which we compare the actual performance
in order to figure out the deviations.

Measurement of Performance:
The measurement of performance against standards should be on a forward looking
basis so that deviations may be detected in advance by appropriate actions. The degree of
difficulty in measuring various types of organizational performance, of course, is determined
primarily by the activity being measured. For example, it is far more difficult to measure the
performance of highway maintenance worker than to measure the performance of a student
enrolled in a college level management course.
Comparing Measured Performance to Stated Standards:
When managers have taken a measure of organizational performance, their next step
in controlling is to compare this measure against some standard. A standard is the level of
activity established to serve as a model for evaluating organizational performance. The
performance evaluated can be for the organization as a whole or for some individuals
working within the organization. In essence, standards are the yardsticks that determine
whether organizational performance is adequate or inadequate.
 Taking Corrective Actions:
After actual performance has been measured compared with established performance
standards, the next step in the controlling process is to take corrective action, if necessary.
Corrective action is managerial activity aimed at bringing organizational performance up to
the level of performance standards. In other words, corrective action focuses on correcting
organizational mistakes that hinder organizational performance. Before taking any corrective
action, however, managers should make sure that the standards they are using were properly
established and that their measurements of organizational performance are valid and reliable.

Types Of Control Systems

The control systems can be classified into three types namely feed forward,
concurrent and feedback control systems.

Feed forward controls:

They are preventive controls that try to anticipate problems and take corrective action
before they occur. Example – a team leader checks the quality, completeness and reliability
of their tools prior to going to the site.

Concurrent controls:
They (sometimes called screening controls) occur while an activity is taking place.
Example – the team leader checks the quality or performance of his members while
performing.

Feedback controls:
They measure activities that have already been completed. Thus corrections can take
place after performance is over. Example – feedback from facilities engineers regarding the
completed job.

Budgetary Control

Definition:
Budgetary Control is defined as "the establishment of budgets, relating the
responsibilities of executives to the requirements of a policy, and the continuous comparison
of actual with budgeted results either to secure by individual action the objective of that
policy or to provide a base for its revision.

Salient features:
 Objectives: Determining the objectives to be achieved, over the budget period,
and the policy that might be adopted for the achievement of these ends.
 Activities: Determining the variety of activities that should be undertaken for
achievement of the objectives.
 Plans: Drawing up a plan or a scheme of operation in respect of each class of
activity, in physical a well as monetary terms for the full budget period and its
parts.
 Performance Evaluation: Laying out a system of comparison of actual
performance by each person section or department with the relevant budget
and determination of causes for the discrepancies, if any. Control
 Action: Ensuring that when the plans are not achieved, corrective actions are
taken; and when corrective actions are not possible, ensuring that the plans are
revised and objective achieved.
 Budgetary Control Techniques

Revenue and Expense Budgets:

The revenue from sales of products or services furnishes the principal income to pay
operating expenses and yield profits. Expense budgets may deal with individual items of
expense, such as travel, data processing, entertainment, advertising, telephone, and insurance.
Time, Space, Material, and Product Budgets:
Many budgets are better expressed in quantities rather than in monetary terms. e.g.
direct-labor-hours, machine-hours, units of materials, square feet allocated, and units
produced. The Rupee cost would not accurately measure the resources used or the results
intended.

Capital Expenditure Budgets:

Capital expenditure budgets outline specifically capital expenditures for plant,
machinery, equipment, inventories, and other items. These budgets require care because they
give definite form to plans for spending the funds of an enterprise.
Cash Budgets:

The cash budget is simply a forecast of cash receipts and disbursements against which
actual cash "experience" is measured. The availability of cash to meet obligations as they fall
due is the first requirement of existence, and handsome business profits do little good when
tied up in inventory, machinery, or other noncash assets.

Variable Budget:
The variable budget is based on an analysis of expense items to determine how
individual costs should vary with volume of output. Some costs do not vary with volume,
particularly in so short a period as 1 month, 6months, or a year. Among these are
depreciation, property taxes and insurance, maintenance of plant and equipment, and costs of
keeping a minimum staff of supervisory and other key personnel.

Zero Based Budget:

The idea behind this technique is to divide enterprise programs into
"packages"composed of goals, activities, and needed resources and then to calculate costs for
each package from the ground up. By starting the budget of each package from base zero,
budgeters calculate costs afresh for each budget period; thus they avoid the common
tendency in budgeting of looking only at changes from a previous period.

Non-Budgetary Control Techniques

There are, of course, many traditional control devices not connected with budgets,
although some may be related to, and used with, budgetary controls. Among the most
important of these are statistical data, special reports and analysis, analysis of break- even
points, the operational audit, and the personal observation.

Statistical data:
Statistical analyses of innumerable aspects of a business operation and the clear
presentation of statistical data, whether of a historical or forecast nature are, of course,
important to control. Some managers can readily interpret tabular statistical data, but most
managers prefer presentation of the data on charts.
 Break- even point analysis:
An interesting control device is the break even chart. This chart depicts the
relationship of sales and expenses in such a way as to show at what volume revenues exactly
cover expenses.

Operational audit:
Another effective tool of managerial control is the internal audit or, as it is now
coming to be called, the operational audit. Operational auditing, in its broadest sense, is the
regular and independent appraisal, by a staff of internal auditors, of the accounting, financial,
and other operations of a business.

Personal observation:
In any preoccupation with the devices of managerial control, one should never
overlook the importance of control through personal observation.

Productivity
Productivity refers to the ratio between the output from production processes to its
input. Productivity may be conceived of as a measure of the technical or engineering
efficiency of production. As such quantitative measures of input, and sometimes output, are
emphasized. Typical Productivity Calculations Measures of size and resources may be
combined in many different ways. The three common approaches referred to as physical,
functional, and economic productivity. Regardless of the approach selected, adjustments may
be needed for the factors of diseconomy of scale, reuse, requirements churn, and quality at
delivery.

Physical Productivity
This is a ratio of the amount of product to the resources consumed. Product may be
measured in lines of code, classes, screens, or any other unit of product. Typically, effort is
measured in terms of staff hours, days, or months. The physical size also may be used to
estimate software performance factors (e.g., memory utilization as a function of lines of
code).

Functional Productivity
This is a ratio of the amount of the functionality delivered to the resources consumed.
Functionality may be measured in terms of use cases, requirements, features, or function
points (as appropriate to the nature of the software and the development method). Typically,
effort is measured in terms of staff hours, days, or months. Traditional measures of Function
Points work best with information processing systems. The effort involved in embedded and
scientific software is likely to be underestimated with these measures, although several
variations of Function Points have been developed that attempt to deal with this issue.

Economic Productivity
This is a ratio of the value of the product produced to the cost of the resources used to
produce it. Economic productivity helps to evaluate the economic efficiency of an
organization. Economic productivity usually is not used to predict project cost because the
outcome can be affected by many factors outside the control of the project, such as sales
volume, inflation, interest rates, and substitutions in resources or materials, as well as all the
other factors that affect physical and functional measures of productivity. However,
understanding economic productivity is essential to making good decisions about outsourcing
and subcontracting.
 Cost Control
Cost control is the measure taken by management to assure that the cost objectives set
down in the planning stage are attained and to assure that all segments of the organization
function in a manner consistent with its policies. Steps involved in designing process of cost
control system.
 Establishing norms: To exercise cost control it is essential to establish norms,
targets or parameters which may serve as yardsticks to achieve the ultimate
objective. These standards, norms or targets may be set on the basis of
research, study or past actual.
 Appraisal: The actual results are compared with the set norms to ascertain the
degree of utilization of men, machines and materials. The deviations are
analyzed so as to arrive at the causes which are controllable and
uncontrollable.
 Corrective measures: The variances are reviewed and remedial measures or
revision of targets, norms, standards etc., as required are taken.

Purchase Control
Purchase control is an element of material control. Material procurement is known as
the purchase function. The functional responsibility of purchasing is that of the purchase
manager or the purchaser. Purchasing is an important function of materials management
because in purchase of materials, a substantial portion of the company's finance is committed
which affects cash flow position of the company. Success of a business is to a large extent
influenced by the efficiency of its purchase organization. The advantages derived from a
good and adequate. System of the purchase control is as follows.

Continuous availability of materials:

It ensures the continuous flow of materials. So production work may not be held up
for want of materials. A manufacturer can complete schedule of production in time.

Purchasing of right quantity:

Purchase of right quantity of materials avoids locking up of working capital. It
minimizes risk of surplus and obsolete stores. It means there should not be possibility of
overstocking and under stocking.

Purchasing of right quality:

Purchase of materials of proper quality and specification avoids waste of materials
and loss in production. Effective purchase control prevents wastes and losses of materials
right from the purchase till their consumptions. It enables the management to
reduce cost of production.

Economy in purchasing:
The purchasing of materials is a highly specialized function. By purchasing materials
at reasonable prices, the efficient purchaser is able to make a valuable contribution to the
success of a business.

Works as information centre:

It serves as a function centre on the materials knowledge relating to prices, sources of
supply, specifications, mode of delivery, etc. By providing continuous information to the
management it is possible to prepare planning for production.
 Development of business relationship:
Purchasing of materials from the best market and from reliable suppliers develops
business relationships. The result is that there may be smooth supply of materials in time and
so it avoid disputes and financial losses.

Finding of alternative source of supply:

If a particular supplier fails to supply the materials in time, it is possible to develop
alternate sources of supply. The effect of this is that the production work is not disturbed.

Fixing responsibilities:
Effective purchase control fix the responsibilities of operating units and individuals
connected with the purchase, storage and handling of materials. In short, the basic objective
of the effective purchase control is to ensure continuity of supply of requisite quantity of
material, to avoid held up of production and loss in production and at the same time reduces
the ultimate cost of the finished products.

Maintenance Control
Maintenance department has to excercise effective cost control, to carry out the
maintenance functions in a pre-specified budget, which is possible only through the following
measures. First line supervisors must be apprised of the cost information of the various
materials so that the objective of the management can be met without extra expenditure on
maintenance functions A monthly review of the budget provisions and expenditures actually
incurred in respect of each center/shop will provide guidlines to the departmental head to
exercise better cost control. The total expenditure to be incurred can be uniformly spread over
the year for better budgetary control. however, the same may not be true in all cases
particularly where overhauling of equipment has to be carried out due to unforseen
breakdowns. some budgetary provisions must be set aside, to meet out unforeseen exigencies.
The controllable elements of cost such as manpower cost and material cost can be discussed
with the concerned personnel, which may help in reducing the total cost of maintenance.
Emphasis should be given to reduce the overhead expenditures, as other expenditures cannot
be compromised. It is observed through studies that the manpower cost is normally fixed, but
the same way increase due to overtime cost.

Quality Control
Quality control refers to the technical process that gathers, examines, analyze & report
the progress of the project & conformance with the performance requirements the steps
involved in quality control process are
Determine what parameter is to be controlled.
Establish its criticality and whether you need to control before, during or after results are
produced.
 Establish a specification for the parameter to be controlled which provides
limits of acceptability and units of measure.
 Produce plans for control which specify the means by which the
characteristics will be achieved and variation detected and removed.
 Organize resources to implement the plans for quality control.
 Install a sensor at an appropriate point in the process to sense variance from
specification.
 Collect and transmit data to a place for analysis.
  Verify the results and diagnose the cause of variance.
 Propose remedies and decide on the action needed to restore the status quo.
 Take the agreed action and check that the variance has been corrected.

Planning Operations
An operational planning is a subset of strategic work plan. It describes short-term
ways of achieving milestones and explains how, or what portion of, a strategic plan will be
put into operation during a given operational period, in the case of commercial application, a
fiscal year or another given budgetary term. An operational plan is the basis for, and
justification of an annual operating budget request. Therefore, a five-year strategic plan
would need five operational plans funded by five operating budgets. Operational plans should
establish the activities and budgets for each part of the organization for the next 1 – 3 years.
They link the strategic plan with the activities the organization will deliver and the resources
required to deliver them. An operational plan draws directly from agency and program
strategic plans to describe agency and program missions and goals, program objectives, and
program activities.

Control Techniques

Many techniques have been developed to control the activities in management. The list is very
long, and it is difficult to describe them all.

Some of the important techniques are:

Financial Control:
Finance is related with mobilization of funds and their utilization and the return on them.
Financial control is exercised through the following:
1. Financial Statements:
Income statement (telling about expenses, segmental incomes, overall income and expenses, and
the net profit/loss), and Balance Sheet (shows the net worth at a single point of time and the
extent to which the debt or equity finance the assets)

2. Financial Audits:
Financial audits, either internal or external are conducted to ensure that the financial
management is done in line with the generally accepted policies, procedures, laws, and ethical
guidelines. Audits may be internal (by Organisation’s own staff), external (statutory audit by
chartered accountants), and management audit (by experts).

3. Ratio Analysis:
Ratio analysis monitors liquidity, profitability, debt, and activity related aspects.

4. Budgetary Controls:
Budgetary control is the process of constructing budgets, comparing actual performance with the
budget one and revising budgets or activities in the light of changed conditions.
Budgetary control is as such not related only to finance area, but all functional areas do take help
of budgetary control. Budgets help not only in planning but also help to keep a tab on overall
spending.

Budgeting may be top-down (managers prepare the budget and ask subordinates to use); bottom-
up (figures come from lower levels and adjusted at upper levels); zero-based (justifying
allocation of funds on the basis of activities or goals); and flexible budgeting (varying standards
and varying allocations).

5. Break-even Analysis:
It is a tool of profit planning and deals with cost-volume-profit relationships.

6. Accounting:
Accounting includes responsibility accounting, cost accounting, standard cost approach, direct
costing, and marginal costing.

Marketing Control:
In the field of marketing, to see that customer gets right product at the right price at the right
place and through right communication, the control is exercised through the following:

Market Research:
It is to assess customers’ needs, expectations and the delivery; and the competitive scenario.

Test Marketing:
To assess consumer acceptance of a new product, a small-scale marketing is done. HUL uses
Chennai for most of its test marketing.

Marketing Statistics:
Marketing managers control through marketing ratios and other statistics.

Human resource control:

Human resource control is required to have a check on the quality of new personnel and also to
monitor performances of existing employees so as to determine firm’s overall effectiveness.

Goal setting, instituting policies and procedures to guide them are to help them. Common
controls include performance appraisals, disciplinary programmes, observations, and
development assessments.

Information Control:
All organizations have confidential and sensitive information to be kept secret. How to control
access to computer databases is very important. This has become a key contemporary issue in
control. Organizations keep a watch on employee’s computer usage in general and internet in
particular.
Production Control:
To ensure quality production in right quantity at right time economically production controls are
required. Two of the important techniques include: Inventory control (ABC Analysis, Economic
Order Quantity, Just-in time inventory control), and quality control (through inspection,
statistical quality control).

Project Control:
Network analysis is most suitable for the projects which are not routine in minimizing cost and
completing project well in time. Network analysis makes use of two techniques – Programme
Evaluation and Review Technique (PERT), and Critical Path Method (CPM).