MANAGEMENT AND ORGANIZATION BEHAVIOUR UNIT I

MANAGEMENT
Definition & Significance – Evolution of Management Thought – Management Functions –
Levels of Management – Managerial Roles and Skills – Social Responsibility of
Management.
DEFINITION AND SIGNIFICANCE OF MANAGEMENT
Introduction
Take a close look at the society around you. You would find the existence of several
organizations. To mention a few, the business organizations that produce goods or services,
hospitals, religious and social institutions like charities, schools, colleges and universities. All
these organizations exist to achieve pre-determined objectives. They affect our lives in many
ways. Though there are vast differences in their functioning and approaches, they all strive to
achieve certain objectives. It must also be noted that organizations cannot achieve the
objectives effortlessly. They are achieved through systematic effort. Several activities have to
be performed in a cohesive way. In the absence of systematic and cohesive performance of
the activities to achieve the objectives, it is no wonder that the resources of organizations
would be underutilized. As such it is the function of the management to facilitate the
performance of activities such that the accomplishment of the objectives becomes possible.
Meaning of Management
Management is understood in different ways by different people. Economists regard it as a
factor of production. Sociologists see it as a class or group of persons while practitioners of
management treat it as a process. For our understanding, management may be viewed as what
a manager does in a formal organization to achieve the objectives. In the words of Mary
Parker Follet management is “the art of getting things done through people”. This
definition throws light on the fact that managers achieve organizational goals by enabling
others to perform rather than performing the tasks themselves.
Management encompasses a wide variety of activities that no one single definition can
capture all the facets of management. That is why, it is often said that there are as many
definitions of management as there are authors in the field. However, the definition given by
James A.F. Stoner covers all the important facets of management.
According to him:

“Management is the process of planning, organizing, leading and controlling the efforts of
organization members and of using all other organizational resources to achieve stated
organizational goals”.

The definition suggests:

management is a continuous process;
  Several interrelated activities have to be performed by managers
 irrespective of their levels to achieve the desired goals;
 Managers use the resources of the organization, both physical as well as human, to
achieve the goals;
 management aims at achieving the organisation’s goals by ensuring effective use of
resources in the best interests of the society.
It is evident that the emphasis is on achieving the objectives by using material, machinery,
money and the services of men. These inputs are drawn from the environment in which the
organization exists. Whether an organization is engaged in business or non-business, the
various inputs are judiciously used to produce the outputs. The process involving the
conversion of inputs into outputs is common to all organizations and is shown in figure 1
Figure 1 INPUT – OUTPUT MODEL

Depending on the nature of business or activity that a firm is engaged in, the output of the
firm may be a physical product or service. Since a business organization is an economic
entity, the justification for its existence lies in producing goods and services that satisfy the
needs of the people. As could be seen in the figure, the organization draws several inputs
from the environment, converts them into products or services and sends them back to the
environment. Environment here means the larger system, i.e., the society in which the firm
exists. Therefore, it goes without saying that how effectively the goods and services are
produced is a matter of concern for any society, given the scarcity of resources. Effective
management therefore plays a crucial role in this context.
Characteristics or Nature of management can be highlighted as:
Management is Goal-Oriented:
The success of any management activity is accessed by its achievement of the predetermined
goals or objective. Management is a purposeful activity. It is a tool which helps use of human
& physical resources to fulfil the pre-determined goals. For example, the goal of an enterprise
is maximum consumer satisfaction by producing quality goods and at reasonable prices. This
can be achieved by employing efficient persons and making better use of scarce resources.
Management integrates Human, Physical and Financial Resources:
In an organization, human beings work with non-human resources like machines. Materials,
financial assets, buildings etc. Management integrates human efforts to those resources. It
brings harmony among the human, physical and financial resources.
Management is Continuous:
Management is an ongoing process. It involves continuous handling of problems and issues.
It is concerned with identifying the problem and taking appropriate steps to solve it. For
achieving this target various policies have to be framed but this is not the end. Marketing and
Advertising is also to be done. For these policies have to be again framed. Hence this is an
ongoing process.
Management is all Pervasive:
Management is required in all types of organizations whether it is political, social, cultural or
business because it helps and directs various efforts towards a definite purpose. Thus clubs,
hospitals, political parties, colleges, hospitals, business firms all require management.
Whenever more than one person is engaged in working for a common goal, management is
necessary. Whether it is a small business firm which may be engaged in trading or a large
firm like Tata Iron & Steel, management is required everywhere irrespective of size or type of
activity.
Management is a Group Activity:
Management is very much less concerned with individual ‘s efforts. It is more concerned with
groups. It involves the use of group effort to achieve predetermined goal of management of
ABC & Co. is good refers to a group of persons managing the enterprise Organized
Activities:
Management is a process of organized activities. Groups of people cannot be involved in the
performance of activities without organized activities. Management comes into existence
where a group of people are involved in achieving a common objective. The organized
activities may take a variety of forms ranging from a tightly structured organization to a
loosely-knit organization.
Existence of Objectives:
The existence of objectives is a basic criterion of every human organization. The
organizational objectives are the desired state of affairs which an organization attempts to
realize. This realization of objectives is sought through the coordinated efforts of the people
constituting an organization. Decision-making:
process involves decision making at all levels. Decision-making describes the process by
which a course of action is selected as the way to deal with a specific problem. If there is only
one alternative, the question of decision making does not arise. The quality of alternatives
which a manger selects determines the organization ‘s performance, and the future of the
organization.

Relationship among resources:

The essence of management is integration of various organizational resources. Resources
include money, machine, materials, and people. Management is concerned with the proper
utilization of human resources which, in turn, utilize other resources.
Working with and through people:
Management involves working with people and getting organizational objectives achieved
through them. Working through people is interpreted in terms of assigning activities to
subordinates.
Multidisciplinary:
Management is multidisciplinary because it includes knowledge/information from various
disciplines- economics, statistics, maths, psychology, sociology, ecology, operations research,
history, etc. Management integrates the ideas and concepts taken from these disciplines and
presents newer concepts which can be put into practice for managing the organizations.
Management is dynamic:
Management has framed certain principles, which are flexible in nature and change with the
changes in the environment in which an organization exits.
Relative, Not Absolute Principles:
Management principles are relative, not absolute, and they should be applied according to the
need of the organization. A particular management principle has different strengths in
different conditions. Therefore, principles should be applied according to the prevailing
conditions.
Management: Science or Art:
Management likes other practices- whether medicine, music composition, or even
accountancy- is an art. It is know-how. Yet managers can work better by using the organized
knowledge about management. It is this knowledge that constitutes science. Thus, managing
as practice is an art; the organized knowledge underlying the practice may be referred to as
science.
Management as Profession:
Management has been regarded as a profession by many while many have suggested that it
has not achieved the status of a profession. Schein concluded that by some criteria
management is indeed a profession, but by other criteria it is not. Today we can see many
signs that management is working towards increased professionalism.
Management is Universal:
Management is a universal phenomenon. However, management principles are not
universally applicable but are to be modified according to the needs of the situation.

The main objectives of management are:

1. Getting Maximum Results with Minimum Efforts –
The main objective of management is to secure maximum outputs with minimum efforts &
resources. Management is basically concerned with thinking & utilizing human, material &
financial resources in such a manner that would result in best combination. This combination
results in reduction of various costs.
2. Increasing the Efficiency of factors of Production –
Through proper utilization of various factors of production, their efficiency can be increased
to a great extent which can be obtained by reducing spoilage, wastages and breakage of all
kinds, this in turn leads to saving of time, effort and money which is essential for the growth
& prosperity of the enterprise.
3. Maximum Prosperity for Employer & Employees –
Management ensures smooth and coordinated functioning of the enterprise. This in turn helps
in providing maximum benefits to the employee in the shape of good working condition,
suitable wage system, incentive plans on the one hand and higher profits to the employer on
the other hand.
4. Human betterment & Social Justice –
Management serves as a tool for the upliftment as well as betterment of the society. Through
increased productivity & employment, management ensures better standards of living for the
society. It provides justice through its uniform policies.
5. It helps in Achieving Group Goals –
It arranges the factors of production, assembles and organizes the resources, integrates the
resources in effective manner to achieve goals. It directs group efforts towards achievement
of predetermined goals. By defining objective of organization clearly there would be no
wastage of time, money and effort. Management converts disorganized resources of men,
machines, money etc. into useful enterprise. These resources are coordinated, directed and
controlled in such a manner that enterprise work towards attainment of goals.
6. Optimum Utilization of Resources –
Management utilizes all the physical & human resources productively. This leads to efficacy
in management. Management provides maximum utilization of scarce resources by selecting
its best possible alternate use in industry from out of various uses. It makes use of experts,
professional and these services leads to use of their skills, knowledge, and proper utilization
and avoids wastage. If employees and machines are producing its maximum there is no under
employment of any resources.

7. Reduces Costs –
It gets maximum results through minimum input by proper planning and by using minimum
input & getting maximum output. Management uses physical, human and financial resources
in such a manner which results in best combination. This helps in cost reduction.
8. Establishes Sound Organization –
No overlapping of efforts (smooth and coordinated functions). To establish sound
organizational structure is one of the objectives of management which is in tune with
objective of organization and for fulfilment of this, it establishes effective authority &
responsibility relationship i.e., who is accountable to whom, who can give instructions to
whom, who are superiors & who are subordinates. Management fills up various positions
with right persons, having right skills, training and qualification. All jobs should be cleared to
everyone.
9. Establishes Equilibrium –
It enables the organization to survive in changing environment. It keeps in touch with the
changing environment. With the change is external environment, the initial co-ordination of
organization must be changed. So, it adapts organization to changing demand of market /
changing needs of societies. It is responsible for growth and survival of organization.
10.Essentials for Prosperity of Society –
Efficient management leads to better economical production which helps in turn to increase
the welfare of people. Good management makes a difficult task easier by avoiding wastage of
scarce resource. It improves standard of living. It increases the profit which is beneficial to
business and society will get maximum output at minimum cost by creating employment
opportunities which generate income in hands. Organization comes with new products and
researches beneficial for society.
Importance of Management
It helps in Achieving Group Goals –
It arranges the factors of production, assembles and organizes the resources, integrates the
resources in effective manner to achieve goals. It directs group efforts towards achievement
of predetermined goals. By defining objective of organization clearly there would be no
wastage of time, money and effort. Management converts disorganized resources of men,
machines, money etc. into useful enterprise. These resources are coordinated, directed and
controlled in such a manner that enterprise work towards attainment of goals.
Optimum Utilization of Resources –
Management utilizes all the physical and human resources productively. This leads to
efficacy in management. Management provides maximum utilization of scarce resources by
selecting its best possible alternate use in industry from out of various uses. It makes use of
experts, professional and these services leads to use of their skills, knowledge, and proper
utilization and avoids wastage. If employees and machines are producing its maximum there
is no under employment of any resources.
Reduces Costs –
It gets maximum results through minimum input by proper planning and by using minimum
input and getting maximum output. Management uses physical, human and financial
resources in such a manner which results in best combination. This helps in cost reduction.
Establishes Sound Organization –
No overlapping of efforts (smooth and coordinated functions). To establish sound
organizational structure is one of the objectives of management which is in tune with
objective of organization and for fulfilment of this, it establishes effective authority &
responsibility relationship i.e., who is accountable to whom, who can give instructions to
whom, who are superiors and who are subordinates. Management fills up various positions
with right persons, having right skills, training and qualification. All jobs should be cleared to
everyone.
Establishes Equilibrium –
It enables the organization to survive in changing environment. It keeps in touch with the
changing environment. With the change is external environment, the initial co-ordination of
organization must be changed. So, it adapts organization to changing demand of market /
changing needs of societies. It is responsible for growth and survival of organization.
Essentials for Prosperity of Society –
Efficient management leads to better economical production which helps in turn to increase
the welfare of people. Good management makes a difficult task easier by avoiding wastage of
scarce resource. It improves standard of living. It increases the profit which is beneficial to
business and society will get maximum output at minimum cost by creating employment
opportunities which generate income in hands. Organization comes with new products and
researches beneficial for society
Levels of Management
Level of management refers to the categories or layers of managerial positions in an
organization. The level of management determines the amount of authority and status of the
person occupying the position at that level. These managerial positions divided into various
categories according to their amount of authority and status, they are known as the level of
management. Managerial Hierarchy consists of-
 Top Level Management or senior management
 Middle Level Management
 Lower-Level Management such as supervisors or team-leaders
Figure 2 Different level of management

Top-level management
 Require an extensive knowledge of management roles and skills.
 They have to be very aware of external factors such as markets.
 Their decisions are generally of a long-term nature
 Their decisions are made using analytic, directive, conceptual
and/or behavioral/participative processes
 They are responsible for strategic decisions.
 They have to chalk out the plan and see that plan may be effective in the future.
 They are executive in nature.
These includes board of Directors, CEO ‘s they comprise small groups but are responsible for
overall management they formulate plans, decide objectives & communicate to middle level
management.
Middle Level of Management
The branch managers and departmental managers constitute middle level. They are
responsible to the top management for the functioning of their department. They devote more
time to organizational and directional functions. In small organization, there is only one layer
of middle level of management but in big enterprises, there may be senior and junior middle
level management. Their role can be emphasized as –
 They execute the plans of the organization in accordance with the policies and
directives of the top management.
 They make plans for the sub-units of the organization.
 They participate in employment & training of lower-level management.
 They interpret and explain policies from top level management to lower level.
 They are responsible for coordinating the activities within the division or department.
 It also sends important reports and other important data to top level management.
 They evaluate performance of junior managers.
 They are also responsible for inspiring lower-level managers towards better
performance.
Lower Level of Management
Lower level is also known as supervisory / operative level of management. It consists of
supervisors, foreman, section officers, superintendent etc. According to R.C. Davis,
―Supervisory management refers to those executives whose work has to be largely with
personal oversight and direction of operative employees‖. In other words, they are concerned
with direction and controlling function of management. Their activities include –
 Assigning of jobs and tasks to various workers.
 They guide and instruct workers for day-to-day activities.
 They are responsible for the quality as well as quantity of production.
 They are also entrusted with the responsibility of maintaining good relation in the
organization.
 They communicate workers problems, suggestions, and recommendatory appeals etc
to the higher level and higher-level goals and objectives to the workers. They help to
solve the grievances of the workers.
 They supervise & guide the sub-ordinates.
 They are responsible for providing training to the workers.
 They arrange necessary materials, machines, tools etc for getting the things done.
 They prepare periodical reports about the performance of the workers.
 They ensure discipline in the enterprise.
 They motivate workers.
 They are the image builders of the enterprise because they are in direct contact with
the workers.
Evolution of Management Thought
Introduction
The origin of management can be traced back to the days when man started living in groups.
One can argue that management took the form of leadership which was essential to
coordinate the efforts of the group members in order to arrange the necessities of life. History
reveals that strong men organised the masses into groups according to their intelligence,
physical and mental capabilities. According to Egyptian literature of 1300 B.C., the art of
management was being practiced in different forms by different people. The literature clearly
indicates the recognition of the importance of organisation and administration in the
bureaucratic set up. Similar records exist for ancient China. According to L.S. Hsu,
Confucius’s parables include unselfish and capable public officers.
In Greece, the existence of the Athenian commonwealth, with its councils, courts,
administrators and board of general indicates the nature of management. Similarly, in Rome,
the existence of Roman magistrates, with their functional areas of authority and degree of
importance, indicates a scalar relationship characteristic or organisation. It is believed that the
secret of the success of the Roman Empire lay in the ability of Romans to organise. Through
the use of the scalar principle and the delegation of authority, the city of Rome was expanded
to an efficient empire.
Table 1 Summary of Management Trends
Taylor, F. W. Scientific management
This approach expounds that maximum efficiency is obtained by breaking
down tasks into each component movement, so finding the best and most
efficient way of doing each. This was the forerunner of 'work study', or time
and motion'. In Taylor's model, the relationship between manager and
employees is one of master servant or parent-child.
Mayo, E (1927- Hawthorne studies
32) Perhaps one of the most quoted approaches in respect of people management
is Elton Mayo's studies at the Hawthorne Works of Western Electric in
Chicago, His findings showed that productivity of workers improved when
working conditions were discussed between employees and management
whether or not the conditions were actually improved. His work contributed
a lot to motivational theory. His work (1949) concluded that the difference
was the result of feeling part of a team and lead to the new idea that workers
should be considered to be part of a social organism rather than individual
cogs in a large wheel.
McGregor D. Theory X and Theory Y

(1930s) This theory suggested two different styles of management, based on the
underlying assumptions of employee motivation. Theory X requires a carrot
and stick' model of motivation; Theory Y places problems of human
resources in the lap of management; -people will exercise self-direction and
self-control in the achievement of organizational objectives, if they are
committed to those objectives. Theory Y suggests that authority and control
are not appropriate for all purposes and under all circumstances.
Herzberg, F. Job enrichment
(1960s) Herzberg differentiated between motivational and hygiene factors, the latter
being such things as salary and working conditions. In his later work (1968)
he suggested that' in attempting to enrich an employee's job, management
often succeed in reducing the man's personal contribution, rather than giving
him an opportunity for growth in his accustomed job'. He called this
'horizontal loading', Which he suggested, merely enlarges the
meaninglessness of the job.
Maslow, A Hierarchy of needs
(1960s) Maslow proposed that there is a series of needs to be satisfied for all
individuals. As each need is satisfied, the satisfaction itself ceases to be
important. The implications for management are an awareness of these needs
and action to satisfy them.
Jaques, E (1950s) Clarity of roles
While Maslow, Herzberg and McGregor led the field in management and
motivational theory during the 1960s and 1970s, research undertaken in
London at The Tavistock Institute was gaining interest. Elliot Jaques (1976)
proposed that the key for management of people was to have clearly defined
and greed and roles and responsibilities. He suggested that lack of clear
boundaries caused confusion which led to frustration, insecurity and a need
to avoid accountability.
Drucker, P. F. Management practice
(1945) Drucker has written on virtually every aspect of organizational management
and change. In his Practice of Management (1954) he says that the function,
which distinguishes the mangers above all others, is an educational one. The
managers unique contribution should be to give others vision and the ability
to perform.' He also proposed' management by objectives', 'risk-taking
decisions', strategic thinking' and 'building an integrated team'.
Boston Management by objectives
Consulting Term such as 'learning curve', 'growth share matrix', 'stars', 'dogs', 'cash-
Group (1970s) cows', 'Question-marks' and the 'Boston Box' will be familiar to users of this
approach. Centred again in the 'scientific management' school' the use of
'decision trees' was prevalent, focusing mainly on investment strategies.
Decision-making strategies with change programmes are often led by this
approach.
Pascale and Japanese management

Althos (1980s) Use of the 'Seven 5' framework as a performance measurement tool and for
comparison between US and Japanese management styles. Pascal felt that
early managerial theory was significant for what it left out-for example, total
absence of attention to building a corporate team. Or to the recruitment and
selection of staff, or to training or socialization within the working teams. He
suggested that 'field identity' value should be acknowledged.
Kanter, R (1980s) Change management
Kanter's views focus on the flatter hierarchy, the post-entrepreneurial
organization and flexibility of an organization to respond to change. She
feels that the first step in change mastery ‘understands how individuals can
exert leverage in an organization'. She refers to ' corporate entrepreneurs'
who test limits and create new possibilities by directing innovation. She also
refers to 'business athletes' who know how to compete in a way that enhances
rather than undercuts cooperation'. Integrative teamwork is an important
component in this approach, as is developing a broader understanding of
'what happens as different levels of the organization' (kanter, 1984).
Peters and Search for excellence
Waterman In this joint publication, Peters and Waterman (1987) suggest that 'leadership
(1982) is patient, usually boring coalition building'. The key of this approach,
however, is built on the 'Seven S (see Pascale and Athos) model. In
companies, which operate with ‘super ordinate goals and strong cultures’,
they found that 'people way down the line knows what they are supposed to
do in most situations because the handful of guiding values is crystal clear'.
Another key component of the excellent company is that 'their systems
reinforce degrees of winning rather than degrees of losing ... targets and
quotas are set to allow that to happen'.
Peters, T. Thriving on Chaos (1988); Liberation Management (1992) In Thriving on
(1990s) Choose, Peters suggests that the most successful organizations are the
impatient ones who will 'reorganize on a dime'. Organizations adopting this
approach will follow the guide that 'if you are not reorganizing, pretty
substantially {once every six to twelve months, you're probably out of step
with the times' In Liberation Management Peters stresses the need for more
rapid and flexible management responses to the demands of the marketplace
with a focus on capturing and retaining the loyalty of customers-going
beyond' satisfied customers' to 'committed" customers'.
Waterman In his book The Renewal Factor (1987), Waterman says that' one of the most
(1990s) difficult challenges in management are developing a sense of value and
vision'. He also gives 14 guidelines for strengthening teamwork. In his later
book on The Frontiers of excellence (1994) he suggests that a well-run total
quality program can be of benefit to middle managers and employees as well
as to customers.
Harvey-Jones, J Managing to survive (1993)
(1990s)
Harvey Jones feels that the most important personal skill in this decade is
that of managing radical change. His view is that no one actually' manages'
change, they release and guide it', He also states that organizations do not
change until the people in those organizations have - and people do not
change their ideas and values quickly.
Handy C. (1990s) Understanding organization (1976) Handy's 1976 book outlined differences
between a 'power culture', a 'role culture', a 'task culture' and a 'person
culture' in organizations. His later books, including Gods of Management,
The Age of Unreason and The Empty Raincoat have expounded his ideas.
He purposed the model of the 'shamrock organization'

Theories of management
Classical Theory

The classical theory signifies the beginning of the systematic study of management
organisation. It is often called the traditional theory. It can be traced historically to the 19th
century prototype industrial and military organisations. Several writers contributed to the
classical thought in the early years of the 20th century. They include Taylor, Fayol, Weber,
Luther Gulick, Urwick, Mooney and Reiley and may others.
The classical theory incorporates three viewpoints: (1) Taylor’s Scientific Management (2)
Fayol’s Administrative Management; and (3) Weber’s Ideal Bureaucracy (an
organisation based on rules and regulations, formal relations, specialization, etc.). All
the three concentrated on the structure of organisation for greater efficiency. Several other
trailblazers have also contributed to the classical theory. For instance, Mooney and Reiley
published ‘Onward Industry’ in 1931 in which they attempted to find organisational
universals. Subsequently, notable contributions came from Gullick, Oliver Sheldon, Urwick
and many others. All these theorists were concerned with the structure of organisations and
that is why their approach is also sometimes labelled as ‘structural theory of organisation’.
Salient features of classical approach are as follows:
1. The classical theory laid emphasis on division of labour and specialization, structure, scalar
and functional processes and span of control. Thus, they concentrated on the anatomy of
formal organisation.
2. The classical theorists emphasis organisation structure for co-ordination of various
activities. They ignored the role of human element.
3. The classical theory ignored the impact of external environment on the working of the
organisation. Thus, it treated organisations as closed systems.
4. The efficiency of the organisation can be increased by making each individual efficient.
5. The integration of the organisation is achieved through the authority and control of the
central mechanism. Thus, it is based on centralization of authority.
6. There is no conflict between the individuals and the organisation. In case of any conflict,
the interests of the organisation should prevail.
7. The people at work could be motivated by the economic rewards as they were supposed to
be ‘rational economic persons.
Scientific Management Approach
The impetus for the scientific management approach came from the first industrial revolution.
Because it brought about such an extraordinary mechanization of industry, this revolution
necessitated the development of new management principles and practices. The main
contributors to scientific management were Frederick W. Taylor, Henry L. Gantt, Frank
Gilbreth, Lillian Gilbreth and Harrington Emerson.
F.W. Taylor (1865-1915) was the first person who insisted on the introduction of scientific
methods in management. He launched a new movement during the last decade of 19th
century which is known as ‘Scientific Management’. That is why, Taylor is regarded as the
father of scientific management. Taylor was an American engineer who responded to the
challenges of management around the turn of the century. During that period, productivity
was very low, labour became extremely dissatisfied and industries had to face frequent strikes
and lockouts. Taylor’s contribution was a system based on science whereby lower labour cost
could be achieved simultaneously with higher wages. He suggested the change in the mental
attitudes of the workers and the management to bring harmony in the industry.
Scientific management means application of scientific methods to the problems of
management. Taylor advocated scientific task setting based on time and motion study,
standardization of materials, tools and working conditions, scientific selection and training of
workers and so on. It is to be noted that Taylor’s thinking was confined to management at the
shop level. However, he demonstrated the possibility and significance of the scientific
analysis of the various aspects of management. To sum up, he laid emphasis on the following
principles:
1. Science, not rule of thumb.
2. Harmony in group action, rather than discord.
3. Maximum output in place of restricted output.
4. Scientific selection, training and placement of the workers.
5. Almost equal division of work and responsibility between workers and managers.
Principles of Scientific Management
1.Development of Science for each part of men’s job (replacement of rule of thumb)
a. This principle suggests that work assigned to any employee should be observed,
analysed with respect to each and every element and part and time involved in it.
b. This means replacement of odd rule of thumb by the use of method of enquiry,
investigation, data collection, analysis and framing of rules.
c. Under scientific management, decisions are made on the basis of facts and by the
application of scientific decisions.
2. Scientific Selection, Training & Development of Workers
a. There should be scientifically designed procedure for the selection of workers.
b. Physical, mental & other requirement should be specified for each and every job.
c. Workers should be selected & trained to make them fit for the job.
d. The management has to provide opportunities for development of workers having better
capabilities.
e. According to Taylor efforts should be made to develop each employee to his greatest level
and efficiency & prosperity.
3. Co-operation between Management & workers or Harmony not discord
a. Taylor believed in co-operation and not individualism.
b. It is only through co-operation that the goals of the enterprise can be achieved efficiently.
c. There should be no conflict between managers & workers.
d. Taylor believed that interest of employer & employees should be fully harmonized so as to
secure mutually understanding relations between them.
4. Division of Responsibility
a. This principle determines the concrete nature of roles to be played by different level of
managers & workers.
b. The management should assume the responsibility of planning the work whereas workers
should be concerned with execution of task.
c. Thus planning is to be separated from execution.
5. Mental Revolution
a. The workers and managers should have a complete change of outlook towards their mutual
relation and work effort.
b. It requires that management should create suitable working condition and solve all
problems scientifically.
c. Similarly workers should attend their jobs with utmost attention, devotion and carefulness.
They should not waste the resources of enterprise.
d. Handsome remuneration should be provided to workers to boost up their moral.
e. It will create a sense of belongingness among worker.
f. They will be disciplined, loyal and sincere in fulfilling the task assigned to them.
g. There will be more production and economic growth at a faster rate.
6. Maximum Prosperity for Employer & Employees
a. The aim of scientific management is to see maximum prosperity for employer and
employees.
b. It is important only when there is opportunity for each worker to attain his highest
efficiency.
c. Maximum output & optimum utilization of resources will bring higher profits for the
employer & better wages for the workers.
d. There should be maximum output in place of restricted output.
e. Both managers and workers should be paid handsomely.
Taylor suggested that management should try to find the best methods of doing various jobs
and introduce standardized materials, tools and equipment so that wastages are reduced. The
management should select right types of people and give them adequate training so as to
increase the quantity and quality of production. It must create congenial working conditions
for optimum efficiency of the workers. It should perform the decision-making function and
should always try to give maximum cooperation to the workers to ensure that work is done
according to the scientific techniques.
The workers should also revise their attitude towards the management. They should not be
workshirkers. They should be disciplined, loyal and sincere in fulfilling the tasks assigned to
them. They should not indulge in wastage of resources. Both the management and the
workers should trust each other and cooperate in achieving maximum production.
Thus, Taylor stood for creating a mental revolution on the part of management and workers.
It is to be noted that Taylor’s thinking was confined to management at the shop level.
However, he demonstrated the possibility and significance of the scientific analysis of the
various aspects of management. To put the philosophy of scientific management into practice,
Taylor and his associates suggested the following techniques:
1. Scientific task setting to determine a fair day; work.
2. Work study to simplify work and increase efficiency. This involves methods study, time
study and motion study.
3. Standardization of materials, tools equipment, costing system, etc.
4. Scientific selection and training of workers.
5. Differential piece-wage plan to reward the highly efficient workers.

6. Specialization in planning and operations through ‘functional foremanship’. Foremen in

the planning department include: route clerk, instruction card clear, time and cost clerk and
shop disciplinarian and those in the operations department include: gang boss, speed boss,
repair boss and inspector.
7. Elimination of wastes and rationalization of system of control.
Criticism of Scientific Management
Although it is accepted that the scientific management enables the management to put
resources to its best possible use and manner, yet it has not been spared of severe criticism.
Workers Viewpoint
1. Unemployment – Workers feel that management reduces employment opportunities
from them through replacement of men by machines and by increasing human productivity
less workers are needed to do work leading to chucking out from their jobs.
2. Exploitation – Workers feel they are exploited as they are not given due share in
increasing profits which is due to their increased productivity. Wages do not rise in
proportion as rise in production. Wage payment creates uncertainty & insecurity (beyond a
standard output, there is no increase in wage rate).
3. Monotony – Due to excessive specialization the workers are not able to take initiative
on their own. Their status is reduced to being mere cogs in wheel. Jobs become dull. Workers
loose interest in jobs and derive little pleasure from work.
4. Weakening of Trade Union – To everything is fixed & predetermined by
management. So it leaves no room for trade unions to bargain as everything is standardized,
standard output, standard working conditions, standard time etc. This further weakens trade
unions, creates a rift between efficient & in efficient workers according to their wages.
5. Over speeding – the scientific management lays standard output, time so they have to
rush up and finish the work in time. These have adverse effect on health of workers. The
workers speed up to that standard output, so scientific management drives the workers to rush
towards output and finish work in standard time.

Employer’s Viewpoint
1. Expensive – Scientific management is a costly system and a huge investment is
required in establishment of planning dept., standardization, work study, training of workers.
It may be beyond reach of small firms. Heavy food investment leads to increase in overhead
costs.
2. Time Consuming – Scientific management requires mental revision and complete
reorganizing of organization. A lot of time is required for work, study, standardization &
specialization. During this overhauling of organization, the work suffers.
Management Process or Administrative Management Approach
The advocates of this school perceive management as a process involving certain functions
such as planning, organising, directing and controlling. That is why, it is also called the
‘functional’ approach. Henri Fayol is regarded as the father of this school. Henri Fayol
defined management in terms of certain functions and then laid down fourteen principles of
management which according to him have universal applicability.
Principles of Management (Contribution of Henry Fayol)
Henry Fayol was born in 1941 at Constantinople in France. He graduated as a mining
engineer in 1860 from the National School of Mining. After his graduation, he joined a
French Coal Mining Company as an Engineer.
After a couple of years, he was promoted as manager. He was appointed as General Manager
of his company in 1888. At that time, the company suffered heavy losses and was nearly
bankrupt. Henry Fayol succeeded in converting his company from near bankruptcy to a
strong financial position and a record of profits and dividends over a long period.
Concept of Management: Henry Fayol is considered the father of modern theory of general
and industrial management. He divided general and industrial management into six groups:
1. Technical activities: Production, manufacture, adaptation.
2. Commercial activities: Buying, selling and exchange.
3. Financial activities: Search for and optimum use of capital.
4. Security activities: Protection of property and persons.
5. Accounting activities: Stock-taking, balance sheet, cost, and statistics.
6. Managerial activities: Planning, organisation, command, co- ordination and control.
These six functions had to be performed to operate successfully any kind of business. He,
however, pointed out that the last function i.e., ability to manage, was the most important for
upper levels of managers.
The process of management as an ongoing managerial cycle involving planning, organising,
directing, co-ordination, and controlling, is actually based on the analysis of general
management by Fayol. Hence, it is said that Fayol established the pattern of management
thought and practice. Even today, management process has general recognition.
Fayol’s Principles of Management: The principles of management are given below:
1. Division of work: Division of work or specialization alone can give maximum
productivity and efficiency. Both technical and managerial activities can be performed in the
best manner only through division of labour and specialization.
2. Authority and Responsibility: The right to give order is called authority. The
obligation to accomplish is called responsibility. Authority and Responsibility are the two
sides of the management coin. They exist together. They are complementary and mutually
interdependent.
3. Discipline: The objectives, rules and regulations, the policies and procedures must be
honoured by each member of an organisation. There must be clear and fair agreement on the
rules and objectives, on the policies and procedures. There must be penalties (punishment)
for nonobedience or indiscipline. No organisation can work smoothly without discipline -
preferably voluntary discipline.
4. Unity of Command: In order to avoid any possible confusion and conflict, each
member of an organisation must receive orders and instructions only from one superior
(boss).
5. Unity of Direction: All members of an organisation must work together to accomplish
common objectives.
6. Emphasis on Subordination of Personal Interest to General or Common Interest:
This is also called principle of co-operation. Each shall work for all and all for each. General
or common interest must be supreme in any joint enterprise.
7. Remuneration: Fair pay with non-financial rewards can act as the best incentive or
motivator for good performance. Exploitation of employees in any manner must be
eliminated. Sound scheme of remuneration includes adequate financial and non-financial
incentives.
8. Centralization: There must be a good balance between centralization and
decentralization of authority and power. Extreme centralization and decentralization must be
avoided.
9. Scalar Chain: The unity of command brings about a chain or hierarchy of command
linking all members of the organisation from the top to the bottom. Scalar denotes steps.
10. Order: Fayol suggested that there is a place for everything. Order or system alone can
create a sound organisation and efficient management.
11. Equity: An organisation consists of a group of people involved in joint effort. Hence,
equity (i.e., justice) must be there. Without equity, we cannot have sustained and adequate
joint collaboration.
12. Stability of Tenure: A person needs time to adjust himself with the new work and
demonstrate efficiency in due course. Hence, employees and managers must have job
security. Security of income and employment is a pre-requisite of sound organisation and
management.
13. Esprit of Co-operation: Esprit de corps is the foundation of a sound organisation.
Union is strength. But unity demands co-operation. Pride, loyalty and sense of belonging are
responsible for good performance.
14. Initiative: Creative thinking and capacity to take initiative can give us sound
managerial planning and execution of predetermined plans. Criticism of Process of
Functional Approach
Though the proponents of management process approach have made significant contribution
to the development of thought, their work suffers from the following limitations:
1. There is no single classification of managerial functions acceptable to all the functional
theorists. There is also lack of unanimity about the various terms such as management and
administration, commanding and directing, etc.
2. The functionalists considered their principles to be universal in nature. But many of the
principles have failed to deliver the desired results in certain situations.
3. The functional theorists did not consider the external environment of business.
4. Fayol overemphasized the intellectual side of management. He felt that management
should be formally taught, but he did not elaborate the nature and contents of management
education.
Bureaucracy
Max Weber (1864-1920), a German sociologist contributed his views on bureaucracy to the
management thought. His primary contribution includes his theory of authority structure and
his description of organisations based on the nature of authority relations within them.

Essentially, it was Weber’s contention that there are three types of legitimate authority which
are as follows:
1. Rational-legal authority: Obedience is owed to a legally established position or rank
within the hierarchy of a business, military unit, government, and so on.
2. Traditional authority: People obey a person because he belongs to certain class or
occupies a position traditionally recognized as possessing authority, such as a real family.

3. Charismatic authority: Obedience is based on the follower’s belief that a person has
some special power or appeal.
Weber’s theory ‘bureaucracy’ recognizes rational-legal authority as the most important type
in organisations. Under traditional authority, leaders are not chosen for their competence, a
charismatic authority is too emotional and irrational. A bureaucratic organisation which is
based on rational-legal authority display the following features:
1. Division of Work: There is a high degree of division of work at both the operative and
administrative levels. This leads to specialization of work.
2. Hierarchy of Positions: There is a hierarchy of authority in the organisation. Each
lower position is under the control of a higher one. Thus, there is unity of command. The
bureaucratic structure is hierarchical in nature. It is like a pyramid in which quantity of
authority increases as one moves up the ladder in the organisation.
3. Rules and Regulations: The rules, regulations and procedures are clearly laid down
by the top administration. Their benefits are as under:
(a) They standardize operations and decisions.
(b) They serve as receptacles of past learning.
(c) They protect incumbents and ensure equality of treatment.
4. Impersonal Conduct: There is impersonality of relationships among the
organisational members. The decisions are entirely guided by rules and regulations and are
totally impersonal. There is no room for emotions and sentiments in this type of structure.
5. Staffing: The personnel are employed by a contractual relationship between the
employee and employer. The tenure of service is governed by the rules and regulations of the
organisation. The employees get a salary every month which is based on the job they handle
and also the length of service.
6. Technical Competence: The bureaucrats are neither elected not inherited, but they are
appointed through selection and the basis of selection is their technical competence.
Promotions in bureaucracies are also based on technical qualifications and performance.
7. Official Records: The administration of a bureaucratic organisation is supported by an
efficient system of record-keeping. The decisions and activities of the organisation are
formally recorded and preserved safely for future reference This is made possible by
extensive filing system. The filing system makes the organisation independent of individuals.
The official records serve as the memory of the organisation.
Criticism of Bureaucracy
It is not free of flaws. It may lead to many undesirable consequences such as:
1. The rules may be followed in letter and not in spirit. Thus, instead of providing guidelines,
the rules may become source of inefficiency. The rules may be misused or misinterpreted
by the persons concerned with the implementation of rules. Redtapism and technicism may
follow as a result.
2. Bureaucracy does not consider informal organisation and inter-personal difficulties.
3. Bureaucracy discourages innovation because every employee is supposed to act as per
rules and regulations or to the secondary goals.
4. Goal displacement may take place in a bureaucratic organisation. The bureaucrats may
give priority to rules and regulations or to the secondary goals.
5. The bureaucratic structure is tall consisting of several layers of executives. Thus,
communication from the top level to the lowest level will take a very long time.
Appraisal of Classical Theory
The fundamental objections against the classical theory are discussed below:
1.Narrow View of Organisation: The value of classical theory is limited by its narrow
concentration on the anatomy of formal organisation. In order to achieve rationality, the
classical writers ignored the human relations aspect. The interplay of individual personality,
informal groups and inter organisational conflicts in the formal organisation were neglected.
It is said that the focus of classical theory is on ‘organisation without people’.
2.Assumption of Closed System: Classical theorists viewed organisation as a closed system,
i.e., having no interaction with environment. This assumption is totally unrealistic. A modern
organisation is an open system which has continuous interaction with the environment
through the exchange of inputs and outputs and various types of information.
3. Assumptions about Human Behaviour: The human being was treated like any other
factor of production. They were supposed to obey their superiors. The classical writers
ignored the social, psychological and motivational aspects of human behaviour.
4. Economic Rewards as Main Motivators: The assumption that people at work can be
motivated solely through economic rewards is also wrong. Several researches in human
behaviour have contradicted this assumption. Non-monetary factors like better status and job
enrichment can also motivate the workers.
5. Lack of Empirical Verification: The classical principles are mostly based on the
personal experiences and limited observations of the practitioners. They are not based on
empirical research. They lack precision and comprehensive framework for analysis.
Moreover, it is not clear whether these principles are action recommendations or simply
definitions.
6. Lack of Universality of Principles: Classical theorists claimed that their principles
have universal application. This suggests that the same principles can be applied in: (i)
different organisations, (ii) different management levels in the same organisation, and (iii)
different functions of the same organisation. The empirical researches, however, suggest that
none of the principles has such characteristics. Moreover, there are many of the principles
which contradict with other principles. For example, principle of specialization is quite in
conflict with the principle of unity of command.
7. Excessive Emphasis on Rules and Regulations: Weber’s ‘ideal’ bureaucracy, a
major constituent of classical theory, suggested strict adherence to rules and regulations. The
scope for individual initiative is thus limited. The result is redtapism in the organisation.
Observation of rules and regulations becomes the main objective while the real objectives for
which these rules and regulations are formed are forgotten.
Neo-classical Theory
Human Relations Approach
The classical writers including Weber, Taylor and Fayol neglected the human relations
aspect. The neo-classicists focussed on the human aspect of industry. They modified the
classical theory by emphasizing the fact that organisation is a social system and the human
factor is the most important element within it. They conducted some experiments (known as
Hawthorne Experiments) and investigated informal groupings, informal relationships,
patterns of communication, patterns of informal leadership, etc. This led to the development
of human relations approach. Elton Mayo is generally recognized as the father of the Human
Relations School. Other prominent contributors to this schools include Roethlisberger,
Dickson, Dewey, Lewin, etc.
The human relations approach is concerned with recognition of the importance of human
element in organisations. It revealed the importance of social and psychological factors in
determining workers’ productivity and satisfaction. It was instrumental in creating a new
image of man and the work place the neo-classical or human relations approach put stress on
inter-personal relations and informal groups at the work-place.
The human relationists argued that achievement of organisational objectives is impossible
without the willing cooperation of people and such cooperation cannot be automatically
secured or ordered.
It has to be consciously achieved. The neo-classical approach advocated people-oriented
organisation structure which will integrate both informal and formal organisations.
The basic tenets of neo-classical theory or human relations approach are as under:
1. The business organisation is a social system.
2. The behaviour of an individual is dominated by the informal group of which he is a
member.
3. An individual employee cannot be motivated by economic incentives alone. His social and
psychological needs must be satisfied to improve the level of motivation.
4. In an organisation, it is ultimately cooperative attitude and not the more command which
yields result.
5. Management must aim at developing social and leadership skills in addition to technical
skills. It must take interest in the welfare of workers.
6. Morale and productivity go hand in hand in an organisation.
Hawthrone Studies
In 1927, a group of researchers led by George Elton Mayo and Fritz J. Roethlisberger at the
Harvard Business School were invited to join in the studies at the Hawthorne Works of
Western
Electric Company, Chicago. The experiment lasted upto 1932. Earlier, from 1924 to 1927, the
National Research Council made a study in collaboration with the Western Electric Company
to determine the effect of illumination and other conditions upon workers and their
productivity.
1. Illumination Experiment: This experiment was conducted to establish relationship
between output and illumination. The output tended to increase every time as the intensity of
light was improved. But the output again showed an upward trend when the illumination was
brought down gradually from the normal level. Thus, it was found that there is no consistent
relationship between output of workers and illumination in the factory. There were some
other factors which influenced the productivity of workers when the intensity of light was
increased or decreased.
2. Relay Assembly Room Experiment: In this experiment, a small homogeneous work-
group of girls was constituted. Several new elements were introduced in the work atmosphere
of this group. These included shorter working hours, rest pauses, improved physical
conditions, friendly and informal supervision, free social interaction among group members,
etc. Productivity and morale increased considerably during the period of the experiment.
Morale and productivity were maintained even if improvements in working conditions were
withdrawn. The researchers concluded that socio-psychological factors such as feeling of
being important, recognition, attention, participation, cohesive workgroup, and non-directive
supervision held the key for higher productivity.
3. Bank Wiring Observation Room Experiment: This experiment was conducted to
study a group of workers under conditions which were as close as possible to normal. This
group comprised of 14 workers. After the experiment, the production records of this group
were compared with their earlier production records. There were no significant changes in the
two because of the maintenance of ‘normal conditions. However, existence of informal
cliques in the group and informal production norms were observed by the researchers.
The Bank Wiring Experiment led to the following observations:
(a) Each individual was restricting output.

(b) The group had its own “unofficial” standards of performance.

(c) Individual output remained fairly constant over a period of time.
(d) Departmental records were distorted due to differences between actual and reported
output or between standard and reported working time.
4. Mass Interview Programme: The researchers interviewed a large number of workers with
regard to their opinions on work, working conditions and supervision. Initially, a direct
approach was used whereby interviewers asked questions considered important by managers
and researchers. Later, this approach was replaced by an indirect technique where the
interviewer simply listed to what the employees had to say. The findings confirmed the
importance of social factors at work in the total work environment.
Contributions of Human Relations Approach or Hawthorne Studies
The human relationists proposed the following points as a result of their findings of the
Hawthorne experiments:
1. Social System: The organisation in general is a social system composed of numerous
interacting parts. The social system defines individual roles and establishes norms that may
differ from those of the formal organisation.
2. Social Environment: The social environment on the job affects the workers and is
also affected by them. Management is not the only variable. Social and psychological factors
exercise a great influence on the behaviour of workers. Therefore, every manager should
adopt a sound human approach to all organisational problems.
3. Informal Organisation: The informal organisation does also exist within the frame
work of formal organisation and it affects and is affected by the formal organisation.
4. Group Dynamics: At the workplace, the workers often do not act or react as
individuals but as members of groups. The group determines the norms of behaviour for the
group members and thus exercises a powerful influence on the attitudes and performance of
individual workers. The management should deal with workers as members of work group
rather than as individuals.
5. Informal Leader: The informal leader sets and enforces group norms. He helps the
workers to function as a social group and the formal leader is rendered ineffective unless he
conforms to the norms of the group.
6. Communication: Two-way communication is necessary because it carries necessary
information downward for the proper functioning of the organisation and transmits upward
the feelings and sentiments of people who work in the organisation. It will help in securing
workers’ cooperation and participation in the decision-making process. Workers tend to be
more productive when they are given the opportunity to express their feelings, opinions and
grievances. This also give them psychological satisfaction.
7. Non-economic Rewards: Money is only one of the motivators, but not the sole
motivator of human behaviour. The social and psychological needs of the workers are very
strong. So noneconomic rewards such as praise, status, interpersonal relations, etc. play an
important role in motivating the employees. Such rewards must be integrated with the wages
and fringe benefits of the employees.
8. Conflicts: There may arise conflicts between the organisational goals and group
goals. Conflicts will harm the interest of workers if they are not handled properly. Conflicts
can be resolved through improvement of human relations in the organisation.
Criticism of Human Relations Approach
The human relations approach has been criticized on the following grounds:
1. Lack of Scientific Validity: The human relationists drew conclusions from Hawthorne
studies. These conclusions are based on clinical insight rather than on scientific evidence.
2. Over-emphasis on Group: The human relations approach over-emphasises the group and
group decision-making.
3. Over-stretching of Human Relations: It is assumed that all organisational problems are
amenable to solutions through human relations.
4. Limited Focus on Work: The human relations approach lacks adequate focus on work.
5. Over-stress on Socio-psychological Factors: The human relations approach undermines
the role of economic incentives in motivation and gives excessive stress on social and
psychological factors.
6. Conflict between Organisational and Individual Goals: It view conflict between the goal
of the organisation and those of individuals as destructive.
Behavioural Science Approach
Under behavioural science approach, the knowledge drawn from behavioural science,
namely, psychology, sociology and anthropology, is applied to explain and predict human
behaviour. It focuses on human behaviour in organisations and seeks to promote verifiable
propositions for scientific understanding of human behaviour in organisations. It lays
emphasis on the study of motivation, leadership, communication, group dynamics,
participative management, etc.
The essential characteristics of behavioural science approach are as under:
1. Data must be objectively collected and analysed.
2. Findings must be presented so that the distinction between cause and effect, as opposed to
chance occurrences, is clear.
3. Facts must be systematically related to one another within a systematic framework. Data
collection alone does not constitute a science.
4. The findings of a study must always be open to further examination and question.
The distinguishing feature of the behavioural sciences approach is the methodology employed
in developing the research in the management discipline. The crux of the methodology lies in
the collection and analysis of the relevant data. It is in this sense that this approach differs
from the human relations approach. Further, the behavioural scientists made the following
propositions:
1. An organisation is a socio-technical system.
2. Individuals differ with regard to attitudes, perceptions and value systems. As a result, they
behave differently to different stimuli under different conditions.
3. People working in the organisation have their needs and goals which may differ from the
organisational goals. Attempts should be made to achieve fusion between organisational
goals and human needs.
4. A wide range of factors influence inter-personal and group behaviour of people in
organisations.
The behaviour school has drawn heavily on the work of Maslow. His development of need
hierarchy to explain human behaviour and the dynamics of motivation process is an important
contribution. Douglas McGregor built on Maslow’s work in explaining his ‘Theory X’ and
‘Theory Y’. Frederick Herzberg developed a two-factor theory of motivation. He made a
distinction between the factors which either cause or prevent job dissatisfaction (hygienic
factors), and those factors which actually lead to motivation (motivational factors).
In the area of leadership, Robert Blak and Jane Mouton developed and popularized the
‘Managerial Grid’. Rensis Likert has identified and extensively researched four Management
Systems ranging from System 1: Exploitive-Authoritative to System 4: Group Participative.
Each system characterizes and organisational climate by employing several key dimensions
of effectiveness such as communication, motivation, leadership and others.
To sum up, the behavioural sciences approach gives emphasis on increasing productivity
through motivation and leadership. The central core of this approach lies in the following
aspects of human behaviour: motivation, leadership, communication, participative
management and group dynamics. The behavioural sciences have provided managers with a
systematic understanding of one of the most critical factors in the process of management-the
human element. Insights evolving from that understanding have been used to design work
situations that encourage increased productivity. It has enabled organisations to formulate
programmes to more efficiently train workers and managers, and it has effects in numerous
other areas of practical significance.
Appraisal of Behavioural Science Approach
1. The study of human behaviour is of great significance in management. Since an
individual is a product of social system, his behaviour is not determined by organisational
forces alone, but many forces like perception, attitudes, habits, and socio-cultural
environment also shape his behaviour. Therefore, in understanding human behaviour in the
organisation, all these factors must be taken into account.
2. The behavioural approach suggests how the knowledge of human behaviour can be
used in making people more effective in the organisation.
3. Behaviourists have enriched management theory through their contributions in the
areas of group dynamics, motivation communication and leadership. However, they have
failed in developing an integrated theory of management. Although, study of human
behaviour in organisations is extremely important yet management cannot be confined only
to this area.
4. There are other variable such as technology and environment which have an important
bearing on the effectiveness of an organisation.
5. The behavioural science, refined as they might be, have not achieved the precision of
the physical sciences.
6. Often the complexities of the human factor and the organisational setting make exact
predictions impossible. It is not uncommon for programmes based on sound behavioural
principles to have unexpected results.
7. It should also be noted that the finding of behavioural science research is tentative and
require further investigation. They should not be treated as applicable to all situations.
8. Behavioural guidelines can be helpful and profitable, but are not complete, valid and
applicable to all situations.
Quantitative Approach
This approach is also called ‘Mathematical’, ‘Operations Research’ or ‘Management Science’
approach. The basic feature of the quantitative management thought is the use of mixed teams
of scientists from several disciplines. This school used scientific tools for providing a
quantitative base for managerial decisions. The techniques commonly used for managerial
decision-making include Linear Programming, Critical Path Method (CPM), Programme
Evaluation Review Technique (PERT), Games Theory, Queuing Theory and Break-Even
Analysis.
The quantitative approach uses mathematical formulae for finding solutions to the problems
that were previously unsolved. The abiding belief of the quantitative approach is that if
management is a logical process, it may be expressed in terms of mathematical symbols and
relationships. The basic approach is the construction of a quantitative model because it is
though this device that the problem is expressed in its basic relationships and in terms of
selected objectives.
The construction of the model expresses the effectiveness of the system under study as a
function of a set of variables at least one of which is subject control. The general form of
operations research model is E = f (x1, y1), where E represents the effectiveness of the
system (profit, cost and the like) x1 the variables of the system which are subjected to control
and y1 those which are not subject to control.
The quantitative approach to management has its root in the scientific management
movement. Since Taylor advocated a logical sequence of problem formulation, fact finding,
modelling, a tentative solution, testing, etc., his scientific approach could be classified as an
early form of quantitative approach to management. A natural extension of the scientific
management is the operations research.
The approach was updated so as to include development of mathematical models to represent
a system under study. I may be noted that the development of models required the skills of
money disciplines such as engineering, mathematics, economic, statistics, physical science,
behavioural sciences and cost accountancy. The mathematical formulation enabled the
managers to discover significant relationships that they could control.
Another important development along with the growth in the number of quantitative
techniques was the introduction of high-speed digital computers. Starting in about 1970, the
quantitative approach to management turned away from emphasis on narrow operations
research techniques to the boarder perspective of decision techniques and models building. It
also incorporated computerised information systems and operations management. The latest
emphasis of the quantitative approach marked a move towards a more broad-based
management.
Systems Approach
In the 1960s, a new approach to management appeared which attempted to unify the earlier
schools of thought. This approach is commonly referred to as ‘Systems Approach’. Basically,
it took up where the functional process management school let off to try to unify management
theory. “A system viewpoint may provide the impetus to unify management theory. By
definition, it could treat the various approaches, such as the process, quantitative and
behavioural ones, as subsystems in an overall theory of management. Thus, the systems
approach may succeed where the process approach has failed to lead management out of the
theory jungle”.
The systems approach is based on the generalization that an organisation is a system and its
components are inter-related and inter-dependent. “A system is composed of related and
dependent elements which, when in interactions, form a unitary whole. It is simply an
assemblage or combination of things or parts, forming a complex whole. Its important feature
is that it is composed of hierarchy of sub-systems. The world as a whole can be considered to
be a system in which various national economies are sub-system. In turn, each national
economy is composed of its various industries, each industry is composed of firms, and of
course, a firm can be considered a system composed of sub-systems such as production,
marketing, finance, accounting and so on”. Thus, each system may comprise several sub-
systems and in turn, each sub-system be further composed of sub-systems.
An organisation as a system has the following characteristics:
1. A system is goal-oriented.
2. A system consists of several sub-systems which are interdependent and inter-related.
3. A system is engaged in processing or transformation of inputs into outputs.
4. An organisation is an open and dynamic system. It has continuous interface with the
external environment as it gets inputs from the environment and also supplies its output to
the environment. It is sensitive to its environment such as government policies,
competition in the market, technological advancement, tastes of people, etc.
5. A system has a boundary which separates it from other systems.
Open System Concept
A system may be closed or open. A closed system is self-dependent and does not have any
interaction with the external environment. Physical and mechanical systems are closed
systems. A closed system concentrates completely on internal relationships, i.e., interaction
between subsystems only. Because of lack of interaction with environment, it is unable to
monitor changes occurring in the external environment. On the other hand, an open system
has active interface with the environment through the input-output process as shown in Figure
1. It can respond to the changes in the environment through the feedback mechanism. That is
why modern authors consider organisation as an open system.
An open system obtains inputs, such as raw materials, layout, capital, technology and
information, from the environment. Operations are performed upon the inputs and combined
with the managerial process to produce desirable outputs which are supplied to the
environment (i.e., customers). Through a feedback process, the environment’s evaluation of
the output becomes part of the inputs for further organisational activity. If the environment is
satisfied with the output, business operations continue. If it is not, changes are initiated within
the business systems so that requirements of the customers are fully met. This is how an open
system responds to the forces of change in the environment.
Figure 3 Open System View of Organisation

Features of Systems Approach Notes

The systems approach is far more superior to classical and neo-classical approach because of
the following features:
1. Interdependent Sub-systems: An organisation is a system consisting of several sub-
systems. For example, in a business enterprise, production, sales and other departments and
subsystems. All these sub-systems are functionally interacting and interdependent. They are
used together into an organic whole through goals, authority flows, resources flows and so
on.
2. Whole Organisation: The system approach provides a unified focus to organisational
efforts. It gives managers a way of looking at the organisation as a whole that is greater than
the sum of its parts. The stress is laid on integration of various sub-systems of the
organisation to ensure overall effectiveness of the system.
3. Synergy: The output of a system is always more than the combined output of its parts.
This is called the law if synergy. The parts of system become more productive when they
interact with each other than when they act in isolation.
4. Multi-disciplinary: Modern theory of management is enriched by contributions from
various disciplines like psychology, sociology, economics, anthropology, mathematics,
operations research and so on.
Appraisal of Systems Approach
The system approach is an attempt to design an overall theory of management.
Interdependency and inter-relationships between various sub-systems of the organisation is
adequately emphasized. A pressure for change in one sub-system generally has a direct or
indirect influence on the other sub-systems also. Thus, the systems approach acknowledges
environmental influences which were ignored by the classical theory.
The systems approach represents a balanced thinking on organisation and management. It
stresses that managers should avoid analysing problems in isolation and rather develop the
ability for integrated thinking. It recognizes the interaction and interdependence among the
different variables of the environment. It provides clues to the to the complex behaviour of an
organisation. It warns against narrow fragmented and piecemeal approach to problems by
stressing interrelationships.
The systems approach is criticized as being too abstract and vague. It cannot easily be applied
to practical problems. It does not offer specific tools and techniques for the practising
manager. Moreover, this approach does not recognize differences in systems. It fails to
specify the nature of interactions and interdependencies between an organisation and its
external environment.

Contingency Approach
A review of the earlier schools of management helps us to place the current approach to
management in perspective. The performance results of the management process school’s
universalist assumptions were generally disappointing. The behavioural approach to
management was incomplete. Certain quantitative techniques worked in some situations and
not in others. The quantitative people could not solve behavioural problems and behavioural
people could not overcome operations problems adaptable to quantitative solutions. Many
authors believe that systems-based theory could solve this dilemma. But this approach is also
as yet incomplete. The latest approach to management which integrates the various
approaches to management is known as ‘contingency’ or ‘situational’ approach.
The contingency approach is not new. Pigors and Myers propagated this approach in the area
of personnel management as early as in 1950. However, the work of Joan Woodward in the
1950s marked the beginning of the contingency approach to organisation and management.
Other contributors include Tom Burns, G.W. Stalker, Paul Lawrence, Jay Lorsch, and James
Thompson.
They analysed the relationship between the structure of the organisation and the environment.
Thus, contingency approach incorporates external environment and attempts to bridge the
theorypractice gap. It does so in the systems framework. In other words, contingency
approach as regards organisation as an open and dynamic system which has continuous
interaction with environment.
The contingency theory stresses that there is no one best style of leadership which will suit
every situation. The effectiveness of a particular leadership style will vary from situation to
situation. For instance, participative leadership may be more effective in an organisation
employing professional personnel in a high technology operation in an atmosphere of
nonmaterialistic orientation and free expression. On the other hand, authoritarian leadership
would be more effective in an organisation which employs unskilled personnel on routine
tasks in social values oriented towards materialism and obedience to authority.
Evaluation of Contingency Approach
Contingency approach guides the managers to be adaptive to environmental variables. In
other words, the managers should develop situational sensitivity and practical selectivity.
Contingency approach suggests the managers to condone environmental contingencies while
choosing their style and techniques.
Contingency approach is an improvement over systems approach. It not only examines the
relationships of sub-systems of the organisation, but also the relationship between the
organisation and its environment.
Operational Approach

Koontz, O’Donnell and Weinrich have advocated the operational approach to management.
This approach recognizes that there is a central core of knowledge about managing which
exists in management such as line and staff, patterns of departmentation, span of
management, managerial appraisal and various managerial control techniques.
Operational approach to management regards management as a universally applicable body
of knowledge that can be brought to bear at all levels of managing and in all types of
enterprises.
At the same time, the approach recognizes that the actual problems managers face and the
environments in which they operate may vary between enterprises and levels. It also
recognizes that application of science by perceptive practitioner must take this into account in
designing practical problem solutions. The operational approach to management is based
largely on the following fundamental beliefs that:
1. Management is an operational process initially best dissected by analysing the management
functions.
2. If the knowledge of management is to be presented effectively, clear concepts are
necessary.
3. Experience with managing in a variety of situations can furnish grounds for distillation of
basic truths-theory and principles-which have a clarifying and predictive value in
understanding and improving practice.
4. Principles of management can become the focal points for useful research both to ascertain
their validity and to improve their applicability.
5. Managing is an art (like medicine and engineering). It should rely on underlying science
concepts, theory and principles and techniques.
6. While the total culture and the physical and biological universe variously affect the
manger’s environment, as they do in every other field of science and art, management
science and theory need not encompass all knowledge in order to serve as a useful
foundation of management practice. Management Functions
Managerial Functions: Various management scholars studied different organizations at
different times; they identified the functions of management in their own ways. Henry Fayol,
the father of functional or administrative management remarked: ―To manage is to forecast
and plan, to organize, to command, to coordinate and to control. Thus, Fayol classified
management functions into five categories as follows:
(i) to forecast and plan,
(ii) to organize,
(iii) to command or to give orders,
(iv) to co-ordinate, and
(v) to control
Luther Gullick offered a list of administrative functions under the catchword PODSCORB.
Each alphabet of this keyword ―PODSCORB stands for the following activities: P for
Planning, O for Organization, D for Directing, S for Staffing, Co for Coordinating, R for
Reporting, and B for Budgeting.
According to Koontz and „O‟ Donnell, ―The most useful method of classifying managerial
activities is to group them around the functions of planning, organizing, staffing, directing,
and controlling. ― They think that coordination is not a separate function but is the essence
of management. Thus, for the sake of analysis of their management process, we can classify
the management functions into the following categories:
Figure 4 Management Functions
1. Planning
It is the basic function of management. It deals with chalking out a future course of action &
deciding in advance the most appropriate course of actions for achievement of pre-determined
goals. According to KOONTZ, ―Planning is deciding in advance – what to do, when to do &
how to do. It bridges the gap from where we are & where we want to be‖. A plan is a future
course of actions. It is an exercise in problem solving & decision making. Planning is
determination of courses of action to achieve desired goals. Thus, planning is a systematic
thinking about ways & means for accomplishment of pre-determined goals. Planning is
necessary to ensure proper utilization of human & non-human resources. It is all pervasive, it
is an intellectual activity and it also helps in avoiding confusion, uncertainties, risks, wastages
etc. Budgeting Planning involves the following steps.
(i) Determination of objectives;
(ii) Forecasting;
(iii) Formulation of policies and programmes;
(iv) Preparation of schedules
Planning is a process of seeking answer to some of the following particular questions:
(i) What is to be done?
(ii) Why it is to be done?
(iii) How the work will be done?
(iv) Who will do the work?
(v) When the work will be done?
(vi) Where the work will be done?
Planning pervades at all the levels of organization. But the scope of planning is not the same
at each level of organization. Higher the level of organization, the broader the scope of
planning. Planning may be long term and short term.
2.Organizing
It is the process of bringing together physical, financial and human resources and developing
productive relationship amongst them for achievement of organizational goals. According to
Henry Fayol, ―To organize a business is to provide it with everything useful or its
functioning i.e., raw material, tools, capital and personnel. To organize a business involves
determining & providing human and non-human resources to the organizational structure.
Organizing as a process involves:
1. Identification of activities.
2. Classification of grouping of activities.
3. Assignment of duties.
4. Delegation of authority and creation of responsibility.
5. Coordinating authority and responsibility relationships.
3.Staffing
It is the function of manning the organization structure and keeping it manned. Staffing has
assumed greater importance in the recent years due to advancement of technology, increase in
size of business, complexity of human behavior etc. The main purpose of staffing is to put
right man on right job i.e., square pegs in square holes and round pegs in round holes.
According to Kootz & O ‘Donell, ―Managerial function of staffing involves manning the
organization structure through proper and effective selection; appraisal & development of
personnel to fill the roles designed the structure‖. Staffing involves:
1. Manpower Planning (estimating man power in terms of searching, choose the person
and giving the right place).
2. Recruitment, selection & placement.
3. Training & development.
4. Remuneration.
5. Performance appraisal.
6. Promotions & transfer.
4. Directing
It is that part of managerial function which actuates the organizational methods to work
efficiently for achievement of organizational purposes. It is considered life-spark of the
enterprise which sets it in motion the action of people because planning, organizing and
staffing are the mere preparations for doing the work. Direction is that inert-personnel aspect
of management which deals directly with influencing, guiding, supervising, motivating sub-
ordinate for the achievement of organizational goals. Direction has following elements:
1. Supervision
2. Motivation
3. Leadership
4. Communication
Supervision- implies overseeing the work of subordinates by their superiors. It is the act of
watching & directing work & workers.
Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work.
Positive, negative, monetary, non-monetary incentives may be used for this purpose.
Leadership- may be defined as a process by which manager guides and influences the work
of subordinates in desired direction.
Communications- is the process of passing information, experience, opinion etc from one
person to another. It is a bridge of understanding.
5. Controlling
It implies measurement of accomplishment against the standards and correction of deviation
if any to ensure achievement of organizational goals. The purpose of controlling is to ensure
that everything occurs in conformities with the standards. An efficient system of control helps
to predict deviations before they actually occur. According to Theo Haimann, ―Controlling
is the process of checking whether or not proper progress is being made towards the
objectives and goals and acting, if necessary, to correct any deviation‖. According to Koontz
& O‟Donell ―Controlling is the measurement & correction of performance activities of
subordinates in order to make sure that the enterprise objectives and plans desired to obtain
them as being accomplished. Therefore, controlling has following steps:
a. Establishment of standard performance.
b. Measurement of actual performance.
c. Comparison of actual performance with the standards and finding out deviation if
any. d. Corrective action.
Managerial Roles and Skills
Role of Managers
Managers are the primary force in an organization's growth and expansion. Larger
organizations are particularly complex due to their size, process, people and nature of
business. However, organizations need to be a cohesive whole encompassing every employee
and their talent, directing them towards achieving the set business goals. This is an extremely
challenging endeavour, and requires highly effective managers having evolved people
management and communication skills.
The Top Management
The top-level executives direct the organization to achieve its objectives and are instrumental
in creating the vision and mission of the organization. They are the strategic think-tank of the
organization.
Senior Management
The General Manager is responsible for all aspects of a company. He is accountable for
managing the P&L (Profit & Loss) statement of the company. General managers usually
report to the company board or top executives and take directions from them to direct the
business.
The Functional Manager is responsible for a single organizational unit or department within a
company or organization. He in turn is assisted by a supervisor or groups of managers within
his unit/department. He is responsible for the department’s profitability and success.
Line and Staff Managers
Line Managers are directly responsible for managing a single employee or a group of
employees. They are also directly accountable for the service or product line of the company.
For example, a line manager at Toyota is responsible for the manufacturing, stocking,
marketing, and profitability of the Corolla product line.
Staff Managers often oversee other employees or subordinates in an organization and
generally head revenue consuming or support departments to provide the line managers with
information and advice.
Project Managers
Every organization has multiple projects running simultaneously through its life cycle. A
project manager is primarily accountable for leading a project from its inception to
completion. He plans and organizes the resources required to complete the project. He will
also define the project goals and objectives and decide how and at what intervals the project
deliverables will be completed.
The Changing Roles of Management and Managers
Every organization has three primary interpersonal roles that are concerned with interpersonal
relationships. The manager in the figurehead role represents the organization in all matters of
formality. The top-level manager represents the company legally and socially to the outside
world that the organization interacts with.

Mintzberg’s Set of Ten Roles

Professor Henry Mintzberg, a great management researcher, after studying managers for
several weeks concluded that, to meet the many demands of performing their functions,
managers assume multiple roles.
He propounded that the role is an organized set of behaviours. He identified the following ten
roles common to the work of all managers. These roles have been split into three groups as
illustrated in the following figure.
Interpersonal Role
Figurehead – Has social, ceremonial and legal responsibilities.
Leader – Provides leadership and direction.
Liaison – Networks and communicates with internal and external contacts.
Informational Role
Monitor – Seeks out information related to your organization and industry, and monitors
internal teams in terms of both their productivity and well-being.
Disseminator – Communicates potentially useful information internally.
Spokesperson – Represents and speaks for the organization and transmits information
about the organization and its goals to the people outside it.
Decisional Role
Entrepreneur – Creates and controls change within the organization - solving problems,
generating new ideas, and implementing them.
Disturbance Handler – Resolves and manages unexpected roadblocks.
Resource Allocator – Allocates funds, assigning staff and other organizational resources.
Negotiator – Involved in direct important negotiations within the team, department, or
organization
Managerial Skills
Henri Fayol, a famous management theorist also called as the Father of Modern Management,
identified three basic managerial skills - technical skill, human skill and conceptual skill.

Technical Skill
Knowledge and skills used to perform specific tasks. Accountants, engineers, surgeons all
have their specialized technical skills necessary for their respective professions. Managers,
especially at the lower and middle levels, need technical skills for effective task performance.
Technical skills are important especially for first line managers, who spend much of their
time training subordinates and supervising their work-related problems
Human Skill
Ability to work with, understand, and motivate other people as individuals or in groups.
According to Management theorist Mintzberg, the top (and middle) managers spend their
time: 59 percent in meetings, 6 percent on the phone, and 3 percent on tours.
Ability to work with others and get co-operation from people in the work group. For
example, knowing what to do and being able to communicate ideas and beliefs to others and
understanding what thoughts others are trying to convey to the manager. Conceptual Skill
 Ability to visualize the enterprise as a whole, to envision all the functions involved in
a given situation or circumstance, to understand how its parts depend on one another,
and anticipate how a change in any of its parts will affect the whole.
 Creativity, broad knowledge and ability to conceive abstract ideas. For example, the
managing director of a telecom company visualizes the importance of better service
for its clients which ultimately helps attract a vast number of clients and an
unexpected increase in its subscriber base and profits.
Other Managerial Skills
Besides the skills discussed above, there are two other skills that a manager should possess,
namely diagnostic skill and analytical skill.
Diagnostic Skill: Diagnose a problem in the organization by studying its symptoms. For
example, a particular division may be suffering from high turnover. With the help of
diagnostic skill, the manager may find out that the division’s supervisor has poor human skill
in dealing with employees. This problem might then be solved by transferring or training the
supervisor.
Analytical Skill: Ability to identify the vital or basic elements in a given situation, evaluate
their interdependence, and decide which ones should receive the most attention. This skill
enables the manager to determine possible strategies and to select the most appropriate one
for the situation.
For example, when adding a new product to the existing product line, a manager may analyze
the advantages and risks in doing so and make a recommendation to the board of directors,
who make the final decision.
Social Responsibility of Management or Social Responsibility of Business (SRB) or
Corporate Social responsibility (CSR).
The term SRB/CSR has been defined in more than one way.
 Narrow or classical definitions
 Neo-classical definitions, and
 Modern eclectic definitions
Narrow or classical definitions: - Classical definitions state SRB/CSR is limited to the
shareholders only. Noble laureate Milton Friedman has stated that. There is one and only one
social responsibility of business i.e., to use its resources in activities designed to increase its
profit ‘s so long as it stays within the rules of the game.
Neo- Classical definitions: The neo-classical definitions of SRB/CSR state that the
responsibility of business goes beyond making profit for shareholders. But to all the
stakeholders (customers, workforce, suppliers, competitors, local community, government
etc.)
According to H.R. Bowen, Social responsibility of business means, “to pursue those policies,
to make those decisions, or to follow those lines of action which are desirable in terms of the
objectives and values of our society “
The neo-classical definitions state that SRB/CSR means the obligation of business
organizations to make decisions and take actions that will contribute to the welfare and
interests of all its stakeholders as well as the public at large.
Modern Eclectic Definitions: - The modern concept states the business has responsibility
towards the various living stakeholders as well as towards the generations to come.
Therefore, the modern eclectic concept of social responsibility includes the responsibility of
business towards all its stakeholders and natural environment for sustainable economic
development.
According to Lord Holmes and Richard Watts. ―CSR is the continuing commitment by
business to behave ethically and contribute to economic development while improving the
quality of life of the work force and their families as well as the local community and society
at large. SRB/CSR is the obligation of business not only to its all stakeholders and society at
large but also the commitment of business to contribute to sustainable economic development
and to protect the natural environment.
Responsibility towards Itself:
 To operate the business efficiently and effectively
 To ensure the production and distribution of goods and services at a profit. This is
necessary for its survival, growth and socially responsible behavior.
 To make policies that ensures achievement of economic and social objectives of the
business simultaneously.
 To maintain wealth- producing resources intact by making profits to offset risk of
business activities.
 To innovate and expand business by producing new products/ services, by entering
into new markets, by using new raw materials etc.
 To make every effort to remain competitive at all times.
 To make every effort to perform all the activities fool proof. Every defect or fault
should be corrected without being told or pointed out by others.
 To ensure protection of natural environment for sustainable economic development
for future growth and development.
Responsibility towards Shareholders/Owners
  To ensure payment of fair and consistent return on their investment.
 To make proper use of their funds within their authority.
 To ensure safety and growth of their investments.
 To make full and proper discloser of all the facts within the framework of law and
regulations
 To hold meetings from time to time and give proper notice of them to all the
shareholders.
 To conduct all the meeting as per the law
 To send copies of annual reports and other documents as required any the law.
 To ensure compliance of code of corporate governance framed by the SEBI/ Ministry
of corporate affairs.
Responsibility towards Customers
 To ensure supply of goods/ services of right quality, at right time, at right place and
right price.
 To ensure supply of goods/ services to meet the needs of different classes/ categories
of customers.
 To enhance product safety.
 To reduce polluting potential of products.
 To improve packaging and labelling through eco- friendly measures
 To innovate and produce energy efficient products
 To adopt fair and ethical practices and not indulge in adulteration, hoarding and black
marketing, profiteering practices. Responsibility towards Employees
 To employ all the employees at the right job  To pay fair wages/salaries, bonus etc.
 To ensure healthy and safe working conditions/ work environment
 To provide adequate benefits such as housing, medical facilities, insurance cover,
retirement benefits etc.
 To provide reasonable job security.
 To provide opportunities of training, promotions. career development and job
satisfaction  To provide day care facilities for working parents.
 To ensure equal opportunity to all without any discrimination of cost, creed, sex etc.
 To ensure compliance of work place ethics.

Responsibility towards Suppliers

 To ensure timely payment of all the bills due.
 To bargain for a win- win situation for both
 To make every effort to ensure long-term sound business relations.
 To ensure proper performance of terms of contract.
  To retrain from taking undue advantages of legal loop-holes in the supply contract.
 To ensure adequate secrecy of contract terms.
 To provide opportunities to new suppliers.
 To inform about the market trends and other facts to suppliers
Responsibility towards Competitors
 To play fair game in competition for encouraging healthy competition
 Not to indulge in monopolistic and restrictive practices that restrains the free and fair
competition.
 Avoid misleading advertisements, false or unreasonable product guarantee, tricky
pricing that create the barriers to healthy competition.
 Not to indulge in brand assassination activities
 Not to mislead or misrepresent the customers about competitors.
 To ensure free entry of competitors for the healthy growth of trade and economy.
Responsibility towards Government
 To comply with the laws and regulations of the land
 To pay the taxes and duties honestly within the time
 To actively contribute to the economic development of the country.
 To contribute to the implementation of socio- economic plans and programmes or the
government such as family welfare, poverty alleviation etc.
 To respond positively to the government appeals and instructions.
 To restrain from sacking undue favors from government officials and deny bribes and
other corrupt practices.
 To donate funds and provide other helps in the times of national calamity.
Responsibility towards Environment
 To help develop local infrastructure like foot ways, roads, water supply, parks and
sanitation facilities, educational institutions, hospitals etc.
 To provide employment opportunities to local people.
 To impart job-oriented education and training to unemployed persons.
 Top contribute to the upliftment of weaker sections of the community.
 To support minority owned businesses.
 To encourage local trade
 To make efforts to recycle the products to save environment
 To refrain from all kinds of anti-social, unfair and unethical activities.

UNIT II
FUCTIONS OF MANAGEMENT
Nature & Purpose of Planning – Types of Plans – Steps in Planning- Decision Making –
Definition & Types- Decision Making Conditions & Styles – Decision Making Process –
Organizing & Organizations Structure – Definitions – Organizing Concepts – Work
Specialization – Chain of Command – Line & Staff Authority – Delegation of Authority –
Span of Control – Centralization & Decentralization – Organization Structure.
PLANNING
Introduction
The necessity for planning arises because of the fact that business organisations have to
operate, survive and progress in a highly dynamic economy where change is the rule, not the
exception. The change may be sudden and extensive, or it may be slow and almost
imperceptible. Some of the important forces of change may be: changes in technology,
changes in population and income distribution, changes in the tastes of consumers, changes in
competition, changes in government policies etc. These changes often give rise to
innumerable problems and throw countless challenges. Most of these changes are thrust on
managers thus, managers are forced to adjust their activities in order to take full advantage of
favourable developments or to minimise the adverse effects of unfavourable ones. Successful
managers try to visualise the problems before they turn into emergencies. As pointed out by
Terry, “successful managers deal with foreseen problems, and unsuccessful managers
struggle with unforeseen problems. The difference lies in planning.” Managers charged with
the responsibility of achieving definite targets, do not wait for future. They make the future.
They introduce original action by removing present difficulties, anticipating future problems,
changing the goals to suit the internal and external changes, experiment with creative ideas
and take the initiative, attempting to shape the future and create a more desirable
environment.
Meaning and Definition of Planning
It is the basic function of management. Planning is the process of bridging the gap between
where we are and where we want to be in the future. In other words, planning is ―looking
ahead, relating today ‘s events with tomorrow ‘s possibilities.

According to KOONTZ, ―Planning is deciding in advance – what to do, when to do & how
to do. It bridges the gap from where we are & where we want to be.
A plan is a future course of actions. It is an exercise in problem solving & decision making.
Planning is determination of courses of action to achieve desired goals. Thus, planning is a
systematic thinking about ways & means for accomplishment of pre-determined goals.
Planning is necessary to ensure proper utilization of human & non-human resources. It is all
pervasive, it is an intellectual activity and it also helps in avoiding confusion, uncertainties,
risks, wastages etc. Planning is a process of seeking answer to some of the following
particular questions:
(vii) What is to be done?
(viii) Why it is to be done?
(ix) How the work will be done?
(x) Who will do the work?
(xi) When the work will be done?
(xii) Where the work will be done?
Planning pervades at all the levels of organization. But the scope of planning is not the same
at each level of organization. Higher the level of organization, broaden the scope of planning.
Planning may be long term and short term.

A plan is a forecast for accomplishment. It is a predetermined course of action. It is today’s

projection for tomorrow’s activity. In other words, to plan is to produce a scheme for future
action, to bring about specified results at a specified cost, in a specified period of time.
Management thinkers have defined the term, basically, in two ways:

1. Based on futurity: “Planning is a trap laid down to capture the future” (Allen).

“Planning is deciding in advance what is to be done in future” (Koontz).

“Planning is informed anticipation of future” (Haimann).

“Planning is ‘anticipatory’ decision-making” (R.L. Ackoff).

2. As a thinking function:

“Planning is a thinking process, an organised foresight, a vision based on fact and

experience that is required for intelligent action” (Alford and Beatty)
It is deciding in the present, what is to be done in future. It is the process of thinking before
doing. A plan is a specific, documented intention consisting of an objective and an action
statement. The objective portion is the end, and the action statement represents the means to
that end. Stated another way, objectives give management targets to shoot at, whereas action
statements provide the arrows for hitting the targets. Properly conceived plans tell what,
where and how something is to be done.
Nature and Characteristics of Planning
Planning has a number of characteristics:
1. Planning is goal-oriented: All plans arise from objectives. Objectives provide the
basic guidelines for planning activities. Planning has no meaning unless it contributes in
some positive manner to the achievement of predetermined goals.
2. Planning is a primary function: Planning is the foundation of management. It is a
parent exercise in management process. It is a preface to business activities.
3. Planning is all-pervasive: Planning is a function of all managers. It is needed and
practised at all managerial levels. Planning is inherent in everything a manager does.
Managers have to plan before launching a new business.
4. Planning is a mental exercise: Planning is a mental process involving imagination,
foresight and sound judgment. Planning compels managers to abandon guesswork and
wishful thinking.
5. Planning is a continuous process: Planning is continuous. It is a never-ending
activity. Once plans for a specific period are prepared, they are translated into action.
6. Planning involves choice: Planning essentially involves choice among various
alternative courses of action.
7. Planning is forward looking: Planning means looking ahead and preparing for the
future. It means peeping into the future, analysing it and preparing for it.
8. Planning is flexible: Planning is based on a forecast of future events. Since future is
uncertain, plans should be reasonably flexible.
9. Planning is an integrated process: Plans are structured in a logical way wherein
every lowerlevel plan serves as a means to accomplish higher level plans. They are highly
interdependent and mutually supportive.
10. Planning includes efficiency and effectiveness dimensions: Plans aim at deploying
resources economically and efficiently. They also try to accomplish what has been actually
targeted. The effectiveness of plans is usually dependent on how much it can contribute to the
predetermined objectives.
Scope and Significance of Planning
In a complex business situation, planning helps managers meet the challenges posed by the
environment, while at the same time minimizing the risks associated with them. Planning is a
prerequisite not only for achieving success but also for surviving in a complex and
competitive world. Planning is very important in all types of organizations. It forces
organizations to look ahead and decide their future course of action so as to improve their
profitability. Organizations that plan in advance are more likely to succeed than those which
fail to plan for the future. Planning is the first step in the management process. It ensures that
the employees of an organization carry out their work in a systematic and methodical manner.
It also helps coordinate and control various tasks and makes sure that resources are used
optimally.
1. Focuses Attention on Objectives
2. Offsets Uncertainty and Risk
3. Provides Sense of Direction
4. Provides Guidelines for Decision-making
5. Increases Organizational Effectiveness
6. Provides Efficiency in Operations
7. Ensures Better Coordination
8. Facilitates Control
9. Encourages Innovation and Creativity
10. Facilitates Delegation
Types of Plans

Three major types of plans can help managers achieve their organisation’s goals: strategic,
tactical, and operational. Operational plans lead to the achievement of tactical plans, which in
turn lead to the attainment of strategic plans. In addition to these three types of plans,
managers should also develop a contingency plan in case their original plans fail.
1. Operational plans: The specific results expected from departments, work groups, and
individuals are the operational goals. These goals are precise and measurable. Thus, 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.
Operational plans can be a single-use plan or an ongoing plan.
(a) Single-use plans: These plans apply to activities that do not recur or repeat. A onetime
occurrence, such as a special sales program, is a single-use plan because it deals with the
who, what, where, how, and how much of an activity.
(b) Continuing or ongoing plans: These are usually made once and retain their value over
a period of years while undergoing periodic revisions and updates.
(i) A policy: Because it provides a broad guideline for managers to follow when dealing
with important areas of decision making. Policies are general statements that explain
how a manager should attempt to handle routine management responsibilities. Typical
human resources policies, for an instance, address such matters as employee hiring,
terminations, performance appraisals, pay increases, and discipline.
(ii) A procedure: Because it explains how activities or tasks are to be carried out. Most
organisations have procedures for purchasing supplies and equipment, for example. This
procedure usually begins with a supervisor completing a purchasing requisition. The
requisition is then sent to the next level of management for approval. The approved
requisition is forwarded to the purchasing department. Depending on the amount of the
request, the purchasing department may place an order, or they may need to secure
quotations and/or bids for several vendors before placing the order. By defining the steps
to be taken and the order in which they are to be done, procedures provide a standardized
way of responding to a repetitive problem.

(iii) A rule: Because it tells an employee what he or she can and cannot do. Rules are “do”
and
“don’t” statements put into place to promote the safety of employees and the uniform
treatment and behavior of employees. For example, rules about tardiness and absenteeism
permit supervisors to make discipline decisions rapidly and with a high degree of fairness.
2. 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.
3. Strategic plans: A strategic plan is an outline of steps designed with the goals of the
entire organisation as a whole in mind, rather than with the goals of specific divisions or
departments.
Strategic planning begins with an organisation’s mission.
Strategic plans look ahead over the next two, three, five, or even more years to move the
organisation from where it currently is to where it wants to be. Requiring multilevel
involvement, these plans demand harmony among all levels of management within the
organisation. Top-level management develops the directional objectives for the entire
organisation, while lower levels of management develop compatible objectives and plans to
achieve them. Top management’s strategic plan for the entire organisation becomes the
framework and sets dimensions for the lowerlevel planning.
4. 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.

Steps in the Planning Process

Planning is a vital managerial function. It is intellectually demanding. It requires a lot of time
and effort on the part of planners. They must adopt a systematic approach so as to avoid
pitfalls, errors and costly mistakes which may upset the whole business later on. Such a
systematic approach may consist of the following steps:
Figure 5 Steps in the Planning Process

1. Establishing objectives: The first step in the planning process is to identify the goals
of the organisation. The internal as well as external conditions affecting the organisation must
be thoroughly examined before setting objectives. The objectives so derived must clearly
indicate what is to be achieved, where action should take place, who is to perform it, how it is
to be undertaken and when is it to be accomplished. In other words, managers must provide
clear guidelines for organisational efforts, so that activities can be kept on the right track.
2. Developing premises: After setting objectives, it is necessary to outline planning
premises. Premises are assumptions about the environment in which plans are made and
implemented. Thus, assumptions about the likely impact of important environmental factors
such as market demand for goods, cost of raw materials, technology to be used, population
growth, government policy, etc. on the future plans are made. The demand for fuel efficient
vehicles in the late 1980s has compelled virtually all automobile manufacturers in India to go
in search of collaborative agreements with foreign manufacturers from Japan, Germany,
USA, etc. Plans should be formulated by the management, keeping the constraints imposed
by internal as well as external conditions in mind.
3. Evaluating alternatives and selection: After establishing the objectives and planning
premises, the alternative courses of action have to be considered. Liberalisation of imports
and the use of high technology in recent times has encouraged manufacturers to produce
colour television sets, electronic sets, electronic equipments, videos, computers, fuel-efficient
vehicles, etc. Thus, changes in government policy, technology, competition, etc. pose several
alternatives before manufacturers, from time to time, regarding the product they should
manufacture. Such alternatives have to be carefully evaluated against factors like costs,
associated risks involved, benefits likely to arise, availability of spare capacity, be examined
thoroughly before a choice is made.
4. Formulating derivative plans: After selecting the best course of action, the
management has to formulate the secondary plans to support the basic plan. The plans
derived for various departments, units, activities, etc., in a detailed manner are known as
‘derivative plans. For example, the basic production plan requires a number of things such as
availability of plant and machinery, training of employees, provision of adequate finance, etc.
To ensure the success of a basic plan, the derivative plans must indicate the time schedule
and sequence of performing various tasks.
5. Securing cooperation and participation: The successful implementation of a plan
depends, to a large extent, on the whole-hearted cooperation of the employees. In view of
this, management should involve operations people in the planning activities. Suggestions,
complaints and criticisms from operating personnel help management rectify the defects in
plans and set things right in the beginning itself. Involvement of subordinates in planning has
the unique advantage of getting a practical view of those closer to the scene of operations.
According to Koontz, ‘plans have to be set in an atmosphere of close participation and a high
degree of concurrence’. Participation enables employees to give their best to plans. They are
also motivated to carry out the plan to the best of their ability.
6. Providing for follow-up: Plans have to be reviewed continually to ensure their
relevance and effectiveness. In the course of implementing plans, certain facts may come to
light that were not even thought of earlier. In the light of these changed conditions, plans
have to be revised. Without such a regular follow-up, plans may become out-of-date and
useless.
Moreover, such a step ensures the implementation plans along right lines. Management can
notice shortcomings in time and initiate suitable remedial steps. A continuous evaluation of
plans also helps to develop sound plans in future, avoiding mistakes that have surfaced while
implementing the previous plans.
Advantages of Planning
1. Planning facilitates management by objectives.
a. Planning begins with determination of objectives.
b. It highlights the purposes for which various activities are to be undertaken.
c. In fact, it makes objectives clearer and more specific.
d. Planning helps in focusing the attention of employees on the objectives or goals of
enterprise.
e. Without planning an organization has no guide.
f. Planning compels manager to prepare a Blue-print of the courses of action to be followed
for accomplishment of objectives.
g. Therefore, planning brings order and rationality into the organization.
2. Planning minimizes uncertainties.
a. Business is full of uncertainties.
b. There are risks of various types due to uncertainties.
c. Planning helps in reducing uncertainties of future as it involves anticipation of future
events.
d. Although future cannot be predicted with cent percent accuracy but planning helps
management to anticipate future and prepare for risks by necessary provisions to meet
unexpected turn of events. e. Therefore with the help of planning, uncertainties can be
forecasted which helps in preparing standbys as a result, uncertainties are minimized to a
great extent.
3. Planning facilitates co-ordination.
a. Planning revolves around organizational goals.
b. All activities are directed towards common goals.
c. There is an integrated effort throughout the enterprise in various departments and groups.
d. It avoids duplication of efforts. In other words, it leads to better co-ordination.
e. It helps in finding out problems of work performance and aims at rectifying the same.

4. Planning improves employee’s moral.

a. Planning creates an atmosphere of order and discipline in organization.
b. Employees know in advance what is expected of them and therefore conformity can be
achieved easily.
c. This encourages employees to show their best and also earn reward for the same.
d. Planning creates a healthy attitude towards work environment which helps in boosting
employee’s moral and efficiency.
5. Planning helps in achieving economies.
a. Effective planning secures economy since it leads to orderly allocation of resources to
various operations.
b. It also facilitates optimum utilization of resources which brings economy in operations.
c. It also avoids wastage of resources by selecting most appropriate use that will contribute to
the objective of enterprise. For example, raw materials can be purchased in bulk and
transportation cost can be minimized. At the same time, it ensures regular supply for the
production department, that is, overall efficiency.
6. Planning facilitates controlling.
a. Planning facilitates existence of certain planned goals and standard of
performance. b. It provides basis of controlling.
c. We cannot think of an effective system of controlling without existence of well thought out
plans.
d. Planning provides pre-determined goals against which actual performance is compared.
e. In fact, planning and controlling are the two sides of a same coin. If planning is root,
controlling is the fruit.
7. Planning provides competitive edge.
a. Planning provides competitive edge to the enterprise over the others which do not
have effective planning. This is because of the fact that planning may involve changing in
work methods, quality, quantity designs, extension of work, redefining of goals, etc.
b. With the help of forecasting not only the enterprise secures its future but at the same
time it is able to estimate the future motives of its competitor which helps in facing future
challenges.
c. Therefore, planning leads to best utilization of possible resources, improves quality of
production and thus the competitive strength of the enterprise is improved.
8. Planning encourages innovations.
a. In the process of planning, managers have the opportunities of suggesting ways and
means of improving performance.
b. Planning is basically a decision-making function which involves creative thinking and
imagination that ultimately leads to innovation of methods and operations for growth and
prosperity of the enterprise.
Disadvantage of Planning
Internal Limitations
There are several limitations of planning. Some of them are inherit in the process of planning
like rigidity and other arise due to shortcoming of the techniques of planning and in the
planners themselves.
1. Rigidity
a. Planning has tendency to make administration inflexible.
b. Planning implies prior determination of policies, procedures and programmes and a strict
adherence to them in all circumstances.
c. There is no scope for individual freedom.
d. The development of employees is highly doubted because of which management might
have faced lot of difficulties in future.
e. Planning therefore introduces inelasticity and discourages individual initiative and
experimentation.
2. Misdirected Planning
a. Planning may be used to serve individual interests rather than the interest of the enterprise.
b. Attempts can be made to influence setting of objectives, formulation of plans and
programmes to suit one’s own requirement rather than that of whole organization.
c. Machinery of planning can never be freed of bias. Every planner has his own likes,
dislikes, preferences, attitudes and interests which is reflected in planning.
3. Time consuming
a. Planning is a time-consuming process because it involves collection of information, its
analysis and interpretation thereof. This entire process takes a lot of time specially where
there are a number of alternatives available.
b. Therefore planning is not suitable during emergency or crisis when quick decisions are
required.
4. Probability in planning
a. Planning is based on forecasts which are mere estimates about future.
b. These estimates may prove to be inexact due to the uncertainty of future.
c. Any change in the anticipated situation may render plans ineffective.
d. Plans do not always reflect real situations in spite of the sophisticated techniques of
forecasting because future is unpredictable.
e. Thus, excessive reliance on plans may prove to be fatal.
5. False sense of security
a. Elaborate planning may create a false sense of security to the effect that everything is taken
for granted.
b. Managers assume that as long as they work as per plans, it is satisfactory.
c. Therefore they fail to take up timely actions and an opportunity is lost.
d. Employees are more concerned about fulfilment of plan performance rather than any kind
of change.
6. Expensive
a. Collection, analysis and evaluation of different information, facts and alternatives
involves a lot of expense in terms of time, effort and money
b. Accoring to Koontz and O ‘Donell, ‘Expenses on planning should never exceed the
estimated benefits from planning. ‘
External Limitations of Planning
1. Political Climate- Change of government from Congress to some other political party, etc.
2. Labour Union- Strikes, lockouts, agitations.
3. Technological changes- Modern techniques and equipments, computerization.
4. Policies of competitors- Eg. Policies of Coca Cola and Pepsi.
5. Natural Calamities- Earthquakes and floods.
6. Changes in demand and prices- Change in fashion, change in tastes, change in income
level, demand falls, price falls, etc.
DECISION MAKING
Introduction
Meaning and Definition
Individuals in organisations make decisions. That is, they make choices from among two or
more alternatives. Decision-making is almost universally defined as choosing between
alternatives. Decision-making is a critical activity in the lives of managers. The decisions a
manager faces can range from very simple, routine matters for which the manager has an
established decision rule (programmed decisions) to new and complex decisions that require
creative solutions (nonprogrammed decisions).
The word "decision" is derived from the Latin words "de ciso" which means, "cutting away"
or to come to a conclusion. A decision is the selection of a course of action.
According to Felex M Lopez, "a decision represents a judgement; a final resolution of a
conflict of needs, means or goals; and a commitment to action made in the face of
uncertainty, complexity or even irrationality."
According to Philip Marvin, "decision-making may be viewed as the process by which
individuals select a course of action from among alternatives to produce a desired result.
It is a process made up of four continuous interrelated phases: explorative, speculative,
evaluative and selective."
Thus, decision-making is the process by which the decision-maker tries to jump over the
obstacles placed between his current position and the desired future position. Decision-
making occurs as a reaction to a problem. A discrepancy exists between some current state of
affairs and some desired state, requiring consideration of alternative courses of action.
Moreover, every decision requires interpretations and evaluation of information. Data is
typically received from multiple sources and it needs to be screened, processed, and
interpreted. What data is relevant to the decision will depend on the perception of the
decision-maker.
Types of Decision Making
Decision making may be classified under various categories based on the scope, importance
and the impact. Decisions have been classified by various authorities in various ways.
Some of the types of decision making are: -
1. Programmed Decisions 2. Non-Programmed Decisions 3. Operational Decisions 4.
Organizational Decisions 5. Personal Decisions 6. Routine Decisions 7. Strategic Decisions 8.
Policy Decisions 9. Operating Decisions 10. Organisational Decisions 11. Personal Decisions
12. Individual Decisions 13. Group Decisions 14. Major Decisions 15. Minor Decisions and a
Few Others.
1. Programmed and Non-Programmed Decisions:
Programmed decisions are repetitive in nature. Such decisions deal with simple, common,
frequently occurring problems that have established procedures. These decisions are taken
based on the existing policy, rule or procedure of the organization. For example: making
purchase orders, sanctioning of different types of leave, increments in salary, etc. Managers
in dealing with such issues of routine nature, follow the established procedures.
Non-programmed decisions are not routine in nature. They are related to exceptional
situations for which there are no established procedure. For example- Issues relating to
declining market share, increasing competition, etc. fall in this category. These problems have
to be handled in a different way. Many of the decisions that managers at top levels make are
non-programmed decisions.
2. Operational and Strategic Decisions:
Operational or tactical decisions relate to the present issues or problems. The main purpose is
to achieve high degree of efficiency. Better working conditions, effective supervision,
prudent use of existing resources, better maintenance of the equipment, etc. fall in this
category.
While, expanding the scale of operations, entering new markets, changing the product mix,
shifting the manufacturing facility, striking alliances with other companies, etc. are strategic
in nature.
Usually, routine decisions are taken by managers at the lower levels, while strategic decisions
are taken by top level managers. The focus in the operational decisions is on the short-run or
immediate present, while it is on the long- rum in the case of strategic decisions.
3. Organizational and Personal Decisions:
Decisions taken by managers in the ordinary course of business in their capacity as managers
are organizational decisions. For example: decisions regarding introducing a new incentive
system, transferring an employee, reallocation or redeployment of employees etc. are taken
by managers to achieve certain objectives.
On the other hand, managers do take some decisions which are purely personal in nature.
However, their impact may affect the organization also. For example: the manager’s decision
to quit the organization, though personal in nature, may create some problems for the
organization.
4. Individual and Group Decisions:
Individual decisions are taken where the problem is of routine nature, whereas important and
strategic decisions which have a bearing on many aspects of the organization are generally
taken by a group. Group decision making is preferred these days because it contributes for
better coordination among the people concerned with the implementation the decision.
5.Routine and Strategic Decisions:
Tactical or routine decisions are made repetitively following certain established rules,
procedures and policies. They neither require collection of new data nor conferring with
people. Thus, they can be taken without much deliberation. They may be complicated but are
always onedimensional. They do not require any special effort by the manager.
Such decisions are generally taken by the managers at the middle and lower management
level. Strategic or basic decisions, on the other hand, are more important and so they are
taken generally by the top management and middle management. The higher the level of a
manager, the more strategic decisions he is required to take.
The strategic decisions relate to policy matters and so require a thorough fact finding and
analysis of the possible alternatives. Finding the correct problem in such decisions assumes
great importance. The managers are more serious about such decisions as they influence
decisionmaking at the lower levels.
6. Policy and Operating Decisions:
Policy decisions are of vital importance and are taken by the top management. They affect the
entire enterprise. But operating decisions are taken by the lower management in order to put
into action the policy decisions. For instance, the bonus issue is a policy matter which is to be
decided by the top management, and calculation of bonus is an operating decision which is
taken at the lower levels to execute the policy decision.
7. Organisational and Personal Decisions:
Organisational decisions are those which a manager takes in his official capacity. Such
decisions can be delegated. But personal decisions, which relate to the manager as an
individual and not as a member of the organisation, cannot be delegated.
8. Major Decision:
Major decision relates to the purchase of fixed assets with more value. The purchase of land
and building is an example of major decision. This decision is taken by the top management.
9. Minor Decision:
Minor decision relates to the purchase of current assets with less value. Purchase of pencil,
pen, ink, etc., are some of the examples of minor decision. This decision is taken by lower-
level management people.
10. Operative Decision:
A decision which relates to day-to-day operation of an organisation is known as operative
decision. This type of decision is taken by middle level management people normally. The
reason is that they are working at supervisory level and have a good knowledge of the
operations. The time of payment of overtime wages is fixed by middle level management
people. It is an example of operative decision.
Conditions that Influence Decision Making

Managers make problem‐solving decisions under three different conditions: certainty, risk,
and uncertainty. All managers make decisions under each condition, but risk and uncertainty
are common to the more complex and unstructured problems faced by top managers.
Certainty
Decisions are made under the condition of certainty when the manager has perfect knowledge
of all the information needed to make a decision. This condition is ideal for problem solving.
The challenge is simply to study the alternatives and choose the best solution.
When problems tend to arise on a regular basis, a manager may address them through
standard or prepared responses called programmed decisions. These solutions are already
available from past experiences and are appropriate for the problem at hand. A good example
is the decision to reorder inventory automatically when stock falls below a determined level.
Today, an increasing number of programmed decisions are being assisted or handled by
computers using decision‐support software.
Structured problems are familiar, straightforward, and clear with respect to the information
needed to resolve them. A manager can often anticipate these problems and plan to prevent or
solve them. For example, personnel problems are common in regard to pay raises,
promotions, vacation requests, and committee assignments, as examples. Proactive managers
can plan processes for handling these complaints effectively before they even occur.
Risk
In a risk environment, the manager lacks complete information. This condition is more
difficult. A manager may understand the problem and the alternatives, but has no guarantee
how each solution will work. Risk is a fairly common decision condition for managers.
When new and unfamiliar problems arise, nonprogrammed decisions are specifically tailored
to the situations at hand. The information requirements for defining and resolving nonroutine
problems are typically high. Although computer support may assist in information
processing, the decision will most likely involve human judgment. Most problems faced by
higher‐level managers demand nonprogrammed decisions. This fact explains why the
demands on a manager's conceptual skills increase as he or she moves into higher levels of
managerial responsibility.
A crisis problem is an unexpected problem that can lead to disaster if it's not resolved
quickly and appropriately. No organization can avoid crises, and the public is well aware of
the immensity of corporate crises in the modern world. The Chernobyl nuclear plant
explosion in the former Soviet Union and the Exxon Valdez spill of years past are a couple of
sensational examples. Managers in more progressive organizations now anticipate that crises,
unfortunately, will occur. These managers are installing early‐warning crisis information
systems and developing crisis management plans to deal with these situations in the best
possible ways.
Uncertainty
When information is so poor that managers can't even assign probabilities to the likely
outcomes of alternatives, the manager is making a decision in an uncertain environment. This
condition is the most difficult for a manager. Decision making under conditions of
uncertainty is like being a pioneer entering unexplored territory. Uncertainty forces managers
to rely heavily on creativity in solving problems: It requires unique and often totally
innovative alternatives to existing processes. Groups are frequently used for problem solving
in such situations. In all cases, the responses to uncertainty depend greatly on intuition,
educated guesses, and hunches — all of which leave considerable room for error.
These unstructured problems involve ambiguities and information deficiencies and often
occur as new or unexpected situations. These problems are most often unanticipated and are
addressed reactively as they occur. Unstructured problems require novel solutions. Proactive
managers are sometimes able to get a jump on unstructured problems by realizing that a
situation is susceptible to problems and then making contingency plans. For example, at the
Vanguard Group, executives are tireless in their preparations for a variety of events that could
disrupt their mutual fund business. Their biggest fear is an investor panic that overloads their
customer service system during a major plunge in the bond or stock markets. In anticipation
of this occurrence, the firm has trained accountants, lawyers, and fund managers to staff the
telephones if needed.
Four decision-making styles
Each decision-making style is characterized by either a task or social focus and a high or low
tolerance for ambiguity. Styles with a high tolerance for ambiguity can work with unknown
variables as they come to a conclusion. Those with a low tolerance for ambiguity want as
much clarity as possible in all the circumstances and information that lead to their decisions.
Decision-making styles also vary in a social or task-driven focus. Social-driven decisions
consider the behavior of others involved in the outcome. Those who are task-driven make
decisions based on how to best achieve a goal.
Directive
The directive decision-making style uses quick, decisive thinking to come to a solution. A
directive decision-maker has a low tolerance for unclear or ambiguous ideas. They are
focused on the task and will use their own knowledge and judgment to come to a conclusion
with selective input from other individuals.
Directive decision-makers excel at verbal communication. They are rational and logical in
their decision making. When the team or organization needs a fast decision, a directive-style
decisionmaker can effectively make a choice. Their style is valuable for making short-term
decisions.
Analytical
Analytical decision-makers carefully analyze data to come up with a solution. They are
careful and adaptable thinkers. They will invest time to glean information to form a
conclusion. These decision-makers are task-oriented, but have a high tolerance for ambiguity.
Analytical decision-makers take time to compile data and evidence before they come to a
conclusion. When they do make a decision, they have looked at all the details and formed
what they believe is the best possible solution.
Conceptual
Those who make decisions with a conceptual style are big picture thinkers who are willing to
take risks. They evaluate different options and possibilities with a high tolerance to
ambiguity. They are social-oriented and take time to consider big ideas and creative solutions.
Conceptual decision-makers look forward to what could happen if the decision is made. Their
conclusions come from visualizing different opportunities and outcomes for the future. They
are strong in making long-term decisions.
Behavioral
A behavioral style of decision-making focuses on relationships more than the task. It
evaluates the feelings of others as part of their decision-making process. Behavior decision-
makers have a low tolerance for ambiguity and a social focus as they evaluate solutions.
These decision-makers rely on information from others to guide what they choose. They are
persuasive communicators who value decisions based on a team consensus. Their decisions
are often based on how the choice will impact relationships.
DECISION MAKING PROCESS
Managers have to make decisions, whether they are simple or extremely complex. Making a
good decision is a difficult exercise. It is the product of deliberation, evaluation and thought.
To make good decisions, managers should invariably follow a sequential set of steps.
Decision-making is a process involving a series of steps as shown in the Figure 6 below.
Figure 6 Decision-making process

First Step: The first step is recognition of the problem.

The manager must become aware that a problem exists and that it is important enough for
managerial action. Identification of the real problem is important; otherwise, the manager
may be reacting to symptoms and firefighting rather than dealing with the root cause of the
problem. In order to monitor the problem situation (decision-making environment), managers
may have to look into management reports, check progress against budgets, compare the
results against industry competitors, and assess factors contributing to employee efficiency or
inefficiency, etc. They have to use judgement and experience in order to identify the exact
nature of the problem. In other words, the manager must determine what is to be
accomplished by the decision.
Second Step: The second step in the decision-making process is gathering information
relevant to the problem.
A successful manager must have the ability to weed out the wheat from the chaff before
deciding on a specific course of action. Once aware of a problem, he must state the real
problem. He must try to solve the problem, not the symptoms. The manager must pull
together sufficient information about why the problem occurred. This involves conducting a
thorough diagnosis of the situation and going on a fact-finding mission.

Third Step: The third step is listing and evaluating alternative courses of action.
Developing alternative solutions (to the problem) guarantees adequate focus and attention on
the problem. It helps managers to fully test the soundness of every proposal before it is finally
translated into action. During this step, a thorough "what if" analysis should also be
conducted to determine the various factors that could influence the outcome. It is important to
generate a wide range of options and creative solutions in order to be able to move on to the
next step. Therefore, managers should encourage people to develop different solutions for the
same problem. The ability to develop alternatives is as important as making a right decision
among alternatives. The development of alternatives is a creative, innovative activity. It calls
for divergent thinking; it calls for "systems thinking". In other words, managers should try to
seek solutions outside the present realm of their knowledge; they are forced to look into all
the relevant factors before coming up with a novel solution.
Fourth Step: Next, the manager selects the alternative that best meets the decision
objective.
If the problem has been diagnosed correctly and sufficient alternatives have been identified,
this step is much easier. Peter Drucker has offered the following four criteria for making the
right choice among available alternatives:
1. The manager has to weigh the risks of each course of action against the expected gains.
2. The alternative that will give the greatest output for the least inputs in terms of material
and human resources is obviously the best one to be selected.
3. If the situation has great urgency, the best alternative is one that dramatizes the decision
and serves notice on the organisation that something important is happening. On the other
hand, if consistent effort is needed, a slow start that gathers momentum may be preferable.
4. Physical, financial and human resources impose a limitation on the choice of selection. Of
these, the most important resources whose limitations have to be considered are the human
beings who will carry out the decision.
There are pros and cons of both the options. Outsourcing can be cost effective and time
saving whereas it might be difficult to control. On the other hand, developing an in-house
panel will require a lot of investment but it will be easier for the higher-level managers to
monitor their performance. Managers need to weigh each pros and cons and then decide on an
alternative. Here, the long-term benefit should also be considered. If the need is urgent, it is
better to outsource as the other option will take time to materialise.
Final Step: Finally, the solution is implemented.
The manager must seek feedback regarding the effectiveness of the implanted solutions.
Feedback allows managers to become aware of the recent problems associated with the
solution. It permits managers to monitor the effects of their acts to gauge their success. They
can evaluate their own decision-making abilities. Consistent monitoring and periodic
feedback is an essential part of the follow-up process.
ORGANIZING
Introduction
Organising as a function of management involves division of work among people whose
efforts must be co-ordinated to achieve specific objectives and to implement pre-determined
strategies. Organisation is the foundation upon which the whole structure of management is
built. It is the backbone of management. After the objectives of an enterprise are determined
and the plan is prepared, the next step in the management process is to organise the activities
of the enterprise to execute the plan and to attain the objectives of the enterprise. The term
organisation is given a variety of interpretations. In any case, there are two broad ways in
which the term is used.
In the first sense, organisation is understood as a dynamic process and a managerial activity
which is necessary for bringing people together and tying them together in the pursuit of
common objectives.
When used in the other sense, organisation refers to the structure of relationships among
positions and jobs which is built up for the realisation of common objectives.
Organising – The Process
Organisation is the process of establishing relationship among the members of the enterprise.
The relationships are created in terms of authority and responsibility. To organise is to
harmonise, coordinate or arrange in a logical and orderly manner. Each member in the
organisation is assigned a specific responsibility or duty to perform and is granted the
corresponding authority to perform his duty.
The managerial function of organising 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, "Organising 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
organisational objectives."
The various steps involved in this process are:
1. Determination of Objectives:
 It is the first step in building up an organisation. Organisation is always related to certain
objectives. Therefore, it is essential for the management to identify the objectives before
starting any activity. Organisation structure is built on the basis of the objectives of the
enterprise. That means, the structure of the organisation can be determined by the
management only after knowing the objectives to be accomplished through the organisation.
This step helps the management not only in framing the organisation structure but also in
achieving the enterprise objectives with minimum cost and efforts. Determination of
objectives will consist in deciding as to why the proposed organisation is to be set up and,
therefore, what will be the nature of the work to be accomplished through the organisation.
2. Enumeration of Objectives:
If the members of the group are to pool their efforts effectively, there must be proper division
of the major activities. The first step in organising group effort is the division of the total job
into essential activities. Each job should be properly classified and grouped. This will enable
the people to know what is expected of them as members of the group and will help in
avoiding duplication of efforts. For example, the work of an industrial concern may be
divided into the following major functions – production, financing, personnel, sales,
purchase, etc.
3. Classification of Activities:
The next step will be to classify activities according to similarities and common purposes and
functions and taking the human and material resources into account. Then, closely related and
similar activities are grouped into divisions and departments and the departmental activities
are further divided into sections.
4. Assignment of Duties:
Here, specific job assignments are made to different subordinates for ensuring a certainty of
work performance. Each individual should be given a specific job to do according to his
ability and made responsible for that. He should also be given the adequate authority to do the
job assigned to him. In the words of Kimball and Kimball, "Organisation embraces the duties
of designating the departments and the personnel that are to carry on the work, defining their
functions and specifying the relations that are to exist between department and individuals."
5. Delegation of Authority:
Since so many individuals work in the same organisation, it is the responsibility of
management to lay down structure of relationship in the organisation. Authority without
responsibility is a dangerous thing and similarly responsibility without authority is an empty
vessel. Everybody should clearly know to whom he is accountable; corresponding to the
responsibility authority is delegated to the subordinates for enabling them to show work
performance. This will help in the smooth working of the enterprise by facilitating delegation
of responsibility and authority.
Organisational Design
Organisation design may be defined as a formal, guided process for integrating the people,
information and technology of an organisation. Organisation design involves the creation of
roles, processes, and formal reporting relationships in an organisation. One can distinguish
between two phases in an organisation design process: strategic grouping, which establishes
the overall structure of the organisation, (its main sub-units and their relationships), and
operational design, which defines the more detailed roles and processes.
It is used to match the form of the organisation as closely as possible to the purpose(s) the
organisation seeks to achieve. Through the design process, organisations act to improve the
probability that the collective efforts of members will be successful. Thus, it may say to be a
process for improving the probability that an organisation will be successful.
Hierarchical Systems
Western organisations have been highly influenced by the command-and-control structure of
ancient military organisations, especially those of USA and by the turn of the century
introduction of Scientific Management. Most organisations today are designed as a
bureaucracy in whom authority and responsibility are arranged in a hierarchy. Within the
hierarchy, the laws, policies, and procedures are uniformly and impersonally applied to exert
control over member behaviours. Activity is organised within departments in which people
perform specialized functions such as manufacturing, sales, or accounting. People who
perform similar tasks are clustered together.
The same basic organisational form is assumed to be appropriate for any organisation, be it a
government, school, business, church, or fraternity. It is familiar, predictable, and rational. It
is what comes immediately to mind when we discover that ...we really have to get organised
As rational as the functional hierarchy may be, there are distinct disadvantages to blindly
applying the same form of organisation to all purposeful groups. To state a few,
1. different groups wish to achieve different outcomes.
2. different groups have different members, and that each group possesses a different culture.
These differences in desired outcomes, and in culture, should alert the mangers to the danger
of assuming there is any single best way of organising. To be complete, however, also
observe that different groups will likely choose different methods through which they will
achieve their purpose. Service groups will choose different methods than manufacturing
groups, and both will choose different methods than groups whose purpose is primarily
social. One structure cannot possibly fit all.
Organising on Purpose
The purpose for which a group exists should be the foundation for everything its members do
– including the choice of an appropriate way to organise. The idea is to create a way of
organising that best suit the purpose to be accomplished, regardless of the way in which
other, dissimilar groups are organised.
Only when there are close similarities in desired outcomes, culture, and methods should the
basic form of one organisation be applied to another. And even then, only with careful fine
tuning. The danger is that the patterns of activity that help one group to be successful may be
dysfunctional for another group, and actually inhibit group effectiveness. To optimize
effectiveness, the form of organisation must be matched to the purpose it seeks to achieve.
The Design Process
Organisation design begins with the creation of a strategy – a set of decision guidelines by
which members will choose appropriate actions. The strategy is derived from clear, concise
statements of purpose, and vision, and from the organisation's basic philosophy. Strategy
unifies the intent of the organisation and focuses members toward actions designed to
accomplish desired outcomes. The strategy encourages actions that support the purpose and
discourages those that do not.
Creating a strategy is planning, not organising. To organise we must connect people with
each other in meaningful and purposeful ways. Further, we must connect people with the
information and technology necessary for them to be successful. Organisation structure
defines the formal relationships among people and specifies both their roles and their
responsibilities.
Administrative systems govern the organisation through guidelines, procedures and policies.
Information and technology define the process(es) through which members achieve
outcomes. Each element must support each of the others and together they must support the
organisation's purpose.
Exercising Choice Notes
Organisations are an invention of man. They are contrived social systems through which
groups seek to exert influence or achieve a stated purpose. People choose to organise when
they recognize that by acting alone, they are limited in their ability to achieve. We sense that
by acting in concert we may overcome our individual limitations.
When we organise, we seek to direct, or pattern, the activities of a group of people toward a
common outcome. How this pattern is designed and implemented greatly influences
effectiveness. Patterns of activity that are complementary and interdependent are more likely
to result in the achievement of intended outcomes. In contrast, activity patterns that are
unrelated and independent are more likely to produce unpredictable, and often unintended
results.
The process of organisation design matches people, information, and technology to the
purpose, vision, and strategy of the organisation. Structure is designed to enhance
communication and information flow among people. Systems are designed to encourage
individual responsibility and decision making. Technology is used to enhance human
capabilities to accomplish meaningful work. The end product is an integrated system of
people and resources, tailored to the specific direction of the organisation.
Importance of Organizing Function
1. Specialization - Organizational structure is a network of relationships in which the
work is divided into units and departments. This division of work is helping in bringing
specialization in various activities of concern.
2. Well defined jobs - Organizational structure helps in putting right men on right job
which can be done by selecting people for various departments according to their
qualifications, skill and experience. This is helping in defining the jobs properly which
clarifies the role of every person.
3. Clarifies authority - Organizational structure helps in clarifying the role positions to
every manager (status quo). This can be done by clarifying the powers to every manager and
the way he has to exercise those powers should be clarified so that misuse of powers does not
take place. Well defined jobs and responsibilities attached helps in bringing efficiency into
managers working. This helps in increasing productivity.
4. Co-ordination - Organization is a means of creating co- ordination among different
departments of the enterprise. It creates clear cut relationships among positions and ensures
mutual co-operation among individuals. Harmony of work is brought by higher level
managers exercising their authority over interconnected activities of lower-level manager.
Authority responsibility relationships can be fruitful only when there is a formal relationship
between the two. For smooth running of an organization, the co- ordination between
authority- responsibilities is very important. There should be co- ordination between different
relationships. Clarity should be made for having an ultimate responsibility attached to every
authority. There is a saying, ―Authority without responsibility leads to ineffective behaviour
and responsibility without authority makes person ineffective. ‘‘Therefore, co- ordination of
authority- responsibility is very important.
5. Effective administration – The organization structure is helpful in defining the jobs
positions. The roles to be performed by different managers are clarified. Specialization is
achieved through division of work. This all leads to efficient and effective administration.

6. Growth and diversification - A company’s growth is totally dependent on how

efficiently and smoothly a concern works. Efficiency can be brought about by clarifying the
role positions to the managers, co-ordination between authority and responsibility and
concentrating on specialization. In addition to this, a company can diversify if its potential
grows. This is possible only when the organization structure is well- defined. This is possible
through a set of formal structure.
7. Sense of security - Organizational structure clarifies the job positions. The roles
assigned to every manager are clear. Co- ordination is possible. Therefore, clarity of powers
helps automatically in increasing mental satisfaction and thereby a sense of security in a
concern. This is very important for job- satisfaction.
8. Scope for new changes - Where the roles and activities to be performed are clear and
every person gets independence in his working, this provides enough space to a manager to
develop his talents and flourish his knowledge. A manager gets ready for taking independent
decisions which can be a road or path to adoption of new techniques of production. This
scope for bringing new changes into the running of an enterprise is possible only through a
set of organizational structure.

Principles of Organizing Function

The organizing process can be done efficiently if the managers have certain guidelines so that
they can take decisions and can act. To organize in an effective manner, the following
principles of organization can be used by a manager.
1. Principle of Specialization
According to the principle, the whole work of a concern should be divided amongst the
subordinates on the basis of qualifications, abilities and skills. It is through division of work
specialization can be achieved which results in effective organization.
2. Principle of Functional Definition
According to this principle, all the functions in a concern should be completely and clearly
defined to the managers and subordinates. This can be done by clearly defining the duties,
responsibilities, authority and relationships of people towards each other. Clarifications in
authority- responsibility relationships
help in achieving co- ordination and thereby organization can take place effectively. For
example, the primary functions of production, marketing and finance and the authority
responsibility relationships in these departments should be clearly defined to every person
attached to that department. Clarification in the authority-responsibility relationship helps in
efficient organization.
3. Principles of Span of Control/Supervision
According to this principle, span of control is a span of supervision which depicts the number
of employees that can be handled and controlled effectively by a single manager. According
to this principle, a manager should be able to handle what number of employees under him
should be decided. This decision can be taken by choosing either from wide or narrow span.
There are two types of spans of control: -
a. Wide span of control- It is one in which a manager can supervise and control
effectively a large group of persons at one time. The features of this span are: -
 Less overhead cost of supervision
  Prompt response from the employees
 Better communication
 Better supervision
 Better co-ordination
 Suitable for repetitive jobs
According to this span, one manager can effectively and efficiently handle a large number of
subordinates at one time.
b. Narrow span of control- According to this span, the work and authority is divided
amongst many subordinates and a manager doesn't supervises and control a very big group of
people under him. The manager according to a narrow span supervises a selected number of
employees at one time. The features are: -
 Work which requires tight control and supervision, for example, handicrafts, ivory
work, etc. which requires craftsmanship, there narrow span is more helpful.
 Co-ordination is difficult to be achieved.
 Communication gaps can come.
 Messages can be distorted.
 Specialization work can be achieved.
Factors influencing Span of Control
Managerial abilities- In the concerns where managers are capable, qualified and
experienced, wide span of control is always helpful.
Competence of subordinates- Where the subordinates are capable and competent and their
understanding levels are proper, the subordinates tend to very frequently visit the superiors
for solving their problems. In such cases, the manager can handle large number of employees.
Hence wide span is suitable.
Nature of work- If the work is of repetitive nature, wide span of supervision is more helpful.
On the other hand, if work requires mental skill or craftsmanship, tight control and
supervision is required in which narrow span is more helpful.
Delegation of authority- When the work is delegated to lower levels in an efficient and
proper way, confusions are less and congeniality of the environment can be maintained. In
such cases, wide span of control is suitable and the supervisors can manage and control large
number of sub- ordinates at one time.
Degree of decentralization- Decentralization is done in order to achieve specialization in
which authority is shared by many people and managers at different levels. In such cases, a
tall structure is helpful. There are certain concerns where decentralization is done in very
effective way which results in direct and personal communication between superiors and sub-
ordinates and there the superiors can manage large number of subordinates very easily. In
such cases, wide span again helps.
4. Principle of Scalar Chain
Scalar chain is a chain of command or authority which flows from top to bottom. With a
chain of authority available, wastages of resources are minimized, communication is affected,
overlapping of work is avoided and easy organization takes place. A scalar chain of command
facilitates work flow in an organization which helps in achievement of effective results. As
the authority flows from top to bottom, it clarifies the authority positions to managers at all
level and that facilitates effective organization.

5. Principle of Unity of Command

It implies one subordinate-one superior relationship. Every subordinate is answerable and
accountable to one boss at one time. This helps in avoiding communication gaps and
feedback and response is prompt. Unity of command also helps in effective combination of
resources, that is, physical, financial resources which helps in easy co- ordination and,
therefore, effective organization.
ORGANIZATIONS STRUCTURE
An organisation structure shows the authority and responsibility relationships between the
various positions in the organisation by showing who reports to whom. Organisation involves
establishing an appropriate structure for the goal seeking activities. It is an established pattern
of relationship among the components of the organisation.
March and Simon have stated that- "Organisation structure consists simply of those aspects of
pattern of behaviour in the organisation that are relatively stable and change only slowly."
The structure of an organisation is generally shown on an organisation chart. It shows the
authority and responsibility relationships between various positions in the organisation while
designing the organisation structure, due attention should be given to the principles of sound
organisation.
Significance of Organisation Structure
1. Properly designed organisation can help improve teamwork and productivity by providing
a framework within which the people can work together most effectively.
2. Organisation structure determines the location of decision-making in the organisation.
3. Sound organisation structure stimulates creative thinking and initiative among
organisational members by providing well defined patterns of authority.
4. A sound organisation structure facilitates growth of enterprise by increasing its capacity to
handle increased level of authority.
5. Organisation structure provides the pattern of communication and coordination.
6. The organisation structure helps a member to know what his role is and how it relates to
other roles.
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.

Elements of Delegation
1. Authority - in context of a business organization, authority can be defined as the
power and right of a person to use and allocate the resources efficiently, to take decisions and
to give orders so as to achieve the organizational objectives. Authority must be well- defined.
All people who have the authority should know what is the scope of their authority is and
they shouldn’t mis- utilize it. Authority is the right to give commands, orders and get the
things done. The top-level management has greatest authority. Authority always flows from
top to bottom. It explains how a superior gets work done from his subordinate by clearly
explaining what is expected of him and how he should go about it. Authority should be
accompanied with an equal amount of responsibility. Delegating the authority to someone
else doesn’t imply escaping from accountability. Accountability still rest with the person
having the utmost authority.
2. Responsibility - is the duty of the person to complete the task assigned to him. A
person who is given the responsibility should ensure that he accomplishes the tasks assigned
to him. If the tasks for which he was held responsible are not completed, then he should not
give explanations or excuses. Responsibility without adequate authority leads to discontent
and dissatisfaction among the person. Responsibility flows from bottom to top. The middle
level and lower-level management holds more responsibility. The person held responsible for
a job is answerable for it. If he performs the tasks assigned as expected, he is bound for
praises. While if he doesn‘t accomplish tasks assigned as expected, then also he is answerable
for that.
3. Accountability - means giving explanations for any variance in the actual
performance from the expectations set. Accountability cannot be delegated. For example, if
‘A‘is given a task with sufficient authority, and ‘A‘ delegates this task to B and asks him to
ensure that task is done well, responsibility rest with ‘B‘, but accountability still rest with
‘A‘. The top-level management is most accountable. Being accountable means being
innovative as the person will think beyond his scope of job. Accountability, in short, means
being answerable for the end result. Accountability can ‘t be escaped. It arises from
responsibility.
The steps perform by the manager in Delegation of Authority.
For achieving delegation, a manager has to work in a system and has to perform following
steps:
1. Assignment of tasks and duties
2. Granting of authority
3. Creating responsibility and accountability
Delegation of authority is the base of superior-subordinate relationship, it involves
following steps: -

1. Assignment 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 divide 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. Creating 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. Responsibility is very important. Therefore, it is that which gives
effectiveness to authority. At the same time, responsibility is absolute and cannot be shifted.
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.
Importance of Delegation
Delegation of authority is a process in which the authority and powers are divided and shared
amongst the subordinates. When the work of a manager gets beyond his capacity, there
should be some system of sharing the work. This is how delegation of authority becomes an
important tool in organization function. Through delegation, a manager, in fact, is multiplying
himself by dividing/multiplying his work with the subordinates. The importance of delegation
can be justified by –
1. Through delegation, a manager is able to divide the work and allocate it to the
subordinates. This helps in reducing his work load so that he can work on important areas
such as - planning, business analysis etc.
2. With the reduction of load on superior, he can concentrate his energy on important
and critical issues of concern. This way he is able to bring effectiveness in his work as well in
the work unit. This effectivity helps a manager to prove his ability and skills in the best
manner.
3. Delegation of authority is the ground on which the superior-subordinate
relationship stands. An organization functions as the authority flows from top level to
bottom. This in fact shows that through delegation, the superior- subordinate relationship
become meaningful. The flow of authority is from top to bottom which is a way of achieving
results.
4. Delegation of authority in a way gives enough room and space to the
subordinates to flourish their abilities and skill. Through delegating powers, the
subordinates get a feeling of importance. They get motivated to work and this motivation
provides appropriate results to a concern. Job satisfaction is an important criterion to bring
stability and soundness in the relationship between superior and subordinates. Delegation
also helps in breaking the monotony of the subordinates so that they can be more creative and
efficient. Delegation of authority is not only helpful to the subordinates but it also helps the
managers to develop their talents and skills. Since the manager get enough time through
delegation to concentrate on important issues, their decision-making gets strong and, in a
way, they can flourish the talents which are required in a manager. Through granting powers
and getting the work done, helps the manager to attain communication skills, supervision and
guidance, effective motivation and the leadership traits are flourished. Therefore, it is only
through delegation, a manager can be tested on his traits.
5. Delegation of authority is help to both superior and subordinates. This, in a way,
gives stability to a concern ‘s working. With effective results, a concern can think of creating
more departments and divisions flow working. This will require creation of more managers
which can be fulfilled by shifting the experienced, skilled managers to these positions. This
helps in both virtual as well as horizontal growth which is very important for a concern ‘s
stability.
Determining the Kind of Organisation Structure
According to Peter F Drucker-"Organisation is not an end in itself, but a means to the end of
business performance and business results. Organisation structure is an indispensable means;
and the wrong structure will seriously impair business performance and may even destroy it.
Organisation structure must be designed so as to make possible to attainment of the objectives
of the business for five, ten, fifteen years hence". Peter Drucker has pointed out three specific
ways to find out what kind or structure is needed to attain the objectives of a specific
business:
1. Activities Analysis: The purpose of 'activities analysis' is to discover the primary
activity of the proposed organisation, for it is around this those other activities will be built. It
may be pointed out that in every organisation; one or two functional areas of business
dominate. For example, designing is an important activity of the readymade garments’
manufacturer. After the activities have been identified and classified into functional areas,
they should be listed in the order of importance.
2. Decision Analysis: At this stage, the manager finds out what kinds of decisions will
need to be made to carry on the work of the organisation. What is even more important, he
has to see where or at what level these decisions will have to be made and how each manager
should be involved in them. This type of analysis is particularly important for deciding upon
the number of levels or layers in the organisation structure.
3. Relations Analysis: Relations Analysis will include an examination of the various
types of relationships that develop within the organisation. These relationships are vertical,
lateral and diagonal. Where a superior-subordinate relationship is envisaged, it will be a
vertical relationship. In case of an expert or specialist advising a manager at the same level,
the relationship will be lateral. Where a specialist exercises authority over a person in
subordinate position in another department in the same organisation it will be an instance of
diagonal relationship.
Principles of Organisational Structure
The following are the main principles that a manager has to keep in mind while formulating
an organisational structure.
1. Consideration of unity of objectives: The objective of the undertaking influences the
organisation structure. There must be unity of objective so that all efforts can be concentrated
on the set goals.
2. Specialisation: Effective organisation must include specialisation. Precise division of
work facilitates specialisation.
3. Co-ordination: Organisation involves division of work among people whose efforts
must be co-ordinated to achieve common goals. Co-ordination is the orderly arrangement of
group effort to provide unity of action in the pursuit of common purpose.
4. Clear unbroken line of Authority: It points out the scalar principle or the chain of
command. The line of authority flows from the highest executive to the lowest managerial
level and the chain of command should not be broken.
5. Responsibility: Authority should be equal to responsibility i.e.; each manager should
have enough authority to accomplish the task.
6. Efficiency: The organisation structure should enable the enterprise to attain objectives
with the lowest possible cost.
7. Delegation: Decisions should be made at the lowest competent level. Authority and
responsibility should be delegated as far down in the organisation as possible.
8. Unity of Command: Each person should be accountable to a single superior. If an
individual has to report to only one supervisor there is a sense of personal responsibility to
one person for results.
9. Span of Management: No superior at a higher level should have more than six
immediate subordinates. The average human brain can effectively direct three to six brains
(i.e., subordinates).
10. Communication: A good communication sub-system is essential for smooth flow of
information and understanding and for effective business performance.
11. Flexibility: The organisation is expected to provide built in devices to facilitate
growth and expansion without dislocation. It should not be rigid or inelastic.
Formal and Informal Organisation
The formal organisation refers to the structure of jobs and positions with clearly defined
functions and relationships as prescribed by the top management. This type of organisation is
built by the management to realise objectives of an enterprise and is bound by rules, systems
and procedures.
Everybody is assigned a certain responsibility for the performance of the given task and given
the required amount of authority for carrying it out. Informal organisation, which does not
appear on the organisation chart, supplements the formal organisation in achieving
organisational 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 organisation and to use them
for achieving organisational objectives.
1. Formal Organisation: Chester I Bernard defines formal organisation 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." The essence of formal organisation is conscious common purpose and comes
into being when persons:
(a) Are able to communicate with each other
(b) Are willing to act, and (c) Share a purpose.
The formal organisation is built around four key pillars. They are:
(a) Division of labour
(b) Scalar and functional processes
(c) Structure, and
(d) Span of control
Thus, a formal organisation is one resulting from planning where the pattern of structure has
already been determined by the top management.
Characteristic of Formal Organisation
(a) Formal organisation structure is laid down by the top management to achieve
organisational goals.
(b) Formal organisation prescribes the relationships amongst the people working in the
organisation.
(c) The organisation structures is consciously designed to enable the people of the
organisation to work together for accomplishing the common objectives of the enterprise.
(d) Organisation structure concentrates on the jobs to be performed and not the individuals
who are to perform jobs.
(e) In a formal organisation, individuals are fitted into jobs and positions and work as per the
managerial decisions. Thus, the formal relations in the organisation arise from the pattern
of responsibilities that are created by the management.
(f) A formal organisation is bound by rules, regulations and procedures.
(g) In a formal organisation, the position, authority, responsibility and accountability of each
level are clearly defined.
(h) Organisation structure is based on division of labour and specialisation to achieve
efficiency in operations.
(i) A formal organisation is deliberately impersonal. The organisation does not take into
consideration the sentiments of organisational members.
(j) The authority and responsibility relationships created by the organisation structure are to
be honoured by everyone.
(k) In a formal organisation, coordination proceeds according to the prescribed pattern.
Advantages of Formal Organisation
(a) The formal organisation structure concentrates on the jobs to be performed. It,
therefore, makes everybody responsible for a given task.
(b) A formal organisation is bound by rules, regulations and procedures. It thus ensures
law and order in the organisation.
(c) The organisation structure enables the people of the organisation to work together for
accomplishing the common objectives of the enterprise.
Disadvantages or Criticisms of Formal Organisation
(a) The formal organisation does not take into consideration the sentiments of
organisational members.
(b) The formal organisation does not consider the goals of the individuals. It is designed
to achieve the goals of the organisation only.
(c) The formal organisation is bound by rigid rules, regulations and procedures. This
makes the achievement of goals difficult.
2. Informal Organisation: Informal organisation refers to the relationship between people in
the organisation based on personal attitudes, emotions, prejudices, likes, dislikes etc. an
informal organisation is an organisation 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 organisation structure; generally large formal groups give rise to small informal or
social groups. These groups may be based on same taste, language, culture or some other
factor. These groups are not pre-planned, but they develop automatically within the
organisation according to its environment.
Characteristics of Informal Organisation
(a) Informal organisation is not established by any formal authority. It is unplanned and
arises spontaneously.
(b) Informal organisations reflect human relationships. It arises from the personal and
social relations amongst the people working in the organisation.
(c) Formation of informal organisations is a natural process. It is not based on rules,
regulations and procedures.
(d) The inter-relations amongst the people in an informal organisation cannot be shown in
an organisation chart.
(e) In the case of informal organisation, the people cut across formal channels of
communications and communicate amongst themselves.
(f) The membership of informal organisations is voluntary. It arises spontaneously and
not by deliberate or conscious efforts.
(g) Membership of informal groups can be overlapping as a person may be member of a
number of informal groups.
(h) Informal organisations are based on common taste, problem, language, religion,
culture, etc. It is influenced by the personal attitudes, emotions, whims, likes and dislikes etc.
of the people in the organisation.
Benefits of Informal Organisation
(a) It blends with the formal organisation to make it more effective.
(b) Many things which cannot be achieved through formal organisation can be achieved
through informal organisation.
(c) The presence of informal organisation in an enterprise makes the managers plan and act
more carefully.
(d) Informal organisation acts as a means by which the workers achieve a sense of security
and belonging. It provides social satisfaction to group members.
(e) An informal organisation has a powerful influence on productivity and job satisfaction.
(f) The informal leader lightens the burden of the formal manager and tries to fill in the gaps
in the manager's ability.
(g) Informal organisation helps the group members to attain specific personal objectives.
(h) Informal organisation is the best means of employee communication. It is very fast.
(i) Informal organisation gives psychological satisfaction to the members. It acts as a safety
valve for the emotional problems and frustrations of the workers of the organisation
because they get a platform to express their feelings.
(j) It serves as an agency for social control of human behaviour.
CENTRALIZATION AND DECENTRALIZATION
Centralization is said to be a process where the concentration of decision making is in a few
hands. All the important decision and actions at the lower level, all subjects and actions at the
lower level are subject to the approval of top management. According to Allen,
―Centralization‖ is the systematic and consistent reservation of authority at central points in
the organization. The implication of centralization can be: -
1. Reservation of decision-making power at top level.
2. Reservation of operating authority with the middle level managers.
3. Reservation of operation at lower level at the directions of the top level.
Under centralization, the important and key decisions are taken by the top management and
the other levels are into implementations as per the directions of top level. For example, in a
business concern, the father & son being the owners decide about the important matters and
all the rest of functions like product, finance, marketing, personnel, are carried out by the
department heads and they have to act as per instruction and orders of the two people.
Therefore, in this case, decision making power remain in the hands of father & son.
On the other hand, Decentralization is a systematic delegation of authority at all levels of
management and in all of the organization. In a decentralization concern, authority in retained
by the top management for taking major decisions and framing policies concerning the whole
concern. Rest of the authority may be delegated to the middle level and lower level of
management.
The degree of centralization and decentralization will depend upon the amount of authority
delegated to the lowest level. According to Allen, ―Decentralization refers to the systematic
effort to delegate to the lowest level of authority except that which can be controlled and
exercised at central points. Decentralization is not the same as delegation. In fact,
decentralization is all extension of delegation. Decentralization pattern is wider is scope and
the authorities are diffused to the lowest most level of management. Delegation of authority is
a complete process and takes place from one person to another. While decentralization is
complete only when fullest possible delegation has taken place. For example, the general
manager of a company is responsible for receiving the leave application for the whole of the
concern. The general manager delegates this work to the personnel manager who is now
responsible for receiving the leave applicants. In this situation delegation of authority has
taken place. On the other hand, on the request of the personnel manager, if the general
manager delegates this power to all the departmental heads at all level, in this situation
decentralization has taken place. There is a saying that ―Everything that increasing the role
of subordinates is decentralization and that decreases the role is centralization‖.
Decentralization is wider in scope and the subordinate ‘s responsibility increase in this case.
On the other hand, in delegation the managers remain answerable even for the acts of
subordinates to their superiors.
Implications of Decentralization
1. There is less burden on the Chief Executive as in the case of centralization.
2. In decentralization, the subordinates get a chance to decide and act independently which
develops skills and capabilities. This way the organization is able to process reserve of
talents in it.
3. In decentralization, diversification and horizontal can be easily implanted.
4. In decentralization, concern diversification of activities can place effectively since there is
more scope for creating new departments. Therefore, diversification growth is of a degree.
5. In decentralization structure, operations can be coordinated at divisional level which is not
possible in the centralization set up.
6. In the case of decentralization structure, there is greater motivation and morale of the
employees since they get more independence to act and decide.
7. In a decentralization structure, co-ordination to some extent is difficult to maintain as there
are lot many department divisions and authority is delegated to maximum possible extent,
i.e., to the bottom most level delegation reaches. Centralization and decentralization are the
categories by which the pattern of authority relationships became clear. The degree of
centralization and decentralization can be affected by many factors like nature of operation,
 volume of profits, number of departments, size of a concern, etc. The larger the size of a
concern, a decentralization set up is suitable in it.
Forms of Organisation or Organization Structure
Organisation requires the creation of structural relationship among different departments and
the individuals working there for the accomplishment of desired goals. Organisation structure
is primarily concerned with the allocation of tasks and delegation of authority. The
establishment of formal relationships among the individuals working in the organisation is
very important to make clear the lines of authority in the organisation and to coordinate the
efforts of different individuals in an efficient manner. According to the different practices of
distributing authority and responsibility among the members of the enterprise, several types
of organisation structure have been evolved. They are:
1. Line organisation
2. Line and staff organisation
3. Functional organisation
4. Committee organisation
Line Organisation
This is the simplest and the earliest form of organisation. It is also known as "Military",
"traditional", "Scalar" or "Hierarchical" form of organisation. The line organisation represents
the structure in a direct vertical relationship through which authority flows. Under this, the
line of authority flows vertically downward from top to bottom throughout the organisation.
The quantum of authority is highest at the top and reduces at each successive level down the
hierarchy. All major decisions and orders are made by the executives at the top and are
handed down to their immediate subordinates who in turn break up the orders into specific
instructions for the purpose of their execution by another set of subordinates. A direct
relationship of authority and responsibility is thus established between the superior and
subordinate. The superior exercises a direct authority over his subordinates who become
entirely responsible for their performance to their commanding superior. Thus, in the line
organisation, the line of authority consists of an uninterrupted series of authority steps and
forms a hierarchical arrangement. The line of authority not only becomes the avenue of
command to operating personnel, but also provides the channel of communication,
coordination and accountability in the organisation.
Prof. Florence enunciates three principles which are necessary to realise the advantages of
this system and the non-observance of which would involve inefficiency.
1. Commands should be given to subordinates through the immediate superior; there
should be no skipping of links in the chain of command.
2. There should be only one chain. That is, command should be received from only one
immediate superior.
3. The number of subordinates whose work is directly commanded by the superior
should be limited.

Figure 7 Line Organisation

Advantages or Merits of Line Organisation

1. It is the easiest to establish and simplest to explain to the employers.
2. It fixes responsibility for the performance of tasks in a definite manner upon certain
individuals.
3. There is clear-cut identification of authority and responsibility relationship. Employees are
fully aware of the boundaries of their job.
4. It is most economical and effective.
5. It makes for unity of control thus conforming to the scalar principle of organisation.
6. It ensures excellent discipline in the enterprise because every individual knows to whom he
is responsible. The subordinates are also aware of the necessity of satisfying their superior
in their own interests.
7. It facilitates prompt decision-making because there is definite authority at every level.
8. As all the activities relating to one department or division are managed by one executive,
there can be effective coordination of activities.
9. This system is flexible or elastic, in the sense that, as each executive has sole responsibility
in his own position and sphere of work, he can easily adjust the organisation to changing
conditions.
10. Under this system, responsibility and authority are clearly defined. Every member of
the organisation knows his exact position, to whom he is responsible and who are
 responsible to him. Because of the clear fixation of responsibility, no person can escape
from his liability.
Disadvantages or Demerits of Line Organisation
1. With growth, the line organisation makes the superiors too overloaded with work. Since all
work is done according to the wishes of one person alone, the efficiency of the whole
department will come to depend upon the qualities of management displayed by the head
of that department. If therefore, something happens to an efficient manager, the future of
the department and of the concern as a whole would be in jeopardy.
2. Being an autocratic system, it may be operated on an arbitrary, opinionated and dictatorial
basis.
3. Under this system, the subordinates should follow the orders of their superior without
expression their opinion on the orders. That means there is limited communication.
4. There may be a good deal of nepotism and favouritism. This may result in efficient people
being left behind and inefficient people getting the higher and better posts.
5. The line organisation suffers from lack of specialised skill of experts. Modern business is
so complex that it is extremely difficult for one person to carry in his head all the necessary
details about his work in this department.
6. Line organisation is not suitable to big organisations because it does not provide specialists
in the structure. Many jobs require specialised knowledge to perform them.
7. If superiors take a wrong decision, it would be carried out without anybody having the
courage to point out its deficiencies.
8. The organisation is rigid and inflexible.
9. There is concentration of authority at the top. If the top executives are not capable, the
enterprise will not be successful.
Line and Staff Organisation
In line and staff organisation, the line authority remains the same as it does in the line
organisation. Authority flows from top to bottom. The main difference is that specialists are
attached to line managers to advise them on important matters. These specialists stand ready
with their speciality 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 organisation as they are
employed to provide expert advice to the line officers. The combination of line organisation
with this expert staff constitutes the type of organisation known as line and staff organisation.
The 'line' maintains discipline and stability; the 'staff' provides expert information. The line
gets out the production, the staffs carry 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.
Figure 8 the line and staff organisation

Types of Staff Notes

The staff position established as a measure of support for the line managers may take the
following forms:
1. Personal Staff: Here the staff official is attached as a personal assistant or adviser to
the line manager. For example, Assistant to managing director.
2. Specialised Staff: Such staff acts as the fountainhead of expertise in specialised areas
like R&D, personnel, accounting etc. For example, R&D Staff.
3. General Staff: This category of staff consists of a set of experts in different areas who
are meant to advise and assist the top management on matters called for expertise. For
example: Financial advisor, technical advisor etc.
Features of Line and Staff Organisation
1. Under this system, there are line officers who have authority and command over the
subordinates and are accountable for the tasks entrusted to them. The staff officers are
specialists who offer expert advice to the line officers to perform their tasks efficiently.
2. Under this system, the staff officers prepare the plans and give advice to the line officers
and the line officers execute the plan with the help of workers.
3. The line and staff organisation is based on the principle of specialisation.
Advantages or Merits of Line and Staff Organisation
1. It brings expert knowledge to bear upon management and operating problems. Thus, the
line managers get the benefit of specialised knowledge of staff specialists at various levels.
2. The expert advice and guidance given by the staff officers to the line officers benefit the
entire organisation.
3. As the staff officers look after the detailed analysis of each important managerial activity,
it relieves the line managers of the botheration of concentrating on specialised functions.
4. Staff specialists help the line managers in taking better decisions by providing expert
advice. Therefore, there will be sound managerial decisions under this system.
5. It makes possible the principle of undivided responsibility and authority, and at the same
time permits staff specialisation. Thus, the organisation takes advantage of functional
organisation while maintaining the unity of command.
6. It is based upon planned specialisation.
7. Line and staff organisation has greater flexibility, in the sense that new specialised
activities can be added to the line activities without disturbing the line procedure.
Disadvantages or Demerits of Line and Staff Organisation
1. Unless the duties and responsibilities of the staff members are clearly indicated by
charts and manuals, there may be considerable confusion throughout the organisation as to
the functions and positions of staff members with relation to the line supervisors.
2. There is generally a conflict between the line and staff executives. The line managers
feel that staff specialists do not always give right type of advice, and staff officials generally
complain that their advice is not properly attended to.
3. Line managers sometimes may resent the activities of staff members, feeling that
prestige and influence of line managers suffer from the presence of the specialists.
4. The staff experts may be ineffective because they do not get the authority to
implement their recommendations.
5. This type of organisation requires the appointment of large number of staff officers or
experts in addition to the line officers. As a result, this system becomes quite expensive.
6. Although expert information and advice are available, they reach the workers through
the officers and thus run the risk of misunderstanding and misinterpretation.
7. Since staff managers are not accountable for the results, they may not be performing
their duties well.
8. Line mangers deal with problems in a more practical manner. But staff officials who
are specialists in their fields tend to be more theoretical. This may hamper coordination in the
organisation.
Functional Organisation
The difficulty of the line organisation in securing suitable chief executive was overcome by
F.W. Taylor who formulated the Functional type of organisation. As the name implies, the
whole task of management and direction of subordinates should be divided according to the
type of work involved. As far as the workman was concerned, instead of coming in contact
with the management at one point only, he was to receive his daily orders and help directly
from eight different bosses; four of these were located in the planning room and four in the
shop. The four specialists or bosses in the planning room are:
1. Route Clerk: To lay down the sequence of operations and instruct the workers concerned
about it.
2. Instruction Card Clerk: To prepare detailed instructions regarding different aspects of
work.
3. Time and Cost Clerk: To send all information relating to their pay to the workers and to
secure proper returns of work from them.
4. Shop Disciplinarian: To deal with cases of breach of discipline and absenteeism.
The four specialists or bosses at the shop level are:
1. Gang Boss: To assemble and set up tools and machines and to teach the workers to make
all their personal motions in the quickest and best way.
2. Speed Boss: To ensure that machines are run at their best speeds and proper tools are used
by the workers.
3. Repair Boss: To ensure that each worker keeps his machine in good order and maintains
cleanliness around him and his machines.
4. Inspector: To show to the worker how to do the work.
It was F.W. Taylor who evolved functional organisation for planning and controlling
manufacturing operations on the basis of specialisation. But in practice, functionalisation is
restricted to the top of the organisation as recommended by Taylor.
Figure 9 Functional Organisation
Features of Functional Organisation
The features of functional organisation are as follows:
1. The work of the enterprise is divided into different functional departments and the different
functional departments are placed under different specialists.
2. The functional specialist has the authority or right to give orders regarding his function
whosesoever that function is performed in the enterprise.
3. Under this system, the workers have to receive instructions from different specialists.
4. If anybody in the enterprise has to take any decision relating to a particular function, it has
to be in consultation with the functional specialist.
5. Under this system, the workers have to perform a limited number of functions.

Advantages of Functional Organisation

1. Functional organisation is based on expert knowledge. Every functionary in charge is an
expert in his area and can help the subordinates in better performance in his area.
2. Division of labour is planned not incidental.
3. As there is not scope for one-man control in this form of organisation, this system ensures
cooperation and teamwork among the workers.
4. This system ensures the separation of mental functions from manual functions.
5. It helps mass production by standardization and specialization.
6. This system ensures maximum use of the principle of specialisation at every work point.
7. As there is joint supervision in the organisation, functional organisation reduces the burden
on the top executives.
8. Functional organisation offers a greater scope for expansion as compared to line
organisation. It does not face the problem of limited capabilities of a few line managers.
9. The expert knowledge of the functional mangers facilitates better control and supervision
in the organisation.
Disadvantages or Demerits of Functional Organisation
1. It is unstable because it weakens the disciplinary controls, by making the workers work
under several different bosses. Thus, functional organisation violates the principle of unity
of command.
2. Under this type of organisation, there are many foremen of equal rank. This may lead to
conflicts among them.
3. The co-ordinating influence needed to ensure a smoothly functioning organisation may
involve heavy overhead expenses.
4. The inability to locate and fix responsibility may seriously affect the discipline and morale
of the workers through apparent or actual contradiction of the orders.
5. This system is very costly as a large number of specialists are required to be appointed.
6. A functional manager tends to create boundaries around himself and think only in term of
his own department rather than of the whole enterprise. This results in loss of overall
perspective in dealing with business problems.
7. It is difficult for the management to fix responsibility for unsatisfactory results.
Committee Organisation
Committee organisation as a method of managerial control has very little practical
importance, because it is managed by a senior member of the committee only. But the
committee organisations are widely used for the purpose of discharging advisory functions of
the management.
Committees are usually relatively formal bodies with a definite structure. They have their
own organisation. To them are entrusted definite responsibility and authority.
According to Hicks, "A committee is a group of people who meet by plan to discuss or
make a decision for a particular subject."
According to Louis A Allen, "A committee is a body of persons appointed or elected to meet
on an organised basis for the consideration of matters brought before it."
A committee may formulate plans, make policy decisions or review the performance of
certain units. In some cases, it may only have the power to make recommendations to a
designated official. Whatever may be the scope of their activities, committees have come to
be recognised as an important instrument in the modern business as well as non-business
organisations.
Objectives of Committees
Committees are constituted to achieve one or more of the following objectives:
1. To have consultations with various persons to secure their view-points
2. To give participation to various groups of people
3. To secure cooperation of different departments
4. To coordinate the functioning of different departments and individuals by bringing about
unity of directions.
Types of Committees
1. Line committee: If a committee is vested with the authority and responsibility to decide
and whose decisions are implemented, it is known as line committee.
2. Staff committee: If a committee is appointed merely to counsel and advise, it is known as a
staff committee.
3. Formal committee: When a committee is constituted as a part of the organisation structure
and has clear-cut jurisdiction, it is a formal committee.
4. Informal committee: An informal committee is formed to advice on certain complicated
matters. It does not form part of the organisation structure.
5. Coordinating committee: It is constituted to coordinate the functioning of different
departments.
6. Executive committee: It is a committee which has power to administer the affairs of the
business.
7. Standing committee: are formal committees that are of permanent character.
8. Ad hoc committee: They are temporary bodies. It is appointed to deal with some special
problem and stops functioning after its job are over.
Advantages or Merits of Committee
1. A committee is an effective method of bringing the collective knowledge and
experience of a number of persons. Therefore, many multi-dimensional and complex
problems of modern enterprises, which cannot be solved satisfactorily by individual
managers, can be solved by committees.
2. Committees offer scope for group deliberations and group judgment. Results obtained
by group deliberation and group judgment are likely to be better than those obtained by
individual judgment.
3. When it is necessary to integrate varying points of view, which cannot conveniently
be coordinated by individuals, the committee may be used to bring about coordination.
4. The management can give representation to the employees in various committees.
This will motivate the employees for better performance as they feel that they have a say in
the affairs of the organisation.
5. A committee form of organisation facilitates pooling of authority of individual
managers for making some type of decisions of an inter-departmental nature.
6. A committee form of organisation tends to promote organisational cohesiveness.
Group endeavour, team spirit and collective responsibility are control to the philosophy of
committees.
Disadvantages of Committee
1. If a manager has an opportunity to carry a problem to a committee, he may take it as a
means of avoiding decision-making or to escape the consequences of an unpopular
decision.
2. Sometimes, a committee may not be able to take the needed decision because of the
conflicting views of the members.
3. Committees take more time in procedural matters before any decision is taken. In some
cases, slowness seriously handicaps the administration of the organisation.
4. Committees are an expensive device both in terms of cost and time.
5. When the committee findings represent a compromise of different viewpoints, they may be
found to be weak and indecisive.
6. No member of a committee can be individually held responsible for the wrong decision
taken by the committee.
7. It is very difficult to maintain secrecy regarding the deliberations and the decisions taken
by a committee, especially when there are many members in the committee.

UNIT III
ORGANISATION BEHAVIOUR
Attitudes – Definitions – Components of Attitudes – Job Related Attitudes – Personality –
Meaning – MBIT – Big Five Model – Other Traits – Perception: Definition, Perceptual
Process – Learning Theories – Motivation – Theories of Motivation.
ORGNISATIONAL BEHAVIOUR
INTRODUCTION
Organisational Behaviour is the study and application of knowledge about how people act
within organisations. It is a human tool for human benefits. It applies to the behaviour of
people at work in all types of organizations: public, private, cooperative sector, commercial
or service organisations. Whatever organisations are, there is a need to understand
organisational behaviour.
Organisational Behaviour is the study of human behaviour in organisations to make more
active human performance to achieve organisational objectives as well as human objectives.
Organisational Behaviour aims at finding out those ways in which people will contribute in
best possible manner.
The study of Organisational Behaviour involves understanding, prediction and control of
human behaviour and the factors which influence the performance of people in an
organisation. It is concerned with the behaviour of individuals and groups not the behaviour
of all members collectively.
DEFINITIONS OF ORGANISATIONAL BEHAVIOUR

1. Stephen P. Robbins: “Organisation Behaviour is a field of study that investigates the

impact that individuals, groups and structure have on behaviour within organisations,
for the purpose of applying such knowledge toward improving an organisation’s
effectiveness.”
2. Moorhead/Griffin: “Organisation behaviour is the study of human behaviour in
organisational settings that interface between human behaviour and the organisation
and the organisation itself.”
3. Ramon J Aldag and Arthur P Brief: “Organisation behaviour is a branch of the
social science that seek to build theories that ca be applied to predicting,
understanding and controlling behaviour in work organisations.”
Nature and Feature: The following is the nature of organisational behaviour:
1. Multidisciplinary study: Organisational behaviour is a Multidisciplinary Subject.
Organisational of behaviour uses and applies principles, practices thoughts and theories of
various disciplines such as: Law, History, Psychology, Political science, Economics etc. So
Organisational behaviour is a Multidisciplinary Subject.
2. Science as well as Art: Organisational behaviour is a science because it applies
principles and concepts objectively. Organisational behaviour is also an art because its
application changes as and when required. Organisational behaviour searches concepts and
solutions according to the situation and need.
3. System Approach: Organisational behaviour uses system approach. System approach
provides a useful framework for understanding how the elements of any organisation react
among themselves and with their external environment. Organisational behaviour uses
system approach because it takes into account all the variables affecting organisational
functioning.
4. Contingency Approach: Today’s business world is full of uncertainties, i.e., in most
organisational situations, outcomes are affected by many factors.
In the earlier days of management studies, managers tried to search for the universally
applicable answers to organizational problems. That’s why the earlier management concepts
were not successful. Organisational environment is volatile and fast changing so management
without contingent approach cannot be successful. It must have Contingency (as and when
required) approach.
OB –as an interdisciplinary approach
Organizational behaviour is an applied behavioral science that is built on contributions from a
number of behavioral disciplines such as psychology, sociology, social psychology,
anthropology and economics.

Let’s see how these disciplines are related to organizational behaviour,

A. Psychology. Psychology is the study of human behavior which tries to identify the
characteristics of individuals and provides an understanding why an individual behaves in a
particular way. This thus provides us with useful insight into areas such as human motivation,
perceptual processes or personality characteristics.
B. Sociology. Sociology is the study of social behavior, relationships among social
groups and societies, and the maintenance of social order. The main focus of attention is on
the social system. This helps us to appreciate the functioning of individuals within the
organization which is essentially a socio-technical entity.
C. Social psychology. Social psychology is the study of human behaviour in the context
of social situations. This essentially addresses the problem of understanding the typical
behavioral patterns to be expected from an individual when he takes part in a group.
D. Anthropology. Anthropology is the science of mankind and the study of human
behaviour as a whole. The main focus of attention is on the cultural system, beliefs, customs,
ideas and values within a group or society and the comparison of behaviour among different
cultures. In the context of today's organizational scenario. It is very important to appreciate
the differences that exist among people coming from different cultural backgrounds as people
are often found to work with others from the other side of the globe.
E. Economics. Any organization to survive and sustain must be aware of the economic
viability of their effort. This applies even to the non-profit and voluntary organizations as
well.
F. Political Science. Although frequently overlooked, the contributions of political
scientists are significant to the understand arrangement in organizations. It studies individuals
and groups within specific conditions concerning the power dynamics. Important topics
under here include structuring of conflict, allocation of power and how people manipulate
power for individual selfinterest etc.
Importance and scope of organizational behaviour
Organisational behaviour offers several ideas to management as to how human factor should
be properly emphasized to achieve organisational objectives. Barnard has observed that an
organisation is a conscious interaction of two or more people. Organisational behaviour
provides opportunity to management to analyse human behaviour and prescribe means for
shaping it to a particular direction.
Organisational behaviour helps to analyse 'why' and 'how' an individual behaves in a
particular way. Understanding Human Behaviour Organisational behaviour provides
understanding the human behaviour in all directions in which the human beings interact.
Thus, organisational behaviour can be understood at the individual level, interpersonal level,
group level and intergroup level.
• Interpersonal Level: Human behaviour can be understood at the level of interpersonal
interaction. Organisational behaviour provides • means for understanding the interpersonal
relationships in an organisation. Analysis of reciprocal relationships, role analysis and
transactional analysis are some of the common methods, which provide such understanding.
• Group Level: Though people interpret anything at their individual level, they are
often modified by group pressures, which then become a force in shaping human behaviour,
Thus, individuals should be studied in groups also. Research in group dynamics has
contributed vitally to organisational behaviour and shows how a group behaves in its norms,
cohesion, goals, procedures, communication pattern and leadership. These research results
are advancing managerial knowledge of understanding group behaviour, which is very
important for organisational morale and productivity.
• Inter-group Level: The organisation is made up of many groups that develop complex
relationships to build their process and substance. Understanding the effect of group
relationships is important for managers in today's organisation. Inter-group relationship may
be in the form of co-operation or competition.
Importance of organizational behaviour
• Controlling and Directing Behaviour: After understanding the mechanism of human
behaviour, managers are required to control and direct the behaviour so that it conforms to
the standards required for achieving the organisational objectives. Thus, managers are
required to control and direct the behaviour at all levels of individual interaction. Therefore,
organisational behaviour helps managers in controlling and directing in different areas such
as use of power and sanction, leadership, communication and building organisational climate
favourable for better interaction.
• Use of Power and Sanction: The behaviours can be controlled and directed by the use
of power and sanction, which are formally defined by the organisation. Power is referred to
as the capacity of an individual to take certain action and may be utilized in many ways.
Organisational behaviour explains how various means of power and sanction can, be utilized
so that both organisational and individual objectives are achieved simultaneously.
• Leadership: Organisational behaviour brings new insights and understanding to the
practice and theory of leadership. It identifies various leadership styles available to a manager
and analyses which style is more appropriate in a given situation. Thus, managers can adopt
styles keeping in view the various dimensions of organisations, individuals and situations.
• Communication: Communication helps people to come in contact with each other. To
achieve organisational objectives, the communication must be effective. The communication
process and its work in inter-personal dynamics have been evaluated by organisational
behaviour.
• Organisational Climate: Organisational climate refers to the total organisational
situations affecting human behaviour. Organisational climate takes a system perspective that
affect human behaviour. Besides improving the satisfactory working conditions and adequate
compensation, organisational climate includes creation of an atmosphere of effective
supervision; the opportunity for the realisation of personal goals, congenial relations with
others at the work place and a sense of accomplishment.
• Organisational Adaptation: Organisations, as dynamic entities are characterised by
pervasive changes. Organisations have to adapt themselves to the environmental changes by
making suitable, internal arrangements such as convincing employees who normally have the
tendency of resisting any changes.
MODELS OF ORGANISATION BEHAVIOUR
Organizations differ in the quality of organizational behaviour that they develop. These
differences are substantially caused by different models of organizational behaviour that
dominant management's thought in each organization. The model that a manager holds
usually begins with certain assumptions about people and thereby leads to certain
interpretations of organizational events. The following four models of organizational
behaviour are as follows:
A. Autocratic model
B. Custodial model
C. Supportive model
D. Collegial model
Autocratic Model
In an autocratic model', the manager has the power to command his subordinates to do a
specific job. Management believes that it knows what is best for an organization and
therefore, employees are required to follow their orders. The psychological result of this
model on employees is their increasing dependence on their boss. Its main weakness is its
high human cost.
Custodial Model
This model focuses better employee satisfaction and security. Under this model organizations
satisfy the security and welfare needs of employees. Hence, it is known as custodian model.
This model leads to employee dependence on an organization rather than on boss. As a result
of economic rewards and benefits, employees are happy and contented but they are not
strongly motivated.
Supportive Model
The supportive model depends on 'leadership' instead of power or money. Through
leadership, management provides a climate to help employees grow and accomplish in the
interest of an organization. This model assumes that employees will take responsibility,
develop a drive to contribute and improve them if management will give them a chance.
Therefore, management's direction is to 'Support' the employee's job performance rather than
to 'support' employee benefit payments, as in the custodial approach. Since management
supports employees in their work, the psychological result is a feeling of participation and
task involvement in an, organization.
Collegial Model
The term 'collegial' relates to a body of persons having a common purpose. It is a team
concept. Management is the coach that builds a better team. The management is seen as joint
contributor rather than as a boss. The employee response to this situation is responsibility.
The psychological result of the collegial approach for the employee is 'self-discipline'. In this
kind of environment employees normally feel some degree of fulfilment and worthwhile
contribution towards their work. This results in enthusiasm in employees' performance.
Table 2 Four models of organizational behaviour
Autocratic Custodial Supportive Collegial
Basis of Model Power Economic Leadership Partnership
resources
Managerial Authority Money Support Teamwork
orientation
Employee Dependence Dependence Participation Self-discipline
psychological on boss on
result organization
Employee Subsistence Security Status and Selfactualization
needs met recognition
Performance Minimum Passive Awakened Moderate
result cooperation drives enthusiasm
It is wrong to assume that a particular model is the best model. The selection of model by a
manager is determined by a number of factors such as, the existing philosophy, vision and
goals of manager. In addition, environmental conditions help in determining which model
will be the most effective model.
INDIVIDUAL BEHAVIOUR
All organizations are composed of individuals. No organization can exist without individuals.
Human behavior, which is; considered a complex phenomenon, is very difficult to define in
absolute terms. It is primarily a combination of responses to external and internal stimuli.
These responses would reflect psychological structure of the person and may be results of the
combination of biological and psychological processes, which interpret them, respond to
them in an appropriate manner and learn from the result of these responses.
Psychologist Kurt Levin has conducted considerable research into the human behavior and its
causes. He believes that people are influenced by a number of diversified factors, which can
be both genetic and environmental. The influence of these factors determines the pattern of
human behavior.
An individual makes a variety of contributions to an organization in the form of—efforts,
skills, ability, time, loyalty and so forth. These contributions presumably satisfy various
needs and requirements of the organization. In return for contributions, the organization
provides incentives such as pay, promotion, and job security to the employee. Just as the
contributions available from the individual must satisfy the organization's needs, the
incentives must serve the employees' needs in return.
If both the individual and the organization consider the psychological contract fair and
equitable, they will be satisfied with the relationship and are likely to continue it. If either
party perceives an imbalance or iniquity in the contract, it may initiate a change. A major
challenge faced by an organization, thus, is to manage the psychological contracts.
One specific aspect of managing psychological contracts is managing the person-job fit. The
'person-job fit' is the extent to which the contributions made by the individual match the
incentives offered by the organization. The behavior of individuals in organization is the
primary concern of management and it is essential that the managers should have an
understanding of the factors influencing the behavior of the employees they manage. The
figure 5.1 identifies five sets of factors that have an impact upon individual behavior in
organizations.
NATURE OF INDIVIDUAL DIFFERENCES
Individual differences are personal attributes that vary from one person to another. Individual
differences may be physical and psychological. The following figure shows the attributes of
physical and psychological differences.
Table 3 Individual Differences
Physical Differences Psychological Differences
Height Personality
Weight Attitudes
Body Shape Perception
Appearance Motivation
Complexion Learning

Whenever an organization attempts to assess the individual differences among its employees,
it must consider the situation in which that particular behavior occurs. Individual differences
make the manager's job extremely challenging. In fact, according to a recent research,
"variability among workers is substantial at all levels but increases dramatically with job
complexity. Due to these reasons, growing work force diversity compels managers to view
individual differences in a fresh way. Leaders now talk frequently about "valuing differences"
and learn to "manage diversity". So rather than limiting diversity, as in the past, today's
managers need to better understand and accommodate employee diversity and individual
differences. Important dimensions of individual differences
 Self-concept
 Personality dimensions
 Abilities, and
 Personal values and ethics.
Self-concept
Self is the core of one's conscious existence. Awareness of self is referred to as one's self-
concept. Sociologists Viktor Gecas defines self-concept as "the concept the individual has of
himself as a physical, social and spiritual or moral being". In other words, every individual
recognizes himself as a distinct individual. A self-concept would be impossible without the
capacity to think. This brings us to the role of cognitions. Cognitions represent, "any
knowledge, opinion, or belief about the environment about oneself, or about one's behavior".
Among many different types of cognitions, those involving expectation, planning, goal
setting, evaluating and setting personal standards are particularly relevant to organizational,
behavior.
Self-esteem
Self-esteem is a belief over one's own worth based on an overall self-evaluation. Those with
low self-esteem tend to view themselves in negative terms. They do not feel good about
themselves, tend to have trouble in dealing effectively with others, and are hampered by self-
doubts. High selfesteem individuals, in contrast, see themselves as worthwhile, capable and
acceptable. Although, high self-esteem is generally considered a positive trait because it is
associated with better performance and greater satisfaction, recent research uncovered flaws
among those having high self-esteem. Specifically, high self-esteem subjects tended to
become self-centred and boastful when faced with situations under pressure Hence moderate
self-esteem is desirable.
Managers can build employee self-esteem in four ways:
1. Be supportive by showing concern for personal problems, interests, status and contribution.
2. Offer work involving variety, autonomy and challenges that suit the individual's values,
skills and abilities.
3. Strive for management-employee cohesiveness and trust building.
4. Have faith in each employee's self-management ability, reward successes.
Self-efficacy
Self-efficacy is a person's belief about his' or her chances of successfully accomplishing a
specific task. According to one organizational behavior writer, "Self-efficacy arises from the
gradual acquisition of complex, cognitive, social, linguistic, and/or physical skills through
experience",
There is strong linkage between high self-efficacy expectations and success in terms of
physical and mental tasks, anxiety reduction, addiction control, pain tolerance and illness
recovery. Oppositely, those with low self-efficacy expectations tend to have low success
rates.
Personality Dimensions
The big, five personality dimensions are: extroversion, agreeableness, thoroughness,
emotional stability and openness to experience. Ideally, these personality dimensions that
correlate positively and strongly with job performance would be helpful in the selection,
training and appraisal of employees. The individuals who exhibit; traits associated with a
strong sense of responsibility and determination generally perform better than those who do
not.
Physical and intellectual qualities
Physical differences among individuals are the most visible of all differences. They are also
relatively easy to assess. Intellectual differences are somewhat more difficult to discern, but
they too can be assessed by fairly objective means. The abilities/skills and competencies of
employees are both physical and intellectual qualities. Ability-
it refers to an individual's skill to perform effectively in one or more areas of activity, such as
physical, mental or interpersonal work.
Skills
skills are generally thought of as being more task-specific capabilities than abilities. For
example, an individual with numerical ability who goes to school to learn accounting
develops a numerical skill specific to that field'. Thus, when a particular ability is applied to a
specialized area, (for example accounting), it becomes a skill.
Competencies-
Competencies are skills associated with specialization. Competencies are skills that have
been refined by practice and experience and that enable, the-individual to specialize in some
field. For example, an accountant with numerical "ability and accounting skill takes a position
in the Taxation Department and as time passes, he develops more competency as a tax expert.
Factors Influencing Individual Behaviour
1. Personality-personality traits
2. Economic factors-wage rate, technological change, the job, economic outlook,
employment opportunity etc.
3. Socio-cultural factors-social environment consist of relation with friends, relatives,
coworkers, superiors, subordinates etc.
4. Cultural factors- basic values, perceptions, work ethics, preferences etc.
5. Organizational factors- structure, hierarchy, resources, leadership, support etc, from
organization
6. Motivation- internal motivation (individual skill, ability, intelligence etc.) external
(incentives, training etc.)
7. Attitudes- perception favourably or unfavourably.
8. Values- personally or socially preferable.
9. Abilities- actual skills and capabilities of a person and physical-mental ability
10. Perception- is the viewpoint which one interpret a situation.
11. Personal factors- age, sex, education, intelligence, marital status, religion etc.
ATTITUDES
In simple words, an "attitude" is an individual's point of view or an individual's way of
looking at something. To be more explicit, an "attitude" may be explained as the mental state
of an individual, which prepares him to react or make him behave in a particular pre-
determined way. it is actually acquired feeling.
An attitude is defined as, "a learned pre-disposition to respond in a consistently
favourable or unfavourable manner with respect to a given object”. (Katz and Scotland)
Attitude is the combination of beliefs and feelings that people have about specific ideas,
situations or other people. Attitude is important because it is the mechanism through which
most people express their feelings.
COMPONENTS OF ATTITUDE
Attitude has three components, which are as follows:
 1. Affective component
2. Cognitive component
3. Intentional component
The affective component of an attitude reflects 'feelings and emotions' that an individual has
towards a situation.
The cognitive component of an attitude is derived from 'knowledge' that an individual has
about a situation. Finally,
the intentional component of an attitude reflects how an individual 'expects to behave'
towards or in the situation.
For example, the different components of an attitude held towards a firm, which supplies
inferior products and that too irregularly could be described as follows:
• "I don't like that company"—Affective component.

• "They are the worst supply firm I have ever dealt with"—Cognitive component.

• "I will never do business with them again"'—Intentional component.

People try to maintain consistency among the three components of their attitudes. However,
conflicting circumstances often arise. The conflict that individuals may experience among
their own attitudes is called 'cognitive dissonance.
ATTITUDE FORMATION AND CHANGE
Individual attitude is formed over time as a result of repeated personal experiences with ideas,
situations or people. One of the very important ways to understand individual behaviour in an
organization is that of studying attitude, which is situational specific and learned.
An attitude may change as a result of new information. A manager may have a negative
attitude about a new employee because of his lack of job-related experience. After working
with a new person, a manager may come to realize that he is actually very talented and
subsequently may develop a more positive attitude toward him.
Work-Related Attitudes
People in an organization form attitude about many things such as about their salary,
promotion possibilities, superiors, fringe benefits, food in the canteen, uniform etc. Especially
some important attitudes are job satisfaction or dissatisfaction, organizational commitment
and job involvement.
Job Satisfaction
Job satisfaction is an attitude reflects the extent to which an individual is gratified or fulfilled
.by his or her work. Extensive research conducted on job satisfaction has indicated that
personal factors such as an individual's needs and aspirations determine this attitude, along
with group and organizational factors such as relationships with co-workers and supervisors,
working conditions, work policies and compensation.
A satisfied employee also tends to be absent less often, makes positive contributions, and
stays with the organization. In contrast, a dissatisfied employee may be absent more often
may experience stress that disrupts co-workers, and may keep continually look for another
job.
Organizational factors that influence employee satisfaction include pay, promotion, policies
and procedures of the organizations and working conditions. Group factors such as
relationship with co-workers and supervisors also influence job- satisfaction. Similarly,
satisfaction depends on individual factors like individual's needs and aspirations. If
employees are satisfied with their job, it may lead to low employee turnover and less
absenteeism and vice-versa.
Organizational Commitment and Involvement
Two other important work-related attitudes arc organizational commitment and involvement.
Organizational commitment is the individual's feeling of identification with and attachment to
an organization. Involvement refers to a person's willingness to be a team member and work
beyond the usual standards of the job. An employee with little involvement is motivated by
extrinsic motivational factor and an employee with strong involvement is motivated by
intrinsic motivational factors.
There are a number of factors that lead to commitment and involvement. Both may increase
with an employee's age and years with the organization, with his sense of job security and
participation in decision-making. If the organization treats its employees fairly and provides
reasonable rewards and job security, employees are more likely to be satisfied and
committed. Involving employees in decision-making can also help to increase commitment.
In particular, designing jobs, which are interesting and stimulating, can enhance job
involvement.
Measurement of Attitude
Since attitude is a psychological phenomenon, it is necessary to measure because it affects the
feeling of the people, labour turn over, absenteeism, productivity etc. some of the popular
method to measure attitudes are.
1. Opinion survey-this is based on questionnaire with closed end questions (Y/N questions)
or multiple-choice questions regarding nature of work, environment, rewards etc. through
which attitude is measured.
2. Interviews- an interview board consisting of neutral person conducting interview with
employees and keep the result as confidential
3. Scaling techniques-Thurston attitude scale, Likert scale etc.
Sources of attitude
1. Direct personal experience
2. Association
3. Family and per groups
4. Neighbourhood
5. Economic status and occupation
6. Mass communication
PERCEPTION
INTRODUCTION
Perception is described as a person’s view of reality. Perception is an important mediating
cognitive process. Through this complex process, people make interpretations of the stimulus
or situation they are faced with. Both selectivity and organization go 'into perceptual,
interpretations.
Externally, selectivity is affected by intensity, size, contrast, repetition, motion and novelty
and familiarity. Internally, perceptual selectivity is influenced by the individual's motivation,
learning and personality. After the selective process filters the stimulus situation, the
incoming information is organized into a meaningful whole.

“It is the interpretation of sensory data so as to gather meaningful ideas”. In the process of
perception, people receive many different kinds of information through all five senses,
assimilate them and then interpret them. Different people perceive the same information
differently.
Perception plays a key role in determining individual behaviour in organizations.
Organizations send messages in a variety of forms to their members regarding what they are
expected to do and not to do. In spite of organizations sending clear messages, those
messages are subject to distortion in the process of being perceived by organizational
members. Hence, managers need to have a general understanding of the basic perceptual
process.
Perceptual Process
Perception is the process by which people select, organize, interpret and respond to
information from the world around them. This information is obtained through the senses
namely, seeing, hearing, touch, taste and smell.
Perception may be defined as the process of receiving, selecting, organizing, interpreting,
checking, and reacting to sensations. It is also defined as ‘a process by which individuals
organize and interpret their sensory impressions in order to give meaning to their
environments.’ The perception processes show that their functioning is affected by three
variables – the objects perceived, the environment in which perception occurs, and the
individual perceiving the objects.
Basic Perceptual Process
Perception is influenced by characteristics of the object being perceived, by the characteristics
of the person and by the situational processes. Perception is a screen or filter through which
information passes before having an effect on people. It consists of:
Figure 10 Basic Perceptual Process

1. Perceptual input- Information, object, event, people, symbols etc. Characteristics of

the object include contrast, intensity, movement, repetition and novelty. Characteristics of the
person include attitude, self-concept and personality.
2. Perceptual mechanism- receiving of information by means of five senses from the
external environment and process them to form output. It includes: a. Perceptual receiving
b. Perceptual selectivity
c. Perceptual organization
d. Perceptual Interpretation (perceptual context, perceptual defence, halo effect, projection,
attribution, stereo typing etc.)
3. Perceptual output- behavioral outcome of perceptual mechanism. It is the result of
perceptual process. It includes attitude, opinions, feelings, values and behaviour the details of
a particular situation affect the way a person perceives an object; the same person may
perceive the same object very differently in different situations. The processes through which
a person's perceptions are altered by the situation include selection, organization, attribution,
projection, stereotyping process, and the halo effect process. Among these, selective
perception and stereotyping are particularly relevant to organizations.
Factors Affecting perception
Perceptual selection is determined by two broad factors:
1. External factors
2. Internal factors
 Figure 11 Factors Affecting perception

External factors
These factors relate the environment. They include:
A. Size – size determines the height or weight of an individual, object etc. bigger the size,
higher will be the perception.
B. Intensity- intensity attracts to increase the selective perception. Eg. An illuminated shop
attracts attention of the customers.
C. Repetition- repeated message and advertisement is more likely perceived than a single
one.
D. Movements – moving objects are more likely to be perceived than a stationary object. A
moving car is more perceived than a parked car.
F. Status- high status people can influence the perception of employees than low status
people. An order from the Managing Director may be perceived by employees quickly.
G. Contrast - an object which contrasts with surrounding environment is more likely to be
noticed.
E.g. “EXIT” sign in the cinema hall, Danger sign in transformers etc.
H. Novelty and Familiarity- this states that either the familiar or novel factor can serve as
attention better. E.g. Face of a film star can be identified even in a crowd. Novel or new
type of advertisement like DOCOMO…
I. Nature – perception level may be varied according to the nature of input or stimuli. Eg. A
picture attracts more attention than a word.
J. Order- the order in which the objects or stimuli are presented is an important factor for
attention. E.g. Welcome speech at the beginning will attract more attention. Like that, in
film, suspense will be revealed at last to heighten the curiosity and perceptive attention.
Internal factors
Internal or personal factors also influence the perception process. The important personal
factors are:
A. Learning- A perceptual set is basically what a person expects from the stimuli on the
basis of experience and learning relative to same or similar stimuli. Eg. Perception on sign
board will be different for those who learned driving and those who not.
Motivation- Motivation also plays an important role in influencing perception.
E.g. A hungry person will be very sensitive to the smell or sight of food than a non-hungry
one.
B. Personality- perception is also influenced by personality especially young and old,
man to women etc.
C. Experience-a successful experience enhance and boost the perceptive ability and
leads to accuracy in perception whereas failure erodes confidence
PERSONALITY
The term personality has been derived from Latin word “personnare” which means to speak
through. Personality is traditionally referring to how people influence others through their
external appearances.
Meaning and Definition of Personality
Personality is a complex phenomenon and difficult understand. There is no single universally
acceptable definition. Personality refers to the personal characteristics that lead to consistent
patterns of behaviour. It represents the overall profile or combination of stable characteristics
that capture the unique nature of a person. Personality combines a set of physical and mental
characteristics that reflect how a person looks, thinks, acts and feels. It has both internal and
external elements. External traits are observable behaviours on the basis of which we can
understand one’s personality. The internal factors are thoughts, values and genetic
characteristics that are inferred from the observable behaviours.
According to Hogan, personality refers to the relatively stable pattern of behaviours and
consistent internal states that explain a person’s behavioural tendencies.

Gorden Allport defines “Personality is the dynamic organisation within an individual of those
psychological systems that determine his unique adjustment to his environment”.
Maddi defines personality as, “A stable set of characteristics and tendencies that determine
those commonalities and differences in the psychological behavior and that may not be easily
understood as the sole result of the social and biological pressures of the moment".
We can understand from the above definition that people have some traits in common with
others and some uncommon with them. Each employee in an organization is unique and he
may or may not act similarly in a similar situation. Therefore, managers cannot use the same
kind of rewards or motivation techniques to influence employee’s behaviour. The above
definition does not mean that people do not ever change. It simply indicates that individuals
do not change drastically overnight and their thoughts, feelings, values, and actions remain
relatively stable over time. Personality changes in individuals occur slowly over an extended
period of time. However, an understanding of personality dimensions would enable managers
to predict the behaviour of employees and manage them effectively.
Characteristics or Features
• Personality is something which is unique in each individual.
• Personality refers particularly to the persistent qualities of an individual.
• Personality represents a dynamic orientation of an organism to the environment.
• Personality is greatly influenced by social interactions.
• Personality represents a unique organization of persistent dynamic and social
predisposition.
• Consistency.
• Psychological and physiological.
• It impacts behaviors and actions.
• Multiple expressions.
Personality traits
Personality traits are very important in organizational behavior. In particular, five personality
traits especially related to job performance have recently emerged from research.
Characteristics of these traits can be summarized as follows:
1. Extroversion: Sociable, talkative and assertive.
2. Agreeableness: Good-natured, cooperative and trusting.
3. Conscientiousness: Responsible, dependable, persistent and achievement-oriented.
4. Emotional Stability: Viewed from a negative standpoint such as tense, insecure and
nervous.
5. Openness to Experience: Imaginative, artistically sensitive and intellectual.
Identifying the above "big five" traits related to performance reveals that personality plays an
important role in organizational behavior. Besides physical appearance and personality traits,
the aspects of personality concerned with the self-concept such as self-esteem and self-
efficacy and the person-situation interaction also play important roles.
 Figure 12 Big Five Personality Model

Personality formation
The personality formation of an individual starts at birth and continues throughout his life.
Three major types of factors play important roles in personality formation, which are as
follows:
• Determinants: The most widely studied determinants of personality are biological,
social and cultural. People grow up in the presence of certain hereditary characteristics (body
shape and height), the social context (family and friends) and the cultural context (religion
and values). These three parts interact with • each other to shape personality. As people grow
into adulthood, their personalities become very clearly defined and generally stable.
• Stages: According to Sigmund Freud human personality progresses through four
stages: dependent, compulsive, oedipal and mature. This concept of stages of growth
provides a valuable perspective to organizational behavior. Experienced managers become
aware of the stages that their employees often go through. This helps them to deal with these
stages effectively and promote maximum growth for the individual and for the organization.
• Traits: Traits to personality are also based on psychology. According to some trait
theories, all people share common traits, like social, (political, religious and aesthetic
preferences but each individual's nature differentiates that person from all others.
Determinants of Personality
Having understood the concept of personality, now we can move further to know how an
individual’s personality is determined? Is it inherited (genetically determined) or is it formed
after years of experience? There are no simple answers to these questions. In fact, several
factors influence the shaping of our personality. Primarily, there are two sources contributing
for personality differences. They are i. heredity and ii. environment. Environment has several
factors within it like culture, family background, life experiences and the groups we interact
with. The following diagram shows how personality is shaped by these factors.
Heredity
Our personality is partly inherited genetically from our parents. For example, whether we are
fair or dark, tall or short, strong or weak are all characteristics that have something to do with
heredity. Personality characteristics are partly influenced by environmental factors also like
experiences in life. Some traits may have strong genetic component while others may be
largely learned.
Culture
Culture refers to the distinctive ways in which people organize and live their lives. Hence
people belonging to different societies will have different cultural orientations. Persons born
into a particular society are exposed to family and societal values and to norms of acceptable
behaviour in the culture of that society. People in the West and those in the East have cultural
differences between themselves. In US culture, people are rewarded for being independent
while in Japanese culture they are rewarded for being group oriented. These differences are
primarily due to variations in cultural norms and expectations of acceptable behaviours in the
respective societies. You may also note that though cultural values may have an impact on
personality differences among people in different cultures, people born in the same culture
may also differ from each other in many characteristics. Managers should keep this in mind
when they are dealing with the employees.
Family Background
An important tool of socializing a person into a particular culture is the person’s immediate
family. Factors like the socio-economic status of the family, the number of children in the
family and birth order, and education of the parents and extended members of the family such
as cousins, uncles and aunts influence personality formation. In this regard, you may note that
parents’ influence on children’s development is significant and it happens in three ways:
i. Through their own behaviours they influence children’s
behaviours; ii. They serve as role models; and iii. They selectively
reward and punish the behaviour of children.
Experiences in Life
Perceptions, ego, temperaments, and self-esteem, are all related to one’s past experiences. A
complex set of events and interactions with other people determine the level of self-esteem of
a person. Therefore, some personality traits get changed positively or negatively on the basis
of the kind of experiences in one’s life.
Groups we interact with
The first group of people, a person interacts with is the family. As they grow, people
participate in various groups in the life time. The roles and experiences people have as
members of different groups lead to personality differences. People influence each other and
tend to associate with members who are similar to them in their attitudes and values. The
interactions begin first with patents and siblings, then teachers and classmates, later on
friends and colleagues. Undoubtedly, the influence of groups and various individuals will
shape our personality. For example, if a person wants to become a member of a work group,
he has to change himself to conform to the values and norms of that group. If the person is of
aggressive type, he may have to become cooperative.
Figure 13 Determinants of Personality

Theories of Personality
Trait Theory
Trait theory presents an approach to understand personality. Many traits are common to most
people. However, there are many other traits that are unique to a person. It may be
remembered that traits are reactions and not what a person possesses. A person does not
possess emotion but he acts emotionally in some circumstances. One the basis of the traits,
people may be described as emotional, aggressive, loyal, creative, flexible, humorous,
sentimental, and impulsive and so on. Traits are the basic elements of personality and can be
used to summarize the behaviour of a person. However, determining basic traits is rather
difficult because thousands of descriptive words are there.
Psychoanalytical Theory
The psychoanalytical theory of personality is based on the Freudian concept of unconscious
nature of personality. On the basis of his clinical experience, Freud noted that his patient’s
behaviour could not always be consciously explained. This prompted him to believe that the
personality structure is primarily founded on unconscious framework and that human
behaviour and motivation are the outcomes of such conflicting psychoanalytic concepts as the
id, the ego and the super ego.
Id is the foundation of the unconscious and is the basis of libido drives. It strives for sexual
and other biological pleasures and has animal instincts of aggression, power and domination.
Ego is conscious in nature and is a mechanism to relate our conscious urges to the outside
real world. It keeps the id in check through the realities of the external environment. While id
demands immediate pleasure, regardless of costs, ego controls it so that these pleasures are
granted at an appropriate time and in an acceptable manner. Because of difficulty in keeping
the id under control, ego is supported by super ego.
The super ego is the higher-level restraining force and can be described as the conscience of
the person. The conscience creates standards of what is right and what is wrong and is
generally subconsciously developed by the absorption of cultural and ethical values of the
social environment. All these three Freudian elements are interrelated and each cannot exist
in isolation from others. In order to create a “normal” personality, there must be a balance in
the relationship among these three forces.
Social Learning Theory
The social learning theory differs from the psychoanalytical theory in two ways. First, it is
believed that personality development is more a result of social variables than biological
drives. Secondly, motives can be traced to known and conscious needs and wants rather than
unconscious and latent desires. Thus, learning theory looks at personality as the sum total of
all that a person has learned. The social learning theory focuses on behaviour patterns and
cognitive activities in relation to the specific conditions that evoke maintain or modify them.
The social learning theory uses “reinforcement and punishment” approach in understanding
personality. For example, good behaviour is rewarded by management in terms of praise that
further reinforces good behaviour. Thus, behaviour and external environment have mutual
interaction. Behaviour partly creates the person’s environment and the environment affects
the behaviour as well.
Learning may also take place simply from observation rather than interaction with the
environment. We watch the behaviour of other people, draw conclusions from it and come
out with our own behaviour. Unlike trait theory or psychoanalytical theory, social learning
theory considers situation as an important variable in determining human behaviour.
Myers-Briggs Type Indicator (MBTI)
The Myers-Briggs Type Indicator (MBTI), developed by Isabel Briggs Myers and her
mother, Katharine Cook Briggs, is a well-known and widely used personality inventory based
on the psychological theories of Carl Gustav Jung. It is often used as a tool for discovering
and understanding different normal human personalities and can be utilized in a variety of
applications such as academic counselling, career development, conflict resolution, leadership
training and relationship counselling, just to cite a few. However, it should be noted that
MBTI is not a test as there are no right or wrong answers and it does not reveal everything
about oneself.
Based on Jung’s psychoanalytical theories, Myers deduced that there were four dichotomies
which made people differ from one another and referred to them as ‘type preferences. The
four dichotomies and their brief descriptions are presented below:
• Extraversion or Introversion: Indicates whether people prefer to acquire their
personal energy from the outer world of people and activities, or from inner world of ideas
and thoughts. E.g., extraverts prefer being in large group of people and introverts tend to take
pleasure in quieter activities.
• Sensing or Intuition: Describes how people take in information, whether they focus
on what is actual and real (factual-based) or prefer to interpret or apply meaning to what they
see. E.g., people who prefer sensing is down-to-earth and more dependent on past
experiences, whereas people who prefer intuition are considered idealists and rely more on
the future.
• Thinking or Feeling: Indicates how people prefer to make decisions, whether it is
based on logical thinking or influenced by their concerns for themselves and others. E.g.,
people who prefer feeling over thinking are generally predominant in helpful professions
such as counsellors and they pay close attention to other people’s needs. In addition, those
who prefer thinking may seek factual clarity in solving disputes.
• Judging or Perceiving: Describes the way you manage your life and how you deal
with the outer world, whether in an orderly manner or spontaneously. E.g., people who prefer
judging like to have everything in order and in a scheduled manner. On the contrary, people
who prefer perceiving are more unplanned and spontaneous in their lifestyle, including
making decisions.
Combinations based on these four categories of type preferences result in 16 different
personality types as shown below.
1. ISTJ – Introverted Sensing with Thinking
2. ISFJ – Introverted Sensing with Feeling
3. INFJ – Introverted Intuition with Feeling
4. INTJ – Introverted Intuition with Thinking
5. ISTP – Introverted Thinking with Sensing
6. ISFP – Introverted Feeling with Sensing
7. INFP – Introverted Feeling with Intuition
8. INTP – Introverted Thinking with Intuition
9. ESTP – Extraverted Sensing with Thinking
10. ESFP – Extraverted Sensing with Feeling
11. ENFP – Extraverted Intuition with Feeling
12. ENTP – Extraverted Intuition with Thinking
13. ESTJ – Extraverted Thinking with Sensing
14. ESFJ – Extraverted Feeling with Sensing
15. ENFJ – Extraverted Feeling with Intuition
16. ENTJ – Extraverted Thinking with Intuition
Figure 14 Myers-Briggs Type Indicator (MBTI)

Type A and B PERSONALITY

Type A and Type B behaviour is a theory of personality which describes two ends of a
continuum of personality which is linked to stress levels. Individuals often have elements of
both personalities. This theory was developed from work by cardiologists Freidman and
Rosenman (1959)
Type A and Type B personality hypothesis describes two contrasting personality types. In this
hypothesis, personalities that are more competitive, highly organized, ambitious, impatient,
highly aware of time management or aggressive are labelled Type A, while more relaxed, less
"neurotic", "frantic", "explainable" personalities are labelled Type B.
Type A behaviour is exhibited by being ambitious, organised, impatient, and like to be
punctual. They can also be irritable. Type A personalities are hard workers and career
orientated.
Type B behaviour is essentially the opposite from type A. Type B personalities are relaxed,
not competitive and generally not as ambitious as their Type A peers.
Individuals with a type B personality are therefore less likely to experience high levels of
stress and will generally score lower on stress levels measurement. This is because they
experience none of the urgency and competitive pressure that someone who is Type A will
feel.
Type A
The hypothesis describes Type A individuals as outgoing, ambitious, rigidly organized,
highly status-conscious, impatient, anxious, proactive, and concerned with time management.
People with Type A personalities are often high-achieving "workaholics". They push
themselves with deadlines, and hate both delays and ambivalence. People with Type A
personalities experience more job-related stress and less job satisfaction. They tend to set
high expectations for themselves, and may believe others have these same high expectations
of them as well.[10] Interestingly, those with Type A personalities do not always outperform
those with Type B personalities. Depending on the task and the individual's sense of time
urgency and control, it can lead to poor results when there are complex decisions to be made.
However, research has shown that Type A individuals are in general associated with higher
performance and productivity. Moreover, Type A students tend to earn higher grades than
Type B students, and Type A faculty members were shown to be more productive than their
Type B behavior counterparts.
Type B
Type B is a behavior pattern that is lacking in Type A behaviours. A-B personality is a
continuum where one either leans to be more Type A or Non-Type A (Type B). The
hypothesis describes Type B individuals as a contrast to those of Type A. Type B personality,
by definition, are noted to live at lower stress levels. They typically work steadily, and may
enjoy achievement, although they have a greater tendency to disregard physical or mental
stress when they do not achieve. When faced with competition, they may focus less on
winning or losing than their Type A counterparts, and more on enjoying the game regardless
of winning or losing. Unlike the Type A personality's rhythm of multi-tasked careers, Type B
individuals are sometimes attracted to careers of creativity: writer, counsellor, therapist, actor
or actress. Their personal character may enjoy exploring ideas and concepts.
Type B personality types are more tolerant than individuals in the Type A category. This can
be evident through their relationship style that members of upper management prefer. Type B
individuals can "see things from a global perspective, encourage teamwork, and exercise
patience in decision making..."
 Figure 15 TYPE A and TYPE B Personality

Other Personality Traits:

Cattell identified 15 source primary traits. These were found to be generally steady and
constant sources of behaviour. But there was found to be no scientific relevance. The traits
are listed below:
1. Reserved-Outgoing
2. Less Intelligent-More intelligent
3. Affected by feelings-Emotionally stable
4. Submissive-Dominant
5. Serious-Happy go guy
6. Expedient-Conscientious
7. Timid-Venturesome
8. Tough Minded-Sensitive
9. Trusting-Suspicious
10. Practical-Imaginative
11. Forthright-Shrewd
12. Conservative-Experimenting
13. Group-dependent-Self-sufficient
14. Uncontrolled-controlled
15. Relaxed-Tense
In the trait approach, several behaviours are seen as cluster characterising individuals with
high degree of stability.
MOTIVATION
The word motivation is derived from ‘motive', which means an active form of a desire,
craving or need that must be satisfied. Motivation is the key to organizational effectiveness.
The manager in general has to get the work done through others. These 'others' are human
resources who need to be motivated to attain organizational objectives.
Motivation is the willingness to exert efforts in order to achieve a desired outcome or goal
which will satisfy someone’s needs.
Motivation Definition
The term motivation has been defined by many authors.
1. According to Stanley Vence, motivation implies “any emotion or desire which so
conditions one’s will that the individual is propelled into action”.
2. Robert Dubin defines it as “the complex of forces starting and keeping a person at
work in an organisation”. According to this definition, motivation is a force which compels
the person to join organisation and keep on working therein.

3. Carroll Shartle, “Motivation is a reported urge or intention to move in a given

direction or to achieve a certain goal”.
4. E.F.L. Brech, “Motivation is a general inspiration process which gets the members of
the team to pull their weight effectively to give their loyalty to the group, to carry out
properly the tasks that they have accepted and generally to play an effective part in the job
that the group has undertaken”.
5. Edwin B. Flippo, “Motivation is a process of attempting to influence others to do
their work through the possibility of getting reward”.
On the basis of above definitions, the following observations can be made regarding
motivation:

• Motivation is an inner psychological force, which activates and compels the person to
behave in a particular manner.

• The motivation process is influenced by personality traits, learning abilities, perception and
competence of an individual.
• A highly motivated employee works more efficiently and his level of production tends to be
higher than others.
• Motivation originates from the-needs and wants of an individual. It is a tension of lacking
something in his mind, which forces him to work more efficiently.

• Motivation is also a process of stimulating and channelising the energy of an individual for
achieving set goals.

• Motivation also plays a crucial role in determining the level of performance. Highly
motivated employees get higher satisfaction, which may lead to higher efficiency.

• Motivating force and its degree, may differ from individual to individual depending on his
personality, needs, competence and other factors.
On the basis of analytical study of above definitions, it may be concluded that motivation is a
process which inspires the human efforts of an organisation to perform their duties in the best
possible manner so that the pre-determined objectives of the enterprise may be achieved.
Motivation is the emotion or desire of an employee that inspires him to act or not to act in
certain ways.
Features of motivation
The following are the features of motivation:

• It is an internal feeling and forces a person to action.

• It is a continuous activity.

• It varies from person to person and from time to time.

• It may be positive or negative.

CHARACTERISTICS OF MOTIVATION
1. Incentive: Motivation is the incentive of employees. It is a personal and natural
feeling of the mind of the employees. This feeling arises in the mind of an individual. In fact,
an individual is inspired to make his efforts to satisfy the needs of his life.
2. Unending Process: Motivation is an unending process. Human needs are unlimited
and a person always feel a need. To satisfy these needs, the person must always be inspired
with the incentives for work. Satisfaction of one need leads to the feeling of another one and
this process never ends.
3. Psychological Concept: Motivation is a psychological concept. It develops the
mental and motivation power of an individual and motivates him to do more and better.
4. Power to Act: Motivation is a power to act. It inspires an individual to work. Feeling
of a need creates tension and a person wants to work to satisfy his need. When the need is
satisfied, the persons feel motivated to work for the achievement of common goals.
5. Increase in Efficiency: Motivation increase the efficiency of an individual. He uses
his ability and efficiency to the best possible extent which increase his efficiency. Motivation
increases the quantity and quality of production.
6. Increase in Morale: Morale is a group felling. Motivation motivates the employees
to work with the co-operation of others. Thus, motivation is helpful in increasing the morale
of the employees.
Aims or Objectives of Motivation
The aims and objectives of motivation may be described as under:
1. To motivate the employees to do more work.
2. To satisfy the economic, social and psychological needs of the employees.
3. To develop human relations in the enterprise.
4. To increase the morale of employees.
5. To increase the efficiency of employees.
6. To get the co-operation of employees.
7. To establish sweet relations between labour and capital.
8. To get the maximum exploitation of human resources.
9. To achieve the objectives of enterprise.
Factors Affecting Motivation
Factors affecting motivation may be divided into following parts:
1. Monetary Incentives:
Monetary incentives are direct incentives provided to the employees of an enterprise. It
includes the following incentives: (1) Proper wage or salary, (2) Bonus, (3) Overtime, (4)
Monetary rewards and (5) Interests on investments. Monetary incentives satisfy the basic
needs of employees.
2. Non-Monetary Incentives:
Monetary incentives are not sufficient to ensure more and better work by employees.
NonMonetary incentives are also provided to them to motivate them in the right direction.
Such incentives motivate them to do more and more work. Following factors are included
under this category: (1) Safety of work, (2) Appraisal of work, (3) Honour of Employees, (4)
Behaviour with employees, (5) Opportunities of promotion, (6) Delegation of authorities, (7)
To increase the feelings and suggestions of employees, (8) To launch welfare schemes for the
employees like housing facilities, medical facilities, recreation facilities, education facilities,
insurance etc. (9) Co-partnership in management.
Process of Motivation
Needs, Incentives and Motives
Need is the starting point of motivation. An unsatisfied need creates tension that stimulates
drives within the individual. These derives generate a search behaviour to achieve particular
goals that will satisfy the need and lead to reduction of tension. The action taken by the
individual will lead to reward which satisfies the need and reduces tension.
Figure 16 Process of Motivation

Management can do its job effectively only through motivating people to work for the
accomplishment of organisational objectives. But it is difficult to understand motivation
without considering what people want and expect from their work.
Human needs may be classified as: (1) basic physiological or primary needs, and (2) social
and psychological or secondary needs. Some of the physiological needs are food, water,
sleep, air to breathe, sex, clothing and shelter. These needs arise out of the basic physiology
of life and are important for the survival of a man. They are virtually universal among people,
but they exist in different intensity. Needs are also influenced by the social environment. One
man may require wheat to satisfy his hunger, other may require rice for the same purpose.
Secondary needs are related to mind and spirit rather than to the physiology of life. Many of
these needs develop as one matures. Instances are belongingness, recognition, self-esteem,
sense of duty, self-assertion and so on. Actually, these are the needs which complicate the
efforts of managers because the secondary needs vary among people much more than primary
physiological or basic needs.
Motivational Sources
Having understood the concept of motivation, now let us understand the various sources of
motivation. You may note that motivation may sometimes come from external environment
in the form of rewards or punishments and sometimes it is generated from within an
employee in the form of intrinsic motivation. It may be recognized that under the same set of
external factors, all employees are not equally motivated. It depends upon various factors
which you can understand when you go through the different motivational theories. The
motivational sources are explained below.
Positive vs. Negative Motivation
Motivation may be either positive or negative. Positive motivation takes place when
management recognizes the employee’s efforts towards the achievement of organizational
goals. It is positive because, this kind of motivation increases the level of performance,
promotes team spirit, a sense of cooperation and generates a feeling of belongingness and
happiness. The positive motivational factors are:
-- Praise and reward for good performance.
-- Concern for the wellbeing of an employee.
-- Confidence reposed in the employee.
-- Delegation of authority
-- Scope of participation given in the decision making.
Negative motivation, on the other hand, results from the use of force, pressure, fear or threat.
You may note that fear of punishment also affects motivation and thereby the behaviour of a
person. In the organizations, negative motivation may come from the fear of being
transferred, demoted or removed. This fear of punishment prompts the person to work hard
and achieve the goals. It may, however, be realized that negative motivation is not desirable
because employees do not like to be punished. Hence, it is desirable to motivate the
employees by positive means.
Extrinsic Vs. Intrinsic Motivation
Motivation may be either extrinsic or intrinsic. Extrinsic motivation is induced by external
factors primarily financial rewards. It is expected that the behaviour caused by positive
rewards is likely to be repeated. But the reward should be sufficiently powerful for desirable
behaviour to be repeated. Money acts as a significant incentive for positive behaviour of
employees. Realizing the value of financial incentives as motivators, managements now-a-
days make use of wage increments, bonus payment, fringe benefits, stock options, profit
sharing schemes, paid holidays, medical benefits, etc. for motivating the employees.
Intrinsic motivation is something that is generated within an individual. It is an inner feeling.
It may be a sense of achievement or recognition leading to satisfaction that motivates the
employee further. Since this kind of motivation comes from within, it is called intrinsic
motivation. There are many retired doctors who work free in the hospitals because it gives
them a sense of accomplishment and satisfaction. Some of the intrinsic motivators include
praise, status, recognition, esteem, challenge, risk and responsibility in job.
Theories of Motivation
There are two types of motivational theories - content theories and process theories (cognitive
theories). While content theories explain what motivates and what does not motivate, the
process theories examine the variables that go into the motivational process taking place
within an individual. Some of these theories are explained below.

Maslow’s Need Hierarchy Theory

Abraham Maslow has propounded this need hierarchy theory as early as in 1943. Maslow
points out that human beings have divergent needs and they strive to fulfil those needs. The
behaviour of an individual is determined by such needs. These needs range from biological
needs at lower level to psychological needs at the highest level. Further, these needs arise in
an order of hierarchy or priority such that lower-level needs must be satisfied before higher
level needs become important for motivation. Maslow postulates five basic needs arranged in
a hierarchical fashion as follows:
The first three levels of needs at the bottom are known as lower order needs as they are
related to one’s existence and security. The top two levels of needs are called higher order
needs as they are concerned with personal development and realization of one’s potential.
The needs are explained below.

Figure 17 Maslow’s Need Hierarchy Theory

Physiological Needs
The physiological needs are the basic needs having the highest strength in terms of
motivation. These are the needs arising out of biological tensions created as a result of
deprivation of food, water, shelter, rest, etc. If these basic needs are gratified, then the next
level needs become important and act as motivators.
Safety and Security Needs
Once the physiological needs are fulfilled, safety and security needs become predominant.
These are the needs for self-preservation while physiological needs are for survival. These
needs include security, stability, freedom from anxiety and a structured and ordered
environment.
Safety and security needs arise out of the concern for the fulfilment of physiological needs in
the future. An individual seeks economic or social protection against future threats and
dangers that he is exposed to. If once these needs are gratified, they fail to serve as motivators
any more. The individual, then, moves on to the next level needs and strives for their
fulfilment.
Social Needs
At the third level, social needs or love needs become important. An individual cannot live an
isolated life. A sense of affiliation becomes important for a meaningful life. These needs
include the need for love, affection, companionship and social interaction. We know very
well that at home the child needs the love of parents and at school he needs the friendship of
his classmates.
This is to attain recognition from others which would induce a feeling of self-worth and
selfconfidence in the individual. It is an urge for status, prestige and power. Self-respect is the
internal recognition while respect from others is the external recognition. People who are able
to fulfil this need feel that they are useful and have some positive influence on their
surrounding environment. Self-actualization Needs
At the highest level is the need to develop and realize one’s capacities and potentialities to the
fullest extent possible. This need gets activated as motivator when all other needs have been
reasonably fulfilled. At this level, the person wants to excel in the skills and abilities that he is
endowed with.
As a result, he seeks challenging work assignments that require creativity and talent. This
need is inner-oriented and the motivation is intrinsic in nature. A self-actualizing person is
creative, independent, content, and spontaneous and has a good perception of reality. He
constantly endeavours to realize his full potential.
In conclusion, it may be said that Maslow’s model explains human behaviour in general. It
has nothing to do with the employee motivation at the work place. Further, human needs may
not necessarily have the hierarchy as shown by him. The relative dominance of not able to
satisfy the social needs may prompt a person to set the physiological needs and safety needs
aside and motivate him for earning the love and affection of the family members and the
friendship of his colleagues.
Maslow felt that the human needs have a definite sequence of domination. Second need does
not dominate until first need is reasonably satisfied and third does not dominate until first two
needs have been reasonably satisfied and so on. The other side of the need hierarchy is that
man is a wanting animal, he continues to want something or the other. He is never fully
satisfied; the other need arises. As said above (according to Maslow), needs arise in a certain
order of preference and not randomly. Thus, if one’s lower-level needs (physiological and
security needs) are unsatisfied, he can be motivated only by satisfying his lower-level needs
and not satisfying his higher-level needs. Another point to note is that once a need or a
certain order of needs is satisfied, it cases to be a motivating factor. Man lives for bread
alone as long as it is not available. In the absence of air one can’t live, but there is it is plenty
of air which ceases to be motivating.
The physiological and security needs are finite, but the needs of higher order are sufficiently
infinite and are likely to be dominant in persons at higher levels in the organisation. This has
been proved by various studies. A study by Boris Blai supported this by showing that
managers and professionals in U.S.A. highly value self-realisation, while service and manual
workers in India reported that they give to priority to job security, earnings and personal
benefits all lower order needs.

Characteristics or Salient Features of Maslow’s Needs Model:

1. The urge to fulfil needs is a prime factor in motivation of people at work. Human needs are
multiple, complex and interrelated.
2. Human needs form a particular hierarchy or priority structure in order of importance.
3. Lower-live needs must be at least partially satisfied before higher-level needs emerge. In
other words, a higher-level need does not become an active motivating force until the
preceding lowerorder needs are satisfied.
4. As soon as one need is satisfied, the individual discovers another need which is still
unfulfilled.
5. A satisfied need ceases to be a motivator, i.e., does not influence human behaviour.
Unsatisfied needs are motivators, i.e., they influence human behaviour.
6. Various need levels are independent and overlapping. Each higher-level need emerges
before the lower-level need is completely satisfied.
7. All people, to a greater or lesser extent, have the identified needs.

Criticisms or Maslow’s Model: Maslow’s theory has been criticised on several grounds:
1. Human needs cannot be classified into clear and only specifies categories, i.e., their
hierarchy cannot be definitely specified. The determination of higher and lower levels is
dependent on people’s cultural values, personalities and desires.
2. It is not necessary that at a time only one need is satisfied. In other words, needs of more
than one levels may be fulfilled jointly, for example, physical and esteem needs. Maslow’
model does not explain this multi-motivation fact.

3. Some of the assumptions of Maslow’s theory are not always found in practice.
4. It has been found by some scholars like Lawler and Suttle that physical and safety needs
may be probably satisfied, but high-level needs do not appear to be rather satisfiable.
Appraisal of Need Hierarchy Model
The need priority model may not apply at all times in all places. Surveys in European
countries and Japan have shown that the model does not apply very well to their managers.
Their degree of satisfaction of needs does not vary according to the need priority model. For
example, workers in Spain and Belgium felt that their esteem needs are better satisfied than
their security and social needs. Apparently, cultural differences are an important cause of
these differences. Thus, need hierarchy may not follow the sequence postulated by Maslow.
Another important proposition that one need is satisfied at one time is also a doubtful validity.
Man’s behaviour at any time mostly guided by multiplicity of motives. However, one or two
motives in any situation may be more dominant, while others may be of secondary
importance. There are always some people in whom, for instance, need for self-esteem seems
to be more prominent than that of love. There are also creative people in whom the drive for
creativeness seems to be more important. In certain people, the level of operation may be
permanently lower. For instance, a person who has experienced chronic unemployment may
continue to be satisfied for the rest of his life if only he can get enough food.

HERZBERG’S Two Factor theory of MOTIVATION

A significant development in motivation theory was distinction between motivational and
maintenance factors in job situation. A research was conducted by Herzberg and his
associates based on the interview of 200 engineers and accountants who worked for eleven
different firms in Pittsburgh area. These men were asked to recall specific incidents in their
experience which made them feel particularly bad about jobs. The findings of the research led
to draw a distinction between what are called as ‘motivators’ and ‘hygiene factors. To this
group of engineers and accountants, the real motivators were opportunities to gain expertise
and to handle more demanding assignments. Hygiene factors served to prevent loss of money
and efficiency. Thus, hygiene factors provide no motivation to the employees, but the absence
of these factors serves as dissatisfies.

Figure 18 Herzberg’s Two Factor Theory of Motivation

Some job conditions operate primarily to dissatisfy employees. Their presence does not
motivate employees in a strong way. Many of these factors are traditionally perceived by
management as motivators, but the factors are really more potent as dissatisfiers. They are
called maintenance factors in job because they are necessary to maintain a reasonable level of
satisfaction among the employees. Their absence proves to be strong dissatisfiers. They are
also known as ‘dissatisfiers’ or ‘hygienic factors’ because they support employees’ mental
health. Another set of job condition operates primarily to build strong motivation and high
job satisfaction among the employees. These conditions are ‘Motivational Factors’.
Herzberg’s maintenance and motivational factors have been shown in the table given below.
Hygienic factors include such things as wages, fringe benefits, Physical conditions and
overall company policy and administration. The presence of these factors at a satisfactory
level prevents job dissatisfaction, but they do not provide motivation to the employees. So,
they are not considered as motivational factors, on the other hand, are essential for increasing
the productivity of the employees. They are also known as satisfiers and include such factors
as recognition, feeling of accomplishment and achievement, opportunity of advancement and
potential for personal growth, responsibility and sense of job and individual importance, new
experience and challenging work etc.
Comparison of Herzberg and Maslow Models
In fact, there is a great similarity between Herzberg’s and Maslow’s models. A close
examination of Herzberg’s model indicates that some employees may have achieved a level
of social and economic progress in the society and for them higher level needs of Maslow
(esteem and selfactualization) are the primary motivators. However, they still must satisfy the
lower-level needs for the maintenance of their current state. Thus, we can say that money
might still be a motivator for operative employees and for some managerial employees.
Herzberg’s model adds to the Maslow’s need hierarchy model because it draws a distinction
between the two groups of factors, namely, motivational and maintenance, and points out that
the motivational factors are often derived from the job itself. Most of the maintenance factors
come under comparatively lower order needs. In economically advanced countries, such
needs of the employees are fulfilled and hence cease to be motivators.
As shown in the following diagram Maslow’s Physiological, security and social needs come
under Herzberg’s maintenance factors whereas self-fulfilment comes under motivating
factors. It may further be noted that a part of esteem need comes under maintenance factor
and another under motivational factors. The esteem needs are divided because there are some
distinct differences between status per se and recognition. Status tends to be a function of
position one occupies. This position may be gained through family ties or social pressures
and so this may not be a reflection of personal achievement or recognition. Recognition is
gained through competence and achievement. It is earned and granted by others. That is why
status is classified with physiological, safety and social needs as a hygiene factor, while
recognition is classified with esteem as a motivator.
Process theory of Motivation
Vroom's expectancy theory
Vroom's expectancy theory assumes that behavior results from conscious choices among
alternatives whose purpose it is to maximize pleasure and minimize pain. Together with
Edward Lawler and Lyman Porter, Victor Vroom suggested that the relationship between
people's behavior at work and their goals was not as simple as was first imagined by other
scientists. Vroom realized that an employee's performance is based on individuals’ factors
such as personality, skills, knowledge, experience and abilities.
The theory suggests that although individuals may have different sets of goals, they can be
motivated if they believe that:
• There is a positive correlation between efforts and performance,
• Favorable performance will result in a desirable reward,
• The reward will satisfy an important need,
• The desire to satisfy the need is strong enough to make the effort worthwhile.
The theory is based upon the following beliefs:
Valence
Valence refers to the emotional orientations people hold with respect to outcomes [rewards].
The depth of the want of an employee for extrinsic [money, promotion, time-off, benefits] or
intrinsic [satisfaction] rewards). Management must discover what employees’ value.
Expectancy
Employees have different expectations and levels of confidence about what they are capable
of doing. Management must discover what resources, training, or supervision employees
need.
Instrumentality
The perception of employees as to whether they will actually get what they desire even if it
has been promised by a manager. Management must ensure that promises of rewards are
fulfilled and that employees are aware of that.
Vroom suggests that an employee's beliefs about Expectancy, Instrumentality, and Valence
interact psychologically to create a motivational force such that the employee acts in ways
that bring pleasure and avoid pain.

Figure 19 Vroom's expectancy theory

Adman’s Equity Theory
This theory has been developed by JS Adam’s. The essence of this theory is that employees
generally make comparison of their efforts and rewards with those of others in similar
position and similar work situation. This approach is based on the basic assumption that
employees working in the organisation should be treated equally in terms of justice, balance
and fairness and when they join organisation, they carry some qualification, skill and
knowledge with them for performing assigned job. To perform the job which involves use of
these abilities and qualities which are known as ‘inputs. And in return of these inputs
whatever they get from the organisation such as compensation, recognition position and
status, etc. known as outcome.
Equity approach of motivation seems to be useful for the manager in determining appropriate
level of reward the employees. Because it emphasises the role played by an individual’s
belief in the equity and fairness of reward and punishment in determining his performance
and satisfaction.
The Adam’s Equity theory of work motivation is based on the social exchange process.
Adam’s has crystallised it in a more formal way. Basically, the theory points out that people
are motivated to maintain fair relationship between their performance and reward in
comparison to others. There are two assumptions on which the theory works.
1. Individual make contribution (inputs) for which they expect certain rewards (outcomes).
2. Individual decide whether or not a particular exchange is satisfactory, by comparing their
input and outcomes with those of others, and try to rectify an inequality.
Table 4 Various Types of Inputs and Outcomes
Inputs Outcome
Efforts Pay
Times Promotion
Education Recognition
Experience Security
Training Personal Development
Ideas Benefits
Ability Friendship Opportunity

Exchange relationship between a person’s inputs/outcomes in relation to those of other

persons may be of three types:
1. Overpaid inequity2. Underpaid inequity 3. Equity
1. Overpaid Inequity: In this case, the person perceives that his outcomes are more as
compared to his inputs in relation to others. This relationship can be expressed by
Person’s Outcomes > Other’s Outcomes

Person’s Inputs Other’s Inputs

In this case, the person experiences guilt feeling.
2. Underpaid Inequity: In this case, the person perceives that his outcomes are lower as
compared to his inputs in relation to others. This relationship can be expressed as

Person’s Outcomes < Other’s Outcomes

Person’s Inputs Other’s Inputs

In such relationship, the person experience dissonance.
3. Equity: In this case, the person perceives that his outcomes in relation to his inputs
are equal to those of others. This relationship can be expressed by:

Person’s Outcomes = Other’s Outcomes

Person’s Inputs Other’s Inputs

In this case, the person experiences satisfaction. The impact of inequity on the person is as
follows:
1. Perceived inequity creates tension in the person.
2. The amount of tension is proportional to the magnitude of inequity.
3. The tension created in the person will motivate him to reduce it.
4. The strength of the motivation to reduce inequity is proportional to the perceived in equity.
THEORIES OF LEARNING
Learning is an important psychological process that-determines human behavior. Simple way,
“learning is something we did when we went to school “it is permanent changing behavior
through education and training, practice and experience. Learning can be defined as
“relatively permanent change in behavior that occurs as a result of experience or reinforced
practice". There are four important points in the definition of learning:
1. Learning involves a change in behavior, though this change is not necessarily an
improvement over previous behavior. Learning generally has the connotation of improved
behavior, but bad habits, prejudices, stereotypes, and work restrictions are also learned.
2. The, behavioral change must be relatively permanent. Any temporary change in behavior is
not a part of learning.
3. The behavioral change must be based on some form of practice or experience.
4. The practice or experience must be reinforced in order so as to facilitate learning to occur.
Components of the learning process
The components of learning process are: drive, cue stimuli, response, reinforcement and
retention.
Drive
Learning frequently occurs in the presence of drive - any strong stimulus that impels action.
Drives are basically of two types -primary (or physiological); and secondary (or
psychological). These two categories of drives often interact with each other. Individuals
operate under many drives at the same time. To predict a behavior, it is necessary to establish
which drives are stimulating the most.
Cue Stimuli
Cue stimuli are those factors that exist in the environment as perceived by the individual. The
idea is to discover the conditions under which stimulus will increase the probability of
eliciting a specific response. There may be two types i of stimuli with respect to their results
in terms of response concerned: generalization and discrimination.
Generalization occurs when a response is elicited by a similar but new stimulus. If two
stimuli are exactly alike, they will have the same probability of evoking a specified response.
The principle of generalization has important implications for human learning. Because of
generalization, a person does not have to 'completely relearn each of the new tasks. It allows
the members to adapt to overall changing conditions and specific new assignments. The
individual can borrow from past learning experiences to adjust more smoothly to new
learning situations.
Discrimination is a procedure in which an organization learns to emit a response to a
stimulus but avoids making the same response to a similar but somewhat different stimulus.
Discrimination has wide applications in 'organizational behavior. For example, a supervisor
can discriminate between two equally high producing workers, one with low quality and other
with high quality.
Responses
The stimulus results in responses. Responses may be in the physical form or may be in terms
of attitudes, familiarity, perception or other complex phenomena. In the above example, the
supervisor discriminates between the worker producing low quality products and the worker
producing high quality products, and positively responds only to the quality conscious
worker.
Reinforcement
Reinforcement is a fundamental condition of learning. Without reinforcement, no measurable
modification of behavior takes place. Reinforcement may be defined as the environmental
event's affecting the probability of occurrence of responses with which they are associated.
Retention
The stability of learned behavior over time is defined as retention and its contrary is known as
forgetting. Some of the learning is retained over a period of time while others may be
forgotten.

UNIT IV
GROUP FOUNDATIONS & LEADERSHIP
Concept of Group & Team – Differences Between Groups and Teams – Stages of Group
Development – Group Properties – Group Decision Making - Types of Teams – Creating
Effective Teams – Concepts & Views of Conflicts – Conflicts Process- Leadership: Theories
of Leadership – Transformational Leadership.
GROUP BEHAVIOUR
A group consists of a number of individuals working together for a common objective.
Groups have significant influence on an organization and are inseparable from an
organization. They are useful for the organization as they form foundation of human
resources.
The study of group behavior is essential for an organization to achieve its goals. Individual
and group behavior varies from each other. In 1920, Elton Mayo and his associates conducted
the Hawthorne experiments and came to know that the group behavior has great impact on
productivity. The importance of group behavior has been realized from time to time.
Human behavior consists of individuals, who move in groups. The knowledge of group
behavior as well as individual behavior is necessary for a manager. He must understand group
psychology and should also understand individual behavior in the context of group behavior.
The group in which he moves influences individual work, job satisfaction and effective
performance.
Definition of a group
A group is a two or more individual who interact regularly with each other to accomplish a
common purpose or goal.
According to Marvin Shaw, "a group comprises, of two or more persons who interact with
one another in such a manner that each person influences and is influenced by each other
person'.
The key parts of this definition are the concepts of interaction and influence, which also limit
the size of the group. It is difficult for members to interact sufficiently in a large group.
Groups or work teams are the primary tools used by managers. Managers need groups to
coordinate individual behavior in order to reach the organizational goals. Groups can make a
manager's job easier because by forming a group, he need not explain the task to each and
every individual. A manager can easily coordinate with the work of an individual by giving
the group a task and allow them to co-ordinate with each other. But for a group to work
effectively, the interactions between its members should be productive. Therefore, managers
must pay attention to the needs of individuals.
Need and importance for a Group
The reasons for the need, of groups are as follows:
� Management of modern organizations makes mutual efforts to introduce industrial
democracy at workplace. They use project teams and work committees where workers get
due recognition. They willingly participate in decision-making.
� the tasks in modern industries are becoming more complex, tedious arid of repetitive
nature. Work committees, work groups and teams are formed to monitor the work. They also
make the environment at workplace livelier.
� Groups help in making participative management more effective.
� Groups of all kinds and types help by cooperating in all the matters related to production
and human relations to work effectively in the organization.
� an individual cannot perform each and every task. Group efforts are required for its
completion. For example, building a ship, making of a movie, construction of a fly-over, etc.
All these require coordinated and unified efforts of many individuals, working in a group.
� A group can judge in a better way as compared to an individual.
Types of Groups
In an organization, there are three types of groups, which are as follows:
• Functional or formal groups
Functional groups are the groups formed by the organization to accomplish different
organizational purposes. According to A L Stencombe, "a formal group is said to be any
social arrangement in which the activities of some persons are planned by others to achieve a
common purpose". These groups are permanent in nature. They have to follow rules,
regulations and policy of the organization. A formal organizational group includes
departments such as the personnel department, the advertising department, the quality control
department and the public relations department.
• Task group
Tasks groups are the groups formed by an organization to accomplish a narrow range of
purposes within a specified time. These groups are temporary in nature. They also develop a
solution to a problem or complete its purpose. Informal committees, task forces and work
teams are included in task groups. The organization after specifying a group membership,
assigns a narrow set of purposes such as developing a new product, evaluating a proposed
grievance procedure, etc.

• Informal group
Informal groups are the groups formed for the purposes other than the organizational goals.
Informal groups form when individuals are drawn together by friendship, by mutual interests
or both. These groups are spontaneous. According to Keith David, "the network of persons
and social relations which is not established or required forms an informal organization".
These are the groups formed by the employees themselves at the workplace while working
together. The organization does not take any active interest in their formation.
Informal groups are very effective and powerful. These groups work as an informal
communication network forming a part of the grapevine to the organizations. They are also
like a powerful force, which an organization cannot avoid. Some managers consider them to
be harmful to the interest of an organization. They suspect their integrity and consider as a
virtual threat.
Some managers do not consider them as threat and seek the help of group members in getting
the organizational task accomplished. Informal groups are of following types:
o Interest group: Interest groups are the groups formed to attain a common purpose.
Employees coming together for payment of bonus, increase in salary, medical benefit and
other facilities are the examples of interest groups
o Membership group: Membership groups are the groups of individuals' belonging to
the same profession and knowing each other. For example, teachers of the same faculty in a
university.
o Friendship group: Friendship groups are the groups of individuals belonging to same
age group, having similar views, tastes and opinions. These groups can also be formed
outside the plant or office and can be in the form of clubs and associations.
o Reference group: Reference groups are the group where individuals shape their ideas,
beliefs, values etc. They want support from the group.
Table 5 Differences between groups and teams
Work group Work team
Formal leader is appointed. The function of leadership and
responsibilities arising from it are divided and
distributed among members.
Adopts the objective of the organization as its Certain objectives are specified which gives
target itself. identity to team and become a stimulating
source.
The result comes from the accumulation and Common result arises from the mixture of
coordination of results of each individual individual and collective activities.
activity
Its members assume responsibility strictly for Its members share a common responsibility for
the particular results produced by each final outcome.
individual
Meetings are of short duration and conducted Meetings are the "place" where members
by formal leader. discuss,
decide, jointly work, and actively solve
problems without the pressure of time.

Provides its members roles appropriate to Encourage its members to assume multiple
their professional qualifications. and diversified roles
Rewards and recognizes individual Recognizes, rewards and celebrates more
contributions. frequently and with more joy, with all
members, collective successes

Group formation and development

Groups can form when individuals with similar goals and motives come, together. Groups are
formed voluntarily. The individuals of a group can join and leave the group any time and they
can also change their tasks. Hence, understanding how groups form and develop is important
for managers. There are certain motives because of which, the individuals join a group, which
are as follows:
• Organizational motives to join groups: Organizations form functional and task groups
because such groups help the organization in structuring and grouping the organizational
activities logically and efficiently.
• Personal motives to join groups: Individuals also choose to join informal or interest groups
for unimportant reasons. Since joining these groups is voluntary, various personal motives
affect membership.
• Interpersonal attraction: Individual’s conic together to form informal or interest group, as
they are also attracted to each other. The factors that contribute to interpersonal attraction
are sex, similar attitudes, personality and economic standing. The closeness of group
members may also be an important factor.
• Interest in-group activities: Individuals may also be motivated to join an informal or
interest group because the activities of the group appeal to them. Playing tennis, discussing
current events or contemporary literature, all these are group activities that individuals
enjoy.
• Support for group goals: The individuals may also be motivated goals by the other group
members to join. For example, a club, which is dedicated to environmental conservation,
may motivate individuals to join. Individuals join groups, such as these in order to donate
their money and time to attain the goals they believe in and to meet other individuals with
similar values.
• Need for affiliation: Another reason for individuals to join groups is to satisfy their need for
attachment. Retired/old aged individuals join groups to enjoy the companionship of other
individuals in similar situation.
• Instrumental benefits: Group membership sometimes also helpful in providing other
benefits to an individual. For example, a manager might join a Rotary/ Lions club if he feels
that being a member of this club will lead to important and useful business contacts.
Stages of development of group
Members of new group are unfamiliar with one another's personalities and: hesitant in their
interactions. The new group must pass of development, which are depicted in the figure
following:
• Forming
• Storming
• Norming
• Performing
• Adjourning

Figure 20 Team Development Life Cycle

Forming
The Forming stage begins with the introduction of team members. This is known as the
“polite stage” in which the team is mainly focused on similarities and the group looks to the
leader for structure and direction. The team members at this point are enthusiastic, and issues
are still being discussed on a global, ambiguous level. This is when the informal pecking
order begins to develop, but the team is still friendly.
Storming
The Storming stage begins as team members begin vying for leadership and testing the group
processes. This is known as the “win-lose” stage, as members clash for control of the group
and people begin to choose sides. The attitude about the team and the project begins to shift
to negative, and there is frustration around goals, tasks, and progress.
Norming
Norming stage may start to take root. During Norming, the team is starting to work well
together, and buy-in to group goals occurs. The team is establishing and maintaining ground
rules and boundaries, and there is willingness to share responsibility and control. At this point
in the team formation, members begin to value and respect each other and their contributions.
Performing
Finally, as the team builds momentum and starts to get results, it is entering the Performing
stage. The team is completely self-directed and requires little management direction. The
team has confidence, pride, and enthusiasm, and there is a congruence of vision, team, and
self. As the team continues to perform, it may even succeed in becoming a high-performing
team. High-performing teams have optimized both task and people relationships—they are
maximizing performance and team effectiveness.
Adjourning
Adjourning, involves the termination of task behaviours and disengagement from
relationships. A planned conclusion usually includes recognition for participation and
achievement and an opportunity for members to say personal goodbyes. Concluding a group
can create some apprehension - in effect, a minor crisis. The termination of the group is a
regressive movement from giving up control to giving up inclusion in the group. The most
effective interventions in this stage are those that facilitate task termination and the
disengagement process.
TEAM AND TEAM WORK
Introduction
A team is a relatively permanent work group whose members must coordinate their activities
to achieve one or more common objectives. The objectives might include advising others in
the organisation, producing goods or services, and carrying out a project. Because
achievement of the team’s objectives requires coordination, team members depend on one
another and must interact regularly. A work team generates positive synergy through
coordinated effort.
Their individual efforts result in a level of performance that is greater than the sum of those
individual inputs. Teams have far-reaching impact in today’s workplace. They have become
an essential part of the way business is being done.
Teams imply a high degree of coordination among their members, along with a shared belief
that winning (achieving team goals) is not only desirable but the very reason for the team’s
existence. You can infer that any team is a group, but unfortunately, not all groups have the
high degree of interdependence and commitment to success that we traditionally associate
with the is common among organisations using teamwork, the nature of specific teams varies
considerably. Two major dimensions along which teams differ are differentiation of team
roles and integration into the organisation.
Creating Effective Teams
The four possible combination – high or low differentiation plus high or low integration – are
associated with creation of effective teams.
1. Advice/Involvement,
2. Production/Service,
3. Project/Development, and
4. Action/Negotiation.
1. Advice and Involvement: An advice/involvement team is a team formed to generate
input from a broad base of employees. They are low in differentiation. Team members meet
only long enough to generate ideas or develop proposals. The work group takes on problem
solving as one of its daily activities. Because this team has a limited scope of control, the use
of teamwork has essentially no impact on the organisation’s management structure.
2. Production and Service: Production/service teams, are charged with the activities
related to producing and selling goods and services. Production/service teams, draw their
membership from a broad base and often are formed as a way to empower first-line
employees.
3. Project and Development: A project/development team is charged with planning,
investigating, analysing and reporting, often with the objective of creating outputs that are
complex and unique. Project/development teams are highly differentiated because they
require employees with expertise in particular areas.
4. Action and Negotiation: Action/negotiation teams are usually comprised mainly of
experts with specialized skills. Owing to their expertise, the team is highly differentiated; it is
also highly integrated with the organisation.
Types of Teams
Based on their objectives, teams may be classified as problem-solving teams, self-managed
teams and cross-functional teams.
1. Problem-solving Teams: Problem-solving teams consist of groups of 5-10 employees
from the same department, who meet for a few hours each week to discuss ways of
improving quality, efficiency and the work environment. These members share ideas or offer
suggestions on how work processes and methods can be improved. Problem-solving teams
meet regularly to discuss their quality problems, investigate causes of problems, recommend
solutions and take corrective actions.
2. Self-managed Work Teams: A self-managed team includes collective control over
the pace of work, determination of work assignments, organisation of breaks, and collective
choice of inspection procedures. Fully self-managed work teams even select their own
members and have the members evaluate each other’s performance. As a result, supervisory
positions take on decreased importance and may even be eliminated. These teams do their
own scheduling, rotate jobs on their own, establish production targets, set pay scales that are
linked to skills, fire coworkers and do the hiring. Self-Managed work teams are compared
with conventional work groups.
3. Cross-functional Teams: Cross-functional teams are made up of employees from
about the same hierarchical level, but from different work areas, who come together to
accomplish a task.
Cross-functional teams are an effective way to allow people from diverse areas within an
organisation (or even between organisations) to exchange information, develop new ideas,
solve problems and coordinate complex projects. These teams are not easy to manage. Their
early stages of development are often very time consuming as members learn to work with
diversity and complexity. It takes time to build trust and teamwork, especially among people
from different backgrounds, with different experiences and perspectives.
There are two types of cross-functional teams. They are:
(a) Task force – is nothing more than a temporary cross-functional team.
(b) Committees – composed of groups made up of members from across departmental lines.
Conflict Management:
Conflicts are natural in all walks of daily life – both at workplace and home. Thus, conflict is
ever present and both charming and maddening. But conflict is a complex and big subject.
There are many sources of conflict. Conflict occurs when individuals or groups are not
obtaining what they need or want and are seeking their own self-interest.
Sometimes the individual is not aware of the need and unconsciously starts to act out. Other
times, the individual is very aware of what he or she wants and actively works at achieving
the goal. It would be better to identify conflict at an early stage and come to an
understanding.
The concept of conflict is controversial. Psychologists and sociologists have given different
meanings. It is being defined as a process by few, an obstructive behavior, and goal
incompatibility by others. Conflict can be expressed as:
Conflict is a process, where perception (real or otherwise) leads to disruption of desirable
state of harmony and stability in an interdependent world.
Views of Conflict
1. The traditional view of organizational conflict,
2. Human relations view of organizational conflict, and
3. Interactionist view of organizational conflict.
Conflict views are described below;
Traditional View of Organizational Conflict
The traditional view on organizational conflict is the earliest of the trio. It was first developed
in the late 1930s and early 1940s, with the most linear and simple approach towards conflict.
According to the traditional view, any conflict in an organization is Outright bad, negative
and harmful.
Although conflicts are of different types, the traditional view only sees conflict as
dysfunctional and destructive. It suggests that organizational conflict must be avoided by
identifying the malfunctioning callus.
Moreover, the traditional view on organizational conflict identifies poor communication,
disagreement, lack of openness and trust among individuals and the failure of managers to be
responsive to their employees’ needs as the main causes and reasons of organizational
conflict
The traditional view is the early approach to conflict which assumed that all conflict was bad
and to be avoided. The conflict was treated negatively and discussed with such terms as
violence, destruction, and irrationality to reinforce its negative implication.
The conflict was a dysfunctional outcome; resulting from poor communication, lack of
transparency and trust between people, and the failure of managers to be responsive to the
necessities and aspirations of their employees. The view that all conflict is negative certainly
offers a simple approach to looking at the behavior of people who create conflict.
Human Relations View of Organizational Conflict
From the late 1940s to the mid-70s, the human relations view dominated the topic of
organizational conflict. In that period, the fields of management and organizational behavior
were expanding.
The traditional view was challenged by various studies and surveys, and therefore, the human
relations view on organizational conflict presented a significantly different perspective on the
topic. The human relations view on organizational conflict primarily teaches us to accept
conflict.
It identifies conflict as an important aspect of any organization, which simply cannot be more
important, unlike the traditional view, the human relations view does not discard conflict as
an outright negative and destructive thing. Instead, it says that an organizational conflict may
be beneficial for the individuals, groups and the organization in general.
Moreover, this perspective even suggests that organizational conflicts within groups may
even lead to better group performance and outcome. The human relations view of conflict
treats conflict as a natural and inevitable phenomenon and, so can’t be eliminated from any
organization.
Here, the conflict was seen in a positive light as it was suggested that conflict may lead to an
improvement in a group’s performance. But it is similar to the interactionist view of the
conflict.
Interactionist View of Organizational Conflict
With passing time and further studies in the field of organizational behavior, people started to
accept conflict as an integral and somewhat positive aspect. The interactionist view on
organizational conflict extends that concept.
While the human relations view accepted organizational conflict as an important part, the
interactionist view on- organizational conflict takes the same concept one step further. It
suggests that an ongoing, minimum level of conflict is necessary and beneficial for a group.
In the interactionist view, an organization or group with no conflict is more likely to become
static, non-responsive, inflexible and inadaptable. It states that a minimum level of conflict is
beneficial for the group because it maintains a certain level of creativity, self-evaluation, and
competition among the individuals.
All these things result in increased group performance, more creative solutions to problems
and better outcomes. It clearly states that only the functional and constructive forms of
conflict help the group, while the dysfunctional or destructive forms of conflict should be
avoided.
The interactionist view indicates that conflict is not only an encouraging force in a group but
also an absolute necessity for a group to perform effectively.
While the human relations view accepted conflict, the interactionist view encourages conflicts
because a harmonious, peaceful, tranquil, and cooperative group is prone to becoming static
apathetic and non-responsive to needs for change in innovation.
So, the major contribution of the interactionist view is encouraging group leaders to sustain
an ongoing minimum level of conflict enough to keep the group viable, self-critical and
inspired.
Characteristics of Conflict:
1. Conflict is a Process:
Conflict occurs in ‘layers. First layer is always misunderstanding. The other layers are
differences of values, differences of viewpoint, differences of interest, and interpersonal
differences. It is also called a process because it begins with one party perceiving the other to
oppose or negatively affect its interests and ends with competing, collaborating,
compromising or avoiding.
2. Conflict is Inevitable:
Conflict exists everywhere. No two persons are the same. Hence, they may have individual
differences. And the differences may be because of values or otherwise, lead to conflict.
Although inevitable, conflict can be minimized, diverted and/or resolved. Conflict develops
because we are dealing with people’s lives, jobs, children, pride, self-concept, ego and sense
of mission. Conflict is inevitable and often good, for example, good teams always go through
a “form, storm, norm and perform” period.
3. Conflict is a Normal Part of Life:
Individuals, groups, and organisations have unlimited needs and different values but limited
resources. Thus, this incompatibility is bound to lead to conflicts. The conflict is not a
problem, but if it is poorly managed then it becomes a problem.
4. Perception:
It must be perceived by the parties to it, otherwise it does not exist. In interpersonal
interaction, perception is more important than reality. What we perceive and think affects our
behaviour, attitudes, and communication.
5. Opposition:
One party to the conflict must be perceiving or doing something the other party does not like
or want.
6. Interdependence and Interaction:
There must be some kind of real or perceived interdependence. Without interdependence
there can be no interaction. Conflict occurs only when some kind of interaction takes place.
7. Everyone is inflicted with Conflict:
Conflict may occur within an individual, between two or more individuals, groups or between
organisations.
8. Conflict is not Unidimensional:
It comes into different ways in accordance with degree of seriousness and capacity. At times,
it may improve even a difficult situation.
Concept of Conflict Management:
‘Conflict management is the principle that all conflicts cannot necessarily be resolved, but
learning how to manage conflicts can decrease the odds of non-productive escalation.
Conflict management involves acquiring skills related to conflict resolution, self-awareness
about conflict modes, conflict communication skills, and establishing a structure for
management of conflict in your environment.’ All members of every organisation need to
have ways of keeping conflict to a minimum – and of solving problems caused by conflict,
before conflict becomes a major obstacle to your work.

Types of Conflict:
Conflicts can be of different types as described below:
On the basis of involvement:
Conflicts may be intrapersonal (conflict with self), interpersonal (between two persons) and
organisational. Organizational conflict, whether real or perceived, is of two types
intraorganizational and interorganizational. Interorganizational conflict occurs between two
or more organizations.
Different businesses competing against each other are a good example of interorganizational
conflict. Intraorganizational conflict is the conflict within an organization, and can be
examined based upon level (e.g., department, work team, individual), and can be classified as
interpersonal, intragroup and intergroup.
Interpersonal conflict-once again-whether it is substantive or affective, refers to conflict
between two or more individuals (not representing the group of which they are a part of) of
the same or different group at the same or different level, in an organization.
Interpersonal conflict can be divided into intergroup and intergroup conflict. While the
former— intragroup-occurs between members of a group (or between subgroups within a
group), intergroupoccurs between groups or units in an organization.
On the basis of Scope:
Conflicts may be substantive and Affective. A substantive conflict is associated with the job,
not individuals, while an affective conflict is drawn from emotions. Substantive conflicts may
be over the facts of a situation, the method or means of achieving a solution to the problem,
ends or goals, and values. Thus, it includes task conflict and process conflict in its scope.
Procedural conflicts can include disagreements about factors such as meeting dates and times,
individual task assignments, group organization and leadership, and methods of resolving
disagreements. Unresolved procedural conflicts can prevent work on collaborative projects.
Substantive conflict can enhance collaborative decision-making. Substantive conflict is also
called performance, task, issue, or active conflict.
On the other hand, an affective conflict (also called as relationship or opposite of agreeable
conflict) deals with interpersonal relationships or incompatibilities and centres on emotions
and frustration between parties.
Affective conflicts can be very destructive to the organisation, if remains unresolved.
Relationship conflict comes under the scope of affective conflicts. An affective conflict is
nearly always disruptive to collaborative decision-making. The conflict causes members to be
negative, irritable, suspicious, and resentful.

On the basis of Results:

Conflict can be Constructive or Destructive, creative or restricting, and positive or negative.
Destructive conflicts are also known as dysfunctional conflicts, because such conflicts
prevent a group from attaining its goals.
Conflict is destructive when it takes attention away from other important activities,
undermines morale or self-concept, polarises people and groups, reduces cooperation,
increases or sharpens difference, and leads to irresponsible and harmful behaviour, such as
fighting, name-calling.
On the other hand, constructive conflicts are also known as functional conflicts, because they
support the group goals and help in improving performance. Conflict is constructive when it
results in clarification of important problems and issues, results in solutions to problems,
involves people in resolving issues important to them, causes authentic communication, helps
release emotion, anxiety, and stress, builds cooperation among people through learning more
about each other; joining in resolving the conflict, and helps individuals develop
understanding and skills.
On the basis of Sharing by Groups:
Conflicts may be Distributive and Integrative. Distributive conflict is approached as a
distribution of a fixed number of positive outcomes or resources, where one side will end up
winning and the other losing, even if they do win some concessions.
On the other hand, integrative – Groups utilizing the integrative model see conflict as a
chance to integrate the needs and concerns of both groups and make the best outcome
possible. This type of conflict has a greater emphasis on compromise than the distributive
conflict. It has been found that the integrative conflict results in consistently better task
related outcomes than the distributive conflict.
On the basis of Strategy:
Conflicts may be competitive and cooperative. Competitive conflict is accumulative. The
original issue that began the conflict becomes irrelevant. The original issue is more of a
pretext than a cause of the conflict. Competitive conflict is marked by the desire to win the
fight or argument, even if winning costs more and causes more pain than not fighting at all.
Costs do not matter in competitive conflict, and therefore, irrationality remains its main mark.
Competitive conflict is characterized by fear, which is one of the important ingredients in a
conflict becoming irrational. If one is personally invested in the outcome, this too leads to
irrational conclusions, especially if issues of self-esteem, whether personal or national, are
involved.
Competitive conflict can either begin by, or be rationalized by, conflicts of ideology or
principle. Even more, when the desire to win overtakes any specific reason for the conflict,
irrationally develops.
Importantly in history, when powers are roughly equal, such as the World War I alliances
were, conflict that becomes competitive and irrational nearly always develops. In economic
competition customers are the winners and the firms may be at risk. But in sports competition
is encouraged.
In a cooperative situation the goals are so linked that everybody ‘sinks or swims’ together,
while in the competitive situation if one swims, the other must sink. A cooperative approach
aligns with the process of interest-based or integrative bargaining, which leads parties to seek
win-win solutions. Disputants that work cooperatively to negotiate a solution are more likely
to develop a relationship of trust and come up with mutually beneficial options for settlement.
On the basis of Rights and Interests:
Conflict of rights means where people are granted certain rights by law or by contract or by
previous agreement or by established practice. If such a right is denied, it will lead to conflict.
Such a conflict is settled by legal decision or arbitration, not negotiation.
On the other hand, conflict of interests means where a person or group demands certain
privileges, but there is no law or right in existence. Such a dispute can be settled only through
negotiation or collective bargaining.
Stages of Conflict:
A manager must know various stages of conflict to handle it. The solution to conflict
becomes easy before it becomes serious, if he knows of the real issue behind the conflict and
how the conflict developed. Normally a conflict passes through the following stages:
a. People recognise lack of resources, diversity of language or culture. Sensitiveness may
possibly result in conflict.
b. If there are serious differences between two or among more than two groups, the latent
conflict in a competitive situation may turn out into conflict.
c. An incident may trigger a latent conflict into an open conflict
d. Once a problem has been solved, the potential for conflict still remains in the aftermath. In
fact, the potential is bigger than before, if one party perceives that the resolution has
resulted into winlose situation.
Conflict Management Styles:
Conflict management must aim at minimizing affective conflicts at all levels, attain and
maintain a moderate amount of substantive conflict, and also to match the status and concerns
of the two parties in conflict.
Many styles of conflict management behavior have been researched in the past century. Mary
Parker Follett described them as domination, compromise, and integration (involves
openness, exchanging information, looking for alternatives, and examining differences to
solve the problem in a manner that is acceptable to both parties).
She also mentioned avoidance and suppression as other forms of handling conflicts. Robert R.
Blake and Jane S. Mouton then presented five styles: forcing, withdrawing, smoothing,
compromising, and problem solving. The five styles in currency in 21st century, as shown in
Figure 20.2, are:
Figure 21 Conflict Management Styles
1. Avoidance (Leave-lose/win):
It is non-assertive and non-cooperative. The manager may think or pretend that no conflict
exists or just ignore it. This strategy is used when the effort to resolve is not worth the salt.
But this approach over the time worsens the situation.
Avoidance might take the form of diplomatic sidestepping the issue or postponing resolution
in time to come or simply withdrawing from a situation. A turtle is a symbol for avoidance,
because it can avoid everything by pulling its head and legs into the shell to be off to
everything.
2. Accommodating (Yield-lose/win):
Accommodating is non-assertive and cooperative, just opposite of competing. To solve the
conflict, if someone puts his interests last so as to satisfy concerns of other people by giving
in, sacrificing, or accepting, or yielding to other’s view point, it is called accommodation.
However, being too accommodating too often can weaken your position to the point where
your voice is never heard. There will be high relationship orientation. This style is also used
when the new approach is to be used in the very near future. It may solve the conflict for the
other party, but a conflict will begin in manager. This style is not objective.
A chameleon is a symbol of the accommodating style since it changes its colour to match the
colour of its environment. By changing its colour to accommodate its surroundings, the
chameleon fits quietly into its environment.

3. Competing (Win/lose):

The style is assertive and non-cooperative. A person puts his/her interests before anyone
else’s interests. It is also known as dominating style. One stands up for his rights and uses all
the power to win his position. There is low relationship orientation. Managers, using this
style, want others to follow his dictates or get his way.
This style can be used only when one’s leadership is established. There would be low
relationship orientation Low relationships orientation a lion can be a symbol of a competitive
style. The lion’s roar helps the lion to satisfy its interests.
4. Compromising (Mini-win/mini-lose):
It is some assertive and some cooperative. Compromise is on the path toward collaboration,
somewhere between competition and accommodation. The style means mutual give-and-take
to satisfy both parties, or both may say, “Something is better than nothing.” It has equal
distance between competing and accommodating.
There would be negotiated relationship orientation. When the objective is to move on, not to
stop the journey, the manager may compromise. A zebra can be a symbol for the
compromising style.
A zebra’s unique look seems to indicate that it didn’t care if it was a black horse or a white
horse, so it “split the difference” and chose black and white stripes.
5. Collaborating (Win/win):
It is assertive as well as cooperative, just opposite of avoiding. It may also be called
integrative style. This style focuses on satisfying the underlying concerns of both the parties,
meeting many current needs by working together. Through this style, employees develop
ownership and commitment. Sometimes this style gives birth to new mutual needs.
LEADERSHIP
Introduction
Leadership is a process of exercising influence over an individual or a group. Effective
leadership is necessary for inspiring the people to work for the accomplishment of objectives.
It provides a cohesive force which holds the group intact and develops a spirit of cooperation.
Chester Bernard viewed leadership as the quality of behavior of individuals whereby they
guide people and their activities. A leader interprets the objectives of the people working
under him and guides them towards achievement of those objectives. He also creates and
sustains enthusiasm among them for superior performance.
In the words of Louis A. Allen, “A leader is one who guides and directs other people. He
gives the efforts of his followers a direction and purpose by influencing their behavior”.
Managers at all levels must perform leadership function in order to lead the
subordinates towards organizational goals.
Leadership is the process of influencing the subordinates so that they cooperate
enthusiastically in the achievement of group goals. In other words, leadership is the process
by which an executive imaginatively directs, guides, and influences the work of others in
choosing and attaining specified goals by mediating between the individuals and the
organization in such a manner that both will obtain maximum satisfaction.
Definitions:
The term ‘leadership’ has been defined by many authors as under:
1. Mooney & Reiley, “Leadership is regarded as the form which the authority assumes
when it enters into process”.

2. Chester I. Koontz & O’Donnell, “Leadership may be defined as the influence, the
art or the process of influencing people so that they will strive willingly towards the
achievement of group goals”.
3. R.T. Livingston, “Leadership is the ability to awaken in others the desire to follow a
goal or objective”.
4. Ordway Tead, “Leadership is that combination of qualities by the possession of
which one is able to get something done by others, chiefly because, through his influence
they become willing to do so”.
5. Alford & Beatly, “Leadership is the ability to secure desirable actions from a group
of followers voluntarily, without the use of coercion”.
6. Theo Haimann, “Leadership can be defined as a process by which an executive
directs, guides and influences the work of others in choosing and attaining specified goals by
mediating between the individual and the organisation in such a manner that both will obtain
maximum satisfaction”.
On the basis of analytical study of above definitions, it may be concluded that leadership is an
ability to direct and motivate other persons of an organisation so that they may contribute
their efforts towards the success of organisation.
Characteristics of Leadership
An analysis of the above definitions reveals that leadership as a managerial process has the
following characteristics:
Characteristics of Leadership:
1. Followers: The success of leadership depends upon the number of followers. Larger
the number of followers, more successful will be the leadership. Leadership cannot be
thought of in the absence of followers.
2. A Personal Quality: Leadership is a personal quality of character and behaviour,
which enables him to influence his men to follow and the followers follow his order and
direction.
3. A Common Goal: Leadership clusters around the achievement of common goals.
There must be some common goals before the leader and his followers. All the activities
must be oriented to achieve these goals.
4. Active Relations: Presence of active relations between a leader and his followers is
essential for effective leadership. The leader must himself initiate the work as he wants it to
be done by his followers.
5. Practical Approach: An effective leader is one who adopts practical approach
towards the problems of enterprise. He should not be rigid. He should change his behaviour
according to the need of time. He should follow the democratic method of leadership through
wide and flexible approach.
6. It is a Process: Leadership is a continuous process of directing, guiding, presenting
examples and influencing the people to make their best efforts for the attainment of pre-
determined objectives.
7. Leadership is a process of influence: Leadership is a process whose important
ingredient is the influence exercised by the leader on the group members. A person is said to
have an influence over others when they are willing to carry out his wishes and accept his
advice, guidance and direction. Successful leaders are able to influence the behavior, attitudes
and beliefs of their followers.
8. Leadership is related to a situation: When we talk to leadership, it is always related
to a particular situation at a given point of time and under a specific set of circumstances.
That means leadership styles will be different under different circumstances. At one point of
time, the subordinates may accept the autocratic behavior of the leader while at a different
point of time and under a different situation participative leadership style may be successful.
9. Leadership is the function of stimulation: Leadership is the function of motivating
people to strive willingly to attain organizational objectives. Leaders are considered
successful when they are able to subordinate the individual interests of the employees to the
general interests of the organization. A successful leader allows his subordinates to have their
individual goals set up by themselves in such a way that they do not conflict with the
organizational objectives.
Essentials of Leadership
Leadership is a quality which enables a person to direct other persons of the organisation and
by that other person become his followers. A leader directs and guides the activities of his
followers and influences them to contribute their whole hearted efforts to achieve the
common objectives of the enterprise. Therefore, it becomes essential that there must be
follower of a leader. He must have a complete and clear knowledge of his organisation. He
must have the clear knowledge of his abilities and limitations. He must have the clear
knowledge of objectives of his organisation also.
Only then he may direct, guide and regulate the activities of his followers. However, it is
important to note that an effective leader is not necessarily a good manager also.
Importance and Need for Leadership
1. Determination of Goals: A leader performs the creative function of laying down
goals and policies for the followers. He acts as a guide in interpreting the goals and policies.
2. Organisation of Activities: A good leader divides organisation activities among the
employees in a systematic manner. The relationships between them are clearly laid down.
This reduces the chances of conflict between them.
3. Achieving Coordination: A leader integrates the goals of the individuals with the
organisational goals and creates a community of interests. He keeps himself informed about
the working of the group. He shares information with the group for the coordination of its
efforts.
4. Representation of Workers: A leader is a representative of his group. He takes
initiative in all matters of interest to the group. He also attempts to fulfil the psychological
needs of his followers.
5. Providing Guidance: A leader guides the subordinates towards the achievement of
organisational objectives. He is available for advice whenever a subordinate faces any
problem.
6. Inspiration of Employees: A good leader inspires the subordinates for better
performance. Motivation is necessary for getting the desired work from the subordinates. The
leader motivates the employees by providing them economic and noneconomic rewards.
7. Building Employees’ Morale: Good leadership is indispensable for high employee
morale. The leader shapes the thinking and altitudes of the group. He develops good human
relations and facilitates interactions among the members of the group. He maintains voluntary
cooperation and discipline among followers.
8. Facilitating Change: Leadership is the mechanism to convince workers about the
need for change. Dynamic leadership is the comer-stone of organisational change. An
effective leader is able to overcome resistance to change on the part of workers and thus
facilitates change.
Thus, leadership is a part of management, but not all of it. This implies that a strong leader
can be a weak manager because he is weak in planning or some other managerial duty.
Reverse to this, manager can be a weak leader and still be an acceptable manager, especially
if he happens to be managing people who have strong inner achievement drives.
LEADERSHIP THEORIES AND APPROACHES OF LEADERSHIP
Various leadership models have been presented by different authors, but important among
them are trait, behaviour, contingency and neo-charismatic models. These models are also
known as theories. Effective leadership is a function of the characteristics of the leader, the
style of leadership, the characteristics of a followers and the situation surrounding the
organisation. It clearly indicates that the leadership models can be respectively a trait model
(theory), behavioural model, contingency model and neo-charismatic models. None of them
can be a supreme model. A combination of all these models makes an appropriate leadership
model.
Theories of Leadership
In influencing the people in the organization towards the goals of the organization, there have
been various approaches adopted by different set of leaders, as one model may not be suitable
for different organizations with different set of objectives. Moreover, such models or theories
of leadership also depend on the qualities that a leader inherit or display in managing her/his
team. Some of the theories of leadership ranging from conventional theories to contemporary
theories have been dealt with over here, the chief of them being the following:
 Great Man Theory/Trait Theory
 Behavioural Theories
 Contingency/Situational Theories,
 Transactional Theory of Leadership
 Transformational Theory of Leadership
Great Man Theory of Leadership:
One of the early notions of leadership, which is still popular in certain circle, is that
leadership is an inborn quality. This is the Great Man Theory of leadership which asserts that
leaders in general and great leaders in particular are born and not made. According to the
theory, leadership calls for certain qualities like charm, persuasiveness, commanding
personality, high degree of intuition, judgment, courage, intelligence, aggressiveness and
action orientation which are of such a nature that they cannot be taught or learnt in a formal
sense.
One either has them or does not have them. Leadership qualities are carried in the genes. In
other words, they are inborn, or- something inherited in family from generation-to-generation.
Examples are drawn from such great leaders like Mahatma Gandhi, Mao Tse Tung, Kamal
Ataturk, Abraham Lincoln, General de Gaulle and others. They were born natural leaders
with built-in qualities of leadership and attained greatness by divine design.
It is said that history is nothing but the biographies of great men and women. They were the
ones who made history. They were great leaders of their time. It is contended that such men
would have become leaders in any case because they were inherently endowed with
leadership traits and skills.
They were not trained in leadership nor did they acquire any leadership skills in their lives;
such skills were natural to them. In other words, there was something in their anatomy,
physiology and personality which marked them out from the common mass of mortals. They
had an instinctive urge to assume leadership and had an inborn will to achieve greatness and
success. People turned to them instinctively for inspiration, solace and support.

The further implications of the theory that leaders are born and not made, are as
follows:
(i) Leaders are gifts of God to mankind. A measure of divinity is attributed to leaders and
their actions.
(ii) Everyone cannot aspire to become a leader and to attain greatness.
(iii) The inborn leadership qualities alone are necessary and sufficient for a leader to
exercise influence over his followers and to become successful.
(iv)Leadership qualities and effectiveness are independent variables. Situational factors like
the nature and needs of followers, the demands of task and the general socioeconomic
environment have little or no influence on a leader’s emergence or effectiveness.
(v) The theory discounts the belief that individuals can be trained for assuming leadership
positions and roles. Leadership qualities cannot be transmitted through education and
exposure.
The Great Man Theory of leadership is similar to the notion of divine right of kings to reign
and rule over their subjects on a perpetual hereditary basis. Kings were supposed to acquire
their legitimacy from God Himself. Similarly, some individuals were destined to become
great leaders on their own because God gave them certain inimitable abilities of a divine
nature.
In fact, the Great Man Theory dates back to the ancient Greek and Roman times when
leadership used to be correlated with certain peculiar mental, physical and personality
characteristics.
Because leaders were thought to be born, a measure of divinity used to be attributed to them
and their behaviour.
The theory carries some credibility to the extent that leaders in general and great leaders in
particular have certain mystique about them and are viewed with awe by their followers. The
qualities and actions of such leaders inspire implicit respect, at-least in some respects. The
incidence and effectiveness of some great individuals who become leaders just like that
without any tutelage and training were inexplicable in any way other than by genetic theory.
Critique of the Theory:
It is clear that the Great Man theory has no scientific basis and empirical validity. It is more
of a speculative piece of notion. The great weakness of the Great Man Theory, apart from the
improbability of inherent traits, is the absurd belief that some people become great and
successful leaders independent of their environmental situations. The Great Man Theory is
totally rejected by many modern theorists and even by some leaders themselves.
The reasons are not far to seek and they are listed as under:
(i) There is nothing inborn, divine or mysterious about leadership qualities. Born leaders
are imaginary characters. The so called born leaders tend to be misfits in the modern complex
fast changing conditions. If at all there are born leaders, they are freaks of nature; their
availability is negligible, unreliable and cannot meet the growing demands of society for
effective leadership in all spheres of activities.
(ii) Leaders are ordinary mortals who happen to acquire certain characteristics and skills
useful for influencing other people. Leadership qualities can be acquired and sharpened by
anyone through proper education, training and exposure.
(iii) Leadership qualities and traits by themselves are not sufficient for achieving
effectiveness. Situational factors, in conjunction with leadership skills and qualities, have
considerable influence on both the emergence and effectiveness of leaders.
(iv) The genetic or great man theory of leadership does not provide a scientific, verifiable
and predictable explanation of why, how and when leaders emerge and become effective,
what are the critical qualities needed for achieving greatness in leadership, and why as
between two leaders of comparable qualities, one becomes effective and the other fails.
A somewhat moderate viewpoint is that one may not totally rule out the genetic or inborn
nature of some leadership attributes. Just as there are some ‘precocious’ and almost born
singers, artists and geniuses in various spheres of activity, there could also be born leaders—
those individuals who demonstrate leadership qualities right from their early age and who
possess a considerable amount of intuitive wisdom.
It is also argued that great leaders, by virtue of their sheer ‘magic’, bend situational factors to
their advantage; hence situational factors have little independent influence on leadership
effectiveness.
Another point of argument is that leaders are made’ out of those individuals who possess
certain basic leadership attributes. The latter are allowed to sharpen and develop through
education and training processes.
Qualities or Traits of a Good Leader:
The trait theorists identified a long list of qualities which leaders possess. The following list is
only illustrative and not exhaustive.
2. Trait Theory of Leadership:
A modification of the Great Man Theory is the Trait Theory which argues that leadership
qualities or traits can be acquired. They need not always be inborn. The trait theory of
leadership states that there are certain identifiable qualities or characteristics that are unique
to leaders and those good leaders possess such qualities to some extent. Leadership qualities
may be inborn or they may be acquired through training and practice.
(i) Intelligence:
Good leaders should be intelligent enough to understand the context and content of their
position and function, to grasp the dynamics of environmental variables, both internal and
external, which affect their activities and to have a good perspective of the present and future
dimensions of their organisation.
(ii) Personality:
This is not to be confused with physical appearance, though it is important. More than
outward appearance, certain inner-personality qualities mark out good leaders from others.
Such qualities include: emotional stability and maturity, self-confidence, decisiveness, strong
drive, optimism, extrovertness, achievement orientation, purposefulness, discipline, skill in
getting along with others, integrity in character and a tendency to be cooperative.
These qualities tend to help leaders to organise and coordinate human effort, to guide and
motivate people in task situations, to make sound decisions, to achieve concrete results and
goals, to resolve conflict and to manage organisational change.
(iii) Other qualities:
Apart from intelligence and personality attributes, good leaders also possess a few key
qualities like open mindedness, scientific spirit, social sensitivity, ability to communicate,
objectivity, an abiding interest in people, pragmatism and a sense of realism.
Limitations:
The trait theory is described as out-dated by many modern theorists.
Its basic validity is questioned on several accounts:
1. It is not based on any research or systematic development of concepts and principles.
It is more a speculative theory which fails when subjected to empirical tests. It is only
descriptive theory on how some people emerge as leaders. It has few explanatory and
predictive properties.
2. It is not possible to isolate a specific set of traits which can be consistently applied to
leadership across a range of situations: cases can be cited to prove that mere possession of
certain traits is not enough for one to become a leader. Nor does the absence of the called
traits prevent individuals from emerging and proving their worth as leaders.
3. The trait theory does not try to relate particular traits to performance and behaviour
effectiveness of leaders. Some traits tend to cancel out each other. For example, pragmatism
and possession of ethical sense of right and wrong do not always go together. Traits which
are needed for maintaining leadership are different from those which are needed for acquiring
leadership.
4. An individual’s traits do not make up his total personality, nor do they fully reveal
about attitudes, values, aspirations and behaviour.
5. The trait theory is inward-looking towards the leader alone to the exclusion of the
group of followers and the task situation, which are in fact more important for leader
effectiveness.
6. There is no way of systematically defining and measuring the incidence and intensity
of traits among persons purported to be leaders. Nor is it possible to position the traits along a
hierarchy of importance.

Behavioral Theory of leadership

Behavioral Theory of leadership is a big leap from Trait Theory, as it was developed
scientifically by conducting behaviour focused studies. The theory emphasizes that leadership
capability can be learned, rather than being inherent. This theory is based on the principle that
a leader's behaviours can be conditioned in a manner that one can have a specific response to
specific stimuli.

Behavioral Theories of Leadership, also known as “The style approach to leadership” focuses
on the behavior of the leader and what leaders do and how they act. In the 1940s, two parallel
studies on leadership were in progress, one based on traits displayed by leaders, another on
the behaviours exhibited by leaders.
• Traits theory assumes that leaders are born, rather than made
• Trait theory concentrates on, what the leaders are
• Great Man Theory and Traits Theory are focused on intrinsic personal characteristics
• Behavioural theories are based upon the belief that great leaders are made, not born
• Behavioural theories concentrate on, what leaders do
• Behavioral approach is based on the leader's beliefs, values, and interpersonal
relations
• Considers the Leader's attitude, behavior, opinion, and
concern about his followers/organization
• Studies leadership behavior from the point of view of motivation, supervision, and
authority
• Behavioural theories assume that specific behavioral patterns of leaders can be
acquired
• People can learn to become leaders through teaching and observation.
Behavioral Theory of Leadership is a leadership theory that considers the observable actions
and reactions of leaders and followers in a given situation. Behavioral theories focus on how
leaders behave and assume that leaders can be made, rather than born, and successful
leadership is based on definable, learnable behavior. Behavioral theories of leadership are
classified as such because they focus on the study of specific behaviors of a leader. For
behavioral theorists, a leader behavior is the best predictor of his leadership influences and as
a result, is the best determinant of his or her leadership success.
These theories concentrate on what leaders actually do rather than on their qualities. Different
patterns of behavior are observed and categorized as 'styles of leadership'. This area has
probably attracted the most attention from practicing managers.

Advantages of Behavioral Theory of Leadership:

Behavioral theory promotes the value of leadership styles with an emphasis on concern for
people and collaboration. It promotes participative decision making and team development by
supporting individual needs and aligning individual and group objectives.
It helps managers evaluate and understand how their behavioral style as a manager affects
their relationship with the team and promotes commitment and contribution towards
organizational goals.
This theory helps managers find the right balance between different styles of leadership, and
helps them decide how to behave as a leader, depending on concerns for people and for
productivity.
Criticism / Arguments against - Behavioral Theory of Leadership:
As there were inherent limitations with the Trait approach to leadership, when early
researchers ran out of steam in their search for traits, they turned to what leaders did, how
they behaved, and came with behavioral theory of leadership. This became the dominant way
of approaching leadership within organizations in the 1950s and early 1960s but this theory
too had its own limitations.
Behavioral Theory of Leadership proposes leadership styles but a specific leadership style
may not be best in all circumstances. When researchers really got to work on this it didn’t
seem to validate their assumptions. While behavioral theories may help managers develop
particular leadership behaviours but they provide little guidance as to what constitutes
effective leadership in different situations.
Situational Contingency Theory of Leadership:
Neither the trait nor the behavioural approaches offered satisfactory explanations of
leadership in organisations, causing the researchers to look for alternate theories. The
advocates of situational theories believe that leadership is greatly affected by a situation and
to maintain that leadership pattern is the product of a situation at a particular time.
The situational theories emphasis not on personal qualities or traits of a leader, but upon the
situation in which he operates. A good leader is one who moulds himself according to the
needs of a given situation. These are three theories which view that leadership is dependent
upon the situations. Their theories are also known as contingency theories of leadership.
These theories are discussed in detail as follows.

Fiedler’s Contingency Model:

Widely respected as the father of the contingency theory of leadership, Fred Fiedler
developed the leadership contingency model. Fiedler’s theory assumes leaders are
predisposed to a particular set of leadership behaviours. Leaders are either task oriented or
relationship oriented. Task oriented leaders are-directive, structure situations, set deadlines
and make task assignments.
Relationship oriented leaders focus on people, are considerate and are not strongly directive.
Although the two types of leaders are similar to the leaders discussed in behavioural theories,
there is an important distinction between contingency theory and behavioural theories.
Fiedler’s theory assumes that the predisposition to a particular style of leadership is difficult
to change, a basic disposition of the leader with almost personality like qualities.
Fiedler suggested that three major situational variables determine whether a given
situation is favourable to leaders:
(i) Their personal relations with the members of their group (leader-member relations)
(ii) The degree of structure in the task that their group has been assigned to perform (task
structure) and
(iii) The power and authority that their position provides (position power).
Leader- member relations describe the quality of the relationship between subordinates and
the leader.
This dimension includes the amount of trust between the leader and the subordinates and
whether the leader is liked and respected by the subordinates or not. Task Structure describes
the extent to which the work is well defined and standardized or ambiguous and vague. When
task structure is high, the work is predictable and can be planned. Low task structure
describes an ambiguous situation with changing circumstances and unpredictable events.
Position Power refers to the formal authority of the leader. A situation with high position
power lets the leader hire people and directly reward or punish behaviour. A leader with low
position power cannot take such actions. In the latter situation, policies may constrain the
leader from using any rewards or punishments.

Fiedler defined the favourableness of a situation as “the degree to which the situation enables
the leader to exert influence over the group.” The most favourable situation for leaders to
influence their groups is one in which they are well liked by the members (good leader
member relations), have a powerful position (strong position power) and are directing a well-
defined job (high task structure) e.g., a well-liked general making an inspection in an army
camp. On the other hand, the most unfavourable situation for leaders is one in which they are
disliked, have little position power and face an unstructured task.
Fielder perceived eight possible combinations of the three situational variables as shown
in the following figure:

Figure 22 Fiedler’s Contingency Model

In a re-examination of old leadership studies and an analysis of new studies, Fiedler

concluded that:
(i) Task oriented leaders tend to perform best in group situations that are either very
favourable or very unfavourable to the leader.
(ii) Relationship oriented leaders tend to perform best in situations that are intermediate in
favourableness.
These conclusions are summarized in the following figure:
Fiedler has made an important contribution to leadership theory, particularly in his focus on
situational variables as moderating influences. Fiedler’s model has research support,
particularly in his general conclusions represented in the figures. He may, in his single that
there are only two basic leadership styles-task oriented and relationship oriented.
Most evidence indicates that leader behaviour must be plotted on two separate axes rather
than on a single continuum. Thus, a leader who is high on task behaviour is not necessarily
high or low on relationship behaviour. Any combination of the two dimensions may occur.
Hersey-Blanchard Situational Model:
Hersey-Blanchard situational model also advocates linking leadership styles with various
situations so as to ensure effective leadership, but its perspective of situational variables is
different as compared to Fiedler’s Model. This model is based on any empirical studies
Hersey and Blanchard feel that the leader has to match his style with the needs of maturity of
subordinates which moves in stages and has a cycle. This model is also known as life cycle
theory of leadership and is based on an interaction among three factors (i) task behaviour (ii)
relationship behaviour (iii) the maturity level.
These variables are discussed as follows:
(i) Task Behaviour:
The extent to which leaders are likely to organize and define the roles of the members of their
group and to explain what activities each is to do and when, where and how tasks are to be
accomplished, characterised by endeavouring to establish well defined patterns of
organisation and ways of getting jobs accomplished.
(ii) Relationship Behaviour:
The extent to which leaders are likely to maintain personal relationships between themselves
and members of their group by opening up channels of communication providing socio-
emotional support, active listening, psychological strokes and facilitating behaviour.
(iii) Maturity Level:
Maturity level is built on the work of Chris Argyris. Maturity is the capacity to set high but
attainable goals plus the willingness and ability to take responsibility and to use education
and/or experience. Ability refers to the knowledge and skills of an individual to do the job
and is called Job Maturity.
Willingness refers to the psychological maturity and has much to do with confidence and
commitment of the individual. People tend to have varying levels of maturity depending upon
the specific task, function or objective that they are attempting to accomplish.

These are defined as the four stages of followers’ readiness:

(i) R1 – People are both unable and either unwilling or too insecure to take responsibility to
do something. They are neither competent nor confident.
(ii) R2 – People are unable but willing to do the necessary tasks. They are motivated but
currently lack appropriate skills.
(iii) R3 – People are able but unwilling or are too apprehensive to do what the leader wants.

(iv) R4 – People are both able and willing to do what is asked of them. They are at a very
high level of maturity.
According to Hersey and Blanchard, as the level of subordinate maturity increases in terms of
accomplishing a specific task, the leader should begin to reduce task behaviour and increase
relationship behaviour. As the subordinate moves into above average level of maturity, the
leader should decrease both task and relationship behaviour. At this level of maturity there is
a reduction of close supervision and an increase in delegation as an indication of trust and
confidence.
If we combine leadership style and maturity, that is the leadership style which is appropriate
at a given level of maturity, we may arrive at the relationship between the two as shown in
the following figure.
Figure 23 life cycle theory of leadership
The above figure summarizes the life cycle theory of leadership.
The theory indicates that effective leadership should shift as follows:

Stage I → High task and low relationship behaviour.

Stage II → High task and high relationship behaviour.

Stage III → High relationship and low task behaviour.

Stage IV → Low task and low relationship behaviour.

Thus, to be effective, the manager’s style must be appropriate for the maturity level of the
subordinates.
According to the levels of maturity of subordinates, the four styles of leadership should
be as follows:
(i) Telling Style:
Telling style emphasizes directive behaviour. It is the high task and low relationship
behaviour stage, where the subordinates have low maturity i.e., neither they have the ability
to do nor they are willing to do.
(ii) Selling Style;
In the second stage, which is marked by high task and high relationship behaviour,
subordinates require both supportive and directive behaviour. Selling leadership style is
appropriate for subordinates of moderate maturity i.e., high willingness but lack of ability.
(iii) Participating Style:
In third stage, participating style of leadership will be effective because it is a high
relationship and low task behaviour stage. Subordinates, in this stage, have high to moderate
maturity i.e. who have ability to do but lack willingness to do. Thus, high external motivating
force is needed to motivate such subordinates.
(iv) Delegating Style:
In the fourth stage, of low task and low relationship behaviour, delegating style of leadership
is suitable. Subordinates in this stage are at a very high level of maturity, i.e. they have ability
as well as willingness to work. Thus, they hardly require any leadership support. Hersey-
Blanchard’s model is simple and appealing. It helps the managers to determine what they
should do and in what circumstances. This model has provided training ground for
developing people in the organisations.
As this model is not based on any research evidence, it has failed to arouse the interest of
researchers. Moreover, this model concentrates on only one situational aspect that is, the
maturity level of subordinates, to judge the leadership effectiveness. Therefore, this model
does not truly reflect the situational leadership.

House’s Path Goal Theory:

In a contingency theory, characteristics of the situation govern the choice of leader behaviour.
Although path goal theory and Fiedler’s theory are both contingency theories, they view the
contingency relationship differently. Robert House advanced his situational theory of
leadership based on Ohio State leadership studies and Vroom’s expectancy model of
motivation.

Path-goal theory sees the leader’s role as one of affecting a subordinate’s motivation to reach
desired goals. It states that a leader’s job is to create a work environment (through structure,
support and rewards) that helps employees reach the organisational goals. Two major roles
involved are to create a goal orientation and to improve the path towards the goal. So that it
will be attained.

It is important to know why this theory is named path-goal theory. House explains it in this
way:
“According to this theory, leaders are effective because of their impact on (followers’)
motivation, ability to perform effectively and satisfactions. The theory is called Path-Goal
because its major concern is how the leader influences the (followers’) perceptions of their
work goals, personal goals and paths to goals attainment. The theory suggests that a leader’s
behaviour is motivating or satisfying to the degree that the behaviour increases (followers’)
goal attainment and clarifies the paths to these goals.”
Path-goal theory proposed the following four leader behaviours.

Directive:
Directive leader behaviour focuses on what must be done, when it must be done and how it
must be done. This behaviour clarifies performance expectations and the role of each
subordinate in the work group.
Supportive:
Supportive leader behaviour includes concern for subordinates as people and the needs they
are trying to satisfy. Supportive leaders are open, warm, friendly and approachable.
Participative:
Participative leader behaviour includes consultation with subordinates and serious
consideration of subordinates’ ideas before making decisions.
Achievement-Oriented:
Achievement oriented leader behaviour emphasizes excellence in subordinate performance
and improvements in performance. An achievement-oriented leader sets high performance
goals and shows confidence in peoples’ abilities to reach those goals. Each of the above
leadership styles work well in some situations but not in others. While exercising leadership
styles the leader must consider two groups of situational variables-characteristics of
subordinates and work environment. Characteristics of Subordinates:
Subordinate characteristics are one set of situational variables that moderate the relationship
between leader behaviour and the outcome variables of subordinate satisfaction and effort.
Personal characteristics of employees partially determine how they will react to a leader’s
behaviour. For example, employees who have an internal locus of control (who believe
awards are contingent upon their own efforts) may be more satisfied with a participative
leadership style whereas employees who have an external locus of control (who believe
awards are beyond their control) may be more satisfied with a directive style.
Another example is that internally oriented employees, who believe they can control their
own behaviours, prefer a supportive leader. But externally oriented employees, on the other
hand, prefer a directive leader as they believe that fate controls their behaviour. Finally,
individuals who feel that they have high levels of task related abilities may not respond well
to directive leader behaviour. Instead, they may prefer an achievement-oriented style of
leadership.
Characteristics of Work Environment:
Three broad aspects are considered in work environment:
(i) Subordinates task-structured or unstructured,
(ii) Formal authority system and
(iii) Primary work group-its characteristics and stage of development.
These aspects of work environment influence subordinate’s behaviour in relation to a
particular leadership style. If the subordinates are working on a highly unstructured job
characterised by high degree of ambiguity in roles, they will require directive leadership
behaviour. Subordinates working in a low ambiguity situation can clearly see what must be
done and how to do the task. Directive leadership in this case will be redundant; rather it
could reduce satisfaction and motivation. A better leadership style in this situation will be
supportive.
The following figure shows the structure of path-goal theory:

Figure 24 House’s Path Goal Theory of Leadership

Thus, the theory proposes that there is nothing like the best leadership style appropriate in all
situations. Appropriate style is one which helps the subordinates cope with the environmental
ambiguity. A leader who is able to reduce uncertainties of the task and sets clear paths is
considered to be satisfying the because he increases the expectations of the subordinates that
their efforts will lead to desired results.
Although, the results of the empirical research testing path-goal theory have shown some
promise, many of the findings are questionable because the theory itself contains some
deficiencies. For example, the theory does not suggest how different situation variables are
likely to interact. In addition, the theory considers the effects of four leader behaviours
separately even though it is likely that interactions among the various behaviours exist.

Despite criticism, however, house’s path-goal theory has made a significant contribution to
the topic of leadership because it specified important leadership behaviours and situation
variables that should be considered in almost any organisational setting.

Vroom-Yetton and Jago’s Contingency Model:

The contingency model developed by Victor Vroom and Phillip Yetton is based on a model
commonly used by researchers who take a contingency approach to leadership. Vroom and
Yetton were later joined by Arther Jago in the development of this model which emphasizes
the role played by leaders in making decisions.
Basically, the model focuses on the degree to which employees should be allowed to
participate in decisions. Three factors which are to be considered for this purpose are decision
quality, decision acceptance and decision timing.
The quality of a decision is highest when the best alternative is chosen, independent of the
effects that may be associated with the necessity that the decision be accepted by
subordinates. For example, where to place a coffee machine in a plant does not require high
decision quality whereas a decision on goal and objectives does require high decision quality.
Decision acceptance is important whenever a decision has implication for subordinates’ work
motivation and whenever a decision must be implemented by subordinates.
Decision timing plays an important role whenever timing uses constraints on decisions.
The Vroom-Yetton model is based on the assumption that situational variables interacting
with personal attributes or characteristics of the leader result in leader behaviour that can
affect organisational effectiveness.
The model is depicted in the following figure:

Figure 25 Vroom-Yetton and Jago’s Contingency Model

The figure assumes that situational variables such as subordinates, time and job demands,
interact with the personal attributes of leader such as experience or communication skills
result in leader behaviour e.g. directive style or supportive style of leadership, to influence the
organisational effectiveness, which is also influenced by the other situational variables
outside the control of the leader like government regulations, competitors’ actions, economic
conditions prevailing in the economy etc.
According to Vroom Vetten and Jago model leaders with multiple subordinates have five
basic decision styles available to them.
There five styles are as follows:
AI. The leader makes the decision or solves the problem himself, using information available
to him at the time.
All. The leader obtains the information from his subordinates, then decide on the solution to
the problem himself. The subordinates act only as the information source. They may not be
told what the problem is while getting information from them.
CI. The leader shares the problem with the subordinates individually, getting their ideas
and suggestions without bringing them together as a group. Then he makes the decision
which may or may not reflect the subordinate’s influence.
CII. The problem is shared with the subordinates as a group, collectively obtaining the
ideas and suggestions. Then, the leader makes the decision which may or may not reflect the
group’s influence.
GII. The leader and subordinates meet as a group to discuss the problem, and the group
makes the decision. The manager accepts and implements any solution which has the support
of the entire group.
The Vroom-Vetten-Jago-decision model of leadership provides the leader with, in effect, a
decision tree to help him choose an effective decision-making style. The decision process
involves answering a lot of questions about the nature of the problem. After working his way
through the decision tree, the leader selects the style that is most appropriate for the situation.
The questions relating to the problem attributes are of the following types:
(A) Is there a quality requirement such that one situation is likely to be more rational than
another? (Quality Requirement)

(B) Does the leader have sufficient information to make a high-quality decision? (Leader’s
information)
(C) Is the problem structured? (Problem structure)
(D) Is acceptance of the leader’s decision by the subordinates critical to effective
implementation? (Commitment requirements)
(E) If the leader were to make the decision by himself, will it be accepted by the
subordinates? (Commitment probability)
(F) Do subordinates’ share the organisational goals to be obtained in solving the problem?
(Goal congruence)
(G) Does conflict among subordinates likely to occur in preferred solutions? (Subordinate
conflict) (The problem attributes to questions are given in the brackets)
Transactional Leadership Theory
The transactional style of leadership was first described by Max Weber in 1947 and then by
Bernard Bass in 1981. This style is most often used by the managers. It focuses on the basic
management process of controlling, organizing, and short-term planning. The famous
examples of leaders who have used transactional technique include McCarthy and de Gaulle.
Transactional leadership involves motivating and directing followers primarily through
appealing to their own self-interest. The power of transactional leaders comes from their
formal authority and responsibility in the organization. The main goal of the follower is to
obey the instructions of the leader. The style can also be mentioned as a ‘telling style’.
The leader believes in motivating through a system of rewards and punishment. If a
subordinate does what is desired, a reward will follow, and if he does not go as per the wishes
of the leader, a punishment will follow. Here, the exchange between leader and follower takes
place to achieve routine performance goals.
These exchanges involve four dimensions:
Contingent Rewards: Transactional leaders link the goal to rewards, clarify expectations,
provide necessary resources, set mutually agreed upon goals, and provide various kinds of
rewards for successful performance. They set SMART (specific, measurable, attainable,
realistic, and timely) goals for their subordinates.

Active Management by Exception: Transactional leaders actively monitor the work of

their subordinates, watch for deviations from rules and standards and taking corrective
action to prevent mistakes.

Passive Management by Exception: Transactional leaders intervene only when

standards are not met or when the performance is not as per the expectations. They may
even use punishment as a response to unacceptable performance.

Laissez-faire: The leader provides an environment where the subordinates get many
opportunities to make decisions. The leader himself abdicates responsibilities and avoids
making decisions and therefore the group often lacks direction.

Assumptions of Transactional Theory

• Employees are motivated by reward and punishment.
• The subordinates have to obey the orders of the superior.

• The subordinates are not self-motivated. They have to be closely monitored and
controlled to get the work done from them.
Implications of Transactional Theory
The transactional leaders overemphasize detailed and short-term goals, and standard rules and
procedures. They do not make an effort to enhance followers’ creativity and generation of
new ideas. This kind of a leadership style may work well where the organizational problems
are simple and clearly defined. Such leaders tend to not reward or ignore ideas that do not fit
with existing plans and goals.
The transactional leaders are found to be quite effective in guiding efficiency decisions which
are aimed at cutting costs and improving productivity. The transactional leaders tend to be
highly directive and action oriented and their relationship with the followers tends to be
transitory and not based on emotional bonds.

The theory assumes that subordinates can be motivated by simple rewards. The only
‘transaction’ between the leader and the followers is the money which the followers receive
for their compliance and effort.
Table 6 Difference between Transactional and Transformational Leaders
Transactional leadership Transformational Leadership

Leadership is responsive Leadership is proactive

Works within the organizational culture Work to change the organizational culture by
implementing new ideas

Transactional leaders make employees Transformational leaders motivate and empower

achieve organizational objectives employees to achieve company’s objectives by
through rewards and punishment appealing to higher ideals and moral values
Motivates followers by appealing to Motivates followers by encouraging them to
their own self-interest transcend their own interests for those of the group
or unit

Creating high-performance workforce has become increasingly important and to do so

business leaders must be able to inspire organizational members to go beyond their task
requirements. As a result, new concepts of leadership have emerged - transformational
leadership being one of them.
Transformational leadership may be found at all levels of the organization: teams,
departments, divisions, and organization as a whole. Such leaders are visionary, inspiring,
daring, risk-takers, and thoughtful thinkers. They have a charismatic appeal. But charisma
alone is insufficient for changing the way an organization operates. For bringing major
changes, transformational leaders must exhibit the following four factors:
 Figure 26 Model of Transformational Leadership

Inspirational Motivation: The foundation of transformational leadership is the

promotion of consistent vision, mission, and a set of values to the members. Their vision
is so compelling that they know what they want from every interaction. Transformational
leaders guide followers by providing them with a sense of meaning and challenge. They
work enthusiastically and optimistically to foster the spirit of teamwork and commitment.

Intellectual Stimulation: Such leaders encourage their followers to be innovative and

creative. They encourage new ideas from their followers and never criticize them
publicly for the mistakes committed by them. The leaders focus on the “what” in
problems and do not focus on the blaming part of it. They have no hesitation in
discarding an old practice set by them if it is found ineffective.

Idealized Influence: They believe in the philosophy that a leader can influence followers
only when he practices what he preaches. The leaders act as role models that followers
seek to emulate. Such leaders always win the trust and respect of their followers through
their action. They typically place their followers needs over their own, sacrifice their
personal gains for them, ad demonstrate high standards of ethical conduct. The use of
power by such leaders is aimed at influencing them to strive for the common goals of the
organization.
 Individualized Consideration: Leaders act as mentors to their followers and reward
them for creativity and innovation. The followers are treated differently according to their
talents and knowledge. They are empowered to make decisions and are always provided
with the needed support to implement their decisions.

The common examples of transformational leaders are Mahatma Gandhi and Obama.
Criticisms of Transformational Leadership Theory
• Transformational leadership makes use of impression management and therefore
lends itself to amoral self-promotion by leaders
• The theory is very difficult to e trained or taught because it is a combination of many
leadership theories.
• Followers might be manipulated by leaders and there are chances that they lose more
than they gain.
Implications of Transformational Leadership Theory
The current environment characterized by uncertainty, global turbulence, and organizational
instability calls for transformational leadership to prevail at all levels of the organization. The
followers of such leaders demonstrate high levels of job satisfaction and organizational
commitment, and engage in organizational citizenship behaviours. With such a devoted
workforce, it will definitely be useful to consider making efforts towards developing ways of
transforming organization through leadership.
Managerial Grid Model of Leadership
Developed by R. R. Blake and J. S. Mouton, the Managerial Grid Model helps Managers to
analyze their leadership styles through a technique known as grid training. Also, Managers
can identify how they concerning their concern for production and people with the
Managerial Grid Model.
The two dimensions of leadership, viz. concern for people on ‘vertical’ axis and concern for
production on the ‘horizontal’ axis have been demonstrated by R. R. Blake and J. S. Mouton
in the form of Managerial Grid Model.
They identified 5 basic leadership styles of practicing managers representing various
combinations of the aforesaid two dimensions as shown in the following figure; Managerial
Grid Model is based on two behavioral dimensions:
1. Concern for people: This is the degree to which a leader considers the needs of team
members, their interests, and areas of personal development when deciding how best
to accomplish a task.
 2. Concern for production: This is the degree to which a leader emphasizes concrete
objectives, organizational efficiency, and high productivity when deciding how best to
accomplish a task.
As shown in the figure, the model is represented as a grid with concern for production as the
Xaxis and concern for people as the Y-axis; each axis ranges from 1 (Low) to 9 (high).
The five resulting leadership styles are as follows:

Figure 27 Managerial Grid

(1,9) Country Club Style Leadership High People and Low Production
(1,9) Country Club Style Leadership style of leader is most concerned about the needs and the
feelings of members of his or her team.
In this environment, the relationship-oriented manager has a high concern for people but a
low concern for production.
He pays much attention to the security and comfort of the employees. He hopes that this will
increase performance.
He is almost incapable of employing the more punitive, coercive and legitimate powers. The
organization will end up to be a friendly atmosphere but not necessarily very productive.
The (1,9) boss mainly uses reward power to preserve discipline and to support his
subordinates in accomplishing their goals.
Conversely, this manager is virtually incapable of employing more disciplinary coercive and
legitimate powers. This inability results from his fear that using such powers could jeopardize
his relationships.
This inability results from his fear that using such powers could jeopardize his relationships.
Thus, the supervisor seldom attempts to impose his will on other people, preferring to accept
the ideas of others instead of forcing his own.
Employees in this type of work environment go about their day working at their own pace on
projects that they enjoy and with coworkers that they are attracted to.
(9,1) Produce or Perish Leadership- High Production and Low People
(9,l) Produce or Perish Leadership management style is characterized by a concern for
production as the only goal.
Employees are viewed as obstacles to performance results unless obedience to the manager’s
wishes is explicitly granted.
In this style, the manager is authoritarian or compliance. A task-oriented manager, he has a
high concern for production and a low concern for people.
He finds employee needs unimportant and simply a means to an end. He provides his
employees with money and expects performance back.
There is little or no allowance for cooperation or collaboration. He pressures his employees
through rules and punishments to achieve the company goals.
This type of leader is very autocratic, has strict work rules, policies and procedures, and
views punishment as the most effective means to motivate employees.
(1,1) Impoverished Leadership-Low Production and Low People:
(1,1) Impoverished Leadership is a delegate-and-disappear management style and a lazy
approach. The manager shows a low concern for both people and production.
He or she avoids getting into trouble. His main concern is not to be held responsible for any
mistakes.
Managers use this style to preserve job and job seniority, protecting themselves by avoiding
getting into trouble.
This leader is mostly ineffective. He or she has neither a high regard for creating systems for
getting the job done nor for creating a work environment that is satisfying and motivating.
A result is a place of disorganization, dissatisfaction, and disharmony.
(5,5) Middle-Of-The-Road Leadership-Medium Production and Medium People
(5,5) Middle-Of-The-Road Leadership is a kind of realistic medium without ambition. It is a
balanced and compromised style.
The manager tries to balance the competing goals of the company and the needs of the
workers.
The manager gives some concern to both people and production, hoping to achieve
acceptable performance. He believes this is the most anyone can do.
Consequently, compromises occur where neither the production nor the people’s needs are
fully met.
The supervisor views it as the most practical management technique. It is also an outcome
when production and people issues are seen as in conflict.

The defining characteristic of this style “is not to seek the best position for both production
and people… but to find the position that is in between both, about halfway.”
Styles of Leadership
Leadership style refers to a leader’s behavior. Behavioral pattern which the leader reflects in
his role as a leader is often described as the style of leadership. Leadership style is the result
of leader’s philosophy, personality, experience, and value system. It also depends upon the
types of followers and the organizational atmosphere prevailing in the enterprise.
Different types of leadership styles are:
1. Autocratic leadership;
2. Participative leadership;
3. Free rein leadership; and
4. Paternalistic leadership.
Autocratic or Authoritarian Leadership
The autocratic leader gives orders which must be obeyed by the subordinates. He determines
policies for the group without consulting them and does not give detailed information about
future plans, but simply tells the group what immediate steps they must take. He gives
personal praise or criticism to each member on his own initiative and remains aloof from the
group for the major part of the time. Thus, under this style, all decision-making power is
centralized in the leader. Leader adopting this style stresses his prerogative to decide and
order and subordinates’ obligation to do what they are told to carry out.
Autocratic leadership may be negative because followers are uniformed, insecure and afraid
of leader’s authority. Such a leader may be called the strict autocrat who realizes on negative
influences and gives orders which the subordinates must accept. Leadership can be positive
also because the leader may use his power to disperse rewards to his group. When his
motivational style is positive, he is often called a benevolent autocrat. The benevolent
autocrat is effective in getting high productivity in many situations and he can develop
effective human relationships. There is another type of autocratic leader known as
manipulative autocrat, who makes the subordinates feel that they are participating in
decision-making process even though he has already taken the decision. An autocratic leader
assumes that people basically work for money they and want security. Because of such
assumptions about human beings, he exercises tight control and supervision over his
subordinates. But these assumptions do not hold good in all the situations. If the motivational
style is negative, people will dislike it. Frustration, low morale and conflict develop easily in
autocratic situations.
Participative or Democratic Leadership
A democratic leader is one who gives instructions only after consulting the group. He sees to
it that policies are worked out in group discussions and with the acceptance of the group.
Participative manager decentralizes managerial authority. His decisions are not unilateral like
that of the autocratic leader. Unlike an autocratic manager who controls through the authority,
a participative manager exercises control mostly by using forces within the group. Some of
the advantages of participative leadership are:
-- It increases the acceptance of management’s ideas.
-- It improves the attitude of employees towards their jobs and the organization.
-- It increases the cooperation between management and employees.
-- It leads to reduction in the number of complaints and grievances.
-- It increases the morale of the employees.
Free Rein or Laissez Faire Leadership
A free rein leader does not lead, but leaves the group entirely to itself. The free rein leader
avoids power. He depends largely upon the group to establish its own goals and work out its
own problems. Group members work themselves and provide their own motivation. The
leader completely abdicates his leadership position by giving most of the work entrusted to
him to the group which he is supposed to lead. This is also known as permissive style of
leadership, where there is least intervention by the leader. Abdication of authority by the
leader and letting the group to operate entirely on its own are the common features of this
style. This mode of direction can produce good and quick results if the subordinates are
highly educated, responsible and brilliant who have a strong desire and commitment to give
their best to the organization.
Paternalistic Leadership
In this style, the leader assumes that his function is paternal or fatherly. His attitude is that of
treating the relationship between the leader and his group as that of family with the leader as
the head of family. He works to help, guide, protect, and keep his followers happily working
together as members of a family. He provides them with good working conditions, fringe
benefits and employee services. This style has been successful, particularly in Japan because
of its cultural background. It is said that employees under such leadership will work harder
out of gratitude.

TRANSACTIONAL AND TRANSFORMATIONAL LEADERS

Transactional Leadership:
A transactional leader is one who guides and motivates his follows in the direction of
established goals by clarifying role and task requirements. Transactional leadership involves
exchange relationship between the leader and the followers. Traditional theory of leadership,
Ohio State Studies, Fielder’s model, and Path-Goal theory are all transactional in nature.
On the basis of his research findings, Bass concluded that in many instances (such as relying
on passive management by exception), transactional leadership is a prescription for
mediocrity and that transformational leadership leads to superior performance in
organisations facing demands for renewal and change. He suggested that fostering
transformational leadership through policies of recruitment, selection, promotion, training and
development will pay off in the health, well-being and effective performance of today’s
organisation.
Managers of the future will continue to face the challenge of a changing their organisations,
primarily because of the accelerating trend to position organisations to be more competitive
in a global business environment. Therefore, transformational leadership will probably get
increasing attention in the leadership research by the behavioural scientists.
Characteristics of Transactional and Transformational Leaders
(i) Contingent Reward: Contracts exchange of rewards for effort, promises rewards for
good performance, recognises accomplishments.
(ii) Management by Exception (Active): Watches and searches for deviations from rules
and standards, takes corrective action.
(iii) Management by Exception (Passive): Intervenes only if standards are not met.
(iv) Laissez Faire: Abdicates responsibilities, avoids making decisions.
Transformational Leadership:
Leader who inspires followers to transcend their won self-interests for the good of the
organisation, and who is capable of having a profound and extraordinary, effect on his or her
followers is known as transformational leader.
For example, Leslie Wexner of the Limited Retail Chain and Jack Welch at General Electric
pay attention to the concerns and developmental needs of individual followers; they change
followers’ awareness of issues by helping them to look at old problems in new ways; and
they are able to excite, arouse and inspire followers to put out extra effort to achieve group
goals. Thus, transformational leaders are the leaders who provide individualised consideration
and intellectual stimulation, and who possess charisma.
Characteristics of Transformational Leaders:
(i) Charisma: Provides vision and sense of mission, instils provide, gains respect and trust.
(ii) Inspiration: Communicates high expectations, uses symbols to focus efforts, and
expresses important purposes in simple ways.
(iii) Intellectual Stimulation: Promotes intelligence, rationality, and careful problem
solving.
(iv) Individualised Consideration: Give personal attention, treats each employee.
Individually, coaches, advices.
Transformational leadership is built on top of transactional leadership (leaders who guide or
motivate their followers in the direction of established goals by clarifying role and task
requirements). It produces levels of subordinate effort and performance that go beyond what
would occur with a transactional approach alone. Moreover, transformational leadership is
more than charisma. “The purely charismatic (Leader) may want followers to adopt the
charismatic’s world view and go no further, the transformational leader who attempt to instil
in followers the ability to question not only established views but eventually those established
by the leader”.
Guidelines for Transformation Leadership: There are some tentative guidelines for leaders
who seek to inspire and motivate followers:
1. Articulate a Clear and Appealing Vision: Transformational leaders strengthen the
existing vision or build commitment to a new vision. A clear vision of what the organisation
could accomplish or become helps people understanding the purpose, objectives and
priorities of the organisation. It gives the work meaning, serves as a source of self-esteem,
and fosters a sense of common purpose.
Finally, the vision helps guide the actions and decisions of each member of the organisation,
which is especially important when individuals or groups are allowed considerable autonomy
and discretion in their work decision.
2. Explain How the Vision can be Attained: It is not enough to articulate an appealing
vision; the leader must also convince followers that the vision is feasible. It is important to
make a clear link between the vision and a credible strategy for attaining it. This link is easier
to establish if the strategy has a few clear themes that are relevant to shared values of
organisation members. Themes provide labels to help people understand issues and problems.
The number of themes should be large enough to focus attention on key issues, but not so
large as to cause confusion and dissipate energy. It is seldom necessary to present an
elaborate plan with detailed action steps.
3. Act Confidently and Optimistically: Followers are not going to have faith in a
vision unless the leader demonstrates self-confidence and conviction. It is important to
remain optimistic about the likely success of the group in attaining its vision, especially in the
face of temporary roadblocks and setbacks. A manager’s confidence and optimism can be
highly contagious. It is best to emphasise what has been accomplished so far rather than how
much more is yet to be done. It is best to emphasise the positive aspects of the vision rather
than the obstacles and dangers that lie ahead. Confidence is expressed in both words and
actions. Lack of self-confidence is reflected in tentative, faltering language (for example, “I
guess, may be, hopefully”) and some nonverbal cues (for example, frowns, lack of eye
contact, nervous gestures, weak posture).
4. Express Confidence in Followers: The motivating effect of a vision also depends on
the extent to which subordinates are confident about their ability to achieve it. People
perform better when a leader has high expectations for them and shows confidence in them.
There is more need to foster confidence and optimism when the task is very difficult or
dangerous or when team members lack confidence in themselves. If appropriate, the leader
should remind followers how they overcame obstacle to achieve an earlier triumph. If they
have never been successful, the leader may be able to make an analogy between the present
situation and success by a similar team or organisational unit.
Review the specific strengths, assets and resources that they can draw on to carry out the
strategy. List the advantages they have relative to opponents or competitors. Tell them that
they are as good as or better than an earlier team that was successful in performing the same
type of activity.
5. Use Dramatic, Symbolic Actions to Emphasise Key Values: Concern for a value or
objective is demonstrated by the way a manager spends time, by resource allocation decisions
made when there are trade-offs between objectives, by the questions the manager asks, and
by what actions the manager rewards.
Dramatic, highly visible actions are an effective way to emphasise key values. Symbolic
actions to achieve an important objective or defend an important value are likely to be more
influential when the manager risks substantial personal toss, makes a self-sacrifice, or does
things that are unconventional. The effect of symbolic actions is increased when they become
the subject of stories and myths that circulate among members of the organisation and are
retold time and again over the years to new employees.
6. Lead by Example: According to an old saying, actions speak louder than words. One
way a leader can influence subordinate commitment is by setting an example of exemplary
behaviour in day-to-day interactions with subordinates. Leading by example is sometimes
called “role modelling”. It is especially important for actions that are unpleasant, dangerous,
unconventional, or controversial. A manager who asks subordinates to observe a particular
standard should also observe the same standard. A manager who asks subordinates to make
special sacrifices should set ana example by doing the same.
7. Empower People to Achieve the Vision: Empowerment means delegating authority
for decisions about how to do the work to individuals and teams. It means asking people to
determine for themselves the best way is to implement strategies or attain objectives, rather
than telling them in detail what to do. It means encouraging subordinates to suggest solutions
to problems if they come to you for help, and it means supporting subordinates who assume
responsibility for resolving problems on their own, even though they do not do it the same
way you would.
Empowering also means reducing bureaucratic constraints on how the work is done so that
people have more discretion. Finally, empowering means providing adequate resources for
subordinates to carry out a task for which they are being held accountable.

UNIT V
CONTROLLING & ORGANISATIONAL DYNAMICS
Concepts of Control – Controlling Methods & Techniques – Basic Control Process – Concept
and Importance of Organizational Culture – Concept of Organizational Change & Resistance
to Change.
CONTROLLING
Introduction
Controlling is an important function of management. It is the process that measures current
performance and guides it towards some predetermined objectives. Under primitive
management, control was undertaken only when something went wrong and the objectives of
control was to reprimand the person responsible for these events and take action against him.
The modern concept of control envisages a system that not only provides a historical record
of what has happened to the business as a whole but also pinpoints the reasons why it has
happened and provides data that enable the manager to take corrective steps, if he finds he is
on the wrong track. Therefore, there is no intention to punish the person for wrongdoing, but
to find out the deviations between the actual performance and the standard performance and
to take steps to prevent such variances in future.
The concept of control is often confused with lack of freedom. The opposite of control is not
freedom but chaos or anarchy. Control is fully consistent with freedom. In fact, they are
interdependent. Without control, freedom cannot be sustained for long. Without freedom,
control becomes ineffective. Both freedom and accountability are embedded in the concept of
control.
Concept of Control
Control is the process through which managers assure that actual activities conform to
planned activities. According to Breach, "Control is checking current performance against
predetermined standards contained in the plans, with a view to ensuring adequate progress
and satisfactory performance."
According to George R. Terry, "Controlling is determining what is being accomplished i.e.,
evaluating the performance and if necessary, applying corrective measures so that the
performance takes place according to plans."
According to Billy E. Goetz, "Management control seeks to compel events to conform
plans".
According to Robert N. Anthony, "Management control is the process by which managers
assure that resources are obtained and used effectively and efficiently."
In the words of Koontz and O'Donnell, "Managerial control implies measurement of
accomplishment against the standard and the correction of deviations to assure attainment
of objectives according to plans."
In the words of Haynes and Massie, "Fundamentally, control is any process that guides
activity towards some predetermined goal. The essence of the concept is in determining
whether the activity is achieving the desired results".
In the words of J. L. Massie, "Control is the process that measures current performance
and guides it towards some predetermined goals."
In the words of Henry Fayol, "Control consists in verifying whether everything occurs in
conformity with the plan adopted, the instructions issued and the principles established. Its
object is to find out the weakness and errors in order to rectify them and prevent
recurrence. It operates on everything, i.e., things, people and actions".
From the above definitions it is clear that the managerial function of control consists in a
comparison of the actual performance with the planned performance with the object of
discovering whether all is going on well according to plans and if not why. Remedial action
arising from a study of deviations of the actual performance with the standard or planned
performance will serve to correct the plans and make suitable changes. Controlling is the
nature of follow-up to the other three fundamental functions of management. There can, in
fact, be not controlling without previous planning, organising and directing. Controlling
cannot take place in a vacuum.
Characteristics of Control
Managerial control has certain characteristic feature. They are:
1. Control is the function of every manager. Managers at all levels have to perform
this function to contribute to the achievement of organisational objectives.
2. Control leads to appraisal of past activities. The deviations in the past are revealed
by the control process. Corrective actions can be initiated accordingly.
3. Control is linked with future, as past cannot be controlled. It should anticipate
possible deviations and to think of corrective action for the control of such deviations in the
future. It is usually preventive as presence of control system tends to minimise wastages,
losses and deviations from standards.
4. Control is concerned with setting standards, measurement of actual performance,
comparison of actual performance with predetermined standards and bringing to light the
variations between the actual performance and the standard performance.
5. Control implies taking corrective measures. The object in checking the variations
or deviations is to rectify them and prevent their recurrence. It is only action which adjusts
performance to predetermined standards whenever deviations occur.
6. Control can be exercised only with reference to and or the basis of plans. To
quote Mary Cushing Niles - "Whereas planning sets the course, control observes deviations
from the course or to an appropriately changed one".
7. To some people, control is opposite of freedom. This is not true. Control is based on
facts and figures. Its purpose is to achieve and maintain acceptable productivity from all
resources of an enterprise. Therefore, control aims at results and not at persons. It is for
correcting a situation, and not for reprimanding persons.
8. Information or feedback is the guide to control. The feedback is helpful to the
manager to determine how far the operations are proceeding in conformity with plans and
standards, and where remedial action is called for.
9. Control involves continuous review of standards of performance and results in
corrective action which may lead to change in the performance of other functions of
management. This makes control a dynamic and flexible process.
10. Control is a continuous activity. It involves constant analysis of validity of
standards, policies, procedures etc. Basic Control Process
Steps in Control Process
Figure 28 Steps in Control Process
There are three basic steps in a control process:
1. Establishing standards
2. Measuring and comparing actual results against standards
3. Taking corrective action.
Establishing Standards
The first step in the control process is to establish standards against which results can be
measured. The standards the managers desire to obtain in each key area should be defined as
far as possible in quantitative terms. Standards expressed in general terms should be avoided.
Standards need to be flexible in order to adapt to changing conditions. The standard should
emphasis the achievement of results more than the conformity to rules and methods. If they
do not do so, then people will start giving more importance to rules and methods than to the
final results.
While setting the standards, the following points have to be borne in mind:
1. The standards must be clear and intelligible. If the standards are clear and are understood
by the persons concerned, they themselves will be able to check their performance.
2. Standards should be accurate, precise, acceptable and workable.
3. Standards are used as the criteria or benchmarks by which performance is measured in the
control process. It should not be either too high or too low. They should be realistic and
attainable.
4. Standards should be flexible i.e., capable of being changed when the circumstances require
so.
Measuring and Comparing Actual Results against Standards
The second step in the control process is to measure the performance and compare it with the
predetermined standards. Measurement of performance can be done by personal observation,
by reports, charts and statements. If the control system is well organised, quick comparison of
these with the standard figure is quite possible. This will reveal variations.
After the measurement of the actual performance, the actual performance should be compared
with the standards fixed quickly. A quick comparison of actual performance with the standard
performance is possible, if the control system is well organised. While comparing the actual
performance with the standards fixed, the manager has to find out not only the extent of
variations but also the causes of variations. This is necessary, because some of the variations
may be unimportant, while others may be important and need immediate corrective action by
the manager.

Taking Corrective Action

After comparing the actual performance with the prescribed standards and finding the
deviations, the next step that should be taken by the manager is to correct these deviations.
Corrective action should be taken without wasting of time so that the normal position can be
restored quickly. The manager should also determine the correct cause for deviation.
Taking corrective action can be achieved in the following way:
1. The manager should try to influence environmental conditions and external situations
in such a way as to facilitate the achievement of goals.
2. He should review with his subordinates the instructions given earlier so that he may
be able to give clear, complete and reasonable instructions in future.
3. There are many external forces which cannot be adjusted by the manager. They have
to be accepted as the facts of the situation, and the executives should revise their plans in the
light of these changing forces.
Types of Control
Most control methods can be grouped into one of the two basic types:
1. Past-oriented controls.
2. Future-oriented controls.
Past-oriented Controls
These are also known as post-action controls and measure results after the process. They
examine what has happened in a particular period in the past. These controls can be used to
plan future behaviour in the light of past errors or successes.
Future-oriented Controls
These are also known as steering controls or feed-forward controls and are designed to
measure results during the process so that action can be taken before the job is done or the
period is over. They serve as warning-posts principally to direct attention rather than to
evaluate, e.g., Cash flow analysis, funds flow analysis, network planning etc.
CONTROLLING METHODS & TECHNIQUES
A variety of tools and techniques have been used over the years to help managers control the
activities in their organisations. There can be control in different perspectives. Time control
relate to deadlines and time constraints, material controls relate to inventory control etc.
Various techniques of control require varied control aids such as:
1. Budgeting: A budget is a statement of anticipated results during a designated time
period expressed in financial and non-financial terms. Budgets cover a designated time period
– usually a year. At stated intervals during that time period, actual performance is compared
directly with the budget targets and deviations are quickly detected and acted upon. E.g., of
Budgets: Sales budget, production budget, capital expenditure budget, cash budget, master
budget etc.
2. Standard Costing: The cost of production determines the profit earned by an
enterprise. The system involves a comparison of the actuals with the standards and the
discrepancy is called variance. The various steps involved in standard costing are:
(a) Setting of cost standards for various components of cost e.g.: raw materials, labour etc.
(b) Measurement of actual performance.
(c) Comparison of actual cost with the standard cost.
(d) Finding the variance of actual from the standard cost.
(e) Findings the causes of variance.
(f) Taking necessary action to prevent the occurrence of variance in future.
3. Responsibility Accounting: Responsibility accounting can be defined as a system of
accounting under which each departmental head is made responsible for the performance
of his department.
4. Reports: A major part of control consists of preparing reports to provide information to the
management for purpose of control and planning.
5. Standing Orders, Rules and Limitations: Standing orders, rules and limitations are also
control techniques used by the management. They are issued by the management and they
are to be observed by the subordinates.
6. Personal Observation: A manager can also exercise fruitful control over his subordinates
by observing them while they are engaged in work.
7. Critical Path Method (CPM)
A critical path consists of that set of dependent tasks (each dependent on the preceding one),
which together take the longest time to complete. A CPM chart can define multiple, equally
critical paths. The tasks, which fall on the critical path, should be noted in some way, so that
they may be given special attention. One way is to draw critical path tasks with a double line
instead of a single line. Tasks, which fall on the critical path, should receive special attention
by both the project manager and the personnel assigned to them. The critical path for any
given method may shift as the project progresses; this can happen when tasks are completed
either behind or ahead of schedule, causing other tasks which may still be on schedule to fall
on the new critical path.
8. Gantt Chart Notes
Henry Laurence Gantt (1861-1919) was a mechanical engineer, management consultant and
industry advisor. He developed Gantt charts in the second decade of the 20th century. Gantt
charts were used as a visual tool to show scheduled and actual progress of projects. It was an
innovation of worldwide importance in the 1920s. Gantt charts were used on large
construction projects. A Gantt chart is a matrix, which lists on the vertical axis all the tasks to
be performed. Each row contains a single task identification, which usually consists of a
number and name. The horizontal axis is headed by columns indicating estimated task
duration, skill level needed to perform the task and the name of the person assigned to the
task, followed by one column for each period in the project's duration. Each period may be
expressed in hours, days, weeks, months and other time units. The graphics portion of the
Gantt chart consists of a horizontal bar for each task connecting the period start and period
ending columns.
A set of markers is usually used to indicate estimated and actual start and end. Each bar on a
separate line and the name of each person assigned to the task, is on a separate line. In many
cases when this type of project plan is used, a blank row is left between tasks. When the
project is under way, this row is used to indicate progress indicated by a second bar, which
starts in the period column when the task is actually started and continues until the task is
actually completed. Comparison between estimated start and end and actual start and end
should indicate project status on a task-by-task basis.
9. Programme Evaluation and Review Technique
Program Evaluation and Review Technique (PERT) is a variation on Critical Path Analysis
that takes a slightly more sceptical view of time estimates made for each project stage.
Critical Path Method (CPM) charts are similar to PERT charts and are sometimes known as
PERT/CPM. To use it, estimate the shortest possible time each activity will take, the most
likely length of time and the longest time that might be taken if the activity takes longer than
expected. PERT charts depict task, duration and dependency information. Each chart starts
with an initiation node from which the first task or tasks, originates. If multiple tasks begin at
the same time, they are all started from the node or branch, or fork out from the starting point.
Each task is represented by a line, which states its name or other identifier, its duration, the
number of people assigned to it and, in some cases, the initials of the personnel assigned. The
other end of the task line is terminated by another node, which identifies the start of another
task or the beginning of any slack time, that is, waiting time between tasks. Each task is
connected to its successor tasks in this manner, forming a network of nodes and connecting
lines. The chart is complete when all final tasks come together at the completion node. When
slack time exists between the end of one task and the start of another, the usual method is to
draw a broken or dotted line between the end of the first task and the start of the next
dependent task.
CONCEPT AND IMPORTANCE OF ORGANIZATIONAL CULTURE
Introduction
Organisational Culture plays an important role in modern business environment because it
has its impact an employee performance and satisfaction. Hence in this chapter we discuss the
nature, role, types and important of Organisational Culture on the performance of the
Organisation.
Though the concept of culture and its implications for society have been studied for long
time. In org. behaviour culture became a central concern only during 1980’s. Several research
studies were undertaken during this period to develop conceptual framework as well as to
understand its impact on the functioning of Organisation.
Meaning and definition:
The concept of culture has been derived from anthropology where it is defined in so many
ways. Culture is nothing but the combination of knowledge belief, art, morals, law, custom
and other capabilities and habits acquired by man in a society.
Organisational Culture may also be called corporate culture has been defined as the
philosophies, ideologies, values, assumptions, beliefs, expectations, attitudes and norms that
an Organisation together and are shared by its employees.
Charles O’Reilly has defined Organisational Culture is a precise manner as:
“Organisational Culture is the set of assumptions beliefs, values, and norms that are
shared by an Organisation are members.
Thus, Organisational Culture is a set of characteristics that are commonly shared by people in
the Organisation. Such characteristics may be in the form of assumptions beliefs, values, and
norms which are known as abstract elements of the culture or externally oriented
characteristics like products, buildings, and dresses etc. which are known as material
elements of the culture.
Characteristics of Organisational Culture:
There are following characteristics which help to understand the essence of an Organisational
Culture.
1. Initiative: The degree of freedom, authority and responsibility enjoyed by an individual in
an Organisation.
2. Risk taking: Employees are encouraged to be aggressive, innovative and risk taking.
3. Direction: The degree to which the organisation creates clear objectives and performance
expectations.
4. Integration: The degree to which units within the org. are encouraged to operate in an
integrated manner.
5. Management Support: The degree to which managers provide clear communication,
assistance and support to their subordinates.
6. Control: The number of rules and regulations and the amount of direct supervision that is
used to control employee behaviour.
7. Identity: The degree to which members’ identity with the org. as a whole rather than with
their particular work group or field of professional expertise.
8. Reward system: The degree to which reward allocation are based an employee
performance criterion in contrast to seniority, favouritism etc.
9. Conflict Tolerance: The degree to which employees are encouraged to air conflicts and
criticisms openly.
10. Communication Patterns: The degree to which org. communication are restricted to
the formal hierarchy of authority.
ORGANISATIONAL CHANGE
Change simply refers to alteration in the existing conditions of an organization. Even in most
stable organizations change is necessary to maintain stability. The economic and social
environment is so dynamic that without adapting to such change even the most successful
organizations cannot survive in the changed environment. Therefore, management must
continuously monitor the outside environment and be sufficiently innovative and creative to
implement these changes effectively.
Organizations encounter different forces for change. These forces come from external and
internal sources of the organization.
External forces
External forces for change originate outside an organization. There are four key external
forces for change:
Demographic Characteristics: These include age, education, skill level and gender of
employees. Organizations need to effectively manage these characteristics in order to receive
maximum contribution and commitment from their employees.
Technological Advancements: Both manufacturing and service organizations are
increasingly using technology as a means to improve productivity and market
competitiveness.
Market Changes: The emergence of a global economy is forcing Indian organizations to
change the way they do business. Organizations are entering into new partnerships with their
suppliers in order to deliver higher quality products at lower prices.
Social and Political Pressures: These forces are created by social and political events.
Personal values affect employees’ needs, priorities and motivation. Therefore, managers need
to adjust their managerial style according to the changing employee values. Political events
also create substantial change in an organization. Although it is difficult for organizations to
predict changes in political forces, many organizations hire lobbyists and consultants to help
them detect and respond to social and political changes.
Internal forces
Internal forces for change come from inside the organization. This may come from both
human resource problems and managerial behavior.

Human Resource Problems

These problems stem from employee perceptions about their work environment and conflict
between an employee and organization needs. Organizations might respond to these problems
by using the various approaches to job design by implementing realistic job previews and by
reducing employees' role conflict, stress, work overload and ambiguity.
Managerial Behaviour
Excessive interpersonal conflict between managers and their subordinates is a sign of
implementing an immediate change. Inappropriate leader behavior such as inadequate
direction and support are the cause of conflict between managers and their subordinates.
Nature of Change
Organizations introduce changes through people. Unless the people are willing to accept the
need and responsibility for organizational change, intended changes can never be translated
into reality. In addition, individuals have to learn to adapt their attitudes and behavioral
patterns to constantly changing environments.
Management of change involves both individual and organizational change. Individual
change is behavioral change, which is determined by individual characteristics of members
such as their knowledge, attitudes, beliefs, needs, expectations and skills. It is possible to
bring about a total change m_ an organization by changing behaviours of individual members
through participative and educative strategies. Although, the degree of difficulty involved in
the change and the time taken to bring about the change will depend on the target of change.
The attitudes towards change are largely dependent on the nature of the situation and the
manner in. which changes are initiated and executed.
Changing individual behavior is more time consuming and a difficult task. The linkage
between attitude and behavior is not direct and therefore changing behavior is more difficult
than changing attitudes. One's attitude does not necessarily get reflected in one's behavior.
For example, we know that honesty is the best policy and we have favourable altitudes
towards people- who are honest but in certain situations, we may still act in a less honest way.
Approaches to organizational change
As organizational change is a complex process, therefore managers must approach it
systematically and logically. Some organizational changes are planned whereas other changes
are reactive.
Planned change is designed and implemented by an organization in an orderly and timely
fashion in the anticipation of future change.
Reactive change results from a reaction of an organization to unexpected events. In contrast
to planned change, it is a piece-meal response to circumstances as they develop. External
forces that the organization has failed to anticipate or interpret always bring about reactive
change. Since reactive change may have to be carried out hastily, it increases the likelihood
of a poorly conceived and poorly executed Program.
Planned change is always preferable to reactive change. Managers who sit back and respond
to change only when they can no longer avoid it are likely to waste a lot of time and money
trying to patch together a last-minute solution. The more effective approach is to anticipate
the significant forces for change working in an organization and plan ways to address them.
To accomplish this, managers must understand the steps needed for effective change.
A comprehensive model of change
The comprehensive model of change shown in the following figure shows seven steps that
can lead to effective change. This model is useful for both planned and reactive change. The
seven steps of comprehensive model of change are as follows:
Figure 29 The comprehensive model of change
Recognize need for change
The first step in this model is recognizing need for change. For marketing managers who
anticipate needed. Change, recognition is likely to come much earlier, as a result of marketing
forecasts indicating new market potential, expert indications about impending socio-
economic change or a perceived opportunity to capitalize on a key technological
breakthrough. These managers tend to ‘initiate change because they expect it to be necessary
in the near future in any case’.
Establish goals for change
The manager must then set goals for the proposed change. It is important for the manager to
specify goals that the change is supposed to accomplish. The goals can be set to maintain or
increase the market standing, to enter new markets, to restore employee morale, to reduce
turnover, to settle a strike and to identify good investment opportunities.
Diagnose relevant variables
An important next step is diagnosing organizational variables that have brought about the
need for change. Turnover, for example, may be caused by a variety of factors such as low
pay, poor working conditions, poor supervision, better alternatives in the job market or
employee job dissatisfaction etc. Thus, if turnover is the recognized stimulus for change, the
manager must understand what has caused it in a particular situation in order to make the
right changes. To carry out this diagnosis, the manager may discuss the situation with
employees and other managers.
Select change intervention
After the manager has developed an understanding of the problem and its causes then he must
select a change intervention that will accomplish the intended goal. An intervention is a
specific change induced in an organization with the intention of solving a particular problem
or accomplishing a specific objective. For example, if turnover is caused by low pay, then a
new reward system is required and if the cause is poor supervision, then interpersonal skills
and training for supervisors is required.
Plan implementation of change
The manager must then carefully plan the implementation of change. Planning the
implementation of change involves consideration of the cost of the change, how the change
will affect other areas of the organization and the degree to which employees should
participate in bringing about the change. Hastily implemented change can result in more harm
than benefit. For example, if the change involves the use of new equipment, the manager
should not make any changes that rely on the use of new equipment until it has arrived and
been installed and workers know how to use it. Moreover, if change is thrust upon them too
quickly, their resistance may stiffen.
Implement change
A systematically implemented change is more likely to proceed smoothly and to encounter
fewer obstacles than is a change that is implemented too quickly and without adequate
preparation.
Evaluate implementation
Finally, after the change has been implemented, the manager should verify that it has
accomplished its intended goals. A change may fail to bring about the intended results. This
may be due to inappropriate goals or inaccurate diagnosis of the situation or wrong selection
of intervention.
Models and dynamics of planned change
Managers are criticized for emphasizing short-term, quick fix solutions to organizational
problems. Quick-fix solutions do not really solve underlying problems and they have little
staying power. Researchers and managers have thus tried to identify effective ways to
manage the change process. The following models have been developed to effectively
manage change:
Lewin's Change Model
Most theories of organizational change originated from the landmark work of social
psychologist Kurt Lewin. Lewin developed a three-stage model of planned change, which
explained how to initiate, manage and stabilize the change process. The three stages are
unfreezing, changing and refreezing. Before reviewing each stage, it is important to highlight
the assumptions on which, this model is based:
1. The change process involves learning something new, as well discontinuing current
attitudes, behaviours and organizational practices.
2. Change will not occur unless there is motivation to change. This is often the most difficult
part of the change process.
3. People are the hub of all organizational changes. Any change, whether in terms of
structure, group process, reward systems or job design requires individuals to change.
4. Resistance to change is found even when the goals of change are highly desirable.
5. Effective change requires reinforcing new behaviours, attitudes and organizational
practices. The following are the three stages of change:
Unfreezing
The focus of this stage is to make organization open to change. In doing so individuals are
encouraged to replace old behaviours and attitudes with those desired by management.
Managers also need to devise ways to reduce the barriers to change during this stage.
Changing
The focus of this stage is in providing employees with new information, new behavioral
models, or new ways of looking at things. The purpose is to help employees learn new
concepts to implement change. Role models, mentors, experts, benchmarking organization
against world-class organizations and training are useful mechanisms to facilitate change.
Re freezing
The focus of this stage is stabilizing the change during refreezing by helping employees
integrate the changed behavior or attitude into their normal way of doing things. This is
accomplished by first giving employees the chance to exhibit the new behaviours or attitudes.
Once exhibited, positive reinforcement is used to reinforce the desired change. Additional
coaching and modelling are also used at this point to reinforce the stability of the change.
Resistance to change
Although organizations initiate changes in order to adjust to the changes in their
environments but people sometimes resist them. Therefore, managers need to recognize the
manifestations of resistance both in themselves and in others, if they want to be more
effective in supporting change.
Sources of resistance to change
The sources of resistance to change within organizations are classified into organizational
sources of resistance and individual sources of resistance.
Organizational sources of resistance
According to Daniel Kantz and Robert L Khan, organizational sources of resistance can be
divided into following six general groups.
• Over determination or structural inertia refers to the tendency of an organization's rules,
policies and structure to maintain the existing conditions and therefore resist change even
when change would benefit the organization more than stability.

• When an organization tries to change one of its division or part of the division without
recognizing the interdependence of the division with other divisions of the organization,
then it is said to have a narrow focus of change. Often a part of division cannot be changed
without changing the whole division.

• Group inertia may weaken an individual’s attempt to bring about change.

• Resistance may also take the form of threatened expertise if the change lends to weaken
special expertise built after years of experience. Organizational restructuring that involves
reducing the number of job categories often meets this kind of resistance.

• Any change that may alter the power relationships within an organization may meet the
form of resistance known as ‘threatened power’.

• Resistance may occur when a change threatens quantum of resource allocation from one
part of the organization to another.
Individual Sources of Resistance
According to researchers, individuals have the following reasons for resisting change:

• Simple habits create a lot of resistance. Most people prefer to do their work the way they
did it last week rather than learn a new approach.

• Perhaps the biggest cause of employee resistance to change is uncertainty. In the face of
impending change, employees are likely to become anxious and nervous. They worry about
their ability to meet new job demands therefore, leading to feeling of job insecurity.

• Some people resist change to avoid feeling of loss. For example, many organizations change
interventions and alter work arrangements, thus disrupting existing social networks. Social
relationships are important to most people, so they resist any change that might adversely
affect those relationships. Change may also threaten people's feelings of familiarity and self-
confidence.
• People may resist change because their perceptions of underlying circumstances differ from
the perceptions of those who are promoting the change.
Overcoming resistance to change
Managers need not abandon planned change in the face of resistance. Before recommending
specific approaches to overcome resistance, there are three key conclusions that should be
kept in mind. First, an organization must be ready for change. Second, the top management
should inform the employees about the process of change. Third, the employees’ perceptions
or interpretations of a change should be considered.
The following methods of overcoming-resistance to change are as follows:
• Participation: Participation is generally considered the most effective technique for
overcoming resistance to change. Employees who take part in planning and implementing
change are better able to understand the reasons for the change than those who are not
involved. They become committed to the change and make it work. Employees who have
the opportunity to express their own ideas and to understand the perspectives of others are
likely to accept change gracefully. It is a time-consuming process.
• Education and Communication: Educating employees about the need for and the expected
results of an impending change help reduce their resistance. Managers should maintain an
open channel of communication while planning and implementing change. However, it is
also a time-consuming process.
• Facilitation of Change: Knowing ahead of lime that employees are likely to resist change
then the manager should do as much as possible to help them cope with uncertainly and
feeling of loss. Introducing change gradually, making only necessary changes, announcing
changes in advance and allowing time for people to adjust to new ways of doing things can
help reduce resistance.
• Force-Field Analysis: In almost any situation where a change is being planned, there are
forces acting for and against the change. In force-field analysis, the manager list each set of
forces and then try to remove or minimize some of the forces acting against the change.
• Negotiation: Where someone or some group will clearly lose out in a change and where that
group has considerable power to resist, there negotiation is required. Sometimes it is a
relatively easy way to avoid major resistance.
• Manipulation and Cooperation: This is followed when other tactics will not work or are
too expensive. It can be quick and inexpensive; however, it can lead to further problems if
people feel manipulated.
• Explicit and Implicit Coercion: This is adopted where speed is essential and where the
change initiators possess considerable power. It is speedy and can overcome resistance.
Each of the above methods has its advantages and disadvantages. There is no universal
strategy for overcoming resistance to change. Hence, an organization that plans to introduce
certain changes must be prepared to face resistance from its employees. An organization
should also have a planned approach to overcome such resistances.